National Fuel Gas (NFG) 4 Nov 222022 Q4 Earnings call transcript

Hello, all, and welcome. My name is Rita, and I will be your conference operator for today. At this time, I would like to welcome everyone to the Q4 2022 National Fuel Gas Company Earnings Conference Call. All lines have been placed on mute today to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator of Director Investor Haspett, Relations. Brandon

begin may your conference. You

the and on morning. prepared you website. for and to National of posted Gas teleconference today’s joining Thank With of to we presentation discussion Midstream. will quarter you, materials Executive on Company discussion forward-looking end Officer; appreciate Karen good Fuel and us release. contain President earnings Investor Resources We call Seneca will At Rita, been the are remarks, us Dave questions. these like to National and remind Financial fiscal during open the We you today’s President Camiolo, Relations last and have refer Treasurer our statements. on evening’s Justin call Principal Bauer, Loweth, XXXX the from of November today’s that fourth may Chief Fuel would The a Officer; call. earnings release investor conference We and

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

ended XXXX a right a last with share, fiscal Fuel over great Adjusted National $X.XX everyone. with line in were year. morning, our operating increase quarter. Good results Brandon. expectations Thanks, XX% per fourth at

under made XXX our successes, part project initiatives. more of also assets Strategically, multiple year utilities market. California progress our of X% at fiscal selling company, net Fuel. XXXX we on tightened miles And we National program. top we the the significant the sustainability focus on of of budget, including as had than production Seneca’s the modernization pipe back, the replacing another by completing exceptional FMXXX and growing for Looking was time and Operationally,

company future. great well of these for the accomplishments the position All extremely

immune While the challenges outlook for the facing the aren’t economy. business broader strong, to the we is

During segments continuing tight a discussed fourth and extremely an in the will a came quarter have XXXX. market expected. our we business across capital last Seneca’s little higher year, inflationary impacted quarter, likely pressures impact us we in as labor than in

of some largest with years, timing associated to season. was the costs that of was heating winter While spot is ahead crew frac this pads between two the fiscal increased completing Tioga factor County, the in related

more Program this the several mitigate inflationary will Justin We have say steps and Upstream have to to later future on Capital taken on in pressures our call.

Regarding practices current compensation challenge the more most we and companies, to attract line to with the a have market. bring adjusted other In labor retain like key market, them response talent. in it’s these conditions, to our

in first asking last commencing page In end, we increase our our increase updated program of of the result, inflationary have of summary million number XX that As its of August filing since Pennsylvania To deck. cases the case divisions we rate with coming on week, particularly rate a both a A X, included modernization division utility of years. expense, short, expected to in our challenges, slide is filed Regulated seen annual $XX are employees. These rate our XXXX. for businesses, O&M in in XXXX. have our increased where we base an utility lead from largest the rate to are along the

the system used Pennsylvania. a clause by DSIC York, us The mechanism to mechanism DSIC, the looking proceeding allow utilities implement rate lowest Like The weather distribution charge that We modernization state cost fashion. few a a tariff. or still the the real-time recover our more is would in rates a improvement We are delivery in a have of DSIC delivery is mechanism tracking in our and straightforward. by out Pennsylvania normalization long-standing also tracking in should to New will system modernization over increase, state. margin million our full in play the already will relatively be quarters, rates wide the lowest be next the even a in after $XX the it program modernization commonly and

year-over-year. We per though, our in the need assumptions. Supply rates Despite fiscal XXXX they in share can our that next settlement drop to which the range $X.XX of rates, in also rate the all earlier Under of outlook and in come revised cases Switching guidance almost required price an respectively, XXXX, in reduction, this new by Regulated At for the midpoint driven gas $X.XX to Empire curve file their both led our they a years. has the recent terms earnings and the revise Pipeline for $X.XX if natural new over reduction, is are expect governing our of our subsidiaries XXXX, FERC forward midpoint, to represents is a natural to. share. than increase to to agreements both the gas few share XX% expected per per us $X.XX the

