National Fuel Reports Record First Quarter Earnings

Posted on: Thursday, 7 February 2008, 18:00 CST

National Fuel Gas Company ("National Fuel" or the "Company") (NYSE:NFG) today announced record earnings for the first quarter of fiscal 2008 (the quarter ended December 31, 2007) of $70.6 million or $0.82 per share.

HIGHLIGHTS

Quarterly operating results, before items impacting comparability, increased 41% to $0.82 per share, an increase of $0.24 per share. Increased earnings in the Exploration and Production segment provided the bulk of the increase. Higher average commodity prices realized and increased natural gas and crude oil production were the main drivers of the higher earnings.

Production of crude oil and natural gas from continuing operations increased more than 7%, to 10.7 billion cubic feet equivalent ("Bcfe"). In Appalachia, production increased over 37% from the prior year's first quarter. The Company's expected total production for the entire 2008 fiscal year remains at the previously announced level of 38 to 44 Bcfe.

The Company is increasing its earnings guidance range for fiscal 2008 by $0.10 per share. The revised guidance range for fiscal 2008 is $2.60 to $2.80 per share.

A conference call is scheduled for Friday, February 8, 2008, at 11:00 am Eastern Standard Time.

MANAGEMENT COMMENTS

Philip C. Ackerman, Chairman and Chief Executive Officer of National Fuel Gas Company stated: "This quarter's record earnings once again add to my satisfaction with our business mix. Record oil prices fueled our growth in profits, while the stability of our regulated operations and our strong dividend history tempered somewhat our stock price performance when compared to other exploration companies during the stock market's steep decline in the last half of January. Under certain market conditions one might wish to be more concentrated in the utility segment, while other market conditions favor more investments in oil and gas, but over the long term, our combination of regulated utility and pipeline operations, and a strong dividend, topped off with the opportunities presented by oil and gas investments has proven to be a winner. Our continued focus to build our Exploration and Production segment, especially in Appalachia, where a steady stream of production and a solid base of reserves can be developed for the long term, should add to the stability of our consolidated structure."

SUMMARY OF RESULTS

National Fuel had consolidated earnings for the quarter ended December 31, 2007, of $70.6 million, or $0.82 per share, an increase of $16.1 million, or $0.18 per share, from the prior year's first quarter earnings of $54.5 million, or $0.64 per share. (note: all references to earnings per share are to diluted earnings per share and all amounts are stated in U.S. dollars).

Three Months

Ended December 31,

2007

2006

(in thousands except per share amounts)

Reported GAAP earnings

70,604

54,520

Items impacting comparability1:

Income from discontinued operations

(3,832

)

Discontinuance of hedge accounting

(1,888

)

Operating results

70,604

48,800

Reported GAAP earnings per share

0.82

0.64

Items impacting comparability1:

Income from discontinued operations

(0.04

)

Discontinuance of hedge accounting

(0.02

)

Operating results

0.82

0.58

1 See discussion of these items below.

As outlined in the table above, two items included in GAAP earnings in the first quarter of fiscal 2007 impacted the comparability of the Company's operating results when comparing the first quarters of fiscal 2008 and fiscal 2007. Excluding these items, operating results for the current first quarter of $70.6 million or $0.82 per share increased $21.8 million, or $0.24 per share, from the prior year's first quarter. Items impacting comparability will be discussed in more detail within the discussion of segment earnings below.

DISCUSSION OF RESULTS BY SEGMENT

The following discussion of the earnings of each segment is summarized in a tabular form in this report. It may be helpful to refer to those tables while reviewing this discussion.

Exploration and Production Segment

The Exploration and Production segment operations are carried out by Seneca Resources Corporation ("Seneca"). Seneca explores for, develops and purchases natural gas and oil reserves mainly in California, in the Appalachian region and in the Gulf Coast region of Texas, Louisiana and Alabama.

The Exploration and Production segment's earnings in the first quarter of fiscal 2008 increased $13.3 million, or $0.15 per share, to $34.0 million, or $0.39 per share. On August 31, 2007, Seneca completed the sale of its Canadian subsidiary. As a result of this transaction, the Company has presented the Canadian operations as discontinued operations. Earnings in the first quarter of fiscal 2007 include earnings from discontinued operations of $3.8 million. The results of discontinued operations are discussed later in this document and are excluded from the remaining discussion of the Exploration and Production segment's quarterly results below.

Excluding discontinued operations, operating results in the Exploration and Production segment increased $17.1 million, or $0.19 per share. The increase was primarily due to higher natural gas and crude oil prices realized after hedging and was also significantly impacted by higher production. For the quarter ended December 31, 2007, the weighted average oil price received by Seneca (after hedging) was $72.59 per barrel ("Bbl"), an increase of $28.77 per Bbl, or 65.7 percent, from the prior year's quarter. The weighted average natural gas price received by Seneca (after hedging) for the quarter ended December 31, 2007, was $7.90 per thousand cubic feet ("Mcf"), an increase of $0.78, or 11.0 percent. In addition, an increase of 0.7 Bcf, or 14 percent, in gas production and a slight increase in crude oil production contributed to the increase in operating results. Most of the production increase was in Appalachia where production increased 0.6 Bcfe, or 37 percent. Higher interest income and lower interest expense during the current quarter also contributed to the increase in operating results. Other items impacting operating results for the quarter were higher depletion expense, higher lease operating expenses and higher state income taxes. The increase in depletion expense, which on a per unit basis increased $0.39 per thousand cubic feet equivalent ("Mcfe") to $2.25 per Mcfe, was mainly due to a 9.8 percent (39.7 Bcfe) reduction in proved reserves in California, primarily in the Midway Sunset field. The fiscal 2007 audit by Netherland Sewell & Associates determined that reduced performance from certain wells in this field supported a reduction in proved reserves. The increase in lease operating expenses ("LOE") is due to higher workover costs in the West, an increase in the number of producing properties, especially in Appalachia and generally escalating costs compared to the prior year's quarter.

