National Fuel Gas Company · NYSE:NFG
National Fuel Gas — Q3 2023 Earnings Presentation
60 slides from National Fuel Gas's earnings presentation, Aug 3, 2023
Slide 1: Investor Presentation Q3 Fiscal 2023 Update
Investor Presentation Q3 Fiscal 2023 Update August 2, 2023
Slide 2: Commitment to safe and environmentally conscious natural gas development
National Fuel is committed to the safe and environmentally conscious development, transportation, storage, and distribution of natural gas 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 Upstream Developing our large, high-quality acreage Exploration & position in Marcellus & Utica shales Production 54% of NFG ~1.2 Million ~1.04 Bcf/day Net acres in Net Appalachian natural EBITDA(1) Appalachia gas production(2) Midstream Expanding a
Slide 4: Why National Fuel?
Why National Fuel? Diversified Assets Provide Stability and Long-Term Growth Opportunities 1 Integrated Model Enhances Shareholder Value 2 Consolidated Business Expected to Generate Significant Free Cash Flow 3 High Quality Assets Drive Consolidated Growth 4 Long History of Returning Capital to Shar
Slide 5: Integrated Model Enhances Shareholder Value
1 Integrated Model Enhances Shareholder Value . . . Benefits of National Fuel’s Geographic and Operational Integration Integrated Structure: Upstream Drives Synergies: Exploration & Ability to adjust to changing commodity Production Upstream Midstream price environments Co-development of Marcell
Slide 6: Continues to Drive Growth Opportunities
. . . and Continues to Drive Growth Opportunities Near Term Strategy Leverages Integration Across the Value Chain Exploration & Pipeline & Gathering Utility Production Storage Integrated Upstream and Midstream development of high-quality Appalachian assets ~1.2 million net acres in the Marcellus
Slide 7: Projected Free Cash Flow
2 Consolidated Business Expected to Generate Significant Free Cash Flow In Fiscal 2024 . . . . . . With Sustainable Free Cash Flow Generation Expected Over the Long-Term $300 Regulated businesses focused on long-term modernization programs that are expected to lead to mid-single digit rate base Pr
Slide 8: High Quality Assets Drive Consolidated Growth
3 High Quality Assets Drive Consolidated Growth Regulated businesses provide stable, predictable growth that underpins integrated Appalachian development program Exploration & Production Utility Decades of high-quality, economic Marcellus Multi-year modernization program, focused on and Utica Sh
Slide 9: Over Half Century of Dividend Growth
4 Over Half Century of Dividend Growth 53 Years 121 Years $1.98 per share 3.7% yield(1) Consecutive Dividend Increases Consecutive Payments $1.5 Billion 4.2% Dividend payments Over Last 10 Years 2023 Dividend Increase $0.19 per share Annual Rate at Fiscal Year End (1) As of July 31, 2023. 9
Slide 10: Focused on Corporate Responsibility and ESG
5 Focused on Corporate Responsibility and ESG Corporate Responsibility & Climate Report provides Enhanced ESG Disclosures Responsive to Key Stakeholder Priorities Enhanced Diversity Disclosures – continued workforce EEO-1 diversity disclosures, as well as supply chain diversity initiatives Green
Slide 11: Emissions Reduction Targets and Initiatives
Emissions Reduction Targets and Initiatives Significant Methane Intensity and Greenhouse Gas Emissions Reduction Targets Across the Reduction Ongoing Sustainability Initiatives Energy Value Chain(1) Since 2020(2) Exploration & Responsible Gas Certifications 40% Reduction in Methane Intensity by 20
Slide 12: Third Quarter Fiscal 2023 Financial Highlights
Third Quarter Fiscal 2023 Financial Highlights 12
