National Fuel Gas Company · NYSE:NFG
National Fuel Gas — Q2 2010 Earnings Presentation
69 slides from National Fuel Gas's earnings presentation, May 17, 2010
Slide 1: Fiscal 2010 Second Quarter Update
Fiscal 2010 Second Quarter Update May 17, 2010
Slide 2: 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, performance and capital structure, anticipated capital expenditures and co
Slide 3: National Fuel Gas Company Business Segment Reporting
National Fuel Gas Company Business Segment Reporting Publicly Traded Holding Company NYSE symbol - NFG Reporting Segments Corporate Subsidiaries
Slide 4: Net Income from Continuing Operations Excluding Items Impacting Comparability
Net Income from Continuing Operations Excluding Items Impacting Comparability (1) National Fuel Gas Company A reconciliation to GAAP Net Income is included at the end of this presentation. (CHART) (CHART) $217.6 Million 12 Months Ended March 31, 2010 E&P $112.4 MM 51.7%
Slide 5: Net Income from Continuing Operations Excluding Items Impacting Comparability
Net Income from Continuing Operations Excluding Items Impacting Comparability (1) National Fuel Gas Company A reconciliation to GAAP Net Income is included at the end of this presentation. A reconciliation to the E&P segment's Total Operating Revenue is included at the end of this presentation (CHAR
Slide 6: Capital Expenditures from Continuing Operations
National Fuel Gas Company Capital Expenditures(1) from Continuing Operations (CHART) A reconciliation to Capital Expenditures as presented on the Consolidated Statement of Cash Flows is included at the end of this presentation.
Slide 7: Capital Expenditures - An Appalachian Focus
National Fuel Gas Company Capital Expenditures(1) - An Appalachian Focus (CHART) (2) (3) A reconciliation to Capital Expenditures as presented on the Consolidated Statement of Cash Flows is included at the end of this presentation. Defined as spending related to efforts to drill for, gather, or tran
Slide 8: Pipeline & Storage / Midstream Expansion Initiatives
WEST TO EAST PHASE 1 & PHASE 2 APPALACHIAN LATERAL LAMONT COMPRESSOR STATION COVINGTON GATHERING SYSTEM TIOGA COUNTY EXTENSION LINE "N" EXPANSION GALBRAITH STORAGE EAST BRANCH STORAGE 8 WEST TO EAST EXPANSION HORIZONTAL DRILLING ACTIVITY VERTICAL DRILLING ACTIVITY PIPELINE & STORAGE / MIDSTREAM EXPA
Slide 9: Utility Segment
Utility Segment National Fuel Gas Distribution Corporation
Slide 10: Utility Segment
Utility Segment (Shaded Region) Operated by National Fuel Gas Distribution Corporation Gas service to approximately 727,000 customers in western New York & northwest Pennsylvania Focused on providing safe, reliable service and minimizing operating expenses May 17, 2010
Slide 11: Utility Keys to Continued Success
Utility Keys to Continued Success
Slide 12: Utility Diluted Earnings per Share
Utility (1) Excludes out-of-period adjustment to symmetrical sharing of $0.03. Diluted Earnings per Share (Before Items Impacting Comparability) (CHART)
Slide 13: Safety Performance
Safety Performance NYGoal NYActual(1) PAActual(1) Bare Steel Main Reduction (Miles) 80 81.22 41 Bare Steel Services Reduction (Services) 4,000 4,440 1,711 Leak Backlog (1, 2A & 2) (Leaks) 75 68 69 Emergency Response within 30 minutes 75% 90.2% 82.8% Emergency Response within 45 minutes 90% 97.2% 98.
