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NATIONAL FUEL POSTS HIGHER EARNINGS <br> ONE-TIME CHARGES CONTRIBUTE TO GAIN

National Fuel Gas Co.'s fourth-quarter profits fell short of analyst expectations, even though the Amherst-based energy company's earnings more than tripled after excluding one-time charges.

With rising energy prices contributing to a 45 percent surge in operating profits from its oil and natural gas drilling business and a Pennsylvania rate increase reducing the size of its utility business' usual summertime loss, National Fuel earned $7.8 million, or 9 cents per share.

Those profits, which were less than the 12 cents per share expected by analysts surveyed by Thomson Financial/First Call, easily topped the $1.9 million, or 3 cents per share, that National Fuel earned a year ago, excluding a series of one-time charges that totaled $56 million a year ago.

With those one-time charges, which included a $100 million gain from the sale of timber, National Fuel's profits plunged by 87 percent from $58.1 million, or 71 cents per share.

National Fuel officials on Friday also repeated their earlier forecast that the company would earn between $1.75 and $1.85 per share during the fiscal year that began this month, but that was less than the $1.89 per share that analysts were predicting.

Ronald Tanski, National Fuel's treasurer, said the company expects to earn between 54 cents and 60 cents per share during the current quarter, which is in line with analyst forecasts.

By far the biggest improvement in the summer quarter came from National Fuel's oil and gas drilling business, which increased its profits to $10.3 million, despite a 21 percent drop in production, as energy prices surged. National Fuel's average oil price jumped by 27 percent after hedging, while its average natural gas price was up 12 percent.

National Fuel's oil and gas production, which dropped by 19 percent during the last fiscal year to the equivalent of 60 billion cubic feet of gas following the sale of its oil fields in Southeast Saskatchewan, is expected to slip further to between the equivalent of 50 billion to 55 billion cubic feet, said James Beck, who runs the company's exploration and production unit.

National Fuel plans to drill more than 150 new wells this year, ranging from the company's fields in Appalachia and Canada to the Gulf of Mexico, Beck said during a conference call. National Fuel also has acquired a 45 percent interest on six Gulf of Mexico drilling sites from Chanex LLC, with drilling on the first three wells expected early next year.

"They are the type of wells (National Fuel) successfully drilled in the 1990s, only now gas prices are above $6," Beck said.

Earnings from the company's pipeline and storage business improved by 12 percent to $11.5 million, partly because of lower interest expenses and taxes. Losses in the utility business shrunk by $3.2 million to $7 million, partly due to a rate increase in Pennsylvania.

The company's international business widened its losses by more than 10 percent to $7 million because of higher costs and lower electricity sales. Its energy marketing business nearly broke even, while earnings from National Fuel's timber operations grew by 20 percent to $1.8 million on higher sales volumes.

e-mail: drobinson@buffnews.com

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