National Fuel Gas Company · NYSE:NFG
National Fuel Gas — Investor Presentation (November 2014)
69 slides from National Fuel Gas's investor presentation, Nov 7, 2014
Slide 1: Investor Presentation November 2014
Investor Presentation November 2014 Exhibit 99 National Fuel Gas Company
Slide 2: Safe Harbor For Forward Looking Statements
National Fuel Gas Company 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
Slide 3: Quality Assets - Exceptional Location - Unique Integration
1.914 Tcfe of Proved Reserves (1) 811,000 Net Acres in Pennsylvania 3 Million Bbls of Crude Oil Production (2) $250 Million of Midstream Adjusted EBITDA (2)(3) National Fuel Gas Company Quality Assets - Exceptional Location - Unique Integration (1) As of September 30, 2014 (2) Fiscal year ended Sept
Slide 4: National Fuel
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Slide 5: Regulated Operations Provide Significant Synergies
National Fuel Gas Company Regulated Operations Provide Significant Synergies
Slide 6: Foundation of Our Appalachian Growth Strategy
Foundation of Our Appalachian Growth Strategy National Fuel Gas Company What Makes NFG Unique, Also Maximizes Value
Slide 7: Targeting Sustained EBITDA Growth over the next Five Years
$131 $121 $111 $137 $161 $186 $64 $280 $327 $377 $397 $492 $539 National Fuel Gas Company Targeting Sustained EBITDA Growth over the next Five Years 2015 – 10-15% Forecasted Adjusted EBITDA CAGR $164 $167 $169 $160 $172 $165 $581 $632 $668 $704 $852 $953 $0 $250 $500 $750 $1,000 $1,250 2019E Fiscal
Slide 8: Capital Spending Adjusts to Capitalize on Opportunities
National Fuel Gas Company Capital Spending Adjusts to Capitalize on Opportunities Note: A reconciliation to Capital Expenditures as presented on the Consolidated Statement of Cash Flows is included at the end of this presentation. (1) Does not include the $34.9 MM Seneca Resources Corporation’s acqu
Slide 9: Maintaining a Strong Balance Sheet
Total Debt (1) 42% Debt/Adjusted EBITDA Capitalization National Fuel Gas Company Maintaining a Strong Balance Sheet $4.1 Billion As of September 30, 2014 Note: A reconciliation of Adjusted EBITDA to Net Income is included at the end of this presentation. (1) Long-term debt of $1.649 billion and shor
Slide 10: Dividend Consistency
Dividend Consistency National Fuel Gas Company Dividend Track Record Consecutive Dividend Payments 112 Years Consecutive Dividend Increases 44 Years Current Annualized Dividend Rate $1.54 per Share (1) As of November 5, 2014
Slide 11: Exploration & Production Overview
Exploration & Production Overview
Slide 12: Seneca Resources: Proven Record of Growth
Fiscal Years 3-Year F&D Cost (1) ($/Mcfe) Seneca Resources Proven Record of Growth 2007-2009 $5.35 2008-2010 $2.37 2009-2011 $2.09 2010-2012 $1.87 2011-2013 $1.67 2012-2014 $1.38 (1) Represents a three-year average U.S. finding and development cost 2014 F&D Cost = $1.15 Marcellus F&D: $1.00 327% Res
Slide 13: Delivering Tremendous Production Growth
Seneca Resources Delivering Tremendous Production Growth
Slide 14: Disciplined Capital Spending