Slide 13: Third Quarter Fiscal 2023 Results and Drivers
Third Quarter Fiscal 2023 Results and Drivers Adjusted Operating Results ($/share)(1) Q3 FY 2022 Q3 FY 2023 Major Drivers Natural Gas Pricing $1.54 ($/Mcfe)(2) $2.87 Natural Gas Prices $2.27 Exploration & Production $1.01 $0.95 Total Production Appalachian Production / Exploration & 94.8 Gathering T
Slide 14: Earnings Guidance
Earnings Guidance FY2023E Adjusted Operating Results FY2024 Preliminary Earnings Guidance Key Guidance Drivers $5.15 to $5.25/share(1) $5.50 to $6.00/share(1) Net Production 390-410 Bcfe (up 7% vs. FY23E) Realized natural gas prices (after-hedge) ~$2.63-2.68/Mcf(2) (vs. ~$2.55/Mcf(2) in FY23E) N
Slide 15: Exploration & Production & Gathering Overview
Exploration & Production & Gathering Overview Seneca Resources Company, LLC National Fuel Gas Midstream Company, LLC 15
Slide 16: Growing Production within Disciplined Capital Program
E&P and Gathering Growing Production within Disciplined Capital Program E&P Net Production (Bcfe) Near-Term Strategy 400 Continue to moderate activity level to target 300 maintenance-to-low production growth beyond fiscal 2024 200 370-380 390-410 327.4 352.5 100 211.8 241.5 Commenced transition
Slide 17: EDA Transition Driving Improved Economics
E&P and Gathering EDA Transition Driving Improved Economics >10 years of prolific EDA inventory at expected development pace Decades of highly economic inventory across acreage position Significant inventory expansion with acquisitions over the past three years Large, contiguous acreage positi
Slide 18: Eastern Development Area
E&P and Gathering Eastern Development Area Seneca EDA Highlights EDA – ~306,000 Acres 1 Tioga County, PA ~200 Utica future development locations ~80 Marcellus future development locations Gathering infrastructure: NFG Tioga gathering systems Numerous marketing opportunities: Ability to uti
Slide 19: EDA: Tioga County Development
E&P and Gathering EDA: Tioga County Development Large Contiguous Acreage Position, with Highly-Economic Utica and Marcellus Inventory Tioga Development Plan Significant Tioga County Acreage Position Large, contiguous Tioga County development position supported by extensive gathering system Undevel
Slide 20: Integrated Development – EDA Tioga Gathering
E&P and Gathering Integrated Development – EDA Tioga Gathering NFG Tioga Gathering Systems Support Growing Seneca Production Current Systems In-Service Tioga County Gathering Systems Map Tioga Gathering System Total Investment (to date): ~$278 million(1) Capacity: up to 550,000 Dth per day (In
Slide 21: EDA: Tioga County Development
E&P and Gathering EDA: Tioga County Development Production Underpinned by Firm Sales and Firm Transportation Contracts Tioga County Gas Marketing Strategy Tioga County Gross Firm Contract Volumes (MDth/d) 600 Production supported by firm transportation capacity to premium markets: 500 EDA - TGP 30
Slide 22: EDA: Lycoming County Development
E&P and Gathering EDA: Lycoming County Development Marcellus Development in Lycoming County Fully Utilizes Valuable Firm Transportation Prolific Marcellus acreage with average EUR of 2.5-3.0 Bcf / 1,000 ft ~30 Marcellus future development locations Currently developing 13-well pad with expecte
Slide 23: Integrated Development – EDA Lycoming Gathering
E&P and Gathering Integrated Development – EDA Lycoming Gathering NFG Trout Run Gathering System Supports Seneca and Third-Party Development Current System In-Service Trout Run Gathering System Map Total Investment (to date): ~$279 million Capacity: 466,000 to 585,000 Dth per day Current Produ
