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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From to
Commission File Number 1-3880
NATIONAL FUEL GAS COMPANY
(Exact name of registrant as specified in its charter)
New Jersey 13-1086010
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 Lafayette Square
Buffalo, New York 14203
(Address of principal executive offices) (Zip Code)
(716) 857-6980
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock, $1 par value, outstanding at January 31, 1995: 37,410,963 shares.
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Company or Group of Companies for which Report is Filed:
NATIONAL FUEL GAS COMPANY (Company or Registrant)
SUBSIDIARIES: National Fuel Gas Distribution Corporation (Distribution
Corporation)
National Fuel Gas Supply Corporation (Supply Corporation)
Seneca Resources Corporation (Seneca)
Utility Constructors, Inc. (UCI)
Highland Land & Minerals, Inc. (Highland)
Leidy Hub, Inc. (Leidy Hub)
Data-Track Account Services, Inc. (Data-Track)
National Fuel Resources, Inc. (NFR)
INDEX
Part I. Financial Information Page
Item 1. Financial Statements
a. Consolidated Statements of Income and Earnings
Reinvested in the Business - Three Months Ended
December 31, 1994 and 1993 3
b. Consolidated Balance Sheets - December 31, 1994
and September 30, 1994 4 - 5
c. Consolidated Statement of Cash Flows - Three
Months Ended December 31, 1994 and 1993 6
d. Notes to Consolidated Financial Statements 7 - 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12 - 21
Part II. Other Information
Item 1. Legal Proceedings 22 - 25
Item 2. Changes in Securities *
Item 3. Defaults Upon Senior Securities *
Item 4. Submission of Matters to a Vote of Security Holders *
Item 5. Other Information *
Item 6. Exhibits and Reports on Form 8-K 25
Signature 26
*The Company has nothing to report under this item.
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Part I. - Financial Information
Item 1. - Financial Statements
National Fuel Gas Company
Consolidated Statements of Income and Earnings
Reinvested in the Business
(Unaudited)
Three Months Ended
December 31,
1994 1993
(Thousands of Dollars)
INCOME
Operating Revenues $ 271,548 $310,131
Operating Expenses
Purchased Gas 103,407 144,158
Operation Expense 66,843 63,547
Maintenance 5,892 5,416
Property, Franchise and Other Taxes 23,066 25,283
Depreciation, Depletion and Amortization 18,329 17,885
Income Taxes - Net 15,433 15,097
232,970 271,386
Operating Income 38,578 38,745
Other Income 844 1,039
Income Before Interest Charges 39,422 39,784
Interest Charges
Interest on Long-Term Debt 10,373 8,883
Other Interest 3,188 3,101
13,561 11,984
Income Before Cumulative Effect 25,861 27,800
Cumulative Effect of Change
in Accounting for Income Taxes - 3,826
Net Income Available for Common Stock 25,861 31,626
EARNINGS REINVESTED IN THE BUSINESS
Balance at October 1 363,854 335,907
389,715 367,533
Dividends on Common Stock
(1994 - $.395; 1993 - $.385) 14,702 14,191
Balance at December 31 $ 375,013 $353,342
Earnings Per Common Share
Income Before Cumulative Effect $ .69 $ .76
Cumulative Effect of Change
in Accounting for Income Taxes - .10
Net Income Available for Common Stock $ .69 $ .86
Weighted Average Common Shares Outstanding 37,326,041 36,752,985
See Notes to Consolidated Financial Statements
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Item 1. - Financial Statements (Cont.)
National Fuel Gas Company
Consolidated Balance Sheets
December 31,
1994 September 30,
(Unaudited) 1994
(Thousands of Dollars)
ASSETS
Property, Plant and Equipment $2,209,617 $2,166,256
Less - Accumulated Depreciation, Depletion
and Amortization 638,006 623,517
1,571,611 1,542,739
Current Assets
Cash and Temporary Cash Investments 20,945 29,016
Receivables - Net 118,868 95,993
Unbilled Utility Revenue 52,151 17,311
Gas Stored Underground 20,878 34,711
Materials and Supplies - at average cost 24,251 23,796
Unrecovered Purchased Gas Costs 178 -
Prepayments 18,119 20,111
255,390 220,938
Other Assets
Recoverable Future Taxes 99,381 99,742
Unamortized Debt Expense 27,826 28,396
Other Regulatory Assets 43,446 47,737
Deferred Charges 14,140 15,796
Other 29,824 26,309
214,617 217,980
$2,041,618 $1,981,657
See Notes to Consolidated Financial Statements
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Item 1. - Financial Statements (Cont.)
National Fuel Gas Company
Consolidated Balance Sheets
December 31,
1994 September 30,
(Unaudited) 1994
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common Stock Equity
Common Stock, $1 Par Value
Authorized - 100,000,000 Shares; Issued and
Outstanding - 37,365,668 Shares and 37,278,409
Shares, Respectively $ 37,366 $ 37,278
Paid In Capital 381,426 379,156
Earnings Reinvested in the Business 375,013 363,854
Total Common Stock Equity 793,805 780,288
Long-Term Debt, Net of Current Portion 404,000 462,500
Total Capitalization 1,197,805 1,242,788
Current and Accrued Liabilities
Notes Payable to Banks and
Commercial Paper 154,600 112,500
Current Portion of Long-Term Debt 154,500 96,000
Accounts Payable 53,465 66,667
Amounts Payable to Customers 34,324 38,714
Other Accruals and Current Liabilities 79,357 61,368
476,246 375,249
Deferred Credits
Accumulated Deferred Income Taxes 276,758 273,560
Taxes Refundable to Customers 31,688 31,688
Unamortized Investment Tax Credit 13,886 14,057
Other Deferred Credits 45,235 44,315
367,567 363,620
Commitments and Contingencies - -
$2,041,618 $1,981,657
See Notes to Consolidated Financial Statements
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Item 1. - Financial Statements (Cont.)
