National Fuel Gas Company · NYSE:NFG
National Fuel Gas — Q1 2024 Earnings Presentation
54 slides from National Fuel Gas's earnings presentation, Feb 8, 2024
Slide 1: Investor Presentation Q1 Fiscal 2024 Update
Investor Presentation Q1 Fiscal 2024 Update February 7, 2024
Slide 2: Committed to safe and environmentally conscious natural gas development
National Fuel is committed to the safe and environmentally conscious development, transportation, storage, and distribution of natural gas 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 Upstream Developing our large, high-quality acreage Exploration & position in Marcellus & Utica shales Production 51% of NFG ~1.2 Million ~1.1 Bcf/day Net acres in Net total production(2) EBITDA(1) Appalachia Midstream Expanding and modernizing pipe
Slide 4: Why National Fuel?
Why National Fuel? Diversified Assets Provide Stability and Long-Term Growth Opportunities 1 Integrated Model Enhances Shareholder Value 2 Consolidated Business Expected to Generate Significant Free Cash Flow 3 Long-Term Strategy Delivers Growth and Enhances Capital Efficiency 4 Long History of Retu
Slide 5: Integrated Model Creates Scale and Drives Synergies
1 Integrated Model Creates Scale and Drives Synergies Benefits of National Fuel’s Geographic & Operational Integration Integrated Structure: Upstream Drives Synergies: Exploration & Ability to adjust to changing commodity Production Upstream Midstream price environments Co-development of Marcell
Slide 6: Consolidated Business Expected to Generate Significant Free Cash Flow
2 Consolidated Business Expected to Generate Significant Free Cash Flow Sustainable Free Cash Flow Generation Expected Over the Long-Term Regulated businesses focused on long-term modernization Projected Free Cash Flow ($ Millions)(1) programs that are expected to lead to mid-single digit rate bas
Slide 7: Long-Term Strategy Delivers Growth and Enhances Capital Efficiency
3 Long-Term Strategy Delivers Growth and Enhances Capital Efficiency Delivering Stable Growth Enhancing Capital Efficiency Pipeline & Storage/ Exploration & Production/ Utility Gathering Regulated Non-Regulated Significant modernization More than a decade of core investments can deliver mid-sing
Slide 8: Over Half Century of Dividend Growth
4 Over Half Century of Dividend Growth 53 Years 121 Years $1.98 per share 4.3% yield(1) Consecutive Dividend Increases Consecutive Payments $1.5 Billion 4.2% Dividend payments Over Last 10 Years 2023 Dividend Increase $0.19 per share Annual Rate at Fiscal Year End (1) As of February 5th, 2024. 8
Slide 9: Focused on Corporate Responsibility and Emissions Reductions
5 Focused on Corporate Responsibility and Emissions Reductions Latest Corporate Responsibility Report provides Enhanced GHG Disclosures on Sustainability Initiatives Continued Progress Toward Emissions Reduction Targets Seneca and NFG Midstream achieved certification under Equitable Origins EO10
Slide 10: Emissions Reduction Targets and Initiatives
Emissions Reduction Targets and Initiatives Significant Methane Intensity and Greenhouse Progress Gas Emissions Reduction Targets Across the Ongoing Sustainability Initiatives Since 2020(2) Energy Value Chain(1) Exploration & Responsible Gas Certifications 40% Reduction in Methane Intensity by 203
Slide 11: Utility Targeting Substantial Emissions Reductions
Utility Targeting Substantial Emissions Reductions Significant Reductions in Utility GHG Emissions to Date, GHG Reduction Targets, Continuing Focus on Lowering Driven by System Modernization Efforts Carbon Footprint Utility Mains & Services Emissions(1) Utility GHG Emissions Reduction Targets(1) (Th
Slide 12: First Quarter Fiscal 2024 Financial Highlights
First Quarter Fiscal 2024 Financial Highlights 12
Slide 13: First Quarter Fiscal 2024 Results and Drivers
First Quarter Fiscal 2024 Results and Drivers Adjusted Operating Results ($/share)(1) Q1 FY2023 Q1 FY2024 Major Drivers $1.84 Natural Gas Pricing ($/Mcfe)(2) $3.02 Natural Gas Prices $1.48 $1.46 $2.51 Exploration & Production $0.99 Exploration & Production Net Gas Production $0.60 94.0 Natural Gas P