Seneca's increase in production and operating results reflect the success of the Company's Appalachian growth plan and other strategic initiatives. During the last six months, 146 new wells were brought on line in the East Division, boosting daily Appalachian gas production from approximately 15 million cubic feet ("MMcf") per day to approximately 21 MMcf per day. In addition, results for the first quarter of fiscal 2008 reflect new production in the Gulf of Mexico from the High Island 24L field, which is producing 70 MMcf per day (19 MMcf per day net to Seneca).

Pipeline and Storage Segment

The Pipeline and Storage segment operations are carried out by National Fuel Gas Supply Corporation ("Supply Corporation") and Empire State Pipeline ("Empire"). These companies provide natural gas transportation and storage services to affiliated and non-affiliated companies through an integrated system of pipelines and underground natural gas storage fields in western New York and western Pennsylvania.

The Pipeline and Storage segment's earnings of $12.8 million, or $0.15 per share, for the quarter ended December 31, 2007, decreased $0.9 million, or $0.01 per share, when compared with the same period in the prior fiscal year. The comparability of the results for the quarter is impacted by a $1.9 million gain associated with the prepayment in the first quarter of fiscal 2007 of the project financing debt for the Empire State Pipeline. Upon the repayment of that debt, the corresponding interest rate collar no longer qualified for hedge accounting, and a gain that had been deferred on the balance sheet was recognized when the repayment was made.

Excluding that 2007 gain, operating results increased $1.0 million. The increase is mainly the result of higher transportation and storage revenues offset by lower efficiency gas revenues. The higher transportation and storage revenues were largely due to favorable market conditions that allowed Supply Corporation to renew expiring storage contracts at higher rates. Substantially all of Supply's firm storage contracts are now at maximum tariff rates. The lower efficiency gas revenues were the result of a FERC-approved settlement involving Supply Corporation, which was generally effective as of December 1, 2006, and lowered the percentages of transported gas which Supply Corporation retains for fuel, company use, and surface operating losses.

Utility Segment

The Utility segment operations are carried out by National Fuel Gas Distribution Corporation ("Distribution"), which sells or transports natural gas to customers located in western New York and northwestern Pennsylvania. The Utility segment's earnings of approximately $20.2 million, or $0.24 per share, for the quarter ended December 31, 2007, increased $3.0 million, or $0.04 per share, compared to the prior year's first quarter.

Earnings increased $2.1 million in the Pennsylvania Division, primarily due to an increase in base rates and higher usage per customer. On January 1, 2007, Distribution implemented a Settlement Agreement approved by the Pennsylvania Public Utility Commission, which, among other things, provided for a $14.3 million (before tax) annual base rate increase. The impact of the rate increase was partially offset by weather that was warmer than in the prior year.

In the New York Division, earnings increased $0.9 million mainly due to an increase in usage per customer during the quarter.

Energy Marketing

National Fuel Resources, Inc. ("NFR") comprises the Company's Energy Marketing segment. NFR markets natural gas to industrial, commercial, public authority and residential customers in western and central New York and northwestern Pennsylvania, offering competitively priced energy and energy management services to its customers.

The Energy Marketing segment's earnings for the quarter of $1.0 million increased $0.5 million from the first quarter last year. This increase is mainly due to higher margins.

Timber Segment

The Timber segment operations are carried out by Highland Forest Resources, Inc. ("Highland") and Seneca's Northeast Division. This segment markets high quality hardwoods from its New York and Pennsylvania land holdings and owns two sawmill/dry kiln operations in northwestern Pennsylvania.

The Timber segment's first quarter earnings were $0.4 million versus $0.2 million in the prior year's first quarter due to increased volumes of lumber and log sales.

Corporate and All Other

Other active, wholly owned subsidiaries of the Company include Horizon LFG, Inc., a corporation engaged, through subsidiaries, in the purchase, processing, transportation and sale of landfill gas, and Horizon Power, Inc., a corporation that develops and owns independent electric generation facilities which are fueled by natural gas or landfill gas.

Earnings in the Corporate and All Other category for the first quarter of fiscal 2008 were flat at $2.2 million when compared to the prior year's first quarter. Higher income from unconsolidated subsidiaries, higher interest income and lower interest expense were offset by higher operating expenses related to the proxy contest initiated by a shareholder.

Discontinued Operations

On August 31, 2007, Seneca completed the sale of its Canadian subsidiary. As a result of this transaction, the Company has presented the Canadian operations as discontinued operations. Earnings in the first quarter of fiscal 2007 include earnings from discontinued operations of $3.8 million. There were no earnings from discontinued operations in the first quarter of fiscal 2008.

