National Fuel Gas Company · NYSE:NFG
National Fuel Gas — Investor Presentation (April 2016)
62 slides from National Fuel Gas's investor presentation, Apr 28, 2016
Slide 1: Investor Presentation Q2 Fiscal 2016 Update
Exhibit 99 Investor Presentation Q2 Fiscal 2016 Update April 2016
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, objectives, goals, projections, estimates of oil and gas quantities, strat
Slide 3: National Fuel Gas Company
National Fuel Gas Company Quality Assets | Exceptional Location | Unique Integration Upstream • 2.3 TcfeProved Reserves (1) • 785,000 net acres in Marcellus Shale • 3 million Bbls/year California crude oil production Midstream • $255 million adjusted EBITDA (2) • $1.2 billion midstream investments s
Slide 4: Integrated Vision for Long-term Growth in Appalachia
Integrated Vision for Long-term Growth in Appalachia Exploration & Production 1 Long-term, return- driven approach to developing vast acreage position 3 Gathering Northern Access projects to 2 transport 660 MDth/d of Seneca- Connecting Our operated WDA production by FY18 Production to Our Interstate
Slide 5: Integrated Upstream & Midstream Development
Integrated Upstream & Midstream Development While Seneca has consistently driven down its well costs and improved break-even economics … WDA Well Costs ($millions) WDA Clermont / Rich Valley Economics Normalized for a 8,800 ft. Lateral Length for15%IRR(1) RealizedPriceRequired $15 Normalized for a 8
Slide 6: Integrated Upstream & Midstream Development
Integrated Upstream & Midstream Development … near-term commodity prices prompted modification to upstream & midstream development pace WDA Clermont /Rich Valley Economics vs. NYMEX Futures Strip 1-Rig Program/Northern Access 1-year Delay Northern Access In-Service (+490 MDth/d) Original Northern Ac
Slide 7: Consolidated Capital Expenditures
Consolidated Capital Expenditures Exercising Capital Flexibility and Discipline to Respond to Commodity Price Environment Key Capital Budget Actions $1,500 Exploration & Production Segment (1) (1) Executed “Drill-Co” JDA Gathering Segment (2) 1-rig Marcellus program Pipeline & Storage Segment (3) No
Slide 8: National Fuel is Well Positioned
National Fuel is Well Positioned Fee ownership on Marcellus acreage limits drilling commitments (& royalties) Flexibility to Just-in-time midstream development model for upstream affiliate limits risk of idle capitalandminimizescontractualcommitmentsto 3 rd partypipelines Deploy Capital Modest 1-rig
Slide 9: Appalachia Overview
Appalachia Overview Exploration & Production | Gathering | Pipeline & Storage 9
Slide 10: Significant Appalachian Acreage Position
Significant Appalachian Acreage Position Exploration & Production Appalachia Seneca Fee Seneca Lease Eastern Development Area (EDA) Western Development Area (WDA) 715,000 Acres 70,000 Acres • 153 wells able to produce 325 MMcf/d • 50-60 remaining Marcellus locations • 110 wells able to produce 245 M
Slide 11: Marcellus Shale: Western Development Area
Marcellus Shale: Western Development Area Exploration & Production Appalachia WDA Tier 1 Acreage200,000 – Acres WDA Highlights Large drilling inventory of quality Marcellus dry gas SRC Fee Acreage o ~1,100 locations economic < $2.25/MMBtu realized SRC Lease Acreage NFG midstream infrastructure suppo
Slide 12: Seneca WDA Joint Development Agreement
