National Fuel Gas Company · NYSE:NFG
National Fuel Gas — Q2 FY2021 Earnings Presentation
65 slides from National Fuel Gas's earnings presentation, May 6, 2021
Slide 1: Investor Presentation Q2 Fiscal 2021 Update
Investor Presentation Q2 Fiscal 2021 Update May 6, 2021 Exhibit 99
Slide 2: Commitment to safe and environmentally conscious operations
National Fuel is committed to the safe and environmentally conscious development, transportation, storage, and distribution of natural gas and oil 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 acreage position in Marcellus & Utica shales(1) Providing safe, reliable and affordable service to customers in WNY and NW Pa. Upstream Exploration & Production Midstream Gathering Pipeline & Storage 38% of NFG EBI
Slide 4: Why National Fuel?
Why National Fuel? Diversified Assets Provide Stability and Long-Term Growth Opportunities Integrated Model Enhances Shareholder Value Appalachian Program Expected to Generate Significant Free Cash Flow Interstate Pipeline Business Drives Significant Regulated Growth Long History of Returning Capita
Slide 5: Integrated Model Enhances Shareholder Value
Integrated Model Enhances Shareholder Value . . . 1 Midstream Ability to adjust to changing commodity price environments More efficient capital investment Higher returns on investment Operational scale Lower cost of capital Lower operating costs More competitive pipeline infrastructure projects Stro
Slide 6: . . . and Continues to Drive Growth Opportunities
. . . and Continues to Drive Growth Opportunities Integrated Upstream and Midstream development of high-quality Appalachian assets ~1.2 million net acres in the Marcellus and Utica shales NFG’s gathering systems move Seneca’s natural gas production, driving consolidated returns NFG’s interstate pipe
Slide 7: Appalachian Program Expected to Generate Free Cash Flow
Appalachian Program Expected to Generate Free Cash Flow . . . 2 Combined estimated Gathering segment and E&P segment free cash flow. The Company defines free cash flow on page 60 of this presentation. Assumes current hedges and $60.00 per Bbl WTI oil price. Net realized price is per MMBtu and reflec
Slide 8: Significant Interstate Pipeline Growth
Significant Interstate Pipeline Growth 3 Northern Access Delivery: NY & Canada 490,000 Dth/d (remains under development) Line N to Monaca Delivery: Shell ethane cracker facility (Beaver Co., Pa) 133,000 Dth/d FM100 Delivery: Transco (Leidy) 330,000 Dth/d Empire North Delivery: Canada & NY 205,000 Dt
Slide 9: Half Century of Dividend Growth
Half Century of Dividend Growth 4 $3.2 Billion Dividend payments since 1970 $1.78 per share 50 Years Consecutive Dividend Increases $0.19 per share 118 Years Consecutive Payments 3.5% yield(1) As of May 4, 2021.
