National Fuel Gas Company · NYSE:NFG
National Fuel Gas — Q4 2023 Earnings Presentation
56 slides from National Fuel Gas's earnings presentation, Nov 1, 2023
Slide 1: Investor Presentation Q4 Fiscal 2023 Update
Exhibit 99 Investor Presentation Q4 Fiscal 2023 Update November 1, 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 Developing our large, high-quality acreage Upstream position in Marcellus & Utica shales Exploration & Production ~1.2 Million ~1.02 Bcf/day 53% of NFG (2) Net acres in Net total production (1) EBITDA Appalachia Expanding and modernizing pipeline Mi
Slide 4: Why National Fuel?
Why National Fuel? Diversified Assets Provide Stability and Long-Term Growth Opportunities Integrated Model Enhances Shareholder Value 1 Consolidated Business Expected to Generate Significant Free Cash Flow 2 High Quality Assets Drive Consolidated Growth 3 Long History of Returning Capital to Shareh
Slide 5: Integrated Model Enhances Shareholder Value
1 Integrated Model Enhances Shareholder Value Geographic and Operational Integration Benefits of National Fuel’s Upstream Drives Synergies: Integrated Structure: Exploration & ü Ability to adjust to changing commodity Production Upstream Midstream price environments ü Co-development of Marcellus and
Slide 6: Consolidated Business Expected to Generate Significant Free Cash Flow
2 Consolidated Business Expected to Generate Significant Free Cash Flow . .. . With Sustainable Free Cash Flow Generation Expected In Fiscal 2024 . . . Over the Long-Term $300 ✓ Regulated businesses focused on long-term modernization programs that are expected to lead to mid-single digit rate base g
Slide 7: High Quality Assets Drive Consolidated Growth
3 High Quality Assets Drive Consolidated Growth Significant long-term growth potential in earnings and free cash flow supported by mid-single digit regulated rate base growth and increasing natural gas price realizations Exploration & Production Utility ü Decades of high-quality, economic Marcellus
Slide 8: Over Half Century of Dividend Growth
4 Over Half Century of Dividend Growth $1.98 3.9% 53 Years 121 Years (1) per share yield Consecutive Dividend Increases Consecutive Payments $1.5 Billion 4.2% Dividend payments Over Last 10 Years 2023 Dividend Increase $0.19 per share Annual Rate at Fiscal Year End 8 (1) As of October 30, 2023.
Slide 9: Focused on Corporate Responsibility and ESG
5 Focused on Corporate Responsibility and ESG Latest Corporate Responsibility Report provides Enhanced ESG Disclosures on Sustainability Initiatives ü Continued Progress Toward Emissions Reduction Targets ü Independent Third-party Verification of Greenhouse Gas Emissions – external assurance of repo
Slide 10: Emissions Reduction Targets and Initiatives
Emissions Reduction Targets and Initiatives Significant Methane Intensity and Greenhouse Progress Gas Emissions Reduction Targets Across the Ongoing Sustainability Initiatives (2) Since 2020 (1) Energy Value Chain ü Responsible Gas Certifications Exploration & 40% Reduction in Methane Intensity by 2
Slide 11: Fourth Quarter and Fiscal 2023 Financial Highlights; Fiscal 2024 Earnings Guidance
Fourth Quarter and Fiscal 2023 Financial Highlights Fiscal 2024 Earnings Guidance 11
Slide 12: Fourth Quarter Fiscal 2023 Results and Drivers
Fourth Quarter Fiscal 2023 Results and Drivers (1) Adjusted Operating Results ($/share) Q4 FY 2022 Q4 FY 2023 Major Drivers $1.19 $2.84 Natural Gas Prices $2.33 Exploration & $0.78 $0.95 Production $0.81 Exploration & Production Natural Gas Production / $0.38 93.7 87.9 Gathering Throughput Gathering
Slide 13: Fiscal 2023 Highlights
Fiscal 2023 Highlights (1) Down 5% vs. FY22 despite natural gas prices lower by 45% Adjusted EBITDA $1.2 billion rd Dividend Grew shareholder distribution for 53 consecutive year $1.98 per share Up 6% vs. FY22; highest output in NFG history Production 372.5 Bcfe Proved Reserves Up 9% vs. FY22; repla
Slide 14: FY2024 Earnings Guidance
