þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
New Jersey | 13-1086010 | |
(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer
Identification No.) |
|
6363 Main Street
Williamsville, New York |
14221 | |
(Address of principal executive offices) | (Zip Code) |
Large Accelerated Filer þ | Accelerated Filer o | Non-Accelerated Filer o (Do not check if a smaller reporting company) | Smaller Reporting Company o |
National Fuel Gas Companies
|
||
Company
|
The Registrant, the Registrant and its subsidiaries or the Registrants
subsidiaries as appropriate in the context of the disclosure
|
|
Distribution Corporation
|
National Fuel Gas Distribution Corporation | |
Empire
|
Empire Pipeline, Inc. | |
ESNE
|
Energy Systems North East, LLC | |
Highland
|
Highland Forest Resources, Inc. | |
Horizon
|
Horizon Energy Development, Inc. | |
Horizon B.V.
|
Horizon Energy Development B.V. | |
Horizon LFG
|
Horizon LFG, Inc. | |
Horizon Power
|
Horizon Power, Inc. | |
Midstream Corporation
|
National Fuel Gas Midstream Corporation | |
Model City
|
Model City Energy, LLC | |
National Fuel
|
National Fuel Gas Company | |
NFR
|
National Fuel Resources, Inc. | |
Registrant
|
National Fuel Gas Company | |
Seneca
|
Seneca Resources Corporation | |
Seneca Energy
|
Seneca Energy II, LLC | |
Supply Corporation
|
National Fuel Gas Supply Corporation | |
|
||
Regulatory Agencies
|
||
EPA
|
United States Environmental Protection Agency | |
FASB
|
Financial Accounting Standards Board | |
FERC
|
Federal Energy Regulatory Commission | |
NYDEC
|
New York State Department of Environmental Conservation | |
NYPSC
|
State of New York Public Service Commission | |
PaPUC
|
Pennsylvania Public Utility Commission | |
SEC
|
Securities and Exchange Commission | |
|
||
Other
|
||
2010 Form 10-K
|
The Companys Annual Report on Form 10-K for the year ended September 30, 2010 | |
Bbl
|
Barrel (of oil) | |
Bcf
Bcfe (or Mcfe) represents |
Billion cubic feet (of natural gas) | |
Bcf (or Mcf) Equivalent
|
The total heat value (Btu) of natural gas and oil expressed as a volume of
natural gas. The Company uses a conversion formula of 1 barrel of
oil = 6 Mcf of natural gas.
|
|
Btu
|
British thermal unit; the amount of heat needed to raise the temperature
of one pound of water one degree Fahrenheit.
|
|
Capital expenditure
|
Represents additions to property, plant, and equipment, or the amount of
money a company spends to buy capital assets or upgrade its existing
capital assets.
|
|
Degree day
|
A measure of the coldness of the weather experienced, based on the
extent to which the daily average temperature falls below a reference
temperature, usually 65 degrees Fahrenheit.
|
|
Derivative
|
A financial instrument or other contract, the terms of which include an
underlying variable (a price, interest rate, index rate, exchange rate, or
other variable) and a notional amount (number of units, barrels, cubic
feet, etc.). The terms also permit for the instrument or contract to be
settled net and no initial net investment is required to enter into the
financial instrument or contract. Examples include futures contracts,
options, no cost collars and swaps.
|
|
Development costs
|
Costs incurred to obtain access to proved reserves and to provide
facilities for extracting, treating, gathering and storing the oil
and gas.
|
|
Dth
|
Decatherm; one Dth of natural gas has a heating value of 1,000,000
British thermal units, approximately equal to the heating value of 1 Mcf
of natural gas.
|
|
Exchange Act
|
Securities Exchange Act of 1934, as amended |
-2-
Expenditures for
long-lived assets |
Includes capital expenditures, stock acquisitions and/or investments in
partnerships.
|
|
Exploration costs
|
Costs incurred in identifying areas that may warrant examination, as well
as costs incurred in examining specific areas, including drilling
exploratory wells.
|
|
Firm transportation
and/or storage |
The transportation and/or storage service that a supplier of such service
is obligated by contract to provide and for which the customer is
obligated to pay whether or not the service is utilized.
|
|
GAAP
|
Accounting principles generally accepted in the United States of America
|
|
Goodwill
|
An intangible asset representing the difference between the fair value of
a company and the price at which a company is purchased.
|
|
Hedging
|
A method of minimizing the impact of price, interest rate, and/or foreign
currency exchange rate changes, often times through the use of
derivative financial instruments.
|
|
Hub
|
Location where pipelines intersect enabling the trading, transportation,
storage, exchange, lending and borrowing of natural gas.
|
|
Interruptible transportation
and/or storage |
The transportation and/or storage service that, in accordance with
contractual arrangements, can be interrupted by the supplier of such
service, and for which the customer does not pay unless utilized.
|
|
LIBOR
|
London Interbank Offered Rate
|
|
LIFO
|
Last-in, first-out
|
|
Marcellus Shale
|
A Middle Devonian-age geological shale formation that is present nearly
a mile or more below the surface in the Appalachian region of the
United States, including much of Pennsylvania and southern New York.
