National Fuel Gas Co. (NFG) said Friday that it’s upstream subsidiary, Seneca Resources Corp., expects year/year production to increase by 24% in fiscal year (FY) 2019, which begins in October, as it will run three rigs and take advantage of the new 190 MMcf/d capacity that’s expected to become available later this month when the Atlantic Sunrise pipeline project comes online.

Driven primarily by an increase in Appalachian natural gas development, NFG said its preliminary FY 2019 capital expenditures are set for $745-845 million, a $180 million increase at the midpoint compared to FY 2018 spending. Seneca’s spending is also set to increase next fiscal year to $460-500 million, up from $350-370 million this FY.

The company soon expects to bring on new wells to fill its capacity on the 1.7 Bcf/d Atlantic Sunrise pipeline in northeast Pennsylvania. “That will allow us to finish the fiscal year on a strong note and will help drive our projected 24% increase in production for our next fiscal year,” CEO Ronald Tanski said. The company added a third rig in May ahead of the Atlantic Sunrise in-service, and it expects to keep operating all of them throughout FY 2019.

Seneca produced 44.6 Bcfe during its fiscal third quarter, or 1.9 Bcfe more than it produced during the same period last year. Production was also up from the 46.1 Bcfe it produced in fiscal 2Q2018. The boost came from a 2.3 Bcf increase in natural gas production from new Marcellus and Utica wells in the company’s Western Development Area (WDA) of northwest Pennsylvania and its Eastern Development Area in northeast Pennsylvania.

Seneca’s year/year oil production, meanwhile, declined by 69,000 bbl in the third quarter, largely from an expected reduction in California volumes after the sale of its Sespe properties there, which closed in May. As a result, California oil volumes are expected to remain relatively flat at 17 Bcfe in FY 2019.

The Sespe field in Ventura County, CA, was sold for $43 million. The oily assets were too remote from the company’s primary oil production operations in the San Joaquin Basin in Kern and Fresno counties, CA. The field was also becoming expensive, management said earlier this year, with declining production and new permits increasingly hard to come by as the properties are in the Los Padres National Forest, where a Condor sanctuary is located.

NFG had no new details on its beleaguered Northern Access expansion project. New York regulators last year denied a water quality certificate for the expansion, and the company continues to wait on the outcome of an appeal in federal court and a decision from the Federal Energy Regulatory Commission on a rehearing request it has filed.

In the meantime, management said the company continues to make progress on a number of takeaway projects that would help offset the impact of the Northern Access delay.

NFG is in the design-phase for its 205 MMcf/d Empire North Project, which would move Appalachian gas through New York and into Canada. The company also is working with Transcontinental Gas Pipe Line Co. on an expansion of the interstate system that would move more gas from the WDA. Along with the FM 100 upgrade in Pennsylvania, which is in the federal pre-filing process, the projects would provide 330 MMcf/d of additional transportation capacity.

Seneca’s higher natural gas production, better realized crude prices, lower expenses and tax benefits were offset by lower realized natural gas prices during the third quarter, which averaged $2.43/Mcf, including hedges, or 51 cents less than the year-ago period.

NFG reported consolidated net income of $63 million (73 cents/share), compared to net income of $59.7 million (69 cents) in fiscal 3Q2017. NFG’s consolidated revenue, which includes the upstream, gathering, pipeline, utility and energy marketing segments, increased to $235.2 million during the period, up from $225 million at the same time last year.