National Fuel Gas Company · NYSE:NFG
National Fuel Gas — Investor Day (November 2010)
83 slides from National Fuel Gas's investor day presentation, Nov 9, 2010
Slide 1: Fiscal 2010 Year-End Analyst Day
Fiscal 2010 Year-End Analyst Day November 9, 2010
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 Company NYSE symbol - NFG Reporting Segments Operating Subsidiaries
Slide 4: Our Businesses
Our Businesses Utility Pipeline & Storage Exploration & Production Appalachia, California, Gulf of Mexico Energy Marketing Midstream Timber Landfill Gas Gas-Fired Generation National Fuel Gas Company
Slide 5: Net Plant by Segment
Net Plant by Segment National Fuel Gas Company
Slide 6: 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. $219.1 Million Fiscal Year Ended September 30, 2010 E&P $112.5 MM 51.4%
Slide 7: A Balanced Business Model
A Balanced Business Model Net Income from Continuing Operations(1) - Excluding Items Impacting Comparability National Fuel Gas Company A reconciliation to GAAP Net Income is included at the end of this presentation. $219.1 Million Fiscal Year Ended September 30, 2010 Unregulated 55% Regulated 45%
Slide 8: Seneca Resources Oil and Gas Revenues
National Fuel Gas Company Seneca Resources Corporation - Oil and Gas Revenues
Slide 9: Peer Group Comparisons
National Fuel Gas Company Peer Group Comparisons Peer Group Total Return Utility Peers 22% National Fuel 19% Diversified Peers 9% E&P Peers 8% 1-Year Total Return Peer Group Total Return National Fuel 20% Utility Peers 19% E&P Peers -10% Diversified Peers -27% 3-Year Total Return Peer Group Total Re
Slide 10: Seneca Resources Evaluation of JV Opportunities
Seneca Resources Evaluation of JV Opportunities Seneca has engaged Jefferies & Company to explore joint-venture opportunities across a broad portion of its acreage, with the following goals: Ramp up development faster than current aggressive growth plans Bring forward the earnings stream, where a mi
Slide 11: 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. Vice Chairman of DTE Energy Director of Northern Border Pipeline Co. Former Chairman and CEO of Questar Corporation Former Vice Chairman, COO and Director o
Slide 12: Utility Segment
Utility Segment National Fuel Gas Distribution Corporation
Slide 13: National Fuel Gas Distribution Service Territory
Slide 14: Utility Keys to Continued Success
Utility Keys to Continued Success
Slide 15: Utility Diluted Earnings per Share
Utility (1) Excludes out-of-period adjustment to symmetrical sharing of $0.03; Including this adjustment, GAAP earnings would be $0.58. Diluted Earnings per Share (Before Items Impacting Comparability)
Slide 16: Utility Capital Spending
Capital Spending ONY MPA ‘578 sse0 $544 $54.2 UAE Bas 2 § s20 2... [a se 02 sua sno $0 2006 2007 2o08 2008 2010 Fiscal Year ss
Slide 17: Utility O&M Expense
National Fuer Utility O&M Expense $250 =PA ONY $2003 $2020 $2027 sit s1e12 & 5150 B $100 z ~| sa39.2 susos suns su2s0 $ $0 + + + + 1 2006 2007 2008 2009 2010 Fiscal Year ss
Slide 18: Utility Excellent Customer Service
Utility Excellent Customer Service Customer Service Performance NY Goal NY Actual(1) PA Actual(1) Telephone Response (within 30 seconds) 74.0% 89.1% 92.3% Customer Satisfaction: Residential Commercial 85.1% 86.0% 92.4% 90.7% 89.5% PSC Complaints (per 100,000 Customers) 2.1 0.1 N/A Estimated Meter Re
Slide 19: Utility Rate Mechanisms
New York Revenue Decoupling Customer Choice / POR Merchant Function Charge 90/10 Sharing (large volume users) Weather Normalization Low Income Rates Pennsylvania Low Income Rates Customer Choice / POR Merchant Function Charge Under Consideration: Revenue Decoupling Rate Mechanisms Utility
