• Recorded consolidated net loss of $8.5 million for the third quarter of 2017, compared to a loss of $8.0 million for 2016.
  
• Increased consolidated net income by $3.9 million to $34.5 million or $1.20 per share for the first nine months of 2017 compared to the same period last year.
• Increased dividends for the 62^nd consecutive year with an annual indicated dividend rate of $1.89 per share.
• Awarded the highest customer satisfaction score among large utilities in the West for the fifth year in a row (2017 J.D. Power Gas Utility Residential Customer Satisfaction study).
• Reduced residential customer rates for the third consecutive year resulting in a cumulative decrease of 15% in Oregon and 18% in Washington over that time.
• Connected nearly 12,700 new utility customers over the past 12 months equating to a customer growth rate of 1.8%.
• Reaffirmed 2017 earnings guidance of $2.05 to $2.25 per share.

PORTLAND, Ore., Nov. 03, 2017 (GLOBE NEWSWIRE) -- Northwest Natural Gas Company, dba NW Natural (NYSE:NWN), reported a consolidated net loss of $8.5 million, or $0.30 per share, for the third quarter of 2017, compared to a loss of $8.0 million, or $0.29 per share, for the same period in 2016. This reflects the seasonal nature of the utility's earnings with the majority of revenues generated during the winter heating season in the first and fourth quarters each year.

Consolidated net income was $34.5 million, or $1.20 per share, for the first nine months of 2017, compared to net income of $30.6 million, or $1.11 per share, for the same period of 2016. Results for the first nine months of 2016 included a non-cash disallowance related to the Company's environmental regulatory proceeding and the implementation of the environmental recovery mechanism. Excluding this charge⁽¹⁾ on a non-GAAP basis, EPS for the first nine months of 2016 was $1.18 on net income of $32.6 million.

Overall results for the first nine months of 2017 reflected higher utility segment earnings, partially offset by lower gas storage segment results. Utility earnings included additional margin from customer growth and cooler weather in 2017 compared to 2016, partially offset by higher operations and maintenance expense.

"I am proud of our achievements and progress this quarter," said David H. Anderson, President and CEO of NW Natural. "Once again we delivered strong customer growth, outstanding customer satisfaction, and lowered customers' rates. Looking forward, the North Mist Gas Storage Expansion Project continues on schedule, and we are very pleased to have announced our 62^nd consecutive annual dividend increase. These achievements reflect our long-standing commitment to our customers, communities, employees, and investors."

Continued Constructing the North Mist Gas Storage Expansion Project
The North Mist Expansion Project is designed to provide long-term, no-notice underground gas storage service to support gas-fired electric generating facilities that are intended to facilitate the integration of more wind power into the region's electric generation mix. Natural gas storage enables electric generation to adjust quickly when renewable energy, such as wind and solar, rises and falls. Our no-notice service is designed to allow the local electric company to draw on our North Mist facility to meet its fueling needs and rapidly respond to natural variability in wind generation.

The project remains on track to be in-service during the fourth quarter of 2018 with the heaviest construction phase occurring this year. To date, we have completed all necessary wells for the project. Construction is nearly complete on the 13-mile pipeline connecting the North Mist facility to Portland General Electric's Port Westward electric generating facility. We expect to begin injecting gas into the reservoir early in 2018. The estimated cost of the expansion remains at $128 million. The expansion will be included in rate base under an established tariff when it is placed into service.

(1) Non-GAAP measure, see reconciliation below.

Third Quarter Results
The following financial comparisons are between the third quarter of 2017 and the third quarter of 2016, unless otherwise noted. Individual factors below are presented on an after-tax basis using a statutory tax rate of 39.5%.

Consolidated Results
Consolidated net loss increased $0.5 million, or $0.01 per share, primarily due to higher utility operation and maintenance expense partially offset by higher utility margin from customer growth.

The third quarter results are summarized by business segment in the table below:

	Three Months Ended September 30,
	2017							2016							Change
In thousands, except per share data	Amount			Per Share				Amount			Per Share				Amount			Per Share
Net income (loss):
Utility segment	$	(10,349	)	$	(0.36	)		$	(9,511	)	$	(0.35	)		$	(838	)	$	(0.01	)
Gas storage segment	1,899			0.06				1,813			0.06				86			—
Other	(45		)	—				(342		)	—				297			—
Consolidated net loss	$	(8,495	)	$	(0.30	)		$	(8,040	)	$	(0.29	)		$	(455	)	$	(0.01	)
Diluted shares	28,678							27,554							1,124

Utility Segment Results
Utility segment net loss increased $0.8 million due to the following offsetting items:

• a $1.7 million increase in operations and maintenance expense reflecting higher payroll and benefits due to increased headcount, general salary increases, and higher health care costs. In addition, non-payroll costs increased as we upgraded employee safety equipment; and
• a $1.0 million increase in utility margin primarily reflecting strong customer growth.

