What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-11-18 compared with 2021-11-19 · 384 added, 353 removed, 1700 unchanged (30% of the section changed)

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Financial Statements:

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID 238 )

Consolidated Statement of Income and Earnings Reinvested in the Business for the years ended September 30, 2022, 2021 and 2020

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

The Impact of Proved Oil and Gas Reserves on Oil and Gas Properties, Net

As described in Note A to the consolidated financial statements, the Exploration and Production segment includes capitalized costs relating to oil and gas producing activities, net of depreciation, depletion, and amortization (DD&A) of $1.9 billion as of September 30, 2021, and related DD&A expense of $177.1 million for the year then ended.

The Impact of Proved Natural Gas Reserves on Natural Gas Properties, Net

As described in Note A to the consolidated financial statements, the Exploration and Production segment includes capitalized costs relating to natural gas producing activities, net of depreciation, depletion, and amortization (DD&A) of $1.9 billion as of September 30, 2022.

The Exploration and Production segment follows the full cost method of accounting.

Under this method, all costs associated with property acquisition, exploration and development activities are capitalized and DD&A is computed based on quantities produced in relation to proved reserves using the units of production method.

Capitalized costs are subject to the SEC full cost ceiling test.

As disclosed by management, in addition to DD&A under the units-of-production method, proved reserves are a major component in the SEC full cost ceiling test.

The ceiling test, which is performed each quarter, determines a limit, or ceiling, on the amount of property acquisition, exploration and development costs that can be capitalized.

If capitalized costs, net of accumulated DD&A and related deferred income taxes, exceed the ceiling at the end of any quarter, a permanent impairment is required to be charged to earnings in that quarter.

For the first quarter ended December 31, 2020, a pre-tax impairment charge of $76.2 million was recognized.

No additional ceiling test impairment charges were recorded during the year ended September 30, 2021.

As of September 30, 2021, the ceiling exceeded the book value of the oil and gas properties by approximately $842.1 million.

As disclosed by management, in addition to DD&A under the units-of-production method, proved reserves are a major component in the SEC full cost ceiling test.

Estimates of the Company’s proved oil and gas reserves and the future net cash flows from those reserves were prepared by the Company’s petroleum engineers and audited by independent petroleum engineers (together referred to as “management’s specialists”).

There were no ceiling test impairment charges for the year ended September 30, 2022.

As of September 30, 2022, the ceiling exceeded the book value of the natural gas properties by approximately $3.2 billion.

Estimates of the Company’s proved natural gas reserves and the future net cash flows from those reserves were prepared by the Company’s petroleum engineers and audited by independent petroleum engineers (together referred to as “management’s specialists”).

Petroleum engineering involves significant assumptions in the evaluation of available geological, geophysical, engineering and economic data for each reservoir.

Estimates of economically recoverable oil and gas reserves and of future net cash flows depend upon a number of variable factors and assumptions, including quantities of oil and gas that are ultimately recovered, the timing of the recovery of oil and gas reserves, the production and operating costs to be incurred, the amount and timing of future development and abandonment expenditures, and the price received for the production.

The principal considerations for our determination that performing procedures relating to the impact of proved oil and gas reserves on oil and gas properties, net is a critical audit matter are the significant judgment by management, including the use of management’s specialists, when developing the estimates of proved oil and gas reserves, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating evidence related to the data, methods, and assumptions used by management and its specialists in developing the estimates of quantities of proved oil and gas that are ultimately recovered.

Estimates of economically recoverable natural gas reserves and of future net cash flows depend upon a number of variable factors and assumptions, including quantities of natural gas that are ultimately recovered, the timing of the recovery of natural gas reserves, the production and operating costs to be incurred, the amount and timing of future development and abandonment expenditures, and the price received for the production.

The principal considerations for our determination that performing procedures relating to the impact of proved natural gas reserves on natural gas properties, net is a critical audit matter are the significant judgment by management, including the use of management’s specialists, when developing the estimates of proved natural gas reserves, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating evidence related to the data, methods, and assumptions used by management and its specialists in developing the estimates of quantities of proved natural gas that are ultimately recovered.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s estimates of proved oil and gas reserves that are utilized in the ceiling test and DD&A expense calculations.

These procedures also included, among others, evaluating the reasonableness of the significant assumptions used by management related to the quantities of oil and gas that are ultimately recovered.

These procedures included testing the effectiveness of controls relating to management’s estimates of proved natural gas reserves that are utilized in the DD&A expense and ceiling test calculations.

These procedures also included, among others, evaluating the reasonableness of the significant assumptions used by management related to the quantities of natural gas that are ultimately recovered.

Evaluating the reasonableness of the significant assumptions included evaluating information on additional development activity, production history, if the assumptions used were reasonable considering the past performance of the Company, and whether they were consistent with evidence obtained in other areas of the audit.

The work of management’s specialists was used in performing the procedures to evaluate the reasonableness of the estimates of proved oil and gas reserves.

The work of management’s specialists was used in performing the procedures to evaluate the reasonableness of the estimates of proved natural gas reserves.

As a basis for using this work, the specialists’ qualifications and objectivity were understood and the Company’s relationship with the specialists assessed.

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1,384,266 1,153,801 1,516,433

Gain on Sale of Timber Properties 51,066 — —

Gain on Sale of Assets 12,736 51,066 —

Operating Income 814,516 639,924 29,858

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Cumulative Effect of Adoption of Authoritative Guidance for

Financial Assets and Liabilities

Cumulative Effect of Adoption of Authoritative Guidance for

Reclassification of Stranded Tax Effects

Balance at End of Year $ 1,587,085 $ 1,191,175 $ 991,630

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Cumulative Effect of Adoption of Authoritative Guidance for Hedging

Reclassification Adjustment for the Cumulative Effect of Adoption of Authoritative Guidance for Financial Assets and Liabilities to Earnings Reinvested in the Business

— — ( 11,738 )

Other Post-Retirement Adjustment for Regulatory Proceeding ( 7,351 ) — —

Other Comprehensive Income (Loss), Before Tax ( 154,986 ) ( 547,569 ) ( 85,973 )

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Income Tax Benefit (Expense) on Cumulative Effect of Adoption of Authoritative Guidance for Hedging

Reclassification Adjustment for Income Tax Benefit (Expense) on the Cumulative Effect of Adoption of Authoritative Guidance for Financial Assets and Liabilities to Earnings Reinvested in the Business

— — ( 4,301 )

Reclassification Adjustment for Stranded Tax Effects Related to the 2017 Tax Reform Act to Earnings Reinvested in the Business

Income Tax Expense (Benefit) Related to Other Post-Retirement Adjustment for Regulatory Proceeding ( 1,544 ) — —

Income Taxes — Net ( 42,850 ) ( 148,729 ) ( 23,371 )

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6,566,477 6,384,283

Assets Held for Sale, Net — 53,424

Current Assets

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Goodwill 5,476 5,476

Prepaid Post-Retirement Benefit Costs 149,151 76,035

Prepaid Pension and Post-Retirement Benefit Costs 196,597 149,151

Fair Value of Derivative Financial Instruments 9,175 —

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Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities:

Gain on Sale of Timber Properties ( 51,066 ) — —

Gain on Sale of Assets ( 12,736 ) ( 51,066 ) —

Impairment of Oil and Gas Producing Properties — 76,152 449,438

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Stock-Based Compensation 19,506 17,065 14,931

Reduction of Other Post-Retirement Regulatory Liability ( 18,533 ) — —

Other 31,983 10,896 6,527

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Capital Expenditures ( 811,826 ) ( 751,734 ) ( 716,153 )

Net Proceeds from Sale of Oil and Gas Producing Properties 254,439 — —

Net Proceeds from Sale of Timber Properties — 104,582 —

Sale of Fixed Income Mutual Fund Shares in Grantor Trust 30,000 — —

Acquisition of Upstream Assets and Midstream Gathering Assets — — ( 506,258 )

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Cash Paid (Refunded) For:

$ 135,136 $ 103,479 $ 102,920

$ 6,374 $ ( 82,876 ) $ ( 17,342 )

Interest $ 124,312 $ 135,136 $ 103,479

Income Taxes $ 16,680 $ 6,374 $ ( 82,876 )

Non-Cash Investing Activities:

Non-Cash Capital Expenditures $ 120,262 $ 102,700 $ 87,328

$ 102,700 $ 87,328 $ 81,121

Non-Cash Contingent Consideration for Asset Sale $ 12,571 $ — $ —

See Notes to Consolidated Financial Statements

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The allowance for uncollectible accounts is the Company’s best estimate of the amount of probable credit losses in the existing accounts receivable.

The allowance is determined based on historical experience, the age of customer accounts, other specific information about customer accounts, and the economic environment.

Account balances are charged off against the allowance twelve months after the account is final billed or when it is anticipated that the receivable will not be recovered.

As a result of the COVID-19 pandemic and the expected increase in customer non-payment, the Company has increased the bad debt reserve to account for the modestly higher receivable balances in the Utility segment.

The allowance, the majority of which is in the Utility segment, is determined based on historical experience, the age of customer accounts, other specific information about customer accounts, and the economic and regulatory environment.

Account balances are charged off against the allowance approximately twelve months after the account is final billed or when it is anticipated that the receivable will not be recovered.

Activity in the allowance for uncollectible accounts are as follows:

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Reference is made to Note F — Regulatory Matters for further discussion.

The impact of weather on revenues in the Utility segment’s New York rate jurisdiction is tempered by a WNC, which covers the eight-month period from October through May.

The WNC is designed to adjust the

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The impact of weather on revenues in the Utility segment’s New York rate jurisdiction is tempered by a WNC, which covers the eight-month period from October through May.

The WNC is designed to adjust the rates of retail customers to reflect the impact of deviations from normal weather.

rates of retail customers to reflect the impact of deviations from normal weather.

Weather that is warmer than normal results in a surcharge being added to customers’ current bills, while weather that is colder than normal results in a refund being credited to customers’ current bills.

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The Company does not recognize any gain or loss on the sale or other disposition of oil and gas properties unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves of oil and gas attributable to a cost center.

The Company's capitalized costs relating to oil and gas producing activities,

The Company's capitalized costs relating to oil and gas producing activities, net of accumulated depreciation, depletion and amortization, were $ 1.9 billion at September 30, 2022 and 2021.

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

net of accumulated depreciation, depletion and amortization, were $ 1.9 billion and $ 1.8 billion at September 30, 2021 and 2020, respectively.

For further discussion of capitalized costs, refer to Note N — Supplementary Information for Oil and Gas Producing Activities.

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If capitalized costs, net of accumulated depreciation, depletion and amortization and related deferred income taxes, exceed the ceiling at the end of any quarter, a permanent non-cash impairment is required to be charged to earnings in that quarter.

For the first quarter ended December 31, 2020, a pre-tax impairment charge of $ 76.2 million was recognized.

A deferred income tax benefit of $ 21.0 million related to the non-cash impairment charge was also recognized during the quarter ended December 31, 2020.

No additional ceiling test impairment charges were recorded during the year ended September 30, 2021.

As of September 30, 2021, the ceiling exceeded the book value of the oil and gas properties by approximately $ 842.1 million.

In adjusting estimated future net cash flows for hedging under the ceiling test at September 30, 2021, 2020 and 2019, estimated future net cash flows were decreased by $ 76.1 million, increased by $ 180.0 million and decreased by $ 17.7 million, respectively.

At September 30, 2022, the ceiling exceeded the book value of the oil and gas properties by approximately $ 3.2 billion.

In adjusting estimated future net cash flows for hedging under the ceiling test at September 30, 2022, 2021 and 2020, estimated future net cash flows were decreased by $ 1.0 billion, decreased by $ 76.1 million and increased by $ 180.0 million, respectively.

The principal assets of the Utility, Pipeline and Storage and Gathering segments, consisting primarily of gas distribution pipelines, transmission pipelines, storage facilities, gathering lines and compressor stations, are recorded at historical cost.

Despite the economic conditions arising from the COVID-19 pandemic, there were no indications of any impairments to property, plant and equipment in the Utility, Pipeline and Storage and Gathering segments at September 30, 2021.

Management will continue to monitor the situation on a quarterly basis.

There were no indications of any impairments to property, plant and equipment in the Utility, Pipeline and Storage and Gathering segments at September 30, 2022.

Maintenance and repairs of property and replacements of minor items of property are charged directly to maintenance expense.

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The following is a summary of depreciable plant by segment:

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

As of September 30

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$ 12,233,508 $ 12,547,784

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Average depreciation, depletion and amortization rates are as follows:

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Financial Instruments

The Company uses a variety of derivative financial instruments to manage a portion of the market risk associated with fluctuations in the price of gas and oil and to manage a portion of the risk of currency fluctuations associated with transportation costs denominated in Canadian currency.

These instruments include natural gas price swap agreements and no cost collars, crude oil price swap agreements, and foreign currency forward contracts.

The Company uses a variety of derivative financial instruments to manage a portion of the market risk associated with fluctuations in the price of natural gas and to manage a portion of the risk of currency fluctuations associated with transportation costs denominated in Canadian currency.

These instruments include natural gas price swap agreements and no cost collars and foreign currency forward contracts.

The Company accounts for these instruments as cash flow hedges for which the fair value of the instrument is recognized on the Consolidated Balance Sheets as either an asset or a liability labeled Fair Value of Derivative Financial Instruments.

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For cash flow hedges, the offset to the asset or liability that is recorded is a gain or loss recorded in accumulated other comprehensive income (loss) on the Consolidated Balance Sheets.

The gain or loss recorded in accumulated other comprehensive income (loss) remains there until the hedged transaction occurs, at which point the gains or losses are reclassified to operating revenues or purchased gas expense on the Consolidated Statements of Income.

Reference is made to Note J — Financial Instruments for further discussion concerning cash flow hedges.

