National Fuel Gas Company Reports Strong Q2 Fiscal 2026 Results; Revises Guidance and Highlights Major Growth Initiatives

Key Highlights and Shareholder Considerations

• Q2 Fiscal 2026 GAAP earnings of \$247.7 million, or \$2.59 per share, up from \$216.4 million (\$2.37/share) last year.
• Adjusted EPS rose to \$2.71, a 13% increase year-over-year.
• Net cash from operating activities hit \$657 million year-to-date, with free cash flow up significantly to \$160 million (+\$111 million YoY).
• Integrated Upstream and Gathering segment adjusted EPS surged 21% to \$1.67, driven by a 17% increase in natural gas price realizations.
• Utility segment net income grew 3% to \$65 million on the back of system modernization and regulatory improvements in NY and PA.
• Fiscal 2026 adjusted EPS guidance revised to \$7.45-\$7.75 (midpoint \$7.60) per share, reflecting lower natural gas price assumptions and weather impacts, but maintaining overall growth outlook.
• Major expansion projects underway in regulated Pipeline & Storage businesses, with new deals and construction updates.
• Ohio natural gas utility acquisition (CenterPoint Energy’s business) expected to close in Q4 2026 calendar year, not impacting FY26 guidance.

Detailed Operating and Financial Performance

1. Consolidated Results and Cash Flow

The company delivered consolidated GAAP earnings of \$247.7 million (\$2.59/share) in Q2, exceeding last year’s \$216.4 million (\$2.37/share). Adjusted EPS, which removes certain acquisition and financing impacts, reached \$2.71, up 13% from Q2 2025. Net cash provided by operating activities reached \$657 million year-to-date, a notable increase, while free cash flow rose to \$160 million, compared to \$49 million in the prior year.

2. Segment Performance

Integrated Upstream & Gathering:

• Adjusted EPS was \$1.67 (+21% YoY), driven by a 17% rise in realized natural gas prices to \$3.45 per Mcf, despite a modest 3% decline in production volumes due to weather-related completion delays and normal well declines.
• Adjusted EBITDA for the segment climbed to \$302.4 million from \$267.1 million.
• Operating costs rose due to higher third-party gathering expenses and winter weather. DD&A expenses also increased, reflecting prior-year impairments that had artificially lowered rates last year.

Pipeline & Storage:

• GAAP earnings were stable at \$31.6 million, with adjusted EBITDA up slightly to \$72 million.
• Increased revenues were largely offset by higher DD&A from a larger depreciable asset base.
• Major news: The company entered a precedent agreement for 94,000 dekatherms per day of incremental capacity on its Line N System Upgrade Project, targeting late 2028 completion.
• Construction started on Tioga Pathway and Shippingport Lateral expansions, both on track for late 2026 in-service dates.

Utility Segment:

• Net income grew 3% YoY to \$65 million; adjusted EBITDA rose to \$99.8 million.
• Customer margin improved by \$9.1 million, driven by a three-year rate agreement in New York and the Distribution System Improvement Charge in Pennsylvania.
• Higher employee-related and uncollectible expenses, as well as DD&A, partially offset gains.
• Ohio utility acquisition (pending CenterPoint Energy transaction) is scheduled to close Q4 2026 and is excluded from current-year guidance.

3. Fiscal 2026 Guidance and Strategic Updates

• Adjusted EPS guidance revised to \$7.45-\$7.75, midpoint \$7.60, reflecting:
  • Lower NYMEX natural gas price assumption of \$3.00/MMBtu for the remainder of FY26, down from \$3.75/MMBtu.
  • Production guidance reduced to 425-440 Bcf (from 440-455 Bcf) due to Winter Storm Fern’s weather impacts and some underperformance at older Utica wells. However, mid-single digit production growth is still expected long-term.
  • Capex guidance unchanged, but company notes possible upward pressure from oil/diesel prices and increased land activity.
• Major regulated pipeline projects (Tioga Pathway, Shippingport Lateral) and the Line N System expansion are expected to drive long-term growth.
• Ohio utility acquisition remains a key catalyst for future value, with no impact to FY26; acquisition/financing costs excluded from guidance.

4. Free Cash Flow and Balance Sheet

• Free cash flow for the six months ended March 31, 2026 was \$160 million, up from \$49 million in the prior year.
• Capital expenditures for the period totaled \$456 million, up from \$373 million the prior year, reflecting ongoing investment in all segments.
• Consolidated capital expenditures for FY26 are forecast at \$955–\$1,065 million.
• Balance sheet remains strong, with total assets at \$9.13 billion and comprehensive shareholders’ equity at \$3.82 billion as of March 31, 2026.

Management Commentary

“National Fuel had a solid second quarter, with adjusted EPS increasing 13% over the prior year. Operationally, our resilient natural gas system and dedicated workforce performed extremely well during the severe weather of Winter Storm Fern, delivering the safe and reliable production, transmission, storage, and distribution services that customers across our businesses expect.

Looking forward, we’ve taken meaningful steps to position National Fuel for the next phase of our long-term growth strategy. With these positive catalysts across our operations, including line of sight to earnings growth at our regulated businesses and increasing free cash flow generation at our non-regulated businesses, National Fuel is well positioned to deliver long-term value to shareholders.”

Risks, Forward-Looking Statements, and Considerations

Investors should note several forward-looking risks disclosed by management, including but not limited to: changes in laws/regulations, rate cases, environmental mandates, commodity price volatility, cost inflation, collective bargaining outcomes, cybersecurity risks, weather and climate impacts, project delays, and the successful completion of pending transactions such as the CenterPoint Energy Ohio acquisition. These factors could materially affect future results and share value.

The company also notes that while it expects to see continued mid-single digit production growth in its Upstream segment, short-term weather and operational impacts may affect quarterly results.

Conclusion: Price-Sensitive and Investor-Relevant News

• Positive: Significant YoY increases in earnings, cash flow, and segment profitability; progress on major pipeline projects; regulatory growth in utility segment; increased free cash flow; upward revision to guidance midpoint; and pending value-accretive Ohio acquisition.
• Potential Risks: Lower natural gas price assumptions, weather-related production delays, and cost headwinds could temper near-term upside.
• Price Sensitivity: The combination of strong financial results, upgraded guidance, and major capital projects/expansion agreements is likely to be price-sensitive and supportive of share value. However, the market may also react to noted risks around commodity prices and operational costs.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Forward-looking statements are subject to risks and uncertainties. Investors should consult official filings and conduct their own due diligence prior to making investment decisions.

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