Seneca WDA Joint Development Agreement Exploration & Production Appalachia On December 2, 2015, Seneca entered into an asset-level joint development agreement with IOG CRV-Marcellus Transaction Capital, LLC, an affiliate of IOG Capital, LP, and funds managed by affiliates of Fortress Investment Grou
Slide 13: Integrated WDA Development - Upstream
Integrated WDA DevelopmentUpstream - Exploration & Production Appalachia Clermont/Rich Valley Development Map Clermont/Rich CRV Development Summary Valley Area • Current: 88 wells able to produce ~225 MMcf/d • 200+ MMcf/d gross firm sales in fiscal 2016 • Dropped to 1 rig in March 2016 (down from 3
Slide 14: Integrated WDA Development - Gathering
Integrated WDA DevelopmentGathering - Gathering Appalachia Gathering System Build-Out Tailored to Accommodate Seneca’s WDA Development Clermont Gathering System Map Current System In-Service • ~60 miles of pipe/13,800 HP of compression • Current Capacity: 470 MMcfper day • Interconnects with TGP 300
Slide 15: Integrated WDA Development - Interstate Pipelines
Integrated WDA DevelopmentInterstate - Pipelines Pipeline & Storage Appalachia Expanding Our Interstate Pipelines to Deliver Seneca’s WDA Production to Canada Northern Access 2015 • Customer: Seneca Resources (NFG) • In-Service: November 2015 (1) Niagara • System: NFG Supply Corp. • Capacity: 140,00
Slide 16: Integrated WDA Development - Interstate Pipelines
Integrated WDA DevelopmentInterstate - Pipelines Pipeline & Storage Appalachia Northern Access 2016 to Increase Transport Capacity out of WDA to Canada by 490,000 Dth/d by FY18 Northern Access 2016 • Customer: Seneca Resources (NFG) • In-Service: Now targeting Nov. 1, 2017 • Capacity: 490,000 Dth/d
Slide 17: Marcellus Shale: Eastern Development Area
Marcellus Shale: Eastern Development Area Exploration & Production Appalachia EDA Highlights EDA Acreage 70,000 – Acres 1 Covington & DCNR Tract 595 o Tioga County, Pa. o 92 wells(1) with 100 MMcf/d productive capacity 3 o 75 MMcf/d firm sales/FT for remainder of FY16 o NFG Covington Gathering Syste
Slide 18: Integrated EDA Development - Gathering
Integrated EDA DevelopmentGathering - Gathering Appalachia Gathering Segment Supporting Seneca’s EDA Production & Future Development Covington Gathering System • In-Service Date: November 2009 • Capital Expenditures (to date): $33 Million • Capacity: 220,000 Dth per day • Production Source: Seneca R
Slide 19: Utica Shale Opportunities in EDA & WDA
Utica Shale Opportunities in EDA & WDA Exploration & Production Appalachia Seneca - DCNR 007 IP: 22.7 MMcf/d Shell PGE 26.5 MMcf/d Seneca – Mt. Jewett IP: 8.9 MMcf/d Seneca – WDA 2 Utica Test Wells Planned for FY16/17 Range 59 MMcf/d Rice Seneca Horiz. CNX 42 MMcf/d 61 MMcf/d Seneca Vert. CNX Permit
Slide 20: Recent 3rd Party Expansions Highly Successful
rd Recent 3 Party Expansions Highly Successful Pipeline & Storage Appalachia rd rd Expansions for 3Parties since 2010 3 Party Expansion Capital Cost ($MM) 1,442 MDth/d $387 million since FY2010 $72 since FY 2010 Northern Access 2012 $183 +320 MDth/d $132 Northern Access 2012 Empire & Lamont Line N P
Slide 21: Planned Empire System Expansion
Planned Empire System Expansion Pipeline & Storage Appalachia Empire North Expansion Project • Target In-Service: Late 2018 • System: Empire Pipeline • Target Market: o Marcellus & Utica producers in Tioga & Potter County, Pa. • Open Season Capacity: 300,000 Dth/d • Delivery Points: o 180,000 Dth/d
Slide 22: 2015 Pipeline Expansion Projects In-Service
