National Fuel Gas Company Annual Report 2016

FY2016 Annual Report · National Fuel Gas Company

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NATIONAL FUEL
GAS COMPANY

SUMMARY ANNUAL REPORT 2016

HOMEGROWN COMPANY,
HOMETOWN TEAM

FOR MORE THAN A CENTURY, THE OPERATING
SUBSIDIARIES OF NATIONAL FUEL HAVE BEEN FUELING
THE DAILY LIVES OF THE FAMILIES AND BUSINESSES
THAT CALL OUR REGION HOME. WITH EACH WELL WE DRILL
AND EVERY PIPELINE WE BUILD, WE ARE DEDICATED
TO PROTECTING THE ENVIRONMENT AND THE HEALTH AND
SAFETY OF THE MEMBERS OF OUR COMMUNITIES.
AS THE HOMETOWN ENERGY TEAM, WE ARE UNIQUELY
POSITIONED TO MAINTAIN OUR COMMITMENT SO THAT
THE TREMENDOUS BENEFITS OF OUR HOMEGROWN ENERGY
RESOURCE CAN BE PROVIDED FOR YEARS TO COME.

UPSTREAM
National Fuel’s upstream
business is conducted through
its exploration and production
subsidiary, Seneca Resources
Corporation, with natural gas-
focused operations in Pennsylvania
and oil-focused operations in
California. Seneca’s ongoing
emphasis on managing the
sourcing, delivery and recycling
of water associated with its
Appalachian development
program has sought to minimize
environmental impacts while
driving down the Company’s
well costs to the lowest amongst
peers in the basin. The rig pictured
below is drilling wells in both
the Marcellus and Utica Shale
formations on a multi-well pad in
Clermont, Pa.

MIDSTREAM
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. National
Fuel is expanding and modernizing
its pipelines to move more
clean-burning, low-cost natural
gas supplies being produced in
Appalachia to diverse markets
served by the North American
pipeline grid. Pictured below,
Midstream employees oversee
the continued construction of the
Clermont Gathering System, a
key link that connects Seneca’s
production to the interstate
pipeline network.

DOWNSTREAM
National Fuel’s utility and energy
marketing subsidiaries, operated
by National Fuel Gas Distribution
Corporation and National Fuel
Resources, Inc., respectively,
provide safe and affordable
natural gas services to residential,
commercial and industrial
customers in New York and
Pennsylvania. The Utility’s ongoing
investment in its pipeline network
ensures the continued safety of
our systems and enhances service
reliability. Our role in providing
access to low-cost, domestic
energy has been an important
driver for economic growth in the
Company’s service territories,
including Buffalo, N.Y., where a
utility employee reads a bank of
meters in the picture below.

785,000
Net Acres in Pennsylvania

3,000,000 (Bbl)
Annual California
Oil Production

4+ (Bcf per day)
Interstate Pipeline Transportation
Capacity Under Contract

1+ (Bcf per day)
Gathering System Capacity
for Seneca Resources

SENECA RESOURCES ANNUAL
PRODUCTION (Bcfe)

MIDSTREAM OPERATING
REVENUES (millions)

160.5

157.8

161.1

$355

$369

$396

742,235
Utility Customer Accounts
in N.Y. & Pa.

1.5 (Bcf per day)
Delivery System Capacity
on Coldest Winter Day

UTILITY INVESTMENT
IN SAFETY (millions)

$50

$54

$62

2014

2015

2016

2014

2015

2016

2014

2015

2016

Pipeline & Storage

Gathering

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DEAR SHAREHOLDERS

WE FACED A NUMBER OF CHALLENGES DURING OUR 2016 FISCAL YEAR.
I AM HAPPY TO REPORT THAT WE MET THOSE CHALLENGES AND
THAT THE FINANCIAL FOOTING OF YOUR COMPANY REMAINS STRONG.
THE OIL AND NATURAL GAS INDUSTRY IN WHICH WE PARTICIPATE,
PERHAPS MORE THAN ANY OTHER, IS KNOWN FOR ITS CYCLES OF BOOM
AND BUST. SINCE NATIONAL FUEL’S INCORPORATION IN 1902—
THE EARLY STAGES OF THE INDUSTRY—WE HAVE SEEN AND BEEN SHAPED
BY SUCH CYCLES, EMERGING STRONGER FROM EACH ONE AND
BETTER PREPARED FOR EACH NEW TURN OF EVENTS. THE CURRENT ERA
OF ENERGY ABUNDANCE USHERED IN BY AMERICA’S SHALE
REVOLUTION, HAS BEEN AN UNPRECEDENTED, TRANSFORMATIVE PERIOD
FOR OUR COMPANY, OUR INDUSTRY, AND OUR NATION’S ECONOMY.

Ron Tanski, President and CEO, is pictured in front of Supply Corporation’s
compressor station in Hinsdale N.Y., which was placed in service in fiscal 2016
as part of the Northern Access 2015 expansion pipeline project.

We have structured the Company in a manner
that allows us to manage through the short-
term vagaries of commodity price declines
and adverse weather events and prosper over
the long term. As the rapid growth in domestic
natural gas and oil production continued to
push commodity prices and revenues lower
over the last few years, we changed the focus
of our operations. We learned to drill wells
faster and at less cost, using innovation and
technology to coax more reserves out of the
ground. However, as the economic realities of
the unbalanced market picture set in, it became
increasingly clear that decreasing cash flows
would eventually disrupt our ability to continue
our impressive growth trajectory.

