National Fuel Gas Company · NYSE:NFG
National Fuel Gas — Q3 2009 Earnings Presentation
76 slides from National Fuel Gas's earnings presentation, Aug 11, 2009
Slide 1: Third Quarter, Fiscal Year 2009 Update
August 2009 Third Quarter, Fiscal Year 2009 Update Exhibit 99
Slide 2: Safe Harbor For Forward Looking Statements
Safe Harbor For Forward Looking Statements This presentation may contain "forward-looking statements" as defined by the Private Securities Litigation Reform Act of 1995, including statements regarding future prospects, plans, performance and capital structure, anticipated capital expenditures and co
Slide 3: Business Segment Reporting
National Fuel Gas Company Business Segment Reporting Publicly Traded Holding Company NYSE symbol - NFG Reporting Segments Corporate Subsidiaries
Slide 4: Net Plant by Segment
Net Plant by Segment $3,068 Million At June 30, 2009 Mktg,Corp & All Other $106 MM 4% National Fuel Gas Company
Slide 5: Capital Expenditures by Segment
National Fuel Gas Company Capital Expenditures(1) by Segment Capital Expenditures exclude all expenditures associated with Discontinued Operations. Fiscal Year 2009 and 2010 estimates are as of August 7, 2009 2008 Amount Includes $16.8 MM of Accrued Capital Expenditures Related to the Empire Connect
Slide 6: Net Income from Continuing Operations
Net Income from Continuing Operations $223.96 Million 12 Months Ended June 30, 2009 Mktg, Corp & All Other $1.54 MM 0.6% National Fuel Gas Company Excludes gains on sale and income/(loss) related to divestiture of international power generation assets (March 2008) and Canadian E&P assets (August 200
Slide 7: Capitalization
National Fuel Gas Company Capitalization The Company may issue debt or equity securities in a public offering or a private placement from time to time, depending on market conditions, indenture requirements, regulatory authorizations and the Company's capital requirements. At June 30, 2009, Total Ca
Slide 8: Dividend Growth
National Fuel Gas Company Dividend Growth $1.34 $0.19 On June 11, 2009, National Fuel announced its 107th year of uninterrupted dividend payments and its 39th consecutive year of dividend increases
Slide 9: 9
9
Slide 10: National Fuel Resources
National Fuel Resources - -Growth with Superior Service and Pricing Options - -Maintain Cost Effective and Flexible Supply & Storage - -Manage Credit Risk and Monitor Regulatory Developments - -Pursue Strategic Acquisitions
Slide 11: Pipeline & Storage
Pipeline & Storage Stability & Opportunity for Long-term Growth Maximize Geographic Advantage Pursue Expansion Opportunities Operate System Efficiently Canadian Gas Rockies Express, Midcontinent & Gulf of Mexico Appalachian Production
Slide 12: The Marcellus Shale
The Marcellus Shale
Slide 13: Exploration & Production Growth and Upside Potential
EOG & Seneca Horizontal Well 3.0 Mmcf/d (7 days) Exploration & Production Growth and Upside Potential Nearly 1 million mineral acres 720,000 acres prospective for the Marcellus Shale Seneca/EOG Resources Horizontal Wells Seneca Vertical Drilling Program EOG & Seneca Horizontal Well 1.4 Mmcf/d (25 da
Slide 14: Midstream Infrastructure
Midstream Infrastructure projects to move Seneca and other third-party production to large diameter pipelines Covington Gathering System $25 - $30 MM project, Phase 1 in-service by Fall 2009
Slide 15: Pipeline & Storage
National Fuel Gas Supply Corporation Empire Pipeline, Inc. Pipeline & Storage
Slide 16: Pipeline & Storage Diluted Earnings per Share
