NFG National Fuel Gas Co

National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated results for the fiscal first quarter ended December 31, 2016.

FISCAL 2017 FIRST QUARTER SUMMARY

• Consolidated net income of $88.9 million or $1.04 per share compared to a consolidated net loss of $189.1 million or $2.23 per share in the prior year
• Adjusted EBITDA of $228.3 million, up from $204.8 million in the prior year (non-GAAP reconciliation on page 21)
• Net production of 44.9 Bcfe, an 18% increase from prior year and 13% increase from the fiscal 2016 fourth quarter
• Seneca lease operating and transportation expense of $0.88 per Mcfe, down $0.15 per Mcfe or 15% from the prior year
• Seneca G&A expense of $0.29 per Mcfe, down $0.23 per Mcfe or 44% from prior year
• Seneca DD&A expense of $0.65 per Mcfe, down $0.51 per Mcfe or 44% from the prior year
• Gathering revenues of $27.9 million on 50.6 Bcf of throughput, up $9.1 million from the prior year
• Utility net income up $2.6 million or $0.03 per share on weather that was more than 17% colder than last year
• Company is raising and tightening fiscal 2017 earnings guidance to a range of $3.10 to $3.30 per share

OPERATING RESULTS

  Three Months Ended December 31, (in thousands except per share amounts) 2016   2015 Reported GAAP earnings (loss) $ 88,908 $ (189,109 ) Items impacting comparability: Impairment of oil and gas properties (E&P) 435,451 Tax impact of impairment of oil and gas properties (182,889 ) Joint development agreement professional fees (E&P) 4,682 Tax impact of joint development agreement professional fees   (1,966 ) Operating Results $ 88,908   $ 66,169     Reported GAAP earnings (loss) per share $ 1.04 $ (2.23 ) Items impacting comparability: Impairment of oil and gas properties (E&P) 5.12 Tax impact of impairment of oil and gas properties (2.15 ) Joint development agreement professional fees (E&P) 0.06 Tax impact of joint development agreement professional fees   (0.02 ) Operating Results per diluted share $ 1.04   $ 0.78  

MANAGEMENT COMMENTS

Ronald J. Tanski, President and Chief Executive Officer of National Fuel Gas Company, stated: “Our 2017 fiscal year is off to a great start. Aside from our pipeline and storage segment, where earnings were down modestly, each of the other segments improved its financial performance over the prior year. We are particularly pleased that natural gas prices increased to levels that allowed Seneca to return wells to production. Seneca’s increased production, and the associated throughput on our gathering systems, were the main drivers that allowed us to exceed our guidance.

“We expect to keep moving forward with our plans to build our Northern Access pipeline by the middle of next fiscal year. In the meantime, our efforts will remain focused on the efficient development of our Marcellus acreage to prepare for the Northern Access capacity while continuing to evaluate our opportunities in the Utica Shale on the very same acreage. Together, these stacked formations provide plenty of running room on our acreage and will fuel our growth for an extended period."

DISCUSSION OF RESULTS BY SEGMENT

The following discussion of the earnings of each segment is summarized in a tabular form on pages 7 and 8 of this report. It may be helpful to refer to those tables while reviewing this discussion. Note that management defines Operating Results as reported GAAP earnings before items impacting comparability and Adjusted EBITDA as reported GAAP earnings before the following items: interest expense, depreciation and amortization, interest and other income, impairments, items impacting comparability, and income taxes.

Upstream Business

Exploration and Production Segment

The Exploration and Production segment operations are carried out by Seneca Resources Corporation ("Seneca"). Seneca explores for, develops and produces natural gas and oil reserves, primarily in Pennsylvania and California.

  Three Months Ended December 31, (in thousands except per share amounts) 2016   2015   Variance Net Income / (Loss) $ 35,080   $ (237,086 )   $ 272,166 Net Income / (Loss) Per Share (Diluted) $ 0.41 $ (2.80 ) $ 3.21 Adjusted EBITDA $ 102,476 $ 91,140 $ 11,336

Net income in the Exploration and Production segment in the first quarter was $35.1 million or $0.41 per share, compared to a net loss of $237.1 million or $2.80 per share in the prior year first quarter, an increase of $272.2 million, or $3.21 per share. Excluding the impact of last year's impairment charge, the increase in the Exploration and Production segment's first quarter earnings is mainly due to higher natural gas production and lower operating expenses, offset partially by a decrease in oil production and lower realized oil and natural gas prices after the impact of hedging. In the prior year first quarter, Seneca recorded a $435.5 million ($252.6 million after-tax) ceiling test impairment charge to reduce the value of Seneca’s oil and gas properties. There were no ceiling test impairment charges in this year’s first quarter.

The full cost method of accounting requires that Seneca perform a quarterly “ceiling test” to compare the present value of future revenues from its oil and natural gas reserves based on an unweighted arithmetic average of the first day of the month oil and gas prices for each month within the 12-month period prior to the end of the reporting period (“the ceiling”) with the book value of those reserves at the balance sheet date. If the book value of the reserves exceeds the ceiling, a non-cash impairment charge must be recorded in order to reduce the book value of the reserves to the calculated ceiling. At December 31, 2016, the ceiling exceeded the book value of the oil and gas properties by approximately $71.5 million. While possible, Seneca does not expect to incur any impairment charges in fiscal 2017 due to the improvement in oil and gas prices and lower lease operating expenses and development costs.

Seneca's first quarter net production was 44.9 billion cubic feet equivalent ("Bcfe"), an increase of 6.9 Bcfe or 18 percent versus the prior year first quarter, and 5.1 Bcfe or 13 percent versus the fourth quarter of fiscal 2016. Net natural gas production increased 7.0 Bcf or 21 percent versus the prior year due mainly to higher natural gas production in Appalachia. An improvement in local natural gas pricing in Pennsylvania allowed Seneca to produce most of its available production volumes since November 1, 2016, selling 8.6 Bcf (net) in the daily spot markets and under new seasonal firm sales agreements during the quarter. Seneca voluntarily curtailed a modest 3.5 Bcf (net) of natural gas production during the quarter, which was a decrease from the 14.6 Bcf (net) in the prior year first quarter. For the remainder of fiscal 2017, Seneca has entered into an additional 6.0 Bcf (net) of seasonal firm sales agreements that will further reduce its daily local spot market exposure.

Seneca’s crude oil production decreased 27 thousand barrels ("Mbbl") or 4 percent due mainly to the lingering impact of a disruption in steam flood operations in the North Midway Sunset field in early fiscal 2016. Field production at North Midway Sunset is expected to return to pre-disruption levels in the second quarter of fiscal 2017.

