National Fuel Gas Company · NYSE:NFG
National Fuel Gas — Q3 2024 Earnings Presentation
59 slides from National Fuel Gas's earnings presentation, Aug 1, 2024
Slide 1: Investor Presentation Fiscal 2024 – 3rd Quarter Update
Investor Presentation Fiscal 2024 – 3rd Quarter Update July 31, 2024 July 31, 2024 Update 1
Slide 2: National Fuel Gas Company
National Fuel Gas Company • Company Overview (3) • Why National Fuel? (7) • Business Updates (12) • Supplemental Information • Segment Information (19) • Rate Case Overview (45) • Guidance & Other Financial Information (47) July 31, 2024 Update 2
Slide 3: History of National Fuel
History of National Fuel Industry Pioneer Born From Rockefeller’s Standard Oil Company July 31, 2024 Update 3
Slide 4: NFG Today: A Diversified, Integrated Natural Gas Company
NFG Today: A Diversified, Integrated Natural Gas Company Adjusted EBITDA(1) Developing our large, high-quality acreage Upstream position in Marcellus & Utica shales Exploration & ~1.2 Million ~1.1 Bcf/day 50% Production Net acres in Net total production(2) Appalachia Expanding and modernizing pipeli
Slide 5: Non-Regulated Business Overview
Non-Regulated Business Overview Exploration & Production Segment (Upstream) • Seneca Resources Company • Total Net Acres (Pennsylvania): ~1.2 million(1) Western Development Area – 925,000 Acres • Total Proved Reserves: 4.5 Tcfe (as of 9/30/2023) • Current Net Production: ~1.1 Bcf/d(2) • Firm Transpo
Slide 6: Regulated Business Overview
Regulated Business Overview Pipeline & Storage Segment (Midstream) • Regulated by Federal Energy Regulatory Commission (FERC) • Total Rate Base: $1.6 Billion(1) • ~2,600 miles of pipeline / 29 storage fields • National Fuel Gas Supply Corporation: • Firm Contracted Storage Capacity: 71 Bcf • Firm Co
Slide 7: Why National Fuel?
Why National Fuel? Strong Integrated Visibility on Long-Term Long-Standing History Responsibly Responsibly Reducing Reduce Returns EPS & FCF Growth of Shareholder Returns Emissions Emissions Optimized capital Targeting significant 122 years of dividend Continued progress allocation rate base
Slide 8: Integrated Model Enhances Returns
Integrated Model Enhances Returns NFG’s ROCE outperforms peers and broader market, on average, over a multi-year period Strong Return on Capital Employed(1) Integrated NFG vs. S&P 500 and Industry Peers Integrated Business Model Benefits… S&P O&G Returns 20% Index Operations: Lower cost structure
Slide 9: Strong Value Proposition Driven by Earnings & Cash Flow Outlook
Strong Value Proposition Driven by Earnings & Cash Flow Outlook Regulated Businesses Regulated Adjusted Operating Results Increasing EPS Expected to Drive >10% Future Dividend Growth $240.00 Strong $220.00 7-10% Consolidated Stable, predictable growth from the regulated Utility and Integrated $200
Slide 10: Long-Standing History of Returning Capital to Shareholders
Long-Standing History of Returning Capital to Shareholders Over $1.5 Billion Returned to Shareholders Over Last 10 Years Dividend Share (2) Total Return of Strong Yield (1) Buyback Yield Capital Integrated Returns ~4% ~2% ~6% Visibility on Stable, Growing Dividend … $2.06 …Plus Share Buyback Long-Te
Slide 11: Continued Progress Toward Methane Intensity Targets
Continued Progress Toward Methane Intensity Targets Latest Corporate Responsibility Report Provides Enhanced GHG Disclosures on Sustainability Initiatives Target: 40% Target: 30% Strong Integrated E&P Gathering National Fuel Gas Company Targets Returns Progress Since 2020: Progress Since 2020: 25%
Slide 12: Business Updates
Business Updates July 31, 2024 Update 12
Slide 13: Regulatory Update: Significant Rate Case Activity
Regulatory Update: Significant Rate Case Activity New York: Significant Filed a rate case in October 2023 for new rates effective October 1, 2024 (FY 2025) Growth Utility – NY ‒ Proposed $88.8 million base rate increase ($83.0 million in March rebuttal filing) ‒ Multi-year settlement negotiations
Slide 14: Regulated Businesses Further Propel Long-Term Growth
