National Fuel Gas Company · NYSE:NFG
National Fuel Gas — Q1 2022 Earnings Presentation
65 slides from National Fuel Gas's earnings presentation, Feb 4, 2022
Slide 1: Investor Presentation Q1 Fiscal 2022 Update
Investor Presentation Q1 Fiscal 2022 Update February 3, 2022
Slide 2: Commitment to safe and environmentally conscious development
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 Upstream Developing our large, high-quality Exploration & acreage position in Marcellus & Production Utica shales(1) 49% of NFG ~1.2 Million ~885 MMcf/day Net acres in Net Appalachian natural EBITDA(2) Appalachia gas production(3) Midstream Expandin
Slide 4: Why National Fuel?
Why National Fuel? Diversified Assets Provide Stability and Long-Term Growth Opportunities 1 Integrated Model Enhances Shareholder Value 2 Expect to Generate Significant Free Cash Flow in Fiscal 2022 and Beyond 3 Interstate Pipeline Business Drives Significant Regulated Growth 4 Long History of Retu
Slide 5: Integrated Model Enhances Shareholder Value
1 Integrated Model Enhances Shareholder Value . . . Benefits of National Fuel’s Geographic and Operational Integrated Structure: Upstream Integration Drives Synergies: Exploration & Ability to adjust to changing Production Upstream Midstream commodity price environments 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 Exploration & Pipeline & Gathering Utility Production Storage Integrated Upstream and Midstream development of high-quality Appalachian assets ~1.2 million net acres in the Marcellus
Slide 7: Free Cash Flow
2 Consolidated Business Expected to Generate Significant Free Cash Flow . . . . . . In Fiscal 2022 at Natural Gas Prices . . . With Sustainable, Growing Free Cash Flow Well Below Current NYMEX Strip . . . Generation Expected Over the Long-Term Free Cash Flow Dividend $400 Consolidated capital expe
Slide 8: Significant Interstate Pipeline Growth
3 Significant Interstate Pipeline Growth Supply Corp. Rate Case Settlement: Northern Access $35 million increase in base rates Delivery: NY & Canada Empire North (effective February 2020) 490,000 Dth/d Delivery: Canada & NY (remains under development) 205,000 Dth/d Additional $15 million step-
Slide 9: Over Half Century of Dividend Growth
4 Over Half Century of Dividend Growth 51Years 119 Years $1.82 per share 2.9% yield(1) Consecutive Dividend Increases Consecutive Payments $3.4 Billion Dividend payments since 1970 $0.19 per share Annual Rate at Fiscal Year End 9 (1) As of February 1, 2022.
Slide 10: Focused on Corporate Responsibility and ESG
5 Focused on Corporate Responsibility and ESG Second Annual Corporate Responsibility Report Provides Enhanced ESG Disclosures Responsive to Key Stakeholder Priorities Climate Risk – Enhanced disclosure under the Task Force on Climate- Related Financial Disclosure (“TCFD”) framework Greenhouse Ga
Slide 11: Emissions Reduction Targets and Initiatives
Emissions Reduction Targets and Initiatives Significant Methane Intensity and Greenhouse Gas Emissions Ongoing Sustainability Reduction Targets Across the Energy Value Chain(1) Initiatives ONE Future NFG 25% Reduction in GHG Emissions by 2030 EPA Methane Challenge Exploration & Responsible Gas
Slide 12: First Quarter Fiscal 2022 Financial Highlights
First Quarter Fiscal 2022 Financial Highlights 12
Slide 13: First Quarter Fiscal 2022 Results and Drivers
First Quarter Fiscal 2022 Results and Drivers Adjusted Operating Results ($/share)(1) Q1 FY 2021 Q1 FY 2022 Major Drivers $1.48 Natural Gas Prices Oil and Gas Pricing(2) $64.29 $2.52 $49.91 $2.14 Exploration & Oil Prices $1.06 Production $0.68 Crude Oil ($/Bbl) Natural Gas ($/Mcfe) Exploration & Pro
Slide 14: Earnings Guidance
Earnings Guidance FY2021 Adjusted Operating Results FY2022 Earnings Guidance Key Guidance Drivers $4.29/share(1) $5.20 to $5.50/share Net Production 340-365 Bcfe (up 8% vs. FY21) Realized natural gas prices (after-hedge) ~$2.50/Mcf(2) (vs. $2.25/Mcf in FY21) Non-Regulated Exploration Realized oi
Slide 15: Exploration & Production & Gathering Overview
Exploration & Production & Gathering Overview Seneca Resources Company, LLC National Fuel Gas Midstream Company, LLC 15
Slide 16: 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 Continue two rig development program with focus on further improving capital efficiency 300 EDA share of total drilling activity increasing 200 327.4 340-365 from ~25% (FY20)
Slide 17: Significant Appalachian Acreage Position
E&P and Gathering Significant Appalachian Acreage Position ~1,000 Economic Drilling Locations at $2.50 NYMEX Prices(1) Decades of highly-economic inventory WDA – 915,000 Acres(2) (~40 wells per year at current 2-rig pace) Large, contiguous acreage position, driving increased capital efficiency
Slide 18: Eastern Development Area