|
|
Mbbl
|
Thousand barrels (of oil)
|
|
Mcf
|
Thousand cubic feet (of natural gas)
|
|
MD&A
|
Managements Discussion and Analysis of Financial Condition and
Results of Operations
|
|
MDth
|
Thousand decatherms (of natural gas)
|
|
MMBtu
|
Million British thermal units
|
|
MMcf
|
Million cubic feet (of natural gas)
|
|
NGA
|
The Natural Gas Act of 1938, as amended; the federal law regulating
interstate natural gas pipeline and storage companies, among other
things, codified beginning at 15 U.S.C. Section 717.
|
|
NYMEX
|
New York Mercantile Exchange. An exchange which maintains a futures
market for crude oil and natural gas.
|
|
Open Season
|
A bidding procedure used by pipelines to allocate firm transportation or
storage capacity among prospective shippers, in which all bids
submitted during a defined time period are evaluated as if they had
been submitted simultaneously.
|
|
PCB
|
Polychlorinated Biphenyl
|
|
Precedent Agreement
|
An agreement between a pipeline company and a potential customer to
sign a service agreement after specified events (called conditions
precedent) happen, usually within a specified time.
|
|
Proved developed reserves
|
Reserves that can be expected to be recovered through existing wells
with existing equipment and operating methods.
|
|
Proved undeveloped reserves
|
Reserves that are expected to be recovered from new wells on undrilled
acreage, or from existing wells where a relatively major expenditure is
required to make these reserves productive.
|
|
Reserves
|
The unproduced but recoverable oil and/or gas in place in a formation
which has been proven by production.
|
|
Restructuring
|
Generally referring to partial deregulation of the pipeline and/or utility
industry by statutory or regulatory process. Restructuring of federally
regulated natural gas pipelines resulted in the separation (or
unbundling) of gas commodity service from transportation
service for wholesale and large-volume retail markets. State restructuring
programs attempt to extend the same process to retail mass markets.
|
-3-
Revenue decoupling
mechanism |
A rate mechanism which adjusts customer rates to render a utility
financially indifferent to throughput decreases resulting from
conservation.
|
|
S&P
|
Standard & Poors Rating Service
|
|
SAR
|
Stock appreciation right
|
|
Stock acquisitions
|
Investments in corporations.
|
|
Unbundled service
|
A service that has been separated from other services, with rates
charged that reflect only the cost of the separated service.
|
|
VEBA
|
Voluntary Employees Beneficiary Association
|
|
WNC
|
Weather normalization clause; a clause in utility rates which adjusts
customer rates to allow a utility to recover its normal operating costs
calculated at normal temperatures. If temperatures during the
measured period are warmer than normal, customer rates are adjusted
upward in order to recover projected operating costs. If
temperatures
during the measured period are colder than normal, customer
rates
are adjusted downward so that only the projected operating costs
will
be recovered.
|
-4-
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EX-10.1 | ||||||||
EX-10.2 | ||||||||
EX-10.3 | ||||||||
EX-10.4 | ||||||||
EX-10.5 | ||||||||
EX-12 | ||||||||
EX-31.1 | ||||||||
EX-31.2 | ||||||||
EX-32 | ||||||||
EX-99 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT |
-5-
-6-
-7-
-8-
-9-
-10-
-11-
-12-
-13-
-14-
-15-
-16-
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-18-
-19-
-20-
-21-
-22-
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-24-
-25-
-26-
-27-
-28-
-29-
-30-
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-35-
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-37-
-38-
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-40-
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-45-
-46-
-47-
-48-
-49-
Reinvested in the Business
(Unaudited)
Table of Contents
(Unaudited)
December 31,
September 30,
(Thousands of Dollars)
2010
2010
$
5,837,365
$
5,637,498
2,236,152
2,187,269
3,601,213
3,450,229
79,622
395,171
2,000
31,446
11,134
147,829
132,136
59,211
20,920
47,839
48,584
31,560
24,987
107,201
115,969
20,901
24,476
525,609
775,377
150,865
149,712
12,036
12,550
534,146
542,801
10,219
9,646
80,701
77,839
13,728
14,828
5,476
5,476
46,152
65,184
1,836
1,983
855,159
880,019
$
4,981,981
$
5,105,625
Table of Contents
Consolidated Balance Sheets
(Unaudited)
December 31,
September 30,
(Thousands of Dollars)
2010
2010
$
82,338
$
82,075
643,856
645,619
1,093,398
1,063,262
1,819,592
1,790,956
(64,650
)
(44,985
)
1,754,942
1,745,971
899,000
1,049,000
2,653,942
2,794,971
20,500
150,000
200,000
181,564
145,223
23,914
38,109
28,407
28,316
15,953
30,512
27,633
27,638
18,508
18,320
30,838
16,046
34,500
20,160
531,817
524,324
821,001
800,758
69,589
69,585
3,112
3,288
125,862
124,032
88,263
89,334
433,010
446,082
100,580
101,618
154,805
151,633
1,796,222
1,786,330
$
4,981,981
$
5,105,625
Table of Contents
Table of Contents
Three Months Ended
December 31,
(Thousands of Dollars)
2010
2009
$
58,543
$
64,499
17
17
34
2,540
(713
)
(27,136
)
(4,853
)
(9,053
)
(12,052
)
(33,598
)
(17,601
)
960
(271
)
(11,168
)
(2,062
)
(3,725
)
(4,962
)
(13,933
)
(7,295
)
(19,665
)
(10,306
)
$
38,878
$
54,193
Table of Contents
Table of Contents
Table of Contents
At December 31, 2010
At September 30, 2010
$
(79,465
)
$
(79,465
)
(51
)
11,580
32,876
3,235
1,655
$
(64,650
)
$
(44,985
)
At December 31, 2010
At September 30, 2010
$
10,873
$
13,884
14,782
12,413
56,287
56,334
15,593
18,007
9,666
15,331
$
107,201
$
115,969
Table of Contents
Table of Contents
Item 1.
