National Fuel Gas Company · NYSE:NFG
National Fuel Gas — Investor Presentation (February 2016)
59 slides from National Fuel Gas's investor presentation, Feb 4, 2016
Slide 1: National Fuel Gas Company Investor Presentation
Exhibit 99 National Fuel Gas Company Investor Presentation February 2016
Slide 2: Safe Harbor For Forward Looking Statements
Safe Harbor For Forward Looking Statements Corporate 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, estimatesof oilandgasquantities,st
Slide 3: National Fuel Gas Company
National Fuel Gas Company Corporate Quality Assets | Exceptional Location | Unique Integration Upstream • 2.3TcfeProvedReserves(1) • 785,000 net acres in Marcellus Shale • 3 million Bbls/year California crude oil production Midstream • $252 million adjusted EBITDA (2) • $1.2 billion midstream invest
Slide 4: 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 5: Appalachia Overview
Appalachia Overview Exploration & Production | Gathering | Pipeline & Storage 5
Slide 6: Integrated Vision for Long-term Growth
Integrated Vision for Long-term Growth 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 Pi
Slide 7: Appalachia Capital Reductions
Appalachia Capital Reductions Exploration & Production Appalachia Exercising Capital Flexibility and Discipline to Respond to Commodity Price Environment $1,500 Pipeline & Storage Gathering FY2016 Appalachia Capital Budget Cut (1) $665 million, or 64%, since preliminary E&P - Appalachia $1,250 budge
Slide 8: 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 153wellsableto produce350MMcf/d (1) 40-50 remaining Marcellus locations 83 wellsableto produce255MMcf/d (1) Ad
Slide 9: 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 ~1,200 locations economic < $2.50/MMBtu SRC Lease Acreage NFG midstream infrastructure supporting gro
Slide 10: 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 11: Integrated WDA Development: Upstream
Integrated WDA DevelopmentUpstream - Exploration & Production Appalachia Clermont/Rich Valley Development Map Clermont/Rich CRV Development Summary Valley Area • Current: 62 wells able to produce ~200 MMcf/d • 200+ MMcf/d gross firm sales in fiscal 2016 • Currently operating 2-rigs (down from 3 to s
Slide 12: 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 • ~44 miles of pipe/13,800 HP of compression • Current Capacity: 470 MMcfper day • Interconnects with TGP 300
Slide 13: 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) • System: NFG Supply Corp. • Capacity: 140,000 Dth pe
Slide 14: Northern Access 2016 to Increase Transport Capacity
Integrated WDA DevelopmentInterstate - Pipelines Pipeline& Storage Appalachia NorthernAccess 2016to IncreaseTransportCapacity 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 Chipp
Slide 15: Marcellus Drilling and Completion Efficiencies
Marcellus Drilling and Completion Efficiencies Exploration & Production Appalachia Fiscal 2012 Average Development (1) Well Fiscal 2016 Average Development (1) Well $8.7 MM Lateral Length: 5,100 ft Lateral Length: 7,600 ft Well Cost $4.9 MM Measured Depth: 14,300 ft Measured Depth: 13,700 ft Well Co
Slide 16: WDA Upstream & Midstream Development
WDA Upstream & Midstream Development Appalachia While Seneca has consistently driven down its well costs and break-even economics … WDA Well Costs WDA Clermont / Rich Valley Economics Normalized for a 8,800 ft. Lateral Length for15%IRR(1) RealizedPriceRequired Normalized for a 8,800 ft. Lateral Leng
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 110 MMcf/d productive capacity 3 o 75 MMcf/d firm sales/FT in FY16 o NFG Covington Gathering System o Opportunit
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 • ProductionSource:SenecaReso
Slide 19: Utica/Point Pleasant: Industry Activity
