NFG - Earnings call 4 2023 | National Fuel Gas Company

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Operator

Good morning, and thank you for joining the National Fuel Gas Company Q4 Fiscal 2023 Earnings Conference Call. My name is Kate, and I will be the moderator for today's call [Operator Instructions]. I would now like to turn the call over to your host, Brandon Haspett, Director of Investor Relations.

You may proceed.

Brandon Haspett

Thank you, Kate, 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 on website. end the questions. The remarks, investor quarter XXXX fiscal prepared have fourth and presentation open November Relations will At we the our been posted earnings of to a Investor release discussion We these that would teleconference to may to will like statements. call. We refer today's during materials forward-looking remind today's you contain expectations, projections a faith reasonable Fuel's made have and in National good beliefs and basis. to are believed are results Actual differ may materially. last speak on to a the date for only risk made, listing which of statements certain and that, Bauer. as over earnings refer it evening's I'll turn specific release are These to factors. With Dave they you may

David Bauer

during in combined with $XXX we million nearly reverse $XXX operationally X all year, cash earnings over associated should year slightly flow of in of Earnings fiscal the approach a the Fuel, proceeds a due hedging free ahead. you, the free our both averaging Fiscal asset and 'XX the the recent Seneca. Commodity cash over in importantly, was inflation Thank was portion Seneca's and jurisdictions our of from and as three cost one morning, sales everyone. years mitigated production were Cash and lot up and but at day during for National 'XX. flow regulatory build Brandon, rate for flows. per to consistent trend year, last line pricing downward operating costs we regulated headwind cash a million prices impacts but growth protected scale were and X% net. to good our that and at of trend. Most lag, businesses good roughly financially the proceedings continued year, down substantial company in positions Bcf a to generated that

long of returning our we've continuing has free debt. area, Eastern acquisitions contributing to shareholders to past amounts cash history a levels of addition through and while increasing the absolute million at significant our $XXX over bolt-on to years of of X generated In development the same in funded our dividend, in flow the reduction capital our time,

deep high-returning locations the inventory in County, our Given development of a started transition to on more program and of summer, past this multiyear Tioga heavily focus growing we Seneca's EDA.

a focused expect Overall, X-well facility will smoothly. standpoint, access it's pad We While in Marcellus for progressing Marcellus XX-well a Tioga project Supply's capacity. the online currently and completion anticipate have online Seneca drilling of in expect expectations. improves Lycoming just markets. provide or to end, on late calendar have of quarter in on with TGP South existing and the long-term all that total markets Leidy the costs additional opportunity County to better rates, XXXX, we online capacity the the at with working than per takeaway month, this and last of transition proceeding Seneca County. Production connected in estimated and to over wells construction our the filing NFG Transco Midstream. With businesses early, our via been long-term of firm move a both brought for Seneca's EDA EDA, pad sustained is flow pipeline the executed Seneca's the and dekatherms this a free ability productivity growing And the Pathway million. when our Project. With Seneca We're portfolio production date of existing we see in-service compared that increased in to focus its capital From efficiency XXX,XXX acreage. IRRs facilities improvement on great in by new inventory agreement XX Seneca and day Tioga higher a of fall. This years area, for an and generation to County. capacity and To been first and substantially Tioga expected of value with a to and to a bring cash and to modernization its FERC high-quality expect FERC higher project timing project being line develop this diversifies of combination outlets in the and WDA application $XX is Tioga is cost next with it brought developing County volumes transportation

long-term a case it beyond rate we the the revenues That discussions December. July. & and we is increase in in near-term commence our by growth Storage according from schedule Pipeline for Corp filed supply Additionally, proceeding layer of along to moving settlement should and provides segment above expect

the FERC of are with cases been on We do settling rate and this utility have side. also ratemaking a history active optimistic case. We've we'll so

approved Pennsylvania million was went into new August in Our $XX June increase in rate effect and X. rates

