In times of economic health and strong commodity prices, the returns of regulated assets can be something of a bore. These days, though, they’re at least one thing to smile about. Such is the case at National Fuel Gas Co. where a charge for a ceiling test writedown on producing properties slashed profits, but utility and pipeline results improved during the first quarter of the company’s fiscal 2009.

National Fuel reported a loss for the quarter of $42.7 million, or minus 53 cents/share, due to a previously announced $108.2 million (after tax), noncash impairment charge to write down the book value of its oil and gas producing properties due to lower year-end commodity prices. In the year-ago period the company earned $70.6 million, or 82 cents/share.

“The continued decrease in commodity prices since July has had a significant negative impact on our financial results, contributing to the large ceiling test write-down as well as the drop in recurring earnings,” said CEO David F. Smith.

However, he said, “[W]e’ve seen great success, particularly in our regulated segments, which performed flawlessly in the face of significant weather variations, and which delivered stable and predictable earnings that are in line with our last rate awards.”

Excluding the impact of the ceiling test charge, results in the exploration and production segment (represented by National Fuel’s Seneca Resources Corp.) were $24.7 million, or 31 cents/share, compared to $34 million, or 39 cents/share, in the first quarter of the prior year. The decrease was primarily due to lower oil prices realized after hedging and lower natural gas production. For the quarter, the weighted average oil price received by Seneca after hedging was $64.34/bbl, a decrease of $8.25/bbl, from the prior year’s first quarter. The weighted average gas price after hedging was $8.90/Mcf, an increase of $1.00/Mcf compared to the prior year’s first quarter. Seneca is active in California, Appalachia and in the Gulf of Mexico.

Oil and gas production during the quarter decreased 1.1 Bcfe compared to a year ago, mainly due to lingering curtailments in the Gulf of Mexico caused by Hurricane Ike. All pre-hurricane production is expected to be back on-line by the end of the second quarter, the company said. Forecast production for the entire 2009 fiscal year remains in the 38-44 Bcfe range.

“When commodity prices peaked over the summer, we enjoyed record earnings,” Smith said. “Even though prices have now cycled lower, we still expect that our operating companies will generate sufficient cash to fund our operations and allow us to comfortably continue our dividend payments.”

The company revised its earnings guidance range for fiscal 2009 to $1.10-1.30/share, including the impairment charge ($1.35/share). It assumes flat equivalent pricing on the New York Mercantile Exchange of $5.50/MMBtu for gas and $45/bbl for oil for unhedged production.

On the regulated side of the business the quarter was much kinder to National Fuel.

Pipeline and storage operations in western New York and western Pennsylvania are carried out by National Fuel Gas Supply Corp. and Empire Pipeline Inc. The segment’s earnings of $17.2 million, or 21 cents/share, for the quarter increased $4.4 million, or 6 cents/share, when compared with the year-ago period, mainly due to higher transportation and storage revenues and higher efficiency gas revenues.

Utility operations are carried out by National Fuel Gas Distribution Corp. in western New York and northwestern Pennsylvania. Earnings of $22.1 million, or 28 cents/ share, for the quarter increased $1.9 million, or 4 cents/share compared with the year-ago period.

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