As I was writing last year’s shareholder letter,
oil and gas prices in the U.S. crashed to
decade lows, declining more than 60% in just
18 months. Over the course of fiscal 2016, the
sustained decline in commodity prices resulted
in lower cash flow at Seneca Resources, our
exploration and production subsidiary, and
caused a continuation of the series of non-cash
write-downs of our oil and gas properties that
began last year. Those write-downs resulted in
a consolidated net loss for fiscal 2016. A record
warm winter, on the heels of the previous year’s
record cold winter, did not help matters either.
While somewhat mitigated by our New York
jurisdiction’s weather normalization clause, the
warm winter resulted in lower customer usage
and reduced earnings in the Utility segment.

The impact of lower prices on the broader
industry, however, was much more drastic
and longer lasting. Many of our peers, having
taken on increasing amounts of debt over the
years to finance unchecked growth, found
themselves with limited financial and operational
flexibility. In order to preserve cash, producers
pulled back sharply on their capital budgets,
some suspending their drilling programs
and temporarily abandoning the completion
of thousands of drilled wells. A number of
midstream companies, anticipating a decline in
revenues from the lower production stream, cut
shareholder dividends and distributions. Once
creditworthy companies saw their credit ratings
slashed multiple notches to below investment
grade. Numerous companies were forced to sell
assets or issue dilutive equity. Many were forced
into bankruptcy or a restructuring.

National Fuel, on the other hand, remains in a
much different position. As a fully integrated
U.S. natural gas company, we had the financial
stability to endure the trough of the cycle. The
predictable earnings and cash flows provided by
our rate-regulated Pipeline & Storage and Utility
businesses provided a measure of business
stability that few in today’s marketplace enjoy.
These businesses continue to provide a strong
foundation that fully supports our ability to fund
our dividend, meet our financial obligations,
and maintain the safety of our pipeline systems.

At this time last year, our team was making
preparations to begin construction on our
Northern Access 2016 project, a $455 million
expansion of our interstate pipeline system
designed to provide Seneca with a key outlet for
its natural gas production. Seneca, meanwhile,
was operating three drilling rigs in Pennsylvania,
developing an inventory of reserves that would
begin flowing into the pipeline on the expected
November 2016 in-service date. As natural gas
prices continued to erode last winter, it simply
did not make economic sense to invest capital to
grow our production and sell it at extremely low
prices. At the same time, however, we thought
it important to maintain a drilling program that
would utilize our existing pipeline infrastructure
and preserve the operational efficiencies our
talented team at Seneca had achieved, which
has been a core competitive advantage for us.

We took two important steps to adjust our
operating plan and conserve cash. First, we
elected to pare back our drilling program,
dropping two of the three rigs we had been
operating in the Marcellus. This slowed down
our build-out of the Clermont Gathering System
and allowed us to revise the in-service date of
our Northern Access pipeline project.

100%

10%

2016

2010

Second, we entered into a joint development
agreement (JDA) with an investor to develop
75 Marcellus wells on our owned acreage in
our Western Development Area, or WDA. By
utilizing external capital to fund a majority of our
drilling program during fiscal 2016 and 2017, we
were able to instantly strengthen our financial
position and liquidity while only giving up a
small portion of the more than 1,000 Marcellus
locations we plan to develop in the WDA over
the next decade. Furthermore, we were able to
maintain drilling operations at levels needed to

HOMEGROWN NATURAL
GAS SUPPLIES
% of Utility Segment Annual
Gas Purchases from
Northeast U.S. Market Area

100%

35%

24%

10%

2010

2016

2010

2016

FUELING THE
ELECTRIC GRID
% of U.S. Electrical
Generation from
Natural Gas (Source: EIA)

35%

24%

2010

2016

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generate enough gross production to utilize and
profit from our gathering and pipeline assets.

The flexibility afforded to us by our diverse
collection of assets allowed us to reduce our
2016 capital budget by more than $600 million
from the previous year. We were able to
comfortably sustain and grow our dividend for
the 46th consecutive year. We maintained our
investment grade credit rating, and we were
not forced to issue dilutive equity in order to
do so. Our actions fortified our finances while
preserving the upside value of our long-term
upstream and midstream growth opportunities
in Appalachia. Simply put, our integrated model
worked as designed.

We believe that our unique business structure
offers the best platform for us to execute our
integrated corporate strategy in Appalachia.
As the pricing outlook has improved going
into 2017, we are once again looking forward
to resuming our growth plans. An important
component of our strategy is the continued
development of our gathering and interstate
pipeline networks. Our most near-term, large-
scale project is our Northern Access pipeline.
This project will allow Seneca to significantly
increase its contracted pipeline capacity to
move production out of the Appalachian basin.
With more than 1,000 undeveloped Marcellus
Shale well locations in our WDA, and perhaps
a similar amount of well locations in the deeper
Utica Shale, we believe our resource base is
large enough to keep our production at levels
that will fill our pipelines for decades. We expect
to generate value every step of the way — from

the sale of our royalty-free production on
through to the utilization of our gathering and
interstate pipeline systems.

