NATIONAL FUEL GAS CO [NFG] Filings

10-Q 1 nfg-20240630.htm 10-Q nfg-20240630

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from____ to_____

Commission File Number 1-3880

NATIONAL FUEL GAS COMPANY

(Exact name of registrant as specified in its charter)


New Jersey		13-1086010
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

6363 Main Street
Williamsville,	New York	14221
(Address of principal executive offices)		(Zip Code)

(716) 857-7000

(Registrant's telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, par value $1.00 per share	NFG	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☑	Accelerated Filer	☐
Non-Accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Common stock, par value $1.00 per share, outstanding at July 31, 2024: 91,356,883 shares.

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GLOSSARY OF TERMS

Frequently used abbreviations, acronyms, or terms used in this report:


National Fuel Gas Companies
Company			The Registrant, the Registrant and its subsidiaries or the Registrant’s subsidiaries as appropriate in the context of the disclosure
Distribution Corporation			National Fuel Gas Distribution Corporation
Empire			Empire Pipeline, Inc.
Midstream Company			National Fuel Gas Midstream Company, LLC
National Fuel			National Fuel Gas Company
Registrant			National Fuel Gas Company
Seneca			Seneca Resources Company, LLC
Supply Corporation			National Fuel Gas Supply Corporation


Regulatory Agencies
CFTC			Commodity Futures Trading Commission
EPA			United States Environmental Protection Agency
FASB			Financial Accounting Standards Board
FERC			Federal Energy Regulatory Commission
IRS			Internal Revenue Service
NYDEC			New York State Department of Environmental Conservation
NYPSC			State of New York Public Service Commission
PaPUC			Pennsylvania Public Utility Commission
PHMSA			Pipeline and Hazardous Materials Safety Administration
SEC			Securities and Exchange Commission


Other
2023 Form 10-K			The Company’s Annual Report on Form 10-K for the year ended September 30, 2023
2017 Tax Reform Act			Tax legislation referred to as the "Tax Cuts and Jobs Act," enacted December 22, 2017.
Bcf			Billion cubic feet (of natural gas)
Bcfe (or Mcfe) – represents Bcf (or Mcf) Equivalent			The total heat value (Btu) of natural gas and oil expressed as a volume of natural gas. The Company uses a conversion formula of 1 barrel of oil = 6 Mcf of natural gas.
Btu			British thermal unit; the amount of heat needed to raise the temperature of one pound of water one degree Fahrenheit
Capital expenditure			Represents additions to property, plant, and equipment, or the amount of money a company spends to buy capital assets or upgrade its existing capital assets.
Cashout revenues			A cash resolution of a gas imbalance whereby a customer (e.g. a marketer) pays for gas the customer receives in excess of amounts delivered into pipeline/storage or distribution systems by the customer’s shipper.
CLCPA			Legislation referred to as the "Climate Leadership & Community Protection Act," enacted by the State of New York on July 18, 2019.
Degree day			A measure of the coldness of the weather experienced, based on the extent to which the daily average temperature falls below a reference temperature, usually 65 degrees Fahrenheit.
Derivative			A financial instrument or other contract, the terms of which include an underlying variable (a price, interest rate, index rate, exchange rate, or other variable) and a notional amount (number of units, barrels, cubic feet, etc.). The terms also permit for the instrument or contract to be settled net and no initial net investment is required to enter into the financial instrument or contract. Examples include futures contracts, forward contracts, options, no cost collars and swaps.
Development costs			Costs incurred to obtain access to proved gas and oil reserves and to provide facilities for extracting, treating, gathering and storing the gas and oil.

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Dodd-Frank Act			Dodd-Frank Wall Street Reform and Consumer Protection Act.
Dth			Decatherm; one Dth of natural gas has a heating value of 1,000,000 British thermal units, approximately equal to the heating value of 1 Mcf of natural gas.
ESG			Environmental, social and governance
Exchange Act			Securities Exchange Act of 1934, as amended
Expenditures for long-lived assets			Includes capital expenditures, stock acquisitions and/or investments in partnerships.
Exploration costs			Costs incurred in identifying areas that may warrant examination, as well as costs incurred in examining specific areas, including drilling exploratory wells.
Exploratory well			A well drilled in unproven or semi-proven territory for the purpose of ascertaining the presence underground of a commercial hydrocarbon deposit.
FERC 7(c) application			An application to the FERC under Section 7(c) of the federal Natural Gas Act for authority to construct, operate (and provide services through) facilities to transport or store natural gas in interstate commerce.
Firm transportation and/or storage			The transportation and/or storage service that a supplier of such service is obligated by contract to provide and for which the customer is obligated to pay whether or not the service is utilized.
GAAP			Accounting principles generally accepted in the United States of America
Goodwill			An intangible asset representing the difference between the fair value of a company and the price at which a company is purchased.
Hedging			A method of minimizing the impact of price, interest rate, and/or foreign currency exchange rate changes, often through the use of derivative financial instruments.
Hub			Location where pipelines intersect enabling the trading, transportation, storage, exchange, lending and borrowing of natural gas.
ICE			Intercontinental Exchange. An exchange which maintains a futures market for crude oil and natural gas.
Impact Fee			An annual fee imposed on unconventional wells spud in Pennsylvania. The fee is administered by the PaPUC and fees are distributed to counties and municipalities where the well is located.
Interruptible transportation and/or storage			The transportation and/or storage service that, in accordance with contractual arrangements, can be interrupted by the supplier of such service, and for which the customer does not pay unless utilized.
LDC			Local distribution company
LIFO			Last-in, first-out
Marcellus Shale			A Middle Devonian-age geological shale formation that is present nearly a mile or more below the surface in the Appalachian region of the United States, including much of Pennsylvania and southern New York.
Mcf			Thousand cubic feet (of natural gas)
MD&A			Management’s Discussion and Analysis of Financial Condition and Results of Operations
MDth			Thousand decatherms (of natural gas)
Methane			The primary component of natural gas. It is a compound made up of one carbon atom and four hydrogen atoms (CH4).
MMBtu			Million British thermal units (heating value of one decatherm of natural gas)
MMcf			Million cubic feet (of natural gas)
Natural Gas			A naturally occurring mixture of gaseous hydrocarbons consisting primarily of methane and found in underground rock formations.
NGA			The Natural Gas Act of 1938, as amended; the federal law regulating interstate natural gas pipeline and storage companies, among other things, codified beginning at 15 U.S.C. Section 717.
NOAA			National Oceanic and Atmospheric Administration