Financial Statements (Cont.)
Recurring Fair Value Measures
At fair value as of December 31, 2010
(Thousands of Dollars)
Level 1
Level 2
Level 3
Total
| | | |
$
47,674
$
$
$
47,674
(392
)
(392
)
46,544
46,544
18,280
18,280
6,789
6,789
257
257
31,446
31,446
$
104,446
$
46,152
$
$
150,598
$
3,125
$
$
$
3,125
37,407
37,407
(6,032
)
(6,032
)
$
3,125
$
(6,032
)
$
37,407
$
34,500
$
101,321
$
52,184
$
(37,407
)
$
116,098
Recurring Fair Value Measures
At fair value as of September 30, 2010
(Thousands of Dollars)
Level 1
Level 2
Level 3
Total
$
277,423
$
$
$
277,423
67,387
67,387
(2,203
)
(2,203
)
17,256
17,256
4,991
4,991
241
241
11,134
11,134
$
311,045
$
67,387
$
(2,203
)
$
376,229
$
5,840
$
$
$
5,840
14,280
14,280
40
40
$
5,840
$
40
$
14,280
$
20,160
$
305,205
$
67,347
$
(16,483
)
$
356,069
Table of Contents
Item 1.
Financial Statements (Cont.)
Total Gains/Losses
Realized and Unrealized
October 1,
Included in
Included in Other
Transfer
(Dollars in thousands)
2010
Earnings
Comprehensive Income
In/Out of Level 3
December 31, 2010
$
(16,483
)
$
(2,803
)
(1)
$
(18,121
)
$
$
(37,407
)
(1)
Amounts are reported in Operating Revenues in the Consolidated Statement of
Income for the three months ended December 31, 2010.
(2)
Derivative Financial Instruments are shown on a net basis.
Table of Contents
Item 1.
Financial Statements (Cont.)
Total Gains/Losses
Realized and Unrealized
Included in Other
October 1,
Included in
Comprehensive
Transfer In/Out of
(Dollars in thousands)
2009
Earnings
Income
Level 3
December 31, 2009
$
26,969
$
(3,135
)
(1)
$
(23,983
)
$
$
(149
)
(1)
Amounts are reported in Operating Revenues in the Consolidated Statement of
Income for the three months ended December 31, 2009.
(2)
Derivative Financial Instruments are shown on a net basis.
December 31, 2010
September 30, 2010
Carrying
Carrying
Amount
Fair Value
Amount
Fair Value
$
1,049,000
$
1,196,215
$
1,249,000
$
1,423,349
Table of Contents
Item 1.
Financial Statements (Cont.)
Fair Values of Derivative Instruments
(Dollar Amounts in Thousands)
Gross Asset Derivatives
Gross Liability Derivatives
Derivatives Designated as Hedging Instruments
Fair Value
Fair Value
$
58,315
$
46,663
$
77,837
$
32,813
Commodity
Units
41.9 Bcf (all short positions)
2,727,000 Bbls (all short positions)
Table of Contents
Item 1.
Financial Statements (Cont.)
Commodity
Units
5.5 Bcf (4.2 Bcf short positions (forecasted storage
withdrawals) and 1.3 Bcf long positions (forecasted storage
injections))
Commodity
Units
0.3 Bcf (all short positions)
Table of Contents
Three Months Ended December 31, 2010 and 2009 (Thousands of Dollars)
Derivatives in
Cash Flow
Hedging
Relationships
Amount of
Derivative Gain or
(Loss) Recognized
in Other
Comprehensive
Income (Loss) on
the Consolidated
Statement of
Comprehensive
Income (Loss)
(Effective Portion)
for the Three
Months Ended
December 31,
Location of
Derivative Gain
or (Loss)
Reclassified
from
Accumulated
Other
Comprehensive
Income (Loss)
on the
Consolidated
Balance Sheet
into the
Consolidated
Statement of
Income
(Effective
Portion)
Amount of Derivative
Gain or (Loss)
Reclassified from
Accumulated Other
Comprehensive
Income (Loss) on the
Consolidated Balance
Sheet into the
Consolidated
Statement of Income
(Effective Portion)
for the Three
Months Ended
December 31,
Location of
Derivative Gain
or (Loss)
Recognized in
the
Consolidated
Statement of
Income
(Ineffective
Portion and
Amount
Excluded from
Effectiveness
Testing)
Derivative Gain or
(Loss) Recognized
in the Consolidated
Statement of
Income (Ineffective
Portion and Amount
Excluded from
Effectiveness
Testing) for the
Three Months
Ended
December 31,
2010
2009
2010
2009
2010
2009
$
(26,781
)
$
(7,910
)
Operating Revenue
$
9,007
$
12,040
Operating Revenue
$
$
$
(269
)
$
3,024
Purchased Gas
$
46
$
23
Operating Revenue
$
$
$
(86
)
$
33
Operating Revenue
$
$
(11
)
Operating Revenue
$
$
$
(27,136
)
$
(4,853
)
$
9,053
$
12,052
$
$
Table of Contents
Consolidated
Statement of Income
Gain/(Loss) on Derivative
Gain/(Loss) on Commitment
$
7,511,054
$
(7,511,054
)
$
(841,956
)
$
841,956
Amount of Derivative Gain or (Loss)
Recognized in the Consolidated
Derivatives in
Location of Derivative Gain or (Loss)
Statement of Income
Fair Value Hedging
Recognized in the Consolidated
for the Three Months Ended
Relationships
Statement of Income
December 31, 2010
(In thousands)
Operating Revenues
$
7,511
Purchased Gas
$
(649
)
Purchased Gas
$
(192
)
$
6,670
(1)
Represents hedging of fixed price sales commitments of natural gas.