Slide 20: Utility Return on Equity
(1) Calculated using Average Total Comprehensive Shareholder Equity. Utility Return on Equity (1)
Slide 21: Utility Challenges
Utility Challenges
Slide 22: Utility Average Use per Residential Customer
Utility Average Use per Residential Customer 12 Months Ended September (Fiscal Year)
Slide 23: Accounts Receivable - Customer
Accounts Receivable - Customer (1) (1) All values include Purchase of Receivables ("POR") Program Utility
Slide 24: HEAP/LIHEAP
Program year runs from November to May HEAP/LIHEAP Utility
Slide 25: Utility Summary: Stable Earnings, Service, Safety, Regulatory Strategy
Provide Stable Earnings by National Fuer Excellent Customer Service Operate Safe System Strong Regulatory Strategy
Slide 26: Exploration & Production Seneca Resources Corporation
Exploration & Production Seneca Resources Corporation
Slide 27: Seneca Resources Fiscal 2010 Highlights
Seneca Resources Fiscal 2010 Highlights
Slide 28: Fiscal 2010 Year End Proved Reserves
Exploration & Production Fiscal 2010 Year End Proved Reserves Proved Reserves @ 9/30 503 Bcfe 528 Bcfe 700 Bcfe West - California Reserves: 333 Bcfe (47%) (55.5 MMBoe) FY '10 Production: 19.8 Bcfe (40%) Gulf of Mexico Reserves: 34 Bcfe (5%) FY '10 Production: 13.4 Bcfe (27%) East - Appalachia Reserv
Slide 29: Exploration & Production Strategy by Region
Exploration & Production Marcellus Shale Accelerate development; Convert resource potential to reserves Appalachian Region - Upper Devonian Drill 25-50 wells per year Proved Reserves at 9/30/10 California Continue to operate as a low-cost producer Gulf of Mexico No exploration; Develop and produce e
Slide 30: Capital Expenditures by Region
Exploration & Production Capital Expenditures by Region Does not include the $34.9MM acquisition of Ivanhoe's US-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 31: Annual Production by Region
Exploration & Production Annual Production by Region 30% 17%
Slide 32: Finding & Development Cost
Exploration & Production Finding & Development Cost (1) 2006 - 2009 Finding and Development cost information was obtained from IHS Herold, Inc. National Fuel's 2007 finding and development cost is adjusted for revisions due to a change in reserve auditors. National Fuel's 2010 finding and developmen
Slide 33: Exploration & Production California
Exploration & Production California
Slide 34: Seneca's California Properties
Seneca's California Properties South Lost Hills 1,900 BOEPD Monterey Shale Primary 216 Active Wells Sespe 1,000 BOEPD Sespe Formation Primary 182 Active Wells North Lost Hills 1,200 BOEPD Tulare & Etchegoin Formation Primary & Steamflood 221 Active Wells North Midway Sunset 4,100 BOEPD Potter & Tula
Slide 35: California Average Daily Production
California Average Daily Production Modest capital spending to maintain production Pursue additional bolt-on acquisitions 2011 Plans: CapEx - $40 MM 50 Development wells Two 5-acre in-fill wells at Sespe
Slide 36: Gulf of Mexico Exploration & Production
Gulf of Mexico Exploration & Production
Slide 37: Gulf of Mexico Average Daily Production
Gulf of Mexico Average Daily Production Minimal capital spending Expect production decline in 2011
Slide 38: East Division Exploration & Production
East Division Exploration & Production
Slide 39: East Division Average Daily Production
East Division Average Daily Production Rapid growth in the East Division as Marcellus is ramping up Expect significant production increase in Q1