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NYMEX			New York Mercantile Exchange. An exchange which maintains a futures market for crude oil and natural gas.
OPEB			Other Post-Employment Benefit
Open Season			A bidding procedure used by pipelines to allocate firm transportation or storage capacity among prospective shippers, in which all bids submitted during a defined time period are evaluated as if they had been submitted simultaneously.
Precedent Agreement			An agreement between a pipeline company and a potential customer to sign a service agreement after specified events (called “conditions precedent”) happen, usually within a specified time.
Proved developed reserves			Reserves that can be expected to be recovered through existing wells with existing equipment and operating methods.
Proved undeveloped (PUD) reserves			Reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required to make these reserves productive.
Reserves			The unproduced but recoverable oil and/or gas in place in a formation which has been proven by production.
Revenue decoupling mechanism			A rate mechanism which adjusts customer rates to render a utility financially indifferent to throughput decreases resulting from conservation.
S&P			Standard & Poor’s Rating Service
SAR			Stock appreciation right
Service agreement			The binding agreement by which the pipeline company agrees to provide service and the shipper agrees to pay for the service.
SOFR			Secured Overnight Financing Rate
Stock acquisitions			Investments in corporations
Utica Shale			A Middle Ordovician-age geological formation lying several thousand feet below the Marcellus Shale in the Appalachian region of the United States, including much of Ohio, Pennsylvania, West Virginia and southern New York.
VEBA			Voluntary Employees’ Beneficiary Association
WNA			Weather normalization adjustment; an adjustment in utility rates which adjusts customer rates to allow a utility to recover its normal operating costs calculated at normal temperatures. If temperatures during the measured period are warmer than normal, customer rates are adjusted upward in order to recover projected operating costs. If temperatures during the measured period are colder than normal, customer rates are adjusted downward so that only the projected operating costs will be recovered.

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INDEX						Page

Part I. Financial Information

Item 1. Financial Statements (Unaudited)						6

a. Consolidated Statements of Income and Earnings Reinvested in the Business - Three and Nine Months Ended June 30, 2024 and 2023						6
b. Consolidated Statements of Comprehensive Income – Three and Nine Months Ended June 30, 2024 and 2023						7
c. Consolidated Balance Sheets – June 30, 2024 and September 30, 2023						8
d. Consolidated Statements of Cash Flows – Nine Months Ended June 30, 2024 and 2023						10
e. Notes to Condensed Consolidated Financial Statements						11
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations						29
Item 3. Quantitative and Qualitative Disclosures About Market Risk						49
Item 4. Controls and Procedures						49

Part II. Other Information

Item 1. Legal Proceedings						49
Item 1 A. Risk Factors						49
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						50
Item 3. Defaults Upon Senior Securities						•
Item 4. Mine Safety Disclosures						•
Item 5. Other Information						51
Item 6. Exhibits						51
Signatures						52

• The Company has nothing to report under this item.

All references to a certain year in this report are to the Company’s fiscal year ended September 30 of that year, unless otherwise noted.

