10-Q
Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2016
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from____ to_____
Commission File Number 1-3880

NATIONAL FUEL GAS COMPANY
(Exact name of registrant as specified in its charter)
New Jersey
13-1086010
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
6363 Main Street
 
Williamsville, New York
14221
(Address of principal executive offices)
(Zip Code)

(716) 857-7000
(Registrant's telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.  YES  þ     NO  ¨
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  YES  þ   NO  ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting   company”   in   Rule   12b-2   of   the   Exchange   Act.    (Check  one):    
Large  Accelerated  Filer
þ
Accelerated Filer
¨
Non-Accelerated Filer
¨ (Do not check if a smaller reporting company)
Smaller Reporting Company
¨
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES  ¨   NO  þ
 
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
 
Common stock, par value $1.00 per share, outstanding at April 30, 2016: 84,935,329 shares.


Table of Contents


GLOSSARY OF TERMS
 
Frequently used abbreviations, acronyms, or terms used in this report:
 
National Fuel Gas Companies
 
Company
The Registrant, the Registrant and its subsidiaries or the Registrant’s subsidiaries as appropriate in the context of the disclosure
Distribution Corporation
National Fuel Gas Distribution Corporation
Empire
Empire Pipeline, Inc.
Midstream Corporation
National Fuel Gas Midstream Corporation
National Fuel
National Fuel Gas Company
NFR
National Fuel Resources, Inc.
Registrant
National Fuel Gas Company
Seneca
Seneca Resources Corporation
Supply Corporation
National Fuel Gas Supply Corporation
 
Regulatory Agencies
 
CFTC
Commodity Futures Trading Commission
EPA
United States Environmental Protection Agency
FASB
Financial Accounting Standards Board
FERC
Federal Energy Regulatory Commission
NYDEC
New York State Department of Environmental Conservation
NYPSC
State of New York Public Service Commission
PaDEP
Pennsylvania Department of Environmental Protection
PaPUC
Pennsylvania Public Utility Commission
SEC
Securities and Exchange Commission
Other
 
2015 Form 10-K
The Company’s Annual Report on Form 10-K for the year ended September 30, 2015
Bbl
Barrel (of oil)
Bcf
Billion cubic feet (of natural gas)
Bcfe (or Mcfe) –  represents Bcf (or Mcf) Equivalent
The total heat value (Btu) of natural gas and oil expressed as a volume of  natural gas. The Company uses a conversion formula of 1 barrel of oil = 6 Mcf of natural gas.
Btu
British thermal unit; the amount of heat needed to raise the temperature of one pound of water one degree Fahrenheit
Capital expenditure
Represents additions to property, plant, and equipment, or the amount of money a company spends to buy capital assets or upgrade its existing capital assets.
Cashout revenues
A cash resolution of a gas imbalance whereby a customer pays Supply Corporation and/or Empire for gas the customer receives in excess of amounts delivered into Supply Corporation’s and Empire’s systems by the customer’s shipper.
Degree day
A measure of the coldness of the weather experienced, based on the extent to which the daily average temperature falls below a reference temperature, usually 65 degrees Fahrenheit.
Derivative
A financial instrument or other contract, the terms of which include an underlying variable (a price, interest rate, index rate, exchange rate, or other variable) and a notional amount (number of units, barrels, cubic feet, etc.).  The terms also permit for the instrument or contract to be settled net and no initial net investment is required to enter into the financial instrument or contract.  Examples include futures contracts, forward contracts, options, no cost collars and swaps.
Development costs
Costs incurred to obtain access to proved oil and gas reserves and to provide facilities for extracting, treating, gathering and storing the oil and gas

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Table of Contents


Dodd-Frank Act
Dodd-Frank Wall Street Reform and Consumer Protection Act.
Dth
Decatherm; one Dth of natural gas has a heating value of 1,000,000 British thermal units, approximately equal to the heating value of 1 Mcf of natural gas.
Exchange Act
Securities Exchange Act of 1934, as amended
Expenditures for long-lived assets
Includes capital expenditures, stock acquisitions and/or investments in partnerships.
Exploration costs
Costs incurred in identifying areas that may warrant examination, as well as costs incurred in examining specific areas, including drilling exploratory wells.
FERC 7(c) application
An application to the FERC under Section 7(c) of the federal Natural Gas Act for authority to construct, operate (and provide services through) facilities to transport or store natural gas in interstate commerce.
Firm transportation and/or storage
The transportation and/or storage service that a supplier of such service is obligated by contract to provide and for which the customer is obligated to pay whether or not the service is utilized.
GAAP
Accounting principles generally accepted in the United States of America
Goodwill
An intangible asset representing the difference between the fair value of a company and the price at which a company is purchased.
Hedging
A method of minimizing the impact of price, interest rate, and/or foreign currency exchange rate changes, often times through the use of derivative financial instruments.
Hub
Location where pipelines intersect enabling the trading, transportation, storage, exchange, lending and borrowing of natural gas.
ICE
Intercontinental Exchange. An exchange which maintains a futures market for crude oil and natural gas.
Interruptible transportation and/or storage
The transportation and/or storage service that, in accordance with contractual arrangements, can be interrupted by the supplier of such service, and for which the customer does not pay unless utilized.
LDC
Local distribution company
LIBOR
London Interbank Offered Rate
LIFO
Last-in, first-out
Marcellus Shale
A Middle Devonian-age geological shale formation that is present nearly a mile or more below the surface in the Appalachian region of the United States, including much of Pennsylvania and southern New York.
Mbbl
Thousand barrels (of oil)
Mcf
Thousand cubic feet (of natural gas)
MD&A
Management’s Discussion and Analysis of Financial Condition and Results of Operations
MDth
Thousand decatherms (of natural gas)
MMBtu
Million British thermal units (heating value of one decatherm of natural gas)
MMcf
Million cubic feet (of natural gas)
NEPA
National Environmental Policy Act of 1969, as amended
NGA
The Natural Gas Act of 1938, as amended; the federal law regulating interstate natural gas pipeline and storage companies, among other things, codified beginning at 15 U.S.C. Section 717.
NYMEX
New York Mercantile Exchange.  An exchange which maintains a futures market for crude oil and natural gas.
Open Season
A bidding procedure used by pipelines to allocate firm transportation or storage capacity among prospective shippers, in which all bids submitted during a defined time period are evaluated as if they had been submitted simultaneously.
Precedent Agreement
An agreement between a pipeline company and a potential customer to sign a service agreement after specified events (called “conditions precedent”) happen, usually within a specified time.

3

Table of Contents


Proved developed reserves
Reserves that can be expected to be recovered through existing wells with existing equipment and operating methods.
Proved undeveloped (PUD) reserves
Reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required to make these reserves productive.
Reserves
The unproduced but recoverable oil and/or gas in place in a formation which has been proven by production.
Revenue decoupling mechanism
A rate mechanism which adjusts customer rates to render a utility financially indifferent to throughput decreases resulting from conservation.
S&P
Standard & Poor’s Rating Service
SAR
Stock appreciation right
Service agreement
The binding agreement by which the pipeline company agrees to provide service and the shipper agrees to pay for the service.
Stock acquisitions
Investments in corporations
VEBA
Voluntary Employees’ Beneficiary Association
WNC
Weather normalization clause; a clause in utility rates which adjusts customer rates to allow a utility to recover its normal operating costs calculated at normal temperatures.  If temperatures during the measured period are warmer than normal, customer rates are adjusted upward in order to recover projected operating costs.  If temperatures during the measured period are colder than normal, customer rates are adjusted downward so that only the projected operating costs will be recovered.




4

Table of Contents


INDEX
 
Page
 
 
 
 
 
 
 
 
 
6 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 3.  Defaults Upon Senior Securities 
 
Item 4.  Mine Safety Disclosures 
 
Item 5.  Other Information 
 
 
 
 
The Company has nothing to report under this item.
 
All references to a certain year in this report are to the Company’s fiscal year ended September 30 of that year, unless otherwise noted.


