Earnings call transcript Q2 2023

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Operator

Good afternoon, everyone. I would like to welcome you all to the National Fuel Gas Company Q2 Fiscal year 2023 Earnings Conference Call. My name is Brika and I will be your event specialist operating today's call. [Operator Instructions] Thank you.

I would now like to hand the conference over to our host for today, Brandon Haspett, Director of Investor Relations. begin call. may you Brandon, your conference Sir

Brandon Haspett

Thank joining for us and good a appreciate you morning. We on release. of evening's you, last Brika, discussion earnings today's conference call

Fuel discussion of us and Midstream. Gas the and With will National questions. Executive Silverstein, and Fuel Financial Tim the At we and Officer; call open of Justin the from Loweth, Chief Company Dave President prepared Bauer, on remarks, are to President Principal Officer; end Treasurer the National Seneca Resources

The Relations release have second materials in May been posted fiscal XXXX quarter earnings may these investor on website. to call. presentation our refer today's Investor during We

remind statements. that like teleconference will you to contain forward-looking We'd today's

to materially. Fuel's results and While expectations, have in projections reasonable beliefs good basis, may made actual are differ National are a believed faith and

statements of as only made, for you may which the earnings specific to on certain a risk and date release speak These evening's last refer listing they are of factors.

it Bauer. over With that, to I'll Dave turn

Dave Bauer

morning, program, businesses. Thank our levels. a Seneca see both with from across you, execution good Brandon, and a Midstream strong and operational particularly to driven development National excellent everyone. Overall, one volumes had to for good its record quarter. second and Fuel which NFG was Seneca has continues quarter the production results good gathering

challenging this was year. be and the remainder pre to for headwind a obviously for for we year Pricing the in much likely are and next the come, expectations. continue but spending Capital and hedged with unit operating very quarters costs of line well quarter will to were in

operations Seneca's update Justin will a complete later in have the call. on

front. on quarter the during active the land was acquisition Seneca

bolt-on but our yesterday, our smaller some opportunities development we release area. earnings highly in we're As in acquiring Eastern announced strategic

Midstream acquisitions each on I've that our boxes. geographically said of price. opportunity These be a are that assets focused in our is check to on provide leverage and purchased strategy at infrastructure, it reasonable an As contiguous A&D Appalachia can calls, past those

three the transactions, XX,XXX we're largely are most approximately undeveloped. contiguous adding acres, which Across all of

cubic production approximately day Lycoming acquiring low connected in EDA XX prolific parts PDNP we're at flowing to per of add feet well XX some of system assets of addition, XX These gathering approximately a relatively In a County million locations the most to cost. that can basin. our be the and highly

off In addition, XX laterals of these program. assets which to existing and our of further longer more efficiency development our us ability enhance the drill allow the should capital locations, returns than

operations. covered to the remaining to will and flow capital dividend for cash by Although debt. from even reduce in headway increase our levels entirely should absolute our these goal our And transactions, outlay considering fund sufficient to be of is acquisitions year, make our be expected the they to cash free

Pipeline Storage the Utility utilities results. businesses. Turning our to & quarter, performed negative our during warmer regulated well and weather though on had financial the a Operationally, segments impact

with FERC. O&M Pennsylvania Higher were also have filed New likely on this York headwind, case say later Tim and we board are to were will main will file costs the and rate a reason higher call. and a expected but the costs in the in across in more the

million In had Under parties other a case. the helping to begun Pennsylvania New weather. a only weather effective rate X and the mitigate in Commission the adopt but is in recently agreed our earnings resulting weather customers This the March, and in to the has years, cash many a revenue agreement, of a to, our the normalization fluctuations addition company, for for volatility flows both York win-win addition reached norm them. we that things, We've in from settlement among August $XX Pennsylvania and increase mechanism.

