- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 1995
-----------------
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 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, 1996:
37,550,736 shares.
- -------------------------------------------------------------------------------
<PAGE 2>
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)
Highland Land & Minerals, Inc. (Highland)
Leidy Hub, Inc. (Leidy Hub)
Data-Track Account Services, Inc. (Data-Track)
National Fuel Resources, Inc. (NFR)
Horizon Energy Development, Inc. (Horizon)
Utility Constructors, Inc. (UCI)
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, 1995 and 1994 3
b. Consolidated Balance Sheets - December 31, 1995 and
September 30, 1995 4 - 5
c. Consolidated Statement of Cash Flows - Three
Months Ended December 31, 1995 and 1994 6
d. Notes to Consolidated Financial Statements 7 - 12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13 - 21
Part II. Other Information
--------------------------
Item 1. Legal Proceedings 22 - 23
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 23
Signature 24
* The Company has nothing to report under this item.
<PAGE 3>
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,
-----------------------
1995 1994
---- ----
(Thousands of Dollars)
INCOME
Operating Revenues $316,328 $279,332
-------- --------
Operating Expenses
Purchased Gas 132,958 103,407
Operation Expense 66,666 66,843
Maintenance 6,024 5,892
Property, Franchise and Other Taxes 23,902 23,066
Depreciation, Depletion and Amortization 21,593 18,329
Income Taxes - Net 18,841 18,507
-------- --------
269,984 236,044
-------- --------
Operating Income 46,344 43,288
Other Income 943 844
-------- --------
Income Before Interest Charges 47,287 44,132
-------- --------
Interest Charges
Interest on Long-Term Debt 10,287 10,373
Other Interest 4,608 3,188
-------- --------
14,895 13,561
-------- --------
Net Income Available for Common Stock 32,392 30,571
EARNINGS REINVESTED IN THE BUSINESS
Balance at October 1 380,123 363,854
-------- --------
412,515 394,425
Dividends on Common Stock
(1995 - $.405; 1994 - $.395) 15,117 14,702
-------- --------
Balance at December 31 $397,398 $379,723
======== ========
Earnings Per Common Share $ .87 $ .82
===== =====
Weighted Average Common Shares Outstanding 37,440,778 37,326,041
========== ==========
See Notes to Consolidated Financial Statements
<PAGE 4>
Item 1. Financial Statements (Cont.)
- -------------------------------------
National Fuel Gas Company
-------------------------
Consolidated Balance Sheets
---------------------------
December 31,
1995 September 30,
(Unaudited) 1995
----------- -------------
(Thousands of Dollars)
ASSETS
Property, Plant and Equipment $2,351,989 $2,322,335
Less - Accumulated Depreciation,
Depletion and Amortization 688,846 673,153
---------- ----------
1,663,143 1,649,182
---------- ----------
Current Assets
Cash and Temporary Cash Investments 17,365 12,757
Receivables - Net 144,838 75,933
Unbilled Utility Revenue 68,925 20,838
Gas Stored Underground 13,776 25,589
Materials and Supplies - at average cost 23,839 24,374
Unrecovered Purchased Gas Costs 187 -
Prepayments 20,648 29,753
---------- ----------
289,578 189,244
---------- ----------
Other Assets
Recoverable Future Taxes 93,658 94,053
Unamortized Debt Expense 26,328 26,976
Other Regulatory Assets 42,911 37,040
Deferred Charges 9,594 8,653
Other 35,488 33,154
---------- ----------
207,979 199,876
---------- ----------
$2,160,700 $2,038,302
========== ==========
See Notes to Consolidated Financial Statements
<PAGE 5>
Item 1. Financial Statements (Cont.)
- -------------------------------------
National Fuel Gas Company
-------------------------
Consolidated Balance Sheets
---------------------------
December 31,
1995 September 30,
(Unaudited) 1995
------------ -------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common Stock Equity
Common Stock, $1 Par Value
Authorized - 100,000,000 Shares;
Issued and Outstanding - 37,471,382
Shares and 37,434,363 Shares,
Respectively $ 37,471 $ 37,434
Paid in Capital 383,932 383,031
Earnings Reinvested in the Business 397,398 380,123
---------- ----------
Total Common Stock Equity 818,801 800,588
Long-Term Debt, Net of Current Portion 474,000 474,000
---------- ----------
Total Capitalization 1,292,801 1,274,588
---------- ----------
Current and Accrued Liabilities
Notes Payable to Banks and
Commercial Paper 268,700 147,600
Current Portion of Long-Term Debt 30,000 88,500
Accounts Payable 66,887 53,842
Amounts Payable to Customers 41,488 51,001
Other Accruals and Current Liabilities 84,550 52,118
---------- ----------
491,625 393,061
---------- ----------
Deferred Credits
Accumulated Deferred Income Taxes 289,255 288,763
Taxes Refundable to Customers 23,080 23,080
Unamortized Investment Tax Credit 13,213 13,380
Other Deferred Credits 50,726 45,430
---------- ----------
376,274 370,653
---------- ----------
Commitments and Contingencies - -
---------- ----------
$2,160,700 $2,038,302
========== ==========
See Notes to Consolidated Financial Statements
<PAGE 6>
Item 1. Financial Statements (Cont.)