Seneca's average realized natural gas price, after the impact of hedging, for the first quarter was $2.97 per thousand cubic feet ("Mcf"), a decrease of $0.19 per Mcf versus the prior year. Seneca's average realized oil price, after the impact of hedging, was $54.71 per barrel ("Bbl"), a decrease of $5.05 per Bbl. Seneca's average realized natural gas and oil prices benefited from an uplift of $0.58 per Mcf and $10.89 per Bbl, respectively, from financial hedges settled during the quarter. At the midpoint of Seneca’s fiscal 2017 production guidance range, Seneca is 82 percent and 55 percent hedged on projected natural gas and oil production, respectively, for the remainder of fiscal 2017 (see page 5 for earnings guidance update).

Depreciation, depletion and amortization ("DD&A") expense decreased $15.0 million due to lower per unit DD&A, offset partially by the impact of higher production. Seneca’s per unit DD&A decreased by $0.51 per Mcf equivalent ("Mcfe") to $0.65 per Mcfe due to a lower depletable fixed asset balance resulting mainly from the ceiling test impairment charges recorded during the prior four quarters.

Seneca’s General & Administrative (“G&A”) expense decreased $7.0 million due to lower personnel costs and nonrecurring professional fees recorded in the prior year. In the prior year first quarter, Seneca incurred $4.7 million of professional and legal expenses relating to the joint development agreement that Seneca entered into in December 2015. Seneca’s per unit of production G&A expense for the quarter was $0.29 per Mcfe, a decrease of $0.23 per Mcfe or 44 percent from the prior year.

Lease operating and transportation expense ("LOE") increased $0.7 million due mainly to higher production, which was partially offset by lower per unit LOE expense. Per unit LOE expense decreased from $1.03 per Mcfe to $0.88 per Mcfe. The $0.15 per Mcfe improvement is largely the result of higher Appalachian natural gas production, which carries lower LOE costs relative to Seneca’s California oil production, as well as a general reduction in well repair and maintenance costs across Seneca's California and Appalachia divisions.

Midstream Businesses

Pipeline and Storage Segment

The Pipeline and Storage segment’s operations are carried out by National Fuel Gas Supply Corporation (“Supply Corporation”) and Empire Pipeline, Inc. (“Empire”). The Pipeline and Storage segment provides natural gas transportation and storage services to affiliated and non-affiliated companies through an integrated system of pipelines and underground natural gas storage fields in western New York and Pennsylvania.

    Three Months Ended December 31, (in thousands except per share amounts) 2016   2015   Variance Net Income / (Loss) $ 19,368   $ 21,276   $ (1,908 ) Net Income / (Loss) Per Share (Diluted) $ 0.23 $ 0.25 $ (0.02 ) Adjusted EBITDA $ 48,014 $ 50,741 $ (2,727 )

The Pipeline and Storage segment's first quarter earnings decreased from the prior year due primarily to higher Operation and Maintenance ("O&M") expense and lower Other Income. O&M expense increased $2.6 million due to higher personnel costs and an increase in expenses associated with the operation of the segment’s expanded compressor facilities. Other Income decreased $0.9 million as the Company recorded lower allowance for funds used during construction (“AFUDC”) following the completion of the expansion projects that were placed in-service during the prior year first quarter.

Operating revenues for the Pipeline & Storage segment were relatively flat when compared to the prior year first quarter. The increase in revenues resulting from a full quarter of revenue from Supply Corporation’s Northern Access 2015 project and Empire’s Tuscarora Lateral Project, which were placed in-service during the prior year first quarter, were more than offset by a reduction in Supply Corporation and Empire’s rates that went into effect following recent rate case settlements.

Gathering Segment

The Gathering segment’s operations are carried out by National Fuel Gas Midstream Corporation’s subsidiary limited liability companies. The Gathering segment constructs, owns and operates natural gas gathering pipelines and compression facilities in the Appalachian region which currently delivers Seneca’s gross Appalachian production to the interstate pipeline system.

    Three Months Ended December 31, (in thousands except per share amounts) 2016   2015   Variance Net Income / (Loss) $ 10,981   $ 4,921   $ 6,060 Net Income / (Loss) Per Share (Diluted) $ 0.13 $ 0.06 $ 0.07 Adjusted EBITDA $ 25,101 $ 16,458 $ 8,643

The Gathering segment’s first quarter earnings increased $6.1 million or 123 percent versus the prior year on higher revenues. Operating revenues increased $9.1 million as the increase in Seneca’s gross Appalachian natural gas production, which includes production from joint development wells, helped drive higher volumes across the Company’s gathering systems. The Gathering segment transported 50.6 Bcf on its systems in the first quarter, up 16.8 Bcf or 50 percent from the prior year. While operating revenues were up 48 percent for the quarter, operating expenses increased only 2 percent versus the prior year.

Downstream Businesses

Utility Segment

The Utility segment operations are carried out by National Fuel Gas Distribution Corporation (“Distribution”), which sells or transports natural gas to customers located in western New York and northwestern Pennsylvania.

    Three Months Ended December 31, (in thousands except per share amounts) 2016   2015   Variance Net Income / (Loss) $ 21,175   $ 18,606   $ 2,569 Net Income / (Loss) Per Share (Diluted) $ 0.25 $ 0.22 $ 0.03 Adjusted EBITDA $ 52,331 $ 45,918 $ 6,413

The Utility segment’s earnings increased $2.6 million or 14 percent due mainly to colder weather, higher customer usage and the positive impact of routine regulatory adjustments, offset partially by higher O&M and DD&A expenses. Weather in Distribution’s Pennsylvania service territory was 17.9 percent colder on average than last year, resulting in higher retail residential and transportation customer throughput and revenues. In New York, the impact of weather variations on earnings is largely mitigated by that jurisdiction’s weather normalization clause. O&M expense increased $2.9 million versus the prior year due mainly to higher personnel costs.

Energy Marketing Segment

The Energy Marketing segment's operations are carried out by National Fuel Resources, Inc. (“NFR”). NFR markets natural gas to industrial, wholesale, commercial, public authority and residential customers primarily in western and central New York and northwestern Pennsylvania, offering competitively priced natural gas to its customers.

    Three Months Ended December 31, (in thousands except per share amounts) 2016   2015   Variance Net Income / (Loss) $ 1,782   $ 1,223   $ 559 Net Income / (Loss) Per Share (Diluted) $ 0.02 $ 0.01 $ 0.01 Adjusted EBITDA $ 2,846 $ 1,846 $ 1,000

The Energy Marketing segment's first quarter earnings increased $0.6 million or 46 percent due to higher margins. NFR’s margins were positively impacted by colder weather, which increased retail customer usage.

Corporate and All Other

The Corporate and All Other category earnings of $0.5 million or $0.00 per share for the quarter ended December 31, 2016, compares to earnings of $2.0 million or $0.03 per share in the prior year first quarter. The decrease is due to higher corporate operating expenses and higher income taxes.

