May 09--Strong growth in its pipeline businesses helped National Fuel Gas Co. boost its second-quarter profits by 11 percent, the Amherst-based energy company said.
The strengthening pipeline businesses offset lower earnings at National Fuel's oil and natural gas drilling unit, where profits were hurt by costs associated with plugging and abandoning a Gulf of Mexico gas well that the company had farmed out to another operator that went bankrupt. But National Fuel executives said that one-time expense masked what otherwise would have been an 8 percent increase in operating profits at the drilling business.
With National Fuel's utility unit's earnings also inching higher, the company hiked its earnings forecast for the entire fiscal year by about 5 percent from its previous prediction. The company said it now expects its profits this year to range between $3.40 and $3.55 per share, up from its earlier guidance of $3.20 to $3.40 per share.
Ronald J. Tanski, National Fuel's president and chief executive officer, described the company's second-quarter profits as outstanding, with operating profits rising by almost 13 percent during the quarter that ended in March.
Overall, National Fuel's profits improved to $95.2 million, or $1.12 per share, from $85.7 million, or $1.02 per share, a year earlier. Those earnings included nearly $1.8 million in one-time expenses, ranging from the well-plugging costs to an increase in state tax deferrals. Excluding those expenses, National Fuel's operating profits rose to $97 million, or $1.15 per share.
The biggest jump in earnings came from National Fuel's pipeline business, which is benefitting from recent expansions and rising natural gas production in Pennsylvania. Profits from the company's pipeline and storage business jumped by 27 percent to $21.4 million.
The company's business that operates smaller-capacity gas pipelines used to move gas from drilling sites to larger interstate pipelines grew rapidly, with its profits more than doubling to $7.3 million.
The company's oil and gas drilling business' profits fell by 12 percent because of the $2.4 million in well-plugging costs. Excluding that expense, the drilling unit's operating profits strengthened, with production jumping by 28 percent as the company's wells in Pennsylvania produced 31 percent more gas than they did a year ago. That increased production helped offset a 4 percent drop in the price National Fuel received for the natural gas it produced and a 2 percent dip in oil prices, after hedging.
National Fuel also said it expects its oil and gas production to grow faster than it previously predicted. The company boosted its production forecast for the fiscal year that ends in September by 3 percent to the equivalent of between 155 billion and 165 billion cubic feet of natural gas, up from its previous guidance of between 145 billion to 165 billion cubic feet.
Earnings from National Fuel's utility business inched up by 3 percent as the unusually cold winter bolstered the company's earnings in its Pennsylvania service territory.
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