What changed in this filing

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Item 1. Business

2022-11-18 compared with 2021-11-19 · 48 added, 76 removed, 195 unchanged (39% of the section changed)

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Also, all references to a certain year in this report relate to the Company’s fiscal year ended September 30 of that year unless otherwise noted.

The Company is a diversified energy company engaged principally in the production, gathering, transportation and distribution of natural gas.

The Company is a diversified energy company engaged principally in the production, gathering, transportation, storage and distribution of natural gas.

The Company operates an integrated business, with assets centered in western New York and Pennsylvania, being used for, and benefiting from, the production and transportation of natural gas from the Appalachian basin.

Current natural gas production development activities are focused in the Marcellus and Utica shales, geological shale formations that are present nearly a mile or more below the surface in the Appalachian region of the United States.

Pipeline development activities are designed to transport natural gas production to new and growing markets.

Pipeline development activities are designed to transport natural gas production to both existing and new markets.

The common geographic footprint of the Company’s subsidiaries enables them to share management, labor, facilities and support services across various businesses and pursue coordinated projects designed to produce and transport natural gas from the Appalachian basin to markets in the eastern United States and Canada.

The Company also develops and produces oil reserves, primarily in California.

The Company reports financial results for four business segments:

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The Exploration and Production segment operations are carried out by Seneca Resources Company, LLC (Seneca), a Pennsylvania limited liability company.

Seneca is engaged in the exploration for, and the development and production of, natural gas and oil reserves in the Appalachian region of the United States and in California.

Seneca is engaged in the exploration for, and the development and production of, primarily natural gas in the Appalachian region of the United States.

At September 30, 2022, Seneca had proved developed and undeveloped reserves of 4,170,662 MMcf of natural gas and 250 Mbbl of oil.

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Supply Corporation and Empire provide interstate natural gas transportation services for affiliated and nonaffiliated companies through integrated gas pipeline systems in Pennsylvania and New York.

Supply Corporation also provides storage services through its underground natural gas storage fields.

Supply Corporation also provides storage services through its underground natural gas storage fields, and Empire provides storage service (via lease with Supply Corporation) to a nonaffiliated company.

The Gathering segment operations are carried out by wholly-owned subsidiaries of National Fuel Gas Midstream Company, LLC (Midstream Company), a Pennsylvania limited liability company.

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Financial information about each of the Company’s business segments can be found in Item 7, MD&A and also in Item 8 at Note M — Business Segment Information.

Seneca’s Northeast Division is included in the Company's All Other category.

Seneca’s Northeast Division is included in the Company's All Other category for 2021 and 2020.

This division marketed timber from Appalachian land holdings.

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The transaction closed on December 10, 2020.

For additional

discussion of the purchase and sale agreement to sell these assets, see Item 8 at Note B — Asset Acquisitions and Divestitures.

National Fuel Resources, Inc.

(NFR) is included in the Company’s All Other category.

NFR marketed gas to industrial, wholesale, commercial, public authority and residential customers in western and central New York and northwestern Pennsylvania.

On August 1, 2020, NFR completed the sale of its commercial and industrial contracts and certain other assets.

This sale, in conjunction with the turn back of NFR's residential customers to Distribution Corporation, effectively ended NFR's operations.

For additional discussion of this sale, see Item 8 at Note B — Asset Acquisitions and Divestitures.

No single customer, or group of customers under common control, accounted for more than 10% of the Company’s consolidated revenues in 2021.

For additional discussion of the purchase and sale agreement to sell these assets, see Item 8 at Note B — Asset Acquisitions and Divestitures.

Revenues from three customers of the Company's Exploration and Production segment, exclusive of hedging losses transacted with separate parties, represented approximately $850 million, or 38.9%, of the Company's consolidated revenue for the year ended September 30, 2022.

These three customers were also customers of the Company's Pipeline and Storage segment, accounting for an additional $15 million, or 0.7%, of the Company's consolidated revenue for the year ended September 30, 2022.

Rates and Regulation

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In addition to this state safety authority program, the NYPSC imposes additional requirements on the construction of certain utility facilities.

Increased regulation by these agencies, or requested changes to construction projects, could lead to operational delays or restrictions and increase compliance costs that the Company may not be able to recover fully through rates or otherwise offset.

