National Fuel Gas Company · NYSE:NFG
National Fuel Gas — Q4 FY2019 Earnings Presentation
68 slides from National Fuel Gas's earnings presentation, Oct 31, 2019
Slide 1: Investor Presentation Q4 Fiscal 2019 Update
Investor Presentation Q4 Fiscal 2019 Update October 31, 2019 Exhibit 99
Slide 2: Commitment to safe and environmentally conscious operations
National Fuel is committed to the safe and environmentally conscious development, transportation, storage, and distribution of natural gas and oil resources. For additional information, please visit our corporate responsibility website at https://responsibility.natfuel.com
Slide 3: NFG: A Diversified, Integrated Natural Gas Company
Developing our large, high quality acreage position in Marcellus & Utica shales(1) NFG: A Diversified, Integrated Natural Gas Company Providing safe, reliable and affordable service to customers in WNY and NW Pa. Upstream Exploration & Production Midstream Gathering Pipeline & Storage 38% of NFG EBI
Slide 4: Why National Fuel?
Why National Fuel? Large Appalachian Footprint Providing Long-Term Growth Opportunities
Slide 5: Midstream Integrated Model Enhances Shareholder Value
Midstream Integrated Model Enhances Shareholder Value . . . Ability to adjust to changing commodity price environments More efficient capital investment Higher returns on investment Operational scale Lower cost of capital Lower operating costs More competitive pipeline infrastructure projects Strong
Slide 6: Drives Organic Growth Opportunities
Integrated Upstream and Midstream development of 785,000 acre Marcellus and Utica shale position Drilling program focused on return trips to existing pads and use of existing infrastructure NFG Gathering transports 100% of natural gas production, driving consolidated returns NFG pipeline expansions
Slide 7: Impressive Dividend History
Impressive Dividend History $3.1 Billion Dividend payments since 1970 $1.74 per share 49 Years Consecutive Dividend Increases $0.19 per share 117 Years Consecutive Payments 3.8% yield(1) As of October 29, 2019. 2
Slide 8: E&P Growth Supported by Existing Firm Sales Portfolio
1 E&P Growth Supported by Existing Firm Sales Portfolio . . . . . . And New Firm Transportation Capacity Providing Access to Premium Markets Production Growth Continues to Drive Increased Gathering Revenues E&P 3 Leidy South (Mid-Atlantic) Firm Sales tied to Firm Transportation (FT) Capacity (Mid-At
Slide 9: Utilization of Existing Infrastructure for Utica Development
Utilization of Existing Infrastructure for Ongoing Utica Development Amplifies Consolidated Returns L Leveraging Existing Infrastructure to Enhance Returns Approximate WDA Marcellus gathering facility costs for 192 wells drilled and completed as of September 30, 2018. Estimated WDA Utica gathering f
Slide 10: $1 Billion+ Backlog in Pipeline & Storage Projects
$1 Billion+ Backlog in Pipeline & Storage Projects Northern Access Delivery: Canada & NY 490,000 Dth/d Line N to Monaca Delivery: Shell ethane cracker facility (Beaver Co., Pa) 133,000 Dth/d FM100 Delivery: Transco (Leidy) 330,000 Dth/d Empire North Delivery: Canada & NY 205,000 Dth/d ~$150 Million
Slide 11: Financial Highlights Fourth Quarter and Fiscal 2019
Financial Highlights Fourth Quarter and Fiscal 2019
Slide 12: Fourth Quarter Fiscal 2019 Results and Drivers
Net Oil and Gas Production Fourth Quarter Fiscal 2019 Results and Drivers Adjusted Operating results of $0.49 for Q4 FY18 and $0.54 for Q4 FY19 include operating results of Corporate & All Other Segments segment. See slide 66 for a Reconciliation of Adjusted Operating Results to Earnings Per Share.
