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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2023
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 Jersey13-1086010
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
6363 Main Street 
Williamsville,New York14221
(Address of principal executive offices)(Zip Code)

(716) 857-7000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol
Name of Each Exchange
on Which Registered
Common Stock, par value $1.00 per shareNFGNew York Stock Exchange

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes      No 
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).  Yes    No 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.      
Large Accelerated FilerAccelerated Filer
Non-Accelerated FilerSmaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES    NO 

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 January 31, 2024: 92,127,623 shares.


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 CorporationNational Fuel Gas Distribution Corporation
EmpireEmpire Pipeline, Inc.
Midstream Company
National Fuel Gas Midstream Company, LLC
National FuelNational Fuel Gas Company
RegistrantNational Fuel Gas Company
SenecaSeneca Resources Company, LLC
Supply CorporationNational Fuel Gas Supply Corporation
Regulatory Agencies
CFTCCommodity Futures Trading Commission
EPAUnited States Environmental Protection Agency
FASBFinancial Accounting Standards Board
FERCFederal Energy Regulatory Commission
IRSInternal Revenue Service
NYDECNew York State Department of Environmental Conservation
NYPSCState of New York Public Service Commission
PaDEPPennsylvania Department of Environmental Protection
PaPUCPennsylvania Public Utility Commission
PHMSAPipeline and Hazardous Materials Safety Administration
SECSecurities and Exchange Commission
Other
2023 Form 10-K
The Company’s Annual Report on Form 10-K for the year ended September 30, 2023
2017 Tax Reform ActTax legislation referred to as the "Tax Cuts and Jobs Act," enacted December 22, 2017.
BcfBillion 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 (e.g. a marketer) pays for gas the customer receives in excess of amounts delivered into pipeline/storage or distribution systems by the customer’s shipper.
CLCPA
Legislation referred to as the "Climate Leadership & Community Protection Act," enacted by the State of New York on July 18, 2019.
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.
2

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
Dodd-Frank ActDodd-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.
EAPEnergy Affordability Program; a program that provides bill discounts to gas customers who receive benefits under qualifying public assistance programs.
ESGEnvironmental, social and governance
Exchange ActSecurities 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.
Exploratory well
A well drilled in unproven or semi-proven territory for the purpose of ascertaining the presence underground of a commercial hydrocarbon deposit.
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.
HedgingA method of minimizing the impact of price, interest rate, and/or foreign currency exchange rate changes, often through the use of derivative financial instruments.
Hub
Location where pipelines intersect enabling the trading, transportation, storage, exchange, lending and borrowing of natural gas.
ICEIntercontinental Exchange. An exchange which maintains a futures market for crude oil and natural gas.
Impact FeeAn annual fee imposed on unconventional wells spud in Pennsylvania. The fee is administered by the PaPUC and fees are distributed to counties and municipalities where the well is located.
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.
LDCLocal distribution company
LIFOLast-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.
McfThousand cubic feet (of natural gas)
MD&A
Management’s Discussion and Analysis of Financial Condition and Results of Operations
MDthThousand decatherms (of natural gas)
Methane
The primary component of natural gas. It is a compound made up of one carbon atom and four hydrogen atoms (CH4).
MMBtu
Million British thermal units (heating value of one decatherm of natural gas)
MMcfMillion cubic feet (of natural gas)
Natural GasA naturally occurring mixture of gaseous hydrocarbons consisting primarily of methane and found in underground rock formations.
3

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.
NOAANational Oceanic and Atmospheric Administration
NYMEX
New York Mercantile Exchange.  An exchange which maintains a futures market for crude oil and natural gas.
OPEBOther Post-Employment Benefit
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.
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&PStandard & Poor’s Rating Service
SARStock 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.
SOFRSecured Overnight Financing Rate
Stock acquisitionsInvestments in corporations
Utica Shale
A Middle Ordovician-age geological formation lying several thousand feet below the Marcellus Shale in the Appalachian region of the United States, including much of Ohio, Pennsylvania, West Virginia and southern New York.
VEBAVoluntary Employees’ Beneficiary Association
WNCWeather normalization clause; a clause/adjustment 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

INDEXPage
  
6 
  
  
 