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Amounts Reclassified From Other Comprehensive Income (Loss) 641,022 8,480 649,502

Other Post-Retirement Adjustment for Regulatory Proceeding — ( 5,807 ) ( 5,807 )

Balance at September 30, 2022

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Amounts Reclassified From Other Comprehensive Income (Loss) 61,246 12,467 73,713

Cumulative Effect of Adoption of Authoritative Guidance for Hedging 950 — 950

Balance at September 30, 2021

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The total amount for accumulated losses was $ 53.2 million and $ 62.9 million at September 30, 2022 and 2021, respectively.

In August 2017, the FASB issued authoritative guidance which changes the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities and to simplify the application of hedge accounting.

The Company adopted this authoritative guidance effective October 1, 2019, recognizing a cumulative effect adjustment that decreased retained earnings by $ 1.0 million and increased accumulated other comprehensive income by the same amount.

During the quarter ended March 31, 2022, the PaPUC concluded a regulatory proceeding that addressed the recovery of OPEB expenses in Distribution Corporation's Pennsylvania service territory.

As a result of that proceeding, Distribution Corporation discontinued regulatory accounting for OPEB expenses in Pennsylvania and a regulatory deferral of $ 7.4 million ($ 5.8 million after tax) related to the funded status of Distribution Corporation’s other post-retirement benefit plans in Pennsylvania was reclassified to accumulated other comprehensive loss.

For further discussion of this regulatory proceeding, refer to Note F — Regulatory Matters under the heading “Pennsylvania Jurisdiction.”

NATIONAL FUEL GAS COMPANY

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($ 882,594 ) ($ 83,973 ) Operating Revenues

Commodity Contracts

— 661 Purchased Gas

Foreign Currency Contracts

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The Company’s restricted cash is composed entirely of amounts reported as Hedging Collateral Deposits on the Consolidated Balance Sheets.

Hedging Collateral Deposits is an account title for cash held in margin accounts funded by the Company to serve as collateral for hedging positions.

Hedging Collateral Deposits is an account title for cash held in margin accounts funded by the Company to serve as collateral for derivative financial instruments in an unrealized loss position.

In accordance with its accounting policy, the Company does not offset hedging collateral deposits paid or received against related derivative financial instruments liability or asset balances.

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Regulatory Liabilities 31,293 60,860

Federal Income Taxes Payable 154 163

Liability for Royalty and Working Interests 86,206 31,483

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The Company follows authoritative guidance which requires the measurement and recognition of compensation cost at fair value for all share-based payments.

SARs and stock options under all plans have exercise prices equal to the average market price of

SARs under all plans have exercise prices equal to the average market price of Company common stock on the date of grant, and generally no SAR is exercisable less than one year or more than ten years after

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Company common stock on the date of grant, and generally no SAR or stock option is exercisable less than one year or more than ten years after the date of each grant.

The Company has chosen the Black-Scholes-Merton closed form model to calculate the compensation expense associated with SARs and stock options.

the date of each grant.

The Company has chosen the Black-Scholes-Merton closed form model to calculate the compensation expense associated with SARs.

For all Company stock awards, forfeitures are recognized as they occur.

Restricted stock is subject to restrictions on vesting and transferability.

Restricted stock awards entitle the participants to full dividend and voting rights.

The market value of restricted stock on the date of the award is recorded as compensation expense over the vesting period.

Certificates for shares of restricted stock awarded under the Company’s stock award plans are held by the Company during the periods in which the restrictions on vesting are effective.

Restrictions on restricted stock awards generally lapse ratably over a period of not more than ten years after the date of each grant.

Restricted stock units also are subject to restrictions on vesting and transferability.

Restricted stock units are subject to restrictions on vesting and transferability.

Restricted stock units represent the right to receive shares of common stock of the Company (or the equivalent value in cash or a combination of cash and shares of common stock of the Company, as determined by the Company) at the end of a specified time period.

The restricted stock units do not entitle the participants to dividend and voting rights.

The accounting for restricted stock units is the same as the accounting for restricted stock awards, except that the fair value at the date of grant of the restricted stock units (represented by the market value of Company common stock on the date of the award) must be reduced by the present value of forgone dividends over the vesting term of the award.

The fair value at the date of grant of the restricted stock units (represented by the market value of Company common stock on the date of the award) must be reduced by the present value of forgone dividends over the vesting term of the award.

The fair value of restricted stock units on the date of award is recorded as compensation expense over the vesting period.

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The performance shares do not entitle the participant to receive dividends during the vesting period.

For performance shares based on a return on capital goal, the fair value at the date of grant of the performance shares is determined by multiplying the expected number of performance shares to be issued by the market value of Company common stock on the date of grant reduced by the present value of forgone dividends.

For performance shares based on a return on capital goal and greenhouse gas emissions reductions, the fair value at the date of grant of the performance shares is determined by multiplying the expected number of performance shares to be issued by the market value of Company common stock on the date of grant reduced by the present value of forgone dividends.

For performance shares based on a total shareholder return goal, the Company uses the Monte Carlo simulation technique to estimate the fair value price at the date of grant.

Refer to Note H — Capitalization and Short-Term Borrowings under the heading “Stock Award Plans” for additional disclosures related to stock-based compensation awards for all plans.

New Authoritative Accounting and Financial Reporting Guidance

On October 1, 2020, the Company adopted authoritative guidance regarding the measurement of credit losses on financial assets measured at amortized cost.

The new guidance requires financial assets measured at amortized cost to be presented at the net amount expected to be collected, which means that companies are required to recognize an allowance for credit losses for the difference between the amortized cost basis of the financial asset and the amount expected to be collected over the contractual life of the asset.

Prior to adoption, the Company analyzed its financial assets measured at amortized cost, primarily trade receivables.

The adoption of this guidance did not have a material impact to the Company’s financial statements.

Note B — Asset Acquisitions and Divestitures

On June 30, 2022, the Company completed the sale of Seneca’s California assets, all of which are in the Exploration and Production segment, to Sentinel Peak Resources California LLC for a total sale price of $ 253.5 million, consisting of $ 240.9 million in cash and contingent consideration valued at $ 12.6 million at closing.

The Company pursued this sale given the strong commodity price environment and the Company’s strategic focus in the Appalachian Basin.

Under the terms of the purchase and sale agreement, the Company can receive up to three annual contingent payments between calendar year 2023 and calendar year 2025, not to exceed $ 10 million per year, with the amount of each annual payment calculated as $ 1.0 million for each $ 1 per barrel that the ICE Brent Average for each calendar year exceeds $ 95 per barrel up to $ 105 per barrel.

The sale price, which reflected an effective date of April 1, 2022, was reduced for production revenues less expenses that were retained by Seneca from the effective date to the closing date.

Under the full cost method of accounting for oil and natural gas properties, $ 220.7 million of the sale price at closing was accounted for as reduction of capitalized costs since the disposition did not alter the relationship between capitalized costs and proved reserves of oil and gas attributable to the cost center.

The remainder of the sale price ($ 32.8 million) was applied against assets that are not subject to the full cost method of accounting, with the Company recognizing a gain of $ 12.7 million on the sale of such assets.

The majority of this gain related to the sale of emission allowances.

The Company also eliminated the asset retirement obligation associated with Seneca’s California oil and gas assets.

This obligation amounted to $ 50.1 million and was accounted for as a reduction of capitalized costs under the full cost method of accounting.

On July 31, 2020, the Company completed its acquisition of certain upstream assets and midstream gathering assets in Pennsylvania from SWEPI LP, a subsidiary of Royal Dutch Shell plc (“Shell”) for total consideration of $ 506.3 million.

The purchase price, which reflected an effective date of January 1, 2020, was reduced for production revenues less expenses that were retained by Shell from the effective date to the closing date.

As part of the transaction, the Company acquired over 400,000 net acres in Appalachia, including approximately 200,000 net acres in Tioga County, Pennsylvania.

The proved developed and undeveloped

The purchase price, which reflected an effective date of January 1, 2020, was reduced for production revenues less expenses that were retained by Shell from the effective date to the closing

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

natural gas reserves associated with this acquisition amounted to 684,141 MMcf.

As part of the transaction, the Company acquired over 400,000 net acres in Appalachia, including approximately 200,000 net acres in Tioga County, Pennsylvania.

The proved developed and undeveloped natural gas reserves associated with this acquisition amounted to 684,141 MMcf.

In addition, the Company acquired gathering pipelines and related compression, water pipelines, and associated water handling infrastructure, all of which support the acquired Tioga County production operations.

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The purchase and sale agreement with Shell was structured, in part, as a reverse like-kind exchange pursuant to Section 1031 of the Internal Revenue Code, as amended (“Reverse 1031 Exchange”).

On December 10, 2020, the Company completed the sale of substantially all timber and other assets in Pennsylvania to Lyme Emporium Highlands III LLC and Lyme Allegheny Land Company II LLC for net proceeds of $ 104.6 million.

At September 30, 2020, these assets, amounting to $ 53.4 million, which previously were recorded as Net Property, Plant and Equipment, were presented as Assets Held for Sale, Net on the Consolidated Balance Sheet.

On December 10, 2020, the Company completed the sale of substantially all timber properties in Pennsylvania to Lyme Emporium Highlands III LLC and Lyme Allegheny Land Company II LLC for net proceeds of $ 104.6 million.

These assets were a component of the Company’s All Other category and did not have a major impact on the Company’s operations or financial results.

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— — — 4,902 4,902 — — 4,902

Natural Gas Marketing — — — — — 678 ( 49 ) 629

Other 7,867 2,512 — ( 3,918 ) 6,461 6 ( 644 ) 5,823

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Total Revenues $ 836,697 $ 343,557 $ 193,264 $ 667,251 $ 2,040,769 $ 1,222 $ ( 299,332 ) $ 1,742,659

The Company records revenue related to its derivative financial instruments in the Exploration and Production segment and previously recorded revenue related to its derivative financial instruments in its NFR operations (included in the All Other category) until NFR completed the sale of its commercial and industrial contracts and certain other assets on August 1, 2020.

The Company records revenue related to its derivative financial instruments in the Exploration and Production segment.

The Company also records revenue related to alternative revenue programs in its Utility segment.

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The Company’s Exploration and Production segment records revenue from the sale of the natural gas and oil that it produces and natural gas liquids (NGLs) processed based on entitlement, which means that revenue is recorded based on the actual amount of natural gas or oil that is delivered to a pipeline, or upon pick-up in the case of NGLs, and the Company’s ownership interest.

Natural gas production occurs primarily in the Appalachian region of the United States and crude oil production occurs primarily in the West Coast region of the United States.

Prior to the completion of the sale of the Company’s California assets on June 30, 2022, natural gas production occurred primarily in the Appalachian region of the United States and crude oil production occurred primarily in the West Coast region of the United States.

Subsequent to June 30, 2022, substantially all Exploration and Production segment production consists of natural gas production from the Appalachian region of the United States.

If a production imbalance occurs between what was supposed to be delivered to a pipeline and what was actually produced and delivered, the Company accrues the difference as an imbalance.

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The contracts typically require payment within 30 days of the end of the calendar month in which the natural gas and oil is delivered, or picked up in the case of NGLs.

The Company uses derivative financial instruments to manage commodity price risk in the Exploration and Production segment related to sales of the natural gas and oil that it produces.

The Company uses derivative financial instruments to manage commodity price risk in the Exploration and Production segment related to sales of the natural gas that it produces.

Gains or losses on such derivative financial instruments are recorded as adjustments to revenue;

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The Company’s Gathering segment provides gathering and processing services in the Appalachian region of Pennsylvania, primarily for Seneca.

The Gathering segment’s primary performance obligation is to deliver gathered natural gas volumes from Seneca’s wells into interstate pipelines at contractually agreed upon per unit rates.

The Gathering segment’s primary performance obligation is to deliver gathered natural gas volumes from Seneca’s wells, and to a lesser extent, other producers' wells, into interstate pipelines at contractually agreed upon per unit rates.

This obligation is satisfied over time.

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Utility Segment Revenue

The Company’s Utility segment records revenue for natural gas sales and natural gas transportation services in western New York and northwestern Pennsylvania at tariff-based rates regulated by the NYPSC and the PaPUC.

Natural gas sales and transportation services are provided largely to residential, commercial and industrial customers.

The Utility segment’s performance obligation to its customers is to deliver natural gas, an obligation which is satisfied over time.

This obligation generally remains in effect as long as the customer

This obligation generally remains in effect as long as the customer consumes the natural gas provided by the Utility segment.

The Utility segment recognizes

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

consumes the natural gas provided by the Utility segment.

The Utility segment recognizes revenue when it satisfies its performance obligation by delivering natural gas to the customer.

revenue when it satisfies its performance obligation by delivering natural gas to the customer.

Natural gas is delivered and consumed by the customer simultaneously.

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Utility Segment Alternative Revenue Programs

As indicated in the revenue table shown above, the Company’s Utility segment has alternative revenue programs that are excluded from the scope of the new authoritative guidance regarding revenue recognition.

As indicated in the revenue table shown above, the Company’s Utility segment has alternative revenue programs that are excluded from the scope of the authoritative guidance regarding revenue recognition.

The NYPSC has authorized alternative revenue programs that are designed to mitigate the impact that weather and conservation have on margin.

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In general, revenue is adjusted monthly for these programs and is collected from or passed back to customers within 24 months of the annual reconciliation period.

Energy Marketing Revenue

The Company’s energy marketing subsidiary, NFR (included in the All Other category), completed the sale of its commercial and industrial contracts and certain other assets on August 1, 2020.

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

The sale did not have a material impact to the Company’s financial statements.

NFR recorded revenue from natural gas sales to industrial, wholesale, commercial, public authority and residential customers in western and central New York and northwestern Pennsylvania.

Note D — Leases

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For contracts that commenced prior to and existed as of October 1, 2019, a package of practical expedients to not reassess whether a contract is or contains a lease, lease classification, and initial direct costs under the new authoritative guidance;

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

An election not to apply the recognition requirements in the new authoritative guidance to short-term leases (a lease that at commencement date has a lease term of one year or less);

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Upon adoption, the Company increased assets and liabilities on its Consolidated Balance Sheet by $ 19.7 million.

