National Fuel Gas Company · NYSE:NFG
National Fuel Gas — Q4 2023 Earnings Presentation
56 slides from National Fuel Gas's earnings presentation, Nov 9, 2023
Slide 1: Investor Presentation Q4 Fiscal 2023 Update
Investor Presentation Q4 Fiscal 2023 Update November 1, 2023
Slide 2: Commitment to safe and environmentally conscious natural gas development
National Fuel is committed to the safe and environmentally conscious development, transportation, storage, and distribution of natural gas resources. For additional information, please review our Corporate Responsibility Report. 2
Slide 3: NFG: A Diversified, Integrated Natural Gas Company
NFG: A Diversified, Integrated Natural Gas Company Upstream Developing our large, high-quality acreage Exploration & position in Marcellus & Utica shales Production 53% of NFG ~1.2 Million ~1.02 Bcf/day Net acres in Net total production(2) EBITDA(1) Appalachia Midstream Expanding and modernizing pip
Slide 4: Why National Fuel?
Why National Fuel? Diversified Assets Provide Stability and Long-Term Growth Opportunities 1 Integrated Model Enhances Shareholder Value 2 Consolidated Business Expected to Generate Significant Free Cash Flow 3 High Quality Assets Drive Consolidated Growth 4 Long History of Returning Capital to Shar
Slide 5: Integrated Model Enhances Shareholder Value
1 Integrated Model Enhances Shareholder Value Benefits of National Fuel’s Geographic and Operational Integration Integrated Structure: Upstream Drives Synergies: Exploration & Ability to adjust to changing commodity Production Upstream Midstream price environments Co-development of Marcellus and
Slide 6: Consolidated Business Expected to Generate Significant Free Cash Flow
2 Consolidated Business Expected to Generate Significant Free Cash Flow In Fiscal 2024 . . . . . . With Sustainable Free Cash Flow Generation Expected Over the Long-Term $300 Regulated businesses focused on long-term modernization programs that are expected to lead to mid-single digit rate base Pr
Slide 7: High Quality Assets Drive Consolidated Growth
3 High Quality Assets Drive Consolidated Growth Significant long-term growth potential in earnings and free cash flow supported by mid-single digit regulated rate base growth and increasing natural gas price realizations Exploration & Production Utility Decades of high-quality, economic Marcellus
Slide 8: Over Half Century of Dividend Growth
4 Over Half Century of Dividend Growth 53 Years 121 Years $1.98 per share 3.9% yield(1) Consecutive Dividend Increases Consecutive Payments $1.5 Billion 4.2% Dividend payments Over Last 10 Years 2023 Dividend Increase $0.19 per share Annual Rate at Fiscal Year End (1) As of October 30, 2023. 8
Slide 9: Focused on Corporate Responsibility and ESG
5 Focused on Corporate Responsibility and ESG Latest Corporate Responsibility Report provides Enhanced ESG Disclosures on Sustainability Initiatives Continued Progress Toward Emissions Reduction Targets Independent Third-party Verification of Greenhouse Gas Emissions – external assurance of repo
Slide 10: Emissions Reduction Targets and Initiatives
Emissions Reduction Targets and Initiatives Significant Methane Intensity and Greenhouse Gas Emissions Reduction Targets Across the Progress Ongoing Sustainability Initiatives Energy Value Chain(1) Since 2020(2) Exploration & Responsible Gas Certifications 40% Reduction in Methane Intensity by 203
Slide 11: Fourth Quarter and Fiscal 2023 Financial Highlights; Fiscal 2024 Earnings Guidance
Fourth Quarter and Fiscal 2023 Financial Highlights Fiscal 2024 Earnings Guidance 11
Slide 12: Fourth Quarter Fiscal 2023 Results and Drivers