For decades, our utility customers in western
New York and northwestern Pennsylvania relied
on natural gas supplies that were produced
in Canada and the Texas / Louisiana Gulf Coast
and delivered to them through interstate
pipelines. Today, prolific production is sourced
from domestic onshore shale basins, but the
existing interstate pipeline network is simply not
equipped to accommodate that geographic shift
in supply. As a result, many potential customers,
particularly in the Northeast, are unable to
efficiently access these new supplies. Northern
Access is one of more than a dozen major
pipeline projects that have been proposed
in the region that are specifically designed to
connect demand centers — utilities, gas-fired
power generation facilities and industry — with
the largest and cheapest source of energy
on the continent. We have the opportunity to
both grow our Company and provide multiple
benefits to our region.

Across the nation, there is a need to modernize
and replace aging infrastructure. Just like
roads and bridges, our nation’s natural gas
pipeline infrastructure, much of which was
constructed during the post-World War II era,
requires constant monitoring and continuous
investment to ensure that we can all safely
rely on the essential, everyday benefits that
natural gas provides. We will continue to invest
millions to upgrade and ensure the safety of our
pipeline network.

INVESTING IN OUR FUTURE
Consolidated Capital Expenditures (millions)

DIVERSITY AND BALANCE
Percent of Consolidated
Total Assets by Segment

$977

$970

$1,001

$717

$780*

$366*

2012

2013

2014

2015

2016

2017E

Upstream

Midstream

Downstream

*Net of $157 million (2016) and $25 million (2017) of JDA proceeds

24%

37%

39%

“THE FLEXIBILITY
AFFORDED TO US
BY OUR DIVERSE
COLLECTION OF
ASSETS ALLOWED
US TO REDUCE OUR
2016 CAPITAL BUDGET
BY MORE THAN
$600 MILLION FROM
THE PREVIOUS YEAR.”

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While we and the industry as a whole stand
ready to meet our energy infrastructure needs,
we are continuing to see an increasing amount
of pushback from groups seeking to slow
or even stop our progress. Concerted efforts
by some vocal environmental groups have
disrupted established regulatory processes and
created a great amount of uncertainty in energy
policy at all levels of government. Certain
groups are fundamentally opposed to any form
of fossil fuel development, with their supposition
that natural gas and renewable energy cannot
co-exist in a world focused on reversing the
effects of climate change. We take a different
view, which you might expect from a company
whose core business is the responsible
development and delivery of energy from
fossil fuels.

We believe that natural gas is a critical and
absolutely necessary component of our nation’s
energy mix if we are to achieve our country’s
long-term economic and environmental
goals. Limiting development of this abundant
resource would actually reverse the country’s
recent progress in reducing greenhouse gas
emissions. Accounting for just half of the carbon
dioxide emissions when compared to coal,
natural gas is now the largest fuel source used
to generate electricity. If we are to keep our
742,235 utility customers warm on the coldest
winter days, keep their lights on, and continue
to drive down emissions, natural gas will be an
essential long-term partner, not a competitor,
with renewable energy. Even our New York
Governor’s ambitious plan to have 50 percent
of the state’s power generated from renewable

sources by the year 2030 implicitly recognizes
that 50 percent will still be generated via
fossil fuels.

The dedicated employees of National Fuel
are uniquely positioned to play an important
role in our region’s energy future. Our core
competencies include developing oil and
natural gas resources, and constructing and
operating natural gas delivery infrastructure.
We have been doing it safely and responsibly
here in western New York and northwestern
Pennsylvania for more than a century, and in
California for nearly 30 years. Our roots in the
utility business provide us with unique insight
into the needs and concerns of the people
and communities that rely on our services. I am
proud of our employees who live and support
their families here. They have a vested interest
in ensuring that all of our activities promote the
health and safety of our communities, and never
compromise the quality of our environment. I
am also proud that, during a difficult period, we
delivered another solid year of performance
for our shareholders. Yes, I would have preferred
that our entire industry could have avoided the
market forces that caused a decline in the value
of our public equity over the past two years,
but I believe National Fuel is well positioned to
responsibly develop our great collection of
energy assets for many years to come.

Ronald J. Tanski
President and Chief Executive Officer

January 10, 2017

FORTY-SIX YEARS OF DIVIDEND INCREASES
Annual Rate at Fiscal Year-End

$1.62

$0.19

1970

1982

1994

2006

2016

“WE BELIEVE THAT
NATURAL GAS
IS A CRITICAL
AND ABSOLUTELY
NECESSARY
COMPONENT OF
OUR NATION’S
ENERGY MIX IF WE
ARE TO ACHIEVE
OUR COUNTRY’S
LONG-TERM
ECONOMIC AND
ENVIRONMENTAL
GOALS.”

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SAFETY IS JOB ONE

National Fuel is an integral part of an industry that has embraced a culture of safety.
Our highest priority has always been the safety of our customers, employees and the
communities where we operate.

With more than 14,000 miles of pipelines, our Utility system is sizeable and complex.
Over the years, advances in materials, such as the improvement of plastic pipe technology,
have allowed us to further enhance system safety. Two decades ago, our Utility segment
began an ambitious program to accelerate the modernization of its system. Since that time,
the company has made remarkable progress, eliminating more than 45 percent of its bare
steel, cast iron and wrought iron mains and more than 62 percent of its bare steel services
across the system. In fiscal 2016, the Utility segment invested nearly $62 million to ensure
the continued safety of its systems, eliminating 157 miles of older mains and 4,106 bare steel
services, our highest one-year totals ever.

