National Fuel Gas Company · NYSE:NFG
National Fuel Gas — AGA Financial Forum 2012
61 slides from National Fuel Gas's conference presentation, May 4, 2012
Slide 1: National Fuel Gas Company Investor Presentation, AGA Financial Forum
National Fuel Gas Company Investor Presentation AGA Financial Forum May 6-8, 2012 Exhibit 99
Slide 2: Safe Harbor For Forward Looking Statements
May 6-8, 2012 2 National Fuel Gas Company Safe Harbor For Forward Looking Statements
Slide 3: Our Business Mix Leads to Long-Term Value Creation
May 6-8, 2012 3 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 Nati
Slide 4: Integrated Business Mix Provides Financial Balance
May 6-8, 2012 4 National Fuel Gas Company Integrated Business Mix Provides Financial Balance Note: A reconciliation of EBITDA to Net Income as presented on the Consolidated Statement of Income and Earnings is included at the end of this presentation.
Slide 5: Businesses with Steady Cash Flows Limit Downside Risk
May 6-8, 2012 5 National Fuel Gas Company Businesses with Steady Cash Flows Limit Downside Risk Note: A reconciliation of EBITDA to Net Income as presented on the Consolidated Statement of Income and Earnings is included at the end of this presentation.
Slide 6: Highly Integrated Assets with Significant Marcellus Exposure
May 6-8, 2012 6 National Fuel Gas Company Highly Integrated Assets with Significant Marcellus Exposure…
Slide 7: And Exposure to Growth from the Utica Shale
May 6-8, 2012 7 National Fuel Gas Company …And Exposure to Growth from the Utica Shale
Slide 8: Business Mix Allows for Strategic Capital Allocation
May 6-8, 2012 Predictable Earnings and Cash Flow 8 National Fuel Gas Company Business Mix Allows for Strategic Capital Allocation Capital Allocation Priorities Ongoing maintenance capital spending in regulated businesses Returning earnings to shareholders through consistent dividends Flexible, retur
Slide 9: Strategically Allocating Growth Capital Expenditures
May 6-8, 2012 9 National Fuel Gas Company Strategically Allocating Growth Capital Expenditures Growth Capital Focus Increasing Marcellus Production Eastern Development Area Western Development Area Delineate other Appalachian Plays Utica Shale Geneseo Shale Marcellus Wet Gas Expand FERC-Regulated In
Slide 10: Broadening Our Infrastructure Expansion Focus
May 6-8, 2012 10 National Fuel Gas Company Broadening Our Infrastructure Expansion Focus Source: ITG IR (formerly Ross Smith Energy Group)
Slide 11: Continued Reduction in Capital Spending
May 6-8, 2012 11 National Fuel Gas Company Continued Reduction in Capital Spending 1. Maintain a strong balance sheet 2. Flexibility to strategically redeploy capital based upon return-driven opportunities Analyst Day: 6.5 Operated Rigs Current Plan: 3 Operated Rigs Factors Behind Capital Reduction
Slide 12: Capital Spending Flexibility to Maintain Financial Strength
May 6-8, 2012 12 National Fuel Gas Company Capital Spending Flexibility to Maintain Financial Strength Note: A reconciliation to Capital Expenditures as presented on the Consolidated Statement of Cash Flows is included at the end of this presentation. To the extent additional infrastructure expansio
Slide 13: Strong Balance Sheet and Liquidity Position
May 6-8, 2012 13 Capital Resources Total Short-Term Capacity: $1,085 Million Committed Credit Facility: $750 Million Five-year syndicated facility entered into January 6, 2012 Uncommitted Lines of Credit: $335 Million $300.0 Million Commercial Paper Program backed by Committed Credit Facility $20.0