Slide 40: Marcellus Shale Seneca's Pennsylvania Acreage
Marcellus Shale Seneca's Pennsylvania Acreage Seneca Resource Acreage Position 745,000 Net Acres in the heart of the PA Marcellus fairway 160,000 Net Acres included in EOG JV 80% Fee - Seneca owns the minerals No lease expiration 94% Average NRI SRC Fee Acreage
Slide 41: Recent Well Results Validate Seneca's Position
Marcellus Shale Recent Well Results Validate Seneca's Position McKean County SM Energy IP: 7+ MMCFD Clearfield County Seneca/EOG IP: 8.9 MMCFD Lycoming County Seneca Resources IP: 15.8 MMCFD Armstrong County EQT IP: 15 MMCFD Elk County Seneca Resources IP: 3.9 MMCFD Tioga County Seneca Resources Avg
Slide 42: Marcellus Shale Recent Activity
Marcellus Shale Recent Activity Approx. Outline of JV Acreage 200,000 Gross Acres Seneca 50% W.I. (Avg. 58% NRI) EOG Acreage Contributed ~120,000 Gross Acres Seneca 50% W.I. (40% NRI) EOG Operated - Last 4 Completions Bigger Fracs - 5 1/2" Casing Average IP: 8.2 MMcf per Day Seneca Operated - Tioga
Slide 43: Eastern Development Area
Marcellus Shale Eastern Development Area Covington Area - Full Development Seneca Operated 24 Wells Drilled; 12 Producing Current Production: 62 MMcf/d 2011: 16 Wells Planned DCNR Block 100 - Full Development Seneca Operated 1 well drilled 2011: 6 Wells Planned First Production: Fall 2011 Initial Te
Slide 44: Western Development Area
Marcellus Shale Western Development Area EOG Contributed JV Acreage SRC Contributed JV Acreage Seneca Operated EOG Operated Punxy Area - Full Development EOG Operated 30 Wells Drilled; 8 Producing Current Gross Production: 16 MMcf/d 2011: 30+ Wells Planned Beechwood Area Seneca Operated 2011: 3 Well
Slide 45: Tioga County Decline Curves
Tioga County Decline Curves Longer Lateral Wells Outpacing Original Decline Curve Chart data represents horizontal well production from wells with lateral lengths greater than 3,000 feet
Slide 46: Pennsylvania Average Daily Gas Production per Horizontal Well
Marcellus Shale Pennsylvania Average Daily Gas Production per Horizontal Well (Companies with at least 5 horizontal wells producing) Source: All data represents Marcellus Shale gas production from July 1, 2009 through June 30, 2010 for companies with at least five producing horizontal wells within t
Slide 47: Marcellus Net Production
Marcellus Shale Marcellus Net Production Seneca Operated EOG JV Marcellus net production at September 30, 2010 was: 53 MMcfe per day
Slide 48: Centralized Water System
Marcellus Shale Centralized Water System Recovering water discharged from an abandoned coal mine which was adversely impacting a local trout stream Authorized by SRBC to withdraw approximately 500,000 gallons per day of mine discharge Water pipeline system supplies frac water for Seneca in Tioga Cou
Slide 49: Marcellus Shale Wells Drilled per Year
Marcellus Shale Wells Drilled per Year
Slide 50: Pre-Tax IRR Comparison
Marcellus Shale Pre-Tax IRR Comparison Description EUR Well Cost ($ MM) Net Working Interest Net Revenue Interest Pre-Tax IRR (NYMEX - $/MMBtu) Pre-Tax IRR (NYMEX - $/MMBtu) Pre-Tax IRR (NYMEX - $/MMBtu) Description EUR Well Cost ($ MM) Net Working Interest Net Revenue Interest $4.00 $5.00 $6.00 Sen
Slide 51: Breakeven Pricing at PV10
Marcellus Shale Breakeven Pricing at PV10 On November 1, 2011, NYMEX Strip(1) for Fiscal Year 2011 was $4.03 The NYMEX strip prices for fiscal year 2011 include the settlement prices for the October 2010 and November 2010 contracts.
