National Fuel Gas Company · NYSE:NFG
National Fuel Gas — Scotia Howard Weil Energy Conference 2018
56 slides from National Fuel Gas's conference presentation, Mar 26, 2018
Slide 1: Investor Presentation – Scotia Howard Weil Energy Conference
Investor Presentation Scotia Howard Weil Energy Conference March 26 - 28, 2018 Exhibit 99
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, objectives, goals, projections, estimates of oil and gas quantities, strat
Slide 3: NFG: A Diversified Natural Gas Company
NFG: A Diversified Natural Gas Company Providing significant base of stable, regulated earnings and cash flows 743,500 Utility customer accounts in NY & PA For the trailing twelve months ended December 31, 2017. A reconciliation of Adjusted EBITDA to Net Income as presented on the Consolidated State
Slide 4: Creating Long-Term, Sustainable Shareholder Value
Creating Long-Term, Sustainable Shareholder Value Opportunity for Considerable Upstream and Midstream Growth in Appalachia 1 Unique Integration and Diversified Asset Mix Serves as Foundation for Growth Strategy 2 Long-term, Disciplined Approach to Capital Allocation and Returns 3 Large, contiguous f
Slide 5: Benefits of Integration
Benefits of Integration Unique Geographic and Operational Integration Drives Synergies that Maximize Shareholder Value Large Appalachian footprint with considerable opportunity for growth Operational scale Lower cost of capital Lower operating costs More efficient capital investment More competitive
Slide 6: Dividend Track Record
Dividend Track Record $2.8 Billion Dividend payments since 1970 $1.66 per share 47 Years Consecutive Dividend Increases $0.19 per share 115 Years Consecutive Payments 3.3% yield(1) As of March 21, 2018.
Slide 7: Adjusted EBITDA by Segment
Adjusted EBITDA by Segment ($ millions)(1) Balanced Earnings and Cash Flows A reconciliation of Adjusted EBITDA to Net Income as presented on the Consolidated Statement of Income and Earnings Reinvested in the Business is included at the end of this presentation.
Slide 8: Disciplined, Flexible Capital Allocation
Disciplined, Flexible Capital Allocation (2) A reconciliation to Capital Expenditures as presented on the Consolidated Statement of Cash Flows is included at the end of this presentation. FY16, FY17, and FY18 guidance reflects the netting of $157 million, $7 million, and $17 million, respectively, o
Slide 9: Maintaining Strong Balance Sheet & Liquidity
Maintaining Strong Balance Sheet & Liquidity Total Debt 53% $3.9 Billion Total Capitalization as of December 31, 2017 Net Debt / Adjusted EBITDA(1) Capitalization Debt Maturity Profile ($MM) Liquidity Committed Credit Facilities Short-term Debt Outstanding Available Short-term Credit Facilities Cash
Slide 10: Near-term Growth Strategy
Near-term Growth Strategy Exploration & Production Gathering Pipeline & Storage Grow Marcellus and Utica production and gathering throughput at a 10%+ CAGR over next 3 years WDA Development (1-rig program) Return to developing 100% NRI wells following completion of 75-well program with joint develop
Slide 11: Fiscal 2018 Earnings Guidance
Fiscal 2018 Earnings Guidance FY 2017 Earnings Non-regulated Businesses Exploration & Production Gathering $3.30 /share $3.20 to $3.40 /share FY2018 Earnings Guidance(1) Seneca Net Production: 180 to 195 Bcfe Gathering Revenues: $110 to $120 million Natural Gas: ~$2.50 /Mcf(2) (vs. $2.95 /Mcf in FY1
Slide 12: Impact of Federal Tax Reform
Impact of Federal Tax Reform Non-Rate Regulated Segments Rate Regulated Segments Exploration & Production and Gathering Positive ongoing earnings impact expected from reduction in federal income tax rate from 35% to 21% (blended 24.5% in FY 2018) Remeasurement of deferred income taxes resulted in $1
Slide 13: Upstream Overview: Exploration & Production
Upstream Overview Exploration & Production
Slide 14: Growing Production within Disciplined Capital Program
Growing Production within Disciplined Capital Program E&P Net Production (Bcfe) E&P Net Capital Expenditures(1) ($ millions) 2-rig development program Target 10%+ production 3-year CAGR Resumed development on prolific Marcellus acreage in Lycoming County, Pa. Return to developing 100% NRI wells in t
Slide 15: Proved Reserves
Proved Reserves 225% Reserve Replacement Rate (adjusted for revisions) Seneca Drill-bit F&D = $0.60/Mcfe(1) Appalachia Drill-bit F&D = $0.51/Mcfe(1) Seneca “Drill-bit” finding and development (“F&D”) costs exclude the impact of reserve revisions. Upstream Total Proved Reserves (Bcfe) Fiscal 2017 Pro