Fourth Quarter Fiscal 2023 Results and Drivers Adjusted Operating Results ($/share)(1) Q4 FY 2022 Q4 FY 2023 Major Drivers Natural Gas Pricing $1.19 ($/Mcfe)(2) $2.84 Natural Gas Prices $2.33 Exploration & $0.95 $0.78 Production $0.81 Net Gas Production Exploration & Production $0.38 Natural Gas Pro
Slide 13: Fiscal 2023 Highlights
Fiscal 2023 Highlights Adjusted EBITDA $1.2 billion(1) Down 5% vs. FY22 despite natural gas prices lower by 45% Dividend $1.98 per share Grew shareholder distribution for 53rd consecutive year Production 372.5 Bcfe Up 6% vs. FY22; highest output in NFG history Proved Reserves 4.5 Tcfe Up 9% vs. FY22
Slide 14: FY2024 Earnings Guidance
FY2024 Earnings Guidance FY2023 Adjusted Operating Results FY2024 Earnings Guidance Key Guidance Drivers $5.17/share(1) $5.40 to $5.90/share Net Production 390-410 Bcfe (up 7% vs. FY23) Realized natural gas prices (after-hedge) ~$2.63-2.68/Mcf(2) (vs. $2.55/Mcf in FY23) Non-Regulated Exploration
Slide 15: Exploration & Production & Gathering Overview
Exploration & Production & Gathering Overview Seneca Resources Company, LLC National Fuel Gas Midstream Company, LLC 15
Slide 16: Focus on Capital Efficiency
E&P and Gathering Focus on Capital Efficiency Net Production (Bcfe) Capital Expenditures ($ MM)(1) $600 400 300 $400 390- $588 $525 - 200 372.5 $566 352.5 410 $575 $200 100 0 $0 2022 2023 2024E 2022 2023 2024E Near-Term Strategy Continue to moderate activity level to target maintenance-to-low prod
Slide 17: EDA Transition Driving Improved Economics
E&P and Gathering EDA Transition Driving Improved Economics Transition to full EDA development, with increasing capital efficiency, enhanced productivity and higher returns, provides differentiated investment opportunity to high-grade development program >10 years of prolific EDA inventory at ex
Slide 18: Eastern Development Area (EDA)
E&P and Gathering Eastern Development Area (EDA) Seneca EDA Highlights EDA – ~309,000 Acres 1 Tioga County, PA Undeveloped Utica ~200 Utica future development locations ~80 Marcellus future development locations Gathering infrastructure: NFG Tioga gathering systems Numerous marketing opportu
Slide 19: Integrated Development – EDA Gathering
E&P and Gathering Integrated Development – EDA Gathering Current Systems In-Service Gathering Systems Map 1 Tioga Gathering Systems Total Investment (to date): ~$420 million(1) Capacity: up to 970,000 Dth per day Current Production Sources: Seneca Resources & Third Party Interconnects: Empir
Slide 20: Western Development Area (WDA)
E&P and Gathering Western Development Area (WDA) Marcellus Core Acreage vs. Utica Trend(1) WDA Highlights Large well inventory: Marcellus Shale: 600+ well locations remaining / 200,000 acres Utica Shale: 500+ potential locations across Utica trend / evaluating extent of prospective acreage(2)
Slide 21: Integrated Development – WDA Gathering System
E&P and Gathering Integrated Development – WDA Gathering System Gathering System Build-Out Tailored to Accommodate Seneca’s WDA Development Clermont Gathering System Map Current System In-Service Total Investment (to date): ~$394 million Capacity: up to 750 MMcf per day Current Production Sour
Slide 22: Production Supported by Long-Term Contracts
E&P and Gathering Production Supported by Long-Term Contracts Natural Gas Marketing Firm Contract / Transport Volumes (gross MDth/day) 1200 Firm Sales Contracts(1) 1000 Will continue to layer-in firm sales deals to reduce in-basin spot exposure Leidy South (Transco & NFG - Supply) Transco Zone 6 Non
Slide 23: Near-term Firm Sales Provide Market & Price Certainty