Slide 14: Fiscal 2024 Earnings Guidance
Fiscal 2024 Earnings Guidance Previous FY2024 Earnings Guidance Updated FY2024 Earnings Guidance Key Guidance Drivers $5.40 to $5.90/share(1) $4.90 to $5.20/share(1) Net Production 395-410 Bcfe (up 8% vs. FY23) Realized natural gas prices (after-hedge) ~$2.43-$2.49/Mcf(2) (vs. $2.55/Mcf in FY23)
Slide 15: Exploration & Production & Gathering Overview
Exploration & Production & Gathering Overview Seneca Resources Company, LLC National Fuel Gas Midstream Company, LLC 15
Slide 16: Focus on Capital Efficiency
E&P and Gathering Focus on Capital Efficiency Net Production (Bcfe) Capital Expenditures ($ MM)(1) 395- $566 $588 $525- 352.5 372.5 410 575 2022 2023 2024E 2022 2023 2024E Near-Term Strategy Continue to moderate activity level to target maintenance-to-low production growth beyond fiscal 2024 Foc
Slide 17: EDA Transition Driving Improved Economics
E&P and Gathering EDA Transition Driving Improved Economics Transition to full EDA development, with increasing capital efficiency, enhanced productivity and higher returns, provides differentiated investment opportunity to high-grade development program >10 years of prolific EDA inventory at ex
Slide 18: Eastern Development Area (EDA)
E&P and Gathering Eastern Development Area (EDA) Seneca EDA Highlights EDA – ~309,000 Acres 1 Tioga County, PA Undeveloped Utica ~200 Utica future development locations ~80 Marcellus future development locations Gathering infrastructure: NFG Tioga gathering systems Numerous marketing opportu
Slide 19: Integrated Development – EDA Gathering
E&P and Gathering Integrated Development – EDA Gathering Current Systems In-Service Gathering Systems Map 1 Tioga Gathering Systems Total Investment (to date): ~$436 million(1) Capacity: up to 970,000 Dth per day Current Production Sources: Seneca Resources & Third Party Interconnects: Empir
Slide 20: Western Development Area (WDA)
E&P and Gathering Western Development Area (WDA) Marcellus Core Acreage vs. Utica Trend(1) WDA Highlights Large well inventory: Marcellus Shale: 600+ well locations remaining / 200,000 acres Utica Shale: 500+ potential locations across Utica trend / evaluating extent of prospective acreage(2)
Slide 21: 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 Total Investment (to date): ~$397 million Capacity: up to 750 MMcf per day Current Production Sour
Slide 22: Production Supported by Long-Term Contracts
E&P and Gathering Production Supported by Long-Term Contracts Natural Gas Marketing Firm Contract / Transport Volumes (gross MDth/day) 1200 Firm Sales Contracts(1) 1000 Will continue to layer-in firm sales deals to reduce in-basin spot exposure Leidy South (Transco & NFG - Supply) Gross Firm Volumes
Slide 23: Near-term Firm Sales Provide Market & Price Certainty
E&P and Gathering Near-term Firm Sales Provide Market & Price Certainty Net Contracted Firm Sales (Dth per day) Contracted Index Price Differentials ($ per Dth)(1) NYMEX Dawn Other Capped Fixed Price 38,300 (2) $0.64 1,058,900 1,001,900 993,800 1,018,200 305,400 208,700 200,300 238,000 $2.47 $2.41 $
Slide 24: Fiscal 2024 Net Production Profile
E&P and Gathering Fiscal 2024 Net Production Profile 271 Bcf of Appalachian Production Protected by Firm Sales 172 Bcf locked-in realizing ~$2.69/Mcf(1), net of transportation 45 Bcf of no-cost collars with $3.39/Mcf floor(2) 54 Bcf of additional firm sales(3) 395-410 Bcfe ~31 Bcfe ~54 Bcfe Ne
Slide 25: Competitive, Low-Cost Profile Operations
E&P and Gathering Competitive, Low-Cost Profile Operations Increased Scale and Highly-Contiguous Operations Drive Low Cash Unit Costs Seneca Cash OpEx ($/Mcfe) $1.32 Operating $1.22 results excluding $0.14 $1.14 California operations $0.12 $1.13 $0.12 $0.13 $0.30 $0.97 $0.93 ~$0.95 $0.26 Fees Paid
Slide 26: Sustainability Initiatives
E&P and Gathering Sustainability Initiatives Responsible Gas Certifications, Methane Detection & Biodiversity Equitable Origin – EO100TM Standard for Responsible Methane Detection Energy Development Certifications For the past decade, standard pad design has included fixed gas detection systems in
