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Fourth Quarter Update – National Fuel Gas Co.

National Fuel Gas Co. · Nov 7, 2014 · 60 slides

Investor presentation from the Shale Experts oil & gas presentation and slide database. Every page is imaged and its text indexed for search across operators, plays, basins and time.

Slides

  1. Fourth Quarter Update – National Fuel Gas Co. – slide 1
    National Fuel Gas Company Investor Presentation November 2014
  2. Fourth Quarter Update – National Fuel Gas Co. – slide 2
    Corporate National Fuel Gas Company Quality Assets - Exceptional Location - Unique Integration 1.914 Tcfe of Proved Reserves(1) 3 Million Bbls of Crude Oil Production(2) November 2014 811,000 Net Acres in Pennsylvania 250…
  3. Fourth Quarter Update – National Fuel Gas Co. – slide 3
    Corporate National Fuel Gas Company Upstream and Midstream Common Vision For Growth Western Development Area Tier I Acreage: 200,000 Acres Clermont Gathering System NFG Supply & Other Interconnects High quality Marcellus…
  4. Fourth Quarter Update – National Fuel Gas Co. – slide 4
    Corporate National Fuel Gas Company Regulated Operations Provide Significant Synergies Operational: Common management, labor, facilities and support systems/services Commercial: NFG Downstream is 32% and 46% of Pipeline & Storage…
  5. Fourth Quarter Update – National Fuel Gas Co. – slide 5
    Corporate National Fuel Gas Company What Makes NFG Unique, Also Maximizes Value Financial High Quality Assets Efficiencies + Lower Cost of Capital Strategic + Lower Operating Costs Commercial + Efficient Capital Spend…
  6. Fourth Quarter Update – National Fuel Gas Co. – slide 6
    Corporate National Fuel Gas Company Targeting Sustained EBITDA Growth over the next Five Years 1,250 Exploration & Production Segment Gathering Segment Pipeline & Storage Segment Utility Segment 1,000 Energy Marketing & Other 953…
  7. Fourth Quarter Update – National Fuel Gas Co. – slide 7
    Corporate National Fuel Gas Company Capital Spending Adjusts to Capitalize on Opportunities 1,500 Exploration & Production Segment Gathering Segment Pipeline & Storage Segment 1,070- 1,250 1,280 Utility Segment Energy Marketing &…
  8. Fourth Quarter Update – National Fuel Gas Co. – slide 8
    Corporate National Fuel Gas Company Maintaining a Strong Balance Sheet Debt/Adjusted EBITDA Capitalization 2.5 2.02 x Average Debt / Adjusted EBITDA 1.98 x 2.0 1.89 x 1.89 x 1.75 x 1.77 x 1.5 Total Debt(1) Shareholders…
  9. Fourth Quarter Update – National Fuel Gas Co. – slide 9
    Corporate National Fuel Gas Company Dividend Track Record 2.00 Dividend Consistency Consecutive Dividend Payments 112 Years Consecutive Dividend Increases 44 Years Annual Dividend Rate 1.50 Current Annualized Dividend Rate 1.54…
  10. Fourth Quarter Update – National Fuel Gas Co. – slide 10
    Upstream Seneca Resources Proven Record of Growth 2,000 1,914 3-Year Natural Gas (Bcf) Fiscal F&D Cost(1) Crude Oil (MMbbl) Years (/Mcfe) 1,549 2007-2009 5.35 1,500 2008-2010 2.37 Total Proved Reserves (Bcfe) 1,246 2009-2011…
  11. Fourth Quarter Update – National Fuel Gas Co. – slide 11
    Upstream Seneca Resources Delivering Tremendous Production Growth 225 Gulf of Mexico (Divested in 2011) East Division 180-220 West Division 160.5 Annual Production (Bcfe) 150 120.7 159-197 83.4 139.3 75 67.6 100.7 49.7…
  12. Fourth Quarter Update – National Fuel Gas Co. – slide 12
