10-K: National Fuel Gas Reports Strong 2025 Earnings, Ohio Expansion

National Fuel Gas Company achieved significant net income growth in fiscal 2025, driven by strong upstream performance and strategic expansion into Ohio's natural gas utility market.

Summary

• Net income available for common stock increased to $518.5 million in fiscal 2025, up from $77.5 million in 2024.
• The Integrated Upstream and Gathering segment contributed $324.7 million in net income in 2025, a substantial increase from a $57.0 million net loss in 2024.
• Natural gas production grew by 9% to 427 Bcfe in 2025, with proved reserves increasing by 5% to 4,981 Bcfe.
• The Pipeline and Storage segment's net income rose to $121.0 million in 2025, an increase of $41.3 million from 2024.
• The Utility segment's net income increased to $83.2 million in 2025, up $26.1 million from 2024, benefiting from new base delivery rates in New York.
• The company plans to acquire Vectren Energy Delivery of Ohio, LLC for $2.62 billion, doubling its gas utility rate base and expanding into Ohio.
• Non-cash impairment charges of $141.8 million ($103.6 million after-tax) were recorded in the Integrated Upstream and Gathering segment in 2025, primarily from a ceiling test impairment.
• The share repurchase program, which had repurchased 1,974,979 shares for $119.0 million since inception, has been suspended due to the planned CenterPoint Ohio acquisition.
• Capital expenditures for long-lived assets totaled $918.1 million in 2025, with $605.4 million in Integrated Upstream and Gathering, $121.8 million in Pipeline and Storage, and $190.0 million in Utility.

Sentiment

Score: 8

Explanation: The company reported a substantial increase in net income and production, driven by strong performance in its core segments. The strategic acquisition of CenterPoint Ohio is a significant growth driver. While there were impairment charges and project terminations, the overall financial health and strategic direction appear positive, with strong liquidity and manageable debt levels.

Positives

• Net income available for common stock significantly increased to $518.5 million in 2025 from $77.5 million in 2024.
• Integrated Upstream and Gathering segment's net income rebounded strongly to $324.7 million in 2025 from a $57.0 million loss in 2024.
• Natural gas production increased by 9% to 427 Bcfe in 2025, with proved reserves growing by 5% to 4,981 Bcfe.
• The planned acquisition of CenterPoint Ohio for $2.62 billion is expected to double the company's gas utility rate base and expand operations into a supportive regulatory environment.
• New base delivery rates in the Utility segment's New York jurisdiction, effective January 1, 2025, are expected to increase revenue requirements by $57.3 million in fiscal 2025, $15.8 million in 2026, and $12.7 million in 2027.
• The Utility segment's Pennsylvania jurisdiction approved a new weather normalization adjustment mechanism effective October 2023, mitigating weather impact on cash flow.
• The Pipeline and Storage segment's transportation and storage rates increased effective February 1, 2024, following a FERC-approved rate case settlement.
• The company successfully issued $1.0 billion in long-term notes in February 2025 at 5.50% and 5.95% to refinance existing debt, demonstrating access to capital markets.
• The debt to capitalization ratio, as calculated under agreements, was 0.45 at September 30, 2025, well below the 0.65 covenant limit, indicating strong financial flexibility.

Negatives

• Non-cash impairment charges of $141.8 million ($103.6 million after-tax) were recorded in the Integrated Upstream and Gathering segment in 2025, primarily due to a ceiling test impairment.
• The All Other category and Corporate operations incurred a net loss of $10.4 million in 2025, an increase in loss of $8.2 million compared to 2024.
• Operating expenses increased in the Pipeline and Storage segment by $4.8 million, primarily due to higher personnel costs, outside service expenses for system integrity, and power costs.
• Interest expense increased by $6.5 million in the Utility segment, mainly due to higher short-term and long-term intercompany debt balances.
• The share repurchase program has been suspended due to the planned CenterPoint Ohio acquisition, limiting immediate shareholder returns through buybacks.