Slide 16: Significant Appalachian Acreage Position
Significant Appalachian Acreage Position Current gross production: ~340 MMcf/d Mostly leased (16-18% royalty) with no significant near-term lease expirations 100+ remaining Marcellus and Utica locations economic under ~$1.90/Mcf Additional Utica & Geneseo potential Eastern Development Area (EDA) EDA
Slide 17: Western Development Area
Western Development Area WDA Core Acreage – 200,000 Acres Significant multi-zone drilling inventory economic at ~$2.00 /Mcf Marcellus Shale : 640 well locations Utica Shale: 125 to 500+ well locations (2) Fee acreage / stacked pay provides flexibility & enhances economics No royalty or lease expirat
Slide 18: WDA Utica Appraisal Results and Initial Type Curve
WDA Utica Appraisal Results and Initial Type Curve Tested / producing from 8 Utica wells in WDA-CRV Higher pressure significantly enhances well productivity (Utica ~5,000’ deeper than Marcellus) Drawdown management is critical: restricted drawdown improves well EURs Early production declines much sh
Slide 19: Transitioning to Utica Development in CRV
Transitioning to Utica Development in CRV WDA-CRV Marcellus (Depth ~7,000 feet) Existing Line Leased Seneca Fee Producing FY18 Producer Development WDA-CRV Utica (Depth ~12,000 feet) Upstream 156 wells producing 250 Mcf/d Remaining Avg. EUR 1.0 Bcf / 1,000 lat ft. Remaining Avg. Well Costs = $655/la
Slide 20: Eastern Development Area
Eastern Development Area EDA Acreage – 70,000 Acres EDA Highlights 3 1 2 1 2 Upstream DCNR Tract 007 (Tioga Co., Pa) 1 Utica and 1 Marcellus producing well Utica 30-day IP = 15.8 MMcf/d Utica development expected to begin in fiscal 2018 ~50 remaining Utica locations economic at ~$1.90 /Mcf Covington
Slide 21: EDA Marcellus: Lycoming County Development
EDA Marcellus: Lycoming County Development Upstream Prolific Marcellus acreage with peer leading well results 66 Marcellus wells producing w/ average IP rate of 17.0 MMcf/d 55 remaining Marcellus locations economic at ~$1.65 /Mcf Near-term development focused on filling Atlantic Sunrise capacity for
Slide 22: EDA Utica: Tioga County Development
EDA Utica: Tioga County Development Upstream Utica Development in Tioga County – Tract 007 Expected to Begin in 2H FY18 Northeast Supply Diversification Project FT Capacity: 50,000 Dth/d @ $0.50/Dth Firm Sales: NYMEX and DAWN EDA - TGP 300 Firm Sales(1) In-Service November 2016 Lateral Length 4,640
Slide 23: Appalachia Drilling Program Economics
Appalachia Drilling Program Economics Net realized price reflects either (a) price received at the gathering system inteconnect or (b) price received at delivery market net of firm transportation charges. Internal Rate of Return (IRR) is pre-tax and includes estimated well costs under current cost s
Slide 24: Long-term Contracts Supporting Appalachian Production
Long-term Contracts Supporting Appalachian Production Atlantic Sunrise (Transco) Delivery Markets: Mid-Atlantic & Southeast U.S. 189,405 Dth/d In-Basin Firm Sales Contracts(1) Niagara Expansion (TGP & NFG) Delivery Markets: Canada-Dawn & TETCO 158,000 Dth/d Northeast Supply Diversification 50,000 Dt
Slide 25: Firm Transportation Commitments
Firm Transportation Commitments Volume (Dth/d) Production Source Delivery Market Demand Charges ($/Dth) Gas Marketing Strategy Northeast Supply Diversification Project Tennessee Gas Pipeline Atlantic Sunrise WMB - Transco In-service: Mid-2018 Niagara Expansion TGP & NFG Northern Access NFG – Supply
Slide 26: Firm Sales Provide Market for Appalachian Production
Firm Sales Provide Market for Appalachian Production Net Contracted Firm Sales Volumes (Dth per day) Contracted Index Price Differentials ($ per Dth)(1) Values shown represent the weighted average fixed price or contracted fixed differential relative to NYMEX (netback price) less any associated tran
Slide 27: California Oil
California Oil Stable Oil Production | Minimal Capital Investment | Steady Free Cash Flow 1 2 3 4 5 6 Location Formation Production Method FY17 Gross Daily Production (Boe/d) 1 East Coalinga Temblor Primary 711 2 North Lost Hills Tulare & Etchegoin Primary/ Steam flood 951 3 South Lost Hills Montere
Slide 28: California Capital Expenditures vs. Production
California Capital Expenditures vs. Production Upstream West Division Average Net Daily Production (BOE/D) West Division Annual Capital Expenditures ($MM)(1) Guidance Guidance Seneca West Division capital expenditures includes Seneca corporate and eliminations.