- -------------------------------------
National Fuel Gas Company
-------------------------
Consolidated Statement of Cash Flows
------------------------------------
(Unaudited)
-----------
Three Months Ended
December 31,
-------------------
1995 1994
---- ----
(Thousands of Dollars)
OPERATING ACTIVITIES
Net Income Available for Common Stock $ 32,392 $ 30,571
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities
Depreciation, Depletion and Amortization 21,593 18,329
Deferred Income Taxes 3,377 2,607
Other (463) (6,332)
Change in:
Receivables and Unbilled Utility Revenue (116,992) (58,214)
Gas Stored Underground and Materials and
Supplies 12,348 13,378
Unrecovered Purchased Gas Costs (187) (178)
Prepayments 9,105 2,490
Accounts Payable 13,045 (14,828)
Amounts Payable to Customers (9,513) (4,390)
Other Accruals and Current Liabilities 29,532 23,250
Other Assets and Liabilities - Net (3,675) 3,505
-------- --------
Net Cash Provided by (Used in)
Operating Activities (9,438) 10,188
-------- --------
INVESTING ACTIVITIES
Capital Expenditures (34,038) (49,783)
Other 112 2,681
-------- --------
Net Cash Used in Investing Activities (33,926) (47,102)
-------- --------
FINANCING ACTIVITIES
Change in Notes Payable to Banks and Commercial
Paper 121,100 42,100
Reduction of Long-Term Debt (58,500) -
Proceeds from Issuance of Common Stock 474 1,414
Dividends Paid on Common Stock (15,102) (14,671)
-------- --------
Net Cash Provided by
Financing Activities 47,972 28,843
-------- --------
Net Increase (Decrease) in Cash and
Temporary Cash Investments 4,608 (8,071)
Cash and Temporary Cash Investments
at October 1 12,757 29,016
-------- --------
Cash and Temporary Cash Investments at December 31 $ 17,365 $ 20,945
======== ========
See Notes to Consolidated Financial Statements
<PAGE 7>
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 presented. The fiscal 1996 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, 1995, 1994 and 1993, that are included in the
Company's combined Annual Report to Shareholders / Form 10-K for 1995.
The earnings for the quarter ended December 31, 1995, should not be
taken as a prediction for the fiscal year ending September 30, 1996, 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.
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,
1995 and 1994, amounted to $13.9 million and $9.5 million, respectively. Income
taxes paid during the three months ended December 31, 1995 and 1994 amounted to
$12.0 million and $4.5 million, respectively.
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 to it by Supply Corporation and other upstream pipeline companies.
As of December 31, 1995, Distribution Corporation's estimate of its
exposure to outstanding transition cost claims is in the range of $7.1 million
to $70.1 million. The estimated maximum exposure is declining as transition
costs are incurred and paid. At December 31, 1995, Distribution Corporation has
recorded the minimum liability and corresponding regulatory asset of $7.1
million.
Distribution Corporation is currently recovering transition costs
from its sales customers in New York and its sales and transportation customers
in Pennsylvania. Recovery of the allocable portion of transition costs related
to Distribution Corporation's transportation customers in New York is expected
to begin upon the Public Service Commission of the State of New York's (PSC)
acceptance of a compliance filing made in November 1995. It is expected that the
compliance filing will be accepted by the spring of 1996.
<PAGE 8>
Item 1. Financial Statements (Cont.)
- -------------------------------------
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. 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 customers.
Gathering Rates. Supply Corporation has approximately $20.0 million of net
production and gathering plant used, in part, to gather natural gas of local
producers, including the Company's production in the Appalachian Region. In its
restructuring orders, the FERC has directed Supply Corporation to fully unbundle
the production and gathering cost of service from the transmission cost of
service, and to establish a separate gathering rate. A Stipulation and Agreement
complying with the FERC's directives was filed with the FERC in September 1995
and the Administrative Law Judge certified it as uncontested to the FERC.
Approval is expected early in calendar 1996. If approved, it will permit Supply
Corporation to fully recover its net investment in production and gathering
plant, as well as its production and gathering cost of service.
NOTE 3 - Income Taxes
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,
------------------
1995 1994
---- ----
Operating Expenses:
Current Income Taxes -
Federal $14,086 $13,739
State 1,378 2,161
Deferred Income Taxes 3,377 2,607
------- -------
18,841 18,507
Other Income:
Deferred Investment Tax Credit (167) (172)
------- -------
Total Income Taxes $18,674 $18,335
======= =======
<PAGE 9>
Item 1. Financial Statements (Cont.)
