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Q2 Fiscal 2016 Update – National Fuel Gas Co.

National Fuel Gas Co. · Apr 28, 2016 · 54 slides

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Slides

  1. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 1
    Investor Presentation Q2 Fiscal 2016 Update April 2016
  2. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 2
    National Fuel Gas Company Quality Assets Exceptional Location Unique Integration Upstream 2.3 Tcfe Proved Reserves (1) 785,000 net acres in Marcellus Shale 3 million Bbls/year California crude oil production Midstream 255…
  3. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 3
    Integrated Vision for Long-term Growth in Appalachia Exploration & Production 1 Long-term, return- driven approach to developing vast acreage position 3 Gathering Northern Access projects to 2 transport 660 MDth/d of Seneca-…
  4. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 4
    Integrated Upstream & Midstream Development While Seneca has consistently driven down its well costs and improved break-even economics WDA Well Costs (millions) WDA Clermont / Rich Valley Economics Normalized for a 8,800 ft. Lateral…
  5. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 5
    Integrated Upstream & Midstream Development near-term commodity prices prompted modification to upstream & midstream development pace WDA Clermont /Rich Valley Economics vs. NYMEX Futures Strip 1-Rig Program/Northern Access 1-year…
  6. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 6
    Consolidated Capital Expenditures Exercising Capital Flexibility and Discipline to Respond to Commodity Price Environment Key Capital Budget Actions 1,500 Exploration & Production Segment (1) (1) Executed Drill-Co JDA Gathering…
  7. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 7
    National Fuel is Well Positioned Fee ownership on Marcellus acreage limits drilling commitments (& royalties) Flexibility to Just-in-time midstream development model for upstream affiliate limits risk of idle capital and minimizes…
  8. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 8
    Significant Appalachian Acreage Position Exploration & Production Appalachia Seneca Fee Seneca Lease Eastern Development Area (EDA) Western Development Area (WDA) 715,000 Acres 70,000 Acres 153 wells able to produce 325 MMcf/d…
  9. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 9
    Marcellus Shale: Western Development Area Exploration & Production Appalachia WDA Tier 1 Acreage 200,000 Acres WDA Highlights Large drilling inventory of quality Marcellus dry gas SRC Fee Acreage o 1,100 locations economic <…
  10. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 10
    Seneca WDA Joint Development Agreement Exploration & Production Appalachia On December 2, 2015, Seneca entered into an asset-level joint development agreement with IOG CRV-Marcellus Transaction Capital, LLC, an affiliate of IOG…
  11. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 11
    Integrated WDA Development - Upstream Exploration & Production Appalachia Clermont/Rich Valley Development Map Clermont/Rich CRV Development Summary Valley Area Current: 88 wells able to produce 225 MMcf/d 200+ MMcf/d gross firm…
  12. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 12
    Integrated WDA Development - Gathering Gathering Appalachia Gathering System Build-Out Tailored to Accommodate Senecas WDA Development Clermont Gathering System Map Current System In-Service 60 miles of pipe/13,800 HP of…
  13. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 13
    Integrated WDA Development - Interstate Pipelines Pipeline & Storage Appalachia Expanding Our Interstate Pipelines to Deliver Senecas WDA Production to Canada Northern Access 2015 Customer: Seneca Resources (NFG) In-Service:…
  14. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 14
    Integrated WDA Development - Interstate Pipelines Pipeline & Storage Appalachia Northern Access 2016 to Increase Transport Capacity Out of WDA by 490,000 Dth/d by FY18 Northern Access 2016 Customer: Seneca Resources (NFG)…
  15. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 15
    Marcellus Shale: Eastern Development Area Exploration & Production Appalachia EDA Highlights EDA Acreage 70,000 Acres 1 Covington & DCNR Tract 595 o Tioga County, Pa. o 92 wells(1) with 100 MMcf/d productive capacity 3 o 75…
  16. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 16
    Integrated EDA Development - Gathering Gathering Appalachia Gathering Segment Supporting Senecas EDA Production & Future Development Covington Gathering System In-Service Date: November 2009 Capital Expenditures (to date): 33…
  17. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 17
    Utica Shale Opportunities in EDA & WDA Exploration & Production Appalachia Seneca - DCNR 007 IP: 22.7 MMcf/d Shell PGE 26.5 MMcf/d Seneca Mt. Jewett IP: 8.9 MMcf/d Seneca WDA 2 Utica Test Wells Planned for FY16/17 Range…
  18. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 18
    Recent 3rd Party Expansions Highly Successful Pipeline & Storage Appalachia Expansions for 3rd Parties since 2010 3rd Party Expansion Capital Cost (MM) 1,442 MDth/d 387 million since FY2010 72 since FY 2010 Northern Access 2012…