EARNINGS GUIDANCE

The Company is revising its earnings guidance for fiscal 2017 to a range of $3.10 to $3.30 per share. The Company is also updating fiscal 2017 capital expenditure and production guidance and revising some of its Exploration & Production forecast assumptions.

  Updated FY 2017 Guidance   Previous FY 2017 Guidance Consolidated Earnings per Share $3.10 to $3.30 $2.85 to $3.15   Capital Expenditures (Millions) Exploration & Production (1) $180 - $220 $180 - $220 Pipeline & Storage $200 - $250 $390 - $440 Gathering $65 - $75 $65 - $75 Utility $90 - $100 $90 - $100 Consolidated Capital Expenditures $535 - $645 $725 - $835   Exploration & Production Segment Guidance NYMEX Natural Gas Price Assumption $3.25 $3.25 NYMEX Crude Oil Price Assumption $55.00 $53.00   Production (Bcfe) East Division - Appalachia 135 to 153 125 to 148 West Division - California 20 to 22 20 to 22 Total Production 155 to 175 145 to 170   E&P Operating Costs ($/Mcfe) LOE $0.95 - $1.05 $0.95 - $1.05 G&A $0.35 - $0.40 $0.35 - $0.40 DD&A $0.65 - $0.70 $0.65 - $0.75 (1)   Net of initial conveyance proceeds received from joint development partner for working interest in joint development wells

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, February 3, 2017, at 11 a.m. Eastern Time to discuss this announcement. There are two ways to access this call. For those with Internet access, visit the NFG Investor Relations News & Events page at National Fuel’s website at investor.nationalfuelgas.com. For those without Internet access, audio access is also provided by dialing (toll-free) 877-201-0168, using conference ID number “47888632.” For those unable to listen to the live conference call, an audio replay will be available approximately two hours following the teleconference at the same website link and by phone at (toll-free) 855-859-2056 or 404-537-3406, using conference ID number “47888632.” Both the webcast and telephonic replay will be available until the close of business on Friday, February 10, 2017.

National Fuel is an integrated energy company reporting financial results for five operating segments: Exploration and Production, Pipeline and Storage, Gathering, Utility, and Energy Marketing. Additional information about National Fuel is available at www.nationalfuelgas.com.

Certain statements contained herein, including statements identified by the use of the words “anticipates,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “predicts,” “projects,” “believes,” “seeks,” “will,” “may” and similar expressions, and statements which are other than statements of historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. The Company’s expectations, beliefs and projections contained herein are expressed in good faith and are believed to have a reasonable basis, but there can be no assurance that such expectations, beliefs or projections will result or be achieved or accomplished. In addition to other factors, the following are important factors that could cause actual results to differ materially from those discussed in the forward-looking statements: delays or changes in costs or plans with respect to Company projects or related projects of other companies, including difficulties or delays in obtaining necessary governmental approvals, permits or orders or in obtaining the cooperation of interconnecting facility operators; governmental/regulatory actions, initiatives and proceedings, including those involving rate cases (which address, among other things, target rates of return, rate design and retained natural gas), environmental/safety requirements, affiliate relationships, industry structure, and franchise renewal; changes in laws, regulations or judicial interpretations to which the Company is subject, including those involving derivatives, taxes, safety, employment, climate change, other environmental matters, real property, and exploration and production activities such as hydraulic fracturing; impairments under the SEC’s full cost ceiling test for natural gas and oil reserves; changes in the price of natural gas or oil; financial and economic conditions, including the availability of credit, and occurrences affecting the Company’s ability to obtain financing on acceptable terms for working capital, capital expenditures and other investments, including any downgrades in the Company’s credit ratings and changes in interest rates and other capital market conditions; factors affecting the Company’s ability to successfully identify, drill for and produce economically viable natural gas and oil reserves, including among others geology, lease availability, title disputes, weather conditions, shortages, delays or unavailability of equipment and services required in drilling operations, insufficient gathering, processing and transportation capacity, the need to obtain governmental approvals and permits, and compliance with environmental laws and regulations; increasing health care costs and the resulting effect on health insurance premiums and on the obligation to provide other post-retirement benefits; changes in price differentials between similar quantities of natural gas or oil sold at different geographic locations, and the effect of such changes on commodity production, revenues and demand for pipeline transportation capacity to or from such locations; other changes in price differentials between similar quantities of natural gas or oil having different quality, heating value, hydrocarbon mix or delivery date; the cost and effects of legal and administrative claims against the Company or activist shareholder campaigns to effect changes at the Company; uncertainty of oil and gas reserve estimates; significant differences between the Company’s projected and actual production levels for natural gas or oil; changes in demographic patterns and weather conditions; changes in the availability, price or accounting treatment of derivative financial instruments; changes in economic conditions, including global, national or regional recessions, and their effect on the demand for, and customers’ ability to pay for, the Company’s products and services; the creditworthiness or performance of the Company’s key suppliers, customers and counterparties; economic disruptions or uninsured losses resulting from major accidents, fires, severe weather, natural disasters, terrorist activities, acts of war, cyber attacks or pest infestation; significant differences between the Company’s projected and actual capital expenditures and operating expenses; changes in laws, actuarial assumptions, the interest rate environment and the return on plan/trust assets related to the Company’s pension and other post-retirement benefits, which can affect future funding obligations and costs and plan liabilities; or increasing costs of insurance, changes in coverage and the ability to obtain insurance. The Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date thereof.

                  NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS QUARTER ENDED DECEMBER 31, 2016 (Unaudited)     Upstream

MidstreamBusinesses

DownstreamBusinesses

  Exploration & Pipeline & Energy Corporate / (Thousands of Dollars) Production   Storage   Gathering   Utility   Marketing   All Other   Consolidated*   First quarter 2016 GAAP earnings $ (237,086 ) $ 21,276 $ 4,921 $ 18,606 $ 1,223 $ 1,951 $ (189,109 ) Items impacting comparability: Impairment of oil and gas producing properties 435,451 435,451 Tax impact of impairment of oil and gas producing properties (182,889 ) (182,889 ) Joint development agreement professional fees 4,682 4,682 Tax impact of joint development agreement professional fees (1,966 )                       (1,966 ) First quarter 2016 operating results 18,192 21,276 4,921 18,606 1,223 1,951 66,169   Drivers of operating results Higher (lower) crude oil prices (2,367 ) (2,367 ) Higher (lower) natural gas prices (5,063 ) (5,063 ) Higher (lower) natural gas production 14,417 14,417 Higher (lower) crude oil production (1,061 ) (1,061 ) Lower (higher) lease operating and transportation expenses (446 ) (446 ) Lower (higher) depreciation / depletion 9,737 386 (965 ) 9,158   Higher (lower) gathering and processing revenues 5,916 5,916 Lower (higher) other operating expenses 1,880 (1,722 ) (313 ) (1,872 ) (611 ) (2,638 )   Colder weather 3,327 3,327 Higher usage 1,480 1,480 Regulatory true-up adjustments 1,314 1,314   Higher (lower) margins 596 596   Higher (lower) AFUDC** (895 ) (895 )   Lower (higher) interest expense 688 635 1,323   Lower (higher) income tax expense / effective tax rate (529 ) (1,148 ) (1,677 )   All other / rounding (368 )   323     (178 )   (715 )   (37 )   330     (645 ) First quarter 2017 GAAP earnings $ 35,080     $ 19,368     $ 10,981     $ 21,175     $ 1,782     $ 522     $ 88,908     * Amounts do not reflect intercompany eliminations ** AFUDC = Allowance for Funds Used During Construction                 NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE QUARTER ENDED DECEMBER 31, 2016 (Unaudited)     Upstream