While safety will always be the number one motivation for our modernization efforts, we
gain an additional benefit in reduced greenhouse gas emissions. In the last five years,
estimated greenhouse gas emissions from utility plant declined 11 percent. We expect this
trend to continue as we modernize our system with materials and technologies that reduce
our carbon footprint.

The Pipeline & Storage segment also has a modernization program and has been leveraging
its expansion projects as an opportunity to increase investments in system upgrades. Over
the past five years, the segment has invested nearly $260 million in this effort. Earlier in
fiscal 2016, Supply completed the replacement of 23 miles of large diameter transmission

MILES OF UTILITY
MAINLINE PIPELINE
REPLACED

157

111

123

2014

2015

2016

New York

Pennsylvania

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UTILITY GHG EMISSIONS
FROM PHYSICAL PLANT*
(thousand metric tons of CO2e)

317

307

296

2013

2014

2015

*EPA Subpart W
(reported on calendar year basis)

pipeline along its Line N system in Beaver County, Pa., which was originally installed in 1947.
We also continue to upgrade equipment at our compressor facilities to enhance safety while
reducing emissions and our impact on the environment.

While we focus on maintaining our existing systems, we ensure that our new pipelines
and facilities are built to last and designed to operate safely for generations. Since 2010, we
have invested more than $1 billion installing gathering infrastructure and expanding our
interstate pipeline systems. Every pipeline and gas-related facility is built to meet or exceed
a comprehensive set of construction standards and regulatory requirements.

We also value the personal safety of the workers who operate our systems. Our number
one goal is to have each employee and contractor return each day in the same or better
condition than they arrived. Across the Company, we have implemented safety programs
and management practices to ensure that safety. These include daily safety meetings
at active construction sites, work rules, regular training requirements for all Company
employees, cross-functional management audits, and frequent emergency preparedness
and response drills with local first responders.

In our Utility and Pipeline & Storage segments, our safety record has significantly
improved over the last eight years. OSHA recordable injury and Days Away/Restricted/
Transfer (DART) injury rates have declined 47 percent and 43 percent, respectively.
Seneca Resources recently participated in the American Exploration and Production
Council’s annual peer benchmarking study, which surveyed 27 peer companies on safety
performance. For calendar 2015, Seneca ranked best in the peer group in Lost Time
Incident and DART injury rates. Additionally, OSHA recordable injury rates were low, making
Seneca a top 10 performer.

While we are proud of our safety record, we are also experienced enough to know that
we can never become complacent. National Fuel will never waver on our commitment to
promoting and improving the safety of our customers, employees and the communities
where we operate. From the very top of the organization on down to the boots in the field,
safety will always be our top priority. ■

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SENECA MARCELLUS
DEVELOPMENT
Average Subsurface Area
Developed Per Pad

983 acres

297 acres

2011

2016

2013

2016

TEN-WELL MARCELLUS PAD IN LYCOMING COUNTY, PA.

MINIMIZING ENVIRONMENTAL
FOOTPRINT, MAXIMIZING
CORPORATE VALUE

National Fuel is a unique company in today’s energy marketplace. Our geographic operating
area and the integration of our business operations provide a number of advantages that
allow us to compete successfully across the natural gas value chain and position us to be a
responsible steward of the environment. We conduct our activities in a way that maximizes
the value of our integrated assets while respecting and minimizing our impact on the
surrounding environment.

In our upstream energy development operations, Seneca goes to great lengths to ensure
its work has minimal impact on land, water, and wildlife. The large, contiguous nature of our
acreage in Pennsylvania allows us flexibility to plan our activities to minimize landscape
disruption. Today, we are often able to drill 10 or more wells from a single surface pad and
extend the lateral length of our horizontal wells up to a mile and a half. These practices have
the added benefits of lowering our development costs through improved efficiencies and
maximizing the natural gas reserves we are able to access.

Seneca’s long-term planning also considers future reuse of drilling pads for
development of other shale formations, such as the Utica and Geneseo. In fiscal 2016,
we began work to appraise the productivity of the Utica Shale on our WDA acreage.
Further development of the Utica formation, which underlies the developed Marcellus,
would allow us to reuse existing production infrastructure originally built to serve our
Marcellus development program.

To minimize methane emissions, Seneca avoids venting or flaring during a well’s initial
production whenever possible. We employ “green completion” techniques on nearly all
of our development wells. Our integrated model allows Seneca to work closely with our
gathering subsidiary to ensure that gathering pipelines are installed and ready so that our
production can flow on day one, limiting operational delays and loss of revenue.

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Once a well pad is placed into production, Seneca takes steps to shrink its operational
presence, carefully restoring native vegetation around the well pad’s perimeter. Among
other initiatives, we regularly consult with state and federal resource agencies to design
and implement strategies and improvements aimed at enhancing existing wildlife habitats.

