National Fuel Gas Company · NYSE:NFG
National Fuel Gas — Q4 2021 Earnings Presentation
67 slides from National Fuel Gas's earnings presentation, Nov 4, 2021
Slide 1: Investor Presentation Q4 Fiscal 2021 Update
Investor Presentation Q4 Fiscal 2021 Update November 5, 2021 Exhibit 99
Slide 2: Commitment to safe and environmentally conscious operations
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 Developing our large, high-quality acreage position in Marcellus & Utica shales(1) Providing safe, reliable and affordable service to customers in WNY and NW Pa. Upstream Exploration & Production Midstream Gathering Pipeline & Storage 38% of NFG EBI
Slide 4: Why National Fuel?
Why National Fuel? Diversified Assets Provide Stability and Long-Term Growth Opportunities Integrated Model Enhances Shareholder Value Expect to Generate Significant Free Cash Flow in Fiscal 2022 and Beyond Interstate Pipeline Business Drives Significant Regulated Growth Long History of Returning Ca
Slide 5: Integrated Model Enhances Shareholder Value
Integrated Model Enhances Shareholder Value . . . 1 Midstream Ability to adjust to changing commodity price environments More efficient capital investment Higher returns on investment Operational scale Lower cost of capital Lower operating costs More competitive pipeline infrastructure projects Stro
Slide 6: And Continues to Drive Growth Opportunities
. . . and Continues to Drive Growth Opportunities Integrated Upstream and Midstream development of high-quality Appalachian assets ~1.2 million net acres in the Marcellus and Utica shales NFG’s gathering systems move Seneca’s natural gas production, driving consolidated returns NFG’s interstate pipe
Slide 7: Consolidated Business Expected to Generate Significant Free Cash Flow
Consolidated Business Expected to Generate Significant Free Cash Flow . . . 2 Consolidated free cash flow. The Company defines free cash flow on page 62 of this presentation. Assumes current hedges and $75.00 per Bbl WTI oil price. . . . In Fiscal 2022 at Natural Gas Prices Well Below Current NYMEX
Slide 8: Significant Interstate Pipeline Growth
Significant Interstate Pipeline Growth 3 Northern Access Delivery: NY & Canada 490,000 Dth/d (remains under development) Line N to Monaca Delivery: Shell ethane cracker facility (Beaver Co., Pa) 133,000 Dth/d FM100 Delivery: Transco (Leidy) 330,000 Dth/d Empire North Delivery: Canada & NY 205,000 Dt
Slide 9: Over Half Century of Dividend Growth
Over Half Century of Dividend Growth 4 $3.4 Billion Dividend payments since 1970 $1.82 per share 51Years Consecutive Dividend Increases $0.19 per share 119 Years Consecutive Payments 3.1% yield(1) As of November 1, 2021.
Slide 10: Focused on Corporate Responsibility and ESG
Focused on Corporate Responsibility and ESG Climate Risk – Enhanced disclosure under the Task Force on Climate-Related Financial Disclosure (“TCFD”) framework Greenhouse Gas Emissions: Enhanced Scope 1 Emissions Disclosures Addition of Scope 2 Emissions Emission Reduction Targets: Segment-Level Meth
Slide 11: Recently Announced Emissions Reduction Targets and Initiatives
Recently Announced Emissions Reduction Targets and Initiatives All emissions reduction targets based on 2020 baseline, except Utility reduction in delivery system targets (1990 baseline). NFG Exploration & Production Gathering Utility Significant Methane Intensity and Greenhouse Gas Emissions Reduct
Slide 12: Fourth Quarter and Fiscal 2021 Financial Highlights
Fourth Quarter and Fiscal 2021 Financial Highlights
Slide 13: Fourth Quarter Fiscal 2021 Results and Drivers
Fourth Quarter Fiscal 2021 Results and Drivers Increased Production (Appalachian Acquisition) Net Oil and Gas Production A Reconciliation of Adjusted Operating Results to Earnings Per Share is provided at the end of this presentation. Realized price after hedging. Oil and Gas Pricing(2) Natural Gas
Slide 14: Fiscal 2021 Highlights
