National Fuel Gas Company · NYSE:NFG
National Fuel Gas — Investor Presentation (January 2015)
64 slides from National Fuel Gas's investor presentation, Jan 30, 2015
Slide 1: Investor Presentation January 2015
Investor Presentation January 2015 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: Our Business Mix Leads to Long-Term Value Creation
Upstream Crude Oil Midstream Downstream Upstream Natural Gas National Fuel Gas Company Our Business Mix Leads to Long-Term Value Creation National Fuel Gas Supply Corporation Empire Pipeline, Inc. National Fuel Gas Midstream Corporation National Fuel Gas Distribution Corporation National Fuel Resour
Slide 4: NFG's Unique Integration
NFG’s Unique Integration NFG’s concentrated geographical footprint differentiates our integrated structure and drives distinct shareholder value creation opportunities Common Geographic Footprint
Slide 5: Regulated Operations Provide Significant Synergies
FINANCIAL EFFICIENCIES OPERATIONAL SYNERGIES COMMERCIAL RELATIONSHIPS National Fuel Gas Company Regulated Operations Provide Significant Synergies Utility segment and Pipeline and Storage segment share common: Utility segment and Energy Marketing segment collectively hold 32% of Pipeline & Storage c
Slide 6: Upstream and Midstream – Common Vision For Growth
Western Development Area Tier I Acreage: 200,000 Acres Northern Access Projects 490 MMcf/d to Canada by 2016 Clermont Gathering System NFG Supply & Other Interconnects National Fuel Gas Company Upstream and Midstream – Common Vision For Growth High quality Marcellus acreage Connected to our intersta
Slide 7: NFG Focused on Long-Term Value
The Company has a well-defined strategy to increase long-term value Integrated model provides significant benefits in variety of market conditions Creating sustainable value for shareholders remains our #1 priority NFG Focused on Long-Term Value • Utility is a vital contributor to the consolidated f
Slide 8: What Makes NFG Unique, Also Maximizes Value
Foundation of Our Appalachian Growth Strategy High Quality Assets + Lower Cost of Capital + Lower Operating Costs + Efficient Capital Spend + More Competitive Projects + Higher Free Cash Flow + Growing Dividend National Fuel Gas Company What Makes NFG Unique, Also Maximizes Value Operational Synergi
Slide 9: Targeting Sustained EBITDA Growth over the next Five Years
$327 $377 $397 $492 $539 $539 $121 $111 $137 $161 $186 $187 $30 $64 $73 National Fuel Gas Company Targeting Sustained EBITDA Growth over the next Five Years Exploration & Production Segment Gathering Segment Pipeline & Storage Segment Utility Segment Energy Marketing & Other $0 $250 $500 $750 $1,000
Slide 10: Capital Spending Adjusts to Capitalize on Opportunities
$38 $129 $144 $80 $55 $56 $138 $140 $125-$175 $225-$275 $525-$575 $603 533 $694 $649 $398 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 o
Slide 11: Maintaining a Strong Balance Sheet
Total Debt (1) 41% Debt/Adjusted EBITDA Capitalization Shareholders’ Equity 59% National Fuel Gas Company Maintaining a Strong Balance Sheet $4.4 Billion As of December 31, 2014 Note: A reconciliation of Adjusted EBITDA to Net Income is included at the end of this presentation. (1) Long-term debt of
Slide 12: Dividend Consistency
Dividend Consistency National Fuel Gas Company Dividend Track Record (1) As of January 26, 2015 $2.00 $1.50 $1.00 $0.50 $0.00 Annual Rate at Fiscal Year End Consecutive Dividend Payments Consecutive Dividend Increases Current Annualized Dividend Rate 112 Years 44 Years $1.54 per Share Current Divide