Item 3.  Defaults Upon Senior Securities 
Item 4.  Mine Safety Disclosures 
 
• 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

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
December 31,
(Thousands of U.S. Dollars, Except Per Common Share Amounts)20232022
INCOME
Operating Revenues:
Utility Revenues$201,920 $311,619 
Exploration and Production and Other Revenues254,019 276,973 
Pipeline and Storage and Gathering Revenues69,422 70,267 
525,361 658,859 
Operating Expenses:
Purchased Gas56,552 171,197 
Operation and Maintenance:
Utility53,705 50,352 
Exploration and Production and Other34,826 26,874 
Pipeline and Storage and Gathering34,962 33,261 
Property, Franchise and Other Taxes22,416 26,205 
Depreciation, Depletion and Amortization115,790 96,600 
 
318,251 404,489 
Operating Income207,110 254,370 
Other Income (Expense):
Other Income (Deductions)3,732 6,318 
Interest Expense on Long-Term Debt(28,462)(29,604)
Other Interest Expense(6,273)(3,843)
Income Before Income Taxes176,107 227,241 
Income Tax Expense43,087 57,552 
Net Income Available for Common Stock133,020 169,689 
EARNINGS REINVESTED IN THE BUSINESS
Balance at Beginning of Period1,885,856 1,587,085 
 2,018,876 1,756,774 
Dividends on Common Stock(45,597)(43,598)
Balance at December 31$1,973,279 $1,713,176 
Earnings Per Common Share:
Basic:
Net Income Available for Common Stock$1.45 $1.85 
Diluted:
Net Income Available for Common Stock$1.44 $1.84 
Weighted Average Common Shares Outstanding:
Used in Basic Calculation91,910,244 91,579,814 
Used in Diluted Calculation92,442,145 92,268,210 
Dividends Per Common Share:
Dividends Declared$0.495 $0.475 
See Notes to Condensed Consolidated Financial Statements
6

National Fuel Gas Company
Consolidated Statements of Comprehensive Income
(Unaudited)
                                                      Three Months Ended
December 31,
(Thousands of U.S. Dollars)                                  20232022
Net Income Available for Common Stock$133,020 $169,689 
Other Comprehensive Income (Loss), Before Tax:
Unrealized Gain (Loss) on Derivative Financial Instruments Arising During the Period
189,167 297,593 
Reclassification Adjustment for Realized (Gains) Losses on Derivative Financial Instruments in Net Income(19,708)159,342 
Other Comprehensive Income (Loss), Before Tax169,459 456,935 
Income Tax Expense (Benefit) Related to Unrealized Gain (Loss) on Derivative Financial Instruments Arising During the Period
52,486 81,377 
Reclassification Adjustment for Income Tax Benefit (Expense) on Realized Losses (Gains) from Derivative Financial Instruments in Net Income
(5,468)43,571 
Income Taxes – Net47,018 124,948 
Other Comprehensive Income (Loss)122,441 331,987 
Comprehensive Income$255,461 $501,676 
 
































See Notes to Condensed Consolidated Financial Statements
7

National Fuel Gas Company
Consolidated Balance Sheets
(Unaudited)
 
December 31,
2023
September 30,
2023
(Thousands of U.S. Dollars)  
ASSETS  
Property, Plant and Equipment$13,857,060 $13,635,303 
Less - Accumulated Depreciation, Depletion and Amortization6,435,129 6,335,441 
 7,421,931 7,299,862 
Current Assets  
Cash and Temporary Cash Investments41,685 55,447 
Receivables – Net of Allowance for Uncollectible Accounts of $37,116 and $36,295, Respectively
189,669 160,601 
Unbilled Revenue48,265 16,622 
Gas Stored Underground26,891 32,509 
Materials and Supplies - at average cost47,692 48,989 
Other Current Assets99,400 100,260 
           453,602 414,428 
Other Assets  
Recoverable Future Taxes73,283 69,045 
Unamortized Debt Expense6,829 7,240 
Other Regulatory Assets72,088 72,138 
Deferred Charges80,347 82,416 
Other Investments76,633 73,976 
Goodwill5,476 5,476 
Prepaid Pension and Post-Retirement Benefit Costs208,015 200,301 
Fair Value of Derivative Financial Instruments184,739 50,487 
Other4,549 4,891 
                   711,959 565,970 
Total Assets$8,587,492 $8,280,260 















