National Fuel Reports First Quarter 2010 Results
National Fuel Gas Company announced consolidated earnings for the first quarter of its 2010 fiscal year (the quarter ended December 31, 2009) of $64.5 million or $0.78 per share.
Quarterly operating results, before items impacting comparability, were $64.5 million, compared to $64.3 million for the prior year's first quarter.
Compared to the prior year’s first quarter, production of crude oil and natural gas increased nearly 2.0 billion cubic feet equivalent ("Bcfe"), or 20.5%, to 11.5 Bcfe. Marcellus production began to flow consistently during the quarter and made up 0.4 Bcfe of the increase in production. The Company’s production forecast for the entire 2010 fiscal year has been increased to a range between 44 and 51 Bcfe. This compares to production of 42.5 Bcfe in fiscal 2009. The previously announced range was between 42 and 50 Bcfe.
The Company placed into service the first phase of its Covington Gathering System to gather Marcellus production in Tioga County.
The second phase will extend the system south to State Forest Tract 595 and is expected to be in service in June 2010. Both phases together are expected to cost $15 million to $18 million.
Seneca-operated Marcellus Shale production was initiated through the Covington Gathering System in late November. The average daily gross production from two Seneca-operated Marcellus wells was 8.5 MMCFD in December. A third Seneca-operated well began producing into the Covington System in January.
The Company has entered into contracts with customers and has initiated the regulatory approval process or started construction with respect to three interstate pipeline projects to transport Marcellus production. The three projects (Tioga County Extension Project, Line N Expansion Project and Lamont Project) have preliminary cost estimates totaling $74 million, and have planned in-service dates between June 2010 and November 2011.
The Company is updating its GAAP earnings guidance range for fiscal 2010 to a range of $2.40 to $2.70 per share. The previous earnings guidance had been a range between $2.30 to $2.65 per share. This guidance assumes flat NYMEX equivalent pricing of $5.00 per MMBtu for natural gas and $75.00 per Bbl for crude oil for unhedged production for the remainder of the fiscal year.
David F. Smith, President and Chief Executive Officer of National Fuel Gas Company stated, "Financial results for the first quarter of fiscal year 2010 were in line with our expectations, as the diversity of our business segments allowed National Fuel to post consistent and steady results in spite of the lower natural gas price environment.
"Operationally, we had another outstanding quarter. In the Exploration and Production segment, we achieved first production from our Seneca-operated Marcellus Shale program, and realized significant increases in production from our conventional Upper Devonian drilling program. As a result, our natural gas production in the East grew by 50% over the prior year. To further expand our foothold in the Marcellus Shale, Seneca Resources was the successful bidder on two tracts of acreage offered by the Pennsylvania Department of Conservation and Natural Resources in their January 2010 lease sale. This addition of approximately 18,000 acres, that is geographically similar to our existing acreage in the area, will help Seneca continue its developmental drilling program in this region, as we identify additional focus areas for drilling on our legacy acreage.
"In the Pipeline and Storage segment, we continue to make progress on important pipeline projects that will help alleviate infrastructure constraints in this region. Overall, we’re very pleased with our achievements and look forward to building on our successes in the quarters to come."