National Fuel Gas Company Annual Report 2014

← All annual reports

FY2014 Annual Report · National Fuel Gas Company

Loading PDF…

NATIONAL
FUEL GAS
COMPANY

SUMMARY
ANNUAL REPORT
2014

National Fuel Gas Company

6363 Main Street, Williamsville, New York 14221

716-857-7000 www.nationalfuelgas.com

NYSE: NFG

Forming one of America’s most established and
successful natural gas companies, the operating
subsidiaries of National Fuel have been active in the
Appalachian region for more than 100 years. Through
those years, the Company has successfully invested in
and managed every segment of the natural gas
business by purchasing, developing and operating gas
utilities, pipelines, storage facilities, production
companies and, most notably in Appalachia, the
hydrocarbon mineral rights that have been the basis
of those operations. Today, those quality investments
are integrated into a highly efficient organization that
enables the Company to leverage growth across
multiple operating segments, achieve financial and
operational synergies, and produce sustainable
results. In fiscal 2014, the Company registered
impressive earnings and reached significant
operational milestones that will continue to generate
returns in the near term, while positioning the
Company for long-term growth.

On the cover:
Top photo: Drilling rig in Tioga County, Pa.
Middle photo: Gathering compressor station in Lycoming County, Pa.
Bottom photo: Utility main line installation in Erie, Pa.

NATIONAL FUEL: GROWTH, QUALITY, INTEGRITY.NATIONAL
FUEL GAS
COMPANY

SUMMARY
ANNUAL REPORT
2014

National Fuel Gas Company

6363 Main Street, Williamsville, New York 14221

716-857-7000 www.nationalfuelgas.com

NYSE: NFG

On the cover:
Top photo: Drilling rig in Tioga County, Pa.
Middle photo: Gathering compressor station in Lycoming County, Pa.
Bottom photo: Utility main line installation in Erie, Pa.

NATIONAL FUEL: GROWTH, QUALITY, INTEGRITY.National Fuel’s upstream
business is conducted
through its exploration
and production subsidiary
Seneca Resources
Corporation. With 780,000
net prospective acres in
the Marcellus Shale, one
of the most prolific and
economic natural gas
basins in the world, and
stable oil operations in
California, Seneca has
distinguished itself as an
operator that consistently
delivers results. The rig
pictured here is drilling a
multi-well pad in Clermont,
Pa., a focus area for
Seneca’s development in
fiscal 2015.

National Fuel’s midstream
operations are carried out by
the interstate pipeline and
storage subsidiaries, National
Fuel Gas Supply Corporation
and Empire Pipeline, Inc., and
the gathering subsidiary National
Fuel Gas Midstream Corporation.
Through these companies,
National Fuel is building pipeline
infrastructure in Appalachia to
provide producers with a critical
link to natural gas demand
markets. A component of the
gathering system pictured here,
located in Covington Township,
Pa., connects Seneca’s Marcellus
production to the interstate
pipeline system.

EXPLORATION & PRODUCTION GROWTH
TOTAL PRODUCTION (BCFE)

MIDSTREAM EXPANSION IN APPALACHIA
OPERATING REVENUES (MILLIONS)

160.5

120.7

83.4

67.6

49.7

$222

$226

$277
$18

$302

$35

$355

$71

GATHERING

$219

$215

$259

$267

$284

PIPELINE &
STORAGE

2010

2011

2012

2013

2014

2010

2011

2012

2013

2014

INVESTOR INFORMATION

COMMON STOCK TRANSFER AGENT AND REGISTRAR
Wells Fargo Shareowner Services
P.O. Box 64856
St. Paul, MN 55164-0856
Tel: 800-648-8166
Website: http://www.shareowneronline.com
Email: stocktransfer@wellsfargo.com
Change of address notices and inquiries about dividends should be
sent to the transfer agent at the address listed above.

NATIONAL FUEL GAS COMPANY DIRECT STOCK PURCHASE AND
DIVIDEND REINVESTMENT PLAN
National Fuel offers a simple, cost-effective method for purchasing
shares of National Fuel stock. A prospectus, which includes details
of the plan, can be obtained by calling, writing or emailing the
administrator of the plan, Wells Fargo Shareowner Services, at the
address listed above.

INVESTOR RELATIONS
Investors or financial analysts desiring information should contact:

David P. Bauer
Treasurer
Tel: 716-857-7318

Brian M. Welsch
Director, Investor Relations
Tel: 716-857-7875
Email: WelschB@natfuel.com
National Fuel Gas Company
6363 Main Street
Williamsville, NY 14221

ADDITIONAL SHAREHOLDER REPORTS
Additional copies of this report, the 2014 Form 10-K, and the 2014
Financial and Statistical Report can be obtained without charge
by writing to or calling:

Paula M. Ciprich
Corporate Secretary
Tel: 716-857-7548

Brian M. Welsch
Director, Investor Relations
Tel: 716-857-7875
National Fuel Gas Company
6363 Main Street
Williamsville, NY 14221

STOCK EXCHANGE LISTING
New York Stock Exchange
(Stock Symbol: NFG)

TRUSTEE FOR DEBENTURES
The Bank of New York Mellon
Attention: Corporate Trust
101 Barclay Street, 8W
New York, NY 10286

m
o
c
.

n
o
s

d
d
a
.
w
w
w

n
o
s

d
d
A
y
b
n
g

s
e
D

ANNUAL MEETING
The Annual Meeting of Stockholders will be held at 9:30 a.m. (local
time) on Thursday, March 12, 2015, at The Ritz-Carlton Golf Resort,
2600 Tiburón Drive, Naples, FL 34109. Stockholders of record as of
the close of business on January 12, 2015, will receive formal notice
of the meeting, proxy statement and proxy.

INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
726 Exchange Street, Suite 1010
Buffalo, NY 14210

UNITS OF MEASURE
Bcf Billion cubic feet (of natural gas)
Bcfe Bcf equivalent (of natural gas and crude oil)
Dth Dekatherm (Approx. 1 Mcf of natural gas)
Mbbl Thousand barrels (of crude oil)
Mcf Thousand cubic feet (of natural gas)
Mcfe Mcf equivalent (of natural gas and crude oil)
MMcf Million cubic feet (of natural gas)
MMcfe MMcf equivalent (of natural gas and crude oil)
Tcf Trillion cubic feet (of natural gas)
Tcfe Tcf equivalent (of natural gas and crude oil)

This Summary Annual Report contains “forward-looking statements” as
defined by the Private Securities Litigation Reform Act of 1995. Forward-
looking statements should be read with the cautionary statements and
important factors included in the Company’s Form 10-K at Item 7, MD&A,
under the heading “Safe Harbor for Forward-Looking Statements,” and with
the “Risk Factors” included in the Company’s Form 10-K at Item 1A. Forward-
looking statements are all statements other than statements of historical
fact, including, without limitation, statements regarding future prospects,
plans, objectives, goals, projections, estimates of oil and gas quantities,
strategies, future events or performance and underlying assumptions, capital
structure, anticipated capital expenditures, completion of construction and
other projects, projections for pension and other post-retirement benefit
obligations, impacts of the adoption of new accounting rules, and possible
outcomes of litigation or regulatory proceedings, as well as statements that
are identified by the use of the words “anticipates,” “estimates,” “expects,”
“forecasts,” “intends,” “plans,” “predicts,” “projects,” “believes,” “seeks,”
“will,” “may” and similar expressions.

Forward-looking statements include estimates of oil and gas quantities.
Proved oil and gas reserves are those quantities of oil and gas which,
by analysis of geoscience and engineering data, can be estimated with
reasonable certainty to be economically producible under existing economic
conditions, operating methods and government regulations. Other estimates
of oil and gas quantities, including estimates of probable reserves, possible
reserves, and resource potential, are by their nature more speculative than
estimates of proved reserves. Accordingly, estimates other than proved
reserves are subject to substantially greater risk of being actually realized.

This Summary Annual Report and the statements contained herein are
submitted for the general information of stockholders and employees of the
Company and are not intended to induce any sale or purchase of securities
or to be used in connection therewith. For up-to-date investor information,
please visit the Investor Relations section of National Fuel Gas Company’s
Corporate Web site at http://www.nationalfuelgas.com. If you would like to
receive news releases automatically by e-mail, simply visit the News section
and subscribe.

UPSTREAMMIDSTREAM

National Fuel’s upstream
business is conducted
through its exploration
and production subsidiary
Seneca Resources
Corporation. With 780,000
net prospective acres in
the Marcellus Shale, one
of the most prolific and
economic natural gas
basins in the world, and
stable oil operations in
California, Seneca has
distinguished itself as an
operator that consistently
delivers results. The rig
pictured here is drilling a
multi-well pad in Clermont,
Pa., a focus area for
Seneca’s development in
fiscal 2015.

EXPLORATION & PRODUCTION GROWTH
TOTAL PRODUCTION (BCFE)

MIDSTREAM EXPANSION IN APPALACHIA
OPERATING REVENUES (MILLIONS)

160.5

120.7

83.4

67.6

49.7

$222

$226

$277
$18

$302

$35

$355

$71

GATHERING

$219

$215

$259

$267

$284

PIPELINE &
STORAGE

2010

2011

2012

2013

2014

2010

2011

2012

2013

2014

INVESTOR INFORMATION

INVESTOR RELATIONS
Investors or financial analysts desiring information should contact:

David P. Bauer
Treasurer
Tel: 716-857-7318

Brian M. Welsch
Director, Investor Relations
Tel: 716-857-7875
Email: WelschB@natfuel.com
National Fuel Gas Company
6363 Main Street
Williamsville, NY 14221

ADDITIONAL SHAREHOLDER REPORTS
Additional copies of this report, the 2014 Form 10-K, and the 2014
Financial and Statistical Report can be obtained without charge
by writing to or calling:

Paula M. Ciprich
Corporate Secretary
Tel: 716-857-7548

Brian M. Welsch
Director, Investor Relations
Tel: 716-857-7875
National Fuel Gas Company
6363 Main Street
Williamsville, NY 14221

STOCK EXCHANGE LISTING
New York Stock Exchange
(Stock Symbol: NFG)

TRUSTEE FOR DEBENTURES
The Bank of New York Mellon
Attention: Corporate Trust
101 Barclay Street, 8W
New York, NY 10286

m
o
c
.

n
o
s

d
d
a
.
w
w
w

n
o
s

d
d
A
y
b
n
g

s
e
D

INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
726 Exchange Street, Suite 1010
Buffalo, NY 14210

UPSTREAMMIDSTREAM

National Fuel’s utility and energy
marketing subsidiaries, operated
by National Fuel Gas Distribution
Corporation and National Fuel
Resources, Inc., respectively,
provide safe and reliable natural
gas services to residential,
commercial and industrial
customers in western New York
and northwestern Pennsylvania.
Pictured here, utility employees
upgrade a service line in Buffalo,
N.Y., as part of ongoing system
modernization.

$58.0

$58.4

$58.3

$72.0

$88.8

Summar y A nnual Repor t 2014

UTILITY INVESTMENT IN SAFETY & SERVICE
CAPITAL EXPENDITURES (MILLIONS)

2010

2011

2012

2013

2014

DOWNSTREAMAN INTEGRATED APPALACHIAN GROWTH STRATEGY

By virtue of its proximity to the Marcellus Shale and integration with the regulated
Pipeline & Storage segment, the Utility plays a key role in National Fuel’s integrated
model: Significant and growing supplies of Marcellus gas are shipped to the Utility
through the regulated pipeline’s facilities to serve retail customers in New York and
Pennsylvania; the utility and pipeline and storage subsidiaries generate synergies that
reduce operating costs for both businesses; and the regulated subsidiaries support
the Company’s investment grade credit rating, resulting in a lower cost of financing
to help fund the Company’s growth initiatives.

