National Fuel Provides Updates Related to Activity in Its Exploration and Production Segment

Business Wire, Nov 1, 2006

Company to Report 4 (th) Quarter and Fiscal Year Earnings on November 9, 2006

WILLIAMSVILLE, N.Y. -- National Fuel Gas Company ("National Fuel" or the "Company") (NYSE: NFG) today announced that due to a further decline in market prices for natural gas at September 30, 2006, Seneca Resources Corporation ("Seneca"), the Company's wholly owned exploration and production subsidiary, will record a non-cash charge to write-down the value of its Canadian oil and natural gas producing properties. This charge is similar to the charge that was required in the Company's third fiscal quarter.

Seneca uses the full cost method of accounting for determining the book value of its oil and natural gas properties. This method requires that Seneca perform a quarterly "ceiling test" to compare, on a country-by-country basis, the present value of future revenues from its oil and natural gas reserves based upon period-end spot market prices (the "ceiling") with the book value of those reserves at the balance sheet date. If the book value of the reserves in any country exceeds the ceiling, a non-cash charge must be recorded to reduce the book value of the reserves to the calculated ceiling.

Following the June 30, 2006 Canadian ceiling test impairment, the book value of Seneca's Canadian reserves equaled the ceiling. Since that date, Canadian spot natural gas prices have declined from approximately CDN $5.50/MMBtu to approximately CDN $3.70/MMBtu at September 30, 2006. As a result, the book value of Seneca's Canadian reserves would again exceed the ceiling calculated as of September 30, 2006. Consequently, Seneca will record an after-tax impairment charge in the range of US $28 million to US $30 million, which would result in a decrease in earnings of $0.33 to $0.35 per diluted share.* At October 30, 2006, Canadian spot prices had rebounded to approximately CDN $7.50/MMBtu. If that pricing were used to calculate the ceiling, no write-down charge would be required this quarter and no write-down charge would have been required last quarter. While the September 30, 2006 valuation of Seneca's U.S. properties was also lower than at the end of June, due to a similar decline in U.S. spot crude oil and natural gas prices, there was still a ceiling test cushion of approximately $200 million related to Seneca's U.S. properties.

David F. Smith, President and Chief Operating Officer of National Fuel stated: "The continued volatility in commodity prices, especially at the quarter's end, clouds the overall performance in our Exploration and Production operation. During the fiscal year, Seneca drilled 277 wells, throughout all divisions, and successfully completed 267 or 96 percent of them. We are still completing our year-end accounting entries, but we expect that Seneca's production will be in line with our expectations and the guidance provided."*

Smith added: "Although our successful wells did not completely replace all the oil and gas that was produced during the year, we plan to drill wells in the Gulf of Mexico and Canada which we believe offer high reserve potential.* Additionally, Seneca expects to continue to increase its drilling program in Appalachia.* We drilled 152 wells in Appalachia this year with a 99 percent success rate, compared to 80 successful wells last year, and we are looking forward to growing our exploration and production program in Appalachia."*

Joint Exploration and Production Program in the Appalachian Basin is Announced

Seneca has selected EOG Resources, Inc. ("EOG") to jointly explore approximately 770,000 acres of Seneca's mineral holdings and 130,000 acres of EOG's mineral holdings in Pennsylvania and New York. The primary exploration targets are the Devonian black shales, which have similar characteristics to the prolific Barnett Shale that is actively producing natural gas in the Fort Worth Basin. The two companies also plan to explore other horizons on acreage held by Seneca and EOG.

After evaluating several candidates, Seneca selected EOG for this venture to explore for natural gas in the Appalachian Basin. EOG has demonstrated technical expertise, experience in the Appalachian region and proven success in the Barnett Shale in Texas.

Seneca and EOG are in the process of completing the agreements for this venture. Exploration activities, including the acquisition of seismic data, will soon commence and initial exploratory drilling is anticipated in 2007.* Smith noted: "We are looking forward to working with EOG, a well-respected and highly-qualified industry partner. Recent technological advances and strong natural gas prices have made it feasible to initiate exploration and production activities in unconventional areas such as the Devonian black shales. Seneca's ownership of considerable mineral holdings in the Appalachian Basin provides significant opportunity for ongoing exploration."

Operational Update

Seneca also recently participated in the drilling of an exploratory test well located in 37 feet of water on the High Island Block 24L, Texas State Waters Offshore in the Gulf of Mexico. The well was drilled to 14,988 feet measured depth and true vertical depth and penetrated more than 250 feet of pay in Lower Miocene Lentic Jeff sands. The well will be tested following current completion operations. Seneca has a thirty-five percent working interest in the well. Seneca and its partners were also the successful bidders at the State of Texas Lease Sale held on October 3, 2006 on three additional offshore tracts that are contiguous to the discovery tract. Seneca now holds a thirty five percent interest in 2,880 acres around the discovery well.