Slide 52: Marcellus Shale Summary
Seneca Resources Marcellus Shale Summary Continuing to achieve high IP rates and showing slow decline Fourth horizontal rig is on location Will have 3 rigs in East and 1 in West for 1st half of FY2011 EOG Program is picking up and showing improvement First "big fracs" came on at high rate Infrastruc
Slide 53: Pipeline & Storage / Midstream
National Fuel Gas Supply Corporation Empire Pipeline, Inc. National Fuel Gas Midstream Corporation Pipeline & Storage / Midstream
Slide 54: Analyst Day - November 9, 2010
Analyst Day - November 9, 2010 55
Slide 55: Analyst Day - November 9, 2010
Analyst Day - November 9, 2010 56
Slide 56: Analyst Day - November 9, 2010
Analyst Day - November 9, 2010 57
Slide 57: Analyst Day - November 9, 2010
Analyst Day - November 9, 2010 58
Slide 58: Pipeline & Storage / Midstream Expansion Initiatives Map
Analyst Day - November 9, 2010 WEST TO EAST OVERBECK TO LEIDY APPALACHIAN LATERAL LAMONT COMPRESSOR STATION PHASE I & II COVINGTON GATHERING SYSTEM TIOGA COUNTY EXTENSION LINE "N" EXPANSION PHASE I & II PIPELINE & STORAGE / MIDSTREAM EXPANSION INITIATIVES NORTHERN ACCESS TROUT RUN GATHERING SYSTEM A
Slide 59: Pipeline & Storage/Midstream Expansion Initiatives
Pipeline & Storage/Midstream Expansion Initiatives Project Name Capacity (Dth/D) Est. CapEx In-Service Date Status Covington Gathering System 145,000 $16 MM 11/17/09 Completed - Flowing into TGP 300 Line Lamont Compressor Station 40,000 $6 MM 6/15/10 Completed - Flowing into TGP 300 Line Lamont Phas
Slide 60: Covington Gathering System - Tioga County
Midstream Corporation Covington Gathering System - Tioga County TGP 300 Interstate Pipeline Gathering System Capacity: 146,000 Dth/d Interconnects with Tennessee Gas Pipeline in Tioga County Seneca Resources is the sole shipper Seneca is currently shipping gross production of approximately 60 MMcf p
Slide 61: Trout Run Gathering System - Lycoming County
Midstream Corporation Trout Run Gathering System - Lycoming County Capacity: 250,000 Dth/d Will Interconnect with Transco Pipeline in Lycoming County Seneca Resources will be the primary shipper Estimated In-Service: Fall 2011 Interstate Pipeline Gathering System Transco
Slide 62: Pipeline & Storage Challenges & Opportunities
Pipeline & Storage Challenges & Opportunities NFGSC Contract Turnbacks Supply has received capacity turnbacks on expiring contracts, decreasing future revenue by: FY11: ~$4.5 Million FY12: ~$6.0 Million Empire Unsold Capacity ~100,000 Dth/d of capacity remains unsold after the construction of the Em
Slide 63: Energy Marketing National Fuel Resources
Energy Marketing National Fuel Resources
Slide 64: National Fuel Resources Fiscal 2010 Highlights
National Fuel Resources Fiscal 2010 Highlights Recently launched a residential marketing campaign on RG&E and NYSEG Further diversify customer pool in areas where commercial, industrial and wholesale customers already exist Falling natural gas futures prices have led to increased customer price lock
Slide 65: National Fuel Resources Fiscal 2011 Expectations
National Fuel Resources Fiscal 2011 Expectations Strong focus on growth of new residential and small commercial customer pools on RG&E and NYSEG using POR programs Expand residential customer program in NFGDC's Pennsylvania territory with the recently adopted POR program Monitor development of Marce
Slide 66: Corporate & Financial Highlights
Corporate & Financial Highlights National Fuel Gas Company
Slide 67: 2011 EPS Guidance & Sensitivity
National Fuel Gas Company 2011 EPS Guidance & Sensitivity NFG & Subsidiaries The preliminary earnings guidance and sensitivity table are current as of November 4, 2010. The sensitivity table only considers revenue from the Exploration and Production segment's crude oil and natural gas sales. The sen
Slide 68: Fiscal Year 2011 Earnings Guidance - Key Drivers
National Fuel Gas Company Fiscal Year 2011 Earnings Guidance - Key Drivers FY 2011 EPS $2.40 to $2.70 Utility Operating Expense: ? 3% to 5% PA Normal Weather Pipeline & Storage / Midstream Operating Expense: ? 3% to 5% Transportation Revenue: ? $4.5 Million Project Development Costs (O&M): $7 Millio
Slide 69: Looking Beyond Fiscal 2011
National Fuel Gas Company Looking Beyond Fiscal 2011... Exploration & Production Marcellus = Substantial growth engine West = Stable production and cash flows Gulf = Produce out assets Pipeline & Storage / Midstream Major expansion projects on line starting in late 2011 Rate case in Supply Corporati
Slide 70: Capital Expenditures from Continuing Operations
National Fuel Gas Company Capital Expenditures(1) from Continuing Operations A reconciliation to Capital Expenditures as presented on the Consolidated Statement of Cash Flows is included at the end of this presentation.
