NFG - Earnings call transcript Q3 2024 | National Fuel Gas Company

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Operator

Good morning. My name is Brianna, and I will be your conference operator today. At this time, I would like to welcome everyone to the National Fuel Gas Company Third Quarter Fiscal 2024 Earnings Conference Call. Please note that this call is being recorded. [Operator Instructions].

the to turn of Fischer, now Relations. Investor will call Natalie over Director I

your conference. begin may You

Natalie Fischer

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

of the open At remarks, the discussion today's end prepared we to will questions.

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

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

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

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

David Bauer

of success from Thank and we for financial good will a the in National one details Tim Justin quarter line the Good the the which everyone. more results natural of Apart get were across gas operational the quarter. quarter prices, one expectations. was for Fuel, continued system. morning, you, third into in with Natalie. a saw Overall, our some right

our National Fuel offers So future opportunities proposition my value to I'll growth focus time and highlighting investors. the

to deliver in flow us to in strong and our very amount of positions earnings cash capital free the significant returning well our to increasing capital growth on return to years. value short, an In our coming significant long-standing commitment shareholders and visibility

XXXX to with in be results. that increase our nearly each initiated And $X.XX major night, operating per guidance system-wide fiscal the at improved increase a earnings segments over a preliminary expect this of $X.XX will XX% share midpoint, seeing for fiscal 'XX. Last we our we of

multiyear In outlooks presentation. addition to added metrics financial key we've our investor several to for our outlook for XXXX, updated

particular, better the In IR our of for can guiding deck, consolidated than at growth on of X Page X to as XX% updated compound years. earnings least we're you next annual now see

expect the should in our Importantly, as we outlook. case system improved each businesses of be to will XXXX, the our contribute across

share utility Pipeline utility rate expect and In of years. a annual Storage year. average Much X ongoing the Supply next will regulated the we rate from year's settled XX% next of our case per we with earlier X% New come businesses, over & growth Corp. in our this York to the earnings growth impact case. along

settlement to Now with are but a I settlement am reach still discussions, we'll that optimistic this case, we quarter. respect in

the like programs in to the the year, next and Pathway rate expected to drive expansion Tioga at X% modernization X% projects beyond Looking are companies regulated base growth area.

it for look gives in As to of to the in continue and me many know, majority you the years growth confidence our to growing fund businesses the expected many of dividend those regulated we our segments ability come. to

our project, in month this next of area service months, application in program gas FERC XXXX ]. in for quick percentage to prices the to X-rig should to the a gathering mid-single-digit on in on file calendar Seneca's to production importantly, X- improve Seneca's better. even we're throughput upstream are meaningfully average. the several natural [ status But more low should grow drive earnings which outlook nonregulated the expect and progress our expected Tioga and is higher. businesses The One and it later growth good for note late with making date Gathering

additional manufacturing. natural of onshoring and demand most in demand for the of support the wave ahead generation online year centers electricity needed power growth LNG next significant to see the gas-fired as and is data in in industry, the Like the projects we to expect increase come

certainty natural It to X-year which will that in over prices greater volatile, in longer-term goes in continue provide that generally unhedged our without Nevertheless, approach earnings layers us long-standing period we saying are consolidated growth see up. can trades prices providing to allow price expect gas a but lock trend. considerable our future from increasing run to deck, realizations, have hedging, should of our we significant that potential as Page XX upside to volumes you investor the

earnings, cash should our at Free nonregulated flow alongside particularly grow businesses.

should position invest As we in the the Eastern [indiscernible] are we're on we we and time to of Seneca's enviable centralized be same I've midstreams grow said prior calls, the we as amount can as program at and drilling complete out. clients infrastructure decreasing built where our well. one development transition capital in the area, as production NFG

