National Fuel Gas Company · NYSE:NFG
National Fuel Gas — Investor Presentation (February 2014)
69 slides from National Fuel Gas's investor presentation, Feb 7, 2014
Slide 1: Investor Presentation February 2014
Investor Presentation February 2014 Exhibit 99 National Fuel Gas Company
Slide 2: Safe Harbor For Forward Looking Statements
National Fuel Gas Company 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 oil
Slide 3: Exceptional Assets, Focused on Execution
1.549 Tcfe of Proved Reserves (1) 800,000 Net Acres in Pennsylvania 2.8 MMBbl of Crude Oil Production (2) $208 Million of Midstream Adjusted EBITDA (2) National Fuel Gas Company Exceptional Assets, Focused on Execution (1) As of September 30, 2013 (2) 12 months ended December 31, 2013
Slide 4: Targeting Sustained Growth for the Next Five Years
National Fuel Gas Company Targeting Sustained Growth for the Next Five Years Note: A reconciliation of Adjusted EBITDA to Net Income as presented on the Consolidated Statement of Income and Earnings is included at the end of this presentation. – 10-15% Forecasted Adjusted EBITDA CAGR
Slide 5: Capital Spending Adjusts to Capitalize on Opportunities
National Fuel Gas Company Capital Spending Adjusts to Capitalize on Opportunities Note: A reconciliation to Capital Expenditures as presented on the Consolidated Statement of Cash Flows is included at the end of this presentation. (1) Does not include the $34.9 MM Seneca Resources Corporation’s acqu
Slide 6: Maintaining a Strong Balance Sheet
Total Debt (1) 42% Debt / Adjusted EBITDA Capitalization National Fuel Gas Company Maintaining a Strong Balance Sheet $3.900 Billion As of December 31, 2013 Note: A reconciliation of Adjusted EBITDA to Net Income is included at the end of this presentation (1) Long-Term Debt of $1.649 billion
Slide 7: Dividend Track Record
National Fuel Gas Company Dividend Track Record Current Dividend Yield (1) 2.0% (1) As of January 28, 2014
Slide 8: Exploration & Production Overview
Exploration & Production Overview
Slide 9: Proven Record of Growth
Fiscal Years 3-Year F&D Cost (1) ($/Mcfe) Seneca Resources Proven Record of Growth 2006-2008 $7.63 2007-2009 $5.35 2008-2010 $2.37 2009-2011 $2.09 2010-2012 $1.87 2011-2013 $1.67 (1) Represents a three-year average U.S. finding and development cost 2013 F&D Cost = $1.31 Marcellus F&D: $0.99 Doubled
Slide 10: Delivering Tremendous Production Growth
Seneca Resources Delivering Tremendous Production Growth
Slide 11: Disciplined Capital Spending
Seneca Resources Disciplined Capital Spending (1) Does not include the $34.9 MM acquisition of Ivanhoe’s U.S.-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 12: LOE: Operating Costs Down; Transportation Costs Up
Seneca Resources LOE: Operating Costs Down; Transportation Costs Up (1) Represents the midpoint of current General & Administrative Expense guidance of $0.40 to $0.45 per Mcfe for fiscal 2014 (2) The total of the two Lease Operating Expense components represents the midpoint of current Lease Operati
Slide 13: Prolific Pennsylvania Acreage
Marcellus Shale Prolific Pennsylvania Acreage
Slide 14: EDA Delivering Significant Growth
Covington – Fully Developed Gross Production: ~45 MMcf per Day 47 Wells Drilled and Producing Marcellus Shale EDA Delivering Significant Growth DCNR Tract 595 Gross Production: ~85 MMcf per Day 34 Wells Drilled (52 Total Locations) 26 Wells Producing DCNR Tract 100 Gross Production: ~240 MMcf per Da
Slide 15: EDA – Historical Well Results Are Exceptional
Development Area Producing Well Count Average IP Rate (MMcf/d) Average 7-Day (MMcf/d) Average 30-Day (MMcf/d) Average EUR per Well (Bcf) Average Lateral Length EUR per 1,000’ of Lateral (Bcfe) Marcellus Shale EDA – Historical Well Results Are Exceptional Covington Tioga County 5.2 4.7 4.1 5.8 4,023’
Slide 16: Seneca's Lycoming Economics are in the Top 3
Seneca’s Operations Seneca’s Lycoming Economics are in the Top 3 Source: ITG IR, raw data provided by didesktop and state agencies There are an additional 109 breakeven data points greater than $3.69/Mcf
Slide 17: Upstream
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Slide 19: Huge Position – Understanding Seneca's 780,000 Net Acres