- -------------------------------------
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,
------------------
1995 1994
---- ----
Net income available for common stock $32,392 $30,571
Total income taxes 18,674 18,335
------- -------
Income before income taxes $51,066 $48,906
======= =======
Income tax expense, computed at
statutory rate of 35% in 1995
and 1994 17,873 17,117
Increase (reduction) in taxes resulting from:
Current state income taxes 896 1,405
Depreciation 523 555
Production tax credits (146) (283)
Miscellaneous (472) (459)
------- -------
Total Income Taxes $18,674 $18,335
======= =======
Significant components of the Company's deferred tax liabilities
(assets) were as follows (in thousands):
<TABLE>
<CAPTION>
At December 31, 1995 At September 30, 1995
------------------------- -------------------------
Accumulated Deferred Accumulated Deferred
Deferred Income Taxes Deferred Income Taxes
Income Taxes Current* Income Taxes Current*
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Deferred Tax Liabilities:
Excess of tax over book
depreciation $186,269 $ - $185,595 $ -
Exploration and intangible
well drilling costs 86,574 - 84,380 -
Other 67,845 - 67,831 -
-------- ------- -------- -------
Total Deferred Tax
Liabilities 340,688 - 337,806 -
-------- ------- -------- -------
Deferred Tax Assets:
Deferred investment tax
credits (7,861) - (7,860) -
Overheads capitalized for
tax purposes (12,213) - (11,766) -
Unrecovered purchased gas
costs - (5,832) - (8,322)
Other (31,359) - (29,417) -
-------- ------- -------- -------
Total Deferred Tax Assets (51,433) (5,832) (49,043) (8,322)
-------- ------- -------- -------
Total Net Deferred Income
Taxes $289,255 $(5,832) $288,763 $(8,322)
======== ======= ======== =======
</TABLE>
* Included on the Consolidated Balance Sheets in "Other Accruals and Current
Liabilities."
<PAGE 10>
Item 1. Financial Statements (Cont.)
- -------------------------------------
NOTE 4 - Capitalization
Common Stock. During the three months ended December 31, 1995, the Company
issued 8,200 shares of common stock under the Company's Section 401(k) plans and
3,257 shares to participants in the Company's Dividend Reinvestment Plan.
Additionally, 25,562 shares of common stock were issued under the Company's
stock option and stock award plans.
New Accounting Pronouncement. In October 1995, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards No.
123, "Accounting for Stock Based Compensation" (SFAS 123). This statement
establishes a fair value based method of accounting for employee stock options
or similar equity instruments and encourages all companies to adopt that method
of accounting for all of their employee stock compensation plans.
Measurement of compensation cost under SFAS 123, if adopted, is
effective for all awards granted after the beginning of the fiscal year in which
that method is first applied. Management is currently reviewing the provisions
of SFAS 123 and has not decided whether to adopt the fair value based
measurement provisions. If the fair value based measurement provisions of SFAS
123 are adopted, they are not expected to have a material impact on the results
of operations or financial condition of the Company.
SFAS 123 allows companies to continue to measure compensation cost
for employee stock options or similar equity instruments using the method of
accounting prescribed by Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees." Companies electing to remain with this method
are required to make pro forma disclosures of net income and earnings per share
as if SFAS 123 accounting had been applied. The Company is required to adopt the
disclosure requirements of SFAS 123 for its fiscal year ending September 30,
1997.
NOTE 5 - Derivative Financial Instruments
The Company, in its Exploration and Production operations, 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 the Company to receive monthly payments from (or make
payment to) other parties based upon the difference between a fixed and a
variable price as specified by the agreement. The variable price is either a
crude oil price quoted on the New York Mercantile Exchange or a quoted natural
gas price in "Inside FERC." These variable prices represent the current market
prices at the locations where the company delivers its natural gas and crude oil
production.
<PAGE 11>
Item 1. Financial Statements (Cont.)
- -------------------------------------
The following summarizes the Company's activity under swap agreements
for the quarters ended December 31, 1995 and 1994, respectively:
Quarter Ended Quarter Ended
December 31, 1995 December 31, 1994
----------------- -----------------
Natural Gas Swap Agreements:
Notional Amount - Equivalent Billion
Cubic Feet (Bcf) 5.4 1.7
Fixed Prices per Thousand Cubic
Feet (Mcf) $1.75 - $2.17 $2.32 - $2.39
Variable Prices per Mcf $1.67 - $2.34 $1.36 - $1.73
Gain $358,000 $1,415,000
Crude Oil Swap Agreements:
Notional Amount - Equivalent
Barrels (bbl) 214,000 151,000
Fixed Prices per bbl $17.40 - $19.00 $16.68 - $18.50
Variable Prices per bbl $17.40 - $19.04 $17.16 - $18.10
Gain $4,000 $2,000
The Company had the following swap agreements outstanding at
December 31, 1995:
Natural Gas Swap Agreements:
Notional Amount
Fiscal Year (Equivalent Bcf) Fixed Price Per Mcf
- ----------- ---------------- -------------------
1996 17.6 $1.71 - $3.05
1997 14.1 $1.71 - $1.99
1997 1.7 (1)
1998 3.4 $1.82 - $1.88
1998 0.6 (1)
----
37.4
====
Crude Oil Swap Agreements:
Notional Amount
Fiscal Year (Equivalent bbl) Fixed Price Per bbl
- ----------- ---------------- -------------------
1996 732,000 $17.40 - $18.50
1997 738,000 $17.40 - $18.33
1998 96,000 $18.31
---------
1,566,000
=========
(1) Price to be set according to market prices at a future date.
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. At December 31, 1995, most of the variable
prices of these price swap agreements exceeded the fixed prices, resulting in an
unrealized loss of approximately $17.0 million. However, the Company utilizes
these price swap agreements as a hedge of its natural gas and crude oil
production, meaning that any decreases in revenues associated with hedging
losses are offset by increased revenues from the increase in prices received for
the Company's actual natural gas and crude oil production. The unrealized loss
on the Company's outstanding price swap agreements at December 31, 1995 was
calculated as the difference between the fixed price associated with those
agreements and the variable prices which were used to settle similar price swap
agreements for the month of December 1995. The actual gain or loss realized upon
settlement of these price swap agreements will depend upon the variable price at
the time of settlement.
