National Fuel Gas Company · NYSE:NFG
National Fuel Gas — Investor Presentation (August 2012)
52 slides from National Fuel Gas's investor presentation, Aug 8, 2012
Slide 1: National Fuel Gas Company Investor Presentation August 2012
National Fuel Gas Company Investor Presentation August 2012 Exhibit 99
Slide 2: Safe Harbor For Forward Looking Statements
August 2012 2 National Fuel Gas Company Safe Harbor For Forward Looking Statements www.nationalfuelgas.com . You can also obtain this form on the SEC’s website at www.sec.gov . This presentation may contain “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 19
Slide 3: Our Business Mix Leads to Long-Term Value Creation
August 2012 3 Upstream Crude Oil Midstream Downstream Upstream Natural Gas National Fuel Gas Company Our Business Mix Leads to Long-Term Value Creation National Fuel Gas Supply Corporation Empire Pipeline, Inc. National Fuel Gas Midstream Corporation National Fuel Gas Distribution Corporation Nation
Slide 4: Integrated Business Mix Provides Financial Balance
August 2012 $162 25% $164 28% $167 26% $169 25% $156 23% $129 20% $131 23% $121 19% $111 17% $128 19% $362 55% $280 48% $327 52% $377 57% $379 56% 4 $654 $581 $632 $668 $672 $0 $250 $500 $750 $1,000 2008 2009 2010 2011 12 Months Ended 6/30/12 Fiscal Year Pipeline & Storage Segment Exploration & Prod
Slide 5: Highly Integrated Assets with Significant Marcellus Exposure
August 2012 5 National Fuel Gas Company Highly Integrated Assets with Significant Marcellus Exposure…
Slide 6: Exposure to Growth from the Utica Shale
August 2012 6 National Fuel Gas Company …And Exposure to Growth from the Utica Shale
Slide 7: Business Mix Allows for Strategic Capital Allocation
August 2012 Predictable Earnings and Cash Flow 7 National Fuel Gas Company Business Mix Allows for Strategic Capital Allocation Capital Allocation Priorities Ongoing maintenance capital spending in regulated businesses Returning earnings to shareholders through consistent dividends Flexible, return-
Slide 8: Capital Spending Flexibility to Maintain Financial Strength
August 2012 8 National Fuel Gas Company Capital Spending Flexibility to Maintain Financial Strength Note: A reconciliation to Capital Expenditures as presented on the Consolidated Statement of Cash Flows is included at the end of this presentation. To the extent additional infrastructure expansions
Slide 9: Strong Balance Sheet and Liquidity Position
August 2012 9 Capital Resources Total Short-Term Capacity: $1,085 Million Committed Credit Facility: $750 Million Syndicated facility extends until January 6, 2017 Uncommitted Lines of Credit: $335 Million $20.2 million of outstanding short-term notes payable to banks as of June 30, 2012 $300.0 Mill
Slide 10: Dividend Consistency
August 2012 10 Dividend Consistency National Fuel Gas Company Dividend Track Record Current Dividend Yield (1) 3.0% (1) As of July 31, 2012 Consecutive Dividend Payments 110 Years Consecutive Dividend Increases 42 Years Current Annualized Dividend Rate $1.46 per Share
Slide 11: Pipeline & Storage / Midstream
August 2012 11 Pipeline & Storage / Midstream
Slide 12: Ongoing Expansion to Transport Appalachian Production
August 2012 12 Longer-Term Infrastructure Expansions Shipping Gas to Canada & Northeast Serving Southwest PA Producers Gathering Marcellus Production Pipeline & Storage / Midstream Ongoing Expansion to Transport Appalachian Production
Slide 13: A Closer Look at the Expansion Progress
August 2012 13 MERCER EXPANSION PROJECT (2014 In-Service) LINE “N” 2012 EXPANSION (Under Construction) LINE “N” EXPANSION (In-Service) TROUT RUN GATHERING SYSTEM (In-Service ) COVINGTON GATHERING SYSTEM (In-Service) CENTRAL TIOGA COUNTY EXTENSION (2014/2015) TIOGA COUNTY EXTENSION (In-Service) NORTH
Slide 14: Using a History of Excellence to Serve Appalachian Producers