(2)
Represents hedging of fixed price purchase commitments of natural gas.
(3)
Represents hedging of natural gas held in storage.
Table of Contents
Item 1.
Financial Statements (Cont.)
Three Months Ended
December 31,
2010
2009
$
$
15,070
1,452
3,916
29,936
17,335
6,664
3,757
38,052
40,078
(174
)
(174
)
$
37,878
$
39,904
$
(174
)
$
(174
)
38,052
39,883
195
$
37,878
$
39,904
Table of Contents
Item 1.
Financial Statements (Cont.)
Table of Contents
Item 1.
Financial Statements (Cont.)
Table of Contents
Item 1.
Financial Statements (Cont.)
Three Months Ended
December 31,
(Thousands)
2009
$
2,876
2,400
476
(7
)
469
195
$
274
Table of Contents
Quarter Ended December 31, 2010 (Thousands)
Exploration
Total
Corporate and
and
Energy
Reportable
Intersegment
Total
Utility
Pipeline and Storage
Production
Marketing
Segments
All Other
Eliminations
Consolidated
$
242,842
$
33,513
$
120,168
$
53,652
$
450,175
$
549
$
224
$
450,948
$
4,570
$
19,882
$
$
$
24,452
$
1,678
$
(26,130
)
$
$
22,990
$
8,578
$
27,373
$
932
$
59,873
$
(574
)
$
(756
)
$
58,543
Quarter Ended December 31, 2009 (Thousands)
Exploration
Total
Corporate and
and
Energy
Reportable
Intersegment
Total
Utility
Pipeline and Storage
Production
Marketing
Segments
All Other
Eliminations
Consolidated
$
232,404
$
34,504
$
106,351
$
71,736
$
444,995
$
8,929
$
211
$
454,135
$
4,514
$
20,257
$
$
$
24,771
$
$
(24,771
)
$
$
23,013
$
10,354
$
29,779
$
1,092
$
64,238
$
892
$
(905
)
$
64,225
Table of Contents
Retirement Plan
Other Post-Retirement Benefits
Three months ended December 31,
2010
2009
2010
2009
$
3,693
$
3,249
$
1,069
$
1,075
10,669
11,077
5,471
6,254
(14,776
)
(14,585
)
(7,291
)
(6,584
)
147
164
(427
)
(427
)
135
135
8,718
5,410
5,948
6,470
(1,793
)
(42
)
1,921
(100
)
$
6,658
$
5,273
$
6,826
$
6,823
(1)
The Companys policy is to record retirement plan and other post-retirement
benefit costs in the Utility segment on a volumetric basis to reflect the fact that the
Utility segment experiences higher throughput of natural gas in the winter months and lower
throughput of natural gas in the summer months.
Table of Contents
of items that are discussed in greater detail in subsequent sections of this report.]
Table of Contents
Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations
(Cont.)
Table of Contents
Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations
(Cont.)
Table of Contents
Increase
Three Months Ended December 31
(Thousands)
2010
2009
(Decrease)
$
22,990
$
23,013
$
(23
)
8,578
10,354
(1,776
)
27,373
29,779
(2,406
)
932
1,092
(160
)
59,873
64,238
(4,365
)
(574
)
892
(1,466
)
(756
)
(905
)
149
58,543
64,225
(5,682
)
274
(274
)
$
58,543
$
64,499
$
(5,956
)
Increase
Three Months Ended December 31
(Thousands)
2010
2009
(Decrease)
$
177,189
$
176,597
$
592
22,545
24,406
(1,861
)
1,244
1,288
(44
)
200,978
202,291
(1,313
)
35,412
30,695
4,717
8,889
1,691
7,198
2,133
2,241
(108
)
$
247,412
$
236,918
$
10,494
Increase
Three Months Ended December 31
(MMcf)
2010
2009
(Decrease)
17,160
16,824
336
2,469
2,490
(21
)
146
158
(12
)
19,775
19,472
303
18,110
17,061
1,049
1,863
356
1,507
39,748
36,889
2,859
Percent
Three Months Ended
Colder (Warmer) Than
December 31
Normal
2010
2009
Normal
(1)
Prior Year
(1)
2,260
2,332
2,246
3.2
3.8
2,081
2,160
2,048
3.8
5.5
(1)
Percents compare actual 2010 degree days to normal degree days and actual 2010
degree days to actual 2009 degree days.
