National Fuel Gas Company · NYSE:NFG
National Fuel Gas — Q4 2020 Earnings Presentation
64 slides from National Fuel Gas's earnings presentation, Nov 6, 2020
Slide 1: Investor Presentation Q4 Fiscal 2020 Update
Investor Presentation Q4 Fiscal 2020 Update November 5, 2020
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 at https://responsibility.natfuel.com 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 & Utica Production shales(1) 40% of NFG ~1.2 Million ~1 Bcf/day Net acres in Gross Appalachian EBITDA(2) Appalachia natural gas production(3) Midstream Expanding
Slide 4: Why National Fuel?
Why National Fuel? Diversified Assets Provide Stability and Long-Term Growth Opportunities 4
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 Acquisition of significant flowing production and contiguous Tioga County acreage, with supporting gathering facilities, f
Slide 7: Appalachian Program Expected to Generate Free Cash Flow
2 Appalachian Program Expected to Generate Free Cash Flow . . . . . . In Fiscal 2021 at Natural Gas Prices . . . While Generating Strong Consolidated Well Below Current NYMEX Strip. . . Returns Across Seneca’s Acreage Footprint $175 Seneca and Gathering Consolidated Economics (Realized Price is NYME
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: Half Century of Dividend Growth
4 Half Century of Dividend Growth 50 Years 118 Years $1.78 per share 4.3% yield(1) Consecutive Dividend Increases Consecutive Payments $3.2 Billion Dividend payments since 1970 $0.19 per share Annual Rate at Fiscal Year End 9 (1) As of November 3, 2020.
Slide 10: Focused on Corporate Responsibility and Sustainability
5 Focused on Corporate Responsibility and Sustainability Initial Corporate Responsibility Report Published in September 2020 Based on feedback from stakeholders, report was developed using the Sustainability Accounting Standards Board (SASB) framework Report covers relevant environmental metrics
Slide 11: Fourth Quarter and Fiscal 2020 Financial Highlights
Fourth Quarter and Fiscal 2020 Financial Highlights 11
Slide 12: Fourth Quarter Fiscal 2020 Results and Drivers
Fourth Quarter Fiscal 2020 Results and Drivers Adjusted Operating Results ($/share)(1) Q4 FY 2019 Q4 FY 2020 Major Drivers Decrease Driven $0.54 Primarily by Oil and Gas Natural Gas Prices Pricing(2) Commodity Prices $61.00 $55.70 $2.26 $1.92 Exploration & $0.40 Oil Prices Production $0.28 E&P $0.16
Slide 13: Fiscal 2020 Highlights
Fiscal 2020 Highlights Adjusted EBITDA $785 million(1) Flat vs. FY19 despite significantly lower commodity prices(1) Dividend $1.78 per share Grew shareholder distribution for 50th consecutive year Up 14% vs. FY19; highest output in NFG history, Production 241.5 Bcfe driven by recent Appalachian acq
Slide 14: Earnings Guidance
Earnings Guidance FY2020 Adjusted Operating Results FY2021 Earnings Guidance Key Guidance Drivers $2.92/share(1) $3.55 to $3.85/share Net Production 305-335 Bcfe (up 33% vs. FY20) ~$2.25/Mcf(2) (vs. $2.07/Mcf in FY20) Non-Regulated Realized natural gas prices (after-hedge) Exploration Exploratio
Slide 15: Exploration & Production and Gathering Overview
Exploration & Production and 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 350 305-335 Appalachia Expect to add 2nd drilling rig in early calendar 300 California 241.5 2021 (additional activity focused in EDA) 250 211.8 200 173.5 178.1 Additional product
Slide 17: Significant Appalachian Acreage Position
E&P and Gathering Significant Appalachian Acreage Position Eastern Development Area (EDA) Average Seneca gross production(1): ~546 MMcf/d WDA – ~915,000 Acres ~300 potential Utica and Marcellus locations Large, highly-contiguous acreage position, with limited near-term lease expirations (~15%
Slide 18: Eastern Development Area
E&P and Gathering Eastern Development Area Seneca EDA Highlights EDA – ~270,000 Acres 1 Tioga County, PA ~180 undeveloped Utica locations, including ~40 return trip locations ~90 undeveloped Marcellus locations Gathering infrastructure: NFG Tioga gathering systems Firm transportation capacit
Slide 19: EDA: Tioga County Development
E&P and Gathering EDA: Tioga County Development Synergistic Acquisition Provides Highly-Economic Utica and Marcellus Inventory Tioga Development Plan Significant Tioga County Acreage Position Acquired assets are contiguous to NFG’s existing Tioga County production and gathering Undeveloped operati
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, Dominion, and T
Slide 21: EDA: Tioga County Development