See Notes to Condensed Consolidated Financial Statements
8

National Fuel Gas Company
Consolidated Balance Sheets
(Unaudited)
                                  December 31,
2023
September 30,
2023
(Thousands of U.S. Dollars)  
CAPITALIZATION AND LIABILITIES  
Capitalization:  
Comprehensive Shareholders’ Equity  
Common Stock, $1 Par Value
  
Authorized  - 200,000,000 Shares; Issued And Outstanding – 92,115,581 Shares
and 91,819,405 Shares, Respectively
$92,116 $91,819 
Paid in Capital1,041,226 1,040,761 
Earnings Reinvested in the Business1,973,279 1,885,856 
Accumulated Other Comprehensive Income (Loss)67,381 (55,060)
Total Comprehensive Shareholders’ Equity3,174,002 2,963,376 
Long-Term Debt, Net of Current Portion and Unamortized Discount and Debt Issuance Costs
2,385,523 2,384,485 
Total Capitalization5,559,525 5,347,861 
Current and Accrued Liabilities  
Notes Payable to Banks and Commercial Paper300,000 287,500 
Accounts Payable105,390 152,193 
Amounts Payable to Customers60,032 59,019 
Dividends Payable45,597 45,451 
Interest Payable on Long-Term Debt42,288 20,399 
Customer Advances23,086 21,003 
Customer Security Deposits30,843 28,764 
Other Accruals and Current Liabilities200,009 160,974 
Fair Value of Derivative Financial Instruments 31,009 
                                                 807,245 806,312 
Other Liabilities  
Deferred Income Taxes1,164,512 1,124,170 
Taxes Refundable to Customers317,838 268,562 
Cost of Removal Regulatory Liability284,687 277,694 
Other Regulatory Liabilities165,988 165,441 
Other Post-Retirement Liabilities2,859 2,915 
Asset Retirement Obligations164,777 165,492 
Other Liabilities120,061 121,813 
                                                 2,220,722 2,126,087 
Commitments and Contingencies (Note 7)  
Total Capitalization and Liabilities$8,587,492 $8,280,260 
 
See Notes to Condensed Consolidated Financial Statements
9

National Fuel Gas Company
Consolidated Statements of Cash Flows
(Unaudited)
                                                        Three Months Ended
 December 31,
(Thousands of U.S. Dollars)20232022
OPERATING ACTIVITIES  
Net Income Available for Common Stock$133,020 $169,689 
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:  
Depreciation, Depletion and Amortization115,790 96,600 
Deferred Income Taxes38,362 53,457 
Stock-Based Compensation4,660 5,575 
Other8,041 4,078 
Change in:  
Receivables and Unbilled Revenue(58,459)(29,522)
Gas Stored Underground and Materials and Supplies6,915 5,622 
Unrecovered Purchased Gas Costs 20,603 
Other Current Assets892 (1,748)
Accounts Payable(3,355)6,091 
Amounts Payable to Customers1,013 (265)
Customer Advances2,083 5,206 
Customer Security Deposits2,079 4,546 
Other Accruals and Current Liabilities28,612 4,523 
Other Assets(6,306)(20,238)
Other Liabilities(2,403)3,122 
Net Cash Provided by Operating Activities270,944 327,339 
INVESTING ACTIVITIES  
Capital Expenditures(246,938)(233,473)
Sale of Fixed Income Mutual Fund Shares in Grantor Trust 10,000 
Other(920)14,637 
Net Cash Used in Investing Activities(247,858)(208,836)
FINANCING ACTIVITIES  
Proceeds from Issuance of Short-Term Note Payable to Bank 250,000 
Net Change in Other Short-Term Notes Payable to Banks and Commercial Paper12,500 (60,000)
Reduction of Long-Term Debt (150,000)
Dividends Paid on Common Stock(45,451)(43,452)
Net Repurchases of Common Stock(3,897)(6,694)
Net Cash Used in Financing Activities(36,848)(10,146)
Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash(13,762)108,357 
Cash, Cash Equivalents, and Restricted Cash at October 155,447 137,718 
Cash, Cash Equivalents, and Restricted Cash at December 31$41,685 $246,075 
Supplemental Disclosure of Cash Flow Information
Non-Cash Investing Activities:  
Non-Cash Capital Expenditures$97,922 $110,314 
See Notes to Condensed Consolidated Financial Statements
10

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.