Increased regulation by these agencies, and other regulators, or requested changes to construction projects, could lead to operational delays or restrictions and increase compliance costs that the Company may not be able to recover fully through rates or otherwise offset.

For additional discussion of the material effects of compliance with government environmental regulation, see Item 7, MD&A under the heading “Environmental Matters.”

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The Pipeline and Storage segment contributed net income of $102.6 million in 2022.

Supply Corporation’s firm transportation capacity is subject to change as the market identifies different transportation paths and receipt/delivery point combinations.

At the end of fiscal year 2021, Supply Corporation had firm transportation service agreements and lease agreements (Contracted Firm Transportation Capacity) for approximately 3,284 MDth per day.

The Utility segment accounts for approximately 1,191 MDth per day or 36% of Contracted Firm Transportation Capacity, and the Exploration and Production segment represents another 44 MDth per day or 1%.

Additionally, Supply Corporation leases 55 MDth per day or 2% of its Contracted Firm Transportation Capacity to Empire.

The remaining 1,994 MDth or 61% is subject to firm transportation service agreements or leases with nonaffiliated customers.

The amount of Contracted Firm Transportation Capacity with nonaffiliated parties will increase materially in fiscal 2022, largely due to the new 330 MDth capacity lease associated with Supply Corporation's FM100 Project.

The contracted firm transportation capacity held by affiliated shippers is expected to remain constant in fiscal 2022.

Supply Corporation had service agreements and leases for all of its firm storage capacity, totaling 70,693 MDth, at the end of 2021.

The Utility segment has contracted for 30,064 MDth or 43% of the total firm storage capacity.

Additionally, Supply Corporation leases 3,753 MDth or 5% of its firm storage capacity to Empire.

Nonaffiliated customers have contracted for the remaining 36,876 MDth or 52%.

Supply Corporation expects contracted storage services totaling approximately 899 MDth to terminate and be remarketed in fiscal 2022.

At the end of fiscal 2021, Empire had service agreements in place for firm transportation capacity totaling approximately 964 MDth per day, with 100% of that capacity contracted as long-term, full-year deals.

The Utility segment and the Exploration and Production segment account for 7% and 21%, respectively, of Empire’s firm contracted capacity, with the remaining 72% subject to contracts with nonaffiliated customers.

Contracted transportation capacity with both affiliated and nonaffiliated shippers is expected to remain relatively constant in fiscal 2022.

Empire’s firm storage capacity, totaling 3,753 MDth, was fully contracted at the end of fiscal 2021.

The total storage capacity is contracted on a long-term basis, with a nonaffiliated customer.

The contract will not expire or terminate in fiscal 2022.

The majority of Supply Corporation’s and Empire's transportation and storage contracts allow either party to terminate the contract upon six or twelve months’ notice effective at the end of the primary term, and include “evergreen” language that allows for annual term extension(s).

The Pipeline and Storage segment generated approximately 30% of its revenues in 2022 from services provided to the Utility segment or Exploration and Production segment.

Additional discussion of the Pipeline and Storage segment appears below under the headings “Sources and Availability of Raw Materials,” “Competition:

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The Gathering segment contributed net income of $101.1 million in 2022.

The Gathering segment generated approximately 94% of its revenues in 2022 from services provided to the Exploration and Production segment.

Additional discussion of the Gathering segment appears below under the headings “Sources and Availability of Raw Materials” and “Competition:

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All Other Category and Corporate Operations

The All Other category and Corporate operations contributed net income of $34.6 million in 2021.

The All Other category and Corporate operations incurred a net loss of $12.7 million in 2022.

Additional discussion of the All Other category and Corporate operations appears below in Item 7, MD&A and in Item 8, Financial Statements and Supplementary Data.

Sources and Availability of Raw Materials

The Exploration and Production segment seeks to discover and produce raw materials (natural gas, oil and hydrocarbon liquids) as further described in this report in Item 7, MD&A and Item 8 at Note M — Business Segment Information and Note N — Supplementary Information for Oil and Gas Producing Activities.

The Exploration and Production segment seeks to discover and produce raw materials (natural gas and hydrocarbon liquids) as further described in this report in Item 7, MD&A and Item 8 at Note M — Business Segment Information and Note N — Supplementary Information for Oil and Gas Producing Activities.