Table of Contents
Increase
Three Months Ended December 31
(Thousands)
2010
2009
(Decrease)
$
34,950
$
36,428
$
(1,478
)
314
305
9
35,264
36,733
(1,469
)
16,603
16,623
(20
)
17
56
(39
)
1,511
1,349
162
$
53,395
$
54,761
$
(1,366
)
Increase
Three Months Ended December 31
(MMcf)
2010
2009
(Decrease)
89,249
80,639
8,610
125
755
(630
)
89,374
81,394
7,980
Table of Contents
Increase
Three Months Ended December 31
(Thousands)
2010
2009
(Decrease)
$
58,009
$
40,868
$
17,141
58,692
62,695
(4,003
)
6,683
7,208
(525
)
(114
)
47
(161
)
(3,102
)
(4,467
)
1,365
$
120,168
$
106,351
$
13,817
(1)
Represents the elimination of certain West Coast gas production revenue included
in Gas (after Hedging) in the table above that was sold to the gas processing plant shown in the
table above. An elimination for the same dollar amount was made to reduce the gas processing
plants Purchased Gas expense.
Increase
Three Months Ended December 31
2010
2009
(Decrease)
2,013
2,690
(677
)
935
997
(62
)
8,082
2,801
5,281
11,030
6,488
4,542
106
146
(40
)
654
684
(30
)
10
11
(1
)
770
841
(71
)
Table of Contents
Increase
Three Months Ended December 31
2010
2009
(Decrease)
$
4.55
$
4.84
$
(0.29
)
$
3.92
$
4.64
$
(0.72
)
$
4.03
$
5.07
$
(1.04
)
$
4.11
$
4.91
$
(0.80
)
$
5.26
$
6.30
$
(1.04
)
$
83.97
$
72.78
$
11.19
$
80.45
$
70.32
$
10.13
$
81.40
$
84.05
$
(2.65
)
$
80.95
$
70.94
$
10.01
$
76.24
$
74.53
$
1.71
Table of Contents
Three Months Ended December 31
(Thousands)
2010
2009
Decrease
$
53,639
$
71,713
$
(18,074
)
13
23
(10
)
$
53,652
$
71,736
$
(18,084
)
Three Months Ended December 31
2010
2009
Decrease
10,746
14,101
(3,355
)
Table of Contents
Table of Contents
Three Months Ended December 31,
Increase
(Millions)
2010
2009
(Decrease)
$
10.9
$
12.0
$
(1.1
)
9.2
(1)
7.0
2.2
178.1
(1)(2)
47.7
(3)(4)
130.4
1.7
1.7
1.0
1.0
(4)
$
200.9
$
67.7
$
133.2
(1)
Capital expenditures for the Exploration and Production segment include $60.7
million of accrued capital expenditures at December 31, 2010, the majority of which was in the
Appalachian region. In addition, capital expenditures for the Pipeline and Storage segment include
$2.0 million of accrued capital expenditures at December 31, 2010. These amounts were excluded
from the Consolidated Statement of Cash Flows at December 31, 2010 since they represented non-cash
investing activities at that date.
(2)
Amount for the three months ended December 31, 2010 excludes $55.5 million
of accrued capital expenditures in the Exploration and Production segment, the majority of which
was in the Appalachian region. This amount was accrued at September 30, 2010 and paid during the
three months ended December 31, 2010. This amount was excluded from the Consolidated Statement of
Cash Flows at September 30, 2010 since it represented a non-cash investing activity at that date.
The amount has been included in the Consolidated Statement of Cash Flows at December 31, 2010.
(3)
Amount includes $15.4 million of accrued capital expenditures at
December 31, 2009, the majority of which was in the Appalachian region. This amount was excluded
from the Consolidated Statement of Cash Flows at December 31, 2009 since it represented a non-cash
investing activity at that date.
Table of Contents
(4)
Capital expenditures for the Exploration and Production segment for the three
months ended December 31, 2009 exclude $9.1 million of capital expenditures, the majority of which
was in the Appalachian region. Capital expenditures for All Other for the three months ended
December 31, 2009 exclude $0.7 million of capital expenditures related to the construction of the
Midstream Covington Gathering System. Both of these amounts were accrued at September 30, 2009 and
paid during the three months ended December 31, 2009. These amounts were excluded from the
Consolidated Statement of Cash Flows at September 30, 2009 since they represented non-cash
investing activities at that date. These amounts have been included in the Consolidated Statement
of Cash Flows at December 31, 2009.
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Item 2.
Managements Discussion and Analysis of Financial Condition and Results of
Operations (Cont.)
Table of Contents
Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations
(Cont.)
1.
Financial and economic conditions, including the availability of credit, and occurrences
affecting the Companys ability to obtain financing on acceptable terms for working capital,
capital expenditures and other investments, including any downgrades in the Companys credit
ratings and changes in interest rates and other capital market conditions;
2.
Changes in economic conditions, including global, national or regional recessions, and their
effect on the demand for, and customers ability to pay for, the Companys products and
services;
3.
The creditworthiness or performance of the Companys key suppliers, customers and
counterparties;
4.
Economic disruptions or uninsured losses resulting from terrorist activities, acts of war,
major accidents, fires, hurricanes, other severe weather, pest infestation or other natural
disasters;
5.