Pipeline & Storage Diluted Earnings per Share (Before Items Impacting Comparability) Excludes SFAS 88 settlement loss of -$0.02 Excludes base gas sale of $0.03 and gain associated with insurance proceeds of $0.05 Excludes reversal of reserve for preliminary project costs of $0.06, and discontinuance
Slide 17: Pipeline & Storage Expansions
West to East / Appalachian Lateral Proposed pipeline project OPPORTUNITY Pipeline & Storage Expansions Storage Expansion Increase Storage Capacity by 8.5 Bcf Lamont Compression Appalachian Production into TGP Bristoria Project Compression & Pipeline Facilities (South of Map Margin) Empire Connector
Slide 18: Utility Segment
Utility Segment National Fuel Gas Distribution Corporation
Slide 19: 19
19
Slide 20: Utility - Goals
Control Costs Provide Excellent Customer Service Operate Safe System Stable Earnings Work Closely with State Commissions and Maintain and Create Innovative Rate Mechanisms Utility - Goals
Slide 21: Utility - Goals
Control Costs Provide Excellent Customer Service Operate Safe System Stable Earnings Work Closely with State Commissions and Maintain and Create Innovative Rate Mechanisms Utility - Goals
Slide 22: Utility O&M Expense
o_O Utility O&M Expense NY MPA $250 $211.0 : : ‘ 208.3 203.0 202.7 q $200 S140 $199.0 2 2 $63.6 = $150 2 g 2 § $100 2 Fa] $132.0 ce $140.3 $139.0 $140.3 $134.7 = $50 4 ° $0 2004 2005 2006 2007 2008 2009 Fiscal Year =e
Slide 23: S sas
$75 Zz $60 2 S S sas 2 2 & $30 = cy a 2 sis £ S & 9 $0 Qe $55.4 $15.7 $39.7 2004 $35.4 2005 NY PA $54.4 $54.2 $38.4 $36.1 2006 2007 Fiscal Year $57.5 $18.3 $39.2 2008 $58.0 $20.0 $38.0 2009
Slide 24: Utility - Goals
Control Costs Provide Excellent Customer Service Operate Safe System Stable Earnings Work Closely with State Commissions and Maintain and Create Innovative Rate Mechanisms Utility - Goals
Slide 25: Utility Customer Service Performance
Utility (1) August 1, 2008 to June 30, 2009 Customer Service Performance Goal Actual(1) Telephone Response (within 30 seconds) 74.0% 82.7% Customer Satisfaction: Residential Commercial 85.1% 86.0% 87.2% 87.5% PSC/PUC Complaints (per 100,000 Customers) 2.1 0.7 Estimated Meter Reading Not to Exceed 15
Slide 26: Utility - Goals
Control Costs Provide Excellent Customer Service Operate Safe System Stable Earnings Work Closely with State Commissions and Maintain and Create Innovative Rate Mechanisms Utility - Goals
Slide 27: Safety Performance Measures
Safety Performance Measures SAFETY PERFORMANCE NY Goal NY Actual Bare Steel Main Reduction (Miles) 80 42.23 Bare Steel Services Reduction (Services) 4,000 2,192 Leak Backlog (1, 2A & 2) (Leaks) 75 116 Damages/1000 Tickets 4.2 2.82 Company Damages/1000 Tickets .2 .02 Mismarks/1000 Tickets .9 .66 Emer
Slide 28: Utility - Goals
Control Costs Provide Excellent Customer Service Operate Safe System Stable Earnings Work Closely with State Commissions and Maintain and Create Innovative Rate Mechanisms Utility - Goals
Slide 29: Utility Diluted Earnings per Share
Utility (1) Excludes SFAS 88 settlement loss of -$0.03 (2) Excludes out-of-period adjustment to symmetrical sharing of $0.03 Diluted Earnings per Share (Before Items Impacting Comparability)
Slide 30: Utility Recent Rate Case Results
New York Pennsylvania Effective Date December 28, 2007 January 1, 2007 Approximate Rate Base $699 MM $280-290 MM Revenue Increase $1.8 MM $14.3 MM Conservation Incentive Program $10.8 MM ---- Authorized Return on Equity 9.1% 10-11%(1) (1) Black Box Settlement - No specific return information specifi
Slide 31: Utility Rate Mechanisms
New York Pennsylvania Revenue Decoupling Conservation Incentive Program Merchant Function Charge Weather Normalization Low Income Rates 90/10 Sharing Low Income Rates Pending: Revenue Decoupling Choice Program Utility Rate Mechanisms