August 2012 14 Transco Lycoming County Tioga County TGP 300 Midstream Using a History of Excellence to Serve Appalachian Producers Midstream’s gathering systems are critical to unlock remote, but highly productive Marcellus acreage History of operational success and efficiency within Pennsylvania Or
Slide 15: Regulatory Rate Filings
August 2012 15 Pipeline & Storage Regulatory Rate Filings National Fuel Gas Supply Corporation Filed a general rate case with FERC on October 31, 2011 as part of an agreement from a 2006 rate settlement On April 14, 2012 an agreement in principle was reached to settle the rate case, with new rates e
Slide 16: Utility
August 2012 16 Utility
Slide 17: Providing Financial Stability
August 2012 17 Rate Mechanisms Low Income Rates Choice Program/POR Merchant Function Charge Revenue Decoupling 90/10 Sharing Weather Normalization Utility Providing Financial Stability 9.8% 10.6% 10.5% 10.9% 13.2% 14.7% 18.8% 12.4% 0.0% 10.0% 20.0% 30.0% 2009 2010 2011 TME 6/30/2012 Fiscal Year Retu
Slide 18: Continued Cost Control Helps Provide Earnings Stability
August 2012 18 $178 $164 $167 $168 $168 Utility Continued Cost Control Helps Provide Earnings Stability Low natural gas prices, combined with a focus on cost control, continue to help reduce expenses $25 $27 $14 $11 $9 $203 $191 $181 $179 $177 $0 $50 $100 $150 $200 $250 2008 2009 2010 2011 12 Months
Slide 19: Strong Commitment to Safety
August 2012 19 Utility Strong Commitment to Safety The Utility remains focused on consistent spending to maintain the ongoing safety and reliability of its system The anticipated increase in 2013 capital expenditures is largely due to the implementation of a new Customer Information System $42.8 $45
Slide 20: Exploration & Production
August 2012 20 Exploration & Production
Slide 21: Ongoing Strategic Responses to Low Gas Prices
August 2012 21 Maintain Focus on California Crude Oil Ongoing Delineation in Appalachia Delaying Marcellus Completions Reduction In Rig Count Production Curtailment Seneca Resources Ongoing Strategic Responses to Low Gas Prices • Generated $175 million of EBITDA in the first nine months of fiscal 20
Slide 22: California: Stable Production and Increasing Cash Flows
August 2012 22 Rank Company California 2011 BOEPD 7 Seneca Resources 9,209 California Stable Production and Increasing Cash Flows Net Acreage: 11,833 Acres Net Wells: 1,322 Oil Gravity: 12 – 37° Api NRI: 87.64 Occidental 164,796 Chevron 163,153 Aera (Shell/Exxon) 149,974 Plains Exploration 36,775 Ve
Slide 23: California Stable Production Fields
August 2012 23 South Lost Hills ~1,700 BOEPD Monterey Shale Primary 215 Active Wells Sespe ~1,200 BOEPD Sespe Formation Primary 188 Active Wells North Lost Hills ~1,200 BOEPD Tulare & Etchegoin Formation Primary & Steamflood 181 Active Wells North Midway Sunset ~4,400 BOEPD Potter & Tulare Formation
Slide 24: Strong Margins Support Significant Free Cash Flow
August 2012 24 California Strong Margins Support Significant Free Cash Flow Average Revenue in First Nine Months of Fiscal 2012 $86.23 per BOE $8.64 3.18 $2.60 $2.37 $1.03 Non Steam Fuel LOE Steam Fuel G&A Production & Other Taxes Other Operating Costs EBITDA Fiscal Year 2012 (First Nine Months) EBI
Slide 25: California: Recent Initiatives Driving Near-Term Growth
August 2012 25 Seneca Resources California – Recent Initiatives Driving Near-Term Growth Production Increase Drivers 1. North Midway Sunset Steaming 2. South Midway Sunset Field Extensions 3. Sespe Infill Drill Program 8,500 9,000 9,500 10,000 Actual Forecast 8,000
Slide 26: Midway Sunset South Activity Update
August 2012 26 Midway Sunset South Activity Update 2011 Drill Program 2012 Drilling Locations Updip Sand Pinch-out Approx. Oil/Water Contact 100 ft 100 ft 50 ft Antelope “A-1” and “A-2” Sands Antelope “B” and “C” Sands Antelope “A-1” Sand Seneca Western Minerals 251T Extended 251 Pool to the West Se
