National Fuel Gas Company · NYSE:NFG
National Fuel Gas — Q4 2022 Earnings Presentation
60 slides from National Fuel Gas's earnings presentation, Nov 3, 2022
Slide 1: Investor Presentation Q4 Fiscal 2022 Update
Exhibit 99 Investor Presentation Q4 Fiscal 2022 Update November 3, 2022
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 Developing our large, high-quality Upstream acreage position in Marcellus & Exploration & Utica shales Production ~1.2 Million ~960 MMcf/day 54% of NFG Net acres in Net Appalachian natural (1) EBITDA (2) Appalachia gas production Expanding and moder
Slide 4: Why National Fuel?
Why National Fuel? Diversified Assets Provide Stability and Long-Term Growth Opportunities Integrated Model Enhances Shareholder Value 1 Expect to Generate Significant Free Cash Flow in Fiscal 2023 and Beyond 2 Optimization of Interstate Pipeline System Drives Future Expected Opportunities 3 Long Hi
Slide 5: Integrated Model Enhances Shareholder Value
1 Integrated Model Enhances Shareholder Value . . . Geographic and Operational Integration Benefits of National Fuel’s Upstream Drives Synergies: Integrated Structure: Exploration & ü Ability to adjust to changing commodity Production Upstream Midstream price environments ü Co-development of Marcell
Slide 6: Continues to Drive Growth Opportunities
. . . and Continues to Drive Growth Opportunities Near Term Strategy Leverages Integration Across the Value Chain Pipeline & Exploration & Gathering Utility Storage Production ü Integrated Upstream and Midstream development of high-quality Appalachian assets § ~1.2 million net acres in the Marcellus
Slide 7: Consolidated Business Expected to Generate Significant Free Cash Flow
Consolidated Business Expected to Generate Significant Free Cash Flow . . .. 2 . . . With Sustainable, Growing Free Cash Flow Generation . . . In Fiscal 2023. . . Expected Over the Long-Term Annualized Dividend Free Cash Flow ü Consolidated capital expenditure optimization to maximize long- $450 ter
Slide 8: Optimization of Interstate Pipeline Drives Future Expected Opportunities
Optimization of Interstate Pipeline Drives Future Expected Opportunities 3 ü FM100: TCPL – Canada/Dawn TGP - Hopewell § Placed into service December 2021 § ~$50 MM in Total Project-Related Revenues (Expansion & Modernization) ü Ongoing Investments in Safety, Emissions Millennium Reductions, and Syst
Slide 9: Over Half Century of Dividend Growth
4 Over Half Century of Dividend Growth 52 Years 120 Years $1.90 2.9% Consecutive Dividend Increases Consecutive Payments (1) per share yield $1.4 Billion 4.4% Dividend payments over last 10 years 2022 Dividend Increase $0.19 per share Annual Rate at Fiscal Year End 9 (1) As of November 2, 2022.