E&P and Gathering Eastern Development Area Seneca EDA Highlights EDA – ~270,000 Acres 1 Tioga County, PA ~160 undeveloped Utica locations ~90 undeveloped Marcellus locations Gathering infrastructure: NFG Tioga gathering systems Numerous marketing opportunities: Ability to utilize Seneca’s
Slide 19: 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 Significant additional assets acquired in mid- 2020, contiguous to NFG’s existing Tioga County prod
Slide 20: 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 Tioga Gathering System Empire Capacity: up to 550,000 Dth per day (Interconnects with Empire, Eastern, and TG
Slide 21: EDA: Tioga County Development Firm Contracts
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 Production supported by firm transportation capacity to premium 450 markets: 400 Leidy So
Slide 22: EDA: Lycoming County Development
E&P and Gathering EDA: Lycoming County Development Marcellus Development in Lycoming County Fully Utilizes Valuable Firm Transportation Prolific Marcellus acreage with average EUR of 2.5-3.0 Bcf / 1,000 ft ~25 remaining Marcellus locations Average lateral length of 5,500-6,000’ and consolidate
Slide 23: 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 Total Investment (to date): ~$272 million Capacity: 466,000 to 585,000 Dth per day Current Produ
Slide 24: Western Development Area
E&P and Gathering Western Development Area 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) Fee
Slide 25: 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 WDA-CRV Area: producing from both Utica and Marcellus wells, with development focused on new Uti
Slide 26: 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 27: 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 Will continue to layer-in firm sales deals of short and longer duration
Slide 28: 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) 1,000 Transco Zone 6 Non-NY 330,000 Dth/d *Capacity can be utilized by all three producing areas (WD
Slide 29: 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) Contracted Index Price Differentials ($ per Dth)(1) NYMEX Dawn Other Capped Fixed Price 17,300 ($0.77) 21,800 ($0.83) 21,700 ($0.83) 936,100 896,200 889,300 882,400 128
Slide 30: Sustainability Initiatives – RSG and Completion Equipment Study
E&P and Gathering Sustainability Initiatives – RSG and Completion Equipment Study Responsible Gas Certification Completion Equipment Emissions Testing & Field Trial Comprehensive Emissions Testing Equitable Origin (100% of Appalachian Assets Certified December 2021) Performed field testing of Tier
Slide 31: California Oil
E&P and Gathering California Oil Stable Oil Production | Minimal Capital Investment | Steady Free Cash Flow 1 Avg. Daily Production Location Formation Production Method (net BOE/d) East Coalinga/ 11 Temblor Primary 613 Other 2 North Lost Tulare & Primary/ 22 728 Hills Etchegoin Steam flood 3 South L
Slide 32: California – Continued Focus on Integrating Renewable Energy
E&P and Gathering California – Continued Focus on Integrating Renewable Energy Ongoing Investments in Solar Facilities Offset Operational Power Needs North Midway Bakersfield South Midway South Lost Hills Sunset Field (2016) Office (2018) Sunset Field (2022E) Field (2022E) Capacity: 3.1 Megawatts
Slide 33: Fiscal 2022 Production Profile
E&P and Gathering Fiscal 2022 Production Profile 235 Bcf of Appalachian Production Protected by Firm Sales 192 Bcf locked-in realizing net ~$2.23/Mcf (1) 43 Bcf of additional firm sales(2) ~11 Bcfe 340-365 Bcfe 350 ~22 Bcf ~59% of oil 300 ~10 Bcf ~33 Bcf (3) Spot production production Production
Slide 34: Hedge Positions and Prices
E&P and Gathering Hedge Positions and Prices Production Supported by Strong Hedge Positions Pro Forma Natural Gas - MMDth, $/MMBtu Crude Oil - MBbl, $/Bbl 207.3 160.7 $2.76 972 855 $58.28 Fiscal 2022 Fiscal 2022 MMDth MBbl 46.6 $2.47 ~79% ~59% 117 $51.00 Hedged(1) - - Hedged(1) 116.2 $2.79 $58.48 48
Slide 35: Continued Decrease in E&P Operating Costs
E&P and Gathering Continued Decrease in E&P Operating Costs Increased Scale and Highly-Contiguous Operations Expected to Drive Lower Cash Unit Costs Seneca Cash OpEx ($/Mcfe) Appalachia LOE ($/Mcfe)(3) Approximately $0.25/Mcfe Reduction in Fees Paid to NFG’s Gathering Segment Comprise ~90% Expected
Slide 36: Pipeline & Storage Overview
Pipeline & Storage Overview National Fuel Gas Supply Corporation Empire Pipeline, Inc. 36
Slide 37: Pipeline & Storage Segment Overview
Pipeline & Storage Pipeline & Storage Segment Overview National Fuel Gas Supply Corporation Contracted Capacity(1): Firm Transportation: 3,284 MDth per day Firm Storage: 70,693 Mdth (fully subscribed) Rate Base(2): ~$959 million Empire Pipeline FERC Rate Proceeding Status: New rates went
Slide 38: FM100 Project – Significant Investment by Supply Corp.