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 Quarterly Report on 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, 2023, 2022 and 2021 that are included in the Company's 2023 Form 10-K.  The consolidated financial statements for the year ended September 30, 2024 will be audited by the Company's independent registered public accounting firm after the end of the fiscal year.
 
    The earnings for the three months ended December 31, 2023 should not be taken as a prediction of earnings for the entire fiscal year ending September 30, 2024.  Most of the business of the Utility segment is seasonal in nature and is influenced by weather conditions.  Due to the seasonal nature of the heating business in the Utility segment, earnings during the winter months normally represent a substantial part of the earnings that this business is expected to achieve for the entire fiscal year.  The Company’s business segments are discussed more fully in Note 8 – Business Segment Information.
 
Consolidated Statements of Cash Flows.  The components, as reported on the Company’s Consolidated Balance Sheets, of the total cash, cash equivalents, and restricted cash presented on the Statement of Cash Flows are as follows (in thousands):
Three Months Ended
 December 31, 2023
Three Months Ended
 December 31, 2022
 Balance at
December 31, 2023
Balance at October 1, 2023Balance at
December 31, 2022
Balance at October 1, 2022
Cash and Temporary Cash Investments$41,685 $55,447 $244,475 $46,048 
Hedging Collateral Deposits  1,600 91,670 
Cash, Cash Equivalents, and Restricted Cash$41,685 $55,447 $246,075 $137,718 

    The Company considers all highly liquid debt instruments purchased with a maturity date of generally three months or less to be cash equivalents. The Company’s restricted cash is composed entirely of amounts reported as Hedging Collateral Deposits on the Consolidated Balance Sheets. Hedging Collateral Deposits is an account title for cash held in margin accounts funded by the Company to serve as collateral for derivative financial instruments in an unrealized loss position. 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.

Allowance for Uncollectible Accounts. The allowance for uncollectible accounts is the Company’s best estimate of the amount of probable credit losses in the existing accounts receivable. The allowance, the majority of which is in the Utility segment, is determined based on historical experience, the age of customer accounts, other specific information about customer accounts, and the economic and regulatory environment. Account balances have historically been written off against the allowance approximately twelve months after the account is final billed or when it is anticipated that the receivable will not be recovered. During 2022 and 2021, final billings were suppressed in the Utility segment as a result of state shut-off moratoriums arising from the COVID-19 pandemic. Those moratoriums were lifted in 2022 which allowed for the resumption of final billings during 2022, thereby resulting in higher amounts being written off in 2023 and 2024.

11

    Activity in the allowance for uncollectible accounts for the three months ended December 31, 2023 and 2022 are as follows (in thousands):

Balance at Beginning of PeriodAdditions Charged to Costs and ExpensesDiscounts on Purchased ReceivablesNet Accounts Receivable Written-OffBalance at End of Period
Three Months Ended December 31, 2023
Allowance for Uncollectible Accounts$36,295 $4,157 $119 $(3,455)$37,116 
Three Months Ended December 31, 2022
Allowance for Uncollectible Accounts$40,228 $5,035 $228 $(1,566)$43,925 

Gas Stored Underground.  In the Utility segment, gas stored underground is carried at lower of cost or net realizable value, 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 $1.2 million at December 31, 2023, 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. The Company's capitalized costs relating to oil and gas producing activities, net of accumulated depreciation, depletion and amortization, were $2.5 billion and $2.4 billion at December 31, 2023 and September 30, 2023, respectively.
 
    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 $159.1 million and $161.1 million at December 31, 2023 and September 30, 2023, 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.
 
    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 unproved properties not being depleted, less (c) income tax effects related to the differences between the book and tax basis of the properties. The 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 non-cash impairment is required to be charged to earnings in that quarter. At December 31, 2023, the ceiling exceeded the book value of the oil and gas properties by approximately $84.4 million.  The estimated future net cash flows were increased by $307.0 million for hedging under the ceiling test at December 31, 2023.
    
    The principal assets of the Utility, Pipeline and Storage and Gathering segments, consisting primarily of gas distribution pipelines, transmission pipelines, storage facilities, gathering lines and compressor stations, are recorded at historical cost. There were no indications of any impairments to property, plant and equipment in the Utility, Pipeline and Storage and Gathering segments at December 31, 2023.