Utica/Point Pleasant: Industry Activity Exploration & Production Appalachia Seneca - DCNR 007 IP: 22.7 MMcf/d Shell 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 Permitted
Slide 20: FY 2016 Production Firm Sales & Spot Exposure
FY 2016 ProductionFirm - Sales & Spot Exposure Exploration & Production Appalachia 250 Remaining FY16 Production with Price Certainty Appalachia Seneca Total 88.7 Bcf Realizing ~$3.25/Mcf (1) Productive Productive 4.9 Bcf of Additional Basis Protection (2) Capacity Capacity 200 150 –180 Bcfe 150 2.5
Slide 21: Significant Base of Long-Term Firm Contracts
Significant Base of Long-Term Firm Contracts Exploration & Production Appalachia 1,250 914,405 Dth per day 1,000 Total Gross Firm Contracts by FY2018 Atlantic Sunrise (Transco) Delivery Markets: Mid-Atlantic & Southeast U.S. 750 189,405 Dth/d Northern Access 2016 (NFG(1), TransCanada & Union) 500 De
Slide 22: Strong Hedge Book in Fiscal 2016 and 2017
Strong Hedge Book in Fiscal 2016 and 2017 Exploration & Production Appalachia Natural Gas Swap & Fixed Physical Sales Contracts (Million MMBtu) 150 FY 2016 = 78% hedged (1) (2) at $3.53 per MMBtu 100 92.0 97.2 30.4 32.9 50 19.0 22.1 14.1 12.7 30.2 8.0 17.2 28.5 29.5 5.8 4.9 20.4 11.4 0 (2) FY 2016 F
Slide 23: Pipeline & Storage: Premier Appalachian Position
Pipeline & Storage: Premier Appalachian Position Pipeline& Storage Appalachia In addition to serving our own upstream and downstream subsidiaries, NFG is uniquely positioned to expand our regional pipeline systems and rd provide valuable outlets forparty 3 producers and shippers in Appalachia Canada
Slide 24: Recent 3rd Party Expansions Highly Successful
rd Recent 3 Party Expansions Highly Successful Pipeline & Storage Appalachia rd rd Expansions for 3 Parties since 2010 3 Party Expansion Capital Cost ($MM) 1,442 MDth/d $387 million $72 since FY2010 since FY 2010 Northern Access 2012 $183 +320 MDth/d $132 Northern Access 2012 Empire & Lamont Line N
Slide 25: 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 26: Midstream Businesses EBITDA
Midstream Businesses EBITDA Appalachia $300 Gathering Pipeline & Storage $257 $252 $250 $64 $69 $62 $200 $191 $30 $152 $15 $121 $10 $100 $188 $190 $186 $161 $137 $111 $0 2011 2012 2013 2014 2015 TTM Fiscal Year 12-31-2015 26 Note: A reconciliation of Adjusted EBITDA to Net Income as presented on the
Slide 27: Downstream Overview
Downstream Overview Utility | Energy Marketing 27
Slide 28: 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 Function Charge (Uncollectibles Adj.) o 90/10
Slide 29: Utility: Shifting Trends in Customer Usage
Utility: Shifting Trends in Customer Usage Downstream Residential Usage Industrial Usage 120 40 110 35 100 30 90 25 80 20 12-Months Ended December 31 12-Months Ended December 31 (1) Weighted Average of New York and Pennsylvania service territories (assumes normal weather). 29
Slide 30: 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 $198 $200 $193 $179 $9 $10 $177 $178 $10 $11 $9 $6 (1) $28 $28 $20 $33 $16 $16 $150 $100 $152 $152 $163 $160 $152 $151 $50 $0 2011 2012 2013 2014 2015 12 Months Fiscal Year
Slide 31: Utility: Strong Commitment to Safety
Utility: Strong Commitment to Safety Downstream 150 Capital Expenditures for Safety Near-term increase due to ~$60MM upgrade of the Utility’s Total Capital Expenditures Customer Information System and anticipated acceleration of pipeline replacement program 120 $95 -$105 $94.4 $88.8 90 $72.0 $58.4 $
Slide 32: California
California Exploration & Production 32
Slide 33: California: Stable Production; Modest Growth
California: Stable Production; Modest Growth Upstream 6,000 FY 2010 East Coalinga FY 2015 Temblor Formation 4,500 Primary 3,000 North Lost Hills 1,500 Tulare & Etchegoin Formation Primary/Steamflood 0 North South South Lost North Lost Sespe East Midway Midway Hills Hills Coalinga South Lost Hills Su