The adoption did not result in a cumulative effect adjustment to earnings reinvested in the business or have a material impact on the Company’s Consolidated Statement of Income or Consolidated Statement of Cash Flows.

The adoption did not result in a cumulative effect adjustment to earnings reinvested in the business or have a material impact on the Company’s Consolidated Statement of Income or Consolidated

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Statement of Cash Flows.

Comparative periods, including disclosures relating to those periods, were not restated.

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The Company did not have any material finance leases as of September 30, 2022 or September 30, 2021.

Aside from a sublease of office space at the Company’s corporate headquarters, the Company does not have any material arrangements where the Company is the lessor.

Aside from a sublease of office space at the Company’s corporate headquarters, which terminated April 30th, 2022, the Company does not have any material arrangements where the Company is the lessor.

Buildings and Property

1 unchanged sentence

Building and property leases include the Company’s corporate headquarters in Williamsville, New York, and Exploration and Production segment offices in Houston, Texas, and Pittsburgh, Pennsylvania.

The primary non-cancelable terms of the Company’s building and property leases range from three months to ten years .

The primary non-cancelable terms of the Company’s building and property leases range from two months to seventeen years .

Most building leases include one or more options to renew, generally at the Company’s sole discretion, with renewal terms that can extend the lease terms from one year to eighteen years .

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Drilling Rigs

The Company enters into contracts for drilling rig services with third party contractors to support Seneca’s development activities in Pennsylvania and California.

Seneca’s drilling rig arrangements are structured with a non-cancelable primary term of one year or less.

Upon mutual agreement with the contractor, Seneca has the option to extend the contract with amended terms and conditions, including a renegotiated day rate fee.

The Company has strategically entered into shorter-term drilling rig arrangements to allow for operational and financial flexibility to respond to changes in its operating and economic environment.

The Company uses discretion in choosing to extend or not extend drilling rig contracts on a rig by rig basis depending on market and operating conditions present at the time the contract expires, including prices for natural gas and oil and other performance indicators.

Due to these considerations, the Company concluded that it is not reasonably certain that it will elect to extend any of its drilling rig arrangements beyond their primary non-cancelable terms of one year or less.

Consequently, the Company’s drilling rig leases are deemed to be short-term leases subject to the exemption for balance sheet recognition.

These costs are capitalized as part of oil and natural gas properties on the Consolidated Balance Sheet when incurred.

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Company enters into contracts for drilling rig services with third party contractors to support Seneca’s development activities in Pennsylvania.

Seneca’s drilling rig arrangements are structured with a non-cancelable primary term that exceeds one year .

Upon mutual agreement with the contractor, Seneca has the option to extend contracts with amended terms and conditions, including a renegotiated day rate fee.

Drilling rig lease costs are capitalized as part of natural gas properties on the Consolidated Balance Sheet when incurred.

Compressor Equipment

The Company enters into contracts for compressor services with third parties primarily to support its gathering system in Pennsylvania.

The primary non-cancelable terms of the Company's compressor equipment leases range from 21 months to 4 years.

Most compressor equipment leases include one or more options to renew or to continue past the primary term on a month-to-month basis, generally at the Company's sole discretion.

Renewal options are included in the lease term if they are reasonably certain to be exercised.

Significant Judgments

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The Company uses a discount rate to calculate the present value of lease payments in order to determine lease classification and measurement of the lease asset and liability.

In the absence of a rate of interest that is readily determinable in the contract, the Company estimates the incremental borrowing rate (IBR) for each lease.

In the absence of a rate of interest that is

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

readily determinable in the contract, the Company estimates the incremental borrowing rate (IBR) for each lease.

The IBR reflects the rate of interest that the Company would pay on the lease commencement date to borrow an amount equal to the lease payments on a collateralized basis over a similar term in similar economic environments.

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As such, the Company has concluded that these arrangements are not leases under the authoritative guidance.

Oil and Gas Leases

The authoritative guidance does not apply to leases to explore for or use minerals, oil or natural gas resources, including the right to explore for those natural resources and rights to use the land in which those natural resources are contained.

As such, the Company has concluded that its oil and gas exploration and production leases and gas storage leases are not leases under the authoritative guidance.

The authoritative guidance does not apply to leases to explore for or use natural gas resources, including the right to explore for those resources and rights to use the land in which those resources are contained.

As such, the Company has concluded that its gas exploration and production leases and gas storage leases are not leases under the authoritative guidance.

Amounts Recognized in the Financial Statements

Operating lease costs, excluding those relating to short-term drilling rig leases that are capitalized as part of oil and natural gas properties under full cost pool accounting, are presented in Operations and Maintenance expense on the Consolidated Statement of Income.

Operating lease costs, excluding those relating to drilling rig leases that are capitalized as part of oil and natural gas properties under full cost pool accounting, are presented in Operations and Maintenance expense on the Consolidated Statement of Income.

The following table summarizes the components of the Company’s total operating lease costs (in thousands):

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Total Lease Expense $ 5,666 $ 6,728

Short-Term Lease Costs Recorded to Property, Plant and Equipment(3) $ 14,188 $ 19,232

Lease Costs Recorded to Property, Plant and Equipment(3) $ 19,839 $ 14,188

(1) Variable lease payments that are not dependent on an index or rate are not included in the lease liability.

(2) Short-term lease costs exclude expenses related to leases with a lease term of one month or less.

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(3) Short-term lease costs relating to drilling rig leases that are capitalized as part of oil and natural gas properties under full cost pool accounting.

(3) Lease costs relating to drilling rig leases that are capitalized as part of oil and natural gas properties under full cost pool accounting as well as certain equipment leases used on construction projects.

Right-of-use assets and lease liabilities are recognized at the commencement date of a leasing arrangement based on the present value of lease payments over the lease term.

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Short-term leases that have a lease term of one year or less are not recorded on the Consolidated Balance Sheet.

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following amounts related to operating leases were recorded on the Company’s Consolidated Balance Sheet (in thousands):

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At September 30, 2022

2023 $ 14,420

Thereafter 11,656

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The Company accounts for asset retirement obligations in accordance with the authoritative guidance that requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred.

An asset retirement obligation is defined as a legal obligation associated with the retirement of a tangible long-lived asset in which the timing and/or method of settlement may or may not be conditional on a

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

future event that may or may not be within the control of the Company.

When the liability is initially recorded, the entity capitalizes the estimated cost of retiring the asset as part of the carrying amount of the related long-lived asset.

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Asset retirement obligations incurred in the current period were Level 3 fair value measurements as the inputs used to measure the fair value are unobservable.

The Company has recorded an asset retirement obligation representing plugging and abandonment costs associated with the Exploration and Production segment’s crude oil and natural gas wells and has capitalized such costs in property, plant and equipment (i.e.

The Company has recorded an asset retirement obligation representing plugging and abandonment costs associated with the Exploration and Production segment’s natural gas wells and has capitalized such costs in

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

property, plant and equipment (i.e.

the full cost pool).

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In addition to the asset retirement obligation recorded in the Exploration and Production segment, the Company has recorded future asset retirement obligations associated with the plugging and abandonment of natural gas storage wells in the Pipeline and Storage segment and the removal of asbestos and asbestos-containing material in various facilities in the Utility and Pipeline and Storage segments.

Asset retirement obligation costs related to storage tanks have been recorded in the Utility, Pipeline and Storage, and Gathering segments.

The Company has also recorded asset retirement obligations for certain costs connected with the retirement of the distribution mains, services and other components of the pipeline system in the Utility segment, the transmission mains and other components in the pipeline system in the Pipeline and Storage segment, and the gathering lines and other components in the Gathering segment.

The retirement costs within the distribution, transmission and gathering systems are primarily for the capping and purging of pipe, which are generally abandoned in place when retired, as well as for the clean-up of PCB contamination associated with the removal of certain pipe.

As discussed in Note B — Asset Acquisitions and Divestitures, on June 30, 2022, the Company completed the sale of Seneca’s California oil and gas assets to Sentinel Peak Resources California LLC.

With the divestiture of these assets, the Company reduced its Asset Retirement Obligation at June 30, 2022 by $ 50.1 million.

This reduction is reflected in Liabilities Settled in the table below.

As discussed in Note B — Asset Acquisitions and Divestitures, on July 31, 2020, the Company completed its acquisition of certain upstream assets and midstream gathering assets in Pennsylvania from Shell.

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Post-Retirement Benefit Costs(5) (Note K) 167,305 213,112

Pension Costs(4) (Note K) 8,242 —

Amounts Payable to Customers (See Regulatory Mechanisms in Note A) 419 21

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$ 26,447 and $ 4,360 are included in Other Regulatory Assets on the Consolidated Balance Sheets at September 30, 2022 and 2021, respectively.

(4) $ 30,000 is included in Other Accruals and Current Liabilities on the Consolidated Balance Sheet at September 30, 2021, since that amount is expected to be passed back to ratepayers in the next 12 months.

$ 183,112 is included in Other Regulatory Liabilities on the Consolidated Balance Sheet at September 30, 2021.

(4) Included in Other Regulatory Liabilities on the Consolidated Balance Sheets.

NATIONAL FUEL GAS COMPANY

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$ 161,505 and $ 183,112 are included in Other Regulatory Liabilities on the Consolidated Balance Sheets at September 30, 2022 and 2021, respectively.

(6) $ 25,493 and $ 30,860 are included in Other Accruals and Current Liabilities on the Consolidated Balance Sheets at September 30, 2022 and 2021, respectively, since such amounts are expected to be passed back to ratepayers in the next 12 months.

$ 19,056 and $ 17,531 are included in Other Regulatory Liabilities on the Consolidated Balance Sheets at September 30, 2022 and 2021, respectively.

If for any reason the Company ceases to meet the criteria for application of regulatory accounting treatment for all or part of its operations, the regulatory assets and liabilities related to those portions ceasing to meet such criteria would be eliminated from the Consolidated Balance Sheets and included in income of the period in which the discontinuance of regulatory accounting treatment occurs.

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Distribution Corporation's current delivery rates in its New York jurisdiction were approved by the NYPSC in an order issued on April 20, 2017 with rates becoming effective May 1, 2017.

The order provided for a return on equity of 8.7 %.

The order also directed the implementation of an earnings sharing mechanism to be in place beginning on April 1, 2018.

The order provided for a return on equity of 8.7 %, and directed the implementation of an earnings sharing mechanism to be in place beginning on April 1, 2018.

The order also authorized the Company to recover approximately $ 15 million annually for pension and OPEB expenses from customers.

Because the Company’s future pension and OPEB costs were projected to be satisfied with existing funds held in reserve, in July, Distribution Corporation made a filing with the NYPSC to effectuate a pension and OPEB surcredit to customers to offset these amounts being collected in base rates effective October 1, 2022.

On September 16, 2022, the NYPSC issued an order approving the filing.

With the implementation of this surcredit, Distribution Corporation will no longer be funding the pension from its New York jurisdiction and it will not be funding its VEBA trusts in its New York jurisdiction.

Pennsylvania Jurisdiction

Distribution Corporation’s current delivery rates in its Pennsylvania jurisdiction were approved by the PaPUC on November 30, 2006 as part of a settlement agreement that became effective January 1, 2007.

The rate settlement does not specify any requirement to file a future rate case.

On July 22, 2021, Distribution Corporation filed a supplement to its current Pennsylvania tariff proposing to reduce base rates effective October 1, 2021 by $ 7.7 million in order to stop collecting other post-employment benefit (“OPEB”) expenses from customers at this time, to begin to refund to customers overcollected OPEB expenses in the amount of $ 50.0 million, and to make certain other adjustments to further reduce Distribution Corporation’s regulatory liability associated with OPEB expenses.

The PaPUC issued an order approving this tariff supplement on September 15, 2021 and new rates went into effect on October 1, 2021.

On September 21, 2021, a complaint was filed in this proceeding.

While new rates, including associated refunds, went into effect on October 1, 2021, certain other adjustments called for by the tariff supplement that allow Distribution Corporation to reduce its regulatory liability and its OPEB expenses will not be recorded in the Company’s consolidated financial statements until the complaint is resolved.

The PaPUC has assigned the matter to the Office of Administrative Law Judge.

The refunds specified in the tariff supplement will be funded entirely by grantor trust assets held by the Company, most of which are included in a fixed income mutual fund that is a component of Other Investments on the Company’s Consolidated Balance Sheet.

With the elimination of OPEB expenses in base rates, Distribution Corporation will no longer fund the grantor trust or its VEBA trusts in its Pennsylvania jurisdiction.

FERC Jurisdiction

Supply Corporation’s rate settlement, approved June 1, 2020, provides that no party may make a rate filing for new rates to be effective before February 1, 2024, except that Supply Corporation may file an NGA general Section 4 rate case to change rates if the corporate federal income tax rate is increased.

If no case has been filed, Supply Corporation must file for rates to be effective February 1, 2025.

Supply Corporation has no rate case currently on file.

On October 28, 2022, Distribution Corporation made a filing with the PaPUC seeking an increase in its annual base rate operating revenues of $ 28.1 million with a proposed effective date of December 27, 2022.

The Company is also proposing, among other things, to implement a weather normalization adjustment mechanism and a new energy efficiency and conservation pilot program for residential customers.

The filing will be suspended for seven months by operation of law unless directed otherwise by the PaPUC.

Effective October 1, 2021, pursuant to a tariff supplement filed with the PaPUC, Distribution Corporation reduced base rates by $ 7.7 million in order to stop collecting OPEB expenses from customers.

It also began to refund customers overcollected OPEB expenses in the amount of $ 50.0 million.

Certain other matters in the tariff supplement were unresolved.

These matters were resolved with the PaPUC’s approval of an Administrative Law Judge’s Recommended Decision on February 24, 2022.

