NFG - Earnings call 3 2023 | National Fuel Gas Company

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Operator

Thank you for standing by. My name is Kayla Baker, and I will be your conference operator today. At this time, I would like to welcome everyone to the National Fuel Gas Company Q3 Fiscal 2023 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Director of Investor Relations, Brandon Haspett, you may begin.

Brandon Haspett

Thank you, Kayla, and good morning. us evening's conference earnings joining discussion for you last of release. appreciate on call today's a We With us Officer; on Loweth, Midstream. Company and are the Financial President call from Bauer, Principal and and National of President Seneca Chief National and Executive Officer; Tim Resources Treasurer Dave Silverstein, Justin Fuel Fuel Gas end the questions. remarks, prepared open will At we the of to the discussion

to website. been XXXX materials refer third and have contain will our release call. fiscal today's that like these presentation earnings remind posted quarter We Investor We'd Relations The investor August on forward-looking you statements. may teleconference during to today's

speak National and as which on are and are of While basis, release the projections made faith have they may risk refer listing a and to earnings in certain statements a evening's reasonable good specific differ beliefs to factors. only expectations, believed for may last actual date are Fuel's results you made These materially.

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

David Bauer

and good of $X.XX Thanks, quarter we operating share. the morning, adjusted night, Brandon, for per results everyone. Last reported

gas compared in down expectations, of of last sold by earnings despite X quarter. California that the June impact generally our line curtailments properties year. loss But up of last were Bcf last during earnings Bcf with than year, sharply the production were was this versus more prices. over natural our X the Appalachian While was to lower offset related to and

program, the record driven $X.XX continues has dekatherm to was this see levels. during it company. compared that year. third You'll recall across its production results [ good from to $X NYMEX last year's ] Seneca quarter development excellent a as about which quarter, to about averaged a Operationally,

pricing in the the But hedging curtailments and through costs of amount as in-basin operating fall. with and the volatile to voluntary said, for likely was our Cash quarter. were Pricing, impact much and during portfolio robust obviously will quarter minimized continue limited unit be headwind the the a to expectations. very low I just line marketing

export as the next to prices XX Longer advantage drilling up term, natural deep LNG we're that time, constructive well increased ramping of natural starts positions higher Over drive locations gas of high-quality increasing us months inventory capacity take pricing. to should XX gas demand. our by in

Our as Midstream strong had businesses well. operational quarters

nonregulated the gathering And a NFG producers. Seneca from our third-party able services. side, On FERC-regulated to transportation we're pipelines, gathering strong Midstream on record saw and capitalize in throughput short-term interest both

job department in our pricing Over modernization, a done the great week, opportunities flows case rate past on Supply our Earlier created system. has months, has few optimizing basis our and locational filed volatility the marketing for shippers a Corp. this numerous driven we've system made to with both filing for rate invest increased investments ongoing in base, projects. of our and FERC. the pipeline considers The the emission reductions overall supply operations in need and the regulatory expenses including

will February effect rates X, refund. subject into to go New

As good of you pipeline know, our we a rate cases. history settling have

can I'm then. reach a before we settlement hopeful So

base rates to track the rate of annual jurisdictions by meet million, their X. and utility, Under the Turning increased Pennsylvania Downstream Construction In both season Commission mileage June, targets. are to settlement that underway business. August our at is Utility $XX replacement on effective recent case. well approved the agreement, the

make near September have allows we in a As the XXXX. recover a time, to through in real in reminder, modernization modernization that York we tracker us New investments

into our Board June, the one to so. confidence impressive paid years We've modernization increase each we're our it's proud the an similar we of the to record. is This and our that investment. dividend, $X.XX a per of to continue we'll track increase on efforts likely which In years. able pace plan Based every outlook our we seek streak tracking share a a the consecutive XXX approved Directors of of, do future. increased begin well in be recovering the Pennsylvania, XX to have and mechanism for In dividend modernization will business, that and plan for last I to continues