Gas Storage Segment Results
Gas storage segment net income increased $0.1 million primarily due to slightly lower operating expenses partially offset by lower revenues.

Year-to-Date Results
The following financial comparisons are between the first nine months of 2017 and the same period of 2016, unless otherwise noted. Individual factors below are presented on an after-tax basis using a statutory tax rate of 39.5%.

Consolidated Results
Consolidated net income increased $3.9 million or $0.09 per share primarily due to higher utility segment results from customer growth and the effects of a colder winter in 2017 than 2016. In addition, 2016 results were negatively impacted by a non-cash disallowance recorded during the first quarter of 2016 related to the Company's environmental regulatory proceeding and the implementation of the environmental recovery mechanism. Offsetting these favorable variances were higher operations and maintenance expense from the utility and lower results from our gas storage segment.

The year-to-date results are summarized by business segment in the table below:

	Nine Months Ended September 30,
	2017							2016							Change
In thousands, except per share data	Amount			Per Share				Amount			Per Share				Amount			Per Share
Net income (loss):
Utility segment	$	31,980		$	1.11			$	26,848		$	0.97			$	5,132		$	0.14
Gas storage segment	2,716			0.09				3,988			0.14				(1,272		)	(0.05		)
Other	(152		)	—				(216		)	—				64			—
Consolidated net income (GAAP)	$	34,544		$	1.20			$	30,620		$	1.11			$	3,924		$	0.09
Adjustment for regulatory environmental disallowance(1)	—			—				1,996			0.07				(1,996		)	(0.07		)
Adjusted net income (non-GAAP)(1)	$	34,544		$	1.20			$	32,616		$	1.18			$	1,928		$	0.02
Diluted shares	28,734							27,629							1,105

(1)   The 2016 disallowance related to the Company's compliance filing under the environmental recovery mechanism with the total pre-tax charge of $3.3 million recorded in utility other income ($2.8 million) and utility operation and maintenance expense ($0.5 million). The income tax effect of the adjustment was $1.3 million and is calculated using the combined federal and state statutory tax rate of 39.5%.

Utility Segment Results
Utility segment net income increased $5.1 million or $0.14 per share primarily due to the following offsetting items:

• a $7.4 million increase in utility margin reflecting strong customer growth and the effects of a colder winter in 2017. Weather for the first nine months of 2017 was 42% colder than 2016 and 11% colder than average. Offsetting these factors were lower gains from our gas cost incentive sharing mechanism in Oregon;
• a $3.4 million increase in operations and maintenance expense reflecting higher payroll and benefits due to increased headcount, general salary increases, and higher health care costs. In addition, non-payroll costs increased as we upgraded employee safety equipment;
• a $2.4 million increase in other income mainly due to the environmental interest disallowance in the first quarter of 2016 as a result of closing out the environmental docket and implementing the environmental recovery mechanism. Also contributing to the increase were higher earnings from the equity portion of allowance for funds used during construction (AFUDC); and
• a $1.6 million increase in depreciation expense due to capital expenditures for customer growth, system reinforcement, facilities, and technology.

Gas Storage Segment Results
Gas storage segment net income decreased $1.3 million or $0.05 per share primarily due to the following factors:

• a $1.2 million decrease in gas storage revenues reflecting lower asset management revenues from our Mist facility and transportation capacity; and
• a $0.2 million increase in operating expenses from pipeline and compressor maintenance at our Gill Ranch facility.

Balance Sheet and Cash Flows
During the first nine months of 2017, the Company generated $192.9 million in operating cash flow, invested $145.4 million in capital expenditures, and paid dividends of $40.4 million.

Cash provided by operations decreased $13.5 million from income tax refunds in 2016 as a result of the reenactment of bonus depreciation in 2015 and changes in working capital. Cash outflows from investing activities increased $51.3 million primarily due to higher capital expenditures from the North Mist Gas Storage Expansion Project. Cash outflows from financing activities decreased $75.1 million primarily due to a long-term debt issuance in September 2017 offset by short- and long-term debt repayments.