to this that a XX by proceeding, which in involved unopposed all few employees approved be of is with a I'd our commission case And to was everyone. in in years. case all, thank this All settlement Pennsylvania I good is the of expected which in over in for was were the like a settlement, think filed session. summer our and parties the was weeks The first-rate ago

in to existing XX% widespread the population recently away to from XX% the Albany are individuals gas territory, about ban despite the York, concerned results public, York were state-wide, New be nearly natural construction new whether of type opposition clear. our natural New as of In throughout homes. about people costs In with any in bans. gas the gas. from opposed of surveyed Siena natural it for legislators moving And and the associated pursue College service continue pulled State or

Nevertheless, week, into law. demands natural state the systems gas XXXX. the new budget enacted Governor despite who bill for signed clear has construction building this and advocated gas starting legislation a message, Hochul, equipment in bands earlier and this

this be surface, step to the appears XXX% On a electrification. significant towards

tacitly electrification. However, Russian acknowledges the public risks when you of state dig safety the you deeper, little a find

contain backup litany rules exemptions, new natural including the and and one, gas commercial for manufacturing a facilities, medical hospitals, uses. generators, For industrial of kitchens

a the energy it the support state gas prosperity, both load, recognizes which increased which the By the for grid economic in gas for at least and encouraging. electric much of that the natural appears provision state. that its term, critical own construction exempts be is the is cannot measure natural includes may in new Further, reliability exemptions, areas near where

leap generally New downstate more in our the a it an Upstate a housing proposed include exemptions solutions Nor to colder and my stock In we've and regulations is older. heating big rules view, to like of stretch approach than to of expanded regional to part hybrid it's this is see is decarbonization. as than XX% consider all-of-the-above see that York list not differences state.

significant energy of day. use Continued deliver of the on money the and in And low gas future reductions will fuels no Western gas sense. in the natural we've for emissions system perfect New York already reliability. makes natural achieved area saves improves our in consumers and the this build carbon It use to

affect Fuel? this how legislation National So will

standpoint, impact practical any see significant future. foreseeable I a don't for the From

For already gas. to heat isn't territory growth. XX% in about major don't natural our Further, existing apply York service the one, Western buildings seeing New with population of bands buildings and the

In as result And commercial fact, of the from our growth stated residential of facilities. older to I lastly, the repurposing or are of mixed-use industrial and of exempt earlier, much is construction gas buildings industrial natural uses bands.

that other the and threats the are and the as more herself While perhaps Is of known It's bands increasingly so legislators residents even all of long of other worst when bans best gas York. the continue to an public, more and remains especially and will very at electrification exist advised much clear it real risk premature legislation to concession. governor New in the acknowledging imposing achievable. concerned businesses than on a too fact solutions pragmatic actions are and

continue In execute results. our great we closing, development on plans to seeing the are across and system

forward, remain sustainable capital investments of efficient balance the and strong look towards significant our strengthens we sheet, free that flexibility. cycles that deliver further cash financial improves on price we returns allocation focused through commodity flow and investment-grade generate As can and our

moment as for Justin, the nearly year recognize retirement. for Before Camiolo, Officer I turning the career last had very best last CFO call Controller and terrific Karen Karen retired over company. wish with who XX want her to serving to XX years take the in Chief a the Friday. and X. to Accounting a I

over the call turn that, to Justin. With I'll

Justin Loweth

from a Bcfe, increase Midstream above and gas in This morning, Thanks, wells for came Dave, XX.X sequentially second in quarter. turned Appalachian and Seneca solid production better-than-expected good production. second XX% half NFG everyone. execution the was of year's increase had quarter the the of year. first last production X% natural online quarter solid at an by operational driven and and

over for production drove the combined throughput a our growth, eclipsed per Bcf at X incremental This third-party record net the We third-party milestone a that with NFG us. average some at also trend of This we'd the near came March. end the business, particularly to production for expect term, online Midstream. with is day continue quarter,

offset gas The facing natural pricing we're the the on strong quarter the production front. headwinds during