National Fuel Gas Company
National Fuel Gas Company

GROWTHFor decades, National Fuel has utilized its mineral resources in Pennsylvania and New
York by producing gas and oil from conventional sandstone formations, developing
natural gas storage fields, and building pipeline systems. As technology rendered
development of the Marcellus Shale economically feasible, the commercial potential
of the Company’s acreage grew dramatically. Beginning with an area of the Marcellus
located east of the Company’s legacy acreage, Seneca drilled its first horizontal
well and launched a development program for what it today calls the Eastern Development
Area (EDA). In 2014, the Company set in motion a long-term development plan for its
vast legacy acreage, the Western Development Area (WDA).

Located across an expansive acreage position in western Pennsylvania, the WDA offers
considerable scale, competitive economics, and the flexibility to tailor development — up
or down — in response to market fluctuations. Primarily because Seneca owns much of
its WDA oil and gas rights in fee, the economics favor development across a wider range
of gas prices.

In late fiscal 2014, Seneca began producing from two multi-well drilling pads in the
Clermont/Rich Valley area of the WDA. Production results confirmed high expectations
for the WDA, allowing Seneca to proceed with a long-term development plan.

Seneca’s production is only part of the development picture. Any site eyed for development
is only as good as its access to demand markets. Much of the WDA acreage is lacking
the infrastructure needed to bring production to market. The combination of rapid
production growth across the Marcellus and inadequate pipeline takeaway capacity
has created a bottleneck that, in turn, has depressed prices for all suppliers in the
Appalachian region.

For Seneca’s production, however, a solution to this bottleneck lies in its affiliation with
and proximity to National Fuel’s midstream pipeline companies. Working in coordination
with Seneca’s development schedule, these pipeline companies build gathering and
transmission facilities that provide access to ultimate demand markets, enabling Seneca
to literally unlock the value of its Marcellus acreage.

The gathering subsidiary, originally serving Seneca’s production in the EDA, continues
to grow. In 2014, it completed the first phase of the Clermont Gathering System in the
WDA, transporting Seneca’s production to an interconnect with Tennessee Gas Pipeline.
To keep pace with Seneca’s development in the WDA, this subsidiary anticipates investing
up to $150 million annually over the next few years to construct gathering and compression
facilities with capacity that will exceed 1 Bcf per day.

National Fuel’s Pipeline & Storage segment builds facilities in coordination with Seneca’s
development plans and increasingly to provide takeaway capacity for third-party
producers. Supply Corporation’s Northern Access 2015 and Northern Access 2016
projects will transport 140,000 Dth per day and 350,000 Dth per day, respectively, of
Seneca’s WDA production to serve premium Canadian markets. At an anticipated cost
of $410 million, Northern Access 2016 will be the largest pipeline project in National
Fuel history. In fiscal 2015, the Pipeline & Storage segment will invest approximately
$150 million on expansion projects for third parties, including the Tuscarora Lateral,
a unique project that will connect the Supply Corporation and Empire Pipeline systems
and allow Empire’s customers to utilize Supply’s gas storage services for the first time.

A drilling rig works on a multi-well pad in the Marcellus
for our upstream subsidiary Seneca Resources.

Summar y A nnual Repor t 2014

National Fuel Gas Midstream Corporation employee Ben Raybuck and
National Fuel Gas Supply Corporation employee Eric Bartkowiak discuss
plans at the Clermont West Compressor Station.

National Fuel Gas Company
National Fuel Gas Company

QUALITYNo business can thrive for more than a century without
the ability to deliver quality performance over the
long run. At National Fuel, quality is measured in
concrete results. In 2014, quality assets, people and
operations enabled National Fuel to achieve one of
the most successful years in the Company’s history.

In Appalachia, Seneca’s Marcellus drilling program
registered another year of significant growth, increasing
annual natural gas production by 37 percent and raising
Seneca’s proved natural gas reserves by .4 Tcf to 1.7 Tcf.
Seneca drilled its most successful Marcellus well to
date in Lycoming County, Pa., which produced at a peak
24-hour rate of 25.7 MMcf per day. The Company’s
performance in the Marcellus is clearly driven by
Seneca’s quality assets, particularly in Lycoming
County, but also by Seneca’s industry - leading drilling
practices. In 2014, for example, Seneca reduced its
average finding and development costs by 12 percent.
Seneca continues to optimize drilling techniques and
completion design, which have consistently improved
well economics across its Marcellus acreage.

With producers in the Marcellus Shale seeking ever
more takeaway pipeline capacity under long-term
contracts, National Fuel’s midstream businesses were
very active in 2014. The Company’s investments in
gathering infrastructure to serve Seneca’s production,
plus regulated pipeline expansions for third-party
producers—investments totaling $800 million since
2010—have yielded tremendous growth. National
Fuel’s gathering and pipeline and storage businesses

generated more than $110 million of net income, their
highest ever contribution to the Company’s bottom line.

In California, Seneca’s crude oil assets add diversity
to the Company’s production mix and generate solid
cash flows that help to fund much of the Company’s
Appalachian growth initiatives. In 2014, Seneca grew
annual oil production 7 percent, primarily as a result of
further development of its properties in the South Midway
Sunset and East Coalinga fields. Since it acquired the
East Coalinga acreage in 2013, Seneca has grown
production there nearly 300 percent. Seneca continues
to look for strategic “bolt-on” opportunities in California
that complement National Fuel’s assets and add oil
production that produces significant free cash flow.