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Part I. Financial Information

Item 1. Financial Statements

National Fuel Gas Company

Consolidated Statements of Income and Earnings

Reinvested in the Business

(Unaudited)


	Three Months Ended June 30,				Nine Months Ended June 30,
(Thousands of U.S. Dollars, Except Per Common Share Amounts)	2024		2023		2024		2023
INCOME
Operating Revenues:
Utility Revenues	$	124,858	$	144,538	$	616,977	$	862,914
Exploration and Production and Other Revenues	220,905		216,581		739,537		738,107
Pipeline and Storage and Gathering Revenues	71,679		67,585		216,228		203,803
	417,442		428,704		1,572,742		1,804,824

Operating Expenses:
Purchased Gas	4,952		35,425		167,444		450,461
Operation and Maintenance:
Utility	53,412		50,080		166,405		156,885
Exploration and Production and Other	35,148		27,659		102,768		86,315
Pipeline and Storage and Gathering	40,019		38,607		114,321		109,347
Property, Franchise and Other Taxes	21,201		20,427		66,635		71,999
Depreciation, Depletion and Amortization	113,454		102,410		348,179		299,973
Impairment of Exploration and Production Properties	200,696		—		200,696		—
	468,882		274,608		1,166,448		1,174,980

Operating Income (Loss)	(51,440)		154,096		406,294		629,844
Other Income (Expense):

Other Income (Deductions)	3,188		3,551		12,989		12,754
Interest Expense on Long-Term Debt	(32,876)		(26,311)		(89,791)		(83,499)
Other Interest Expense	(1,341)		(5,781)		(14,250)		(15,485)
Income (Loss) Before Income Taxes	(82,469)		125,555		315,242		543,614
Income Tax Expense (Benefit)	(28,311)		32,935		70,108		140,425

Net Income (Loss) Available for Common Stock	(54,158)		92,620		245,134		403,189

EARNINGS REINVESTED IN THE BUSINESS
Balance at Beginning of Period	2,090,172		1,810,454		1,885,856		1,587,085
	2,036,014		1,903,074		2,130,990		1,990,274
Share Repurchases under Repurchase Plan	(18,435)		—		(22,252)		—
Dividends on Common Stock	(47,195)		(45,444)		(138,354)		(132,644)


Balance at June 30	$	1,970,384	$	1,857,630	$	1,970,384	$	1,857,630

Earnings (Loss) Per Common Share:
Basic:
Net Income (Loss) Available for Common Stock	$	(0.59)	$	1.01	$	2.67	$	4.40
Diluted:
Net Income (Loss) Available for Common Stock	$	(0.59)	$	1.00	$	2.65	$	4.37
Weighted Average Common Shares Outstanding:
Used in Basic Calculation	91,874,049		91,803,638		91,966,034		91,725,286
Used in Diluted Calculation	91,874,049		92,294,666		92,467,787		92,268,904
Dividends Per Common Share:
Dividends Declared	$	0.515	$	0.495	$	1.505	$	1.445

See Notes to Condensed Consolidated Financial Statements

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National Fuel Gas Company

Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended June 30,				Nine Months Ended June 30,
(Thousands of U.S. Dollars)	2024		2023		2024		2023
Net Income (Loss) Available for Common Stock	$	(54,158)	$	92,620	$	245,134	$	403,189
Other Comprehensive Income (Loss), Before Tax:
Unrealized Gain (Loss) on Derivative Financial Instruments Arising During the Period	(21,936)		65,244		238,395		673,381
Reclassification Adjustment for Realized (Gains) Losses on Derivative Financial Instruments in Net Income	(75,346)		(57,692)		(155,203)		120,590
Other Comprehensive Income (Loss), Before Tax	(97,282)		7,552		83,192		793,971
Income Tax Expense (Benefit) Related to Unrealized Gain (Loss) on Derivative Financial Instruments Arising During the Period	(6,086)		17,885		66,146		184,655
Reclassification Adjustment for Income Tax Benefit (Expense) on Realized Losses (Gains) from Derivative Financial Instruments in Net Income	(20,906)		(15,813)		(43,064)		32,967
Income Taxes (Benefits) – Net	(26,992)		2,072		23,082		217,622
Other Comprehensive Income (Loss)	(70,290)		5,480		60,110		576,349
Comprehensive Income (Loss)	$	(124,448)	$	98,100	$	305,244	$	979,538

See Notes to Condensed Consolidated Financial Statements

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National Fuel Gas Company

Consolidated Balance Sheets

(Unaudited)


	June 30, 2024		September 30, 2023
(Thousands of U.S. Dollars)
ASSETS
Property, Plant and Equipment	$	14,245,690	$	13,635,303
Less - Accumulated Depreciation, Depletion and Amortization	6,834,824		6,335,441
	7,410,866		7,299,862

Current Assets
Cash and Temporary Cash Investments	81,414		55,447

Receivables – Net of Allowance for Uncollectible Accounts of $32,622 and $36,295, Respectively	156,846		160,601
Unbilled Revenue	15,032		16,622
Gas Stored Underground	14,186		32,509
Materials and Supplies - at average cost	48,331		48,989

Other Current Assets	82,923		100,260
	398,732		414,428

Other Assets
Recoverable Future Taxes	80,820		69,045
Unamortized Debt Expense	6,007		7,240
Other Regulatory Assets	73,934		72,138
Deferred Charges	89,740		82,416
Other Investments	79,547		73,976
Goodwill	5,476		5,476
Prepaid Pension and Post-Retirement Benefit Costs	230,591		200,301
Fair Value of Derivative Financial Instruments	100,317		50,487
Other	5,007		4,891
	671,439		565,970