Tim to NFG XX% projected gathering more our next to is our production later share number per driven midpoint 'XX initial Pennsylvania natural on higher our rate including fiscal at increase year, at realizations than Supply price regulated Corp. will 'XX and impact is gas guidance higher the and by This factors Seneca, the of outlook the earnings in Midstream higher volumes call. the of midpoint, at Looking and companies. guidance. a cases anticipated updated have nearly expected

'XX. next be modestly we will about to year Consolidated decreases X% expected the capital year. is Most be at expected this than anticipate lower capital in spending of where lower than Seneca,

fiscal 'XX, to will as by level Seneca moderate growth maintenance activity low During we its to transition fiscal a rate 'XX. single-digit

our closed program recently we focus We EDA County heavily development large in since acreage development also years and X been our on bolstered additional plan modest acquisitions completed acquisition, in more to area. that Eastern Tioga position. we It's X our the

outstanding, Well more we see results like we what than and inventory. a have Obviously, decade we are there. of high-quality

focus So assets. our to sense on it those makes increase

have will say call. more to on this Justin the in later

continued in referenced companies Capital the investment ramp-up reduction the projects modernization spending free Pennsylvania emissions earlier, the at and cash Supply of at This use good increase, modernization I driven and cost continued program expected in inflation, the is coupled a regulated flow. large to Corp. in by is part with

flows as our and growing and regulated on that As durable rate I've way calls, is dividend. in priority a the investment said business the side base growing earnings great of support generate a past cash to

see across we the results great to closing, operational system. continue In

efficient earnings and returns fiscal allow balance capital strong remain which our allocation of overall that further beyond, investments strengthen to 'XX generates our improve deliver As to our sheet towards focused commodity us we flexibility. cycles and on we that price flows look through cash the dividend, and grow financial sustainable

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

Justin Loweth

year's and third quarter X Bcfe, third-party above and morning, quarter wrapped XX.X third operational with of Seneca everyone. Notwithstanding last good throughput. pipeline and of downtime record strong reported NFG voluntary quarter another pricing-related an over increase up Dave, Appalachian second the Bcf over production. Seneca curtailments. Midstream and the impact production of and X% Thanks, production X% quarter

Looking balance year. the of to the fiscal

We XXX Seneca range of fiscal to production XXX are guidance with early revising pricing. our expected advantage moving to the winter plan of timing Bcfe. fiscal take back online forward is pads higher 'XX push to its 'XX to to X

will As a down production be to relative quarter. the fourth expect result, slightly third we quarter

approach. spot cycles experience support pricing maintained have is depressed, multiple a production of we the and our over Through curtailing decade, analysis still when this pricing and last philosophy detailed

characteristics allow one to periods us up we're production and and teams marketing down through Our operations ramp and volatile experiencing. coordinated reservoir like the

several I that Given July in-basin pricing for for as however, year. impact our the months, be locked in-basin further the firm curtailments. not continue pricing-related sales over for that potential the we've of depressed to our August, of expectation next in exposure voluntary and the remainder leaving us will additional pricing account guidance with to will does minimal note, usual

of fiscal guidance. increase to X% Moving to range 'XX production We XXX a to Bcfe. XXX anticipate a

production and new take a and during of be demand turned in up are wells additional recovery and to higher QX targeting begun gas to we as drive strong which in Overall, up in advantage QX November a December of and dynamics beyond. supply/demand late line into February, XX late and ramps are price to pads wave expected have January in winter to which natural improve, expect pricing. LNG for 'XX will set We

a pricing provides our significant level While favorable protection more robust hedge downside are setting book prices. longer-term fundamentals the environment, up at attractive for a of

of in layer Over and market fiscal firm the to the sales combination is over hedges past locked few quarters, with we fixed-price for methodically in 'XX. and currently new XXX a we have allowed continued Bcf have hedges as

firm also XX% the and have production midpoint of of sales We at firm transportation guidance. covering