For the Utility, which contributed approximately
21 percent of National Fuel’s 2014 earnings, quality
is reflected in rate stability, customer service and
reliability. As a result of National Fuel’s proven ability
to manage operating costs, the Utility has not sought to
increase its delivery rates in more than seven years.
This achievement, however, has not come at the cost
of providing excellent customer service, which continues
to meet or exceed established performance metrics.
Beginning last year, the Utility commenced a $65 million
project to replace its legacy Customer Information
System. Expected to go in-service in 2015, the new
system will provide the flexibility needed to meet future
customer needs and address increasingly complex
regulatory requirements.

THE WINTER OF 2013–14

The winter of 2013–14 won’t soon be forgotten, even by the resilient people of western New York and
northwestern Pennsylvania. Enduring two blizzards and persistently record low temperatures across its
service territories, the Utility delivered more than 1 Bcf of gas on each of sixteen different days, more days than
in the eight previous winters combined. Through trying conditions, National Fuel’s dedicated employees kept
the gas flowing with only a few minor exceptions that were promptly addressed. Likewise, the Company’s
physical plant proved itself once again, and matched the operating extremes for which it was designed and built.

Summar y A nnual Repor t 2014

NFG FOUNDATION CELEBRATES $10 MILLION ACHIEVEMENT

Ten years ago, the Company formed a charitable foundation to serve as a vehicle
for community giving by the Company and its employees. We are proud to report
that through the National Fuel Gas Company Foundation, National Fuel’s shareholders
and employees have donated more than $10 million to approximately 800 charitable
organizations located primarily in National Fuel communities, but also
throughout the U.S.

National Fuel Gas Company
National Fuel Gas Company

INTEGRITYNational Fuel expects high standards of conduct and operates its business with
integrity. The Company recognizes that it is entrusted with the prudent stewardship
of valuable energy assets, and manages those assets to produce long-term
shareholder value. The Company also respects the fact that like any industrial
activity, energy production and distribution cannot be responsibly undertaken
without addressing safety and environmental impacts.

National Fuel is committed to building value for its shareholders. The Company’s
dividend, which was increased for the 44th consecutive year in 2014, reflects that
commitment. The Company has also structured and capitalized the business in
a manner that preserves its investment grade credit rating and allows the Company
to continue to finance its growth-oriented capital spending programs.

To build shareholder value over the long run, National Fuel has been engaged in
an ambitious program to develop its Marcellus acreage. The Company has the
unique ability to adjust its plans to maximize near-term performance while also
promoting long-term growth. This is made possible largely by Seneca’s affiliation
with National Fuel’s midstream companies, which provides the Company with
greater flexibility to execute its plans for development of its Marcellus resources.

National Fuel’s culture of integrity is also reflected in its commitment to customer
safety, safety in the workplace, and environmental stewardship. National Fuel’s
employees, most of who live and work within the Company’s utility service
territory and exploration and production footprint, have developed significant
experience in the production, transportation and delivery of natural gas in a
reliable, safe and environmentally sound manner.

Among its many environmental practices, Seneca has taken extraordinary efforts
to address water sourcing and handling. Adopting a “zero surface discharge” policy
to minimize freshwater usage, Seneca has become a “net-recycler” of produced
fluids, reusing 100 percent of its own produced fluids and also recycling fluids
produced by third parties. In addition, Seneca invested approximately $20 million
to build a freshwater pipeline system that will serve the WDA development program.
In 2014, approximately 90 percent of the fresh water used in WDA operations was
delivered to well pad sites via pipelines, which was estimated to have saved more
than 70,000 truck trips in 2014 alone, resulting in significant truck traffic and
air emissions reductions.

Focusing on safety, the Utility continues to modernize its pipeline system, investing
nearly $50 million in 2014 to replace legacy cast iron and bare steel pipe. Additionally,
National Fuel’s regulated pipeline and storage subsidiaries invested approximately
$51 million in 2014 in their ongoing pipeline replacement and system modernization
programs. System modernization will not only ensure the ongoing safety and
reliability of the Company’s pipelines, but will also allow National Fuel to continue
the expansion of its systems to serve growing production volumes from the
Appalachian basin.

Utility employees replace main line pipe in a residential neighborhood
as part of National Fuel Gas Distribution Corporation’s ongoing pipeline
replacement efforts.

Summar y A nnual Repor t 2014

UPSTREAM

OPERATING
REVENUES

NET
INCOME

$804.1 M $121.6 M
(up 14%)

(up 5%)

CAPITAL
EXPENDITURES

$602.7 M
(up 13%)

TOTAL
PRODUCTION

PROVED
RESERVES

160.5 Bcfe 1.914 Tcfe
(up 33%)

(up 24%)

MIDSTREAM

OPERATING
REVENUES

NET
INCOME

$355.0 M $110.3 M
(up 17%)

(up 44%)

CAPITAL
EXPENDITURES

$277.6 M
(up 150%)

NET
PLANT

SYSTEM
THROUGHPUT

$1,481 M 874.7 Bcf
(up 20%)

(up 30%)

DOWNSTREAM

OPERATING
MARGIN

NET
INCOME

$419.3 M $70.7 M
(up 6%)

(up 1%)

CAPITAL
EXPENDITURES

$89.1 M
(up 23%)

NET
PLANT

UTILITY
THROUGHPUT

$1,299 M 154.8 Bcf
(up 4%)

(up 13%)

National Fuel Gas Company
National Fuel Gas Company

NEW YORKCANADAPENNSYLVANIAThis map shows the location of National Fuel’s diversified
assets in western New York and northwestern Pennsylvania.
With 720,000 high-quality acres located in the heart of the
Marcellus Shale fairway, National Fuel’s Western Development
Area is an extraordinary asset that will continue to generate
significant earnings for Seneca while also serving as a
catalyst for the long-term growth of the Company’s
midstream businesses. The Marcellus Shale is becoming
the dominant source of supply for the Company’s
downstream businesses.