Total Assets	$	8,481,037	$	8,280,260

See Notes to Condensed Consolidated Financial Statements

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National Fuel Gas Company

Consolidated Balance Sheets

(Unaudited)


	June 30, 2024		September 30, 2023
(Thousands of U.S. Dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Comprehensive Shareholders’ Equity
Common Stock, $1 Par Value
Authorized - 200,000,000 Shares; Issued And Outstanding – 91,612,488 Shares and 91,819,405 Shares, Respectively	$	91,612	$	91,819
Paid in Capital	1,046,479		1,040,761
Earnings Reinvested in the Business	1,970,384		1,885,856
Accumulated Other Comprehensive Income (Loss)	5,050		(55,060)
Total Comprehensive Shareholders’ Equity	3,113,525		2,963,376
Long-Term Debt, Net of Current Portion and Unamortized Discount and Debt Issuance Costs	2,637,115		2,384,485
Total Capitalization	5,750,640		5,347,861

Current and Accrued Liabilities
Notes Payable to Banks and Commercial Paper	—		287,500
Current Portion of Long-Term Debt	50,000		—
Accounts Payable	101,200		152,193
Amounts Payable to Customers	62,569		59,019
Dividends Payable	47,195		45,451
Interest Payable on Long-Term Debt	46,926		20,399
Customer Advances	—		21,003
Customer Security Deposits	36,674		28,764
Other Accruals and Current Liabilities	169,133		160,974
Fair Value of Derivative Financial Instruments	2,941		31,009
	516,638		806,312

Other Liabilities
Deferred Income Taxes	1,172,068		1,124,170
Taxes Refundable to Customers	302,733		268,562

Cost of Removal Regulatory Liability	289,356		277,694
Other Regulatory Liabilities	164,390		165,441
Other Post-Retirement Liabilities	2,741		2,915
Asset Retirement Obligations	157,653		165,492
Other Liabilities	124,818		121,813
	2,213,759		2,126,087
Commitments and Contingencies (Note 8)	—		—

Total Capitalization and Liabilities	$	8,481,037	$	8,280,260

See Notes to Condensed Consolidated Financial Statements

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National Fuel Gas Company

Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended June 30,
(Thousands of U.S. Dollars)	2024		2023
OPERATING ACTIVITIES
Net Income Available for Common Stock	$	245,134	$	403,189
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:

Impairment of Exploration and Production Properties	200,696		—
Depreciation, Depletion and Amortization	348,179		299,973
Deferred Income Taxes	47,212		101,096


Stock-Based Compensation	15,984		15,807

Other	18,542		16,640
Change in:
Receivables and Unbilled Revenue	5,253		192,324
Gas Stored Underground and Materials and Supplies	18,981		11,757
Unrecovered Purchased Gas Costs	—		75,244
Other Current Assets	17,431		(12,230)
Accounts Payable	(13,705)		(52,340)
Amounts Payable to Customers	3,550		21,972
Customer Advances	(21,003)		(26,108)
Customer Security Deposits	7,910		9,741
Other Accruals and Current Liabilities	23,846		45,363
Other Assets	(35,346)		(39,367)
Other Liabilities	(14,649)		(7,949)
Net Cash Provided by Operating Activities	868,015		1,055,112

INVESTING ACTIVITIES
Capital Expenditures	(684,200)		(727,738)



Acquisition of Upstream Assets	—		(124,758)
Sale of Fixed Income Mutual Fund Shares in Grantor Trust	—		10,000
Other	(1,371)		13,397
Net Cash Used in Investing Activities	(685,571)		(829,099)

FINANCING ACTIVITIES
Proceeds from Issuance of Short-Term Note Payable to Bank	—		250,000
Repayment of Short-Term Note Payable to Bank	—		(250,000)
Net Change in Other Short-Term Notes Payable to Banks and Commercial Paper	(287,500)		78,500

Net Proceeds from Issuance of Long-Term Debt	299,396		297,533
Shares Repurchased Under Repurchase Plan	(27,847)		—
Reduction of Long-Term Debt	—		(549,000)
Dividends Paid on Common Stock	(136,610)		(130,653)
Net Repurchases of Common Stock Under Stock and Benefit Plans	(3,916)		(6,696)
Net Cash Used in Financing Activities	(156,477)		(310,316)
Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash	25,967		(84,303)
Cash, Cash Equivalents, and Restricted Cash at October 1	55,447		137,718
Cash, Cash Equivalents, and Restricted Cash at June 30	$	81,414	$	53,415

Supplemental Disclosure of Cash Flow Information
Non-Cash Investing Activities:
Non-Cash Capital Expenditures	$	80,468	$	71,823

See Notes to Condensed Consolidated Financial Statements

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National Fuel Gas Company

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1 – Summary of Significant Accounting Policies

Principles of Consolidation. The Company consolidates all entities in which it has a controlling financial interest. All significant intercompany balances and transactions are eliminated. The Company uses proportionate consolidation when accounting for drilling arrangements related to exploration and production properties accounted for under the full cost method of accounting.