XXXX winter. north supply-demand beyond, per outlook constructive, likely NYMEX and pose and long-term the next some will inventory near-term pricing the storage extremely through While futures $X MMBtu fundamentals remains of challenges in with

months expect load is more into demand get couple will We the we pricing over of provide support. in-basin where power remain increased next to expected summer, challenged until

we shoulder we the fall season, near levels storage expect gas summer, as again late [ph] As capacity. early deteriorate cash enter prices to

are well by over protected this weakness we with our valuable pricing significantly dampens However, from which remaining insulated our expected XX% production portfolio, our exposure. marketing of

remainder to are adjusting primarily modestly by With schedule early operation anticipated not online higher production expected in capital months, by to during impact our dates This or will the This higher of is or will of material prices to environment. which flush fiscal couple a winter, production winter online XXXX. out pad fiscal a pushing be volumes target anticipated of have accomplished year. by production the next and on pricing a a two bring we improve

relates million. our it the overall level range to are $XXX within of our As maintaining year, guidance for we $XXX capital of to million the

quarter, first online in fiscal crew completions the front rig our last year. discussed activity we was spot hole As and top work half loaded the of

the As year. the remainder moderate naturally of capital a will for result,

plan, X non-operated as these winter last our first the line a well compared of first to unchanged higher quarters. plan X to Despite aforementioned push during remains offset XXX to wells the amount take to in to operated of the and reference, guidance of XX Bcfe performance to production turn in our we strong production modest to to For to XXX expected X months year, of the fiscal that XXXX XX we operations at wells the advantage X pricing. is expect adjustments quarter

this early before our into up declining QX during expect peak winter QX months. will production in in and and year the increase Taking of into all I ramp again next then consideration,

not curtailments. reminder, voluntary our does a As guidance incorporate pricing-related

us, going the deflationary Regarding of costs, rollover signs service modest tubulars. headwinds inflationary a behind we believe into in XXXX. see the may raw fiscal and seeing in I flat a that particularly of and inflation, we trend to are worst are material

plans term, transportation XX 'XX, months, maintenance activity our beyond to firm existing to fiscal while our longer XX firm the shift out next may portfolio our and we look supports Looking sales development to over mode.

reducing firm firm to towards move levels maintenance securing transportation plan beyond, spending or sales, XXXX levels. and long-term the new of production we fiscal in Absent significant additional capacity our execution

plans, and development to our consolidated Given of on opportunities continue is Midstream as the long-term in we optimize this to levels investment at nature capital NFG also lower returns. result to integrated focus expected plans

NFG development flow come. allocation generation Area, free County, particular, in capital maximize Midstream development in As communicated and increasingly cash which efficiency to and Seneca Eastern our focus us to in plan years will allow our Tioga previously, to the and capital

time. last over months, same the bolt-on acquisitions, we've come various area had note, development at that together Eastern On few long-pursued all the

separate our X core announced we we transactions that mentioned, integrate in locations. our deepen With Dave of development Tioga will differentiated inventory we assets and believe development position the As Eastern Lycoming these and value. further create core large can area, operating

Seneca with County acquire feet cubic First, entered has production. into approximately per includes acreage Southwestern acres position, Tioga of net approximately XX,XXX contiguous in million to net allowing to that is Tioga existing day flowing significant also and operational This XX Potter agreement our Energy efficiencies.

executed with have smaller We and nonproducing a Counties, in Tioga proved well. about acres fee modest also lease developed bolt-on X two of also amount totaling acquisitions Lycoming production and and X,XXX -- net contiguous we

bolt-ons, and with Fuel's National to these existing at close looking Midstream assets to be integrate these opportunities infrastructure. excited We're we'll

team a highlight Turning is to our we to I surface our initiatives. program neutral construction moving initiative. the forward like footprint with, sustainability named which Seneca have would

development plan every this for for state initiative, acquired projects. our biodiversity and enhance of operations disturbance acre a land of acre returning to by its to Through variety pad we of road protect and natural conservation restore, through X

facility our later reduction at We published NFG forward facility responsibility also progress significant conversions Midstream, on include at progress make sharing report to our ongoing and on and scale monitoring, continue modifications details year. efforts. is when Examples pneumatic more to this device we our aerial look emissions corporate Seneca our

supports portfolio successfully execute to generation. plans. the And current a and despite continues free development pricing marketing team flow cash long-term gas integrated our conclusion, natural headwinds, our robust In

continued operations, our of all acreage for XXXX, commodity cycle. us safety inventory integrated throughout culture strong the in success puts deep development price fiscal position of and a of and stages beyond sustainability Looking high-quality great

over turn that, to With the Tim. call I'll

Tim Silverstein

evening, share. reported morning, per $X.XX good everyone. second GAAP National and Last earnings quarter Fuel of Justin, Thanks,

