What changed in this filing

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Item 1. Business

2023-11-17 compared with 2022-11-18 · 63 added, 82 removed, 161 unchanged (47% of the section changed)

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

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

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

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

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(Empire), a New York corporation.

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

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

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

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

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

This division marketed timber from Appalachian land holdings.

On August 5, 2020, the Company entered into a purchase and sale agreement to sell substantially all timber and other assets, which at September 30, 2020, accounted for the Company's ownership of approximately 95,000 acres of timber property and management of approximately 2,500 additional acres of timber cutting rights.

The transaction closed on December 10, 2020.

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

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

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

Revenue from one customer of the Company's Exploration and Production segment, exclusive of hedging losses transacted with separate parties, represented approximately $208 million, or 9.6%, of the Company's consolidated revenue for the year ended September 30, 2023.

This one customer was also a customer of the Company's Pipeline and Storage segment, accounting for an additional $14 million, or 0.6%, of the Company's consolidated revenue for the year ended September 30, 2023.

Rates and Regulation

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Sources and Availability of Raw Materials

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

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

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

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Purchases from DTE Energy Trading, Inc.

(33%), Emera Energy Services, Inc.

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

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

(24%), Vitol, Inc.

(14%), Shell Energy North America US (9%), EQT Energy, LLC (9%), Emera Energy Services, Inc.

Aron & Company (7%), Tenaska Marketing Ventures (5%), Chevron Natural Gas (5%), and NRG Business Marketing Inc.

(5%), accounted for nearly 86% of the Utility segment's 2023 gas purchases.

No other producer or supplier provided the Utility segment with more than 5% of its gas requirements in 2023.

The Utility segment does not directly purchase gas from affiliates.

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

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

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

Management believes that the reliability and affordability of natural gas support its competitive position relative to other fuels.

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

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

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

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

The Pipeline and Storage Segment

Supply Corporation competes for market growth in the natural gas market with other pipeline companies transporting gas in the northeast United States and with other companies providing gas storage services.

Supply Corporation competes for growth in the natural gas market with other pipeline companies transporting gas in the northeast United States and with other companies providing gas storage services.

Supply Corporation has some unique characteristics which enhance its competitive position.

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Supply Corporation has developed and placed into service a number of pipeline expansion projects designed to transport natural gas to key markets in New York, Pennsylvania, the northeastern United States, Canada, and to long-haul pipelines with access to the U.S.

Midwest and the Gulf Coast.

Midwest, Mid-Atlantic and the Gulf Coast.

For further discussion of Pipeline and Storage projects, refer to Item 7, MD&A under the heading “Investing Cash Flow.”

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Empire’s geographic location provides it the opportunity to compete for service to its on-system LDC markets, as well as for a share of the gas transportation markets into Canada (via Chippawa) and into the northeastern United States.

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

Various expansion projects on Empire have expanded it's footprint and capability, allowing Empire to serve new markets in New York and elsewhere in the Northeast, and to attach to prolific Marcellus and Utica supplies principally from Tioga and Bradford Counties in Pennsylvania.

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

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The Utility Segment

With respect to gas commodity service, in New York and Pennsylvania, both of which have implemented “unbundling” policies that allow customers to choose their gas commodity supplier, Distribution Corporation

has retained a substantial majority of small sales customers.

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

In contrast, almost all large-volume load is served by unregulated retail marketers.

However, retail competition for gas commodity service does not pose an acute competitive threat for Distribution Corporation, because in both jurisdictions, utility cost of service is recovered through rates and charges for gas delivery service, not gas commodity service.

However, retail competition for gas commodity service does not pose an acute competitive

threat for Distribution Corporation, because in both jurisdictions, utility cost of service is recovered through rates and charges for gas delivery service, not gas commodity service.

Competition for transportation service to large-volume customers continues with local producers or pipeline companies attempting to sell or transport gas directly to end-users located within the Utility segment’s service territories without use of the utility’s facilities (i.e., bypass).

In addition, while competition with fuel oil suppliers exists, natural gas retains its competitive position despite recent commodity pricing.

In addition, while competition with fuel oil suppliers continues to exist and competition with electrification alternatives is growing, particularly in New York State, natural gas retains its competitive position from a reliability and affordability standpoint.

The Utility segment competes in its most vulnerable markets (the large commercial and industrial markets) by offering unbundled, flexible, high quality services.

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

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

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

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

Variations in weather conditions can materially affect the volume of natural gas delivered by the Utility segment, as virtually all of its residential and commercial customers use natural gas for space heating.

The effect that this has on Utility segment margins in New York is largely mitigated by a weather normalization clause (WNC), which covers the eight-month period from October through May.