EARNINGS GUIDANCE

The Company is increasing its consolidated earnings guidance for fiscal 2008 by $0.10 per share to the range of $2.60 to $2.80 per share. This increase is a result of higher than forecast crude oil prices realized by Seneca during the three months ended December 31, 2007, combined with Seneca having entered into additional hedge contracts covering production for the remainder of the fiscal year at prices that are higher than the prices assumed for unhedged production in the previous guidance. This current guidance still utilizes the July 24, 2007, NYMEX commodity pricing incorporated in the Company's original guidance for unhedged production volumes. To the extent that actual pricing for unhedged volumes during the remainder of the fiscal year varies from those July 24, 2007, prices, the fiscal year earnings will be affected as detailed in the earnings sensitivity table in this release.

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, February 8, 2008, at 11 a.m. (Eastern Time) to discuss this announcement. There are two ways to access this call. For those with Internet access, visit National Fuel's Web site at investor.nationalfuelgas.com. For those without Internet access, access is also provided by dialing (toll-free) 1-866-383-8009, and using the passcode "43320193." For those unable to listen to the live conference call, a replay will be available approximately one hour after the conclusion of the call at the same Web site link and by phone at (toll free) 1-888-286-8010 using passcode "59260259." Both the webcast and telephonic replay will be available until the close of business on Friday, February 15, 2008.

National Fuel is an integrated energy company with $4.0 billion in assets comprised of the following five operating segments: Exploration and Production, Pipeline and Storage, Utility, Energy Marketing, and Timber. Additional information about National Fuel is available on its Internet Web site: http://www.nationalfuelgas.com or through its investor information service at 1-800-334-2188.

Certain statements contained herein, including those regarding expected future natural gas and oil production and estimated future earnings, as well as statements that are identified by the use of the words "anticipates,""estimates,""expects,""forecasts,""intends,""plans,""predicts,""projects,""believes,""seeks,""will,""may" and similar expressions, are "forward-looking" statements" as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. The Company's expectations, beliefs and projections contained herein are expressed in good faith and are believed to have a reasonable basis, but there can be no assurance that such expectations, beliefs or projections will result or be achieved or accomplished. In addition to other factors, the following are important factors that could cause actual results to differ materially from those discussed in the forward-looking statements: changes in economic conditions, including economic disruptions caused by terrorist activities, acts of war or major accidents; changes in demographic patterns and weather conditions, including the occurrence of severe weather such as hurricanes; 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 or the valuation of the Company's natural gas and oil reserves; uncertainty of oil and gas reserve estimates; ability to successfully identify, drill for and produce economically viable natural gas and oil reserves; significant changes from expectations in the Company's actual production levels for natural gas or oil; changes in the availability and/or price of derivative financial instruments; changes in the price differentials between various types of oil; inability to obtain new customers or retain existing ones; significant changes in competitive factors affecting the Company; changes in laws and regulations to which the Company is subject, including changes in tax, environmental, safety and employment laws and regulations; governmental/regulatory actions, initiatives and proceedings, including those involving acquisitions, financings, rate cases (which address, among other things, allowed rates of return, rate design and retained gas), affiliate relationships, industry structure, franchise renewal, and environmental/safety requirements; unanticipated impacts of restructuring initiatives in the natural gas and electric industries; significant changes from expectations in actual capital expenditures and operating expenses and unanticipated project delays or changes in project costs or plans; the nature and projected profitability of pending and potential projects and other investments, and the ability to obtain necessary governmental approvals and permits; occurrences affecting the Company's ability to obtain funds from operations, from borrowings under our credit lines or other credit facilities or from issuances of other short-term notes or debt or equity securities to finance needed capital expenditures and other investments, including any downgrades in the Company's credit ratings; ability to successfully identify and finance acquisitions or other investments and ability to operate and integrate existing and any subsequently acquired business or properties; impairments under the SEC's full cost ceiling test for natural gas and oil reserves; significant changes in tax rates or policies or in rates of inflation or interest; significant changes in the Company's relationship with its employees or contractors and the potential adverse effects if labor disputes, grievances or shortages were to occur; changes in accounting principles or the application of such principles to the Company; the cost and effects of legal and administrative claims against the Company; changes in actuarial assumptions and the return on assets with respect to the Company's retirement plan and post-retirement benefit plans; increasing health care costs and the resulting effect on health insurance premiums and on the obligation to provide post-retirement benefits; or increasing costs of insurance, changes in coverage and the ability to obtain insurance. The Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.

NATIONAL FUEL GAS COMPANY

RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS

QUARTER ENDED DECEMBER 31, 2007

Exploration &

Pipeline &

Energy

Corporate /

(Thousands of Dollars)

Production *

Storage

Utility

Marketing

Timber

All Other

Consolidated

First quarter 2007 GAAP earnings

20,723

13,688

17,174

492

217

2,226

54,520

Items impacting comparability:

Income from discontinued operations

(3,832

)

(3,832

)

Discontinuance of hedge accounting

(1,888

)

(1,888

)

First quarter 2007 operating results

16,891

11,800

17,174

492

217

2,226

48,800

Drivers of operating results

Higher crude oil prices

15,366

Higher natural gas prices

2,921

Higher natural gas production

3,282

Higher crude oil production

Higher lease operating costs

(1,515

)

(1,515

)

Lower (higher) depreciation / depletion

(3,545

)

770

(2,775

)

Higher transportation and storage revenues

1,425

Lower efficiency gas revenues

(213

)

