National Fuel Gas Company · NYSE:NFG
National Fuel Gas — Q2 2024 Earnings Presentation
56 slides from National Fuel Gas's earnings presentation, May 1, 2024
Slide 1: Investor Presentation Fiscal 2024 Second Quarter Update
Exhibit 99 Investor Presentation nd Fiscal 2024 - 2 Quarter Update May 1, 2024 May 2024 Update 1
Slide 2: National Fuel Gas Company agenda
National Fuel Gas Company • Company Overview (3) • Why National Fuel? (7) • Business Updates (12) • Supplemental Information • Segment Information (19) • Rate Case Overview (43) • Guidance & Other Financial Information (45) May 2024 Update 2
Slide 3: History of National Fuel
History of National Fuel Industry Pioneer Born From Rockefeller’s Standard Oil Company May 2024 Update 3
Slide 4: NFG Today: A Diversified, Integrated Natural Gas Company
NFG Today: A Diversified, Integrated Natural Gas Company (1) Adjusted EBITDA Developing our large, high-quality acreage position in Marcellus & Utica shales Upstream Exploration & ~1.2 Million ~1.1 Bcf/day 51% Production (2) Net acres in Net total production Appalachia Expanding and modernizing pipe
Slide 5: Non-Regulated Business Overview
Non-Regulated Business Overview Exploration & Production Segment (Upstream) • Seneca Resources Company • Total Net Acres (Pennsylvania): ~1.2 million Western Development Area – 915,000 Acres • Total Proved Reserves: 4.5 Tcfe (as of 9/30/2023) • Current Net Production: ~1.1 Bcf/d • Firm Transportatio
Slide 6: Regulated Business Overview
Regulated Business Overview Pipeline & Storage Segment (Midstream) • Regulated by Federal Energy Regulatory Commission (FERC) (2) • Total Rate Base: $1.6 Billion • ~2,600 miles of pipeline/ 29 storage fields • National Fuel Gas Supply Corporation: • Firm Contracted Storage Capacity: 71 Bcf (1) • Fir
Slide 7: Why National Fuel?
Why National Fuel? Responsibly Reducing Strong Integrated Visibility on Long-Term Long-Standing History Responsibly Reduce Emissions Returns EPS & FCF Growth of Shareholder Returns Emissions ü Optimized capital ü Targeting significant ü Continued progress ü Over 120 years of allocation rate base gro
Slide 8: Integrated Model Enhances Returns
Integrated Model Enhances Returns NFG’s ROCE outperforms peers and broader market, on average, over a multi-year period (1) Return on Capital Employed Strong Integrated Business Model Benefits… Integrated NFG vs. S&P 500 and Industry Peers S&P O&G 20% Returns Index üOperations: Lower cost structure
Slide 9: Robust Earnings & Free Cash Flow Growth Outlook
Robust Earnings & Free Cash Flow Growth Outlook Non-Regulated Business Significant Growth in Future FCF Growth Drivers § Increasing well productivity from prolific EDA Strong Integrated § Moderate production growth combined with lower capital Returns § Targeting production growth of 0% to 5% per yea
Slide 10: Long-Standing History of Returning Capital to Shareholders
Long-Standing History of Returning Capital to Shareholders $1.5 Billion Returned to Shareholders Over Last 10 Years Dividend Share Total Return of (2) (1) Strong Yield Buyback Yield Capital Integrated Returns ~4% ~2% ~6% Visibility on Stable, Growing Dividend … …Plus New Share Buyback $1.98 Long-Ter
Slide 11: Continued Progress Toward Methane Intensity Targets
Continued Progress Toward Methane Intensity Targets Latest Corporate Responsibility Report Provides Enhanced GHG Disclosures on Sustainability Initiatives Target: 40% Target: 30% Strong E&P Gathering Integrated National Fuel Gas Company Targets Returns Progress Since 2020: Progress Since 2020: § 25%
Slide 12: Business Updates
Business Updates 12 May May 2024 U 2024 Updat pdate e 12
Slide 13: Regulatory Update: Significant Rate Case Activity
Regulatory Update: Significant Rate Case Activity New York: Significant ü Filed a rate case in October 2023 for new rates effective October 1, 2024 (FY 2025) Growth ‒ Settlement negotiations began mid-April ü NFG requested revenue increase of $88.8 million ($72.6 million net margin impact) ü Major a
Slide 14: Regulated Businesses Further Propel Long-Term Growth
Regulated Businesses Further Propel Long-Term Growth ~5-7% Avg. Increasing Rate Base Drives Annual Rate Long-Term EPS Growth Base Growth Factors Driving Long-Term Growth ($ in billions) Beyond FY23 3000 $2,796 $2,583 § Infrastructure modernization program $2,433 2500 $2,289 $2,127 § Ongoing expansio
Slide 15: EDA Transition Creates Differentiated Upstream Value
EDA Transition Creates Differentiated Upstream Value Western Development Areas (WDA) Eastern Development Areas (EDA) Legacy Development Area Development Focus Area Primarily Owned in Fee (No Royalty) 10+ Years Low-Risk Inventory EDA Transition ü High-grading development plan with higher capital effi
