National Fuel Gas Company · NYSE:NFG
National Fuel Gas — Q2 2022 Earnings Presentation
63 slides from National Fuel Gas's earnings presentation, May 5, 2022
Slide 1: Investor Presentation Q2 Fiscal 2022 Update
Exhibit 99 Investor Presentation Q2 Fiscal 2022 Update May 5, 2022
Slide 2: Commitment to safe and environmentally conscious operations
National Fuel is committed to the safe and environmentally conscious development, transportation, storage, and distribution of natural gas and oil resources. For additional information, please review our Corporate Responsibility Report. 2
Slide 3: NFG: A Diversified, Integrated Natural Gas Company
NFG: A Diversified, Integrated Natural Gas Company Developing our large, high-quality Upstream acreage position in Marcellus & Utica Exploration & (1) shales Production ~1.2 Million ~930 MMcf/day 50% of NFG Net acres in Net Appalachian natural (2) EBITDA (3) Appalachia gas production Expanding and m
Slide 4: Why National Fuel?
Why National Fuel? Diversified Assets Provide Stability and Long-Term Growth Opportunities Integrated Model Enhances Shareholder Value 1 Expect to Generate Significant Free Cash Flow in Fiscal 2022 and Beyond 2 Optimization of Interstate Pipeline System Drives Future Expected Opportunities 3 Long Hi
Slide 5: Integrated Model Enhances Shareholder Value
1 Integrated Model Enhances Shareholder Value . . . Geographic and Operational Integration Benefits of National Fuel’s Upstream Drives Synergies: Integrated Structure: Exploration & ü Ability to adjust to changing commodity Production Upstream Midstream price environments ü Co-development of Marcell
Slide 6: Continues to Drive Growth Opportunities
. . . and Continues to Drive Growth Opportunities Near Term Strategy Leverages Integration Across the Value Chain Pipeline & Exploration & Gathering Utility Storage Production ü Integrated Upstream and Midstream development of high-quality Appalachian assets § ~1.2 million net acres in the Marcellus
Slide 7: Consolidated Business Expected to Generate Significant Free Cash Flow
2 Consolidated Business Expected to Generate Significant Free Cash Flow . .. . . . . With Sustainable, Growing Free Cash Flow Generation . . . In Fiscal 2022 and Fiscal 2023. . . Expected Over the Long-Term ✓ Consolidated capital expenditure optimization to maximize long- Free Cash Flow Annualized D
Slide 8: Optimization of Interstate Pipeline Drives Future Opportunities
Optimization of Interstate Pipeline Drives Future Expected Opportunities 3 ü Near Term Growth: TCPL – Canada/Dawn TGP - Hopewell § FM100: $35 MM in Expansion Revenues (placed into service December 1, 2021) § Supply Rate Case Settlement - additional $15 MM step-up in base rates (April 2022) Millenium
Slide 9: Over Half Century of Dividend Growth
4 Over Half Century of Dividend Growth $1.82 2.6% 51Years 119 Years (1) per share yield Consecutive Dividend Increases Consecutive Payments $3.4 Billion Dividend payments since 1970 $0.19 per share Annual Rate at Fiscal Year End 9 (1) As of May 3, 2022.