(213

)

Higher operating expenses

(713

)

(2,370

)

(3,083

)

Base rate increase in Pennsylvania

2,006

Warmer Weather in Pennsylvania

(664

)

(664

)

Usage

1,877

Higher margins

497

458

955

Income from unconsolidated subsidiaries

679

Higher AFUDC **

358

Higher interest income

1,055

511

1,566

Lower (higher) interest expense

1,173

(465

)

783

1,491

(Higher) lower income tax expense

(1,082

)

362

(720

)

All other / rounding

(555

)

(184

)

(176

)

(35

)

(278

)

(1,183

)

First quarter 2008 operating results

34,022

12,778

20,217

954

397

2,236

70,604

Items impacting comparability

First quarter 2008 GAAP earnings

34,022

12,778

20,217

954

397

2,236

70,604

* Includes discontinued operations

** AFUDC = Allowance for Funds Used During Construction

NATIONAL FUEL GAS COMPANY

RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE

QUARTER ENDED DECEMBER 31, 2007

Exploration &

Pipeline &

Energy

Corporate /

Production *

Storage

Utility

Marketing

Timber

All Other

Consolidated

First quarter 2007 GAAP earnings

0.24

0.16

0.20

0.01

0.03

0.64

Items impacting comparability:

Income from discontinued operations

(0.04

)

(0.04

)

Discontinuance of hedge accounting

(0.02

)

(0.02

)

First quarter 2007 operating results

0.20

0.14

0.20

0.01

0.03

0.58

Drivers of operating results

Higher crude oil prices

0.18

Higher natural gas prices

0.03

Higher natural gas production

0.04

Higher crude oil production

Higher lease operating costs

(0.02

)

(0.02

)

Lower (higher) depreciation / depletion

(0.04

)

0.01

(0.03

)

Higher transportation and storage revenues

0.02

Lower efficiency gas revenues

Higher operating expenses

(0.01

)

(0.03

)

(0.04

)

Base rate increase in Pennsylvania

0.02

Warmer Weather in Pennsylvania

(0.01

)

(0.01

)

Usage

0.02

Higher margins

Income from unconsolidated subsidiaries

0.01

Higher AFUDC **

Higher interest income

0.01

0.02

Lower (higher) interest expense

0.01

(0.01

)

0.01

(Higher) lower income tax expense

(0.01

)

(0.01

)

All other / rounding

(0.01

)

0.01

First quarter 2008 operating results

0.39

0.15

0.24

0.01

0.03

0.82

Items impacting comparability

First quarter 2008 GAAP earnings

0.39

0.15

0.24

0.01

0.03

0.82

* Includes discontinued operations

** AFUDC = Allowance for Funds Used During Construction

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

(Thousands of Dollars, except per share amounts)

Three Months Ended

December 31,

(Unaudited)

SUMMARY OF OPERATIONS

2007

2006

Operating Revenues

568,268

490,659

Operating Expenses:

Purchased Gas

278,010

242,939

Operation and Maintenance

102,455

94,704

Property, Franchise and Other Taxes

17,672

16,952

Depreciation, Depletion and Amortization

44,121

39,407

442,258

394,002

Operating Income

126,010

96,657

Other Income (Expense):

Income from Unconsolidated Subsidiaries

2,275

1,231

Interest Income

3,093

1,085

Other Income

1,253

715

Interest Expense on Long-Term Debt

(16,289

)

(16,043

)

Other Interest Expense

(724

)

(1,849

)

Income from Continuing Operations Before Income Taxes

115,618

81,796

Income Tax Expense

45,014

31,108

Income from Continuing Operations

70,604

50,688

Income from Discontinued Operations, Net of Tax

3,832

Net Income Available for Common Stock

70,604

54,520

Earnings Per Common Share:

Basic:

Income from Continuing Operations

0.84

0.61

Income from Discontinued Operations

0.05

Net Income Available for Common Stock

0.84

0.66

Diluted:

Income from Continuing Operations

0.82

0.60

Income from Discontinued Operations

0.04

Net Income Available for Common Stock

0.82

0.64

Weighted Average Common Shares:

Used in Basic Calculation

83,611,177

82,679,343

Used in Diluted Calculation

85,819,534

84,730,910

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

December 31,

September 30,

(Thousands of Dollars)

2007

ASSETS

Property, Plant and Equipment

4,525,608

4,461,586

Less - Accumulated Depreciation, Depletion and Amortization

1,616,488

1,583,181

Net Property, Plant and Equipment

2,909,120

2,878,405

Current Assets:

Cash and Temporary Cash Investments

189,767

124,806

Cash Held in Escrow

61,964

Hedging Collateral Deposits

1,996

4,066

Receivables - Net

242,440

172,380

Unbilled Utility Revenue

78,480

20,682

Gas Stored Underground

60,481

66,195

Materials and Supplies - at average cost

41,569

35,669

Unrecovered Purchased Gas Costs

12,186

14,769

Other Current Assets

32,453

45,057

Deferred Income Taxes

17,468

8,550

Total Current Assets

676,840

554,138

Other Assets:

