Citing weaker natural gas prices amid robust production, National Fuel Gas Co. said it revised lower its earnings outlook for 2023.

The Williamsville, NY-based company now projects earnings per share of $5.35-$5.75, a decrease of $1.10 per share from the midpoint of its prior guidance range.

CEO David Bauer said in the company’s fiscal first quarter earnings report the change in guidance was “impacted by the recent reduction in natural gas prices” and expectations for continued pressure on futures and cash markets.

[2023 Natural Gas Price Outlook: How will the energy industry continue to evolve in 2023? NGI’s special report “Reshuffling the Deck: High Stakes for Natural Gas & The World is All-In” offers trusted insight and data-backed forecasts on U.S. natural gas and the global LNG markets. Download now.]

Following price strength throughout 2022 – reflecting strong domestic and global consumption – demand to start 2023 faded quickly amid relatively mild weather throughout January. At the same time, production that ramped up to meet demand last year remains elevated, leaving the U.S. market with ample supplies in the heart of winter.

“This decrease was almost entirely attributable to the drop in natural gas prices, partially offset by some smaller tailwinds across all of our businesses,” National Fuel CFO Karen Camiolo, speaking on the company’s earnings call Friday, said of the lower earnings guidance. She said the company expected New York Mercantile Exchange pricing to average $3.25/MMBtu for the last three quarters of 2023. That marked a decrease of $1.92 from previous guidance.

Analyst assessments of prices so far this year suggest the new price estimate may prove optimistic.

U.S. production held around 100 Bcf/d last month and, aside from short-lived freeze-off events, is expected to hold strong through the winter and beyond. It touched record highs above 102 Bcf/d at times late last year and again early in 2023, according to Bloomberg estimates.

East Daley Analytics estimated that domestic gas production would rise by 5 Bcf/d over the course of this year and approach 105 Bcf/d late in 2023.

U.S. natural gas futures traded well below the $3.00/MMBtu level this week – less than half the level of late 2022 and far from the nearly $10 peak reached last summer, when production was lighter and intense summer heat fueled cooling demand.

Strong calls for U.S. LNG also fueled price surges in 2022. Demand from Europe proved exceptionally strong after Russia invaded Ukraine last February. Europe boosted its calls for liquefied natural gas when Russia cut off most pipelined gas exports to the continent after European leaders protested the war.

However, Europe has since stocked up on gas in storage, easing demand some, and exporters’ capacity is also limited. Following a fire last June, the Freeport LNG facility in Texas is slated to return to service in stages during the current quarter, eventually building back to nearly 2.4 Bcf/d capacity. But the exact timing of Freeport’s full return remains unknown, leaving a big chunk of demand off the table indefinitely.

Against that backdrop, prices are under heavy pressure.

“As we look forward, lower natural gas prices will impact our near-term cash flow, but the combination of growing production, holding the line on capital and a robust marketing and hedging portfolio mitigates a good portion of that decrease,” Justin Loweth president of Seneca Resources Co., said on the earnings call. Seneca is National Fuel’s exploration and production (E&P) segment.

He said the company overall is on sound footing, with strength across its E&P, pipeline and storage operations.

The E&P division’s fiscal 2023 net production guidance range of 370-390 Bcfe remained unchanged. The company said it has firm sales contracts in place for approximately 90% of its projected remaining fiscal 2023 production.

National Fuel reported fiscal first quarter net income of $169.7 million ($1.84/share), compared to net income of $132.4 million ($1.44) a year earlier. Its fiscal first quarter covered the final three months of calendar year 2022.