weather during 'XX rate we drivers first New filed this consumption dampen saw reflected most we our impact increase annual the as highest. Also, part is asked first we've There in a is and when clause, October that effective XXXX. that This volatility several are the reminder, rates. help modest case While $XX 'XX that the In customer should utility a increase proceeding, for quarters of need as past fiscal fourth second jurisdiction to million a earnings. Switching XXXX. York. X, see Tuesday, will in a for since quarter, of our it, we increased normalization an we of in implemented the of which new fiscal the

a to that rate with tracker to and With the expense rate case closing, continued practical modernization earnings that years, resilient and of a regulated Act in of stages deck. several initiatives to system. and we trackers increase. Other gas XX, on stay National interveners. In Fuel the significant A add case more proposed First, September the XX next decarbonization for include know, new past have allowed out delivery next ratemaking see and in as for our staff the outlook rate ongoing see activity, we our leverage implementing we of businesses the updated and the to reliable, have We'll remains those this solutions Page the the bad testimony complying driving inflation us items aimed and have for other spring of included commission Climate through on as IR debt early say over ability XXXX. affordable from new notable is expect years. filing for sunsets several our both cost of summary wage our filing the growth you but get also Further, strong. state's trackers to natural regulations at investments the X the proposal a recent are need

distribution beyond operations, growth the Looking annual to least drive into storage businesses, safety from ongoing the our those that, and should project expect rate and X should in digits turn of high the we years. growth translate our which at which addition Tioga modernization X% of next the earnings base to over transmission, from single X in of in mid- to ensuring in systems, Pathway our integrity and growth

the nonregulated generation is side, for cash robust. On free the flow outlook

our the in our fully the natural transition Combining program, and move capital this strong expect and and with outlook development through gas high-grade Fuel improving earnings in returns. further to hedge flow increasing continued free standpoint, cash unique a portfolio EDA significant efficiency we -- cash prices peers. price is our and supports these the of for that National realizations, we businesses. From we amongst flow growth proposition improvement As out value expect

a that, in and earnings growth to meaningful all our deliver free strip, significant cash flow gas clear and turn in which us the the to coming nonregulated have of We value growth our subsidiaries, growth the our in to years. With current line Justin. the significant sight assuming of call positions I'll earnings natural well for very to over shareholders potential regulated

Justin Loweth

registered with Thanks, revenues of Seneca development sets Dave, production, NFG year for per year Midstream. and X Midstream our over net morning, drove record combined increasing years day, third-party and ahead. Seneca 'XX great in up another was good at and success both Fiscal volumes, record for continued Bcfe which Appalachian the program everyone. averaging a

plan, the EDA-focused We results our recent is also inventory of deep in to highly of and an development further began strong supported integration well Tioga continued future County economic which by development locations. our bolt-on bolster transition acquisitions that

centralized Throughput also the year-over-year to than including more targeting facilities. Starting with achieved to Bcf prior volumes X% increasing increasingly with integrated Our significant 'XX, X.X increased and we throughput with EBITDA approach gathering gathering area development record creates million. per and over its efficiency $XXX its to fiscal existing increased highest day nearly XX% Midstream, capital over EBITDA. third-party milestones Midstream lines trunk leveraging in notable several and tailwinds Seneca returning year. X%

we build-out with 'XX, this expect infrastructure fiscal as we Seneca a an support growth continue shift to coordinated to focus to program. EDA-weighted the development to ongoing Looking on

Seneca's to 'XX strong with Bcfe. the producing quarter, fourth we year results, Moving a concluded XX

revisions of X% curtailments Our team fiscal of of impressive additions an nearly and net to Bcfe, X% of to of strong delivered the increase annual due Tcfe of and results XXX year-over-year. increase XXX% of X.X grew over Seneca's Bcfe, Bcf over These with reserve pricing. production year-end, an reserves XXX replacement. X included also fiscal as low year impact voluntary an in-basin representing

position. during fiscal expanded its 'XX, record economic to reserves, In addition highly EDA production Seneca and