    Upstream Seneca Resources Disciplined Capital Spending 1,000 Gulf of Mexico (Divested in 2011) East Division West Division 800 Capital Expenditures (Millions) 694 649 600-700 603 600 533 398 400 631 545- 596 520 620…
  13. Fourth Quarter Update – National Fuel Gas Co. – slide 13
    Upstream Seneca Resources LOE: Operating Costs down; Transportation Costs up 4.50 Property, Franchise & Other Taxes Seneca matches its long-term firm Other O&M Expense transport (FT) contracts with firm sales (FS) General &…
  14. Fourth Quarter Update – National Fuel Gas Co. – slide 14
    Upstream Marcellus Shale Prolific Pennsylvania Acreage Seneca Fee Seneca Lease 720,000 Acres 60,000 Acres Eastern Development Area (EDA) Mostly leased (16-18% royalty) Western Development Area (WDA) No near-term lease…
  15. Fourth Quarter Update – National Fuel Gas Co. – slide 15
    Upstream Marcellus Shale EDA Delivering Significant Growth DCNR Tract 007 Covington Fully Developed Utica & Marcellus delineation wells Gross Production: 45MMcf per Day Results expected 1H FY2015 47 Wells Drilled and Producing…
  16. Fourth Quarter Update – National Fuel Gas Co. – slide 16
    Upstream Marcellus Shale EDA Historical Well Results are Exceptional Average EUR per Average Average Average EUR Average 1,000 of Producing IP Rate 7-Day 30-Day per Well Lateral Lateral Development Area Well Count (MMcf/d) (MMcf/d)…
  17. Fourth Quarter Update – National Fuel Gas Co. – slide 17
    Upstream Marcellus Shale Focusing on WDA Development Senecas Tier I Acreage: 200,000 Acres 6-8 Bcfe EUR Wells 2-4 BCF/well Economic at 2.80 to 3.80/Mcfe 6 - 8 BCF/well 4 - 6 BCF/well 2-4 BCF/well 4 - 6 BCF/well November…
  18. Fourth Quarter Update – National Fuel Gas Co. – slide 18
    Upstream Marcellus Shale Strong Wells Currently Producing Across WDA Acreage WDA Development Areas: Peak Producing 24-Hour Rate Average Average Treatable Area Well Count (MMcfd) 7-Day (MMcf/d) Lateral Length Clermont/Rich Valley…
  19. Fourth Quarter Update – National Fuel Gas Co. – slide 19
    Upstream Marcellus Shale Clermont / Rich Valley (CRV) Area Clermont/Rich Valley 200-250 Planned Horizontal Locations FY 2014 Year-end: 19 Wells; 75 MMcfd FY 2015 Fcst Year-end:50 Wells; 180 MMcfd Planned Wells Drilled Wells…
  20. Fourth Quarter Update – National Fuel Gas Co. – slide 20
    Upstream Marcellus Shale WDA Mineral Interests Significantly Enhance Returns Clermont/Rich Valley Example Typical The Seneca Producer Advantage (/Mcf) 15% Royalty 0% Royalty Average Net Realized Price 3.27 2.80 Less: Cash…
  21. Fourth Quarter Update – National Fuel Gas Co. – slide 21
    Corporate Natural Gas Marketing How Does Seneca Sell its Production Contracted Basis Differential 3rd Party Marketer (or spot market) Gathering System Interconnection Well Head with Interstate Spot Market Pipeline Network…
  22. Fourth Quarter Update – National Fuel Gas Co. – slide 22
    Corporate Natural Gas Marketing Adding Long-Term Firm Transport to the Portfolio FT Capacity (Dth/day) In- Project Service Contract Delivery Fiscal Fiscal Fiscal Fiscal (Counterparty) Date Term Market 2015 2016 2017 2018 Matched…
  23. Fourth Quarter Update – National Fuel Gas Co. – slide 23
    Corporate Natural Gas Marketing Significant Base of Long-Term Firm Contracts 1,000 Atlantic Sunrise 189,405 Dth/d 750 Northern Access 2016 350,000 Dth/d Dth per Day (Thousands) Niagara Expansion Northern Access 2015 500…
  24. Fourth Quarter Update – National Fuel Gas Co. – slide 24