2017 Earnings Guidance
The Company reaffirms 2017 earnings guidance today in the range of $2.05 to $2.25 per share. This guidance assumes customer growth from our utility segment, average weather conditions, slow recovery of the gas storage market, and no significant changes in prevailing regulatory policies, mechanisms, or outcomes, or significant laws or regulations.

Dividend Declared
The board of directors of NW Natural declared a quarterly dividend of 47.25 cents per share on the Company’s common stock. The dividend will be paid on November 15, 2017 to shareholders of record on October 31, 2017. The Company’s current indicated annual dividend rate is $1.89 per share.

Conference Call and Webcast
As previously reported, NW Natural will host a conference call and webcast today to discuss its third quarter and year-to-date 2017 financial and operating results.

Date and Time:	Friday, November 3 8 a.m. PT (11 a.m. ET)
Phone Numbers:	United States:  1-866-267-6789 Canada:  1-855-669-9657 International:  1-412-902-4110

The call will also be webcast in a listen-only format for the media and general public and can be accessed at nwnatural.com under the Investor Relations tab. A replay of the conference call will be available on our website and by dialing 1-877-344-7529 (U.S.), 1-855-669-9658 (Canada), and 1-412-317-0088 (international). The replay access code is (10112833).

About NW Natural
NW Natural (NYSE:NWN) is headquartered in Portland, Ore., and provides natural gas service to more than 730,000 residential, commercial, and industrial customers in western Oregon and southwestern Washington. NW Natural and its subsidiaries currently own and operate 31 Bcf of underground gas storage capacity in Oregon and California. Additional information is available at nwnatural.com.

Investor Contact:
Nikki Sparley
Phone: 503-721-2530
Email: n1s@nwnatural.com

Media Contact:
Melissa Moore
Phone: 503-220-2436
Email: msm@nwnatural.com

Forward-Looking Statements
This report, and other presentations made by NW Natural from time to time, may contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "anticipates," "assumes," "intends," "plans," "seeks," "believes," "estimates," "expects" and similar references to future periods. Examples of forward-looking statements include, but are not limited to, statements regarding the following: plans, objectives, goals, strategies, future events, investments, customer growth, weather, commodity and other costs, customer rates or rate recovery, customer preference, growth, adoption of renewable energy and our ability to provide effective supporting resources, environmental remediation cost recoveries, levels and pricing of gas storage contracts, gas storage development or costs or timing related thereto, financial positions, revenues, returns, and earnings and the timing thereof, dividends, performance, timing or effects of future regulatory proceedings or future regulatory approvals, regulatory prudence reviews, effects of regulatory mechanisms, including, but not limited to, SRRM, effects of changes in laws or regulations, and other statements that are other than statements of historical facts.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future operational, economic or financial performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements are discussed by reference to the factors described in Part I, Item 1A "Risk Factors", and Part II, Item 7 and Item 7A "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Quantitative and Qualitative Disclosure about Market Risk" in the Company's most recent Annual Report on Form 10-K and in Part I, Items 2 and 3 "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Quantitative and Qualitative Disclosures About Market Risk", and Part II, Item 1A, "Risk Factors", in the Company's quarterly reports filed thereafter.

All forward-looking statements made in this report and all subsequent forward-looking statements, whether written or oral and whether made by or on behalf of the Company, are expressly qualified by these cautionary statements. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. New factors emerge from time to time and it is not possible for the Company to predict all such factors, nor can it assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements.

Presentation of Non-GAAP Results
In addition to presenting the results of operations and earnings amounts in total, certain financial measures exclude the after-tax regulatory charge related to the regulatory order implementing the SRRM in 2016, which are non-GAAP financial measures. We present net income and EPS excluding the regulatory disallowance along with the GAAP measures to illustrate the magnitude of this disallowance on ongoing business and operational results. Although the excluded amounts are properly included in the determination of these items under GAAP, we believe the amount and nature of such disallowance make period to period comparisons of operations difficult or potentially confusing. Financial measures are expressed in cents per share as these amounts reflect factors that directly impact earnings, including income taxes. All references to EPS are on the basis of diluted shares. We use such non-GAAP financial measures to analyze our financial performance because we believe they provide useful information to our investors and creditors in evaluating our financial condition and results of operations.