Slide 10: Focused on Corporate Responsibility and ESG
5 Focused on Corporate Responsibility and ESG Corporate Responsibility & Climate Report provides Enhanced ESG Disclosures Responsive to Key Stakeholder Priorities ü Enhanced Diversity Disclosures – continued workforce EEO-1 diversity disclosures, as well as supply chain diversity initiatives ü Green
Slide 11: Emissions Reduction Targets and Initiatives
Emissions Reduction Targets and Initiatives Significant Methane Intensity and Greenhouse Reduction Gas Emissions Reduction Targets Across the Ongoing Sustainability Initiatives Since 2020 (1) Energy Value Chain ü Responsible Gas Certifications Exploration & 40% Reduction in Methane Intensity by 2030
Slide 12: Fourth Quarter and Fiscal 2022 Financial Highlights; Fiscal 2023 Earnings Guidance
Fourth Quarter and Fiscal 2022 Financial Highlights Fiscal 2023 Earnings Guidance 12
Slide 13: Fourth Quarter Fiscal 2022 Results and Drivers
Fourth Quarter Fiscal 2022 Results and Drivers (1) Adjusted Operating Results ($/share) Q4 FY 2021 Q4 FY 2022 Major Drivers $1.19 Natural Gas Prices $2.84 $2.37 $0.95 Exploration & $0.95 Production $0.81 Exploration & Production Natural Gas Production / $0.61 87.9 76.3 Gathering Throughput Gathering
Slide 14: Fiscal 2022 Highlights
Fiscal 2022 Highlights (1) (1) Up 23% vs. FY21 Adjusted EBITDA $1.2 billion nd Grew shareholder distribution for 52 consecutive year and Dividend $1.90 per share doubled rate of annual dividend increase Up 8% vs. FY21; highest output in NFG history, Production 352.5 Bcfe despite divesting California
Slide 15: Earnings Guidance
Earnings Guidance FY2022 Adjusted Operating Results FY2023 Earnings Guidance (1) $5.88/share $6.40 to $6.90/share Key Guidance Drivers § 370-390 Bcfe (up 8% vs. FY22) Net Production (2) Realized natural gas prices (after-hedge)§ ~$3.05/Mcf (vs. $2.71/Mcf in FY22) Exploration & (1) G&A Expense § $0.1
Slide 16: Exploration & Production & Gathering Overview
Exploration & Production & Gathering Overview Seneca Resources Company, LLC National Fuel Gas Midstream Company, LLC 16
Slide 17: Growing Production within Disciplined Capital Program
E&P and Gathering Growing Production within Disciplined Capital Program E&P Net Production (Bcfe) Near-Term Strategy 400 ü Continue two rig development program with focus on maximizing returns and cash flows, targeting 300 mid-to-high single digit production growth 200 370-390 352.5 327.4 § EDA shar
Slide 18: Significant Appalachian Acreage Position
E&P and Gathering Significant Appalachian Acreage Position >1,000 Economic Drilling Locations (1) at $3.50 NYMEX Prices ( ) ( ) ü Decades of highly-economic inventory (~40 wells per year at current 2-rig pace) ü Large, contiguous acreage position, driving increased capital efficiency (()) § ~50% und
Slide 19: Eastern Development Area
E&P and Gathering Eastern Development Area Seneca EDA Highlights EDA – ~270,000 Acres 1 Tioga County, PA ü ~140 Utica future development locations ü ~80 Marcellus future development locations ü Gathering infrastructure: NFG Tioga gathering systems ü Numerous marketing opportunities: § Ability to uti
Slide 20: EDA: Tioga County Development
E&P and Gathering EDA: Tioga County Development Large Contiguous Acreage Position, with Highly-Economic Utica and Marcellus Inventory Tioga Development Plan Significant Tioga County Acreage Position ü Significant additional assets acquired in mid-2020, contiguous to NFG’s existing Tioga County produ
Slide 21: Integrated Development – EDA Tioga Gathering
E&P and Gathering Integrated Development – EDA Tioga Gathering NFG Tioga Gathering Systems Support Growing Seneca Production Current Systems In-Service Tioga County Gathering Systems Map ü Tioga Gathering System (1) § Total Investment (to date): ~$255 million § Capacity: up to 550,000 Dth per day (I
Slide 22: EDA: Tioga County Firm Sales and Transportation Contracts