    Corporate Natural Gas Marketing Firm Sales Provide a Market for Appalachian Production 500,000 Fixed Price Values shown represent the price or differential to a reference Long-Term Firm Gross Sales (Avg Dth per Day) NYMEX price…
  25. Fourth Quarter Update – National Fuel Gas Co. – slide 25
    Corporate Natural Gas Marketing Current Natural Gas Hedge Positions 125 NYMEX Dominion Dawn & MichCon SoCal 100 96.7 Natural Gas Swaps (Million MMBtu) 24.8 75 65.7 14.5 50 46.8 18.8 11.0 70.7 12.7 25 32.4 23.1 5.6…
  26. Fourth Quarter Update – National Fuel Gas Co. – slide 26
    Corporate Natural Gas Marketing Current Hedge Book has Seneca Positioned Very Well 100% Hedging Policy Range Oil Hedges Natural Gas Hedges(1) 80% 60% 60% % Hedged (2) 51% 40% 37% 34% 24% 20% 9% 1% 2% 0% Fiscal…
  27. Fourth Quarter Update – National Fuel Gas Co. – slide 27
    Corporate Natural Gas Marketing FY 2015 Production Firm Sales & Hedge Composition Firm Sales with Price Certainty Spot Price Exposure 108 Bcf at 3.70 /Mcf 66 Bcf at 2.50-2.75 /Mcf (1) 200 159-197 Bcf 43.5 Bcf 150 Total…
  28. Fourth Quarter Update – National Fuel Gas Co. – slide 28
    Upstream Utica Shale Seneca Activity in Tioga County Seneca - Mt Jewett Horizontal: Completed September 2013 Peak 24-Hour Rate: 8.5 MMcf/d Shell Shell 11 MMcf/d 26 MMcf/d Seneca - DCNR 007 Drilling Seneca - Tionesta…
  29. Fourth Quarter Update – National Fuel Gas Co. – slide 29
    Upstream California Stable Production Fields; Modest Growth Potential 6,000 2010 4,500 East Coalinga Q4 2014 4,100 Temblor Formation Gross Operated Daily 4,500 Production (Boe/d) Primary 3,000 1,700…
  30. Fourth Quarter Update – National Fuel Gas Co. – slide 30
    Upstream California East Coalinga Summary 2014 Location 2013 Well Active Well Production has increased from 214 BOPD to Idle Well 800 BOPD P&A Highest on leases since 2000 Seneca Lease Drilled 12 evaluation wells in 2013 Field…
  31. Fourth Quarter Update – National Fuel Gas Co. – slide 31
    Upstream California South Midway Sunset Has Delivered Significant Growth 2,000 1,800 B Pool A Pool 1,600 Seneca Acquired 1,400 in June 2009 1,200 1,000 800 600 16X Pool 400 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10…
  32. Fourth Quarter Update – National Fuel Gas Co. – slide 32
    Upstream California Evaluating the Monterey Shale at South Lost Hills GR Brittleness Oil SP ResD Gas Truman 2H Lower Reef Ridge Currently Completing Seneca Lease 1000 Upper Antelope A Truman 1H 2013 Upper Antelope B 190…
  33. Fourth Quarter Update – National Fuel Gas Co. – slide 33
    Upstream California Modest Growth Opportunities, But Strong Economics Average Estimated Average EUR IRR Fiscal 2015 Field Well Cost (MBO) 85/Bbl Locations North Midway Sunset 300,000 32 59% 29 South Midway Sunset 300,000 38 96%…
  34. Fourth Quarter Update – National Fuel Gas Co. – slide 34
    Upstream California Modest Growth Anticipated in 2015 11,000 Average Daily Net Production (BOE per Day) 9,800- 10,200 10,000 9,699 9,322 9,056 9,078 9,000 8,773 8,000 7,000 6,000 2010 2011 2012 2013 2014 2015…
  35. Fourth Quarter Update – National Fuel Gas Co. – slide 35
    Upstream California Strong Margins Support Significant Free Cash Flow Fiscal Year 2014 EBITDA per BOE Non-Steam Fuel LOE 13.07 Steam Fuel 4.64 Average Revenue for Fiscal 2014 G&A 3.90 87.71 per BOE Production & Other Taxes…
  36. Fourth Quarter Update – National Fuel Gas Co. – slide 36