Slide 24: Western Development Area
E&P and Gathering Western Development Area Marcellus Core Acreage vs. Utica Trend(1) WDA Highlights Large well inventory: Marcellus Shale: 600+ well locations remaining / 200,000 acres Utica Shale: 500+ potential locations across Utica trend / evaluating extent of prospective acreage(2) High
Slide 25: Integrated Development – WDA Gathering System
E&P and Gathering Integrated Development – WDA Gathering System Gathering System Build-Out Tailored to Accommodate Seneca’s WDA Development Clermont Gathering System Map Current System In-Service Capacity: 750 MMcf per day Interconnects with TGP 300 and NFG Supply Total Investment (to date): ~
Slide 26: WDA Firm Transportation and Sales Capacity
E&P and Gathering WDA Firm Transportation and Sales Capacity WDA Exit Capacity Supports Production and Enhances Consolidated Returns WDA Gas Marketing Strategy WDA Contracted Firm Transport and Gross Sales Volumes (MDth/d) 500 Will continue to layer-in firm sales deals of short and longer duration
Slide 27: Long-term Contracts Supporting Appalachian Production
E&P and Gathering Long-term Contracts Supporting Appalachian Production Seneca Appalachia Natural Gas Marketing Firm Contract / Transport Volumes (MDth/day) 1200 Firm Sales Contracts(1) 1000 Leidy South (Transco & NFG - Supply) Transco Zone 6 Non-NY 800 330,000 Dth/d *Capacity can be utilized by all
Slide 28: Near-term Firm Sales Provide Market & Price Certainty
E&P and Gathering Near-term Firm Sales Provide Market & Price Certainty Net Contracted Firm Sales / Transport Volumes (Dth per day) Contracted Index Price Differentials ($ per Dth)(1) NYMEX Dawn Other Capped Fixed Price 32,200 (2) 47,000 (2) 53,300 (2) ($1.54) ($0.19) $0.66 1,029,400 1,030,800 1,026
Slide 29: Fiscal 2023 Production Profile
E&P and Gathering Fiscal 2023 Production Profile 91 Bcf of Appalachian Production Protected by Firm Sales 54 Bcf locked-in realizing ~$2.28/Mcf(1), net of transportation 23 Bcf of no-cost collars with $3.54/Mcf floor(2) 14 Bcf of additional firm sales(3) 400 ~5 Bcf 370-380 Bcfe ~14 Bcfe 350 ~2
Slide 30: Fiscal 2024 Production Profile
E&P and Gathering Fiscal 2024 Production Profile 352 Bcf of Appalachian Production Protected by Firm Sales 205 Bcf locked-in realizing ~$2.70/Mcf (1), net of transportation 64 Bcf of no-cost collars with $3.43/Mcf floor(2) 83 Bcf of additional firm sales(3) 390-410 Bcfe 400 ~48 Bcfe 350 ~83 Bc
Slide 31: Competitive, Low-Cost Profile Operations
E&P and Gathering Competitive, Low-Cost Profile Operations Increased Scale and Highly-Contiguous Operations Drive Low Cash Unit Costs Seneca Cash OpEx ($/Mcfe) Operating $1.32 results excluding $1.22 California operations $0.14 $0.12 $1.14 $1.13 $0.12 $0.13 $0.97 $0.30 ~0.94 ~$0.96 Fees Paid to NF
Slide 32: Sustainability Initiatives
E&P and Gathering Sustainability Initiatives Responsible Gas Certifications and Methane Detection Equitable Origin Methane Detection (100% of Appalachian Assets - Certified December 2021) For the past decade, standard pad design has included fixed gas detection 2022 Re-Verification assessment di
Slide 33: Pipeline & Storage Overview
Pipeline & Storage Overview National Fuel Gas Supply Corporation Empire Pipeline, Inc. 33
Slide 34: Pipeline & Storage Segment Overview
Pipeline & Storage Pipeline & Storage Segment Overview National Fuel Gas Supply Corporation Contracted Capacity(1): Firm Transportation: 3,461 MDth per day Firm Storage: 70,693 MDth (fully subscribed) Rate Base(2): ~$1,179 million FERC Rate Proceeding Status: Empire Pipeline Filed rate c
Slide 35: FM100 Project – Significant Investment by Supply Corp.
