National Fuel Reports Record First Quarter Earnings

Business Wire, Feb 7, 2008

WILLIAMSVILLE, N.Y. -- National Fuel Gas Company ("National Fuel" or the "Company") (NYSE:NFG) today announced record earnings for the first quarter of fiscal 2008 (the quarter ended December 31, 2007) of $70.6 million or $0.82 per share.

HIGHLIGHTS

* Quarterly operating results, before items impacting comparability, increased 41% to $0.82 per share, an increase of $0.24 per share. Increased earnings in the Exploration and Production segment provided the bulk of the increase. Higher average commodity prices realized and increased natural gas and crude oil production were the main drivers of the higher earnings.

* Production of crude oil and natural gas from continuing operations increased more than 7%, to 10.7 billion cubic feet equivalent ("Bcfe"). In Appalachia, production increased over 37% from the prior year's first quarter. The Company's expected total production for the entire 2008 fiscal year remains at the previously announced level of 38 to 44 Bcfe.

* The Company is increasing its earnings guidance range for fiscal 2008 by $0.10 per share. The revised guidance range for fiscal 2008 is $2.60 to $2.80 per share.

* A conference call is scheduled for Friday, February 8, 2008, at 11:00 am Eastern Standard Time.

MANAGEMENT COMMENTS

Philip C. Ackerman, Chairman and Chief Executive Officer of National Fuel Gas Company stated: "This quarter's record earnings once again add to my satisfaction with our business mix. Record oil prices fueled our growth in profits, while the stability of our regulated operations and our strong dividend history tempered somewhat our stock price performance when compared to other exploration companies during the stock market's steep decline in the last half of January. Under certain market conditions one might wish to be more concentrated in the utility segment, while other market conditions favor more investments in oil and gas, but over the long term, our combination of regulated utility and pipeline operations, and a strong dividend, topped off with the opportunities presented by oil and gas investments has proven to be a winner. Our continued focus to build our Exploration and Production segment, especially in Appalachia, where a steady stream of production and a solid base of reserves can be developed for the long term, should add to the stability of our consolidated structure."

SUMMARY OF RESULTS

National Fuel had consolidated earnings for the quarter ended December 31, 2007, of $70.6 million, or $0.82 per share, an increase of $16.1 million, or $0.18 per share, from the prior year's first quarter earnings of $54.5 million, or $0.64 per share. (note: all references to earnings per share are to diluted earnings per share and all amounts are stated in U.S. dollars).

[TABLE OMITTED]

1 See discussion of these items below.

As outlined in the table above, two items included in GAAP earnings in the first quarter of fiscal 2007 impacted the comparability of the Company's operating results when comparing the first quarters of fiscal 2008 and fiscal 2007. Excluding these items, operating results for the current first quarter of $70.6 million or $0.82 per share increased $21.8 million, or $0.24 per share, from the prior year's first quarter. Items impacting comparability will be discussed in more detail within the discussion of segment earnings below.

DISCUSSION OF RESULTS BY SEGMENT

The following discussion of the earnings of each segment is summarized in a tabular form in this report. It may be helpful to refer to those tables while reviewing this discussion.

Exploration and Production Segment

The Exploration and Production segment operations are carried out by Seneca Resources Corporation ("Seneca"). Seneca explores for, develops and purchases natural gas and oil reserves mainly in California, in the Appalachian region and in the Gulf Coast region of Texas, Louisiana and Alabama.

The Exploration and Production segment's earnings in the first quarter of fiscal 2008 increased $13.3 million, or $0.15 per share, to $34.0 million, or $0.39 per share. On August 31, 2007, Seneca completed the sale of its Canadian subsidiary. As a result of this transaction, the Company has presented the Canadian operations as discontinued operations. Earnings in the first quarter of fiscal 2007 include earnings from discontinued operations of $3.8 million. The results of discontinued operations are discussed later in this document and are excluded from the remaining discussion of the Exploration and Production segment's quarterly results below.

Excluding discontinued operations, operating results in the Exploration and Production segment increased $17.1 million, or $0.19 per share. The increase was primarily due to higher natural gas and crude oil prices realized after hedging and was also significantly impacted by higher production. For the quarter ended December 31, 2007, the weighted average oil price received by Seneca (after hedging) was $72.59 per barrel ("Bbl"), an increase of $28.77 per Bbl, or 65.7 percent, from the prior year's quarter. The weighted average natural gas price received by Seneca (after hedging) for the quarter ended December 31, 2007, was $7.90 per thousand cubic feet ("Mcf"), an increase of $0.78, or 11.0 percent. In addition, an increase of 0.7 Bcf, or 14 percent, in gas production and a slight increase in crude oil production contributed to the increase in operating results. Most of the production increase was in Appalachia where production increased 0.6 Bcfe, or 37 percent. Higher interest income and lower interest expense during the current quarter also contributed to the increase in operating results. Other items impacting operating results for the quarter were higher depletion expense, higher lease operating expenses and higher state income taxes. The increase in depletion expense, which on a per unit basis increased $0.39 per thousand cubic feet equivalent ("Mcfe") to $2.25 per Mcfe, was mainly due to a 9.8 percent (39.7 Bcfe) reduction in proved reserves in California, primarily in the Midway Sunset field. The fiscal 2007 audit by Netherland Sewell & Associates determined that reduced performance from certain wells in this field supported a reduction in proved reserves. The increase in lease operating expenses ("LOE") is due to higher workover costs in the West, an increase in the number of producing properties, especially in Appalachia and generally escalating costs compared to the prior year's quarter.