TOTAL MARCELLUS
SHALE ACREAGE

780,000

Net Acres

TOTAL WDA
ACREAGE

720,000

Net Acres

FUTURE TRANSPORT
CAPACITY TO CANADA ON
AFFILIATED PIPELINES

490,000

Dth/day

CLERMONT GATHERING
SYSTEM PLANNED
CAPACITY

1,000,000

Dth/day

UPSTREAM
Western Development
Area Acreage

UPSTREAM
Eastern Development
Area Acreage

MIDSTREAM
Interstate & Gathering
Pipelines

MIDSTREAM
Storage Fields

DOWNSTREAM
Utility Service Area

Summar y A nnual Repor t 2014

NEW YORKCANADAPENNSYLVANIAINTEGRATED OPERATIONSRon Tanski, President & CEO, is pictured at
the Clermont West Compressor Station,
a central gathering point for Seneca’s WDA
production. The production will move to
an interconnect with National Fuel Gas
Supply Corporation, which will ultimately
transport the gas to Canada.

FELLOW SHAREHOLDERS

I am pleased to discuss with you the terrific results of
National Fuel’s 2014 fiscal year. The Company’s earnings,
which were higher only one time in its 112-year history,
allowed us to increase our dividend for the 44th consecutive
year. Operationally, we continued to raise the bar across
the Company’s integrated group of businesses. We
increased our natural gas and oil proved reserves and
annual production to all-time highs. Our gathering and
rate-regulated transmission pipeline systems transported
more gas than ever, and we provided another year of safe
and reliable service for our wholesale and retail customers.

National Fuel Gas Company

44 YEARS OF DIVIDEND INCREASES
ANNUALIZED DIVIDEND RATE
AT FISCAL YEAR END

4
5
.
1
$

2
1
.
1
$

9
7
.
0
$

7
4
.
0
$

3
2
.
0
$

1974

1984

1994

2004

2014

Our utility service territories recorded the coldest winter in fifty

years. We plan for severe winters and all of National Fuel’s operating
companies were up to nature’s challenge. We kept the gas flowing for our
737,800 retail customers in New York and Pennsylvania, with only minor
disruptions that were promptly addressed, and for pipeline customers
shipping gas to serve major downstream markets. I attribute this
accomplishment to the dedication and hard work of our employees, who
answered our customer’s needs, maintained our facilities in top working
order, and made the right decisions in planning our supply requirements
for such an extreme winter. As Marcellus Shale gas makes up a larger part
of our supply portfolio, we were pleased that the wells performed reliably.
There were no appreciable weather-related service interruptions, and
our Downstream companies purchased more Marcellus supplies than
ever before.

The Marcellus has set the course for unprecedented growth and
transformation across all of National Fuel’s integrated businesses. Since
2009, Seneca has grown annual production by 278 percent and more than
tripled its proved reserve base. Year after year, Seneca has drilled wells
faster and increased well performance while driving down finding and
development costs and minimizing impacts on roads and other public
infrastructure. Through a process of experimentation and innovation,
Seneca’s geologists and engineers continue to optimize our drilling and
completion design and produce results that place Seneca among the
best-in-class operators in the Marcellus.

INVESTING IN OUR FUTURE
CONSOLIDATED CAPITAL
EXPENDITURES (MILLIONS)

5
7
1
,
1
$

0
7
9
$

7
7
9
$

4
5
8
$

7
1
7
$

1
0
5
$

2010

2011

2012

2013

2014

2015*

*Forecast

Over the years, the Company
has deliberately leveraged the
common geographic footprint
of these assets to build a highly
integrated business that has
enabled significant operational
synergies and financial efficiencies
across our segments.

Prolific production

from the Marcellus Shale also
helped to drive significant
growth in our midstream
businesses in 2014. Over the
past five years, National Fuel’s
Pipeline & Storage segment
added more than 1 Bcf of
daily contracted pipeline
capacity to accommodate
the growing demand from
Appalachian producers,

generating $72 million in additional annual demand revenues from
non-affiliated shippers. These capacity expansions continue to realign
much of National Fuel’s pipeline system, facilitating transportation
of natural gas from the Marcellus Shale to Canada and the Utility, and
growing demand markets in the northeastern U.S.

Our quickly growing gas gathering business performed according

to plan in 2014, generating more than $70 million in revenues under
contract. This segment designs gathering solutions for Seneca, with
each business supporting the growth of the other and maximizing the
economics of our capital investments. As Seneca develops its Marcellus
acreage, the Gathering segment constructs “just-in-time” facilities that
minimize the time it takes to turn Seneca’s completed wells into sales.
While focused primarily on meeting Seneca’s production needs, the
Gathering segment is well positioned to serve other producers who are
developing nearby acreage.

Summar y A nnual Repor t 2014

GROWTH IN APPALACHIA RESULTS IN A
CHANGING BUSINESS MIX
NET PLANT (MILLIONS)

$3,132

$5,743

UPSTREAM

MIDSTREAM

DOWNSTREAM

2009

2010

2011

2012

2013

2014

The strategic decision to focus on the development

of the Marcellus Shale was a significant inflection point
in National Fuel’s history, and the Marcellus Shale provides
us with our greatest near-term opportunities. During
2015, Seneca will focus on its acreage in the Western
Development Area, which holds a significant, high-quality
drilling inventory and where we own our oil and gas rights
in fee. Such fee ownership avoids royalty payments, and
also allows us to be flexible and disciplined with the pace
of our development.

As production growth from the Marcellus and

Utica shales has exceeded even the most optimistic of
projections, the natural gas exploration and production
business has in some ways become a victim of its own
success. Pipeline capacity in the region has not kept up
with production, resulting in local price realizations that
are often at a significant discount to prevailing Henry Hub
prices. While Seneca is better positioned than most
producers to weather this challenge in the short run, over
the longer run new pipeline capacity is needed to move
production to meet anticipated increased demand. As
we look forward over the next few years, we believe

that National Fuel’s integrated model will allow us to
turn such challenges into opportunities.