E&P and Gathering Near-term Firm Sales Provide Market & Price Certainty Net Contracted Firm Sales (Dth per day) Contracted Index Price Differentials ($ per Dth)(1) NYMEX Dawn Other Capped Fixed Price 37,300 (2) 38,600 (2) ($0.26) $0.43 1,044,300 1,044,700 1,015,900 988,400 986,500 252,000 284,700 18
Slide 24: Fiscal 2024 Net Production Profile
E&P and Gathering Fiscal 2024 Net Production Profile 357 Bcf of Appalachian Production Protected by Firm Sales 211 Bcf locked-in realizing ~$2.69/Mcf (1), net of transportation 64 Bcf of no-cost collars with $3.43/Mcf floor(2) 82 Bcf of additional firm sales(3) 390-410 Bcfe 400 ~43 Bcfe 350 ~8
Slide 25: Competitive, Low-Cost Profile Operations
E&P and Gathering Competitive, Low-Cost Profile Operations Increased Scale and Highly-Contiguous Operations Drive Low Cash Unit Costs Seneca Cash OpEx ($/Mcfe) Operating $1.32 results excluding $1.22 California operations $0.14 $0.12 $1.14 $1.13 $0.12 $0.13 $0.97 $0.30 $0.93 ~$0.95 Fees Paid to NF
Slide 26: Sustainability Initiatives
E&P and Gathering Sustainability Initiatives Responsible Gas Certifications, Methane Detection & Biodiversity Equitable Origin – EO100TM Standard for Responsible Methane Detection Energy Development Certifications For the past decade, standard pad design has included fixed gas detection systems in
Slide 27: Pipeline & Storage Overview
Pipeline & Storage Overview National Fuel Gas Supply Corporation Empire Pipeline, Inc. 27
Slide 28: Pipeline & Storage Segment Overview
Pipeline & Storage Pipeline & Storage Segment Overview National Fuel Gas Supply Corporation Contracted Capacity(1): Firm Transportation: 3,461 MDth per day Firm Storage: 70,693 MDth (fully subscribed) Rate Base(2): ~$1,179 million FERC Rate Proceeding Status: Empire Pipeline Filed rate c
Slide 29: Tioga Pathway Project – Organic Growth
Pipeline & Storage Tioga Pathway Project – Organic Growth Project provides long-term revenue growth for Supply, while providing an additional outlet for Seneca’s EDA development Capacity: 190,000 Dth/day Estimated annual revenue: ~$15 million (underpinned by 15-year agreement with Seneca) Esti
Slide 30: Continued Expansion of the Supply Corp. Line N System
Pipeline & Storage Continued Expansion of the Supply Corp. Line N System Recent Expansion of Line N Over the past three years, the company has successfully placed into service several projects which have added: Mercer Contracted firm transport: 158,000 Dth/d Contracted firm storage: 267,000 Dt
Slide 31: Northern Access Project
Pipeline & Storage Northern Access Project Delivery points: 350,000 Dth/d to Chippawa (TCPL interconnect) 140,000 Dth/d to East Aurora (TGP 200 line) Regulatory/legal status: To Dawn Feb. 2017 – FERC 7(c) certificate issued Aug. 2018 – FERC issued Order finding that NY DEC waived water quali
Slide 32: Pipeline & Storage Customer Mix
Pipeline & Storage Pipeline & Storage Customer Mix Customer Transportation by Shipper Type(1) Affiliated Customer Mix (Contracted Capacity) Affiliated Non-Affiliated End User 8% 23% Outside Pipeline Producer 52% 16% 34% 84% Marketer 5% 77% LDC 48% 37% 16% LDCs Producers Firm Storage Firm Transport (
Slide 33: Utility Overview
Utility Overview National Fuel Gas Distribution Corporation 33
Slide 34: New York & Pennsylvania Service Territories
Utility New York & Pennsylvania Service Territories New York Total Customers(1): 540,000 Allowed ROE: 8.7% (NY PSC Rate Case Order, April 2017) Rate Mechanisms: o Revenue Decoupling o Weather Normalization o Low Income Rates o Merchant Function Charge (Uncollectibles Adj.) o 90/10 Sharing (Large Cus
Slide 35: New York Rate Case