Slide 14: Utility O&M Expense
Utility O&M Expense $250 ONY PA 2100 $204.3 $203.0 $202.7 @ $200 $191.2 2 = a $150 g 2 8 $100 Fa S $1aa.s $140.5 $139.2 $140.6 $1308 3 $50 $o 2005 2006 2008 2009 een To
Slide 15: Accounts Receivable - Customer
Accounts Receivable - Customer (1) (CHART) (1) All values include Purchase of Receivables ("POR") Program Utility
Slide 16: HEAP/LIHEAP
As of May 7, 2010 Program year runs from November to May HEAP/LIHEAP (CHART) (1) Utility
Slide 17: Excellent Customer Service
Utility Excellent Customer Service Customer Service Performance NY Goal NY Actual(1) PA Actual(1) Telephone Response (within 30 seconds) 74.0% 85.0% 90.7% Customer Satisfaction: Residential Commercial 85.1%86.0% 88.6%86.3% 86.2% PSC Complaints (per 100,000 Customers) 2.1 0.5 N/A Estimated Meter Read
Slide 18: Rate Mechanisms
New York Revenue Decoupling Conservation Incentive Program Merchant Function Charge 90/10 Sharing Weather Normalization Low Income Rates Pennsylvania Low Income Rates Pending: Revenue Decoupling Choice Program Rate Mechanisms Utility
Slide 19: Focus: Continued Execution of this Strategy
FOCUS: Continued Execution of this Strategy Utility
Slide 20: Exploration & Production
Exploration & Production Seneca Resources Corporation
Slide 21: Exploration & Production Overview by Region
Exploration & Production Marcellus Shale Accelerate development; convert resource potential to reserves Appalachian Region - Upper Devonian Drill 50-150 wells per year Proved Reserves @ 9/30/2009 California Continue to operate as a low-cost producer Gulf of Mexico No exploration; Develop and produce
Slide 22: Balance Between Oil and Gas
Exploration & Production Balance Between Oil and Gas (CHART) (1) (2) (2) At September 30, 2009 12 months ended March 31, 2010
Slide 23: Capital Expenditures by Region
Exploration & Production Capital Expenditures by Region (CHART) Does not include the $34.9MM acquisition of Ivanhoe's US-based assets in California, as this was accounted for as an investment in subsidiaries on the Statement of Cash Flows, and was not included in Capital Expenditures.
Slide 24: Annual Production by Region
Exploration & Production Annual Production by Region (CHART)
Slide 25: Exploration & Production California
Exploration & Production California
Slide 26: Seneca's California Properties
Seneca's California Properties South Lost Hills 2,100 BOEPD Monterey Shale Primary 221 Active Wells Sespe 900 BOEPD Sespe Formation Primary 192 Active Wells North Lost Hills 1,200 BOEPD Tulare & Etchegoin Formation Primary & Steamflood 202 Active Wells North Midway Sunset 4,300 BOEPD Potter & Tulare
Slide 27: California Average Daily Production
California Average Daily Production 2009 Average Daily Production Up ~ 550 BOEPD vs. 2008: Marvic drilling @ MWSS Sespe property exchange Improved steaming efficiency Ivanhoe Acquisition Strategy: Modest Capital spending to maintain production Pursue additional bolt-on acquisitions (CHART) Ivanhoe A
Slide 28: West Division Ivanhoe Acquisition
West Division Ivanhoe Acquisition Acquisition(July 2009) January 2010 Oil Price $58 $72 PV10 (Proved) $42.1MM $70.3MM LOE $17.56/BOE $10.97/BOE Completed 14 well development program First well went into production on February 10, 2010 South Midway Sunset Production: 600 BOE/d 900 BOE/d by Fiscal Yea
Slide 29: Gulf of Mexico
Gulf of Mexico Exploration & Production
Slide 30: Gulf of Mexico Average Daily Production
Gulf of Mexico Average Daily Production Minimal Capital spending in 2010 Production Holding steady (CHART)
Slide 31: Marcellus Shale
Marcellus Shale Exploration & Production
Slide 32: Marcellus Shale Seneca Acreage Position
Marcellus Shale Seneca Acreage Position Range Resources Seneca Chesapeake Cabot Seneca/EOG SRC Fee/Lease Seneca
Slide 33: Marcellus Shale EOG Joint Venture Overview & Results
Marcellus Shale EOG Joint Venture Overview & Results Approx. Outline of JV Acreage 200,000 Gross Acres Seneca 50% W.I. (Avg. 58% NRI) EOG 50% W.I. (40% NRI) EOG Acreage Contributed ~120,000 Gross Acres Seneca 50% W.I. (40% NRI) EOG Operated 20 Horizontals Drilled; 6 frac'd IP: 1-4 MMCFD Net Producti
Slide 34: Marcellus Shale Seneca Drilling Program Results