Meanwhile our Pipeline & Storage segment has undertaken a significant expansion of its
systems in response to growing demand for pipeline infrastructure in Appalachia. Since
2010, we have added more than 1.5 Bcf per day of new capacity for Appalachian producers,
including Seneca. Most of this growth has been accomplished by upgrading and installing
new compression facilities located across the system, allowing us to transport more gas
through existing pipelines. When we construct new compressor facilities, we take great care
to minimize our impact to the environment and the surrounding communities.

We have also added needed transmission pipelines in certain areas to access the
Appalachian supplies. Wherever possible, we aim to route new pipelines along existing
rights of way to minimize land disturbance. We regularly employ minimally intrusive
construction techniques to avoid disturbing environmentally sensitive areas such as
streams and wetlands. After construction, National Fuel restores all rights of way and work
areas as soon as possible.

For decades, we have responsibly operated within the boundaries of national forests,
and state parks, forests and game lands. Our pipelines traverse under streams and rivers,
through wetlands and farm fields, beneath hiking and biking trails and golf courses, under
our sidewalks, streets and yards and up to our customers’ homes. Most people don’t know
that our pipelines are there because our presence and operations generally do not disrupt
their daily lives. On most days, we remain relatively invisible to the vast majority of the
population, yet every day we provide the energy source that heats our homes, cooks our
food and generates our electricity in a safe, reliable and affordable fashion. ■

TUSCARORA LATERAL PIPELINE IN STEUBEN COUNTY, N.Y.

2015

2016

INTERSTATE PIPELINE
TRANSPORTATION
CAPACITY UNDER
CONTRACT
(MDth per day)

3,626

3,811

4,155

2014

2015

2016

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PROTECTING WATER AND AIR THROUGH
INNOVATION AND TECHNOLOGY

Water management is a high priority for Seneca Resources. In Appalachia, each Marcellus
well that Seneca completes requires nearly 250,000 Bbls of water before it’s ready
for production, enough to fill 15 Olympic-sized swimming pools. In California, water is
converted to steam as part of the process to produce the heavy crude oil reserves found
in the region.

In Pennsylvania, Seneca has more than 1,100 well locations in the Marcellus that we plan
to develop over the next decade and beyond. To be successful over the long-term, Seneca
has been focused on developing innovative solutions and adopting technologies to
manage our water needs in an environmentally and economically sustainable manner.

Effective water management practices have enabled Seneca to substantially reduce fresh
water consumption and drive down well costs. Leveraging the advantages of its large,
contiguous acreage position in Pennsylvania, Seneca started its own water logistics company,
Highland Field Services, to manage all of Seneca’s regional water needs from sourcing
through delivery, storage and disposal. Over the past two years, Highland has invested more
than $20 million in water infrastructure, including a water treatment plant in McKean County,
Pa., which is by volume the industry’s largest water management facility in the state.

Today, Seneca recycles 100 percent of its produced water from existing Marcellus and Utica
wells. Highland also provides disposal solutions for other shale producers in the region
who deliver their own produced water to Highland’s centralized storage facility for reuse by
Seneca, directly offsetting Seneca’s freshwater needs for drilling operations.

100%
of Seneca’s
produced water in
Appalachia was
recycled in 2016

62%
of water used in
completion of new
wells was recycled

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BEST-IN-CLASS
MARCELLUS WELL COSTS*
($ per completed foot of lateral)

$855

$663

Seneca Resources
Peer Average

*as of September 30, 2016

Seneca’s water recycling efforts have resulted in tremendous environmental and financial
benefits. In 2016, Seneca’s fresh water consumption averaged only 38 percent of water used
in well completions, a decrease from 65 percent in 2015. From a cost standpoint, Seneca’s
operational efficiencies have lowered its water costs from over $4 per Bbl in 2014 to under
$1 per Bbl in 2016, a savings of nearly $1 million per well. Furthermore, better than 90 percent
of water used by Seneca in hydraulic fracturing operations in 2016 was transported by
Highland’s water pipeline system, which eliminated an estimated 70,000 truck trips and
associated emissions and lessened the impact on local roads.

Seneca is focused on reducing emissions and energy consumption through the upgrade
and modernization of its production equipment and emission control systems. Seneca
pioneered the industry’s onshore use of ultrasonic methane detection technology on its
Marcellus well pads. Now, with more than 100 units in place, Seneca is able to remotely
detect the presence of any leaks on its well pads and immediately shut down production,
if necessary.

In California, Seneca adopted renewable energy technology in connection with its oil
production operations. In July 2016, Seneca’s California division completed installation of a
3.1 megawatt photovoltaic solar array at Seneca’s North Midway Sunset field in Kern County,
pictured above. This state-of-the-art complex is California’s largest solar power generation
system in the oil and gas industry. It’s estimated that the project will generate 5.4 million
kilowatt-hours of electricity each year, for use by Seneca’s production equipment at its North
Midway Sunset production field.

Seneca’s solar facility will also generate significant environmental and financial benefits.
With this project, Seneca became the first California oil producer to take advantage of
the California Air Resource Board’s Low Carbon Fuel Standard “Innovative Method” credit
program. In addition to the carbon credits, Seneca was able to claim a $2 million tax
credit and will save more than $800,000 per year in utility expenses. ■

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FUELING OUR COMMUNITIES

National Fuel has deep roots in the natural gas industry. From its early beginnings, National
Fuel has been the hometown energy team, providing a safe, reliable and affordable source
of energy, and contributing to the economic health of the communities where we live and
work. As a locally-based company headquartered in Western New York, stewardship —
from wellhead to burner tip — is at the forefront of the Company’s operations. We continue
to invest in the community, building new pipeline infrastructure, expanding our workforce,
supporting local business partners and contributing to hundreds of nonprofit organizations.