Pipeline & Storage FM100 Project – Significant Investment by Supply Corp. In-service date: December 1, 2021(1) Estimated capital cost: $230 million Annual revenue: ~$50 million In-service: ~$35 million (lease revenues) April 2022: ~$15 million (negotiated revenue step-up)(2) Underpinned
Slide 39: Empire North Project
Pipeline & Storage Empire North Project Fully Subscribed Project Provides 205,000 Dth/day of Incremental Firm Transportation In-service date: September 15, 2020 Capital cost: $129 million Annual revenues: ~$27 million Underpinned by long-term firm transportation contracts (10-15 years): Re
Slide 40: 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 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 41: 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 42: Pipeline & Storage Customer Mix
Pipeline & Storage Pipeline & Storage Customer Mix Customer Transportation by Shipper Type(1) Affiliated Customer Mix (Contracted Capacity) Outside Affiliated Non-Affiliated Pipeline 9% End User 8% 26% 52% Marketer Producer 7% 36% 84% 74% LDC 40% 48% 16% LDCs Producers Firm Storage Firm Transport (1
Slide 43: Utility Overview
Utility Overview National Fuel Gas Distribution Corporation 43
Slide 44: New York & Pennsylvania Service Territories
Utility New York & Pennsylvania Service Territories New York Total Customers(1): 539,000 ROE: 8.7% (NY PSC Rate Case Order, April 2017)(2) Rate Mechanisms: o Revenue Decoupling o Weather Normalization o Low Income Rates o Merchant Function Charge (Uncollectibles Adj.) o 90/10 Sharing (Large Customer
Slide 45: Utility Continues its Significant Investments in Safety
Utility Utility Continues its Significant Investments in Safety Long-Standing Focus on Distribution System Safety and Reliability $125.0 (1) Capital Expenditures for Safety Total Capital Expenditures Utility Capital Expenditures ($ millions) $98.0 $100.8 $100.0 $95.8 $94.3 $90-$100 $85.6 $80.9 $79.7
Slide 46: Long-Standing Pipeline Replacement & Modernization
Utility Long-Standing Pipeline Replacement & Modernization Utility Mains by Material(1) Miles of Utility Main Pipeline Replaced Wrought Iron 159 158 154 156 Coated Bare 144 NY Cast Iron 9,782 miles Plastic Wrought Coated Bare Iron PA* 4,850 miles Plastic 2017 2018 2019 2020 2021 Calendar Year * No C
Slide 47: A Proven History of Controlling Costs
Utility A Proven History of Controlling Costs Utility O&M Expense and Non-Service Pension Costs ($ millions)(1) Expect ~$10 MM reduction to O&M Expense (GAAP) Non-Service Pension Costs Non-Service Pension Costs in FY22, with associated reduction in customer margin $250 $206 $209 $208 $195 $197 $196
Slide 48: Utility Targeting Substantial Emissions Reductions
Utility Utility Targeting Substantial Emissions Reductions Significant Reductions in Utility GHG Emissions to GHG Reduction Targets, Continuing Focus on Date, Driven by System Modernization Efforts Lowering Carbon Footprint Utility EPA Subpart W Emissions Utility GHG Emissions Reduction Targets(1) (
Slide 49: Promoting Renewable Natural Gas
Utility Promoting Renewable Natural Gas Through Fiscal 2020 October 2020 July 2021 Ongoing Accepted first RNG Petitioned NY PSC to deliveries into NY system Continue to advance Awarded three RNG include RNG in the from anaerobic digester RNG and evaluate grants for $1.2 million supply mix and recove
Slide 50: Consolidated Financial Overview
Consolidated Financial Overview Upstream I Midstream I Downstream 50
Slide 51: Diversified, Balanced Earnings and Cash Flows
Diversified, Balanced Earnings and Cash Flows Adjusted Operating Results ($ per share)(1) Adjusted EBITDA ($ millions)(2) $1,200 $6.00 $5.20 to $5.50 $1,047 $1,000 $5.00 $1,000 $4.29 $4.00 E&P $800 $465 $511 $1.83 $3.00 $600 $159 $163 Gathering $2.00 $0.88 $400 Pipeline & Rate $219 $218 Rate $1.00 $