Slide 27: Pipeline & Storage Overview
Pipeline & Storage Overview National Fuel Gas Supply Corporation Empire Pipeline, Inc. 27
Slide 28: Pipeline & Storage Segment Overview
Pipeline & Storage Pipeline & Storage Segment Overview National Fuel Gas Supply Corporation Contracted Capacity(1): Firm Transportation: 3,408 MDth per day Firm Storage: 70,693 MDth (fully subscribed) Rate Base(2): ~$1,179 million FERC Rate Proceeding Status: Empire Pipeline Filed rate c
Slide 29: Tioga Pathway Project – Organic Growth
Pipeline & Storage Tioga Pathway Project – Organic Growth Project provides long-term revenue growth for Supply, while providing an additional outlet for Seneca’s EDA development Capacity: 190,000 Dth/day Estimated annual revenue: ~$15 million (underpinned by 15-year agreement with Seneca) Esti
Slide 30: Continued Expansion of the Supply Corp. Line N System
Pipeline & Storage Continued Expansion of the Supply Corp. Line N System Recent Expansion of Line N Over the past four years, the company has successfully placed into service several projects which have added: Mercer Contracted firm transport: 158,000 Dth/d Contracted firm storage: 267,000 Dth
Slide 31: Northern Access Project
Pipeline & Storage 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: To Dawn Feb. 2017 – FERC 7(c) certificate issued Aug. 2018 – FERC issued Order finding that NY DEC waived water quali
Slide 32: Pipeline & Storage Customer Mix
Pipeline & Storage Pipeline & Storage Customer Mix Customer Transportation by Shipper Type(1) Affiliated Customer Mix (Contracted Capacity) Affiliated Non-Affiliated End User 8% 22% Outside Producer Pipeline 28% 52% 16% 79% Marketer 78% 12% LDC 48% 36% 21% LDCs Producers Firm Storage Firm Transport
Slide 33: Utility Overview
Utility Overview National Fuel Gas Distribution Corporation 33
Slide 34: New York & Pennsylvania Service Territories
Utility New York & Pennsylvania Service Territories New York Total Customers(1): 540,000 Allowed 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 Cus
Slide 35: New York Rate Case
Utility New York Rate Case On October 31, 2023, National Fuel Gas Distribution Corporation filed a request with the New York Public Service Commission (NY PSC) to amend its tariff and increase its base rates. National Fuel’s base rates have not changed since the last base rate case was litigated in
Slide 36: Customer Affordability
Utility Customer Affordability New York Pennsylvania #3 #1 Out of 9 Gas Utilities(1) Out of 6 Gas Utilities(2) New York Large Gas Utilities Monthly Bill Pennsylvania Large Gas Utilities Monthly Bill Residential Heating (based on 100 MCF annually) Residential Heating (based on 15 MCF monthly) $200 $3
Slide 37: Utility Continues its Significant Investments in Safety
Utility Utility Continues its Significant Investments in Safety Long-Standing Focus on Distribution System Safety and Reliability Capital Expenditures for Safety Total Capital Expenditures(1) $150-$175 (2) Utility Capital Expenditures ($ millions) $139.9 $111.0 $108.6 $100.8 $95.8 $94.3 $85.6 $82.6
Slide 38: Long-Standing Pipeline Replacement & Modernization
Utility Long-Standing Pipeline Replacement & Modernization Utility Mains by Material(1) Miles of Utility Main Pipeline Replaced(2) Wrought Iron 158 161 Coated 154 156 154 Bare NY 45 40 43 41 49 9,817 miles Plastic Coated Wrought Iron 113 114 113 113 112 Bare PA 4,832 miles Plastic 2019 2020 2021 202
Slide 39: Promoting Renewable Natural Gas and Hydrogen
Utility Promoting Renewable Natural Gas and Hydrogen Through Fiscal 2020 July 2021 Ongoing Accepted first RNG deliveries into Advance RNG, Hydrogen, and Awarded three RNG grants for other CLCPA related NY system from anaerobic $1.2 million through the Utility’s digester project (receipts opportuniti
Slide 40: Consolidated Financial Overview
Consolidated Financial Overview Upstream I Midstream I Downstream 40
Slide 41: Diversified, Balanced Earnings and Cash Flows
Diversified, Balanced Earnings and Cash Flows Adjusted Operating Results ($ per share)(1) Adjusted EBITDA ($ millions)(2) $1,226 $5.88 $1,165 $1,137 $5.17 $4.90 - $5.20 $656 $3.21 $612 $581 $2.52 E&P Gathering $177 $186 $192 $1.01 $1.08 Pipeline & $241 $1.11 $237 $232 $1.09 Storage $0.59 $0.52 Utili