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) Acquired production supported by firm 450 transportation capacity to premium 400 markets: Dom
Slide 22: EDA: Lycoming County Development
E&P and Gathering EDA: Lycoming County Development Marcellus Development in Lycoming County Fully Utilizes Firm Transportation Prolific Marcellus acreage with peer-leading well results ~30 remaining Marcellus locations – breakeven (15% IRR) consolidated economics of ~$1.04/MMBtu Near-term deve
Slide 23: Integrated Development – EDA Lycoming Gathering
E&P and Gathering Integrated Development – EDA Lycoming Gathering NFG Trout Run Gathering System Supports Seneca and Future Third-Party Development Current System In-Service Trout Run Gathering System Map Total Investment (to date): ~$270 million Capacity: 466,000 to 585,000 Dth per day Curren
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 ~100 Potential Utica Locations with Strong Economics WDA Development Update WDA – Potential RV-Beechwood Development Area WDA-CRV Area: producing from both Utica and Marcellus wells, with recent development focused on retur
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: 470 MMcf per day Interconnects with TGP 300 and NFG Supply Total Investment to Date: $32
Slide 27: WDA Firm Transportation and Sales Capacity
E&P and Gathering WDA Firm Transportation and Sales Capacity WDA Exit Capacity Supports Production and Enhances Consolidated Returns WDA Gas Marketing Strategy WDA Contracted Firm Transport and Gross Sales Volumes (MDth/d) 600 Will continue to layer-in firm sales deals of short and longer 500 dura
Slide 28: Long-term Contracts Supporting Appalachian Production
E&P and Gathering Long-term Contracts Supporting Appalachian Production Seneca Appalachia Natural Gas Marketing Firm Contract Volumes (MDth/day) 1,200 1,000 Leidy South (Transco & NFG - Supply) Dominion 100,000 Dth/d(1) Transco Zone 6 NNY Gross Frim Volumes (MDth/d) 330,000 Dth/d 800 Dominion to Lei
Slide 29: Near-term Firm Sales Provide Market & Price Certainty
E&P and Gathering Near-term Firm Sales Provide Market & Price Certainty Net Contracted Firm Sales Volumes (Dth per day) Contracted Index Price Differentials ($ per Dth)(1) NYMEX Dawn Other Fixed Price 932,600 16,800 ($0.84) 22,100 ($0.70) 21,900 ($0.70) 17,600 ($0.88) 121,200 786,400 805,600 781,500
Slide 30: 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/ 1 Temblor Primary 614 Other 2 North Lost Tulare & Primary/ 2 775 Hills Etchegoin Steam flood 3 South Los
Slide 31: Fiscal 2021 Production and Price Certainty
E&P and Gathering Fiscal 2021 Production and Price Certainty 275 Bcf of Appalachian Production Protected by Firm Sales 209 Bcf locked-in realizing net ~$2.19/Mcf (1) 25 Bcf of no-cost collars with $2.89/Mcf ceiling(2) 41 Bcf of additional basis protection 350 305-335 Bcfe ~15 Bcfe 300 ~30 Bcf
Slide 32: Hedge Positions and Prices
E&P and Gathering Hedge Positions and Prices Production Supported by Strong Hedge Positions in Fiscal 2021 and 2022 (1) Reflects percentage of remaining projected production for FY21 hedged at the midpoint of the production guidance range. (2) Average weighted floor and ceiling prices. 32 (3) Fixed
Slide 33: Acquisition Drives Expected Decrease in E&P Operating Costs
E&P and Gathering Acquisition Drives Expected Decrease in E&P Operating Costs Increased Scale and Highly-Synergistic Operations Expected to Drive Lower Cash Unit Costs Seneca Cash OpEx ($/Mcfe) Appalachia LOE ($/Mcfe)(3) Approximately $0.07/Mcfe Reduction in Expected Expected FY21 Increase Driven by
Slide 34: Pipeline and Storage Overview
Pipeline and Storage Overview National Fuel Gas Supply Corporation ~ Empire Pipeline, Inc. 34
Slide 35: Pipeline & Storage Segment Overview
Pipeline & Storage Pipeline & Storage Segment Overview National Fuel Gas Supply Corporation Contracted Capacity(1): Firm Transportation: 3,443 MDth per day Firm Storage: 70,693 Mdth (fully subscribed) Rate Base(2): ~$944 million Empire Pipeline FERC Rate Proceeding Status: New rates went
Slide 36: 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 Est. capital cost: $129 million Annual revenues: ~$27 million Receipt point: Jackson (Tioga Co., Pa. production) Design capacity
Slide 37: FM100 Project - Consolidated Benefit for NFG
Pipeline & Storage FM100 Project - Consolidated Benefit for NFG Project expected to provide long-term earnings 330,000 Dth/d of new transportation capacity from uplift to Seneca, Supply Corp. and Gathering WDA and EDA acreage positions to premium markets Supply Corp. Lease to Transco of new capaci
Slide 38: FM100 Project – Significant Investment by Supply Corp.