California last June contributed year's closed Excluding items were approximately in assets, of a quarter. the year, There Last impacting were of adjusted the this during related operating results our $X.XX decrease the share, largest decrease earnings of XXXX. from quarter. per with being principal which drivers sale our $X.XX $X.XX comparability, of second to California X in

experienced weather XX% our In costs our in and addition, warmer regulated subsidiaries in utility. we also higher operating

costs, associated our Seneca's a gathering production plans take to mitigate these to and decreases respect few weather to business. throughput and impacts. were With our Somewhat address their higher offsetting I'll operating regulated in minutes

as reached an $XX a with on First, case in increase. Dave we agreement rate Pennsylvania mentioned, million parties our revenue

in effect was would decision on The filed the settlement into commission a April, expect and agreement that rates put new X. from August we

rate a outcome to this a lowest rates continue among dead normalization Commonwealth, to volatility. inclusion in if the minus the with of customers. help settlement, addition the increase, plus for our year-to-year X%, the will expect In we a not band which weather have to lowest, reduce of great the mechanism With is or

the program, we experiencing. modernization This mitigating emissions will long inflationary way system further on reducing pressures go a our currently support while are our ongoing to

progress Pennsylvania, modernization the recover system Consistent with modernization positive in March, with costs tracker. Commission the York associated approved to to this permits new New our current addition in a new Service improvement In us Public tracker, investments.

The system placed this approved September modernization year allows investments continue X recovering with associated service April through us in from of newly costs tracker XXXX. to

go expect of earned million $X of will in to incremental all up a York. XXXX, with X New mechanisms, associated improving fiscal For to these ROEs long we way revenues which

tracker, agreed The short to file In conjunction this new also we respect provision potential the to rate stay we could a out with it with earliest case. fall. a

rate we the currently modernization this new continued proceeding Given This in base are ongoing program, path the on. inflationary rates the at fiscal effect headwinds put of into the 'XX. our start is would from and growth

Storage Pipeline rate segment, & end settlement a our previous we Supply increase early as In under July. rate for Corporation, our the can at as of file

cost measures, rate compliance Given new reduction see our base pressuring regulations, continue emission to ongoing pipeline and our including modernization focus safety increases returns. on and with and we growth

could a increases as As such to supports modernization case summer on that to headwinds, subsidiaries. combined expect rate effect rates front, our reductions the result, inflationary in Collectively, the at the a with rate February. time busy next ongoing new as need focus a emission early file with and we rate it's continued case in system be on regulated

look we and 'XX, expect contribute fiscal improving As to 'XX we cash proceedings of these resolution to the into and flows. earnings

remainder the of fiscal for outlook the 'XX. to Turning

or remainder guidance natural earnings decrease by a range price of driven have midpoint. for major $X.XX the $X.XX X% This to the the share, the which year. at to largest We factors, gas X is revised a our the per is of of $X.XX of expected lower realizations

expected due the Also on business during combined second a utility financing rates Seneca's need of latter will forecasted. contributing to interest from bolt-on is higher our expense. is and near-term projected quarter interest the that the effect higher to result of The larger reduction the closing warmer with previously than weather acquisitions,

months prices, a our NYMEX price the our gas natural $X.XX With unchanged. MMBtu which for the to the a benefit rest is year is guidance items, some new added our Offsetting year, per X assumptions during than the from of these Other prior impact of $X.XX remaining remain the of of reduction quarter. respect guidance. full this favorable from guidance the for reflects hedges

the remainder year, are For of swaps price This at $X.XX. the Bcf hedged. of of new XX includes a NYMEX XX% we

share. per in by For pricing earnings reference, impact $X.XX change $X.XX would a

is we reminder, not in a costless this As of necessarily have place, XX collars so Bcf impact linear.