To provide Seneca with its needed pipeline

capacity, our Gathering segment will continue to build new
systems to ensure that infrastructure is available when
Seneca needs it. We also plan to exploit our first-mover
advantage in the counties where we operate to pursue
third parties who hold acreage close to our gathering
systems. In addition, the Pipeline & Storage segment will
build incremental capacity to better facilitate the sale
of Seneca’s gas in markets where there is higher demand.
By fiscal 2017, our Northern Access projects will transport
approximately 500 MMcf per day of Seneca’s WDA
production to premium Canadian markets, with potential
for further expansion. We will also continue to leverage
the strategic location of our pipeline assets and low cost
structure to expand our system for third parties.

In our downstream businesses, I am encouraged
by emerging load opportunities in industrial and power
generation markets that our utility and marketing companies
continue to pursue, helped by commodity prices that

12
12

National Fuel Gas Company
National Fuel Gas Company

reflect our pipeline system’s extraordinary access to
the Marcellus and other shale gas plays. The Utility
will remain focused on customer safety and quality of
service, while continuing another year of stepped-up
investment in pipeline replacement and modernization.

the current consolidated structure reduces annual tax
payments and provides a significant source of cash to
fund our capital expenditure program. Last, but not least,
earnings generated by the various subsidiaries in our
integrated model have allowed the Company to continue
one of the best dividend records in the U.S.

The ability of National Fuel to implement strategy

and generate shareholder value is rooted in the strength

It has been 40 years since National Fuel

reorganized its three main local distribution
subsidiaries—Iroquois Gas Corporation, Pennsylvania
Gas Company and United Natural Gas Company—into
the present-day Utility and Pipeline & Storage segments.
Along with The Mars Company, later renamed Seneca
Resources, National Fuel organized a collection of
valuable energy assets into a highly integrated system
designed to maximize the value of those assets for the
benefit of shareholders and customers over the long run.
Commenting on the reorganization in the 1974 annual
report, Herbert D. Clay, our Chairman and Chief Executive
Officer at the time, wrote, “We believe that the new
corporate structure will enable your Company to meet
the energy challenges of the 70’s and beyond.” While
I am confident that National Fuel’s corporate structure
enables your company to meet the energy challenges
of today and our future, I am sure that Mr. Clay would
have agreed that our integrated model also enables the
Company to view many of those challenges as opportunities,
and to turn those opportunities into results. I look forward
to another year of delivering on our abundant opportunities,
and positioning your Company for continued success.

Ronald J. Tanski
President and Chief Executive Officer
January 6, 2015

The ability of National Fuel to
implement strategy and generate
shareholder value is rooted in the
strength of our integrated model.

of our integrated
model. Over the
past few years,
there has been
a shift among
some of National
Fuel’s peers to

break-up their integrated corporate structures to become
more “pure-play” entities that focus on one or two pieces
of the natural gas value chain. Naturally, we have examined
whether our peers’ reasons for doing so might apply to
National Fuel. As we view the alternatives, the analysis
shows that our opportunities are enhanced by our
integrated model.

What most differentiates National Fuel from

its once-integrated peers is the geographic footprint of
the Company’s operations. Substantially all of National
Fuel’s assets — including our oil and gas rights that are
prospective in each of the Marcellus, Utica, and Geneseo
shales, our gathering and interstate pipeline systems,
and our utility service territories — sit literally on top of
each other. Over the years, the Company has deliberately
leveraged the common geographic footprint of these
assets to build a highly integrated business that has
enabled significant operational synergies and financial
efficiencies across our segments.

National Fuel’s regulated downstream and

midstream segments maintain many integrated
operations. The ability to share common services reduces
operating costs across the two segments — and in some
cases, all operating segments—resulting in lower prices
for our utility customers and providing our pipeline
businesses with a considerable advantage when competing
for expansion projects. Additionally, collaboration and
coordination between our upstream and midstream
segments allows us to plan development and spend capital
more efficiently and effectively.

There are also financial efficiencies that flow

from National Fuel’s integrated model. From a credit
standpoint, our regulated downstream and midstream
segments support an investment grade credit rating,
resulting in a lower cost of financing and greater financial
flexibility to fund our growth initiatives. At the same time,

Summar y A nnual Repor t 2014

13
13

PRINCIPAL OFFICERS

NATIONAL FUEL GAS
COMPANY

Ronald J. Tanski
President and Chief
Executive Officer

Matthew D. Cabell
Senior Vice President

James D. Ramsdell
Senior Vice President

David P. Bauer
Treasurer and Principal
Financial Officer

Karen M. Camiolo
Controller and Principal
Accounting Officer

Paula M. Ciprich
General Counsel
and Secretary

Donna L. DeCarolis
Vice President
Business Development

Matthew D. Cabell
President

Barry L. McMahan
Senior Vice President
and Secretary

John P. McGinnis
Senior Vice President

Cindy D. Wilkinson
Controller

Steven J. Conley
Vice President

Bradley D. Elliott
Vice President

Jeffrey J. Formica
Vice President

Douglas Kepler
Vice President

Justin I. Loweth
Vice President

Dale A. Rowekamp
Vice President

Kevin M. Ryan
Vice President

Steven Wagner
Vice President

Robert T. Brady — 19 Years as Director
Rolland E. Kidder — 12 Years as Director

National Fuel benefited greatly from Bob and Rolly’s
31 collective years of service as members of our Board.
Bob’s depth of knowledge of the manufacturing sector
and the international arena was invaluable during his
tenure with our Board. Rolly’s extensive personal
experience in the oil and gas business provided insights
of substantial value.

We thank Bob and Rolly for their dedication and extend
our deep appreciation for their strong leadership and
valuable contributions to the strategic direction of the
Company. While their Board service ended in March,
both Bob and Rolly will remain important members of
the National Fuel family.