MidstreamBusinesses

DownstreamBusinesses

  Exploration & Pipeline & Energy Corporate / Production   Storage   Gathering   Utility   Marketing   All Other   Consolidated*   First quarter 2016 GAAP earnings $ (2.80 ) $ 0.25 $ 0.06 $ 0.22 $ 0.01 $ 0.03 $ (2.23 ) Items impacting comparability: Impairment of oil and gas producing properties 5.12 5.12 Tax impact of impairment of oil and gas producing properties (2.15 ) (2.15 ) Joint development agreement professional fees 0.06 0.06 Tax impact of joint development agreement professional fees (0.02 )                       (0.02 ) First quarter 2016 operating results 0.21 0.25 0.06 0.22 0.01 0.03 0.78   Drivers of operating results Higher (lower) crude oil prices (0.03 ) (0.03 ) Higher (lower) natural gas prices (0.06 ) (0.06 ) Higher (lower) natural gas production 0.17 0.17 Higher (lower) crude oil production (0.01 ) (0.01 ) Lower (higher) lease operating and transportation expenses (0.01 ) (0.01 ) Lower (higher) depreciation / depletion 0.11 — (0.01 ) 0.10   Higher (lower) gathering and processing revenues 0.07 0.07 Lower (higher) other operating expenses 0.02 (0.02 ) — (0.02 ) (0.01 ) (0.03 )   Colder weather 0.04 0.04 Higher usage 0.02 0.02 Regulatory true-up adjustments 0.02 0.02   Higher (lower) margins 0.01 0.01   Higher (lower) AFUDC** (0.01 ) (0.01 )   Lower (higher) interest expense 0.01 0.01 0.02   Lower (higher) income tax expense / effective tax rate (0.01 ) (0.01 ) (0.02 )   All other / rounding 0.01     0.01     (0.01 )   (0.02 )   —     (0.01 )   (0.02 ) First quarter 2017 GAAP earnings $ 0.41     $ 0.23     $ 0.13     $ 0.25     $ 0.02     $ —     $ 1.04     * Amounts do not reflect intercompany eliminations ** AFUDC = Allowance for Funds Used During Construction       NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES   (Thousands of Dollars, except per share amounts) Three Months Ended December 31, (Unaudited)

SUMMARY OF OPERATIONS

2016   2015 Operating Revenues: Utility and Energy Marketing Revenues $ 207,780 $ 168,832 Exploration and Production and Other Revenues 161,694 152,884 Pipeline and Storage and Gathering Revenues 53,026   53,479   422,500 375,195 Operating Expenses: Purchased Gas 70,243 42,068 Operation and Maintenance: Utility and Energy Marketing 50,422 47,549 Exploration and Production and Other 30,461 45,575 Pipeline and Storage and Gathering 22,660 19,568 Property, Franchise and Other Taxes 20,379 20,357 Depreciation, Depletion and Amortization 56,196 70,551 Impairment of Oil and Gas Producing Properties —   435,451   250,361 681,119   Operating Income (Loss) 172,139 (305,924 )   Other Income (Expense): Interest Income 1,600 1,799 Other Income 1,614 2,418 Interest Expense on Long-Term Debt (29,103 ) (30,372 ) Other Interest Expense (910 ) (1,380 )   Income (Loss) Before Income Taxes 145,340 (333,459 )   Income Tax Expense (Benefit) 56,432   (144,350 )   Net Income (Loss) Available for Common Stock $ 88,908   $ (189,109 )   Earnings (Loss) Per Common Share: Basic $ 1.04   $ (2.23 ) Diluted $ 1.04   $ (2.23 )   Weighted Average Common Shares: Used in Basic Calculation 85,189,851 84,651,233 Used in Diluted Calculation 85,797,989 84,651,233 NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited)   December 31,   September 30, (Thousands of Dollars)   2016   2016   ASSETS Property, Plant and Equipment $9,620,006 $9,539,581 Less - Accumulated Depreciation, Depletion and Amortization   5,133,877     5,085,099   Net Property, Plant and Equipment   4,486,129     4,454,482     Current Assets: Cash and Temporary Cash Investments 136,493 129,972 Hedging Collateral Deposits — 1,484 Receivables - Net 161,025 133,201 Unbilled Revenue 59,121 18,382 Gas Stored Underground 23,431 34,332 Materials and Supplies - at average cost 34,170 33,866 Unrecovered Purchased Gas Costs 3,697 2,440 Other Current Assets   49,778     59,354   Total Current Assets   467,715     413,031     Other Assets: Recoverable Future Taxes 179,941 177,261 Unamortized Debt Expense 1,556 1,688 Other Regulatory Assets 323,448 320,750 Deferred Charges 22,215 20,978 Other Investments 114,721 110,664 Goodwill 5,476 5,476 Prepaid Post-Retirement Benefit Costs 17,960 17,649 Fair Value of Derivative Financial Instruments 42,065 113,804 Other   491     604   Total Other Assets   707,873     768,874   Total Assets   $5,661,717     $5,636,387     CAPITALIZATION AND LIABILITIES Capitalization: Comprehensive Shareholders' Equity Common Stock, $1 Par Value Authorized - 200,000,000 Shares; Issued and Outstanding - 85,292,570 Shares and 85,118,886 Shares, Respectively $85,293 $85,119 Paid in Capital 775,868 771,164 Earnings Reinvested in the Business 762,641 676,361 Accumulated Other Comprehensive Loss   (54,859 )   (5,640 ) Total Comprehensive Shareholders' Equity 1,568,943 1,527,004 Long-Term Debt, Net of Unamortized Discount and Debt Issuance Costs   2,086,817     2,086,252   Total Capitalization   3,655,760     3,613,256     Current and Accrued Liabilities: Notes Payable to Banks and Commercial Paper — — Current Portion of Long-Term Debt — — Accounts Payable 113,136 108,056 Amounts Payable to Customers 3,231 19,537 Dividends Payable 34,544 34,473 Interest Payable on Long-Term Debt 28,985 34,900 Customer Advances 13,779 14,762 Customer Security Deposits 16,692 16,019 Other Accruals and Current Liabilities 88,519 74,430 Fair Value of Derivative Financial Instruments   7,312     1,560   Total Current and Accrued Liabilities   306,198     303,737     Deferred Credits: Deferred Income Taxes 803,166 823,795 Taxes Refundable to Customers 93,940 93,318 Unamortized Investment Tax Credit 340 383 Cost of Removal Regulatory Liability 195,544 193,424 Other Regulatory Liabilities 104,054 99,789 Pension and Other Post-Retirement Liabilities 272,672 277,113 Asset Retirement Obligations 113,194 112,330 Other Deferred Credits   116,849     119,242   Total Deferred Credits   1,699,759     1,719,394   Commitments and Contingencies   —     —   Total Capitalization and Liabilities   $5,661,717     $5,636,387         NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended December 31, (Thousands of Dollars)   2016   2015   Operating Activities: Net Income (Loss) Available for Common Stock $ 88,908 $ (189,109 ) Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities: Impairment of Oil and Gas Producing Properties — 435,451 Depreciation, Depletion and Amortization 56,196 70,551 Deferred Income Taxes 44,852 (140,013 ) Excess Tax Benefits Associated with Stock-Based Compensation Awards — (226 ) Stock-Based Compensation 2,482 960 Other 3,607 3,418 Change in: Hedging Collateral Deposits 1,484 1,573 Receivables and Unbilled Revenue (67,395 ) (31,150 ) Gas Stored Underground and Materials and Supplies 10,597 3,466 Unrecovered Purchased Gas Costs (1,257 ) — Other Current Assets 9,576 (5,254 ) Accounts Payable 18,805 (20,784 ) Amounts Payable to Customers (16,306 ) (11,702 ) Customer Advances (983 ) 7,189 Customer Security Deposits 673 267 Other Accruals and Current Liabilities 5,919 (14,353 ) Other Assets (8,389 ) 885 Other Liabilities   (4,122 )   2,904   Net Cash Provided by Operating Activities   $ 144,647     $ 114,073     Investing Activities: Capital Expenditures $ (106,053 ) $ (186,437 ) Net Proceeds from Sale of Oil and Gas Producing Properties 5,759 10,574 Other   (4,297 )   (15,756 ) Net Cash Used in Investing Activities   $ (104,591 )   $ (191,619 )   Financing Activities: Changes in Notes Payable to Banks and Commercial Paper $ — $ 31,400 Excess Tax Benefits Associated with Stock-Based Compensation Awards — 226 Dividends Paid on Common Stock (34,473 ) (33,415 ) Net Proceeds From Issuance of Common Stock   938     2,068   Net Cash (Used in) Provided by Financing Activities   $ (33,535 )   $ 279     Net Increase (Decrease) in Cash and Temporary Cash Investments 6,521 (77,267 ) Cash and Temporary Cash Investments at Beginning of Period   129,972     113,596   Cash and Temporary Cash Investments at December 31   $ 136,493     $ 36,329           NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES   SEGMENT OPERATING RESULTS AND STATISTICS (UNAUDITED)   UPSTREAM BUSINESS     Three Months Ended (Thousands of Dollars, except per share amounts) December 31,