National Fuel Gas Company
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
December 31,
1994 1993
(Thousands of Dollars)
OPERATING ACTIVITIES
Net Income Available for Common Stock $ 25,861 $ 31,626
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Effect of Noncash Adjustments:
Cumulative Effect of Change in
Accounting for Income Taxes - (3,826)
Depreciation, Depletion and Amortization 18,329 17,885
Deferred Income Taxes 2,607 7,673
Other 1,452 1,820
48,249 55,178
Change in:
Receivables and Unbilled Utility Revenue (57,715) (98,833)
Gas Stored Underground and Materials and
Supplies 13,378 5,730
Unrecovered Purchased Gas Costs (178) (15,490)
Prepayments 1,992 (331)
Accounts Payable (13,202) 22,885
Amounts Payable to Customers (4,390) (8,562)
Other Accruals and Current Liabilities 18,550 42,647
Other Assets and Liabilities - Net 3,504 (1,617)
Net Cash Provided by
Operating Activities 10,188 1,607
INVESTING ACTIVITIES
Capital Expenditures (49,783) (31,124)
Other 2,681 2,986
Net Cash Used in Investing Activities (47,102) (28,138)
FINANCING ACTIVITIES
Change in Notes Payable to Banks and Commercial
Paper 42,100 41,800
Proceeds from Issuance of Common Stock 1,414 3,033
Dividends Paid on Common Stock (14,671) (14,102)
Net Cash Provided by
Financing Activities 28,843 30,731
Net Increase (Decrease) in Cash and
Temporary Cash Investments (8,071) 4,200
Cash and Temporary Cash Investments
at October 1 29,016 13,595
Cash and Temporary Cash Investments at December 31 $ 20,945 $ 17,795
See Notes to Consolidated Financial Statements
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Item 1. Financial Statements (cont.)
National Fuel Gas Company
Notes to Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies
Quarterly Earnings. The Company, in its opinion, has included all adjustments
that are necessary for a fair statement of the results of operations for the
periods. The fiscal 1995 consolidated financial statements will be examined by
the Company's independent accountants after the end of the fiscal year. The
consolidated financial statements and notes thereto, included herein, should be
read in conjunction with the financial statements and notes for the years ended
September 30, 1994, 1993 and 1992, that are included in the Company's 1994
Annual Report to the Securities and Exchange Commission (SEC) on Form 10-K.
The earnings for the three months ended December 31, 1994, should not be
taken as a prediction for the fiscal year ending September 30, 1995, as most of
the Company's business is seasonal in nature and is influenced by weather
conditions. Because of the seasonal nature of the Company's heating business,
earnings during the winter months normally represent a substantial part of
earnings for the entire fiscal year. The impact of abnormal weather on
earnings during the heating season is partially reduced by the operation of a
weather normalization clause included in Distribution Corporation's New York
tariff. The weather normalization clause is effective for October through May
billings. In addition, Supply Corporation's straight fixed variable rate
design, which allows for recovery of substantially all fixed costs in the
demand or reservation charge, reduces the earnings impact of weather.
Rate Refunds. Supply Corporation collects revenues subject to refund if a
final rate case settlement is pending. Estimated rate refunds are recorded
which reflect management's current estimate as to the ultimate outcome of each
rate case.
Consolidated Statement of Cash Flows. For purposes of the Consolidated
Statement of Cash Flows, the Company considers all highly liquid debt
instruments purchased with a maturity of generally three months or less to be
cash equivalents. Cash interest payments during the three months ended
December 31, 1994 and 1993, amounted to $9,538,000 and $10,626,000,
respectively. Income taxes paid during the three months ended December 31,
1994 and 1993 amounted to $4,536,000 and $864,000, respectively.
Financial Instruments. Seneca has entered into certain price swap agreements
that effectively hedge a portion of the market risk associated with
fluctuations in the price of natural gas and crude oil. These agreements are
not held for trading purposes. The price swap agreements call for Seneca to
receive monthly payments from (or make payments to) other parties based upon
the differential between a fixed and a variable price as specified by the
agreement. At December 31, 1994, Seneca had natural gas price swap agreements
which run through December 1996 and have an aggregate notional amount of
approximately 20.4 billion cubic feet (Bcf) of natural gas equivalent. Of this
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Item 1. Financial Statements (cont.)
Seneca also had crude oil price swap agreements at December 31, 1994, which run
through September 1997 and have an aggregate notional amount of 622,000 barrels
of crude oil equivalent. Gains or losses from these price swap agreements are
reflected in operating revenues on the Consolidated Statement of Income at the
time of settlement with the other parties, which is when the underlying hedged
commodity transaction occurs.
Seneca is at risk in the event of nonperformance by counterparties on
natural gas and crude oil price swap agreements, but Seneca does not anticipate
nonperformance by any of these counterparties.
The Company has SEC authority to enter into interest rate swaps associated
with short-term borrowings up to a notional amount of $200,000,000. The
Company has requested authorization from the SEC for additional authority to
enter into interest rate swaps associated with long-term borrowings up to a
notional amount of $350,000,000 along with certain other derivative
instruments. Currently, no such agreements are outstanding.
NOTE 2 - Regulatory Matters
FERC Order 636 Transition Costs. As a result of the industrywide restructuring
under the FERC's Order 636, Distribution Corporation is incurring transition
costs billed by Supply Corporation and other upstream pipeline companies.
At December 31, 1994, Distribution Corporation's estimate of its exposure
to outstanding transition cost claims is in the range of $4,600,000 to
$80,100,000. The majority of these costs relate to gas supply realignment
(GSR) costs and stranded costs and is exclusive of any potential stranded costs
related to production plant or gathering facilities which pipeline companies,
including Supply Corporation, may file for at a future date, and any potential
GSR costs claimed by an upstream supplier, which are subject to the outcome of
its bankruptcy and FERC proceedings. At December 31, 1994, the Company has
recorded the minimum liability and corresponding regulatory asset of $4,600,000.
Distribution Corporation has authorization from the State of New York
Public Service Commission (PSC) to recover up to $11,000,000 annually of
transition costs from sales customers in New York through the monthly Gas
Adjustment Clause (GAC). Distribution Corporation will defer, for recovery in
future periods, any amounts that may exceed the $11,000,000 annual amount.
The recovery of transition costs from transportation customers in New York
was addressed in the December 20, 1994 PSC order issued in a generic
restructuring case (the Generic Case). In the Generic Case, the PSC authorized
gas utilities to file revised tariffs, subject to PSC approval, providing that
transportation customers be assigned a per-unit charge that is equal to 50% of
the per-unit charge being collected from sales customers for GSR and stranded
costs. At December 31, 1994, Distribution Corporation had deferred transition
costs related to transportation customers in its New York jurisdiction
amounting to $2,145,000. Of this amount, Distribution Corporation has
calculated, based upon the PSC order in the Generic Case, that approximately
$770,000 is allocable to, and recoverable from, sales customers and the
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Item 1. Financial Statements (Cont.)
remaining approximate $1,375,000 is allocable to, and recoverable from
transportation customers.
