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National Fuel slowing drilling after earnings swoon

The plunge in natural gas and oil prices is taking a toll on National Fuel Gas Co.’s profits.

The Amherst-based energy company’s earnings, excluding special charges, fell by 11 percent during the first three months of this year as the plunge in natural gas prices prompted National Fuel to delay production at several wells and caused its overall production to decline for the first time since the beginning of the shale gas boom.

Even so, National Fuel’s earnings from its operations, which fell to $86.1 million, or $1.02 per share, from $97 million, or $1.15 per share, a year ago, still topped analyst forecasts by 11 cents.

But the drop in energy prices also forced National Fuel to take a massive, $69.5 million write-down of the value of its oil and natural gas reserves. With energy prices down sharply, U.S. Securities and Exchange Commission reporting rules require drillers to recalculate the value of their reserves each year, using updated pricing data.

Because oil and gas prices have plunged, the current value of National Fuel’s reserves has dropped by an estimated $69.5 million, forcing the company to take a write-down on its books. As a result, National Fuel’s net income, including the write-down, plunged by 82 percent to $16.7 million, or 20 cents per share, from $95.2 million, or $1.12 per share, a year ago.

In response to the lower energy prices, Ronald J. Tanski, National Fuel’s president and CEO, said the company plans to slow its spending on its natural gas drilling in Pennsylvania and its oil drilling in California.

But National Fuel also will continue to move ahead with plans to expand its pipeline operations throughout Appalachia, aimed at building a distribution system capable of moving larger volumes of natural gas from Pennsylvania to markets in Canada and the East Coast, Tanski said.

The company said it now expects its profits this year to come in at the high end of its previously forecasted range. National Fuel narrowed its earnings guidance for the fiscal year that ends in September to between $2.75 and $2.90 per share, raising its target at the low end from $2.65 per share.

National Fuel also narrowed its oil and gas production forecast toward the lower end of its earlier guidance. The company now expects production this year to total 155 billion to 175 billion cubic feet of natural gas. Its earlier forecast had estimated that production could reach as high as 190 billion cubic feet.