Tier I ~200,000 Acres Northeast Core ~30,000 acres in NE Core Tier I Acres ~200,000 acres Economic at $2.80 to $3.80/Mcfe Longer-Term Evaluation ~250,000 acres (Minimal Lease Expiration) Requires Gas Price Above $4/Mcf ~300,000 acres Seneca Acreage Huge Position – Varies in Understanding Seneca Leas
Slide 20: 2013 & 2014 WDA Delineation Program
Marcellus Shale 2013 & 2014 WDA Delineation Program
Slide 21: Strong Wells Across WDA Acreage
Well Name Completion Design Treatable Lateral Length Stages Peak 24-Hour Rate (MMcfd) Peak 7-Day Rate (MMcfd) EUR (Bcf) Status Marcellus Shale Strong Wells Across WDA Acreage Rich Valley 27H RCS ¹ 6,372’ 8.1 7.8 7.4 Producing Clermont 9H RCS 5,500’ 11.4 10.0 8.6 Producing Clermont 10H Non-RCS 5,565’
Slide 22: Clermont Wells Improved from Early Non-Op JV Wells
Marcellus Shale Clermont Wells Improved from Early Non-Op JV Wells Clermont 5H & 6H (Non-op wells) Avg. lateral length: 3,344’ Small casing: 4.5” Restricted pump rates Wide stage spacing: 350’ No soaking, low Sw’s Clermont 9H & 10H (Seneca wells) Avg. lateral length: >5,500’ Large casing: 5.5” Incre
Slide 23: Rich Valley/Clermont is in Full Development Mode
Marcellus Shale Rich Valley/Clermont is in Full Development Mode
Slide 24: 200,000 Acres With 6-8 Bcfe EUR Wells
Marcellus Shale 200,000 Acres With 6-8 Bcfe EUR Wells Note: Assumes 6,000’ treated lateral length
Slide 25: 1,700 To 2,000 Economic WDA Locations Below $4/Mcfe
Marcellus Shale 1,700 To 2,000 Economic WDA Locations Below $4/Mcfe (1) Internal Rate of Return (IRR) includes estimated well costs, LOE, and Gathering tariffs anticipated for each prospect
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Slide 27: Stable Production Fields; Modest Growth Potential
East Coalinga Temblor Formation Primary North Lost Hills Tulare & Etchegoin Formation Primary/Steamflood South Lost Hills Monterey Shale Primary North Midway Sunset Tulare & Potter Formation Steamflood South Midway Sunset Antelope Formation Steamflood Sespe Sespe Formation Primary Key Areas of Focus
Slide 28: Outstanding Cash Flow
California Outstanding Cash Flow (1) (1) Adjusted EBITDA and Capital Expenditures represent Seneca Resources Corporation’s West Division, which includes its activity in Kansas
Slide 29: Looking Forward
California Looking Forward 1. Manage decline of base production 2. Pursue and develop opportunities for growth from current assets Sespe East Coalinga South Midway Sunset 3. Continue to pursue additional acquisition and farm-in opportunities
Slide 30: South Midway Sunset Has Delivered Significant Growth
California South Midway Sunset Has Delivered Significant Growth Highlights Since Acquisition Increased daily production by 130% Drilled 80 new producers Added 3.3 MMBO of proven reserves Increased steam capacity by 280% Identified opportunities for additional pool development
Slide 31: South MWSS Growth Opportunities Continue
California South MWSS Growth Opportunities Continue into 2014
Slide 32: Early Success in Farm-In with Chevron at East Coalinga
California Early Success in Farm-In with Chevron at East Coalinga Highlights Since Acquisition Achieved highest field production in 10 years Production increased 130% since 1/2013 Drilled 12 evaluation wells that confirmed downspacing potential Returned 40 idle wells back to production
Slide 33: Ongoing Evaluation of Long-Term Sespe Potential
Year Target # of Wells Average IP (BOEPD) California Ongoing Evaluation of Long-Term Sespe Potential Sespe (5-Acre Infill) Sespe (10-Acre) Sespe (5-Acre Infill) Coldwater Sespe (10 Acre) Sespe (5-Acre Infill) Coldwater Sespe (10 Acre)
Slide 34: Limited Growth Opportunities, But Strong Economics
Field Average Well Cost Average EUR (MBO) Estimated IRR @$100/Bbl Fiscal 2014 Locations California Limited Growth Opportunities, But Strong Economics South Midway Sunset $250,000 75% East Coalinga $400,000 50% Sespe – 5 Acre Infill $2,800,000 25% Sespe - Coldwater $2,800,000 35%
Slide 35: Modest Growth Anticipated in 2014 and 2015
California Modest Growth Anticipated in 2014 and 2015
Slide 36: Commencing Evaluation Program in Fiscal 2014
Mississippian Lime Commencing Evaluation Program in Fiscal 2014 Total Net Acres: 13,615 100% working interest in 4,400 gross acres 55% net working interest in 17,365 gross acres Negotiated an increase in Seneca’s working interest and have taken over as operator Currently drilling second well Will dr
Slide 37: How Does Seneca Sell its Production?