Concurrent with that decision, the Company discontinued regulatory accounting for OPEB expenses and recorded an $ 18.5 million adjustment during the quarter ended March 31, 2022 to reduce its regulatory liability for previously deferred OPEB income

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

amounts through September 30, 2021 and to increase Other Income (Deductions) on the consolidated financial statements by a like amount.

The Company also increased customer refunds of overcollected OPEB expenses from $ 50.0 million to $ 54.0 million.

All refunds specified in the tariff supplement are being funded entirely by grantor trust assets held by the Company, most of which are included in a fixed income mutual fund that is a component of Other Investments on the Company’s Consolidated Balance Sheet.

With the elimination of OPEB expenses in base rates, Distribution Corporation is no longer funding the grantor trust or its VEBA trusts in its Pennsylvania jurisdiction.

FERC Jurisdiction

Supply Corporation’s 2020 rate settlement provides that no party may make a rate filing for new rates to be effective before February 1, 2024, except that Supply Corporation may file an NGA general Section 4 rate case to change rates if the corporate federal income tax rate is increased.

If no case has been filed, Supply Corporation must file for rates to be effective February 1, 2025.

Empire’s 2019 rate settlement provides that Empire must make a rate case filing no later than May 1, 2025.

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Total Income Taxes $ 116,629 $ 114,682 $ 18,739

On December 22, 2017, federal tax legislation referred to as the “Tax Cuts and Jobs Act” (the 2017 Tax Reform Act) was enacted.

The 2017 Tax Reform Act repealed the corporate alternative minimum tax (AMT) and provides that the Company’s existing AMT credit carryovers are refundable, if not utilized to reduce tax, beginning in fiscal 2019.

As of September 30, 2018, the Company had $ 85.0 million of AMT credit carryovers.

The Company received the first installment for $ 42.5 million of AMT credit refunds related to fiscal 2019 in January 2020.

On March 27, 2020, the “Coronavirus Aid, Relief and Economic Security (CARES) Act” was signed into law.

The CARES Act, among other things, includes provisions relating to AMT credit refunds discussed above, refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, and modifications to the net interest deduction limitation.

The CARES Act, among other things, includes provisions relating to alternative minimum tax (AMT) credit refunds, refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, and modifications to the net interest deduction limitation.

The Company filed for the acceleration of the remaining AMT credit refunds (under CARES) of $ 42.5 million, which were received in June 2020.

Total income taxes as reported differ from the amounts that were computed by applying the federal income tax rate to income before income taxes.

On July 8, 2022, House Bill 1342 was signed into law in Pennsylvania.

The law reduces the corporate income tax rate to 8.99 % for fiscal 2024.

Starting with fiscal 2025, the rate is reduced by 0.5 % annually until it reaches 4.99 % for fiscal 2032.

Under GAAP, the tax effects of a change in tax law must be recognized in the period in which the law is enacted.

GAAP also requires deferred income tax assets and liabilities to be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled.

The Company's deferred income taxes were re-measured based upon the new tax rates.

For the Company's non-rate regulated activities, the change in deferred income taxes was $ 28.4 million as of the enactment date and was recorded as a reduction to income tax expense.

For the Company's rate regulated activities, the reduction in deferred income taxes of $ 37.2 million was recorded as a decrease to Recoverable Future Taxes of $ 19.8 million and an increase to Taxes Refundable to Customers of $ 17.4 million.

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

On August 16, 2022, the "Inflation Reduction Act" (IRA) was signed into law.

The IRA, among other things, includes provisions to expand energy incentives and impose a corporate minimum tax.

The provisions of the IRA did not have a material impact on the fiscal 2022 financial statements, although some of the provisions may be applicable in future years.

Total income taxes as reported differ from the amounts that were computed by applying the federal income tax rate to income (loss) before income taxes.

The following is a reconciliation of this difference:

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Federal Tax Credits ( 5,701 ) ( 310 ) ( 217 )

Impact of 2017 Tax Reform Act(5) — — ( 5,000 )

Miscellaneous 265 282 ( 85 )

Total Income Taxes $ 116,629 $ 114,682 $ 18,739

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(1) Amounts include the impact of deferred investment tax credits reported in Other Income (Deductions) on the Consolidated Statements of Income.

(2) During fiscal 2020, a valuation allowance was recorded against certain state deferred tax assets, as discussed below.

(3) The state income tax expense (benefit) shown above includes adjustments to the estimated state effective tax rates utilized in the calculation of deferred income taxes and the impact of state enhanced oil recovery tax credits.

(4) Represents amortization of net excess deferred federal income taxes under the 2017 Tax Reform Act.

(5) The $ 5.0 million benefit in fiscal 2019 represents the reversal of the estimated sequestration of AMT credit refunds.

(2) During fiscal 2020, a valuation allowance was recorded against certain state deferred tax assets.

During fiscal 2022, the valuation allowance was removed.

See discussion below.

(3) The state income tax expense (benefit) shown above includes adjustments to the estimated state effective tax rates utilized in the calculation of deferred income taxes, including the Pennsylvania rate change discussed above.

Significant components of the Company’s deferred tax liabilities and assets were as follows:

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Deferred Tax Assets:

OCI Hedging ( 170,155 ) ( 9,546 )

Unrealized Hedging Losses ( 215,187 ) ( 170,155 )

Tax Loss and Credit Carryforwards ( 50,686 ) ( 120,725 )

3 unchanged sentences

Valuation Allowance

57,645 63,205

Total Deferred Tax Assets ( 335,553 ) ( 318,593 )

Total Net Deferred Income Taxes $ 698,229 $ 660,420

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following is a summary of changes in valuation allowances for deferred tax assets:

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A valuation allowance for deferred tax assets, including net operating losses and tax credits, is recognized when it is more likely than not that some or all of the benefit from the deferred tax assets will not be realized.

The Company continually assesses the realizability of its deferred tax assets, including factors such as future taxable income, reversal of existing temporary differences, and tax planning strategies.

The Company, at each reporting date, assesses the realizability of its deferred tax assets, including factors such as future taxable income, reversal of existing temporary differences, and tax planning strategies.

The Company considers both positive and negative evidence related to the likelihood of the realization of the deferred tax assets.

During fiscal 2019, there was a $ 5.0 million benefit recorded to reverse the valuation allowance established at September 30, 2018 related to the potential sequestration of estimated alternative minimum tax credit refunds as

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

a result of the 2017 Tax Reform Act.

As of September 30, 2020, the Company recorded a valuation allowance against certain state deferred tax assets in the amount of $ 63.2 million based on its conclusion, considering all available objective evidence and the Company’s history of subsidiary state tax losses, that it was more likely than not that the deferred tax assets would not be realized.

The valuation allowance decreased to $ 57.6 million as of September 30, 2021 as a result of certain state net operating loss and tax credit activity.

Changes in judgment regarding future realization of these deferred tax assets may result in a reversal of all or a portion of the valuation allowance.

The Company will continue to re-assess this position each quarter.

Regulatory liabilities representing the reduction of previously recorded deferred income taxes associated with rate-regulated activities that are expected to be refundable to customers amounted to $ 354.1 million and $ 357.5 million at September 30, 2021 and 2020, respectively.

Also, regulatory assets representing future amounts collectible from customers, corresponding to additional deferred income taxes not previously recorded because of ratemaking practices, amounted to $ 122.0 million and $ 118.3 million at September 30, 2021 and 2020, respectively.

As of March 31, 2020, the Company recorded a valuation allowance against certain state deferred tax assets based on its conclusion, considering all available objective evidence and the Company’s history of subsidiary state tax losses, that it was more likely than not that the deferred tax assets would not be realized.

On June 30, 2022, the Company completed the sale of Seneca's California oil and gas assets to Sentinel Peak Resources California, LLC.

As a result of the sale of the California oil and gas assets, the remaining deferred tax assets and valuation allowance of approximately $ 27.2 million related to the California net operating loss and tax credit carryforwards were written off.

The deferred tax assets and valuation allowance were written off as the Company determined that there was a remote possibility for use as the Company no longer has California operations.

During the quarter ended September 30, 2022, the valuation allowance was adjusted because of the Pennsylvania corporate income tax rate change remeasurement described above and for current activity for a cumulative adjustment of $ 5.5 million.

In addition, the Company determined there was sufficient positive evidence, despite a prior history of subsidiary tax losses, to conclude that it was more likely than not that the remaining state deferred tax assets would be realized.

The conclusion was primarily related to the use of net operating losses in Pennsylvania in the current year due to sustained strong operating results as well as the expectation for future forecasted earnings in Pennsylvania due to increased natural gas prices.

The sale of California assets will also result in higher apportionment of income to Pennsylvania on a prospective basis, further supporting realization of existing Pennsylvania net operating loss deferred tax assets.

Accordingly, the Company reversed the remaining valuation allowance and recognized an income tax benefit of approximately $ 24.9 million.

Regulatory liabilities representing the reduction of previously recorded deferred inc ome taxes associated with rate-regulated activities that are expected to be refundable to customers amounted to $ 362.1 million and $ 354.1 million at September 30, 2022 and 2021, respectively.

Also, regulatory assets representing future amounts collectible from customers, corresponding to additional deferred income taxes not previously recorded because of ratemaking practices, amoun ted to $ 106.2 million and $ 122.0 million at September 30, 2022 and 2021, respectively.

The Company is in the Bridge Phase of the IRS Compliance Assurance Process (“CAP”) for fiscal 2022.

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The Company is also subject to various routine state income tax examinations.

The Company’s principal subsidiaries operate mainly in four states which have statutes of limitations that generally expire between three to four years from the date of filing of the income tax return.

Net operating losses being carried forward from prior years remain subject to examination on a future return until they are utilized, upon which time the statute of limitation begins.

The Company’s principal subsidiaries have state statutes of limitations that generally expire between three to four years from the date of filing of the income tax return.

Net operating losses being carried forward from prior years remain subject to examination on a future return until they are utilized, upon which

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

time the statute of limitation begins.

The Company has no unrecognized tax benefits as of September 30, 2022, 2021, or 2020.

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(Thousands) Expires

Federal Pre-Fiscal 2019 Net Operating Loss $ 55,832 2033-2038

Federal Post-Fiscal 2018 Net Operating Loss 83,356 Unlimited

Pennsylvania Net Operating Loss $ 378,631 2030-2042

California Net Operating Loss 201,997 2030-2039

Federal Enhanced Oil Recovery Credit 26,790 2029-2039

California Enhanced Oil Recovery Credit 7,903 2031-2039

California Alternative Minimum Tax Credit 8,737 Unlimited

Federal R&D Tax Credit 6,919 2031-2041

Federal General Business Credits 20,677 2035-2042

NATIONAL FUEL GAS COMPANY

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Comprehensive

Income (Loss)

Shares Amount

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86,315 $ 86,315 $ 832,264 $ 1,272,601 $ ( 52,155 )

Net Income Available for Common Stock

Net Loss Available for Common Stock ( 123,772 )

Dividends Declared on Common Stock ($ 1.76 Per Share) ( 156,249 )

Cumulative Effect of Adoption of Authoritative Guidance for Financial Assets and Liabilities

Cumulative Effect of Adoption of Authoritative Guidance for Reclassification of Stranded Tax Effects

Other Comprehensive Income, Net of Tax 15,595

Cumulative Effect of Adoption of Authoritative Guidance for Hedging

Other Comprehensive Loss, Net of Tax ( 62,602 )

Share-Based Payment Expense(1) 13,180

Common Stock Issued from Sale of Common Stock

4,370 4,370 161,399

Common Stock Issued (Repurchased) Under Stock and Benefit Plans

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90,955 90,955 1,004,158 991,630 ( 114,757 )

Net Loss Available for Common Stock ( 123,772 )

Net Income Available for Common Stock 363,647

Dividends Declared on Common Stock ($ 1.80 Per Share) ( 164,102 )

Cumulative Effect of Adoption of Authoritative Guidance for Hedging

Other Comprehensive Loss, Net of Tax ( 398,840 )

Share-Based Payment Expense(1)

Common Stock Issued from Sale of Common Stock

4,370 4,370 161,399

Common Stock Issued (Repurchased) Under Stock and Benefit Plans

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Common Stock Issued (Repurchased) Under Stock and Benefit Plans 296 296 ( 8,079 )

227 227 ( 2,009 )

Balance at September 30, 2022

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The expense is included within Net Income Available for Common Stock, net of tax benefits.

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(2) The availability of consolidated earnings reinvested in the business for dividends payable in cash is limited under terms of the indentures covering long-term debt.

At September 30, 2022, $ 1.4 billion of accumulated earnings was free of such limitations.

On June 2, 2020, the Company completed a public offering and sale of 4,370,000 shares of the Company's common stock, par value $ 1.00 per share, at a price of $ 39.50 per share.

After deducting fees, commissions and other issuance costs, the net proceeds to the Company amounted to $ 165.8 million.

The proceeds of this issuance were used to fund a portion of the purchase price of the acquisition of Shell's upstream assets and midstream gathering assets in Pennsylvania that closed on July 31, 2020.

Refer to Note B — Asset Acquisitions and Divestitures for further discussion.

The Company has various plans which allow shareholders, employees and others to purchase shares of the Company common stock.

The National Fuel Gas Company Direct Stock Purchase and Dividend Reinvestment Plan allows shareholders to reinvest cash dividends and make cash investments in the Company’s common stock and provides investors the opportunity to acquire shares of the Company common stock without the payment of any brokerage commissions in connection with such acquisitions.

The National Fuel Gas Company Direct Stock Purchase and Dividend Reinvestment Plan allows shareholders to reinvest cash dividends and make cash investments in the Company’s

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

common stock and provides investors the opportunity to acquire shares of the Company common stock without the payment of any brokerage commissions in connection with such acquisitions.

The 401(k) Plans allow employees the opportunity to invest in the Company common stock, in addition to a variety of other investment alternatives.

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During 2022, the Company did no t issue any original issue shares of common stock for the Direct Stock Purchase and Dividend Reinvestment Plan or the Company's 401(k) plans.