In its Pennsylvania jurisdiction, Distribution Corporation is recovering
GSR and stranded costs from its customers through a separate surcharge. At
December 31, 1994, Distribution Corporation had deferred GSR and stranded costs
related to its Pennsylvania jurisdiction of approximately $323,000.
Distribution Corporation will recover these costs through a volumetric true-up
mechanism and is allowed to update its surcharge on a quarterly basis.
Distribution Corporation is recovering under-recovered purchased gas transition
costs from its Pennsylvania sales customers through its gas cost recovery rates.
Distribution Corporation will continue to actively challenge relevant FERC
filings made by the upstream pipeline companies to ensure the eligibility and
prudency of all transition cost claims. This industrywide issue will
potentially involve years of rate proceedings before the FERC, state
commissions and the courts. Management believes that any transition costs
resulting from the implementation of Order 636 which have been determined to be
both eligible and prudently incurred should be fully recoverable from the
respective customers of Supply Corporation and Distribution Corporation.
Gathering Rates. Supply Corporation has approximately $19,000,000 of
production and gathering facilities used, in part, to gather natural gas of
local producers, including the Company's production in the Appalachian Region.
Currently, Supply Corporation has a gathering rate in place under an interim
settlement with customers and local producers. In its restructuring orders,
the FERC has directed Supply Corporation to fully unbundle its gathering rate
effective July 1, 1995. Supply Corporation submitted an offer of settlement
(the Settlement) which if approved would provide for a ten-year transition to
fully unbundle rates beginning July 1, 1995. Comments on the Settlement have
been filed by the parties. Such comments were generally favorable. However,
opposition came largely from offsystem customers claiming that they should not
have any cost responsibility for the production and gathering plant because it
is not necessary to provide service to them. The Settlement currently awaits a
FERC decision. The FERC had directed Supply Corporation to file a fully
unbundled rate by December 31, 1994, that would become immediately effective on
July 1, 1995. However, after receiving Supply Corporation's request for an
extension of the December deadline to April 28, 1995, the FERC, on December 13,
1994, granted an extension of the deadline until 30 days after a FERC order on
the Settlement.
NOTE 3 - Income Taxes
On October 1, 1993, the Company adopted Financial Accounting Standards No.
109, "Accounting for Income Taxes" (SFAS 109). The cumulative effect of this
change increased net income for the three months ended December 31, 1993 by
$3,826,000 as a result of the reduction in deferred income taxes associated
with the Company's nonregulated operations.
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Item 1. Financial Statements (Cont.)
At December 31, 1994, the deferred tax liabilities (assets) were comprised
of the following (in thousands):
Accumulated Deferred
Deferred Income Taxes
Income Taxes Current*
Deferred Tax Liabilities:
Excess of tax over book depreciation $175,385 $ -
Exploration and intangible well
drilling costs 81,150 -
Other 62,081 -
Total Deferred Tax Liabilities 318,616 -
Deferred Tax Assets:
Deferred investment tax credits (8,388) -
Overheads capitalized for tax purposes (9,544) -
Provisions for rate contingencies and
refunds - (686)
Unrecovered purchased gas costs - (4,761)
Other (23,926) -
Total Deferred Tax Assets (41,858) (5,447)
Total Net Deferred Income Taxes $276,758 $(5,447)
* Included on the Consolidated Balance Sheets in "Other Accruals and Current
Liabilities."
The components of federal and state income taxes included in the
Consolidated Statement of Income are as follows (in thousands):
Three Months Ended
December 31,
1994 1993
Operating Expenses:
Current Income Taxes -
Federal $11,204 $ 7,884
State 1,622 (460)
Deferred Income Taxes 2,607 7,673
15,433 15,097
Other Income:
Deferred Investment Tax Credit (172) (172)
Cumulative effect prior to
October 1, 1993 of applying SFAS
No. 109 - (3,826)
Total Income Taxes $15,261 $11,099
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Item 1. Financial Statements (Concl.)
Total income taxes as reported differ from the amounts that were computed
by applying the federal income tax rate to income before income taxes. The
following is a reconciliation of this difference (in thousands):
Three Months Ended
December 31,
1994 1993
Net income available for common stock $25,861 $31,626
Total income taxes 15,261 11,099
Income before income taxes $41,122 $42,725
Income tax expense, computed at
statutory rate of 35% in 1994
and 1993 14,393 14,954
Increase (reduction) in taxes resulting from:
Current state income taxes 1,054 (299)
Depreciation 555 425
Production tax credits (283) (432)
Adoption of SFAS 109 - (3,826)
Miscellaneous (458) 277
Total Income Taxes $15,261 $11,099
NOTE 4 - Capitalization
Common Stock. During the three months ended December 31, 1994, the Company
issued 31,549 shares of common stock under the Company's Customer Stock
Purchase Plan and 46,600 shares to participants in the Company's section 401(k)
plans.
In December 1994, 8,000 shares of restricted stock were awarded under the
1993 Award and Option Plan. Restrictions on these shares will lapse respecting
approximately one-fourth of such shares on each January 2, for the years 2002
through 2005.
NOTE 5 - Commitments and Contingencies
In addition to the litigation discussed in Part II, Item 1 of this report,
the Company is involved in litigation arising in the normal course of business.
In addition to the regulatory matters discussed in Note 2, the Company is
involved in other regulatory matters arising in the normal course of business
that involve rate base, cost of service and purchased gas cost issues. While
the resolution of such litigation or other regulatory matters could have a
material effect on earnings and cash flows, none of this litigation, and none
of these other regulatory matters, is expected to have a material effect on the
financial condition of the Company at this time.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Earnings.
Earnings were $25.9 million, or $.69 per common share, during the quarter
ended December 31, 1994. This compares with earnings of $31.6 million, or $.86
per common share, during the quarter ended December 31, 1993. The quarter
ended December 31, 1993 included earnings of $3.8 million, or $.10 per common
share, related to the cumulative effect of a required change in accounting for
income taxes adopted October 1, 1993, in accordance with the Financial
Accounting Standards Board's (FASB) Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" (SFAS 109). Earnings before the
cumulative effect of the change in accounting for income taxes amounted to
$27.8 million, or $.76 per common share.
The decrease in earnings, before the cumulative effect of the change in
accounting for income taxes, is attributable to a decline in earnings of the
Company's regulated operations, which outweighed the increase in the earnings
of its nonregulated operations.
Earnings from the Company's Utility Operation were down because of warmer
weather while the earnings of the Pipeline and Storage segment decreased
because the first quarter of fiscal 1994 benefited from the nonrecurring
receipt of refunds of prior costs related to joint storage sites.