Interconnection with Interstate Pipeline Network 3rd Party Marketer (or spot market) Firm Transport Demand Center (firm sales or spot market) Spot Market Hedging Overview How Does Seneca Sell its Production? Gathering System Contracted Basis Differential FT Rate The 1,700 to 2,000 economic locations
Slide 38: Firm Sales Provide a Market for Appalachian Production
1 NYMEX 202,745 Less: $0.28 NYMEX 189,091 Less: $0.45 NYMEX 180,000 Less: $0.37 Hedging Overview Firm Sales Provide a Market for Appalachian Production Prices shown represent the sales (netback price) at the first non-affiliated interstate pipeline, including the cost of all related downstream trans
Slide 39: Current Natural Gas Hedge Positions
Hedging Overview Current Natural Gas Hedge Positions (1) 2014 hedge positions are for the remaining nine months of the fiscal year
Slide 40: Current Hedge Book has Seneca Positioned Very Well
Crude Oil $100.22/Bbl $95.90/Bbl $92.97/Bbl $92.30/Bbl $91.00/Bbl Hedging Overview Current Hedge Book has Seneca Positioned Very Well (1) Hedge positions for fiscal years 2016-2018 reflect the midpoint of Seneca’s target annual production growth (20%) starting with the midpoint of Fiscal 2015 guidan
Slide 41: FY 2014 Production – Firm Sales & Hedge Composition
Hedging Overview FY 2014 Production – Firm Sales & Hedge Composition Seneca has an additional ~17.5 Bcf of NYMEX hedges to help mitigate commodity exposure on its sales
Slide 42: What Will Seneca Look Like Moving Forward?
Consistent Production Growth: 15-25% CAGR Driven by a very large, high-quality Appalachian acreage position Maintain Oil Production Expand When Possible Excellent operator and significant cash flow generation Disciplined Spending Driven by Rates of Return Pace of development adapts to changing marke
Slide 43: Midstream Businesses Overview
Midstream Businesses Overview
Slide 44: Positioned to Serve Seneca's Rapidly Growing Production
Midstream Businesses Positioned to Serve Seneca’s Rapidly Growing Production
Slide 45: Gathering is the First Step to Reaching a Market
Gathering Gathering is the First Step to Reaching a Market
Slide 46: Existing Systems Supporting Seneca's Near-Term Growth
Gathering Existing Systems Supporting Seneca’s Near-Term Growth Covington Gathering System In-service date: November 2009 Capacity: 220,000 Dth per day Interconnect: TGP 300 Capital expenditures (to date): $28.3 million Capital expenditures (future): $7.5 million Trout Run Gathering System In-servic
Slide 47: Clermont Gathering System has Large Expandability
Clermont Gathering System Gathering Clermont Gathering System has Large Expandability In-Service: Ongoing build-out Ultimate Trunkline Capacity: 700 to 1,000 MMcf per day Interconnects TGP 300 and National Fuel Gas Supply Corporation (anticipated) Capital: 2014: $60- $92 million 2015: $75 - $125 mil
Slide 48: Capital Deployment Will Deliver Long-Term Growth
Gathering Capital Deployment Will Deliver Long-Term Growth
Slide 49: Project Opportunities to Support WDA Growth
Develop multiple outlets to high-value markets Pipeline & Storage Project Opportunities to Support WDA Growth
Slide 50: Northeast PA Spot Markets are Heavily Discounted
Pipeline & Storage Northeast PA Spot Markets are Heavily Discounted
Slide 51: Expansions to Move Gas from the WDA are Significant
Projects to Support WDA Growth Pipeline & Storage Expansions to Move Gas from the WDA are Significant Project Capacity (Dth/day) Northern Access 2015 140,000 Clermont to Chippawa 350,000 Total New Capacity 490,000 Project Capital Cost Northern Access 2015 $67 million Clermont to Chippawa $360 millio
Slide 52: Recent 3rd Party Expansions Have Been Highly Successful
Completed Expansions for 3 Parties rd Pipeline & Storage Recent 3 rd Party Expansions Have Been Highly Successful Project Capacity (Dth/day) Northern Access 2013 320,000 Tioga County Extension 350,000 Line N (2011, 2012 & 2013) 353,000 Total New Capacity 1,023,000 Project Capital Cost Northern Acces
Slide 53: Additional Line N Expansions Planned for the Future
Mercer Expansion Pipeline & Storage Additional Line N Expansions Planned for the Future In-Service: November 2014 System: NFG Supply Corp. Capacity: 105,000 Dth per day Precedent agreements signed for all available capacity Interconnect Mercer (TGP Station 219) Total Cost: $34 Million Expansion: $30