Recoverable Future Taxes

83,787

83,954

Unamortized Debt Expense

11,586

12,070

Other Regulatory Assets

131,154

137,577

Deferred Charges

5,582

5,545

Other Investments

85,325

85,902

Investments in Unconsolidated Subsidiaries

17,825

18,256

Goodwill

5,476

Intangible Assets

28,170

28,836

Prepaid Pension and Post-Retirement Benefit Costs

63,188

61,006

Fair Value of Derivative Financial Instruments

6,026

9,188

Other

7,344

8,059

Total Other Assets

445,463

455,869

Total Assets

4,031,423

3,888,412

CAPITALIZATION AND LIABILITIES

Capitalization:

Comprehensive Shareholders' Equity

Common Stock, $1 Par Value Authorized - 200,000,000

Shares; Issued and Outstanding - 83,946,575 Shares

and 83,461,308 Shares, Respectively

83,947

83,461

Paid in Capital

595,375

569,085

Earnings Reinvested in the Business

1,027,951

983,776

Total Common Shareholder Equity Before

Items of Other Comprehensive Loss

1,707,273

1,636,322

Accumulated Other Comprehensive Loss

(16,286

)

(6,203

)

Total Comprehensive Shareholders' Equity

1,690,987

1,630,119

Long-Term Debt, Net of Current Portion

799,000

Total Capitalization

2,489,987

2,429,119

Current and Accrued Liabilities:

Notes Payable to Banks and Commercial Paper

Current Portion of Long-Term Debt

200,000

200,024

Accounts Payable

152,155

109,757

Amounts Payable to Customers

9,181

10,409

Dividends Payable

26,023

25,873

Interest Payable on Long-Term Debt

13,541

18,158

Customer Advances

23,498

22,863

Other Accruals and Current Liabilities

50,207

36,062

Fair Value of Derivative Financial Instruments

29,089

16,200

Total Current and Accrued Liabilities

503,694

439,346

Deferred Credits:

Deferred Income Taxes

581,692

575,356

Taxes Refundable to Customers

14,031

14,026

Unamortized Investment Tax Credit

5,217

5,392

Cost of Removal Regulatory Liability

98,613

91,226

Other Regulatory Liabilities

78,374

76,659

Post-Retirement Liabilities

66,706

70,555

Asset Retirement Obligations

77,253

75,939

Other Deferred Credits

115,856

110,794

Total Deferred Credits

1,037,742

1,019,947

Commitments and Contingencies

Total Capitalization and Liabilities

4,031,423

3,888,412

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Three Months Ended

December 31,

(Thousands of Dollars)

2007

2006

Operating Activities:

Net Income Available for Common Stock

70,604

54,520

Adjustments to Reconcile Net Income to Net Cash

Provided by Operating Activities:

Depreciation, Depletion and Amortization

44,121

42,825

Deferred Income Taxes

5,296

11,198

Income from Unconsolidated Subsidiaries, Net of Cash Distributions

431

(18

)

Excess Tax Benefits Associated with Stock-Based Compensation Awards

(16,275

)

(13,717

)

Other

4,916

5,728

Change in:

Hedging Collateral Deposits

2,070

9,916

Receivables and Unbilled Utility Revenue

(127,894

)

(91,875

)

Gas Stored Underground and Materials and

Supplies

(186

)

5,324

Unrecovered Purchased Gas Costs

2,583

(11,021

)

Prepayments and Other Current Assets

10,422

20,398

Accounts Payable

42,398

11,736

Amounts Payable to Customers

(1,228

)

3,166

Customer Advances

635

534

Other Accruals and Current Liabilities

25,400

(756

)

Other Assets

10,163

1,883

Other Liabilities

1,889

(6,810

)

Net Cash Provided by Operating Activities

75,345

43,031

Investing Activities:

Capital Expenditures

($69,744

)

($65,302

)

Investment in Partnership

(1,650

)

Cash Held in Escrow

58,397

Net Proceeds from Sale of Oil and Gas Producing Properties

1,500

2,141

Other

(761

)

(316

)

Net Cash Used in Investing Activities

($10,608

)

($65,127

)

Financing Activities:

Change in Notes Payable to Banks and Commercial Paper

71,600

Excess Tax Benefits Associated with Stock-Based Compensation Awards

16,275

13,717

Share Repurchases under Repurchase Plan

(42,921

)

Reduction of Long-Term Debt

(24

)

(23,005

)

Dividends Paid on Common Stock

(25,873

)

(25,026

)

Proceeds From Issuance of Common Stock

9,846

6,743

Net Cash Provided by Financing Activities

224

1,108

Effect of Exchange Rates on Cash

(1,025

)

Net Increase (Decrease) in Cash and Temporary

Cash Investments

64,961

(22,013

)

Cash and Temporary Cash Investments

at Beginning of Period

124,806

69,611

Cash and Temporary Cash Investments

at December 31

189,767

47,598

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

SEGMENT OPERATING RESULTS AND STATISTICS

(UNAUDITED)

(Thousands of Dollars, except per share amounts)

Three Months Ended

December 31,

EXPLORATION AND PRODUCTION SEGMENT

2007

2006

Variance

Operating Revenues

107,955

75,128

32,827

Operating Expenses:

Operation and Maintenance:

General and Administrative Expense

5,580

4,214

1,366

Lease Operating Expense

11,727

10,208

1,519

All Other Operation and Maintenance Expense

1,736

2,576

(840

)

Property, Franchise and Other Taxes (Lease Operating Expense)

