National Fuel Gas pany(NFG) - 2022 Q1 - Quarterly Report

Part I. Financial Information Financial Statements (Unaudited) Presents unaudited consolidated financial statements for Q1 FY2022, covering income, balance sheets, cash flows, and detailed notes Consolidated Statements of Income Net income significantly increased to $132.4 million, driven by higher operating revenues across all segments Consolidated Income Statement Highlights (Q1 FY2022 vs Q1 FY2021) | Metric | Q1 2022 (ended Dec 31, 2021) | Q1 2021 (ended Dec 31, 2020) | Change | | :--- | :--- | :--- | :--- | | Total Operating Revenues | $546.6M | $441.2M | +23.9% | | Operating Income | $209.7M | $143.5M | +46.1% | | Net Income Available for Common Stock | $132.4M | $77.8M | +70.2% | | Diluted Earnings Per Share | $1.44 | $0.85 | +$0.59 | - The prior-year period (Q1 2021) included a $76.2 million impairment charge on oil and gas properties and a $51.1 million gain on the sale of timber properties, which significantly impacted the comparability of operating income[12] Consolidated Statements of Comprehensive Income Comprehensive income substantially increased to $369.0 million, primarily due to higher net income and derivative gains Comprehensive Income Summary (Q1 FY2022 vs Q1 FY2021) | (Thousands of U.S. Dollars) | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | | :--- | :--- | :--- | | Net Income Available for Common Stock | $132,392 | $77,774 | | Other Comprehensive Income, Before Tax | $325,720 | $48,332 | | Comprehensive Income | $368,963 | $112,790 | Consolidated Balance Sheets Total assets increased to $7.59 billion, driven by higher property, plant, and equipment and shareholders' equity Key Balance Sheet Items | (Thousands of U.S. Dollars) | Dec 31, 2021 | Sep 30, 2021 | | :--- | :--- | :--- | | Total Assets | $7,589,673 | $7,464,825 | | Net Property, Plant and Equipment | $6,490,755 | $6,384,283 | | Total Current Assets | $567,190 | $522,449 | | Total Capitalization and Liabilities | $7,589,673 | $7,464,825 | | Total Comprehensive Shareholders' Equity | $2,110,195 | $1,786,206 | | Long-Term Debt, Net | $2,629,602 | $2,628,687 | | Fair Value of Derivative Financial Instruments (Liabilities) | $290,690 | $616,410 | Consolidated Statements of Cash Flows Operating cash flow decreased to $171.5 million, with significant cash used in investing and financing activities Cash Flow Summary (Q1 FY2022 vs Q1 FY2021) | (Thousands of U.S. Dollars) | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $171,483 | $204,743 | | Net Cash Used in Investing Activities | ($169,710) | ($66,870) | | Net Cash Used in Financing Activities | ($42,846) | ($49,001) | | Net Increase (Decrease) in Cash | ($41,073) | $88,872 | Notes to Condensed Consolidated Financial Statements Provides detailed explanations of accounting policies, revenue recognition, fair value measurements, and segment information - The company's Exploration and Production segment uses the full cost method of accounting. At December 31, 2021, the calculated ceiling for capitalized costs exceeded the book value of oil and gas properties by approximately $1.3 billion, indicating no impairment was necessary for the quarter[31][33] - The Pipeline and Storage segment expects to recognize $165.2 million in revenue for the remainder of fiscal 2022 from fixed charges associated with existing transportation and storage contracts[50] - The company has outstanding commodity derivative contracts covering 371.2 Bcf of natural gas and 1,692,000 Bbls of crude oil as of December 31, 2021, to manage price risk[65] - In its Pennsylvania jurisdiction, the Utility segment began refunding $50.0 million in overcollected OPEB expenses to customers and stopped collecting these expenses in base rates, effective October 1, 2021[88] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Discusses Q1 FY2022 financial performance, highlighting increased earnings from Exploration & Production and capital resources Overview Summarizes the integrated energy business, focusing on natural gas production and recent FM100 Project completion - The FM100 Project, which upgraded a pipeline in northwestern Pennsylvania, was placed in service in December 2021. It is expected to provide incremental annual transportation revenues of approximately $50 million[96] - Seneca's companion Leidy South Project also went in service in December 2021, providing 330,000 Dth/day of incremental capacity, allowing Seneca to increase production and access premium Transco Zone 6 markets[97] Results of Operations Consolidated earnings rose to $132.4 million, primarily driven by higher commodity prices and increased