Slide 52: Disciplined, Flexible Capital Allocation
Disciplined, Flexible Capital Allocation Capital Expenditures by Segment ($ millions)(1) $1,000 (2) (3) Exploration & Production Gathering Pipeline & Storage Utility $781 $770 $719 $665-$810 $750 $583 $381 $492 $384 $500 $455 $425-$500 $356 $35 $246 $74 $250 $50 $50-$60 $252 $33 $48 $143 $167 $100-$
Slide 53: Maintaining Strong Balance Sheet & Liquidity
Maintaining Strong Balance Sheet & Liquidity Net Debt / Adjusted EBITDA(1) Capitalization 3.08 x Expect 2.72 x further Total 2.45 x 2.47 x 2.61 x 2.53 x reduction Equity in FY22 Total 43%(2) Debt 57% 2017 2018 2019 2020 2021 TTM 2022E $4.9 Billion Total Capitalization Fiscal Year 12/31/2021 as of De
Slide 54: Appendix
Appendix 54
Slide 55: 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 56: Hedge Positions and Prices
Appendix Hedge Positions and Prices Natural Gas Volumes in thousand MMBtu; Prices in $/MMBtu Fiscal 2022 Fiscal 2023 Fiscal 2024 Avg. Avg. Avg. Volume Price Volume Price Volume Price NYMEX Swaps 160,740 $2.76 116,200 $2.79 61,080 $2.72 No Cost Collars - - 52,800 $3.06 / $3.65 40,000 $3.18 / $3.86 (1
Slide 57: NYMEX Capped Firm Sales Additional Detail
Appendix NYMEX Capped Firm Sales Additional Detail Capped Firm Sales - Net Contracted Volumes (Dth/d) NYMEX Cap Q2 FY22 Q3 FY22 Q4 FY22 FY23 Avg $2.92 25,800 25,500 25,100 25,800 $3.00 45,100 44,200 44,000 3,700 $3.00 capped firm sales expire 10/31/22 $4.95 17,200 17,000 16,800 17,200 Total 88,100 8
Slide 58: Firm Transportation Commitments
Appendix Firm Transportation Commitments Volume Delivery Demand Charges Production Source Gas Marketing Strategy (Dth/d) Market ($/Dth) Northeast Supply Firm Sales Contracts Canada Diversification EDA – Tioga 50,000 $0.50 (3rd party) Dawn/NYMEX (Dawn) Tennessee Gas Pipeline 10 years NFG pipelines -
Slide 59: Primary Development Area Type Curves
Appendix Primary Development Area Type Curves Lycoming Marcellus Tioga Utica WDA Utica 20 18 16 Cumulative Production, BCF 14 12 10 8 Estimated Cumulative Volumes (Bcf) Lycoming Tioga Utica WDA Utica 6 Year Marcellus (10,000 - (10,000- (5,500-6,000') 11,000') 11,000’) 4 1 3.5 5.9 2.7 5 9.5 14.1 8.0
Slide 60: Comparable GAAP Financial Measure Slides & Reconciliations
Appendix Comparable GAAP Financial Measure Slides & Reconciliations This presentation contains certain non-GAAP financial measures. For pages that contain non-GAAP financial measures, pages containing the most directly comparable GAAP financial measures and reconciliations are provided in the slides
Slide 61: Non-GAAP Reconciliations – Adjusted EBITDA
Appendix Non-GAAP Reconciliations – Adjusted EBITDA (1) Reconciliation of Adjusted EBITDA to Consolidated Net Income ($ Thousands) 12-Months FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Ended 12/31/21 Total Adjusted EBITDA Exploration & Production Adjusted EBITDA $ 361,079 $ 317,707 $ 351,159 $ 312,166 4
Slide 62: 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) FY22 FY21 12-Months FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FYTD FYTD Ended 12/31/21 Exploration and Production Segment Reported GAAP Earnings $ 129,326 $ 180,632
Slide 63: Non-GAAP Reconciliations – Adjusted Operating Results
Appendix Non-GAAP Reconciliations – Adjusted Operating Results Three Months Ended Fiscal Year Ended December 31, September 30, (in thousands except per share amounts) (in thousands except per share amounts) 2021 2020 2021 2020 Reported GAAP Earnings $ 363,647 $ (123,772) Reported GAAP Earnings $ 132
Slide 64: 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 65: 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 Appalachia West Coast(2) Total E&P Appalachia West
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