During 2021, the Company issued 106,007 original issue shares of common stock for restricted stock units that vested and 165,161 original issue shares of common stock for performance shares that vested.

During 2022, the Company issued 30,769 original issue shares of common stock as a result of SARs exercises, 129,169 original issue shares of common stock for restricted stock units that vested and 265,607 original issue shares of common stock for performance shares that vested.

Holders of stock-based compensation awards will often tender shares of common stock to the Company for payment of applicable withholding taxes.

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Under this program, the Company issued 28,782 original issue shares of common stock during 2022.

On June 2, 2020, the Company completed a public offering and sale of 4,370,000 shares of the Company's common stock, par value $ 1.00 per share, at a price of $ 39.50 per share.

After deducting fees, commissions and other issuance costs, the net proceeds to the Company amounted to $ 165.8 million.

Refer to Note B — Asset Acquisitions and Divestitures for further discussion.

Stock Award Plans

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A portion of stock-based compensation expense is subject to capitalization under IRS uniform capitalization rules.

Stock-based compensation of $ 0.1 million was capitalized under these rules during each of the years ended September 30,

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

2021, 2020 and 2019.

The tax expense related to stock-based compensation exercises and vestings was $ 0.7 million for the year ended September 30, 2021.

Stock-based compensation of $ 0.1 million was capitalized under these rules during each of the years ended September 30, 2022, 2021 and 2020.

The tax benefit related to stock-based compensation exercises and vestings was $ 0.6 million for the year ended September 30, 2022.

Pursuant to registration statements for these plans, there were 2,149,203 shares available for future grant at September 30, 2022.

These shares include shares available for future options, SARs, restricted stock and performance share grants.

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Transactions for 2022 involving SARs for all plans are summarized as follows:

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Outstanding at September 30, 2021

318,445 $ 53.60

Granted in 2022

Exercised in 2022

( 241,437 ) $ 55.73

Forfeited in 2022

Expired in 2022

( 5,000 ) $ 55.09

Outstanding at September 30, 2022

72,008 $ 53.05 0.22 $ 612

SARs exercisable at September 30, 2022

72,008 $ 53.05 0.22 $ 612

The Company did no t grant any SARs during the years ended September 30, 2021 and 2020.

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The accounting for SARs is the same as the accounting for stock options.

During the year ended September 30, 2020, no SARs were exercised.

The total intrinsic value of SARs exercised during the year ended September 30, 2019 totaled approximately $ 7.2 million.

The total intrinsic value of SARs exercised during the years ended September 30, 2022 totaled approximately $ 2.0 million.

During the years ended September 30, 2021 and 2020, no SARs were exercised.

There were no SARs that became fully vested during the years ended September 30, 2022, 2021 and 2020, and all SARs outstanding have been fully vested since fiscal 2017.

Restricted Share Awards

Transactions for 2021 involving restricted share awards for all plans are summarized as follows:

Share Awards Weighted Average

Fair Value per

Outstanding at September 30, 2020 20,000 $ 47.46

Granted in 2021 — $ —

Vested in 2021 ( 20,000 ) $ 47.46

Forfeited in 2021 — $ —

Outstanding at September 30, 2021 — $ —

The Company did no t grant any restricted share awards (non-vested stock as defined by the current accounting literature) during the years ended September 30, 2020 and 2019.

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Restricted Stock Units

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Outstanding at September 30, 2021

365,481 $ 41.45

Granted in 2022

128,950 $ 54.10

Vested in 2022

( 129,169 ) $ 45.24

Forfeited in 2022

( 17,835 ) $ 44.61

Outstanding at September 30, 2022

347,427 $ 44.58

The Company also granted 172,513 and 150,839 nonperformance-based restricted stock units during the years ended September 30, 2021 and 2020, respectively.

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and 2027 — 19,352 units.

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Performance Shares

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Outstanding at September 30, 2021

600,634 $ 45.13

Granted in 2022

195,397 $ 65.39

Vested in 2022

( 265,607 ) $ 55.93

Forfeited in 2022

( 23,414 ) $ 49.84

Change in Units Based on Performance Achieved 100,169 $ 56.36

Outstanding at September 30, 2022

607,179 $ 48.60

The Company also granted 309,470 and 254,608 performance shares during the years ended September 30, 2021 and 2020, respectively.

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and 2025 — 186,423 shares.

Half of the performance shares granted during the years ended September 30, 2021, 2020 and 2019 must meet a performance goal related to relative return on capital over a three-year performance cycle.

The performance goal over the respective performance cycles for the performance shares granted during 2021, 2020 and 2019 is the Company’s total return on capital relative to the total return on capital of other companies in a group selected by the Compensation Committee (“Report Group”).

Total return on capital for a given company means the average of the Report Group companies’ returns on capital for each twelve month period corresponding to each of the Company’s fiscal years during the performance cycle, based on data reported for

The performance shares granted during the years ended September 30, 2022, 2021 and 2020 include awards that must meet a performance goal related to either relative return on capital over a three-year performance cycle ("ROC performance shares"), methane intensity and greenhouse gas emissions reductions over a three-year performance cycle ("ESG performance shares") or relative shareholder return over a three-year performance cycle ("TSR performance shares").

The performance goal over the respective performance cycles for the ROC performance shares granted during 2022, 2021 and 2020 is the Company’s total return on capital relative to the total return on capital of other companies in a group selected by the Compensation Committee (“Report Group”).

Total return on capital for a given company means the average of the Report Group companies’ returns on capital for each twelve-month period corresponding to each of the Company’s fiscal years during the performance cycle, based on data reported for the Report Group companies in the Bloomberg database.

The number of these ROC performance shares that will vest and be paid will depend upon the Company’s performance relative to the Report Group and not upon the absolute level of return achieved by the Company.

The fair value of the ROC performance shares is calculated by multiplying the expected number of shares that will be issued by the average market price of Company common stock on the date of grant reduced by the present value of forgone dividends over the vesting term of the award.

The fair value is recorded as compensation expense over the vesting term of the award.

The performance goal over the performance cycle for the ESG performance shares granted during 2022 consists of two parts:

reductions in the rates of intensity of methane emissions for each of the Company's operating segments, and reduction of the consolidated Company's total greenhouse gas emissions.

The Company's Compensation Committee set specific target levels for methane intensity rates and total greenhouse gas emissions, and the performance goal is intended to incentivize and reward performance that helps position the Company to meet or exceed its 2030 methane intensity and greenhouse gas reduction targets.

The number of these ESG performance shares that will vest and be paid out will depend upon the number of methane intensity segment targets achieved and whether the Company meets the total greenhouse gas emissions target.

The fair value of these ESG performance shares is calculated by multiplying the expected number of shares that will be issued by the average market price of Company common stock on the date of grant reduced by the present value of forgone dividends over the vesting term of the award.

The fair value is recorded as compensation expense over the vesting term of the award.

There were no ESG performance shares granted in 2021 and 2020.

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

the Report Group companies in the Bloomberg database.

The number of these performance shares that will vest and be paid will depend upon the Company’s performance relative to the Report Group and not upon the absolute level of return achieved by the Company.

The fair value of these performance shares is calculated by multiplying the expected number of shares that will be issued by the average market price of Company common stock on the date of grant reduced by the present value of forgone dividends over the vesting term of the award.

The fair value is recorded as compensation expense over the vesting term of the award.

The other half of the performance shares granted during the years ended September 30, 2021, 2020 and 2019 must meet a performance goal related to relative total shareholder return over a three-year performance cycle.

The performance goal over the respective performance cycles for the total shareholder return performance shares ("TSR performance shares") granted during 2021, 2020 and 2019 is the Company’s three-year total shareholder return relative to the three-year total shareholder return of the other companies in the Report Group.

Three-year shareholder return for a given company will be based on the data reported for that company (with the starting and ending stock prices over the performance cycle calculated as the average closing stock price for the prior calendar month and with dividends reinvested in that company’s securities at each ex-dividend date) in the Bloomberg database.

The performance goal over the respective performance cycles for the TSR performance shares granted during 2022, 2021 and 2020 is the Company’s three-year total shareholder return relative to the three-year total shareholder return of the other companies in the Report Group.

Three-year total shareholder return for a given company will be based on the data reported for that company (with the starting and ending stock prices over the performance cycle calculated as the average closing stock price for the prior calendar month and with dividends reinvested in that company’s securities at each ex-dividend date) in the Bloomberg database.

The number of these TSR performance shares that will vest and be paid will depend upon the Company’s performance relative to the Report Group and not upon the absolute level of return achieved by the Company.

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As of September 30, 2022, there were 10,000,000 shares of $ 1 par value Preferred Stock authorized but unissued.

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Long-Term Debt

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(1) The Medium-Term Notes and Notes are unsecured.

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(2) The holders of these notes may require the Company to repurchase their notes at a price equal to 101 % of the principal amount in the event of both a change in control and a ratings downgrade to a rating below investment grade.

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A downgrade with a resulting increase to the coupon does not preclude the coupon from returning to its original rate if the Company's credit rating is subsequently upgraded.

(4) None of the Company's long-term debt at September 30, 2021 and 2020 will mature within the following twelve-month period.

(4) Current Portion of Long-Term Debt at September 30, 2022 consists of $ 500.0 million of 3.75 % notes and $ 49.0 million of 7.395 % notes that each mature in March 2023.

The Company has committed to redeeming $ 150.0 million of the 3.75 % notes on November 25, 2022.

None of the Company's long-term debt as of September 30, 2021 had a maturity date within the following twelve-month period.

On February 24, 2021, the Company issued $ 500.0 million of 2.95 % notes due March 1, 2031.

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As of September 30, 2022, the aggregate principal amounts of long-term debt maturing during the next five years and thereafter are as follows:

zero in 2022, $ 549.0 million in 2023, zero in 2024, $ 500.0 million in 2025, $ 500.0 million in 2026, and $ 1,100.0 million thereafter.

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

$ 549.0 million in 2023, zero in 2024, $ 500.0 million in 2025, $ 500.0 million in 2026, $ 300.0 million in 2027, and $ 800.0 million thereafter.

Short-Term Borrowings

The Company historically has obtained short-term funds either through bank loans or the issuance of commercial paper.

On October 25, 2018, the Company entered into a Fourth Amended and Restated Credit Agreement ("Credit Agreement") with a syndicate of twelve banks.

This Credit Agreement provides a $ 750.0 million multi-year unsecured committed revolving credit facility through October 25, 2023.

In addition to the Credit Agreement, on February 3, 2021, the Company amended its existing 364-Day Credit Agreement to extend the maturity date thereof from May 3, 2021 to December 30, 2022, and to increase the lenders' commitments thereunder from $ 200.0 million to $ 250.0 million, among other changes (as amended, the "Amended 364-Day Credit Agreement").

Twelve banks are parties to the Amended 364-Day Credit Agreement, all of which are also lenders under the Credit Agreement.

On February 28, 2022, the Company entered into a Credit Agreement (as amended from time to time, the "Credit Agreement") with a syndicate of twelve banks.

The Credit Agreement replaced the previous Fourth Amended and Restated Credit Agreement and a previous 364-Day Credit Agreement.

The Credit Agreement provides a $ 1.0 billion unsecured committed revolving credit facility with a maturity date of February 26, 2027.

On June 30, 2022, the Company entered into a new 364-Day Credit Agreement (the "364-Day Credit Agreement") with a syndicate of five banks, all of which are also lenders under the Credit Agreement.

The 364-Day Credit Agreement provides an additional $ 250.0 million unsecured committed delayed draw term loan credit facility with a maturity date of June 29, 2023.

The Company elected to draw $ 250.0 million under the facility on October 27, 2022.

The Company is using the proceeds for general corporate purposes, which will include the redemption in November of a portion of the Company's outstanding long-term debt maturing in March 2023.

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Company also has uncommitted lines of credit with financial institutions for general corporate purposes.

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The total amount available to be issued under the Company’s commercial paper program is $ 500.0 million.

At September 30, 2021, the commercial paper program is backed by the Credit Agreement.

At September 30, 2021, the Company had outstanding commercial paper of $ 158.5 million with a weighted average interest rate on the commercial paper of 0.40 %.

The commercial paper program is backed by the Credit Agreement.

At September 30, 2022, the Company had outstanding short-term notes payable to banks of $ 60.0 million, all of which was issued under the Credit Agreement, with an interest rate of 4.02 %.

The Company did not have any outstanding commercial paper at September 30, 2022.

The Company had outstanding commercial paper of $ 158.5 million at September 30, 2021, with a weighted average interest rate on the commercial paper of 0.40 %.

The Company did not have any outstanding short-term notes payable to banks at September 30, 2021.

At September 30, 2020, the Company had outstanding short-term notes payable to banks of $ 15.0 million, all of which was issued under the Credit Agreement.

The Company had outstanding commercial paper of $ 15.0 million at September 30, 2020.

At September 30, 2020, the weighted average interest rate on the short-term notes payable to banks was 1.51 % and the weighted average interest rate on the commercial paper was 0.25 %.

Debt Restrictions

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For purposes of calculating the debt to capitalization ratio, the Company's total capitalization will be increased by adding back 50 % of the aggregate after-tax amount of non-cash charges directly arising from any ceiling test impairment occurring on or after July 1, 2018, not to exceed $ 400 million.

This provision also applies to the Amended 364-Day Credit Agreement.

Since July 1, 2018, the Company recorded non-cash, after-tax ceiling test impairments totaling $ 381.4 million.

As a result, at September 30, 2021, $ 190.7 million was added back to the Company's total capitalization for purposes of the facility, and the Company’s debt to capitalization ratio, as calculated under the facility, was .59 .

The constraints specified in both the Credit Agreement and Amended 364-Day Credit Agreement would have permitted an additional $ 884.2 million in short-term and/or long-term debt to be outstanding before the Company’s debt to capitalization ratio exceeded .65 .

As a result, at September 30, 2022, $ 190.7 million was added back to the Company's total capitalization for purposes of the calculation under the Credit Agreement and 364-Day Credit Agreement.