Risks

• Dependence on capital and credit markets to finance capital requirements, with potential for increased borrowing costs or restricted access if credit ratings are downgraded.
• Regulatory, legislative, consumer behavior, and capital access developments related to climate change, including potential natural gas bans, carbon taxes, methane fees, and reduced demand for natural gas.
• Organized opposition to the natural gas industry, which could lead to increased regulatory and legislative initiatives, operational delays, restrictions, and increased operating costs.
• Delays or changes in plans or costs with respect to company projects, including regulatory delays or denials, which could prevent anticipated project completion, result in asset write-offs, and reduce earnings.
• Adverse effects from economic conditions, including trade policies, inflation, supply chain disruptions, and their impact on suppliers and customers, potentially leading to decreased energy consumption and increased bad debt expense.
• Fluctuations in natural gas prices, which can be volatile and affect revenues, cash flows, and profitability, particularly in the Integrated Upstream and Gathering segment.
• Risks associated with significant transactions involving price hedging, including potential liquidity impacts from margin calls if natural gas prices significantly increase, and nonperformance risk by counterparties.
• Uncertainty of natural gas reserve estimates, which are inherently imprecise and subject to substantial revisions, potentially affecting future production, revenues, and expenditures.
• Financial accounting requirements regarding exploration and production activities, specifically the full cost ceiling test, which could result in material non-cash impairment charges if commodity prices decline.
• Inherent operational risks such as fires, natural disasters, explosions, pipeline ruptures, and cybersecurity threats, which could cause personal injury, property damage, environmental damage, or business interruption losses not fully covered by insurance.
• Dependence on natural gas gathering, storage, and transmission facilities, including third-party midstream facilities, which if unavailable, could adversely affect the company's ability to market and deliver products.
• Disputes with collective bargaining units, including potential strikes or work stoppages, which could disrupt operations and impact financial results.
• The planned acquisition of CenterPoint Ohio may not occur or may be delayed, negatively affecting stock price and future business, and could limit financial flexibility if permanent financing is not obtained on favorable terms.
• The company may not realize the anticipated benefits, including growth opportunities, from the planned acquisition of CenterPoint Ohio due to integration challenges or failure to recover capital investments.

Future Outlook

The company anticipates repaying a $300.0 million delayed draw term loan maturing in February 2026 using cash from operations and/or borrowings. Cash provided by operating activities is expected to exceed capital expenditures in both fiscal 2026 and 2027. Construction on the Tioga Pathway Project is expected to commence in early calendar 2026 with a target in-service date in late calendar 2026. The Shippingport Lateral Project's incremental capacity is expected to come online as early as Fall 2026. The acquisition of CenterPoint Ohio is expected to close in the fourth quarter of calendar 2026, with permanent financing planned through long-term debt and common equity issuance. The company expects to meet its financing needs despite current economic conditions, including inflationary pressures and volatile interest rates.

Management Comments

• 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.
• The common geographic footprint of the company's subsidiaries enables them to share management, labor, facilities and support services across various businesses and pursue coordinated projects.
• Management believes that the reliability and affordability of natural gas support its competitive position relative to electrification and other energy sources.
• The integration of upstream and gathering operations is a key differentiator within the industry, enabling greater capital allocation efficiency and a low-cost structure that supports resilient margins across commodity cycles.
• The company aims to attract qualified employees, and to retain those employees through offering competitive benefits and compensation packages, and career development and training opportunities in a safe, inclusive and productive work environment.
• The company is committed to developing its proved undeveloped reserves within five years as required by the SEC's final rule on Modernization of Oil and Gas Reporting.

Industry Context

The company operates within a natural gas industry facing increasing scrutiny and regulation related to climate change and greenhouse gas emissions, particularly in New York State with the CLCPA mandates. There is growing competition from electrification and renewable energy sources. However, the company emphasizes the reliability and affordability of natural gas. Its strategic focus on the Appalachian Basin for production and transportation, coupled with pipeline expansion projects, positions it to serve regional demand, including for power generation and data centers. The planned acquisition in Ohio reflects a strategy to expand regulated utility assets into states with supportive regulatory environments for natural gas.