Regulated Businesses Further Propel Long-Term Growth ~5-7% Increasing Rate Base Drives Avg. Expected Annual Rate Long-Term EPS Growth Base Growth Factors Driving Long-Term Growth ($ in billions) Beyond FY23 3 $2.8 $2.6 Infrastructure modernization program 2.5 $2.4 $2.3 $2.1 Ongoing expansion opp
Slide 15: EDA Transition Creates Differentiated Upstream Value
EDA Transition Creates Differentiated Upstream Value Western Development Areas (WDA) Eastern Development Areas (EDA) Legacy Development Area Development Focus Area Primarily Owned in Fee (No Royalty) 10+ Years Low-Risk Inventory EDA Transition High-grading development plan with higher capital effi
Slide 16: EDA: Best in Basin Performance & Breakevens
EDA: Best in Basin Performance & Breakevens >10 years of prolific EDA inventory at expected development pace Program Productivity Increasing Significantly Already Low Breakevens Continue to Improve 600 $3.50 12 M. Cumulative Gas, MCF/1,000(1) 400 $3.00 200 PV-10 Breakeven @ 20:1 WTI: HH ($/Mcf) 0 FY
Slide 17: Capital Allocation Priorities Drive Spending Levels
Capital Allocation Priorities Drive Spending Levels Capital Expenditures by Segment ($ millions)(1) Capital Allocation Priorities (2) (2) Exploration & Production Gathering Pipeline & Storage Utility $973 $890–$970 • Invest in regulated growth via modernization Organic $885–$970 Investments and pipe
Slide 18: Maintaining Strong Balance Sheet & Liquidity
Maintaining Strong Balance Sheet & Liquidity Net Debt / Adjusted EBITDA(1) Capitalization Current Credit Ratings Quickly de-levered after 2020 Shell acquisition. Debt 3.08 x 2.72 x Total S&P BBB- 2.22 x 2.27 x Equity Debt 2.14 x 54% 46% Moody’s Baa3 Fitch BBB Investment Grade $5.8 Billion Total Capi
Slide 19: Exploration & Production & Gathering Overview
Supplemental Information: Segment Overview Exploration & Production & Gathering Overview Seneca Resources Company, LLC National Fuel Gas Midstream Company, LLC 19
Slide 20: Focused on Capital Efficiency and FCF Generation
E&P and Gathering Focused on Capital Efficiency and FCF Generation Net Production (Bcfe) Capital Expenditures ($ MM)(1) WDA– 925,000 Acres 400- 588 390- 420 566 525- 372 400 495- 353 545 525 2022 2023 2024E 2025E 2022 2023 2024E 2025E Near-Term Strategy EDA – 313,000 Acres Moderating activity leve
Slide 21: Integration Drives Industry Leading Cost Structure
E&P and Gathering Integration Drives Industry Leading Cost Structure Seneca Cash OpEx ($/Mcfe) Seneca + Gathering Cash OpEx ($/Mcfe) $0.97 $0.94 $0.95 $0.93 $0.11 $0.07 $0.07 $0.07 (1) $0.18 $0.18 $0.18 $0.19 (2) $0.10 $0.11 $0.11 $0.12 (2) $0.58 $0.57 $0.58 $0.57 FY 2022 FY 2023 FY2024E FY2025E LOE
Slide 22: Long Runway of Development Opportunities in the EDA
E&P and Gathering Long Runway of Development Opportunities in the EDA 1 Tioga County, PA EDA Exploration & Production: Utica Development Low-risk development locations: ~200 Utica, 80 Marcellus Gathering infrastructure: NFG Midstream Tioga gathering systems Numerous marketing opportunities: ̶
Slide 23: High Quality Acreage in WDA, Primarily Owned in Fee
E&P and Gathering High Quality Acreage in WDA, Primarily Owned in Fee Western Development Area (WDA) Highlights Marcellus & Utica Trend Fairways(1) Potential for 600+ Marcellus Shale and 500+ Utica Shale well locations Large gathering system with multiple interconnects provides access to firm tr
Slide 24: Production Supported by Long-Term Contracts
E&P and Gathering Production Supported by Long-Term Contracts ~1 Bcf/d of Firm Transportation Firm Sales Portfolio 1200 Incremental Firm Sales Contracts(1) 1000 Will continue to layer-in firm sales deals to reduce in-basin spot exposure To Canada, Dawn, TPG-200 Leidy South (Transco & NFG - Supply) G
Slide 25: Fiscal 2024 Sales Mix Provides Near-Term Price Certainty
E&P and Gathering Fiscal 2024 Sales Mix Provides Near-Term Price Certainty Firm Sales & Production Cadence Price Realizations with Hedging (Net Bcfe, $ per MMBtu) ~390 - 400 103 Bcfe 101 Bcfe $1.50 96 Bcfe ($0.79) NYMEX Differential to ($1.21) Floor: $3.22 NYMEX Cap: $3.79 $2.60 ($0.66) $2.43 (1) 1Q
Slide 26: Fiscal 2025 Sales Portfolio Provides High Degree of Price Certainty
