National Fuel Gas Company · NYSE:NFG
National Fuel Gas — Q2 2023 Earnings Presentation
60 slides from National Fuel Gas's earnings presentation, May 4, 2023
Slide 1: Investor Presentation Q2 Fiscal 2023 Update
Investor Presentation Q2 Fiscal 2023 Update May 3, 2023
Slide 2: Commitment to safe and environmentally conscious natural gas development
National Fuel is committed to the safe and environmentally conscious development, transportation, storage, and distribution of natural gas 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 Upstream Developing our large, high-quality Exploration & acreage position in Marcellus & Production Utica shales 55% of NFG ~1.2 Million ~1.04 Bcf/day Net acres in Net Appalachian natural EBITDA(1) Appalachia gas production(2) Midstream Expanding a
Slide 4: Why National Fuel?
Why National Fuel? Diversified Assets Provide Stability and Long-Term Growth Opportunities 1 Integrated Model Enhances Shareholder Value 2 Consolidated Business Continuing to Generate Significant Free Cash Flow 3 High Quality Assets Drive Consolidated Growth 4 Long History of Returning Capital to Sh
Slide 5: Integrated Model Enhances Shareholder Value
1 Integrated Model Enhances Shareholder Value . . . Benefits of National Fuel’s Geographic and Operational Integration Integrated Structure: Upstream Drives Synergies: Exploration & Ability to adjust to changing commodity Production Upstream Midstream 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 Integrated Upstream and Midstream development of high-quality Appalachian assets ~1.2 million net acres in the Marcellus
Slide 7: Consolidated Business Generating Significant Free Cash Flow
2 Consolidated Business Generating Significant Free Cash Flow . . . . . . In Fiscal 2023. . . . . . With Sustainable Free Cash Flow Generation Expected Projected Free Cash Flow Annualized Dividend Over the Long-Term $500 Upstream Acquisitions Consolidated capital expenditure optimization to maximi
Slide 8: High Quality Assets Drive Consolidated Growth
3 High Quality Assets Drive Consolidated Growth Regulated businesses provide stable, predictable growth that underpins integrated Appalachian development program Exploration & Production Utility Inventory of 1,000+ high-quality, economic Multi-year modernization program, focused on Marcellus and
Slide 9: Over Half Century of Dividend Growth
4 Over Half Century of Dividend Growth 52 Years 120 Years $1.90 3.7% Consecutive Dividend Increases Consecutive Payments per share yield(1) $1.4 Billion 4.4% Dividend payments over last 10 years 2022 Dividend Increase $0.19 per share Annual Rate at Fiscal Year End (1) As of May 2, 2023. 9
Slide 10: Focused on Corporate Responsibility and ESG
5 Focused on Corporate Responsibility and ESG Corporate Responsibility & Climate Report provides Enhanced ESG Disclosures Responsive to Key Stakeholder Priorities Enhanced Diversity Disclosures – continued workforce EEO-1 diversity disclosures, as well as supply chain diversity initiatives Green
Slide 11: Emissions Reduction Targets and Initiatives
Emissions Reduction Targets and Initiatives Significant Methane Intensity and Greenhouse Gas Emissions Reduction Targets Across the Reduction Ongoing Sustainability Initiatives Energy Value Chain(1) Since 2020(2) Exploration & Responsible Gas Certifications 40% Reduction in Methane Intensity by 20
Slide 12: Second Quarter Fiscal 2023 Financial Highlights
Second Quarter Fiscal 2023 Financial Highlights 12
Slide 13: Second Quarter Fiscal 2023 Results and Drivers
Second Quarter Fiscal 2023 Results and Drivers Adjusted Operating Results ($/share)(1) Q2 FY 2022 Q2 FY 2023 Major Drivers Natural Gas Pricing $1.68 ($/Mcfe)(2) $1.54 Natural Gas Prices $2.56 $2.58 Exploration & Production Exploration & Appalachia $0.77 Production $0.68 Total Production Appalachian
Slide 14: Earnings Guidance
Earnings Guidance FY2022 Adjusted Operating Results FY2023 Earnings Guidance Key Guidance Drivers $5.88/share(1) $5.10 to $5.40/share(1) Net Production 370-390 Bcfe (up 8% vs. FY22) Realized natural gas prices (after-hedge) ~$2.50-2.55/Mcf(2) (vs. $2.71/Mcf in FY22) Non-Regulated Exploration & P
Slide 15: Exploration & Production & Gathering Overview
Exploration & Production & 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 400 Continue two rig development program with focus 300 on maximizing returns and cash flows, targeting mid-to-high single digit production growth 200 370-390 327.4 352.5 211.8 241.