NORTHWEST NATURAL
Consolidated Income Statement and Financial Highlights (Unaudited)
Third Quarter 2017
			Three Months Ended									Nine Months Ended									Twelve Months Ended
In thousands, except per share amounts, customer, and degree day data			September 30,									September 30,									September 30,
		2017				2016			Change		2017				2016			Change		2017				2016			Change
Operating revenues		$	88,190			$	87,727		1	%	$	521,751			$	442,439		18	%	$	755,279			$	673,157		12	%
Operating expenses:
	Cost of gas		27,239				28,264		(4	)		223,855				157,546		42			326,897				261,114		25
	Operations and maintenance		36,867				34,870		6			115,833				109,771		6			156,036				145,834		7
	Environmental remediation		1,355				1,191		14			10,920				8,113		35			16,105				11,626		39
	General taxes		7,901				7,211		10			24,490				23,333		5			31,695				30,461		4
	Depreciation and amortization		21,484				20,628		4			63,924				61,435		4			84,778				81,675		4
	Total operating expenses		94,846				92,164		3			439,022				360,198		22			615,511				530,710		16
Income (loss) from operations			(6,656	)			(4,437	)	50			82,729				82,241		1			139,768				142,447		(2	)
Other income (expense), net			1,493				652		129			3,332				(1,144	)	(391	)		3,933				(327	)	(1,303	)
Interest expense, net			9,451				9,729		(3	)		29,044				29,183		—			38,989				40,692		(4	)
Income (loss) before income taxes			(14,614	)			(13,514	)	8			57,017				51,914		10			104,712				101,428		3
Income tax expense (benefit)			(6,119	)			(5,474	)	12			22,473				21,294		6			41,893				41,103		2
Net income (loss)		$	(8,495	)		$	(8,040	)	6		$	34,544			$	30,620		13		$	62,819			$	60,325		4
Common shares outstanding:
	Average diluted for period		28,678				27,554					28,734				27,629					28,595				27,590
	End of period		28,713				27,558					28,713				27,558					28,713				27,558
Per share information:
Diluted earnings (loss) per share		$	(0.30	)		$	(0.29	)			$	1.20			$	1.11				$	2.20			$	2.19
Dividends declared per share of common stock			0.4700				0.4675					1.4100				1.4025					1.8800				1.8700
Book value per share, end of period			29.49				28.27					29.49				28.27					29.49				28.27
Market closing price, end of period			64.40				60.11					64.40				60.11					64.40				60.11
Capital structure, end of period:
	Common stock equity		52.1	%			49.6	%				52.1	%			49.6	%				52.1	%			49.6	%
	Long-term debt		46.6				33.8					46.6				33.8	%				46.6				33.8	%
	Short-term debt (including amounts due in one year)		1.3				16.6					1.3				16.6	%				1.3				16.6	%
	Total		100.0	%			100.0	%				100.0	%			100.0	%				100.0	%			100.0	%
Utility segment operating statistics:
Customers - end of period			730,824				718,139		1.8	%		730,824				718,139		1.8	%		730,824				718,139		1.8	%
Utility volumes - therms:
	Residential and commercial sales		54,557				55,610					495,949				381,109					724,062				594,292
	Industrial sales and transportation		109,064				106,595					369,954				346,578					499,150				469,480
Total utility volumes sold and delivered			163,621				162,205					865,903				727,687					1,223,212				1,063,772
Utility operating revenues:
	Residential and commercial sales	$	69,294			$	68,508				$	466,867			$	388,689				$	682,568			$	601,457
	Industrial sales and transportation		13,488				13,412					47,182				42,048					64,520				59,920
	Other revenues		606				619					3,149				3,132					3,829				3,858
	Less: Revenue taxes		2,262				2,161					13,251				11,252					19,110				17,080
Total utility operating revenues			81,126				80,378					503,947				422,617					731,807				648,155
	Less: Cost of gas		27,239				28,264					223,855				157,546					326,897				261,114
	Environmental remediation expense		1,355				1,191					10,920				8,113					16,105				11,626
Utility margin, net		$	52,532			$	50,923				$	269,172			$	256,958				$	388,805			$	375,415
Degree days:
	Average (25-year average)		95				95					2,641				2,657					4,240				4,256
	Actual		78				78		—	%		2,931				2,066		42	%		4,416				3,456		28	%
Percent (warmer) colder than average weather			(18	)%			(18	)%				11	%			(22	)%				4	%			(19	)%
Gas storage segment operating statistics:
Operating revenues		$	7,006			$	7,293				$	17,635			$	19,654				$	23,247			$	24,778
Operating expenses			3,463				3,791					11,887				11,547					16,470				15,637