The Pipeline and Storage segment transports and stores natural gas owned by its customers, whose gas primarily originates in the Appalachian region of the United States, as well as other gas supply regions in the United States and Canada.

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The Gathering segment gathers, processes and transports natural gas that is, in large part, produced by Seneca in the Appalachian region of the United States.

Additional discussion of proposed gathering projects appears below in Item 7, MD&A.

Natural gas is the principal raw material for the Utility segment.

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(33%), Emera Energy Services, Inc.

(14%), Tenaska Marketing Ventures (9%), Shell Energy North America US (7%), and Repsol Energy North America (6%) accounted for nearly 73% of the Utility segment's 2021 gas purchases.

(12%), Chevron Natural Gas (8%), EQT Energy, LLC (7%), Vitol Inc.

(6%), Tenaska Marketing Ventures (6%), and Shell Energy North America US (6%), accounted for nearly 78% of the Utility segment's 2022 gas purchases.

No other producer or supplier provided the Utility segment with more than 5% of its gas requirements in 2022.

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Competition in the natural gas industry exists among providers of natural gas, as well as between natural gas and other sources of energy, such as fuel oil and electricity.

Management believes that the environmental advantages of natural gas have enhanced its competitive position relative to other fuels.

Management believes that the reliability and affordability, along with the environmental advantages of natural gas have enhanced its competitive position relative to other fuels.

The Company competes on the basis of price, service and reliability, product performance and other factors.

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The Exploration and Production Segment

The Exploration and Production segment competes with other oil and natural gas producers and marketers with respect to sales of oil and natural gas.

The Exploration and Production segment also competes, by competitive bidding and otherwise, with other oil and natural gas producers with respect to exploration and development prospects and mineral leaseholds.

exploratory studies and drilling operations, and seeks prospect and partnership opportunities based on size, operating expertise and financial criteria.

The Exploration and Production segment competes with other natural gas producers and marketers with respect to sales of natural gas.

The Exploration and Production segment also competes, by competitive bidding and otherwise, with other natural gas producers with respect to exploration and development prospects and mineral leaseholds.

To compete in this environment, Seneca originates and acts primarily as operator on its prospects, seeks to minimize the risk of exploratory efforts through partnership-type arrangements, utilizes technology for both exploratory studies and drilling operations, and seeks prospect and partnership opportunities based on size, operating expertise and financial criteria.

The Pipeline and Storage Segment

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The Empire Connector, along with other subsequent projects, has expanded Empire’s footprint and capability, allowing Empire to serve new markets in New York and elsewhere in the Northeast, and to attach to prolific Marcellus and Utica supplies principally from Tioga and Bradford Counties in Pennsylvania.

Like Supply Corporation, Empire’s expanded system facilitates transportation of shale gas to key markets within New York State, the northeastern United States and Canada.

Like Supply Corporation, Empire’s expanded system facilitates transportation of natural gas to key markets within New York State, the northeastern United States and Canada.

The Gathering Segment

The Gathering segment principally provides gathering services for Seneca’s production and competes with other companies that gather and process natural gas in the Appalachian region.

The Gathering segment provides gathering services for Seneca and, to a lesser extent, other producers.

It competes with other companies that gather and process natural gas in the Appalachian region.

The Utility Segment

With respect to gas commodity service, in New York and Pennsylvania, both of which have implemented “unbundling” policies that allow customers to choose their gas commodity supplier, Distribution Corporation has retained a substantial majority of small sales customers.

has retained a substantial majority of small sales customers.

In both New York and Pennsylvania, approximately 8% of Distribution Corporation’s small-volume residential and commercial customers purchase their supplies from unregulated marketers.

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Legislative and regulatory measures to address climate change and greenhouse gas emissions are in various phases of discussion or implementation in jurisdictions that impact the Utility segment.

New York, for example, adopted the Climate Leadership & Community Protection Act (CLCPA) in July 2019, which could

ultimately result in increased competition from electric and geothermal forms of energy.

In addition to the Inflation Reduction Act, New York, for example, adopted the Climate Leadership & Community Protection Act (CLCPA) in July 2019, which could ultimately result in increased competition from electric and geothermal forms of energy.

