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National Fuel reports third quarter earnings

WILLIAMSVILLE — National Fuel Gas Company announced consolidated results for the third quarter of its 2017 fiscal year and for the nine months ended June 30.

Ronald J. Tanski, President and Chief Executive Officer of National Fuel Gas Company, stated: “Our fiscal third quarter was a strong one with each of our business segments posting solid financial results that were in-line with expectations. Across the system, our talented teams continue to execute on our operational plans. As is typical during the summer period, our utility and transmission pipeline construction crews are busy maintaining the safety and integrity of our thousands of miles of pipelines that will assure safe, reliable, and affordable natural gas services for our region and local communities.

“As we look ahead, we continue to manage around the delay in the Northern Access Project and see plenty of opportunity in the meantime to extract value from our world class natural gas assets in Appalachia. After a year of testing, we believe we have de-risked the Utica potential in our Western Development Area, adding years of economic drilling inventory on the very same acreage we have already developed for the Marcellus. Over the next 18 months, we will continue to optimize our well designs and transition into a Utica development program that will leverage existing upstream and midstream infrastructure to drive capital, operational, and marketing efficiencies. While the commodities futures markets indicate that Seneca Resources, our exploration and production company, will likely achieve lower prices for its production next year, our proven success in driving down finding and development costs and our ability to develop our upstream and midstream assets efficiently allows us to continue to grow our integrated business, maintain a strong financial position, and add shareholder value throughout the commodity price cycle.”

The Company is raising and tightening its earnings guidance for fiscal 2017 to a range of $3.25 to $3.35 per share to reflect the impact of actual results for the nine months ended June 30.

The Company is also initiating preliminary earnings, production, capital expenditures, and certain business segment operational guidance for fiscal 2018. National Fuel is projecting that its fiscal 2018 earnings will be within a range of $2.70 to $3.05 per share, or $2.875 per share at the midpoint of the range. The $0.425 per share decrease from the fiscal 2017 earnings guidance midpoint is being driven primarily by lower expected price realizations after hedging on Seneca’s natural gas and oil production and higher expected operating costs at the Company’s regulated businesses, offset partially by the impact of normal weather on the Utility segment’s earnings and an increase in projected natural gas production in Appalachia, which will benefit earnings for the Company’s Exploration and Production and Gathering segments.

Seneca’s fiscal 2018 net production is expected to be in the range of 185 to 200 Bcfe. Natural gas production in the East Division is expected to be in a range of 165 to 180 Bcf, an 11 percent increase versus fiscal 2017. Seneca added a second rig and resumed Marcellus shale development activities in Lycoming County, Pa. this past May, which is the main driver of the 17.5 Bcf increase. Seneca’s oil operations in California are expected to produce approximately 20 Bcfe, relatively flat versus fiscal 2017. The midpoint of the production range does not assume any price related curtailments.

Due to the expiration of physical firm sales and financial hedge contracts with favorable pricing relative to current market prices and hedge book, Seneca is projecting a significant decrease in natural gas and oil price realizations in fiscal 2018. Seneca’s fiscal 2018 natural gas production is 52 percent hedged at an average hedge price of $2.90 per MMBtu. Assuming NYMEX natural gas pricing of $3.00 per MMBtu, average Appalachian basin spot prices of $2.40 per MMBtu, and adjustments for transportation costs, contracted firm sale differentials, and Btu uplift, Seneca expects its fiscal 2018 net realized gas price after hedging to be approximately $2.55 per Mcf, which is a decrease of $0.41 per Mcf from Seneca’s realized pricing after hedging of $2.96 per Mcf for the nine months ended June 30, 2017. Seneca is approximately 45 percent hedged on an expected 3 million bbls of oil production in fiscal 2018 at an average hedge price of $55.46 per Bbl.

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