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Earnings for Interim Periods. The Company, in its opinion, has included all adjustments (which consist of only normally recurring adjustments, unless otherwise disclosed in this Quarterly Report on Form 10-Q) that are necessary for a fair statement of the results of operations for the reported periods. The consolidated financial statements and notes thereto, included herein, should be read in conjunction with the financial statements and notes for the years ended September 30, 2023, 2022 and 2021 that are included in the Company's 2023 Form 10-K. The consolidated financial statements for the year ended September 30, 2024 will be audited by the Company's independent registered public accounting firm after the end of the fiscal year.

The earnings for the nine months ended June 30, 2024 should not be taken as a prediction of earnings for the entire fiscal year ending September 30, 2024. Most of the business of the Utility segment is seasonal in nature and is influenced by weather conditions. Due to the seasonal nature of the heating business in the Utility segment, earnings during the winter months normally represent a substantial part of the earnings that this business is expected to achieve for the entire fiscal year. The Company’s business segments are discussed more fully in Note 9 – Business Segment Information.

Consolidated Statements of Cash Flows. The components, as reported on the Company’s Consolidated Balance Sheets, of the total cash, cash equivalents, and restricted cash presented on the Statement of Cash Flows are as follows (in thousands):


	Nine Months Ended June 30, 2024				Nine Months Ended June 30, 2023
	Balance at June 30, 2024		Balance at October 1, 2023		Balance at June 30, 2023		Balance at October 1, 2022

Cash and Temporary Cash Investments	$	81,414	$	55,447	$	53,415	$	46,048
Hedging Collateral Deposits	—		—		—		91,670
Cash, Cash Equivalents, and Restricted Cash	$	81,414	$	55,447	$	53,415	$	137,718

The Company considers all highly liquid debt instruments purchased with a maturity date of generally three months or less to be cash equivalents. The Company’s restricted cash is composed entirely of amounts reported as Hedging Collateral Deposits on the Consolidated Balance Sheets. Hedging Collateral Deposits is an account title for cash held in margin accounts funded by the Company to serve as collateral for derivative financial instruments in an unrealized loss position. In accordance with its accounting policy, the Company does not offset hedging collateral deposits paid or received against related derivative financial instruments liability or asset balances.

Allowance for Uncollectible Accounts. The allowance for uncollectible accounts is the Company’s best estimate of the amount of probable credit losses in the existing accounts receivable. The allowance, the majority of which is in the Utility segment, is determined based on historical experience, the age of customer accounts, other specific information about customer accounts, and the economic and regulatory environment. Account balances have historically been written off against the allowance approximately twelve months after the account is final billed or when it is anticipated that the receivable will not be recovered. During 2022 and 2021, final billings were suppressed in the Utility segment as a result of state shut-off moratoriums arising from the COVID-19 pandemic. Those moratoriums were lifted in 2022 which allowed for the resumption of final billings during 2022, thereby resulting in higher amounts being written off in 2023 and 2024.

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Activity in the allowance for uncollectible accounts for the nine months ended June 30, 2024 and 2023 are as follows (in thousands):


	Balance at Beginning of Period		Additions Charged to Costs and Expenses		Discounts on Purchased Receivables		Net Accounts Receivable Written-Off		Balance at End of Period
Nine Months Ended June 30, 2024
Allowance for Uncollectible Accounts	$	36,295	$	11,774	$	698	$	(16,145)	$	32,622
Nine Months Ended June 30, 2023
Allowance for Uncollectible Accounts	$	40,228	$	13,142	$	1,316	$	(11,578)	$	43,108

Gas Stored Underground. In the Utility segment, gas stored underground is carried at lower of cost or net realizable value, on a LIFO method. Gas stored underground normally declines during the first and second quarters of the year and is replenished during the third and fourth quarters. In the Utility segment, the current cost of replacing gas withdrawn from storage is recorded in the Consolidated Statements of Income and a reserve for gas replacement is recorded in the Consolidated Balance Sheets under the caption “Other Accruals and Current Liabilities.” Such reserve, which amounted to $6.7 million at June 30, 2024, is reduced to zero by September 30 of each year as the inventory is replenished.

Property, Plant and Equipment. In the Company’s Exploration and Production segment, property acquisition, exploration and development costs are capitalized under the full cost method of accounting. Under this methodology, all costs associated with property acquisition, exploration and development activities are capitalized, including internal costs directly identified with acquisition, exploration and development activities. The internal costs that are capitalized do not include any costs related to production, general corporate overhead, or similar activities. The Company does not recognize any gain or loss on the sale or other disposition of properties unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves attributable to a cost center. The Company's capitalized costs relating to exploration and production activities, net of accumulated depreciation, depletion and amortization, were $2.6 billion and $2.4 billion at June 30, 2024 and September 30, 2023, respectively.

Capitalized costs include costs related to unproved properties, which are excluded from amortization until proved reserves are found or it is determined that the unproved properties are impaired. Such costs amounted to $202.2 million and $161.1 million at June 30, 2024 and September 30, 2023, respectively. All costs related to unproved properties are reviewed quarterly to determine if impairment has occurred. The amount of any impairment is transferred to the pool of capitalized costs being amortized.