Comparison to Industry Standards

• The company's total proved undeveloped (PUD) reserves were 26.4% of total proved reserves at September 30, 2025, down from 26.7% in 2024, indicating a continued focus on developing existing reserves.
• The company developed 31% of its beginning year PUD reserves in fiscal 2025, demonstrating progress towards the SEC's five-year development requirement for PUD reserves.

Management Changes

Corporate Governance

Legal Proceedings

• The company is involved in other litigation and regulatory matters arising in the normal course of business, including negligence claims and tax, regulatory, or governmental audits, inspections, investigations, and proceedings.
• The Northern Access project was subject to substantial litigation over several years concerning federal and state authorizations, which ultimately led to the project's termination and an impairment charge in 2024.

Related Party Transactions

• The Integrated Upstream and Gathering segment generated approximately $258 million (11.3%) of consolidated revenue from one customer, who was also a customer of the Pipeline and Storage segment, accounting for an additional $16 million (0.7%) of consolidated revenue in 2025.
• The Pipeline and Storage segment generated approximately 35% of its revenues in 2025 from services provided to the Utility segment or Integrated Upstream and Gathering segment.
• Supply Corporation has executed a Precedent Agreement with Seneca for 190,000 Dth per day of transportation capacity for the Tioga Pathway Project.

Stakeholder Impact

• Shareholders: Significant increase in net income and proved reserves, strategic acquisition for growth, but suspension of share repurchase program. Credit rating stability is important for borrowing costs.
• Employees: Approximately 47% of the workforce is covered by collective bargaining agreements, with negotiations for Pennsylvania units in late 2025. Focus on competitive benefits, compensation, and a safe, inclusive work environment.
• Customers (Utility): New base delivery rates in New York and a new weather normalization adjustment in Pennsylvania impact billing. Purchased gas costs are passed through, not impacting profit margins directly.
• Customers (Pipeline & Storage): Rate increases approved by FERC for Supply Corporation, but a modest reduction in Empire's transportation unit rates effective November 1, 2025.
• Regulatory Authorities: Ongoing compliance with federal and state regulations, including those related to climate change, safety standards, and rate proceedings. The CenterPoint Ohio acquisition is subject to regulatory review.

Next Steps

• Repay a $300.0 million delayed draw term loan maturing in February 2026.
• Commence construction on the Tioga Pathway Project in early calendar 2026, with a target in-service date in late calendar 2026.
• Bring the Shippingport Lateral Project's incremental capacity online as early as Fall 2026.
• Close the acquisition of Vectren Energy Delivery of Ohio, LLC in the fourth quarter of calendar 2026, pending regulatory approvals.
• Execute permanent financing for the CenterPoint Ohio acquisition, including long-term debt and common equity issuance.
• Begin negotiations with two collective bargaining units in Pennsylvania in late 2025.

Key Dates

Recommendation

The company demonstrated strong financial performance in fiscal 2025, with a significant rebound in net income and robust growth in natural gas production and proved reserves. The strategic acquisition of CenterPoint Ohio is a transformative move, expected to double the utility rate base and expand into a favorable regulatory environment, offering substantial long-term growth potential. While there were non-cash impairment charges and the share repurchase program is suspended, the underlying operational improvements, successful debt refinancing, and strong liquidity position indicate a healthy and expanding business. The company's commitment to developing PUD reserves and managing climate-related risks also provides a solid foundation for future value creation, making it an attractive investment.

Keywords

Natural Gas, Energy, Appalachian Basin, Utility, Pipeline, Storage, Exploration and Production, Midstream, SEC Filing, 10-K, Financial Results, Acquisition, CenterPoint Ohio, Capital Expenditures, Proved Reserves, Climate Change, Regulation, Hedging, Debt, Share Repurchase