5

Table of Contents


Part I.  Financial Information
 
Item 1.  Financial Statements
National Fuel Gas Company
Consolidated Statements of Income and Earnings
Reinvested in the Business
(Unaudited)
 
Three Months Ended 
 March 31,
Six Months Ended 
 March 31,
(Thousands of Dollars, Except Per Common Share Amounts)
2016
 
2015
2016
 
2015
INCOME
 
 
 
 

 
 

Operating Revenues:
 
 
 
 
 
 
Utility and Energy Marketing Revenues
$
248,173

 
$
374,141

$
417,005

 
$
640,380

Exploration and Production and Other Revenues
144,570

 
166,139

297,454

 
371,917

Pipeline and Storage and Gathering Revenues
56,389

 
55,847

109,868

 
107,739

 
449,132

 
596,127

824,327

 
1,120,036

 
 
 
 
 
 
 
Operating Expenses:
 
 
 
 

 
 

Purchased Gas
81,623

 
190,600

123,691

 
317,690

Operation and Maintenance:
 
 
 
 
 
 
   Utility and Energy Marketing
57,309

 
62,764

104,858

 
112,461

   Exploration and Production and Other
42,964

 
50,906

88,539

 
94,401

   Pipeline and Storage and Gathering
21,541

 
19,575

41,109

 
38,965

Property, Franchise and Other Taxes
21,305

 
24,916

41,662

 
45,845

Depreciation, Depletion and Amortization
63,947

 
82,687

134,498

 
185,433

Impairment of Oil and Gas Producing Properties
397,443

 
120,348

832,894

 
120,348

 
686,132

 
551,796

1,367,251

 
915,143

Operating Income (Loss)
(237,000
)
 
44,331

(542,924
)
 
204,893

Other Income (Expense):
 
 
 
 

 
 

Interest Income
278

 
46

2,077

 
1,303

Other Income
3,236

 
1,388

5,654

 
2,571

Interest Expense on Long-Term Debt
(28,994
)
 
(22,376
)
(59,366
)
 
(44,687
)
Other Interest Expense
(1,237
)
 
(1,584
)
(2,617
)
 
(2,375
)
Income (Loss) Before Income Taxes
(263,717
)
 
21,805

(597,176
)
 
161,705

Income Tax Expense (Benefit)
(116,030
)
 
5,136

(260,380
)
 
60,296

 
 
 
 
 
 
 
Net Income (Loss) Available for Common Stock
(147,687
)
 
16,669

(336,796
)
 
101,409

 
 
 
 
 
 
 
EARNINGS REINVESTED IN THE BUSINESS
 
 
 
 

 
 

Balance at Beginning of Period
880,619

 
1,666,659

1,103,200

 
1,614,361

 
732,932

 
1,683,328

766,404

 
1,715,770

 
 
 
 
 
 
 
Dividends on Common Stock
(33,533
)
 
(32,488
)
(67,005
)
 
(64,930
)
Balance at March 31
$
699,399

 
$
1,650,840

$
699,399

 
$
1,650,840

 
 
 
 
 
 
 
Earnings Per Common Share:
 
 
 
 

 
 

Basic:
 
 
 
 

 
 

Net Income (Loss) Available for Common Stock
$
(1.74
)
 
$
0.20

$
(3.97
)
 
$
1.20

Diluted:
 
 
 
 

 
 

Net Income (Loss) Available for Common Stock
$
(1.74
)
 
$
0.20

$
(3.97
)
 
$
1.19

Weighted Average Common Shares Outstanding:
 
 
 
 

 
 

Used in Basic Calculation
84,806,982

 
84,317,508

84,728,680

 
84,262,471

Used in Diluted Calculation
84,806,982

 
85,133,142

84,728,680

 
85,175,961

Dividends Per Common Share:
 
 
 
 
 
 
Dividends Declared
$
0.395

 
$
0.385

$
0.790

 
$
0.770

See Notes to Condensed Consolidated Financial Statements

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Table of Contents


National Fuel Gas Company
Consolidated Statements of Comprehensive Income
(Unaudited)

                                                      
Three Months Ended 
 March 31,
 
Six Months Ended 
 March 31,
(Thousands of Dollars)                                  
2016
 
2015
 
2016
 
2015
Net Income (Loss) Available for Common Stock
$
(147,687
)
 
$
16,669

 
$
(336,796
)
 
$
101,409

Other Comprehensive Income (Loss), Before Tax:


 


 
 

 
 

Unrealized Gain (Loss) on Securities Available for Sale Arising During the Period
(4
)
 
265

 
(642
)
 
(147
)
Unrealized Gain (Loss) on Derivative Financial Instruments Arising During the Period
33,768

 
61,165

 
99,139

 
304,994

Reclassification Adjustment for Realized (Gains) Losses on Securities Available for Sale in Net Income
(388
)
 

 
(388
)
 

Reclassification Adjustment for Realized (Gains) Losses on Derivative Financial Instruments in Net Income
(61,235
)
 
(54,130
)
 
(118,405
)
 
(78,395
)
Other Comprehensive Income (Loss), Before Tax
(27,859
)
 
7,300

 
(20,296
)
 
226,452

Income Tax Expense (Benefit) Related to Unrealized Gain (Loss) on Securities Available for Sale Arising During the Period
(16
)
 
99

 
(207
)
 
(61
)
Income Tax Expense (Benefit) Related to Unrealized Gain (Loss) on Derivative Financial Instruments Arising During the Period
14,190

 
25,902

 
34,866

 
128,851

Reclassification Adjustment for Income Tax Benefit (Expense) on Realized Losses (Gains) from Securities Available for Sale in Net Income
(163
)
 

 
(163
)
 

Reclassification Adjustment for Income Tax Benefit (Expense) on Realized Losses (Gains) from Derivative Financial Instruments in Net Income
(25,600
)
 
(22,917
)
 
(43,606
)
 
(33,006
)
Income Taxes – Net
(11,589
)
 
3,084

 
(9,110
)
 
95,784

Other Comprehensive Income (Loss)
(16,270
)
 
4,216

 
(11,186
)
 
130,668

Comprehensive Income (Loss)
$
(163,957
)
 
$
20,885

 
$
(347,982
)
 
$
232,077

 





















See Notes to Condensed Consolidated Financial Statements

7

Table of Contents


National Fuel Gas Company
Consolidated Balance Sheets
(Unaudited)
 
 
March 31,
2016
 
September 30, 2015
(Thousands of Dollars)
 
 
 
ASSETS
 
 
 
Property, Plant and Equipment
$
9,451,538

 
$
9,261,323

Less - Accumulated Depreciation, Depletion and Amortization
4,879,363

 
3,929,428

 
4,572,175

 
5,331,895

Current Assets
 

 
 

Cash and Temporary Cash Investments
93,700

 
113,596

Hedging Collateral Deposits
9,963

 
11,124

Receivables – Net of Allowance for Uncollectible Accounts of $34,236 and $29,029, Respectively
137,718

 
105,004

Unbilled Revenue
35,140

 
20,746

Gas Stored Underground
8,599

 
34,252

Materials and Supplies - at average cost
33,430

 
30,414

Unrecovered Purchased Gas Costs
1,245

 

Other Current Assets
56,714

 
60,665

           
376,509

 
375,801

 
 
 
 
Other Assets
 

 
 

Recoverable Future Taxes
172,417

 
168,214

Unamortized Debt Expense
1,953

 
2,218

Other Regulatory Assets
270,941

 
278,227

Deferred Charges
17,063

 
15,129

Other Investments
104,273

 
92,990

Goodwill
5,476

 
5,476

Prepaid Post-Retirement Benefit Costs
26,344

 
24,459

Fair Value of Derivative Financial Instruments
253,716

 
270,363

Other                  
157

 
167

                   
852,340

 
857,243

 
 
 
 
Total Assets
$
5,801,024

 
$
6,564,939












See Notes to Condensed Consolidated Financial Statements
 
 

8

Table of Contents


National Fuel Gas Company
Consolidated Balance Sheets
(Unaudited)
                                  
March 31,
2016
 
September 30, 2015
(Thousands of Dollars)
 
 
 
CAPITALIZATION AND LIABILITIES
 
 
 
Capitalization:
 
 
 
Comprehensive Shareholders’ Equity
 
 
 
Common Stock, $1 Par Value
 
 
 
Authorized  - 200,000,000 Shares; Issued And Outstanding – 84,892,747 Shares and 84,594,383 Shares, Respectively
$
84,893

 
$
84,594

Paid in Capital
756,001

 
744,274

Earnings Reinvested in the Business
699,399

 
1,103,200

Accumulated Other Comprehensive Income
82,186

 
93,372

Total Comprehensive Shareholders’ Equity 
1,622,479

 
2,025,440

Long-Term Debt, Net of Unamortized Discount and Debt Issuance Costs
2,085,123

 
2,084,009

Total Capitalization 
3,707,602

 
4,109,449

 
 
 
 
Current and Accrued Liabilities
 

 
 

Notes Payable to Banks and Commercial Paper

 

Current Portion of Long-Term Debt

 

