National Fuel Cuts Outlook as Gas Production Declines
Fiscal third-quarter natural-gas production fell 7% to 104.3 Bcf.
National Fuel Gas (NFG), the diversified energy company, reported lower fiscal third-quarter earnings as declining natural-gas production and higher operating costs outweighed stronger realized prices. GAAP earnings fell to $138.6 million, or $1.45 a share, from $149.8 million, or $1.64 a share, a year earlier. Adjusted earnings declined to $1.54 a share from $1.64.
The quarter extended a sequential earnings decline from the fiscal second quarter, when National Fuel earned $247.7 million, or $2.59 a share, on a GAAP basis and $2.71 a share after adjustments. Acquisition and financing costs also became a material comparison item, including $6.2 million tied to the pending Ohio utility acquisition and a $0.3 million after-tax loss on early debt redemption.
The upstream business drove the weakness. Integrated Upstream and Gathering adjusted earnings fell $4.5 million to $112.2 million, while adjusted EBITDA declined $9.9 million to $248.5 million. Higher realized gas prices and lower interest expense were outweighed by reduced output and higher operating expenses.
Seneca's realized natural-gas price after hedging and transportation rose 4%, or 10 cents per Mcf, to $2.81 per Mcf despite lower NYMEX prices, reflecting hedge gains and tighter basis differentials. Upstream operating costs increased 14 cents to $1.32 per Mcf, including higher lease operating, gathering and depreciation expenses.
Results in the regulated businesses were steadier. Pipeline and Storage earnings were essentially flat at $28.7 million as revenue from new long-term transportation contracts was offset by higher operating and depreciation costs. Utility earnings rose $700,000 to $5.7 million, helped by a $6 million increase in customer margin from new rates and a Pennsylvania infrastructure charge.
National Fuel now expects fiscal 2026 adjusted earnings of $7.40 to $7.60 a share, down from $7.45 to $7.75. The revision is due to lower expected production, partly offset by lower upstream unit costs, and the Integrated Upstream and Gathering production forecast was cut to 420 Bcf to 430 Bcf from 425 Bcf to 440 Bcf.
The company raised the midpoint of consolidated capital-spending guidance and introduced a discretionary land-acquisition program that is expected to add $20 million to $40 million of fiscal 2026 spending as it expands its Tioga County inventory. National Fuel also expanded the planned Line N System Upgrade Project to 294,000 dekatherms a day of incremental capacity after signing a new 20-year transportation agreement.
National Fuel projects average annual earnings growth of 7% to 10% from fiscal 2026 through fiscal 2029 and $1 billion to $1.5 billion of free cash flow over the next three years, leaving its longer-term targets dependent on converting higher investment and expanded infrastructure commitments into production and contracted demand.