Slide 14: Dividend Consistency
May 6-8, 2012 14 Dividend Consistency National Fuel Gas Company Dividend Track Record Current Dividend Yield (1) 3.0% Consecutive Dividend Payments 109 Years Consecutive Dividend Increases 41 Years Current Annualized Dividend Rate $1.42 per Share (1) As of April 30, 2012
Slide 15: Pipeline & Storage / Midstream
May 6-8, 2012 15 Pipeline & Storage / Midstream
Slide 16: Ongoing Expansion to Transport Appalachian Production
May 6-8, 2012 16 Pipeline & Storage / Midstream Ongoing Expansion to Transport Appalachian Production
Slide 17: A Closer Look at the Expansion Progress
May 6-8, 2012 17 Pipeline & Storage / Midstream A Closer Look at the Expansion Progress
Slide 18: Using a History of Excellence to Serve Appalachian Producers
May 6-8, 2012 18 TGP 300 Transco Tioga County Lycoming County Midstream Using a History of Excellence to Serve Appalachian Producers Midstream’s gathering systems are critical to unlock remote, but highly productive Marcellus acreage History of operational success and efficiency within Pennsylvania
Slide 19: Deploying Significant Growth Capital
May 6-8, 2012 19 19 Pipeline & Storage Growth Deploying Significant Growth Capital Capital spending is increasing to fund system expansion and assuming recently allowed industry average ROE and capital structure targets, this segment can achieve significant growth with a rapid increase in contracted
Slide 20: Regulatory Rate Filings
May 6-8, 2012 20 Pipeline & Storage Regulatory Rate Filings National Fuel Gas Supply Corporation Filed a general rate case with FERC on October 31, 2011 as part of an agreement from a 2006 rate settlement On April 14, 2012 an agreement in principle was reached to settle the rate case, with new rates
Slide 21: Utility
May 6-8, 2012 21 Utility
Slide 22: Providing Financial Stability
May 6-8, 2012 22 Rate Mechanisms New York & Pennsylvania Low Income Rates Choice Program/POR Merchant Function Charge New York only Revenue Decoupling 90/10 Sharing Weather Normalization Utility Providing Financial Stability
Slide 23: Low Natural Gas Prices Have Reduced Customer Bills
May 6-8, 2012 23 Utility Low Natural Gas Prices Have Reduced Customer Bills
Slide 24: Continued Cost Control Helps Provide Earnings Stability
May 6-8, 2012 24 Utility Continued Cost Control Helps Provide Earnings Stability Low natural gas prices, combined with a focus on cost control, continue to help reduce expenses
Slide 25: Strong Commitment to Safety
May 6-8, 2012 25 Utility Strong Commitment to Safety Capital spending from 2011 to 2014 is expected to be between $55 and $60 million per year
Slide 26: Exploration & Production
May 6-8, 2012 26 Exploration & Production
Slide 27: Ongoing Strategic Responses to Low Gas Prices
May 6-8, 2012 27 Seneca Resources Ongoing Strategic Responses to Low Gas Prices
Slide 28: California: Stable Production and Increasing Cash Flows
May 6-8, 2012 28 Rank Company California 2010 BOEPD 7 Seneca Resources 9,041 California Stable Production and Increasing Cash Flows Chevron 174,856 Aera (Shell/Exxon) 158,786 Occidental 151,584 Plains Exploration 36,488 Venoco Inc. 19,121 Berry Petroleum 18,513 Breitburn Energy 7,414 MacPherson 7,18
Slide 29: California: Stable Production Fields
May 6-8, 2012 29 South Lost Hills ~1,700 BOEPD Monterey Shale Primary 215 Active Wells Sespe ~1,200 BOEPD Sespe Formation Primary 188 Active Wells North Lost Hills ~1,200 BOEPD Tulare & Etchegoin Formation Primary & Steamflood 181 Active Wells North Midway Sunset ~4,400 BOEPD Potter & Tulare Formati