the production which our to On year guidance of exposed also the amount firm locking we in-basin to pricing. actively range, volumes near-term we've remaining our fiscal tied the sales. a limits have of of side, approximately sale, physical XX% in been At midpoint

be will new continue adding to to our in methodical hedging committed remain hedges. program and We

Bcf To gas place good have the approximately we that on positioned in during opportunity XXXX. are past the prices, already hedges for hedges the the focus and hedges contango few added end, with we we forward prices. strong to layer Given where with at quarters in XXX the months, year, curve, next additional the see natural XXXX well of in at coming and particular a

to I free for our discuss flow. Lastly, cash outlook want

presentation we opposed metric our this that the of to see as switched to from operations. in on IR will funds deck operations cash from focus You

approach, changes more more this complete this volatility While under can gives in drive we a working picture. capital investors believe

we flow, the the million year, be our before acquisitions. the we to million $XXX dividend to free of with inclusive $XXX to impact working related expect now $XXX our expected For with repayment. to cash are announced recently towards approximately for left debt rest cover acquisitions, capital of be directed Accounting million these

of debt cash combination we long-term From and redeemed debt a of million through perspective, a on this short-term financing year, earlier $XXX hand.

short-term result, paper and the end at end million borrowings split million $XXX approximately a between $XXX to were of of our As that at March. term matures borrowings June. the These a increased loan commercial

and Given two will market likely through debt near-term the reduce multiyear This of under the long-term past bank more inverted short-term interest term debt curve challenging large free the expense yield billion and will over the capacity issuance. out help months, revolver. a $X up portion a our we

with us well further flexibility cash our book potential us our macroeconomic trending With the near-term growth $X, are to growing and our liquidity long-term and long-term return to for generation capital long-standing our in to ongoing transportation natural or additional leaves plans This near firm outlook opportunities valuable strategically retaining shareholders. above term. and sales all flow navigate firm supported dividend, remains execute portfolio. in gas to positions deleveraging challenges and hedge invest price on NYMEX is by the and strong the This free volatility prices

ask questions. With the to operator that, open the for I'll line

Operator

of on question the phone James. first Instructions] Thank We Trafford our lines Lamar you [Operator Raymond have from

Trafford Lamar

morning. I kind but it's think or on surrounding specifically decreasing deflation, some cost kind CapEx. the of first cost Justin, plateauing What my Hey, you are what seeing all guys. you early, guess for about [ph] Reagan I there frac side. Justin, surrounding side? of 'XX mentioned question specifically I service the tubular is know even Good on

Justin Loweth

Sure.

at the so is your just that were So biggest very of last and this there's and very, more so, seen, over with we've services, that we rig frac availability the couple so months or tight. your specifically change services, significantly point, of

edge that. may that, back I X the is is X up. that's out go to some really to that's And that the and think our reductions. but to months towards the the next there first view, you X opened Definitely, X around If significantly activity modest play over frankly, But months of ago, really decreases leading in to gas in step also be some basin. the amount think going we basins, will relate in oil

So is our service you or bias on X to side if declining flat so. the X of months out modestly to kind look

Trafford Lamar

Appreciate Okay. Dave that. And Perfect. then on color next Tim. question the is for and

Looking at the sheet. balance

around right figure repaid issuing mentioned price of maturities Xx, leverage all to You do a leverage grade, target investment debt. longer-term environment? and pay at some forward, off are look your of And you at how maturity moving you low Xx. all at leverage 'XX short-term kind possibly this cycle have with kind a you But especially

Tim Silverstein

Yes, question. Trafford, good a it's

bounds have is obviously, I agencies for to think making we said through that about right area comfortably rating mean maintain within the can cycle. and Xs, the low Xs that is I in think probably lower the So it points high be, of metrics the the our to us sure the the way

now, at of we're we've got where lots at right room look guidelines. our you current within if And

the today for two we next spot into I'd over Xs at high trending So say the the us. is year are or where and

Trafford Lamar

Perfect. guys. you, Thank

Tim Silverstein

Thank you.