E&P and Gathering EDA: Tioga County Development Production Underpinned by Firm Sales and Firm Transportation Contracts Tioga County Gas Marketing Strategy Tioga County Gross Firm Contract Volumes (MDth/d) 500 ü Production supported by firm transportation capacity to premium markets: 450 (1) EDA - TG
Slide 23: EDA: Lycoming County Development
E&P and Gathering EDA: Lycoming County Development Marcellus Development in Lycoming County Fully Utilizes Valuable Firm Transportation ü Prolific Marcellus acreage with average EUR of 2.5-3.0 Bcf / 1,000 ft ü ~30 Marcellus future development locations § Average lateral length of 6,500-7,500’ and co
Slide 24: Integrated Development – EDA Lycoming Gathering
E&P and Gathering Integrated Development – EDA Lycoming Gathering NFG Trout Run Gathering System Supports Seneca and Third-Party Development Current System In-Service Trout Run Gathering System Map ü Total Investment (to date): ~$275 million ü Capacity: 466,000 to 585,000 Dth per day ü Current Produ
Slide 25: Western Development Area
E&P and Gathering Western Development Area (1) Marcellus Core Acreage vs. Utica Trend WDA Highlights ü Large well inventory: § Marcellus Shale: 600+ well locations remaining / 200,000 acres § Utica Shale: 500+ potential locations across Utica trend (2) / evaluating extent of prospective acreage ü Fe
Slide 26: 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 § Capacity: 750 MMcf per day § Interconnects with TGP 300 and NFG Supply § Total Investment (to date): $
Slide 27: WDA Firm Transportation and Sales Capacity
E&P and Gathering WDA Firm Transportation and Sales Capacity WDA Exit Capacity Supports Production and Enhances Consolidated Returns WDA Gas Marketing Strategy WDA Contracted Firm Transport and Gross Sales Volumes (MDth/d) 500 ü Will continue to layer-in firm sales 450 deals of short and longer dura
Slide 28: Long-term Contracts Supporting Appalachian Production
E&P and Gathering Long-term Contracts Supporting Appalachian Production Seneca Appalachia Natural Gas Marketing Firm Contract / Transport Volumes (MDth/day) 1,200 (1) Firm Sales Contracts 1,000 Leidy South (Transco & NFG - Supply) Transco Zone 6 Non-NY 800 330,000 Dth/d *Capacity can be utilized by
Slide 29: Near-term Firm Sales Provide Market & Price Certainty
E&P and Gathering Near-term Firm Sales Provide Market & Price Certainty Net Contracted Firm Sales / Transport Volumes (Dth per day) (1) Contracted Index Price Differentials ($ per Dth) NYMEX Dawn Other Capped Fixed Price 35,100 ($0.77) 988,600 2,800 ($0.72) 983,400 948,200 4,300 ($0.72) 915,800 905,
Slide 30: Fiscal 2023 Production Profile
E&P and Gathering Fiscal 2023 Production Profile 335 Bcf of Appalachian Production Protected by Firm Sales (1) § 185 Bcf locked-in realizing ~$2.31/Mcf , net of transportation (2) § 69 Bcf of no-cost collars with $3.20/Mcf floor (3) § 81 Bcf of additional firm sales 400 370-390 Bcfe ~45 Bcfe 350 Spo
Slide 31: Continued Decrease in E&P Operating Costs
E&P and Gathering Continued Decrease in E&P Operating Costs Increased Scale and Highly-Contiguous Operations Expected to Drive Lower Cash Unit Costs Seneca Cash OpEx ($/Mcfe) Operating $1.40 $1.32 results excluding California operations $0.14 $1.22 $0.14 $1.14 $0.12 $0.34 $0.11 $0.97 $0.30ü Fees Pai
Slide 32: Sustainability Initiatives – Independently Certified Gas
E&P and Gathering Sustainability Initiatives – Independently Certified Gas Responsible Gas Certifications Equitable Origin MiQ (100% of Appalachian Assets - Certified December 2021) (100% of Appalachian Assets - Certified August 2022) Certification focuses on three emissions management criteria: Cer
Slide 33: Pipeline & Storage Overview
Pipeline & Storage Overview National Fuel Gas Supply Corporation Empire Pipeline, Inc. 33
Slide 34: Pipeline & Storage Segment Overview
Pipeline & Storage Pipeline & Storage Segment Overview National Fuel Gas Supply Corporation (1) ü Contracted Capacity : § Firm Transportation: 3,284 MDth per day § Firm Storage: 70,693 MDth (fully subscribed) (2) ü Rate Base : ~$1,173 million Empire Pipeline ü FERC Rate Proceeding Status: § 2020 set
Slide 35: FM100 Project – Significant Investment by Supply Corp.