Slide 32: Utility Challenges
Utility Challenges
Slide 33: Average Use per Residential Customer
Utility Average Use per Residential Customer Fiscal Year TME
Slide 34: Accounts Receivable - Customer
Accounts Receivable - Customer Utility
Slide 35: Utility HEAP/LIHEAP Program
Utility HEAP/LIHEAP Program year opens in November The NY Regular & Emergency components of the 2008-2009 HEAP Program closed May 15, 2009; PA Regular & Crisis components of the 2008-2009 LIHEAP Program closed April 3, 2009. (2)
Slide 36: Exploration & Production, Seneca Resources
Exploration & Production Seneca Resources Corporation
Slide 37: Exploration & Production Overview
Exploration & Production Marcellus Shale Accelerate development of 720,000 acres Appalachian Upper Devonian Region Extract value from this low-risk play, drilling 150-300 wells per year, depending on commodity prices Proved Reserves California Continue to operate as a low-cost producer, and optimize
Slide 38: Exploration & Production Proved Reserves
Exploration & Production Proved Reserves Proved Reserves @9/30 491 Bcfe 503 Bcfe West - California(1) Reserves: 339 Bcfe (57 Mmboe) 67% Gulf of Mexico Reserves: 33 Bcfe 7% East - Appalachia Reserves: 131 Bcfe 26% Does not include any reserves acquired as part of Ivanhoe's US-based assets
Slide 39: Exploration & Production Capital Expenditures
Exploration & Production Capital Expenditures Does not include the $39.2MM acquisition of Ivanhoe's US-based assets in California, as this will be accounted for as an investment in Subsidiaries on the Statement of Cash Flows, and will not be included in Capital Expenditures
Slide 40: Annual Production by Region
Exploration & Production Annual Production by Region
Slide 41: Appalachian Basin
Exploration & Production Appalachian Basin
Slide 42: Seneca is 4th Largest Marcellus Acreage Holder
Marcellus Shale Seneca is 4th Largest Marcellus Acreage Holder Taken from Wells Fargo research report, dated July 14, 2009; top 11 acreage holders sorted by acres/1,000 shares outstanding Seneca Resources 720,000 79.5 9.05 Atlas Energy Resources LLC 546,000 63.4 8.61 Range Resources 900,000 157.3 5.
Slide 43: Marcellus Shale EOG Joint Venture Acreage
SRC Fee/Lease EOG Marcellus Shale EOG Joint Venture Approx. Outline of JV Acreage 200,000 Gross Acres Seneca 50% W.I. (Avg. 58% NRI) EOG 50% W.I. (40% NRI) EOG Acreage Contributed ~120,000 Gross Acres Seneca 50% W.I. (40% NRI)
Slide 44: Fiscal Year 2009 EOG Joint Venture Activity
Marcellus Shale Fiscal Year 2009 EOG Joint Venture Activity EOG & Seneca Horizontal Well 1.4 Mmcf/d (25 days) EOG & Seneca Horizontal Well 3.0 Mmcf/d (7 days) EOG & Seneca Horizontal Wells Completed EOG & Seneca Horizontal Well Flare Testing Calendar Year Wells per Year 2009 10 2010 20 2011 30 2012
Slide 45: Seneca Vertical Drilling Program
Marcellus Shale Seneca Vertical Drilling Program Plan: 10 Vertical Wells in 7 Counties, and 6 to 7 cores As of August, 7 wells drilled and 5 cores completed SRC Fee/Lease EOG
Slide 46: Seneca Horizontal Development Drilling Program
SRC Fee/Lease EOG Marcellus Shale Seneca Horizontal Development Drilling Program 1st HWD Rig arrived July 2009 2nd Seneca horizontal rig 1st half FY2010 EOG JV
Slide 47: Marcellus Shale Resource Potential
Marcellus Shale Resource Potential Net resource potential of 4 to 8 trillion cubic feet Assumptions: Average EUR of 2 to 3 Bcfe/well Risk Factor of 30% to 40% Anticipated well costs of $3.5 to $4.0 MM per horizontal in a development program 100 acre well spacing