<PAGE 12>
Item 1. Financial Statements (Concl.)
- --------------------------------------
The Company has SEC authority to enter into interest rate swaps
and other derivative instruments associated with long-term borrowings up to a
notional amount of $350.0 million at any one time outstanding. All such interest
rate swaps and other derivative instruments must be directly related to then
outstanding long or short-term debt. The Company also has SEC authority to enter
into interest rate and currency exchange agreements associated with short-term
borrowings covering a total principal amount of $300.0 million. No such
agreements were entered into during the quarter ended December 31, 1995 and
none are currently outstanding.
Credit Risk. Credit risk relates to the risk of loss that the Company would
incur as a result of nonperformance by counterparties pursuant to the terms of
their contractual obligations. The Company is at risk in the event of
nonperformance by counterparties on its derivative financial instruments. The
counterparties to the Company's derivative financial instruments are investment
grade financial institutions. Furthermore, the Company has guarantees from
counterparty affiliates on a large portion of its derivative financial
instruments. Accordingly, the Company does not anticipate any material impact to
its financial position, results of operations or cash flow as a result of
nonperformance by counterparties.
NOTE 6 - Commitments and Contingencies
Environmental Matters. The Company is subject to various federal, state and
local laws and regulations relating to the protection of the environment. The
Company has established procedures for on-going evaluation of its operations to
identify potential environmental exposures and assure compliance with regulatory
policies and procedures.
It is the Company's policy to accrue estimated environmental clean-up
costs when such amounts can reasonably be estimated and it is probable that the
Company will be required to incur such costs. Distribution Corporation has
estimated that clean-up costs related to several former manufactured gas plant
sites and several other waste disposal sites are in the range of $8.0 million to
$9.4 million. At December 31, 1995, Distribution Corporation has recorded the
minimum liability of $8.0 million. The Company is currently not aware of any
material additional exposure to environmental liabilities. However, adverse
changes in environmental regulations or other factors could impact the Company.
In New York, Distribution Corporation is recovering site
investigation and remediation costs over a three-year period for each site. In
Pennsylvania, Distribution Corporation expects to recover such costs in rates,
as the Pennsylvania Public Utility Commission (PaPUC) has allowed recovery of
other environmental clean-up costs in rate cases. For further discussion, see
disclosure in Note H - Commitments and Contingencies under the heading
"Environmental Matters" in Item 8 of the Company's 1995 Form 10-K.
Other. 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.
<PAGE 13>
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations
---------------------
RESULTS OF OPERATIONS
Earnings.
The Company's earnings were $32.4 million, or $0.87 per common share,
during the quarter ended December 31, 1995. This compares with earnings of $30.6
million, or $0.82 per common share, during the quarter ended December 31, 1994.
The $0.05 per common share increase in earnings resulted from an
increase in earnings of the Company's Utility Operation and Exploration and
Production segment which outweighed the decline in earnings of its Pipeline and
Storage segment and its Other Nonregulated operations.
The earnings of the Utility Operation increased mainly because of
colder weather and rate increases effective in September 1995 in both the New
York and Pennsylvania jurisdictions combined with a rate increase effective in
December 1994 in the Pennsylvania jurisdiction. The earnings of the Exploration
and Production segment increased because of higher natural gas and oil
production coupled with an increase in the weighted average price received for
this production.
The earnings of the Pipeline and Storage segment decreased as
revenues related to unbundled pipeline sales and open access transportation
decreased from the prior year. The loss in the Other Nonregulated operations,
compared to earnings in the quarter ended December 31, 1994, resulted from
expenses which were expected to be incurred while exploring new opportunities in
the international market. Additionally, last year's earnings of the Company's
pipeline construction subsidiary were not repeated because of the discontinuance
of its operations in the latter part of fiscal 1995. The Company's timber
operations had lower earnings as a result of a general decline in demand and
price for furniture quality timber.
<PAGE 14>
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations (Cont.)
-----------------------------
OPERATING REVENUES
(in thousands)
Three Months Ended
December 31,
-----------------------------
1995 1994 % Change
---- ---- --------
Utility Operation
Retail Revenues:
Residential $192,240 $166,578 15.4
Commercial 45,796 39,702 15.3
Industrial 5,292 5,467 (3.2)
-------- --------
243,328 211,747 14.9
Off-System Sales 9,672 2,227 334.3
Transportation 10,850 8,880 22.2
Other 808 1,271 (36.4)
-------- --------
264,658 224,125 18.1
-------- --------
Pipeline and Storage
Storage Service 14,893 14,890 -
Transportation 23,046 22,277 3.5
Other 2,297 8,684 (73.5)
-------- --------
40,236 45,851 (12.2)
-------- --------
Exploration and Production 22,973 14,274 60.9
Other Nonregulated 12,336 17,089 (27.8)
-------- --------
35,309 31,363 12.6
-------- --------
Less-Intersegment Revenues 23,875 22,007 8.5
-------- --------
$316,328 $279,332 13.2
======== ========
OPERATING INCOME (LOSS) BEFORE INCOME TAXES
(in thousands)
Three Months Ended
December 31,
-----------------------------
1995 1994 % Change
---- ---- --------
Utility Operation $40,632 $33,348 21.8
Pipeline and Storage 16,206 23,287 (30.4)
Exploration and Production 9,504 3,748 153.6
Other Nonregulated (454) 2,103 (121.6)
Corporate (703) (691) (1.7)
------- -------
$65,185 $61,795 5.5
======= =======
<PAGE 15>
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations (Cont.)