E&P and Gathering Fiscal 2025 Sales Portfolio Provides High Degree of Price Certainty Firm Sales & Production Cadence(1) Price Realizations with Hedging (Net Bcfe, $ per MMBtu) ~400 - 420 $2.30 ($1.06) ($0.94) ($0.93) ($0.93) ($0.82) Differential to ($0.70) NYMEX ($0.71) $2.66 NYMEX ($0.69) ($0.69)
Slide 27: Hedging Program: Disciplined with Upside Potential
E&P and Gathering Hedging Program: Disciplined with Upside Potential Significant Opportunity to Capture Value From Increasing Natural Gas Prices 450 400 Methodical approach of layering in (1) % Hedged / % Unhedged 350 ~27% hedges over time ~40% 300 55- Protect near-term earnings and cash 60% 250
Slide 28: Industry-Leading Focus on Sustainability
E&P and Gathering Industry-Leading Focus on Sustainability Responsible Gas Certifications, Methane Detection & Biodiversity Equitable Origin – EO100TM Standard for Responsible Methane Detection Energy Development Certifications Standard pad design includes fixed gas detection systems installed nea
Slide 29: Pipeline & Storage Overview
Supplemental Information: Segment Overview Pipeline & Storage Overview National Fuel Gas Supply Corporation Empire Pipeline, Inc. 29 July 31, 2024 Update 29
Slide 30: 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): ~$1,244 million Empire Pipeline FERC Rate Proceeding Status: Rate case se
Slide 31: 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 32: Pipeline Modernization & Expansion Projects Propel Growth
Pipeline & Storage Pipeline Modernization & Expansion Projects Propel Growth Investments Support Long-Term Rate Base Growth of ~5-7% Pipeline & Storage Capital Expenditures Rate Base Growth Drivers Long-term modernization and emission reduction spending of ~8% YOY Growth ~$100-150 MM per year $ mi
Slide 33: 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 34: 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 35: 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: Feb. 2017 – FERC 7(c) certificate issued To Dawn Aug. 2018 – FERC issued Order finding that NY DEC waived water quali
Slide 36: Utility Overview
Supplemental Information: Segment Overview Utility Overview National Fuel Gas Distribution Corporation 36
Slide 37: New York & Pennsylvania Service Territories
Utility New York & Pennsylvania Service Territories New York Last Rate Case: Currently pending, settlement discussions ongoing 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 Mercha
Slide 38: NY Utility Rate Case Status
Utility NY Utility Rate Case Status Rate Case is Ongoing with New Rates Expected to Start October 1, 2024 Filed case on October 31, 2023; National Fuel’s base rates have not changed since the last base rate case was litigated in 2017 Rebuttal testimony filed March 22, 2024; Settlement discussion
Slide 39: NY Utility Regulated Environment
Utility NY Utility Regulated Environment NY Regulatory Environment Continues to Prioritize Access to Safe, Reliable and Affordable Energy First utility in the state to submit a LTP (Long-Term Plan) NY PSC implemented NFG’s LTP with modifications in December 2023 Includes an “All-of-the-Above P
Slide 40: 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) $250 $2
Slide 41: Utility Continues its Significant Investments in Safety
Utility Utility Continues its Significant Investments in Safety Long-Standing Focus on Distribution System Safety and Reliability $200.0 Capital Expenditures for Safety Total Capital Expenditures (1) $165-$185 $180.0 (2) Utility Capital Expenditures ($ millions) $150-$175 $160.0 $139.9 $140.0 $120.0
Slide 42: 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 43: 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 Utility Mains & Services Emissions(1) Utility GHG Emissions Reduction Target
Slide 44: Promoting Renewable & Certified Natural Gas
Utility Promoting Renewable & Certified Natural Gas RNG (Renewable Natural Gas) Progress: Through Fiscal 2020 July 2021 Currently Future Three site locations under Awarded four RNG grants First on-system project construction. Advance RNG for $1.1 million through goes online. Production the Utility’s
Slide 45: Rate Case Overview
Supplemental Information Rate Case Overview July 31, 2024 Update 45