Slide 10: Focused on Corporate Responsibility and ESG
5 Focused on Corporate Responsibility and ESG Recently Published Inaugural Climate Report Provides Enhanced Climate-Risk Disclosures, Responsive to Key Stakeholder Priorities ü Alignment with TCFD – report further aligns the Company’s climate-risk disclosures with the TCFD framework ü Evaluating our
Slide 11: Emissions Reduction Targets and Initiatives
Emissions Reduction Targets and Initiatives Significant Methane Intensity and Greenhouse Gas Emissions Reduction Ongoing Sustainability Initiatives (1) Targets Across the Energy Value Chain ü ONE Future NFG 25% Reduction in GHG Emissions by 2030 ü EPA Methane Challenge ü Responsible Gas Certificatio
Slide 12: Second Quarter Fiscal 2022 Financial Highlights
Second Quarter Fiscal 2022 Financial Highlights 12
Slide 13: Second Quarter Fiscal 2022 Results and Drivers
Second Quarter Fiscal 2022 Results and Drivers (1) Adjusted Operating Results ($/share) Q2 FY 2021 Q2 FY 2022 Major Drivers $1.68 Natural Gas Prices $70.45 $2.60 $57.11 $2.28 $1.34 Exploration & Oil Prices Production $0.77 Exploration & Crude Oil ($/Bbl) Natural Gas ($/Mcfe) Production $0.52 Natural
Slide 14: Earnings Guidance
Earnings Guidance FY2021 Adjusted Operating Results FY2022 Earnings Guidance (1) (1) $4.29/share $5.70 to $6.00/share Key Guidance Drivers ▪ 340-360 Bcfe (up 7% vs. FY21) Net Production (2) ▪ ~$2.65/Mcf (vs. $2.25/Mcf in FY21) Realized natural gas prices (after-hedge) (3) Exploration & ▪ ~$70.00/Bbl
Slide 15: Divestiture of Seneca's California Assets
Divestiture of Seneca’s California Assets 15
Slide 16: E&P and Gathering California Divestiture Overview
E&P and Gathering California Divestiture Overview Divestiture of Seneca’s California assets for total consideration of between $280 - $310 MM ü $280 million cash at closing ü Up to three annual contingent payments that can total $30 million in aggregate, from 2023 – 2025 § Value of contingent paymen
Slide 17: Exploration & Production & Gathering Overview
Exploration & Production & Gathering Overview Seneca Resources Company, LLC National Fuel Gas Midstream Company, LLC 17
Slide 18: Growing Production within Disciplined Capital Program
E&P and Gathering Growing Production within Disciplined Capital Program E&P Net Production (Bcfe) Near-Term Strategy 400 ü Continue two rig development program with focus on maximizing returns and cash flows 300 200 § EDA share of total drilling activity increasing (2) 340-360 327.4 from ~25% (FY20)
Slide 19: Significant Appalachian Acreage Position
E&P and Gathering Significant Appalachian Acreage Position ~1,000 Economic Drilling Locations (1) at $2.50 NYMEX Prices ( ) ü Decades of highly-economic inventory (~40 wells per year at current 2-rig pace) ü Large, contiguous acreage position, driving increased capital efficiency ü Development suppo
Slide 20: Eastern Development Area
E&P and Gathering Eastern Development Area Seneca EDA Highlights EDA – ~270,000 Acres 1 Tioga County, PA ü ~150 undeveloped Utica locations ü ~90 undeveloped Marcellus locations ü Gathering infrastructure: NFG Tioga gathering systems ü Numerous marketing opportunities: § Ability to utilize Seneca’s
Slide 21: EDA: Tioga County Development
E&P and Gathering EDA: Tioga County Development Large Contiguous Acreage Position, with Highly-Economic Utica and Marcellus Inventory Tioga Development Plan Significant Tioga County Acreage Position ü Significant additional assets acquired in mid-2020, contiguous to NFG’s existing Tioga County Undev
Slide 22: Integrated Development – EDA Tioga Gathering
E&P and Gathering Integrated Development – EDA Tioga Gathering NFG Tioga Gathering Systems Support Growing Seneca Production Current Systems In-Service Tioga County Gathering Systems Map ü Tioga Gathering System (1) § Total Investment (to date): ~$237 million § Capacity: up to 550,000 Dth per day (I
Slide 23: EDA: Tioga County Firm Sales and Firm Transportation
E&P and Gathering EDA: Tioga County Development Production Underpinned by Firm Sales and Firm Transportation Contracts Tioga County Gas Marketing Strategy Tioga County Gross Firm Contract Volumes (MDth/d) 500 ü Production supported by firm transportation capacity to premium markets: 450 400 Leidy So
Slide 24: EDA: Lycoming County Development