12

Accumulated Other Comprehensive Income (Loss). The components of Accumulated Other Comprehensive Income (Loss) and changes for the three months ended December 31, 2023 and 2022, net of related tax effect, are as follows (amounts in parentheses indicate debits) (in thousands): 
 Gains and Losses on Derivative Financial InstrumentsFunded Status of the Pension and Other Post-Retirement Benefit PlansTotal
Three Months Ended December 31, 2023
Balance at October 1, 2023$4,623 $(59,683)$(55,060)
Other Comprehensive Gains and Losses Before Reclassifications
136,681  136,681 
Amounts Reclassified From Other Comprehensive Income(14,240) (14,240)
Balance at December 31, 2023$127,064 $(59,683)$67,381 
Three Months Ended December 31, 2022
Balance at October 1, 2022$(572,163)$(53,570)$(625,733)
Other Comprehensive Gains and Losses Before Reclassifications
216,216  216,216 
Amounts Reclassified From Other Comprehensive Income115,771  115,771 
Balance at December 31, 2022$(240,176)$(53,570)$(293,746)

Reclassifications Out of Accumulated Other Comprehensive Income (Loss).  The details about the reclassification adjustments out of accumulated other comprehensive income (loss) for the three months ended December 31, 2023 and 2022 are as follows (amounts in parentheses indicate debits to the income statement) (in thousands):
Details About Accumulated Other Comprehensive Income (Loss) ComponentsAmount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss)Affected Line Item in the Statement Where Net Income is Presented
Three Months Ended
December 31,
20232022
Gains (Losses) on Derivative Financial Instrument Cash Flow Hedges:
 
     Commodity Contracts$19,755 ($159,162)Operating Revenues
     Foreign Currency Contracts(47)(180)Operating Revenues
 19,708 (159,342)Total Before Income Tax
 (5,468)43,571 Income Tax Expense
 $14,240 ($115,771)Net of Tax

13

Other Current Assets.  The components of the Company’s Other Current Assets are as follows (in thousands):
                            At December 31, 2023At September 30, 2023
Prepayments$17,993 $18,966 
Prepaid Property and Other Taxes14,778 14,186 
Federal Income Taxes Receivable10,799 14,602 
State Income Taxes Receivable18,208 16,133 
Regulatory Assets37,622 36,373 
 $99,400 $100,260 
 
Other Accruals and Current Liabilities.  The components of the Company’s Other Accruals and Current Liabilities are as follows (in thousands):
                            At December 31, 2023At September 30, 2023
Accrued Capital Expenditures$75,485 $43,323 
Regulatory Liabilities35,770 38,105 
Reserve for Gas Replacement1,247  
Liability for Royalty and Working Interests25,529 17,679 
Non-Qualified Benefit Plan Liability13,052 13,052 
Other48,926 48,815 
 $200,009 $160,974 
 
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 had outstanding were restricted stock units and performance shares. For the quarter ended December 31, 2023, 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. Restricted stock units and performance shares that are antidilutive are excluded from the calculation of diluted earnings per common share. There were no securities excluded as being antidilutive for the quarter ended December 31, 2023. For the quarter ended December 31, 2022, 1,987 securities were excluded as being antidilutive.

Stock-Based Compensation.  The Company granted 361,729 performance shares during the quarter ended December 31, 2023. The weighted average fair value of such performance shares was $44.23 per share for the quarter ended December 31, 2023. 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.
 