Weather that is warmer than normal results in an upward adjustment to customers’ current bills, while weather that is colder than normal results in a downward adjustment, so that in either case projected delivery revenues calculated at normal temperatures will be largely recovered.

Volumes transported and stored by Supply Corporation and by Empire may vary significantly depending on weather, without materially affecting the revenues of those companies.

The effect that this has on Utility segment margins is largely mitigated by a weather normalization clause (WNC).

Prior to October 2023, the weather impact on cash flow in the Utility segment was mitigated by a WNC solely in its New York rate jurisdiction.

However, effective October 2023, the weather impact on cash flow in the Utility segment will also be mitigated by a WNC in its Pennsylvania rate jurisdiction.

Refer to Item 8, Note A – Summary of Significant Accounting Policies under the heading “Regulatory Mechanisms” for additional discussion.

Under the WNC, weather that is warmer than normal results in an upward adjustment to customers’ current bills, while weather that is colder than normal results in a downward adjustment, so that in either case projected delivery revenues calculated at normal temperatures will be largely recovered.

Volumes transported and stored by Supply Corporation and Empire may vary significantly depending on weather, without materially affecting the revenues of those companies.

Supply Corporation’s and Empire’s allowed rates are based on a straight fixed-variable rate design which allows recovery of fixed costs in fixed monthly reservation charges.

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The Utility segment has numerous municipal franchises under which it uses public roads and certain other rights-of-way and public property for the location of facilities.

When necessary, the Utility segment renews such franchises.

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

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

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

Human Capital

The Company aims to attract the best employees, to retain those employees through offering competitive benefits, career development and training opportunities, while also prioritizing their safety and wellness, and to create a safe, inclusive and productive work environment for everyone.

Human capital measures and objectives that the Company focuses on in managing its business include the safety of its employees, its voluntary attrition rate, the number of work stoppages, its employee benefits, employee development, and diversity and inclusion.

Additional information regarding the Company’s human capital measures and objectives is contained in the Company’s recently published Corporate Responsibility Report, which is available on the Company’s website, www.nationalfuelgas.com.

The Company aims to attract the best employees, to retain those employees through offering competitive total rewards, career development and training opportunities, while also prioritizing their safety and wellness, and to create a safe, inclusive and productive work environment for everyone.

Human capital measures and objectives that the Company focuses on in managing its business include the safety of its employees, its voluntary attrition rate, the number of work stoppages, its total rewards, employee development, and diversity and inclusion.

The information on the Company’s website is not, and will not be deemed to be, a part of this annual report on Form 10-K or incorporated into any of the Company’s other filings with the SEC.

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Safety is one of the Company’s guiding principles.

In managing the business, the Company focuses on the safety of its employees and contractors and has implemented safety programs and management practices to promote a culture of safety.

This includes required trainings for both field and office employees, as well as specific qualifications and certifications for field employees.

In managing the business, the Company focuses on the safety of its employees, contractors and communities and has implemented safety programs and management practices to promote a culture of safety.

This includes required trainings for both field and office employees, as well as specific qualifications and certifications for field employees and applicable contractors.

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

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

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

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

The Company's voluntary attrition rate was 8.7% (not including retirements), which is comparable to last year’s voluntary attrition rate of 8%.

The Company continues to actively monitor employee metrics, including attrition rate, to ensure proper management of and responsiveness to human capital matters.

No Work Stoppages

During the Company’s fiscal year, the Company did not incur any work stoppages (strikes or lockouts) and therefore experienced zero idle days for the fiscal year.

Employee Benefits

During fiscal 2023, the Company did not incur any work stoppages (strikes or lockouts) and therefore experienced zero idle days for the fiscal year.

Total Rewards

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

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

Additionally, the Company continuously looks for ways to improve employee work-life balance and well-being.

Additionally, the Company continuously looks for ways to improve employee work-life balance and well-being, and periodically conducts employee surveys to provide additional insight into employee perspectives and interest in desired benefits.

The Company's compensation program for salaried employees is intended to align employee compensation with the market while providing greater incentive to the Company’s employees to work toward the achievement of Company goals.

These goals include the coordinated business goals and ESG objectives of the Company's business segments as a whole.

This meaningful investment illustrates the Company’s view that attracting, retaining and motivating our employees is integral to the Company’s success.

Employee Development

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

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

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

Diversity, Equity and Inclusion

The Company recognizes that a diverse talent pool provides the opportunity to gain a diversity of perspectives, ideas and solutions to help the Company succeed.