program large portion of mitigated a the hedging drop pricing. longstanding in Our expected

policy. reduction Our fiscal hedged, XXXX in right which line two-thirds roughly with stated is is our

the us and lot As current allowing debt XX% in a a year. policy of our reminder, our hedge production of latitude to fiscal XX% gives between us

around the have greater our trended and few pricing investment outlook in range to we past was hedges, at credit support was did place time of cash closer the result that this the grade to Over the the flows to end as the natural high that rating. as well gas we help have the years, certainty of desire

believe important to and will protection be is expect still with an provide Looking I downside tool Seneca continue program. hedging forward, to we its active

in within trend improved range. the possible lower beyond fiscal it’s bit with However, percentages gas, policy XXXX outlook for and very will our a our hedge natural

if the prices In in addition, we more us been costless increase. using upside have commodity focused allow to on which participate collars,

on earnings expect in funds spending now the earnings our capital more the from unchanged. our forecast, revised exceed and will we million cash for our operations $XXX Karen will Considering spending expectations by the flow later details side On of call. capital guidance, XXXX. have is fiscal outlook

significant grid that world, nearly emissions-free solutions see sacrificing beyond generation. approach, four and outlook we challenges balance to the puts technologies can have customers of money see have capital what business they the in alone cold made solar significant truly be simultaneously all shareholders flow no a our to one the position when pursue and we aspirations our of resources. lines Looking a like free of policymakers further across today facing cash sustained by faith lead complete in sheet, the that a dividend intermittent climates should and of XXXX, return us without appreciation opportunities. behalf exist deleverage additional strengthened electric remarkable. investments generation This to Europe continues of National massive our is and impacting can period of to growth on we longstanding gas growing to Nevertheless, The continue where future without growth and is amounts through the enviable to reliability sacrificing other see natural needs it’s former energy been wind costs will size the look to We at gap the be continue the reliability. unmatched its payrolls customers California reliability. At central existing obvious are heating an gas developed reality triple any all have believe energy delivery of system, winter affordability the our and and is a meet a resilient narrative in to of security without will we and including of and importance in more fully more in the elsewhere, know a electric for all scale. affordability approach important, by needs dispatchable for gas fully component natural York of that between gas. need above infrastructure, to National natural Fuel going when energy today. pushing never energy in Buffalo, resilience time They to New policy. reasonable affordability, only advocate and can leverage our on saving natural such One and Fuel’s

our Lastly, substantial social had And Responsibility environmental, Corporate we few we before that In Annual see closing, ESG. published efforts. you a which our words highlights September, governance and report, on third year towards our ESG made we with initiatives. gas methane XXXX certifications. our of the great I have as reduction another progress am well targets, particularly responsibly intensity proud sourced Seneca’s as

I are about of was what addition, job the at National a the Fuel makes did a fiscal a culture. that on our conclusion, great In In we focused National doubt, to adhering guiding safety and our future. excited Fuel are core team successful. XXXX for the am great principles Without year advancing system-wide,

of one of with of in and significant strong generate world and the the and to a balance flow is that, National over call investment our to basins outlook in as Fuel our been. intensity sheet grade this assets free are as it’s will great in for strength businesses Justin. and I ever footprint significant combine across I We position durable cash the firmly lowest turn believe emission the With the our

fourth the trend with development everyone. Thanks, our up performance, fiscal wrapped strong Appalachian quarter program. continuing Dave, and across morning, of NFG of execution good and and year the Midstream operational Seneca financial our solid

also be by XXX markets of integrated EBITDA net the reserve XX%. our a our replaced our our by driven premium X.X peers. unique of proved with record valuable X%, businesses reaching proved We to expansive now XXX% strong a our approximately quality Bcfe Non-Regulated fiscal had position, portfolio, proved Gathering connectivity base XX% our adjusted we we total reserve developing highest From to production of Despite year, while Appalachian increased for our the infrastructure increased acreage great production Tcfe a reserves, of For and sit XXXX through the reserves, Bcfe, which to to one continues XXX gas developed, the by acreage. deliver increased performance of approach by perspective, marketing ability This and high Bcfe. are XXX among year. our sale