Factors affecting the Companys ability to successfully identify, drill for and produce
economically viable natural gas and oil reserves, including among others geology, lease
availability, weather conditions, shortages, delays or unavailability of equipment and
services required in drilling operations, insufficient gathering, processing and
transportation capacity, the need to obtain governmental approvals and permits, and compliance
with environmental laws and regulations;
6.
Changes in laws and regulations to which the Company is subject, including those involving
derivatives, taxes, safety, employment, climate change, other environmental matters, and
exploration and production activities such as hydraulic fracturing;
7.
Uncertainty of oil and gas reserve estimates;
8.
Significant differences between the Companys projected and actual production levels for
natural gas or oil;
9.
Significant changes in market dynamics or competitive factors affecting the Companys ability
to retain existing customers or obtain new customers;
10.
Changes in demographic patterns and weather conditions;
11.
Changes in the availability and/or price of natural gas or oil and the effect of such changes
on the accounting treatment of derivative financial instruments;
12.
Impairments under the SECs full cost ceiling test for natural gas and oil reserves;
13.
Changes in the availability and/or price of derivative financial instruments;
Table of Contents
Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations
(Cont.)
14.
Changes in price differential between similar quantities of natural gas at different
geographic locations, and the effect of such changes on the demand for pipeline transportation
capacity to or from such locations;
15.
Other changes in price differentials between similar quantities of oil or natural gas having
different quality, heating value, geographic location or delivery date;
16.
Changes in the projected profitability of pending or potential projects, investments or
transactions;
17.
Significant differences between the Companys projected and actual capital expenditures and
operating expenses;
18.
Delays or changes in costs or plans with respect to Company projects or related projects of
other companies, including difficulties or delays in obtaining necessary governmental
approvals, permits or orders or in obtaining the cooperation of interconnecting facility
operators;
19.
Governmental/regulatory actions, initiatives and proceedings, including those involving
derivatives, acquisitions, financings, rate cases (which address, among other things, allowed
rates of return, rate design and retained natural gas), affiliate relationships, industry
structure, franchise renewal, and environmental/safety requirements;
20.
Unanticipated impacts of restructuring initiatives in the natural gas and electric
industries;
21.
Ability to successfully identify and finance acquisitions or other investments and ability to
operate and integrate existing and any subsequently acquired business or properties;
22.
Changes in actuarial assumptions, the interest rate environment and the return on plan/trust
assets related to the Companys pension and other post-retirement benefits, which can affect
future funding obligations and costs and plan liabilities;
23.
Significant changes in tax rates or policies or in rates of inflation or interest;
24.
Significant changes in the Companys relationship with its employees or contractors and the
potential adverse effects if labor disputes, grievances or shortages were to occur;
25.
Changes in accounting principles or the application of such principles to the Company;
26.
The cost and effects of legal and administrative claims against the Company or activist
shareholder campaigns to effect changes at the Company;
27.
Increasing health care costs and the resulting effect on health insurance premiums and on the
obligation to provide other post-retirement benefits; or
28.
Increasing costs of insurance, changes in coverage and the ability to obtain insurance.
Table of Contents
Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations
(Concl.)
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Item 4.
Controls and Procedures
Table of Contents
-50-
-51-
-52-
-53-
-54-
Item 1.
Legal Proceedings
Item 1A.
Risk Factors
Table of Contents
Item 1A.
Risk Factors (Cont.)
Table of Contents
Item 1A.
Risk Factors (Cont.)
Table of Contents
Item 1A.
Risk Factors (Concl.)
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Total Number of
Maximum Number of
Shares Purchased as
Shares that May Yet
Part of Publicly
Be Purchased Under
Total Number of
Announced Share
Share Repurchase
Shares
Average Price
Repurchase Plans or
Plans or Programs
Period
Purchased
(a)
Paid per Share
Programs
(b)
99,753
$
54.37
6,971,019
95,433
$
62.64
6,971,019
95,197
$
65.28
6,971,019
290,383
$
60.66
6,971,019
(a)
Represents (i) shares of common stock of the Company purchased on the open market
with Company matching contributions for the accounts of participants in the Companys 401(k)
plans, and (ii) shares of common stock of the Company tendered to the Company by holders of
stock options or shares of restricted stock for the payment of option exercise prices or
applicable withholding taxes. During the quarter ended December 31, 2010, the Company did not
purchase any shares of its common stock pursuant to its publicly announced share repurchase
program. Of the 290,383 shares purchased other than through a publicly announced share
repurchase program, 20,408 were purchased for the Companys 401(k) plans and 269,975 were
purchased as a result of shares tendered to the Company by holders of stock options or shares
of restricted stock.
(b)
In September 2008, the Companys Board of Directors authorized the repurchase of eight million shares of the Companys common stock. The Company, however,
stopped repurchasing shares after September 17, 2008 in light of the unsettled nature of the
credit markets. Since that time, the Company has increased its emphasis on Marcellus Shale
development and pipeline expansion. As such, the Company does not anticipate repurchasing any
shares in the near future.
Table of Contents
Item 6.
Exhibits
Exhibit
Number
Description of Exhibit
Description of long-term
performance incentives under the National Fuel Gas Company Performance Incentive Program.
Description of performance goals
under the Amended and Restated National Fuel Gas Company 2007 Annual
At Risk Compensation Incentive Program and the National Fuel Gas Company Executive Annual Cash Incentive Program.