Slide 46: Rate Case Overview: Timing and Status
Rate Case Overview: Timing and Status Recent updates in orange Pipeline & Storge Utility Supply Empire NY PA Regulatory Agency (Governed by) FERC FERC NY PSC PAPUC • Settlement approved • Rates in effect since • Filed rate case • Settlement approved by FERC June 11, 2024 January 1, 2019 October 31,
Slide 47: Guidance & Other Financial Information
Supplemental Information Guidance & Other Financial Information July 31, 2024 Update 47
Slide 48: Fiscal 2025 Earnings Guidance
Fiscal 2025 Earnings Guidance Updated FY2024 Earnings Guidance Preliminary FY2025 Earnings Guidance $5.00 to $5.10/share(1) $5.75 to $6.25/share +19% Key Guidance Drivers Net Production 400 - 420 Bcfe (increase from 395 - 400 in fiscal 2024) Non-Regulated Realized natural gas prices (after-hedge) ~$
Slide 49: Financial Results and Major Drivers
Financial Results and Major Drivers Adjusted Operating Results(1) Adjusted EBITDA(2) FY24 Major Drivers ($ per share) ($ millions) $1,226 $1,190 $5.88 ~$6.00 $1,165 E&P and Gathering: Natural Gas Prices $5.17 ~$5.05 Natural Gas Production E&P $656 $612 $593 & Gathering $3.21 Throughput $2.52 E&P
Slide 50: 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 gas quantities, strategies, f
Slide 51: Hedge Portfolio & Capped Firm Sales
Hedge Portfolio & Capped Firm Sales 4Q 2024 1Q 2025 2Q 2025 3Q 2025 4Q 2025 FY 2026 FY 2027 FY 2028 Swaps Units Volume MMBtu 38,670 33,730 31,650 24,825 24,825 40,635 21,750 1,750 Wtd. Avg. Floor $ / MMBtu $3.35 $3.42 $3.49 $3.54 $3.54 $3.95 $4.16 $4.16 Collars Volume MMBtu 14,400 11,920 13,305 15,9
Slide 52: Firm Transportation Commitments
Firm Transportation Commitments Volume Delivery Demand Charges Production Source Gas Marketing Strategy (Dth/d) Market ($/Dth) Northeast Supply Canada Firm Sales Contracts Diversification EDA – Tioga 50,000 $0.46 (3rd party) (Dawn) Dawn/NYMEX Tennessee Gas Pipeline NFG pipelines - $0.24 Niagara Expa
Slide 53: Comparable GAAP Financial Measure Slides & Reconciliations
Comparable GAAP Financial Measure Slides & Reconciliations This presentation contains certain non-GAAP financial measures. For pages that contain non-GAAP financial measures, pages containing the most directly comparable GAAP financial measures and reconciliations are provided in the slides that fol
Slide 54: Non-GAAP Reconciliations – Adjusted EBITDA
Non-GAAP Reconciliations – Adjusted EBITDA Reconciliation of Adjusted EBITDA to Consolidated Net Income ($ Thousands) 12-Months Ended FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 6/30/2024 Total Adjusted EBITDA Exploration & Production Adjusted EBITDA $ 351,159 $ 312,166 464,529 656,310 611,782 593,214 P
Slide 55: Non-GAAP Reconciliations – Adjusted EBITDA, by Segment
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 6/30/24 Exploration and Production Segment Reported GAAP Earnings $ 180,632 $ 111,807 $ (326,904) $ 101,916
Slide 56: Non-GAAP Reconciliations – Adjusted Operating Results
Non-GAAP Reconciliations – Adjusted Operating Results Three Months Ended June 30, (in thousands except per share amounts) 2024 2023 Reported GAAP Earnings $ (54,158) $ 92,620 Items impacting comparability: Impairment of oil and gas properties (E&P) $ 200,696 — Tax impact of impairment of oil and gas
Slide 57: Non-GAAP Reconciliations – Free Cash Flow
Non-GAAP Reconciliations – Free Cash Flow Reconciliation of Free Cash Flow ($ Thousands) Nine Months Ended June 30, 2024 2023 Net Cash Provided by Operating Activities $ 868,015 $ 1,055,112 Less: Net Cash Used in Investing Activities $ 685,571 $ 829,099 $ 182,444 $ 226,013 Plus: Acquisitions $ - $ 1
Slide 58: Reconciliation – Capital Expenditures
Reconciliation – Capital Expenditures Reconciliation of Segment Capital Expenditures to Consolidated Capital Expenditures ($ Thousands) FY 2024 FY 2025 FY 2020 FY 2021 FY 2022 FY 2023 Guidance Guidance Capital Expenditures Exploration & Production Capital Expenditures $ 670,455 $ 381,408 $ 565,791 $
Slide 59: Reconciliation – E&P Operating Expenses
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 West Coast
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