$31 $28 $47 $63 $105 $83 $55-$80 Disciplined Capital Spending $139 $356 $596 $631 $428 $520 $545 - $620 $188 (1) $398 $649 $694 $533 $603 $600-$700 $0 $200 $400 $600 $800 $1,000 2015E Fiscal Year Gulf of Mexico (Divested in 2011) East Division West Division Seneca Resources (1) Does not include the
Slide 15: LOE: Operating Costs down; Transportation Costs up
Seneca Resources LOE: Operating Costs down; Transportation Costs up (1) Represents the midpoint of current General & Administrative Expense guidance of $0.35 to $0.40 per Mcfe for fiscal 2015 (2) The total of the two LOE components represents the midpoint of current LOE guidance of $0.95 to $1.05 pe
Slide 16: Upstream
@)) national Fuer Upstream ‘Chautauqua Cattaraugus Aiagany Chemung Mercer “ 5 R g 5 g Zz
Slide 17: Y Glearteia
Y Glearteia
Slide 18: Y Glearteia
Y Glearteia
Slide 19: Marcellus Shale: Prolific Pennsylvania Acreage
Eastern Development Area (EDA) Mostly leased (16-18% royalty) No near-term lease expiration Limited development drilling until firm transportation capacity on Atlantic Sunrise becomes available in late 2017 Drilling activity will HBP key acreage Western Development Area (WDA) Average net revenue int
Slide 20: EDA Delivering Significant Growth
Covington – Fully Developed Gross Production: ~45MMcf per Day 47 Wells Drilled and Producing Marcellus Shale EDA Delivering Significant Growth DCNR Tract 595 Gross Production: ~90 MMcf per Day 45 Wells Drilled (1) (52 Total Locations) 38 Wells Producing DCNR Tract 100 Gross Production: ~410 MMcf per
Slide 21: EDA - Historical Well Results are Exceptional
Development Area Producing Well Count Average IP Rate (MMcf/d) Average 7-Day (MMcf/d) Average 30-Day (MMcf/d) Average EUR per Well (Bcf) Average Lateral Length EUR per 1,000’ of Lateral (Bcfe) Marcellus Shale EDA – Historical Well Results are Exceptional Covington Tioga County 5.2 4.7 4.1 5.8 4,023’
Slide 22: Focusing on WDA Development
Seneca’s Tier I Acreage: 200,000 Acres 6-8 Bcfe EUR Wells Economic at $2.80 to $3.80/Mcfe Marcellus Shale Focusing on WDA Development SRC Lease Acreage SRC Fee Acreage EOG Earned JV Acreage Note: Assumes 6,000’ treated lateral length
Slide 23: Strong Wells Currently Producing Across WDA Acreage
Area Producing Well Count Peak 24-Hour Rate (MMcfd) Average 7-Day (MMcf/d) Average Treatable Lateral Length Area Producing Well Count Peak 24-Hour Rate (MMcfd) Average 7-Day (MMcf/d) Average Treatable Lateral Length Marcellus Shale Strong Wells Currently Producing Across WDA Acreage Clermont/Rich Va
Slide 24: Clermont/Rich Valley (CRV) Area
Pad H 6 Wells Ave. IP: 8.0 MMCFD Pad N 9 Wells Ave. IP: 8.2 MMCFD Clermont/Rich Valley 200-250 Planned Horizontal Locations FY 2014 Year-end: 19 Wells; ~ 75 MMcfd FY 2015 Fcst Year-end:~50 Wells; ~180 MMcfd Pad C8-F Completing Pad C8-G Drilling Pad D9-D 6 Wells Drilled Marcellus Shale Clermont/Rich
Slide 25: WDA Mineral Interests Significantly Enhance Returns
($/Mcf) Typical Producer 15% Royalty The Seneca Advantage 0% Royalty Marcellus Shale WDA Mineral Interests Significantly Enhance Returns Average Net Realized Price $ 3.27 Less: Cash Operating Expenses (0.65) Less: Royalty Payment (0.47) Cash Margin $ 2.15 Before Tax IRR (1) 15% In Clermont/Rich Vall
Slide 26: How Does Seneca Sell its Production?