Slide 13: Exploration & Production Overview
Exploration & Production Overview
Slide 14: Proven Record of Growth
Fiscal Years 3-Year F&D Cost (1) ($/Mcfe) 45.2 43.3 42.9 41.6 38.5 428 675 988 1,300 1,683 (1) Represents a three-year average U.S. finding and development cost 2007-2009 $5.35 2008-2010 $2.37 2009-2011 $2.09 2010-2012 $1.87 2011-2013 $1.67 2012-2014 $1.38 1,246 1,549 1,914 1,000 1,500 2,000 At Sept
Slide 15: Delivering Tremendous Production Growth
19.8 19.2 20.5 20.0 21.2 21-23 Seneca Resources Delivering Tremendous Production Growth 2015E Fiscal Year 49.6 67.6 83.4 120.7 160.5 155-190 13.3 16.5 43.2 62.9 100.7 139.3 134-167 Gulf of Mexico (Divested in 2011) East Division West Division
Slide 16: Disciplined Capital Spending
$28 $47 $63 $105 $83 $40-$50 Seneca Resources Disciplined Capital Spending $356 $596 $631 $428 $520 $485- $525 $398 $649 $694 $533 $603 $525- $575 $0 $200 $400 $600 $800 $1,000 2015E Fiscal Year Gulf of Mexico (Divested in 2011) East Division West Division
Slide 17: LOE: Operating Costs down; Transportation Costs up
(2) $1.17 $0.91 $0.76 $0.65 $0.57 $0.54 $0.21 $0.18 $0.28 $0.14 $0.13 $0.10 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 2015 (2) The total of the two LOE com
Slide 18: Prolific Pennsylvania Acreage
Average net revenue interest (NRI): 98% No lease expiration No royalty on most acreage Highly contiguous Significant economies of scale 1,700 to 2,000 locations de-risked Mostly leased (16-18% royalty) No near-term lease expiration Limited development drilling until firm transportation capacity on A
Slide 19: EDA Delivering Significant Growth
Covington – Fully Developed Productive Capacity: ~45MMcf per Day 47 Wells Drilled and Producing Marcellus Shale EDA Delivering Significant Growth DCNR Tract 595 DCNR Tract 100 Gamble (1) One well included in this total is drilled into and producing from the Geneseo Shale DCNR Tract 007 Utica & Marce
Slide 20: 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 21: Focusing on WDA Development
Seneca’s Tier I Acreage: 200,000 Acres 6-8 Bcfe EUR Wells Economic at $2.60 to $4.00/MMbtu Marcellus Shale Focusing on WDA Development Note: Assumes 6,000’ treated lateral length 4 - 6 BCF/well 6 - 8 BCF/well 4 - 6 BCF/well 2-4 BCF/well 2-4 BCF/well SRC Fee Acreage SRC Lease Acreage EOG Earned JV Ac
Slide 22: Strong Wells Currently Producing Across WDA Acreage
Area Producing Well Count Peak 24-Hour Rate (MMcfd) Average 7-Day (MMcf/d) Average Treatable Lateral Length (ft) Area Producing Well Count Peak 24-Hour Rate (MMcfd) Average 7-Day (MMcf/d) Average Treatable Lateral Length (ft) Marcellus Shale Strong Wells Currently Producing Across WDA Acreage Clermo
Slide 23: Clermont/Rich Valley (CRV) Area
Pad H 6 Wells Ave. IP: 8.0 MMCFD Pad N 9 Wells Ave. IP: 8.2 MMCFD Clermont/Rich Valley 200-250 Planned Horizontal Locations Productive Capacity: 19 Wells; ~ 60 MMcfd Pad C8-F Completing Pad C8-G Drilling Pad D9-D 6 Wells Completed Marcellus Shale Clermont/Rich Valley (CRV) Area Planned Wells Drilled
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Slide 25: WDA Mineral Interests Significantly Enhance Returns
($/Mcf) Typical Producer 15% Royalty The Seneca Advantage 0% Royalty Marcellus Shale WDA Mineral Interests Significantly Enhance Returns In Clermont/Rich Valley, a typical producer burdened by a 15% royalty would require a $0.46 higher net realized price to achieve same level of economics as Seneca
Slide 26: How Does Seneca Sell its Production?