On May 3, 2022, the Company entered into Amendment No.

1 to the Credit Agreement with the same twelve banks under the initial Credit Agreement.

The amendment further modified the definition of consolidated capitalization, for purposes of calculating the debt to capitalization ratio under the Credit Agreement, to exclude, beginning with the quarter ended June 30, 2022, all unrealized gains or losses on commodity-related derivative financial instruments and up to $ 10 million in unrealized gains or losses on other derivative financial instruments included in Accumulated Other Comprehensive Income (Loss) within Total Comprehensive Shareholders' Equity on the Company's consolidated balance sheet.

Under the Credit Agreement, such unrealized losses will not negatively affect the calculation of the debt to capitalization ratio, and such unrealized gains will not positively affect the calculation.

The 364-Day Credit Agreement includes the same debt to capitalization covenant and the same exclusions of unrealized gains or losses on derivative financial instruments as the Credit Agreement.

At September 30, 2022, the Company’s debt to capitalization ratio, as calculated under the Credit Agreement and 364-Day Credit Agreement, was .49 .

The constraints specified in the Credit Agreement and 364-Day Credit Agreement would have permitted an additional $ 2.56 billion in short-term and/or long-term debt to be outstanding at September 30, 2022 (further limited by the indenture covenants discussed below) before the Company’s debt to capitalization ratio exceeded .65 .

A downgrade in the Company’s credit ratings could increase borrowing costs, negatively impact the availability of capital from banks, commercial paper purchasers and other sources, and require the Company's subsidiaries to post letters of credit, cash or other assets as collateral with certain counterparties.

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However, the Company expects that it could borrow under its credit facilities or rely upon other liquidity sources.

The Credit Agreement and Amended 364-Day Credit Agreement contain a cross-default provision whereby the failure by the Company or its significant subsidiaries to make payments under other borrowing arrangements, or the occurrence of certain events affecting those other borrowing arrangements, could trigger an obligation to repay any amounts outstanding under the Credit Agreement and the Amended 364-Day Credit

The Credit Agreement and 364-Day Credit Agreement contain a cross-default provision whereby the failure by the Company or its significant subsidiaries to make payments under other borrowing arrangements, or the occurrence of certain events affecting those other borrowing arrangements, could trigger an obligation to repay any amounts outstanding under the Credit Agreement and 364-Day Credit Agreement.

In particular, a repayment obligation could be triggered if (i) the Company or any of its significant subsidiaries fails to make a

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

In particular, a repayment obligation could be triggered if (i) the Company or any of its significant subsidiaries fails to make a payment when due of any principal or interest on any other indebtedness aggregating $ 40.0 million or more, or (ii) an event occurs that causes, or would permit the holders of any other indebtedness aggregating $ 40.0 million or more to cause, such indebtedness to become due prior to its stated maturity.

payment when due of any principal or interest on any other indebtedness aggregating $ 40.0 million or more or (ii) an event occurs that causes, or would permit the holders of any other indebtedness aggregating $ 40.0 million or more to cause, such indebtedness to become due prior to its stated maturity.

In order to issue incremental long-term debt, the Company must meet an interest coverage test under its existing indenture covenants.

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In addition, taking into account the incremental issuance, and using a pro forma balance sheet as of the last day of the 12 -month period used in the interest coverage test, the Company must maintain a ratio of long-term debt to consolidated assets (as defined under the indenture) of not more than 60 %.

Under the Company's existing indenture covenants at September 30, 2021, the Company would have been permitted to issue up to a maximum of approximately $ 1.6 billion in additional unsubordinated long-term indebtedness at then current market interest rates, in addition to being able to issue new indebtedness to replace existing debt (further limited by debt to capitalization ratio constraints under the Company’s Credit Agreement and Amended 364-Day Credit Agreement, as discussed above).

Under the Company's existing indenture covenants at September 30, 2022, the Company would have been permitted to issue up to a maximum of approximately $ 2.0 billion in additional unsubordinated long-term indebtedness at then current market interest rates, in addition to being able to issue new indebtedness to replace existing debt.

The Company's present liquidity position is believed to be adequate to satisfy known demands.

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Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The fair value presentation for over-the-counter swaps combines gas

The fair value presentation for over-the-counter swaps combines gas and oil swaps because a significant number of the counterparties have historically entered into both gas and oil swap agreements with the Company.

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

and oil swaps because a significant number of the counterparties enter into both gas and oil swap agreements with the Company.

At Fair Value as of September 30, 2022

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Derivative Financial Instruments:

Over the Counter Swaps — Gas and Oil — 1,802 — ( 1,802 ) —

Over the Counter Swaps — Gas — 5,177 — ( 4,178 ) 999

Contingent Consideration for Asset Sale — 8,176 — — 8,176

Foreign Currency Contracts — 128 — ( 128 ) —

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Derivative Financial Instruments:

Over the Counter Swaps — Gas and Oil $ — $ 601,551 $ — $ ( 1,802 ) $ 599,749

Over the Counter Swaps — Gas $ — $ 517,464 $ — $ ( 4,178 ) $ 513,286

Over the Counter No Cost Collars — Gas — 270,453 — — 270,453

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Cash Equivalents — Money Market Mutual Funds $ 22,269 $ — $ — $ — $ 22,269

Hedging Collateral Deposits 88,610 — — — 88,610

Derivative Financial Instruments:

Over the Counter Swaps — Gas and Oil — 1,802 — ( 1,802 ) —

Over the Counter No Cost Collars — Gas — — — ( 720 ) ( 720 )

Foreign Currency Contracts — 938 — ( 938 ) —

2 unchanged sentences

Fixed Income Mutual Fund 70,639 — — — 70,639

Common Stock — Financial Services Industry 639 — — — 639

Total $ 215,951 $ 2,740 $ — $ ( 2,740 ) $ 215,951

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Derivative Financial Instruments

At September 30, 2021, the derivative financial instruments reported in Level 2 consist of natural gas price swap agreements, natural gas no cost collars, crude oil price swap agreements, and foreign currency contracts, all of which are used in the Company's Exploration and Production segment.

Hedging collateral deposits of $ 88.6 million at September 30, 2021, which were associated with the price swap agreements, no cost collars and foreign currency contracts, have been reported in Level 1 at September 30, 2021.

The fair value of the Level 2 price swap agreements and no cost collars is based on an internal, discounted cash flow model that uses observable inputs (i.e.

LIBOR based discount rates and basis differential information, if applicable, at active natural gas and crude oil trading markets).

At September 30, 2022, the derivative financial instruments reported in Level 2 consist of natural gas price swap agreements, natural gas no cost collars, and foreign currency contracts, all of which are used in the Company's Exploration and Production segment.

The derivative financial instruments reported in Level 2 at September 30, 2021 consist of the same type of instruments in addition to crude oil price swap agreements.

The use of crude oil price swap agreements was discontinued during the year ended September 30, 2022 in conjunction with the sale of the Exploration and Production segment's California assets.

Hedging collateral deposits of $ 91.7 million (at September 30, 2022) and $ 88.6 million (at September 30, 2021), which were associated with the price swap agreements, no cost collars and foreign currency contracts, have been reported in Level 1.

The fair value of the Level 2 price swap agreements and no cost collars is based on an internal cash flow model that uses observable inputs (i.e.

LIBOR based discount rates for the price swap agreements and basis differential information, if applicable, at active natural gas and crude oil trading markets).

The fair value of the Level 2 foreign currency contracts at September 30, 2022 and September 30, 2021 are determined using the market approach based on observable market transactions of forward Canadian currency rates.

The authoritative guidance for fair value measurements and disclosures require consideration of the impact of nonperformance risk (including credit risk) from a market participant perspective in the measurement of the fair value of assets and liabilities.

At September 30, 2021, the Company determined that nonperformance risk would have no material impact on its financial position or results of operation.

At September 30, 2022, the Company determined that nonperformance risk associated with the price swap agreements, no cost collars and foreign currency contracts would have no material impact on its financial position or results of operation.

To assess nonperformance risk, the Company considered information such as any applicable collateral posted, master netting arrangements, and applied a market-based method by using the counterparty's (assuming the derivative is in a gain position) or the Company’s (assuming the derivative is in a loss position) credit default swaps rates.

Derivative financial instruments reported in Level 2 at September 30, 2022 also includes the contingent consideration associated with the sale of the Exploration and Production segment's California assets on June 30, 2022, which is discussed at Note B — Asset Acquisitions and Divestitures and at Note J — Financial Instruments.

The fair value of the contingent consideration was calculated using a Monte Carlo simulation model that uses observable inputs, including the ICE Brent closing price as of the valuation date, initial and max trigger price, volatility, risk free rate, time of maturity and counterparty risk.

For the years ended September 30, 2022 and 2021, there were no assets or liabilities measured at fair value and classified as Level 3.

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The fair value amounts are not intended to reflect principal amounts that the Company will ultimately be required to pay.

Carrying amounts for other financial instruments recorded on the Company’s Consolidated Balance Sheets approximate fair value.

Carrying amounts for other financial instruments recorded on the Company’s Consolidated

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Balance Sheets approximate fair value.

The fair value of long-term debt was calculated using observable inputs (U.S.

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Given the short-term nature of the notes payable to banks and commercial paper, the Company believes cost is a reasonable approximation of fair value.

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Other Investments

4 unchanged sentences

Fixed Income Mutual Fund 33,348 70,639

Marketable Equity Securities — 639

$ 95,025 $ 149,632

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The Company uses derivative financial instruments to manage commodity price risk in the Exploration and Production segment.

The Company enters into over-the-counter no cost collars and over-the-counter swap agreements for natural gas and crude oil to manage the price risk associated with forecasted sales of gas and oil.

The Company enters into over-the-counter no cost collars and over-the-counter swap agreements for natural gas to manage the price risk associated with forecasted sales of natural gas.

In addition, the Company also enters into foreign exchange forward contracts to manage the risk of currency fluctuations associated with transportation costs denominated in Canadian currency in the Exploration and Production segment.

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The duration of the Company’s cash flow hedges does not typically exceed 5 years while the foreign currency forward contracts do not exceed 8 years.

On June 30, 2022, the Company completed the sale of Seneca’s California assets.

The Company has determined that this contingent consideration meets the definition of a derivative under the authoritative accounting guidance.

Changes in the fair value of this contingent consideration are marked-to-market each reporting period, with changes in fair value recognized in Other Income (Deductions) on the Consolidated Statement of Income.

The fair value of this contingent consideration was estimated to be $ 12.6 million and $ 8.2 million at June 30, 2022 and September 30, 2022, respectively.

A $ 4.4 million mark-to-market adjustment was recorded during the quarter ended September 30, 2022.

The Company has presented its net derivative assets and liabilities as “Fair Value of Derivative Financial Instruments” on its Consolidated Balance Sheets at September 30, 2022 and September 30, 2021.

Substantially all of the derivative financial instruments reported on those line items relate to commodity contracts and a small portion relates to foreign currency forward contracts.

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Cash Flow Hedges

For derivative financial instruments that are designated and qualify as a cash flow hedge, the gain or loss on the derivative is reported as a component of other comprehensive income (loss) and reclassified into earnings in the period or periods during which the hedged transaction affects earnings.

As of September 30, 2021, the Company had the following commodity derivative contracts (swaps and no cost collars) outstanding:

Commodity Units

Natural Gas 419.7 Bcf

Crude Oil 2,016,000 Bbls

As of September 30, 2022, the Company had 420.8 Bcf of natural gas commodity derivative contracts (swaps and no cost collars) outstanding.

As of September 30, 2022, the Company was hedging a total of $ 49.4 million of forecasted transportation costs denominated in Canadian dollars with foreign currency forward contracts.

As of September 30, 2022, the Company had $ 784.7 million ($ 572.2 million after-tax) of net hedging losses included in the accumulated other comprehensive income (loss) balance.

It is expected that $ 464.5

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

million ($ 339.1 million after-tax) of such unrealized losses will be reclassified into the Consolidated Statement of Income within the next 12 months as the underlying hedged transactions are recorded in earnings.

It is expected that $ 476.7 million ($ 347.6 million after-tax) of such unrealized losses will be reclassified into the Consolidated Statement of Income within the next 12 months as the underlying hedged transactions are recorded in earnings.

The Effect of Derivative Financial Instruments on the Statement of Financial Performance for the

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Relationships Amount of

Derivative Gain or

(Loss) Recognized

Comprehensive

Income (Loss) on

the Consolidated

Derivative Gain or (Loss) Recognized in Other

Comprehensive

Income (Loss) on the Consolidated Statement

of Comprehensive

Income (Loss)

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Statement of Income Amount of

Derivative Gain or

(Loss) Reclassified

from Accumulated

Comprehensive

Income (Loss) on

the Consolidated

Balance Sheet into

the Consolidated

Derivative Gain or (Loss) Reclassified from Accumulated

Other Comprehensive

Income (Loss) on the Consolidated Balance

Sheet into the Consolidated

Statement of Income

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Commodity Contracts $ ( 1,048,200 ) $ ( 668,074 ) Operating Revenue $ ( 882,594 ) (1) $ ( 83,973 )

Commodity Contracts — 391 Purchased Gas — 661

Foreign Currency Contracts ( 2,631 ) 2,703 Operating Revenue 13 262

Total $ ( 1,050,831 ) $ ( 665,371 ) $ ( 882,581 ) $ ( 83,711 )

The Company has over-the-counter swap positions, no cost collars and applicable foreign currency forward contracts with seventeen counterparties.

(1) On June 30, 2022, the Company completed the sale of Seneca's California assets.

Because of this sale, the Company terminated its remaining crude oil derivative contracts and discontinued hedge accounting for such contracts.

A loss of $ 44.6 million was reclassified from Accumulated Other Comprehensive Income (Loss) on the Consolidated Balance Sheet to Operating Revenues on the Consolidated Statement of Income for the year ended September 30, 2022.

This loss is included in the reported reclassification amounts.

The Company may be exposed to credit risk on any of the derivative financial instruments that are in a gain position.