Pipeline & Storage FM100 Project – Significant Investment by Supply Corp. In-service date: December 1, 2021(1) Capital cost: ~$230 million Annual revenue: ~$50 million(2) Underpinned by long-term lease agreement with Transco (15 years) Project includes best-in-class emissions controls, lim
Slide 36: 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 Over the past three years, the company has successfully placed into service several projects which have added: Mercer Contracted firm transport: 158,000 Dth/d Contracted firm storage: 267,000 Dt
Slide 37: Northern Access Project
Pipeline & Storage 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: To Dawn Feb. 2017 – FERC 7(c) certificate issued Aug. 2018 – FERC issued Order finding that NY DEC waived water quali
Slide 38: Pipeline & Storage Customer Mix
Pipeline & Storage Pipeline & Storage Customer Mix Customer Transportation by Shipper Type(1) Affiliated Customer Mix (Contracted Capacity) Affiliated Non-Affiliated End User 8% 23% Outside Pipeline Producer 52% 16% 34% 84% Marketer 5% 77% LDC 48% 37% 16% LDCs Producers Firm Storage Firm Transport (
Slide 39: Utility Overview
Utility Overview National Fuel Gas Distribution Corporation 39
Slide 40: New York & Pennsylvania Service Territories
Utility New York & Pennsylvania Service Territories New York Total Customers(1): 540,000 ROE: 8.7% (NY PSC Rate Case Order, April 2017)(2) Rate Mechanisms: o Revenue Decoupling o Weather Normalization o Low Income Rates o Merchant Function Charge (Uncollectibles Adj.) o 90/10 Sharing (Large Customer
Slide 41: Customer Affordability
Utility Customer Affordability New York Pennsylvania #3 #1 Out of 9 Gas Utilities(1) Out of 6 Gas Utilities(2) 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) $200 $3
Slide 42: Utility Continues its Significant Investments in Safety
Utility Utility Continues its Significant Investments in Safety Long-Standing Focus on Distribution System Safety and Reliability (1) Capital Expenditures for Safety Total Capital Expenditures $130-$150 $140.0 $125-$135 Utility Capital Expenditures ($ millions) $120.0 $111.0 $100.8 $95.8 $94.3 $100.
Slide 43: Long-Standing Pipeline Replacement & Modernization
Utility Long-Standing Pipeline Replacement & Modernization Utility Mains by Material(1) Miles of Utility Main Pipeline Replaced Wrought Iron 159 158 154 156 154 Coated Bare NY 9,798 miles Plastic Bare Wrought Iron Coated PA 4,845 miles Plastic 2018 2019 2020 2021 2022 Calendar Year (1) All values ar
Slide 44: 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 Utility Mains & Services Emissions(1) Utility GHG Emissions Reduction Target
Slide 45: Promoting Renewable Natural Gas and Hydrogen
Utility Promoting Renewable Natural Gas and Hydrogen Through Fiscal 2020 July 2021 Ongoing Accepted first RNG deliveries into Advance RNG, Hydrogen, and Awarded three RNG grants for other CLCPA related NY system from anaerobic $1.2 million through the Utility’s digester project (receipts opportuniti
Slide 46: Consolidated Financial Overview
Consolidated Financial Overview Upstream I Midstream I Downstream 46
Slide 47: Diversified, Balanced Earnings and Cash Flows
Diversified, Balanced Earnings and Cash Flows Adjusted Operating Results ($ per share)(1) Adjusted EBITDA ($ millions)(2) $1,400 $7.00 $1,226 $1,202 $6.00 $5.88 $5.50 - $6.00 $1,200 $5.15 to $5.25 $1,000 $5.00 $1,000 $656 $645 $3.21 E&P $4.00 $800 $465 E&P $3.00 $600 Gathering $159 $177 $182 $1.01 G
Slide 48: Disciplined, Flexible Capital Allocation