Capitalized costs are subject to the SEC full cost ceiling test. The ceiling test, which is performed each quarter, determines a limit, or ceiling, on the amount of property acquisition, exploration and development costs that can be capitalized. The ceiling under this test represents (a) the present value of estimated future net cash flows, excluding future cash outflows associated with settling asset retirement obligations that have been accrued on the balance sheet, using a discount factor of 10%, which is computed by applying commodity pricing (as adjusted for hedging) to estimated future production of proved reserves as of the date of the latest balance sheet, less estimated future expenditures, plus (b) the cost of unproved properties not being depleted, less (c) income tax effects related to the differences between the book and tax basis of the properties. The commodity prices used to calculate the full cost ceiling are based on an unweighted arithmetic average of first day of the month commodity price for each month within the twelve-month period prior to the end of the reporting period. If capitalized costs, net of accumulated depreciation, depletion and amortization and related deferred income taxes, exceed the ceiling at the end of any quarter, a permanent non-cash impairment is required to be charged to earnings in that quarter. The book value of the exploration and production properties exceeded the ceiling at June 30, 2024. As such, the Company recognized a non-cash, pre-tax impairment charge of $200.7 million for the quarter ended June 30, 2024. A deferred income tax benefit of $55.7 million related to the non-cash impairment charge was also recognized for the quarter ended June 30, 2024. In adjusting estimated future cash flows for hedging under the ceiling test at June 30, 2024, estimated future net cash flows were increased by $375.8 million.

The principal assets of the Utility, Pipeline and Storage and Gathering segments, consisting primarily of gas distribution pipelines, transmission pipelines, storage facilities, gathering lines and compressor stations, are recorded at historical cost. There were no indications of any impairments to property, plant and equipment in the Utility, Pipeline and Storage and Gathering segments at June 30, 2024.

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Accumulated Other Comprehensive Income (Loss). The components of Accumulated Other Comprehensive Income (Loss) and changes for the nine months ended June 30, 2024 and 2023, net of related tax effect, are as follows (amounts in parentheses indicate debits) (in thousands):


	Gains and Losses on Derivative Financial Instruments		Funded Status of the Pension and Other Post-Retirement Benefit Plans		Total
Three Months Ended June 30, 2024
Balance at April 1, 2024	$	135,023	$	(59,683)	$	75,340
Other Comprehensive Gains and Losses Before Reclassifications	(15,850)		—		(15,850)
Amounts Reclassified From Other Comprehensive Loss	(54,440)		—		(54,440)

Balance at June 30, 2024	$	64,733	$	(59,683)	$	5,050
Nine Months Ended June 30, 2024
Balance at October 1, 2023	$	4,623	$	(59,683)	$	(55,060)
Other Comprehensive Gains and Losses Before Reclassifications	172,249		—		172,249
Amounts Reclassified From Other Comprehensive Income	(112,139)		—		(112,139)


Balance at June 30, 2024	$	64,733	$	(59,683)	$	5,050
Three Months Ended June 30, 2023
Balance at April 1, 2023	$	(1,294)	$	(53,570)	$	(54,864)
Other Comprehensive Gains and Losses Before Reclassifications	47,359		—		47,359
Amounts Reclassified From Other Comprehensive Income	(41,879)		—		(41,879)

Balance at June 30, 2023	$	4,186	$	(53,570)	$	(49,384)
Nine Months Ended June 30, 2023
Balance at October 1, 2022	$	(572,163)	$	(53,570)	$	(625,733)
Other Comprehensive Gains and Losses Before Reclassifications	488,726		—		488,726
Amounts Reclassified From Other Comprehensive Income	87,623		—		87,623

Balance at June 30, 2023	$	4,186	$	(53,570)	$	(49,384)

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Reclassifications Out of Accumulated Other Comprehensive Income (Loss). The details about the reclassification adjustments out of accumulated other comprehensive income (loss) for the nine months ended June 30, 2024 and 2023 are as follows (amounts in parentheses indicate debits to the income statement) (in thousands):


Details About Accumulated Other Comprehensive Income (Loss) Components	Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss)				Affected Line Item in the Statement Where Net Income is Presented
	Three Months Ended June 30,		Nine Months Ended June 30,
	2024	2023	2024	2023
Gains (Losses) on Derivative Financial Instrument Cash Flow Hedges:
Commodity Contracts	$75,462	$57,842	$155,401	($120,088)	Operating Revenues

Foreign Currency Contracts	(116)	(150)	(198)	(502)	Operating Revenues
	75,346	57,692	155,203	(120,590)	Total Before Income Tax
	(20,906)	(15,813)	(43,064)	32,967	Income Tax Expense
	$54,440	$41,879	$112,139	($87,623)	Net of Tax

Other Current Assets. The components of the Company’s Other Current Assets are as follows (in thousands):


	At June 30, 2024		At September 30, 2023

Prepayments	$	23,972	$	18,966
Prepaid Property and Other Taxes	11,462		14,186
Federal Income Taxes Receivable	—		14,602
State Income Taxes Receivable	12,298		16,133

