National Fuel Gas Company · NYSE:NFG
National Fuel Gas — FY2009 Earnings Presentation
81 slides from National Fuel Gas's earnings presentation, Nov 13, 2009
Slide 1: Fiscal Year 2009 Review
Fiscal Year 2009 ReviewNovember 2009 Exhibit 99
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: Business Segment Reporting
National Fuel Gas Company Business Segment Reporting Publicly Traded Holding CompanyNYSE symbol - NFG Reporting Segments Corporate Subsidiaries
Slide 4: Our Businesses
Our Businesses UtilityPipeline & StorageExploration & ProductionAppalachia, California, Gulf of MexicoEnergy MarketingMidstreamTimberLandfill GasGas-Fired Generation National Fuel Gas Company
Slide 5: Net Plant by Segment
Net Plant by Segment (CHART) National Fuel Gas Company 33% 27% 37% 35% 25% 36%
Slide 6: Capital Expenditures by Segment
National Fuel Gas Company Capital Expenditures(1) by Segment(CHART) Capital Expenditures exclude all expenditures associated with Discontinued Operations. Fiscal Year 2010 and 2011 estimates are as of November 5, 2009.2009 Excludes $16.8 MM of Capital Expenditures related to the Empire Connector Pro
Slide 7: An Appalachian Focus
(CHART) National Fuel Gas Company An Appalachian Focus Defined as spending related to efforts to drill for, gather, or transport Appalachian sources of natural gas.Any other maintenance spending in the Appalachian region, plus spending in areas outside of the Appalachian region.2010E and 2011E perce
Slide 8: 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) 46.5% 22.5% 27.9%
Slide 9: Independent Directors - A Wealth of Industry Experience
National Fuel Gas Company Independent Directors - A Wealth of Industry Experience Former Director, President & CEO of Northwest Natural Gas Co.Former Director of Northwest Natural Gas Co.Vice Chairman of DTE EnergyDirector of Northern Border Pipeline Co.Former Chairman and CEO of Questar Corporation
Slide 10: Utility Segment
Utility Segment National Fuel Gas Distribution Corporation
Slide 11: National Fuel Gas Distribution Corporation Service Territory
CANADA Ontario ) ravione et NATIONAL FUEL GAS DISTRIBUTION CORPORATION SERVICE TERRITORY
Slide 12: Utility Priorities
Operate Safe System Provide Excellent Customer Service Control Costs Provide Stable Earnings Utility
Slide 13: Utility O&M Expense
National Fuel Utility O&M Expense $250 NY mPA $211.0 $204.3 $203.0 $202.7 @ $200 $191.2 $193.1 2 seoa $63.6 $63.6 $61.9 5 : : $60.7 $61.1 2 $150 g ¢ & $100 a s $178 $140.3 $139.0 $140.3 $1305 $132.0 Oo $50 $0 2005 2006 2007 2008 2009 2010E Fiscal Year ee ae
Slide 14: Utility Capital Spending
(CHART) Capital Spending Utility
Slide 15: 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 16: Utility Rate Mechanisms
Utility Rate Mechanisms Low Income Rates Conservation Incentive Program Revenue Decoupling 90/10 Sharing (Revenue Decoupling for Industrial Load) Merchant Function Charge Weather Normalization
Slide 17: Utility Return on Equity
(1) Calculated using Average Total Comprehensive Shareholder Equity. (CHART) Utility Return on Equity (1)
Slide 18: Utility Challenges
a _____ YEE Utility Challenges
Slide 19: Utility Average Use per Residential Customer
Utility Average Use per Residential Customer (CHART) Fiscal Year TME
Slide 20: Accounts Receivable - Customer
Accounts Receivable - Customer (CHART) Utility
Slide 21: Utility HEAP/LIHEAP
Utility HEAP/LIHEAP (CHART)
Slide 22: Exploration & Production - Seneca Resources Corporation
Exploration & Production Seneca Resources Corporation
Slide 23: Exploration & Production Strategy and Reserves
Exploration & Production Marcellus ShaleAccelerate development; convert resource potential to reserves Appalachian Upper Devonian RegionDrill 150-200 wells per year Proved Reserves CaliforniaContinue to operate as a low-cost producer Gulf of MexicoDevelop and produce existing reserves 721 Bcfe 4 - 8
Slide 24: Exploration & Production Proved Reserves
Exploration & Production Proved Reserves (CHART) Proved Reserves @9/30 491 Bcfe 503 Bcfe 528 Bcfe West - CaliforniaReserves: 342 Bcfe (64%) (57 Mmboe)FY '09 Production: 20.1 Bcfe (47%) Gulf of MexicoReserves: 35 Bcfe (7%)FY '09 Production: 13.7 Bcfe (32%) East - AppalachiaReserves: 151 Bcfe (29%)FY
Slide 25: Exploration & Production Capital Expenditures
Exploration & Production Capital Expenditures (CHART) Does not include the $34.9MM acquisition of Ivanhoe's US-based assets in California, as this will be accounted for as an investment in Subsidiaries on the Statement of Cash Flows, and will not be included in Capital Expenditures.