Slide 34: California Average Daily Net Production
California Average Daily Net Production Upstream $40-$50 Million Annual Capital Spending to Keep 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 34
Slide 35: Strong Margins Support Significant Free Cash Flow
Strong Margins Support Significant Free Cash Flow Upstream West Division Adjusted EBITDA per(1)BOE Trailing 12-months Ended 12/31/15 Non-Steam Fuel LOE $12.74 Steam Fuel $3.37 Average Revenue for TTM 12/31/15(1) G&A $5.56 $60.84 per BOE Production & Other Taxes $2.90 DD&A Other Operating Costs $2.44
Slide 36: Consolidated Financial Overview
Consolidated Financial Overview Upstream | Midstream | Downstream 36
Slide 37: Appalachia Driving Proved Reserve Growth
Appalachia Driving Proved Reserve Growth Corporate 3,000 Natural Gas (Bcf) Crude Oil (MMbbl) 3-Year Fiscal F&D Cost(2) 2,500 (1) Years ($/Mcfe) 2,344 2008-2010 $2.37 1,914 2009-2011 $2.09 2,000 2010-2012 $1.87 1,549 2011-2013 $1.67 1,500 1,246 2012-2014 $1.38 2,142 1,683 2013-2015 $1.12 1,000 935 1,
Slide 38: Seneca Production
Seneca Production Corporate 200 Gulf of Mexico (Divested in 2011) Appalachia Division (1) West Coast Division 150 –180 Bcfe 160.5 157.8 Appalachia 150 Spot Sales 120.7 100 83.4 139.3 136.6 129.0 67.6 100.7 50 62.9 43.2 19.2 20.5 20.0 21.2 21.2 ~21 0 2011 2012 2013 2014 2015 2016E Fiscal Year (1) Ref
Slide 39: EBITDA Contribution by Segment
EBITDA Contribution by Segment Corporate $1,250 Exploration & Production Segment Gathering Segment Pipeline & Storage Segment $1,000 Utility Segment $953 Energy Marketing & Other $852 $843 $785 $750 $704 $668 $539 $492 $422 $378 $500 $397 $377 $64 $69 $62 $250 $161 $186 $188 $190 $111 $137 $169 $160
Slide 40: Capital Expenditures by Segment
Capital Expenditures by Segment Corporate $1,500 (1) Exploration & Production Segment Gathering Segment Pipeline & Storage Segment Utility Segment Energy Marketing & Other $977 $970 $1,001 $1,000 $854 $717 $557 $694 $603 $455- $575 $500 $649 533 $150-$200 $118 $138 $85-$95 $80 $230 $55 $140 $125-$17
Slide 41: Financial Position & Liquidity
Financial Position & Liquidity Corporate Debt/Adjusted EBITDA Capitalization 2.52 x 2.27 x 1.75 x 1.89 x 1.89 x 1.77 x TotalEquity TotalDebt 46% 54% 2011 2012 2013 2014 2015 TTM $3.9 Billion Total Capitalization Fiscal Year 12-31-15 as of December 31, 2015 Debt Maturity Profile ($MM) Liquidity $600
Slide 42: 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) 3.4% $0.00 Annual Rate at Fiscal Year End (1) As of February 3, 2016.
Slide 43: Appendix
ry) National Fuel S _aperi
Slide 44: 2015 Pipeline Expansion Projects In-Service
2015 Pipeline Expansion Projects In-Service Appendix 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 million • Capacity: 175,000
Slide 45: Total Seneca Capital Spending by Division
Total Seneca Capital Spending by Division Appendix $1,000 Gulf of Mexico (Divested in 2011) Appalachia(1) (2) West Coast (California) $800 $694 $649 $603 $600 $533 $557 $400 $631 $596 $520 $428 $500 $150 - $200 $200 $110- $150 $63 $105 $83 $47 $57 $40-$50 $0 2011 2012 2013 2014 2015 2016E Fiscal Yea
Slide 46: Marcellus Operated Well Results
Marcellus Operated Well Results Exploration & Production Appalachia 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 56(1) 7.5 5.7 (1) 6,823’ Elk, Cameron & McKeancounties EDA D
Slide 47: Highly Competitive Cost Structure
Highly Competitive Cost Structure Appendix $3.00 Property, Franchise & Other Taxes Other O&M Expense General & Administrative Expense (3) Lease Operating & Transportation Expense (Gathering Only) Lease Operating & Transportation Expense (Excl. Gathering) $2.09 $2.01 $2.00 $0.18 $0.28 $1.74 $1.70 $1.