Slide 48: Well Drilling Forecast
Well Drilling Forecast Seneca Horizontal Wells assumes that as a rig arrives, it will drill one well per month, and will continue to do so through the end of fiscal year 2012, based on the previously disclosed program rig count. Marcellus Shale
Slide 49: Marcellus Shale Summary
Marcellus Shale Summary 720,000 net Acres 4-8 TCF Resource Potential EOG JV activity is accelerating Seneca operated activity has begun Major growth focus for Seneca Approximately two-thirds of CapEx budget in Fiscal Year 2010 Expect production of 20-30 MMCFD by September 2010 Expect production of 5
Slide 50: Upper Devonian Development Drilling
Appalachian Basin Upper Devonian - Development Drilling 2009 drilling plan revised from original plan of 300 wells at start of fiscal year due to reduced natural gas price
Slide 51: Upper Devonian and Medina Reserves
Appalachian Basin Upper Devonian and Medina Fiscal Year-end Reserves Replaced 361% of production Proved Reserves up 19% 670 Bcfe - Additional Resource Potential
Slide 52: Exploration & Production California
Exploration & Production California
Slide 53: Seneca's California Properties
Seneca's California Properties South Lost Hills 2100 BOEPD Monterey Shale Primary 221 Active Wells Sespe 1030 BOEPD Sespe Formation Primary 192 Active Wells North Lost Hills 1175 BOEPD Tulare & Etchegoin Formation Primary & Steamflood 202 Active Wells North Midway Sunset 4600 BOEPD Potter & Tulare F
Slide 54: California Average Daily Production
California Average Daily Production 2009 Average Daily Production Up ~ 550 BOEPD vs. 2008 Production Increases: Monterey shale drilling @ Lost Hills Marvic drilling @ MWSS Sespe property exchange Improved steaming efficiency Additional increase in FY 2010 following Ivanhoe Acquisition
Slide 55: California Lifting Cost - Peer Comparison
California Lifting Cost - Peer Comparison Seneca is a low-cost operator in California, with Lifting Costs consistently outperforming its peers Source: IHS Herold, Inc. and Seneca Financial Reports
Slide 56: Acquisition of Ivanhoe Energy US-based Operations
California Acquisition of Ivanhoe Energy US-based Operations US oil and gas exploration and production operations acquired in July 2009 Total acquisition cost of $34 MM after closing adjustments for 1.8 MMBbl of reserves (~$19/Bbl proved) Current Production ? 645 gross bopd in California & Texas Inc
Slide 57: Exploration & Production Gulf of Mexico
Exploration & Production Gulf of Mexico
Slide 58: Gulf of Mexico Discoveries
Gulf of Mexico 5 Discoveries since April 1st, 2007 Recent Discovery Gulf of Mexico Statistics Exploration: 5 of 6 successful wells in the last 24 months Producing 50+ Mmcfe/d net One discovery still being developed No exploration drilling in FY '09 Fiscal 2010 CapEx of $10 - $18 Million
Slide 59: Strategic Direction
Strategic Direction Long-Term Goals Achieve sustainable annual production growth of 10-20% starting in 2010 Transform Resource Potential into Reserves Long-Term Goals* Continue shift from high-risk exploration to low-risk development of resource plays in order to achieve consistent and predictable r
Slide 60: Questions
Questions
Slide 61: Appendix
Appendix
Slide 62: Corporate Overview
National Fuel Gas Company Corporate Overview New York Stock Exchange NFG Fiscal Year End September Shares Outstanding (Approx.) (As of 6/30/09) 79.9 Million Average Daily Trading Volume (12 Months Ended 6/30/09) 639,446 Market Capitalization (Approx.) ( As of 7/31/09) $3.26 Billion ) Annual Dividend
Slide 63: 2010 EPS Guidance & Sensitivity
