National Fuel Gas Company · NYSE:NFG
National Fuel Gas — Q1 FY2011 Earnings Presentation
54 slides from National Fuel Gas's earnings presentation, Feb 10, 2011
Slide 1: Fiscal 2011 First Quarter Update
Fiscal 2011 First Quarter Update February 4, 2011 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 Operating Subsidiaries
Slide 4: Corporate & Financial Highlights
Corporate & Financial Highlights National Fuel Gas Company
Slide 5: Net Income from Continuing Operations Excluding Items Impacting Comparability
Net Income from Continuing Operations Excluding Items Impacting Comparability (1) National Fuel Gas Company A reconciliation to GAAP Net Income is included at the end of this presentation. $213.5 Million Twelve Months Ended December 31, 2010 E&P $110.1 MM 51.6%
Slide 6: Capital Expenditures from Continuing Operations
National Fuel Gas Company Capital Expenditures(1) from Continuing Operations A reconciliation to Capital Expenditures as presented on the Consolidated Statement of Cash Flows is included at the end of this presentation.
Slide 7: Capital Structure
National Fuel Gas Company Capital Structure $2.824 Billion(1) at December 31, 2010 Forecasted Capital Structure(2) at September 30, 2011 At December 31, 2010, Comprehensive Shareholders' Equity, Long-Term Debt and the Current Portion of Long-Term Debt totaled $2.824 Billion as presented on the Compa
Slide 8: Dividend Growth
National Fuel Gas Company Dividend Growth $1.38 $0.19 Compound Annual Growth Rate 5.1% National Fuel has had 108 uninterrupted years of dividend payments and has increased its dividend for 40 consecutive years
Slide 9: Fiscal 2011 First Quarter Update - February 4, 2011
9 Fiscal 2011 First Quarter Update - February 4, 2011
Slide 10: Fiscal 2011 First Quarter Update - February 4, 2011
10 Fiscal 2011 First Quarter Update - February 4, 2011
Slide 11: Fiscal 2011 First Quarter Update - February 4, 2011
11 Fiscal 2011 First Quarter Update - February 4, 2011
Slide 12: Exploration & Production: Seneca Resources Corporation
Exploration & Production Seneca Resources Corporation
Slide 13: Fiscal Year End Proved Reserves
Exploration & Production Fiscal Year End Proved Reserves(1) West - California Reserves: 333 Bcfe (47%) (55.5 MMBoe) Gulf of Mexico Reserves: 34 Bcfe (5%) East - Appalachia Reserves: 333 Bcfe (48%) At September 30, 2010 Total Proved Reserves: 700 Bcfe
Slide 14: Fiscal 2010 Annual Production
Exploration & Production Fiscal 2010 Annual Production West - California Production: 19.8 Bcfe (40%) (3.3 MMBoe) Gulf of Mexico Production: 13.4 Bcfe (27%) East - Appalachia Production: 16.5 Bcfe (33%) Total Production: 49.7 Bcfe
Slide 15: Fiscal 2010 Oil/Gas Mix
Exploration & Production Fiscal 2010 Oil/Gas Mix 700 Bcfe(1) At September 30, 2010 49.7 Bcfe $425.6 Million
Slide 16: Marcellus Shale: Accelerate Development
Exploration & Production Marcellus Shale Accelerate development; Convert resource potential to reserves Appalachian Region - Upper Devonian Drill 25-50 wells per year Proved Reserves at 9/30/10 California Continue to operate as a low-cost producer Gulf of Mexico No exploration; Develop and produce e
Slide 17: Seneca Fiscal 2010 Highlights
Exploration & Production Seneca Fiscal 2010 Highlights
Slide 18: Finding & Development Cost
Exploration & Production Finding & Development Cost (1) 2006 - 2009 Finding and Development cost information was obtained from IHS Herold, Inc. National Fuel's 2007 finding and development cost is adjusted for revisions due to a change in reserve auditors. National Fuel's 2010 finding and developmen
Slide 19: Capital Expenditures by Region
Exploration & Production Capital Expenditures by Region Does not include the $34.9MM acquisition of Ivanhoe's US-based assets in California, as this was accounted for as an investment in subsidiaries on the Statement of Cash Flows, and was not included in Capital Expenditures.