Moving capital. to

million capital are range our $XXX to guidance We $XXX fiscal increasing million. to a 'XX of

of the in were the our had running X crew we EDA crew well top hole as WDA. the operating frac the first rigs half an intermittent addition, we in rig, in dedicated spot frac During in as a year,

is top are a work and additional completing and XX-well now we electric where pad. Going we have to This pad dedicated in EDA, crew planned single operating the completed forward, late hole a frac a currently crew. Seneca May, not do X-well moved recently any in

have estimates. 'XX spending capital water which moderated, overall has and our our costs higher, is trended now management While 'XX reflected fiscal in

over 'XX. guidance. fiscal Capital more midpoint the decrease is would to forecasted important It's driven which fiscal -- that our quarter. decrease. offset totaling a a land-driven to what and infrastructure water otherwise expect million, expected by 'XX long-term Moving program efficiency close a are 'XX Lycoming that $XX X% versus and larger few fiscal budget a capital investments County be pronounced Tioga, to our onetime include seismic note updated includes in a in to shoot to that acre cost X,XXX provide will the to in investments during development future benefits These lease we of by

Regarding next moderate tailwind still rig steady and costs long-term and year though frac year and rates those a pricing peaked is we're Tubular earlier service slight contract to seeing ago. are compared elevated and seem both year. costs or this levels, to are expect costs, trending from down, a pricing holding have from have decreased

we in to expect we NYMEX production target with term, low fiscal decade development forward and is primarily highly Looking a maintenance moderate of plans, inventory. to EDA out consistent longer based continue to and long-term activity to expect beyond. to development over and 'XX by prior supported current growth Further, which on prices will prolific transition single-digit

our free development that productivity wells as is WDA. the on the an well EDA higher optimizing costs to on WDA is in long-term cash efficiency The capital drive returns of the and to wells program well development expected focused flow strong, continue to EDA focus we transition expected and While superior plans. to are in the

can that new preserving our fortunate pipelines. have peer EDA acreage is takeaway the through to additional allowing interstate expire, are will WDA prioritize out-of-basin once fee We entirely economic acreage construction WDA inventory the whether while our where we ability capacity acreage now the or available, never the to most develop in develop exhaustion us to almost of

Turning to Midstream.

We third-party volumes systems. opportunities develop owned utilizing gathering wholly to by our grow fully to continue significant

terrific throughput the We levels, XX in third a are system year having quarter. with Bcf at exceeding third-party record

in the have underway we construction County Seneca's plans Tioga support development long-term to in EDA. out also as infrastructure significant We build

positioned and flow, commodity years program for cost cash through success on up sustained and steadfastly maintaining come. continued By remains initiatives, leveraging we on set development in the promoting are our free integrated well our Appalachian culture price our focusing capital cycles. to structure, prudently safety while Overall, to deploying focus our generate sustainability model

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

Timothy Silverstein

National good share. of per third and Justin, reported morning, Fuel Yesterday, $X Thanks, everyone. earnings GAAP quarter

last from to relating gains $X.XX items were $X.XX that year's share, comparability, quarter. results impact minor operating third decrease some a adjusted Excluding unrealized our per of

the the XXXX, Dave We major net were want so detail The reflected sale quarter I on the hit California last on our this in last we share and remainder year-over-year $X.XX note be did June last earnings year's related third quarter earnings to see of that approximately results to assets. will where drivers, relatively but per discussed night's in our impact. straightforward for the quarter of a release. closed

I'll curtailments this spend fiscal of remainder some about time price-related tweaks to assumptions. a year, earnings our reflects that, some Given talking our with per for year our share. the $X.XX of of other discussed the modest for range XXXX. guidance to we've to this $X.XX and narrowed Starting and guidance Justin This outlook

XX% remainder of of changes. the hedged year the We approximately our production for pricing protected with are from well

of production. of pricing, near-term price-related Additionally, with This expected minimal in we limiting leaves exposure sales curtailments. XX% for our firm us in-basin the approximately place to have risk remaining

strong meaningful the As we to the of outlook to expected see our for each growth. segments is look across company is fiscal XXXX, earnings

with are a share, of initiating midpoint. XX% increase $X.XX earnings $X.XX of at to We guidance an the per range