Pipeline & Storage FM100 Project – Significant Investment by Supply Corp. Estimated capital cost: $279 million Expansion facilities: ~$159 million Modernization facilities: ~$120 million Facilities (all in Pennsylvania) include: Approximately 30 miles of new pipeline 2 new compressor sta
Slide 39: Continued Expansion of the NFG Supply System
Pipeline & Storage Continued Expansion of the NFG Supply System Line N to Monaca Project Project: Firm transportation service to a new ethane cracker facility being built by Shell Chemical Appalachia, LLC In-service date: November 1, 2019 Capital cost: ~$24.5 million Contracted capacity: 133
Slide 40: 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 41: Pipeline & Storage Customer Mix
Pipeline & Storage Pipeline & Storage Customer Mix Customer Transportation by Shipper Type(1) Affiliated Customer Mix (Contracted Capacity) (2) 4.4 MMDth/d Affiliated Non-Affiliated End User Outside 8% Pipeline 9% 26% 52% Producer 82% Marketer 34% 10% 74% LDC 48% 39% 18% LDCs Producers Firm Storage
Slide 42: Utility Overview
Utility Overview National Fuel Gas Distribution Corporation 42
Slide 43: New York & Pennsylvania Service Territories
Utility New York & Pennsylvania Service Territories New York Total Customers(1): 534,000 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 Customers)
Slide 44: New York Rate Case Outcome
Utility New York Rate Case Outcome On April 20, 2017, the New York Public Service Commission issued a Rate Order relating to NFG Distribution’s rate case (No. 16-G-0257) filed in April 2016. Rate Order Summary: Revenue Requirement: $5.9 million Rate Base: $704 million Allowed Return on Equity
Slide 45: Utility Continues its Significant Investments in Safety
Utility Utility Continues its Significant Investments in Safety Ongoing system modernization program drives increased rate base, with tracker in NY allowing recovery of pipeline replacement costs $125.0 Capital Expenditures for Safety (1) Total Capital Expenditures Capital Expenditures ($ millions)
Slide 46: Ongoing Pipeline Replacement & Modernization
Utility Ongoing Pipeline Replacement & Modernization Utility Mains by Material(1) Miles of Utility Main Pipeline Replaced Wrought 159 158 Iron 146 144 Coated Bare Cast Iron 130 NY 9,738 miles Plastic Wrought Bare Iron Coated PA* 4,843 miles Plastic 2015 2016 2017 2018 2019 Calendar Year * No Cast Ir
Slide 47: A Proven History of Controlling Costs
Utility A Proven History of Controlling Costs (1) Utility O&M Expense and Non-Service Pension Costs ($ millions) $250 O&M Expense (GAAP) Non-Service Pension Costs $200 $206 $195 $197 $196 $200 $189 $27 $31 $28 $169 $179 $150 $166 $100 $50 $0 2015 2016 2017 2018 2019 2020 Fiscal Year (1) As of Octobe
Slide 48: Consolidated Financial Overview
Consolidated Financial Overview Upstream I Midstream I Downstream 48
Slide 49: Diversified, Balanced Earnings and Cash Flows
Diversified, Balanced Earnings and Cash Flows Adjusted Operating Results ($ per share)(1) Adjusted EBITDA ($ millions)(2) $785 $785 $4.00 $3.55 to $3.85 $800 $2.92 $312 $3.00 E&P $351 $600 $0.68 $2.00 Gathering $400 $120 $0.73 $108 Pipeline & $162 $190 $1.00 $0.89 Rate Rate Storage $200 Regulated Re
Slide 50: Disciplined, Flexible Capital Allocation
Disciplined, Flexible Capital Allocation Capital Expenditures by Segment ($ millions)(1) $1,000 (2) (3) Exploration & Production Gathering Pipeline & Storage Utility $781 $720-$830 $750 $719 $583 $350-$390 $492 $384 $500 $455 $366 $356 $30-$40 $99 $246 $74 $250 $50 $54 $250-$300 $33 $48 $114 $143 $1
Slide 51: Maintaining Strong Balance Sheet & Liquidity
Maintaining Strong Balance Sheet & Liquidity Net Debt / Adjusted EBITDA(1) Capitalization Includes only 2 months of EBITDA from acquisition 3.08 x Total Equity Total 2.51 x 2.45 x 2.47 x 2.61 x 43% Debt Expect 57% reduction to ~2.75x in FY21 2016 2017 2018 2019 2020 2021E $4.6 Billion Total Capitali