Fiscal 2021 Highlights Adjusted EBITDA Dividend Production Proved Reserves Gathering Throughput Pipeline & Storage Revenues Utility Safety Investments $1.0 billion(1) Up 27% vs. FY20(1) $1.82 per share Grew shareholder distribution for 51st consecutive year 327.4 Bcfe Up 36% vs. FY20; highest output
Slide 15: Earnings Guidance
Earnings Guidance FY2021 Adjusted Operating Results Exploration & Production Gathering $4.29/share(1) $5.05 to $5.45/share FY2022 Earnings Guidance 335-365 Bcfe (up 7% vs. FY21) ~$2.50/Mcf(2) (vs. $2.25/Mcf in FY21) Key Guidance Drivers Excludes items impacting comparability. A reconciliation of Adj
Slide 16: Exploration & Production & Gathering Overview
Exploration & Production & Gathering Overview Seneca Resources Company, LLC National Fuel Gas Midstream Company, LLC
Slide 17: Growing Production within Disciplined Capital Program
Growing Production within Disciplined Capital Program Near-Term Strategy E&P Net Capital Expenditures ($ millions)(1) E&P Net Production (Bcfe) Continue two rig development program with focus on further improving capital efficiency EDA share of total drilling activity increasing from ~25% (FY20) to
Slide 18: Significant Appalachian Acreage Position
Significant Appalachian Acreage Position Drilling locations with expected consolidated Exploration & Production and Gathering segments pre-tax IRR’s in 20%. Seneca Appalachian acreage is fee-owned, or leased from either the Pennsylvania Department of Conservation and Natural Resources or private lan
Slide 19: Eastern Development Area
Eastern Development Area EDA – ~270,000 Acres Seneca EDA Highlights ~160 undeveloped Utica locations ~90 undeveloped Marcellus locations Gathering infrastructure: NFG Tioga gathering systems Numerous marketing opportunities: Ability to utilize Seneca’s firm transportation capacity: Empire Tioga Coun
Slide 20: EDA: Tioga County Development
EDA: Tioga County Development Large Contiguous Acreage Position, with Highly-Economic Utica and Marcellus Inventory (1) Significant Tioga County Acreage Position Undeveloped Utica Undeveloped Marcellus Tioga Development Plan Significant assets acquired in mid-2020, contiguous to NFG’s existing Tioga
Slide 21: Integrated Development – EDA Tioga Gathering
Integrated Development – EDA Tioga Gathering NFG Tioga Gathering Systems Support Growing Seneca Production Tioga County Gathering Systems Map Current Systems In-Service Empire Eastern TGP E&P and Gathering Tioga Gathering System Capacity: up to 550,000 Dth per day (Interconnects with Empire, Eastern
Slide 22: EDA: Tioga County Firm Sales and Transportation
EDA: Tioga County Development Production Underpinned by Firm Sales and Firm Transportation Contracts (1) Includes physical fixed price and NYMEX-based firm sales contracts that do not carry any additional transportation costs. Production supported by firm transportation capacity to premium markets:
Slide 23: EDA: Lycoming County Development
EDA: Lycoming County Development Includes physical fixed price and NYMEX-based firm sales contracts that do not carry any additional transportation costs. Marcellus Development in Lycoming County Fully Utilizes Valuable Firm Transportation Prolific Marcellus acreage with average EUR of 2.5-3.0 Bcf /
Slide 24: Integrated Development – EDA Lycoming Gathering
Integrated Development – EDA Lycoming Gathering NFG Trout Run Gathering System Supports Seneca and Third-Party Development Trout Run Gathering System Map Current System In-Service Third-Party Volumes Long-term contract executed, with volumes online in November 2020 Completed construction of new faci
Slide 25: Western Development Area
Western Development Area Marcellus Core Acreage vs. Utica Trend(1) The Utica Shale lies approximately 5,000 feet beneath Seneca’s WDA Marcellus acreage. Appraisal program currently in progress. Additional tests are planned. Prior Marcellus delineation tests helped define the prospective limits of th
Slide 26: WDA Development Plan