Slide 17: Significant Appalachian Acreage Position
E&P and Gathering Significant Appalachian Acreage Position >1,000 Economic Drilling Locations at $3.50 NYMEX Prices(1) Decades of highly-economic inventory (~35 wells per year at current 2-rig pace) Large, contiguous acreage position, driving increased capital efficiency >50% undeveloped acrea
Slide 18: Strategic Bolt-On Opportunities in EDA Deepen High-Quality Inventory
E&P and Gathering Strategic Bolt-On Opportunities in EDA Deepen High-Quality Inventory Assets Overview ~36,000 net acres(1), 20 MMcf/day current production, and a PDNP well 50-70 incremental future development locations and significantly lengthens laterals on >20 existing locations Strategic Rat
Slide 19: Eastern Development Area
E&P and Gathering Eastern Development Area Seneca EDA Highlights EDA – ~300,000 Acres(1) 1 Tioga County, PA ~200 Utica future development locations(1) ~80 Marcellus future development locations Gathering infrastructure: NFG Tioga gathering systems Numerous marketing opportunities: Ability
Slide 20: EDA: Tioga County Development
E&P and Gathering EDA: Tioga County Development Large Contiguous Acreage Position, with Highly-Economic Utica and Marcellus Inventory Tioga Development Plan Significant Tioga County Acreage Position Significant additional assets acquired in mid-2020, contiguous to NFG’s existing Tioga County produ
Slide 21: 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 Total Investment (to date): ~$267 million(1) Capacity: up to 550,000 Dth per day (In
Slide 22: EDA: Tioga County Development – Firm Sales and Transportation
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) 600 Production supported by firm transportation capacity to premium markets: 500 EDA - TGP 30
Slide 23: EDA: Lycoming County Development
E&P and Gathering EDA: Lycoming County Development Marcellus Development in Lycoming County Fully Utilizes Valuable Firm Transportation Prolific Marcellus acreage with average EUR of 2.5-3.0 Bcf / 1,000 ft ~30 Marcellus future development locations Average lateral length of 7,500-8,500’ and co
Slide 24: Integrated Development – EDA Lycoming Gathering
E&P and Gathering Integrated Development – EDA Lycoming Gathering NFG Trout Run Gathering System Supports Seneca and Third-Party Development Current System In-Service Trout Run Gathering System Map Total Investment (to date): ~$276 million Capacity: 466,000 to 585,000 Dth per day Current Produ
Slide 25: Western Development Area
E&P and Gathering Western Development Area Marcellus Core Acreage vs. Utica Trend(1) WDA Highlights Large well inventory: Marcellus Shale: 600+ well locations remaining / 200,000 acres Utica Shale: 500+ potential locations across Utica trend / evaluating extent of prospective acreage(2) Fee
Slide 26: Integrated Development – WDA Gathering System
E&P and Gathering Integrated Development – WDA Gathering System Gathering System Build-Out Tailored to Accommodate Seneca’s WDA Development Clermont Gathering System Map Current System In-Service Capacity: 750 MMcf per day Interconnects with TGP 300 and NFG Supply Total Investment (to date): ~
Slide 27: WDA Firm Transportation and Sales Capacity
E&P and Gathering WDA Firm Transportation and Sales Capacity WDA Exit Capacity Supports Production and Enhances Consolidated Returns WDA Gas Marketing Strategy WDA Contracted Firm Transport and Gross Sales Volumes (MDth/d) 500 Will continue to layer-in firm sales deals of short and longer duration
Slide 28: Long-term Contracts Supporting Appalachian Production
E&P and Gathering Long-term Contracts Supporting Appalachian Production Seneca Appalachia Natural Gas Marketing Firm Contract / Transport Volumes (MDth/day) 1200 Firm Sales Contracts(1) 1000 Leidy South (Transco & NFG - Supply) Transco Zone 6 Non-NY 800 330,000 Dth/d *Capacity can be utilized by all
Slide 29: Near-term Firm Sales Provide Market & Price Certainty
E&P and Gathering Near-term Firm Sales Provide Market & Price Certainty Net Contracted Firm Sales / Transport Volumes (Dth per day) Contracted Index Price Differentials ($ per Dth)(1) NYMEX Dawn Other Capped Fixed Price 32,200 (2) ($1.09) 22,000 ($0.91) 1,024,400 994,000 1,009,100 237,200 218,400 (3