Slide 27: Sespe Field 2011 Drilling Highlights and Results
August 2012 27 350’ Thick (Medium Blue) 800’ Thick (Dark Red) ~550’ Thick (Green) White Star – 5 Acre Tests Powell – 10 Acre Tests Powell 4 61 BOEPD 1 Oil 11/11 WS 534-33 42 BOEPD 1 Oil 1/12 White Star – 10 Acre Test WS 48-33 1 Production August 2012 WS 533-33 88 BOEPD 1 Oil 1/12 “X” SANDS ISOCHORE
Slide 28: Sespe Field 2012 Drill Plan Builds Upon 2011 Successes
August 2012 28 Oak Flat (10) Frankel A (5) Thornbury (10/5) Coldwater Tests “X” SANDS ISOCHORE (Thickness) Seneca Resources Sespe Field – 2012 Drill Plan Builds Upon 2011 Successes 350’ Thick (Medium Blue) 800’ Thick (Dark Red) ~550’ Thick (Green) 2012 Sespe Plans 6 Wells Planned (2 5-acre infill we
Slide 29: Monterey Shale Play
August 2012 29 Producing (Gross): 50 BOPD 3-4 Delineation Wells Planned AMI Outlines Seneca Resources Monterey Shale Play Monterey Shale Play Belridge Field 5 AMIs across the field Seneca WI: 12.5% Seneca NRI: 11.1% Gross Thickness of Monterey Interval
Slide 30: Expansive Pennsylvania Acreage Position
August 2012 30 Seneca Resources Expansive Pennsylvania Acreage Position SRC Lease Acreage SRC Fee Acreage Eastern Development Area Net Acreage: 55,000 acres Mostly leased (16-18% royalty) No near-term lease expiration First large expiration: 2018 Ongoing development drilling in Western Development A
Slide 31: Seneca Resources Net Rig Count
August 2012 31 1.0 1.0 1.0 1.0 5.0 3.0 2.0 2.0 2.0 1.5 1.5 1.5 0.5 Seneca Resources Net Rig Count (Working Interest) Seneca anticipates minimal joint venture activity in fiscal 2013 Seneca Resources - Delineation Seneca Resources - Development EOG Resources Fiscal 2012 - Q1 Fiscal 2012 - Q2 Fiscal 2
Slide 32: Ramping Marcellus Shale Production
August 2012 32 Seneca Resources Ramping Marcellus Shale Production Seneca anticipates ongoing curtailments of production into TGP 300 due to low pricing basis Covington DCNR 595 DCNR 100 EOG JV WDA/Other Forecast
Slide 33: Eastern Development Area Results & Plan Forward
August 2012 33 ~20 MMcf per day of gross production is curtailed due to very low pricing basis on uncontracted sales volumes Covington – Fully Developed 47 Wells Drilled and Producing Net Production: ~55 MMcf per Day Average EUR: 5.5 Bcf per Well Seneca Resources Eastern Development Area (EDA) – Res
Slide 34: Evaluating Marcellus Wet Gas Potential
August 2012 34 Owl’s Nest (2 Wells) Church Run (1 Well) Seneca Resources Evaluating Marcellus Wet Gas Potential More than 100,000 acres within the targeted window of 1,100 Btu to 1,200 Btu Will need cryogenic processing plant running in “ethane rejection mode” processing SRC Lease Acreage SRC Fee Ac
Slide 35: Utica Shale Activity Summary
August 2012 35 Chesapeake 9.5 MMCFD 1,425 BLPD Chesapeake 3.8 MMCFD 980 BLPD Chesapeake 3.1 MMCFD 1,015 BLPD Dry Wet Hess 11 MMCFD Utica Shale – Activity Summary Seneca Resources Vertical Well Drilled Horizontal Well Permit Horizontal Well Drilled Mt. Jewett Vertical: Tested Dry Gas Horizontal: Comp
Slide 36: Increased California Spending with Ongoing Marcellus Cuts
August 2012 36 $31 $31 $47 ~$50 $60-$75 $68 (1) Seneca Resources Increased California Spending with Ongoing Marcellus Cuts (1) Does not include the $34.9 MM acquisition of Ivanhoe’s U.S.-based assets in California, as this was accounted for as an investment in subsidiaries on the Statement of Cash F
Slide 37: Production Still Growing
August 2012 37 20.1 19.8 19.2 20-21 20-22 8.7 9.3 7.9 7 5-7 Seneca Resources Production Still Growing 7.2 35.3 54-57 67-76 13.7 13.3 5.2 42.5 49.6 67.6 81-85 92-105 2009 2010 2011 2012 Forecast 2013 Forecast Fiscal Year California Upper Devonian Marcellus/Utica Gulf of Mexico
Slide 38: Appendix
August 2012 38 National Fuel Gas Company Appendix
Slide 39: Fiscal Year 2013 Earnings Guidance Drivers