Slide 48: Marcellus Shale Program Economics
Marcellus Shale Program Economics Appendix ~1,200 WDA Locations Economic Below $2.50/MMBtu Locations Completed NYMEX / DAWN Pricing Average 15% IRR(1) Prospect Product Remaining Lateral BTU $3.25 $3.00 $2.75 EUR (Bcf) Realized Price to Be Drilled Length (ft) IRR %(1) IRR %(1) IRR %(1) DCNR 100 Dry G
Slide 49: Firm Transportation Portfolio
Firm Transportation Portfolio Appendix Gross FT Capacity (Dth/day) In- Demand Project Service Contract Delivery Charge Fiscal Fiscal Fiscal Matched Firm (Counterparty) Date Term Market ($/Dth) 2016 2017 2018 Sales Contracts NortheastSupply Executed Contracts Nov. Diversification 15 years Canada $0.4
Slide 50: Firm Sales Provide Market for Appalachian Production
Firm Sales Provide Market for Appalachian Production Appendix Fiscal 2016 Firm Sales by Fiscal Quarter GrossContracted Volumes(Dthperday)(1) Pricing Index Key: Fixed Price ContractedIndexPriceDifferentials($ perDth)(2) Dawn 600,000 Dominion SP NYMEX 469,698 468,098 468,098 400,000 160,000 175,000 17
Slide 51: Appalachian Price Realizations & Margins
Appalachian Price Realizations & Margins Exploration & Production Appalachia Strong hedge book,firm sales portfolio, and cost discipline generating impressive natural gas price realizations and margins in challenging commodity environment Q4 FY15 Average Natural Gas Realizations per Mcf Q4 FY15 Adju
Slide 52: Natural Gas Hedge Positions
Natural Gas Hedge Positions Appendix (Volumes in thousands MMBtu; Prices in $/MMBtu) Fiscal 2016(1) 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 28,440 $3.92 29,530 $4.20 20,350 $3.62 11,400 $3.3
Slide 53: 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 404,000 $94.63 231,000 $92.14 51,000 $91.00 NYMEX Swaps 640,000 $83.33 465,000 $66.77 24,000 $90.52 Total 1,044,000 $87.70 696,000 $7
Slide 54: Utica/Point Pleasant: EDA Opportunities
Utica/Point Pleasant: EDA Opportunities Shell: Neal Travis Peak: 26.5 MMcf/d Currently Drilling Shell: Gee DCNR Tract 001 11.2 MMcf/d Potential Future Location JKLM Pt Pleasant Test PGE DCNR 595 Vertical Tests Seneca DCNR Tract 007 Potential Future Location IP: 22.7 MMcf/d Seneca Horizontal Lateral
Slide 55: Comparable GAAP Financial Measure Slides & Reconciliations
Comparable GAAP Financial Measure Slides & Reconciliations Appendix Thispresentationcontainscertainnon-GAAPfinancialmeasures. Forpagesthat contain non-GAAPfinancial measures, pages containing the most directly comparableGAAPfinancial measuresand reconciliationsare provided in the slidesthat follow.
Slide 56: Reconciliation of Adjusted EBITDA to Consolidated Net Income
National Fuel Gas Company Appendix Reconciliation of Adjusted EBITDA to Consolidated Net Income ($ Thousands) 12-Months FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Ended 12/31/15 Total Adjusted EBITDA Exploration & Production Adjusted EBITDA $ 377,457 $ 397,129 $ 492,383 $ 539,472 $ 422,289 377,998 Pipe
Slide 57: Reconciliation of West Coast Division Adjusted EBITDA per Mboe
National Fuel Gas Company Appendix Reconciliation of Exploration & Production - West Coast division Adjusted EBITDA per Mboe of Production ($ Thousands) 12-Months Ended 12/31/15 Appalachia Division Adjusted EBITDA $ 259,134 West Coast Division Adjusted EBITDA 118,864 Total Exploration & Production A
Slide 58: Reconciliation of Segment Capital Expenditures
National Fuel Gas Company Appendix Reconciliation of Segment Capital Expenditures to Consolidated Capital Expenditures ($ Thousands) FY 2016 (1) FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Forecast Capital Expenditures from Continuing Operations Exploration & Production Capital Expenditures $ 648,815 $
Slide 59: Reconciliation of Adjusted EBITDA for Appalachia and West Coast
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 Three Months Ended Twelve Months Ended Twelve Months Ended September 30, 2015 Septembe
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