As one of the largest publicly-held companies based in Western New York, National Fuel
employs nearly 2,000 employees across its New York and Pennsylvania operating areas.
Local union members make up more than half of the Utility and Pipeline & Storage segments’
workforce. Across the organization, we pride ourselves as a local employer that offers
competitive wages and benefits, and provides opportunities for career advancement and
fulfillment.

National Fuel’s investments and operations contribute to the economic health and vitality of
our local communities. Over the last 10 years, National Fuel has spent more than $6 billion
in energy development across all its businesses, investing in real, long-lived assets that
support good-paying jobs and provide significant tax base. A large portion of the Company’s
expenditures support the local economy. In fiscal 2016, we spent $261 million among more
than 2,000 local vendors and contractors in New York and Pennsylvania.

In addition to enhancing energy reliability and providing cost advantages for consumers,
our ongoing infrastructure development and expansion has a significant impact on local
economies. For example, our proposed Northern Access Project, which will utilize local
union labor, is estimated to inject almost $1 billion into the area economy, employ more than
1,600 people throughout the project, and add $11.5 million in annual property taxes for local
schools and municipalities.

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Our utility customers have seen the direct benefit of recent natural gas development in
the form of lower energy costs. As a result of the availability and access to low-cost natural
gas, our residential utility customer bills are down significantly. Since 2008, the average
bill for our residential customers has declined more than 50 percent. Commercial and
industrial customers have been enjoying similar reductions, which has incentivized business
expansion in our service territories to take advantage of the low-cost local energy supplies.

An important part of our stewardship includes giving back. National Fuel’s employees
have a longstanding history of donating their time and money to the causes that are
important to them, such as the Roswell Park Cancer Institute’s “Ride for Roswell,” pictured
to the left. Since 2005, the Company and its employees in New York, Pennsylvania, Texas
and California, through the National Fuel Gas Company Foundation, donated more than
$14 million to over 800 local and national charitable organizations. National Fuel is proud to
call these people employees and these regions home.

Without question, National Fuel’s 2,094 employees and 2,274 retirees are woven into the
fabric of our communities. They are the faces of National Fuel. Our families live here, often
for generations, and we have a vested interest in ensuring a growing, thriving community.
This is one of many reasons why customer safety, environmental stewardship and corporate
responsibility are ingrained in National Fuel’s culture, driving safe operations along with
community consideration and care throughout all of our business practices. ■

FUELING OUR COMMUNITIES IN 2016

OUR UTILITY CUSTOMERS

1.7 million
People Served
in N.Y. & Pa.

#1
Residential Bill Affordability
in N.Y. & Pa.

93% +
Residential Customer
Satisfaction Rate

90%
N.Y. Commercial Customer
Satisfaction Rate

OUR EMPLOYEES & RETIREES

2,080
Full-time Employees

1,017
Union Employees

2,274
Retired Employees

831
Employees Hired
Over Past Five Years

OUR LOCAL ECONOMIES

$243 million
Wages and
Pension Payments

$261 million
Spend with Local
N.Y. & Pa. Vendors

$72 million
Property Taxes and
Impact Fees Paid

$33 million
Drilling Royalties Paid
to Landowners

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PRINCIPAL OFFICERS

UPSTREAM

MIDSTREAM

DOWNSTREAM

NATIONAL FUEL
GAS COMPANY

Ronald J. Tanski
President and Chief
Executive Officer

John R. Pustulka
Chief Operating Officer

Paula M. Ciprich
Senior Vice President,
General Counsel and
Secretary

David P. Bauer
Treasurer and Principal
Financial Officer

Karen M. Camiolo
Controller and Principal
Accounting Officer

Donna L. DeCarolis
Vice President,
Business Development

SENECA RESOURCES
CORPORATION

NATIONAL FUEL GAS
SUPPLY CORPORATION

John P. McGinnis
President

David P. Bauer
President and Treasurer

Steven J. Conley
Senior Vice President

Ronald C. Kraemer
Senior Vice President

David P. Bauer
Treasurer

Cindy D. Wilkinson
Controller and Secretary

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

Karen M. Camiolo
Controller

Sarah J. Mugel
Vice President,
General Counsel
and Secretary

Steven Wagner
Vice President

EMPIRE PIPELINE, INC.

Ronald C. Kraemer
President

David P. Bauer
Treasurer

Karen M. Camiolo
Controller

Sarah J. Mugel
Secretary

Steven Wagner
Vice President

NATIONAL FUEL
GAS MIDSTREAM
CORPORATION

Duane A. Wassum
President

David P. Bauer
Treasurer

Karen M. Camiolo
Controller

Sarah J. Mugel
Secretary

Steven Wagner
Vice President

NATIONAL FUEL
GAS DISTRIBUTION
CORPORATION

Carl M. Carlotti
President

Jay W. Lesch
Senior Vice President

Paula M. Ciprich
Secretary

David P. Bauer
Treasurer

Karen M. Camiolo
Vice President and
Controller

Michael W. Reville
Vice President and
General Counsel

Joseph N. Del Vecchio
Vice President and
Chief Regulatory Counsel

Michael D. Colpoys
Vice President

Jeffrey F. Hart
Vice President

Steven Wagner
Vice President

Ann M. Wegrzyn
Vice President

NATIONAL FUEL
RESOURCES, INC.