Slide 29: Future Development Focused on Midway Sunset
Future Development Focused on Midway Sunset Modest near-term capital program focused on locations that earn attractive returns in current oil price environment A&D will focus on low cost, bolt-on opportunities Sec. 17 and Pioneer farm-ins to provide future growth Midway-Sunset Midway-Sunset Pioneer
Slide 30: Strong Hedge Book
Strong Hedge Book Natural Gas Swap & Fixed Physical Sales Contracts (Millions MMBtu) Fixed price physical sales exclude joint development partner’s share of fixed price contract WDA volumes as specified under the joint development agreement. Reflects percentage of projected production for the remain
Slide 31: Fiscal 2018 Production
Fiscal 2018 Production Average realized price reflects uplift from financial hedges less fixed differentials under firm sales contracts and any firm transportation costs. Indicates firm sales contracts with fixed index differentials but not backed by a matching financial hedge. 83 Bcf locked-in real
Slide 32: Seneca Operating Costs
Seneca Operating Costs Competitive, low cost structure in Appalachia and California supports strong cash margins Gathering fee generates significant revenue stream for affiliated gathering company Seneca DD&A Rate $/Mcfe Appalachia LOE & Gathering $/Mcfe California LOE $/Boe Total Seneca Cash OpEx $
Slide 33: Midstream Businesses
Midstream Businesses
Slide 34: Midstream Businesses
Midstream Businesses Midstream Midstream Midstream Businesses Adjusted EBITDA ($MM)(1) A reconciliation of Adjusted EBITDA to Net Income as presented on the Consolidated Statement of Income and Earnings Reinvested in the Business is included at the end of this presentation. Midstream Businesses Syst
Slide 35: Integrated Development – WDA Gathering System
Integrated Development – WDA Gathering System Current System In-Service ~70 miles of pipe / 31,220 HP of compression Current Capacity: 470 MMcf per day Interconnects with TGP 300 Total Investment to Date: $286 million Future Build-Out FY 2018 CapEx: $10 MM - $15MM Modest gathering pipeline and compr
Slide 36: Integrated Development – EDA Gathering Systems
Integrated Development – EDA Gathering Systems Total Investment (to date): $33 million Capacity: 220,000 Dth per day (Interconnect w/ TGP 300) Production Source: Seneca Resources – Tioga Co. (Covington and DCNR Tract 595) Total Investment (to date): $185 million FY 2018 Capital Expenditures: $35 MM
Slide 37: Pipeline & Storage Segment Overview
Pipeline & Storage Segment Overview As of September 30, 2017 as disclosed in the Company’s fiscal 2017 form 10-K. As of December 31, 2016 calculated from National Fuel Supply Corporation’s and Empire Pipeline, Inc.’s 2016 FERC Form-2 reports, respectively. Midstream Empire Pipeline, Inc. National Fu
Slide 38: Infrastructure Expansions Bolster Supply Diversity
Infrastructure Expansions Bolster Supply Diversity Northern Access 2015 (In-Service(1)) System: NFG Supply Corp. Capacity: 140,000 Dth per day Leased to TGP as part of TGP’s Niagara Expansion project Delivery Interconnect: Niagara (TransCanada) Total Cost: $67.1 million Annual Revenues: $13.3 millio
Slide 39: Northern Access Project Status
Northern Access Project Status Regulatory / Appeal Status US Court of Appeals for the 2nd Circuit: On April 21, 2017, NFG filed appeal of NY DEC notice of denial of the Clean Water Act Section 401 Water Quality Certification (WQC) Decision from the Court is pending Federal Energy Regulatory Commissi
Slide 40: Empire System Expansion
Empire System Expansion Target In-Service: November 2019 Est. Capital Cost: $142 million Est. Annual Revenues: $25 million Receipt Point: Jackson (Tioga Co., Pa. production) Design Capacity and Delivery Points: 175,000 Dth/d to Chippawa (TCPL interconnect) 30,000 Dth/d to Hopewell (TGP 200 interconn
