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National Fuel's Fourth-Quarter Profits Soared ; Company Sold Its Czech Republic Business

Posted on: Sunday, 30 October 2005, 09:00 CST

By David Robinson

National Fuel Gas Co.'s fourth-quarter profits soared as the company booked a big gain from the sale of its Czech Republic business and earnings from its oil and gas drilling and pipeline operations showed solid improvement.

The earnings were at the low end of the increased forecast that National Fuel officials issued earlier this month after the Gulf Coast hurricanes caused a spike in oil and natural gas prices that bolstered its energy exploration business.

National Fuel's profits soared to $49.2 million, or 57 cents per share, from $7.8 million, or 9 cents per share, a year earlier, mainly because the sale of its Czech business gave a $31 million boost to its earnings.

Excluding that gain, National Fuel's earnings from continuing operations rose by 33 percent to $18.3 million, or 21 cents per share, from $13.8 million, or 16 cents per share, a year earlier.

Philip C. Ackerman, National Fuel's chairman, president and chief executive officer, said he was pleased with the improved earnings, noting that they came at a time when the company doubled its reserves for bad debts at its utility business and absorbed a write- down linked to the hedging strategy used by its oil and gas drilling unit.

"The fundamentals of the company are very sound," he said during a conference call Friday.

National Fuel's oil and gas drilling business increased its earnings by 14 percent to $11.7 million as higher energy prices offset a drop in production stemming from the Gulf Coast hurricanes.

About 45 percent of National Fuel's production in the Gulf of Mexico has come back on line after the hurricanes. Another 47 percent of the company's capacity there is ready to resume but is on hold until the region's pipelines have been repaired. The remaining 8.5 percent of National Fuel's production is out of service while the company waits for equipment needed to make required repairs.

The company's earnings also were reduced by 4 cents per share because it wrote down the value of some hedges that were linked to production that had been expected in the current quarter but now won't take place because of the hurri

canes. The company will recover that charge later in the current fiscal year.

National Fuel also has been revamping the staff at its Canadian exploration and production (E&P) operations after reporting a drop in reserves there. "We have recognized the weakness of our Canadian E&P operations," Ackerman said.

National Fuel's pipeline and storage business increased its earnings by 30 percent to $15 million, as operating expenses fell.

The company's utility business, which typically has its poorest performance in the summer months, when residential gas use is low, lost $6 million during the quarter.

The company also roughly doubled its reserve for bad debts at its utility business to $25 million as soaring heating bills squeezed many of its customers, resulting in a sharp increase this summer in accounts where service has been shut off due to unpaid bills, Ackerman said.

e-mail: drobinson@buffnews.com

Source: Buffalo News

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