Slide 30: Strong Margins Support Significant Free Cash Flow
May 6-8, 2012 30 California Strong Margins Support Significant Free Cash Flow Average Revenue in First Six Months of Fiscal 2012 $87.33 per BOE Note: A reconciliation of Exploration & Production West Division EBITDA to Exploration & Production Segment Net Income is included at the end of this presen
Slide 31: California: Recent Initiatives Driving Near-Term Growth
May 6-8, 2012 31 Seneca Resources California – Recent Initiatives Driving Near-Term Growth Production Increase Drivers 1.North Midway Sunset Steaming 2.South Midway Sunset Field Extensions 3.Sespe Infill Drill Program
Slide 32: tel
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Slide 33: Sespe Field: 2011 Drilling Highlights and Results
May 6-8, 2012 33 350’ Thick (Medium Blue) 800’ Thick (Dark Red) ~550’ Thick (Green) White Star – 5 Acre Tests Powell – 10 Acre Tests Powell 4 61 BOEPD 1 st Oil 11/11 WS 534-33 42 BOEPD 1 st Oil 1/12 White Star – 10 Acre Test WS 48-33 Completion Begins April 2012 WS 533-33 88 BOEPD 1 st Oil 1/12 “X”
Slide 34: Sespe Field: 2012 Drill Plan Builds Upon 2011 Successes
May 6-8, 2012 34 Proposed Bottom Hole Locations Oak Flat (10) Frankel A (5) Thornbury (10/5) Coldwater Tests “X” SANDS ISOCHORE (Thickness) Type Log for Frankel A Wells Seneca Resources Sespe Field – 2012 Drill Plan Builds Upon 2011 Successes 350’ Thick (Medium Blue) 800’ Thick (Dark Red) ~550’ Thic
Slide 35: Monterey Shale Play
May 6-8, 2012 35 Producing (Gross): 50 BOPD 3-4 Delineation Wells Planned AMI Outlines Seneca Resources Monterey Shale Play Monterey Shale Play Belridge Field 5 AMIs across the field Seneca WI: 12.5% Seneca NRI: 11.1% Gross Thickness of Monterey Interval
Slide 36: (SENECA
(SENECA RESOURCES
Slide 37: Net Rig Count (Working Interest)
May 6-8, 2012 37 Seneca Resources Net Rig Count (Working Interest) Fiscal 2013 rig count range depends on participation in EOG JV wells
Slide 38: Ramping Marcellus Shale Production
May 6-8, 2012 38 Seneca Resources Ramping Marcellus Shale Production
Slide 39: Eastern Development Area: Results & Plan Forward
May 6-8, 2012 39 Covington – Fully Developed 47 Wells Drilled and Producing Production: 85 MMcf per Day Seneca Resources Eastern Development Area (EDA) – Results & Plan Forward SRC Lease Acreage SRC Fee Acreage DCNR Tract 595 FY2012: 1 Rig Operating FY2013: 0-1 Rigs Operating Production: 45 MMcf per
Slide 40: Evaluating Marcellus Wet Gas Potential
May 6-8, 2012 40 Owl’s Nest (2 Wells) Church Run (1 Well) Seneca Resources Evaluating Marcellus Wet Gas Potential More than 100,000 acres within the targeted window of 1,100 Btu to 1,200 Btu Will need cryogenic processing plant running in “ethane rejection mode” processing Potential $0.50 - $0.70 pe
Slide 41: Utica Shale: Activity Summary
May 6-8, 2012 41 Chesapeake 9.5 MMCFD 1,425 BLPD Chesapeake 3.8 MMCFD 980 BLPD Chesapeake 3.1 MMCFD 1,015 BLPD Dry Wet Hess 11 MMCFD Utica Shale – Activity Summary Seneca Resources Vertical Well Drilled Horizontal Well Permit Horizontal Well Drilled Mt. Jewett Vertical: Tested Dry Gas Horizontal: Pr
Slide 42: Increased California Spending with Ongoing Marcellus Cuts
May 6-8, 2012 42 Seneca Resources Increased California Spending with Ongoing Marcellus Cuts (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 C
Slide 43: Production Still Growing
May 6-8, 2012 43 Seneca Resources Production Still Growing
Slide 44: Appendix
May 6-8, 2012 44 National Fuel Gas Company Appendix
Slide 45: Manageable Debt Maturity Schedule
