National Fuel Gas pany(NFG) - 2024 Q1 - Quarterly Report

Part I. Financial Information This section presents the unaudited financial statements and management's analysis of the company's financial condition and operational results Item 1. Financial Statements (Unaudited) The company reported a decrease in net income and operating cash flow for the quarter, while total assets increased Consolidated Statements of Income and Earnings Reinvested in the Business Net income and total operating revenues significantly decreased for the quarter, leading to a drop in diluted EPS Consolidated Income Statement Highlights (Three Months Ended Dec 31) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Total Operating Revenues (Thousands of U.S. Dollars) | $525,361 | $658,859 | | Operating Income (Thousands of U.S. Dollars) | $207,110 | $254,370 | | Net Income Available for Common Stock (Thousands of U.S. Dollars) | $133,020 | $169,689 | | Diluted EPS (U.S. Dollars) | $1.44 | $1.84 | Consolidated Statements of Comprehensive Income Comprehensive income declined sharply due to a smaller unrealized gain on derivative financial instruments Consolidated Comprehensive Income (Three Months Ended Dec 31) | Metric (Thousands of U.S. Dollars) | 2023 | 2022 | | :--- | :--- | :--- | | Net Income Available for Common Stock | $133,020 | $169,689 | | Other Comprehensive Income (Loss), Before Tax | $169,459 | $456,935 | | Comprehensive Income | $255,461 | $501,676 | Consolidated Balance Sheets Total assets and capitalization increased, driven by growth in property, plant, equipment, and derivative financial instruments Consolidated Balance Sheet Highlights | Metric (Thousands of U.S. Dollars) | Dec 31, 2023 | Sep 30, 2023 | | :--- | :--- | :--- | | Total Assets | $8,587,492 | $8,280,260 | | Total Comprehensive Shareholders' Equity | $3,174,002 | $2,963,376 | | Total Capitalization and Liabilities | $8,587,492 | $8,280,260 | Consolidated Statements of Cash Flows Operating cash flow decreased, while cash used in investing and financing activities increased for the quarter Consolidated Cash Flow Summary (Three Months Ended Dec 31) | Metric (Thousands of U.S. Dollars) | 2023 | 2022 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $270,944 | $327,339 | | Net Cash Used in Investing Activities | ($247,858) | ($208,836) | | Net Cash Used in Financing Activities | ($36,848) | ($10,146) | | Net (Decrease) Increase in Cash | ($13,762) | $108,357 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, derivative usage, segment performance, and regulatory rate case updates - The company uses derivative financial instruments, including over-the-counter swaps and collars, to manage commodity price risk. As of December 31, 2023, it had 380.2 Bcf of natural gas commodity derivative contracts outstanding[60][63] - The company remains committed to the Northern Access project and received a FERC extension until December 31, 2024, to construct it. As of December 31, 2023, approximately $56.0 million has been spent on the project[78] Segment Profit (Net Income) - Three Months Ended Dec 31 | Segment (Thousands of U.S. Dollars) | 2023 | 2022 | | :--- | :--- | :--- | | Exploration and Production | $52,483 | $91,192 | | Pipeline and Storage | $24,055 | $29,476 | | Gathering | $28,825 | $24,738 | | Utility | $26,551 | $23,817 | - In its New York jurisdiction, the company filed for an $88 million revenue increase effective October 2024. In Pennsylvania, a $23 million annual revenue increase became effective on August 1, 2023[87][89] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Quarterly earnings decreased due to lower natural gas prices impacting Exploration and Production, partially offset by other segments, while liquidity remains strong Results of Operations Consolidated earnings declined due to lower natural gas prices impacting Exploration and Production, despite growth in Gathering and Utility segments Earnings (Loss) by Segment (Three Months Ended Dec 31) | Segment (Thousands of U.S. Dollars) | 2023 | 2022 | Increase (Decrease) | | :--- | :--- | :--- | :--- | | Exploration and Production | $52,483 | $91,192 | ($38,709) | | Pipeline and Storage | $24,055 | $29,476 | ($5,421) | | Gathering | $28,825 | $24,738 | $4,087 | | Utility | $26,551 | $23,817 | $2,734 | | Total Consolidated | $133,020 | $169,689 | ($36,669) | - The Exploration and Production segment's earnings decrease was driven by lower natural gas prices after hedging ($40.7 million impact), partially offset by higher production ($24.3 million impact)[110] - The Utility segment's earnings increase was primarily due to new base rates in its Pennsylvania jurisdiction, which contributed $6.8 million[127] Capital Resources and Liquidity Operating cash flow and a $1.0 billion credit facility support liquidity, with significant capital expenditures primarily in Exploration and Production - Net cash provided by operating activities decreased by $56.4 million year-over-year, totaling $270.9 million for the quarter[140] Expenditures for Long-Lived Assets (Three Months Ended Dec 31) | Segment (Millions of U.S. Dollars) | 2023 | 2022 | | :--- | :--- | :--- | | Exploration and Production | $161.0 | $168.5 | | Pipeline and Storage | $24.6 | $16.4 | | Gathering | $19.6 | $13.3 | | Utility | $30.5 | $25.3 | | Total | $235.7 | $223.5 | - The company extended its $1.0 billion credit facility to February 25, 2028. The debt-to-capitalization ratio under the agreement's terms was 0.45, well below the 0.65 covenant limit[156][158] Rate Matters The company is pursuing rate increases in New York and Pennsylvania, with a FERC rate case also filed by a subsidiary - Distribution Corporation filed with the NYPSC for an approximately $88 million increase in total annual operating revenues, with a proposed effective date of October 1, 2024[175] - In Pennsylvania, the PaPUC approved a settlement for a $23 million increase in annual base rate operating revenues, which went into effect on August 1, 2023[178] - Supply Corporation filed a NGA Section 4 rate case at FERC, proposing rate increases to be effective February 1, 2024, reflecting a proposed cost of equity of 15.12%[179] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section refers to the MD&A for disclosures on the company's market risk exposure - The report refers readers to the 'Market Risk Sensitive Instruments' section in the MD&A for disclosures about market risk[191] Item 4. Controls and Procedures Disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and Principal Financial Officer concluded that the Company's disclosure controls and procedures were effective as of December 31, 2023[192] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[193] Part II. Other Information This section covers legal proceedings, risk factors, equity security sales, other corporate information, and a list of exhibits Item 1. Legal Proceedings This section refers to other report sections for details on legal, environmental, and regulatory matters - For information on legal proceedings, the report directs readers to Note 7 (Commitments and Contingencies), the MD&A section on Other Matters, and Note 10 (Regulatory Matters)[194] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - The risk factors disclosed in the Company's 2023 Form 10-K have not materially changed[195] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company issued unregistered shares to directors and purchased shares for 401(k) plans and tax withholding on stock awards - The Company issued 8,570 unregistered shares to non-employee directors as compensation and an additional 558 shares through its Deferred Compensation Plan for Directors[196][197] - A total of 110,050 shares were purchased by the company, consisting of 32,956 for 401(k) plans and 77,094 tendered by employees for tax withholding on stock awards[198] Item 5. Other Information No Rule 10b5-1 trading arrangements were adopted or terminated, and the credit agreement maturity was extended to 2028 - On February 7, 2024, the company extended its Credit Agreement maturity date from February 26, 2027, to February 25, 2028. This provides aggregate commitments of $1.0 billion before Feb 2027 and $940 million thereafter until the new maturity date[201] Item 6. Exhibits This section lists all exhibits, including equity plan notices, CEO/PFO certifications, and interactive data files - The filing includes required certifications from the Chief Executive Officer (31.1) and Principal Financial Officer (31.2) pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act[203]