Slide 26: Annual Production by Region
Exploration & Production Annual Production by Region (CHART)
Slide 27: Exploration & Production - California
Exploration & Production California
Slide 28: Seneca's California Properties
Seneca's California Properties South Lost Hills2036 BOEPDMonterey ShalePrimary221 Active Wells Sespe1084 BOEPDSespe FormationPrimary192 Active Wells North Lost Hills1171 BOEPDTulare & Etchegoin FormationPrimary & Steamflood202 Active Wells North Midway Sunset4551 BOEPDPotter & Tulare FormationSteamf
Slide 29: California Average Daily Production
California Average Daily Production 2009 Average Daily Production Up ~ 550 BOEPD vs. 2008Production Increases:Monterey shale drilling @ Lost HillsMarvic drilling @ MWSSSespe property exchangeImproved steaming efficiencyIvanhoe Acquisition (CHART) Ivanhoe Acquisition BOE/day
Slide 30: Acquisition of Ivanhoe Energy US-based Operations
Acquisition of Ivanhoe Energy US-based Operations US oil and gas assets acquired in July 2009Total acquisition cost of $34.9 MM after closing adjustments for 2.2 MMBbl of reserves ($15.86/Bbl proved)Current Production ? 645 gross boepd in California & TexasIncrease production through steaming techni
Slide 31: Lifting Cost - Peer Comparison
Lifting Cost - Peer Comparison (CHART) Seneca is a low-cost operator in California, with Lifting Costs consistently outperforming peers Source: IHS Herold, Inc. and Seneca Financial Reports California $/BOE
Slide 32: Gulf of Mexico
Gulf of Mexico Exploration & Production
Slide 33: Gulf of Mexico Average Daily Production
Gulf of Mexico Average Daily Production 3rd Quarter Production highest since 20054th Quarter curtailments on non- operated properties due to pricingProduction Increase from 2007- 2008 discoveriesMinimal Capital spending in 2009 and 2010(CHART)
Slide 34: Upper Devonian
Upper Devonian Exploration & Production
Slide 35: Appalachian Basin Upper Devonian - Development Drilling
Appalachian Basin Upper Devonian - Development Drilling (CHART)
Slide 36: Quarterly Production Growth Seneca East
Quarterly Production Growth Seneca East (CHART) Since 2006, Seneca Eastproduction has grown at a 12% CAGR
Slide 37: Marcellus Shale
Marcellus Shale Exploration & Production
Slide 38: Marcellus Shale Net Acres Peer Comparison
Marcellus Shale Company Net Acres Shares Outstanding (MM) Acres/1K Shares Seneca Resources 720,000 79.5 9.05 Atlas Energy Resources LLC 546,000 63.4 8.61 Range Resources 900,000 157.3 5.72 EQT Corporation 400,000 130.9 3.06 Chesapeake Energy 1,300,000 626.2 2.08 EXCO Resources Inc. 360,000 211.1 1.7
Slide 39: Seneca Acreage Position
Marcellus Shale Seneca Acreage Position Cabot SRC Fee/Lease Range Resources Chesapeake EOG/Seneca Seneca
Slide 40: EOG Marcellus Shale Joint Venture
SRC Fee/LeaseEOG Marcellus Shale EOG Joint Venture Approx. Outline of JV Acreage200,000 Gross AcresSeneca 50% W.I. (Avg. 58% NRI)EOG 50% W.I. (40% NRI) EOG Acreage Contributed~120,000 Gross AcresSeneca 50% W.I. (40% NRI) Calendar Year Wells per Year (1) 2009 10 2010 20 2011 30 2012 40 2013 50 2014 6
Slide 41: Seneca-operated Vertical Drilling Program
Marcellus Shale Seneca-operated Vertical Drilling Program Fiscal 2009 Marcellus Vertical ProgramDrilled 11 Wells; cored 7 SRC Fee/LeaseEOG
Slide 42: Marcellus Shale Core and Log Data from Vertical Wells
Increasing Gas In Place ? Additional Factors: Reservoir Pressure Natural Fractures Silica Content (Brittleness) Marcellus Shale Core and Log Data from Vertical Wells
Slide 43: Seneca Horizontal Development Drilling Program