May 6-8, 2012 45 National Fuel Gas Company Manageable Debt Maturity Schedule
Slide 46: Targeted Capital Structure
May 6-8, 2012 46 National Fuel Gas Company Targeted Capital Structure Long-Term Consolidated Capital Structure Target Capital Structure Targets by Segment
Slide 47: Pipeline & Storage / Midstream Appendix
May 6-8, 2012 47 Pipeline & Storage / Midstream Appendix
Slide 48: Pipeline & Storage Expansion Initiatives
May 6-8, 2012 48 Project Name Capacity (Dth/D) Est. CapEx In-Service Market Status Pipeline & Storage Expansion Initiatives Lamont Compressor Station 40,000 $6 MM 6/2010 Fully Subscribed Completed Lamont Phase II Project 50,000 $7.6 MM 7/2011 Fully Subscribed Completed Line “N” Expansion 160,000 $22
Slide 49: Midstream Corporation Expansion Initiatives
May 6-8, 2012 49 Project Name Capacity (Mcf/D) Est. CapEx In-Service Date Market Comments Midstream Corporation Expansion Initiatives Covington Gathering System 220,000 $54 MM Multiple Phases - Most In-Service Fully Subscribed Completed – Flowing into TGP 300 Line. This includes $32 million of spend
Slide 50: Exploration & Production Appendix
May 6-8, 2012 50 Exploration & Production Appendix
Slide 51: Hedge Positions and Strategy
May 6-8, 2012 51 Natural Gas Swaps Volume (Bcf) Average Hedge Price Oil Swaps Volume (MMBbl) Average Hedge Price National Fuel Gas Company Hedge Positions and Strategy Fiscal 2012 (1) 17.5 $5.89 / Mcf Fiscal 2013 38.9 $4.97 / Mcf Fiscal 2014 19.5 $4.34 / Mcf Fiscal 2012 (1) 0.8 $77.03 / Bbl Fiscal 2
Slide 52: CEE
CEE {) SENECA RESOURCES
Slide 53: Slide 53
Slide 54: Western Development Area: Results & Plan Forward
May 6-8, 2012 52 Marcellus Shale Western Development Area (WDA) – Results & Plan Forward SRC Lease Acreage SRC Fee Acreage EOG Contributed JV Acreage SRC Contributed JV Acreage Seneca Operated EOG Operated Approx. Outline of JV Acreage 200,000 Gross Acres Seneca 50% W.I. (Avg. 58% NRI) Punxy (EOG Op
Slide 55: Expanding 3D Seismic Coverage
May 6-8, 2012 53 Punxy West Branch Mt. Jewett DCNR 001 DCNR 007 Covington DCNR 595 DCNR 100 Owl’s Nest Marcellus Shale Expanding 3D Seismic Coverage Completed In Progress
Slide 56: Covington Typecurve: 6.7 Bcfe EUR
May 6-8, 2012 54 Marcellus Shale Covington Typecurve – 6.7 Bcfe EUR (Greater Than 3,500’ Lateral)
Slide 57: Targeting Continued Cost Reductions
May 6-8, 2012 55 Marcellus Shale Targeting Continued Cost Reductions
Slide 58: Breaking Down Our Acreage Position
May 6-8, 2012 56 Area Net Acres Possible Locations Wells Drilled Wells Completed EUR (Bcfe) Status Developed Marcellus Shale Breaking Down Our Acreage Position Eastern Development Area (EDA) Covington 7,000 5.5 6,000 7.0 Full Development 10,000 8.0 Full Development 15,000 3.0 - 5.0 Delineating 13,00
Slide 59: Water Management Program
May 6-8, 2012 57 Marcellus Shale Water Management Program Water Sourcing: Coal mine runoff Permitted freshwater sources Recycled water Water Management: Instituted a “Zero Surface Discharge” policy Recycle Marcellus flowback and produced water Centralized water handling in development areas Tioga Co
Slide 60: Zero Liquid Discharge Operation
May 6-8, 2012 58 Marcellus Shale “Zero Liquid Discharge Operation” Utilizing a state-of-the-art evaporative technology to ensure no liquid is discharged at the surface Building centrally located units in the Western Development Area (WDA) and the Eastern Development Area (EDA) Removes all liquids fr
Slide 61: Comparable GAAP Financial Measure Slides and Reconciliations
May 6-8, 2012 59 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 reconc