Well Head Interconnection with Interstate Pipeline Network 3rd Party Marketer (or spot market) Firm Transport Demand Center (firm sales or spot market) Spot Market Natural Gas Marketing How Does Seneca Sell its Production? Gathering System Contracted Basis Differential FT Rate Breakeven economics ba
Slide 27: Adding Long-Term Firm Transport to the Portfolio
Project (Counterparty) In- Service Date Contract Term Delivery Market FT Capacity (Dth/day) Matched Firm Sales Fiscal 2015 Fiscal 2016 Fiscal 2017 Fiscal 2018 Natural Gas Marketing Adding Long-Term Firm Transport to the Portfolio Northeast Supply Diversification Project (TGP) Nov. 15 years Canada 50
Slide 28: Significant Base of Long-Term Firm Contracts
Natural Gas Marketing Significant Base of Long-Term Firm Contracts
Slide 29: Firm Sales Provide a Market for Appalachian Production
26 Natural Gas Marketing Firm Sales Provide a Market for Appalachian Production EDA (2) 318,033 Dth/d 320,036 Dth/d 280,036 Dth/d 280,036 Dth/d WDA (2) 58,034 Dth/d 61,100 Dth/d 60,000 Dth/d 60,000 Dth/d (1) Fixed price sales contracts totaling 50,000 Dth/day at an average fixed price of $3.77 per D
Slide 30: Current Natural Gas Hedge Positions
Natural Gas Marketing Current Natural Gas Hedge Positions
Slide 31: Current Hedge Book has Seneca Positioned Very Well
Crude Oil $95.27/Bbl $92.95/Bbl $92.30/Bbl $91.00/Bbl Natural Gas Marketing Current Hedge Book has Seneca Positioned Very Well (1) Natural gas hedges include fixed price firm sales (2) Hedge positions reflect the midpoint of Seneca’s target annual production growth (20%) starting with the midpoint o
Slide 32: FY 2015 Production - Firm Sales & Hedge Composition
Firm Sales with Price Certainty 108 Bcf at ~$3.70 /Mcf Spot Price Exposure 66 Bcf at $2.50-$2.75 /Mcf (1) 68.1 Bcf 24.1 Bcf 16.2 Bcf 22.0 Bcf 43.5 Bcf Natural Gas Marketing FY 2015 Production – Firm Sales & Hedge Composition (1) Spot price assumptions reflected in fiscal 2015 earnings guidance range
Slide 33: Upstream
Upstream “ 5 R g 5 g Zz d National Fuel Permitted Drilled/Drilling Completed Producing
Slide 34: California
California Stable Production Fields; Modest Growth Potential
Slide 35: East Coalinga Summary
California East Coalinga Summary Production has increased from 214 BOPD to BOPD • Highest on leases since 2000 Drilled 12 evaluation wells in 2013 • Producing ~150 BOPD Drilled 31 new producers and 1 water disposal well in 2014. Currently have 27 of the new producers on line. 2014 Location 2013 Well
Slide 36: South Midway Sunset Has Delivered Significant Growth
California South Midway Sunset Has Delivered Significant Growth 252 Pool 97X Pool SE Pool 251 Pool B Pool A Pool Extended Pool Boundary Original Pool Boundary Existing Wells 1000’ 16X Pool Highlights Since Acquisition Increased daily production 310% to approximately 1,700 BOPD Drilled 102 new produc
Slide 37: Evaluating the Monterey Shale at South Lost Hills
California Evaluating the Monterey Shale at South Lost Hills
Slide 38: Modest Growth Opportunities, But Strong Economics
Field Average Well Cost Average EUR (MBO) Estimated IRR @$85/Bbl Fiscal 2015 Locations California Modest Growth Opportunities, But Strong Economics North Midway Sunset $300,000 59% South Midway Sunset $300,000 96% East Coalinga $580,000 30%
Slide 39: Modest Growth Anticipated in 2015
California Modest Growth Anticipated in 2015
Slide 40: Strong Margins Support Significant Free Cash Flow
California Strong Margins Support Significant Free Cash Flow Average Revenue for Fiscal 2014 $87.71 per BOE Note: A reconciliation of Exploration & Production West Division EBITDA to Exploration & Production Segment Net Income is included at the end of this presentation.
Slide 41: What Will Seneca Look Like Moving Forward?
