National Fuel Gas Company · NYSE:NFG
National Fuel Gas — Investor Presentation (April 2015)
65 slides from National Fuel Gas's investor presentation, Apr 30, 2015
Slide 1: National Fuel Gas Company Investor Presentation April 2015
1 National Fuel Gas Company Investor Presentation April 2015 Exhibit
Slide 2: Forward-looking statements
Corporate 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, strategies, future events or performan
Slide 3: Quality Assets, Exceptional Location, Unique Integration
Corporate 3 Million BBls of Annual Crude Oil Production $265 Million of Midstream Adjusted EBITDA (2) 800,000+ Net Acres in Pennsylvania 1.9 Tcfe of Proved Reserves (1) Quality Assets, Exceptional Location, Unique Integration (1) Total proved reserves are as of September 30, 2014. (2) For the traili
Slide 4: The National Fuel Value Proposition
Corporate Creating sustainable value for shareholders remains our #1 priority Unique Integrated Business Model Provides Competitive Advantage The National Fuel Value Proposition (1) Per NGI’s Shale Daily (January 5, 2015). The Company has identified 780,000 acres as prospective in Marcellus Shale. 8
Slide 5: National Fuet
d National Fuet
Slide 6: EBITDA Contribution by Segment
Corporate EBITDA Contribution by Segment Note: 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 7: Adjusting Capex to Capitalize on Opportunities
Corporate Adjusting Capex to Capitalize on Opportunities Note: A reconciliation to Capital Expenditures as presented on the Consolidated Statement of Cash Flows is included at the end of this presentation.
Slide 8: Maintaining a Strong Balance Sheet
Corporate Total Debt (1) 41% Maintaining a Strong Balance Sheet Note: A reconciliation of Adjusted EBITDA to Net Income is included at the end of this presentation. (1) Long-term debt of $1.649 billion and short-term debt of $157.5 million. $4.4 Billion As of March 31, 2015 Debt/Adjusted EBITDA Capi
Slide 9: Dividend Consistency
Corporate Dividend Consistency Dividend Track Record (1) As of April 29, 2015. Current Dividend Yield (1) 2.4% Consecutive Dividend Payments 112 Years Consecutive Dividend Increases 44 Years Current Annualized Dividend Rate $1.54 per Share
Slide 10: Overview Exploration & Production
Upstream Overview Exploration & Production
Slide 11: Proven Record of Reserve Growth
Upstream Fiscal Years 3-Year F&D Cost (1) ($/Mcfe) Proven Record of Reserve Growth (1) Represents a three-year average U.S. finding and development cost. 2007-2009 $5.35 2008-2010 $2.37 2009-2011 $2.09 2010-2012 $1.87 2011-2013 $1.67 2012-2014 $1.38 • 2014 F&D Cost = $1.15 • Marcellus F&D: $1.00 • 3
Slide 12: Marcellus Shale Driving Production Growth
Upstream Marcellus Shale Driving Production Growth
Slide 13: Disciplined Capital Spending
Upstream Disciplined Capital Spending
Slide 14: Highly Competitive Cost Structure
Upstream (1) (2) (2) Highly Competitive Cost Structure (1) Represents the midpoint of current General & Administrative Expense guidance of $0.40 to $0.45 per Mcfe for fiscal 2015. (2) The total of the two LOE components represents the midpoint of current LOE guidance of $1.00 to $1.10 per Mcfe for f
Slide 15: Seneca Resources
SENECA, RESOURCES.
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Slide 18: Marcellus Shale: Prolific Pennsylvania Acreage
Upstream Eastern Development Area (EDA) • Mostly leased (16-18% royalty) • No near-term lease expiration • Limited development drilling until firm transportation capacity on Atlantic Sunrise becomes available in late 2017 o Drilling activity will HBP key acreage Western Development Area (WDA) • Aver
Slide 19: EDA Delivering Significant Growth
Upstream Covington – Fully Developed • Productive Capacity: ~45MMcf per Day • 47 Wells Producing Gamble • 30 to 50 future Marcellus locations • 1 Well Producing • Opportunity for Geneseo development EDA Delivering Significant Growth (1) One well included in the total for both Tract 595 and Tract 100
Slide 20: Seneca Resources
SENECA, RESOURCES.