E&P and Gathering EDA: Lycoming County Development Marcellus Development in Lycoming County Fully Utilizes Valuable Firm Transportation ü Prolific Marcellus acreage with average EUR of 2.5-3.0 Bcf / 1,000 ft ü ~30 remaining Marcellus locations § Average lateral length of 5,500-6,000’ and consolidate
Slide 25: Integrated Development – EDA Lycoming Gathering
E&P and Gathering Integrated Development – EDA Lycoming Gathering NFG Trout Run Gathering System Supports Seneca and Third-Party Development Current System In-Service Trout Run Gathering System Map ü Total Investment (to date): ~$272 million ü Capacity: 466,000 to 585,000 Dth per day ü Current Produ
Slide 26: Western Development Area
E&P and Gathering Western Development Area (1) Marcellus Core Acreage vs. Utica Trend WDA Highlights ü Large well inventory: § Marcellus Shale: 600+ well locations remaining / 200,000 acres § Utica Shale: 500+ potential locations across Utica trend (2) / evaluating extent of prospective acreage ü Fe
Slide 27: WDA Development Plan
E&P and Gathering WDA Development Plan Beechwood Development Area Provides ~90 Potential Utica Locations with Strong Economics WDA Development Update WDA – Potential RV-Beechwood Utica Development Area ü WDA-CRV Area: producing from both Utica and Marcellus wells, with development focused on new Uti
Slide 28: Integrated Development – WDA Gathering System
E&P and Gathering Integrated Development – WDA Gathering System Gathering System Build-Out Tailored to Accommodate Seneca’s WDA Development Clermont Gathering System Map Current System In-Service § Capacity: 750 MMcf per day § Interconnects with TGP 300 and NFG Supply § Total Investment (to date): $
Slide 29: WDA Firm Transportation and Sales Capacity
E&P and Gathering WDA Firm Transportation and Sales Capacity WDA Exit Capacity Supports Production and Enhances Consolidated Returns WDA Gas Marketing Strategy WDA Contracted Firm Transport and Gross Sales Volumes (MDth/d) 500 ü Will continue to layer-in firm sales deals of short and longer duration
Slide 30: Long-term Contracts Supporting Appalachian Production
E&P and Gathering Long-term Contracts Supporting Appalachian Production Seneca Appalachia Natural Gas Marketing Firm Contract / Transport Volumes (MDth/day) 1,200 Leidy South (Transco & NFG - Supply) Transco Zone 6 Non-NY 1,000 330,000 Dth/d *Capacity can be utilized by all three producing areas (WD
Slide 31: Near-term Firm Sales Provide Market & Price Certainty
E&P and Gathering Near-term Firm Sales Provide Market & Price Certainty Net Contracted Firm Sales / Transport Volumes (Dth per day) (1) Contracted Index Price Differentials ($ per Dth) NYMEX Dawn Other Capped Fixed Price 934,800 900,600 881,900 199,700 210,000 203,200 $2.45 $2.67 $2.63 (3) 46,800 7,
Slide 32: Fiscal 2022 Production Profile
E&P and Gathering Fiscal 2022 Production Profile 158 Bcf of Appalachian Production Protected by Firm Sales (1) § 137 Bcf locked-in realizing net ~$2.28/Mcf (2) § 21 Bcf of additional firm sales 400 (4) 340-360 Bcfe ~3 Bcfe ~17 Bcf (3) 350 ~17 Bcf ~4 Bcf Spot production 300 assumed to be sold at $6.2
Slide 33: Continued Decrease in E&P Operating Costs
E&P and Gathering Continued Decrease in E&P Operating Costs Increased Scale and Highly-Contiguous Operations Expected to Drive Lower Cash Unit Costs (4) Seneca Cash OpEx ($/Mcfe) Appalachia LOE ($/Mcfe) Approximately $0.28/Mcfe Reduction in Fees Paid to NFG’s Gathering Segment Comprise ~90% Expected
Slide 34: Sustainability Initiatives – RSG and Pneumatic Devices
E&P and Gathering Sustainability Initiatives – RSG and Pneumatic Devices Responsible Gas Certification Pneumatic Devices Emissions Reduction Initiative Continue to systematically transition natural gas actuated pneumatic devices to Equitable Origin compressed air, electric, or solar powered compress
Slide 35: Pipeline & Storage Overview
Pipeline & Storage Overview National Fuel Gas Supply Corporation Empire Pipeline, Inc. 35
Slide 36: Pipeline & Storage Segment Overview
Pipeline & Storage Pipeline & Storage Segment Overview National Fuel Gas Supply Corporation (1) ü Contracted Capacity : § Firm Transportation: 3,284 MDth per day § Firm Storage: 70,693 Mdth (fully subscribed) (2) ü Rate Base : ~$1,173 million Empire Pipeline ü FERC Rate Proceeding Status: § Rate cas
Slide 37: FM100 Project – Significant Investment by Supply Corp.