    The performance shares granted during the quarter ended December 31, 2023 include awards that must meet a performance goal related to either relative return on capital over a three-year or five-year performance cycle ("ROC performance shares"), methane intensity and greenhouse gas emissions reductions over a three-year performance cycle ("ESG performance shares") or relative shareholder return over a three-year or five-year performance cycle ("TSR performance shares"). The performance goal related to the ROC performance shares over the respective performance cycles 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 ROC 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 the ROC performance shares is calculated by multiplying the expected number of shares that will be issued by the average market price of Company common
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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 performance goal related to the ESG performance shares over the three-year performance cycle consists of two parts: reductions in the rates of intensity of methane emissions for each of the Company's operating segments, and reduction of the consolidated Company's total greenhouse gas emissions. The Company's Compensation Committee set specific target levels for methane intensity rates and total greenhouse gas emissions, and the performance goal is intended to incentivize and reward performance to the extent management achieves methane intensity and greenhouse gas reduction targets making progress towards the Company's 2030 goals. The number of these ESG performance shares that will vest and be paid out will depend upon the number of methane intensity segment targets achieved and whether the Company meets the total greenhouse gas emissions target. The fair value of these ESG 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 performance goal related to the TSR performance shares over the respective performance cycles is the Company’s three-year (or five-year) total shareholder return relative to the three-year (or five-year) total shareholder return of the other companies in the Report Group.  Three-year (or five-year) total 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 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 219,578 restricted stock units during the quarter ended December 31, 2023.  The weighted average fair value of such restricted stock units was $42.44 per share for the quarter ended December 31, 2023.  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 restricted stock units do not entitle the participant to receive dividends during the vesting period. The fair value at the date of grant of the restricted stock units (represented by the market value of Company common stock on the date of the award) must be reduced by the present value of forgone dividends over the vesting term of the award. The fair value of restricted stock units on the date of award is recorded as compensation expense over the vesting period.



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Note 2 – Revenue from Contracts with Customers
 
    The following tables provide a disaggregation of the Company's revenues for the three months ended December 31, 2023 and 2022, presented by type of service from each reportable segment.
Quarter Ended December 31, 2023 (Thousands)   
Revenues By Type of ServiceExploration and ProductionPipeline and StorageGatheringUtilityAll OtherCorporate and Intersegment EliminationsTotal Consolidated
Production of Natural Gas$232,661 $ $ $ $ $ $232,661 
Production of Crude Oil687      687 
Natural Gas Processing267      267 
Natural Gas Gathering Service  62,588   (57,992)4,596 
Natural Gas Transportation Service 71,618  29,285  (20,362)80,541 
Natural Gas Storage Service 21,292    (9,059)12,233 
Natural Gas Residential Sales   146,546   146,546 
Natural Gas Commercial Sales   20,281   20,281 
Natural Gas Industrial Sales   906  (2)904 
Other649 1,503  (567) (251)1,334 
Total Revenues from Contracts with Customers234,264 94,413 62,588 196,451  (87,666)500,050 
Alternative Revenue Programs   5,556   5,556 
Derivative Financial Instruments19,755      19,755 
Total Revenues$254,019 $94,413 $62,588 $202,007 $ $(87,666)$525,361 
Quarter Ended December 31, 2022 (Thousands)   
Revenues By Type of ServiceExploration and ProductionPipeline and StorageGatheringUtilityAll OtherCorporate and Intersegment EliminationsTotal Consolidated
Production of Natural Gas$432,359 $ $ $ $ $ $432,359 
Production of Crude Oil628      628 
Natural Gas Processing374      374 
Natural Gas Gathering Service  56,413   (53,767)2,646 
Natural Gas Transportation Service 76,201  28,378  (20,817)83,762 
Natural Gas Storage Service 21,286    (8,996)12,290 
Natural Gas Residential Sales   244,306   244,306 
Natural Gas Commercial Sales   34,495   34,495 
Natural Gas Industrial Sales   1,638   1,638 
Other2,774 168  (259) (283)2,400 
Total Revenues from Contracts with Customers436,135 97,655 56,413 308,558  (83,863)814,898 
Alternative Revenue Programs   3,123   3,123 
Derivative Financial Instruments(159,162)     (159,162)
Total Revenues$276,973 $97,655 $56,413 $311,681 $ $(83,863)$658,859 
    The Company records revenue related to its derivative financial instruments in the Exploration and Production segment. The Company also records revenue related to alternative revenue programs in its Utility segment. Revenue related to derivative financial instruments and alternative revenue programs are excluded from the scope of the authoritative guidance regarding revenue recognition since they are accounted for under other existing accounting guidance.
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    The Company’s Pipeline and Storage segment expects to recognize the following revenue amounts in future periods related to “fixed” charges associated with remaining performance obligations for transportation and storage contracts: $159.1 million for the remainder of fiscal 2024; $191.6 million for fiscal 2025; $149.2 million for fiscal 2026; $123.3 million for fiscal 2027; $107.5 million for fiscal 2028; and $581.0 million thereafter.

Note 3 – 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.
 