Slide 54: Pairing Line N Expansions with System Modernization
Westside Expansion & Modernization Mercer (TGP Station 219) Pipeline & Storage Pairing Line N Expansions with System Modernization In-Service: November 2015 System: NFG Supply Corp. Capacity: 175,000 Dth per day Precedent agreements signed for all available capacity Interconnect Mercer (TGP Station
Slide 55: Developing Unique Solutions for Shippers
Tuscarora Lateral Pipeline & Storage Developing Unique Solutions for Shippers In-Service: November 2015 System: NFG Supply & Empire Pipeline New No-Notice Services Preserving 172,500 Dth per day (RG&E) Preserving 20,000 Dth per day (NYSEG) Precedent agreement executed with RG&E Capacity Transportati
Slide 56: Significant Expansions Are Driving Growth
Completed Projects (Since 2009) Line N Corridor Line “N” Expansion Line “N” 2012 Expansion Line “N” 2013 Expansion Mercer Expansion West Side Expansion Total Capacity 633 MDth/d Delivering Gas North Tioga County Extension Northern Access Northern Access 2015 Clermont to Chippawa Total Capacity 1,160
Slide 57: Expansion Project Revenue Growth
Larger projects under consideration for fiscal 2016 and 2017 will drive significant revenue growth Pipeline & Storage Expansion Project Revenue Growth
Slide 58: Utility
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Slide 59: New York & Pennsylvania Service Territories
Utility New York & Pennsylvania Service Territories New York Total Customers: 522,000 Rate Mechanisms: Revenue Decoupling Weather Normalization Low Income Rates Choice Program/Purchase of Receivables Merchant Function Charge (Uncollectibles Adjustment) 90/10 Sharing (Large Customers ) Natural Gas Ve
Slide 60: Customer Usage
Utility Customer Usage (1) Weighted Average of New York and Pennsylvania service territories (assumes normal weather)
Slide 61: Continued Cost Control Helps Provide Earnings Stability
Utility Continued Cost Control Helps Provide Earnings Stability
Slide 62: Capital Spending Largely Focused on Maintenance
Utility Capital Spending Largely Focused on Maintenance The Utility remains focused on spending to maintain the ongoing safety and reliability of its system
Slide 63: Achieved a Settlement in New York
Utility Achieved a Settlement in New York March 27, 2013 Filed a plan with the NY PSC to adopt an earnings sharing and stabilization mechanism on earnings above a 9.96% ROE April 19, 2013 NY PSC issued an Order to Show Cause (OTSC) commencing a proceeding to establish “temporary rates” June 1, 2013
Slide 64: A History of Success & A Future of Opportunity
A History of Success National Fuel Gas Company A History of Success & A Future of Opportunity Note: A reconciliation of Adjusted EBITDA to Net Income as presented on the Consolidated Statement of Income and Earnings is included at the end of this presentation.
Slide 65: Appendix
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Slide 66: Current Hedge Positions
Fiscal Year NYMEX Volume (Bcf) Average Price ($/Mcf) Dominion Volume (Bcf) Average Price ($/Mcf) SoCal Volume (Bcf) Average SoCal Price Total Volume (Bcf) Average Price ($/Mcf) Fiscal Year MWSS Volume (MMBbl) Average Price ($/Bbl) Brent Volume (MMBbl) Average Price ($/Bbl) NYMEX Volume (MMBbl) Avera
Slide 67: 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
Slide 68: Reconciliation of Adjusted EBITDA to Consolidated Net Income
Reconciliation of Adjusted EBITDA to Consolidated Net Income ($ Thousands) FY 2009 FY 2010 FY 2011 FY 2012 Exploration & Production - West Division Adjusted EBITDA 171,572 $ 187,838 $ 187,603 $ 226,897 $ 215,042 $ 212,540 $ Exploration & Production - All Other Divisions Adjusted EBITDA 108,139 139,6
Slide 69: Reconciliation of Segment Capital Expenditures to Consolidated Capital Expenditures
Reconciliation of Segment Capital Expenditures to Consolidated Capital Expenditures ($ Thousands) FY 2014 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 Forecast Capital Expenditures from Continuing Operations Exploration & Production Capital Expenditures 188,290 $ 398,174 $ 648,815 $ 693,810 $ 533,129 $ $
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