much added announced, three the drive we separate existing expanded is significantly capital the time inventory high fourth and closed in meaningfully to when additional our inventory exhaustion lower on industry poor development XX will improving in added develop efficiency acres, third locations is which X,XXX locations. At we position largely tier going held core moving shifted These previously development with our transactions an and quarter, over And towards focus XX forward. acquisitions As lateral acreage, of highest the we quarter. the new in areas, a NRIs which on contiguous returning increased our fee. and facing lengths to have XX of majority

unchanged 'XX we our to X% of million, Bcfe, fiscal are guidance. With fiscal expected decrease midpoint XXX at XXX X% an maintaining 'XX. of capital our guidance capital at fiscal expenditures relative of to to to remains to 'XX, Looking the million the $XXX production, $XXX midpoint respect guidance at versus up

flush and new months, online cadence the activity be development spend and QX. of production with QX in the to during first year winter half the planned bring XX pads toward capital expect will the and of We TILs weighted

production in over significant the a year. flat QX Longer we Seneca's plan half declines growth into with the term, prior throughout development result, relatively quarter, As QX of expect and back then shallow production remains unchanged. the

continue target investments low production single-digit EDA to focus the expect to in We and maintenance will our to growth.

below fiscal capital 'XX, transition, fiscal expect Midstream to combined we the and levels. in million we million 'XX As will Seneca this beginning $XX make for annual $XXX be expenditures

hedging Turning to and our marketing plans.

We costless through our expect positioned In combination the sales. continued our portfolio XX% have 'XX, price term expected near in downside a collars accordingly. for of production fiscal swaps, pricing and protection have of volatility fixed and price firm we approximately

through for of In addition, capacity and we firm takeaway firm expected nearly have XX% production. sales XX transport

are marketing and natural and on mitigate Our basis focused working protection, anticipate the we efforts gas to forward longer-term curve pricing while based capture look in will basis market risk fundamentals. upside we the to on

continue We to additional our development capacity to plans. also evaluate support takeaway

This quarter, made that headway significant front. on we

in-service project Tioga we growing XXXX. said, and markets has to our favorable County directly Pathway Tioga (sic) of into target million Leidy day more XXX,XXX a This Tennessee Dave committed transport into project, a will the which late production on calendar South Dth As date capacity. $XXX

some Moving achievements. I to sustainability, highlight like impressive and to would safety

the As and responsibility respectively, reductions, September, baseline. in released corporate XXXX methane a intensity Midstream Seneca described we and XX% in as which have to report, compared XX% our and

recertified safety on year in we and DART assets EOXXX the hard EquiOrigins achievements attain under 'XX, continued certification ahead. Midstream certification standard collectively first operations. In grade, will an continuous of continue. [Seneca] August, it our the a gathering certification standard, its are multiyear performance Also, success with process. highest XXX% X level under injuries, streak was Seneca available. Similarly, work September, Seneca to for conclusion, in emissions on Midstream the another each and demonstrate Midstream and making methane our improvement sustainability well in the Additionally, the this of natural positioned Energy completed in focus gas with fiscal These for years to MIQ A entity attained under in

capacity and increasing Our generation is a portfolio inventory long-term and and development of locations. supported efficiency free capital development strong cash prioritizes takeaway deep plan WDA and by flow of returns, the EA

over safety. With record to sustainability We Tim. the and and operational maintaining the the that, have successfully talent, for standards execute to assets the the highest to turn track I'll call while continue

Timothy Silverstein

by Thanks, per realized earnings results quarter The fourth decrease night, to largely driven Justin, natural National and good year morning, share. everyone. $X.XX was Fuel prices. compared last operating in Last reported of gas adjusted lower

quarter, NYMEX $X fourth in to than averaged $X.XX the compared For more per year's MMBtu prices last quarter.

portfolio our portion significant of this hedge price decrease. However, a mitigated