    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 December 31, 2023 and September 30, 2023.  Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.  
Recurring Fair Value MeasuresAt fair value as of December 31, 2023
(Thousands of Dollars)   Level 1Level 2Level 3
Netting
Adjustments(1)
Total(1)
Assets:
 
    
Cash Equivalents – Money Market Mutual Funds$32,781 $ $ $ $32,781 
Derivative Financial Instruments:     
Over the Counter Swaps – Gas 140,548  (16,722)123,826 
Over the Counter No Cost Collars – Gas 57,917   57,917 
Contingent Consideration for Asset Sale 3,078   3,078 
Foreign Currency Contracts 505  (587)(82)
Other Investments:     
Balanced Equity Mutual Fund17,484    17,484 
Fixed Income Mutual Fund16,510    16,510 
Total$66,775 $202,048 $ $(17,309)$251,514 
Liabilities:     
Derivative Financial Instruments:     
Over the Counter Swaps – Gas$ $16,722 $ $(16,722)$ 
Foreign Currency Contracts 587  (587) 
Total$ $17,309 $ $(17,309)$ 
Total Net Assets/(Liabilities)$66,775 $184,739 $ $ $251,514 

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Recurring Fair Value MeasuresAt fair value as of September 30, 2023
(Thousands of Dollars)   Level 1Level 2Level 3
Netting
Adjustments(1)
Total(1)
Assets:
Cash Equivalents – Money Market Mutual Funds$39,332 $ $ $ $39,332 
Derivative Financial Instruments:
Over the Counter Swaps – Gas 65,800  (37,508)28,292 
Over the Counter No Cost Collars – Gas  30,966  (14,745)16,221 
Contingent Consideration for Asset Sale 7,277   7,277 
Foreign Currency Contracts 150  (1,453)(1,303)
Other Investments:
Balanced Equity Mutual Fund15,837    15,837 
Fixed Income Mutual Fund15,897    15,897 
Total$71,066 $104,193 $ $(53,706)$121,553 
Liabilities:
Derivative Financial Instruments:
Over the Counter Swaps – Gas$ $68,311 $ $(37,508)$30,803 
Over the Counter No Cost Collars – Gas 14,950  (14,745)205 
Foreign Currency Contracts 1,454  (1,453)1 
Total$ $84,715 $ $(53,706)$31,009 
Total Net Assets/(Liabilities)$71,066 $19,478 $ $ $90,544 

(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.
 
Derivative Financial Instruments
 
    The derivative financial instruments reported in Level 2 at December 31, 2023 and September 30, 2023 include natural gas price swap agreements, natural gas no cost collars, and foreign currency contracts, all of which are used in the Company’s Exploration and Production segment. The fair value of the Level 2 price swap agreements and no cost collars is based on an internal cash flow model that uses observable inputs (i.e. SOFR based discount rates for the price swap agreements and basis differential information, if applicable, at active natural gas 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 authoritative guidance 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 December 31, 2023, the Company determined that nonperformance risk associated with the price swap agreements, no cost collars and foreign currency contracts 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.
 
    Derivative financial instruments reported in Level 2 at December 31, 2023 also includes the contingent consideration associated with the sale of the Exploration and Production segment's California assets on June 30, 2022. The terms of the purchase and sale agreement specified that the Company could receive up to three annual contingent payments between calendar year 2023 and calendar year 2025, not to exceed $10 million per year, with the amount of each annual payment calculated at $1.0 million for each $1 per barrel that the ICE Brent Average for each calendar year exceeds $95 per barrel up to $105 per barrel. The calendar 2023 contingency period expired with the ICE Brent Average falling below $95 per barrel. The fair value of the contingent consideration was calculated using a Monte Carlo simulation model that uses observable inputs, including the ICE Brent closing price as of the valuation date, initial and max trigger price, volatility, risk-free rate, time of maturity and counterparty risk.
 
    For the quarters ended December 31, 2023 and December 31, 2022, there were no assets or liabilities measured at fair value and classified as Level 3.