Credit risk relates to the risk of loss that the Company would incur as a result of nonperformance by counterparties pursuant to the terms of their contractual obligations.

To mitigate such credit risk, management performs a credit check, and then on a quarterly basis monitors counterparty credit exposure.

The majority of the Company’s counterparties are financial institutions and energy traders.

As of September 30, 2021, fifteen of the seventeen counterparties to the Company’s outstanding derivative financial instrument contracts (specifically the over-the-counter swaps, over-the-counter no cost collars and applicable foreign currency forward contracts) had a common credit-risk related contingency feature.

The Company has over the-counter swap positions, no cost collars and applicable foreign currency forward contracts with nineteen counterparties of which one is in a net gain position.

The Company had $ 1.0 million of credit exposure with the counterparty in a gain position at September 30, 2022.

As of September 2022, no collateral was received from the counterparties by the Company.

The Company's gain position on such derivative financial instruments had not exceeded the established thresholds at which the counterparties would be required to post collateral, nor had the counterparties' credit ratings declined to levels at which the counterparties were required to post collateral.

As of September 30, 2022, seventeen of the nineteen counterparties to the Company’s outstanding derivative financial contracts (specifically the over-the-counter swaps, over-the-counter no cost collars and

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

applicable foreign currency forward contracts) had a common credit-risk related contingency feature.

In the event the Company’s credit rating increases or falls below a certain threshold (applicable debt ratings), the available credit extended to the Company would either increase or decrease.

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The Retirement Plan covers certain non-collectively bargained employees hired before July 1, 2003 and certain collectively bargained employees hired before November 1, 2003.

Certain non-collectively bargained employees hired after June 30, 2003 and certain collectively bargained employees hired after October 31, 2003

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

are eligible for a Retirement Savings Account benefit provided under the Company’s defined contribution Tax-Deferred Savings Plans.

Certain non-collectively bargained employees hired after June 30, 2003 and certain collectively bargained employees hired after October 31, 2003 are eligible for a Retirement Savings Account benefit provided under the Company’s defined contribution Tax-Deferred Savings Plans.

Costs associated with the Retirement Savings Account were $ 5.3 million, $ 4.8 million and $ 4.2 million for the years ended September 30, 2022, 2021 and 2020, respectively.

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The market-related value of plan assets is the market value as of the measurement date adjusted for variances between actual returns and expected returns (from previous years) that have not been reflected in net periodic benefit costs.

The expected return on other post-retirement benefit assets (i.e.

the VEBA trusts and 401(h) accounts), which is a component of net periodic benefit cost shown in the tables below, is applied to the fair value of assets as of the measurement date.

The expected return on other

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

post-retirement benefit assets (i.e.

the VEBA trusts and 401(h) accounts), which is a component of net periodic benefit cost shown in the tables below, is applied to the fair value of assets as of the measurement date.

Reconciliations of the Benefit Obligations, Plan Assets and Funded Status, as well as the components of Net Periodic Benefit Cost and the Weighted Average Assumptions of the Retirement Plan and other post-retirement benefits are shown in the tables below.

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537 631 729 ( 429 ) ( 429 ) ( 429 )

Recognition of Actuarial Loss(1) 36,814 39,384 32,096 849 535 5,962

Recognition of Actuarial (Gain) Loss(1) 26,405 36,814 39,384 ( 7,610 ) 849 535

Net Amortization and Deferral for Regulatory Purposes

16,854 14,063 5,359 21,340 28,010 25,596

Net Periodic Benefit Cost $ 24,911 $ 24,657 $ 19,907 $ 10,371 $ 10,992 $ 10,521

Net Periodic Benefit Cost (Income) $ 23,087 $ 24,911 $ 24,657 $ ( 5,664 ) $ 10,371 $ 10,992

Weighted Average Assumptions Used to Determine Net Periodic Benefit Cost at September 30

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All the other subsidiaries of the Company utilize the corridor approach.

The Net Periodic Benefit Cost in the table above includes the effects of regulation.

The Net Periodic Benefit Cost (Income) in the table above includes the effects of regulation.

The Company recovers pension and other post-retirement benefit costs in its Utility and Pipeline and Storage segments in accordance with the applicable regulatory commission authorizations.

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Any activity under the tracking mechanisms (including the amortization of pension and other post-retirement regulatory assets and liabilities) is reflected in the Net Amortization and Deferral for Regulatory Purposes line item above.

In addition to the Retirement Plan discussed above, the Company also has Non-Qualified benefit plans that cover a group of management employees designated by the Chief Executive Officer of the Company.

In addition to the Retirement Plan discussed above, the Company also has Non-Qualified benefit plans that cover a group of management employees whose income level has exceeded certain IRS thresholds or who have been designated as participants by the Chief Executive Officer of the Company.

These plans provide for defined benefit payments upon retirement of the management employee, or to the spouse upon death of the management employee.

The net periodic benefit costs associated with these plans were $ 8.3 million, $ 8.9 million and $ 7.6 million in 2021, 2020 and 2019, respectively.

The components of net periodic benefit cost other than service costs associated with these plans are presented in Other Income (Deductions) on

The net periodic benefit costs associated with these plans were $ 8.9 million, $ 8.3

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

the Consolidated Statements of Income.

million and $ 8.9 million in 2022, 2021 and 2020, respectively.

The components of net periodic benefit cost other than service costs associated with these plans are presented in Other Income (Deductions) on the Consolidated Statements of Income.

The accumulated benefit obligations for the plans were $ 64.9 million, $ 76.9 million and $ 78.7 million at September 30, 2022, 2021 and 2020, respectively.

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At September 30, 2020, $ 14.5 million of the projected benefit obligation was recorded in Other Accruals and Current Liabilities and the remaining $ 83.6 million was recorded in Other Liabilities on the Consolidated Balance Sheets.

The weighted average discount rates for these plans were 2.15 %, 1.92 % and 2.77 % as of September 30, 2021, 2020 and 2019, respectively and the weighted average rates of compensation increase for these plans were 8.00 %, 8.00 % and 8.00 % as of September 30, 2021, 2020 and 2019, respectively.

The weighted average discount rates for these plans were 5.49 %, 2.15 % and 1.92 % as of September 30, 2022, 2021 and 2020, respectively and the weighted average rate of compensation increase for these plans was 8.00 % as of September 30, 2022, 2021 and 2020.

The cumulative amounts recognized in accumulated other comprehensive income (loss), regulatory assets, and regulatory liabilities through fiscal 2022, as well as the changes in such amounts during 2022, are presented in the table below:

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The effect of the discount rate change for the Retirement Plan in 2022 was to decrease the projected benefit obligation of the Retirement Plan by $ 262.2 million.

The mortality improvement projection scale was updated, which decreased the projected benefit obligation of the Retirement Plan in 2021 by $ 2.9 million.

The mortality improvement projection scale was updated, which increased the projected benefit obligation of the Retirement Plan in 2022 by $ 1.8 million.

Other actuarial experience increased the projected benefit obligation for the Retirement Plan in 2022 by $ 9.2 million.

The effect of the discount rate change for the Retirement Plan in 2020 was to increase the projected

The effect of the discount rate change for the Retirement Plan in 2021 was to decrease the projected benefit

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

benefit obligation of the Retirement Plan by $ 61.3 million.

obligation of the Retirement Plan by $ 11.2 million.

The effect of the discount rate change for the Retirement Plan in 2020 was to increase the projected benefit obligation of the Retirement Plan by $ 61.3 million.

The Company made cash contributions totaling $ 20.4 million to the Retirement Plan during the year ended September 30, 2022.

The Company expects that the annual contribution to the Retirement Plan in 2022 will be in the range of $ 20.0 million to $ 25.0 million.

The Company expects that the annual contribution to the Retirement Plan in 2023 will be in the range of zero to $ 8.0 million.

The following Retirement Plan benefit payments, which reflect expected future service, are expected to be paid by the Retirement Plan during the next five years and the five years thereafter:

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The effect of the discount rate change in 2022 was to decrease the other post-retirement benefit obligation by $ 98.9 million.

The mortality improvement projection scale was updated, which decreased the other post-retirement benefit obligation in 2021 by $ 2.0 million.

The health care cost trend rates were updated, which decreased the other post-retirement benefit obligation in 2021 by $ 3.7 million.

The mortality improvement projection scale was updated, which increased the other post-retirement benefit obligation in 2022 by $ 1.1 million.

Other actuarial experience decreased the other post-retirement benefit obligation in 2022 by $ 22.5 million, the majority of which was attributable to a revision in assumed per-capita claims cost, premiums, retiree contributions and retiree drug subsidy assumptions based on actual experience.

The effect of the discount rate change in 2020 was to increase the other post-retirement benefit obligation by $ 25.4 million.

The effect of the discount rate change in 2021 was to decrease the other post-retirement benefit obligation by $ 2.5 million.

The mortality improvement projection scale was updated, which decreased the other post-retirement benefit obligation in 2021 by $ 2.0 million.

The health care cost trend rates were updated, which decreased the other post-retirement benefit obligation in 2021 by $ 3.7 million.

Other actuarial experience decreased the other post-retirement benefit obligation in 2021 by $ 26.6 million, the majority of which was attributable to a revision in assumed per-capita claims cost, premiums, retiree contributions and retiree drug subsidy assumptions based on actual experience.

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In addition, the Company made direct payments of $ 0.3 million to retirees not covered by the VEBA trusts and 401(h) accounts during the year ended September 30, 2022.

The Company expects that the annual contribution to its VEBA trusts in 2022 will be in the range of $ 2.5 million to $ 3.0 million.

The Company does not expect to make any contributions to its VEBA trusts in 2023.

Investment Valuation

11 unchanged sentences

International Fixed Income(5) 7,782 — 7,782 — —

Global Fixed Income(6) 42,454 — — — 42,454

Real Estate 140,739 — — — 140,739

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Unrealized Gains/(Losses) 234 ( 18 ) 216

Sales ( 553 ) 42 ( 511 )

Balance at September 30, 2022

$ 319 $ ( 24 ) $ 295

NATIONAL FUEL GAS COMPANY

6 unchanged sentences

Balance at September 30, 2022

The Company’s assumption regarding the expected long-term rate of return on plan assets is 5.20 % for both the Retirement Plan and other post-retirement benefits, effective for fiscal 2022.

The Company’s assumption regarding the expected long-term rate of return on plan assets is 6.90 % (Retirement Plan) and 5.70 % (other post-retirement benefits), effective for fiscal 2023.

The return assumption reflects the anticipated long-term rate of return on the plan’s current and future assets.

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The assets of the Retirement Plan trust, VEBA trusts and the 401(h) accounts have no significant concentrations of risk in any one country (other than the United States), industry or entity.

In fiscal 2021, capital market conditions led to significant improvements in the funded status of the Retirement Plan.

As a result, the Company reduced the return seeking portion of its assets, particularly equity securities, held in the Retirement Plan, and increased its allocation to non-return seeking fixed income securities in conjunction with the Company’s liability driven investment strategy.

The actual asset allocations as of September 30, 2021 are noted in the table above, and such allocations are subject to change, but the majority of the assets will remain non-return seeking fixed income assets.

Similarly, given the level of the VEBA trust and 401(h) assets in relation to the Other Post-Retirement Benefits, the majority of those assets are and will remain in fixed income securities.

In fiscal 2021 and fiscal 2022, capital market conditions led to significant improvements in the funded status of the Retirement Plan.

As a result, the Company reduced the return seeking portion of its assets during both years, particularly equity securities and return seeking fixed income securities, held in the Retirement Plan, and increased its allocation to hedging fixed income securities in conjunction with the Company’s liability driven investment strategy.

The actual asset allocations as of September 30, 2022 are noted in the table above, and such allocations are subject to change, but the majority of the assets will remain hedging fixed income assets.

Given the level of the VEBA trust and 401(h) assets in relation to the Other Post-Retirement Benefits, the majority of those assets are and will remain in fixed income securities.

Investment managers are retained to manage separate pools of assets.

3 unchanged sentences

lower yield) instruments to settle its liabilities.

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note L — Commitments and Contingencies

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The Company has established procedures for the ongoing evaluation of its operations to identify potential environmental exposures and to comply with regulatory requirements.

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

It is the Company’s policy to accrue estimated environmental clean-up costs (investigation and remediation) when such amounts can reasonably be estimated and it is probable that the Company will be required to incur such costs.

At September 30, 2021, the Company has estimated its remaining clean-up costs related to former manufactured gas plant sites will be approximately $ 3.3 million, which includes a $ 0.2 million estimated minimum liability for post-remediation ongoing monitoring and long-term maintenance of a former manufactured gas plant site located in New York.

In March 2018, the NYDEC issued a Record of Decision for this New York site.

Active remedial work at the site has been completed and restoration is currently underway.

At September 30, 2022, the Company has estimated its remaining clean-up costs related to former manufactured gas plant sites will be approximately $ 3.6 million.

The Company's liability for such clean-up costs has been recorded in Other Liabilities on the Consolidated Balance Sheet at September 30, 2022.

The Company expects to recover its environmental clean-up costs through rate recovery over a period of approximately one year and the Company is currently not aware of any material additional exposure to environmental liabilities.

The Company expects to recover its environmental clean-up costs through rate recovery over a period of approximately one year and is currently not aware of any material additional exposure to environmental liabilities.

However, changes in environmental laws and regulations, new information or other factors could have an adverse financial impact on the Company.

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In addition, in the Company's state court litigation challenging the NYDEC's actions with regard to various state permits, the New York State Supreme Court issued a decision finding these permits to be preempted.

The Company remains committed to the project.

The Company remains committed to the project and, on June 29, 2022, received an extension of time from FERC, until December 31, 2024, to construct the project.

As of September 30, 2022, the Company has spent approximately $ 55.8 million on the project, all of which is recorded on the balance sheet.

The Company, in its Utility segment and Exploration and Production segment, has entered into contractual commitments in the ordinary course of business, including commitments to purchase gas, transportation, and storage service to meet customer gas supply needs.

