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National Fuel Gas Reports 41 Percent Decline in Earnings

Posted on: Sunday, 31 July 2005, 09:00 CDT

National Fuel Gas Co.'s third-quarter profits dropped by 41 percent, hurt by tax expenses stemming from the sale of its Czech business and lower earnings from its utility and oil and natural gas drilling operations.

But excluding the $7.2 million in losses from the Czech business, which includes a $6 million tax charge that will be reversed in the current quarter, the company's earnings from continuing operations slid by 20 percent and matched Wall Street forecasts.

National Fuel also narrowed its earnings forecast for the rest of the fiscal year that runs through September, saying it now expects earnings for the full year to range between $1.77 and $1.81 per share, excluding the impact of the Czech sale, compared with its previous forecast of $1.75 to $1.85 per share.

National Fuel expects to book a $25 million gain during the current quarter on the Czech sale, which closed last week.

The company also said it expects earnings next year to range between $1.95 and $2.10 per share, which straddles the average estimate of $2.04 from analysts surveyed by Thomson Financial/First Call.

National Fuel said its third-quarter profits were hurt by lower earnings at most of its main businesses. Its utility business, which serves consumers in Western New York and northwestern Pennsylvania, lost $1.7 million during the quarter, compared with an operating profit of $4.2 million a year earlier, mainly because of additional expenses and regulatory adjustments in New York.

The company's pipeline and storage business' operating profits slid by 10 percent to $10.8 million because of higher development costs for the proposed expansion of its Empire State Pipeline and higher operating expenses.

Despite sharply higher oil and natural gas commodity prices, earnings from National Fuel's oil and gas drilling business fell by 7 percent to $13.8 million, mainly because of higher operating and administrative expenses.

While National Fuel's oil and gas production was down by 12 percent, it was in line with the company's forecasts and officials said output this year remains on track to meet its predicted production targets. The average price for the natural gas produced by National Fuel rose by 18 percent, after hedging, as production dropped by 9 percent. Oil production dropped by 15 percent, but the average price, after hedging, increased by 4 percent.

The company also has increased its capital budget for the rest of the current fiscal year by $26 million to $139 million, which will allow National Fuel to drill an additional 20 wells in California before it loses access to a drilling rig it now is using, said James Beck, who runs the oil and gas drilling business.

The company's energy marketing business had a 25 percent jump in its operating profits, while earnings fell 15 percent at National Fuel's timber operations.

e-mail: drobinson@buffnews.com

Source: Buffalo News

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