IR flow with gas contango lead The nonregulated cash see our natural curve significant should to improved to deck. capital -- opportunities, sheet can to capital towards shareholders. over as you investment-grade improve X either growth allocate the next our on financial in return the of X or flexibility additional combined give further balance efficiency, This [indiscernible] years, free additional natural us considerable growth capital Page of gas should these

our our and approved consecutive our Board a each dividend of or years in To the it core is XX. continues $X.XX streak increasing in an value X% paying of which proposition. impressive in element last The a that dividend, end, June, of dividend XXX for our increase

allocating of capital. their projects of XX returns more one of our increased strong capital companies long cost in a are testament the which generate half for have in excess than We country that approximately century, that history a of to our is dividend judiciously to

program. million in complete program you by year. share expect buyback end this next we March, with track right to we fiscal that a As know, initiated $XXX the on of We're

our we As outstanding shares approximately by reduced yesterday, $XX under has stock, our of which of X%. repurchased just million total

similar quarters Looking ahead, cadence. program this at to continuing the I see a

National this as given our price call, opportunity to see long-term great a in last cycle. outlook back buy on point low Fuel the positive value view we businesses, said integrated I shares at the and As a for in commodity significant

especially the for gas future for the industry and for excited natural Fuel. I'm closing, National In

for National positioned returns bright and history come, there's trying so, minority toward across The affordable energy gas people execution long makes to sway to globe reliable, of of for these Fuel's in future doing assets strong decades critical to that the is generate is future that gas, us is While the outstanding and majority operational our a energy vast of policymakers to prosperity. source attractive natural group natural supplies shareholders. vocal recognize the without economic and critical well a our of provide

turn Tim our discuss more to for preliminary results to the call fiscal quarter and that, the for the over provide guidance I'll XXXX. With details on

Timothy Silverstein

Thanks, Dave, everyone. morning, good and

for prices quarter, past Seneca National months release, $XX loss a loss natural that over a the million $X.XX ceiling As to share. XX you in saw in charge of of Fuel or caused $X.XX amounted to per the per GAAP cost decline last gas third reported full impairment noncash share. night's a record The test

this as share. were impairment items well $X.XX couple results impacting the as operating Excluding a per comparability, for of smaller adjusted quarter other

rate last first positive to segment, modernization were regulated from where along to growth impact case, of we third XXXX In Corp we Pennsylvania hedge quarter this impact which ratemaking combined & continued system down in In of Growth regulated increase the to with the Supply margin related we related year's our our book, expected our in in our continue New increase which activity. was saw natural our quarter. recent MMBtu all rate nearly revenues compared Storage strong prices, York. gas the approximately lower settlement, revenues is an with In see the by X million. from $X.XX the utility, segments, benefit to approximately per segments Pipeline $XX annual mitigated saw full trackers the our to our

to pricing nonregulated our segments, a limited overall our was impact. approach gas while hedging the In headwind, natural methodical

hedge $XX quarter, offset gain million and lower which NYMEX Our delivered pricing. a more than during in-basin book the

reaches discussed spot curtail as we've improve. it the prudent view prices until past, in-basin we certain As threshold, pricing a to in our gas when

is year, curtailed pricing. also our the this, to to due production Bcf was Seneca's Despite a nearly ongoing last production During growth transition an of in development continue results X our XX area, initial outpacing of and to eastern where the [indiscernible] development integrated gathering to of expectations. which quarter, our was specifically the Bcf we This program compared to increase revenues. X% segment strength to contributed testament of see strong

Justin activities the will E&P have and our on more to call. later Gathering say in

curtailments, X the reflected XXXX projection guidance which guidance quarter to third earnings of other end guidance. be per in for Bcf. impact the third price-related the top of production $X.XX We our to incorporates year. our Turning share. of $X We've our our of modest revisions Which the by and quarter to range results reduced balance fiscal the the to updated

a As does any not include our guidance reminder, pricing future curtailments.

low continue, prices So we natural additional voluntarily to gas extent may volumes. the curtail

That we also being have Prices our to volatile X price of market. Bcf our only said, late. remaining We've production per updated MMBtu. have spot to exposed assumption been the $X.XX of NYMEX as

changes fourth quarter, approximately $X.XX share. extent the So earnings per $X.XX our by to NYMEX for would by the change

we such recorded comparability, any impairment third ceiling as items excludes test in guidance Our the the impacting quarter.