National Fuel Gas Company

UPSTREAM

MIDSTREAM

DOWNSTREAM

SENECA RESOURCES
CORPORATION

NATIONAL FUEL GAS
SUPPLY CORPORATION

NATIONAL FUEL
GAS DISTRIBUTION
CORPORATION

Anna Marie Cellino
President

Carl M. Carlotti
Senior Vice President

Paula M. Ciprich
Secretary

Karen M. Camiolo
Controller

Richard E. Klein
Treasurer

Bruce D. Heine
Vice President

Jay W. Lesch
Vice President

Sarah J. Mugel
Vice President and
General Counsel

Steven Wagner
Vice President

Ann M. Wegrzyn
Vice President

NATIONAL FUEL
RESOURCES, INC.

Joseph N. Del Vecchio
Vice President

Steven Wagner
Vice President

John R. Pustulka
President

David P. Bauer
Treasurer

James R. Peterson
Secretary and
General Counsel

Karen M. Camiolo
Controller

Ronald C. Kraemer
Vice President

Steven Wagner
Vice President

EMPIRE PIPELINE, INC.

Ronald C. Kraemer
President

James R. Peterson
Secretary

David P. Bauer
Treasurer

Karen M. Camiolo
Controller

Steven Wagner
Vice President

NATIONAL FUEL GAS
MIDSTREAM
CORPORATION

Duane A. Wassum
President

James R. Peterson
Secretary

David P. Bauer
Treasurer

Karen M. Camiolo
Controller

DIRECTORS

1 Member of Audit Committee

4 Member of Nominating/

2 Member of Compensation

Corporate Governance Committee

Committee

5 Member of Financing Committee

3 Member of Executive Committee

^ Denotes Committee Chairman

Summar y A nnual Repor t 2014

Philip C. Ackerman 3,5 ^Former Chairman of the Board of Directors, Chief Executive Officer and President of the Company. Director of Associated Electric and Gas Insurance Services Limited. Company Director since 1994.David C. Carroll 3,4President and Chief Executive Officer of Gas Technology Institute. Former Director of Versa Power Systems, Inc. Member of the Society of Gas Lighting. Chairman of the steering committee for the 17th International Conference and Exhibition on Liquefied Natural Gas in Houston (2013) and will become President of the International Gas Union in June 2015 as the United States prepares to host the 2018 World Gas Conference in Washington, D.C. Company Director since 2012.R. Don Cash 1,2, 4Chairman Emeritus and Director of Questar Corporation. Former Chairman, Chief Executive Officer and President of Questar Corporation. Director of Associated Electric and Gas Insurance Services Limited and the Ranching Heritage Association. Former Director of Zions Bancorporation and former Director of TODCO (The Offshore Drilling Company). Company Director since 2003.Stephen E. Ewing 1,2^,5Former Vice Chairman of DTE Energy Company. Former President and Chief Operating Officer of MCN Energy Group Inc. and former President and Chief Executive Officer of DTE Gas Company (formerly know as Michigan Consolidated Gas Company). Director of CMS Energy. Trustee and past Chairman of the Board of The Skillman Foundation. Chairman of the Auto Club of Michigan (AAA) and Chairman of the Board of the Auto Club Group (AAA). Former Chairman of the American Gas Association, the Midwest Gas Association and the Natural Gas Vehicle Coalition, and former member of the National Petroleum Council. Company Director since 2007.Ronald W. Jibson 2,4 ^Chairman, President and Chief Executive Officer of Questar Corporation. President and CEO of both Questar Gas Company and Wexpro Company. Chairman of Questar Pipeline Company. Board member of IDACORP, Inc. Past Chairman of the Board of Directors of the American Gas Association and past Chairman of the Western Energy Institute. Board member of Gas Technology Institute, Chairman of Utah State University’s Board of Trustees and Chair of the Salt Lake Chamber Board of Directors. Past Chair of the Economic Development Corporation of Utah. Company Director since 2014.Craig G. Matthews 1^,3,5Former President, Chief Executive Officer and Director of NUI Corporation. Former Vice Chairman, Chief Operating Officer and Director of KeySpan Corporation. Board member of Republic Financial Corporation. Member and former Chairman of the Board of Trustees of Polytechnic Institute of New York University, member and founding Chairman of the New Jersey Salvation Army Advisory Board and former member, for 18 years, of the National Salvation Army Advisory Board. Company Director since 2005.Jeffrey W. Shaw 1Will retire as Chief Executive Officer of Southwest Gas Corporation on March 1, 2015. Director and former President of Southwest. Member of the American Institute of Certified Public Accountants, the Nevada Society of CPAs and the Leadership Las Vegas Alumni Association. Serves on the boards of the American Gas Association, the UNLV Foundation, the Council for a Better Nevada and the Las Vegas Economic Club. Past president of the Western Energy Institute and past president of the Las Vegas Area Council of the Boy Scouts of America. Company Director since 2014.David F. Smith 3^,5Chairman of the Board of the Company. Former Executive Chairman of the Board of the Company, and former Chairman, Chief Executive Officer and President of the Company. Board member of Gas Technology Institute (Executive Committee and Audit Committee), the Business Council of New York State (Co-Chairman and member of the Executive Committee) and the State University of New York at Buffalo Law School Dean’s Advisory Council. Former Director of the American Gas Association. Company Director since 2007.Ronald J. Tanski 3,5President and Chief Executive Officer of the Company. Former Chief Operating Officer, Treasurer and Principal Financial Officer. Chairman of the Board of Directors of the Interstate Natural Gas Association of America (INGAA). Director of the American Gas Association. Member of the Council on Accountancy at Canisius College. Member on the Board of Managers of the Buffalo Museum of Science and a Director of the Buffalo Niagara Enterprise. Company Director since 2014.FINANCIAL AND OPERATING HIGHLIGHTS

NATIONAL FUEL GAS COMPANY YEAR ENDED SEPTEMBER 30

Operating Revenues (Thousands) (1)