Slide 30: Fiscal 2023 Production Profile
E&P and Gathering Fiscal 2023 Production Profile 180 Bcf of Appalachian Production Protected by Firm Sales 105 Bcf locked-in realizing ~$2.28/Mcf(1), net of transportation 47 Bcf of no-cost collars with $3.54/Mcf floor(2) 28 Bcf of additional firm sales(3) 400 ~16 Bcf 370-390 Bcfe 350 ~28 Bcfe
Slide 31: Continued Decrease in E&P Operating Costs
E&P and Gathering Continued Decrease in E&P Operating Costs Increased Scale and Highly-Contiguous Operations Expected to Drive Lower Cash Unit Costs Seneca Cash OpEx ($/Mcfe) $1.40 Operating $1.32 results excluding $0.14 $1.22 California operations $0.14 $1.14 $0.12 $0.34 $0.11 $0.30 $0.97 ~$0.95
Slide 32: Sustainability Initiatives
E&P and Gathering Sustainability Initiatives Responsible Gas Certifications and Methane Detection Equitable Origin Methane Detection (100% of Appalachian Assets - Certified December 2021) For the past decade, standard pad design has included fixed gas detection 2022 Re-Verification assessment di
Slide 33: Pipeline & Storage Overview
Pipeline & Storage Overview National Fuel Gas Supply Corporation Empire Pipeline, Inc. 33
Slide 34: Pipeline & Storage Segment Overview
Pipeline & Storage Pipeline & Storage Segment Overview National Fuel Gas Supply Corporation Contracted Capacity(1): Firm Transportation: 3,461 MDth per day Firm Storage: 70,693 MDth (fully subscribed) Rate Base(2): ~$1,179 million FERC Rate Proceeding Status: Empire Pipeline 2020 settlem
Slide 35: FM100 Project – Significant Investment by Supply Corp.
Pipeline & Storage FM100 Project – Significant Investment by Supply Corp. In-service date: December 1, 2021(1) Capital cost: ~$230 million Annual revenue: ~$50 million(2) Underpinned by long-term lease agreement with Transco (15 years) Project includes best-in-class emissions controls, lim
Slide 36: 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 three 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 Dt
Slide 37: 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 38: 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% 23% Outside Pipeline Producer 52% 16% 34% 84% Marketer 5% 77% LDC 48% 37% 16% LDCs Producers Firm Storage Firm Transport (
Slide 39: Utility Overview
Utility Overview National Fuel Gas Distribution Corporation 39
Slide 40: New York & Pennsylvania Service Territories
Utility New York & Pennsylvania Service Territories New York Total Customers(1): 540,000 ROE: 8.7% (NY PSC Rate Case Order, April 2017)(2) Rate Mechanisms: o Revenue Decoupling o Weather Normalization o Low Income Rates o Merchant Function Charge (Uncollectibles Adj.) o 90/10 Sharing (Large Customer
Slide 41: Customer Affordability
Utility Customer Affordability New York Pennsylvania #2 #1 Out of 9 Gas Utilities(1) Out of 7 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) $180 $3
Slide 42: Utility Continues its Significant Investments in Safety
Utility Utility Continues its Significant Investments in Safety Long-Standing Focus on Distribution System Safety and Reliability $140.0 (1) Capital Expenditures for Safety Total Capital Expenditures $110-$130 Utility Capital Expenditures ($ millions) $120.0 $111.0 $100.8 $95.8 $94.3 $100.0 $80.9 $8
Slide 43: Long-Standing Pipeline Replacement & Modernization
Utility Long-Standing Pipeline Replacement & Modernization Utility Mains by Material(1) Miles of Utility Main Pipeline Replaced Wrought Iron 159 158 154 156 154 Coated Bare NY 9,798 miles Plastic Bare Wrought Iron Coated PA 4,845 miles Plastic 2018 2019 2020 2021 2022 Calendar Year (1) All values ar
Slide 44: 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 45: Promoting Renewable Natural Gas and Hydrogen
Utility Promoting Renewable Natural Gas and Hydrogen Through Fiscal 2020 October 2020 July 2021 Ongoing Petitioned NY PSC to include Accepted first RNG deliveries Awarded three RNG grants into NY system from Continue to advance RNG RNG in the supply mix and for $1.2 million through the anaerobic dig
Slide 46: Consolidated Financial Overview
Consolidated Financial Overview Upstream I Midstream I Downstream 46
Slide 47: Diversified, Balanced Earnings and Cash Flows