ceiling of assumption reminder, price gas utilizes reserves. a our assess value test a cost the natural historical the average future As full to XX-month

potential leading XX-month Given expect the the this current trailing near-term pricing for impairments. decrease, outlook, additional we price to to

is test looking, the $X While outlook the higher. in pricing ceiling prices forward nearly backwards is the used for

So the excess value the carrying on reserves expected our is today. of financial economic well value of in our statements

the consecutive On now million quarter the made of $XXX the side, tweaks. for spending modest of year. and notably, end the few a $XXX capital to million range we've Seneca's reduced are for second Most projecting we've top

in initiated At the fiscal expected ahead, fiscal where XX% midpoint, per share. preliminary this the XXXX. earnings is are for $X.XX XXXX, of Looking a to guidance we've range increase to $X.XX from be

the highlights. Hitting a of few on

see a year little which In go Pipeline million in a we see segment, Storage the our regulated had revenue February. additional growth growth rates second more to case will Supply drive into to First, of in revenues our than will of year-over-year. year $XX Corp businesses. expect This related rate & we impact significant in our full effect straight

New Other from York, rate does settlement to that At our FERC case the given in additional include confidence this ability rate in supply than guidance in impacts. a case fiscal settlement reach guidance. our reflected corp we've any not the year, our our utility, 'XX

until effective recover While been if the be X out extended make-whole a effectively new rates will have standard common implemented of requested is the X provision that This statement This X. allow in February we our second these approval of us the to PSC XXXX. York, between has rates York formal for and October any been to suspension to settlement. year, within company majority impact the lost this the approved, October has would out period rate financial New rate and of fiscal the any the of see New push of But annual the to quarter. increases hit rate case expect date could increase

the are a extent New the While of details we'd settlement be York will to confidential, agreement at point we reach updated with with the an guidance joint provide the necessary. PSC which proposal parties expect filed involved, discussions if to

nonregulated to Switching businesses. our

we 'XX forecast to We expect $X.XX an year, X% increase of higher, is Bcf, To XXX modestly given for in NYMEX lower, extent line MMBtu are $X.XX. prices per that increase $X.XX will be to to approximately assumption remain midpoint. to book. $X.XX. average the share. the $X.XX will approximately production to our the earnings within hedge per increase and expected an earnings expect benefit costs Appalachian XXXX. extent fiscal at lower the this average XXX spot by reduced with the the would are by fiscal Underpinning prices [indiscernible] are of expected Unit is the range generally of would To $X.XX Which prices

fiscal Turning XXXX capital. to

at of expect X% at million. this in further capital midpoint. the largely $XX spending, Driving decrease expenditures modestly to range expected $XXX with reduction higher Offsetting be Seneca's million $XXX this to which We line in regulated is in is in or a nonregulated is the capital fiscal consolidated subsidiaries. XXXX. in the a million particular,

any the utility, York. is through capital New of the This consistent in proposed settlement. is increased rate case the In and recoverable levels expected in our are bulk to the spending potential with be

regulated to program In is of reliability and reduce similar growth the driven state base Pipeline These being to earnings. contribute regulations safety which federal emissions in at requirements the maintain expected X%, the which system of X% modernization and long-term of & rate Storage of implemented number meet the by ongoing segment, the the of need increase level in is level. investments, growth and growing our our and to largely support to long-term expected a

in together, shape. is it our Bringing all sheet great balance

the buyback cash in program dividend offset near such metrics fiscal should combination flow add of free remain incremental to credit XXXX, by expect EBITDA, modestly leverage exceed be and of our from the to the to current that through our is expected we operations are While and growth funds expected levels. end

XX% Specifically, relative around year. leaving X.XXx the downgrade we focused expect below FFO opportunistically cushion to as be debt flexibility financial our next to for through fiscal and shareholders. us remain thresholds, lot significant of gives end to to on debt EBITDA us of we value creating a This