-----------------------------
SYSTEM NATURAL GAS VOLUMES
(millions of cubic feet-MMcf)
Three Months Ended
December 31,
--------------------------
1995 1994 % Change
---- ---- --------
Utility Gas Sales
Residential 27,471 22,833 20.3
Commercial 7,356 6,212 18.4
Industrial 1,271 1,353 (6.1)
Off-System 4,137 1,107 273.7
------ ------
40,235 31,505 27.7
------ ------
Non-Utility Gas Sales
Gas Sales for Resale 73 92 (20.7)
Production(in equivalent MMcf) 10,719 6,602 62.4
------ ------
10,792 6,694 61.2
------ ------
Total Gas Sales 51,027 38,199 33.6
------ ------
Transportation
Utility Operation 13,558 12,042 12.6
Pipeline and Storage 93,441 71,856 30.0
Nonregulated 305 811 (62.4)
------- ------
107,304 84,709 26.7
------- ------
Marketing Volumes 4,780 4,471 6.9
------- -----
Less-Intersegment Volumes:
Transportation 50,200 42,823 17.2
Production 1,292 1,009 28.0
Marketing 75 - NM
Gas Sales 371 8 NM
------- ------
51,938 43,840 18.5
------- ------
Total System Natural Gas
Volumes 111,173 83,539 33.1
======= ======
NM = Not meaningful.
Utility Operation.
Operating revenues for the Utility Operation increased $40.5 million
for the quarter ended December 31, 1995, compared with the same period a year
ago. This increase reflects the recovery of increased gas costs mainly because
of higher gas sales as well as an increase in the average cost of purchased gas.
The 8.7 Bcf increase in gas sales primarily reflects weather in Distribution
Corporation's service territory that was, on a weighted average basis, 27.0%
colder than last year. The increase in operating revenues also reflects general
rate increases of $14.2 million and $6.0 million in the New York and
Pennsylvania rate jurisdictions, respectively, effective in September 1995. The
Pennsylvania rate jurisdiction also had a general rate increase of $4.8 million
effective in December 1994 which increased revenues during the current quarter.
Operating income before income taxes for the Utility Operation
increased $7.3 million for the quarter ended December 31, 1995, compared with
the same period a year ago. This resulted primarily from colder weather, which
contributed to an increase in gas sales, as discussed above. The impact
<PAGE 16>
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations (Cont.)
-----------------------------
of colder 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 tempered by that jurisdiction's WNC,
which resulted in a benefit to customers of $2.0 million for the current
quarter. In the quarter ended December 31, 1994, the WNC preserved pretax
operating income of $4.3 million, as weather was warmer than normal.
Degree Days.
Three Months Ended December 31:
- ------------------------------
Percent Colder
Than
Normal 1995 1994 Normal Last Year
- ----------------------------------------------------------------------
Buffalo 2,254 2,430 1,936 7.8 25.5
Erie 2,045 2,239 1,715 9.5 30.6
- ----------------------------------------------------------------------
Pipeline and Storage.
Operating income before income taxes for the Pipeline and Storage
segment decreased $7.1 million for the quarter ended December 31, 1995, as
compared with the same period a year ago. This decrease resulted primarily
because of higher earnings in the quarter ended December 31, 1994 reflecting
application of a final rule issued by the Federal Energy Regulatory Commission
in September 1995 related to financial reporting of unbundled pipeline sales and
open access transportation.
While transportation volumes for the current quarter increased 21.6
Bcf from the quarter ended December 31, 1994, the increase in volumes 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 $5.8 million compared with the same period a
year ago, mainly because of increased natural gas and oil production combined
with higher weighted average prices for both natural gas and oil. Natural gas
production increased 3.5 Bcf, or 64.6%, compared with the same period a year
ago, and the weighted average price received for natural gas increased $0.23 per
Mcf. The increase in volumes primarily reflects bringing the West Cameron 552
well on production. Oil and condensate production increased 100,000 barrels
(bbls), or 51.3%, and the weighted average price received for oil increased
$0.73 per bbl. The fluctuations in prices denoted above do not reflect revenue
from hedging activities, which contributed a net $0.4 million and $1.5 million
to revenues for the quarters ended December 31, 1995 and 1994, respectively.
Refer to further discussion of the Company's hedging activities under "Financing
Cash Flow" and in Note 5 - Derivative Financial Instruments.
<PAGE 17>
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations (Cont.)
-----------------------------
PRODUCTION VOLUMES
Exploration and Production.
Three Months Ended
December 31,
-------------------------
1995 1994 % Change
---- ---- --------
Gas Production - (MMcf)
Gulf Coast 7,296 3,748 94.7
West Coast 257 165 55.8
Appalachia 1,393 1,521 (8.4)
----- -----
8,946 5,434 64.6
===== =====
Oil Production - (Thousands of Barrels)
Gulf Coast 169 89 89.9
West Coast 123 103 19.4
Appalachia 3 3 -
----- -----
295 195 51.3
===== =====
WEIGHTED AVERAGE PRICES
Exploration and Production.