Slide 71: Sources and Uses of Cash
Sources and Uses of Cash National Fuel Gas Company 2010 Actual $ Millions 2011 Forecast $566 For its fiscal 2011 earnings forecast, the Company is using flat commodity pricing of $4.00 per MMBtu for natural gas and $80.00 per Bbl for crude oil, and adjusting for basis differential. NFG Consolidated
Slide 72: Seneca Oil and Gas Hedge Positions
National Fuel Gas Company Seneca Oil and Gas Hedge Positions Natural Gas Swaps Volume (Bcf) Average Hedge Price Fiscal 2011 19.9 $6.76 / Mcf Fiscal 2012 14.6 $7.03 / Mcf Fiscal 2013 3.8 $6.65 / Mcf Oil Swaps Volume (MMBbl) Average Hedge Price Fiscal 2011 1.6 $70.26 / Bbl Fiscal 2012 1.1 $70.55 / Bbl
Slide 73: Capital Structure
National Fuel Gas Company Capital Structure $2.995 Billion(1) at September 30, 2010 Forecasted Capital Structure(2) at September 30, 2011 At September 30, 2010, Comprehensive Shareholders' Equity, Long-Term Debt and the Current Portion of Long-Term Debt totaled $2.995 Billion as presented on the Com
Slide 74: Capital Resources & Credit Ratings
National Fuel Gas Company Capital Resources & Credit Ratings Capital Resources $300.0 MM Commercial Paper Program and $405 MM in Uncommitted Credit Facilities - Aggregate of $705.0 MM $300.0 MM Committed Credit Facility through September 2013 - backs Commercial Paper Program RATING AGENCY RATING FIT
Slide 75: Debt Maturity Schedule
National Fuel Gas Company Debt Maturity Schedule Fiscal Year Total Long-Term Debt Outstanding At September 30, 2010: $1.249 B
Slide 76: Dividend Growth
National Fuel Gas Company Dividend Growth $1.38 $0.19 Compound Annual Growth Rate 5.1% National Fuel has had 108 uninterrupted years of dividend payments and has increased its dividend for 40 consecutive years
Slide 77: Key Takeaways
National Fuel Gas Company Key Takeaways High-Quality Marcellus Acreage Position 745,000 net acres with a resource potential of 8-15 Tcfe Recent well results validate the quality of our acreage Fee ownership results in superior economics Balanced Business Model Regulated segments support dividend and
Slide 78: Appendix
Appendix
Slide 79: Marcellus Shale Recent Activity
Marcellus Shale Recent Activity EOG Contributed JV Acreage SRC Contributed JV Acreage
Slide 80: Comparable GAAP Financial Measure Slides and Reconciliations
National Fuel Gas Company Comparable GAAP Financial Measure Slides and Reconciliations This presentation contains certain non-GAAP financial measures. For pages that contain non-GAAP financial measures, pages containing the most directly comparable GAAP financial measures and reconciliations are pro
Slide 81: Reconciliation of GAAP Net Income to Income From Continuing Operations
Reconciliation of GAAP Net income to income From Continuing Oper Excluding tems Impacting Comparabalty Hons ($ Thousands) Fy2007 Fy 2008 Fv 2009 Fv2010 GAAP Not Income E&P Segment GAAP Net Income. S 210869 $ 146612 $ (10238) $112,831 P&S Segment GAAP Net income 56,386 54148 47358, 36,703, sity Segme
Slide 82: Reconciliation of Segment Capital Expenditures to Consolidated Capital Expenditures
Naconcisamon oF Segment wapiapendures to ‘Consolidated Capital Expenditures (6 Thousands) ‘Capital Expenditures from Continuing Operations ‘Eploraton & Producton Capital Expenditures Pipeline & Storage Capital Expenditures Utity Capital Emendtures Marketing, Corporate & Al Other Capital Emendiures T
Slide 83: Reconciliation of Appalachian Growth Capital Expenditures
Reconctiation of Appalachian Growth Capital Expenditures to Consolidated Capital Expendtures (SMilions) Appalachian Growth Capital Expeniturs from Continuing Operations ‘iploaton & Production Capital Expenditures - East Dision Pipeline & Storage Appalachian Expansion Capital Expenditurs Mesieam Capi