Accounts Payable
111,054

 
180,388

Amounts Payable to Customers
42,217

 
56,778

Dividends Payable
33,533

 
33,415

Interest Payable on Long-Term Debt
34,900

 
36,200

Customer Advances
33

 
16,236

Customer Security Deposits
16,101

 
16,490

Other Accruals and Current Liabilities
104,925

 
96,557

Fair Value of Derivative Financial Instruments
9,864

 
10,076

                                                 
352,627

 
446,140

 
 
 
 
Deferred Credits
 

 
 

Deferred Income Taxes
844,916

 
1,137,962

Taxes Refundable to Customers
93,674

 
89,448

Unamortized Investment Tax Credit
557

 
731

Cost of Removal Regulatory Liability
189,421

 
184,907

Other Regulatory Liabilities
101,104

 
108,617

Pension and Other Post-Retirement Liabilities
216,852

 
202,807

Asset Retirement Obligations
171,991

 
156,805

Other Deferred Credits
122,280

 
128,073

                                                 
1,740,795

 
2,009,350

Commitments and Contingencies (Note 6)

 

 
 
 
 
Total Capitalization and Liabilities
$
5,801,024

 
$
6,564,939

 
See Notes to Condensed Consolidated Financial Statements

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Table of Contents



National Fuel Gas Company
Consolidated Statements of Cash Flows
(Unaudited)
                                                        
Six Months Ended 
 March 31,
(Thousands of Dollars)                                  
2016
 
2015
OPERATING ACTIVITIES
 

 
 
Net Income (Loss) Available for Common Stock
$
(336,796
)
 
$
101,409

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

 
 

Impairment of Oil and Gas Producing Properties
832,894

 
120,348

Depreciation, Depletion and Amortization
134,498

 
185,433

Deferred Income Taxes
(283,912
)
 
10,351

Excess Tax Benefits Associated with Stock-Based Compensation Awards
(226
)
 
(9,024
)
Stock-Based Compensation
2,518

 
5,985

Other
6,106

 
4,709

Change in:
 

 
 

Hedging Collateral Deposits
1,161

 
(12,992
)
Receivables and Unbilled Revenue
(28,211
)
 
(88,339
)
Gas Stored Underground and Materials and Supplies
22,637

 
29,085

Unrecovered Purchased Gas Costs
(1,245
)
 

Other Current Assets
4,177

 
4,184

Accounts Payable
(31,786
)
 
62,832

Amounts Payable to Customers
(14,561
)
 
11,051

Customer Advances
(16,203
)
 
(18,735
)
Customer Security Deposits
(389
)
 
2,702

Other Accruals and Current Liabilities
22,420

 
53,491

Other Assets
3,754

 
1,826

Other Liabilities
(4,073
)
 
43,186

Net Cash Provided by Operating Activities
312,763

 
507,502

 
 
 
 
INVESTING ACTIVITIES
 

 
 

Capital Expenditures
(358,981
)
 
(493,341
)
Net Proceeds from Sale of Oil and Gas Producing Properties
104,938

 

Other                                             
(18,249
)
 
(1,262
)
Net Cash Used in Investing Activities
(272,292
)
 
(494,603
)
 
 
 
 
FINANCING ACTIVITIES
 

 
 

Changes in Notes Payable to Banks and Commercial Paper

 
71,900

Excess Tax Benefits Associated with Stock-Based Compensation Awards
226

 
9,024

Dividends Paid on Common Stock
(66,887
)
 
(64,842
)
Net Proceeds from Issuance of Common Stock
6,294

 
3,574

Net Cash (Used in) Provided by Financing Activities
(60,367
)
 
19,656

Net Increase (Decrease) in Cash and Temporary Cash Investments 
(19,896
)
 
32,555

 
 
 
 
Cash and Temporary Cash Investments at October 1
113,596

 
36,886

Cash and Temporary Cash Investments at March 31 
$
93,700

 
$
69,441

 
 
 
 
Supplemental Disclosure of Cash Flow Information
 
 
 
Non-Cash Investing Activities:
 

 
 

Non-Cash Capital Expenditures
$
66,058

 
$
94,484

Receivable from Sale of Oil and Gas Producing Properties
$
10,297

 
$

 See Notes to Condensed Consolidated Financial Statements

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Table of Contents


National Fuel Gas Company
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 
Note 1 - Summary of Significant Accounting Policies
 
Principles of Consolidation.  The Company consolidates all entities in which it has a controlling financial interest.  All significant intercompany balances and transactions are eliminated. The Company uses proportionate consolidation when accounting for drilling arrangements related to oil and gas producing properties accounted for under the full cost method of accounting.
 
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Reclassification. Due to the adoption of the authoritative guidance regarding the presentation of deferred income taxes, certain prior year amounts have been reclassified to conform with current year presentation. The Company reclassified Deferred Income Taxes of $137.2 million previously shown as Current Assets in the Company's 2015 Form 10-K to Deferred Income Taxes shown as Deferred Credits on the Consolidated Balance Sheet at September 30, 2015.

Earnings for Interim Periods.  The Company, in its opinion, has included all adjustments (which consist of only normally recurring adjustments, unless otherwise disclosed in this Form 10-Q) that are necessary for a fair statement of the results of operations for the reported periods. The consolidated financial statements and notes thereto, included herein, should be read in conjunction with the financial statements and notes for the years ended September 30, 2015, 2014 and 2013 that are included in the Company's 2015 Form 10-K.  The consolidated financial statements for the year ended September 30, 2016 will be audited by the Company's independent registered public accounting firm after the end of the fiscal year.
 
The earnings for the six months ended March 31, 2016 should not be taken as a prediction of earnings for the entire fiscal year ending September 30, 2016.  Most of the business of the Utility and Energy Marketing segments is seasonal in nature and is influenced by weather conditions.  Due to the seasonal nature of the heating business in the Utility and Energy Marketing segments, earnings during the winter months normally represent a substantial part of the earnings that those segments are expected to achieve for the entire fiscal year.  The Company’s business segments are discussed more fully in Note 7 – Business Segment Information.
 
Consolidated Statement of Cash Flows.  For purposes of the Consolidated Statement of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity of generally three months or less to be cash equivalents.
 
Hedging Collateral Deposits.  This is an account title for cash held in margin accounts funded by the Company to serve as collateral for hedging positions.  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.
 
Gas Stored Underground.  In the Utility segment, gas stored underground is carried at lower of cost or market, on a LIFO method.  Gas stored underground normally declines during the first and second quarters of the year and is replenished during the third and fourth quarters.  In the Utility segment, the current cost of replacing gas withdrawn from storage is recorded in the Consolidated Statements of Income and a reserve for gas replacement is recorded in the Consolidated Balance Sheets under the caption “Other Accruals and Current Liabilities.”  Such reserve, which amounted to $17.5 million at March 31, 2016, is reduced to zero by September 30 of each year as the inventory is replenished.
 
Property, Plant and Equipment.  In the Company’s Exploration and Production segment, oil and gas property acquisition, exploration and development costs are capitalized under the full cost method of accounting. Under this methodology, all costs associated with property acquisition, exploration and development activities are capitalized, including internal costs directly identified with acquisition, exploration and development activities. The internal costs that are capitalized do not include any costs related to production, general corporate overhead, or similar activities. 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.
 
Capitalized costs include costs related to unproved properties, which are excluded from amortization until proved reserves are found or it is determined that the unproved properties are impaired.  Such costs amounted to $163.4 million and $176.3 million at March 31, 2016 and September 30, 2015, respectively.  All costs related to unproved properties are reviewed quarterly to determine if impairment has occurred. The amount of any impairment is transferred to the pool of capitalized costs being amortized.

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Capitalized costs are subject to 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. The ceiling under this test represents (a) the present value of estimated future net cash flows, excluding future cash outflows associated with settling asset retirement obligations that have been accrued on the balance sheet, using a discount factor of 10%, which is computed by applying prices of oil and gas (as adjusted for hedging) to estimated future production of proved oil and gas reserves as of the date of the latest balance sheet, less estimated future expenditures, plus (b) the cost of unevaluated properties not being depleted, less (c) income tax effects related to the differences between the book and tax basis of the properties. The natural gas and oil prices used to calculate the full cost ceiling are based on an unweighted arithmetic average of the first day of the month oil and gas prices for each month within the twelve-month period prior to the end of the reporting period. 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 impairment is required to be charged to earnings in that quarter.  The book value of the oil and gas properties exceeded the ceiling at December 31, 2015 as well as March 31, 2016. As such, the Company recognized pre-tax impairment charges of $397.4 million and $832.9 million for the quarter and six months ended March 31, 2016, respectively. Deferred income tax benefits of $166.9 million and $349.8 million related to the impairment charges were also recognized for the quarter and six months ended March 31, 2016, respectively. In adjusting estimated future cash flows for hedging under the ceiling test at December 31, 2015 and March 31, 2016, estimated future net cash flows were increased by $253.7 million and $252.1 million, respectively.