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Slide 24: Focusing on WDA Development
Upstream 4 - 6 BCF/well 4 - 6 BCF/well 6 - 8 BCF/well 2-4 BCF/well 2-4 BCF/well Seneca’s Tier I Acreage: • 200,000 Acres • 860+ locations economic at realized prices <$2.70 /MMbtu CRV Hemlock Ridgway Focusing on WDA Development Note: Assumes 6,000’ treated lateral length. SRC Lease Acreage SRC Fee A
Slide 25: Clermont/Rich Valley (CRV) Area
Upstream Clermont/Rich Valley Area • 200-250 Planned Horizontal Locations • Current Productive Capacity: 30 Wells; 95 MMcfd • IP Range: 5-11 MMcfd Pad D08-G Drilling 11 Wells Pad C8-X Drilling 7 wells Pad E8-D Drilling 8 wells Pad E09-E 10 Wells Completing Clermont/Rich Valley (CRV) Area Currently D
Slide 26: Marcellus Well Results
Upstream Area Producing Well Count Average IP Rate (MMcfd) Average 7-Day (MMcf/d) Average Treatable Lateral Length (ft) Area Producing Well Count Average IP Rate (MMcfd) Average 7-Day (MMcf/d) Average Treatable Lateral Length (ft) Marcellus Well Results (1) Does not include a well drilled into and p
Slide 27: Marcellus Drilling and Completion Efficiencies
Upstream $8.7 MM Well Cost $6.3 MM Well Cost Fiscal 2012 Average Development Well Fiscal 2015 (1) Average Development Well Marcellus Drilling and Completion Efficiencies Lateral Length: 5,100 ft Measured Depth: 13,700 ft Completion Stages: Lateral Length: 7,200 ft Measured Depth: 14,300 ft Completio
Slide 28: EDA and WDA
4)SENEC, RSE EDA WDA
Slide 29: WDA Mineral Interests Significantly Enhance Returns
Upstream ($/Mcf) The Seneca Advantage 0% Royalty A producer burdened by a 15% royalty would require a $0.41 higher realized price to achieve same level of economics as Seneca Resources Producer Paying 15% Royalty WDA Mineral Interests Significantly Enhance Returns (1) Internal Rate of Return (IRR) i
Slide 30: Adding Long-Term Firm Transport to the Portfolio
Upstream Project (Counterparty) In- Service Date Contract Term Delivery Market FT Capacity (Dth/day) Matched Firm Sales Contracts Fiscal 2015 Fiscal 2016 Fiscal 2017 Fiscal 2018 Adding Long-Term Firm Transport to the Portfolio (1) A large majority of the executed firm sales agreements continue for t
Slide 31: Significant Base of Long-Term Firm Contracts
Upstream Atlantic Sunrise Williams Co. (Transco) 189,405 Dth/d Northern Access 2016 NFG , TransCanada & Union 490,000 Dth/d Niagara Expansion / TETCO TGP & NFG 170,000 Dth/d Significant Base of Long-Term Firm Contracts Current Firm Sales (1) & FT 914,405 Dth per day (1) Total Firm Contracts by FY 20
Slide 32: Major Transmission Pipelines and Seneca Acreage
MAJOR TRANSMISSION PPELINES IIE seneca resources acreace
Slide 33: Firm Sales Provide Market for Appalachian Production
Upstream EDA (2) 280,036 /d 280,036 /d 226,993 /d 200,036 /d 160,036 /d 160,036 /d WDA (2) 94,952 /d 110,900 /d 175,878 /d 208,900 /d 208,000 /d 208,000 /d Fiscal 2015 Fiscal 2016 Firm Sales Provide Market for Appalachian Production (1) Includes new 50,000 Dth per day firm sales contractstarting May
Slide 34: Natural Gas Financial Hedge Positions
Upstream Natural Gas Financial Hedge Positions (1) (1) Excludes fixed price physical firm sales. (2) For the remaining six months of fiscal 2015. A table of volumes and average hedge prices by index are included in the Appendix.