Well Head Interconnection with Interstate Pipeline Network 3rd Party Marketer (or spot market) Firm Transport Demand Center (firm sales or spot market) Spot Market Natural Gas Marketing How Does Seneca Sell its Production? Gathering System Contracted Basis Differential FT Rate Breakeven economics ba
Slide 27: Adding Long-Term Firm Transport to the Portfolio
Project (Counterparty) In- Service Date Contract Term Delivery Market FT Capacity (Dth/day) Matched Firm Sales Fiscal 2015 Fiscal 2016 Fiscal 2017 Fiscal 2018 Natural Gas Marketing Adding Long-Term Firm Transport to the Portfolio (1) A large majority of the executed firm sales agreements continue fo
Slide 28: Significant Base of Long-Term Firm Contracts
Natural Gas Marketing Significant Base of Long-Term Firm Contracts Atlantic Sunrise 189,405 Dth/d Northern Access 2016 350,000 Dth/d Niagara Expansion TETCO 170,000 Dth/d 1,000 - Base Firm Sales Contracts Firm Sales Matched to Firm Transport Capacity Additional Firm Transport Capacity Fiscal Year
Slide 29: Firm Sales Provide a Market for Appalachian Production
29 NYMEX 236,198 Less: $0.51 NYMEX 205,036 Less: $0.59 NYMEX 205,036 Less: $0.59 50,000 Fixed $3.77 50,000 Fixed $3.77 50,000 Fixed $3.77 Natural Gas Marketing Firm Sales Provide a Market for Appalachian Production Values shown represent the price or differential to a reference price (netback price)
Slide 30: Current Natural Gas Hedge Positions
14.5 5.6 49.1 32.4 23.1 11.0 Natural Gas Marketing Current Natural Gas Hedge Positions (1) For the remaining nine months of fiscal 2015. Fiscal Year 68.7 65.7 46.8 5.6 18.6 18.8 12.7 NYMEX Dominion Dawn & MichCon SoCal
Slide 31: FY 2015 Production – Firm Sales & Hedge Composition
Firm Sales with Price Certainty 76.5 Bcf at ~$3.70/Mcf Spot Price Exposure 27 Bcf at $2.00-$2.25/Mcf (1) 42.9 Bcf 47.4 Bcf 18 Bcf 11.1 Bcf 8.6 Bcf 18.6 Bcf Natural Gas Marketing FY 2015 Production – Firm Sales & Hedge Composition (1) Spot price assumptions reflected in fiscal 2015 earnings guidance
Slide 32: Seneca Activity in Tioga County
Seneca - DCNR 007 Completing Utica Shale Seneca Activity in Tioga County Seneca - Tionesta Horizontal: Completed Fall 2012 Peak 24-Hour Rate: 3.9 MMcf/d Seneca - Mt Jewett Horizontal: Completed September 2013 Peak 24-Hour Rate: 8.5 MMcf/d Shell 26 MMcf/d Shell 11 MMcf/d
Slide 33: 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 34: South Midway Sunset Has Delivered Significant Growth
Seneca Acquired in June 2009 California South Midway Sunset Has Delivered Significant Growth 252 Pool 97X Pool SE Pool 251 Pool B Pool A Pool Extended Pool Boundary Original Pool Boundary Existing Wells 1000’ 16X Pool Highlights Since Acquisition Significantly increased daily production Drilled 114
Slide 35: East Coalinga Summary
Seneca Acquired in January 2013 California East Coalinga Summary Production has increased from 214 BOPD to 750 BOPD Drilled 31 new producers and 1 water disposal well in 2014 Plan to drill 5 wells in 2015 Evaluating potential of undeveloped Upper Temblor heavy oil reservoir in Section 28
Slide 36: Evaluating the Monterey Shale at South Lost Hills
California Evaluating the Monterey Shale at South Lost Hills Citrus 11 Upper Antelope A Upper Antelope B McDonald Truman 1H 190 BOEPD Citrus 2H 100 BOEPD Truman 2H Currently Installing Artificial Lift GR SP ResD Brittleness Gas Oil 18 potential locations in each of the three horizons (concept) Senec
Slide 37: Modest Growth Opportunities, But Strong Economics
Field Average Well Cost Average EUR (MBO) Estimated IRR @$55/Bbl Fiscal 2015 Locations California Modest Growth Opportunities, But Strong Economics South Midway Sunset $250,000 57% North Midway Sunset $300,000 25% East Coalinga $420,000 15%
Slide 38: Modest Growth Anticipated in 2015