Bruce D. Heine
Senior Vice President

Steven Wagner
Vice President

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DIRECTORS

Philip C. Ackerman 3, 5^ – since 1994
Former Chairman of the Board, Chief Executive Officer, President
and Principal Financial Officer of the Company. Former Director
of Associated Electric and Gas Insurance Services Limited. Past
Director of the Business Council of New York State and, prior
Chairman of the Erie County Industrial Development Agency.

David C. Carroll 3, 4 – since 2012
President and Chief Executive Officer of Gas Technology Institute.
Trustee of the American Gas Foundation, member of the Governing
Board of Stanford University’s Natural Gas Initiative, and member
of the Society of Gas Lighting. Former Director of Versa Power
Systems, Inc. President of the International Gas Union as the
United States prepares to host the 2018 World Gas Conference in
Washington, D.C. Chairman of the steering committee for the 17th
International Conference and Exhibition on Liquefied Natural Gas in
Houston (2013).

Stephen E. Ewing 1, 2^, 5 – since 2007
Lead Independent Director. Former 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 known as Michigan Consolidated
Gas Company). Director of CMS Energy. Immediate past Chairman
of the Auto Club of Michigan (AAA) and immediate past 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.

Joseph N. Jaggers 1 , 2 – since June 2015
President, Chief Executive Officer and Chairman of Jagged Peak
Energy LLC and Jagged Peak Energy Inc. Forme r President and
Chief Executive Officer of Ute Energy, LLC. Former Director,
President and Chief Operating Officer of Bill Barrett Corporation.
Former Vice President, Exploration & Production, for Williams
Companies. Former President and Chief Operating Officer of
Barrett Resources prior to its sale to William s Companies. Former
Independent Director of Mission Resources Corporation. Past
President of the Colorado Oil and Gas Association and past
Executive Director of the Independent Producers Association of
the Mountain State and inductee into the Rocky Mountain Oil and
Gas Hall of Fame.

Craig G. Matthews 1^, 2, 3, 5 – since 2005
Former President, Chief Executive Officer and Director of NUI
Corporation. Former Vice Chairman, Chief Operating Officer and
Director of KeySpan Corporation. Former Director of Houston
Exploration Company (formerly a subsidiary of KeySpan Corporation),
Hess Corporation (formerly Amerada Hess Corporation), Staten
Island Bancorp, Inc., and Republic Financial Corporation.

Rebecca Ranich 4 – since 2016
Former Director at Deloitte Consulting, LLP, where she led the
firm’s Energy and Sustainability Investment Advisory Services.
Former management team member at PSG International that led
negotiations to implement the Trans-Caspian Gas Pipeline. Former
Vice President at Michael Baker Corporation (Baker), an international
engineering, energy and environmental services firm. Former
Director of Questar Corporation. Vice Chair of the Board of the Gas
Technology Institute. Advisory board member of Yet Analytics, an
xAPI data analytics platform. Member of the Baltimore Angels — an
early stage investment group and the National Petroleum Council.

Jeffrey W. Shaw 1, 4 – since 2014
Former Director, Chief Executive Officer and President of Southwest
Gas Corporation. Member of the American Institute of Certified
Public Accountants, the Nevada Society of CPAs and the Leadership
Las Vegas Alumni Association. Former Director of the American
Gas Association and former Chairman and Director of the Western
Energy Institute.

Thomas E. Skains 2 – since 2016
Former Chairman of the Board, Chief Executive Officer and
President of Piedmont Natural Gas Company, Inc. Former Senior
Vice President — Transportation and Customer Service of
Transcontinental Gas Pipe Line Corporation. Director of Duke Energy
Corporation. Director of BB&T Corporation and its subsidiary Branch
Banking and Trust Company. Former Chairman and Director of
the American Gas Association and the Southern Gas Association.
Former Director of the Gas Technology Institute, and the American
Gas Foundation (a not-for-profit energy research group).

David F. Smith 3^, 5 – since 2007
Chairman of the Board of the Company. Former Executive Chairman
of the Board, Chief Executive Officer and President of the Company.
Director of the Gas Technology Institute (Executive Committee and
Audit Committee), former Director of the American Gas Association
and former Chairman of the Board of the Business Council of New
York State.

Ronald J. Tanski 3, 5 – since 2014
President and Chief Executive Officer of the Company. Former
Chief Operating Officer, Treasurer and Principal Financial Officer.
Member and past Chairman (2015) of the Board of Directors of the
Interstate Natural Gas Association of America (INGAA). Director of
the American Gas Association. Director of Invest Buffalo Niagara.