WDA Development Plan WDA – Potential RV-Beechwood Utica Development Area Beechwood Development Area Provides ~90 Potential Utica Locations with Strong Economics WDA-CRV Area: producing from both Utica and Marcellus wells, with development focused on new Utica development pads as well as Utica/Marcel
Slide 27: Integrated Development – WDA Gathering System
Integrated Development – WDA Gathering System Current System In-Service Capacity: 620 MMcf per day Interconnects with TGP 300 and NFG Supply Total Investment (to date): $349 million 40,620 HP of compression (3 stations) Future Build-Out Modest gathering pipeline and compression investment required t
Slide 28: WDA Firm Transportation and Sales Capacity
WDA Firm Transportation and Sales Capacity Will continue to layer-in firm sales deals of short and longer duration on TGP 300 to reduce spot exposure WDA spot realizations track TGP Station 313 pricing, typically 15¢ - 20¢ better than TGP Marcellus Zone 4 Leidy South will provide additional capacity
Slide 29: Long-term Contracts Supporting Appalachian Production
Long-term Contracts Supporting Appalachian Production Seneca Appalachia Natural Gas Marketing Firm Contract / Transport Volumes (MDth/day) E&P and Gathering Represents base firm sales contracts not tied to firm transportation capacity. Base firm sales are either fixed priced or priced at an index (e
Slide 30: Near-term Firm Sales Provide Market & Price Certainty
Near-term Firm Sales Provide Market & Price Certainty Net Contracted Firm Sales / Transport Volumes (Dth per day) Contracted Index Price Differentials ($ per Dth)(1) E&P and Gathering Values shown represent the weighted average fixed price or weighted average differential relative to NYMEX (netback
Slide 31: Completion Equipment Emissions Testing & Field Trial
Completion Equipment Emissions Testing & Field Trial Sustainability Initiatives – RSG and Completion Equipment Study Responsible Gas Certification Comprehensive Emissions Testing Performed field testing of Tier 2 and Tier 4 diesel and dual fuel engines, natural gas-powered turbine engines, and natur
Slide 32: California Oil
California Oil Stable Oil Production | Minimal Capital Investment | Steady Free Cash Flow 1 2 3 4 5 Location Formation Production Method Avg. Daily Production (net BOE/d) 1 East Coalinga/ Other Temblor Primary 607 2 North Lost Hills Tulare & Etchegoin Primary/ Steam flood 781 3 South Lost Hills Mont
Slide 33: California – Continued Focus on Integrating Renewable Energy
California – Continued Focus on Integrating Renewable Energy North Midway Sunset Field (2016) Bakersfield Office (2018) South Midway Sunset Field (2021E) Ongoing Investments in Solar Facilities Offset Operational Power Needs Capacity: 3.1 Megawatts Online Date: August 2016 Cost: $6.6 MM Annual Elect
Slide 34: Fiscal 2022 Production Profile
Fiscal 2022 Production Profile Average realized price reflects uplift from financial hedges less fixed differentials under firm sales contracts and any firm transportation costs. Average weighted ceiling price (average weighted floor price of $2.37/Mcf). Includes ~56 Bcf of firm sales with fixed ind
Slide 35: Hedge Positions and Prices
Hedge Positions and Prices Production Supported by Strong Hedge Positions E&P and Gathering 35 Pro Forma Natural Gas - MMDth, $/MMBtu 190.9 MMDth 263.2 MMDth ~76% Hedged(1) $2.75 $2.27 $2.28 / $2.77(2) $2.79 $2.23 $2.78 / $3.19(2) Crude Oil - MBbl, $/Bbl 480 MBbl 1,296 MBbl ~61% Hedged(1) $58.28 $51
Slide 36: Continued Decrease in E&P Operating Costs
Continued Decrease in E&P Operating Costs Increased Scale and Highly-Contiguous Operations Expected to Drive Lower Cash Unit Costs Seneca Cash OpEx ($/Mcfe) (2) (2) (1) Appalachia LOE ($/Mcfe)(3) Approximately $0.25/Mcfe Reduction in Expected Cash Unit Costs vs. 2018 Levels Fees Paid to NFG’s Gather
Slide 37: Pipeline & Storage Overview
Pipeline & Storage Overview National Fuel Gas Supply Corporation Empire Pipeline, Inc.
