National Fuel Gas (NYSE:NFG) is a diversified and relatively low-profile energy company with interests ranging from exploration and production to pipelines and storage along with a regulated utility operation that distributes natural gas in the Northeastern United States. The company plans a major ramp up in activity in the Marcellus Shale in 2011.

IN PICTURES: 5 "New" Rules For Safe Investing

In the twelve months ending 6/30/2010, National Fuel Gas reported total income from continuing operations of $217.3 million. The exploration and production segment represented 52% of this income, with Pipeline and Storage and Utility were 17% and 28%, respectively.

Exploration and Production
National Fuel Gas conducts its exploration and production activities through Seneca Resources Corporation, a wholly owned subsidiary of the company. The company has production and reserves in several domestic areas including California, the Gulf of Mexico and the Appalachian region.

On a resource basis, National Fuel Gas is diversified with 53% of its proved reserves composed of oil at September 30, 2009. On a production basis, the company reported that 41% of its production was oil in the twelve months ending June 30, 2010.

The current focus of National Fuel Gas is to develop the company's properties that are prospective for the Marcellus Shale. The company has 738,000 net acres in Appalachia with much of the acreage royalty-free and with no lease expirations issues.

National Fuel Gas is in a joint venture with EOG Resources (NYSE:EOG) in some areas to develop acreage, and has reported successful results to date.

The company is planning a major ramp in development of the Marcellus Shale in 2011. National Fuel Gas plans to drill between 100 and 130 wells in fiscal 2011 (ending September 30, 2011), up from only 24 wells in fiscal 2009. If the development plan is successful, the company expects to be producing more than 100 million cubic feet per day of natural gas net to the company by the end of fiscal 2011.

Although California is not a major focus for National Fuel Gas, the company is attempting to keep its production flat there. In July 2009, National Fuel Gas purchased properties at the South Midway Field from Ivanhoe Energy (Nasdaq:IVAN). National Fuel Gas recently completed a 14 well steam flood redevelopment and hopes to increase production by 80% from this field by mid 2011.

Pipeline and Storage
National Fuel Gas also has a thriving Pipeline and Storage business, which is centered in Appalachia. The company has several major expansion planned over the next year, which will be needed due to the rapid expansion of drilling in the area.

Companies in other shale plays are also securing capacity to gather and transport natural gas. Swift Energy Company (NYSE:SFY) and Anadarko Petroleum (NYSE:APC) just signed agreements with third parties to provide pipeline and gas gathering services in the Eagle Ford Shale.

National Fuel Gas also has a regulated utility operation where the company distributes natural gas to customers in New York and Pennsylvania. In New York, the company earned a 9.7% return on a rate base of $730 million. In Pennsylvania, the company earned a 14.3% return on a base of $305.2 million. While this business is not as desired by some investors in energy, it does help protect earnings for the company in a downturn.

The Bottom Line
National Fuel Gas is planning to shed its image as a utility as the company initiates a major expansion into the Marcellus Shale by its exploration and production business in 2011. (For related reading, take a look at our Oil And Gas Industry Primer)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Stock Analysis

    Fortinet: A Great Play on Cybersecurity

    Discover how a healthy product mix, large-business deal growth and the boom of the cybersecurity industry are all driving Fortinet profits.
  2. Stock Analysis

    2 Catalysts Driving Intrexon to All-Time Highs

    Examine some of the main reasons for Intrexon stock tripling in price between 2014 and 2015, and consider the company's future prospects.
  3. Stock Analysis

    Net Neutrality: Pros and Cons

    The fight over net neutrality has become an amazing spectacle. But at its core, it's yet another skirmish in cable television's war to remain relevant.
  4. Savings

    Do Natural Gas Prices Always Follow Oil Trends?

    Prices for oil and natural gas are highly correlated. But investors should be aware of different factors affecting the prices of these commodities.
  5. Charts & Patterns

    Understand How Square Works before the IPO

    Square is reported to have filed for an IPO. For interested investors wondering how the company makes money, Investopedia takes a look at its business.
  6. Technical Indicators

    4 Ways to Find a Penny Stock Worth Millions

    Thinking of trading in risky penny stocks? Use this checklist to find bargains, not scams.
  7. Professionals

    Chinese Slowdown Affects Iron Ore Market

    The Chinese economy's ongoing slowdown is having a major impact on iron ore demand.
  8. Investing Basics

    Why do Debt to Equity Ratios Vary From Industry to Industry?

    Obtain a better understanding of the debt/equity ratio, and learn why this fundamental financial metric varies significantly between industries.
  9. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  10. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Profit Margin

    A category of ratios measuring profitability calculated as net ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis ...
  4. Debt Ratio

    A financial ratio that measures the extent of a company’s or ...
  5. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing ...
  6. Net Present Value - NPV

    The difference between the present values of cash inflows and ...
  1. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. What is the difference between the return on total assets and an interest rate?

    Return on total assets (ROTA) represents one of the profitability metrics. It is calculated by taking a company's earnings ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!