XXXX the in Appalachian acquired sale gas pure-play Tioga a and to operations, exceeding Utica our brought closed Seneca. expectations, significant from on a for year on County, natural Looking California pads was back, transitioning producer. multiple our we We of Marcellus and both fiscal results the our with online acreage

Origin validating and made in and also Canary, natural sustainability our We culture Project excellence. further MiQ, our and stewardship independently operational under Equitable initiatives, of our gas strides environmental certifying production including major

volumes also a County fantastic heels registering commencing throughput, production of Gathering strong Seneca’s our Tioga centralized the the had third-party and build-out come. in growing will On that record of significantly serve our results, business years to facilities in system growing on our year, the

on with Looking execution forward, plans. our no later we focused remain change to

accelerate to drilling wells production with prices are our the of mid-to-high years. is production to these months. program flat quarter, to this the XXXX. and these first will WDA the anticipated the two-rig we expect few deliver with higher expected single-digit over the other natural next expected in during Tioga continue which timing our QX expect County. new quarter winter wells In online Based be XX take of gas We in coming near-term, growth of during XX the of on are seven the production to the pads, fiscal advantage

as end spring or However, fiscal summer should new flattening throughout end QX, year. the our of into modestly winter, the steadily there, of and production the production From come to out will pads continue online. increase declining towards ramp the early before these

spending we steps are unchanged possible, our of fiscal that pressures XXXX $XXX to range plans maintaining operational guidance million. taken inflationary million we and $XXX have are to Given capital where largely our mitigate of

our this fiscal reminder, in experienced an of slightly a guidance in inflation XXXX. At to and XXXX XX% year-over-year. the range, we be increase of we incorporates fiscal XXXX impact the expected would additional CapEx expect As midpoint the XX% fiscal down

capital alluded to related month. at over million, this expected remainder cost portion later related earlier, and to from we online guidance. bit capital plan the on to As came pulling fiscal With XXXX bring XXXX completion pad, than forward $XXX Dave a a Tioga higher a in fiscal to County

long-term over continues on full As a spot a this XXXX, contract. and be second for pad spot time pad utilizing new the of we in QX a fiscal had electric near-term. activity crew fleet under But by frac result, solely frac place will we a our

a marketing expect contracting with transport trajectory. environment. dedicated our crew our add to our to Switching that And allow prices. and growth diesel to to volatile and elevated supplement electric support continue a to a exposure saw look equipment move for service us and to utilizing ways that meaningfully we reduce and crew cost portfolio will we avoid sales reach or will our of portfolio, frac We periodically tight challenges firm spot to markets premium for firm our

about capacity. Ontario, both TransCanada direct dekatherms expected incremental existing our our of quarter, Tioga is new long-term secured on Hub path is Pipeline providing capacity markets, to Dawn will fourth for to Pipeline, XX,XXX trades complement Canada. which and premium, a production. This Empire to capacity Dawn value Having in the highly at During liquid successfully markets significant we a provide access

end, To We A also remain achieved MiQ sustainability for focused our our certification Seneca and in the standard grade, on an that certification methane for safety accelerating highest under initiatives. gas production natural emission performance. the August, XXX% of available

also our significant and reduce operations. to projects made lower we on side, intensity Gathering of overall progress the methane emissions On the

our by by expect NFG our existing system, are goals. completed in are year. of alongside Station, The an Midstream, at to we the calendar the intensity be current to Clermont we end The emissions-related which improvements gas-driven convert reduction step important efforts example, For West Compressor this our pneumatics largest working and reaching long-term of will owned the methane station, operated