The increase in earnings from the Company's nonregulated operations
resulted primarily from the positive performance of its pipeline construction
subsidiary and higher earnings from its gas marketing and timber operations.
This increase was partly offset by a slight decline in earnings from the
Company's Exploration and Production segment.
The Company's earnings were also impacted by higher income tax and
interest expense.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont.)
OPERATING INCOME (LOSS) BEFORE
INCOME TAXES
(in thousands)
Three Months Ended
December 31,
1994 1993 % Change
Regulated
Utility Operation $33,348 $33,632 (.8)
Pipeline and Storage 15,502 16,729 (7.3)
Nonregulated
Exploration and Production 3,749 3,584 4.6
Other 2,103 635 231.2
5,852 4,219 38.7
Corporate (691) (738) 6.4
$54,011 $53,842 .3
OPERATING REVENUES
(in thousands)
Three Months Ended
December 31,
1994 1993 % Change
Regulated
Utility Operation
Retail Revenues:
Residential $166,578 $196,660 (15.3)
Commercial 39,702 50,361 (21.2)
Industrial 5,467 8,394 (34.9)
211,747 255,415 (17.1)
Off-System Sales 2,227 - -
Transportation 8,880 8,212 8.1
Other 1,271 1,071 18.7
224,125 264,698 (15.3)
Pipeline and Storage
Storage Service 14,890 14,553 2.3
Transportation 22,277 22,682 (1.8)
Other 900 881 2.2
38,067 38,116 (.1)
Nonregulated
Exploration and Production 14,274 14,332 (.4)
Other 17,089 14,786 15.6
31,363 29,118 7.7
Less-Intersegment Revenues 22,007 21,801 .9
$271,548 $310,131 (12.4)
<PAGE 14>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont.)
Utility Operation.
Operating income before income taxes for the Utility Operation decreased
$0.3 million for the quarter ended December 31, 1994, compared with the same
period a year ago. This resulted primarily from warmer weather, which
contributed to a 6.3 Bcf reduction in throughput. A decrease in operating
revenues of $40.6 million for this segment reflects decreased gas costs mainly
because of lower throughput as well as a decline in the average cost of
purchased gas. The impact of warmer weather was greatest in the Pennsylvania
jurisdiction since Pennsylvania does not have a weather normalization clause
(WNC). The impact of weather in the New York jurisdiction was mitigated by
that jurisdiction's WNC, which preserved pretax operating income of $4.3
million for the current quarter. In the first quarter of fiscal 1994, the WNC
resulted in a benefit to customers of $1.1 million, as weather was colder than
normal.
Degree Days
Three Months Ended December 31:
Percent Colder (Warmer)
Than
Normal 1994 1993 Normal Last Year
Buffalo 2,260 1,936 2,327 (14.3) (16.8)
Erie 1,956 1,715 2,183 (12.3) (21.4)
SYSTEM THROUGHPUT
(millions of cubic feet-MMcf)
Three Months Ended
December 31,
1994 1993 % Change
Utility Operation
Retail Sales:
Residential 22,834 26,997 (15.4)
Commercial 6,212 7,722 (19.6)
Industrial 1,353 1,716 (21.2)
30,399 36,435 (16.6)
Transportation 12,042 12,258 (1.8)
42,441 48,693 (12.8)
Pipeline and Storage
Transportation 71,575 79,771 (10.3)
Less-Intersegment Throughput:
Transportation 42,719 50,121 (14.8)
Total System Throughput 71,297 78,343 (9.0)
<PAGE 15>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont.)
Pipeline and Storage.
Operating income before income taxes for the Pipeline and Storage segment
decreased $1.2 million for the quarter ended December 31, 1994, as compared
with the same period a year ago. This resulted primarily because last year's
first quarter benefited from the nonrecurring receipt of approximately $1.3
million in refunds from upstream pipeline companies for the correction of prior
period overbillings on joint storage operations.
While throughput for the current quarter declined 8.2 Bcf from the first
quarter of fiscal 1994, the decrease in throughput did not have a significant
impact on earnings as a result of Supply Corporation's straight fixed-variable
(SFV) rate design.
Exploration and Production.
Operating income before income taxes from the Company's Exploration and
Production operations increased $0.2 million compared with the same period a
year ago. While natural gas production increased by 0.6 Bcf, or 12%, this
increase was offset by lower gas prices. The weighted average price received
for natural gas in the current quarter was $1.72 per Mcf compared with $2.28
per Mcf in the first quarter of fiscal 1994. The weighted average price
received for oil in the current quarter was $15.67 per barrel compared with
$13.74 per barrel in the first quarter of fiscal 1994. Oil production was down
slightly. The impact of the fluctuations in oil and gas prices was stabilized
by the Company's hedging program, which contributed $1.5 million to operating
revenues during the current quarter. The Company is delaying expenditures for
some drilling, workovers and recompletions in this segment pending higher
prices for gas. In addition, it may also delay bringing certain production on
line this spring, including its West Cameron 552 well, again dependent upon the
price of gas.
PRODUCTION VOLUMES
Exploration and Production
Three Months Ended
December 31,
1994 1993 % Change
Gas Production - (MMcf)
Gulf Coast 3,748 3,076 21.8
West Coast 165 208 (20.7)
Appalachia 1,521 1,574 (3.4)
5,434 4,858 11.9
Oil Production - (Thousands of Barrels)
Gulf Coast 89 99 (10.1)
West Coast 103 102 1.0
Appalachia 3 3 -
195 204 (4.4)
<PAGE 16>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont.)
Other Nonregulated.
Operating income before income taxes associated with this segment
increased $1.5 million for the quarter ended December 31, 1994, compared with
the same period of the prior year. This was mainly due to a positive
performance by UCI, the Company's pipeline construction subsidiary, as a result
of higher margins on its construction jobs. In addition, NFR, the Company's
gas marketing subsidiary, had higher pretax operating income as a result of
increased volumes marketed and improved margins. Highland, the Company's
sawmill operation, also contributed to the increase through higher lumber sales.
Income Taxes.
Although pretax income was down for the quarter ended December 31, 1994,
compared with the same period of the prior year, income taxes increased $0.3
million. This is due in part to a reduction of approximately $150,000 in the
Section 29 nonconventional fuel tax credits related to production from
qualified gas wells. In addition, the Utility Operation had higher
Pennsylvania state income taxes compared to the first quarter of fiscal 1994.
This relates to a change in the methodology in the recording of Pennsylvania
state income tax on unbilled revenues, which was implemented in March 1994,
creating a timing difference. This timing difference is expected to reverse in
the second quarter of fiscal 1995.