SRC Fee/LeaseEOG Seneca Horizontal Development Drilling Program 1st Seneca Rig arrived July 2009 2nd Seneca horizontal rig to arrive November '09 EOG JV (CHART) Marcellus Shale
Slide 44: Marcellus Shale Horizontal Drilling Results
SRC Fee/LeaseEOG Marcellus Shale Horizontal Drilling Results EOG Operated8 Horizontals Drilled4 Frac'dTypical IP: 3.0 MMCFD Seneca Operated4 Horizontals Drilled2 Frac'dTypical IP: 5.5 MMCFD EOG Operated4 Horizontals Drilled4 Frac'dTypical IP: 3.0 MMCFD EOG Operated2 Horizontals Drilled2 Frac'dTypica
Slide 45: Fiscal 2010 Marcellus Shale Drilling Plan
Fiscal 2010 Marcellus Shale Drilling Plan Develop JV focus area (EOG Operated)25-35 wellsSeptember 2010 net production 15-25 MmcfdDevelop Tioga focus area (Seneca Operated)15-20 wellsSeptember 2010 net production 15-25 MmcfdDe-risk and prioritize additional areas:15-20 wells (includes some verticals
Slide 46: Wells Drilled per Year
Wells Drilled per Year (CHART) Marcellus Shale
Slide 47: Marcellus Shale Decline Curve - 3.0 BCF EUR
Marcellus Shale 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 Average first year rate
Slide 48: Marcellus Shale Pre-tax IRR
Marcellus Shale Pre-tax IRR: 3.0 BCF EUR; $4.0 MM Well Cost (CHART) JV Wells on Seneca Mineral Fee 100% Wells on Seneca Fee Typical 15% Royalty Rate
Slide 49: Seneca Full-Cycle Economics Superior to Most Competitors
Seneca Full-Cycle Economics Superior to Most Competitors Minimal Acreage CostMostly Fee (Seneca owns minerals)Average cost < $100/acreLow RoyaltyMostly Fee (0% royalty)Acres contributed to EOG JV have 50% WI/ 58% NRIRode the Learning Curve at minimal costEarly EOG JV wells at no cost to SenecaExperi
Slide 50: Marcellus Shale Resource Potential
Marcellus Shale Resource Potential Net resource potential of 4 to 8 trillion cubic feet Assumptions:Average EUR of 2 to 3 Bcfe/wellAverage Risk Factor of 30% to 40%Anticipated well costs of $3.5 to $4.0 MM per horizontal in a development program100 acre well spacing
Slide 51: Seneca Resources Summary
Seneca Resources Summary Redeploy excess cash flow from CaliforniaMaintain productionLow-cost leadershipProduce-out Gulf of MexicoMinimal CapexExpect fairly robust production in fiscal 2010Focus on the Marcellus7-day IPs averaging 5.3 MMCFD on Seneca operated wellsPlan 40-60 horizontal wells in Fisc
Slide 52: Pipeline & Storage
National Fuel Gas Supply CorporationEmpire Pipeline, Inc. Pipeline & Storage
Slide 53: Pipeline & Storage Diluted Earnings per Share
(CHART) Pipeline & Storage Diluted Earnings per Share(Before Items Impacting Comparability) Excludes base gas sale of $0.03 and gain associated with insurance proceeds of $0.05Excludes reversal of reserve for preliminary project costs of $0.06, and discontinuance of Hedge Accounting for interest rat
Slide 54: Pipeline & Storage / Midstream Expansion Initiatives
WEST TO EAST PHASE 1 &PHASE 2 APPALACHIANLATERAL LAMONTCOMPRESSORSTATION COVINGTONGATHERINGSYSTEM TIOGACOUNTYEXTENSION LINE "N"EXPANSION TUSCARORA STORAGE GALBRAITH STORAGE EAST BRANCH STORAGE PIPELINE & STORAGE / MIDSTREAM EXPANSION INITIATIVES 54 WEST TO EAST EXPANSION HORIZONTAL DRILLING ACTIVITY
Slide 55: Appalachian Lateral / West to East Expansion - Key Statistics
55 Appalachian Lateral / West to East Expansion - Key Statistics Appalachian Lateral / West to East Expansion - Key Statistics Planned Capacity & Compression 860 Mmcf/d40,000 HP Anticipated In-Service Date PHASED Estimated CAPEX Investment $750 MM - $1 B ~340 Miles of Pipe to Connect the Rockies Exp
Slide 56: West to East Expansion Phase I - Key Statistics