FY2024 Earnings Guidance FY2023 Adjusted Operating Results FY2024 Earnings Guidance (1) $5.17/share $5.40 to $5.90/share Key Guidance Drivers § 390-410 Bcfe (up 7% vs. FY23) Net Production (2) Realized natural gas prices (after-hedge)§ ~$2.63-2.68/Mcf (vs. $2.55/Mcf in FY23) Exploration & G&A Expens
Slide 15: Exploration & Production & Gathering Overview
Exploration & Production & Gathering Overview Seneca Resources Company, LLC National Fuel Gas Midstream Company, LLC 15
Slide 16: E&P and Gathering Focus on Capital Efficiency
E&P and Gathering Focus on Capital Efficiency (1) Net Production (Bcfe) Capital Expenditures ($ MM) $600 400 300 $400 390- $525 - $588 200 $566 372.5 352.5 410 $575 $200 100 0 $0 2022 2023 2024E 2022 2023 2024E Near-Term Strategy ü Continue to moderate activity level to target maintenance-to-low pro
Slide 17: EDA Transition Driving Improved Economics
E&P and Gathering EDA Transition Driving Improved Economics ü Transition to full EDA development, with increasing capital efficiency, enhanced productivity and higher returns, provides differentiated investment opportunity to high-grade development program ü >10 years of prolific EDA inventory at ex
Slide 18: Eastern Development Area (EDA)
E&P and Gathering Eastern Development Area (EDA) Seneca EDA Highlights EDA – ~309,000 Acres 1 Tioga County, PA Undeveloped Utica ü ~200 Utica future development locations ü ~80 Marcellus future development locations ü Gathering infrastructure: NFG Tioga gathering systems ü Numerous marketing opportu
Slide 19: Integrated Development – EDA Gathering
E&P and Gathering Integrated Development – EDA Gathering Current Systems In-Service Gathering Systems Map 1 Tioga Gathering Systems (1) ü Total Investment (to date): ~$420 million ü Capacity: up to 970,000 Dth per day ü Current Production Sources: Seneca Resources & Third Party ü Interconnects: Empi
Slide 20: Western Development Area (WDA)
E&P and Gathering Western Development Area (WDA) (1) Marcellus Core Acreage vs. Utica Trend WDA Highlights ü Large well inventory: § Marcellus Shale: 600+ well locations remaining / 200,000 acres § Utica Shale: 500+ potential locations across Utica trend (2) / evaluating extent of prospective acreag
Slide 21: 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 § Total Investment (to date): ~$394 million § Capacity: up to 750 MMcf per day § Current Production Sour
Slide 22: Production Supported by Long-Term Contracts
E&P and Gathering Production Supported by Long-Term Contracts Natural Gas Marketing Firm Contract / Transport Volumes (gross MDth/day) 1200 (1) Firm Sales Contracts Will continue to layer-in firm sales deals to reduce in-basin spot exposure 1000 Leidy South (Transco & NFG - Supply) Transco Zone 6 No
Slide 23: Near-term Firm Sales Provide Market & Price Certainty
E&P and Gathering Near-term Firm Sales Provide Market & Price Certainty Net Contracted Firm Sales (Dth per day) (1) Contracted Index Price Differentials ($ per Dth) NYMEX Dawn Other Capped Fixed Price (2) (2) 37,300 38,600 ($0.26) $0.43 1,044,300 1,044,700 1,015,900 988,400 986,500 252,000 284,700 2
Slide 24: Fiscal 2024 Net Production Profile
E&P and Gathering Fiscal 2024 Net Production Profile 357 Bcf of Appalachian Production Protected by Firm Sales (1) § 211 Bcf locked-in realizing ~$2.69/Mcf , net of transportation (2) § 64 Bcf of no-cost collars with $3.43/Mcf floor (3) § 82 Bcf of additional firm sales 390-410 Bcfe 400 ~43 Bcfe 350
Slide 25: Competitive, Low-Cost Profile Operations
E&P and Gathering Competitive, Low-Cost Profile Operations Increased Scale and Highly-Contiguous Operations Drive Low Cash Unit Costs Seneca Cash OpEx ($/Mcfe) Operating results excluding $1.32 California operations $1.22 $0.14 $1.14 $1.13 $0.12 $0.12 $0.13 $0.97 $0.30ü Fees Paid to NFG’s Gathering
Slide 26: E&P and Gathering Sustainability Initiatives
E&P and Gathering Sustainability Initiatives Responsible Gas Certifications, Methane Detection & Biodiversity TM Equitable Origin – EO100 Standard for Responsible Methane Detection Energy Development Certifications ü For the past decade, standard pad design has included fixed gas detection systems i