  19. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 19
    Planned Empire System Expansion Pipeline & Storage Appalachia Empire North Expansion Project Target In-Service: Late 2018 System: Empire Pipeline Target Market: o Marcellus & Utica producers in Tioga & Potter County, Pa. Open…
  20. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 20
    2015 Pipeline Expansion Projects In-Service Pipeline & Storage Appalachia Westside Expansion & Modernization 2015 Completed Pipeline Expansion Projects In-Service (October 2015) Total Cost: 86 million o Expansion: 45 million o…
  21. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 21
    Pipeline & Storage Customer Mix Pipeline & Storage Appalachia Contracted Transportation FT Capacity - Marketers by Shipper Type(1) FT Capacity - Producers 4.1 MMDth/d Outside End User 6% Pipeline 1% 23% 6% 77% Marketer 94%…
  22. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 22
    Proved Reserves & Development Costs Production & Marketing 3,000 Natural Gas (Bcf) Crude Oil (MMbbl) 3-Year Fiscal F&D Cost(2) 2,500 (1) Years (/Mcfe) 2,344 2008-2010 2.37 2,000 1,914 2009-2011 2.09 Total Proved Reserves…
  23. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 23
    Seneca Production Production & Marketing (1) 200 Appalachia - Spot Exposure (1) Appalachia - Firm Commitments 158-175 Bcfe West Coast (California) 160.5 Appalachia 157.8 Spot Sales 150 Annual Net Production (Bcfe) 120.7…
  24. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 24
    Significant Base of Long-Term Firm Contracts Production & Marketing FY2016 to FY2017 Fiscal 2018 and beyond 450,000+ Dth/d 914,405 Dth/d 1,000 Atlantic Sunrise (Transco) Delivery Markets: Mid-Atlantic & Southeast U.S. 189,405…
  25. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 25
    Firm Transportation Commitments Production & Marketing Production Volume Delivery Demand Charges Gas Marketing Strategy Source (Dth/d) Market (/Dth) Northeast Supply EDA -Tioga Firm Sales Contracts Currently In-Service…
  26. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 26
    Firm Sales Provide Market for Appalachian Production Production & Marketing Fiscal 2016 Firm Sales by Fiscal Quarter Net Contracted Volumes (Dth per day) Pricing Index Key: Contracted Index Price Differentials ( per Dth)(1) Fixed…
  27. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 27
    Strong Hedge Book in Fiscal 2016 and 2017 Production & Marketing Natural Gas Swap & Fixed Physical Sales Contracts (Million MMBtu) 150.0 Remaining FY 2016 80% hedged(1) at 3.41 per MMBtu 115.0 100.0 50.7 66.8 24.2 22.1…
  28. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 28
    FY 2016 Production Firm Sales & Spot Exposure Production & Marketing Fiscal 2016 Price Certainty 64.3 Bcf realizing net 3.20/Mcf(1) 200 4.2 Bcf of Additional Basis Protection(2) 821,000 Bbls crude oil hedged at 81.10/Bbl(3)…
  29. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 29
    Operating Costs Production & Marketing Appalachia Division West Division (California) Seneca Resources Consolidated /Mcfe /Boe /Mcfe LOE (Affiliated Gathering) LOE (non-Gathering) G&A Taxes & Other 1.65 1.70 1.58 27.97 0.22 0.22…
  30. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 30
    California Upstream Stable Oil Production Minimal Capital Investment Free Cash Flow Positive East Coalinga 6,000 FY 2010 Gross Operated Daily Production 4,500 Temblor Formation 4,350 FY 2015 Primary 4,500…
  31. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 31
    Economic Development Focused on Midway Sunset Upstream North Midway Sunset Economics North MWSS MWSS Project IRRs at 40/Bbl(1) Sec. 17N Acreage 36% 25% NMWSS SMWSS Hoyt FY16 Budgeted D&C Portfolio South MWSS Modest…
  32. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 32
    California Average Daily Net Production Upstream 35-40 Million Annual Capital Spending Will Keep CA Production Flat 10,000 9,699 9,674 9,560 9,322 9,078 8,773 7,500 (BOE per Day) 5,000 2,500 0 2011 2012 2013…
  33. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 33
    Strong Margins Support Significant Free Cash Flow Upstream West Division Adjusted EBITDA per BOE(1) Trailing 12-months Ended 3/31/16 Non-Steam Fuel LOE 12.46 Steam Fuel 3.24 California Margins (per BOE) Average Revenue 57.62…
  34. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 34
    New York & Pennsylvania Service Territories Downstream New York Total Customers(1): 526,323 ROE: 9.1% (NY PSC Rate Case Settlement, May 2014) Rate Mechanisms: o Earnings Sharing o Revenue Decoupling o Weather Normalization o…
  35. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 35
    New York Rate Case Downstream On April 28, 2016, National Fuel Gas Distribution Corporation filed a request with the New York Background Public Service Commission (NY PSC) to amend its tariff and increase its base rates. National…
  36. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 36
    Utility: Shifting Trends in Customer Usage Downstream Residential Usage Industrial Usage 120 40 Usage Per Account(1) (MMcf) 110 35 Usage Per Account(1) (Mcf) 100 30 90 25 80 20 12-Months Ended March 31…
  37. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 37