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As of September 30, 2022, the future contractual commitments related to the system modernization and expansion projects are $ 68.9 million in 2023, $ 8.5 million in 2024, $ 8.1 million in 2025, $ 6.9 million in 2026, $ 5.8 million in 2027 and $ 5.8 million thereafter.

The Company, in its Exploration and Production segment, has entered into contractual obligations to support its development activities and operations in Pennsylvania and California, including hydraulic fracturing and other well completion services, well tending services, well workover activities, tubing and casing purchases, production equipment purchases, contracts for drilling rig services and fuel purchases for steam generation.

The future contractual commitments are $ 150.5 million in 2022, $ 17.3 million in 2023 and $ 2.4 million in 2024.

There are no contractual commitments extending beyond 2024.

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Company, in its Exploration and Production segment, has entered into contractual obligations to support its development activities and operations in Pennsylvania, including hydraulic fracturing and other well completion services, well tending services, well workover activities, tubing and casing purchases, production equipment purchases, water hauling services and contracts for drilling rig services.

The future contractual commitments are $ 282.5 million in 2023, $ 180.4 million in 2024 and $ 153.8 million in 2025, and $ 43.8 million in 2026.

There are no contractual commitments extending beyond 2026.

The Company is involved in other litigation arising in the normal course of business.

7 unchanged sentences

The division of the Company’s operations into reportable segments is based upon a combination of factors including differences in products and services, regulatory environment and geographic factors.

The Exploration and Production segment, through Seneca, is engaged in exploration for and development of natural gas and oil reserves in the Appalachian region of the United States and in California.

The Exploration and Production segment, through Seneca, is engaged in exploration for and development of natural gas reserves in the Appalachian region of the United States.

The Pipeline and Storage segment operations are regulated by the FERC for both Supply Corporation and Empire.

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$ 43,898 $ 35,043 $ 24,949 $ 17,165 $ 121,055 $ 3 $ ( 4,429 ) $ 116,629

Significant Non-Cash Item:

Impairment of Oil and Gas Producing Properties

$ 76,152 $ — $ — $ — $ 76,152 $ — $ — $ 76,152

Significant Item:

Gain on Sale of Timber Properties

Gain on Sale of Assets

$ 12,736 $ — $ — $ — $ 12,736 $ — $ — $ 12,736

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Impairment of Oil and Gas Producing Properties $ 76,152 $ — $ — $ — $ 76,152 $ — $ — $ 76,152

Significant Item:

Gain on Sale of Assets

$ — $ — $ — $ — $ — $ 51,066 $ — $ 51,066

Segment Profit:

22 unchanged sentences

$ ( 41,472 ) $ 28,613 $ 18,191 $ 13,274 $ 18,606 $ 210 $ ( 77 ) $ 18,739

Significant Non-Cash Item:

Impairment of Oil and Gas Producing Properties

$ 449,438 $ — $ — $ — $ 449,438 $ — $ — $ 449,438

Segment Profit:

6 unchanged sentences

(1) All Revenue from External Customers originated in the United States.

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

Geographic Information At September 30

7 unchanged sentences

All monetary amounts are expressed in U.S.

As discussed in Note B — Asset Acquisitions and Divestitures, the Company completed the sale of its California assets on June 30, 2022.

With the completion of this sale, the Company no longer has any oil or gas reserves in the West Coast region of the U.S.

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Capitalized Costs Relating to Oil and Gas Producing Activities

5 unchanged sentences

$ 1,947,535 $ 1,874,128

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(1) Includes asset retirement costs of $ 120.8 million and $ 152.8 million at September 30, 2022 and 2021, respectively.

24 unchanged sentences

$ 561,239 $ 371,878 $ 710,611

(1) Amounts for 2021, 2020 and 2019 include capitalized interest of $ 0.1 million, zero and zero , respectively.

(2) Amounts for 2021, 2020 and 2019 include capitalized interest of $ 0.4 million, $ 1.0 million and $ 0.2 million, respectively.

For the years ended September 30, 2021, 2020 and 2019, the Company spent $ 81.2 million, $ 219.9 million and $ 246.0 million, respectively, developing proved undeveloped reserves.

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(1) Amounts for 2022, 2021 and 2020 include capitalized interest of zero , $ 0.1 million and zero respectively.

(2) Amounts for 2022, 2021 and 2020 include capitalized interest of $ 0.6 million, $ 0.4 million and $ 1.0 million, respectively.

For the years ended September 30, 2022, 2021 and 2020, the Company spent $ 154.3 million, $ 81.2 million and $ 219.9 million, respectively, developing proved undeveloped reserves.

Results of Operations for Producing Activities

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The Company's Senior Manager of Reservoir Engineering is the primary technical person responsible for overseeing the Company's reserve estimation process and engaging and overseeing the third party reserve audit.

His qualifications include a Bachelor of Science Degree in Petroleum Engineering and over 12 years of Petroleum Engineering experience with independent oil and gas companies and is a member of the Society of Petroleum Engineers.

His qualifications include a Bachelor of Science Degree in Petroleum Engineering and over 13 years of Petroleum Engineering experience with independent oil and gas companies, licensure as a Professional Engineer and is a member of the Society of Petroleum Engineers.

The Company maintains a system of internal controls over the reserve estimation process.

3 unchanged sentences

Significant changes to the reserve report are reviewed by senior management on a quarterly basis.

Periodically, the Company's internal audit department assesses the design of these controls and performs testing to determine the effectiveness of such controls.

All of the Company's reserve estimates are audited annually by Netherland, Sewell and Associates, Inc.

Since 1961, NSAI has evaluated gas and oil properties and independently certified petroleum reserve quantities in the United States and internationally under the Texas Board of Professional Engineers Registration No.

Periodically, the

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

4 years of prior industry experience in petroleum engineering) and a professional geoscientist registered in the State of Texas (consulting at NSAI since 2008 and with over 11 years of prior industry experience in petroleum geosciences).

Company's internal audit department assesses the design of these controls and performs testing to determine the effectiveness of such controls.

All of the Company's reserve estimates are audited annually by Netherland, Sewell & Associates, Inc.

The primary technical persons (employed by NSAI) that are responsible for leading the audit include a professional engineer registered with the State of Texas (consulting at NSAI since 2011 and with over 4 years of prior industry experience in petroleum engineering) and a professional geoscientist registered in the State of Texas (consulting at NSAI since 2008 and with over 11 years of prior industry experience in petroleum geosciences).

NSAI was satisfied with the methods and procedures used by the Company to prepare its reserve estimates at September 30, 2022 and did not identify any problems which would cause it to take exception to those estimates.

3 unchanged sentences

These were used to confirm continuity of the formation.

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Region West Coast

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Production ( 225,513 ) (2) ( 1,889 ) ( 227,402 )

Purchases of Minerals in Place 684,141 — 684,141

September 30, 2020 3,296,113 28,972 3,325,085

2 unchanged sentences

Production ( 312,300 ) (2) ( 1,720 ) ( 314,020 )

Purchases of Minerals in Place 684,141 — 684,141

September 30, 2021 3,693,148 30,285 3,723,433

2 unchanged sentences

Production ( 341,700 ) (2) ( 1,211 ) ( 342,911 )

Sale of Minerals in Place ( 21,178 ) ( 29,145 ) ( 50,323 )

September 30, 2022 4,170,662 — 4,170,662

11 unchanged sentences

Extensions and discoveries include 0 Bcf (during 2020), 497 Bcf (during 2021) and 537 Bcf (during 2022), of Utica Shale gas (which exceed 15 % of total reserves) in the Appalachian region.

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(2) Production includes 169,453 MMcf (during 2020), 218,016 MMcf (during 2021) and 209,463 MMcf (during 2022), from Marcellus Shale fields.

Production includes 55,392 MMcf (during 2020), 93,253 MMcf (during 2021) and 130,240 MMcf (during 2022), from Utica Shale fields.

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Region West Coast

12 unchanged sentences

Production ( 16 ) ( 1,588 ) ( 1,604 )

Sales of Minerals in Place — ( 20,766 ) ( 20,766 )

September 30, 2022 250 — 250

11 unchanged sentences

PUD reserves in the Utica Shale increased from 411 Bcfe at September 30, 2021 to 503 Bcfe at September 30, 2022.

PUD reserves in the Marcellus Shale increased from 220 Bcfe at September 30, 2021 to 355 Bcfe at September 30, 2022.

PUD reserves in the West Coast region decreased from 5 Bcfe at September 30, 2021 to zero at September 30, 2022.

The Company’s total PUD reserves were 20.6 % of total proved reserves at September 30, 2022, up from 16.5 % of total proved reserves at September 30, 2021.

The Company’s PUD reserves increased from 551 Bcfe at September 30, 2020 to 636 Bcfe at September 30, 2021.

PUD reserves in the Utica Shale increased from 265 Bcfe at September 30, 2020 to 411 Bcfe at September 30, 2021.

PUD reserves in the Marcellus Shale decreased from 287 Bcfe at September 30, 2020 to 220 Bcfe at September 30, 2021.

The Company’s total PUD reserves were 16.5 % of total proved reserves at September 30, 2021, roughly flat from 16 % of total proved reserves at September 30, 2020.

The Company’s PUD reserves decreased from 1,018 Bcfe at September 30, 2019 to 551 Bcfe at September 30, 2020.

PUD reserves in the Marcellus Shale decreased from 383 Bcfe at September 30, 2019 to 287 Bcfe at September 30, 2020.

PUD reserves in the Utica Shale decreased from 632 Bcfe at September 30, 2019 to 265 Bcfe at September 30, 2020.

The Company’s total PUD reserves were 16 % of total proved reserves at September 30, 2020, down from 33 % of total proved reserves at September 30, 2019.

The increase in PUD reserves in 2021 of 85 Bcfe is a result of 344 Bcfe in new PUD reserve additions and 9 Bcfe in upward revisions to remaining PUD reserves, partially offset by 188 Bcfe in PUD conversions to developed reserves ( 82 Bcfe from the Marcellus Shale and 106 Bcfe from the Utica Shale), and 80 Bcfe in PUD

The increase in PUD reserves in 2022 of 222 Bcfe is a result of 502 Bcfe in new PUD reserve additions and 23 Bcfe in upward revisions to remaining PUD reserves, partially offset by 287 Bcfe in PUD conversions to developed reserves ( 55 Bcfe from the Marcellus Shale, 231 Bcfe from the Utica Shale and 1 Bcfe from the West Coast region), and 13 Bcfe in PUD reserves removed for one Utica PUD location due to pad layout changes.

The remaining change of 3 Bcf was due to removing West Coast region PUDs included in the beginning of year balances through development and divesture of Seneca's California assets.

NATIONAL FUEL GAS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

reserves removed for eight PUD locations, half of these due to pad layout changes, and the other half due to schedule changes.

Six of these wells removed were in the Marcellus Shale ( 54 Bcfe) and two were in the Utica Shale ( 26 Bcfe).

The decrease in PUD reserves in 2020 of 467 Bcfe is a result of 363 Bcfe in PUD conversions to developed reserves ( 146 Bcfe from the Marcellus Shale, 214 Bcfe from the Utica Shale and 3 Bcfe from the West Coast region), and 179 Bcfe in PUD reserves removed for seventeen PUD locations, all in the Western Development Area, due to development timing no longer scheduled to meet the five year requirement for proved reserves.

Two of these wells removed were in the Marcellus Shale ( 14 Bcfe) and fifteen were in the Utica Shale ( 165 Bcfe).

These decreases were offset by 7 Bcfe in new PUD reserve additions, 20 Bcfe in upward revisions to remaining PUD reserves and 48 Bcfe in revisions for five PUD locations added back in 2020 (after removing one in 2016 and four in 2017 due to scheduling delays beyond the five year requirement).

The Company invested $ 154 million during the year ended September 30, 2022 to convert 287 Bcfe ( 333 Bcfe after revisions) of predominantly Marcellus and Utica Shale PUD reserves to developed reserves.

This represents 45 % of the net PUD reserves recorded at September 30, 2021.

In the Appalachian region, 18 of 53 PUD locations were developed.

In the Appalachian region, 31 of 65 PUD locations were developed while the West Coast region developed 6 of 17 PUD locations prior to the divesture.

PUD expenditures in 2022 were lower than the 2021 estimate primarily due to changes in the development schedule.

1 unchanged sentence

This represents 34 % of the net PUD reserves recorded at September 30, 2020.

The 30 Bcfe in upward revisions to PUD reserves converted to developed reserves in 2020 were primarily a result of longer completed laterals.

In the Appalachian region, 35 of 99 PUD locations were developed and in the West Coast region, all 14 PUD locations were developed.

In the Appalachian region, 18 of 53 PUD locations were developed.

PUD expenditures in 2021 were lower than the 2020 estimate primarily due to changes in the development schedule.

In 2023, the Company estimates that it will invest approximately $ 308 million to develop its PUD reserves.

The Company is committed to developing its PUD reserves within five years as required by the SEC’s final rule on Modernization of Oil and Gas Reporting.

Since that rule, and over the last five years, the Company developed 27 % of its beginning year PUD reserves in fiscal 2017, 51 % of its beginning year PUD reserves in fiscal 2018, 39 % of its beginning year PUD reserves in fiscal 2019, 36 % of its beginning year PUD reserves in fiscal 2020 and 34 % of its beginning year PUD reserves in fiscal 2021.

Since that rule was adopted, and over the last five years, the Company developed 51 % of its beginning year PUD reserves in fiscal 2018, 39 % of its beginning year PUD reserves in fiscal 2019, 36 % of its beginning year PUD reserves in fiscal 2020, 34 % of its beginning year PUD reserves in fiscal 2021 and 45 % of its beginning year PUD reserves in fiscal 2022.

At September 30, 2022, the Company does not have any proved undeveloped reserves that have been on the books for more than five years at the corporate level, country level or field level.

39 unchanged sentences

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 8. Financial Statements and Supplementary Data