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

Justin Loweth

the we in for increased development in of hit across as 'XX in for transition Thanks, solid the for Tim, program capital have delivered and are efficiency everyone. high an on All strong pads guidance to guidance assumptions. operations, first the our reduce to productivity Tim row. Starting Seneca fiscal expectations. with quarter trends, second turned quarter good the the quarter and results our continues updated seeing exceed its points year half and Seneca capital and production. morning, allowing NFG focused EDA a the demonstrated Midstream line our to Seneca

to So the operational I'll a discuss underlying cadence. production and plan minute take

a Our operations With few next the expected plan line only remains before be year. fiscal to turned in unchanged. wells

in a As expect such, production decline quarter. this year's modest fourth we in

ramp the stronger line to the end Overall, As expect first fiscal and spring of modestly we of arrives, over to than look the increase 'XX, out wells production and pricing to months turn of as LNG to we we winter 'XX exports during up. take by fiscal advantage plan winter for in expected year decline year. the half XX the

gas setting believe are headwinds. pricing. natural a We fundamentals price for to near-term up longer-term environment favorable Turning despite

of layered gas next persistently during continue firm we over in Likely hedges resilient fall. the into we production pricing balance expect strong years, the to prices. methodically protection upside combination will provides and our sales and downside few have Over natural period, which In inventory order quarters, participation. this financial risk that levels both past of price high several limit the and a the physical constrain to

a of downside fiscal the to of have the XX% and of production covering per weighted average of forward For a pricing price remainder year. With price of are well we $X.XX current remainder costless the 'XX, protection for sales. swaps, floor MMBtu, combination more expected the collars our through fixed relative than prices firm we positioned

and Looking is ahead forecasted to fiscal limiting firm 'XX, exposure. almost XX% of sales, pricing production protected by firm transportation in-basin

expected demand around fixed bit year of of more by uncertainty This more timing hedge XX% is position pricing, a roughly Additionally, the weighted swap or to we first production of 'XX is some where to collar see of the a sale. heavily the half the given firm exact protected LNG risk fiscal price growth.

materializes expected of Our balancing prices the demand upside approach goal months. as with allowing growth XX participation to XX consistent, remained downside while the depressed, in remain if portfolio has protection next

the curve, into price to a position are floor we hedge after next realizations see increasing sitting great With above going in year. the average comfortably forward price

capital. to Moving

team's Our to second a in drive consecutive efficiencies prior of costs to fiscal is decrease excess testament ability and capital 'XX increase our down in our estimates.

fiscal 'XX. 'XX strong million reduction At $XX Seneca's and this plan. The we million versus capital when development a to transition of an fiscal guidance midpoint, million Given focused versus we EDA range began momentum, of million. reduction the initiating $XXX $XX 'XX $XXX a to our fiscal are year

and Counties. capturing by periodic our between are fiscal we development top activity dedicated assets operational maintaining and year. throughout X- Lycoming fleet flexibility. in return nonregulated our the hole our efficiencies Tioga and focus completion includes and capital activity Drilling highest businesses, operating Across primarily focused 'XX increased Seneca's on prioritize will on plan rig X-rigs, continuing frac development while to

Midstream, NFG team our well. is extremely At executing

which the prolific in to all markets, come. connectivity years support attractive to while continue investments for deliverability development long-term help of highly We interstate acreage greater facilities to make of additional many Seneca's centralized adding and will

driven gathering few in growth quarter, this construction During development fiscal systems voluntary remainder of at flat QX, development 'XX to the expected NFG Seneca. throughput EDA Project previous region. marketing the activity supporting third Seneca's on will remain years, largely on the Midstream's for significant for compared next by focused year's and and future relatively remained and curtailments production

XX% of NFG County. day of capable million Tioga Midstream's to dehydration is Tioga, 'XX remain of Midstream's with will capital projects in fiscal station [ in Northwest 'XX capital fiscal with XXX million range commissioned equipment million, at with expected be ] NFG production. a an invested handling in In Keeneyville approximately compressor month, estimated this line $XX $XXX to of of the

The early next expected facilities to first year. is utilized pad turn in these in line

we Tioga flow XX on plan 'XX, to more will to fiscal Tract production also and gas Gathering of preferential to over allow connect which into than flowing future markets. $XXX development XXX million locations production this During robust our system,