1 Member of Audit Committee

2 Member of Compensation Committee

3 Member of Executive Committee

4 Member of Nominating/ Corporate Governance Committee

5 Member of Financing Committee
^ Denotes Committee Chairman

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FINANCIAL AND OPERATING HIGHLIGHTS

National Fuel Gas Company Year Ended September 30

2016

2015

2014

2013

2012

Operating Revenues (Thousands)

$ 1,452,416

$ 1,760,913

$ 2,113,081

$ 1,829,551

$ 1,626,853

Net Income (Loss) Available for Common Stock (Thousands)

(290,958) (1)

(379,427) (2)

299,413 (3)

260,001 (4)

Return on Average Common Equity(6)

(16.4%)

(17.1%)

13.0%

12.5%

220,077 (5)

11.4%

Per Common Share

Basic Earnings (Loss)

Diluted Earnings (Loss)

Dividends Paid

Dividend Rate at Year-End

Book Value at Year-End

(3.43)

1.59

1.62

17.94

(4.50)

1.55

1.58

23.94

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

Common Shares Outstanding at Year-End

85,118,886

84,594,383

84,157,220

83,661,969

83,330,140

Weighted Average Common Shares Outstanding

Basic

Diluted

84,847,993

84,387,755

83,929,989

83,518,857

83,127,844

84,847,993

84,387,755

84,952,347

84,341,220

83,739,771

Average Common Shares Traded Daily

518,574

482,631

451,731

385,586

558,000

Common Stock Price

High

Low

Net Cash Provided by Operating Activities (Thousands)

59.62

37.03

54.07

588,979

72.21

48.61

49.98

853,580

78.79

65.23

69.99

909,390

69.27

48.51

68.76

738,572

64.19

41.57

54.04

659,010

Total Assets (Thousands)

$ 5,636,387

$ 6,564,939

$ 6,687,717

$ 6,125,618

$ 5,914,939

Capital Expenditures per Statements of Cash Flows (Thousands)

581,576

$ 1,018,179

914,417

703,461

$ 1,035,007

Volume Information

Production

Gas – MMcf

Oil – Mbbl

Total – MMcfe

Proved Reserves

Gas – MMcf

Oil – Mbbl

Total – MMcfe

Pipeline & Storage Throughput – MMcf

Gas Transportation

Gathering Volume – MMcf

Gathered Volume

Utility Throughput – MMcf

Gas Sales

Gas Transportation

Energy Marketing Volume – MMcf

Gas

Average Number of Utility Retail Customers

Average Number of Utility Transportation Customers

Number of Employees at September 30

143,547

2,923

161,085

1,674,575

29,009

1,848,629

139,563

3,034

157,767

142,307

3,036

160,523

103,693

2,831

120,679

2,142,128

1,682,884

1,299,515

33,722

38,477

41,598

66,131

2,870

83,351

988,434

42,862

2,344,460

1,913,746

1,549,103

1,245,606

764,423

750,080

735,995

579,802

371,139

161,955

139,629

138,726

93,449

48,562

58,705

70,847

39,849

602,284

139,951

2,080

72,434

78,749

46,752

591,098

148,877

2,125

73,892

80,949

52,694

584,415

153,407

2,010

67,903

69,149

46,875

587,760

147,431

1,912

64,099

61,027

45,756

599,106

133,467

1,874

(1) Includes impairment of oil and gas producing properties of ($550.0) million and includes

(4) Includes a $4.9 million refund provision related to the Utility segment’s New York

joint development agreement professional fees of $4.6 million.

rate proceeding.

(2) Includes impairment of oil and gas producing properties of ($650.2) million and includes

reversal of stock-based compensation expense of $4.7 million.

(3) Includes a $3.6 million gain on life insurance policies.

(5) Includes elimination of other post-retirement regulatory liability of $12.8 million.
(6) Calculated using average Total Comprehensive Shareholder Equity.

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INVESTOR INFORMATION

COMMON STOCK TRANSFER AGENT
AND REGISTRAR
Wells Fargo Shareowner Services
P.O. Box 64854
St. Paul, MN 55164-0854
Tel. 800-648-8166
Website: http://www.shareowneronline.com
Email: stocktransfer@wellsfargo.com

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, 7W
New York, NY 10286

NATIONAL FUEL 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 of 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 2016
Form 10-K, and the 2016 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 of Investor Relations
Tel. 716-857-7875
National Fuel Gas Company
6363 Main Street
Williamsville, NY 14221

ANNUAL MEETING
The Annual Meeting of Stockholders will
be held at 9:30 a.m. (local time) on Thursday,
March 9, 2017, at the Houstonian Hotel,
111 North Post Oak Lane, Houston, TX 77024.
Stockholders of record as of the close of
business on January 9, 2017, will receive a
formal notice of the meeting, proxy statement
and proxy.

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

UNITS OF MEASURE
Billion cubic feet
Bcf
(of natural gas)

Bbl

Barrels

CO2e Carbon dioxide equivalent

Mbbl

Thousands of barrels
(of crude oil)

MMBtu Million British thermal units

(heating value of one
dekatherm of natural gas)

MMcf Million cubic feet

(of natural gas)

MDth Thousands of dekatherms

(of natural gas)

MMcfe MMcf 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 website at
http://www.nationalfuelgas.com. If you would
like to receive news releases automatically
by email, simply visit the News section
and subscribe.

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NATIONAL FUEL GAS COMPANY
6363 Main Street, Williamsville, New York 14221
716-857-7000 www.nationalfuelgas.com
NYSE: NFG