Consistent Production Growth: 15-25% CAGR Driven by a very large, high-quality Appalachian acreage position Maintain Oil Production Expand When Possible Excellent operator and significant cash flow generation Disciplined Spending Driven by Firm Pace of development adapts to changing market dynamics
Slide 42: Midstream Businesses Overview
Midstream Businesses Overview
Slide 43: Positioned to Serve Rapidly Growing Production in Appalachia
Midstream Businesses Positioned to Serve Rapidly Growing Production in Appalachia
Slide 44: Gathering is the First Step to Reaching a Market
Gathering Gathering is the First Step to Reaching a Market
Slide 45: Gathering Systems Supporting Seneca's EDA Production
Gathering Gathering Systems Supporting Seneca’s EDA Production Covington Gathering System In-Service Date: November 2009 Capacity: 220,000 Dth per day Interconnect: TGP 300 Capital Expenditures (to date): $32 Million Trout Run Gathering System In-Service Date: May 2012 Capacity: 466,000 to 585,000 D
Slide 46: Clermont Gathering System has Large Expandability
Clermont Gathering System Gathering Clermont Gathering System has Large Expandability In-Service: July 2014 Ultimate Trunkline Capacity: 1+ Bcf per day Interconnects TGP 300 (current) NFG Supply Corporation (Northern Access 2016) Capital: 2014: $96 Million 2015: $110 - $160 Million Seneca Pads Conne
Slide 47: Project Opportunities to Support Appalachian Growth
Pipeline & Storage Project Opportunities to Support Appalachian Growth
Slide 48: Expansions to Move Gas from the WDA Are Significant
Projects to Support WDA Growth Pipeline & Storage Expansions to Move Gas from the WDA Are Significant Project Capacity (Dth/day) Northern Access 2015 140,000 Northern Access 2016 350,000 Total New Capacity 490,000 Project Capital Cost Northern Access 2015 $66 Million Northern Access 2016 $410 Millio
Slide 49: Major Expansion Designed for Canadian Deliveries
Northern Access 2015 Pipeline & Storage Major Expansion Designed for Canadian Deliveries Customer: Seneca Resources In-Service: November 2015 System: NFG Supply Corp. Capacity: 140,000 Dth per day Lease to TGP as part of their Niagara Expansion project Interconnect Niagara (TransCanada) Total Cost:
Slide 50: Northern Access 2016 Provides Additional Access to Canada
Northern Access 2016 Pipeline & Storage Northern Access 2016 Provides Additional Access to Canada Customer: Seneca Resources In-Service: Late 2016 System: NFG Supply Corp. & Empire Pipeline, Inc. Capacity 350,000 Dth per day Interconnect Chippawa (TransCanada) Total Cost: ~$410 Million FERC Timing P
Slide 51: Recent Third Party Expansions Have Been Highly Successful
Completed Expansions for 3 rd Parties Pipeline & Storage Recent rd Party Expansions Have Been Highly Successful Capacity (Dth/day) Northern Access 2012 320,000 Tioga County Extension 350,000 Line N (2011, 2012 & 2013) 353,000 Total New Capacity 1,023,000 Capital Cost ($Millions) Northern Access 2012
Slide 52: Additional Line N Expansions
Mercer Expansion Pipeline & Storage Additional Line N Expansions Customer: Third Party Placed in-service November 1, 2014 System: NFG Supply Corp. Capacity: 105,000 Dth per day Precedent agreements signed for all available capacity Interconnect Mercer (TGP Station 219) Total Cost: $34 Million Expans
Slide 53: Pairing Line N Expansions with System Modernization
Westside Expansion & Modernization Mercer (TGP Station 219) Pipeline & Storage Pairing Line N Expansions with System Modernization Customer: Third Party In-Service: November 2015 System: NFG Supply Corp. Capacity: 175,000 Dth per day Precedent agreements signed for all available capacity Interconnec
Slide 54: Developing Unique Solutions for Shippers
Tuscarora Lateral Pipeline & Storage Developing Unique Solutions for Shippers In-Service: November 2015 System: NFG Supply & Empire Pipeline New No-Notice Services Precedent agreements executed with RG&E, NYSEG & NFG Utility Preserving 172,500 Dth per day (RG&E) Preserving 20,000 Dth per day (NYSEG)
Slide 55: Significant Expansions Are Driving Growth
Completed Projects (Since 2009) Line N Corridor Line “N” Expansion Line “N” 2012 Expansion Line “N” 2013 Expansion Mercer Expansion West Side Expansion Total Capacity 633 MDth/d Delivering Gas North Tioga County Extension Northern Access 2012 Northern Access 2015 Northern Access 2016 Total Capacity