West to East Expansion Phase I - Key Statistics West to East Expansion Phase I - Key Statistics Planned Capacity 200,000 dth/d Anticipated In-Service Date November 2011 Estimated CAPEX Investment $108 MM Open Season Closed 10/8/2009Negotiating Precedent Agreements Open Season Closed 10/8/2009Negotia
Slide 57: West to East Expansion Phase II - Key Statistics
West to East Expansion Phase II - Key Statistics West to East Expansion Phase II - Key Statistics Planned Capacity (Compression Confidential) 300,000 dth/d Anticipated In-Service Date November 2012 Estimated CAPEX Investment $149 MM Open Season Closed 10/8/2009Negotiating Precedent Agreements Open S
Slide 58: Lamont Compressor Station - Key Statistics
Lamont Compressor Station - Key Statistics Lamont Compressor Station - Key Statistics Planned Capacity & Compression 40,000 dth/d1,200 HP Anticipated In-Service Date May 2010 Estimated CAPEX Investment $6 MM Installation Under Blanket Certificate Authority Installation Under Blanket Certificate Auth
Slide 59: Tioga County Extension - Key Statistics
Tioga County Extension - Key Statistics Tioga County Extension - Key Statistics Planned Capacity > 200,000 Dth/d Anticipated In-Service Date September 2011 Estimated CAPEX Investment $43 MM Open Season Closed 10/23/2009Negotiating Precedent Agreements Open Season Closed 10/23/2009Negotiating Precede
Slide 60: Line N Expansion - Key Statistics
Line "N" Expansion - Key Statistics Line "N" Expansion - Key Statistics Planned Capacity & Compression 150,000 dth/d4,700 HP Anticipated In-Service Date Fall 2011 Estimated CAPEX Investment $23 MM Preparing FERC Application Preparing FERC Application WV PA 60
Slide 61: Storage Expansion - Key Statistics
Storage Expansion - Key Statistics Storage Expansion - Key Statistics Planned Capacity & Compression 8.5 Bcf13,615 HP Anticipated In-Service Date 2013 Estimated CAPEX Investment $78.4 MM 38 New Wells & 12.6 Miles of PipeRequires West to East Phase I & II 38 New Wells & 12.6 Miles of PipeRequires Wes
Slide 62: Covington Gathering Phase I - Key Statistics
Covington Gathering Phase I - Key Statistics Covington Gathering Phase I - Key Statistics Planned Capacity 100,000 dth/d Anticipated In-Service Date November 2009 Estimated CAPEX Investment ~ $16 MM Currently Marketing Capacity to Producers Currently Marketing Capacity to Producers 62
Slide 63: Capitalization
National Fuel Gas Company Capitalization The Company may issue debt or equity securities in a public offering or a private placement from time to time, depending on market conditions, indenture requirements, regulatory authorizations and the Company's capital requirements.At the end of FY 2009, Tota
Slide 64: Capitalization
(CHART) National Fuel Gas Company Capitalization
Slide 65: 2010 EPS Guidance & Sensitivity
National Fuel Gas Company 2010 EPS Guidance & Sensitivity Fiscal 2010Preliminary Earnings per Share (Diluted) Guidance(1)Consolidated Earnings $2.30 - $2.65(2)Earnings per Share Sensitivity to Changes from $5.00/ MMBtu for natural gas and $75.00/Bbl for crude oil(1)$1 change per $5 change per MMBtu
Slide 66: Share Price Appreciation
(CHART) (CHART) National Fuel Gas Company Share Price Appreciation 13% Return Including Dividend Reinvestment 13% Annualized Return Including Dividend Reinvestment
Slide 67: Dividend Growth
National Fuel Gas Company Dividend Growth (CHART) $1.34 $0.19 Compound Annual Growth Rate5.2% National Fuel has had 107 uninterrupted years of dividend payments and has increased its dividend for 39 consecutive years
Slide 68: 1 Year Return Comparison