Slide 20: Annual Production by Region
Exploration & Production Annual Production by Region 40% 17%
Slide 21: Exploration & Production: California
Exploration & Production California
Slide 22: Seneca's California Properties
Seneca's California Properties South Lost Hills 1,900 BOEPD Monterey Shale Primary 216 Active Wells Sespe 1,000 BOEPD Sespe Formation Primary 182 Active Wells North Lost Hills 1,200 BOEPD Tulare & Etchegoin Formation Primary & Steamflood 221 Active Wells North Midway Sunset 4,100 BOEPD Potter & Tula
Slide 23: California Average Daily Production
California Average Daily Production Modest capital spending to maintain production Pursue additional bolt-on acquisitions 2011 Plans: CapEx - $40 MM 50 Development wells Two 5-acre in-fill wells at Sespe Participate in first well in Aera exploration agreement Production for the months of October 201
Slide 24: Fiscal Year 2011 Sespe Field Development Plans
California Fiscal Year 2011 Sespe Field Development Plans First drilling for Seneca at Sespe since 1991 Will drill six wells during this fiscal year Wells to be drilled at 10-acre spacing: 4 wells Test wells to be drilled at 5-acre spacing: 2 wells If successful, 5-acre down-spacing could add substa
Slide 25: Gulf of Mexico Exploration & Production
Gulf of Mexico Exploration & Production
Slide 26: Gulf of Mexico Average Daily Production
Gulf of Mexico Average Daily Production Minimal capital spending Expect production decline in 2011 Production for the months of October 2010, November 2010 and December 2010 are estimates
Slide 27: East Division Exploration & Production
East Division Exploration & Production
Slide 28: East Division Average Daily Production
East Division Average Daily Production Rapid growth in the East Division as Marcellus is ramping up Production for the months of October 2010, November 2010 and December 2010 are estimates
Slide 29: Marcellus Shale: Seneca's Pennsylvania Acreage
Marcellus Shale Seneca's Pennsylvania Acreage Seneca Resource Acreage Position 745,000 Net Acres in the heart of the PA Marcellus fairway Risked Resource Potential: 8-15 TCFE 80% Fee - Seneca owns the minerals No lease expiration 94% Average NRI SRC Fee Acreage
Slide 30: Marcellus Shale: Seneca's Development Areas
Marcellus Shale Seneca's Development Areas SRC Fee Acreage Eastern Development Area (Mostly Leased) Western Development Area (Mostly Fee and HBP)
Slide 31: Marcellus Shale Eastern Development Area
Marcellus Shale Eastern Development Area Covington Area - Full Development 31 Wells Drilled; 18 Producing Production (As of 1/1/11): 65 MMcf/d 2011: 16 Wells Planned DCNR Block 100 1st Well IP: 15.8 MMCFD 2011: 6 Wells Planned First Production: Fall 2011 Initial Test Wells Drilling / Fracing SRC Fee
Slide 32: Acquisition of EOG's Tioga County Interests
Exploration & Production Acquisition of EOG's Tioga County Interests Seneca has acquired EOG's interest in Tioga County, Pa. Seneca has always been the operator on all joint-interest wells in Tioga County, Pa. Acquisition Price: $24.1 million Proved Reserves at 10/1/10: 42 Bcfe PDP: 14 Bcfe PUD: 28
Slide 33: Marcellus Shale Western Development Area - Activity
Marcellus Shale Western Development Area - Activity EOG Contributed JV Acreage SRC Contributed JV Acreage Seneca Operated EOG Operated Punxy Area - Full Development EOG Operated 30 Wells Drilled; 18 Producing Gross Production (As of 1/1/11): 32 MMCFD 2011: 30+ Wells Planned Owl's Nest Area Seneca Op
Slide 34: Marcellus Net Production
Marcellus Shale Marcellus Net Production Seneca Operated EOG JV Marcellus net production at December 31, 2010 was: 90 MMcfe per day
Slide 35: Marcellus Shale Centralized Water System
Marcellus Shale Centralized Water System Recovering water discharged from an abandoned coal mine which was adversely impacting a local trout stream Authorized by SRBC to withdraw approximately 500,000 gallons per day of mine discharge Water pipeline system supplies frac water for Seneca in Tioga Cou
Slide 36: Marcellus Shale Wells Drilled per Year
Marcellus Shale Wells Drilled per Year
Slide 37: Marcellus Shale Pre-Tax IRR Comparison
Marcellus Shale Pre-Tax IRR Comparison Description EUR Well Cost ($ MM) Net Working Interest Net Revenue Interest Pre-Tax IRR (NYMEX - $/MMBtu) Pre-Tax IRR (NYMEX - $/MMBtu) Pre-Tax IRR (NYMEX - $/MMBtu) Description EUR Well Cost ($ MM) Net Working Interest Net Revenue Interest $4.00 $5.00 $6.00 Sen
Slide 38: Evaluation of JV Opportunities