California Modest Growth Anticipated in 2015 9,056 8,773 9,322 9,078 9,699 9,800- 10,200 7,000 8,000 9,000 10,000 11,000 Forecast Fiscal Year
Slide 39: Strong Margins Support Significant Free Cash Flow
California Strong Margins Support Significant Free Cash Flow Average Revenue for TTM 12/31/14 $84.26 per BOE $12.98 $4.77 $3.99 $3.15 $1.72 $57.65 Non-Steam Fuel LOE Steam Fuel G&A Production & Other Taxes Other Operating Costs EBITDA 12-months ended 12/31/14 EBITDA per BOE Note: A reconciliation of
Slide 40: Midstream Businesses Overview
Midstream Businesses Overview
Slide 41: Positioned to Serve Rapidly Growing Production in Appalachia
Midstream Businesses Positioned to Serve Rapidly Growing Production in Appalachia
Slide 42: Gathering is the First Step to Reaching a Market
Trout Run Gathering System (In-Service) Covington Gathering System (In-Service) Clermont Gathering System (In-Service) Gathering Interconnects Gathering Gathering is the First Step to Reaching a Market TGP 300 Transco (1) Fiscal 2015 estimated revenue reflects projected throughput based on the range
Slide 43: Gathering Systems Supporting Seneca's EDA Production
Gathering Gathering Systems Supporting Seneca’s EDA Production Covington Gathering System In-Service Date: November 2009 Capacity: 220,000 Dth per day Interconnect: TGP 300 Capital Expenditures (to date): $32 Million Trout Run Gathering System In-Service Date: May 2012 Capacity: 466,000 to 585,000 D
Slide 44: Clermont Gathering System has Large Expandability
Clermont Gathering System Gathering Clermont Gathering System has Large Expandability In-Service: July 2014 Ultimate Trunkline Capacity: 1+ Bcf per day Interconnects TGP 300 (current) NFG Supply Corporation (Northern Access 2016) Capital Expenditures: To date: $115 Million (1) : $95 - $135 Million C
Slide 45: Project Opportunities to Support Appalachian Growth
Develop multiple outlets to high-value markets Pipeline & Storage Project Opportunities to Support Appalachian Growth
Slide 46: 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 Northern Access 2016 350,000 Total New Capacity 490,000 Project Capital Cost Northern Access 2015 $66 Million Northern Access 2016 $449 Millio
Slide 47: Northern Access 2015
Northern Access 2015 Pipeline & Storage Major Expansion Designed for Canadian Deliveries Customer: Seneca Resources In-Service: November 2015 System: NFG Supply Corp. Capacity: 140,000 Dth per day Lease to TGP as part of their Niagara Expansion project Interconnect Niagara (TransCanada) Total Cost:
Slide 48: Northern Access 2016
Northern Access 2016 Pipeline & Storage Northern Access 2016 Provides Additional Access to Canada Customer: Seneca Resources In-Service: Late 2016 System: NFG Supply Corp. & Empire Pipeline, Inc. Capacity 350,000 Dth per day Interconnect Chippawa (TransCanada) Total Cost: ~$449 Million FERC Timing P
Slide 49: Recent 3rd Party Expansions Have Been Highly Successful
Completed Expansions for 3 Parties rd Pipeline & Storage Recent 3 rd Party Expansions Have Been Highly Successful Capacity (Dth/day) Northern Access 2012 320,000 Tioga County Extension 350,000 Line N & Mercer Expansion 458,000 Total New Capacity 1,128,000 Capital Cost ($Millions) Northern Access 201
Slide 50: 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 Range Resources (145,000 Dth/d) Seneca Resources (30,000 Dth/d) Interconnect Mercer (TGP
Slide 51: 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 Precedent agreements executed with RG&E, NYSEG & NFG Utility Preserving 172,500 Dth per day (RG&E) Preserving 20,000 Dth per day (NYSEG)
Slide 52: Significant Expansions Are Driving Growth
Completed Projects (Since 2009) Planned Projects (2015+) Precedent Agreements Executed Total Expansion (2009-2016+) Delivering Gas North Tioga County Extension Northern Access 2012 Northern Access 2015 Northern Access 2016 Total Capacity 1,160 MDth/d Other Projects Lamont Compressor Tuscarora Latera