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

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

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

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

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

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

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

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

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

The D&I Director maintains close partnerships with the employment teams, cultivates the Company’s relationships with community organizations, and focuses on initiatives to attract diverse candidates, vendors and suppliers.

The executive team receives a monthly report about the composition of the Company’s salaried applicant pools to encourage the recruiting team to focus recruiting in diverse communities and identify resources needed to do so.

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

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

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

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

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

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

The Company’s Employee Handbook Policy includes equal employment opportunity commitments and nondiscrimination and anti-harassment disclosures, which communicate the Company’s expectations with respect to maintaining a professional workplace free of harassment.

The Company prohibits discrimination or harassment against any employee or applicant on the basis of sex, race/ethnicity, or the other protected categories listed within the Company’s Non-Discrimination and Anti-Harassment Policy.

This policy is mailed to employees annually with an employee survey, and employees must acknowledge that they have received the policy.

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

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

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

The Company’s focus on building a diverse and inclusive culture is reflected in the Company's approach to Board diversity, its adoption of specific diversity and inclusion performance goals as part of the Company’s executive compensation program, and policies and training that reinforce the Company’s commitment to diversity and inclusion in the workplace.

The Company’s policies prohibit discrimination or harassment against any employee or applicant on the basis of sex, race/ethnicity, and other protected categories.

The Company communicates to employees its commitment to a harassment free workplace through the onboarding process, annual distribution and acknowledgement of the Company’s Non-Discrimination and Anti-Harassment Policy, and training for all employees including management.

Additionally, to ensure transparency over time, the Company publicly discloses gender, racial and ethnic minority representation, and multi-generational workforce metrics in the Company’s Corporate Responsibility Report.

The Company's Diversity and Inclusion team continues to spearhead diversity and inclusion initiatives to help attract candidates within diverse communities, encourage partnerships with diverse vendors and suppliers and provide tools and trainings designed to promote equity and inclusion within employment teams.

The Company also supports multiple active Employee Resource Groups for women, ethnically diverse employees, veterans and employees who identify as LGBTQ+, where employees can network, build community and seek support.

Each group is voluntary, employee-led, open to allies, and has an executive sponsor to help facilitate communication directly to senior management.

Executive Officers of the Company as of November 15, 2023(1)

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Chief Executive Officer of the Company since July 2019.

President of Supply Corporation from February 2016 through June 2019.

Bauer previously served as President of Supply Corporation from February 2016 through June 2019.

Treasurer and Principal Financial Officer of the Company from July 2010 through June 2019.

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Treasurer of Midstream Company from April 2013 through June 2019.

Treasurer of Supply Corporation from June 2007 through June 2019.

Treasurer of Empire from June 2007 through June 2019.

Treasurer of Supply Corporation and Empire from June 2007 through June 2019.

President of Distribution Corporation since February 2019.

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Kraemer previously served as Senior Vice President of Supply Corporation from June 2016 through June 2019.

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

Treasurer of Seneca Resources Company since July 2019.

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

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

Vice President of Distribution Corporation from April 2015 through June 2019.

Controller of Midstream Company from April 2013 through June 2019.

Controller of Empire from June 2007 through June 2019.

Controller of Distribution Corporation and Supply Corporation from April 2004 through June 2019.

Treasurer and Principal Financial Officer of the Company since May 2023.

Treasurer of Seneca Resources Company since May 2023.

Treasurer of Distribution Corporation, Supply Corporation, Empire and Midstream Company since July 2021.

Silverstein previously served as Assistant Treasurer of Distribution Corporation, Supply Corporation and Empire from April 2020 through June 2021.

General Manager of Finance from April 2019 through March 2020.

Manager of Finance from April 2017 through March 2019.

Controller and Principal Accounting Officer of the Company since July 2019.

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

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

Chief Information Officer of the Company since December 2018.

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

Chief Information Officer of the Company since December 2018 and Senior Vice President of Distribution Corporation since May 2023.

Prior to joining the Company, Mr.

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

Corporate Responsibility Officer of the Company since April 2022.

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

Mugel has been Vice President of Supply Corporation since April 2015 and General Counsel and Secretary of Supply Corporation since April 2016.

Mugel has been Secretary of Empire Pipeline and Secretary of Midstream Company, and has served as the General Counsel of both entities, since April 2016.

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

General Counsel and Secretary of the Company since April 2023 and Senior Vice President of Distribution Corporation since May 2020.

Reville previously served as General Counsel of Distribution Corporation from April 2015 through March 2023.

Secretary of Distribution Corporation from May 2020 through March 2023.

Vice President of Distribution Corporation from April 2015 through April 2020.

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

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

What changed 10-K

Item 1. Business