NORTHWEST NATURAL
Consolidated Balance Sheets (Unaudited)					September 30,
In thousands					2017				2016
Assets:
Current assets:
	Cash and cash equivalents			$	15,780			$	6,230
	Accounts receivable				23,450				25,506
	Accrued unbilled revenue				15,974				15,537
	Allowance for uncollectible accounts				(459	)			(289	)
	Regulatory assets				49,504				55,280
	Derivative instruments				2,073				4,857
	Inventories				59,549				67,470
	Gas reserves				16,218				16,257
	Income taxes receivable				—				2,257
	Other current assets				17,457				17,480
		Total current assets			199,546				210,585
Non-current assets:
	Property, plant, and equipment				3,384,122				3,177,196
	Less: Accumulated depreciation				986,332				943,334
		Total property, plant, and equipment, net			2,397,790				2,233,862
	Gas reserves				87,876				103,976
	Regulatory assets				345,352				341,188
	Derivative instruments				1,555				1,151
	Other investments				69,245				67,853
	Other non-current assets				4,243				1,269
		Total non-current assets			2,906,061				2,749,299
		Total assets		$	3,105,607			$	2,959,884
Liabilities and equity:
Current liabilities:
	Short-term debt			$	—			$	194,900
	Current maturities of long-term debt				21,995				64,994
	Accounts payable				87,475				55,933
	Taxes accrued				12,295				11,954
	Interest accrued				9,854				9,671
	Regulatory liabilities				34,659				27,921
	Derivative instruments				8,968				5,334
	Other current liabilities				27,705				31,997
		Total current liabilities			202,951				402,704
Long-term debt					757,429				530,219
Deferred credits and other non-current liabilities:
	Deferred tax liabilities				572,293				544,575
	Regulatory liabilities				363,838				342,143
	Pension and other postretirement benefit liabilities				212,259				216,909
	Derivative instruments				3,926				1,682
	Other non-current liabilities				146,229				142,450
		Total deferred credits and other non-current liabilities			1,298,545				1,247,759
Equity:
	Common stock				447,129				389,834
	Retained earnings				406,081				396,938
	Accumulated other comprehensive loss				(6,528	)			(7,570	)
		Total equity			846,682				779,202
		Total liabilities and equity		$	3,105,607			$	2,959,884

NORTHWEST NATURAL
Consolidated Statements of Cash Flows (Unaudited)						Nine Months Ended September 30,
In thousands						2017				2016
Operating activities:
	Net income				$	34,544			$	30,620
	Adjustments to reconcile net income to cash provided by operations:
		Depreciation and amortization				63,924				61,435
		Regulatory amortization of gas reserves				12,036				11,403
		Deferred income taxes				17,287				17,810
		Qualified defined benefit pension plan expense				3,923				3,989
		Contributions to qualified defined benefit pension plans				(15,400	)			(11,250	)
		Deferred environmental expenditures, net				(10,468	)			(8,302	)
		Regulatory disallowance of prior environmental cost deferrals				—				3,287
		Amortization of environmental remediation				10,920				8,113
		Other				2,605				4,817
		Changes in assets and liabilities:
			Receivables, net			90,735				83,377
			Inventories			(5,420	)			3,226
			Income taxes			146				7,170
			Accounts payable			(29,726	)			(17,612	)
			Interest accrued			3,888				3,798
			Deferred gas costs			13,419				(10,470	)
			Other, net			443				14,988
		Cash provided by operating activities				192,856				206,399
Investing activities:
	Capital expenditures					(145,441	)			(98,111	)
	Other					(1,131	)			2,868
		Cash used in investing activities				(146,572	)			(95,243	)
Financing activities:
	Repurchases related to stock-based compensation					(2,034	)			(1,042	)
	Proceeds from stock options exercised					3,711				5,874
	Long-term debt issued					100,000				—
	Long-term debt retired					(40,000	)			—
	Change in short-term debt					(53,300	)			(75,135	)
	Cash dividend payments on common stock					(40,390	)			(38,556	)
	Other					(2,012	)			(278	)
		Cash used in financing activities				(34,025	)			(109,137	)
Increase in cash and cash equivalents						12,259				2,019
Cash and cash equivalents, beginning of period						3,521				4,211
Cash and cash equivalents, end of period					$	15,780			$	6,230
Supplemental disclosure of cash flow information:
	Interest paid, net of capitalization				$	22,859			$	23,271
	Income taxes paid (refunded)					11,581				(6,900	)

 

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