Slide 16: EDA: Best in Basin Performance & Breakevens
EDA: Best in Basin Performance & Breakevens >10 years of prolific EDA inventory at expected development pace Best-in-Class Well Performance Already Low Breakevens Continue to Improve Seneca EDA 2022/2023 NE/ SW Appalachia Peer $3.50 1,500 1,000 $3.00 500 $2.50 0 0 12 24 Months 36 48 60 Program Produ
Slide 17: Capital Allocation Priorities Drive Spending Levels
Capital Allocation Priorities Drive Spending Levels (1) Capital Expenditures by Segment ($ millions) Capital Allocation Priorities (2) (2) Exploration & Production Gathering Pipeline & Storage Utility • Invest in regulated growth via modernization $973 Organic and pipeline expansions $885 - $980 Inv
Slide 18: Maintaining Strong Balance Sheet & Liquidity
Maintaining Strong Balance Sheet & Liquidity (1) Net Debt / Adjusted EBITDA Capitalization Current Credit Ratings Quickly de-levered after 2020 Shell acquisition. Debt 3.08 x Total 2.72 x S&P BBB- Equity Debt 2.27 x 2.22 x 2.14 x Moody’s Baa3 55% 45% Fitch BBB Investment Grade $6.0 Billion Total Cap
Slide 19: Supplemental Information: E&P and Gathering Overview
Supplemental Information: Segment Overview Exploration & Production & Gathering Overview Seneca Resources Company, LLC National Fuel Gas Midstream Company, LLC 19
Slide 20: E&P and Gathering Focused on Capital Efficiency and FCF Generation
E&P and Gathering Focused on Capital Efficiency and FCF Generation (1) Net Production (Bcfe) Capital Expenditures ($ MM) $588 390- $566 $525- 405 372.5 $555 352.5 2022 2023 2024E 2022 2023 2024E Near-Term Strategy ü Continue to moderate activity level to target maintenance-to-low production growth b
Slide 21: E&P and Gathering Integration Drives Industry Leading Cost Structure
E&P and Gathering Integration Drives Industry Leading Cost Structure Seneca Cash OpEx ($/Mcfe) Seneca + Gathering Cash OpEx ($/Mcfe) Operating results excluding California operations $0.97 ~$0.95 $0.93 $0.11 $0.07 $0.07 (1) $0.18 $0.18 $0.18 (2) $0.12 $0.10 $0.11 (2) $0.58 $0.58 $0.57 FY 2022 FY 202
Slide 22: Long Runway of Development Opportunities in the EDA
E&P and Gathering Long Runway of Development Opportunities in the EDA 1 Tioga County, PA EDA Exploration & Production: Utica Development ü Low-risk development locations: ~200 Utica, 80 Marcellus ü Gathering infrastructure: NFG Midstream Tioga gathering systems ü Numerous marketing opportunities: ̶
Slide 23: High Quality Acreage in WDA, Primarily Owned in Fee
E&P and Gathering High Quality Acreage in WDA, Primarily Owned in Fee (1) Western Development Area (WDA) Highlights Marcellus & Utica Trend Fairways ü Potential for 600+ Marcellus Shale and 500+ Utica Shale well locations ü Large gathering system with multiple interconnects provides access to firm t
Slide 24: Production Supported by Long-Term Contracts
E&P and Gathering Production Supported by Long-Term Contracts ~1 Bcf/d of Firm Transportation Firm Sales Portfolio 1200 (1) Incremental Firm Sales Contracts 1000 Will continue to layer-in firm sales deals to reduce in-basin spot exposure To Canada, Dawn, Leidy South (Transco & NFG - Supply) TPG-200
Slide 25: Fiscal 2024 Sales Mix Provides Near-Term Price Certainty
E&P and Gathering Fiscal 2024 Sales Mix Provides Near-Term Price Certainty Firm Sales & Production Cadence Price Realizations with Hedging (Net Bcfe, $ per Mmbtu) ~390 - 405 103 Bcfe 101 Bcfe $1.60 ($0.82) ($0.71) ($0.91) Differential to Floor: $2.56 NYMEX Cap: $3.13 ($0.66) ($0.66) $2.57 $2.28 $2.4
Slide 26: Hedging Program: Disciplined with Upside Potential
E&P and Gathering Hedging Program: Disciplined with Upside Potential Significant Opportunity to Capture Increasing Natural Gas Prices 450 400 ü Methodical approach of layering in 350 ~26% hedges over time 40- 300 45% 60- ü Protect near-term earnings and cash 65% 250 80- flows while maintaining upsid
Slide 27: Industry-Leading Focus on Sustainability
E&P and Gathering Industry-Leading Focus on Sustainability Responsible Gas Certifications, Methane Detection & Biodiversity TM Equitable Origin – EO100 Standard for Responsible Methane Detection Energy Development Certifications ü Standard pad design includes fixed gas detection systems installed ne
Slide 28: Supplemental Information: Pipeline & Storage Overview
Supplemental Information: Segment Overview Pipeline & Storage Overview National Fuel Gas Supply Corporation Empire Pipeline, Inc. 28 May 2024 Update 28
Slide 29: Pipeline & Storage Segment Overview