On December 1, 2015, Seneca and IOG - CRV Marcellus, LLC (IOG), an affiliate of IOG Capital, LP, and funds managed by affiliates of Fortress Investment Group, LLC, executed a joint development agreement that allows IOG to participate in the development of certain oil and gas interests owned by Seneca in Elk, McKean and Cameron Counties, Pennsylvania. Under the terms of the agreement, Seneca and IOG will jointly participate in a program that will develop up to 80 Marcellus wells, with Seneca serving as program operator. IOG will hold an 80% working interest and is obligated to participate in the first 42 wells, and has a one-time option to participate in the remaining 38 wells that can be exercised on or before July 1, 2016. With respect to the first 42 wells, IOG has committed to fund up to $231 million to develop the joint wells. As of March 31, 2016, Seneca had received $104.9 million of cash and had recorded a $10.3 million receivable in recognition of IOG funding that is due to Seneca for costs previously incurred to develop a portion of the first 42 wells. The cash proceeds and receivable were recorded by Seneca as a $115.2 million reduction of property, plant and equipment. As the fee-owner of the property’s mineral rights, Seneca retains a 7.5% royalty interest and the remaining 20% working interest (26% net revenue interest) in the first 42 wells. If IOG exercises its option to participate in the remaining 38 wells, IOG has agreed to fund up to an additional $211 million to develop such joint wells. Seneca will retain a 10% royalty and the remaining 20% working interest (28% net revenue interest) in the remaining 38 wells. Seneca’s working interest under the agreement will increase to 85% after IOG achieves a 15% internal rate of return.

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Accumulated Other Comprehensive Income (Loss).  The components of Accumulated Other Comprehensive Income (Loss) and changes for the quarter and six months ended March 31, 2016 and 2015, net of related tax effect, are as follows (amounts in parentheses indicate debits) (in thousands): 
 
Gains and Losses on Derivative Financial Instruments
Gains and Losses on Securities Available for Sale
Funded Status of the Pension and Other Post-Retirement Benefit Plans
Total
Three Months Ended March 31, 2016
 
 
 
 
Balance at January 1, 2016
$
162,728

$
5,522

$
(69,794
)
$
98,456

Other Comprehensive Gains and Losses Before Reclassifications
19,578

12


19,590

Amounts Reclassified From Other Comprehensive Income (Loss)
(35,635
)
(225
)

(35,860
)
Balance at March 31, 2016
$
146,671

$
5,309

$
(69,794
)
$
82,186

Six Months Ended March 31, 2016
 
 
 
 
Balance at October 1, 2015
$
157,197

$
5,969

$
(69,794
)
$
93,372

Other Comprehensive Gains and Losses Before Reclassifications
64,273

(435
)

63,838

Amounts Reclassified From Other Comprehensive Income (Loss)
(74,799
)
(225
)

(75,024
)
Balance at March 31, 2016
$
146,671

$
5,309

$
(69,794
)
$
82,186

Three Months Ended March 31, 2015
 
 
 
 
Balance at January 1, 2015
$
170,363

$
8,130

$
(56,020
)
$
122,473

Other Comprehensive Gains and Losses Before Reclassifications
35,263

166


35,429

Amounts Reclassified From Other Comprehensive Income (Loss)
(31,213
)


(31,213
)
Balance at March 31, 2015
$
174,413

$
8,296

$
(56,020
)
$
126,689

Six Months Ended March 31, 2015
 
 
 
 
Balance at October 1, 2014
$
43,659

$
8,382

$
(56,020
)
$
(3,979
)
Other Comprehensive Gains and Losses Before Reclassifications
176,143

(86
)

176,057

Amounts Reclassified From Other Comprehensive Income (Loss)
(45,389
)


(45,389
)
Balance at March 31, 2015
$
174,413

$
8,296

$
(56,020
)
$
126,689

 
 
 
 
 


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Reclassifications Out of Accumulated Other Comprehensive Income (Loss).  The details about the reclassification adjustments out of accumulated other comprehensive income (loss) for the quarter and six months ended March 31, 2016 and 2015 are as follows (amounts in parentheses indicate debits to the income statement) (in thousands):
Details About Accumulated Other Comprehensive Income (Loss) Components
Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income
Affected Line Item in the Statement Where Net Income (Loss) is Presented
 
Three Months Ended March 31,
Six Months Ended March 31,
 
 
2016
2015
2016
2015
 
Gains (Losses) on Derivative Financial Instrument Cash Flow Hedges:
 
 
 
 
 
     Commodity Contracts

$57,914


$53,471


$114,242


$73,508

Operating Revenues
     Commodity Contracts
3,530

659

4,450

4,887

Purchased Gas
     Foreign Currency Contracts
(209
)

(287
)

Operation and Maintenance Expense
Gains (Losses) on Securities Available for Sale
388


388


Other Income
 
61,623

54,130

118,793

78,395

Total Before Income Tax
 
(25,763
)
(22,917
)
(43,769
)
(33,006
)
Income Tax Expense
 

$35,860


$31,213


$75,024


$45,389

Net of Tax

Other Current Assets.  The components of the Company’s Other Current Assets are as follows (in thousands):
                            
At March 31, 2016
 
At September 30, 2015
 
 
 
 
Prepayments
$
5,923

 
$
10,743

Prepaid Property and Other Taxes
21,757

 
13,709

Fair Values of Firm Commitments
12,941

 
15,775

Regulatory Assets
16,093

 
20,438

 
$
56,714

 
$
60,665

 
Other Accruals and Current Liabilities.  The components of the Company’s Other Accruals and Current Liabilities are as follows (in thousands):
                            
At March 31, 2016
 
At September 30, 2015
 
 
 
 
Accrued Capital Expenditures
$
38,299

 
$
53,652

Regulatory Liabilities
20,786

 
5,346

Reserve for Gas Replacement
17,469

 

Federal Income Taxes Payable
4,102

 
5,686

State Income Taxes Payable
224

 
1,170

Other
24,045

 
30,703

 
$
104,925

 
$
96,557

 
Earnings Per Common Share.  Basic earnings per common share is computed by dividing income or loss by the weighted average number of common shares outstanding for the period. Diluted earnings per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.  For purposes of determining earnings per common share, the potentially dilutive securities the Company has outstanding are stock options, SARs, restricted stock units and performance shares.  As the Company recognized a net loss for both the quarter and six months ended March 31, 2016, the aforementioned securities, amounting to 386,626 and 451,291 securities, were not recognized in the diluted earnings per share calculation for the quarter and six months ended March 31, 2016, respectively. For 2015, the diluted weighted average shares outstanding shown on the Consolidated Statements of Income reflects the potential dilution as a result of these securities as determined using the Treasury Stock Method.  Stock options, SARs, restricted stock units and performance shares that are antidilutive are excluded from the calculation of diluted earnings per common share. There were 5 and 2,565 securities excluded as being antidilutive for the quarter and six months ended March 31, 2015, respectively.

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Stock-Based Compensation.  The Company granted 309,996 performance shares during the six months ended March 31, 2016. The weighted average fair value of such performance shares was $30.71 per share for the six months ended March 31, 2016. Performance shares are an award constituting units denominated in common stock of the Company, the number of which may be adjusted over a performance cycle based upon the extent to which performance goals have been satisfied.  Earned performance shares may be distributed in the form of shares of common stock of the Company, an equivalent value in cash or a combination of cash and shares of common stock of the Company, as determined by the Company. The performance shares do not entitle the participant to receive dividends during the vesting period.
 
Half of the performance shares granted during the six months ended March 31, 2016 must meet a performance goal related to relative return on capital over the performance cycle of October 1, 2015 to September 30, 2018.  The performance goal over the performance cycle 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 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 six months ended March 31, 2016 must meet a performance goal related to relative total shareholder return over the performance cycle of October 1, 2015 to September 30, 2018.  The performance goal over the performance cycle 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 number of these total shareholder return performance shares ("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.  The fair value price at the date of grant for the TSR performance shares is determined using a Monte Carlo simulation technique, which includes a reduction in value for the present value of forgone dividends over the vesting term of the award.  This price is multiplied by the number of TSR performance shares awarded, the result of which is recorded as compensation expense over the vesting term of the award.
 