Form of Restricted Stock Award
Notice under the National Fuel Gas Company 1997 Award and Option Plan.
Form of Stock Appreciation Right
Award Notice under the National Fuel Gas Company 2010 Equity Compensation Plan.
Administrative Rules of the Compensation Committee of the Board of
Directors of National Fuel Gas Company, as amended and restated effective December 8, 2010.
Statements regarding Computation of Ratios:
Ratio of Earnings to Fixed Charges for the Twelve Months Ended
December 31, 2010 and the Fiscal Years Ended September 30, 2007 through 2010.
Written statements of Chief
Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934.
Written statements of Principal
Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934.
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
National Fuel Gas Company
Consolidated Statements of Income for the Twelve Months Ended December 31, 2010 and 2009.
Interactive data files pursuant to
Regulation S-T: (i) the Consolidated Statements of Income and
Earnings Reinvested in the Business for the three months ended December 31, 2010 and 2009, (ii) the Consolidated Balance
Sheets at December 31, 2010 and September 30, 2010, (iii) the
Consolidated Statements of Cash Flows for the three months ended December 31, 2010 and 2009,
(iv) the Consolidated Statements of Comprehensive Income for the
three months ended December 31, 2010 and 2009 and (v) the Notes to
Condensed Consolidated Financial Statements.
Table of Contents
-55-
NATIONAL FUEL GAS COMPANY
(Registrant)
/s/ D. P. Bauer
D. P. Bauer
Treasurer and Principal Financial Officer
/s/ K. M. Camiolo
K. M. Camiolo
Controller and Principal Accounting Officer
Very truly yours,
NATIONAL FUEL GAS COMPANY |
||||
By: | ||||
[Name] | ||||
[Title] | ||||
|
[Date] |
1. | Grant Price and Vesting Schedule |
Incremental Number of Shares Subject to SAR | ||
Date Exercisable | Exercisable | |
[one year after date of grant] | [one third of shares] | |
[two years after date of grant] | [one third of shares] | |
[three years after date of grant] | [one third of shares] |
2. | Restriction on Exercise |
3. | Exercise |
(a) | the excess, if any, of the Fair Market Value at the date of exercise over the Grant Price |
(b) | the number of shares of Common Stock with respect to which the stock appreciation right is then being exercised. |
4. | Termination of Employment |
5. | Adjustments in Common Stock |
6. | Non-Transferability of Stock Appreciation Right |
7. | Authority of Committee |
8. | Miscellaneous |
9. | Tax Withholding |
10. | Securities Law Requirements |
11. | Stock Appreciation Right Subject to Plan and Rules |
12. | American Jobs Creation Act |
Very truly yours,
NATIONAL FUEL GAS COMPANY |
||||
By: | ||||
[Name] | ||||
[Title] | ||||
By:
|
||||
|
||||
|
Grantee |
I. Meetings | 1 | |||||||||||||||||||
II. Quorum and Voting; Delegation | 2 | |||||||||||||||||||
III. Grants and Awards Under the Plans | 2 | |||||||||||||||||||
A. General Rules Regarding Awards Under the 1997 and 2010 Plans | 3 | |||||||||||||||||||
1. Making of An Award | 3 | |||||||||||||||||||
2. Contemporaneous Awards | 3 | |||||||||||||||||||
3. Stock-Based Awards | 3 | |||||||||||||||||||
a. Source | 3 | |||||||||||||||||||
b. Cash Dividends and Cash Dividend Equivalents | 3 | |||||||||||||||||||
|
i. Stock Based Awards Other Than Restricted Stock | 3 | ||||||||||||||||||
|
ii. Restricted Stock Awards | 4 | ||||||||||||||||||
c. Payment | 4 | |||||||||||||||||||
4. Withholding Taxes | 4 | |||||||||||||||||||
5. Deferral of Payment | 5 | |||||||||||||||||||
B. Stock Options Under the 1997 and 2010 Plans | 5 | |||||||||||||||||||
1. Designation | 5 | |||||||||||||||||||
2. Price | 6 | |||||||||||||||||||
3. Exercise Period/Duration | 6 | |||||||||||||||||||
a. Non-Qualified Stock Options Under the 1997 and 2010 Plans | 6 | |||||||||||||||||||
b. Incentive Stock Options Under the 1997 and 2010 Plans | 6 | |||||||||||||||||||
c. Suspension of Rights to Exercise | 6 | |||||||||||||||||||
d. Delegation of Authority | 7 | |||||||||||||||||||
4. Death or Other Termination of Employment | 7 | |||||||||||||||||||
a. Definitions | 7 | |||||||||||||||||||
b. Non-Qualified Stock Options Under the 1997 and 2010 Plans | 8 | |||||||||||||||||||
c. Extension of Incentive Stock Options Under the 1997 and 2010 Plans | 8 | |||||||||||||||||||
5. Mechanics of Exercise | 9 | |||||||||||||||||||
6. Reload Options | 10 | |||||||||||||||||||
C. SARs Under the 1997 and 2010 Plans | 10 | |||||||||||||||||||