Slide 35: FY 2015 Production – Firm Sales & Spot Exposure
Upstream FY 2015 Production – Firm Sales & Spot Exposure (1) Spot price assumptions reflected in fiscal 2015 earnings guidance range. (2) Indicates firm sales not backed by financial hedges. DOM Firm Sales include 3.7 Bcf of non-operated WDA production volumes. (3) EPS guidance assumesspot volumes a
Slide 36: FY 2016 Productive Capacity Summary
Upstream FY 2016 Productive Capacity Summary FY 2016 Productive Capacity (1) Hedged Firm & Fixed Sales 99 Bcf Unhedged Firm Sales (2) 34 Bcf Productive Capacity Exposed to Spot 47 - 55 Bcf Total East Div. Productive Capacity 180 - 188 Bcf West Division (California) 20 - 22 Bcfe Total SRC Productive
Slide 37: Utica/Point Pleasant: Industry Activity
Upstream PGE Seneca - DCNR 007 IP: 22.7 MMcfd Seneca – Mt. Jewett IP: 8.9 MMcfd Utica/Point Pleasant: Industry Activity Range 59 Mmcf/d Rice Mmcf/d Shell 26.5 Mmcf/d PGE Permitted Permitted Drilling Drilling Completed Completed Production Production Seneca Vert. Seneca Vert. Seneca Horiz. Seneca Hor
Slide 38: Utica/Point Pleasant Shale: EDA Opportunities
Upstream Utica/Point Pleasant Shale: EDA Opportunities Shell: Gee 11.2 Mmcf/d PGE Currently Drilling Permitted Permitted Drilling Drilling Completed Completed Producing Producing Seneca Seneca Horizontal Horizontal Shell: Neal 26.5 Mmcf/d Other Operators Other Operators
Slide 39: California: Stable Production; Modest Growth
Upstream East Coalinga Temblor Formation Primary North Lost Hills Tulare & Etchegoin Formation Primary/Steamflood South Lost Hills Monterey Shale Primary North Midway Sunset Tulare & Potter Formation Steamflood South Midway Sunset Antelope Formation Steamflood Sespe Sespe Formation Primary Californi
Slide 40: Seneca Resources
SENECA, RESOURCES.
Slide 41: Focused on High Return Opportunities
Upstream CALIFORNIA Field Average Well Cost Average EUR (MBO) Estimated IRR @$55/Bbl Fiscal 2015 Locations Focused on High Return Opportunities South Midway Sunset $250,000 57% North Midway Sunset $300,000 25% East Coalinga $420,000 15%
Slide 42: California: Modest Growth Anticipated in 2015
Upstream California: Modest Growth Anticipated in 2015
Slide 43: Strong Margins Support Significant Free Cash Flow
Upstream Strong Margins Support Significant Free Cash Flow Average Revenue for FYTD 2015 (1) $68.34 per BOE (1) Reflects the six month period ended March 31, 2015. Average revenue per BOE includes impact of hedging.
Slide 44: Midstream Overview Pipeline & Storage Gathering
Midstream Overview Pipeline & Storage Gathering
Slide 45: Gathering is the First Step to Reaching a Market
Midstream Covington Gathering System (In-Service) Trout Run Gathering System (In-Service) Clermont Gathering System (In-Service) Gathering Interconnects TGP 300 Transco Gathering is the First Step to Reaching a Market (1) Fiscal 2015 estimated revenue reflects projected throughput based on the range
Slide 46: Gathering Supporting Seneca's EDA Production
Midstream Covington Gathering System Trout Run Gathering System Gathering Supporting Seneca’s EDA Production (1) Fiscal 2015 estimated throughput reflects the midpoint of Seneca’s Fiscal 2015 production guidance range (155-175 Bcfe). • In-Service Date: November 2009 • Capacity: 220,000 Dth per day •
Slide 47: Clermont Gathering System has Large Expandability
Midstream Clermont Gathering System • In-Service: July 2014 • Ultimate Trunkline Capacity: o Approx. 1 Bcf per day • Interconnects: o TGP 300 (current) o NFG Supply Corporation (Northern Access 2016) • Capital Expenditures: o To date: $150 Million o (1) : $70 - $90 Million Clermont Gathering System
Slide 48: Pipeline & Storage: Premier Appalachian Position
Midstream NFG is uniquely positioned to expand our regional pipeline systems and provide valuable outlets for producers and shippers in Appalachia Canada New England & Northeast Midwest & Southeast Mid-Atlantic Pipeline & Storage: Premier Appalachian Position
Slide 49: Major Expansion Designed for Canadian Deliveries
Midstream Northern Access 2015 Northern Access 2015 (November 2015) Major Expansion Designed for Canadian Deliveries • Customer: Seneca Resources • In-Service: November 2015 • System: NFG Supply Corp. • Capacity: 140,000 Dth per day o Lease to TGP as part of their Niagara Expansion project • Interco
Slide 50: Northern Access 2016 Provides Access to Canada
Midstream Northern Access 2016 Northern Access 2016 (Late 2016) Northern Access 2016 Provides Access to Canada • Customer: Seneca Resources • In-Service: Targeting Late 2016 • Capacity: 490,000 Dth/d • Interconnects: o TransCanada – Chippawa (350,000 Dth/d) o TGP 200 – East Aurora (140,000 Dth/d) •