Pipeline & Storage FM100 Project – Significant Investment by Supply Corp. (1) ü In-service date: December 1, 2021 ü Estimated capital cost: $230 million ü Annual revenue: ~$50 million § In-service: ~$35 million (lease revenues) (2) § April 2022: ~$15 million (negotiated revenue step-up) ü Underpinne
Slide 38: Continued Expansion of the Supply Corp. Line N System
Pipeline & Storage Continued Expansion of the Supply Corp. Line N System Line N to Monaca Project ü Shell Chemical Appalachia, LLC - On-system Delivery Point § In-service date: November 2019 TGP 219 § Contracted firm transport: 133,000 Dth/d § Capital cost: $24.5 million § Annual revenue: $5.6 milli
Slide 39: Northern Access Project
Pipeline & Storage Northern Access Project Delivery points: ü 350,000 Dth/d to Chippawa (TCPL interconnect) ü 140,000 Dth/d to East Aurora (TGP 200 line) Regulatory/legal status: To Dawn ü Feb. 2017 – FERC 7(c) certificate issued ü Aug. 2018 – FERC issued Order finding that NY DEC waived water quali
Slide 40: Pipeline & Storage Customer Mix
Pipeline & Storage Pipeline & Storage Customer Mix (1) Customer Transportation by Shipper Type Affiliated Customer Mix (Contracted Capacity) Outside Affiliated Non-Affiliated Pipeline 9% End User 8% 26% 52% Producer Marketer 7% 36% 84% 74% LDC 48% 40% 16% LDCs Producers Firm Storage Firm Transport 4
Slide 41: Utility Overview
Utility Overview National Fuel Gas Distribution Corporation 41
Slide 42: New York & Pennsylvania Service Territories
Utility New York & Pennsylvania Service Territories New York (1) Total Customers : 539,000 (2) ROE: 8.7% (NY PSC Rate Case Order, April 2017) Rate Mechanisms: o Revenue Decoupling o Weather Normalization o Low Income Rates o Merchant Function Charge (Uncollectibles Adj.) o 90/10 Sharing (Large Custo
Slide 43: Utility Continues its Significant Investments in Safety
Utility Utility Continues its Significant Investments in Safety Long-Standing Focus on Distribution System Safety and Reliability $125.0 (1) Capital Expenditures for Safety Total Capital Expenditures $100-$110 $100.8 $98.0 $95.8 $94.3 $100.0 $85.6 $80.9 $79.7 $74.1 $71.4 $75.0 $69.9 $63.6 $61.8 $50.
Slide 44: Long-Standing Pipeline Replacement & Modernization
Utility Long-Standing Pipeline Replacement & Modernization (1) Utility Mains by Material Miles of Utility Main Pipeline Replaced Wrought Iron 159 158 156 154 Coated Bare 144 Cast Iron NY 9,782 miles Plastic Wrought Iron Bare Coated PA* 4,850 miles Plastic 2017 2018 2019 2020 2021 Calendar Year * No
Slide 45: Utility Targeting Substantial Emissions Reductions
Utility Utility Targeting Substantial Emissions Reductions Significant Reductions in Utility GHG Emissions to Date, GHG Reduction Targets, Continuing Focus on Lowering Driven by System Modernization Efforts Carbon Footprint (1) Utility GHG Emissions Reduction Targets Utility EPA Subpart W Emissions
Slide 46: Promoting Renewable Natural Gas and Hydrogen
Utility Promoting Renewable Natural Gas and Hydrogen July 2021 Through Fiscal 2020 October 2020 Ongoing Accepted first RNG deliveries Petitioned NY PSC to include Awarded three RNG grants Continue to advance RNG into NY system from RNG in the supply mix and for $1.2 million through the anaerobic dig
Slide 47: Consolidated Financial Overview
Consolidated Financial Overview Upstream I Midstream I Downstream 47
Slide 48: Diversified, Balanced Earnings and Cash Flows
Diversified, Balanced Earnings and Cash Flows (1) (2) Adjusted Operating Results ($ per share) Adjusted EBITDA ($ millions) $1,200 $5.70 to $6.00 $6.00 $1,086 $1,000 $1,000 $5.00 $4.29 E&P $542 $800 $4.00 $465 $1.83 $600 $3.00 $165 $159 Gathering $0.88 $2.00 $400 $219 $221 Rate Pipeline & Rate $1.01
Slide 49: Disciplined, Flexible Capital Allocation
Disciplined, Flexible Capital Allocation (1) Capital Expenditures by Segment ($ millions) $1,000 (2) (3) Exploration & Production Gathering Pipeline & Storage Utility $725-$870 $781 $770 $719 $750 $583 $381 $475-$550 $492 $384 $500 $455 $356 $35 $246 $74 $50 $50-$60 $250 $252 $48 $33 $167 $143 $100-
Slide 50: Maintaining Strong Balance Sheet & Liquidity
Maintaining Strong Balance Sheet & Liquidity (1) Net Debt / Adjusted EBITDA Capitalization Expect AOCI 3.08 x further 2.72 x 7% 2.61 x reduction in Total 2.47 x 2.48 x 2.45 x FY22 Equity Debt 40% 53% $4.7 Billion Total Capitalization 2017 2018 2019 2020 2021 TTM 2022E 3/31/2022 as of March 31, 2022
Slide 51: Appendix
Appendix 0) National Fuel’
Slide 52: Safe Harbor For Forward Looking Statements
Appendix 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 and gas quantiti
Slide 53: Hedge Positions and Prices
Appendix Hedge Positions and Prices (1) 53 (1) Fixed price physical sales exclude joint development partner’s share of fixed price contract WDA volumes as specified under the joint development agreement.