We great performance reporting a our to also straight and with contractor adherence high of alignment year Midstream, and in year injuries our had at and maintaining safety zero standards. oversight Seneca on also improving a while DART second ensure safety,

finding areas activity safety culture significant Gathering ways teams, our in to together and our contractors business results. and the entire outstanding Given as an differentiated operations of validates our our of from increased well thank our first. continuously in drive want in inventory. efforts value clearly is I levels our accomplishment Upstream this certain as workers, new these Seneca optimize hand and their glove, development tireless and In influx Midstream for to working are achieving and plan conclusion, an

our continued enhance see across model margins we integrated investment to forward, Looking returns. and opportunities

Our to and extremely integrated focused safety over XXXX and Karen. will model well in turn us call culture fiscal With sustainably position that, I paired with the beyond. our

earnings morning, $X.XX in strong here. them prior items our a at so note, Justin, everyone. I with release, to Thanks, out coming its described that closed and are Fuel Several per cover results share. good won’t night’s comparability GAAP National on year fiscal in year impacted last

Higher in adjusted these along higher all offset XX%. were FMXXX pipeline and an of our increase Regulated drivers results per project costs of operating for natural quarter share, impact quarter. This our increase Gathering prices, production throughput, with $X.XX Excluding its were during key items, Seneca’s gas by benefits businesses. on in the partially corresponding the the the was

prior As compensation, was pressure tight went increases in salaried for that collectively earlier wage impacts Dave saw has mentioned, both labor market combined expense. the of year. the We increases O&M up to driven in employees on employee upward expense O&M bargained the which our effect and is XX%. Compared into year, the putting

a performance a of supervisory short-term is for accrued our we across tied strong Additionally, number expense an metrics. to corporate incentive to related the workforce year program that for

performing or was in Storage up really were our results While largely and year-over-year, FMXXX attributable XX% businesses increase to is segment Pipeline rising while operating million high revenues of Pipeline over short-term push of us topline headwinds, $XX guidance over Utility which inflationary some project our helped year. well. X% along the Regulated The costs our our revenues broader was the in good business, with end are in up the our range. alongside last margin

uplift our optimize has facilities the found through to to Our short-term ways to commercial during revenues contracts leading team some maximize quarter.

contracts to value the our modest, continue Pipeline While these of highlight infrastructure.

we to at to decrease share $X.XX prices. natural lower per our forward guidance a is midpoint. NYMEX share the almost reduced entirely of $X.XX per to year, next gas due or to Turning earnings $X.XX range have $X.XX This

from $X $X the gas the summer. assumptions in price $X.XX $X.XX to winter and summer in natural winter We have this in reduced the and our

As we natural every prices mentioned gas last in impacts quarter, $X.XX $X.XX. earnings NYMEX change approximately by

our income step be details. recent us Due falls remained Utility position still pension significantly sensitivity customers voluntary benefit Brandon minor to forward. which to flows going our on non-service from hedge and operating made income that revenue on assumptions relates does to reach cash than funded our allows investor few any unchanged are be this New was impact in found we that note plans. our our reduced but to the million constant, walk reduce a offsetting fund filing out EBITDA a to with our other can This in de-risked, other no finer our below EBITDA to recovering or rates becoming holds. largely used of statement. fully a without so in pricing and order plans, presentation. Given financial adjustments, $XX bit costs, is impact through York One relatively release guidance and earnings reduce This by item into to has the heading our earnings to that these utility an will complicated, results. winter a please pension Other

from our our XXXX capital, line cash fiscal an capital overall a spending to cash but have year our the million operations, of our ended Moving flow year. debt remain in From consolidated million $XXX would the sale our was prior the deposits California XXXX in hedging perspective, And was our unchanged. short-term the with $XX for and debt outstanding collateral from proceeds for were fiscal plans spending Between XXXX guidance with to by properties, outstanding. and fiscal no we reduce for great during year. able