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Note 4 – 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): 
 December 31, 2023September 30, 2023
 Carrying
Amount
Fair ValueCarrying
Amount
Fair Value
Long-Term Debt$2,385,523 $2,286,446 $2,384,485 $2,210,478 
 
    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 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. The components of the Company's Other Investments are as follows (in thousands):
At December 31, 2023At September 30, 2023
Life Insurance Contracts$42,639 $42,242 
Equity Mutual Fund17,484 15,837 
Fixed Income Mutual Fund16,510 15,897 
$76,633 $73,976 
 
    Investments in life insurance contracts are stated at their cash surrender values or net present value. Investments in an equity mutual fund and a fixed income mutual fund are stated at fair value based on quoted market prices with changes in fair value recognized in net income. The insurance contracts and equity mutual fund are primarily informal funding mechanisms for various benefit obligations the Company has to certain employees. The fixed income mutual fund is primarily an informal funding mechanism for certain regulatory obligations that the Company has to Utility segment customers in its Pennsylvania jurisdiction and 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. The Company enters into over-the-counter no cost collar and swap agreements for natural gas to manage the price risk associated with forecasted sales of natural gas. 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 duration of the Company’s cash flow hedges does not typically exceed 5 years while the foreign currency forward contracts do not exceed 7 years.

    On June 30, 2022, the Company completed the sale of Seneca’s California assets. The terms of the purchase and sale agreement specified that the Company could receive up to three annual contingent payments between calendar year 2023 and calendar year 2025, not to exceed $10 million per year, with the amount of each annual payment calculated as $1.0 million for each $1 per barrel that the ICE Brent Average for each calendar year exceeds $95 per barrel up to $105 per barrel. The calendar 2023 contingency period expired with the ICE Brent Average falling below $95 per barrel. The Company has determined that this contingent consideration meets the definition of a derivative under the authoritative accounting guidance. Changes in the fair value of this contingent consideration are marked-to-market each reporting period, with changes in fair value recognized in Other Income (Deductions) on the Consolidated Statement of Income. The fair value of this contingent consideration was estimated to be $3.1 million and $7.3 million at December 31, 2023 and September 30, 2023, respectively. A $4.2 million
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mark-to-market adjustment to reduce the fair value of the contingent consideration was recorded during the quarter ended December 31, 2023.

    The Company has presented its net derivative assets and liabilities as “Fair Value of Derivative Financial Instruments” on its Consolidated Balance Sheets at December 31, 2023 and September 30, 2023.
 
Cash Flow Hedges
 
    For derivative financial instruments that are designated and qualify as a cash flow hedge, the gain or loss on the derivative is reported as a component of other comprehensive income (loss) and reclassified into earnings in the period or periods during which the hedged transaction affects earnings.

    As of December 31, 2023, the Company had 380.2 Bcf of natural gas commodity derivative contracts (swaps and no cost collars) outstanding.

    As of December 31, 2023, the Company was hedging a total of $53.7 million of forecasted transportation costs denominated in Canadian dollars with foreign currency forward contracts.

    As of December 31, 2023, the Company had $127.1 million of net hedging gains after taxes included in the accumulated other comprehensive income (loss) balance. Of this amount, it is expected that $92.3 million of unrealized gains after taxes will be reclassified into the Consolidated Statement of Income within the next 12 months as the underlying hedged transactions are recorded in earnings.
The Effect of Derivative Financial Instruments on the Statement of Financial Performance for the
Three Months Ended December 31, 2023 and 2022 (Thousands of Dollars)
Derivatives in Cash Flow Hedging RelationshipsAmount of Derivative Gain or (Loss) Recognized in Other Comprehensive Income (Loss) on
the Consolidated Statement of
Comprehensive Income (Loss)
for the
 Three Months Ended
 December 31,
Location of Derivative Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) on the Consolidated Balance Sheet into the Consolidated Statement of IncomeAmount of Derivative Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) on the Consolidated Balance Sheet into the Consolidated Statement of Income for the
 Three Months Ended
 December 31,
 20232022 20232022
Commodity Contracts$187,989 $297,120 Operating Revenue$19,755 $(159,162)
Foreign Currency Contracts1,178 473 Operating Revenue(47)(180)
Total$189,167 $297,593  $19,708 $(159,342)
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, no cost collars and applicable foreign currency forward contracts with nineteen counterparties of which all nineteen are in a net gain position. On average, the Company had $9.6 million of credit exposure per counterparty in a gain position at December 31, 2023. The maximum credit exposure per counterparty in a gain position at December 31, 2023 was $