Slide 52: Appendix
Appendix 52
Slide 53: 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 54: Consolidated Seneca and Gathering Economics
Appendix Consolidated Seneca and Gathering Economics (2) Average Realized Pricing Locations Average 15% IRR (3) Completed EUR Prospect Reservoir Remaining CAPEX $2.50 $2.25 $2.00 Realized Lateral (Bcf/1000') to Be Drilled ($M/1000') IRR (%) (3) IRR (%) (3) IRR (%) (3) Price Length (ft) 5,500 - Lycom
Slide 55: Hedge Positions and Prices
Appendix Hedge Positions and Prices Natural Gas Volumes in thousand MMBtu; Prices in $/MMBtu Fiscal 2021 Fiscal 2022 Fiscal 2023 Avg. Avg. Avg. Volume Price Volume Price Volume Price NYMEX Swaps 149,160 $2.63 128,530 $2.65 23,240 $2.54 Dawn Swaps 600 $3.00 - - - - 2-Way Collars 25,850 $2.28 / $2.77
Slide 56: Firm Transportation Commitments
Appendix Firm Transportation Commitments Volume Delivery Demand Charges Production Source Gas Marketing Strategy (Dth/d) Market ($/Dth) Northeast Supply Firm Sales Contracts Canada $0.50 Diversification EDA – Tioga 50,000 Dawn/NYMEX+ (Dawn) (3rd party) Tennessee Gas Pipeline 10 years NFG pipelines =
Slide 57: EDA Type Curves
Appendix EDA Type Curves Lycoming Marcellus Tioga Utica 18 16 14 Cumulative Production (Bcf) 12 10 8 Estimated Cumulative Volumes (Bcf) Lycoming Tioga 6 Year Marcellus Utica (5,800') (10,000') 4 1 3.1 6.0 5 8.3 14.3 10 10.8 17.6 2 EUR (Bcf) 14.5-16.8 20.0-23.0 NRI 84% 82-87% 0 0 12 24 36 48 60 72 84
Slide 58: WDA Type Curves
Appendix WDA Type Curves (1) RV/Beechwood Utica CRV Marcellus 12 Estimated Cumulative Volumes (Bcf) Utica Marcellus Year (10,000') (9,000') 10 1 2.7 1.6 5 7.8 4.2 Cumulative Production (Bcf) 10 10.5 5.9 8 EUR (Bcf) 15.0-18.0 9.0-10.8 NRI 100% 100% 6 4 2 0 0 12 24 36 48 60 72 84 96 108 120 (1) Type C
Slide 59: Comparable GAAP Financial Measure Slides & Reconciliations
Appendix Comparable GAAP Financial Measure Slides & Reconciliations This presentation contains certain non-GAAP financial measures. For pages that contain non-GAAP financial measures, pages containing the most directly comparable GAAP financial measures and reconciliations are provided in the slides
Slide 60: Non-GAAP Reconciliations – Adjusted EBITDA
Appendix Non-GAAP Reconciliations – Adjusted EBITDA Reconciliation of Adjusted EBITDA to Consolidated Net Income ($ Thousands) (1) (1) FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Total Adjusted EBITDA Exploration & Production Adjusted EBITDA $ 363,830 $ 360,979 $ 317,707 $ 351,159 312,166 Pipeline & Sto
Slide 61: Non-GAAP Reconciliations – Adjusted EBITDA, by Segment
Appendix Non-GAAP Reconciliations – Adjusted EBITDA, by Segment Reconciliation of Segment Capital Expenditures to Consolidated Capital Expenditures ($ Thousands) FY 2021 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Guidance Capital Expenditures Exploration & Production Capital Expenditures $ 256,104 $ 25
Slide 62: Non-GAAP Reconciliations – Adjusted Operating Results
Appendix Non-GAAP Reconciliations – Adjusted Operating Results Three Months Ended Fiscal Year Ended September 30, September 30, (in thousands except per share amounts) 2020 2019 2020 2019 Reported GAAP Earnings $ (145,545) $ 47,281 $ (123,772) $ 304,290 Items impacting comparability: Impairment of o
Slide 63: Non-GAAP Reconciliations – Capital Expenditures
Appendix Non-GAAP Reconciliations – Capital Expenditures Reconciliation of Segment Capital Expenditures to Consolidated Capital Expenditures ($ Thousands) FY 2021 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Guidance Capital Expenditures Exploration & Production Capital Expenditures $ 256,104 $ 253,057 $
Slide 64: 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, 2020 September 30, 2019 (2) (2) (2) (2) Appalachia West Coast Total E&P Ap
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