in forecast XXXX, operations revised and by our fully natural our to with be longstanding mid-teens $XXX million. and from redeem debt continue expect debt primarily next capital cash a is fiscal is exceed accomplish guidance by we price to maturing spot approximately now of gas rate, million guidance. This lower million March, offset from we $XX and short-term expected by compared to long-term funds the combination our cash to prior which growing the This Looking to dividend as as prior now partly down a assumptions, in spending a we necessary. driven tax digits of to which great to $XXX us the in puts high-single that flow expect our is

to with it while next to for anticipate of now, a from have financial reduction rating position XXXX towards, rating below to said X.X moving like forward. reduce roughly with have the our X in going this is which I with we line be near-term significant would for mid Operator flexibility times agencies As profile questions. further guided our open of where a a financial cash great on BBB debt focus the With the and that, the that balance free trending we ask consistent us forward. us we moving We outlook amount EBITDA end continued debt metrics will With is This leave are flow leverage will generation, our for at year. forward. to fiscal sheet strong times will the

Thank first America. phone John you. question [Operator from Instructions] lines open. we Abbott from the John, of line comes The your is have of Bank

you thank our taking for and questions. morning Good

morning. Good

question you yeah, do is stuff inflation just about think going just My the how -- has given long-term? across and is, just been where businesses your various where first maintenance CapEx for

capital going had Well, ongoing to stick program with. are we an have we that

time. that does to think there what the pressures I it is extent over inflationary

need to the do of it certainly the be timing do think edges influences safe when filing to for I keep a we going we to system reliable. rate we would are But case. just and what at the

for are think do and about maintenance but I of understand you I think thinking maintenance you long-term keep business. saying to about E&P Pipeline sort Gathering it what what CapEx CapEx business, long-term business? and I business, Utility the the on mean was Utility E&P you where segment for that, Yeah. is actually

Yeah.

to go is we John, say, So, now to general view where the are maintenance. I’d down

top completions, to down a continue to You I as and be our by will $XXX to continuously would that and mid-to-high are we of and growing different, unlike rigs, plan production, million million single little rig that grow number are active look utilizing we bit have couple a year. to have because where for come about spoken in hole digits. we per $XX operating would It today

little can of kind year-to-year would flat you at But cause a at we also wouldn’t picture, reduction. have a Midstream, variability about the cadence same mode, that million $XX if to broadly think Moving would completions and you a a little million variability cause big about Seneca. expansions. of to think It $XXX

to it. is follow-up appreciate And have here. I then I question That Karen

fiscal do So, understand, when if the cash do cash fiscal to be tax I so of the high-single just will in change looking you XXXX in the taxes on you now taxes think versus tax expect beyond and based forecast is digits at How Karen, strip guidance? be cash prior. XXXX in mid-teens

Yeah.

a the the taxpayer, at think, I we next when moving full probably into as definitely be will mean, we few would over far XXXX. I and years So, as mid-teens we are looking be

Thank helpful. very taking very is much for questions. our That you

bet. You

Thanks.

line open. Umang you. now Thank of Sachs. is Goldman have We your now Choudhary Umang,

morning change business like Good opportunities that to NFG thank would your I thoughts if and does question, on participate business How I or Hi. sequestration, love additional for example? first other example, lines you the New you for and the to for business that for York in for rules. want scoping long-term plans [inaudible] RNG, for question. on carbon E&P creates get taking -- a

Yeah.

the part say first one that more You you up on little just E&P. Could for please? a broke time,

Sure.

