Stronger earnings from its utility and pipeline and storage businesses helped National Fuel Gas Co. boost its third-quarter profits by 9 percent, the diversified natural gas company said Wednesday.
The Buffalo-based firm said its profits rose to $18.9 million, or 50 cents per share, from $17.3 million, or 46 cents per share, a year ago. The earnings easily beat the 44 cents per share that analysts surveyed by Zacks Investment Research had been expecting.
Revenues rose by 3 percent to $246.1 million from $239.3 million the year before.
National Fuel said colder weather and lower operating costs, coupled with the 1.1 percent rate increase that took effect in New York last October and also allows the firm to earn a higher rate of return, led to improved earnings from its utility business in Western New York and Northwestern Pennsylvania.
National Fuel said its operation and maintenance expenses from its utility business slid by 3.3 percent during the quarter, partly due to lower labor costs stemming from an early retirement program it offered last summer and other efforts to control costs.
The company's pipeline and storage business also strengthened, mostly because of lower operating costs, coupled with higher revenues from unbundled pipeline sales and open access transportation.
Those gains, however, were offset by weakness in the company's oil and natural gas exploration and production business, which was stung by a 17 percent drop in revenue.
National Fuel said lower oil and gas prices, combined with a 5 percent drop in production because of lower output from some of its onshore horizontal wells and a reduced working interest in the Vermilion 252 wells in the Gulf of Mexico, hurt earnings in that business.
The company also lost about $2.1 million before taxes on its hedging program, which is designed to smooth out fluctuations in oil and gas prices, compared with a loss of $4.3 million before taxes a year ago.
Bernard J. Kennedy, National Fuel's chairman, president and chief executive officer, said oil and gas production was lower than expected during the spring quarter because of a shortage of drilling rigs in the Gulf of Mexico.
"We have not been able to drill as many wells as we planned and place them on production," Kennedy said. "The good news to report is that we have obtained the drilling rigs necessary to get our program back on track. We have an excellent inventory of prospects to drill and expect to catch up during the next fiscal year."
For the first nine months of the fiscal year, National Fuel said its profits rose by 9 percent to $114.6 million, or $3.01 per share, from $105.4 million, or $2.81 per share, a year earlier. Revenues increased by 6 percent to $1.11 billion from $1.05 billion.