Diversified, Balanced Earnings and Cash Flows Adjusted Operating Results ($ per share)(1) Adjusted EBITDA ($ millions)(2) $1,400 $7.00 $1,263 $1,226 $6.00 $5.88 $1,200 $5.10 to $5.40 $1,000 $5.00 $1,000 $4.29 $656 $696 $3.21 $4.00 E&P $800 $465 $1.83 $3.00 $600 $159 $177 $182 $0.88 $1.01 Gathering $
Slide 48: Disciplined, Flexible Capital Allocation
Disciplined, Flexible Capital Allocation Capital Expenditures by Segment ($ millions)(1) $1,000 Exploration & Production (2) Gathering (3) Pipeline & Storage Utility $830-$940 $829 $781 $770 $750 $719 $583 $525-$575 $381 $492 $384 $566 $500 $356 $35 $74 $85-$105 $250 $50 $252 $56 $48 $110-$130 $143
Slide 49: Maintaining Strong Balance Sheet & Liquidity
Maintaining Strong Balance Sheet & Liquidity Net Debt / Adjusted EBITDA(1) Capitalization 3.08 x 2.61 x 2.72 x 2.47 x Total 2.22 x 2.08 x Equity Debt 54% 46% 2018 2019 2020 2021 2022 TTM $5.4 Billion Total Capitalization Fiscal Year 3/31/2023 as of March 31, 2023(2) Debt Maturity Profile by Fiscal Y
Slide 50: Appendix
Appendix 50
Slide 51: Safe Harbor For Forward Looking Statements
Appendix Safe Harbor For Forward Looking Statements This presentation may contain “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995, including statements regarding future prospects, plans, objectives, goals, projections, estimates of gas quantities, stra
Slide 52: Hedge Positions and Prices
Appendix Hedge Positions and Prices (1) Fixed price physical sales exclude joint development partner’s share of fixed price contract WDA volumes as specified under the joint development agreement. 52
Slide 53: NYMEX Capped Firm Sales Additional Detail
Appendix NYMEX Capped Firm Sales Additional Detail (1) Values shown represent the weighted average differential relative to NYMEX (netback price) and are net of any associated transportation costs. Transportation costs include minor variable components such as the Canadian exchange rate and fuel 53
Slide 54: Firm Transportation Commitments
Appendix Firm Transportation Commitments Volume Delivery Demand Charges Production Source Gas Marketing Strategy (Dth/d) Market ($/Dth) Northeast Supply Canada Firm Sales Contracts Diversification EDA – Tioga 50,000 $0.46 (3rd party) (Dawn) Dawn/NYMEX Tennessee Gas Pipeline NFG pipelines - $0.24 Nia
Slide 55: Comparable GAAP Financial Measure Slides & Reconciliations
Appendix Comparable GAAP Financial Measure Slides & Reconciliations This presentation contains certain non-GAAP financial measures. For pages that contain non-GAAP financial measures, pages containing the most directly comparable GAAP financial measures and reconciliations are provided in the slides
Slide 56: Non-GAAP Reconciliations – Adjusted EBITDA
Appendix Non-GAAP Reconciliations – Adjusted EBITDA (1) Reconciliation of Adjusted EBITDA to Consolidated Net Income ($ Thousands) 12-Months FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Ended 3/31/2023 Total Adjusted EBITDA Exploration & Production Adjusted EBITDA $ 317,707 $ 351,159 $ 312,166 464,529 65
Slide 57: Non-GAAP Reconciliations – Adjusted EBITDA, by Segment
Appendix Non-GAAP Reconciliations – Adjusted EBITDA, by Segment Reconciliation of Adjusted EBITDA to Net Income, by Segment ($ Thousands) FY23 FY22 12-Months FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FYTD FYTD Ended 3/31/23 Exploration and Production Segment Reported GAAP Earnings $ 180,632 $ 111,807
Slide 58: Non-GAAP Reconciliations – Adjusted Operating Results
Appendix Non-GAAP Reconciliations – Adjusted Operating Results 58
Slide 59: Reconciliation – Capital Expenditures
Appendix Reconciliation – Capital Expenditures Reconciliation of Segment Capital Expenditures to Consolidated Capital Expenditures ($ Thousands) FY 2023 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Guidance Capital Expenditures Exploration & Production Capital Expenditures $ 380,677 $ 491,889 $ 670,455 $
Slide 60: Reconciliation – E&P Operating Expenses
Appendix 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, 2022 September 30, 2021 Appalachia West Coast(2) Total E&P Appalachia West Coast(2)
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