However, given the extended time frames associated with the CLCPA's emission reduction mandates as discussed in Item 7, MD&A under the heading “Environmental Matters” and subheading “Environmental Regulation,” any meaningful competition resulting from the CLCPA cannot be determined.

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When necessary, the Utility segment renews such franchises.

The Company makes its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, available free of charge on the Company’s website, www.nationalfuelgas.com, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC.

The information available at the Company’s website is not part of this Form 10-K or any other report filed with or furnished to the SEC.

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As of September 30, 2022, 48% of the Company’s active workforce was covered under collective bargaining agreements.

The Company has agreements in place with collective bargaining units in New York into February 2025, as well as with one collective bargaining unit in Pennsylvania into May 2026.

One agreement covering employees in a collective bargaining unit in Pennsylvania is scheduled to expire in April 2022 and negotiations with respect to renewing that agreement are likely to start in early 2022.

The Company has agreements in place with collective bargaining units in New York into February 2025, as well as with collective bargaining units in Pennsylvania into April 2026.

Safety is one of the Company’s guiding principles.

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The Company also ties executive compensation to safety related goals to emphasize the importance of and focus on safety at the Company.

The Company has continued to monitor and respond to developments related to the coronavirus (COVID-19) pandemic and limit exposure for our workforce.

In response to the COVID-19 pandemic, the Company’s Pandemic Response Team has implemented workforce and facility changes designed to protect the health and safety of the Company’s employees.

These efforts continue to include:

remote and flexible work arrangements where possible, facility cleaning and sanitation protocols, policies on the use of personal protective equipment and employee health screening protocols.

Voluntary Attrition Rate

The Company measures the voluntary attrition rate of its employees in assessing the Company’s overall human capital.

The Company has maintained a relatively low voluntary attrition rate (not including retirements) of 5.1%.

Additionally, throughout the COVID-19 pandemic, the Company has not instituted any furloughs or workforce reductions.

The Company's voluntary attrition rate (not including retirements and excluding the severance related to the sale of Seneca's assets in California) was 8%.

Additionally, throughout the COVID-19 pandemic, the Company did not institute any furloughs or workforce reductions.

No Work Stoppages

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Employee Benefits

To attract employees and meet the needs of the Company’s workforce, the Company offers benefits packages to employees of its subsidiaries.

To attract employees and meet the needs of the Company’s workforce, the Company offers market-competitive benefits packages to employees of its subsidiaries.

The Company’s benefits package options may vary depending on type of employee and date of hire.

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(v) providing opportunities for on-the-job growth, through stretch assignments or temporary projects outside of an employee’s typical responsibilities;

and (vi) offering one-on-one meetings for supervisory employees at the Company’s regulated subsidiaries to discuss career pathing and employee development.

(vi) offering one-on-one meetings for supervisory employees at the Company’s subsidiaries to discuss career pathing and employee development.

Diversity, Equity and Inclusion

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As such, the Company approaches diversity from the top-down, which is reflected in the makeup of our Board of Directors and senior leadership team:

three out of eleven directors are diverse, and four of the Company’s ten designated executive officers are women.

three out of eleven directors are diverse, and four of the Company’s eight designated executive officers are women.

The Company's Corporate Governance Guidelines incorporate the “Rooney Rule.” As a result, when identifying independent director candidates for nomination to the Board, the Nominating/Corporate Governance Committee is committed to including in any initial candidate pool qualified racially, ethnically and/or gender diverse candidates.

Beginning in fiscal year 2021, the Compensation Committee adopted specific diversity and inclusion performance goals as part of the Company's Annual at Risk Compensation Incentive Plan and Executive Annual Compensation Incentive Program to link executive compensation to the Company's focus on diversity.

During fiscal year 2021, the Company furthered numerous initiatives to increase the diversity of our workforce and create a more inclusive environment.

The Company created the new role of Director of Diversity and Inclusion (“D&I Director”) to spearhead diversity and inclusion initiatives across the organization.

Part of that initiative is to focus on diversity when making hiring and promotional decisions.

Beginning in fiscal 2021, the Compensation Committee adopted specific diversity and inclusion performance goals as part of the Company's Annual at Risk Compensation Incentive Plan and Executive Annual Compensation Incentive Program to link executive compensation to the Company's focus on diversity.