Slide 27: Pipeline & Storage Overview
Pipeline & Storage Overview National Fuel Gas Supply Corporation Empire Pipeline, Inc. 27
Slide 28: Pipeline & Storage Segment Overview
Pipeline & Storage Pipeline & Storage Segment Overview National Fuel Gas Supply Corporation (1) ü Contracted Capacity : § Firm Transportation: 3,461 MDth per day § Firm Storage: 70,693 MDth (fully subscribed) (2) ü Rate Base : ~$1,179 million Empire Pipeline ü FERC Rate Proceeding Status: § Filed ra
Slide 29: 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 30: 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 three 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 Dt
Slide 31: 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 32: 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 8% 23% Outside 52% Pipeline Producer 16% 34% 84% Marketer 5% 77% LDC 48% 37% 16% LDCs Producers Firm Storage Firm Transport
Slide 33: Utility Overview
Utility Overview National Fuel Gas Distribution Corporation 33
Slide 34: 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 35: Utility New York Rate Case
Utility New York Rate Case On October 31, 2023, National Fuel Gas Distribution Corporation filed a request with the New York Public Service Commission (NY PSC) to amend its tariff and increase its base rates. National Fuel’s base rates have not changed since the last base rate case was litigated in
Slide 36: Utility 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) $200
Slide 37: 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) $160.0 Capital Expenditures for Safety Total Capital Expenditures $130-$150 $139.9 $140.0 $111.0 $120.0 $108.6 $100.8 $95.8 $94.3 $100.0 $85.6 $82.6 $79.7 $80.0 $74.1
Slide 38: Long-Standing Pipeline Replacement & Modernization
Utility Long-Standing Pipeline Replacement & Modernization (1) 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 9,798 miles Plastic 114 113 113 113 Wrought Iron 112 Bare Coated PA 4,845 miles Plastic 2019 2020 2021 2022
Slide 39: 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 40: Promoting Renewable Natural Gas and Hydrogen
Utility Promoting Renewable Natural Gas and Hydrogen July 2021 Through Fiscal 2020 Ongoing Advance RNG, Hydrogen, and Accepted first RNG deliveries into Awarded three RNG grants for other CLCPA related NY system from anaerobic $1.2 million through the Utility’s digester project (receipts opportuniti
Slide 41: Consolidated Financial Overview
Consolidated Financial Overview Upstream I Midstream I Downstream 41
Slide 42: Diversified, Balanced Earnings and Cash Flows
Diversified, Balanced Earnings and Cash Flows (1) (2) Adjusted Operating Results ($ per share) Adjusted EBITDA ($ millions) $1,400 $7.00 $1,226 $1,165 $5.88 $1,200 $6.00 $5.40 - $5.90 $5.17 $1,000 $5.00 $656 $612 E&P $3.21 $800 $4.00 $2.52 $600 $3.00 $177 Gathering $186 $1.01 $1.08 $2.00 $400 Pipeli
Slide 43: Disciplined, Flexible Capital Allocation
Disciplined, Flexible Capital Allocation (1) Capital Expenditures by Segment ($ millions) (2) (3) Exploration & Production Gathering Pipeline & Storage Utility $974 $1,000 $865-$975 $829 $781 $770 $800 $719 $588 $525-$575 $600 $381 $566 $492 $384 $400 $35 $103 $90-$110 $74 $50 $56 $252 $142 $120-$14
Slide 44: Maintaining Strong Balance Sheet & Liquidity
Maintaining Strong Balance Sheet & Liquidity (1) Net Debt / Adjusted EBITDA Capitalization 3.08 x 2.72 x 2.61 x 2.47 x Total 2.27 x 2.22 x Equity Debt 53% 47% 2018 2019 2020 2021 2022 2023 $5.6 Billion Total Capitalization Fiscal Year (2) as of September 30, 2023 Debt Maturity Profile by Fiscal Year
Slide 45: Appendix
Appendix 0) National Fuel’
Slide 46: 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 47: Hedge Positions and Prices
Appendix Hedge Positions and Prices Natural Gas Volumes in thousand MMBtu; Prices in $/MMBtu Fiscal 2024 Q1 Q2 Q3 Q4 Avg. Avg. Avg. Avg. Volume Price Volume Price Volume Price Volume Price NYMEX Swaps 30,620 $3.16 34,770 $3.39 34,770 $3.39 34,770 $3.39 No Cost Collars 19,380 $3.43 / $4.38 17,100 $3.