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Slide 54: New York & Pennsylvania Service Territories
Utility New York & Pennsylvania Service Territories Revenue Decoupling Weather Normalization Low Income Rates 90/10 Sharing (Large Customers) Rates Unchanged 9.1% ROE Confirmed 2-Tier Earnings Sharing Mechanism 9.5% to 10.5% - Share 50% 10.5% > - Share 80% $8.2 MM CapEx - system replacement Low Inco
Slide 55: Shifting Trends in Customer Usage
Utility Shifting Trends in Customer Usage Residential Usage Industrial Usage (1) Weighted Average of New York and Pennsylvania service territories (assumes normal weather) 12-Months Ended December 31 12-Months Ended December 31
Slide 56: A Proven History of Controlling Costs
$13 $16 $16 $20 $33 $31 $14 $11 $9 $6 $10 $10 Utility A Proven History of Controlling Costs $154 $152 $152 $152 $151 $154 $181 $179 $177 $178 $193 $195 $0 $100 $150 $200 $250 12 Months Ended Fiscal Year All Other O&M Expenses O&M Pension Expense O&M Uncollectible Expense $50 12/31/14
Slide 57: Strong Commitment to Safety
The Utility remains focused on maintaining the ongoing safety and reliability of its system Near-term increase due to ~$60MM upgrade of the Utility’s Customer Information System and ~$25MM NRG Dunkirk power plant project Utility Strong Commitment to Safety $45.0 $44.3 $43.8 $48.1 $49.8 $58.0 $58.4 $
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Slide 59: Natural Gas Hedge Positions
Fiscal 2015 (1) Fiscal 2016 Fiscal 2017 Fiscal 2018 Volume Avg. Price Volume Avg. Price Volume Avg. Price Volume Avg. Price National Fuel Gas Company Natural Gas Hedge Positions (Volumes in thousands Mmbtu; Prices in $/Mmbtu) NYMEX Swaps 49,130 $4.18 32,350 $4.24 23,130 $4.50 5,550 $4.59 Dominion Sw
Slide 60: Crude Oil Hedge Positions
Fiscal 2015 (1) Fiscal 2016 Fiscal 2017 Fiscal 2018 Volume Avg. Price Volume Avg. Price Volume Avg. Price Volume Avg. Price National Fuel Gas Company Crude Oil Hedge Positions Midway Sunset (MWSS) Swaps 108,000 $92.10 36,000 $92.10 - - - - Brent Swaps 765,000 $98.32 933,000 $95.18 384,000 $92.30 75,
Slide 61: Path to Geneseo Development – 2018/2019 Start
Geneseo Shale Path to Geneseo Development – 2018/2019 Start 1 Well (Tract 100 – Pad N) Peak IP: 14.1 MMcf per day 30-Day Average Rate: 8.6 MMcf per day Estimated EUR: 7.0 Bcf Lateral Length: 4,920’ Frac Stages: 33 stages Current developed infrastructure from DCNR 100 & Gamble: 13 well pads 3 compres
Slide 62: Comparable GAAP Financial Measure Slides and Reconciliations
National Fuel Gas Company Comparable GAAP Financial Measure Slides and Reconciliations This presentation contains certain non-GAAP financial measures. For pages that contain non-GAAP financial measures, pages containing the most directly comparable GAAP financial measures and reconciliations are pro
Slide 63: Reconciliation of Adjusted EBITDA to Consolidated Net Income
Reconciliation of Adjusted EBITDA to Consolidated Net Income ($ Thousands) FY 2010 FY 2011 FY 2012 Exploration & Production - West Division Adjusted EBITDA 187,838 $ 187,603 $ 226,897 $ 215,042 $ 217,150 $ 206,875 $ Exploration & Production - All Other Divisions Adjusted EBITDA 139,624 189,854 170,2
Slide 64: Reconciliation of Segment Capital Expenditures to Consolidated Capital Expenditures
Reconciliation of Segment Capital Expenditures to Consolidated Capital Expenditures ($ Thousands) FY 2015 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 Forecast Capital Expenditures from Continuing Operations Exploration & Production Capital Expenditures 398,174 $ 648,815 $ 693,810 $ 533,129 $ 602,705 $ $
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