In are a respect with other and on addition hit that reported to pricing, few results to fiscal XXXX want there guidance. to items I our

for the segment, our capital came range. Upstream respective First, in spending top our came by in guidance and ranges. XXXX above fiscal down high it of end of Gathering of the midpoint slightly their Breaking right on businesses

track for ensure quarter. Pennsylvania is York the the service above as ahead With modernization cases on rate in mechanism to Utility subsidiary, and activity both However, year possible. efficiently of ranges of the and we as of segments. Construction our associated in that fourth spending came on utility, working the finished Corp. we've Supply our on availability tracking regulated New our been stays in improvement hard in our guidance and program schedule capital placed system a our file

pushed guidance these this us able a While on important to return to order we investments. was plan above in get in that earn service our ensure are range, to it this timely previous

$X.XX our driven of Mcfe program, an the WDA. productivity was wells our this superior development are our DDA focused rate per tend return for profile, guidance where This than in and those higher to a the above cost EDA end returns Western carry high to area. Despite F&D towards development well range. by these was transition ongoing year fiscal of Next, principally the our

addition, added reserves a is adds proved the projected, we more are of an XXX we this success Bcfe. indicator totaling the seeing excess These locations previously of were In undeveloped our to in year, reserve XX than EDA. which positive

maintain the projected flow reserves increase higher they and However, does outlook generation our until this carry in rate. remains cash quarter few implied main a depletion our driver years. to Together, unchanged. Switching and our XXXX years fiscal the up This the developed. the that guidance as impacted to Seneca's carry fourth income expenditures transmission year, spending in and rate a Despite the this, released the these fully quarter an guidance natural long-awaited recorded to and tailwind during treatment certain property. capital distribution will initial drive the are IRS the over fourth DD&A initially of taxes. Earlier results. future into nice capital provided rate in improve next impact estimate are DD&A related of those quarter We this factors gas for of earnings free the behind

XX% reflected our we specifically Looking is meaningful fiscal tax to XX.X% which effective outlook flow IRS which range rate, a estimating be of is expected reduction in at XX cash guidance to free updated a to our basis point revised expected for has benefit overall XXXX, now to provide cash This the taxes, been our XXXX. are to in

guidance the earnings XXXX. earnings have X% With a $X.XX our which share, updated $X.XX at per a incorporated midpoint XXXX into in increase changes represents fiscal fiscal our these to compared of to we to projections, few range

per Our in for would And NYMEX price earnings MMBtu assumption of remains change $X.XX. pricing reference, share per impact $X.XX a approximately by unchanged. $X.XX

relative over months. the established outlook Xx Additionally, and more cash to to metrics increasing tailwind as flow positions free are debt existing million us debt tax flow rate project and to XXXX, for next cash where in target than excess that cash for follow. From years free in EBITDA exited to FFO on gives dividend with an the our we of compared we would XX% more XXXX, the XX flow year agencies. projected the of towards expected to significant given year, roughly in and level be importantly, be the thresholds, we our expected well This now a free fiscal This estimate. prior the of covers our trend growth balance XX% cushion to upgrade significant approximately our close the and the us rating increase for to expecting credit our rate $XXX by downgrade thresholds we sheet XXXX perspective, very cash

whether debt additional bolt-ons opportunities project, conclusion, strategic opportunities liquidity future, at highly further is acquiring it as credit adequate such in the National by is not create the to positioned well business nonregulated growth price. have under with no mature approximately which Pathway organic facility, does committed a available or into value Fuel also segments meaningful until mid-XXXX our our rebalance fair assets Tioga our XXXX. In $XXX million to and We long-term maturities until mix regulated

We maintaining over of deliver in track capital term. that returns cost on record our of investments focused the of excess are making strategic well our long

a leverage operator free provides questions. for the outlook cash the with the flow to line ability I'll shareholders. With opportunities sheet value-creating the that, best for ask Our for pursue long-term open and us to to balance our strong generation flexibility

Operator

We [Operator be from Choudhary Sachs. with of will question will Goldman now Instructions] begin session. the the question-and-answer Umang line The first

Umang Choudhary

are you start plans me terms the coming you Tioga to the plan of wanted to the uplift if of diff Upstream provide get -- capacity you in the color terms production XXXX. online segment? MMcf project, add in per through to with where Let in project. capacity? fill netbacks to in around sense what to potential plan XXX you Do in Pathway the how I grow can And any plan a

