National Fuel Gas pany(NFG) - 2025 Q2 - Quarterly Results

Fiscal 2025 Second Quarter Financial Highlights National Fuel Gas Company reported strong Q2 FY2025 results, with a 32% increase in GAAP EPS, driven by record natural gas production and growth in regulated segments, leading to raised full-year guidance Overall Performance Summary National Fuel Gas Company reported strong results for the second quarter of fiscal 2025, with a 32% year-over-year increase in GAAP earnings per share to $2.37, driven by record natural gas production and significant earnings growth in regulated segments Q2 FY2025 Key Financial Metrics | Metric | Q2 FY2025 | Change vs. Prior Year | | :--- | :--- | :--- | | GAAP Net Income | $216 million | +30% | | GAAP EPS | $2.37 | +32% | | Adjusted Operating Results | $218 million | +32% | | Adjusted EPS | $2.39 | +34% | - Seneca Resources achieved record natural gas production of 105.5 Bcf, marking a 3% increase from the prior year and an 8% sequential increase, primarily due to strong performance from new pads in the Eastern Development Area (EDA)[6] - The Utility segment's net income grew by 44% per share, largely due to a rate settlement in its New York jurisdiction, which was its first base rate increase since 2017[6] - The company increased its fiscal 2025 adjusted earnings per share guidance to a new range of $6.75 to $7.05[6] Management Commentary CEO David P. Bauer highlighted the company's positive momentum, attributing the 32% increase in EPS to higher natural gas price realizations and strong operational execution, supporting increased production guidance and regulated business growth - The CEO stated that higher natural gas price realizations drove a 32% increase in earnings per share over the prior year[4] - Seneca's recent well results in the Eastern Development Area (EDA) showed the highest productivity to date, leading to an increase in the fiscal 2025 production guidance[5] - Significant earnings growth in the regulated business was driven by positive rate case outcomes, balancing infrastructure investment with customer affordability[5] Reconciliation of GAAP Earnings to Adjusted Operating Results The company adjusted its GAAP earnings to provide 'Adjusted Operating Results,' a non-GAAP measure, with Q2 2025 GAAP earnings of $216.4 million ($2.37/share) adjusted to $218.3 million ($2.39/share) Q2 GAAP to Adjusted Operating Results Reconciliation (in thousands, except per share) | Description | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Reported GAAP Earnings | $216,358 | $166,272 | | Premiums paid on early redemption of debt (net of tax) | $1,743 | — | | Unrealized (gain) loss on derivative asset (net of tax) | $245 | ($389) | | Unrealized (gain) loss on other investments (net of tax) | ($13) | ($607) | | Adjusted Operating Results | $218,333 | $165,276 | | Reported GAAP EPS | $2.37 | $1.80 | | Adjusted Operating Results EPS | $2.39 | $1.79 | Fiscal 2025 Guidance and Financing Activities National Fuel updated its fiscal 2025 guidance, raising adjusted EPS and detailing significant debt refinancing activities, including new note issuance and early redemptions Fiscal 2025 Guidance Update National Fuel has increased its fiscal 2025 adjusted earnings per share guidance by $0.15 at the midpoint, to a new range of $6.75 to $7.05, reflecting strong Q2 results, higher production, and lower unit costs in the E&P segment - The company increased its fiscal 2025 adjusted EPS guidance to a range of $6.75 to $7.05, citing strong Q2 results, higher expected production, and lower unit costs in the E&P segment[9] Fiscal 2025 Adjusted EPS Guidance Sensitivity to NYMEX Prices | NYMEX Assumption (Remaining 6 months) | Adjusted Earnings Per Share Range | | :--- | :--- | | $3.00/MMBtu | $6.50 - $6.80 | | $3.50/MMBtu | $6.75 - $7.05 | | $4.00/MMBtu | $7.05 - $7.35 | Financing Activities Update In February 2025, the company issued $1 billion in new notes to refinance $950 million of maturing debt and placed $50 million in trust to discharge its 1974 Indenture, resulting in a $1.7 million after-tax loss - Issued $1 billion of new five- and ten-year notes to refinance the early redemption of $950 million of notes maturing in July 2025 and January 2026[12] - Placed $50 million in trust to discharge the Company's 1974 Indenture, relieving it from the indenture's covenants[12] - Recognized an after-tax loss of $1.7 million in connection with these financing transactions[12] Segment Performance Analysis The company's Q2 performance was driven by strong upstream and utility segment growth, while midstream results were mixed, with pipeline earnings up and gathering earnings down Upstream Business (Exploration & Production) The Exploration and Production segment reported a significant increase in Q2 GAAP earnings to $97.8 million, driven by a 3% YoY increase in natural gas production to a record 105.5 Bcf and higher realized natural gas prices Exploration and Production Segment Earnings (in thousands) | Metric | Q2 2025 | Q2 2024 | Variance | | :--- | :--- | :--- | :--- | | GAAP Earnings | $97,828 | $62,065 | $35,763 | | Adjusted Operating Results | $99,118 | $61,676 | $37,442 | | Adjusted EBITDA | $214,350 | $172,068 | $42,282 | - Natural gas production increased by 3% YoY to 105.5 Bcf, driven by two highly prolific pads turned online in the Eastern Development Area (EDA)[18] - The weighted average realized natural gas price, after hedging and transportation, was $2.94 per Mcf, an increase of $0.38 per Mcf from the prior year[19] - Depreciation, Depletion and Amortization (DD&A) expense decreased by $0.10 per Mcf to $0.61 per Mcf, largely due to prior period ceiling test impairments[20] Midstream Businesses The Midstream Businesses reported mixed results, with the Pipeline and Storage segment seeing slight earnings growth due to higher rates, while the Gathering segment's earnings decreased due to higher expenses offsetting revenue increases Pipeline and Storage Segment The Pipeline and Storage segment's GAAP earnings increased by $1.0 million to $31.7 million, primarily due to higher operating revenues from increased transportation and storage rates, despite a future slight revenue reduction from a FERC settlement Pipeline and Storage Segment Earnings (in thousands) | Metric | Q2 2025 | Q2 2024 | Variance | | :--- | :--- | :--- | :--- | | GAAP Earnings | $31,707 | $30,737 | $970 | | Adjusted EBITDA | $70,169 | $70,033 | $136 | - On March 17, 2025, FERC approved an amendment to Empire's rate case settlement, which is estimated to decrease Empire's annual revenues by approximately $0.5 million with new rates effective November 1, 2025[24] Gathering Segment The Gathering segment's Q2 GAAP earnings decreased by $2.4 million to $26.3 million, as increased operating revenues from higher throughput were more than offset by higher O&M and DD&A expenses Gathering Segment Earnings (in thousands) | Metric | Q2 2025 | Q2 2024 | Variance | | :--- | :--- | :--- | :--- | | GAAP Earnings | $26,342 | $28,706 | ($2,364) | | Adjusted Operating Results | $27,040 | $28,706 | ($1,666) | | Adjusted EBITDA | $52,748 | $53,103 | ($355) | - Operating revenues increased by 2% due to higher throughput from Seneca's new wells in Tioga County, but this was offset by a $1.5 million increase in O&M expense and a $1.2 million increase in DD&A expense[27] Downstream Business (Utility) The Utility segment delivered strong performance, with Q2 GAAP earnings increasing by 42% to $63.5 million, primarily driven by a new rate case settlement in its New York jurisdiction that boosted customer margin by $22.2 million Utility Segment Earnings (in thousands) | Metric | Q2 2025 | Q2 2024 | Variance | | :--- | :--- | :--- | :--- | | GAAP Earnings | $63,544 | $44,739 | $18,805 | | Adjusted EBITDA | $95,270 | $78,326 | $16,944 | - The primary driver for the 42% earnings increase was the implementation of the recently approved rate case settlement in the New York jurisdiction, effective October 1, 2024[30] - Customer margin (operating revenues less purchased gas sold) increased by $22.2 million, primarily due to the New York rate case settlement[31] Corporate and All Other The Corporate and All Other segment reported a net loss of $3.1 million for the second quarter, primarily due to higher interest expense from increased net borrowings and lower investment income - The segment generated a net loss of $3.1 million compared to a small profit in the prior year[33] - The earnings reduction was primarily driven by higher interest expense due to a higher average amount of net borrowings, along with a decrease in investment income[33] Detailed Guidance Summary The company provided detailed updated fiscal 2025 guidance, including increased consolidated adjusted EPS, stable capital expenditures, and higher E&P production forecasts FY 2025 Guidance Details The company's updated FY 2025 guidance reflects increased production and lower costs in the E&P segment, with capital expenditure plans remaining consistent and revenue guidance for midstream and downstream segments reaffirmed Updated Fiscal 2025 Guidance Assumptions | Metric | Previous FY 2025 Guidance | Updated FY 2025 Guidance | | :--- | :--- | :--- | | Consolidated Adjusted EPS | $6.50 to $7.00 | $6.75 to $7.05 | | Consolidated Capital Expenditures | $885 - $960 million | $885 - $960 million | | E&P Production (Bcf) | 410 to 425 | 415 to 425 | | E&P Realized Gas Prices, after hedging ($/Mcf) | $2.77 - $2.81 | $2.72 - $2.76 | | Gathering Segment Revenues | $250 - $260 million | $250 - $260 million | | Pipeline and Storage Segment Revenues | $415 - $435 million | $415 - $435 million | | Utility Segment Customer Margin | $445 - $465 million | $445 - $465 million | Consolidated Financial Statements The consolidated financial statements for Q2 FY2025 show increased operating revenues and net income, a slight rise in total assets, and a shift to net cash inflow from financing activities Summary of Operations (Income Statement) For Q2 FY2025, total operating revenues increased to $730.0 million, operating income rose to $317.3 million, and net income available for common stock significantly grew to $216.4 million, or $2.37 per