Disciplined, Flexible Capital Allocation Capital Expenditures by Segment ($ millions)(1) Exploration & Production (2) Gathering (3) Pipeline & Storage Utility $1,000 $905-$970 $865-$975 $829 $781 $770 $750 $719 $575-$600 $525-$575 $381 $492 $384 $566 $500 $35 $74 $95-$105 $90-$110 $250 $50 $252 $56
Slide 49: Maintaining Strong Balance Sheet & Liquidity
Maintaining Strong Balance Sheet & Liquidity Net Debt / Adjusted EBITDA(1) Capitalization 3.08 x 2.61 x 2.72 x 2.47 x Total 2.22 x 2.12 x Equity Debt 54% 46% 2018 2019 2020 2021 2022 TTM $5.5 Billion Total Capitalization Fiscal Year 6/30/2023 as of June 30, 2023(2) Debt Maturity Profile by Fiscal Ye
Slide 50: Appendix
Appendix 50
Slide 51: Safe Harbor For Forward Looking Statements
Appendix 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, stra
Slide 52: Hedge Positions and Prices
Appendix Hedge Positions and Prices Natural Gas Volumes in thousand MMBtu; Prices in $/MMBtu Remaining Fiscal 2023 Fiscal 2024 Q4 Q1 Q2 Q3 Q4 Avg. Avg. Avg. Avg. Avg. Volume Price Volume Price Volume Price Volume Price Volume Price NYMEX Swaps 32,820 $2.88 30,620 $3.16 34,770 $3.39 34,770 $3.39 34,7
Slide 53: NYMEX Capped Firm Sales Additional Detail
Appendix NYMEX Capped Firm Sales Additional Detail Capped Firm Sales - Net Contracted Volumes (Dth/d) NYMEX Cap Q4 FY23 Q1 FY24 Q2 FY24 Q3 FY24 Q4 FY24 FY24 Avg $2.92 26,100 29,100 29,300 29,500 29,600 29,400 $4.95 17,400 17,500 16,800 16,900 16,900 17,000 $7.00 0 14,100 20,400 20,600 20,600 18,900
Slide 54: Firm Transportation Commitments
Appendix Firm Transportation Commitments Volume Delivery Demand Charges Production Source Gas Marketing Strategy (Dth/d) Market ($/Dth) Northeast Supply Canada Firm Sales Contracts Diversification EDA – Tioga 50,000 $0.46 (3rd party) (Dawn) Dawn/NYMEX Tennessee Gas Pipeline NFG pipelines - $0.24 Nia
Slide 55: Comparable GAAP Financial Measure Slides & Reconciliations
Appendix Comparable GAAP Financial Measure Slides & Reconciliations This presentation contains certain non-GAAP financial measures. For pages that contain non-GAAP financial measures, pages containing the most directly comparable GAAP financial measures and reconciliations are provided in the slides
Slide 56: Non-GAAP Reconciliations – Adjusted EBITDA
Appendix Non-GAAP Reconciliations – Adjusted EBITDA Reconciliation of Adjusted EBITDA to Consolidated Net Income ($ Thousands) 12-Months FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Ended 6/30/2023 Total Adjusted EBITDA Exploration & Production Adjusted EBITDA $ 317,707 $ 351,159 $ 312,166 464,529 656,31
Slide 57: Non-GAAP Reconciliations – Adjusted EBITDA, by Segment
Appendix Non-GAAP Reconciliations – Adjusted EBITDA, by Segment Reconciliation of Adjusted EBITDA to Net Income, by Segment ($ Thousands) FY23 FY22 12-Months FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FYTD FYTD Ended 6/30/23 Exploration and Production Segment Reported GAAP Earnings $ 180,632 $ 111,807
Slide 58: Non-GAAP Reconciliations – Adjusted Operating Results
Appendix Non-GAAP Reconciliations – Adjusted Operating Results 58
Slide 59: Reconciliation – Capital Expenditures
Appendix Reconciliation – Capital Expenditures Reconciliation of Segment Capital Expenditures to Consolidated Capital Expenditures ($ Thousands) FY 2023 FY 2024 FY 2019 FY 2020 FY 2021 FY 2022 Guidance Guidance Capital Expenditures Exploration & Production Capital Expenditures $ 491,889 $ 670,455 $
Slide 60: Reconciliation – E&P Operating Expenses
Appendix 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, 2022 September 30, 2021 Appalachia West Coast(2) Total E&P Appalachia West Coast(2)
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