National Fuel Gas Co. continued to curtail natural gas production in its fiscal year (FY) 1Q2016, saying during its earnings call on Friday that it would scale back further by dropping a rig in the Marcellus Shale and delay its Northern Access pipeline expansion project until next year.

The company’s fiscal year started in October, and during the first quarter NFG’s exploration and production subsidiary, Seneca Resources Corp., curtailed another 14.6 Bcf of natural gas production on lower prices. That comes in addition to the 45 Bcfe of curtailments that Seneca has announced since 1Q2015 (see Shale Daily,Nov. 17, 2015). Management said Seneca would drop a rig in March, leaving it just one to operate in the Marcellus Shale for FY 2016 and 2017.

With the reduction in activity, the company’s planned in-service date for its Northern Access 2016 expansion project would be delayed until November 2017. Northern Access would expand the National Fuel Gas Supply Corp. and Empire Pipeline systems to transport more than 490,000 Dth/d from Seneca-operated wells in Northwest Pennsylvania to multiple markets in the Northeast. The company had originally planned for the expansion to be in service by late 2016.

“Our decrease in drilling activity will obviously affect the amount of gas that could flow into the Northern Access pipeline,” said CEO Ronald Tanski. “…Extending the target in-service date gives our project more breathing room to complete all the necessary development activities, and we will continue to press forward on those.”

Tanski said the compressors have already been purchased for the expansion, and the company is currently finalizing its agreement for pipeline. He added that NFG expects the Federal Energy Regulatory Commission to issue a certificate for the expansion by May and said the bulk of the construction would likely occur in 2017.

Senior Vice President Matthew Cabell said the company has a backlog of about 70 drilled but uncompleted wells that it would finish as it gets closer to bringing the expansion online to help fill it. Capacity on the expansion is subscribed completely by Seneca.

A decision to push back Northern Access also means that the company is slowing the build-out of its Clermont Gathering System in its Western Development Area (WDA) of Northwest Pennsylvania. As the fee-owner of nearly all the mineral rights in the WDA, Seneca is mostly unencumbered by lease expirations that would require it to drill the acreage within a certain timeframe.

The reduced rig count and the slowdown in activity, management said, would not affect Seneca’s joint venture with IOG Capital LP in the Marcellus Shale, which was signed to give the company more financial flexibility this fiscal year (see Shale Daily, Dec. 3, 2015). Seneca is also reducing its previously announced FY 2016 capital budget by $50 million to $150-200 million. NFG and its subsidiaries are planning to do the same, cutting spending plans in half from a previously announced high end of $1 billion to $455-575 million.

Seneca produced 38.1 Bcfe in 1Q2016, down from 48.2 Bcfe in the year-ago period and up slightly from the 37.6 Bcfe it produced in 4Q2015. 1Q2016 production consisted of 33.6 Bcfe and 748,000 bbl of crude oil. Production was driven primarily by the company’s 785,000 net acres in the Marcellus Shale, while its oilier legacy assets in California accounted for some.

Seneca recorded a $252.6 million write-down related to its oil and gas properties. Earnings for NFG’s pipeline segment were up on higher transportation revenues compared to the year-ago period. But profits in its utility, gathering and energy marketing segments were all down due to production curtailments, lower commodity prices and warmer-than-normal temperatures in the company’s service territories.

Overall, NFG and its subsidiaries reported a net loss of $189.1 million (minus $2.23/share) for 1Q2016, compared with net income of $84.7 million ($1/share) in the year-ago period. Revenue was also down in 1Q2016 to $375.2 million from $523.9 million in 1Q2015.