diluted share Summary of Operations (in thousands) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Operating Revenues | $729,950 | $629,939 | | Operating Income | $317,252 | $250,623 | | Net Income Available for Common Stock | $216,358 | $166,272 | | Diluted Earnings Per Common Share | $2.37 | $1.80 | Consolidated Balance Sheets As of March 31, 2025, total assets increased slightly to $8.48 billion, with stable net property, plant, and equipment, while total capitalization rose to $5.15 billion due to increased long-term debt, and shareholders' equity decreased to $2.77 billion Key Balance Sheet Items (in thousands) | Metric | March 31, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Total Assets | $8,479,963 | $8,319,770 | | Net Property, Plant and Equipment | $7,347,199 | $7,339,205 | | Long-Term Debt, Net | $2,381,126 | $2,188,243 | | Total Comprehensive Shareholders' Equity | $2,765,611 | $2,848,343 | | Total Capitalization and Liabilities | $8,479,963 | $8,319,770 | Consolidated Statements of Cash Flows For the six months ended March 31, 2025, net cash from operating activities decreased to $473.9 million, investing activities used less cash at $425.4 million, and financing activities shifted to a $4.6 million net inflow due to debt management Six-Month Cash Flow Summary (in thousands) | Metric | Six Months Ended Mar 31, 2025 | Six Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $473,870 | $586,261 | | Net Cash Used in Investing Activities | ($425,379) | ($483,147) | | Net Cash Provided by (Used in) Financing Activities | $4,593 | ($107,792) | | Net Increase (Decrease) in Cash | $53,084 | ($4,678) | Segment and Operational Data This section provides detailed operational statistics for each segment, highlighting increased production and throughput across upstream, midstream, and downstream businesses, alongside capital expenditure breakdowns Upstream Business Statistics The Upstream segment's Appalachian gas production for Q2 2025 increased by 2.6% to 105,514 MMcf, with the weighted average gas price after hedging rising to $2.94 per Mcf, and DD&A decreasing to $0.61 per Mcf Upstream Gas Production and Prices | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Production (MMcf) | 105,514 | 102,883 | | Avg. Price (Per Mcf) | $3.02 | $1.98 | | Avg. Price after Hedging (Per Mcf) | $2.94 | $2.56 | Midstream Businesses Statistics In Q2 2025, the Pipeline and Storage segment's total throughput increased to 235,184 MMcf, driven by higher firm transportation, while the Gathering segment's volume also grew to 129,771 MMcf Pipeline and Storage Throughput (MMcf) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Firm Transportation - Affiliated | 49,240 | 42,561 | | Firm Transportation - Non-Affiliated | 185,490 | 179,697 | | Total Throughput | 235,184 | 223,529 | Gathering Volume (MMcf) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Gathered Volume | 129,771 | 125,565 | Downstream Business Statistics The Utility segment's throughput for Q2 2025 increased to 62,919 MMcf, driven by higher demand across all customer classes, with residential sales showing the largest volume increase Utility Throughput (MMcf) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Residential Sales | 32,111 | 27,063 | | Commercial Sales | 5,420 | 4,293 | | Transportation | 25,086 | 22,637 | | Total Throughput | 62,919 | 54,183 | Capital Expenditures Total capital expenditures for Q2 FY2025 decreased to $181.0 million, with the Exploration and Production segment remaining the largest investment area at $108.4 million, while the Utility segment saw increased spending to $41.9 million Capital Expenditures by Segment (in thousands) | Segment | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Exploration and Production | $108,384 | $124,184 | | Pipeline and Storage | $15,626 | $18,025 | | Gathering | $18,499 | $19,949 | | Utility | $41,867 | $37,741 | | Total Capital Expenditures | $181,030 | $200,020 | Non-GAAP Financial Measures This section provides reconciliations for non-GAAP financial measures, such as Adjusted Operating Results and Adjusted EBITDA, to their GAAP equivalents, offering insights into core operational performance Reconciliation of Non-GAAP Measures This section details the company's use of non-GAAP financial measures, such as Adjusted Operating Results and Adjusted EBITDA, which management believes provide a clearer view of ongoing operational performance, with Q2 2025 Adjusted EBITDA at $428.5 million - The company uses non-GAAP financial measures like adjusted operating results and adjusted EBITDA to provide an alternative method for assessing ongoing operating results and for comparison with other companies[80] Reconciliation of GAAP Earnings to Adjusted EBITDA (in thousands) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Reported GAAP Earnings | $216,358 | $166,272 | | Depreciation, Depletion and Amortization | $111,277 | $118,935 | | Other (Income) Deductions | ($15,232) | ($6,070) | | Interest Expense | $44,757 | $35,089 | | Income Taxes | $71,369 | $55,332 | | Adjusted EBITDA | $428,529 | $369,558 |