    Upstream Seneca Resources What Will Seneca Look Like Moving Forward Consistent Production Growth: 15-25% CAGR Driven by a very large, high-quality Appalachian acreage position Disciplined Spending Driven by Firm Pace of…
  37. Fourth Quarter Update – National Fuel Gas Co. – slide 37
    Midstream Midstream Businesses Positioned to Serve Rapidly Growing Production in Appalachia November 2014 40
  38. Fourth Quarter Update – National Fuel Gas Co. – slide 38
    Midstream Gathering Gathering is the First Step to Reaching a Market Gathering Segment Revenue 120 90 - TGP 200 110 Revenue (Millions) 90 70.6 60 34.8 30 0 2010 2011 2012 2013 2014 2015E Fiscal Year Clermont…
  39. Fourth Quarter Update – National Fuel Gas Co. – slide 39
    Midstream Gathering Gathering Systems Supporting Senecas EDA Production Covington Gathering System In-Service Date: November 2009 Capacity: 220,000 Dth per day Interconnect: TGP 300 Capital Expenditures (to date): 32 Million…
  40. Fourth Quarter Update – National Fuel Gas Co. – slide 40
    Midstream Gathering Clermont Gathering System has Large Expandability C Compressor Station Clermont Gathering C Interconnect System In-Service: July 2014 Ultimate Trunkline Capacity: 1+ Bcf per day Interconnects TGP 300…
  41. Fourth Quarter Update – National Fuel Gas Co. – slide 41
    Midstream Pipeline & Storage Project Opportunities to Support Appalachian Growth Develop multiple outlets to high-value markets November 2014 44
  42. Fourth Quarter Update – National Fuel Gas Co. – slide 42
    Midstream Pipeline & Storage Expansions to Move Gas from the WDA Are Significant Projects to Support WDA Growth Northern Capacity Access 2015 (November 2015) Project (Dth/day) Northern Access 2015 140,000 Northern Access 2016…
  43. Fourth Quarter Update – National Fuel Gas Co. – slide 43
    Midstream Pipeline & Storage Major Expansion Designed for Canadian Deliveries Northern Access 2015 Northern Access 2015 (November 2015) Customer: Seneca Resources In-Service: November 2015 System: NFG Supply Corp. Capacity:…
  44. Fourth Quarter Update – National Fuel Gas Co. – slide 44
    Midstream Pipeline & Storage Northern Access 2016 Provides Additional Access to Canada Northern Access 2016 Customer: Seneca Resources In-Service: Late 2016 System: NFG Supply Corp. & Empire Pipeline, Inc. Capacity 350,000 Dth…
  45. Fourth Quarter Update – National Fuel Gas Co. – slide 45
    Midstream Pipeline & Storage Recent 3rd Party Expansions Have Been Highly Successful Completed Expansions for 3rd Parties Capacity (Dth/day) Northern Access 2012 320,000 Tioga County Extension 350,000 Tioga County Northern…
  46. Fourth Quarter Update – National Fuel Gas Co. – slide 46
    Midstream Pipeline & Storage Additional Line N Expansions Mercer Expansion Customer: Third Party Placed in-service November 1, 2014 System: NFG Supply Corp. Capacity: 105,000 Dth per day Mercer Precedent agreements signed for…
  47. Fourth Quarter Update – National Fuel Gas Co. – slide 47
    Midstream Pipeline & Storage Pairing Line N Expansions with System Modernization Westside Expansion & Modernization Customer: Third Party In-Service: November 2015 System: NFG Supply Corp. Capacity: 175,000 Dth per day Precedent…
  48. Fourth Quarter Update – National Fuel Gas Co. – slide 48
    Midstream Pipeline & Storage Developing Unique Solutions for Shippers Tuscarora Lateral In-Service: November 2015 System: NFG Supply & Empire Pipeline New No-Notice Services Precedent agreements executed with RG&E, NYSEG & NFG…
  49. Fourth Quarter Update – National Fuel Gas Co. – slide 49