Slide 10: Focused on Corporate Responsibility and ESG
Focused on Corporate Responsibility and ESG 5 NFG Upstream Segment Midstream Segment Downstream Segment Ongoing Sustainability-Focused Initiatives Across the Energy Value Chain Initial Corporate Responsibility Report published in September 2020 (SASB/GRI disclosures for each segment) Each business i
Slide 11: Second Quarter Fiscal 2021 Financial Highlights
Second Quarter Fiscal 2021 Financial Highlights
Slide 12: Second Quarter Fiscal 2021 Results and Drivers
Second Quarter Fiscal 2021 Results and Drivers Increased Scale (Appalachian Acquisition) Net Oil and Gas Production A Reconciliation of Adjusted Operating Results to Earnings Per Share is provided at the end of this presentation. Realized price after hedging. Combined Lease Operating Expense, Genera
Slide 13: Earnings Guidance
Earnings Guidance FY2020 Adjusted Operating Results Exploration & Production Gathering $2.92/share(1) $3.85 to $4.05/share(1) FY2021 Earnings Guidance 315-330 Bcfe (up 33% vs. FY20) ~$2.20/Mcf(2) (vs. $2.07/Mcf in FY20) Key Guidance Drivers Excludes items impacting comparability. A reconciliation of
Slide 14: Exploration & Production & Gathering Overview
Exploration & Production & Gathering Overview Seneca Resources Company, LLC National Fuel Gas Midstream Company, LLC
Slide 15: Growing Production within Disciplined Capital Program
Growing Production within Disciplined Capital Program Near-Term Strategy E&P Net Capital Expenditures ($ millions)(1) E&P Net Production (Bcfe) 2nd drilling rig added in January 2021 (additional activity focused in EDA) Additional production will support Leidy South capacity (330 Mdth/d) Gross produ
Slide 16: Significant Appalachian Acreage Position
Significant Appalachian Acreage Position Average Seneca gross production(1): ~660 MMcf/d ~300 potential Utica and Marcellus locations Large, highly-contiguous acreage position, with limited near-term lease expirations (~15% royalty) Low breakeven consolidated economics (15% IRR) Tioga Utica: $1.07/M
Slide 17: Eastern Development Area
Eastern Development Area EDA – ~270,000 Acres Seneca EDA Highlights ~180 undeveloped Utica locations, including ~40 return trip locations ~90 undeveloped Marcellus locations Gathering infrastructure: NFG Tioga gathering systems Firm transportation capacity: Empire Pipeline (NFG): 200 MDth/d Dominion
Slide 18: EDA: Tioga County Development
EDA: Tioga County Development Large Contiguous Acreage Position, with Highly-Economic Utica and Marcellus Inventory (1) Significant Tioga County Acreage Position Undeveloped Utica Undeveloped Marcellus Tioga Development Plan Significant assets acquired in mid-2020, contiguous to NFG’s existing Tioga
Slide 19: Integrated Development – EDA Tioga Gathering
Integrated Development – EDA Tioga Gathering NFG Tioga Gathering Systems Support Growing Seneca Production Tioga County Gathering Systems Map Current Systems In-Service Empire DTI TGP E&P and Gathering Tioga Gathering System Capacity: up to 550,000 Dth per day (Interconnects with Empire, Dominion, a
Slide 20: EDA: Tioga County Development Firm Sales and Transportation
EDA: Tioga County Development Production Underpinned by Firm Sales and Firm Transportation Contracts (1) Includes physical fixed price and NYMEX-based firm sales contracts that do not carry any additional transportation costs. 100 MDth/d of Dominion capacity provides optionality to fill Leidy South.
Slide 21: EDA: Lycoming County Development
EDA: Lycoming County Development Includes physical fixed price and NYMEX-based firm sales contracts that do not carry any additional transportation costs. Marcellus Development in Lycoming County Fully Utilizes Firm Transportation Prolific Marcellus acreage with peer-leading well results ~25 remaini
Slide 22: Integrated Development – EDA Lycoming Gathering
Integrated Development – EDA Lycoming Gathering NFG Trout Run Gathering System Supports Seneca and Third-Party Development Trout Run Gathering System Map Current System In-Service Opportunities for Third-Party Volumes Long-term contract executed, with volumes online in late calendar 2020 Completed c
Slide 23: Western Development Area
Western Development Area Marcellus Core Acreage vs. Utica Trend(1) The Utica Shale lies approximately 5,000 feet beneath Seneca’s WDA Marcellus acreage. Appraisal program currently in progress. Additional tests are planned. Prior Marcellus delineation tests helped define the prospective limits of th