EXPLORATION AND PRODUCTION SEGMENT

2016   2015   Variance Total Operating Revenues $ 160,932     $ 151,965     $ 8,967     Operating Expenses: Operation and Maintenance: General and Administrative Expense 12,974 19,955 (6,981 ) Lease Operating and Transportation Expense 39,708 39,022 686 All Other Operation and Maintenance Expense 2,552 3,145 (593 ) Property, Franchise and Other Taxes 3,222 3,385 (163 ) Depreciation, Depletion and Amortization 29,053 44,033 (14,980 ) Impairment of Oil and Gas Producing Properties —     435,451     (435,451 ) 87,509     544,991     (457,482 )   Operating Income (Loss) 73,423 (393,026) 466,449   Other Income (Expense): Interest Income 86 667 (581 ) Interest Expense (13,523 )   (14,582 )   1,059     Income (Loss) Before Income Taxes 59,986 (406,941 ) 466,927 Income Tax Expense (Benefit) 24,906     (169,855 )   194,761   Net Income (Loss) $ 35,080     $ (237,086 )   $ 272,166     Net Income (Loss) Per Share (Diluted) $ 0.41     $ (2.80 )   $ 3.21         NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES   SEGMENT OPERATING RESULTS AND STATISTICS (UNAUDITED)   MIDSTREAM BUSINESSES     Three Months Ended (Thousands of Dollars, except per share amounts) December 31,

PIPELINE AND STORAGE SEGMENT

  2016   2015   Variance Revenues from External Customers $ 53,000 $ 53,354 $ (354 ) Intersegment Revenues 22,155     22,183     (28 ) Total Operating Revenues 75,155     75,537     (382 )   Operating Expenses: Purchased Gas 222 458 (236 ) Operation and Maintenance 20,242 17,593 2,649 Property, Franchise and Other Taxes 6,677 6,745 (68 ) Depreciation, Depletion and Amortization 9,662     10,256     (594 ) 36,803     35,052     1,751     Operating Income 38,352 40,485 (2,133 )   Other Income (Expense): Interest Income 273 111 162 Other Income 686 1,582 (896 ) Interest Expense (8,347 )   (8,038 )   (309 )   Income Before Income Taxes 30,964 34,140 (3,176 ) Income Tax Expense 11,596     12,864     (1,268 ) Net Income $ 19,368     $ 21,276     $ (1,908 )   Net Income Per Share (Diluted) $ 0.23     $ 0.25     $ (0.02 )     Three Months Ended December 31,

GATHERING SEGMENT

2016   2015   Variance Revenues from External Customers $ 26 $ 125 $ (99 ) Intersegment Revenues 27,840     18,640     9,200   Total Operating Revenues 27,866     18,765     9,101     Operating Expenses: Operation and Maintenance 2,754 2,273 481 Property, Franchise and Other Taxes 11 34 (23 ) Depreciation, Depletion and Amortization 3,880     4,210     (330 ) 6,645     6,517     128     Operating Income 21,221 12,248 8,973   Other Income (Expense): Interest Income 146 34 112 Other Income 1 1 — Interest Expense (2,093 )   (3,070 )   977     Income Before Income Taxes 19,275 9,213 10,062 Income Tax Expense 8,294     4,292     4,002   Net Income $ 10,981     $ 4,921     $ 6,060     Net Income Per Share (Diluted) $ 0.13     $ 0.06     $ 0.07           NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES   SEGMENT OPERATING RESULTS AND STATISTICS (UNAUDITED)   DOWNSTREAM BUSINESSES     Three Months Ended (Thousands of Dollars, except per share amounts) December 31,