The Company granted 99,843 non-performance based restricted stock units during the six months ended March 31, 2016.  The weighted average fair value of such non-performance based restricted stock units was $35.57 per share for the six months ended March 31, 2016. 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. These non-performance based restricted stock units do not entitle the participant to receive dividends during the vesting period. The accounting for non-performance based restricted stock units is the same as the accounting for restricted share awards, except that the fair value at the date of grant of the restricted stock units must be reduced by the present value of forgone dividends over the vesting term of the award.
 
No stock options, SARs or restricted share awards were granted by the Company during the six months ended March 31, 2016.

New Authoritative Accounting and Financial Reporting Guidance. In May 2014, the FASB issued authoritative guidance regarding revenue recognition. The authoritative guidance provides a single, comprehensive revenue recognition model for all contracts with customers to improve comparability. The revenue standard contains principles that an entity will apply to determine the measurement of revenue and timing of when it is recognized. The original effective date of this authoritative guidance was as of the Company's first quarter of fiscal 2018. However, the FASB has delayed the effective date of the new revenue standard by one year, and the guidance will now be effective as of the Company's first quarter of fiscal 2019. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements and disclosures.

In June 2014, the FASB issued authoritative guidance regarding accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the employee has completed the requisite service period. This authoritative guidance requires that such performance targets that affect vesting be treated as performance conditions, meaning that the performance target should not be factored in the calculation of the award at the grant date. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved. This authoritative guidance will be effective as of the Company's first quarter of fiscal 2017, with early adoption permitted. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements.

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In July 2015, the FASB issued authoritative guidance simplifying inventory measurement by requiring companies to value inventory at the lower of cost and net realizable value. The authoritative guidance applies to all inventory other than inventory that is measured using last-in, first-out or the retail inventory method. The intention of this authoritative guidance is to eliminate some diversity in practice. This authoritative guidance will be effective as of the Company's first quarter of fiscal 2018, with early adoption permitted. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements.
    
In November 2015, the FASB issued authoritative guidance simplifying the presentation of deferred income taxes. The authoritative guidance requires entities with a classified balance sheet to present all deferred tax assets and liabilities as noncurrent. The Company early adopted this guidance at December 31, 2015 on a retrospective basis.
    
In January 2016, the FASB issued authoritative guidance regarding the recognition and measurement of financial assets and liabilities. The authoritative guidance primarily affects the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. All equity investments in unconsolidated entities will be measured at fair value through earnings rather than through other comprehensive income. This authoritative guidance will be effective as of the Company's first quarter of fiscal 2019. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements.

In February 2016, the FASB issued authoritative guidance requiring organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by all leases, regardless of whether they are considered to be capital leases or operating leases. The FASB’s previous authoritative guidance required organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by capital leases while excluding operating leases from balance sheet recognition. The new authoritative guidance will be effective as of the Company’s first quarter of fiscal 2020, with early adoption permitted. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements.

In March 2016, the FASB issued authoritative guidance simplifying several aspects of the accounting for stock-based compensation. Among other things, the revised guidance specifies that the difference between the compensation recognized for financial reporting purposes and the deduction allowed for tax purposes (excess tax benefit or deficiency) shall be recognized as income tax expense or benefit in the income statement, as opposed to the current treatment where this difference is recognized as additional paid-in capital in the balance sheet. For statement of cash flows purposes, the revised guidance specifies that the excess tax benefit shall be classified along with other income tax cash flows as an item impacting cash flow from operating activities. The current guidance separates the excess tax benefit from other income tax cash flows and classifies the excess tax benefit as an item impacting cash flow from financing activities. The new authoritative guidance will be effective as of the Company’s first quarter of fiscal 2018, with early adoption permitted. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements.
Note 2 – Fair Value Measurements
 
The FASB authoritative guidance regarding fair value measurements establishes a fair-value hierarchy and prioritizes the inputs used in valuation techniques that measure fair value. Those inputs are prioritized into three levels. Level 1 inputs are unadjusted quoted prices in active markets for assets or liabilities that the Company can access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly at the measurement date. Level 3 inputs are unobservable inputs for the asset or liability at the measurement date. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.
 

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The following table sets forth, by level within the fair value hierarchy, the Company's financial assets and liabilities (as applicable) that were accounted for at fair value on a recurring basis as of March 31, 2016 and September 30, 2015.  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 and oil swaps because a significant number of the counterparties enter into both gas and oil swap agreements with the Company.  
Recurring Fair Value Measures
At fair value as of March 31, 2016
(Thousands of Dollars)   
Level 1
 
Level 2
 
Level 3
 
Netting Adjustments(1)
 
Total(1)
Assets:
 

 
 

 
 

 
 

 
 

Cash Equivalents – Money Market Mutual Funds
$
65,530

 
$

 
$

 
$

 
$
65,530

Derivative Financial Instruments:
 

 
 

 
 

 
 

 
 

Commodity Futures Contracts – Gas
2,754

 

 

 
(2,754
)
 

Over the Counter Swaps – Gas and Oil

 
255,867

 

 
(406
)
 
255,461

Foreign Currency Contacts

 

 

 
(1,745
)
 
(1,745
)
Other Investments:
 

 
 

 
 

 
 

 
 

Balanced Equity Mutual Fund
36,297

 

 

 

 
36,297

Fixed Income Mutual Fund
25,085

 

 

 

 
25,085

Common Stock – Financial Services Industry
3,942

 

 

 

 
3,942

Hedging Collateral Deposits
9,963

 

 

 

 
9,963

Total                                           
$
143,571

 
$
255,867

 
$

 
$
(4,905
)
 
$
394,533

 
 
 
 
 
 
 
 
 
 
Liabilities:
 

 
 

 
 

 
 

 
 

Derivative Financial Instruments:
 

 
 

 
 

 
 

 
 

Commodity Futures Contracts – Gas
$
10,311

 
$

 
$

 
$
(2,754
)
 
$
7,557

Over the Counter Swaps – Gas and Oil

 
2,713

 

 
(406
)
 
2,307

Foreign Currency Contracts

 
1,745

 

 
(1,745
)
 

Total
$
10,311

 
$
4,458

 
$

 
$
(4,905
)
 
$
9,864

Total Net Assets/(Liabilities)
$
133,260

 
$
251,409

 
$

 
$

 
$
384,669

 
Recurring Fair Value Measures
At fair value as of September 30, 2015
(Thousands of Dollars)   
Level 1
 
Level 2
 
Level 3
 
Netting Adjustments(1)
 
Total(1)
Assets:
 

 
 

 
 

 
 

 
 

Cash Equivalents – Money Market Mutual Funds
$
92,196

 
$

 
$

 
$

 
$
92,196

Derivative Financial Instruments:
 

 
 

 
 

 
 

 
 

Commodity Futures Contracts – Gas
6,373

 

 

 
(6,373
)
 

Over the Counter Swaps – Gas and Oil

 
272,335

 
1,791

 
(808
)
 
273,318

Foreign Currency Contracts

 

 

 
(2,955
)
 
(2,955
)
Other Investments:
 

 
 

 
 

 
 

 
 

Balanced Equity Mutual Fund
34,884

 

 

 

 
34,884

Fixed Income Mutual Fund
8,004

 

 

 

 
8,004

Common Stock – Financial Services Industry
4,318

 

 

 

 
4,318

Other Common Stock
450

 

 

 

 
450

Hedging Collateral Deposits
11,124

 

 

 

 
11,124

Total                                           
$
157,349

 
$
272,335

 
$
1,791

 
$
(10,136
)
 
$
421,339

 
 
 
 
 
 
 
 
 
 
Liabilities:
 

 
 

 
 

 
 

 
 

Derivative Financial Instruments:
 

 
 

 
 

 
 

 
 

Commodity Futures Contracts – Gas
$
15,276

 
$

 
$

 
$
(6,373
)
 
$
8,903

Over the Counter Swaps – Gas and Oil

 
1,981

 

 
(808
)
 
1,173

     Foreign Currency Contracts

 
2,955

 

 
(2,955
)
 

Total
$
15,276

 
$
4,936

 
$

 
$
(10,136
)
 
$
10,076

Total Net Assets/(Liabilities)
$
142,073

 
$
267,399

 
$
1,791

 
$

 
$
411,263


(1) 
Netting Adjustments represent the impact of legally-enforceable master netting arrangements that allow the Company to net gain and loss positions held with the same counterparties. The net asset or net liability for each counterparty is recorded as an asset or liability on the Company’s balance sheet.
 