2015 Pipeline Expansion Projects In-Service Pipeline & Storage Appalachia Westside Expansion & Modernization 2015 Completed Pipeline Expansion Projects In-Service (October 2015) • Total Cost: $86 million o Expansion: $45 million o Modernization: $41 million • Incremental Annual Revenues: $8.8 millio
Slide 23: Pipeline & Storage Customer Mix
Pipeline & Storage Customer Mix Pipeline & Storage Appalachia Contracted Transportation FT CapacityMarketers - byShipperType(1) FT CapacityProducers - 4.1 MMDth/d 6% Outside End User 6% 23% Pipeline 1% 6% 77% Marketer 94% 9% Affiliated Non-Affiliated Producer Affiliated Non-Affiliated 36% FT Capacit
Slide 24: Production and Marketing
Production and Marketing Exploration & Production 24
Slide 25: Proved Reserves & Development Costs
Proved Reserves & Development Costs Production & Marketing 3,000 Natural Gas (Bcf) Crude Oil (MMbbl) 3-Year Fiscal F&D Cost(2) 2,500 (1) Years ($/Mcfe) 2,344 2008-2010 $2.37 1,914 2009-2011 $2.09 2,000 2010-2012 $1.87 1,549 $1.67 2011-2013 1,500 1,246 2012-2014 $1.38 2,142 1,683 2013-2015 $1.12 1,00
Slide 26: Seneca Production
Seneca Production Production & Marketing 200 Appalachia - Spot Exposure (1) (1) Appalachia - Firm Commitments 158-175 Bcfe West Coast (California) 160.5 Appalachia 157.8 Spot Sales 150 120.7 100 67.6 139.3 136.6 138 100.7 50 62.9 20.5 20.0 21.2 21.2 20 -21 0 2012 2013 2014 2015 2016E (1) Refer to sl
Slide 27: Significant Base of Long-Term Firm Contracts
Significant Base of Long-Term Firm Contracts Production & Marketing FY2016 to FY2017 Fiscal 2018 and beyond 450,000+ Dth/d 914,405 Dth/d 1,000 Atlantic Sunrise (Transco) Delivery Markets: Mid-Atlantic & Southeast U.S. 189,405 Dth/d 750 Northern Access 2016 (NFG(2), TransCanada & Union) 500 Delivery
Slide 28: Firm Transportation Commitments
Firm Transportation Commitments Production & Marketing Production Volume Delivery Demand Charges Gas Marketing Strategy Source (Dth/d) Market ($/Dth) Northeast Supply EDA -Tioga Firm Sales Contracts Diversification County Canada $0.50 50,000 Dth/d 50,000 rd Project Covington & (Dawn) (3 party) Dawn/
Slide 29: Firm Sales Provide Market for Appalachian Production
Firm Sales Provide Market for Appalachian Production Production & Marketing Fiscal 2016 Firm Sales by Fiscal Quarter Net Contracted Volumes (Dth per day) Pricing Index Key: ($ perDth)(1) ContractedIndexPriceDifferentials Fixed Price Dawn Dominion SP 392,100 387,300 NYMEX 133,100 131,800 $2.54 $2.55
Slide 30: Strong Hedge Book in Fiscal 2016 and 2017
Strong Hedge Book in Fiscal 2016 and 2017 Production & Marketing Natural Gas Swap & Fixed Physical Sales Contracts (Million MMBtu) 150.0 Remaining FY 2016 (1) at $3.41 per MMBtu 80% hedged 115.0 100.0 50.7 66.8 24.2 22.1 47.8 50.0 39.7 13.4 14.2 12.7 6.9 27.5 8.4 7.2 9.4 7.2 29.5 26.0 25.6 19.0 16.9
Slide 31: FY 2016 Production - Firm Sales & Spot Exposure
FY 2016 ProductionFirm – Sales & Spot Exposure Production &Marketing Fiscal 2016 Price Certainty 64.3Bcfrealizingnet ~$3.20/Mcf(1) 200 4.2Bcfof AdditionalBasisProtection(2) 821,000Bblscrudeoil hedgedat $81.10/Bbl(3) 158-175 Bcfe 150 20-21 Bcfe 0-16 Bcf 23.3 Bcf 2.5 Bcf(4) 100 41.0 Bcf 4.2 Bcf(2) 50
Slide 32: Operating Costs
Operating Costs Production & Marketing Appalachia Division West Division (California) Seneca Resources Consolidated $/Mcfe $/Boe $/Mcfe LOE (Affiliated Gathering) LOE (non-Gathering) G&A Taxes & Other $1.65 $1.70 $1.58 $27.97 $0.22 $0.22 $27.16 $0.20 $1.27 $1.19 $0.11 $5.20 $5.70 $0.40 $0.42 (1) $0.