    A Proven History of Controlling Costs Downstream 250 All Other O&M Expenses O&M Pension Expense O&M Uncollectible Expense 200 200 193 192 179 9 177 178 10 7 11 6 28 O&M Expense (Millions) 9 33 (1) 26 16 16 20 150…
  38. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 38
    Utility: Strong Commitment to Safety Downstream 150 Capital Expenditures for Safety Recent increase due to 60MM upgrade Total Capital Expenditures of the Utilitys Customer Information System and anticipated acceleration of…
  39. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 39
    EBITDA Contribution by Segment Corporate 1,250 Exploration & Production Segment Gathering Segment Pipeline & Storage Segment Utility Segment 1,000 Energy Marketing & Other 953 852 843 Adjusted EBITDA (Millions) 762 750…
  40. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 40
    Capital Expenditures by Segment Corporate 1,500 Exploration & Production Segment (1) Gathering Segment Pipeline & Storage Segment Utility Segment Energy Marketing & Other 1,001 Capital Expenditures (Millions) 1,000 977…
  41. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 41
    Financial Position & Liquidity Corporate Debt/Adjusted EBITDA Capitalization 2.56 x 2.27 x 1.89 x 1.89 x 1.77 x Total Equity Total Debt 44% 56% 3.7 Billion Total Capitalization 2012 2013 2014 2015 TTM as of March 31,…
  42. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 42
    Dividend Track Record Corporate 2.00 Dividend Consistency Consecutive Dividend Payments 113 Years Consecutive Dividend Increases 45 Years 1.50 Current Annualized Dividend Rate 1.58 per Share Annual Dividend Rate 1.00…
  43. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 43
    The National Fuel Value Proposition Corporate Considerable Upstream and Midstream Growth Opportunities in Appalachia Fee ownership on 715,000 net acres in WDA = limited royalties or drilling commitments Seneca has 900,000 Dth/day of…
  44. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 44
    Total Seneca Capital Spending by Division Appendix 1,000 Appalachia (1) (2) West Coast (California) 800 694 Capital Expenditures (Millions) 603 600 533 557 400 631 520 428 500 200 150 - 200 110-150 63 105 83 57 40-50 0 2012 2013 2014…
  45. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 45
    Marcellus Operated Well Results Appendix WDA Development Wells: Producing Well Average IP Rate Average Average Treatable Area Count (MMcfd) 30-Day (MMcf/d) Lateral Length (ft) Clermont/Rich Valley (CRV) &amp; Hemlock 86(1) 6.9 5.2 (1)…
  46. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 46
    Marcellus Shale Program Economics Appendix 1,100 WDA Locations Economic Below 2.25/MMBtu Locations Completed NYMEX / DAWN Pricing (1) Average 15% IRR Prospect Product Remaining Lateral BTU 3.00 2.75 2.50 EUR (Bcf) Realized…
  47. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 47
    Appalachian Price Realizations & Margins Appendix Strong hedge book, firm sales portfolio, and cost discipline generating impressive natural gas price realizations and margins in challenging commodity environment Q1 FY16 Average…
  48. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 48
    Natural Gas Hedge Positions Appendix (Volumes in thousands MMBtu; Prices in /MMBtu) (1) Fiscal 2016 Fiscal 2017 Fiscal 2018 Fiscal 2019 Fiscal 2020 Avg. Avg. Avg. Avg. Avg. Volume Price Volume Price Volume Price Volume Price…
  49. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 49
    Crude Oil Hedge Positions Appendix (Volumes & Prices in Bbl) (1) Fiscal 2016 Fiscal 2017 Fiscal 2018 Avg. Avg. Avg. Volume Price Volume Price Volume Price Brent Swaps 102,000 94.06 123,000 92.27 24,000 91.00 NYMEX Swaps…
  50. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 50
    Utica/Point Pleasant: EDA Opportunities Appendix Shell: Neal Travis Peak: 26.5 MMcf/d Currently Drilling Shell: Gee DCNR Tract 001 11.2 MMcf/d Potential Future Location JKLM Pt Pleasant Test PGE DCNR 595 Vertical Tests…
  51. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 51
    National Fuel Gas Company Appendix Reconciliation of Adjusted EBITDA to Consolidated Net Income ( Thousands) 12-Months FY 2012 FY 2013 FY 2014 FY 2015 Ended 3/31/16 Total Adjusted EBITDA Exploration & Production Adjusted EBITDA…
  52. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 52
    National Fuel Gas Company Appendix Reconciliation of Segment Capital Expenditures to Consolidated Capital Expenditures ( Thousands) FY 2016 (1) FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Forecast Capital Expenditures from Continuing…
  53. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 53
    National Fuel Gas Company Appendix Reconciliation of Exploration & Production Adjusted EBITDA for Appalachia and West Coast divisions to Exploration & Production Segment Net Income ( Thousands) Three Months Ended Twelve Months Ended…
  54. Q2 Fiscal 2016 Update – National Fuel Gas Co. – slide 54
    National Fuel Gas Company Appendix Reconciliation of Exploration & Production Segment Operating Expenses by Division (000s unless noted otherwise) Twelve Months Ended Twelve Months Ended September 30, 2015 September 30, 2014…

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