National Fuel Gas Company · NYSE:NFG
National Fuel Gas — Q3 FY2024 Earnings Presentation
59 slides from National Fuel Gas's earnings presentation, Jul 31, 2024
Slide 1: Investor Presentation Fiscal 2024 – 3rd Quarter Update
Investor Presentation Fiscal 2024 – 3rd Quarter Update July 31, 2024 Exhibit 99
Slide 2: National Fuel Gas Company agenda
National Fuel Gas Company Company Overview (3) Why National Fuel? (7) Business Updates (12) Supplemental Information Segment Information (19) Rate Case Overview (45) Guidance & Other Financial Information (47)
Slide 3: History of National Fuel
History of National Fuel Industry Pioneer Born From Rockefeller’s Standard Oil Company
Slide 4: NFG Today: A Diversified, Integrated Natural Gas Company
NFG Today: A Diversified, Integrated Natural Gas Company Developing our large, high-quality acreage position in Marcellus & Utica shales Providing safe, reliable and affordable service to customers in WNY and NW PA Upstream Exploration & Production Midstream Gathering Pipeline & Storage Downstream U
Slide 5: Non-Regulated Business Overview
Non-Regulated Business Overview Exploration & Production Segment (Upstream) Gathering Segment (Midstream) Seneca Resources Company Total Net Acres (Pennsylvania): ~1.2 million(1) Total Proved Reserves: 4.5 Tcfe (as of 9/30/2023) Current Net Production: ~1.1 Bcf/d(2) Firm Transportation Capacity: ~1
Slide 6: Regulated Business Overview
Regulated Business Overview Pipeline & Storage Segment (Midstream) Utility Segment (Downstream) Regulated by Federal Energy Regulatory Commission (FERC) Total Rate Base: $1.6 Billion(1) ~2,600 miles of pipeline / 29 storage fields National Fuel Gas Supply Corporation: Firm Contracted Storage Capacit
Slide 7: Why National Fuel?
Why National Fuel? Optimized capital allocation Lower cost of capital Operational synergies Improved profitability Targeting significant rate base growth from system modernization and expansion High-grading upstream development and increasing capital efficiencies Responsibly Reduce Emissions Continu
Slide 8: Integrated Model Enhances Returns
Integrated Model Enhances Returns Integrated Business Model Benefits… Operations: Lower cost structure Financial: Lower cost of capital Strategic: Optimized capital allocation Commercial: Greater revenue/ margin Strong Integrated Returns Visibility on Long-Term EPS & FCF Growth Responsibly Reducing
Slide 9: Strong Value Proposition Driven by Earnings & Cash Flow Outlook
Strong Value Proposition Driven by Earnings & Cash Flow Outlook (1) NYMEX based on flat price assumptions per year and remainder of FY24 at $2.40. Includes current hedge positions as of June 30, 2024 and excludes acquisitions. Note: The Company defines free cash flow as net cash provided by operatin
Slide 10: Long-Standing History of Returning Capital to Shareholders
Long-Standing History of Returning Capital to Shareholders ~4% Dividend Yield ~2% Share Buyback Yield ~6% Total Return of Capital 54 Years Consecutive Dividend Increases 122 Years Consecutive Payments $2.06 per share $0.19 per share Stable, Growing Dividend … …Plus Share Buyback $200 MM Share Repurc
Slide 11: Continued Progress Toward Methane Intensity Targets
Continued Progress Toward Methane Intensity Targets Latest Corporate Responsibility Report Provides Enhanced GHG Disclosures on Sustainability Initiatives All emissions reduction targets based on 2020 baseline. Measured using calendar 2022 emissions data, as reported in Company’s 2022 Corporate Resp
Slide 12: Business Updates
Business Updates G) National Fuel’
Slide 13: Regulatory Update: Significant Rate Case Activity
(1) DSIC tracker allows recovery on incremental system investments after July 31, 2024, subject to attaining rate year plant balance of $781.3 million and earning below a statewide ROE target (currently 10.15%). Regulatory Update: Significant Rate Case Activity New York: Filed a rate case in October
Slide 14: Regulated Businesses Further Propel Long-Term Growth
Regulated Businesses Further Propel Long-Term Growth Infrastructure modernization program Ongoing expansion opportunities Emissions reductions initiatives Timely rate recovery and supportive ratemaking constructs minimize regulatory lag Factors Driving Long-Term Growth ~6% CAGR ~5-7% Avg. Expected A