Slide 24: WDA Development Plan
WDA Development Plan (1) Internal Rate of Return is for consolidated Seneca and Gathering, is pre-tax, and includes expected gathering capital expenditures, well costs under current cost structure, and non-gathering LOE. WDA – Potential RV-Beechwood Utica Development Area Beechwood Development Area
Slide 25: Integrated Development – WDA Gathering System
Integrated Development – WDA Gathering System Current System In-Service Capacity: 470 MMcf per day Interconnects with TGP 300 and NFG Supply Total Investment (to date): $337 million 38,120 HP of compression (3 stations) Future Build-Out Modest gathering pipeline and compression investment required t
Slide 26: WDA Firm Transportation and Sales Capacity
WDA Firm Transportation and Sales Capacity Will continue to layer-in firm sales deals of short and longer duration on TGP 300 to reduce spot exposure WDA spot realizations track TGP Station 313 pricing, typically 10¢ - 20¢ better than TGP Marcellus Zone 4 Leidy South will provide additional capacity
Slide 27: Long-term Contracts Supporting Appalachian Production
Long-term Contracts Supporting Appalachian Production Seneca Appalachia Natural Gas Marketing Firm Contract / Transport Volumes (MDth/day) E&P and Gathering 100,000 Dth/day on Dominion provides optionality to fill Leidy South. Represents base firm sales contracts not tied to firm transportation capa
Slide 28: Near-term Firm Sales Provide Market & Price Certainty
Near-term Firm Sales Provide Market & Price Certainty Net Contracted Firm Sales / Transport Volumes (Dth per day) Contracted Index Price Differentials ($ per Dth)(1) Actual Daily Net Production 993,100 917,800 1,045,000 Gross Firm Sales Volumes (Dth/d) E&P and Gathering Values shown represent the we
Slide 29: California Oil
California Oil Stable Oil Production | Minimal Capital Investment | Steady Free Cash Flow 1 2 3 4 5 Location Formation Production Method Avg. Daily Production (net BOE/d) 1 East Coalinga/ Other Temblor Primary 565 2 North Lost Hills Tulare & Etchegoin Primary/ Steam flood 787 3 South Lost Hills Mont
Slide 30: California – Continued Focus on Integrating Renewable Energy
California – Continued Focus on Integrating Renewable Energy North Midway Sunset Field (2016) Bakersfield Office (2018) South Midway Sunset Field (2021E) Ongoing Investments in Solar Facilities Offset Operational Power Needs Capacity: 3.1 Megawatts Online Date: August 2016 Cost: $6.6 MM Annual Elect
Slide 31: Fiscal 2021 Production and Price Certainty
Fiscal 2021 Production and Price Certainty Average realized price reflects uplift from financial hedges less fixed differentials under firm sales contracts and any firm transportation costs. Average weighted ceiling price (average weighted floor price of $2.37/Mcf). Indicates firm sales contracts wi
Slide 32: Hedge Positions and Prices
Hedge Positions and Prices Reflects percentage of remaining projected production for FY21 hedged at the midpoint of the production guidance range. Average weighted floor and ceiling prices. Fixed price physical sales exclude joint development partner’s share of fixed price contract WDA volumes as sp
Slide 33: Continued Decrease in E&P Operating Costs
Continued Decrease in E&P Operating Costs Increased Scale and Highly-Contiguous Operations Expected to Drive Lower Cash Unit Costs Seneca Cash OpEx ($/Mcfe) (2) (2) (1) Appalachia LOE ($/Mcfe)(3) Approximately $0.25/Mcfe Reduction in Expected Cash Unit Costs vs. 2018 Levels Fees Paid to NFG’s Gather
Slide 34: Pipeline & Storage Overview
Pipeline & Storage Overview National Fuel Gas Supply Corporation Empire Pipeline, Inc.
Slide 35: Pipeline & Storage Segment Overview
Pipeline & Storage Segment Overview As of September 30, 2020 as disclosed in the Company’s fiscal 2020 Form 10-K. As of December 31, 2020 calculated from National Fuel Gas Supply Corporation’s and Empire Pipeline, Inc.’s 2020 FERC Form-2 reports, respectively. Empire Pipeline, Inc. National Fuel Gas
Slide 36: FM100 Project - Consolidated Benefit for NFG
FM100 Project - Consolidated Benefit for NFG All Seneca volumes will flow through wholly-owned NFG gathering facilities 330,000 Dth/d of new transportation capacity from WDA and EDA acreage positions to premium markets New Transco capacity (Leidy South): 330,000 Dth/day Rate(1) : competitive with ot
Slide 37: FM100 Project – Significant Investment by Supply Corp.