Interest Charges.
Total interest charges increased $1.6 million for the quarter ended
December 31, 1994, compared with the same quarter of last year. Interest on
long-term debt increased $1.5 million mainly because of a higher average amount
of long-term debt compared to the same period of a year ago. Other interest
increased $0.1 million over the same quarter of last year primarily because of
increases in short-term borrowing rates offset in part by lower interest
expense on rate refunds to customers.
CAPITAL RESOURCES AND LIQUIDITY
The Company's primary sources of cash during the three month period
consisted of cash provided by operating activities and short-term bank loans
and commercial paper. These sources were supplemented by issuances of common
stock under the Company's Customer Stock Purchase Plan and section 401(k) Plans.
Operating Cash Flow
Internally generated cash from operating activities consists of net income
available for common stock, adjusted for noncash expenses, noncash income and
changes in operating assets and liabilities. Noncash items include
depreciation, depletion and amortization, deferred income taxes and allowance
for funds used during construction. For the three months ended December 31,
<PAGE 17>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont.)
1993, a noncash income item also included the cumulative effect of a required
change in accounting for income taxes in accordance with SFAS 109.
Cash provided by operating activities in the Utility Operation and the
Pipeline and Storage segments may vary substantially from period to period
because of supplier refunds, the impact of rate cases and for the Utility
Operation, fluctuations in weather and over- or under-recovered purchased gas
costs. The impact of weather on cash flow is tempered in the Utility
Operation's New York rate jurisdiction by its WNC. The Pipeline and Storage
segment's cash flow is not significantly impacted by weather because of Supply
Corporation's SFV rate design.
Because of the seasonal nature of the Company's heating business, revenues
are relatively high during the quarter ended December 31 and receivables and
unbilled utility revenue historically increase from September to December with
the beginning of winter weather.
The storage gas inventory normally declines during the first and second
quarters of the fiscal year and is replenished during the third and fourth
quarters. Under the last-in, first-out (LIFO) method of accounting, the
current cost of replacing gas withdrawn from storage is recorded in the
Consolidated Statement of Income and a reserve for gas replacement is recorded
in the Consolidated Balance Sheet and is included under the caption "Other
Accruals and Current Liabilities." Such reserve is reduced as the inventory is
replenished.
Net cash provided by operating activities totaled $10.2 million for the
quarter ended December 31, 1994, an increase of $8.6 million compared with $1.6
million provided by operating activities in the quarter ended December 31,
1993. Higher cash flow reflects a significantly lower increase in the accounts
receivable balances of the Utility Operation for the three months ended
December 31, 1994 compared with the same period of the prior year, mainly due
to lower throughput and warmer weather in the current quarter. This was partly
offset by the change in the accounts payable balances, which went up for the
three months ended December 31, 1993, but decreased for the three months ended
December 31, 1994.
<PAGE 18>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont.)
Investing Cash Flow
Capital Expenditures
The Company's capital expenditures totaled $49.8 million during the three
month period. Total expenditures for the quarter represent 27% of the total
capital expenditure budget for fiscal 1995 of $183 million. The following
table presents first quarter capital expenditures by business segment:
(in thousands) Percentage
Utility Operation $16,305 32.8%
Pipeline and Storage 13,328 26.8
Exploration and Production 13,698 27.5
Other Nonregulated 6,452 12.9
$49,783 100.0%
The bulk of the Utility Operation's capital expenditures were made for
replacement of mains and main extensions, as well as for the replacement of
service lines and, to a minor extent, the installation of new services.
Pipeline and Storage capital expenditures during the quarter included $1.6
million in connection with its link with the Empire State Pipeline at Grand
Island, New York and $1.7 million related to compressor engine emission
controls necessary to comply with the Clean Air Act Amendments of 1990. In
addition, capital expenditures were made for additions, improvements, and
replacements to this segment's transmission and storage systems.
In a January 23, 1995 letter to the FERC, Supply Corporation informed the
FERC that it no longer intends to phase its Laurel Fields project, but rather
intends to seek authorization to construct the project as a whole. The timing
of this project is still not finalized.
The Exploration and Production segment's capital expenditures were made
almost entirely for the exploration and development of oil and gas properties
in the Gulf of Mexico and in the Northeast Clay field in central Texas. The
Company is delaying expenditures for some drilling, workovers and recompletions
in this segment pending higher prices for gas.
Other Nonregulated capital expenditures consisted primarily of timberland
purchases.
The Company's capital expenditure program is under continuous review. The
amounts are subject to modification for opportunities in the natural gas
industry such as the acquisition of attractive oil and gas properties or
storage facilities and the expansion of transmission line capacities. While
<PAGE 19>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont.)
the majority of capital expenditures in the Utility Operation are necessitated
by the continued need for replacement and upgrading of mains and service lines,
the magnitude of future capital expenditures in the Company's other business
segments depends, to a large degree, upon market conditions. Expenditures in
the Pipeline and Storage segment are also dependent on adequate rate relief.
Other
Cash received on the sale of the Company's investment in property, plant and
equipment is reflected as a cash flow from investing activities. Approximately
$2.1 million of cash was received in the first quarter of fiscal 1995, related
to the sale of certain gas reserves in the Gulf of Mexico.
Financing Cash Flow
Consolidated short-term debt increased by $42.1 million during the first
quarter. The Company considers short-term bank loans and commercial paper
important sources of cash for temporarily financing construction expenditures,
gas in storage inventory, unrecovered purchased gas costs and other working
capital needs.
The Company, through Seneca, is engaged in certain price swap agreements
as a means of managing a portion of the market risk associated with
fluctuations in the market price of natural gas and crude oil. In addition,
the Company has Securities and Exchange Commission (SEC) authority to enter
into certain interest rate swap agreements. For further discussion, see
disclosure under "Financial Instruments" in Note 1, "Summary of Significant
Accounting Policies."
The Company's previous authorization to issue debentures and/or
medium-term notes expired on December 31, 1994, and the Company has filed with
the SEC, under the Public Utility Holding Company Act of 1935, as amended, for
authority to issue up to $350 million of debentures and/or medium-term notes,
through December 31, 1997. SEC approval is expected shortly. The Company
currently has an effective shelf registration under the Securities Act of 1933,
as amended, to issue and sell up to $220 million of debentures and/or medium
term notes. Depending on market conditions and the requirements of the
Company, the Company may issue and sell as much as approximately $100 million
of the debentures and/or medium-term notes within the remainder of fiscal 1995.