Regulatory Assets	35,191		36,373
	$	82,923	$	100,260

Other Accruals and Current Liabilities. The components of the Company’s Other Accruals and Current Liabilities are as follows (in thousands):


	At June 30, 2024		At September 30, 2023

Accrued Capital Expenditures	$	52,620	$	43,323
Regulatory Liabilities	27,538		38,105
Reserve for Gas Replacement	6,657		—
Liability for Royalty and Working Interests	17,670		17,679
Federal Income Taxes Payable	1,027		—



Non-Qualified Benefit Plan Liability	13,052		13,052
Other	50,569		48,815
	$	169,133	$	160,974

Earnings Per Common Share. Basic earnings per common share is computed by dividing income or loss by the weighted average number of common shares outstanding for the period. Diluted earnings per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For purposes of determining earnings per common share, the potentially dilutive securities the Company had outstanding were restricted stock units and performance shares. As the Company recognized a net loss for the quarter ended June 30, 2024, in accordance with accounting guidance, all dilution associated with restricted stock units and performance shares in the amount of 567,681 shares, was excluded from the earnings per share calculation for the quarter ended June 30, 2024. For the nine months ended June 30, 2024 and for the quarter and nine months ended June 30, 2023, the diluted weighted average shares

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outstanding shown on the Consolidated Statements of Income reflects the potential dilution as a result of these securities as determined using the Treasury Stock Method. Restricted stock units and performance shares that are antidilutive are excluded from the calculation of diluted earnings per common share. There were 335 securities excluded as being antidilutive for the nine months ended June 30, 2024. There were 8,322 securities and 4,526 securities excluded as being antidilutive for the quarter and nine months ended June 30, 2023, respectively.

Share Repurchases. The Company considers all shares repurchased as cancelled shares restored to the status of authorized but unissued shares, in accordance with New Jersey law. The repurchases are accounted for on the date the share repurchase is traded as an adjustment to common stock (at par value) with the excess repurchase price allocated between paid in capital and retained earnings. Refer to Note 7 – Capitalization for further discussion of the Company's share repurchase program.

Stock-Based Compensation. The Company granted 361,729 performance shares during the nine months ended June 30, 2024. The weighted average fair value of such performance shares was $44.23 per share for the nine months ended June 30, 2024. Performance shares are an award constituting units denominated in common stock of the Company, the number of which may be adjusted over a performance cycle based upon the extent to which performance goals have been satisfied. Earned performance shares may be distributed in the form of shares of common stock of the Company, an equivalent value in cash or a combination of cash and shares of common stock of the Company, as determined by the Company. The performance shares do not entitle the participant to receive dividends during the vesting period.

The performance shares granted during the nine months ended June 30, 2024 include awards that must meet a performance goal related to either relative return on capital over a three-year or five-year performance cycle ("ROC performance shares"), methane intensity and greenhouse gas emissions reductions over a three-year performance cycle ("ESG performance shares") or relative shareholder return over a three-year or five-year performance cycle ("TSR performance shares"). The performance goal related to the ROC performance shares over the respective performance cycles is the Company’s total return on capital relative to the total return on capital of other companies in a group selected by the Compensation Committee (“Report Group”). Total return on capital for a given company means the average of the Report Group companies’ returns on capital for each twelve-month period corresponding to each of the Company’s fiscal years during the performance cycle, based on data reported for the Report Group companies in the Bloomberg database. The number of these ROC performance shares that will vest and be paid will depend upon the Company’s performance relative to the Report Group and not upon the absolute level of return achieved by the Company. The fair value of the ROC performance shares is calculated by multiplying the expected number of shares that will be issued by the average market price of Company common stock on the date of grant reduced by the present value of forgone dividends over the vesting term of the award. The fair value is recorded as compensation expense over the vesting term of the award.

The performance goal related to the ESG performance shares over the three-year performance cycle consists of two parts: reductions in the rates of intensity of methane emissions for each of the Company's operating segments, and reduction of the consolidated Company's total greenhouse gas emissions. The Company's Compensation Committee set specific target levels for methane intensity rates and total greenhouse gas emissions, and the performance goal is intended to incentivize and reward performance to the extent management achieves methane intensity and greenhouse gas reduction targets making progress towards the Company's 2030 goals. The number of these ESG performance shares that will vest and be paid out will depend upon the number of methane intensity segment targets achieved and whether the Company meets the total greenhouse gas emissions target. The fair value of these ESG performance shares is calculated by multiplying the expected number of shares that will be issued by the average market price of Company common stock on the date of grant reduced by the present value of forgone dividends over the vesting term of the award. The fair value is recorded as compensation expense over the vesting term of the award.