Slide 15: EDA Transition Creates Differentiated Upstream Value
EDA Transition Creates Differentiated Upstream Value EDA Transition High-grading development plan with higher capital efficiencies and cash flow generation EDA wells deliver >2x the well productivity versus legacy WDA program(1) 24 EDA wells turned in line (TIL) since transition began (May 2023) Acc
Slide 16: EDA: Best in Basin Performance & Breakevens
Enverus 2022 Actuals Enverus 2022 Actuals Seneca Estimates Seneca + Gathering Estimates EDA: Best in Basin Performance & Breakevens FY22 is based on actual data. FY23 to FY26 data is projected until 12 months after the last pad has been online. Source: FY22 data is based on Enverus Intelligence Rese
Slide 17: Capital Allocation Priorities Drive Spending Levels
Capital Allocation Priorities Drive Spending Levels (2) Total Capital Expenditures include Corporate and All Other. A reconciliation to Capital Expenditures as presented on the Consolidated Statement of Cash Flows is included at the end of this presentation. FY20 reflects the netting of $283 million
Slide 18: Maintaining Strong Balance Sheet & Liquidity
Maintaining Strong Balance Sheet & Liquidity $5.8 Billion Total Capitalization as of June 30, 2024 Net Debt / Adjusted EBITDA(1) Capitalization Debt Maturity Profile by Fiscal Year ($MM) Liquidity as of June 30, 2024 Net Debt is net of cash and temporary cash investments. Reconciliations of Net Debt
Slide 19: Exploration & Production & Gathering Overview
Exploration & Production & Gathering Overview Seneca Resources Company, LLC National Fuel Gas Midstream Company, LLC Supplemental Information: Segment Overview
Slide 20: Focused on Capital Efficiency and FCF Generation
Focused on Capital Efficiency and FCF Generation Near-Term Strategy Capital Expenditures ($ MM)(1) Net Production (Bcfe) Moderating activity levels beyond fiscal 2024 to target 0% to 5% production growth Development program focused on the EDA to maximize returns and capital efficiency EDA Tioga: mos
Slide 21: Integration Drives Industry Leading Cost Structure
Integration Drives Industry Leading Cost Structure Seneca Cash OpEx ($/Mcfe) G&A estimate represents the midpoint of the G&A guidance ranges for fiscal 2024. The total of the two LOE components represents the midpoint of the LOE guidance ranges for fiscal 2024. (2) E&P and Gathering (2) Seneca + Gat
Slide 22: Long Runway of Development Opportunities in the EDA
Long Runway of Development Opportunities in the EDA 1 2 Utica Development Marcellus Development Exploration & Production: Low-risk development locations: ~200 Utica, 80 Marcellus Gathering infrastructure: NFG Midstream Tioga gathering systems Numerous marketing opportunities: Ability to utilize Sene
Slide 23: High Quality Acreage in WDA, Primarily Owned in Fee
High Quality Acreage in WDA, Primarily Owned in Fee Potential for 600+ Marcellus Shale and 500+ Utica Shale well locations Large gathering system with multiple interconnects provides access to firm transportation portfolio that reaches premium markets Highly contiguous fee acreage (no royalty) enhan
Slide 24: E&P and Gathering Production Supported by Long-Term Contracts
E&P and Gathering Production Supported by Long-Term Contracts To Canada, Dawn, TPG-200 (45% of total) To Mid-Atlantic, SE US (20% of total) To NY, NJ, Northeast (35% of total) ~1 Bcf/d of Firm Transportation NE Supply Diversification (TGP) 50,000 Dth/d (Canada-Dawn) (EDA-Tioga) Niagara Expansion (TG
Slide 25: Fiscal 2024 Sales Mix Provides Near-Term Price Certainty
Fiscal 2024 Sales Mix Provides Near-Term Price Certainty Q4 Volumes: Fixed Price 18 Bcfe, NYMEX-Linked 67 Bcfe, Index 5 Bcfe. NYMEX-Linked and Index prices are shown as differentials to NYMEX and $ per MMBtu. Price certainty defined as volumes where the price is locked in through either a fixed pric
Slide 26: Fiscal 2025 Sales Portfolio Provides High Degree of Price Certainty
Fiscal 2025 Sales Portfolio Provides High Degree of Price Certainty Q1 Volumes: Fixed Price 20 Bcfe, NYMEX-Linked 64 Bcfe, Index 7 Bcfe. Q2 Volumes: Fixed Price 20 Bcfe, NYMEX-Linked 62 Bcfe, Index 8 Bcfe. Q3 Volumes: Fixed Price 19 Bcfe, NYMEX-Linked 49 Bcfe, Index 22 Bcfe. Q4 Volumes: Fixed Price
Slide 27: Hedging Program: Disciplined with Upside Potential