National Fuel Gas Company 1Year Return Comparison (1)(2) 20% OneYear Return National Fuel's Diversified model has been successful during the last fiscal year, outperforming the return of peers in our business segments 20% Peer Group 1Yr Return NFG 13% Utility Companies 0% 60% SEP 2008 DEC 2008 MAR 2
Slide 69: 3 Year Return Comparison
National Fuel Gas Company 3? Year Return Comparison (1)(2) 100% Three? Year Return 3? Yr National Fuel's Diversified model has Peer Group Return been successful in all economic NFG 38% cycles, consistently file outperforming in bshare Utility Companies 7% the return of peers in our business E&P Comp
Slide 70: 5 Year Return Comparison
National Fuel Gas Company 5? Year Return Comparison (1)(2) 300% Five? Year Return file in bshare National Fuel's Diversified model has been successful 5? Yr in all economic cycles, Peer Group Return consistently outperforming 200% NFG 91% the return of peers in our E&P Companies 83% business segment
Slide 71: Diversified Business Model Stock Performance
Diversified Business Model Stock Performance National Fuel Gas Company AS OF SEPTEMBER 30, 2009(Adjusted for Dividends & Splits) 1-YEAR RETURN 3-YEAR RETURN 5-YEAR RETURN NATIONAL FUEL GAS COMPANY 12.8% 38.2% 90.9% E&P PEER GROUP (1) -11.0% 3.0% 82.7% DIVERSIFIED PEER GROUP (2) -5.9% -1.6% 45.0% UTI
Slide 72: Ranked the 4th best energy company in 2009 Report
Ranked the 4th best energy company in 2009 Report Based on the 4-year averages of:Profit MarginDividend YieldFCF, ROE, ROASustainable GrowthConsistently in the Top 10 best energy companies (2006-2009 Reports)"National Fuel Gas ... strongly positioned in gas markets from the well to the burner tip."
Slide 73: Questions
(4 1) National Fuer Questions
Slide 74: Appendix
Appendix
Slide 75: Corporate Overview Key Information & Statistics
Corporate Overview Key Information & Statistics Key Information & Statistics New York Stock Exchange NFG Fiscal Year End September Shares Outstanding (Approx.)(As of 9/30/09) 80.5 Million Average Daily Trading Volume(12 Months Ended 9/30/09) 551,327 Market Capitalization (Approx.)(As of 9/30/09) $3.
Slide 76: Net Plant by Segment
National Fuel Gas Company Net Plant by Segment (CHART) FY 2010E$3.4 B
Slide 77: Debt Maturity Schedule
National Fuel Gas Company Debt Maturity Schedule (CHART) ($ Millions) Fiscal Year Total Long-Term Debt Outstanding At September 30, 2009: $1.249 B
Slide 78: Pipeline Overview Key Statistics
Pipeline & Storage Pipeline Overview Key Statistics Key Statistics Transportation Volume (2009) 360.8 Bcf Pipeline Revenue (2009) $142.2 MM Total Compressor Stations 16 Total Horsepower 60,399 HP
Slide 79: Storage Overview Key Statistics
Pipeline & Storage Storage Overview Key Statistics Key Statistics Underground Nat. Gas Storage Fields 31(1) Total Compressor Stations 14 Total Horsepower 35,550 HP Working Storage Capacity 78.3 Bcf Storage Revenue (2009) $66.7 MM (1) Includes 4 storage fields co-owned with non-affiliated companies.
Slide 80: Utility Segment Overview Key Statistics
Utility Segment Overview Key Statistics Key Statistics Average Number of Customers 727,325 Total Utility Volumes (2009) 129,165 MMcf Utility Revenue (2009) $1,113 MM Diluted EPS (2009) $0.73 Average Annual Residential Bill (2009) $1,440
Slide 81: Reconciliation of Income from Continuing Operations by Segment to GAAP Net Income
(CHART) (1) Excludes resolution of a purchased gas contingency of $0.03. Diluted Earnings per Share(Before Items Impacting Comparability) Energy Marketing Reconciliation of Income from Continuing Operations by Segment to Consolidated GAAP Net Income ($000s) FY05 FY06 FY07 FY08 FY09 GAAP Net Income U