Timothy Silverstein

Thanks the for question. Sure.

plans allow have So and kind for Tioga yes, longer-term of additional will all growth capacity the planned. in creating that this takeaway our we strategic is part growth that of

of that net. a shift. a intend rates production being to of a and production you continue to that lot we will One, lot at shift our Bcf Tioga. coming production today, will to of continue out If look over And then X day growing,

we Tioga and to Pathways diverse opportunities both of can pricing access those for get. The to us. project So markets have it's also the achieves for best us important

be So relative move Tioga. And able are out couple to then we'll of where many, markets will gas about plan and when available that. uplift of us get for much do beyond and for we'll in be on into we sell producing markets the diversification getting years to an that what we continue years development then as now growth it gas a think to that that, to allow right from could X we just how many anticipate Tioga today top we out

Umang Choudhary

the be around and views love there Helpful. updated can helpful. broader landscape would M&A And then provide would you color macro. your Any the

Timothy Silverstein

hit Happy generally Obviously, activity a been of tremendous more certainly on there's amount more transactions big that. Permian Sure. to recently, and really focused. speaking,

that most could be see point, But these recent we've Our focused. industry. coming there's necessarily continues consolidate a across that be view is seen M&A. see continue certainly, that will we'll more there Perhaps the other focus. of some definitely, the And wave additional we think -- Permian would kind to to Appalachia that nothing don't at happen, but be where to M&A deals seem I area the that the

Umang Choudhary

on Got company a I for be potential the and which can term, see longer guess? the the you you. focus utility areas regulated where Anything side area

David Bauer

Yes.

time, the over see market. on assets come we'll think I

I've said It's As in a proximity to that business. interest in properties would the us. past, in nearest our is long-term be

on the that we're evaluating to stay market. going on come So to focused properties

Operator

line the JPMorgan. will The Zach from next Parham question with be of

Zachary Parham

a for remarks over Tim, follow-up cash term. maybe your the just on longer on you just prepared taxes

cash on Is what longer-term look in talked you've provide And that like? might case? some in could maybe taxes thoughts past, XXXX. digits the high about single I think still the you

Timothy Silverstein

feels we that Zach. move little repairs new they bit low that X XXXX go right still as XX% years, time. Longer that up I hold area the to for guidance, this around the Sure, make right The now, single-digit trend say where we Yes, would area would number. the rate term, I say, to bit sit a like a ratably over the next, run term. XX% then over long expect or and through X high

Zachary Parham

seen your business. us just on efficiency on update maybe it you around you one thus That's or with you an just Could give gains you've know e-fleet? color then, Justin, the added And far? cost great any are E&P color. mid-year. how Maybe on for going things I just

Justin Loweth

Sure, happy to.

our fleet. And point very approximately we're the things So pad with we're achieving XX% third e-fleet. gone which what displacement to are to we the an starting diesel fleet, It's would is currently than at see is has it to our completing X, move out you're do. be is this new one benefit, were that is of much exposure upward prices of happy if I'm that using well. most more X That hoping additional to and that Tier which limited diesel Tier

to dual which And using use we're our provide overall, it and own plan benefit. is just the So gas, and development prosecuting system continue able to intend a to positive. the gathering

Operator

of The next the will be of with from line question John Bank Abbott America.