Operator

had Instructions] questions [Operator no have further We you registered. Thank

do Haspett from any line I hand -- question So a on to apologize. Trafford I'll for We final follow-up have remarks Lamar. it the Brandon back

Trafford Lamar

have let And one flow. to I on here. guess but is forward? Hey, guys. for thoughts framework. return on the moving if get really too, considered free potential buybacks really I you just get last more all have the Thanks base buybacks me mean, I your thing I in want to obviously, in working you'll shareholder cash

Dave Bauer

will Yes. Certainly, for road. there down that potential the be the

our that our to to is leverage is but allow would evaluate opportunities, debt a we come grow that buyback a metrics would mean, rather goal of us I actual company FFO not opportunities. down. consider. Our hope total that buyback. shrink the first we and along something hit different down, through those levels absolute But just Once debt is than certainly our like to get leverage it that, so EBITDA, absent to we'll something

Trafford Lamar

Yes. .That you. sense, Thank makes okay.

Dave Bauer

You bet.

Operator

And we have no further questions on line. the

question Company. a have of from now we Gabelli -- Winter Timothy So &

Timothy Winter

look and like what the thanks maintenance taking sort questions. Good could that more a to bit talk look underlying would mode, go saw to I a a and planned wondering decision just plan? like. capital mode little morning was my if maintenance about for you And what expenditure production of from guidance

Justin Loweth

the our Thanks Sure. production Tim. reach our remained consistent really question, time a and premium your for to growth long for now, plans has ability What development and it's underpins markets.

so portfolio. that firm We've sister And And fortunate. really growth significant project us sales. firm we about FT giving strong Leidy And firm a came augmented online, our to markets. of now, were XX other our had able leg we've - recall, opportunity South the you companies solid if transportation and months plus into with been we've FMXXX ago a

been any been backs, at going There's get of we've a look the of those long-term potential and to we by the don't last sales, is the which firm year. we practice future, additional built turn long has capacity And new over a anticipate XXXX. a announced as to ours infrastructure successful of so the build And there's of possibility couple get for also time. and

answer around right all with to takeaway. course, of very policy view And moderate a levels don't if that much our and of market basically long-standing to our match have the is vast our premium production our will capital gas that to. entering we of our is move majority augmenting our then, moderate methodically But The hedges. long-term

expect you me, - is or really per kind - cost any of that $XXX excluding Seneca has the the to But of sort changed generally, discussion I on the general levels. much and to service it would inflation kind that. capital, As of apple-apple There current nothing million would with be have relates XX view below excuse changes Capital $XX year Midstream - comment. million less prior

little like a year that in a something we And project in or that so can given of and infrastructure that a move bit noise there'll have large may be a range you midstream or be around extra so that on long-term we'll pad an view being trend, forth. about completed coming But quarters. it's would general in more be the and talking the and the something

Timothy Winter

Okay, great. Thank you. That's very helpful.

Operator

Thank I'll you have questions Haspett [Operator back we remarks. final to Instructions] As no any registered, for Brandon hand it

Brandon Haspett

replay everyone and Thank the you, to available this access Thank Brika. A and for thank please for of investor.nationalfuelgas.com, conference both website telephone, at call today. Investor XXXXXX. with call telephone and the our run will XX. X concludes afternoon be We'd website May Thursday, To business be call like will close access through on our This online, you, taking code to to the goodbye. XXX-XXXX, visit today. time by provide and this on by Relations (XXX) access of replay our us

Operator

you joining. can have confirm today's conclude and does a now disconnect you Please day, lines. call. I lovely that Thank for your may

National Fuel Gas (NFG) 4 May 232023 Q2 Earnings call transcript