Hedging Program: Disciplined with Upside Potential Significant Opportunity to Capture Value From Increasing Natural Gas Prices Methodical approach of layering in hedges over time Protect near-term earnings and cash flows while maintaining upside Maintain the strength of our investment grade credit p
Slide 28: Industry-Leading Focus on Sustainability
Industry-Leading Focus on Sustainability E&P and Gathering Responsible Gas Certifications, Methane Detection & Biodiversity Equitable Origin – EO100TM Standard for Responsible Energy Development Certifications Certification focuses on three emissions management criteria: Methane Intensity Company Pr
Slide 29: Pipeline & Storage Overview
Pipeline & Storage Overview National Fuel Gas Supply Corporation Empire Pipeline, Inc. Supplemental Information: Segment Overview
Slide 30: Pipeline & Storage Segment Overview
Pipeline & Storage Segment Overview Disclosed annually as of September 30, 2023. As of December 31, 2023, calculated from National Fuel Gas Supply Corporation’s and Empire Pipeline, Inc.’s 2023 FERC Form-2 reports, respectively. Empire Pipeline, Inc. National Fuel Gas Supply Corporation Empire Pipel
Slide 31: Pipeline & Storage Customer Mix
Pipeline & Storage Customer Mix Firm Transport Customer Transportation by Shipper Type(1) Affiliated Customer Mix (Contracted Capacity) Disclosed annually as of 9/30/2023. Pipeline & Storage
Slide 32: Pipeline Modernization & Expansion Projects Propel Growth
Pipeline Modernization & Expansion Projects Propel Growth A reconciliation to Capital Expenditures as presented on the Consolidated Statement of Cash Flows is included at the end of this presentation. FY24E and FY25E capex is presented at mid-point of guidance. Investments Support Long-Term Rate Bas
Slide 33: Tioga Pathway Project – Organic Growth
Tioga Pathway Project – Organic Growth Capacity: 190,000 Dth/day Estimated annual revenue: ~$15 million (underpinned by 15-year agreement with Seneca) Estimated capital cost: ~$100 million A portion of the capital to be allocated to modernization facilities Facilities (all in Pennsylvania) include:
Slide 34: Continued Expansion of the Supply Corp. Line N System
Continued Expansion of the Supply Corp. Line N System Over the past four years, the company has successfully placed into service several projects which have added: Contracted firm transport: 158,000 Dth/d Contracted firm storage: 267,000 Dth Combined annual revenue: ~$7 million Pipeline & Storage Me
Slide 35: Northern Access Project
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: Feb. 2017 – FERC 7(c) certificate issued Aug. 2018 – FERC issued Order finding that NY DEC waived water quality certification (WQC) Apr. 2019 –
Slide 36: Utility Overview
Utility Overview National Fuel Gas Distribution Corporation Supplemental Information: Segment Overview
Slide 37: New York & Pennsylvania Service Territories
New York & Pennsylvania Service Territories New York Last Rate Case: Currently pending, settlement discussions ongoing Total Customers(1): ~540,000 Allowed ROE: 8.7% (NY PSC Rate Case Order, April 2017) Rate Mechanisms: Revenue Decoupling Weather Normalization Low Income Rates Merchant Function Char
Slide 38: NY Utility Rate Case Status
NY Utility Rate Case Status Rate Case is Ongoing with New Rates Expected to Start October 1, 2024 Utility Filed case on October 31, 2023; National Fuel’s base rates have not changed since the last base rate case was litigated in 2017 Rebuttal testimony filed March 22, 2024; Settlement discussions on
Slide 39: NY Long-Term Plan and Regulatory Environment
First utility in the state to submit a LTP (Long-Term Plan) NY PSC implemented NFG’s LTP with modifications in December 2023 Includes an “All-of-the-Above Pathway” for an affordable and practical way to meet the State’s climate goals LTP includes Hybrid Heating, Demand Response, RNG and RSNG pilots
Slide 40: Customer Affordability
Customer Affordability New York Pennsylvania Based on 2023 average monthly residential bill data posted on company websites required by the NYPSC. Based on analysis of 2024 PAPUC Annual Rate Comparison Report, which includes data for average monthly residential bills for 2023. Utility #3 Out of 9 Ga
Slide 41: Utility Continues its Significant Investments in Safety