Slide 41: Continued Expansion of the NFG Supply System
Continued Expansion of the NFG Supply System Line N Expansion Opportunities Line D Expansion Project Midstream Project Status: In-service on November 1, 2017 Contracted Capacity: 77,500 Dth/d from an interconnect with TGP 300 at Lamont, Pa. into Erie, Pa. market Est. Capital Cost: $28 million ($8 mi
Slide 42: NFG Supply Corp. System Modernization
NFG Supply Corp. System Modernization NFG plans to increase investments in the modernization of its Supply Corp system over the next 5 years Retire pre-1970 vintage pipelines Replace portions of Supply’s existing system to enhance service for distribution, storage and local production customers Upgr
Slide 43: Pipeline & Storage Customer Mix
Pipeline & Storage Customer Mix 4.1 MMDth/d Contracted as of 11/1/2017. Customer Transportation by Shipper Type(1) Affiliated Customer Mix (Contracted Capacity) Firm Transport Midstream
Slide 44: Downstream Overview: Utility and Energy Marketing
Downstream Overview Utility ~ Energy Marketing
Slide 45: New York & Pennsylvania Service Territories
New York & Pennsylvania Service Territories New York Total Customers(1): 530,400 ROE: 8.7% (NY PSC Rate Case Order, April 2017) Rate Mechanisms: Revenue Decoupling Weather Normalization Low Income Rates Merchant Function Charge (Uncollectibles Adj.) 90/10 Sharing (Large Customers) Pennsylvania Total
Slide 46: New York Rate Case Outcome
New York Rate Case Outcome Rate Order Summary: Revenue Requirement:$5.9 million Rate Base:$704 million (prior case $632 million1) Allowed Return on Equity (ROE):8.7% (prior case allowed 9.1%1) Capital Structure:42.9% equity Other notable items: New rates became effective 5/1/17 Retains rate mechanis
Slide 47: Utility: Shifting Trends in Customer Usage
Utility: Shifting Trends in Customer Usage Weighted Average of New York and Pennsylvania service territories (assumes normal weather). Usage Per Account (1) 12-Months Ended December 31 Downstream
Slide 48: Utility: Strong Commitment to Safety
Utility: Strong Commitment to Safety The Utility remains focused on maintaining the ongoing safety and reliability of its system Capital Expenditures ($ millions)(1) Downstream A reconciliation to Capital Expenditures as presented on the Consolidated Statement of Cash Flows is included at the end of
Slide 49: Accelerating Pipeline Replacement & Modernization
Accelerating Pipeline Replacement & Modernization NY 9,723 miles PA* 4,832 miles * No Cast Iron Mains in Pa.* Miles of Utility Main Pipeline Replaced Utility Mains by Material Downstream
Slide 50: A Proven History of Controlling Costs
A Proven History of Controlling Costs O&M Expense ($ millions) Downstream
Slide 51: Appendix
Appendix
Slide 52: Hedge Positions and Prices
Hedge Positions and Prices Fixed price physical sales exclude joint development partner’s share of fixed price contract WDA volumes as specified under the joint development agreement. Appendix (1) Natural Gas Volumes in thousand MMBtu; Prices in $/MMBtu Fiscal 2018 (last 9 mos.) Fiscal 2019 Fiscal 2
Slide 53: Comparable GAAP Financial Measure Slides & Reconciliations
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 that fol
Slide 54: Non-GAAP Reconciliations – Adjusted EBITDA
Non-GAAP Reconciliations – Adjusted EBITDA Appendix
Slide 55: Non-GAAP Reconciliations – Capital Expenditures
Non-GAAP Reconciliations – Capital Expenditures Appendix
Slide 56: Non-GAAP Reconciliations – E&P Operating Expenses
Non-GAAP Reconciliations – E&P Operating Expenses Appendix
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