$ 2,113,081

$ 1,829,551

$ 1,626,853

$ 1,778,842

$ 1,760,503

Net Income Available for Common Stock (Thousands)

299,413 (2)

260,001 (3)

220,077 (4)

258,402 (5)

225,913 (6)

Return on Average Common Equity (7)

13.0%

12.5%

11.4%

14.2%

13.5%

2014

2013

2012

2011

2010

Per Common Share

Basic Earnings

Diluted Earnings

Dividends Paid

Dividend Rate at Year-End

Book Value at Year-End

3.57

3.52

1.51

1.54

28.64

3.11

3.08

1.47

1.50

26.23

2.65

2.63

1.43

1.46

23.52

3.13

3.09

1.39

1.42

22.85

2.78

2.73

1.35

1.38

21.27

Common Shares Outstanding at Year-End

84,157,220

83,661,969

83,330,140

82,812,677

82,075,470

Weighted Average Common Shares Outstanding

Basic

Diluted

83,929,989

83,518,857

83,127,844

82,514,015

81,380,434

84,952,347

84,341,220

83,739,771

83,670,802

82,660,598

Average Common Shares Traded Daily

451,731

385,586

558,000

534,526

411,256

Common Stock Price

High

Low

Net Cash Provided by Operating Activities (Thousands)

78.79

65.23

69.99

909,390

69.27

48.51

68.76

738,572

64.19

41.57

54.04

659,010

75.98

48.67

48.68

653,952

54.42

42.83

51.81

447,032

Total Assets (Thousands)

$ 6,739,597

$ 6,218,347

$ 5,935,142

$ 5,221,084

$ 5,047,054

Capital Expenditures
per Statements of Cash Flows (Thousands)

Volume Information

Utility Throughput – MMcf

Gas Sales

Gas Transportation

Pipeline & Storage Throughput – MMcf

Gas Transportation

Gathering Volume – MMcf

Gathered Volume

Production

Gas – MMcf

Oil – Mbbl

Total – MMcfe

Proved Reserves

Gas – MMcf

Oil – Mbbl

Total – MMcfe

Energy Marketing Volume - MMcf

Gas

Average Number of Utility Retail Customers

Average Number of Utility Transportation Customers

Number of Employees at September 30

914,417

703,461

$ 1,035,007

814,278

443,101

73,892

80,949

67,903

69,149

64,099

61,027

73,857

66,273

68,760

60,105

735,995

579,802

371,139

319,954

301,366

138,726

93,449

48,562

29,988

6,812

142,307

3,036

160,523

103,693

2,831

120,679

1,682,884

1,299,515

38,477

41,598

66,131

2,870

83,351

988,434

42,862

1,913,746

1,549,103

1,245,606

52,694

584,415

153,407

2,010

46,875

587,760

147,431

1,912

45,756

599,106

133,467

1,874

50,467

2,860

67,627

674,922

43,345

934,992

52,893

609,126

122,474

1,827

30,345

3,220

49,665

428,413

45,239

699,847

58,299

619,897

108,850

1,859

(1) Excludes discontinued operations.
(2) Includes a $3.6 million gain on life insurance policies.
(3) Includes a $4.9 million refund provision.
(4) Includes elimantion of other post-retirement regulatory liability of $12.8 million.

(5) Includes gain on sale of unconsolidated subsidiaries of $31.4 million.
(6) Includes gain on sale of Horizon LFG, Inc. of $6.3 million.
(7) Calculated using average Total Comprehensive Shareholder Equity.

National Fuel Gas Company

EXPLORATION & PRODUCTION GROWTH
TOTAL PRODUCTION (BCFE)

MIDSTREAM EXPANSION IN APPALACHIA
OPERATING REVENUES (MILLIONS)

160.5

120.7

83.4

67.6

49.7

$222

$226

$277
$18

$302

$35

$355

$71

GATHERING

$219

$215

$259

$267

$284

PIPELINE &
STORAGE

2010

2011

2012

2013

2014

2010

2011

2012

2013

2014

INVESTOR INFORMATION

INVESTOR RELATIONS
Investors or financial analysts desiring information should contact:

David P. Bauer
Treasurer
Tel: 716-857-7318

Brian M. Welsch
Director, Investor Relations
Tel: 716-857-7875
Email: WelschB@natfuel.com
National Fuel Gas Company
6363 Main Street
Williamsville, NY 14221

ADDITIONAL SHAREHOLDER REPORTS
Additional copies of this report, the 2014 Form 10-K, and the 2014
Financial and Statistical Report can be obtained without charge
by writing to or calling:

Paula M. Ciprich
Corporate Secretary
Tel: 716-857-7548

Brian M. Welsch
Director, Investor Relations
Tel: 716-857-7875
National Fuel Gas Company
6363 Main Street
Williamsville, NY 14221

STOCK EXCHANGE LISTING
New York Stock Exchange
(Stock Symbol: NFG)

TRUSTEE FOR DEBENTURES
The Bank of New York Mellon
Attention: Corporate Trust
101 Barclay Street, 8W
New York, NY 10286

m
o
c
.

n
o
s

d
d
a
.
w
w
w

n
o
s

d
d
A
y
b
n
g

s
e
D

INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
726 Exchange Street, Suite 1010
Buffalo, NY 14210

UPSTREAMMIDSTREAM

NATIONAL
FUEL GAS
COMPANY

SUMMARY
ANNUAL REPORT
2014

National Fuel Gas Company

6363 Main Street, Williamsville, New York 14221

716-857-7000 www.nationalfuelgas.com

NYSE: NFG

On the cover:
Top photo: Drilling rig in Tioga County, Pa.
Middle photo: Gathering compressor station in Lycoming County, Pa.
Bottom photo: Utility main line installation in Erie, Pa.

NATIONAL FUEL: GROWTH, QUALITY, INTEGRITY.