Marcellus Shale Seneca Drilling Program Results Seneca Operated 12 Horizontals Drilled 7 frac'd IP: 5-13 MMCFD EURs: 4-6 BCF Net Production: ~25 MMCFD Seneca Operated 2 Horizontals Drilled 1 frac'd IP: 3.9 MMCFD EUR: 3 BCF EOG Seneca Operated Currently drilling/completing Seneca Operated 2 Horizonta
Slide 35: Marcellus Shale Covington Area Structure Map
IP: 5.7, 4.8 MMCFPD Peak 24 hr IP: 13.2 MMCFPD (First 30 Days: 10.8 MMCFD) IP: 9.3, 7.5, 7.2 MMCFPD IP: 7.8 MMCFD off map to south Marcellus Shale Covington Area Structure Map Currently drilling 7th well on pad Drilling "top holes" for 5 well pad
Slide 36: Marcellus Shale 5-Well Pad in Covington Area
Marcellus Shale 5-Well Pad in Covington Area Utilizing multi-well Pad drilling in Tioga County "Crawler rig" air rig drills a series of top holes to kick-off-point Switch over to mud and drill a reverse sequence of laterals Greatly reduced time for rig moves Only switch from air to mud once for enti
Slide 37: Marcellus Shale Water Use
Marcellus Shale Water Use Recovering water discharged from an abandoned coal mine which was polluting a local trout stream Authorized by SRBC to withdraw approximately 500,000 gallon per day of mine discharge Building water pipeline system to supply all frac water for Seneca in Tioga County (90 well
Slide 38: Marcellus Shale Horizontal Drilling Results EOG
Marcellus Shale Horizontal Drilling Results EOG Total 43 Horizontals Drilled 22 Frac'd and Completed Net Production: 32 MMCFD
Slide 39: Marcellus Net Production
Marcellus Shale Marcellus Net Production (CHART)
Slide 40: Fiscal 2010 Marcellus Shale Drilling Plan
Fiscal 2010 Marcellus Shale Drilling Plan Marcellus Shale Develop JV focus area (EOG Operated) 20-30 wells September 2010 net production 10-20 MMcfd Develop Tioga focus area (Seneca Operated) 22-30 wells Current net production ~25 MMcfd September 2010 net production 30-50 MMcfd De-risk and prioritiz
Slide 41: Marcellus Shale Wells Drilled per Year
(CHART) Marcellus Shale Wells Drilled per Year
Slide 42: Marcellus Shale Western Development Area Pre-Tax IRR
Marcellus Shale (CHART) Western Development Area Pre-Tax IRR: 3.0 BCF EUR; $4.0 MM Well Cost JV Wells on Seneca Mineral Fee 100% Wells on Seneca Mineral Fee Typical 15% Royalty Rate Assumes approximately $.60/MCF lifting and gathering cost
Slide 43: Seneca Full-Cycle Economics Superior to Most Competitors
Seneca Full-Cycle Economics Superior to Most Competitors Marcellus Shale Minimal Acreage Cost Mostly Fee (Seneca owns minerals) Average cost < $100/acre Low Royalty Mostly Fee (0% royalty) Acres contributed to EOG JV have 50% WI/ 58% NRI Rode the Learning Curve at minimal cost Early EOG JV wells at
Slide 44: Seneca Resources Summary
Seneca Resources Summary Maintain California oil production Continue as low-cost producer Use excess cash flow for Marcellus growth Produce-out Gulf of Mexico Minimal Capex Strong production from recent development projects Focus on the Marcellus Plan 50-70 horizontal wells in Fiscal 2010 Net Marcel
Slide 45: National Fuel Gas Company Dividend Growth
National Fuel Gas Company Dividend Growth (CHART) $1.34 $0.19 Compound Annual Growth Rate 5.2% National Fuel has had 107 uninterrupted years of dividend payments and has increased its dividend for 39 consecutive years
Slide 46: Capital Structure
National Fuel Gas Company Capital Structure (CHART) $2.958 Billion(1) at March 31, 2010 (CHART) Forecasted Capital Structure(2) at September 30, 2011 At March 31, 2010, Comprehensive Shareholders' Equity, Long-Term Debt and the Current Portion of Long-Term Debt totaled $2.958 Billion as presented on
Slide 47: Ranked the 4th Best Energy Company in 2009
Ranked the 4th best energy company in 2009 Report Based on the 4-year averages of: Profit Margin Dividend Yield FCF, ROE, ROA Sustainable Growth Consistently in the Top 10 best energy companies (2006-2009 Reports) "National Fuel Gas ... strongly positioned in gas markets from the well to the burner
Slide 48: Peer Group Comparisons
National Fuel Gas Company Peer Group Comparisons Peer Group Total Return National Fuel 61% E&P Peers 61% Diversified Peers 47% Utility Peers 28% 1-Year Total Return Peer Group Total Return National Fuel 21% Utility Peers 4% E&P eers -5% Diversified Peers -10% 3-Year Total Return Peer Group Total Ret
Slide 49: Appendix
| ‘a Appendix
Slide 50: Corporate & Financial Highlights
Corporate & Financial Highlights National Fuel Gas Company
Slide 51: Net Plant by Segment