Slide 33: California Overview
California Overview Exploration & Production 33
Slide 34: California
California Upstream Stable Oil Production | Minimal Capital Investment | Free Cash Flow Positive East Coalinga Temblor Formation Primary North Lost Hills Tulare & Etchegoin Formation Primary/Steamflood South Lost Hills Monterey Shale Primary North Midway Sunset Tulare & Potter Formation Steamflood S
Slide 35: Economic Development Focused on Midway Sunset
Economic Development Focused on Midway Sunset Upstream North Midway Sunset Economics North MWSSProjectIRRsat $40/Bbl(1) Sec. 17N MWSS Acreage 36% 25% NMWSS SMWSS Hoyt FY16 Budgeted D&C Portfolio South MWSS Modest near-term capital program focused on Acreage locations that earn attractive returns in
Slide 36: California Average Daily Net Production
California Average Daily Net Production Upstream $35-$40 Million Annual Capital Spending Will Keep CA Production Flat 10,000 9,699 9,674 9,560 9,322 9,078 8,773 7,500 5,000 2,500 0 2011 2012 2013 2014 2015 2016 Forecast Fiscal Year 36
Slide 37: Strong Margins Support Significant Free Cash Flow
Strong Margins Support Significant Free Cash Flow Upstream WestDivisionAdjustedEBITDAperBOE(1) Trailing 12-months Ended 3/31/16 Non-Steam Fuel LOE $12.46 Steam Fuel $3.24 California Margins (per BOE) Average Revenue $ 57.62 G&A $5.55 Less: Cash Costs $ 25.84 = Adjusted EBITDA $ 31.78 Production & Ot
Slide 38: Downstream Overview
Downstream Overview Utility | Energy Marketing 38
Slide 39: New York & Pennsylvania Service Territories
New York & Pennsylvania Service Territories Downstream New York Total Customers (1): 526,323 ROE: 9.1% (NY PSC Rate Case Settlement, May 2014) Rate Mechanisms: o Earnings Sharing o Revenue Decoupling o Weather Normalization o Low Income Rates o Merchant FunctionCharge(UncollectiblesAdj.) o 90/10 Sha
Slide 40: New York Rate Case
New York Rate Case Downstream On April 28, 2016, National Fuel Gas Distribution Corporation filed a request with the New York Background 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 l
Slide 41: Utility: Shifting Trends in Customer Usage
Utility: Shifting Trends in Customer Usage Downstream Residential Usage Industrial Usage 12-Months Ended March 31 12-Months Ended March 31 (1) Weighted Average of New York and Pennsylvania service territories (assumes normal weather). 41
Slide 42: A Proven History of Controlling Costs
A Proven History of Controlling Costs Downstream $250 All Other O&M Expenses O&M Pension Expense O&M Uncollectible Expense $200 $200 $193 $192 $9 $179 $177 $178 $10 $7 $11 $9 $6 (1) $28 $26 $20 $33 $16 $16 $150 $100 $152 $152 $163 $159 $152 $151 $50 $0 2011 2012 2013 2014 2015 12 Months Fiscal Year
Slide 43: Utility: Strong Commitment to Safety
Utility: Strong Commitment to Safety Downstream 150 Capital Expenditures for Safety Recent increase due to ~$60MM upgrade Total Capital Expenditures of the Utility’s Customer Information Systemand anticipated acceleration of pipeline replacement program 120 $94.4 $90 -$100 $88.8 90 $72.0 $58.4 $58.3
Slide 44: Consolidated Financial Overview
Consolidated Financial Overview Upstream | Midstream | Downstream 44
Slide 45: EBITDA Contribution by Segment