National Fuel Gas Company 2010 EPS Guidance & Sensitivity Fiscal 2010 Preliminary Earnings per Share (Diluted) Guidance(1) Consolidated Earnings $2.30 - $2.60(2) Earnings per Share Sensitivity to Changes from $5.00/ MMBtu for natural gas and $75.00/Bbl for crude oil(1) $1 change per $5 change per MM
Slide 64: Net Plant by Segment
National Fuel Gas Company Net Plant by Segment $3.1 B
Slide 65: Debt Maturity Schedule
National Fuel Gas Company Debt Maturity Schedule ($ Millions) Fiscal Year Total Long-Term Debt Outstanding at June 30, 2009: $1.249 B
Slide 66: Debt Ratings
National Fuel Gas Company Debt Ratings - As of July 31, 2009
Slide 67: Public Utilities Fortnightly Ranking
National Fuel Gas Company Public Utilities Fortnightly Ranked the 3rd best energy company in 2008 Based on the 3-year averages of: Profit Margin Dividend Yield FCF, ROE, ROA Sustainable Growth Consistently in the Top 10 best energy companies (2006-2008) "National Fuel Gas ... strongly positioned in
Slide 68: Intermediate Expansion Opportunities
Intermediate Expansion Opportunities West to East/Appalachian Lateral Bristoria Project - add pipeline facilities and compression to interconnect with Spectra Energy and move Appalachian production Lamont Compression - add compression to move Appalachian production into TGP 300-line 2 3
Slide 69: Pipeline & Storage Upcoming Projects
Pipeline & Storage Upcoming Projects West to East & Appalachian Lateral Project Pipeline Length: 324 Miles Starting Location: Rockies Express (REX) - Clarington, OH Ending Location: Millennium Pipeline - Corning, NY Receipts From: REX (~555,000 to 750,000 Dth/d) Local Production Cove Point Gas at Le
Slide 70: Storage Overview
Pipeline & Storage Storage Overview Key Statistics Underground Nat. Gas Storage Fields 31(1) Total Compressor Stations 15 Total Horsepower 35,475 HP Working Storage Capacity 78.3 Bcf Storage Revenue (2008) $67.0 MM (1) Includes 4 storage fields co-owned with non-affiliated companies
Slide 71: Pipeline Overview
Pipeline & Storage Pipeline Overview Key Statistics System Pipeline Mileage 2,877 Miles Transportation Volume (2008) 358.4 Bcf Pipeline Revenue (2008) $126.7 MM Total Compressor Stations 15 Total Horsepower 39,779 HP
Slide 72: Utility Segment Overview
Utility Segment Overview Key Statistics Average Number of Customers 726,863 Total Utility Volumes (2008) 137,737 MMcf Utility Revenue (2008) $1,194 MM Utility Pipeline Mileage (2008) 14,819 Miles Diluted EPS (2008) $0.73 Average Annual Residential Bill (2008) $1,479
Slide 73: Upper Devonian Drilling Program
Appalachian Basin 73 Upper Devonian Drilling Program Detailed Geologic work has improved per well reserves and success rates Accelerating reserve additions each year (excludes PUDs): 2005 - 5.8 Bcfe 2006 - 11.8 Bcfe 2007 - 20.8 Bcfe 2008 - 24.2 Bcfe
Slide 74: Midstream Covington Gathering System
Midstream Covington Gathering System - Lycoming & Tioga Counties
Slide 75: NFG Midstream Covington, LLC
NFG Midstream Covington, LLC Approximately: 26 miles of 12" steel 4 miles of 8" steel Delivery into TGP and UGI Estimated Cost: $25 MM - $30 MM Preliminary Survey Complete Acquiring Rights In-Service Date: Phase 1: Fall 2009 Phase 2: Fall 2010 Pipeline System accesses areas of Tioga County and Lycom
Slide 76: Reconciliation of Income from Continuing Operations by Segment
(1) Excludes resolution of a purchased gas contingency of +$0.03 Diluted Earnings per Share (Before Items Impacting Comparability) $0.08 9 Months Ended 6/30/08 Energy Marketing Reconciliation of Income from Continuing Operations by Segment to Consolidated GAAP Net Income FY05 FY06 FY07 FY08 Income f