Three Months Ended
December 31,
--------------------------
1995 1994 % Change
---- ---- --------
Weighted Avg. Gas Price/Mcf
Gulf Coast $1.96 $1.59 23.3
West Coast $1.19 $1.70 (30.0)
Appalachia $2.05 $2.04 0.5
Weighted Average Price $1.95 $1.72 13.4
Weighted Avg. Oil Price/bbl
Gulf Coast $17.53 $16.16 8.5
West Coast $14.86 $15.25 (2.6)
Appalachia $16.28 $15.27 6.6
Weighted Average Price $16.40 $15.67 4.7
Other Nonregulated.
The Other Nonregulated operations experienced an operating loss
before income taxes for the quarter ended December 31, 1995, compared with
operating income before income taxes during the quarter ended December 31, 1994.
This decline was mainly due to expenses which were expected to be incurred while
exploring new opportunities in the international market through Horizon, the
Company's foreign and domestic energy projects subsidiary. In addition, last
year's pretax operating income of the Company's pipeline construction subsidiary
was not repeated because of the discontinuance of pipeline construction
operations in the latter part of fiscal 1995. Furthermore, the Company's timber
operation had lower pretax operating income as a result of a general decline in
demand and price for furniture quality timber.
Income Taxes.
Income taxes increased $0.3 million for the current quarter mainly
because of an increase in pretax income.
<PAGE 18>
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations (Cont.)
-----------------------------
Interest Charges.
Total interest charges increased $1.3 million for the quarter ended
December 31, 1995, compared with the same period a year ago. Interest on
long-term debt decreased $0.1 million and other interest increased $1.4 million.
The increase in other interest resulted primarily from increases in short-term
borrowings and short-term interest rates. It also increased because of higher
interest expense associated with greater amounts payable to customers during the
quarter ended December 31, 1995, compared with the same period a year ago.
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.
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.
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 used in operating activities totaled $9.4 million for the
quarter ended December 31, 1995, compared with $10.2 million provided by
operating activities in the quarter ended December 31, 1994. This shift in cash
flow can be attributed primarily to an increase in receivable balances, offset
partly by higher payable balances, in the Utility Operation and Exploration and
Production segment.
<PAGE 19>
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 $34.0 million during the
three month period. Total expenditures for the quarter represent 20% of the
total capital expenditure budget for fiscal 1996 of $172.9 million. The
following table presents first quarter capital expenditures by business segment:
(in thousands) Percentage
-------------- ----------
Utility Operation $14,147 41.6%
Pipeline and Storage 5,788 17.0
Exploration and Production 13,780 40.5
Other Nonregulated 323 0.9
------- -----
$34,038 100.0%
======= ======
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.
The bulk of the Pipeline and Storage capital expenditures were made
for additions, improvements, and replacements to this segment's transmission and
storage systems.
The Exploration and Production segment spent approximately $6.8
million on its offshore program in the Gulf of Mexico, including offshore lease
acquisitions and drilling expenditures. Lease acquisitions included the
acquisition of Galveston Block 225 through a federal lease sale.
Approximately $7.0 million was spent on the Exploration and
Production segment's onshore program, including horizontal onshore drilling in
central Texas and Seneca's development drilling program in California.
Other Nonregulated capital expenditures consisted of equipment
purchases for the Company's sawmill operation.
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 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.
Financing Cash Flow.
In December 1995, the Company retired $58.5 million of maturing
medium-term notes with short-term borrowings. This consisted of $38.5 million of
8.90% medium-term notes and $20.0 million of 8.875% medium-term notes.
<PAGE 20>
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations (Cont.)
-----------------------------
Consolidated short-term debt increased by $121.1 million during the
first quarter. This increase reflects, among other things, the use of short-term
borrowings to retire the medium-term notes discussed above. 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'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, 1995, the Company would have
been permitted to issue up to a maximum of $656.0 million in additional
long-term unsecured indebtedness, in light of then current long-term interest
rates. In addition, at December 31, 1995, the Company had regulatory
authorizations and unused short-term credit lines that would have permitted it
to borrow an additional $331.3 million of short-term debt.
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. These price swap
agreements are not held for trading purposes. During the quarter ended December
31, 1995, Seneca utilized natural gas and crude oil swap agreements with
notional amounts of 5.4 equivalent Bcf and 214,000 equivalent bbl, respectively.
This activity resulted in net revenues of approximately $0.4 million.
At December 31, 1995, Seneca had natural gas swap agreements
outstanding with a notional amount of 37.4 equivalent Bcf at prices ranging from
$1.71 per Mcf to $3.05 per Mcf. Seneca also had crude oil swap agreements
outstanding at December 31, 1995 with a notional amount of 1,566,000 equivalent
bbl at prices ranging from $17.40 per bbl to $18.50 per bbl. In addition, the
Company has SEC authority to enter into certain interest rate swap agreements.
For further discussion, refer to Note 5 - Derivative Financial Instruments.
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.
