National Fuel Gas Company (NFG) Q4 2026 earnings review
National Fuel doubles its utility business, but FY27 profit falls
National Fuel Gas Company, a natural gas driller, pipeline operator and utility owner in New York, Pennsylvania and Ohio, finished fiscal 2026 on plan but set a lower profit target for fiscal 2027. Fourth-quarter revenue edged up 3% to $468 million, while profit per share excluding one-offs stayed at $1.22 as price hedges offset a 7% drop in gas output. Chief executive David P. Bauer announced a plan to spin off the drilling business in late 2027, and by our math the new fiscal 2027 outlook has profit per share falling 18%.
| Q4 Revenue | $467.8M +2.5% from a year ago |
|---|---|
| Q4 Profit per share, excluding one-offs | $1.22 0% from a year ago |
| Q4 Natural gas production | 104.0 Bcf -6.8% from a year ago |
| FY27 Profit per share outlook, excluding one-offs | $6.00–6.40 middle of the range: -18% from FY26 |
⚖️ Verdict: 🔴 Bearish
The story got worse because the first fiscal 2027 outlook shows that lower gas prices, higher drilling unit costs and acquisition financing outweigh the new regulated utility profit. In addition, fourth-quarter gas production missed the bottom of a full-year target that management had already cut twice, even as drilling capital spending ran over budget. The good news: the Ohio utility purchase closed on time on October 1, and two major pipeline expansion projects entered service on November 1.
The question now is whether the regulated expansion can lift per-share profit once the Ohio financing is settled and the drilling unit is separated. One view is that pipeline rate settlements and doubling the utility rate base build a higher earnings base; the other is that new debt, extra shares and natural well declines absorb the gains. The Supply Corporation pipeline rate settlement due by December 2026 and first-quarter production will tell.
🐂 Bull Case
Regulated Rate Base And Pipeline Projects Step Up
National Fuel runs gas utilities and pipelines alongside its drilling business, and it has been building regulated assets to steady its earnings. On October 1 the company closed its purchase of CenterPoint Energy's Ohio gas utility, adding about 335,000 customers and doubling its utility rate base — the regulated asset value on which utilities earn a set return. One month later, it placed the Tioga Pathway and Shippingport Lateral pipeline projects into service.
- Utility FY27 operating income plan: $235–255 million, roughly double FY26's $122.6 million
- Pipeline and Storage FY27 revenue plan: $475–500 million, up 13% from FY26 at the middle of the range by our math
- Pennsylvania utility rate decision: regulators approved a $10.4 million rate increase, compared with the $19.7 million the utility requested
- New York utility tracker: regulators approved a System Modernization Tracker to recover pipe replacement costs
These milestones matter because they turn two years of regulatory filings and construction spending into billed revenue right away. Even though Pennsylvania regulators granted only about half of the requested rate hike, the Ohio utility addition and the two new pipelines lift regulated earnings while pipeline construction spending drops by 41% in the new plan.
What to watch: the Federal Energy Regulatory Commission rate settlement for Supply Corporation, which National Fuel expects before the end of December 2026. A settlement near its $95 million annual request would lift pipeline profit above the base plan.
Drilling Added Reserves And Replaced 150% Of Output
Seneca Resources, the company's exploration and production arm in Pennsylvania, needs deep underground gas reserves to support its upcoming spin-off. At the end of September, total proved reserves — gas quantities that geological and engineering data show can be recovered under current prices — reached 5,191 billion cubic feet equivalent (Bcfe), up 4% or 209 Bcfe from a year ago.
The energy producer replaced 150% of the gas it pumped during the year, because new well extensions and discoveries of 747 Bcfe far outweighed 420 Bcfe of production. Alongside the reserve growth, the board raised the annual dividend for a 56th straight year to $2.22 per share. What to watch: discretionary land spending in Tioga County, budgeted at $50–100 million in fiscal 2027, which will show how aggressively Seneca buys acreage ahead of the separation.