FM100 Project – Significant Investment by Supply Corp. Estimated capital cost: $279 million Expansion facilities: ~$159 million Modernization facilities: ~$120 million Facilities (all in Pennsylvania) include: Approximately 30 miles of new pipeline 2 new compressor stations (totaling approximately 3
Slide 38: Empire North Project
Empire North Project In-service date: September 15, 2020 Est. capital cost: $129 million Annual revenues: ~$27 million Underpinned by long-term firm transportation contracts (10-15 years): Repsol Oil & Gas: 150 MDth/d National Fuel Gas Distribution Corporation: 35 MDth/d Greenidge Markets & Trading:
Slide 39: Continued Expansion of the Supply Corp. System
Continued Expansion of the Supply Corp. System Line N to Monaca Project Project: Firm transportation service to a new ethane cracker facility being built by Shell Chemical Appalachia, LLC In-service date: November 1, 2019 Capital cost: ~$24.5 million Contracted capacity: 133,000 Dth/day Several expa
Slide 40: Northern Access Project
Northern Access Project Delivery points: 350,000 Dth/d to Chippawa (TCPL interconnect) 140,000 Dth/d to East Aurora (TGP 200 line) Regulatory/legal status: Feb. 2017 – FERC 7(c) certificate issued Aug. 2018 – FERC issued Order finding that NY DEC waived water quality certification (WQC) April 2019 –
Slide 41: Pipeline & Storage Customer Mix
Pipeline & Storage Customer Mix 4.4 MMDth/d Firm Transport Customer Transportation by Shipper Type(1) Affiliated Customer Mix (Contracted Capacity) Contracted as of 9/30/2020. Pipeline & Storage
Slide 42: Utility Overview
Utility Overview National Fuel Gas Distribution Corporation
Slide 43: New York & Pennsylvania Service Territories
New York & Pennsylvania Service Territories New York Total Customers(1): 534,000 ROE: 8.7% (NY PSC Rate Case Order, April 2017)(2) Rate Mechanisms: Revenue Decoupling Weather Normalization Low Income Rates Merchant Function Charge (Uncollectibles Adj.) 90/10 Sharing (Large Customers) System Moderniz
Slide 44: Utility Continues its Significant Investments in Safety
Utility Continues its Significant Investments in Safety (1) A reconciliation to Capital Expenditures as presented on the Consolidated Statement of Cash Flows is included at the end of this presentation. Long-Standing Focus on Distribution System Safety and Reliability Utility
Slide 45: Long-Standing Pipeline Replacement & Modernization
Long-Standing Pipeline Replacement & Modernization NY 9,758 miles PA* 4,850 miles * No Cast Iron Mains in Pa.* Miles of Utility Main Pipeline Replaced Utility Mains by Material(1) (1) All values are reported on a calendar year basis as of December 31, 2020. Utility
Slide 46: A Proven History of Controlling Costs
A Proven History of Controlling Costs Utility O&M Expense and Non-Service Pension Costs ($ millions)(1) (1) As of October 1, 2018, Operation and Maintenance Expense does not include non-service pension costs, which were re-classified as Other Income (Deductions) on the Company’s Income Statement. Ut
Slide 47: Utility Targeting Substantial Emissions Reductions
Targets Exceed Those Included in New York State Climate Act (CLCPA)(2) Reductions Primarily Driven by Ongoing Modernization of Mains and Services Utility Targeting Substantial Emissions Reductions Baseline emissions and emissions reduction targets are calculated pursuant to the reporting methodology
Slide 48: Promoting Renewable Natural Gas
Promoting Renewable Natural Gas Low Resource Scenario High Resource Scenario Technical Potential Landfill 20 33 50 Animal/Food Waste 7 13 37 Wastewater 2 3 7 Other 24 56 177 All Sources 53 105 271 Provided three RNG grants for $1.2 million through the Utility’s Area Development Program Petitioned NY
