Seneca Production Falls 7% as National Fuel Gas Prepares 2027 Spinoff

Seneca Resources produced 104 Bcf in the July-September quarter, down 7% year on year and equal to roughly 1.13 Bcf/d, according to the fiscal fourth-quarter and full-year 2026 update National Fuel Gas Company (NFG) issued this week.

The Buffalo-based parent company runs on an October 1 to September 30 fiscal year. It described a strong year for itself, with adjusted earnings up 9%. Its drilling subsidiary had a weaker one. Seneca's full-year output of 419.5 Bcf fell below even the lowered guidance management had already handed investors. The shortfall works out to a company producing about 1.15 Bcf/d across the year — down from a pace near 1.23 Bcf/d implied by the prior year's figures.

For fiscal 2027, Seneca expects production to be roughly flat. Growth, the company says, should resume in fiscal 2028. That is a two-year wait for a unit already preparing for life as a standalone public company. NFG plans to spin off Seneca Resources as a separate listed company in the second half of 2027 — meaning the spin will list with a flat production profile and a recently missed guidance number on its record.

What went wrong in the field?

Management blamed three specific problems, and each sits in a named Appalachian basin county. They are worth separating, because two are geological and one is operational.

• A dud Marcellus pad in Lycoming County, Pennsylvania. One pad underperformed. The company did not quantify the loss.
• So-so Upper Utica results. The shallower Utica interval disappointed relative to expectations.
• "Frac interactions" between Lower Utica wells in Tioga County. The industry calls these frac hits — pressure from one well's hydraulic stimulation communicating into a neighboring wellbore, damaging its productivity.

The frac-hit diagnosis matters most. It is a well-spacing and completion-design problem, not a rock-quality problem, and design problems are fixable. NFG indicated that Seneca believes it understands what went wrong. The claim is management's own, and investors will test it against fiscal 2027 volumes.

The geography anchors the story. Lycoming County sits in the dry gas core of the Marcellus shale in north-central Pennsylvania. Tioga County, on the New York border, hosts the deeper Lower Utica play where Seneca has drilled some of its highest-rate wells. Both plays carry the company's production base.

What does this mean for the spinoff?

The timing is awkward, though not fatal. A spin in the second half of 2027 lands after a flat fiscal 2027, and the company itself projects resumed growth only in fiscal 2028. Prospective shareholders in the standalone driller are being asked to underwrite a turnaround narrative before the volumes confirm it.

There is a precedent reading, too. Seneca entered fiscal 2026 with guidance it later lowered, then missed the lowered number. Two consecutive disappointments in a commodity business usually trace to geology or to execution; here management has effectively conceded a mix of both.

The parent, for its part, absorbed the miss. Adjusted earnings still rose 9% across the fiscal year, cushioned by the utility and pipeline businesses that will remain with NFG after the separation.

The takeaway: a 7% quarterly decline and a missed 419.5 Bcf annual target are real, but the fix — revised well design in the Lower Utica and better pad placement in the Marcellus — is the kind that shows up in results within a year or two. Watch fiscal 2027 guidance execution and the second-half 2027 spin date.