🐻 Bear Case
FY27 Profit Plan Drops 18% On Lower Gas Prices
"The long-term outlook for each of our businesses is strong," chief executive David P. Bauer said. Last quarter management framed its multi-year trajectory around 7% to 10% average annual profit per share growth through fiscal 2029, and the company just closed the Ohio utility purchase that doubles its utility rate base.
Yet National Fuel initiated its fiscal 2027 profit per share outlook, excluding one-offs, at $6.00 to $6.40, down 18% from fiscal 2026's $7.55 at the middle of the range by our math. The plan assumes New York Mercantile Exchange (NYMEX) benchmark natural gas prices average $2.85 per million British thermal units (MMBtu) and local Appalachian spot prices average $2.15. Even in the company's $3.50 gas sensitivity table, profit per share reaches only $6.85 to $7.25, still below fiscal 2026.
This step-down happens because lower gas prices and rising unit costs in the drilling segment overwhelm the new Ohio utility profit at the per-share level, once interest on the new acquisition debt and the 5% higher share count are included. In the fourth quarter, GAAP operating margin fell 5.7 percentage points from a year ago to 33.7%, as total operation and maintenance expenses — the day-to-day costs of running pipes, wells and corporate offices, including $17.9 million of deal and spin-off bills — rose by 5.5 percentage points of revenue.
What to watch: realized gas prices after price-lock hedges in the first quarter of fiscal 2027. A drop toward the $2.80 fourth-quarter level during the winter heating season would confirm that older, higher-priced hedges have rolled off.
Gas Output Missed Its Cut Plan While Spending Ran Over
Integrated Upstream and Gathering (IUG), the company's drilling and pipe-gathering division, previously set capital efficiency — generating more gas per dollar spent — as its core goal. Management had already lowered its fiscal 2026 gas production plan twice during the year, from 440–455 billion cubic feet (Bcf) down to 420–430 Bcf, blaming winter weather and well-completion interactions.
- Fourth-quarter gas production: 104.0 Bcf, down 6.8% from a year ago and below the 104.5–114.5 Bcf implied by the third-quarter outlook by our math
- Full-year gas production: 419.5 Bcf, down 1.6% from fiscal 2025 and below the 420–430 Bcf range
- Full-year IUG capital spending: $628.9 million, above the raised $580–605 million outlook
- Fourth-quarter IUG total operating costs: $1.39 per thousand cubic feet (Mcf), up $0.12 or 9.4% from a year ago
The division missed even the lowered floor because "natural declines from existing wells" outweighed new wells turned in line, while capital spending ran $36 million above the middle of its budget. Looking ahead, IUG expects 400 to 435 Bcf in fiscal 2027, which includes "estimated price-related marketing curtailments during October" and points to a 0.5% decline at the middle of the range by our math.
What to watch: first-quarter fiscal 2027 production volumes and well turn-in-line results. Another quarterly decline after October's price curtailments pass would show that underlying well performance is still lagging.
Risks This Quarter Didn't Answer
Several standing financial and regulatory questions received no new figures in the fourth-quarter earnings release.
- Seller note refinancing and equity dilution: management did not detail how much common stock or long-term debt it will issue to pay off the $1.2 billion 364-day seller note from the Ohio purchase.
- Standalone Ohio utility earnings: the release combines the new Ohio utility into the total Utility operating income target of $235–255 million without breaking out Ohio's standalone profit or financing drag.
- New York climate and electrification policy: the release gave no update on state mandates affecting long-term residential gas hookups, though the annual 10-K filing will cover regulatory risks.
👓 Other Themes
Plan To Split Into Two Public Companies By Late 2027
National Fuel announced a plan to separate its IUG drilling and gathering division into an independent public company named Seneca Resources in the second half of calendar 2027. Bauer said the split will "establish two scaled, financially sound publicly traded natural gas businesses", leaving National Fuel as a pure regulated utility and pipeline group with about $5 billion in rate base. The parent company will distribute at least 80.1% of Seneca's shares to shareholders and sell up to 19.9% to pay down debt.