Slide 56: uransumog PIOT PqUAAON
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Slide 57: Utility: New York & Pennsylvania Service Territories
Utility New York & Pennsylvania Service Territories Total Customers: 524,300 Rate Mechanisms: Revenue Decoupling Weather Normalization Low Income Rates Merchant Function Charge (Uncollectibles Adjustment) 90/10 Sharing (Large Customers) NY PSC Rate Case Settlement, May 2014 Rates Unchanged 9.1% ROE
Slide 58: Shifting Trends in Customer Usage
Utility Shifting Trends in Customer Usage Residential Usage Industrial Usage (1) Weighted Average of New York and Pennsylvania service territories (assumes normal weather)
Slide 59: A Proven History of Controlling Costs
Utility A Proven History of Controlling Costs
Slide 60: Strong Commitment to Safety
The Utility remains focused on maintaining the ongoing safety and reliability of its system Near-term increase in capital expenditures is due to the approx. $60MM upgrade of the Utility’s Customer Information System (CIS) Utility Strong Commitment to Safety $44.4 $45.0 $44.3 $43.8 $48.1 $49.8 $56.2
Slide 61: A History of Success & A Future of Opportunity
Adjusted EBITDA Growth Production Growth Midstream Businesses Adjusted EBITDA A History of Success A Future of Opportunity Adjusted EBITDA Growth Production Growth Midstream Businesses Adjusted EBITDA National Fuel Gas Company A History of Success & A Future of Opportunity 32% CAGR Since 2010 11% CA
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Slide 63: Natural Gas Hedge Positions
Fiscal 2015 Fiscal 2016 Fiscal 2017 Fiscal 2018 Volume Avg. Price Volume Avg. Price Volume Avg. Price Volume Avg. Price National Fuel Gas Company Natural Gas Hedge Positions (Volumes in thousands Mmbtu; Prices in $/Mmbtu) NYMEX Swaps 70,690 $4.16 32,350 $4.24 23,130 $4.50 5,550 $4.59 Dominion Swaps
Slide 64: Crude Oil Hedge Positions
Fiscal 2015 Fiscal 2016 Fiscal 2017 Fiscal 2018 Volume Avg. Price Volume Avg. Price Volume Avg. Price Volume Avg. Price National Fuel Gas Company Crude Oil Hedge Positions Midway Sunset (MWSS) Swaps 258,000 $92.10 36,000 $92.10 - - - - Brent Swaps 903,000 $98.42 933,000 $95.18 384,000 $92.30 75,000
Slide 65: Position Offers Attractive Economics at $2.00 to $3.80/Mcfe
Prospect County Product Approx. Remaining Locations EUR (Bcfe) BTU IRR (1) @ $4/MMBtu 15% IRR (1) Breakeven Price ($/Mcf) $5.50 $7.14 $7.14 Marcellus Shale Position Offers Attractive Economics at $2.00 to $3.80/Mcfe EASTERN DEVELOPMENT AREA (EDA) Tract 100 Lycoming Dry Gas 11.5-12.5 1,030 90% $1.92
Slide 66: Path to Geneseo Development - 2018/2019 Start
Geneseo Shale Path to Geneseo Development – 2018/2019 Start st Well (Tract 100 – Pad N) Peak IP: 14.1 MMcf per day 30-Day Average Rate: 8.6 MMcf per day Estimated EUR: 7.0 Bcf Lateral Length: 4,920’ Frac Stages: 33 stages Current developed infrastructure from DCNR 100 & Gamble: 13 well pads 3 compre
Slide 67: Comparable GAAP Financial Measure Slides and Reconciliations
National Fuel Gas Company Comparable GAAP Financial Measure Slides and Reconciliations This presentation contains certain non-GAAP financial measures. For pages that contain non-GAAP financial measures, pages containing the most directly comparable GAAP financial measures and reconciliations are pro
Slide 68: Reconciliation of Adjusted EBITDA to Consolidated Net Income
Reconciliation of Adjusted EBITDA to Consolidated Net Income ($ Thousands) FY 2009 FY 2010 FY 2011 FY 2012 Exploration & Production - West Division Adjusted EBITDA 171,572 $ 187,838 $ 187,603 $ 226,897 $ 215,042 $ 217,150 $ Exploration & Production - All Other Divisions Adjusted EBITDA 108,139 139,6
Slide 69: Reconciliation of Segment Capital Expenditures to Consolidated Capital Expenditures
Reconciliation of Segment Capital Expenditures to Consolidated Capital Expenditures ($ Thousands) FY 2015 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 Forecast Capital Expenditures from Continuing Operations Exploration & Production Capital Expenditures 188,290 $ 398,174 $ 648,815 $ 693,810 $ 533
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