1,801

990

811

Depreciation, Depletion and Amortization

24,045

18,590

5,455

44,889

36,578

8,311

Operating Income

63,066

38,550

24,516

Other Income (Expense):

Interest Income

3,888

2,265

1,623

Other Income

Other Interest Expense

(11,144

)

(12,947

)

1,803

Income from Continuing Operations Before Income Taxes

55,892

27,868

28,024

Income Tax Expense

21,870

10,977

10,893

Income from Continuing Operations

34,022

16,891

17,131

Income from Discontinued Operations, Net of Tax

3,832

(3,832

)

Net Income

34,022

20,723

13,299

Income from Continuing Operations Per Share (Diluted)

0.39

0.20

0.19

Income from Discontinued Operations, Net of Tax, Per

Share (Diluted)

0.04

(0.04

)

Net Income Per Share (Diluted)

0.39

0.24

0.15

Three Months Ended

December 31,

PIPELINE AND STORAGE SEGMENT

2007

2006

Variance

Revenues from External Customers

31,884

29,809

2,075

Intersegment Revenues

20,347

20,368

(21

)

Total Operating Revenues

52,231

50,177

2,054

Operating Expenses:

Purchased Gas

(13

)

Operation and Maintenance

15,999

14,903

1,096

Property, Franchise and Other Taxes

4,273

4,277

)

Depreciation, Depletion and Amortization

8,109

9,293

(1,184

)

28,386

28,460

(74

)

Operating Income

23,845

21,717

2,128

Other Income (Expense):

Interest Income

Other Income

690

184

506

Interest Expense on Long-Term Debt

(16

)

1,839

(1,855

)

Other Interest Expense

(3,035

)

(2,287

)

(748

)

Income Before Income Taxes

21,578

21,537

Income Tax Expense

8,800

7,849

951

Net Income

12,778

13,688

(910

)

Net Income Per Share (Diluted)

0.15

0.16

(0.01

)

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

SEGMENT OPERATING RESULTS AND STATISTICS

(UNAUDITED)

Three Months Ended

(Thousands of Dollars, except per share amounts)

December 31,

UTILITY SEGMENT

2007

2006

Variance

Revenues from External Customers

327,125

288,782

38,343

Intersegment Revenues

4,299

4,029

270

Total Operating Revenues

331,424

292,811

38,613

Operating Expenses:

Purchased Gas

219,123

186,361

32,762

Operation and Maintenance

50,981

50,767

214

Property, Franchise and Other Taxes

11,098

11,191

(93

)

Depreciation, Depletion and Amortization

10,042

9,778

264

291,244

258,097

33,147

Operating Income

40,180

34,714

5,466

Other Income (Expense):

Interest Income

198

284

(86

)

Other Income

345

286

Other Interest Expense

(7,251

)

(7,376

)

125

Income Before Income Taxes

33,472

27,908

5,564

Income Tax Expense

13,255

10,734

2,521

Net Income

20,217

17,174

3,043

Net Income Per Share (Diluted)

0.24

0.20

0.04

Three Months Ended

December 31,

ENERGY MARKETING SEGMENT

2007

2006

Variance

Operating Revenues

86,719

83,318

3,401

Operating Expenses:

Purchased Gas

83,929

81,255

2,674

Operation and Maintenance

1,346

1,294

Property, Franchise and Other Taxes

)

Depreciation, Depletion and Amortization

85,296

82,567

2,729

Operating Income

1,423

751

672

Other Income (Expense):

Interest Income

(37

)

Other Income

136

(78

)

Other Interest Expense

(84

)

(127

)

Income Before Income Taxes

1,422

822

600

Income Tax Expense

468

330

138

Net Income

954

492

462

Net Income Per Share (Diluted)

0.01

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

SEGMENT OPERATING RESULTS AND STATISTICS

(UNAUDITED)

Three Months Ended

(Thousands of Dollars, except per share amounts)

December 31,

TIMBER SEGMENT

2007

2006

Variance

Operating Revenues

12,900

11,763

1,137

Operating Expenses:

Operation and Maintenance

9,959

9,143

816

Property, Franchise and Other Taxes

397

393

Depreciation, Depletion and Amortization

1,546

1,367

179

11,902

10,903

999

Operating Income

998

860

138

Other Income (Expense):

Interest Income

390

316

Other Income

(20

)

Other Interest Expense

(860

)

(803

)

(57

)

Income Before Income Taxes

529

394

135

Income Tax Expense

132

177

(45

)

Net Income

397

217

180

Net Income Per Share (Diluted)

Three Months Ended

December 31,

ALL OTHER

2007

2006

Variance

Revenues from External Customers

1,550

1,676

(126

)

Intersegment Revenues

2,714

2,198

516

Total Operating Revenues

4,264

3,874

390

Operating Expenses:

Purchased Gas

2,202

1,828

374

Operation and Maintenance

1,058

805

253

Property, Franchise and Other Taxes

Depreciation, Depletion and Amortization

196

197

)

3,479

2,850

629

Operating Income

785

1,024

(239

)

Other Income (Expense):

Income from Unconsolidated Subsidiaries

2,275

1,231

1,044

Interest Income

Other Income

)

Other Interest Expense

(287

)

(670

)

383

Income Before Income Taxes

2,796

1,600

1,196

Income Tax Expense

457

615

(158

)

Net Income

2,339

985

1,354

Net Income Per Share (Diluted)