    Midstream Pipeline & Storage Significant Expansions Are Driving Growth Completed Projects (Since 2009) Delivering Gas North Tioga County Extension Recent Capacity 1,113,000 Dth/day Northern Access 2012 Additions Northern Access…
  50. Fourth Quarter Update – National Fuel Gas Co. – slide 50
    Downstream Utility New York & Pennsylvania Service Territories New York Total Customers: 524,300 Rate Mechanisms: Revenue Decoupling Weather Normalization Low Income Rates Merchant Function Charge (Uncollectibles Adjustment)…
  51. Fourth Quarter Update – National Fuel Gas Co. – slide 51
    Downstream Utility Shifting Trends in Customer Usage 120 Residential Usage 35 Industrial Usage Usage Per Account(1) (MMcf) Usage Per Account(1) (Mcf) 110 30 100 25 90 20 80 15 12-Months Ended September 30…
  52. Fourth Quarter Update – National Fuel Gas Co. – slide 52
    Downstream Utility A Proven History of Controlling Costs 250 203 200 191 193 O&M Expense (Millions) 25 181 179 177 178 10 27 14 11 9 6 150 100 178 164 167 168 168 183 172 50 0 2008 2009 2010 2011 2012 2013…
  53. Fourth Quarter Update – National Fuel Gas Co. – slide 53
    Downstream Utility Strong Commitment to Safety 95-105 100 Capital Expenditures for Safety 88.8 Total Capital Expenditures Capital Expenditures (Millions) 80 Near-term 72.0 increase in capital expenditures is 56.2 58.0…
  54. Fourth Quarter Update – National Fuel Gas Co. – slide 54
    Corporate National Fuel Gas Company A History of Success & A Future of Opportunity A History of Success A Future of Opportunity Adjusted EBITDA 11% CAGR Adjusted EBITDA 10-15% CAGR Growth Since 2010 Growth 2015 to 2019…
  55. Fourth Quarter Update – National Fuel Gas Co. – slide 55
    Appendix National Fuel Gas Company Natural Gas Hedge Positions (Volumes in thousands Mmbtu; Prices in /Mmbtu) Fiscal 2015 Fiscal 2016 Fiscal 2017 Fiscal 2018 Avg. Avg. Avg. Avg. Volume Price Volume Price Volume Price Volume Price…
  56. Fourth Quarter Update – National Fuel Gas Co. – slide 56
    Appendix National Fuel Gas Company Crude Oil Hedge Positions (Volumes & Prices in Bbl) Fiscal 2015 Fiscal 2016 Fiscal 2017 Fiscal 2018 Avg. Avg. Avg. Avg. Volume Price Volume Price Volume Price Volume Price Midway Sunset 258,000…
  57. Fourth Quarter Update – National Fuel Gas Co. – slide 57
    Appendix Marcellus Shale Position Offers Attractive Economics at 2.00 to 3.80/Mcfe Approx. 15% IRR(1) Remaining EUR IRR(1) Breakeven Price Prospect County Product Locations (Bcfe) BTU 4/MMBtu (/Mcf) EASTERN DEVELOPMENT AREA (EDA)…
  58. Fourth Quarter Update – National Fuel Gas Co. – slide 58
    Appendix Geneseo Shale Path to Geneseo Development 2018/2019 Start Tract 100/Gamble (Lycoming County) 1st Well (Tract 100 Pad N) Peak IP: 14.1 MMcf per day 30-Day Average Rate: 8.6 MMcf per day Estimated EUR: 7.0 Bcf Lateral…
  59. Fourth Quarter Update – National Fuel Gas Co. – slide 59
    Appendix Reconciliation of Adjusted EBITDA to Consolidated Net Income ( Thousands) FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 Exploration & Production - West Division Adjusted EBITDA 171,572 187,838 187,603 226,897 215,042…
  60. Fourth Quarter Update – National Fuel Gas Co. – slide 60
    Appendix Reconciliation of Segment Capital Expenditures to Consolidated Capital Expenditures ( Thousands) FY 2015 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 Forecast Capital Expenditures from Continuing Operations…

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