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Derivative Financial Instruments
 
At March 31, 2016 and September 30, 2015, the derivative financial instruments reported in Level 1 consist of natural gas NYMEX and ICE futures contracts used in the Company’s Energy Marketing segment. Hedging collateral deposits of $10.0 million at March 31, 2016 and $11.1 million at September 30, 2015, which are associated with these futures contracts, have been reported in Level 1 as well. The derivative financial instruments reported in Level 2 at March 31, 2016 and September 30, 2015 consist of natural gas price swap agreements used in the Company’s Exploration and Production and Energy Marketing segments, the majority of the crude oil price swap agreements used in the Company’s Exploration and Production segment and foreign currency contracts used in the Company's Exploration and Production segment. The fair value of the Level 2 price swap agreements 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). The fair value of the Level 2 foreign currency contracts is determined using the market approach based on observable market transactions of forward Canadian currency rates. The derivative financial instruments reported in Level 3 consist of a small portion of the crude oil price swap agreements used in the Company’s Exploration and Production segment at September 30, 2015 that settled prior to December 31, 2015.  The fair value of the Level 3 crude oil price swap agreements was based on an internal, discounted cash flow model that uses both observable (i.e. LIBOR based discount rates) and unobservable inputs (i.e. basis differential information of crude oil trading markets with low trading volume). 
 
The accounting rules 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 March 31, 2016, the Company determined that nonperformance risk 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.
 
The tables listed below provide reconciliations of the beginning and ending net balances for assets and liabilities measured at fair value and classified as Level 3 for the quarters and six months ended March 31, 2016 and 2015, respectively. For the quarters and six months ended March 31, 2016 and March 31, 2015, no transfers in or out of Level 1 or Level 2 occurred. There were no purchases or sales of derivative financial instruments during the periods presented in the tables below.  All settlements of the derivative financial instruments are reflected in the Gains/Losses Realized and Included in Earnings column of the tables below (amounts in parentheses indicate credits in the derivative asset/liability accounts).  
 
 
 
 
 
 
 
Fair Value Measurements Using Unobservable Inputs (Level 3)
(Thousands of Dollars)   
 
Total Gains/Losses 
 
 
 
October 1, 2015
Gains/Losses Realized and Included in Earnings
Gains/Losses Unrealized and Included in Other Comprehensive Income (Loss)
Transfer In/Out of Level 3
March 31, 2016
Derivative Financial Instruments(2)
$
1,791

$
(2,002
)
(1) 
$
211

$

$

 
 
 
 
 
 
 
    
(1) 
Amounts are reported in Operating Revenues in the Consolidated Statement of Income for the six months ended March 31, 2016
(2) 
Derivative Financial Instruments are shown on a net basis.        

Fair Value Measurements Using Unobservable Inputs (Level 3)
(Thousands of Dollars)   
 
Total Gains/Losses 
 
 
 
January 1, 2015
Gains/Losses Realized and Included in Earnings
Gains/Losses Unrealized and Included in Other Comprehensive Income (Loss)
Transfer In/Out of Level 3
March 31, 2015
Derivative Financial Instruments(2)
$
5,337

$
(2,949
)
(1) 
$
2,438

$

$
4,826


(1) 
Amounts are reported in Operating Revenues in the Consolidated Statement of Income for the three months ended March 31, 2015
(2) 
Derivative Financial Instruments are shown on a net basis.

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Table of Contents


 
 
 
 
 
 
 
Fair Value Measurements Using Unobservable Inputs (Level 3)
(Thousands of Dollars)   
 
Total Gains/Losses 
 
 
 
October 1, 2014
Gains/Losses Realized and Included in Earnings
Gains/Losses Unrealized and Included in Other Comprehensive Income (Loss)
Transfer In/Out of Level 3
March 31, 2015
Derivative Financial Instruments(2)
$
1,368

$
(6,804
)
(1) 
$
10,262

$

$
4,826

 
 
 
 
 
 
 

(1) 
Amounts are reported in Operating Revenues in the Consolidated Statement of Income for the six months ended March 31, 2015
(2) 
Derivative Financial Instruments are shown on a net basis.
    
Note 3 – Financial Instruments
 
Long-Term Debt.  The fair market value of the Company’s debt, as presented in the table below, was determined using a discounted cash flow model, which incorporates the Company’s credit ratings and current market conditions in determining the yield, and subsequently, the fair market value of the debt.  Based on these criteria, the fair market value of long-term debt, including current portion, was as follows (in thousands): 
 
March 31, 2016
 
September 30, 2015
 
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
Long-Term Debt
$
2,085,123

 
$
2,026,988

 
$
2,084,009

 
$
2,129,558

 
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. The fair value of long-term debt was calculated using observable inputs (U.S. Treasuries/LIBOR for the risk free component and company specific credit spread information – generally obtained from recent trade activity in the debt).  As such, the Company considers the debt to be Level 2.
 
Any temporary cash investments, notes payable to banks and commercial paper are stated at cost. Temporary cash investments are considered Level 1, while notes payable to banks and commercial paper are considered to be Level 2.  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.
 
Other Investments.  Investments in life insurance are stated at their cash surrender values or net present value as discussed below. Investments in an equity mutual fund, a fixed income mutual fund and the stock of an insurance company (marketable equity securities), as discussed below, are stated at fair value based on quoted market prices.
 
Other investments include cash surrender values of insurance contracts (net present value in the case of split-dollar collateral assignment arrangements) and marketable equity and fixed income securities. The values of the insurance contracts amounted to $38.9 million at March 31, 2016 and $45.3 million at September 30, 2015. The fair value of the equity mutual fund was $36.3 million at March 31, 2016 and $34.9 million at September 30, 2015. The gross unrealized gain on this equity mutual fund was $6.2 million at March 31, 2016 and $6.5 million at September 30, 2015. The fair value of the fixed income mutual fund was $25.1 million at March 31, 2016 and $8.0 million at September 30, 2015. The gross unrealized loss on this fixed income mutual fund was $0.1 million at March 31, 2016. The fair value of the stock of an insurance company was $3.9 million at March 31, 2016 and $4.3 million at September 30, 2015. The gross unrealized gain on this stock was $2.2 million at March 31, 2016 and $2.6 million at September 30, 2015. The insurance contracts and marketable equity securities are primarily informal funding mechanisms for various benefit obligations the Company has to certain employees.
 
Derivative Financial Instruments.  The Company uses derivative financial instruments to manage commodity price risk in the Exploration and Production segment as well as the Energy Marketing segment. The Company enters into futures contracts 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. 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. These instruments are accounted for as cash flow hedges. The Company also enters into futures contracts and swaps, which are accounted for as cash flow hedges, to manage the price risk associated with forecasted gas purchases. The Company enters into futures

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contracts and swaps to mitigate risk associated with fixed price sales commitments, fixed price purchase commitments, and the decline in value of natural gas held in storage. These instruments are accounted for as fair value hedges. The duration of the Company’s combined cash flow and fair value commodity hedges does not typically exceed 5 years while the foreign currency forward contracts do not exceed ten years. The Exploration and Production segment holds the majority of the Company’s derivative financial instruments. The derivative financial instruments held by the Energy Marketing segment are not considered to be material to the Company.

The Company has presented its net derivative assets and liabilities as “Fair Value of Derivative Financial Instruments” on its Consolidated Balance Sheets at March 31, 2016 and September 30, 2015.  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.
 
Cash Flow Hedges
 
For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the period or periods during which the hedged transaction affects earnings.  Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. 

As of March 31, 2016, the Company had the following commodity derivative contracts (swaps and futures contracts) outstanding:
Commodity
Units

 
Natural Gas
139.5

 Bcf (short positions)
Natural Gas
3.1

 Bcf (long positions)
Crude Oil
1,467,000

 Bbls (short positions)
    
As of March 31, 2016, the Company was hedging a total of $84.5 million of forecasted transportation costs denominated in Canadian dollars with foreign currency forward contracts (long positions).
As of March 31, 2016, the Company had $252.9 million ($146.7 million after tax) of net hedging gains included in the accumulated other comprehensive income balance. It is expected that $180.3 million ($104.6 million after tax) of such unrealized gains will be reclassified into the Consolidated Statement of Income within the next 12 months as the underlying hedged transaction are recorded in earnings.
Refer to Note 1, under Accumulated Other Comprehensive Income (Loss), for the after-tax gain (loss) pertaining to derivative financial instruments.