Slide 13: Fiscal 2019 Highlights
Fiscal 2019 Highlights Adjusted Operating Results Dividend Production Proved Reserves Gathering Segment Throughput Pipeline & Storage Revenues Utility Safety Investments $3.45 per share(1) Up from $3.35 per share (adjusted operating results) in FY18(1) $1.74 per share Grew shareholder distribution f
Slide 14: Earnings Guidance
Earnings Guidance FY2019 Adjusted Operating Results Non-regulated Businesses Exploration & Production Gathering $3.45/share(1) $3.00 to $3.30/share FY2020 Earnings Guidance Seneca Net Production: 235 to 245 Bcfe Gathering Revenues: $135-$145 million Natural Gas: ~$2.20/Mcf(2) (vs. $2.44/Mcf in FY 20
Slide 15: Exploration & Production and Gathering Overview
Exploration & Production and Gathering Overview Seneca Resources Company, LLC ~ National Fuel Gas Midstream Company, LLC
Slide 16: Proved Reserves
Proved Reserves 372% Reserve Replacement Rate Seneca Drill-bit F&D = $0.67/Mcfe(1) Appalachia Drill-bit F&D = $0.62/Mcfe(1) Seneca “Drill-bit” finding and development (“F&D”) costs exclude the impact of reserve revisions. Seneca Drill-Bit F&D and Appalachia Drill-Bit F&D are 3-year averages. Total P
Slide 17: Growing Production within Disciplined Capital Program
2-rig development program, with flexibility to adjust activity level Development focused in WDA-Utica, with return trips to existing pads expected to drive strong E&P and Gathering returns Gross production growth will benefit NFG’s Gathering segment Layer in additional firm sales in advance of new f
Slide 18: Significant Appalachian Acreage Position
Significant Appalachian Acreage Position Average gross production(1): ~395 MMcf/d Mostly leased (16-18% royalty) with no significant near-term lease expirations 70-80 remaining Marcellus & Utica locations: Breakeven (15% IRR) consolidated economics of $1.40 or less Additional Marcellus (Tioga Co.) &
Slide 19: Western Development Area Marcellus Core vs. Utica Appraisal Trend
Western Development Area Marcellus Core Acreage vs. Utica Appraisal Trend(1) The Utica Shale lies approximately 5,000 feet beneath Seneca’s WDA Marcellus acreage. Appraisal program currently in progress. Additional tests are planned. Prior Marcellus delineation tests helped define the prospective li
Slide 20: WDA-CRV Utica Results and Type Curve
WDA-CRV Utica Results and Type Curve Tested / producing from 27 Utica wells in WDA-CRV Drawdown management is critical: restricted drawdown appears to significantly improve well performance and EURs Produced fluid blend %: At high produced water blend rates, both well performance and EURs appear to
Slide 21: Clermont Rich Valley Utica Development
Avg. CRV Utica Production: 92 MMcf/d Est. EURs (Return Trips): 1.6-1.7 Bcf / 1,000 lateral feet Avg. CRV Marcellus Production: 215 MMcf/d Est. EURs (Return Trips): 1.1-1.2 Bcf / 1,000 lateral feet Clermont Rich Valley Utica Development Utilizes Existing Gathering, Water & Pad Infrastructure WDA: CRV
Slide 22: Leveraging Existing Gathering, Water and Pad Infrastructure
Leveraging Existing Gathering, Water and Pad Infrastructure Enhances Returns Limited New Infrastructure Needed to Support Production Growth WDA Well Costs(1) WDA-CRV Consolidated Economics Coordination between upstream and midstream activities enhances returns, provides economies of scale and signif
Slide 23: Integrated Development – WDA Gathering System
Integrated Development – WDA Gathering System Current System In-Service Current Capacity: 470 MMcf per day Interconnects with TGP 300 and NFG Supply Total Investment to Date: $307 million 38,120 HP of compression (3 stations) Future Build-Out FY 2020 CapEx: $18 - $23 million Modest gathering pipelin
Slide 24: WDA Firm Transportation and Sales Capacity
WDA Firm Transportation and Sales Capacity Will continue to layer-in firm sales deals of short and longer duration on TGP 300 to reduce spot exposure WDA spot realizations track TGP Station 313 pricing, typically 10¢ - 20¢ better than TGP Marcellus Zone 4 Leidy South will provide additional capacity
Slide 25: Eastern Development Area
Eastern Development Area EDA Acreage – 70,000 Acres EDA Highlights 1 DCNR Tract 007 (Tioga Co., Pa) Utica development resumed in third quarter fiscal 2018 40-45 remaining Utica locations Gathering infrastructure: NFG Midstream Wellsboro Marcellus Shale expected to provide ~60 additional locations E&