UTILITY SEGMENT

2016   2015   Variance Revenues from External Customers $ 170,971 $ 143,848 $ 27,123 Intersegment Revenues 1,826     3,664     (1,838 ) Total Operating Revenues 172,797     147,512     25,285     Operating Expenses: Purchased Gas 60,732 45,068 15,664 Operation and Maintenance 49,529 46,599 2,930 Property, Franchise and Other Taxes 10,205 9,927 278 Depreciation, Depletion and Amortization 13,102     11,618     1,484   133,568     113,212     20,356     Operating Income 39,229 34,300 4,929   Other Income (Expense): Interest Income 134 85 49 Other Income 92 697 (605 ) Interest Expense (7,198 )   (7,334 )   136     Income Before Income Taxes 32,257 27,748 4,509 Income Tax Expense 11,082     9,142     1,940   Net Income $ 21,175     $ 18,606     $ 2,569     Net Income Per Share (Diluted) $ 0.25     $ 0.22     $ 0.03       Three Months Ended December 31,

ENERGY MARKETING SEGMENT

2016   2015   Variance Revenues from External Customers $ 36,809 $ 24,984 $ 11,825 Intersegment Revenues 19     311     (292 ) Total Operating Revenues 36,828     25,295     11,533     Operating Expenses: Purchased Gas 32,339 21,723 10,616 Operation and Maintenance 1,643 1,723 (80 ) Property, Franchise and Other Taxes — 3 (3 ) Depreciation, Depletion and Amortization 70     70     —   34,052     23,519     10,533     Operating Income 2,776 1,776 1,000   Other Income (Expense): Interest Income 134 50 84 Other Income 3 10 (7 ) Interest Expense (13 )   (19 )   6     Income Before Income Taxes 2,900 1,817 1,083 Income Tax Expense 1,118     594     524   Net Income $ 1,782     $ 1,223     $ 559     Net Income Per Share (Diluted) $ 0.02     $ 0.01     $ 0.01   NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES       SEGMENT OPERATING RESULTS AND STATISTICS (UNAUDITED)   Three Months Ended (Thousands of Dollars, except per share amounts) December 31,

ALL OTHER

2016   2015   Variance Total Operating Revenues $ 554     $ 706     $ (152 ) Operating Expenses: Operation and Maintenance 516 75 441 Property, Franchise and Other Taxes 143 143 — Depreciation, Depletion and Amortization 241     182     59   900     400     500     Operating Income (Loss) (346 ) 306 (652 ) Other Income (Expense): Interest Income 39     19     20     Income (Loss) Before Income Taxes (307 ) 325 (632 ) Income Tax Expense (Benefit) (128 )   136     (264 ) Net Income (Loss) $ (179 )   $ 189     $ (368 )   Net Income (Loss) Per Share (Diluted) $ —     $ —     $ —       Three Months Ended December 31,

CORPORATE

2016   2015   Variance Revenues from External Customers $ 208 $ 213 $ (5 ) Intersegment Revenues 976     967     9   Total Operating Revenues 1,184     1,180     4   Operating Expenses: Operation and Maintenance 3,391 2,891 500 Property, Franchise and Other Taxes 121 120 1 Depreciation, Depletion and Amortization 188     182     6   3,700     3,193     507     Operating Loss (2,516 ) (2,013 ) (503 )   Other Income (Expense): Interest Income 31,805 31,743 62 Other Income 832 128 704 Interest Expense on Long-Term Debt (29,103 ) (30,372 ) 1,269 Other Interest Expense (753 )   753     (1,506 )   Income (Loss) Before Income Taxes 265 239 26 Income Tax Expense (Benefit) (436 )   (1,523 )   1,087   Net Income $ 701     $ 1,762     $ (1,061 )   Net Income Per Share (Diluted) $ —     $ 0.03     $ (0.03 )     Three Months Ended December 31,

INTERSEGMENT ELIMINATIONS

2016   2015   Variance Intersegment Revenues $ (52,816 )   $ (45,765 )   $ (7,051 ) Operating Expenses: Purchased Gas (23,050 ) (25,181 ) 2,131 Operation and Maintenance (29,766 )   (20,584 )   (9,182 ) (52,816 )   (45,765 )   (7,051 )   Operating Income — — —   Other Income (Expense): Interest Income (31,017 ) (30,910 ) (107 ) Interest Expense 31,017     30,910     107   Net Income $ —     $ —     $ —     Net Income Per Share (Diluted) $ —     $ —     $ —               NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES   SEGMENT INFORMATION (Continued) (Thousands of Dollars)     Three Months Ended December 31, (Unaudited) Increase 2016 2015 (Decrease)  

Capital Expenditures:

Exploration and Production $ 40,689

(1)(2)

$ 88,125 (3)(4) $ (47,436 ) Pipeline and Storage 25,392 (1)(2) 31,621 (3)(4) (6,229 ) Gathering 11,344 (1)(2) 21,744 (3)(4) (10,400 ) Utility 17,052 (1)(2) 19,917 (3)(4) (2,865 ) Energy Marketing 7   7   —   Total Reportable Segments 94,484 161,414 (66,930 ) All Other 39 — 39 Corporate 60   48   12   Total Capital Expenditures $ 94,583   $ 161,462   $ (66,879 ) (1)  

Capital expenditures for the three months ended December 31, 2016, include accounts payable and accrued liabilities related to capital expenditures of $25.3 million, $8.7 million, $7.9 million, and $7.1 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively. These amounts have been excluded from the Consolidated Statement of Cash Flows at December 31, 2016, since they represent non-cash investing activities at that date.

(2)

Capital expenditures for the three months ended December 31, 2016, exclude capital expenditures of $25.2 million, $18.7 million, $5.3 million and $11.2 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively. These amounts were in accounts payable and accrued liabilities at September 30, 2016 and paid during the three months ended December 31, 2016. These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2016, since they represented non-cash investing activities at that date. These amounts have been included in the Consolidated Statement of Cash Flows at December 31, 2016.

(3)

Capital expenditures for the three months ended December 31, 2015, include accounts payable and accrued liabilities related to capital expenditures of $43.7 million, $19.0 million, $18.8 million, and $12.5 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively. These amounts have been excluded from the Consolidated Statement of Cash Flows at December 31, 2015, since they represent non-cash investing activities at that date.

(4)

Capital expenditures for the three months ended December 31, 2015, exclude capital expenditures of $46.2 million, $33.9 million, $22.4 million and $16.5 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively. These amounts were in accounts payable and accrued liabilities at September 30, 2015 and paid during the three months ended December 31, 2015. These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2015, since they represented non-cash investing activities at that date. These amounts have been included in the Consolidated Statement of Cash Flows at December 31, 2015.