20

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The Effect of Derivative Financial Instruments on the Statement of Financial Performance for the
Three Months Ended March 31, 2016 and 2015 (Thousands of Dollars)
Derivatives in Cash Flow Hedging Relationships
Amount of Derivative Gain or (Loss) Recognized in Other Comprehensive Income (Loss) on the Consolidated Statement of Comprehensive Income (Loss) (Effective Portion) for the Three Months Ended March 31,
Location of Derivative Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) on the Consolidated Balance Sheet into the Consolidated Statement of Income (Effective Portion)
Amount of Derivative Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) on the Consolidated Balance Sheet into the Consolidated Statement of Income (Effective Portion) for the Three Months Ended March 31,
Location of Derivative Gain or (Loss) Recognized in the Consolidated Statement of Income (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Derivative Gain or (Loss) Recognized in the Consolidated Statement of Income (Ineffective Portion and Amount Excluded from Effectiveness Testing) for the Three Months Ended March 31,
 
2016
2015
 
2016
2015
 
2016
2015
Commodity Contracts
$
30,876

$
60,571

Operating Revenue
$
57,914

$
53,471

Operating Revenue
$
31

$
1,469

Commodity Contracts
$
(214
)
$
594

Purchased Gas
$
3,530

$
659

Not Applicable
$

$

Foreign Currency Contracts
$
3,106

$

Operation and Maintenance Expense
$
(209
)
$

Not Applicable
$

$

Total
$
33,768

$
61,165

 
$
61,235

$
54,130

 
$
31

$
1,469

The Effect of Derivative Financial Instruments on the Statement of Financial Performance for the
Six Months Ended March 31, 2016 and 2015 (Thousands of Dollars)
Derivatives in Cash Flow Hedging Relationships
Amount of Derivative Gain or (Loss) Recognized in Other Comprehensive Income (Loss) on the Consolidated Statement of Comprehensive Income (Loss) (Effective Portion) for the Six Months Ended March 31,
Location of Derivative Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) on the Consolidated Balance Sheet into the Consolidated Statement of Income (Effective Portion)
Amount of Derivative Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) on the Consolidated Balance Sheet into the Consolidated Statement of Income (Effective Portion) for the Six Months Ended March 31,
Location of Derivative Gain or (Loss) Recognized in the Consolidated Statement of Income (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Derivative Gain or (Loss) Recognized in the Consolidated Statement of Income (Ineffective Portion and Amount Excluded from Effectiveness Testing) for the Six Months Ended March 31,
 
2016
2015
 
2016
2015
 
2016
2015
Commodity Contracts
$
96,217

$
300,594

Operating Revenue
$
114,242

$
73,508

Operating Revenue
$
168

$
2,929

Commodity Contracts
$
1,999

$
4,400

Purchased Gas
$
4,450

$
4,887

Not Applicable
$

$

Foreign Currency Contracts
$
923

$

Operation and Maintenance Expense
$
(287
)
$

Not Applicable
$

$

Total
$
99,139

$
304,994

 
$
118,405

$
78,395

 
$
168

$
2,929

 
 
 
 
 
 
 
 
 
Fair Value Hedges
 
The Company utilizes fair value hedges to mitigate risk associated with fixed price sales commitments, fixed price purchase commitments, and the decline in the value of certain natural gas held in storage. With respect to fixed price sales commitments, the Company enters into long positions to mitigate the risk of price increases for natural gas supplies that could occur after the Company enters into fixed price sales agreements with its customers. With respect to fixed price purchase commitments, the Company enters into short positions to mitigate the risk of price decreases that could occur after the Company locks into fixed price purchase deals with its suppliers. With respect to storage hedges, the Company enters into short positions to mitigate the risk of price decreases that could result in a lower of cost or market writedown of the value of natural gas in storage that is recorded in the Company’s financial statements. As of March 31, 2016, the Company’s Energy Marketing segment had fair value hedges covering approximately 13.8 Bcf (13.2 Bcf of fixed price sales commitments, 0.1 Bcf of fixed price purchase commitments and 0.5 Bcf of commitments related to the withdrawal of storage gas). For derivative instruments that are designated

21

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and qualify as a fair value hedge, the gain or loss on the derivative as well as the offsetting gain or loss on the hedged item attributable to the hedged risk completely offset each other in current earnings, as shown below.

Derivatives in Fair Value Hedging Relationships
Location of Gain or (Loss) on Derivative and Hedged Item Recognized in the Consolidated Statement of Income
Amount of Gain or (Loss) on Derivative Recognized in the Consolidated Statement of Income for the
Six Months Ended March 31, 2016
(In Thousands)
Amount of Gain or (Loss) on the Hedged Item Recognized in the Consolidated Statement of Income for the
Six Months Ended March 31, 2016
(In Thousands)
Commodity Contracts
Operating Revenues
$
5,557

$
(5,557
)
Commodity Contracts
Purchased Gas
$
(154
)
$
154

 
 
$
5,403

$
(5,403
)
 
Credit Risk
 
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. The Company has over-the-counter swap positions and applicable foreign currency forward contracts with sixteen counterparties of which fifteen are in a net gain position.   On average, the Company had $16.8 million of credit exposure per counterparty in a gain position at March 31, 2016. The maximum credit exposure per counterparty in a gain position at March 31, 2016 was $43.2 million. The Company’s gain position on such derivative financial instruments for certain counterparties exceeded the established thresholds at which the counterparties would be required to post collateral. At March 31, 2016, collateral deposits from counterparties of $24.2 million were posted. These collateral deposits are recorded as a component of Accounts Payable on the Consolidated Balance Sheet.
 
As of March 31, 2016, twelve of the sixteen counterparties to the Company’s outstanding derivative instrument contracts (specifically the over-the-counter swaps and 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. A decline in the Company’s credit rating, in and of itself, would not cause the Company to be required to increase the level of its hedging collateral deposits (in the form of cash deposits, letters of credit or treasury debt instruments). If the Company’s outstanding derivative instrument contracts were in a liability position (or if the liability were larger) and/or the Company’s credit rating declined, then additional hedging collateral deposits may be required.  At March 31, 2016, the fair market value of the derivative financial instrument assets with a credit-risk related contingency feature was $162.9 million according to the Company’s internal model (discussed in Note 2 — Fair Value Measurements).  For its over-the-counter swap agreements and foreign currency forward contracts, no hedging collateral deposits were required to be posted by the Company at March 31, 2016.    
 
For its exchange traded futures contracts, the Company was required to post $10.0 million in hedging collateral deposits as of March 31, 2016.   As these are exchange traded futures contracts, there are no specific credit-risk related contingency features. The Company posts hedging collateral based on open positions and margin requirements it has with its counterparties.
 
The Company’s requirement to post hedging collateral deposits and the Company's right to receive hedging collateral deposits is based on the fair value determined by the Company’s counterparties, which may differ from the Company’s assessment of fair value. Hedging collateral deposits may also include closed derivative positions in which the broker has not cleared the cash from the account to offset the derivative liability. The Company records liabilities related to closed derivative positions in Other Accruals and Current Liabilities on the Consolidated Balance Sheet. These liabilities are relieved when the broker clears the cash from the hedging collateral deposit account. This is discussed in Note 1 under Hedging Collateral Deposits.
 

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Note 4 - Income Taxes
 
The components of federal and state income taxes included in the Consolidated Statements of Income are as follows (in thousands): 
                                                         
Six Months Ended 
 March 31,
                                                         
2016
 
2015
Current Income Taxes 
 

 
 

Federal                                              
$
7,995

 
$
36,746

State                                                  
15,537

 
13,199

 
 
 
 
Deferred Income Taxes                                
 

 
 

Federal                                               
(197,982
)
 
13,242

State                                                    
(85,930
)
 
(2,891
)
 
(260,380
)
 
60,296

Deferred Investment Tax Credit                            
(174
)
 
(208
)
 
 
 
 
Total Income Taxes                                      
$
(260,554
)
 
$
60,088

Presented as Follows:
 

 
 

Other Income
(174
)
 
(208
)
Income Tax Expense (Benefit)
(260,380
)
 
60,296

 
 
 
 
Total Income Taxes
$
(260,554
)
 
$
60,088


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 (in thousands): 
 
Six Months Ended 
 March 31,
 
2016
 
2015
U.S. Income (Loss) Before Income Taxes
$
(597,350
)
 
$
161,497

 
 

 
 

Income Tax Expense (Benefit), Computed at U.S. Federal Statutory Rate of 35%
$
(209,073
)
 
$
56,524

State Income Taxes (Benefit)
(45,756
)
 
6,700

Miscellaneous
(5,725
)
 
(3,136
)
 
 
 
 
Total Income Taxes
$
(260,554
)
 
$
60,088

 
As a result of a settlement reached during the quarter, the Company has reduced the balance of unrecognized tax benefits by $2.6 million, of which $0.5 million was recorded as an income tax benefit. As of March 31, 2016, the entire balance of unrecognized tax benefits would favorably impact the effective tax rate, if recognized.