RATE MATTERS
Utility Operation
New York Jurisdiction
- ---------------------
In November 1995, Distribution Corporation filed in its New York
jurisdiction a request for an annual base rate increase of $28.9 million with a
requested return on equity of 11.5%. Proceedings in this rate case are ongoing
and management cannot predict their outcome. New rates are expected to become
effective in October 1996. Prior to this filing, Distribution Corporation
entered into discussions concerning a multi-year settlement, the outcome of
which is uncertain at this time.
<PAGE 21>
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations (Concl.)
------------------------------
In October 1994, Distribution Corporation filed in its New York
jurisdiction a request for an annual base rate increase of $56.5 million with a
requested return on equity of 12.85%. In September 1995, the PSC issued an order
authorizing an annual base rate increase of $14.2 million with a return on
equity of 10.4%. The new rates became effective as of September 20, 1995.
Pennsylvania Jurisdiction
- -------------------------
On March 15, 1995, Distribution Corporation filed in its Pennsylvania
jurisdiction a request for an annual base rate increase of $22.0 million with a
return on equity of 13.25%. In September 1995, the PaPUC approved a settlement
authorizing an annual base rate increase of $6.0 million with no specified rate
of return on equity. The new rates became effective as of September 27, 1995.
On March 8, 1994, Distribution Corporation filed in its Pennsylvania
jurisdiction a request for an annual base rate increase of $16.0 million 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 base
rate increase of $4.8 million 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 $21.0 million, with a requested return on equity of 12.6%.
Settlement discussions to resolve the various issues have achieved a settlement
in principle. This settlement in principle will increase Supply Corporation's
revenues by approximately $6.4 million annually from current levels, with a
return on equity of 11.3%. The services of the former Penn-York Energy
Corporation (Penn-York), which was merged into Supply Corporation effective July
1, 1994, will be rolled-in for ratemaking purposes. Approximately two-thirds of
the former Penn-York service is now on year-to-year contracts and Supply
Corporation has agreed not to seek recovery of revenues related to terminated
Penn-York service from other storage customers until April 1, 2000, as long as
the terminations are not greater than approximately 30% of the terminable
service. Supply Corporation also agreed not to seek recovery for increased cost
of service until April 1, 1998. A Stipulation and Agreement incorporating the
settlement in principle was filed with the FERC in September 1995 and the
Administrative Law Judge certified the settlement as uncontested to the FERC on
November 6, 1995. Approval is expected in early calendar year 1996 and rates are
expected to become effective retroactive to June 1, 1995.
With respect to the terminable Penn-York storage service, Supply
Corporation has received notification of termination of 3.3 Bcf of service
effective on March 31, 1996. An open season was recently completed concerning
the 3.3 Bcf of service, and management is currently evaluating the results.
<PAGE 22>
Part II. Other Information
- ---------------------------
Item 1. Legal Proceedings
- --------------------------
Paragon/TGX Litigation
A. New York Litigation
Since November 30, 1984, Distribution Corporation has been involved in
litigation 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). Distribution Corporation sought 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 $4.4 million 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, and continuing through December 1993, when
Paragon/TGX purported to assign the Paragon Contract, Distribution Corporation
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.
On December 3, 1991, the United States Court of Appeals for the Second
Circuit (the Second Circuit) issued an opinion regarding a partial summary
judgment granted by the District Court. The Second Circuit essentially held that
the Disapproval Order had "voided the Contract's price term," but 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. The Second Circuit also remanded the case to the
District Court for further proceedings.
In a letter dated December 13, 1991, TGX demanded that Distribution
Corporation pay it $21.9 million (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.
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.
Various motions have been heard before the District Court. A United
States Magistrate Judge is now handling other preliminary matters and discovery
issues before the case is ultimately set for trial.
B. State Commission Proceedings
In 1992, Distribution Corporation filed two petitions with the PSC
that involved the Paragon Contract. Distribution Corporation sought authority
<PAGE 23>
Item 1. Legal Proceeding (Concl.)
- ----------------------------------
from the PSC to defer, and ultimately recover through rates, a partial
settlement payment made to TGX. Distribution Corporation also requested the PSC
to review the prices charged by TGX in the context of the "just and reasonable"
standard of Section 110(4) of the New York Public Service Law and issue a
declaratory order regarding its findings.
The PSC consolidated the proceedings, and, in an order issued on
May 5, 1995, (i) authorized Distribution Corporation to recover through rates
the amounts previously paid to TGX, and (ii) dismissed Distribution
Corporation's petition regarding the New York Public Service Law Section 110(4)
issues because the PSC determined there was no "properly reviewable contract"
that had been filed with it.
In September 1995, Distribution Corporation filed a petition with
the New York Supreme Court (Albany County, Special Term) seeking judicial review
of the PSC's May 1995 order regarding the dismissal of Distribution
Corporation's petition for a declaratory order. In January 1996, Distribution
Corporation and the PSC stipulated to a dismissal of Distribution Corporation's
September 1995 petition.
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, 1995.
(27) Financial Data Schedule
(99) National Fuel Gas Company Consolidated
Statement of Income for the Twelve Months
Ended December 31, 1995 and 1994.
(b) Reports on Form 8-K
None
<PAGE 24>
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
undersigned thereunto duly authorized.