Slide 54: NYMEX Capped Firm Sales Additional Detail
Appendix NYMEX Capped Firm Sales Additional Detail $3.00 capped firm sales expire 10/31/22 (1) Values shown represent the weighted average differential relative to NYMEX (netback price) and are net of any associated transportation costs. Transportation costs include minor variable components such as
Slide 55: Firm Transportation Commitments
Appendix Firm Transportation Commitments Volume Delivery Demand Charges Production Source Gas Marketing Strategy (Dth/d) Market ($/Dth) Northeast Supply Canada Firm Sales Contracts rd EDA – Tioga 50,000 $0.46 (3 party) Diversification (Dawn) Dawn/NYMEX Tennessee Gas Pipeline NFG pipelines - $0.24 15
Slide 56: Primary Development Area Type Curves
Appendix Primary Development Area Type Curves Lycoming Marcellus Tioga Utica WDA Utica 20 18 16 14 12 10 8 Estimated Cumulative Volumes (Bcf) Lycoming Tioga Utica WDA Utica 6 Year Marcellus (10,000 - (10,000- (5,500-6,000') 11,000') 11,000’) 4 1 3.5 5.9 2.7 5 9.5 14.1 8.0 10 12.2 17.3 10.8 2 EUR (Bc
Slide 57: Comparable GAAP Financial Measure Slides & Reconciliations
Appendix Comparable GAAP Financial Measure Slides & Reconciliations This presentation contains certain non-GAAP financial measures. For pages that contain non-GAAP financial measures, pages containing the most directly comparable GAAP financialmeasuresandreconciliations areprovidedinthe slidesthat f
Slide 58: Non-GAAP Reconciliations – Adjusted EBITDA
Appendix Non-GAAP Reconciliations – Adjusted EBITDA (1) Reconciliation of Adjusted EBITDA to Consolidated Net Income ($ Thousands) 12-Months FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Ended 3/31/22 Total Adjusted EBITDA Exploration & Production Adjusted EBITDA $ 361,079 $ 317,707 $ 351,159 $ 312,166 46
Slide 59: Non-GAAP Reconciliations – Adjusted EBITDA, by Segment
Appendix Non-GAAP Reconciliations – Adjusted EBITDA, by Segment Reconciliation of Adjusted EBITDA to Net Income, by Segment FY21 ($ Thousands) FY22 12-Months FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FYTD FYTD Ended 3/31/22 Exploration and Production Segment Reported GAAP Earnings $ 129,326 $ 180,632
Slide 60: Non-GAAP Reconciliations – Adjusted Operating Results
Appendix Non-GAAP Reconciliations – Adjusted Operating Results 60
Slide 61: Non-GAAP Reconciliations – Capital Expenditures
Appendix Non-GAAP Reconciliations – Capital Expenditures Reconciliation of Segment Capital Expenditures to Consolidated Capital Expenditures ($ Thousands) FY 2022 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Guidance Capital Expenditures Exploration & Production Capital Expenditures $ 253,057 $ 380,677 $
Slide 62: Non-GAAP Reconciliations – E&P Operating Expenses
Appendix Non-GAAP Reconciliations – E&P Operating Expenses Reconciliation of Exploration & Production Segment Operating Expenses by Division ($000s unless noted otherwise) Twelve Months Ended Twelve Months Ended September 30, 2021 September 30, 2020 (2) (2) (2) (2) Appalachia West Coast Total E&P Ap
Slide 63: Non-GAAP Reconciliations – Free Cash Flow
Appendix Non-GAAP Reconciliations – Free Cash Flow Reconciliation of Free Cash Flow ($ Thousands) FY 2021 Operating Cash Flow $ 791,553 Less: Change in Working Capital: Receivables and Unbilled Revenue $ (61,413) Gas Stored Underground and Materials, Supplies and Emission Allowances $ (2,014) Unreco