As out Tioga we to will area. of future, provide project Pathway further deliverability Fuel this look Supplies National the

opportunities third-party placed in In addition, to fiscal interconnect expect throughput year. a NFG Midstream for and Last month, third-party to increase continues create early we new service business. next

all near-term well execute we capitalizing development to to gas on EDA plan strip. continue and increases our natural in price expected are volatility, it the Putting weather positioned while focused together,

curve Moreover, our allows and base to on fiscal in sustainability years model success focus 'XX and and the come. excellence to operational our best-in-class asset alongside in integrated at considerable Our sets seamless cost of our us while for leadership execution low co-development us of and culture operate strong the of end safety ensuring the up assets.

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

Operator

[Operator Instructions].

with Parham Zach from Our first JPMorgan. comes question

Zachary Parham

deflation. you. E&Ps also efficiency efficiency is foot NFG seeing deflation? about give from first, an field about lot hearing cost what cost per And in both where Justin, leading-edge you gains the gains and talk are? on guess and of some your update I about modest heard on us maybe Can We've a D&C one for

Justin Loweth

Sure, related that. thanks to part the of good Zach. One, we've for our really chunk focused of Yes, is been couple development that to efficiencies operational things on question. of our EDA plan. attribute I A a move an gaining

on has in particular. Our team been operations laser-focused planning

every the of into I'm of we're need, costs. planning we how infrastructure lot your a which optimizing that to do really our order to, amount it, pads we ways lower the and development. And of our going like so the to leads detail -- importantly, and elements future then go we So operations the last about finding in getting

As well as really good completions. drilling execution in our of of all terms and

decreases. have costs. some balance, service being XX had expected, decrease on of We that whole related something be I'd that tailwinds the benefit, it be to We say, a see we'd our not in net-net months forward. significant over last, don't I'd see would some to say X but would lot going a

So actually and of the both this as development we've a the of how well our been has Tioga lot been moving accomplish managing particularly what able as with planning forward in our County. development execution to about around we're

Zachary Parham

those cost where color kind now? D&C any on are and And of

Justin Loweth

Yes, Sure. happy to.

So I was just getting there.

the In like of $X,XXX there And are where of majority foot, a of focused. wells $X,XXX activity lower, terms our upon exact are costs maybe that's around more vicinity a the foot, the around Tioga be will Utica D&C, lateral the length. depending in Marcellus

relevant downward both moving forward. we trends be of And on those continued see areas. the those as X most So we will go

Zachary Parham

a versus well the productivity ask lateral mentioned wanted down to basis I just you years. look the it at productivity, well my your I foot like XXXX in on prior look on data, does took in if step which modest prepared adjusted And remarks, state your on follow-up,

EDA. are the also state your to in to productivity data Some the extent perfect some on broader there you well But productivity impacting would but you going curtailments trend that's in can know the probably data. give of and forward? just how expect thoughts some and the I isn't us WDA,

Justin Loweth

Sure.

comment exactly there right. is So I your think

there to Within nuances some be can the data, look state at.

the Utica, the I I've mean, If had in activity other line would we've we our also majority you -- areas are and all looking and Tioga, Marcellus expect. good. excess very in Lycoming those in Tioga to would on really right we're focus in wells, said, going be where, -- be, Marcellus is instances, of as vast which of on some They're what

looking you're all see And But think we seeing time, trends pursue in some you'll what really to see out, us. versus you'll can what those at seeing is and in I the exactly impact come which out you're investor to, seeing the wells quarters just our time. voluntary frankly, over nuances I really we have moving related additional the continue pressure we're obviously data pricing deck. in we to of think probably drop the terms of as data of laid are months as good curtailments

Operator

[Operator Instructions].

with from Sachs. Greta Drefke Our next question comes Goldman

Margaret Drefke

the so see environment? Given set thoughts if wondering you the provide your of for M&A I views way seen you on broader opportunity updated far, your could was on landscape, consolidation the we've the macro NFG? And