EBITDA Contribution by Segment Corporate $1,250 Exploration & Production Segment Gathering Segment Pipeline & Storage Segment Utility Segment $1,000 Energy Marketing & Other $953 $852 $843 $762 $750 $704 $539 $492 $422 $362 $500 $397 $64 $69 $66 $250 $161 $186 $188 $189 $137 $160 $172 $165 $164 $146
Slide 46: Capital Expenditures by Segment
Capital Expenditures by Segment Corporate $1,500 Exploration & Production Segment (1) Gathering Segment Pipeline & Storage Segment Utility Segment Energy Marketing & Other $977 $970 $1,001 $1,000 $717 $557 $603 $694 $445-$545 $500 533 $118 $150-$200 $138 $75-$85 $80 $230 $55 $140 $130-$160 $144 $56
Slide 47: Financial Position & Liquidity
Financial Position & Liquidity Corporate Debt/Adjusted EBITDA Capitalization 2.56 x 2.27 x 1.89 x 1.89 x 1.77 x TotalEquity TotalDebt 44% 56% $3.7 Billion Total Capitalization 2012 2013 2014 2015 TTM as of March 31, 2016 Fiscal Year 3-31-16 Debt Maturity Profile ($MM) Liquidity $600 $500 $549 $500 C
Slide 48: Dividend Track Record
Dividend Track Record Corporate $2.00 Dividend Consistency Consecutive Dividend Payments 113 Years Consecutive Dividend Increases 45 Years $1.50 CurrentAnnualized Dividend Rate$1.58per Share $1.00 Current $0.50 Dividend Yield (1) 2.9% $0.00 Annual Rate at Fiscal Year End (1) As of April 27, 2016. 48
Slide 49: The National Fuel Value Proposition
The National Fuel Value Proposition Corporate Considerable Upstream and Midstream Growth Opportunities in Appalachia Fee ownership on ~715,000 net acres in WDA = limited royalties or drilling commitments Seneca has >900,000 Dth/day of firm transportation & sales contracts by start of fiscal 2018 Sta
Slide 50: Appendix
Appendix 50
Slide 51: Total Seneca Capital Spending by Division
Total Seneca Capital Spending by Division Appendix $1,000 Appalachia (1) (2) West Coast (California) $800 $694 $603 $600 $557 $533 $400 $631 $520 $428 $500 $200 $150 -$200 $110-$150 $63 $105 $83 $57 $40-$50 $0 2012 2013 2014 2015 2016E Fiscal Year (1) FY2016 capital expenditure guidance reflects the
Slide 52: Marcellus Operated Well Results
Marcellus Operated Well Results Appendix WDA Development Wells: Producing Well Average IP Rate Average Average Treatable Area Count (MMcfd) 30-Day (MMcf/d) Lateral Length (ft) Clermont/Rich Valley (CRV) & Hemlock 86(1) 6.9 5.2 (1) 6,970’ Elk, Cameron & McKeancounties EDA Development Wells: Producing
Slide 53: Marcellus Shale Program Economics
Marcellus Shale Program Economics Appendix ~1,100 WDA Locations Economic Below $2.25/MMBtu Locations Completed NYMEX / DAWN Pricing (1) Average 15% IRR Prospect Product Remaining Lateral BTU $3.00 $2.75 $2.50 EUR (Bcf) (1) (1) (1) Realized Price to Be Drilled Length (ft) IRR % IRR % IRR % DCNR 100 D
Slide 54: Appalachian Price Realizations & Margins
Appalachian Price Realizations & Margins Appendix Strong hedge book,firm sales portfolio, and cost discipline generating impressive natural gas price realizations and margins in challenging commodity environment Q1 FY16 Average Natural Gas Realizations per Mcf Q1 FY16 Adjusted EBITDA per Mcfe vs. Ap
Slide 55: Natural Gas Hedge Positions
Natural Gas Hedge Positions Appendix (Volumes in thousands MMBtu; Prices in $/MMBtu) (1) Fiscal 2016 Fiscal 2017 Fiscal 2018 Fiscal 2019 Fiscal 2020 Avg. Avg. Avg. Avg. Avg. Volume Price Volume Price Volume Price Volume Price Volume Price NYMEX Swaps 18,960 $3.92 29,530 $4.20 26,070 $3.49 25,560 $3.