Note 5 - Capitalization
 
Common Stock.  During the six months ended March 31, 2016, the Company issued 138,060 original issue shares of common stock as a result of stock option and SARs exercises and 61,150 original issue shares of common stock for restricted stock units that vested.  In addition, the Company issued 72,358 original issue shares of common stock for the Direct Stock Purchase and Dividend Reinvestment Plan and 65,046 original issue shares of common stock for the Company’s 401(k) plans.  The Company also issued 8,538 original issue shares of common stock to the non-employee directors of the Company who receive compensation under the Company’s 2009 Non-Employee Director Equity Compensation Plan, as partial consideration for the directors’ services during the six months ended March 31, 2016.  Holders of stock options, SARs, restricted share awards or restricted stock units will often tender shares of common stock to the Company for payment of option exercise prices and/or applicable withholding

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Table of Contents


taxes.  During the six months ended March 31, 2016, 46,788 shares of common stock were tendered to the Company for such purposes.  The Company considers all shares tendered as cancelled shares restored to the status of authorized but unissued shares, in accordance with New Jersey law.
 
Current Portion of Long-Term Debt.    None of the Company’s long-term debt at March 31, 2016 will mature within the following twelve-month period.

Note 6 - Commitments and Contingencies
 
Environmental Matters.  The Company is subject to various federal, state and local laws and regulations relating to the protection of the environment.  The Company has established procedures for the ongoing evaluation of its operations to identify potential environmental exposures and to comply with regulatory requirements.  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 March 31, 2016, the Company has estimated its remaining clean-up costs related to former manufactured gas plant sites and third party waste disposal sites will be approximately $4.7 million.  The Company expects to recover its environmental clean-up costs through rate recovery over a period of approximately 12 years.

The Company's estimated liability for clean-up costs discussed above includes a $3.6 million estimated liability to remediate a former manufactured gas plant site located in New York. In February 2009, the Company received approval from the NYDEC of a Remedial Design Work Plan (RDWP) for this site. In October 2010, the Company submitted a RDWP addendum to conduct additional Preliminary Design Investigation field activities necessary to design a successful remediation. As a result of this work, the Company submitted to the NYDEC a proposal to amend the NYDEC’s Record of Decision remedy for the site.  In April 2013, the NYDEC approved the Company’s proposed amendment.  Final remedial design work for the site was completed, and active remedial work has recently been completed. Restoration work is underway. 
 
The Company 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.
 
Other.  The Company is involved in other litigation and regulatory matters arising in the normal course of business.  These other matters may include, for example, negligence claims and tax, regulatory or other governmental audits, inspections, investigations and other proceedings.  These matters may involve state and federal taxes, safety, compliance with regulations, rate base, cost of service and purchased gas cost issues, among other things.  While these other matters arising in the normal course of business could have a material effect on earnings and cash flows in the period in which they are resolved, an estimate of the possible loss or range of loss, if any, cannot be made at this time.
 
Note 7 – Business Segment Information    
 
The Company reports financial results for five segments: Exploration and Production, Pipeline and Storage, Gathering, Utility and Energy Marketing.  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 data presented in the tables below reflect financial information for the segments and reconciliations to consolidated amounts.  As stated in the 2015 Form 10-K, the Company evaluates segment performance based on income before discontinued operations, extraordinary items and cumulative effects of changes in accounting (when applicable).  When these items are not applicable, the Company evaluates performance based on net income.  There have not been any changes in the basis of segmentation nor in the basis of measuring segment profit or loss from those used in the Company’s 2015 Form 10-K.  A listing of segment assets at March 31, 2016 and September 30, 2015 is shown in the tables below.  
Quarter Ended March 31, 2016 (Thousands)
 
 
 
 
 
 
 
Exploration and Production
Pipeline and Storage
Gathering
Utility
Energy Marketing
Total Reportable Segments
All Other
Corporate and Intersegment Eliminations
Total Consolidated
Revenue from External Customers
$143,783
$56,276
$113
$212,737
$35,436
$448,345
$561
$226
$449,132
Intersegment Revenues
$—
$23,292
$21,545
$5,364
$312
$50,513
$—
$(50,513)
$—
Segment Profit: Net Income (Loss)
$(213,335)
$21,194
$7,568
$31,960
$3,484
$(149,129)
$(23)
$1,465
$(147,687)

 


 






24

Table of Contents


Six Months Ended March 31, 2016 (Thousands)
 
 
 
 
 
 
 
Exploration and Production
Pipeline and Storage
Gathering
Utility
Energy Marketing
Total Reportable Segments
All Other
Corporate and Intersegment Eliminations
Total Consolidated
Revenue from External Customers
$295,749
$109,630
$238
$356,585
$60,420
$822,622
$1,266
$439
$824,327
Intersegment Revenues
$—
$45,477
$40,184
$9,028
$624
$95,313
$—
$(95,313)
$—
Segment Profit: Net Income (Loss)
$(450,421)
$42,470
$12,490
$50,566
$4,707
$(340,188)
$166
$3,226
$(336,796)
 
 
 
 
 
 
 
 
 
 
(Thousands)
Exploration and Production
Pipeline and Storage
Gathering
Utility
Energy Marketing
Total Reportable Segments
All Other
Corporate and Intersegment Eliminations
Total Consolidated
Segment Assets:
 
 
 
 
 
 
 
 
 
At March 31, 2016
$1,622,264
$1,664,920
$487,421
$1,984,921
$91,671
$5,851,197
$77,689
$(127,862)
$5,801,024
At September 30, 2015
$2,439,801
$1,590,525
$444,358
$1,934,730
$90,676
$6,500,090
$77,350
$(12,501)
$6,564,939

Quarter Ended March 31, 2015 (Thousands)
 
 
 
 
 
 
 
Exploration and Production
Pipeline and Storage
Gathering
Utility
Energy Marketing
Total Reportable Segments
All Other
Corporate and Intersegment Eliminations
Total Consolidated
Revenue from External Customers
$165,521
$55,758
$89
$309,974
$64,167
$595,509
$388
$230
$596,127
Intersegment Revenues
$—
$23,054
$17,365
$6,521
$211
$47,151
$—
$(47,151)
$—
Segment Profit: Net Income (Loss)
$(53,562)
$23,377
$6,405
$38,238
$3,373
$17,831
$98
$(1,260)
$16,669
Six Months Ended March 31, 2015 (Thousands)
 
 
 
 
 
 
 
Exploration and Production
Pipeline and Storage
Gathering
Utility
Energy Marketing
Total Reportable Segments
All Other
Corporate and Intersegment Eliminations
Total Consolidated
Revenue from External Customers
$370,186
$107,504
$235
$520,047
$120,333
$1,118,305
$1,271
$460
$1,120,036
Intersegment Revenues
$—
$44,515
$41,793
$11,055
$417
$97,780
$—
$(97,780)
$—
Segment Profit: Net Income (Loss)
$(26,842)
$44,155
$18,028
$60,831
$6,199
$102,371
$93
$(1,055)
$101,409
 
 
 
 
 
 
 
 
 
 


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Note 8 – Retirement Plan and Other Post-Retirement Benefits
 
Components of Net Periodic Benefit Cost (in thousands):
 
 
Retirement Plan
 
Other Post-Retirement Benefits
Three Months Ended March 31,
2016
2015
 
2016
2015





 




Service Cost
$
2,928

$
3,012

 
$
583

$
673

Interest Cost
10,579

10,304

 
5,096

4,821

Expected Return on Plan Assets
(14,842
)
(14,904
)
 
(7,883
)
(8,522
)
Amortization of Prior Service Cost (Credit)
308

46

 
(228
)
(478
)
Amortization of Losses
8,062

9,032

 
1,382

1,037

Net Amortization and Deferral for Regulatory Purposes (Including Volumetric Adjustments) (1)
5,609

7,055

 
6,599

7,396






 




Net Periodic Benefit Cost
$
12,644

$
14,545

 
$
5,549

$
4,927

 
 
 
 
 
 
 
Retirement Plan
 
Other Post-Retirement Benefits
Six Months Ended March 31,
2016
2015
 
2016
2015
 
 
 
 
 
 
Service Cost
$
5,855

$
6,024

 
$
1,166

$
1,346

Interest Cost
21,158

20,608

 
10,193

9,642

Expected Return on Plan Assets
(29,685
)
(29,808
)
 
(15,768
)
(17,044
)
Amortization of Prior Service Cost (Credit)
617

92

 
(456