D. Restricted Stock and Restricted Stock Units Under the 1997 and 2010 Plans | 10 |
ii
1. Restrictions on Transferability; Vesting | 10 | |||||||||||||||||||
2. Mechanics of Grant | 11 | |||||||||||||||||||
IV. Procedures For Exercising Stock Options and SARs | 11 | |||||||||||||||||||
A. Authority and Scope | 11 | |||||||||||||||||||
B. Notice of Exercise | 11 | |||||||||||||||||||
1. Form and Delivery | 11 | |||||||||||||||||||
2. Exercise Date | 12 | |||||||||||||||||||
C. Payment of Exercise Price | 12 | |||||||||||||||||||
1. Cash Payment | 12 | |||||||||||||||||||
2. Payment with Existing Company Stock | 13 | |||||||||||||||||||
3. Additional Time to Pay Exercise Price | 13 | |||||||||||||||||||
4. Cashless Exercise | 14 | |||||||||||||||||||
D. Restrictions Relating to Possession of Material Nonpublic Information | 15 | |||||||||||||||||||
|
iii
2
3
4
5
6
7
8
9
10
11
12
a. | regarding shares in the Companys Direct Registration System, comply with the Companys procedures (including signature guarantee requirements) for transferring book-entry shares to the Company; or | ||
b. | regarding shares that are evidenced by a paper stock certificate, deliver the certificate to the Secretary or Assistant Secretary. Each certificate delivered must have a guaranteed signature either on the back or on a stock power to be attached. The recommended procedure for mailing certificates is to mail the certificate and signed stock power separately. |
a. | traveling away from his or her usual place of Company employment, or |
13
b. | disabled, as defined in the applicable Plan or these Administrative Rules, |
14
15
(1) | Investment Tax Credit is included in Other Income. | |
(2) | Rentals shown above represent the portion of all rentals (other than delay rentals) deemed representative of the interest factor. | |
(3) | Fiscal 2009 includes an impairment of an investment in a partnership of $1,804. |
/s/ D. F. Smith | ||||
D. F. Smith | ||||
Chairman of the Board and
Chief Executive Officer |
/s/ D. P. Bauer | ||||
D. P. Bauer | ||||
Treasurer and Principal Financial Officer |
1. | The Companys Quarterly Report on Form 10-Q for the quarter ended December 31, 2010 (the Report) fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934, as amended; and | |
2. | Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ D. F. Smith | ||||
Chairman of the Board and Chief | ||||
Executive Officer | ||||
/s/ D. P. Bauer | ||||
Treasurer and Principal Financial Officer | ||||
Twelve Months Ended | ||||||||
December 31 | ||||||||
2010 | 2009 | |||||||
(Thousands of Dollars) | ||||||||
INCOME
|
||||||||
Operating Revenues
|
$ | 1,757,316 | $ | 1,899,558 | ||||
|
||||||||
|
||||||||
Operating Expenses
|
||||||||
Purchased Gas
|
650,180 | 839,411 | ||||||
Operation and Maintenance
|
398,249 | 394,992 | ||||||
Property, Franchise and Other Taxes
|
76,938 | 72,004 | ||||||
Depreciation, Depletion and Amortization
|
199,724 | 173,281 | ||||||
|
||||||||
|
1,325,091 | 1,479,688 | ||||||
|
||||||||
|
||||||||
Operating Income
|
432,225 | 419,870 | ||||||
|
||||||||
Other Income (Expense):
|
||||||||
Income from Unconsolidated Subsidiaries
|
987 | 2,649 | ||||||
Interest Income
|
3,459 | 5,038 | ||||||
Other Income
|
4,275 | 3,676 | ||||||
Interest Expense on Long-Term Debt
|
(85,319 | ) | (83,426 | ) | ||||
Other Interest Expense
|
(6,780 | ) | (9,201 | ) | ||||
|
||||||||
|
||||||||
Income from Continuing Operations Before Income Taxes
|
348,847 | 338,606 | ||||||
|
||||||||
Income Tax Expense
|
135,395 | 128,107 | ||||||
|
||||||||
|
||||||||
Income from Continuing Operations
|
213,452 | 210,499 | ||||||
|
||||||||
Income (Loss) from Discontinued Operations
|
6,506 | (2,614 | ) | |||||
|
||||||||
|
||||||||
Net Income Available for Common Stock
|
$ | 219,958 | $ | 207,885 | ||||
|
||||||||
|
||||||||
Earnings Per Common Share:
|
||||||||
Basic:
|
||||||||
Income from Continuing Operations
|
$ | 2.61 | $ | 2.63 | ||||
Income (Loss) from Discontinued Operations
|
0.08 | (0.03 | ) | |||||
|
||||||||
Net Income Available for Common Stock
|
$ | 2.69 | $ | 2.60 | ||||
|
||||||||
|
||||||||
Diluted:
|
||||||||
Income from Continuing Operations
|
$ | 2.57 | $ | 2.59 | ||||
Income (Loss) from Discontinued Operations
|
0.08 | (0.03 | ) | |||||
|
||||||||
Net Income Available for Common Stock
|
$ | 2.65 | $ | 2.56 | ||||
|
||||||||
|
||||||||
Weighted Average Common Shares Outstanding:
|
||||||||
Used in Basic Calculation
|
81,786,524 | 79,983,513 | ||||||
|
||||||||
|
||||||||
Used in Diluted Calculation
|
82,989,108 | 81,156,966 | ||||||
|