$X significant regulated We've driven our anticipating by an line growth, from will a Pennsylvania, volatility primarily dampen season. with settlement normalization trackers. Starting to winter $XX increase is margin that to our agreed by the York, heating expected new we top New are mechanism In are In revenue earnings million during modernization projecting increase million. businesses, rate pipeline increases. case our X recent we margin also annual weather

tracker modernization Our ability original in to new add March. system investments to our ended

with year. That are investments allows the prior investments we XXst to us after on new recover date. still able recover which a was to sunset to improvement However, system supplemented this the March of made tracker the tracker made

reflected Lastly, as guidance. rate of and Supply in in Storage Dave we is mentioned, for to initial in our have our year, We'd segment, at Corporation. a increase next new that Pipeline expect effect filed and rates February

projecting are in levels regulatory and year. ongoing state projected the regulated prior increases expense, impacts material businesses still headwinds, driven both labor we and costs, to compliance and Notwithstanding X% the expect is costs. in the On side, a we inflationary significant O&M at earnings expanded versus increase on contractor our by regulated deliver the This cost growth. these the federal

X our are to increase in year-over-year nonregulated There major drivers our segments. Switching earnings. behind expected

First, our assumes per natural guidance gas average a fiscal MMBtu price. XXXX $X.XX NYMEX

this $X.XX book While from meaningfully our decrease year, year. this represents hedge a increases next value the of

average As result, a will realized than $X.XX fiscal be expect we gas higher our natural XXXX. approximately price

Pricing to around. move continues

in midpoint earnings in So for guidance, also Bcfe change of in our in benefit prices the share. NYMEX is of year. production the our coupling per Seneca The deliver segment. next reference, to growth meaningful increase with change $X.XX gas expected XX Gathering When to realized positioned a growth equates a $X.XX earnings an at higher accrues to production natural

are increase by to million. to $XX Our revenues midpoint midpoint expected

side cost flat. offset the Seneca's Pennsylvania based unit calendar modestly things, expecting fee NYMEX cash lower to prices. to other of higher by related to -- unit impact are basis, a taxes expected year On is relative which average On on remain per we be largely the LOE cost is roughly

DD&A also F&D trending of DD&A $X.XX expense. per expect a our projected of Mcfe towards We Mcfe. $X.XX long-term our with is line rate in in increase expectation per This approximately

million Turning increase We've driven approximately discussed by to principally guidance our the range the Seneca capital. midpoint, that increased Justin XXXX $XX earlier. at by at

our are of fiscal activity. timing occurring fiscal pipeline capital and straddle the construction season, middle move timing related construction around. minor to the in With years of are the changes year-end many projects of and other The the can largely

million and our largely storage of in expected is we've a million. increases This fiscal spending anticipated $XXX $XXX regulated decrease offset utility Looking businesses fiscal our from at the decrease XXXX, segments. the in initiated at represents guidance Overall, pipeline range midpoint. capital a with XXXX in nonregulated to with X% and

safety system it these and is believe of Given for [ the to emissions of to significantly and the to focused importance in programs invest our in modernization integrity we each requirements jurisdictions. our substantial reliability, support ] prudent and operations, continue

to ability to cash supports We grow is term. generated this believe growth value next and flows of pipeline the an attractive funded our investments base drive providing for dividend expect with over that several internally long predictable over will returns this our stable, rate our years, We mid-single-digit to way deliver the shareholders. our continue

it sufficient expecting approximately together, we now and more cash operations exceed year. Bringing our $XXX acquisitions this dividend This cover year's all than million. from $XXX fiscal to million are by upstream this flow to capital is expenditures of

XXXX, to decrease exceed million. expect relative expected primary fiscal $XXX XXXX capital. spending our operations to to levels to the normalized from return The Looking to by cash capital more reason for of is working we

sheet the debt-to-EBITDA that large our We'd with and Xx As low expect balance this a in in you of decrease great or the are gives fiscal to course and year leave cash given source likely flow that this may our will us spot. well profile end recall, challenges in over a deal a range positions year area to we working opportunities projecting gas of come of prices. us This natural potential execute in way. will This capital good on the XXXX. navigate flexibility remain

business our strong. remains the for look we beyond XXXX, As outlook

Forward MMBtu. $X prices for per natural gas are around

path in value at are to provide We these Seneca's our towards dividend and continue shareholders. to the And our our businesses programs improve further this hedges is to expected steady, increase to leverage come. long-term our generate regulated well growth profile high to in capital prices. many years in modernization to deliver the positioned lock we layer returns decrease. long-standing With the value-accretive we for outlook,

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

Operator

We'll Goldman question Instructions] Choudhary take our with [Operator first from Umang Sachs.