Slide 48: NYMEX Capped Firm Sales Additional Detail
Appendix NYMEX Capped Firm Sales Additional Detail Capped Firm Sales - Net Contracted Volumes (Dth/d) NYMEX Cap Q1 FY24 Q2 FY24 Q3 FY24 Q4 FY24 FY24 Avg $2.92 28,900 29,100 29,500 29,500 29,300 $4.95 17,300 16,600 16,800 16,800 16,900 $7.00 14,000 20,300 20,500 20,500 18,800 Total 60,200 66,000 66,8
Slide 49: Firm Transportation Commitments
Appendix Firm Transportation Commitments Volume Delivery Demand Charges Production Source Gas Marketing Strategy (Dth/d) Market ($/Dth) Northeast Supply Canada Firm Sales Contracts rd EDA – Tioga 50,000 $0.46 (3 party) Diversification (Dawn) Dawn/NYMEX Tennessee Gas Pipeline NFG pipelines - $0.24 15
Slide 50: Comparable GAAP Financial Measure Slides & Reconciliations
Appendix Comparable GAAP Financial Measure Slides & Reconciliations This presentation contains certain non-GAAP financial measures. For pages that contain non-GAAP financial measures, pages containing the most directly comparable GAAP financial measures and reconciliations are provided in the slides
Slide 51: Non-GAAP Reconciliations – Adjusted EBITDA
Appendix Non-GAAP Reconciliations – Adjusted EBITDA Reconciliation of Adjusted EBITDA to Consolidated Net Income ($ Thousands) FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Total Adjusted EBITDA Exploration & Production Adjusted EBITDA $ 317,707 $ 351,159 $ 312,166 464,529 656,310 611,782 Pipeline
Slide 52: 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) FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Exploration and Production Segment Reported GAAP Earnings $ 180,632 $ 111,807 $ (326,904) $ 101,916 $ 306,064 $ 23
Slide 53: Non-GAAP Reconciliations – Adjusted Operating Results
Appendix Non-GAAP Reconciliations – Adjusted Operating Results 53
Slide 54: Non-GAAP Reconciliations – Free Cash Flow
Appendix Non-GAAP Reconciliations – Free Cash Flow Reconciliation of Free Cash Flow ($ Thousands) Twelve Twelve Months Ended Months Ended September 30, September 30, 2023 2022 Net Cash Provided by Operating Activities $ 1,237,075 $ 812,521 Less: Net Cash Used in Investing Activities $ 1,112,347 $ 51
Slide 55: Reconciliation – Capital Expenditures
Appendix Reconciliation – Capital Expenditures Reconciliation of Segment Capital Expenditures to Consolidated Capital Expenditures ($ Thousands) FY 2024 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Guidance Capital Expenditures Exploration & Production Capital Expenditures $ 491,889 $ 670,455 $ 381,408 $
Slide 56: 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, 2023 September 30, 2022 (2) (2) (2) (2) Appalachia West Coast Total E&P Appalachia W