Slide 38: Pipeline & Storage Segment Overview
Pipeline & Storage Segment Overview As of September 30, 2020 as disclosed in the Company’s fiscal 2020 Form 10-K. As of December 31, 2020 calculated from National Fuel Gas Supply Corporation’s and Empire Pipeline, Inc.’s 2020 FERC Form-2 reports, respectively. Empire Pipeline, Inc. National Fuel Gas
Slide 39: FM100 Project - Consolidated Benefit for NFG
FM100 Project - Consolidated Benefit for NFG All Seneca volumes will flow through wholly-owned NFG gathering facilities 330,000 Dth/d of new transportation capacity from WDA and EDA acreage positions to premium markets New Transco capacity (Leidy South): 330,000 Dth/day Rate(1) : competitive with ot
Slide 40: FM100 Project – Significant Investment by Supply Corp.
FM100 Project – Significant Investment by Supply Corp. Estimated capital cost: $240 million Facilities (all in Pennsylvania) include: Approximately 30 miles of new pipeline 2 new compressor stations (totaling approximately 37,000 HP) New interconnection station and modification of existing interconn
Slide 41: Empire North Project
Empire North Project In-service date: September 15, 2020 Capital cost: $129 million Annual revenues: ~$27 million Underpinned by long-term firm transportation contracts (10-15 years): Repsol Oil & Gas: 150 MDth/d National Fuel Gas Distribution Corporation: 35 MDth/d Greenidge Markets & Trading: 15 M
Slide 42: Continued Expansion of the Supply Corp. Line N System
Continued Expansion of the Supply Corp. Line N System Shell Chemical Appalachia, LLC - On-system Delivery Point In-Service Date: November 2019 Contracted Firm Transport: 133,000 Dth/d Capital Cost: $24.5 million Annual Revenue: $5.6 million Pipeline & Storage TGP 219 Rover Holbrook Columbia Intercon
Slide 43: Northern Access Project
Northern Access Project Delivery points: 350,000 Dth/d to Chippawa (TCPL interconnect) 140,000 Dth/d to East Aurora (TGP 200 line) Regulatory/legal status: Feb. 2017 – FERC 7(c) certificate issued Aug. 2018 – FERC issued Order finding that NY DEC waived water quality certification (WQC) April 2019 –
Slide 44: Pipeline & Storage Customer Mix
Pipeline & Storage Customer Mix 4.4 MMDth/d Firm Transport Customer Transportation by Shipper Type(1) Affiliated Customer Mix (Contracted Capacity) Contracted as of 9/30/2020. Pipeline & Storage
Slide 45: Utility Overview
Utility Overview National Fuel Gas Distribution Corporation
Slide 46: New York & Pennsylvania Service Territories
New York & Pennsylvania Service Territories New York Total Customers(1): 534,000 ROE: 8.7% (NY PSC Rate Case Order, April 2017)(2) Rate Mechanisms: Revenue Decoupling Weather Normalization Low Income Rates Merchant Function Charge (Uncollectibles Adj.) 90/10 Sharing (Large Customers) System Moderniz
Slide 47: Utility Continues its Significant Investments in Safety
Utility Continues its Significant Investments in Safety (1) A reconciliation to Capital Expenditures as presented on the Consolidated Statement of Cash Flows is included at the end of this presentation. Long-Standing Focus on Distribution System Safety and Reliability Utility Modernization Spending
Slide 48: Long-Standing Pipeline Replacement & Modernization
Long-Standing Pipeline Replacement & Modernization NY 9,758 miles PA* 4,850 miles * No Cast Iron Mains in Pa.* Miles of Utility Main Pipeline Replaced Utility Mains by Material(1) (1) All values are reported on a calendar year basis as of December 31, 2020. Utility
Slide 49: A Proven History of Controlling Costs
A Proven History of Controlling Costs Utility O&M Expense and Non-Service Pension Costs ($ millions)(1) (1) As of October 1, 2018, Operation and Maintenance Expense does not include non-service pension costs, which were re-classified as Other Income (Deductions) on the Company’s Income Statement. Ut
Slide 50: Utility Targeting Substantial Emissions Reductions