The proceeds of such sales would be used to replace outstanding short-term
borrowings, to finance a portion of the Company's capital expenditures and/or
for other general corporate purposes.
In addition to the litigation discussed in Part II, Item 1, of this
report, the Company is involved in litigation arising in the normal course of
business. In addition to the regulatory matters discussed in Note 2, the
Company is involved in other regulatory matters arising in the normal course of
business that involve rate base, cost of service and purchased gas cost issues,
among other things. While the resolution of such litigation or other
regulatory matters could have a material effect on earnings and cash flows,
none of this other litigation and none of these other regulatory matters are
expected to change materially the Company's present liquidity position.
<PAGE 20>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont.)
The Company's present liquidity position is believed to be adequate to
satisfy known demands. Under the Company's covenants contained in its
indenture covering long-term debt, at December 31, 1994, the Company would have
been permitted to issue up to a maximum of $370 million in additional long-term
unsecured indebtedness, subject to maturity and long-term interest rates. In
addition, at December 31, 1994, the Company had regulatory authorizations and
unused short-term credit lines that would have permitted it to borrow an
additional $245.4 million of short-term debt.
RATE MATTERS
Utility Operation
New York Jurisdiction
In October 1994, Distribution Corporation filed in its New York
jurisdiction a request for an annual rate increase of $56.5 million, or 8.9%,
with a requested return on equity of 12.85%. Proceedings in this rate case are
ongoing and management cannot predict their outcome. New rates are expected to
become effective in August or September 1995.
In August 1993, Distribution Corporation filed in its New York
jurisdiction a request for an annual rate increase of $55.4 million, or 8.5%,
with a return on equity of 12.16%. Included in the requested rate increase was
an initial amount of $24.9 million for the recovery of transition costs arising
from the FERC's Order 636, which represented 3.8% of the total 8.5% requested
increase.
On July 19, 1994, the PSC issued an order authorizing a base rate increase
of $11.1 million, or 1.7%, with a return on equity of 10.7%. In addition, the
PSC authorized recovery of transition costs arising from the FERC's Order 636
of up to $11 million annually from sales customers through the monthly Gas
Adjustment Clause (GAC). Distribution Corporation will defer, for recovery in
future periods, any amounts that may exceed the $11 million annual amount. New
rates became effective July 24, 1994.
The recovery of transition costs from transportation customers in New York
was addressed in the December 20, 1994 PSC Order issued in a generic
restructuring case (the Generic Case). In the Generic Case, the PSC authorized
gas utilities to file revised tariffs, subject to PSC approval, providing that
transportation customers be assigned a per-unit charge that is equal to 50% of
the per-unit charge being collected from sales customers for gas supply
realignment (GSR) costs and stranded costs. At December 31, 1994, Distribution
Corporation had deferred transition costs related to transportation customers
in its New York jurisdiction amounting to approximately $2.1 million. Of this
amount, Distribution Corporation has calculated, based upon the PSC Order in
the Generic Case, that approximately $0.7 million is allocable to, and
<PAGE 21>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Concl.)
recoverable from, sales customers and the remaining approximate $1.4 million is
allocable to, and recoverable from, transportation customers.
In addition to addressing transition cost recovery related to
transportation customers, the December 20, 1994 PSC Order in the Generic Case
addresses key issues such as unbundling, rate design and the extent of state
regulation. Implementation will likely be achieved by each utility on a
case-by-case basis. In addition, the PSC has convened a generic proceeding to
develop, among other things, an appropriate performance-based gas cost
incentive mechanism and address concepts of affordability in utility service.
Pennsylvania Jurisdiction
On March 8, 1994, Distribution Corporation filed in its Pennsylvania
jurisdiction a request for an annual rate increase of $16 million, or 6.8%,
with a return on equity of 12.25%. A proposal for a WNC was included in this
filing. On December 6, 1994, an order was issued by the PaPUC authorizing an
annual rate increase of $4.8 million, or 2.0 %, with a return on equity of
11.0% and without a WNC. The new rates became effective as of December 7, 1994.
General rate increases do not reflect the recovery of purchased gas costs.
Such costs are recovered through operation of the purchased gas adjustment
clauses of the regulatory authorities having jurisdiction.
Pipeline and Storage. For a discussion of Supply Corporation's gathering
rates, refer to Note 2 - Regulatory Matters.
On October 31, 1994, Supply Corporation filed for an annual rate increase
of $21 million, with a requested return on equity of 12.6%. This rate case was
filed as a result of the FERC's order issued on October 28, 1994, rejecting
Supply Corporation's rate case filed on September 30, 1994. The FERC rejected
the September 30, 1994 filing because it disagreed with the proposed method of
rolling-in rates for the storage service previously offered by Penn-York
(Penn-York was merged into Supply Corporation effective July 1, 1994).
Proceedings in this rate case are ongoing and management cannot predict their
outcome.
<PAGE 22>
Part II. Other Information
Item 1. Legal Proceedings
Paragon/TGX Litigation
A. New York Litigation
On November 30, 1984, Distribution Corporation commenced an action against
Paragon Resources, Inc. (Paragon) and TGX Corp. (collectively Paragon/TGX), in
the United States District Court for the Western District of New York (the
District Court) seeking a declaratory judgment concerning the contract effect
of a December 20, 1983 PSC order (the Disapproval Order) which, among other
things, disapproved a 1974 gas purchase agreement between Distribution
Corporation's predecessor in interest, Iroquois Gas Corporation, and Paragon
(the Paragon Contract). Paragon/TGX counterclaimed for (i) a declaration that
the Disapproval Order did not affect the Paragon Contract in any way,
whatsoever, (ii) approximately $4,400,000 in respect of take-or-pay claims, and
(iii) unquantified amounts in respect of other alleged breaches of the Paragon
Contract. Commencing with its payment for production received in September
1984, Distribution Corporation has paid Paragon/TGX for Paragon Contract gas at
prices below those developed by the Paragon Contract's price formula, as the
same have been impacted, from time to time, by the Natural Gas Policy Act of
1978 (NGPA).
On the basis of a Memorandum and Order dated December 10, 1988, the
District Court in January 1991 issued a partial summary judgment which declared
that, whereas the Disapproval Order abrogated only the Paragon Contract's price
term, the legal consequence of such abrogation was to render the Paragon
Contract "void and no longer of any force or effect" as of December 20, 1983.