The performance goal related to the TSR performance shares over the respective performance cycles is the Company’s three-year (or five-year) total shareholder return relative to the three-year (or five-year) total shareholder return of the other companies in the Report Group. Three-year (or five-year) total shareholder return for a given company will be based on the data reported for that company (with the starting and ending stock prices over the performance cycle calculated as the average closing stock price for the prior calendar month and with dividends reinvested in that company’s securities at each ex-dividend date) in the Bloomberg database. The number of these TSR performance shares that will vest and be paid will depend upon the Company’s performance relative to the Report Group and not upon the absolute level of return achieved by the Company. The fair value price at the date of grant for the TSR performance shares is determined using a Monte Carlo simulation technique, which includes a reduction in value for the present value of forgone dividends over the vesting term of the award. This price is multiplied by the number of TSR performance shares awarded, the result of which is recorded as compensation expense over the vesting term of the award.

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The Company granted 220,778 restricted stock units during the nine months ended June 30, 2024. The weighted average fair value of such restricted stock units was $42.44 per share for the nine months ended June 30, 2024. Restricted stock units represent the right to receive shares of common stock of the Company (or the equivalent value in cash or a combination of cash and shares of common stock of the Company, as determined by the Company) at the end of a specified time period. These restricted stock units do not entitle the participant to receive dividends during the vesting period. The fair value at the date of grant of the restricted stock units (represented by the market value of Company common stock on the date of the award) must be reduced by the present value of forgone dividends over the vesting term of the award. The fair value of restricted stock units on the date of award is recorded as compensation expense over the vesting period.

Pursuant to registration statements for the Company's stock award plans, there were 3,890,301 shares available for future grant at June 30, 2024. These shares include shares available for future options, SARs, restricted stock and performance share grants.

Note 2 – Asset Acquisition

On June 1, 2023, the Company completed its acquisition of certain upstream assets located primarily in Tioga County, Pennsylvania from SWN Production Company, LLC ("SWN") for total consideration of $124.8 million. The purchase price, which reflects an effective date of January 1, 2023, was reduced for production revenues less expenses that were retained by SWN from the effective date to the closing date. As part of the transaction, the Company acquired approximately 34,000 net acres in an area that is contiguous with existing Company-owned upstream assets. This transaction was accounted for as an asset acquisition, and, as such, the purchase price was allocated to property, plant and equipment. The following is a summary of the asset acquisition in thousands:


Purchase Price	$	124,178
Transaction Costs	580
Total Consideration	$	124,758

Note 3 – Revenue from Contracts with Customers

The following tables provide a disaggregation of the Company's revenues for the quarter and nine months ended June 30, 2024 and 2023, presented by type of service from each reportable segment.


Quarter Ended June 30, 2024 (Thousands)
Revenues By Type of Service	Exploration and Production		Pipeline and Storage		Gathering		Utility		All Other		Corporate and Intersegment Eliminations		Total Consolidated
Production of Natural Gas	$	144,374	$	—	$	—	$	—	$	—	$	—	$	144,374
Production of Crude Oil	511		—		—		—		—		—		511
Natural Gas Processing	195		—		—		—		—		—		195
Natural Gas Gathering Service	—		—		60,120		—		—		(56,476)		3,644
Natural Gas Transportation Service	—		79,640		—		21,690		—		(26,826)		74,504
Natural Gas Storage Service	—		24,612		—		—		—		(10,436)		14,176
Natural Gas Residential Sales	—		—		—		89,034		—		—		89,034
Natural Gas Commercial Sales	—		—		—		11,022		—		—		11,022
Natural Gas Industrial Sales	—		—		—		480		—		(1)		479

Other	363		1,167		—		(618)		—		(207)		705
Total Revenues from Contracts with Customers	145,443		105,419		60,120		121,608		—		(93,946)		338,644
Alternative Revenue Programs	—		—		—		3,336		—		—		3,336
Derivative Financial Instruments	75,462		—		—		—		—		—		75,462
Total Revenues	$	220,905	$	105,419	$	60,120	$	124,944	$	—	$	(93,946)	$	417,442

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Nine Months Ended June 30, 2024 (Thousands)
Revenues By Type of Service	Exploration and Production		Pipeline and Storage		Gathering		Utility		All Other		Corporate and Intersegment Eliminations		Total Consolidated
Production of Natural Gas	$	580,233	$	—	$	—	$	—	$	—	$	—	$	580,233
Production of Crude Oil	1,722		—		—		—		—		—		1,722
Natural Gas Processing	765		—		—		—		—		—		765
Natural Gas Gathering Service	—		—		186,701		—		—		(174,544)		12,157
Natural Gas Transportation Service	—		232,532		—		88,817		—		(73,040)		248,309
Natural Gas Storage Service	—		71,247		—		—		—		(30,520)		40,727
Natural Gas Residential Sales	—		—		—		445,971		—		—		445,971
Natural Gas Commercial Sales	—		—		—		62,117		—		—		62,117
Natural Gas Industrial Sales	—		—		—		2,668		—		(5)		2,663

Other	1,416		4,073		—		(2,066)		—		(695)		2,728
Total Revenues from Contracts with Customers	584,136		307,852		186,701		597,507		—		(278,804)		1,397,392
Alternative Revenue Programs	—		—		—		19,949		—		—		19,949
Derivative Financial Instruments	155,401		—		—		—		—		—		155,401
Total Revenues	$	739,537	$	307,852	$	186,701	$	617,456	$	—