production Earnings (Loss) by Segment (Thousands) | Segment | Q1 2022 (ended Dec 31, 2021) | Q1 2021 (ended Dec 31, 2020) | Increase (Decrease) | | :--- | :--- | :--- | :--- | | Exploration and Production | $62,369 | $(29,623) | $91,992 | | Pipeline and Storage | $25,168 | $24,183 | $985 | | Gathering | $23,137 | $20,550 | $2,587 | | Utility | $22,130 | $23,037 | $(907) | | Total Consolidated | $132,392 | $77,774 | $54,618 | - The prior year's (Q1 2021) results were impacted by a non-cash impairment charge of $55.2 million after-tax in the Exploration and Production segment and a $37.0 million after-tax gain on the sale of timber properties[106] Capital Resources and Liquidity Operating cash flow decreased, while capital expenditures increased, with adequate liquidity maintained through credit facilities - Net cash provided by operating activities decreased by $33.2 million year-over-year, primarily due to lower cash flow from the Utility segment related to the timing of gas cost recovery and customer refunds in Pennsylvania[141] Capital Expenditures by Segment (Millions) | Segment | Q1 2022 (ended Dec 31, 2021) | Q1 2021 (ended Dec 31, 2020) | | :--- | :--- | :--- | | Exploration and Production | $139.2 | $81.3 | | Pipeline and Storage | $24.1 | $43.7 | | Gathering | $8.9 | $8.3 | | Utility | $19.4 | $17.3 | | Total | $191.8 | $150.9 | - The company maintains $1.0 billion of unsecured committed revolving credit access across two facilities. The debt-to-capitalization ratio was 0.55 at quarter-end, well below the 0.65 covenant limit[163][164] Other Matters Covers regulatory rate matters, environmental regulations, climate change initiatives, and forward-looking statements - In New York, the NYPSC extended the system modernization tracker, allowing recovery of pipeline replacement costs through March 31, 2023, contingent on not filing a new rate case before then[179] - The company has established methane intensity reduction targets for each business and an absolute greenhouse gas emissions reduction target for the consolidated company, building on its ongoing efforts to lower its emissions profile[185] - The company highlights risks from legislative and regulatory measures addressing climate change, such as New York's CLCPA, which mandates significant greenhouse gas reductions by 2030 and 2050[186] Quantitative and Qualitative Disclosures About Market Risk Refers to the MD&A for detailed disclosures regarding the company's exposure to market risk - The report directs readers to the "Market Risk Sensitive Instruments" section in Item 2 (MD&A) for disclosures about market risk[191] Controls and Procedures Management concluded disclosure controls and procedures were effective with no material changes during the quarter - The Chief Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and procedures were effective as of December 31, 2021[192] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls[193] Part II. Other Information Legal Proceedings Refers to Note 8 and MD&A for discussions on legal, environmental, and regulatory proceedings - For information on legal proceedings, the report refers to Note 8 – Commitments and Contingencies, and the MD&A section on Other Matters – Environmental Matters[194] Risk Factors No material changes to risk factors previously disclosed in the 2021 Annual Report on Form 10-K - The risk factors disclosed in the Company's 2021 Form 10-K have not materially changed[195] Unregistered Sales of Equity Securities and Use of Proceeds Details unregistered common stock issuance to directors and issuer purchases of equity securities for compensation plans - On October 1, 2021, the company issued 8,210 unregistered shares of common stock to non-employee directors under its 2009 Non-Employee Director Equity Compensation Plan[196] Issuer Purchases of Equity Securities (Q1 FY2022) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Oct. 1 - 31, 2021 | 10,583 | $57.78 | | Nov. 1 - 30, 2021 | 14,328 | $59.11 | | Dec. 1 - 31, 2021 | 152,833 | $60.37 | | Total | 177,744 | $60.13 | - The company's share repurchase program, authorized in 2008 for eight million shares, remains active but no shares have been repurchased under it since September 2008. Approximately 6.97 million shares may still be purchased under the plan[199] Exhibits Lists exhibits filed with Form 10-Q, including equity award notices, CEO/CFO certifications, and XBRL data - Key exhibits filed include: - Forms of Award Notices for Performance Shares (Exhibits 10.1, 10.2, 10.3) - CEO and CFO certifications (Exhibits 31.1, 31.2, 32) - Interactive data files in Inline XBRL format (Exhibit 101)[200]