0.03

0.01

0.02

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

SEGMENT OPERATING RESULTS AND STATISTICS

(UNAUDITED)

(Thousands of Dollars, except per share amounts)

Three Months Ended

December 31,

CORPORATE

2007

2006

Variance

Revenues from External Customers

135

183

(48

)

Intersegment Revenues

961

851

110

Total Operating Revenues

1,096

1,034

Operating Expenses:

Operation and Maintenance

5,141

1,748

3,393

Property, Franchise and Other Taxes

Depreciation, Depletion and Amortization

172

175

)

5,383

1,993

3,390

Operating Loss

(4,287

)

(959

)

(3,328

)

Other Income (Expense):

Interest Income

22,704

21,930

774

Other Income

)

Interest Expense on Long-Term Debt

(16,273

)

(17,882

)

1,609

Other Interest Expense

(2,284

)

(1,498

)

(786

)

Income (Loss) Before Income Taxes

(71

)

1,667

(1,738

)

Income Tax Expense

426

(394

)

Net (Loss) Income

(103

)

1,241

(1,344

)

Net Income (Loss) Per Share (Diluted)

0.02

(0.02

)

Three Months Ended

December 31,

INTERSEGMENT ELIMINATIONS

2007

2006

Variance

Intersegment Revenues

(28,321

)

(27,446

)

(875

)

Operating Expenses:

Purchased Gas

(27,249

)

(26,492

)

(757

)

Operation and Maintenance

(1,072

)

(954

)

(118

)

(28,321

)

(27,446

)

(875

)

Operating Income

Other Income (Expense):

Interest Income

(24,221

)

(23,859

)

(362

)

Other Interest Expense

24,221

23,859

362

Net Income

Net Income Per Share (Diluted)

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

SEGMENT INFORMATION (Continued)

(Thousands of Dollars)

Three Months Ended

December 31,

(Unaudited)

Increase(Decrease)

2007

2006

Capital Expenditures:

Exploration and Production

30,666

37,241

(6,575

)

Pipeline and Storage

25,371

4,952

20,419

Utility

12,709

12,879

(170

)

Energy Marketing

Timber

982

806

176

Total Reportable Segments

69,737

55,887

13,850

All Other

(29

)

Corporate

(31

)

Total Expenditures from

Continuing Operations

69,744

55,954

13,790

Discontinued Operations

9,348

(9,348

)

Total Capital Expenditures

69,744

65,302

4,442

DEGREE DAYS

Percent Colder

(Warmer) Than:

Three Months Ended December 31

Normal

2007

2006

Normal

Last Year

Buffalo, NY

2,260

2,094

1,947

(7.3

)

7.6

Erie, PA

2,081

1,871

1,878

(10.1

)

(0.4

)

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

EXPLORATION AND PRODUCTION INFORMATION

Three Months Ended

December 31,

Increase

(Decrease)

2007

2006

Gas Production/Prices:

Production (MMcf)

Gulf Coast

2,826

2,723

103

West Coast

1,027

944

Appalachia

1,917

1,394

523

Total Production from Continuing Operations

5,770

5,061

709

Canada - Discontinued Operations

1,721

(1,721

)

Total Production

5,770

6,782

(1,012

)

Average Prices (Per Mcf)

Gulf Coast

7.14

6.55

0.59

West Coast

6.77

6.09

0.68

Appalachia

7.45

7.22

0.23

Weighted Average for Continuing Operations

7.18

6.65

0.53

Weighted Average after Hedging for Continuing Operations

7.90

7.12

0.78

Canada - Discontinued Operations

6.39

(6.39

)

Oil Production/Prices:

Production (Thousands of Barrels)

Gulf Coast

156

202

(46

)

West Coast

629

591

Appalachia

Total Production from Continuing Operations

822

820

Canada - Discontinued Operations

(56

)

Total Production

822

876

(54

)

Average Prices (Per Barrel)

Gulf Coast

89.84

56.51

33.33

West Coast

81.80

51.11

30.69

Appalachia

84.12

59.78

24.34

Weighted Average for Continuing Operations

83.43

52.73

30.70

Weighted Average after Hedging for Continuing Operations

72.59

43.82

28.77

Canada - Discontinued Operations

42.58

(42.58

)

Total Production (Mmcfe)

10,702

12,038

(1,336

)

Selected Operating Performance Statistics:

General & Administrative Expense per Mcfe(1)

0.52

0.42

0.10

Lease Operating Expense per Mcfe(1)

1.26

1.12

0.14

Depreciation, Depletion & Amortization per Mcfe(1)

2.25

1.86

0.39

(1) Refer to page 13 for the General and Administrative Expense,Lease Operating Expense and Depreciation, Depletion, andAmortization Expense for the Exploration and Production segment.Amounts exclude discontinued operations of Canada.