Slide 49: Consolidated Financial Overview
Consolidated Financial Overview Upstream I Midstream I Downstream
Slide 50: Diversified, Balanced Earnings and Cash Flows
Diversified, Balanced Earnings and Cash Flows Adjusted Operating Results ($ per share)(1) A reconciliation of Adjusted Operating Results to Earnings per Share, by segment, as presented on the Consolidated Statement of Income and Earnings Reinvested in the Business is included at the end of this pres
Slide 51: Disciplined, Flexible Capital Allocation
Disciplined, Flexible Capital Allocation (2) Total Capital Expenditures include Corporate and All Other. A reconciliation to Capital Expenditures as presented on the Consolidated Statement of Cash Flows is included at the end of this presentation. FY16, FY17, and FY18 reflects the netting of $157 mi
Slide 52: Maintaining Strong Balance Sheet & Liquidity
Maintaining Strong Balance Sheet & Liquidity Total Debt 56% $4.7 Billion Total Capitalization as of March 31, 2021 Net Debt / Adjusted EBITDA(1) Capitalization Debt Maturity Profile by Fiscal Year ($MM) Liquidity Committed Credit Facilities Short-term Debt Outstanding Available Short-term Credit Fac
Slide 53: Appendix
Appendix 53
Slide 54: 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 55: Consolidated Seneca and Gathering Economics
Consolidated Seneca and Gathering Economics Over 1,000 Potential Additional Marcellus and Utica Locations Economic on a Stand-Alone Basis at ~$2.00/MMBtu(1) Stand-alone Seneca breakeven economics (15% pre-tax IRR) by prospect are as follows: Lycoming Marcellus: $1.51; Tioga County: $1.48; WDA-RV/Bee
Slide 56: Hedge Positions and Prices
Hedge Positions and Prices Fixed price physical sales exclude joint development partner’s share of fixed price contract WDA volumes as specified under the joint development agreement. (1) Appendix
Slide 57: Firm Transportation Commitments
Firm Transportation Commitments Volume (Dth/d) Production Source Delivery Market Demand Charges ($/Dth) Gas Marketing Strategy Northeast Supply Diversification Tennessee Gas Pipeline Niagara Expansion TGP & NFG - Supply Leidy South / FM100 WMB – Transco; NFG - Supply Target in-service: late 2021 50,
Slide 58: EDA Type Curves
EDA Type Curves Estimated Cumulative Volumes (Bcf) Year Lycoming Marcellus (5,800') Tioga Utica (10,000') 1 3.1 6.0 5 8.3 14.3 10 10.8 17.6 EUR (Bcf) 14.5-16.8 20.0-23.0 NRI 84% 82-87% Appendix
Slide 59: WDA Type Curves
WDA Type Curves Estimated Cumulative Volumes (Bcf) Year Utica (10,000') Marcellus (9,000') 1 2.7 1.6 5 7.8 4.2 10 10.5 5.9 EUR (Bcf) 15.0-18.0 9.0-10.8 NRI 100% 100% (1) (1) Type Curve based on the first 19 wells brought online. Appendix
Slide 60: 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 61: Non-GAAP Reconciliations – Adjusted EBITDA
Non-GAAP Reconciliations – Adjusted EBITDA Total Adjusted EBITDA for FY 2018, FY 2019, FY 2020, and 12 months ended March 31, 2021, include the reclassification of non-service pension costs from Operating and Maintenance Expense to Other Income (Deductions) as of October 1, 2018 on the Company’s Inc
Slide 62: Non-GAAP Reconciliations – Adjusted EBITDA, by Segment
Non-GAAP Reconciliations – Adjusted EBITDA, by Segment Appendix
Slide 63: Non-GAAP Reconciliations – Adjusted Operating Results
Non-GAAP Reconciliations – Adjusted Operating Results Appendix
Slide 64: Non-GAAP Reconciliations – Capital Expenditures
Non-GAAP Reconciliations – Capital Expenditures Appendix
Slide 65: Non-GAAP Reconciliations – E&P Operating Expenses
Non-GAAP Reconciliations – E&P Operating Expenses Appendix