National Fuel Gas cuts 2023 earnings guidance 5% on low gas prices

In the face of collapsing natural gas prices, vertically integrated New York gas company National Fuel Gas Co. trimmed its profit outlook for 2023 by roughly 5% in announcing the company's fiscal second-quarter 2023 results May 4.

At the same time, National Fuel took advantage of low commodity prices to snap up 36,000 acres of adjacent leasehold in north-central Pennsylvania worth $127 million. The bolt-on acreages are all located in areas where they can be served by the company's midstream gathering and transportation units, National Fuel President and CEO David Bauer told analysts during a May 4 call to discuss second-quarter earnings. National Fuel said it would pay for the three deals from existing cash flows.

National Fuel cut its assumed gas price forecast by 75 cents/MMBtu to $2.50/MMBtu for the remainder of its fiscal year, which drove the 5% cut in National Fuel's 2023 earnings guidance to between $5.10-$5.40/share, down from $5.35-$5.75/share.

"Pricing was obviously a headwind for the quarter and will likely continue to be challenging in the quarters to come, but we are well hedged for the remainder of this year and for next year," Bauer told analysts.

In its fiscal second quarter, National Fuel's adjusted operating result of $141.8 million, or $1.54/share, was less than the $1.68/share of adjusted results in the same quarter of 2022, primarily because the company sold its California oil operation in June 2022. The second quarter's earnings were a penny per share less than analysts' expectations compiled by S&P Global Market Intelligence.

Low prices muted the impact of a 12% increase in Appalachian natural gas production by National Fuel's upstream unit Seneca Resources Company LLC to over 93 Bcfe, or more than 1 Bcfe/d in the second quarter. Overall, National Fuel's output was a 7% increase over the second quarter of last year, which included the California oil production.

National Fuel reported selling that gas for an average of $2.58, after hedging two cents less than the prices the company saw in the second quarter of 2022.

Seneca contributed $61 million in income to the larger company, a 14% decrease from the second quarter of 2022 because of lower commodity prices.

National Fuel's midstream pipeline and storage segment contributed $23.9 million in income, 6% less than the year before because of higher operations and maintenance expenses, the company said.

The company's gathering segment, which serves National Fuel and other Appalachian customers, contributed $24.3 million in income, a 10% increase over the previous year because of increased throughput.

National Fuel's western New York gas utility had earnings of $31.7 million, a decrease of $21.3 million from the second quarter of 2022. Adjusting for the $14.6 million impact of a Pennsylvania rate case last year, the utility's earnings dropped by 17% in this year's second quarter when compared to last year's.