Slide 42: Disciplined, Flexible Capital Allocation
Disciplined, Flexible Capital Allocation Capital Expenditures by Segment ($ millions)(1) Exploration & Production (2) Gathering (3) Pipeline & Storage Utility $974 $885-$1,000 $829 $781 $770 $719 $588 $525-575 $381 $492 $384 $566 $35 $103 $90-110 $74 $50 $252 $56 $142 $120-140 $143 $167 $96 $111 $14
Slide 43: Maintaining Strong Balance Sheet & Liquidity
Maintaining Strong Balance Sheet & Liquidity Net Debt / Adjusted EBITDA(1) Capitalization 3.08 x 2.61 x 2.72 x 2.22 x 2.27 x 2.27 x Total Debt Equity 46% 54% 2019 2020 2021 2022 2023 TTM $5.9 Billion Total Capitalization Fiscal Year 12/31/23 as of December 31, 2023(2) Debt Maturity Profile by Fiscal
Slide 44: Appendix
Appendix 44
Slide 45: 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 gas quantities, stra
Slide 46: Hedge Positions and Prices
Appendix Hedge Positions and Prices Natural Gas Volumes in thousand MMBtu; Prices in $/MMBtu Fiscal 2024 Q2 Q3 Q4 Avg. Avg. Avg. Volume Price Volume Price Volume Price NYMEX Swaps 34,770 $3.39 38,670 $3.35 38,670 $3.35 No Cost Collars 17,100 $3.42 / $4.56 14,400 $3.22 / $3.79 14,400 $3.22 / $3.79 (1
Slide 47: NYMEX Capped Firm Sales Additional Detail
Appendix NYMEX Capped Firm Sales Additional Detail (1) Values shown represent the weighted average differential relative to NYMEX (netback price) and are net of any associated transportation costs. Transportation costs include minor variable components such as the Canadian exchange rate and fuel com
Slide 48: Firm Transportation Commitments
Appendix Firm Transportation Commitments Volume Delivery Demand Charges Production Source Gas Marketing Strategy (Dth/d) Market ($/Dth) Northeast Supply Canada Firm Sales Contracts Diversification EDA – Tioga 50,000 $0.46 (3rd party) (Dawn) Dawn/NYMEX Tennessee Gas Pipeline NFG pipelines - $0.24 Nia
Slide 49: Comparable GAAP Financial Measure Slides & Reconciliations
Appendix Comparable GAAP Financial Measure Slides & Reconciliations This presentation contains certain non-GAAP financial measures. For pages that contain non-GAAP financial measures, pages containing the most directly comparable GAAP financial measures and reconciliations are provided in the slides
Slide 50: Non-GAAP Reconciliations – Adjusted EBITDA
Appendix Non-GAAP Reconciliations – Adjusted EBITDA Reconciliation of Adjusted EBITDA to Consolidated Net Income ($ Thousands) 12-Months Ended FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 12/31/2023 Total Adjusted EBITDA Exploration & Production Adjusted EBITDA $ 351,159 $ 312,166 464,529 656,310 611,782
Slide 51: Non-GAAP Reconciliations – Adjusted EBITDA, by Segment
Appendix Non-GAAP Reconciliations – Adjusted EBITDA, by Segment Reconciliation of Adjusted EBITDA to Net Income, by Segment ($ Thousands) 12-Months FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Ended 12/31/23 Exploration and Production Segment Reported GAAP Earnings $ 180,632 $ 111,807 $ (326,904)
Slide 52: Non-GAAP Reconciliations – Adjusted Operating Results
Appendix Non-GAAP Reconciliations – Adjusted Operating Results Three Months Ended December 31, (in thousands except per share amounts) 2023 2022 Reported GAAP Earnings $ 133,020 $ 169,689 Items impacting comparability: Unrealized (gain) loss on derivative asset (E&P) 4,198 — Tax impact of unrealized
Slide 53: Reconciliation – Capital Expenditures
Appendix Reconciliation – Capital Expenditures Reconciliation of Segment Capital Expenditures to Consolidated Capital Expenditures ($ Thousands) FY 2024 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Guidance Capital Expenditures Exploration & Production Capital Expenditures $ 491,889 $ 670,455 $ 381,408 $
Slide 54: Reconciliation – E&P Operating Expenses
Appendix Reconciliation – 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, 2023 September 30, 2022 (2) (2) (2) (2) Appalachia West Coast Total E&P Appalachia W
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