         

DEGREE DAYS

  Percent Colder (Warmer) Than:

Three Months Ended December 31

Normal 2016 2015 Normal (1) Last Year (1)   Buffalo, NY 2,253 1,966 1,677 (12.7) 17.2 Erie, PA 2,044 1,750 1,484 (14.4) 17.9 (1)   Percents compare actual 2016 degree days to normal degree days and actual 2016 degree days to actual 2015 degree days.         NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES   EXPLORATION AND PRODUCTION INFORMATION     Three Months Ended December 31, Increase 2016 2015 (Decrease)  

Gas Production/Prices:

Production (MMcf) Appalachia 39,807 32,788 7,019 West Coast 776   783   (7 ) Total Production 40,583   33,571   7,012     Average Prices (Per Mcf) Appalachia $ 2.35 $ 1.98 $ 0.37 West Coast 4.24 3.65 0.59 Weighted Average 2.39 2.02 0.37 Weighted Average after Hedging 2.97 3.16 (0.19 )  

Oil Production/Prices:

Production (Thousands of Barrels) Appalachia — 6 (6 ) West Coast 721   742   (21 ) Total Production 721   748   (27 )   Average Prices (Per Barrel) Appalachia N/M $ 39.78 N/M West Coast $ 43.69 36.05 $ 7.64 Weighted Average 43.82 36.08 7.74 Weighted Average after Hedging 54.71 59.76 (5.05 )   Total Production (Mmcfe) 44,909   38,059   6,850    

Selected Operating Performance Statistics:

General & Administrative Expense per Mcfe (1) $ 0.29 $ 0.52 $ (0.23 ) Lease Operating and Transportation Expense per Mcfe (1)(2) $ 0.88 $ 1.03 $ (0.15 ) Depreciation, Depletion & Amortization per Mcfe (1) $ 0.65 $ 1.16 $ (0.51 ) N/M - Not Meaningful

(1)

 

Refer to page 12 for the General and Administrative Expense, Lease Operating Expense and Depreciation, Depletion, and Amortization Expense for the Exploration and Production segment.

(2) Amounts include transportation expense of $0.53 and $0.51 per Mcfe for the three months ended December 31, 2016 and December 31, 2015, respectively. NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES          

EXPLORATION AND PRODUCTION INFORMATION

  Hedging Summary for the Remaining Nine Months of Fiscal 2017

Volume

Average Hedge Price

Oil Swaps Brent 72,000 BBL $ 91.00 / BBL NYMEX 1,163,000 BBL $ 58.40 / BBL Total 1,235,000 BBL $ 60.30 / BBL   Gas Swaps NYMEX 27,780,000 MMBTU $ 4.32 / MMBTU Dominion Transmission Appalachian (DOM) 3,630,000 MMBTU $ 3.85 / MMBTU Dawn Ontario (DAWN) 12,990,000 MMBTU $ 3.63 / MMBTU Fixed Price Physical Sales 45,029,281 MMBTU $ 2.60 / MMBTU Total 89,429,281 MMBTU $ 3.33 / MMBTU   Hedging Summary for Fiscal 2018

Volume

Average Hedge Price

Oil Swaps Brent 24,000 BBL $ 91.00 / BBL NYMEX 1,119,000 BBL $ 55.38 / BBL Total 1,143,000 BBL $ 56.13 / BBL   Gas Swaps NYMEX 42,570,000 MMBTU $ 3.34 / MMBTU DOM 180,000 MMBTU $ 3.82 / MMBTU DAWN 8,400,000 MMBTU $ 3.08 / MMBTU Fixed Price Physical Sales 32,927,835 MMBTU $ 2.43 / MMBTU Total 84,077,835 MMBTU $ 2.96 / MMBTU   Hedging Summary for Fiscal 2019

Volume

Average Hedge Price

Oil Swaps NYMEX 756,000 BBL $ 54.60 / BBL Total 756,000 BBL $ 54.60 / BBL   Gas Swaps NYMEX 27,060,000 MMBTU $ 3.17 / MMBTU DAWN 7,200,000 MMBTU $ 3.00 / MMBTU Fixed Price Physical Sales 11,947,289 MMBTU $ 3.09 / MMBTU Total 46,207,289 MMBTU $ 3.13 / MMBTU   Hedging Summary for Fiscal 2020

Volume

Average Hedge Price

Gas Swaps NYMEX 16,880,000 MMBTU $ 3.07 / MMBTU DAWN 7,200,000 MMBTU $ 3.00 / MMBTU Fixed Price Physical Sales 3,566,558 MMBTU $ 3.24 / MMBTU Total 27,646,558 MMBTU $ 3.07 / MMBTU   Hedging Summary for Fiscal 2021

Volume

Average Hedge Price

Gas Swaps NYMEX 4,840,000 MMBTU $ 3.01 / MMBTU DAWN 600,000 MMBTU $ 3.00 / MMBTU Total 5,440,000 MMBTU $ 3.01 / MMBTU NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES     EXPLORATION AND PRODUCTION INFORMATION  

Gross Wells in Process of Drilling

Three Months Ended December 31, 2016

Total

East

West

Company

Wells in Process - Beginning of Period Exploratory 6.000 0.000 6.000 Developmental 87.000 0.000 87.000 Wells Commenced Exploratory 4.000 0.000 4.000 Developmental 12.000 7.000 19.000 Wells Completed Exploratory 1.000 0.000 1.000 Developmental 12.000 6.000 18.000 Wells Plugged & Abandoned Exploratory 0.000 0.000 0.000 Developmental 0.000 0.000 0.000 Wells in Process - End of Period Exploratory 9.000 0.000 9.000 Developmental 87.000 1.000 88.000    