Slide 51: Recent Third Party Expansions Highly Successful
Midstream Completed Expansions Line N Projects Northern Access 2012 Tioga County Extension Recent rd Party Expansions Highly Successful Capacity (Dth/day) Northern Access 2012 320,000 Tioga County Ext. & Lamont 440,000 Line N & Mercer Expansion 458,000 Total New Capacity 1,218,000 Capital Cost ($Mil
Slide 52: Pairing Line N Expansions with System Modernization
Midstream Westside Expansion & Modernization Westside Expansion & Modernization Pairing Line N Expansions with System Modernization Mercer (TGP Station 219) Holbrook (TETCO) • In-Service: November 2015 • System: NFG Supply Corp. • Capacity: 175,000 Dth per day o Range Resources (145,000 Dth/d) o Sen
Slide 53: Developing Unique Solutions for Shippers
Midstream Tuscarora Lateral Tuscarora Lateral Developing Unique Solutions for Shippers • In-Service: November 2015 • System: NFG Supply & Empire Pipeline • New No-Notice Services o Precedent agreements executed with RG&E, NYSEG & NFG Utility o Preserving 172,500 Dth per day (RG&E) o Preserving 20,00
Slide 54: Significant Expansions Are Driving Growth
Midstream Total Expansion (2009-2016+) Planned Projects (2015+) Precedent Agreements Executed Completed Projects (Since 2009) Significant Expansions Are Driving Growth Capacity Additions 2,072,000 Dth/day In-Service 2015 364,000 Dth/day In-Service 2016+ 490,000 Dth/day Delivering Gas North Tioga Cou
Slide 55: Downstream Overview Utility Energy Marketing
Downstream Overview Utility Energy Marketing
Slide 56: New York & Pennsylvania Service Territories
Downstream New York Pennsylvania New York & Pennsylvania Service Territories Total Customers: 524,300 ROE: 9.1% (NY PSC Rate Case Settlement, May 2014) Rate Mechanisms: Total Customers: 213,500 ROE: Black Box Settlement (2007) Rate Mechanisms: o Low Income Rates o Merchant Function Charge o Earnings
Slide 57: Utility: Shifting Trends in Customer Usage
Downstream Utility: Shifting Trends in Customer Usage (1) Weighted Average of New York and Pennsylvania service territories (assumes normal weather).
Slide 58: A Proven History of Controlling Costs
Downstream A Proven History of Controlling Costs
Slide 59: Utility: Strong Commitment to Safety
Downstream The Utility remains focused on maintaining the ongoing safety and reliability of its system Utility: Strong Commitment to Safety Near-term increase due to ~$60MM upgrade of the Utility’s Customer Information System and ~$25MM NRG Dunkirk power plant project
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Slide 61: Natural Gas Hedge Positions
Appendix Fiscal 2015 (1) Fiscal 2016 Fiscal 2017 Fiscal 2018 Volume Avg. Price Volume Avg. Price Volume Avg. Price Volume Avg. Price Natural Gas Hedge Positions (1) For the remaining six months of fiscal 2015. (2) Includes new 50,000 Dth per day firm sales contract starting May 1, and ending on Marc
Slide 62: Crude Oil Hedge Positions
Appendix Fiscal 2015 (1) Fiscal 2016 Fiscal 2017 Fiscal 2018 Volume Avg. Price Volume Avg. Price Volume Avg. Price Volume Avg. Price Crude Oil Hedge Positions (1) For the remaining six months of fiscal 2015. Midway Sunset (MWSS) Swaps 182,000 $68.62 36,000 $92.10 - - - - Brent Swaps 510,000 $98.32 9
Slide 63: WDA Delineation Well Results
Appendix Area Producing Well Count Peak 24-Hour Rate (MMcfd) Average 7-Day (MMcf/d) Average Treatable Lateral Length (ft) WDA Delineation Well Results Ridgway Elk County 7.1 6.4 5,537’ Church Run Elk & Jefferson counties 4.8 4.5 4,690’ Hemlock Elk County 5.4 5.2 7,067’ Owl’s Nest Elk & Forest counti
Slide 64: Reconciliation of Adjusted EBITDA to Consolidated Net Income
Appendix National Fuel Gas Company Reconciliation of Adjusted EBITDA to Consolidated Net Income ($ Thousands) FY 2010 FY 2011 FY 2012 Exploration & Production - West Division Adjusted EBITDA 187,838 $ 187,603 $ 226,897 $ 215,042 $ 217,150 $ 177,646 $ Exploration & Production - All Other Divisions Ad
Slide 65: Reconciliation of Segment Capital Expenditures to Consolidated Capital Expenditures
Appendix National Fuel Gas Company Reconciliation of Segment Capital Expenditures to Consolidated Capital Expenditures ($ Thousands) FY 2015 FY 2016 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 Forecast Forecast Capital Expenditures from Continuing Operations Exploration & Production Capital Expenditures
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