Slide 56: Crude Oil Hedge Positions
Crude Oil Hedge Positions Appendix (Volumes & Prices in Bbl) (1) Fiscal 2016 Fiscal 2017 Fiscal 2018 Avg. Avg. Avg. Volume Price Volume Price Volume Price Brent Swaps 102,000 $94.06 123,000 $92.27 24,000 $91.00 NYMEX Swaps 719,000 $79.27 573,000 $71.47 51,000 $90.62 Total 821,000 $81.10 696,000 $75.
Slide 57: Utica/Point Pleasant: EDA Opportunities
Utica/Point Pleasant: EDA Opportunities Appendix Shell: Neal Travis Peak: 26.5 MMcf/d Currently Drilling Shell: Gee DCNR Tract 001 11.2 MMcf/d Potential Future Location JKLM Pt Pleasant Test PGE DCNR 595 Vertical Tests Seneca DCNR Tract 007 Potential Future Location IP: 22.7 MMcf/d Seneca Horizontal
Slide 58: Comparable GAAP Financial Measure Slides & Reconciliations
Comparable GAAP Financial Measure Slides & Reconciliations Appendix Thispresentationcontainscertainnon-GAAPfinancialmeasures. Forpagesthat contain non-GAAPfinancial measures, pages containing the most directly comparableGAAPfinancial measuresand reconciliationsare provided in the slidesthat follow.
Slide 59: Reconciliation of Adjusted EBITDA to Consolidated Net Income
National Fuel Gas Company Appendix Reconciliation of Adjusted EBITDA to Consolidated Net Income ($ Thousands) 12-Months FY 2012 FY 2013 FY 2014 FY 2015 Ended 3/31/16 Total Adjusted EBITDA Exploration & Production Adjusted EBITDA $ 397,129 $ 492,383 $ 539,472 $ 422,289 361,994 Pipeline & Storage Adju
Slide 60: Reconciliation of Segment Capital Expenditures
National Fuel Gas Company Appendix Reconciliation of Segment Capital Expenditures to Consolidated Capital Expenditures ($ Thousands) (1) FY 2016 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Forecast Capital Expenditures from Continuing Operations Exploration & Production Capital Expenditures $ 648,815 $
Slide 61: Reconciliation of E&P Adjusted EBITDA by Division
National Fuel Gas Company Appendix Reconciliation of Exploration & Production Adjusted EBITDA for Appalachia and West Coast divisions to Exploration & Production Segment Net Income ($ Thousands) Three Months Ended Twelve Months Ended Three Months Ended March 31, 2016 March 31, 2016 December 31, 2015
Slide 62: Reconciliation of E&P Operating Expenses by Division
National Fuel Gas Company Appendix Reconciliation of Exploration & Production Segment Operating Expenses by Division ($000s unless noted otherwise) Twelve Months Ended Twelve Months Ended September 30, 2015 September 30, 2014 Appalachia West Coast Total E&P Appalachia West Coast Total E&P Appalachia
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