During fiscal 2022, the Company furthered numerous initiatives to increase the diversity of our workforce and create a more inclusive environment.

The Company's Director of Diversity and Inclusion (“D&I Director”) continued to spearhead diversity and inclusion initiatives across the organization.

Additional resources were added to the Diversity and Inclusion team with the creation of a Diversity and Inclusion Specialist ("D&I Specialist") role to assist and expand the Company’s proactive efforts of creating a more inclusive organization.

These efforts include initiatives to focus on diversity when making hiring and promotional decisions.

To attract diverse candidates, the Company works with community groups and organizations to help promote awareness of our job opportunities within diverse communities.

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The Company has also focused on encouraging diverse suppliers to receive the necessary certifications to participate in the industry and has added new diverse suppliers to its list of vendors in an effort to promote diversity.

The D&I Director also spearheads inclusion initiatives throughout the organization.

To promote a more inclusive work environment, the Company has provided training opportunities available to employees relating to Unconscious Bias Training, Building an Inclusive Culture with Intention, and Micro-aggressions.

The D&I Director and D&I Specialist also spearhead inclusion initiatives throughout the organization.

To promote a more inclusive work environment, the Company has continued to provide training opportunities to employees relating to Unconscious Bias, Inclusivity, and Micro-aggressions.

In addition, four new Employee Resource Groups, focused towards ethnically diverse, veteran, LGBTQ and female employees, were developed.

These Employee Resource Groups provide an opportunity to engage and connect with underrepresented employees, and each group has an executive sponsor which helps facilitate communication directly to senior management.

In addition, the Company has several policies that reinforce its commitment to diversity and inclusion within the workplace.

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The Company reiterates its commitment to a harassment free workplace through this process, as well as through prevention training for employees.

Annually, the Company’s Chief Executive Officer reinforces the Company’s commitment to equal employment opportunity by signing a corporate Equal Employment Opportunity policy statement.

This statement is then displayed at Company locations, included in employee handbooks, and discussed with new hires during their onboarding process.

Annually, the Company’s Chief Executive Officer reinforces the Company’s commitment to harassment prevention and equal employment opportunity by signing corporate Equal Employment Opportunity and Non-Discrimination and Anti-Harassment policy statements.

These statements are then displayed at Company locations, included in employee handbooks, and discussed with new hires during their onboarding process.

Executive Officers of the Company as of November 15, 2022(1)

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DeCarolis previously served as Vice President of Business Development of the Company from October 2007 through January 2019.

President of Midstream Company since August 2018.

Vice President of Midstream Company from July 2017 through July 2018.

Kasprzak previously served as Assistant Vice President of Supply Corporation from March 2009 until July 2017.

Chief Operating Officer of the Company since March 2021, President of Supply Corporation since July 2019 and President of Empire since August 2008.

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Treasurer and Principal Financial Officer of the Company since July 2019.

Treasurer of Distribution Corporation, Supply Corporation, Empire, Seneca and Midstream Company since July 2019.

Treasurer of Seneca Resources Company since July 2019.

Camiolo previously served as Treasurer of Distribution Corporation, Supply Corporation, Empire and Midstream Company from July 2019 through June 2021.

Camiolo previously served as Controller and Principal Accounting Officer of the Company from April 2004 through June 2019.

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Assistant Controller of Distribution Corporation, Supply Corporation and Empire from February 2017 through June 2019.

Mendel also previously served as Chief Auditor of the Company from July 2012 through January 2017.

Chief Information Officer of the Company since December 2018.

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Krebs' prior employers are not subsidiaries or affiliates of the Company.

Corporate Responsibility Officer of the Company since April 2022.

General Counsel of the Company since May 2020 and Secretary of the Company since July 2018.

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Mugel previously served as Assistant Secretary of the Company from June 2016 through June 2018.

President of Seneca Resources Company since May 2021.

Loweth previously served as Senior Vice President of Seneca Resources Company from October 2017 through April 2021 and as Vice President of Seneca Resources Company from September 2012 through September 2017.

President of Midstream Company since April 2022 and President of Seneca Resources Company since May 2021.

Loweth previously served as Senior Vice President of Seneca Resources Company from October 2017 through April 2021.

(1) The executive officers serve at the pleasure of the Board of Directors.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business