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

EXPLORATION AND PRODUCTION INFORMATION

Hedging Summary for Fiscal 2008

SWAPS

Volume

Average Hedge Price

Oil

1.2 MMBBL

$65.72 / BBL

Gas

8.9 BCF

$8.45 / MCF

No-cost Collars

Volume

Floor Price

Ceiling Price

Gas

0.7 BCF

$9.12 / MCF

$16.94 / MCF

Hedging Summary for Fiscal 2009

SWAPS

Volume

Average Hedge Price

Oil

0.7 MMBBL

$68.35 / BBL

Gas

5.7 BCF

$8.95 / MCF

Gross Wells in Process of Drilling

Quarter Ended December 31, 2007

Total

Gulf

West

East

Company

Wells in Process - Beginning of Period

Exploratory

.00

Developmental

.00

Wells Commenced

Exploratory

.00

Developmental

.00

Wells Completed

Exploratory

.00

Developmental

.00

Wells Plugged & Abandoned

Exploratory

.00

Developmental

.00

Wells in Process - End of Period

Exploratory

.00

Developmental

.00

Net Wells in Process of Drilling

Quarter Ended December 31, 2007

Total

Gulf

West

East

Company

Wells in Process - Beginning of Period

Exploratory

.30

.00

.30

Developmental

.00

Wells Commenced

Exploratory

.29

.00

.29

Developmental

.00

Wells Completed

Exploratory

.00

Developmental

.00

Wells Plugged & Abandoned

Exploratory

.00

Developmental

.00

Wells in Process - End of Period

Exploratory

.59

.00

.59

Developmental

.00

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

Pipeline & Storage Throughput- (millions of cubic feet - MMcf)

Three Months Ended

December 31,

Increase

2007

2006

(Decrease)

Firm Transportation - Affiliated

31,336

29,730

1,606

Firm Transportation - Non-Affiliated

61,547

44,697

16,850

Interruptible Transportation

1,083

995

93,966

75,422

18,544

Utility Throughput - (MMcf)

Three Months Ended

December 31,

Increase

2007

2006

(Decrease)

Retail Sales:

Residential Sales

17,127

16,678

449

Commercial Sales

2,877

2,868

Industrial Sales

123

192

(69

)

20,127

19,738

389

Off-System Sales

1,031

Transportation

17,827

15,853

1,974

38,985

35,591

3,394

Energy Marketing Volumes

Three Months Ended

December 31,

Increase

2007

2006

(Decrease)

Natural Gas (MMcf)

10,841

11,116

(275

)

Timber Board Feet (Thousands)

December 31,

Increase

2007

2006

(Decrease)

Log Sales

2,024

1,709

315

Green Lumber Sales

2,431

1,530

901

Kiln Dry Lumber Sales

3,747

3,157

590

8,202

6,396

1,806

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

FISCAL 2008 EARNINGS GUIDANCE AND SENSITIVITIES

Fiscal 2008 (Diluted earnings per share guidance*)

Earnings per share sensitivity to changesfrom NYMEX prices used in guidance* ^

$1 change per MMBtu gas

$5 change per Bbl oil

Range

Increase

Decrease

Increase

Decrease

Consolidated Earnings

2.60

- $

2.80

+ $

0.05

- $

0.05

+ $

0.04

- $

0.04

NYMEX Settlement Prices at July 24, 2007

Natural Gas

Oil

($ per MMBtu)

($ per Bbl)

Jan-08

$8.468

$72.95

Feb-08

$8.488

$72.82

Mar-08

$8.338

$72.70

Apr-08

$7.713

$72.59

May-08

$7.678

$72.48

Jun-08

$7.768

$72.39

Jul-08

$7.866

$72.29

Aug-08

$7.939

$72.19

Sep-08

$7.994

$72.09

Average

$8.028

$72.50

* Please refer to forward looking statement footnote at page 6 of this document.

^ This sensitivity table is current as of February 1, 2008 and onlyconsiders revenue from the Exploration and Production segment's crudeoil and natural gas sales. The sensitivities will become obsolete withthe passage of time, changes in Seneca's production forecast, changesin basis differential, as additional hedging contracts are enteredinto, and with the settling of NYMEX hedge contracts at their maturity.

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

Quarter Ended December 31 (unaudited)

2007

2006

Operating Revenues

568,268,000

490,659,000

Income from Continuing Operations

70,604,000

50,688,000

Income from Discontinued Operations, Net of Tax

3,832,000

Net Income Available for Common Stock

70,604,000

54,520,000

Earnings Per Common Share:

Basic:

Income from Continuing Operations

0.84

0.61

Income from Discontinued Operations

0.05

Net Income Available for Common Stock

0.84

0.66

Diluted:

Income from Continuing Operations

0.82

0.60

Income from Discontinued Operations

0.04

Net Income Available for Common Stock

0.82

0.64

Weighted Average Common Shares:

Used in Basic Calculation

83,611,177

82,679,343

Used in Diluted Calculation

85,819,534

84,730,910

Twelve Months Ended December 31 (unaudited)

Operating Revenues

2,117,176,000

2,043,073,000

Income from Continuing Operations

221,591,000

186,542,000

Income (Loss) from Discontinued Operations, Net of Tax

131,948,000

(51,350,000

)

Net Income Available for Common Stock

353,539,000

135,192,000

Earnings Per Common Share:

Basic:

Income from Continuing Operations

2.66

2.23

Income (Loss) from Discontinued Operations

1.58

(0.61

)

Net Income Available for Common Stock

4.24

1.62

Diluted:

Income from Continuing Operations

2.59

2.18

Income (Loss) from Discontinued Operations

1.54

(0.60

)

Net Income Available for Common Stock

4.13

1.58

Weighted Average Common Shares:

Used in Basic Calculation

83,376,508

83,590,690

Used in Diluted Calculation

85,541,214

85,650,747

Source: Business Wire

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