Slide 26: EDA Marcellus: Lycoming County Development
EDA Marcellus: Lycoming County Development Marcellus Development in Lycoming County has Resumed in Connection with Atlantic Sunrise Includes physical fixed price and NYMEX-based firm sales contracts that do not carry any additional transportation costs. E&P and Gathering Prolific Marcellus acreage w
Slide 27: EDA Utica: Tioga County Development
EDA Utica: Tioga County Development Development Focused on Tract 007 Production Area, with Production Underpinned by Firm Sales (1) Includes physical fixed price and NYMEX-based firm sales contracts that do not carry any additional transportation costs. E&P and Gathering Northeast Supply Diversifica
Slide 28: EDA Utica: Tract 007 Wells Brought Online
EDA Utica: Tioga County Development Tract 007 Utica Wells Brought Online in Q2 Fiscal 2019 Tracking Best Industry Results to Date Production from first multi-well pad (4 wells) brought online in February/March 2019 Early results compare favorably with industry Potter/Tioga Co. wells 40-45 remaining
Slide 29: Integrated Development – EDA Gathering Systems
Integrated Development – EDA Gathering Systems Total Investment (to date): ~$48 million FY 2020 Estimated Capital Expenditures: ~$2 MM Capacity: 220,000 Dth per day (Interconnect w/ TGP 300) Production Source: Seneca Resources – Tioga Co. (Covington and DCNR Tract 595) Total Investment (to date): ~$
Slide 30: Long-term Contracts Supporting Appalachian Growth
Long-term Contracts Supporting Appalachian Growth Represents base firm sales contracts not tied to firm transportation capacity. Base firm sales are either fixed priced or priced at an index (e.g., NYMEX ) +/- a fixed basis and do not carry any transportation costs. Seneca continues to layer-in firm
Slide 31: Near-term Firm Sales Provide Market & Price Certainty
Near-term Firm Sales Provide Market & Price Certainty Net Contracted Firm Sales Volumes (Dth per day) Contracted Index Price Differentials ($ per Dth)(1) Actual Daily Net Production 657,100 659,200 684,300 676,800 676,800 691,900 689,300 681,800 Gross Firm Sales Volumes (Dth/d) E&P and Gathering Val
Slide 32: California Oil
California Oil Stable Oil Production | Minimal Capital Investment | Steady Free Cash Flow 1 2 3 4 5 Location Formation Production Method Avg. Daily Production (net Boe/d)(1) 1 East Coalinga/ Other Temblor Primary 477 2 North Lost Hills Tulare & Etchegoin Primary/ Steam flood 864 3 South Lost Hills M
Slide 33: California Capital Expenditures vs. Production
California Capital Expenditures vs. Production West Division Average Net Daily Production (Boe) West Division Annual Capital Expenditures ($ MM)(1) Estimate Seneca West Division capital expenditures includes Seneca corporate and eliminations. E&P and Gathering Sespe Sale Closed on 5/1/18 (reduced pr
Slide 34: California Development Activities
Pioneer South MWSS Acreage North MWSS Acreage Sec. 17N California Development Activities Modest near-term capital program focused on locations that earn attractive returns in current oil price environment A&D will focus on low cost, bolt-on opportunities Sec. 17, Pioneer, and East Coalinga developme
Slide 35: Fiscal 2020 Production and Price Certainty
Fiscal 2020 Production and Price Certainty Average realized price reflects uplift from financial hedges less fixed differentials under firm sales contracts and any firm transportation costs. Indicates firm sales contracts with fixed index differentials but not backed by a matching financial hedge. 1
Slide 36: Strong Hedge Book
Strong Hedge Book Natural Gas Swap & Fixed Physical Sales Contracts (Millions MMBtu) Fixed price physical sales exclude joint development partner’s share of fixed price contract WDA volumes as specified under the joint development agreement. Reflects percentage of projected production for FY20 hedge
Slide 37: Seneca Operating Costs
Seneca Operating Costs Competitive, low cost structure in Appalachia and California supports strong cash margins Gathering fee generates significant revenue stream for affiliated gathering company Seneca DD&A Rate $/Mcfe Appalachia LOE & Gathering $/Mcfe California LOE $/Boe Total Seneca Cash OpEx $
Slide 38: Pipeline and Storage Overview
Pipeline and Storage Overview National Fuel Gas Supply Corporation ~ Empire Pipeline, Inc.
