A must-read overview of National Fuel Gas’s business segments

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NFG’s segments

National Fuel Gas’ assets are distributed among five business segments: Exploration and Production, Pipeline and Storage, Gathering, Utility, and Energy Marketing. In this part of the series, we’ll briefly go through National Fuel Gas’ businesses.

NFG’s Upstream business includes Exploration and Production, while the Downstream businesses comprises the company’s Utility Segment, Energy Marketing Segment, and corporate and other businesses. The Pipeline and Storage segment and Gathering segment’s operations are part of the company’s midstream assets.

NFG overview

Upstream business

The company’s Exploration and Production segment operations are carried out by Seneca Resources Corporation, a Pennsylvania company. Seneca explores for, develops, and produces natural gas and oil reserves—primarily in Pennsylvania and California.

NFG said in its 10Q filing that it controls the natural gas interests associated with approximately 780,000 net acres within the Marcellus Shale. It holds the majority of the interests in fee, carrying no royalty and no lease expirations.

The segment contributed approximately 44.4% of the company’s 2013 net income.

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Range Resources (RRC), EQT (EQT), Southwestern Energy (SWN), and Cabot Oil & Gas Corporation (COG) are some of NFG’s peers operating in the Marcellus Shale. Other major players include Chesapeake Energy (CHK), Chevron Corporation (CVX), and Anadarko E&P (APC), which are part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

Midstream businesses

  • The Pipeline and Storage segment’s operations are carried out by National Fuel Gas Supply Corporation and interstate pipeline company Empire Pipeline, Inc. The segment provides natural gas transportation and storage services to affiliated and non-affiliated companies through an integrated system of pipelines and underground natural gas storage fields in western New York and Pennsylvania. The segment contributed approximately 24.3% of the company’s 2013 net income.
  • The Gathering segment’s operations are carried out by National Fuel Gas Midstream Corporation’s subsidiary limited-liability companies. The segment constructs, owns, and operates natural gas pipeline gathering and processing facilities in Appalachia. It currently provides the critical gathering infrastructure for transporting Seneca’s Marcellus Shale production to the interstate pipeline system.

Downstream businesses

  • The Utility segment operations are carried out by the New York–based National Fuel Gas Distribution Corporation. The unit sells natural gas or provides natural gas transportation services to approximately 735,000 customers through a local distribution system located in western New York and northwestern Pennsylvania. The principal metropolitan areas that National Fuel Gas Distribution Corporation serves include Buffalo, Niagara Falls, and Jamestown in New York and Erie and Sharon in Pennsylvania. The segment contributed approximately 25.3% of the company’s net income for the fiscal year ended September 30, 2013.
  • The Energy Marketing segment operations are carried out by National Fuel Resources, Inc. (or NFR). NFR is a New York corporation that markets natural gas to industrial, wholesale, commercial, public authority, and residential customers—primarily in western and central New York and northwestern Pennsylvania. It offers competitively priced natural gas for its customers.
  • The Corporate and Other category primarily includes corporate operations. The category also includes the remaining operations of Seneca’s Northeast division that markets high-quality hardwoods from Appalachian land holdings.

The next part of this series will highlight GAMCO’s views on a spinoff NFG’s utility business.

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