Net Wells in Process of Drilling

Three Months Ended December 31, 2016

Total

East

West

Company

Wells in Process - Beginning of Period Exploratory 6.000 0.000 6.000 Developmental 62.900 0.000 62.900 Wells Commenced Exploratory 4.000 0.000 4.000 Developmental 12.000 7.000 19.000 Wells Completed Exploratory 1.000 0.000 1.000 Developmental 2.400 6.000 8.400 Wells Plugged & Abandoned Exploratory 0.000 0.000 0.000 Developmental 0.000 0.000 0.000 Well Interest Sold (1) Exploratory 0.000 0.000 0.000 Developmental 4.000 0.000 4.000 Wells in Process - End of Period Exploratory 9.000 0.000 9.000 Developmental 68.500 (1) 1.000 69.500 (1)   Seneca's East Division sold an 80% working interest in 5 of the existing developmental wells in process to IOG during the three months ended December 31, 2016.       NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES       Pipeline & Storage Throughput - (millions of cubic feet - MMcf)   Three Months Ended December 31, Increase 2016 2015 (Decrease) Firm Transportation - Affiliated 31,607 24,709 6,898 Firm Transportation - Non-Affiliated 159,174 151,123 8,051 Interruptible Transportation 3,046   5,631   (2,585 ) 193,827   181,463   12,364     Gathering Volume - (MMcf) Three Months Ended December 31, Increase 2016 2015 (Decrease) Gathered Volume - Affiliated 50,569   33,800   16,769       Utility Throughput - (MMcf) Three Months Ended December 31, Increase 2016 2015 (Decrease) Retail Sales: Residential Sales 15,764 13,133 2,631 Commercial Sales 2,299 1,827 472 Industrial Sales 77   66   11   18,140 15,026 3,114 Off-System Sales 173 — 173 Transportation 19,565   17,615   1,950   37,878   32,641   5,237     Energy Marketing Volume Three Months Ended December 31, Increase 2016 2015 (Decrease) Natural Gas (MMcf) 11,127   10,098   1,029  

NATIONAL FUEL GAS COMPANYAND SUBSIDIARIES

NON-GAAP FINANCIAL MEASURES

In addition to financial measures calculated in accordance with generally accepted accounting principles (GAAP), this press release contains information regarding Operating Results and Adjusted EBITDA, which are non-GAAP financial measures. The Company believes that these non-GAAP financial measures are useful to investors because they provide an alternative method for assessing the Company's ongoing operating results and for comparing the Company’s financial performance to other companies. The Company's management uses these non-GAAP financial measures for the same purpose, and for planning and forecasting purposes. The presentation of non-GAAP financial measures is not meant to be a substitute for financial measures in accordance with GAAP.

Management defines Operating Results as reported GAAP earnings before items impacting comparability. The table at page 1 of this report reconciles National Fuel's reported GAAP earnings to Operating Results for the three months ended December 31, 2016 and 2015.

Management defines Adjusted EBITDA as reported GAAP earnings before the following items: interest expense, depreciation, depletion and amortization, interest and other income, impairments, items impacting comparability and income taxes.

The following tables reconcile National Fuel's reported GAAP earnings to Adjusted EBITDA for the three months ended December 31, 2016 and 2015:

    Three Months Ended December 31, 2016 2015 (in thousands) Reported GAAP Earnings $ 88,908 $ (189,109 ) Depreciation, Depletion and Amortization 56,196 70,551 Interest and Other Income (3,214 ) (4,217 ) Interest Expense 30,013 31,752 Income Taxes 56,432 (144,350 ) Impairment of Oil and Gas Producing

Properties

— 435,451 Joint Development Agreement Professional

Fees

—   4,682   Adjusted EBITDA $ 228,335   $ 204,760     Adjusted EBITDA by Segment Pipeline and Storage Adjusted EBITDA $ 48,014 $ 50,741 Gathering Adjusted EBITDA 25,101   16,458   Total Midstream Businesses Adjusted EBITDA 73,115 67,199 Exploration and Production Adjusted EBITDA 102,476 91,140 Utility Adjusted EBITDA 52,331 45,918 Energy Marketing Adjusted EBITDA 2,846 1,846 Corporate and All Other Adjusted EBITDA (2,433 ) (1,343 ) Total Adjusted EBITDA $ 228,335   $ 204,760  

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

NON-GAAP FINANCIAL MEASURES

SEGMENT ADJUSTED EBITDA

  Three Months Ended December 31, (in thousands) 2016   2015

Exploration and Production Segment

Reported GAAP Earnings $ 35,080 $ (237,086 ) Depreciation, Depletion and Amortization 29,053 44,033 Interest and Other Income (86 ) (667 ) Interest Expense 13,523 14,582 Income Taxes 24,906 (169,855 ) Impairment of Oil and Gas Producing Properties — 435,451 Joint Development Agreement Professional Fees —   4,682   Adjusted EBITDA $ 102,476   $ 91,140    

Pipeline and Storage Segment

Reported GAAP Earnings $ 19,368 $ 21,276 Depreciation, Depletion and Amortization 9,662 10,256 Interest and Other Income (959 ) (1,693 ) Interest Expense 8,347 8,038 Income Taxes 11,596   12,864   Adjusted EBITDA $ 48,014   $ 50,741    

Gathering Segment

Reported GAAP Earnings $ 10,981 $ 4,921 Depreciation, Depletion and Amortization 3,880 4,210 Interest and Other Income (147 ) (35 ) Interest Expense 2,093 3,070 Income Taxes 8,294   4,292   Adjusted EBITDA $ 25,101   $ 16,458    

Utility Segment

Reported GAAP Earnings $ 21,175 $ 18,606 Depreciation, Depletion and Amortization 13,102 11,618 Interest and Other Income (226 ) (782 ) Interest Expense 7,198 7,334 Income Taxes 11,082   9,142   Adjusted EBITDA $ 52,331   $ 45,918    

Energy Marketing Segment

Reported GAAP Earnings $ 1,782 $ 1,223 Depreciation, Depletion and Amortization 70 70 Interest and Other Income (137 ) (60 ) Interest Expense 13 19 Income Taxes 1,118   594   Adjusted EBITDA $ 2,846   $ 1,846    

Corporate and All Other

Reported GAAP Earnings $ 522 $ 1,951 Depreciation, Depletion and Amortization 429 364 Interest and Other Income (1,659 ) (980 ) Interest Expense (1,161 ) (1,291 ) Income Taxes (564 ) (1,387 ) Adjusted EBITDA $ (2,433 ) $ (1,343 )     NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES    

Quarter Ended December 31 (unaudited)

2016 2015   Operating Revenues $ 422,500,000   $ 375,195,000     Net Income (Loss) Available for Common Stock $ 88,908,000   $ (189,109,000 )   Earnings (Loss) Per Common Share: Basic $ 1.04   $ (2.23 ) Diluted $ 1.04   $ (2.23 )   Weighted Average Common Shares: Used in Basic Calculation 85,189,851   84,651,233   Used in Diluted Calculation 85,797,989   84,651,233    

Twelve Months Ended December 31 (unaudited)

  Operating Revenues $ 1,499,721,000   $ 1,612,199,000     Net Income (Loss) Available for Common Stock $ (12,941,000 ) $ (653,276,000 )   Earnings (Loss) Per Common Share: Basic $ (0.15 ) $ (7.73 ) Diluted $ (0.15 ) $ (7.73 )   Weighted Average Common Shares: Used in Basic Calculation 84,983,380   84,499,299   Used in Diluted Calculation 84,983,380   84,499,299  

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National Fuel Gas CompanyAnalyst:Brian M. Welsch, 716-857-7875orMedia:Karen L. Merkel, 716-857-7654