💲 Other KPIs
Total debt — long-term bonds, current maturities and short-term bank notes combined — rose 39.4% from a year ago, up from $2,833 million at the end of fiscal 2025. The energy group issued $1.48 billion in long-term debt during the year and held $1,440 million of cash in escrow on September 30 to close the Ohio utility purchase the next day.
Full-year free cash flow — operating cash flow minus capital investment — fell 4.6% from $208.3 million in fiscal 2025, equaling 7.9% of revenue by our math. Operating cash flow climbed 15.6% to $1,272 million on higher full-year gas prices, but capital spending jumped 19.5% to $1,091 million as pipeline construction and drilling costs increased.
Weighted average diluted shares rose 5.0% from 91.2 million a year ago. National Fuel issued 4.4 million shares in a December 2025 private placement for $338 million in net proceeds to help pay for the Ohio gas utility, while keeping its share buyback programme paused.
🔮 Guidance
Cut against the multi-year framework. The first explicit plan for fiscal 2027 points to $6.20 at the middle of the range, down 17.9% from fiscal 2026's $7.55 by our math and well below the 7% to 10% multi-year growth rate discussed last quarter. It assumes $2.85 NYMEX gas and includes the full year of IUG and the new Ohio utility.
New. The capital budget rises 5.9% at the middle of the range from fiscal 2026's $1,091 million segment total by our math, excluding $50–100 million of optional land buying. Utility spending more than doubles to $350–400 million with the addition of Ohio, while Pipeline and Storage drops 41.1% to $140–180 million and IUG edges down 1.4% to $600–640 million.
Cut against the prior mid-single-digit target. At the middle of the range (417.5 Bcf), output falls 0.5% from fiscal 2026's 419.5 Bcf by our math. The forecast includes estimated price-related curtailments during October.
Held consistent with earlier project estimates. The middle of the range ($487.5 million) represents a 12.9% increase over fiscal 2026's $431.7 million by our math, driven by the November 1 start of the Tioga Pathway and Shippingport Lateral pipelines and the pending Supply Corporation rate case.
Held consistent with earlier commentary. The plan doubles Utility operating profit from fiscal 2026's $122.6 million (+99.8% at the middle of the range by our math), reflecting a full year of the acquired Ohio gas utility, the $10.4 million Pennsylvania rate hike, and the New York rate settlement.
New. Post-retirement benefit credit stays flat at a $25 million middle of the range, matching fiscal 2026's $24.7 million actual result.
New. The expected tax rate edges down from fiscal 2026's 24.8% actual rate and 25.5% prior-year plan.
New. Every per-unit cost line in the drilling and gathering business rises from fiscal 2026 full-year levels: G&A up from $0.18, lease operating expense up from $0.16, gathering O&M up from $0.13, and depreciation and depletion up from $0.79 per Mcf.
❓ Key Questions
How much profit does the Ohio utility add after debt costs?
Utility operating income doubles to $235–255 million in fiscal 2027, but consolidated profit per share drops 18%. Investors need the standalone net income and financing cost of the Ohio deal to see if the purchase adds to per-share earnings in year one.
Will refinancing the $1.2 billion seller note require more stock?
National Fuel closed the Ohio purchase on October 1 using a $1.2 billion 364-day seller note at 6.5% interest and later announced plans to retain up to 19.9% of Seneca in the 2027 spin-off. Management has not said whether it still plans to issue common equity before the note matures.
How much gas did October price curtailments hold back?
Fourth-quarter gas production missed the lowered full-year target on natural well declines, and the fiscal 2027 plan of 400–435 Bcf is down slightly at the middle of the range. Separating voluntary October price shut-ins from well performance will clarify Seneca's true production trajectory.
What debt split will Seneca Resources and National Fuel carry?
Total debt reached $3.95 billion before the $1.2 billion seller note was added on October 1. As the company prepares to spin off at least 80.1% of Seneca in late 2027, investors need to know how much debt moves to the drilling company.