Umang Choudhary

first high this you're eastern question on development grading, towards program. My the was doing which

near from about can outlook? you we a have you efficiency the for you $XX what expect the You also, of of increase CapEx why term, think FY gains And terms can 'XX? any from talk million then program kind on us should just of in this impact next provide color as year. the But the through multiyear basis, onetime

Justin Loweth

the Sure. and year, fiscal kind the when seen of of of first drivers that at of rates I'll start some on going the with a were here going program high. we the 'XX had near the in increase quite a significant Really, spot up activity is, just time behind term, completion half was late. a amount significant we've -- particular, with,

our little bit is high. So capital running a

particularly water the I the to transitory in costs, more work of we operations costs, evolving But what water the continue them through to we trucking additional half second seeing mostly increased we These ultimately, noted rates. we've related to some as related over as elevated been hauling year, as the view EDA management, on have on and time.

to longer-term capital pivoting the of and kind long-term and into levels gains time. the So how the over will really our plan efficiency benefit EDA move

productivity we a significantly completed in in the really and our the of last have have we've expect deep there years. better the what we've acquisitions position our EDA quality should over going where forward. few following And Utica validated well well performance and the we We particular, inventory very

area of related higher next water-related both holding project. be continued many the and infrastructure And us productivity, shifting costs that onetime day for will benefit to to ramps and with some come, of activity deliverability that business over in as in And the XX X so things over which wells investing projects benefit also, about of dehydration, XX then good time. flat into and the rates more centralized So upfront of development well the associated year compression to really life, with terms to us but our we'll build-out largely infrastructure for have of a some benefit months early capital of will the of EURs mentioned really a many like our over at years chunk the time. here talking been where to at moving O&M Gathering in some million are There and an million I've up. restricted we're that initial their doing EDA

-- for it more million $XXX big to million this. result into move down overall all 'XX expect increased to maintenance, would $XX picture, shift capital capital as would capital levels putting below we of So fiscal a we And Gathering we expect as then a efficiency to of Seneca levels. and together,

Umang Choudhary

just onetime excluding of which $XX million And to in out taking sure, 'XX? the that million be $XX $XX the to nature onetime is right, charges, so as $XX million million in well,

Justin Loweth

Yes.

So to those long-range would I even of onetimes. initial on not about an 'XX down 'XX, talk for been it will a off view point. been it I'm had kind as capital, down be relative have more When 'XX referencing

what off down see definitely Seneca a bit So we in here between quite and 'XX Gathering.

Umang Choudhary

upstream anything balancing seeing, term? are for thoughts helpful. longer you M&A which you on would the how thinking then and is are business business which company? your love about the the more Very opportunities M&A portfolio nonregulated regulated around and the interesting And And space side, outside regulated the the between

David Bauer

Yes.

When as of organic growing So us for our Tim keep deals I've eye at out our there. mid-single and deal likely kind would happen. regulated digits and once tend And out growth said in hopefully, every will, a we is through a in what's priority. that see on the keep quickly those M&A come balance more our you getting but past business area, that that of we'll to spend, come capital said, a while, calls look side

Umang Choudhary

have which spend the in you. cases, over the rate . meantime, grow the this business year. the will in next the help -- And modernization Got you regulated and

David Bauer

Yes. Right.