Utility New York Rate Case On October 31, 2023, National Fuel Gas Distribution Corporation filed a request with the New York Public Service Commission (NY PSC) to amend its tariff and increase its base rates. National Fuel’s base rates have not changed since the last base rate case was litigated in
Slide 36: Customer Affordability
Utility Customer Affordability New York Pennsylvania #3 #1 Out of 9 Gas Utilities(1) Out of 6 Gas Utilities(2) New York Large Gas Utilities Monthly Bill Pennsylvania Large Gas Utilities Monthly Bill Residential Heating (based on 100 MCF annually) Residential Heating (based on 15 MCF monthly) $200 $3
Slide 37: Utility Continues its Significant Investments in Safety
Utility Utility Continues its Significant Investments in Safety Long-Standing Focus on Distribution System Safety and Reliability (1) $160.0 Capital Expenditures for Safety Total Capital Expenditures $139.9 $130-$150 Utility Capital Expenditures ($ millions) $140.0 $120.0 $111.0 $100.8 $108.6 $95.8
Slide 38: Long-Standing Pipeline Replacement & Modernization
Utility Long-Standing Pipeline Replacement & Modernization Utility Mains by Material(1) Miles of Utility Main Pipeline Replaced Wrought Iron 158 161 154 156 154 Coated Bare NY 45 40 43 41 49 9,798 miles Plastic Bare Wrought Iron 113 114 113 113 112 Coated PA 4,845 miles Plastic 2019 2020 2021 2022 2
Slide 39: Utility Targeting Substantial Emissions Reductions
Utility Utility Targeting Substantial Emissions Reductions Significant Reductions in Utility GHG Emissions to Date, GHG Reduction Targets, Continuing Focus on Lowering Driven by System Modernization Efforts Carbon Footprint Utility Mains & Services Emissions(1) Utility GHG Emissions Reduction Target
Slide 40: Promoting Renewable Natural Gas and Hydrogen
Utility Promoting Renewable Natural Gas and Hydrogen Through Fiscal 2020 July 2021 Ongoing Accepted first RNG deliveries into Advance RNG, Hydrogen, and Awarded three RNG grants for other CLCPA related NY system from anaerobic $1.2 million through the Utility’s digester project (receipts opportuniti
Slide 41: Consolidated Financial Overview
Consolidated Financial Overview Upstream I Midstream I Downstream 41
Slide 42: Diversified, Balanced Earnings and Cash Flows
Diversified, Balanced Earnings and Cash Flows Adjusted Operating Results ($ per share)(1) Adjusted EBITDA ($ millions)(2) $1,400 $7.00 $1,226 $5.88 $1,165 $6.00 $5.40 - $5.90 $1,200 $5.17 $5.00 $1,000 $656 $3.21 E&P $612 $4.00 $2.52 $800 $3.00 $600 Gathering $177 $186 $1.01 $1.08 $2.00 $400 Pipeline
Slide 43: Disciplined, Flexible Capital Allocation
Disciplined, Flexible Capital Allocation Capital Expenditures by Segment ($ millions)(1) Exploration & Production (2) Gathering (3) Pipeline & Storage Utility $1,000 $974 $865-$975 $829 $781 $770 $800 $719 $588 $525-$575 $600 $381 $492 $384 $566 $400 $35 $103 $90-$110 $74 $50 $252 $56 $142 $200 $167
Slide 44: Maintaining Strong Balance Sheet & Liquidity
Maintaining Strong Balance Sheet & Liquidity Net Debt / Adjusted EBITDA(1) Capitalization 3.08 x 2.61 x 2.72 x 2.47 x Total 2.22 x 2.27 x Equity Debt 53% 47% 2018 2019 2020 2021 2022 2023 $5.6 Billion Total Capitalization Fiscal Year as of September 30, 2023(2) Debt Maturity Profile by Fiscal Year (
Slide 45: Appendix
Appendix 45
Slide 46: Safe Harbor For Forward Looking Statements
Appendix 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, objectives, goals, projections, estimates of gas quantities, stra
Slide 47: Hedge Positions and Prices
Appendix Hedge Positions and Prices Natural Gas Volumes in thousand MMBtu; Prices in $/MMBtu Fiscal 2024 Q1 Q2 Q3 Q4 Avg. Avg. Avg. Avg. Volume Price Volume Price Volume Price Volume Price NYMEX Swaps 30,620 $3.16 34,770 $3.39 34,770 $3.39 34,770 $3.39 No Cost Collars 19,380 $3.43 / $4.38 17,100 $3.