Pipeline & Storage Pipeline & Storage Segment Overview National Fuel Gas Supply Corporation (1) ü Contracted Capacity : § Firm Transportation: 3,408 MDth per day § Firm Storage: 70,693 MDth (fully subscribed) (2) ü Rate Base : ~$1,244 million Empire Pipeline ü FERC Rate Proceeding Status: § New rate
Slide 30: Pipeline & Storage Customer Mix
Pipeline & Storage Pipeline & Storage Customer Mix (1) Customer Transportation by Shipper Type Affiliated Customer Mix (Contracted Capacity) Affiliated Non-Affiliated End User 22% 8% Outside Producer 52% Pipeline 28% 16% 79% Marketer 78% 12% LDC 48% 36% 21% LDCs Producers Firm Storage Firm Transport
Slide 31: Tioga Pathway Project
Pipeline & Storage Tioga Pathway Project – Organic Growth Project provides long-term revenue growth for Supply, while providing an additional outlet for Seneca’s EDA development ü Capacity: 190,000 Dth/day ü Estimated annual revenue: ~$15 million (underpinned by 15-year agreement with Seneca) ü Esti
Slide 32: 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 four years, the company has successfully placed Mercer into service several projects which have added: § Contracted firm transport: 158,000 Dth/d § Contracted firm storage: 267,000 Dth
Slide 33: 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 34: Supplemental Information: Utility Overview
Supplemental Information: Segment Overview Utility Overview National Fuel Gas Distribution Corporation 34
Slide 35: New York & Pennsylvania Service Territories
Utility New York & Pennsylvania Service Territories New York (1) Total Customers : 540,000 Allowed 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 C
Slide 36: NY Utility Rate Case Status
Utility NY Utility Rate Case Status Rate Case is Ongoing with New Rates Expected to Start October 1, 2024 ü Filed case on October 31, 2023; National Fuel’s base rates have not changed since the last base rate case was litigated in 2017 ü Rebuttal testimony filed March 22, 2024; Settlement discussion
Slide 37: NY Utility Regulated Environment
Utility NY Utility Regulated Environment NY Regulatory Environment Continues to Prioritize Access to Safe, Reliable and Affordable Energy ü First utility in the state to submit a LTP (Long-Term Plan) § NY PSC implemented NFG’s LTP with modifications in December 2023 § Includes an “All-of-the-Above P
Slide 38: Customer Affordability
Utility Customer Affordability New York Pennsylvania #1 #3 (2) (1) Out of 6 Gas Utilities Out of 9 Gas Utilities New York Large Gas Utilities Monthly Bill Pennsylvania Large Gas Utilities Monthly Bill Residential Heating (based on 100 Mcf annually) Residential Heating (based on 15 Mcf monthly) $250
Slide 39: Significant Investments in Safety
Utility Utility Continues its Significant Investments in Safety Long-Standing Focus on Distribution System Safety and Reliability (2) $150-$175 (1) Capital Expenditures for Safety Total Capital Expenditures $139.9 $111.0 $108.6 $100.8 $95.8 $94.3 $85.6 $82.6 $79.7 $74.1 $71.4 $69.9 Modernization Spe
Slide 40: Long-Standing Pipeline Replacement & Modernization
Utility Long-Standing Pipeline Replacement & Modernization (1) (2) Utility Mains by Material Miles of Utility Main Pipeline Replaced Wrought Iron 161 158 156 154 154 Coated Bare 49 NY 45 43 40 41 9,817 miles Plastic 114 Wrought Iron 113 113 113 112 Coated Bare PA 4,832 miles Plastic 2019 2020 2021 2
Slide 41: 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 42: Promoting Renewable & Certified Natural Gas
Utility Promoting Renewable & Certified Natural Gas RNG (Renewable Natural Gas) Progress: Through Fiscal 2020 July 2021 Currently Future Three site locations under Awarded four RNG grants First on-system project Advance RNG construction. for $1.1 million through goes online. Production By end of 202
Slide 43: Supplemental Information: Rate Case Overview
Supplemental Information Rate Case Overview 43 May May 2024 U 2024 Updat pdate e 43
Slide 44: Rate Case Overview: Timing and Status
Rate Case Overview: Timing and Status Recent updates in orange Pipeline & Storge Utility Supply Empire NY PA Regulatory Agency FERC FERC NY PSC PaPUC (Governed by) • Settlement filed • Rates in effect since • Filed rate case • Settlement approved March 27, 2024 January 1, 2019 October 31, 2023 in Ju
Slide 45: Supplemental Information: Guidance & Other Financial Information
Supplemental Information Guidance & Other Financial Information 45 May May 2024 U 2024 Updat pdate e 45
Slide 46: Fiscal 2024 Earnings Guidance
Fiscal 2024 Earnings Guidance Previous FY2024 Earnings Guidance Updated FY2024 Earnings Guidance (1) (1) $4.90 to $5.20/share $4.75 to $5.05/share Key Guidance Drivers 390 - 405 Bcfe Net Production (2) Realized natural gas prices (after-hedge) ~$2.40 - $2.45/Mcf Exploration & G&A Expense $0.17 - $0.