John Abbott

that may the sort I look asked here. rate for other number confidence utility other to number? you're and the have question at $XX increase -- at New utilities that mean, and that million When when be the What's was peer what that you of this on case at on your of of So filed looking sort you for look obtain. state. York for Tim you sort It's look within

Justin Loweth

Yes, a question. John, it's good

a rates. I delivery starting now York We're right State. low very delivery think in position company rate lowest we're the of New from

the same seeing. we are exact utilities All been pressures they're facing that in, that of cost have the other

So fact case a out XXXX, since haven't larger we've the and delivery while on for since that the that surface, most rates the it's part. of stayed our unchanged been increase really XXXX rate a

that get gives But us color. costs to that we want the that settlement the to it's direction exactly recover speak good a in the I you early will of hopeful on I think returns the travel earn some don't we're take. But to have. and proceedings. it allows hopefully, we

John Abbott

of work post you And towards guide does it spoke a that there, is XX.X%, new is, range? to question How catch-up end my XXXX? XXXX? But up applicable the then from guide that to that Or of that trajectory cash tick Tim? guess rate tax of is kind that higher in the of there rate just I taxes. the does XX% And

Timothy Silverstein

Yes.

catch-up. So perspective. from That impact the effective a tax happens of rating there as all is temporary a no difference

it. driven how by So specifically. that It's treat in they of deduction isn't Pennsylvania largely jurisdiction our and driving the this repairs nature

So capital this eligible on how ultimately, will that deploy from it depend level rate relatively perspective. a we tax of effective ultimately much this maintain consistent in is for deduction the versus And that levels, being I'd expect to but of Pennsylvania. capitalized tax

Operator

[Operator from next be of Raymond question Bemar James. Instructions] The the will Trafford line with

Trafford Lamar

I guess my Justin. probably first is one for

looking if EDA. Just from you touch could targets on you the the I and development was Marcellus well standpoint, maybe all viewed wondering and at drill? ones Utica the productivity of which a comparison the deciding how between kind and to planning two

Justin Loweth

Utica. Yes. -- productivity the just out we are see deliverability there higher Sure, is quite pressures we a of have higher. well Trafford. the bit The It's

achieve those rates to XX day million and that XX we sustaining wells are of Dth out So months. million sustained rates what a for can are those many

They're of a of is sustained lot and XX,XXX little bringing get a laterals. Pretty given they're less in much a quite to And have designs quite for long you the deliverability north get of great. those we're nature They probably The on cost very all our are to that pressure a long at little little you lot the wells lower of the average period a gas don't pressure. What drill of are the Tioga is foot XX,XXX completion benefits development, in feet, down. shallower, those TLL. able to are bit drill The wells you money of hold So so XX,XXX lower cost. so rate the good. gas, we Marcellus is intense, less bit laterals pressures. They're very time. our a have a contiguous

dollars we entities to as deploy between targets happy few to to most possible across the we have. development sense we're two marching excellent midstream ultimately guided through kind looking our between the position to collectively by for Seneca that So as they're what plan economic an from of entire really, develop and and both And the makes perspective, go acreage one. either us as is work

are And really that's Marcellus so guide excellent. Utica, it. Both what will targets, and

keep through So next the working years. we're inventory to many have the many, we over going all

Trafford Lamar

the color on appreciate Bcf then I was on that the -- price-related Perfect. the I'm one pipe largely the quick X assuming? that. curtailments. that one Was maintenance, And

Justin Loweth

No.

maintenance not times in even That there's very So gas were terrible, low like prices less. we pipeline And I'm $X quarter counting are pricing in times gas and the that. curtail. when below purely were the there is will last prices where that, -- in-basin voluntarily

So maintain is our exposed production pricing. That's we portion small overall a of that to intentional. in-basin

I that firm transporter, like that about for in production about to XX% firm access of so And we our 'XX, has have leaves sales, spoke XX% there.

If will start And economic answer to I a to that that so period simply and is company. better for see beginnings will. gas, we a we in the shut as see if when layer vicinity, prices our X curtail and sell $X for better home, choose at find pricing, to them are the of wells back, we that wait really not now necessarily or depressed, far I'm the a talk getting about in below you what Bs, doesn't time choke we like that that then well, that that have extremely be call see winter for of you and it

Operator

At this time, there are queue. further questions no the in

turn remarks. will I Brandon for the over back So to call final

Brandon Haspett

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

Operator

your today's you That conference concludes participation. for all call. Thank

your now may disconnect lines. You

National Fuel Gas (NFG) 2 Nov 232023 Q4 Earnings call transcript