Slide 48: NYMEX Capped Firm Sales Additional Detail
Appendix NYMEX Capped Firm Sales Additional Detail Capped Firm Sales - Net Contracted Volumes (Dth/d) NYMEX Cap Q1 FY24 Q2 FY24 Q3 FY24 Q4 FY24 FY24 Avg $2.92 28,900 29,100 29,500 29,500 29,300 $4.95 17,300 16,600 16,800 16,800 16,900 $7.00 14,000 20,300 20,500 20,500 18,800 Total 60,200 66,000 66,8
Slide 49: Firm Transportation Commitments Currently In-Service
Appendix Firm Transportation Commitments Volume Delivery Demand Charges Production Source Gas Marketing Strategy (Dth/d) Market ($/Dth) Northeast Supply Canada Firm Sales Contracts Diversification EDA – Tioga 50,000 $0.46 (3rd party) (Dawn) Dawn/NYMEX Tennessee Gas Pipeline NFG pipelines - $0.24 Nia
Slide 50: Comparable GAAP Financial Measure Slides & Reconciliations
Appendix Comparable GAAP Financial Measure Slides & Reconciliations This presentation contains certain non-GAAP financial measures. For pages that contain non-GAAP financial measures, pages containing the most directly comparable GAAP financial measures and reconciliations are provided in the slides
Slide 51: Non-GAAP Reconciliations – Adjusted EBITDA
Appendix Non-GAAP Reconciliations – Adjusted EBITDA Reconciliation of Adjusted EBITDA to Consolidated Net Income ($ Thousands) FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Total Adjusted EBITDA Exploration & Production Adjusted EBITDA $ 317,707 $ 351,159 $ 312,166 464,529 656,310 611,782 Pipeline
Slide 52: Non-GAAP Reconciliations – Adjusted EBITDA, by Segment
Appendix Non-GAAP Reconciliations – Adjusted EBITDA, by Segment Reconciliation of Adjusted EBITDA to Net Income, by Segment ($ Thousands) FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Exploration and Production Segment Reported GAAP Earnings $ 180,632 $ 111,807 $ (326,904) $ 101,916 $ 306,064 $ 23
Slide 53: Non-GAAP Reconciliations – Adjusted Operating Results
Appendix Non-GAAP Reconciliations – Adjusted Operating Results 53
Slide 54: Non-GAAP Reconciliations – Free Cash Flow
Appendix Non-GAAP Reconciliations – Free Cash Flow Reconciliation of Free Cash Flow ($ Thousands) Twelve Twelve Months Ended Months Ended September 30, September 30, 2023 2022 Net Cash Provided by Operating Activities $ 1,237,075 $ 812,521 Less: Net Cash Used in Investing Activities $ 1,112,347 $ 51
Slide 55: Reconciliation – Capital Expenditures
Appendix Reconciliation – Capital Expenditures Reconciliation of Segment Capital Expenditures to Consolidated Capital Expenditures ($ Thousands) FY 2024 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Guidance Capital Expenditures Exploration & Production Capital Expenditures $ 491,889 $ 670,455 $ 381,408 $
Slide 56: Reconciliation – E&P Operating Expenses
Appendix Reconciliation – E&P Operating Expenses Reconciliation of Exploration & Production Segment Operating Expenses by Division ($000s unless noted otherwise) Twelve Months Ended Twelve Months Ended September 30, 2023 September 30, 2022 (2) (2) (2) (2) Appalachia West Coast Total E&P Appalachia W
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