Net Plant by Segment (CHART) National Fuel Gas Company
Slide 52: 2010 EPS Guidance & Sensitivity
National Fuel Gas Company 2010 EPS Guidance & Sensitivity NFG & Subsidiaries The earnings guidance and sensitivity table are current as of May 6, 2010. The sensitivity table only considers revenue from the Exploration and Production segment's crude oil and natural gas sales. The sensitivities will b
Slide 53: Sources and Uses of Cash
(CHART) Sources and Uses of Cash National Fuel Gas Company 2010 Forecast $ Millions 2011 Forecast $578 For its fiscal 2010 earnings forecast, the Company is using flat commodity pricing of $5.00 per MMBtu for natural gas and $75.00 per Bbl for crude oil, and adjusting for basis differential. For its
Slide 54: Debt Maturity Schedule
National Fuel Gas Company Debt Maturity Schedule (CHART) Fiscal Year Total Long-Term Debt Outstanding At March 31, 2010: $1.249 B
Slide 55: Capital Resources & Credit Ratings
National Fuel Gas Company Capital Resources & Credit Ratings Capital Resources(1) $300.0 MM Commercial Paper Program and Uncommitted Credit Facilities - Aggregate of $720.0 MM $300.0 MM Committed Credit Facility through September 2010 - backs Commercial Paper Program RATING AGENCY RATING FITCH BBB+
Slide 56: Utility Segment
Utility Segment National Fuel Gas Distribution Corporation
Slide 57: Rate Cases
Rate Cases Pennsylvania New York Effective Date Effective Date 1/1/2007 12/28/2007 Rate Case Result Rate Case Result Settled Litigated Approximate Rate Base Approximate Rate Base $280 - 290 MM(1) $699 MM Approximate Base Rate Revenue Increase Approximate Base Rate Revenue Increase $14.3 MM $1.8 MM C
Slide 58: NFGDC Rate Base
(CHART) Utility NFGDC Rate Base New York Ratemaking uses an average net plant and rate base for setting rates and calculating earnings Pennsylvania Ratemaking uses a date certain net plant and rate base for setting rates and calculating earnings (1) (2)
Slide 59: Utility Return on Equity
(1) Calculated using Average Total Comprehensive Shareholder Equity. (CHART) Utility Return on Equity (1)
Slide 60: Average Use per Residential Customer
Utility Average Use per Residential Customer (CHART) 12 Months Ended September (Fiscal Year)
Slide 61: Exploration & Production
Exploration & Production Seneca Resources Corporation
Slide 62: Exploration & Production Proved Reserves
Exploration & Production Proved Reserves (CHART) Proved Reserves @ 9/30 491 Bcfe 503 Bcfe 528 Bcfe West - California Reserves: 342 Bcfe (64%) (57 Mmboe) FY '09 Production: 20.1 Bcfe (47%) Gulf of Mexico Reserves: 35 Bcfe (7%) FY '09 Production: 13.7 Bcfe (32%) East - Appalachia Reserves: 151 Bcfe (2
Slide 63: Marcellus Shale Acreage per Share Comparison
Marcellus Shale Company Net Acres Shares Outstanding (MM) Acres/1K Shares Seneca Resources 738,000 80.5 9.17 Range Resources 1,400,000 157.4 8.89 Atlas Energy Resources LLC 519,000 78.1 6.65 Carrizo Oil & Gas 108,000 31.1 3.47 EQT Corp. 445,000 130.9 3.40 Chesapeake Energy 1,520,000 644.5 2.36 Cabot
Slide 64: Marcellus Shale Western Development Area Decline Curve
Marcellus Shale Western Development Area Decline Curve - 3.0 BCF Estimated Ultimate Recovery (EUR) (CHART) Category Type Curve Parameters Initial Rate 3,550 MCF/D Average first year decline 68% Final decline 6% Hyperbolic Coefficient 1.6 Abandonment rate 10 MCF/D Average first month rate 3,090 MCF/D
Slide 65: Upper Devonian Development Drilling
Upper Devonian Development Drilling (CHART)
Slide 66: Pipeline & Storage
National Fuel Gas Supply Corporation Empire Pipeline, Inc. Pipeline & Storage
Slide 67: Pipeline & Storage/Midstream Expansion Initiatives
Pipeline & Storage/Midstream Expansion Initiatives Project Name Capacity (Dth/Day) Estimated CapEx In-Service Date Status Covington Gathering System - Phase I 200,000 ~16 MM 11/17/09 Project flowing into the Tennessee 300 Line Lamont Compressor Station 40,000 $40 MM June 2010 Construction under FERC
Slide 68: Pipeline & Storage / Midstream Expansion Initiatives
WEST TO EAST PHASE 1 & PHASE 2 APPALACHIAN LATERAL LAMONT COMPRESSOR STATION COVINGTON GATHERING SYSTEM TIOGA COUNTY EXTENSION LINE "N" EXPANSION GALBRAITH STORAGE EAST BRANCH STORAGE 68 WEST TO EAST EXPANSION HORIZONTAL DRILLING ACTIVITY VERTICAL DRILLING ACTIVITY PIPELINE & STORAGE / MIDSTREAM EXP
Slide 69: 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