Pipeline & Storage FM100 Project – Significant Investment by Supply Corp. (1) ü In-service date: December 1, 2021 ü Capital cost: ~$230 million (2) ü Annual revenue: ~$50 million ü Underpinned by long-term lease agreement with Transco (15 years) ü Project includes best-in-class emissions controls, l
Slide 36: 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 ü Over the past three years, the company has successfully placed TGP 219 into service several projects which have added: § Contracted firm transport: 158,000 Dth/d § Contracted firm storage: 267,000 D
Slide 37: Northern Access Project
Pipeline & Storage Northern Access Project Delivery points: ü 350,000 Dth/d to Chippawa (TCPL interconnect) ü 140,000 Dth/d to East Aurora (TGP 200 line) Regulatory/legal status: To Dawn ü Feb. 2017 – FERC 7(c) certificate issued ü Aug. 2018 – FERC issued Order finding that NY DEC waived water quali
Slide 38: Pipeline & Storage Customer Mix
Pipeline & Storage Pipeline & Storage Customer Mix (1) Customer Transportation by Shipper Type Affiliated Customer Mix (Contracted Capacity) Outside Affiliated Non-Affiliated Pipeline 9% End User 8% 26% 52% Producer Marketer 7% 36% 84% 74% LDC 48% 40% 16% LDCs Producers Firm Storage Firm Transport 3
Slide 39: Utility Overview
Utility Overview National Fuel Gas Distribution Corporation 39
Slide 40: New York & Pennsylvania Service Territories
Utility New York & Pennsylvania Service Territories New York (1) Total Customers : 539,000 (2) 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 Custo
Slide 41: Pennsylvania Rate Case
Utility Pennsylvania Rate Case On October 28, 2022, National Fuel Gas Distribution Corporation filed a request with the Pennsylvania Public Utility Commission (PA PUC) to amend its tariff and increase its base rates. National Fuel’s base rates have not changed since the last base rate case reached s
Slide 42: Utility Continues its Significant Investments in Safety
Utility Utility Continues its Significant Investments in Safety Long-Standing Focus on Distribution System Safety and Reliability $140.0 (1) Capital Expenditures for Safety Total Capital Expenditures $110-$130 $111.0 $120.0 $100.8 $95.8 $94.3 $100.0 $85.6 $82.6 $80.9 $79.7 $74.1 $71.4 $80.0 $69.9 $6
Slide 43: Long-Standing Pipeline Replacement & Modernization
Utility Long-Standing Pipeline Replacement & Modernization (1) Utility Mains by Material Miles of Utility Main Pipeline Replaced Wrought Iron 159 158 156 154 Coated Bare 144 Cast Iron NY 9,782 miles Plastic Wrought Iron Bare Coated PA* 4,850 miles Plastic 2017 2018 2019 2020 2021 Calendar Year * No
Slide 44: 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 (1) (1) Utility GHG Emissions Reduction Targets Utility Mains & Services Emi
Slide 45: Promoting Renewable Natural Gas and Hydrogen
Utility Promoting Renewable Natural Gas and Hydrogen July 2021 Through Fiscal 2020 October 2020 Ongoing Accepted first RNG deliveries Petitioned NY PSC to include Awarded three RNG grants Continue to advance RNG into NY system from RNG in the supply mix and for $1.2 million through the anaerobic dig
Slide 46: Consolidated Financial Overview
Consolidated Financial Overview Upstream I Midstream I Downstream 46
Slide 47: Diversified, Balanced Earnings and Cash Flows
Diversified, Balanced Earnings and Cash Flows (1) (2) Adjusted Operating Results ($ per share) Adjusted EBITDA ($ millions) $1,400 $8.00 $1,226 $6.40 to $6.90 $1,200 $7.00 $1,000 $5.88 $6.00 $1,000 $656 $5.00 $4.29 $800 E&P $465 $3.21 $4.00 $600 $1.83 $3.00 $177 $159 $400 $1.01 $0.88 Gathering $2.00