Baseline emissions & emissions reduction targets are calculated pursuant to the reporting methodology under the EPA GHG Reporting Program (current Subpart W, and using AR5), primarily Distribution pipeline mains & services. New York Climate Leadership and Community Protection Act, enacted in 2019. T
Slide 51: Promoting Renewable Natural Gas
Promoting Renewable Natural Gas Low Resource Scenario High Resource Scenario Technical Potential Landfill 20 33 50 Animal/Food Waste 7 13 37 Wastewater 2 3 7 Other 24 56 177 All Sources 53 105 271 Awarded three RNG grants for $1.2 million through the Utility’s Area Development Program Petitioned NY
Slide 52: Consolidated Financial Overview
Consolidated Financial Overview Upstream I Midstream I Downstream
Slide 53: Diversified, Balanced Earnings and Cash Flows
Diversified, Balanced Earnings and Cash Flows Adjusted Operating Results ($ per share)(1) A reconciliation of Adjusted Operating Results to Earnings per Share, by segment, as presented on the Consolidated Statement of Income and Earnings Reinvested in the Business is included at the end of this pres
Slide 54: Disciplined, Flexible Capital Allocation
Disciplined, Flexible Capital Allocation (2) Total Capital Expenditures include Corporate and All Other. A reconciliation to Capital Expenditures as presented on the Consolidated Statement of Cash Flows is included at the end of this presentation. FY17 and FY18 reflects the netting of $7 million, an
Slide 55: Maintaining Strong Balance Sheet & Liquidity
Maintaining Strong Balance Sheet & Liquidity Total Debt 61% $4.6 Billion Total Capitalization as of September 30, 2021 Net Debt / Adjusted EBITDA(1) Capitalization Debt Maturity Profile by Fiscal Year ($MM) Liquidity Committed Credit Facilities Short-term Debt Outstanding Available Short-term Credit
Slide 56: Appendix
Appendix 56
Slide 57: 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 58: 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)
Slide 59: NYMEX Capped Firm Sales Additional Detail
NYMEX Capped Firm Sales Additional Detail Appendix Values shown represent the weighted average differential relative to NYMEX (netback price), and are net of any associated transportation costs. Transportation costs include minor variable components such as the Canadian exchange rate and fuel compon
Slide 60: Firm Transportation Commitments
Firm Transportation Commitments Volume (Dth/d) Production Source Delivery Market Demand Charges ($/Dth) Gas Marketing Strategy Northeast Supply Diversification Tennessee Gas Pipeline Niagara Expansion TGP & NFG - Supply Leidy South / FM100 WMB – Transco; NFG - Supply Target in-service: late 2021 50,
Slide 61: Primary Development Area Type Curves
Primary Development Area Type Curves Appendix Estimated Cumulative Volumes (Bcf) Year Lycoming Marcellus (5,500-6,000') Tioga Utica (10,000 -11,000') WDA Utica (10,000-11,000’) 1 3.5 5.9 2.7 5 9.5 14.1 8.0 10 12.2 17.3 10.8 EUR (Bcf) 14.5-16.8 19.0-24.0 15.8-18.9 NRI 84% 82-87% 100%
Slide 62: 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 63: Non-GAAP Reconciliations – Adjusted EBITDA
Non-GAAP Reconciliations – Adjusted EBITDA Total Adjusted EBITDA for FY 2018, FY 2019, FY 2020, and FY 2021, include the reclassification of non-service pension costs from Operating and Maintenance Expense to Other Income (Deductions) as of October 1, 2018 on the Company’s Income Statement. This rec
Slide 64: Non-GAAP Reconciliations – Adjusted EBITDA, by Segment
Non-GAAP Reconciliations – Adjusted EBITDA, by Segment Appendix
Slide 65: Non-GAAP Reconciliations – Adjusted Operating Results
Non-GAAP Reconciliations – Adjusted Operating Results Appendix
Slide 66: Non-GAAP Reconciliations – Capital Expenditures
Non-GAAP Reconciliations – Capital Expenditures Appendix (1) Amount is $2,805 lower than the accrued capital expenditures reported in the prior year, representing certain liabilities assumed in connection with the 2020 acquisition of assets from Shell, capitalized as part of the asset acquisition co
Slide 67: Non-GAAP Reconciliations – E&P Operating Expenses
Non-GAAP Reconciliations – E&P Operating Expenses Appendix