Operator

of your John line Bank And comes America. question the from Abbott of next with

John Abbott

rate $XXX to back $XX Eastern shift just to to rates E&P expect about share. the changes between decline Western how the underlying XXXX. you I and you the in areas Development by the and going you sort decline Area. underlying of from understanding color the you additional that million decline mean just sort versus mentioned what Just million your areas that business Area provide you Can Development X expect to as between just CapEx any on of

Justin Loweth

Sure.

to to So to true over John, just capital. the as time to would -- relative $XX $XXX plus decline I Seneca on 'XX, make a sure expect maintenance. million by a Gathering setting we to annum million The per level shift

on the see the as And efficiencies some rate, well that's decline we of anticipate currently range a in better would capital I that productivity. the driven overall are of changing. our meaningfully by Over result not we'll time, low XX%

overall as of operators shallow Appalachia a I in still decline. the think remain we'll one with

so meaningful over in rate no overall And years multiple I'm shifts foreseeing. that that

John Abbott

remarks that next Appreciate for the part range And missed CapEx here. horizon? of the question, it. just gave this that a question that do would opening And be year, level But I about think with you the Tim, how you over regulated second Tim. business, for multiyear

Timothy Silverstein

John. good It's Yes. a question,

I as million to efforts alluded organically, it, trying that, emission pipeline efforts. Dave $XXX regulated to modernization businesses growth rate low generates And think area. to focused mid-single-digit the, think, expect to really the to, goal in I I'd grow with the reduction base and the in million to $XXX of on call business area see the continue the

million the a York XXX availability Pennsylvania modernization $XXX each I mechanism the replace side million area, in to continuing given or year. it's miles to New so there grow so On side, disc program capital trend, $XXX the to and utility of of would our continuing flatter in say the terms

million into per $XXX about $XXX translates to And that million annum. so

Operator

[Operator Lamar Instructions] line with of Raymond comes from next question Our the Trafford James.

Trafford Lamar

expansion up. color of guess mentioned on going for think should how Justin, view kind we I pad CapEx. I was in a production cadence you ask 'XX? I XX-well to I the appreciate

get that. to on be Just any would great trying color

Justin Loweth

Sure.

so shoulder part not ramping. really kind we're That the October would of it, comes 'XX, when So inter we I be should of quite around, call month. as say

ramping So into our around winter designed plans pricing. are really, the

So in that kind of timeframe. November, December

of and up and to in into is February, and November continuing right the and January will balance as throughout expectation production meaningfully we now, see then then So start increase that our going over we'll we the December -- trend. year, will get see

to growth So you'll We QX of kind have the that and into going lot of out year, the That's flattening the end we the seasonal best of kind and things of into our again of gas and pricing. really of you balance try manage one then can declining sculpt as somewhat year. really on. few a the of plans then advantage development in over the can to prices take rely

so And we to sculpt plans our that. development to hard around try really work

Trafford Lamar

makes that And then to the Yes, sense. Great. for 'XX with activity EDA. shifting

mentioned water provide benchmark cost of for I a per assuming, is You that say, let's higher flat for see slightly once transition to color per that completed, all just kind foot you any And OFS? of on then going management. like looks what was lateral via if kind foot 'XX? could number cost

Justin Loweth

Yes.

of see same see, for that's that cost over Utica ZIP in we you the of is $X,XXX that all-in of what of Tioga see operators producers, are to in, the to unique. foot. developing Utica more which in $X,XXX over you'd That's deep that's terms an what kind most to well these overall kind and kind somewhat the ballpark, wells, comparable in you akin When say, our So Utica Marcellus deeper cost number, think kind wells. of structure wells Southern Ohio Northeast about play, an there. they're code developing kind We're of per

of is kind that out you the see balance of And to the wells. these what are reason those

of able flow a are generally months very on excess these TLL. wells north in you're and at for Bs are we're so many average, foot per X you sustained to beginning high these And very, pressure, before of X,XXX. a XX,XXX in drilling And to decline that rates EURs get

foot an XX,XXX of number. round to XX,XXX average kind the in So is

So transition that's to down we EDA, well begin trending time, the expect we to more And cost into foot. as per we activity that would those then of expect over where overall be. and more our

Operator

no And Haspett, there this the questions over further time. turn to are call back you. Mr. I'll at

Brandon Haspett

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

Operator

call. today's concludes conference This

You may disconnect. now

National Fuel Gas (NFG) 3 Aug 232023 Q3 Earnings call transcript