NATIONAL FUEL GAS COMPANY
(Registrant)
/s/ Joseph P. Pawlowski
------------------------------
Joseph P. Pawlowski
Treasurer and Principal
Accounting Officer
Date: February 14, 1996
-----------------
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-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,663,143
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 289,578
<TOTAL-DEFERRED-CHARGES> 9,594
<OTHER-ASSETS> 198,385
<TOTAL-ASSETS> 2,160,700
<COMMON> 37,471
<CAPITAL-SURPLUS-PAID-IN> 383,932
<RETAINED-EARNINGS> 397,398
<TOTAL-COMMON-STOCKHOLDERS-EQ> 818,801
0
0
<LONG-TERM-DEBT-NET> 474,000
<SHORT-TERM-NOTES> 163,700
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 105,000
<LONG-TERM-DEBT-CURRENT-PORT> 30,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 569,199
<TOT-CAPITALIZATION-AND-LIAB> 2,160,700
<GROSS-OPERATING-REVENUE> 316,328
<INCOME-TAX-EXPENSE> 18,841
<OTHER-OPERATING-EXPENSES> 251,143
<TOTAL-OPERATING-EXPENSES> 269,984
<OPERATING-INCOME-LOSS> 46,344
<OTHER-INCOME-NET> 943
<INCOME-BEFORE-INTEREST-EXPEN> 47,287
<TOTAL-INTEREST-EXPENSE> 14,895
<NET-INCOME> 32,392
0
<EARNINGS-AVAILABLE-FOR-COMM> 32,392
<COMMON-STOCK-DIVIDENDS> 15,117
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> (9,438)
<EPS-PRIMARY> .87
<EPS-DILUTED> .87
</TABLE>
EXHIBIT 99
NATIONAL FUEL GAS COMPANY
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
Twelve Months Ended
December 31,
-------------------
1995 1994
(Thousands of Dollars)
INCOME
Operating Revenues $1,012,491 $1,110,529
---------- ----------
Operating Expenses
Purchased Gas 380,645 456,935
Operation Expense 266,609 263,706
Maintenance 25,851 31,455
Property, Franchise and Other Taxes 92,673 101,574
Depreciation, Depletion and Amortization 75,046 75,208
Income Taxes - Net 44,212 51,205
---------- ----------
885,036 980,083
---------- ----------
Operating Income 127,455 130,446
Other Income 5,477 3,460
----------- ----------
Income Before Interest Charges 132,932 133,906
---------- ----------
Interest Charges
Interest on Long-Term Debt 40,810 38,188
Other Interest 14,407 10,512
---------- ----------
55,217 48,700
---------- ----------
Income Before Cumulative Effect 77,715 85,206
Cumulative Effect of Change
in Accounting - (589)
---------- ----------
Net Income Available for Common Stock $ 77,715 $ 84,617
========== ==========
Earnings Per Common Share
Income Before Cumulative Effect $2.08 $2.30
Cumulative Effect of Change
in Accounting - (.02)
----- -----
Net Income Available for Common Stock $2.08 $2.28
===== =====
Weighted Average Common Shares Outstanding 37,425,797 37,190,689
========== ==========
<TABLE>
<CAPTION>
COMPUTATION OF RATIO OF EXHIBIT 12
EARNINGS TO FIXED CHARGES
UNAUDITED
Fiscal Year Ended September 30
Twelve -------------------------------------------------
Months Ended
12/31/95 1995 1994 1993 1992 1991
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS:
Income Before Interest Charges (2) $131,216 $128,061 $127,885 $125,742 $118,222 $110,240
Allowance for Borrowed Funds Used in Construction 164 195 209 174 1,088 2,278
Federal Income Tax 30,869 30,522 36,630 21,148 17,680 (3,929)
State Income Tax 4,121 4,905 6,309 2,979 3,426 341
Deferred Inc. Taxes - Net (3) 9,222 8,452 4,853 16,919 14,125 26,873
Investment Tax Credit - Net (668) (672) (682) (693) (706) (738)
Rentals (1) 5,431 5,422 5,730 5,621 5,857 4,915
-------------------------------------------------------------
$180,355 $176,885 $180,934 $171,890 $159,692 $139,980
=============================================================
FIXED CHARGES:
Interest & Amortization of Premium and
Discount of Funded Debt $40,810 $40,896 $36,699 $38,507 $39,949 $41,916
Interest on Commercial Paper and
Short-Term Notes Payable 7,585 6,745 5,599 7,465 12,093 11,933
Other Interest (2) 5,270 4,721 3,361 4,727 6,958 9,679
Rentals (1) 5,431 5,422 5,730 5,621 5,857 4,915
------------------------------------------------------------
$59,096 $57,784 $51,389 $56,320 $64,857 $68,443
============================================================
RATIO OF EARNINGS TO FIXED CHARGES 3.05 3.06 3.52 3.05 2.46 2.05
</TABLE>
Notes:
(1) Rentals shown above represent the portion of all rentals (other than
delay rentals) deemed representative of the interest factor.
(2) The twelve month period ended December 31, 1995, and the fiscal years
1995, 1994, 1993 and 1992 reflect the reclassification of $1,716,
$1,716, $1,674, $1,374 and $1,129, respectively, representing the loss
on reacquired debt amortized during each period, from Other Interest
Charges to Operation Expense.
(3) Deferred Income Taxes - Net for fiscal 1994 excludes the cumulative
effect of changes in accounting.