August 2012 39 2013 Forecast National Fuel Gas Company Fiscal Year 2013 Earnings Guidance Drivers GAAP Earnings per Share $2.45 - $2.75 Exploration & Production Drivers Total Production (Bcfe) 92 - DD&A Expense $2.30 - $2.40 LOE Expense $0.90 - $1.10 G&A Expense $59 - $63 MM Pipeline & Storage Drive
Slide 40: Manageable Debt Maturity Schedule
August 2012 40 National Fuel Gas Company Manageable Debt Maturity Schedule $250 $300 $250 $500 $49 $50 7.395% 7.375% $0 $100 $200 $300 $400 $500 $600 Fiscal Year
Slide 41: Targeted Capital Structure
August 2012 41 Debt 35% - 45% Equity 55% - 65% 40% 30% 50% 50% 60% 70% 50% 50% National Fuel Gas Company Targeted Capital Structure Long-Term Consolidated Capital Structure Target Capital Structure Targets by Segment All Other E&P P&S Utility Debt Equity
Slide 42: Pipeline & Storage / Midstream Appendix
August 2012 42 Pipeline & Storage / Midstream Appendix
Slide 43: Pipeline & Storage Expansion Initiatives
August 2012 43 Project Name Capacity (Dth/D) Est. CapEx In-Service Market Status Pipeline & Storage Expansion Initiatives Lamont Compressor Station 40,000 $6 MM 6/2010 Fully Subscribed Completed Lamont Phase II Project 50,000 $7.6 MM 7/2011 Fully Subscribed Completed Line “N” Expansion 160,000 $22 M
Slide 44: Midstream Corporation Expansion Initiatives
August 2012 44 Project Name Capacity (Mcf/D) Est. CapEx In-Service Date Market Comments Midstream Corporation Expansion Initiatives Covington Gathering System 220,000 $54 MM Multiple Phases - Most In-Service Capacity Available [Marketing to Third Parties] Completed – Flowing into TGP 300 Line. This
Slide 45: Exploration & Production Appendix
August 2012 45 Exploration & Production Appendix
Slide 46: Hedge Positions and Strategy
August 2012 46 Natural Gas Swaps Volume (Bcf) Average Hedge Price Oil Swaps Volume (MMBbl) Average Hedge Price National Fuel Gas Company Hedge Positions and Strategy Fiscal 2012 (1) 12.4 $4.99 / Mcf Fiscal 2013 46.7 $4.82 / Mcf Fiscal 2014 27.4 $4.26 / Mcf Fiscal 2015 17.8 $4.07 / Mcf Fiscal 2016 17
Slide 47: Western Development Area Results & Plan Forward
August 2012 47 Marcellus Shale Western Development Area (WDA) – Results & Plan Forward Approx. Outline of JV Acreage 200,000 Gross Acres Seneca 50% W.I. (Avg. 58% NRI) Punxy (EOG Operated) 80 Wells Drilled; 55 Producing FY2012: 1 Rig Operating Gross Production: ~60 MMcf per Day Owl’s Nest Drilled 3
Slide 48: Expanding 3D Seismic Coverage
August 2012 48 Punxy West Branch Mt. Jewett DCNR 001 DCNR 007 Covington DCNR 595 DCNR 100 Owl’s Nest Marcellus Shale Expanding 3D Seismic Coverage Completed In Progress
Slide 49: Targeting Continued Cost Reductions
August 2012 49 Marcellus Shale Targeting Continued Cost Reductions $200 $300 $400 $500 $600 $700 $800 2010 2011 2012 Forecast 2013 Target Drilling Cost per Lateral Foot WDA/DCNR 595 DCNR 100 $100 $150 $200 $250 $300 $350 $400 2010 2011 2012 Forecast 2013 Target Completion Cost per Stage ($000) WDA/D
Slide 50: Water Management Program
August 2012 50 Marcellus Shale Water Management Program Water Sourcing: Coal mine runoff Permitted freshwater sources Recycled water Water Management: Instituted a “Zero Surface Discharge” policy Recycle Marcellus flowback and produced water Centralized water handling in development areas Tioga Coun
Slide 51: Zero Liquid Discharge Operation
August 2012 51 Marcellus Shale “Zero Liquid Discharge Operation” Utilizing a state-of-the-art evaporative technology to ensure no liquid is discharged at the surface Building a centrally located unit in Eastern Development Area (EDA) Removes all liquids from the production stream Has the ability to
Slide 52: Comparable GAAP Financial Measure Slides and Reconciliations
August 2012 52 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 reconcil
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