David Bauer

Sure. that interested is very interested way it. in a to grow certainly much we're in interesting do for us Well, and the be company to would continuing M&A

at acquisitions think balance think the that look calls, call last said kind a consolidating priority at, assets I've the continue as bolt-on -- said I a the previous looking system. our to the to our to regulated where we we year out doing on were to ones in But be near E&P on of acreage position. would it, smaller that, we do our having term did similar adding side, I regulated company,

that optimistic us. of deals along I'm interest come that will be So will to

Margaret Drefke

And on XXXX is, and next your your your bit the Got Can the it. a broadly on to speak how position on views updated through And landscape more natural gas impacted your you has longer have question XXXX. hedging hedging term? thoughts outlook been hedging any my in framework? you've added

David Bauer

going to things can much, production. natural gas We've very but near Weather it to I obviously just challenging. really as recover things online But the macro, year seem it be be next be we're supply prices think, doesn't exactly are on when pretty that beyond, mean I term, move up. in broadly driving lined Yes. of high isn't kind higher to of comes LNG to to timing the demand, got going storages, we online. But into and are that to probably new be the the confident going relative obviously, longer as variable. term, comes

So could volatility. some there be

being area. So of XX% that book we feel good kind about our hedge

out, you price positions add our continue the advantage time, to will, cause increase. we curve, in taking point As which of realizations to net contango over

Operator

with next question John Partners. Daniel Our comes Energy from Daniel

John Daniel

having at when Seneca differing you frame the on be -- in to see it? to Justin, there demand I just demand do your be. activity see do you big the you. Or demand? XXXX D&C beyond for not Any do different There how But meet you time But the on out I'm estimates, natural opportunities. are what this regarding think for will looking ramp specific and question the thoughts? estimates got higher a overall, picture point potential meet AI to call LNG demand and look estimates for you what will activity gas. the that view to

Justin Loweth

talk Sure, John. Happy that. to about

So at this. we've looked

We and building look gas. a have on more really stance investment-grade we looking active sustainable, counterparty that kind approximate. great deep relies of on plant it natural to getting is long other characterize downstream would these be hyperscalers at have that, dialogue assess what demand it a I could better to credit. inventory. and We're an a try affordable I with could our for and the We're a anyone interested guess of on company's reliable, like, parties way view in where then both also this opportunities talking exactly number

centers. got net-net capacity the to be in markets to that. going dialogues. active very demand We're be that to ] connects that we've So also should those ability got [ do increasing We've

positioned. to early be continue So it. say favorably also But evaluating I it's think just I'd the company We'll is days.

flexibility I 'XX, that, are and and there. is maybe think point, to our about something evolving is on 'XX your depth take advantage. and it's But by going resource really operations standing to out an be of this story team

John Daniel

a comments Seneca flattish E&P speak calling -- yourself. essentially forth. push you of and would wondering just a industry year, the they for of up just 'XX as activity the simplistically, terms right next at because because And it down now, when not in I'm will, and industry But so of challenge don't thought. ready maybe in -- gains But the activity. to a we're for for is the efficiency to you Okay. That's lot is seem if all. look right, accelerator, setting and [indiscernible] if from It's

Justin Loweth

Sure. speculate Yes. others integrated our and much. pipes But fact of really certainly, as It's too and within have we're me have benefited hard accelerate, we well. for the to business -- having to model FERC we the by on an capacity ample business, in with midstream

can it, about kind really So and I earlier. I'm but not good respond others exactly feel of our sure how mentioned depth resource to I the other of factors

Operator

over closing back questions Fischer will turn call any remarks. to Natalie now further I for the at no time. are There this

Natalie Fischer

out for our thank telephone Thursday, Thank of this run through both you us we today. on time day. you, to replay with website Thank you, taking by questions. if business to Brianna. reach this We'd afternoon any follow-up like speaking Otherwise, call be next to everyone feel to be have will the and available close August the and Please X. will have with forward look again free and of quarter. a on nice you A

Operator

participation. you call. will today's your This conclude for conference Thank

disconnect. now may You

National Fuel Gas (NFG) 1 Aug 242024 Q3 Earnings call transcript