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Low natural gas prices will take toll on profits, National Fuel says

National Fuel Gas's profits during the third quarter topped analyst forecasts slightly, but the Amherst-based energy company also warned that low natural gas prices will take a toll on its profits next year.

National Fuel's operating profits rose by 3 percent to $59.7 million, or 69 cents per share, compared with $58.1 million, or 68 cents per share, a year ago, excluding one-time items. The earnings were a penny better than analysts expected.

But National Fuel also said its profits next year are expected to drop by about 13 percent, mainly because it likely won't get as much for the natural gas it produces after the expiration of some of the financial hedges that have been propping up its gas prices in a saturated market. National Fuel expects to receive about 14 percent less for the natural gas it produces next year, after hedging.

National Fuel said it expects to earn between $2.70 and $3.05 per share during the fiscal year that begins in October, down from its newly increased guidance that it will earn between $3.25 and $3.35 per share this year.

With natural gas prices hovering below $3 per 1,000 cubic feet, National Fuel said it has expanded its drilling program in northwestern Pennsylvania to include a second drilling rig. The company also said it is shifting its drilling focus to the Utica Shale, a gas-rich layer of rock that lies below the Marcellus Shale that has been the focus of much of the company's drilling in recent years.

By focusing on drilling into the Utica Shale, which has shown the potential to be at least as prolific as the Marcellus Shale, National Fuel executives believe the company can reduce its drilling costs by using existing drilling pads and gathering pipelines from its Marcellus exploration efforts, as opposed to drilling in new areas that require new infrastructure.

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