On December 3, 1991 the U. S. Court of Appeals for the Second Circuit (the
Second Circuit) reversed the District Court's partial summary judgment and
remanded the case to the District Court for further proceedings. The Second
Circuit agreed with the District Court that the Disapproval Order had "voided
the Contract's price term," but did not agree that the Paragon Contract as a
whole was "voided by the cancellation of the price term." Rather, the Second
Circuit found that Paragon/TGX had elected an option available to it under the
Paragon Contract to continue that contract, in the aftermath of the Disapproval
Order, at "a price consistent with" that order.
In a letter dated December 13, 1991, TGX demanded that Distribution
Corporation pay it $21,874,042 (including interest), alleged to represent the
difference between the amount received by Paragon/TGX in respect of Paragon
Contract gas delivered during the period September 1984 through October 1991,
and the amount allegedly due TGX in respect of such gas during such period.
Distribution Corporation rejected TGX's demand.
By Order entered March 23, 1992, the District Court granted Distribution
Corporation permission to amend its reply to Paragon/TGX's counterclaims to
allege, among other things, (i) Distribution Corporation's "termination" of the
Paragon Contract by letter effective February 1, 1988; (ii) Paragon's pre-
September 1984 repudiation of the Paragon Contract; and (iii) the PSC's
"primary jurisdiction" to interpret the Disapproval Order as respects "a price
consistent" therewith. With respect to (iii) above, Distribution Corporation
<PAGE 23>
Item 1. Legal Proceedings (Cont.)
notes that the New York State Public Service Law provides that no charge for
gas made pursuant to a contract with a New York gas utility shall exceed the
"just and reasonable charge" for such gas. In response to Distribution
Corporation's motion for partial summary judgment in respect of the defense
denominated (ii) above, the District Court, in a Memorandum and Order entered
July 10, 1992, as revised by a Memorandum and Order entered March 1, 1993,
denied Distribution Corporation's summary judgment motion (due to a perceived
question of fact as to the occurrence of a condition precedent to Paragon's
pre-September 1984 contract repudiation), but confirmed Distribution
Corporation's right to assert the repudiation defense upon the trial of the
action.
On January 4, 1993, the District Court entered a non-final order
purportedly responsive to a February 13, 1992 Paragon/TGX motion. The order
purports to declare that, by voiding the Paragon Contract price escalation
mechanism effective December 31, 1983, the PSC's 1983 Disapproval Order
effectively capped the Paragon Contract price, at the lesser, from time to
time, of (i) the 1983 Paragon Contract summer/winter "base prices," or (ii) the
applicable "Natural Gas Ceiling Prices" set forth in 18 CFR paragraph 271.101
Table I. Under date of January 19, 1993 Distribution Corporation sought
rehearing, reargument, reconsideration and clarification of the January 4, 1993
order. On July 12, 1993, the District Court filed a Memorandum and Order
granting in part the January 19, 1993 motion. The July 12, 1993 Order stated
that, while the January 4, 1993 Memorandum and Order did determine that an
obligation on Distribution Corporation's part to pay for gas purchased pursuant
to the gas purchase agreement at the applicable NGPA ceiling price arose out of
the conduct of the parties after the NGPA became effective and that the
Disapproval Order did not relieve Distribution Corporation of such obligation,
it did not determine the just and reasonable price for the gas pursuant to
Public Service Law section 110(4), set a contract price for the duration of the
contract, resolve any defenses presented by Distribution Corporation, determine
whether such obligation continues until the present time, or rule on any
deregulation issues.
Effective January 14, 1994, TGX purportedly effected a partial assignment
of its interest under the Paragon Contract to an unaffiliated third-party, with
whom Distribution Corporation subsequently negotiated agreements to supersede
the terms of the Paragon Contract, prospectively. These transactions did not
materially increase (and potentially may have decreased) Distribution
Corporation's exposure in the New York Litigation.
On September 29, 1994, Paragon/TGX served an amended answer and
counterclaim. That pleading restates Paragon/TGX's claims for unquantified
money damages respecting Distribution Corporation's alleged (i) breach of
contract price and "take-or-pay" provisions, (ii) "lack of good
faith...material breach" of the contract, and (iii) repudiation of the
contract. The pleading also adds two new, but unquantified claims - (i)
consequential damages suffered upon the sale of properties and assignment of
the Paragon Contract at less than full value, and (ii) damages related to the
allegation that Distribution Corporation "tortiously and with intent injured
TGX in the conduct of its business." Distribution Corporation filed a timely
reply to Paragon/TGX's claims.
<PAGE 24>
Item 1. Legal Proceedings (Cont.)
TGX in the conduct of its business." Distribution Corporation filed a timely
reply to Paragon/TGX's claims.
The parties are awaiting a scheduling order from the magistrate regarding
discovery and the trial of this proceeding.
B. Louisiana Litigation
On February 22, 1990, TGX, the purported assignee of the Paragon Contract,
filed a voluntary petition pursuant to Chapter 11 of the United States
Bankruptcy Code in the United States Bankruptcy Court for the Western District
of Louisiana (the Bankruptcy Court). Thereafter TGX commenced a "turnover"
proceeding against Distribution Corporation, premised upon TGX's December 13,
1991 payment demand described above under "New York Litigation." Pursuant to a
partial settlement agreement between TGX and Distribution Corporation, approved
by the Bankruptcy Court in August 1992, TGX has withdrawn the "turnover"
proceeding and Distribution Corporation has paid to TGX $2,940,000 in
consideration of, among other things, TGX's release of Distribution Corporation
from the cause of action asserted in the "turnover" proceeding. TGX is still
free to pursue its breach of contract counterclaims in the New York Litigation.
However, the $2,940,000 paid by Distribution Corporation to TGX will be
credited against the amount, if any, which is ultimately adjudged due TGX
and/or Paragon in the New York Litigation.
C. State Commission Proceedings
By its "Order Instituting Proceeding," issued in Case 93-G-0352, et al.,
and effective April 28, 1993, the PSC granted Distribution Corporation deferral
authority in respect of the New York allocable share ($2,006,000) of the
partial settlement payment described above under "Louisiana Litigation" and
instituted a proceeding designed to address Distribution Corporation's request
for recovery authority in respect of that amount. Distribution Corporation
received authority to treat the Pennsylvania allocable share ($934,000) of the
partial settlement payment as a gas cost experienced during the twelve (12)
month period ending November 30, 1992.
The PSC proceeding is also expected to address Distribution Corporation's
recovery in New York of gas costs incurred in respect of the Paragon Contract
during the reconciliation period September 1, 1991 through August 30, 1992.
Finally, the PSC proceeding is expected to include the review of the Paragon
Contract in light of the "just and reasonable" standard of the New York Public
Service Law.