Slide 47: Financial Results and Major Drivers
Financial Results and Major Drivers (1) (2) Adjusted Operating Results Adjusted EBITDA ($ millions) FY24 Major Drivers ($ per share) $1,226 $1,184 $1,165 $5.88 E&P and Gathering: § Natural Gas Prices $5.17 $4.75 - $5.05 § Natural Gas Production $656 $599 $612 & Gathering Throughput $3.21 $2.52 E&P P
Slide 48: 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 gas quantities, strategies, f
Slide 49: Hedge Portfolio & Capped Firm Sales
Hedge Portfolio & Capped Firm Sales 3Q 2024 4Q 2024 FY 2025 FY 2026 FY 2027 FY 2028 Swaps Units Volume Mmbtu 38,670 38,670 101,080 40,060 21,750 1,750 Wtd. Avg. Floor $ / Mmbtu $3.35 $3.35 $3.50 $3.96 $4.16 $4.16 Collars Volume Mmbtu 14,400 14,400 43,960 42,720 3,560 -- Wtd. Avg. Ceiling $ / Mmbtu $
Slide 50: Firm Transportation Commitments
Firm Transportation Commitments Volume Delivery Demand Charges Production Source Gas Marketing Strategy (Dth/d) Market ($/Dth) Northeast Supply Canada Firm Sales Contracts rd Diversification EDA – Tioga 50,000 $0.46 (3 party) (Dawn) Dawn/NYMEX Tennessee Gas Pipeline NFG pipelines - $0.24 158,000 Can
Slide 51: Comparable GAAP Financial Measure Slides & Reconciliations
Comparable GAAP Financial Measure Slides & Reconciliations This presentation contains certain non-GAAP financial measures. For pages that contain non-GAAP financial measures, pages containing the most directly comparable GAAP financial measures and reconciliations are provided in the slides that fol
Slide 52: Non-GAAP Reconciliations – Adjusted EBITDA
Non-GAAP Reconciliations – Adjusted EBITDA Reconciliation of Adjusted EBITDA to Consolidated Net Income ($ Thousands) 12-Months Ended FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 3/31/2024 Total Adjusted EBITDA Exploration & Production Adjusted EBITDA $ 351,159 $ 312,166 464, 529 656, 310 611,782 598,915
Slide 53: Non-GAAP Reconciliations – Adjusted EBITDA, by Segment
Non-GAAP Reconciliations – Adjusted EBITDA, by Segment Reconciliation of Adjusted EBITDA to Net Income, by Segment ($ Thousands) 12-Months FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Ended 3/31/24 Exploration and Production Segment Reported GAAP Earnings $ 180,632 $ 111,807 $ (326,904) $ 101,916
Slide 54: Non-GAAP Reconciliations – Adjusted Operating Results
Non-GAAP Reconciliations – Adjusted Operating Results Three Months Ended March 31, (in thousands except per share amounts) 2024 2023 Reported GAAP Earnings $166,272 $140,880 Items impacting comparability: Unrealized (gain) loss on derivative asset (E&P) -536 2,471 Tax impact of unrealized (gain) los
Slide 55: Reconciliation – Capital Expenditures
Reconciliation – Capital Expenditures Reconciliation of Segment Capital Expenditures to Consolidated Capital Expenditures ($ Thousands) FY 2024 FY 2020 FY 2021 FY 2022 FY 2023 Guidance Capital Expenditures Exploration & Production Capital Expenditures $ 670,455 $ 381,408 $ 565, 791 $ 737,725 $525,00
Slide 56: Reconciliation – E&P Operating Expenses
Reconciliation – 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, 2023 September 30, 2022 (2) (2) (2) (2) Appalachia West Coast Total E&P Appalachia West Coast