Slide 39: Pipeline & Storage Segment Overview
Pipeline & Storage Segment Overview As of September 30, 2018 as disclosed in the Company’s fiscal 2018 form 10-K. As of December 31, 2018 calculated from National Fuel Gas Supply Corporation’s and Empire Pipeline, Inc.’s 2018 FERC Form-2 reports, respectively. Empire Pipeline, Inc. National Fuel Gas
Slide 40: FM100 Project - Consolidated Benefit for NFG
All Seneca volumes will flow through wholly-owned NFG gathering facilities FM100 Project - Consolidated Benefit for NFG 330,000 Dth/d of new transportation capacity from WDA and EDA acreage positions to premium markets New Transco capacity (Leidy South): 330,000 Dth/day Rate(1) : competitive with ot
Slide 41: FM100 Project – Significant Investment by Supply Corp.
FM100 Project – Significant Investment by Supply Corp. Pipeline & Storage Estimated capital cost: $279 million Expansion facilities: ~159 million Modernization facilities: ~$120 million Facilities (all in Pennsylvania) include: Approximately 30 miles of new pipeline 2 new compressor stations (totali
Slide 42: Empire North Project
Empire North Project Target in-service: second half of fiscal 2020 Est. capital cost: $145 million Est. annual revenues: ~$25 million Receipt point: Jackson (Tioga Co., Pa. production) Design capacity and delivery points: 175,000 Dth/d to Chippawa (TCPL interconnect) 30,000 Dth/d to Hopewell (TGP 20
Slide 43: Northern Access Project
Northern Access Project In-service: no sooner than fiscal 2022 Total cost: ~$500 MM(1) (~$57 MM spent to date) Estimated annual revenues: ~$84 million Delivery points: 350,000 Dth/d to Chippawa (TCPL interconnect) 140,000 Dth/d to East Aurora (TGP 200 line) Regulatory/legal status: Feb. 2017 – FERC
Slide 44: Continued Expansion of the NFG Supply System
Continued Expansion of the NFG Supply System Line N Expansion Opportunities Line N to Monaca Project Project: Firm transportation service to a new ethane cracker facility being built by Shell Chemical Appalachia, LLC Expected In-service date: November 1, 2019 Estimated capital cost: $24.5 million Co
Slide 45: Pipeline & Storage Customer Mix
Pipeline & Storage Customer Mix 4.2 MMDth/d Contracted as of 10/31/2018. Customer Transportation by Shipper Type(1) Affiliated Customer Mix (Contracted Capacity) Firm Transport Pipeline & Storage
Slide 46: Utility Overview
Utility Overview National Fuel Gas Distribution Corporation
Slide 47: New York & Pennsylvania Service Territories
New York & Pennsylvania Service Territories New York Total Customers(1): 535,800 ROE: 8.7% (NY PSC Rate Case Order, April 2017) Rate Mechanisms: Revenue Decoupling Weather Normalization Low Income Rates Merchant Function Charge (Uncollectibles Adj.) 90/10 Sharing (Large Customers) System Modernizati
Slide 48: New York Rate Case Outcome
New York Rate Case Outcome Rate Order Summary: Revenue Requirement:$5.9 million Rate Base:$704 million Allowed Return on Equity (ROE):8.7% Capital Structure:42.9% equity Other notable items: New rates became effective 5/1/17 Retains rate mechanisms in place under prior order (revenue decoupling, wea
Slide 49: Utility Continues Significant Investments in Safety Modernization
Utility Continues its Significant Investments in Safety Modernization Spending in NY Expected to Grow Gross Margin By $2 MM - $5 MM Annually (1) A reconciliation to Capital Expenditures as presented on the Consolidated Statement of Cash Flows is included at the end of this presentation. Utility Syst
Slide 50: Accelerating Pipeline Replacement & Modernization
Accelerating Pipeline Replacement & Modernization NY 9,726 miles PA* 4,830 miles * No Cast Iron Mains in Pa.* Miles of Utility Main Pipeline Replaced Utility Mains by Material(1) Utility (1) All values are reported on a calendar year basis as of December 31, 2018.