Slide 48: Disciplined, Flexible Capital Allocation
Disciplined, Flexible Capital Allocation (1) Capital Expenditures by Segment ($ millions) (2) (3) $1,000 Exploration & Production Gathering Pipeline & Storage Utility $830-$940 $829 $781 $770 $719 $750 $583 $525-$575 $381 $566 $492 $384 $500 $356 $35 $74 $85-$105 $50 $250 $56 $252 $48 $110-$130 $167
Slide 49: Maintaining Strong Balance Sheet & Liquidity
Maintaining Strong Balance Sheet & Liquidity (1) Net Debt / Adjusted EBITDA Capitalization Expect Excluding AOCI, 3.08 x further Equity as percentage 2.72 x 2.61 x reduction in of Total 2.45 x 2.47 x Equity Total FY23 2.22 x Capitalization would (2) 44% Debt be 50% 56% 2017 2018 2019 2020 2021 2022
Slide 50: Appendix
Appendix 0) National Fuel’
Slide 51: 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 52: Hedge Positions and Prices
Appendix Hedge Positions and Prices 52 (1) Fixed price physical sales exclude joint development partner’s share of fixed price contract WDA volumes as specified under the joint development agreement.
Slide 53: NYMEX Capped Firm Sales Additional Detail
Appendix NYMEX Capped Firm Sales Additional Detail Capped Firm Sales - Net Contracted Volumes (Dth/d) NYMEX Cap Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 FY23 Avg $2.92 25,200 25,200 25,900 26,100 25,600 $3.00 14,900 0 0 0 3,700 $3.00 capped firm sales expired 10/31/22 $4.95 16,800 16,800 17,300 17,400 17,100
Slide 54: Firm Transportation Commitments
Appendix Firm Transportation Commitments Volume Delivery Demand Charges Production Source Gas Marketing Strategy (Dth/d) Market ($/Dth) Northeast Supply Canada Firm Sales Contracts rd EDA – Tioga 50,000 $0.46 (3 party) Diversification (Dawn) Dawn/NYMEX Tennessee Gas Pipeline NFG pipelines - $0.24 15
Slide 55: Comparable GAAP Financial Measure Slides & Reconciliations
Appendix Comparable GAAP Financial Measure Slides & Reconciliations This presentation contains certain non-GAAP financial measures. For pages that contain non-GAAP financial measures, pages containing the most directly comparable GAAP financial measures and reconciliations are provided in the slides
Slide 56: Non-GAAP Reconciliations – Adjusted EBITDA
Appendix Non-GAAP Reconciliations – Adjusted EBITDA (1) Reconciliation of Adjusted EBITDA to Consolidated Net Income ($ Thousands) FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Total Adjusted EBITDA Exploration & Production Adjusted EBITDA $ 361,079 $ 317,707 $ 351,159 $ 312,166 464,529 656,310 Pi
Slide 57: 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 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Exploration and Production Segment Reported GAAP Earnings $ 129,326 $ 180,632 $ 111,807 $ (326,904) $ 101,916 $ 30
Slide 58: Non-GAAP Reconciliations – Adjusted Operating Results
Appendix Non-GAAP Reconciliations – Adjusted Operating Results 58
Slide 59: Non-GAAP Reconciliations – Capital Expenditures
Appendix Non-GAAP Reconciliations – Capital Expenditures Reconciliation of Segment Capital Expenditures to Consolidated Capital Expenditures ($ Thousands) FY 2023 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Guidance Capital Expenditures Exploration & Production Capital Expenditures $ 380,677 $ 491,889 $
Slide 60: Non-GAAP Reconciliations – E&P Operating Expenses
Appendix Non-GAAP Reconciliations – 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, 2022 September 30, 2021 (2) (2) (2) (2) Appalachia West Coast Total E&P Ap