Utility Continues its Significant Investments in Safety (1) A reconciliation to Capital Expenditures as presented on the Consolidated Statement of Cash Flows is included at the end of this presentation. Increase from FY23 to FY24E is partially due to the estimated impact of New York State’s Roadway
Slide 42: Long-Standing Pipeline Replacement & Modernization
Long-Standing Pipeline Replacement & Modernization NY 9,817 miles PA 4,832 miles Miles of Utility Main Pipeline Replaced(2) Utility Mains by Material(1) (1) All values are reported on a calendar year basis, as of December 31, 2023, as required by the DOT. (2) All values are reported on a fiscal year
Slide 43: Utility Targeting Substantial Emissions Reductions
Baseline emissions & emissions reduction targets are calculated pursuant to the reporting methodology under the EPA GHG Reporting Program (current Subpart W, and using AR5), primarily Distribution pipeline mains & services. New York Climate Leadership and Community Protection Act, enacted in 2019. T
Slide 44: Promoting Renewable & Certified Natural Gas
Promoting Renewable & Certified Natural Gas Awarded four RNG grants for $1.1 million through the Utility’s Area Development Program First on-system project goes online. Production volumes ~50,000 Mcf/year. Through Fiscal 2020 Future Distribution Corporation received approval from NY and PA utility c
Slide 45: Rate Case Overview
Rate Case Overview Supplemental Information
Slide 46: Rate Case Overview: Timing and Status
Rate Case Overview: Timing and Status Supply Empire NY PA Regulatory Agency (Governed by) FERC FERC NY PSC PAPUC Timing/ Status Settlement approved by FERC June 11, 2024 New rates went into effect February 1, 2024 No moratorium or comeback period Rates in effect since January 1, 2019 Must file for n
Slide 47: Guidance & Other Financial Information
Guidance & Other Financial Information Supplemental Information
Slide 48: Fiscal 2025 Earnings Guidance
Fiscal 2025 Earnings Guidance Updated FY2024 Earnings Guidance $5.00 to $5.10/share(1) $5.75 to $6.25/share Preliminary FY2025 Earnings Guidance 400 - 420 Bcfe (increase from 395 - 400 in fiscal 2024) ~$2.62 - $2.66/Mcf(2) (increase from ~$2.44 in fiscal 2024) Key Guidance Drivers Net Production Rea
Slide 49: Financial Results and Major Drivers
Financial Results and Major Drivers Adjusted Operating Results(1) Excludes items impacting comparability. See Comparable GAAP Financial Measure Slides & Reconciliations at the end of this presentation. Consolidated Adjusted EBITDA includes Corporate & All Other. A reconciliation of Adjusted EBITDA t
Slide 50: 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, objectives, goals, projections, estimates of gas quantities, strategies, f
Slide 51: Hedge Portfolio & Capped Firm Sales
Hedge Portfolio & Capped Firm Sales 4Q 2024 1Q 2025 2Q 2025 3Q 2025 4Q 2025 FY 2026 FY 2027 FY 2028 Swaps Units Volume MMBtu 38,670 33,730 31,650 24,825 24,825 40,635 21,750 1,750 Wtd. Avg. Floor $ / MMBtu $3.35 $3.42 $3.49 $3.54 $3.54 $3.95 $4.16 $4.16 Collars Volume MMBtu 14,400 11,920 13,305 15,9
Slide 52: Firm Transportation Commitments
Firm Transportation Commitments Volume (Dth/d) Production Source Delivery Market Demand Charges ($/Dth) Gas Marketing Strategy Northeast Supply Diversification Tennessee Gas Pipeline Niagara Expansion TGP & NFG - Supply Leidy South / FM100 WMB – Transco; NFG - Supply 50,000 158,000 EDA – Tioga WDA –
Slide 53: Comparable GAAP Financial Measure Slides & Reconciliations
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 that fol
Slide 54: Non-GAAP Reconciliations – Adjusted EBITDA
Non-GAAP Reconciliations – Adjusted EBITDA
Slide 55: Non-GAAP Reconciliations – Adjusted EBITDA, by Segment
Non-GAAP Reconciliations – Adjusted EBITDA, by Segment
Slide 56: Non-GAAP Reconciliations – Adjusted Operating Results
Non-GAAP Reconciliations – Adjusted Operating Results Three Months Ended June 30, (in thousands except per share amounts) 2024 2023 Reported GAAP Earnings $ (54,158) $ 92,620 Items impacting comparability: Impairment of oil and gas properties (E&P) $ 200,696 — Tax impact of impairment of oil and gas
Slide 57: Non-GAAP Reconciliations – Free Cash Flow
Non-GAAP Reconciliations – Free Cash Flow
Slide 58: Reconciliation – Capital Expenditures
Reconciliation – Capital Expenditures
Slide 59: Reconciliation – E&P Operating Expenses
Reconciliation – E&P Operating Expenses