Slide 51: A Proven History of Controlling Costs
A Proven History of Controlling Costs Utility O&M Expense and Non-Service Pension Costs ($ millions) Utility (1) (1) As of October 1, 2018, Operation and Maintenance Expense does not include non-service pension costs, which were re-classified as Other Income (Deductions) on the Company’s Income Stat
Slide 52: Consolidated Financial Overview
Consolidated Financial Overview Upstream I Midstream I Downstream
Slide 53: Diversified, Balanced Earnings and Cash Flows
Adjusted Operating Results ($ per share)(1) Diversified, Balanced Earnings and Cash Flows A reconciliation of Adjusted Operating Results to Earnings per Share, by segment, as presented on the Consolidated Statement of Income and Earnings Reinvested in the Business is included at the end of this pres
Slide 54: Disciplined, Flexible Capital Allocation
Disciplined, Flexible Capital Allocation (2) Total Capital Expenditures include Corporate and All Other. A reconciliation to Capital Expenditures as presented on the Consolidated Statement of Cash Flows is included at the end of this presentation. FY16, FY17, and FY18 reflects the netting of $157 mi
Slide 55: Maintaining Strong Balance Sheet & Liquidity
Maintaining Strong Balance Sheet & Liquidity Total Debt 50% $4.3 Billion Total Capitalization as of September 30, 2019 Net Debt / Adjusted EBITDA(1) Capitalization Debt Maturity Profile ($MM) Liquidity Committed Credit Facilities Short-term Debt Outstanding Available Short-term Credit Facilities Cas
Slide 56: Appendix
Appendix
Slide 57: 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, objectives, goals, projections, estimates of oil and gas quantities, strat
Slide 58: Consolidated Seneca and Gathering Economics
Consolidated Seneca and Gathering Economics Stand-alone Seneca breakeven economics (15% pre-tax IRR) by prospect are as follows: Tract 100 & Gamble: $1.51; Tract 007: $1.74; CRV Return Trip (Utica): $2.00; CRV Return Trip (Marcellus): $1.95. Internal Rate of Return (IRR) for stand-alone Seneca is pr
Slide 59: Hedge Positions and Prices
Hedge Positions and Prices Fixed price physical sales exclude joint development partner’s share of fixed price contract WDA volumes as specified under the joint development agreement. (1) Appendix Natural Gas Volumes in thousand MMBtu; Prices in $/MMBtu Fiscal 2020 Fiscal 2021 Fiscal 2022 Fiscal 202
Slide 60: EDA Type Curves
EDA Type Curves Appendix Estimated Cumulative Volumes (Bcf) Year Lycoming Marcellus (5,800') Tract 007 Utica (8,700') 1 3.2 5.3 5 8.6 12.6 10 11.1 15.5 EUR (Bcf) 14.5-16.8 17.4-20.0 NRI 84% 82%
Slide 61: WDA-CRV Type Curves
WDA-CRV Type Curves Estimated Cumulative Volumes (Bcf) Year WDA-CRV Utica (9,500') WDA-CRV Marcellus (9,000') 1 2.2 1.6 5 6.2 4.4 10 8.8 6.3 EUR (Bcf) 15.2-16.2 9.0-10.8 NRI 100% 100% Appendix
Slide 62: Firm Transportation Commitments
Firm Transportation Commitments Volume (Dth/d) Production Source Delivery Market Demand Charges ($/Dth) Gas Marketing Strategy Northeast Supply Diversification Tennessee Gas Pipeline Niagara Expansion TGP & NFG Northern Access NFG – Supply & Empire In-service: as early as FY 2022 50,000 158,000 350,
Slide 63: Comparable GAAP Financial Measure Slides & Reconciliations
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 that fol
Slide 64: Non-GAAP Reconciliations – Adjusted EBITDA
Non-GAAP Reconciliations – Adjusted EBITDA Appendix Total Adjusted EBITDA for FY 2018 and FY 2019 include the reclassification of non-service pension costs from Operating and Maintenance Expense to Other Income (Deductions) as of October 1, 2018 on the Company’s Income Statement, which on a consolid
Slide 65: Non-GAAP Reconciliations – Adjusted EBITDA, by Segment
Non-GAAP Reconciliations – Adjusted EBITDA, by Segment Appendix
Slide 66: Non-GAAP Reconciliations – Adjusted Operating Results
Non-GAAP Reconciliations – Adjusted Operating Results Appendix
Slide 67: Non-GAAP Reconciliations – Capital Expenditures
Non-GAAP Reconciliations – Capital Expenditures Appendix
Slide 68: Non-GAAP Reconciliations – E&P Operating Expenses
Non-GAAP Reconciliations – E&P Operating Expenses Appendix