Seneca Resources Evaluation of JV Opportunities Seneca has engaged Jefferies & Company to explore joint-venture opportunities across a broad portion of its acreage, with the following goals: Ramp up development faster than current aggressive growth plans Bring forward the earnings stream, where a mi
Slide 39: Seneca Oil and Gas Hedge Positions
National Fuel Gas Company Seneca Oil and Gas Hedge Positions For fiscal year 2011, Seneca has hedged 54% of their remaining forecasted production NYMEX Strip Prices (at 01/31/11) Natural Gas Oil Fiscal 2011(1) $4.25 $89.60 Fiscal 2012 $4.89 $98.93 Fiscal 2013 $5.19 $99.18 The NYMEX strip prices for
Slide 40: Pipeline & Storage / Midstream
National Fuel Gas Supply Corporation Empire Pipeline, Inc. National Fuel Gas Midstream Corporation Pipeline & Storage / Midstream
Slide 41: Pipeline & Storage / Midstream Expansion Initiatives
LAMONT COMPRESSOR STATION PHASE I & II LINE "N" EXPANSION PHASE I & II NORTHERN ACCESS COVINGTON GATHERING SYSTEM TROUT RUN GATHERING SYSTEM WEST TO EAST OVERBECK TO LEIDY LAMONT COMPRESSOR STATION PHASE I & II TIOGA COUNTY EXTENSION PHASE I & II LINE "N" EXPANSION PHASE I & II PIPELINE & STORAGE /
Slide 42: Pipeline & Storage/Midstream Expansion Initiatives
Pipeline & Storage/Midstream Expansion Initiatives Project Name Capacity (Dth/D) Est. CapEx In-Service Date Status Covington Gathering System 145,000 $16 MM 11/17/09 Completed - Flowing into TGP 300 Line Lamont Compressor Station 40,000 $6 MM 6/15/10 Completed - Flowing into TGP 300 Line Lamont Phas
Slide 43: Pipeline & Storage Challenges & Opportunities
Pipeline & Storage Challenges & Opportunities NFGSC Contract Turnbacks Supply has received capacity turnbacks on expiring contracts, decreasing future revenue by: FY11: ~$7.5 Million FY12: ~$6.0 Million Empire Unsold Capacity ~100,000 Dth/d of capacity remains unsold after the construction of the Em
Slide 44: Trout Run Gathering System - Lycoming County
Midstream Corporation Trout Run Gathering System - Lycoming County Capacity: 250,000 Dth/d Will Interconnect with Transco Pipeline in Lycoming County Seneca Resources will be the primary shipper Estimated In-Service: Fall 2011 Interstate Pipeline Gathering System Transco
Slide 45: Utility Segment: National Fuel Gas Distribution Corporation
Utility Segment National Fuel Gas Distribution Corporation
Slide 46: Utility Rate Mechanisms
New York Revenue Decoupling Customer Choice / POR Merchant Function Charge 90/10 Sharing (large volume users) Weather Normalization Low Income Rates Pennsylvania Low Income Rates Customer Choice / POR Merchant Function Charge Under Consideration: Revenue Decoupling Rate Mechanisms Utility
Slide 47: Utility Return on Equity
(1) Calculated using Average Total Comprehensive Shareholder Equity. Utility Return on Equity (1)
Slide 48: Key Takeaways
National Fuel Gas Company Key Takeaways High-Quality Marcellus Acreage Position 745,000 net acres with a resource potential of 8-15 Tcfe Recent well results validate the quality of our acreage Fee ownership results in superior economics Balanced Business Model Regulated segments support dividend and
Slide 49: Appendix
Appendix
Slide 50: 2011 EPS Guidance & Sensitivity
National Fuel Gas Company 2011 EPS Guidance & Sensitivity NFG & Subsidiaries The preliminary earnings guidance and sensitivity table are current as of February 3, 2011. The sensitivity table only considers revenue from the Exploration and Production segment's crude oil and natural gas sales. The sen
Slide 51: Fiscal Year 2011 Earnings Guidance - Key Drivers
National Fuel Gas Company Fiscal Year 2011 Earnings Guidance - Key Drivers FY 2011 EPS $2.75 to $3.00 Utility Operating Expense: ? 3% to 5% PA Normal Weather Pipeline & Storage Operating Expense: ? 3% to 5% Transportation Revenue: ? $7.5 Million Project Development Costs (O&M): $7 Million Exploratio
Slide 52: Peer Group Comparisons
National Fuel Gas Company Peer Group Comparisons 1-Year Total Return Peer Group Total Return National Fuel 75% Utility Peers 26% E&P Peers 0% Diversified Peers -6% 3-Year Total Return Peer Group Total Return National Fuel 148% Utility Peers 50% Diversified Peers 36% E&P Peers 29% 5-Year Total Return
Slide 53: Marcellus Shale Pennsylvania Acreage Holdings
Marcellus Shale Pennsylvania Acreage Holdings EOG Contributed JV Acreage SRC Contributed JV Acreage
Slide 54: Comparable GAAP Financial Measure Slides and Reconciliations
National Fuel Gas Company Comparable GAAP Financial Measure Slides and 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 pro