Under date of October 25, 1994, the Administrative Law Judge (ALJ) in this
proceeding issued a recommended decision (RD). The RD seemingly recommends
that the maximum price Paragon/TGX should be authorized to receive for gas
delivered in respect of the contract should be $3.714 per Mcf. The ALJ noted
that Distribution Corporation might owe approximately $9.6 million more to
Paragon/TGX under this scenario. The ALJ also found that payments previously
made by Distribution Corporation were prudent and reasonable. Nonetheless, he
recommended that Distribution Corporation be allowed to recover from ratepayers
only one-half of the $2,006,000 payment referred to above and one-half of
<PAGE 25>
Item 1. Legal Proceedings (Concl.)
future amounts that might be paid to Paragon/TGX. The ALJ's recommendations
are not binding on the PSC or the courts. All parties to the proceedings have
taken exception to various portions of the RD. The PSC is expected to issue
its decision in this proceeding during 1995.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description of Exhibit
(12) Statements regarding Computation of Ratios:
Ratio of Earnings to Fixed Charges for the
Twelve Months Ended December 31, 1994.
(27) Financial Data Schedule
(99) National Fuel Gas Company Consolidated
Statement of Income for the Twelve Months
Ended December 31, 1994 and 1993.
(b) Reports on Form 8-K
None
<PAGE 26>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the under-
signed thereunto duly authorized.
NATIONAL FUEL GAS COMPANY
(Registrant)
/S/ Joseph P. Pawlowski
Joseph P. Pawlowski
Treasurer and Principal
Accounting Officer
Date: February 10, 1995
<TABLE>
<CAPTION>
EXHIBIT 12
NATIONAL FUEL GAS COMPANY
COMPUTATION OF ACTUAL RATIO OF
EARNINGS TO FIXED CHARGES
(UNAUDITED)
(Thousands of Dollars)
Twelve
Months
Ended Year Ended September 30
12/31/94 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
EARNINGS:
Income Before Interest Charges(1) $127,495 $127,885 $125,742 $118,222 $110,240 $109,781
Allowance for Borrowed Funds
Used in Construction 224 209 174 1,088 2,278 1,273
Federal Income Tax 39,952 36,630 21,148 17,680 (3,929) 17,435
State Income Tax 8,391 6,309 2,979 3,426 342 2,419
Deferred Income Taxes - Net(3) (209) 4,857 16,923 14,130 26,880 7,657
Investment Tax Credit - Net (685) (685) (698) (711) (746) (798)
Rentals(2) 5,576 5,730 5,621 5,857 4,915 4,915
$180,744 $180,935 $171,889 $159,692 $139,980 $142,682
FIXED CHARGES:
Interest and Amortization
of Premium and Discount
on Funded Debt $ 38,188 $ 36,699 $ 38,507 $ 39,949 $ 41,916 $ 37,236
Interest on Commercial Paper
and Short-Term Notes Payable 5,592 5,599 7,465 12,093 11,933 12,521
Other Interest(1) 3,443 3,361 4,727 6,958 9,679 9,298
Rentals(2) 5,576 5,730 5,621 5,857 4,915 4,915
$ 52,799 $ 51,389 $ 56,320 $ 64,857 $ 68,443 $ 63,970
Ratio of Earnings to
Fixed Charges 3.42 3.52 3.05 2.46 2.05 2.23
<FN>
Note: (1) For the twelve months ended 12/31/94, fiscal 1994 and fiscal 1993 reflect the reclassification of
the $1,702, $1,674 and $1,374, respectively, representing the loss on reacquired debt amortized
during each period, from Other Interest Charges to Operation Expense.
(2) Rentals shown above represent the portion of all rentals (other than delay rentals) deemed
representative of the interest factor.
(3) Deferred Income Taxes - Net for the twelve months ended 12/31/94 and the fiscal year ended 9/30/94
excludes the cumulative effect of changes in accounting.
</FN>
</TABLE>
EXHIBIT 99
NATIONAL FUEL GAS COMPANY
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
Twelve Months Ended
December 31,
1994 1993
(Thousands of Dollars)
INCOME
Operating Revenues $1,102,745 $1,036,294
Operating Expenses
Purchased Gas 456,935 419,149
Operation Expense 263,707 260,476
Maintenance 31,455 23,871
Property, Franchise and Other Taxes 101,574 96,091
Depreciation, Depletion and Amortization 75,208 70,772
Income Taxes - Net 48,130 43,358
977,009 913,717
Operating Income 125,736 122,577
Other Income 3,460 4,363
Income Before Interest Charges 129,196 126,940
Interest Charges
Interest on Long-Term Debt 38,188 37,320
Other Interest 10,512 12,544
48,700 49,864
Income Before Cumulative Effect 80,496 77,076
Cumulative Effect of Changes
in Accounting (589) 3,826
Net Income Available for Common Stock $ 79,907 $ 80,902
Earnings Per Common Share
Income Before Cumulative Effect $2.16 $2.16
Cumulative Effect of Changes
in Accounting (.02) .11
Net Income Available for Common Stock $2.14 $2.27
Weighted Average Common Shares Outstanding 37,190,689 35,655,517
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NATIONAL
FUEL GAS COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 03-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,571,611
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 255,390
<TOTAL-DEFERRED-CHARGES> 14,140
<OTHER-ASSETS> 200,477
<TOTAL-ASSETS> 2,041,618
<COMMON> 37,366
<CAPITAL-SURPLUS-PAID-IN> 381,426
<RETAINED-EARNINGS> 375,013
<TOTAL-COMMON-STOCKHOLDERS-EQ> 793,805
0
0
<LONG-TERM-DEBT-NET> 404,000
<SHORT-TERM-NOTES> 154,600
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 154,500
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 534,713
<TOT-CAPITALIZATION-AND-LIAB> 2,041,618
<GROSS-OPERATING-REVENUE> 271,548
<INCOME-TAX-EXPENSE> 15,433
<OTHER-OPERATING-EXPENSES> 217,537
<TOTAL-OPERATING-EXPENSES> 232,970
<OPERATING-INCOME-LOSS> 38,578
<OTHER-INCOME-NET> 844
<INCOME-BEFORE-INTEREST-EXPEN> 39,422
<TOTAL-INTEREST-EXPENSE> 13,561
<NET-INCOME> 25,861
0
<EARNINGS-AVAILABLE-FOR-COMM> 25,861
<COMMON-STOCK-DIVIDENDS> 14,702
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 10,188
<EPS-PRIMARY> .69
<EPS-DILUTED> .69
</TABLE>