around So does NFG participate it had thoughts then like business your creates for which to rules indicated for to change any that businesses for I it New for grow? before? and scoping additional the opportunities love how in example, your plans like E&P would York if RNG, And you

the year. finalizing Action I the busy plan. the The end the is Council vote Well, on Climate publish will they plan that Yeah. with start at would of and scoping

that it, to take above that ignored hybrid approach than of they hope seemed you going to much was and energy the it’s is reliability, however or they put all initial approach want the It our plan. more pretty Our me forth they what scoping describe a forward. in and that approach, reasonable more hope take policy a costs to reasoned

hope independent the to there. that the it’s what we you just time, think, that the to investments to at at to in towards respect participate are make the plan, in scoping that plan place of E&P I and both, looking alike, have area at or regardless Seneca, when decarbonization, look trends ability and there hydrogen of an we overall teams we happens have that I scoping RNG, that expectation come able With our has my and and over so am of and on point we a sure it’s the much where will RNG, not impact business. are

For going the level big regardless a to what to we operating a RNG so and free it flow fund that side program. going on a near-term, do put be or are cash are two-rig capital and generating we it happens two-rig and to York hydrogen considerable are difficult of talking New two-rig program, the that program about would isn’t of make the that we in

Got Thank you. That’s maybe… great you. color. then And

bet. You

then you do remind … are inventory in there have inventory? area, any can if look opportunities to you development the area much look I which and how would towards to add guess, us at just Eastern you we if that if bolt-on

Yeah.

-- we EDA, and a within the that mean, well I the Counties. of Tioga Lycoming in area decade across over inventory across So have

sitting opportunities great to bolt-on. a do spot. continue to are So We in we evaluate

leverage or the opportunity at ideally the so proximate principles or basically an very our assets either We on side very them see will will acreage, to put Supply continue to adhering be having continuous before, our focusing or which integrated continue contiguous to as and existing is to Gathering we where and out Empire. model, that’s whether do to we we

certainly ones look make the sense. on focus as complete to opportunities and and them those continue come will we We that evaluate those to will up,

That makes you. sense. Thank

Yeah.

We line from ahead the Instructions] are go Lamar ready now Thank you. Trafford. when question next the Please [Operator James. on Trafford Raymond of have you

already you maybe My taking differentials. Yeah. quarter. revised of why a around that widening, topical one XXXX. the Thanks sales the looking basis good been kind or at and pretty have all but kind in, of saw my firm thoughts half second And that’s about recently you basis takeaway chunk this talk for of in XXXX kind all a seen firm revolves is item on half dips It capacity guide the beyond? Can especially your baked and first have what of of you of second question.

Yeah. Sure. to, Happy Trafford.

So, generally, a probably it’s it’s and huge interesting been been say an volatile -- to understatement. market. It’s

to, slide you encourage are to deck. overall at as of of, gives look our XX positioned. level have We a well very you what good time That really visibility I you investor through our firm would will so the takeaway forecasted combination the takeaway and/or Overall call, production of I XX% firm sales our got our sales. have year, capacity. and protection, for we of flowing either transport into firm

right to production of the meet that slide year. exposure to of in-basin on mitigates our prices any throughout our of expected you So significantly growing gates. kind then the sort our XX, can portfolio low is, what And cash out really see developed we have

expect we are today that you firm QX, year, following our where versus see to that sales. the particularly through growth so, quarterly disclosure And into on the we the can

well. think we have so we really And portfolio positioned the

couple kind But participate up of have firm to and that a are We again, of literally true in we we those have seen forward is not relatively sense a us. days forwards. the made very It’s minor a the as it what thought for we seeing kind of to which upside given in so us, and big of markets a for to and with good are that spot our in widen price sales any protection roughly to exposure to think We of our of fixed combine exposure some is two-thirds. downside. and then sort pretty you hedge positioning position, on ago

frac contract a on you XQ, this mentioned that time? the crew versus And you over then long-term the on diesel Seneca, diesel Thank Justin. a a Great. savings in what gallon, more coming at are an rig on one cost with electric $X

significant. very It’s

-- on its net an over So diesel the well annualized difference versus gas over the between well the basis, million. is $XX

and So intangibles some to long-term well. our our perspective, of an cost obviously, some from one meaningfully mitigate pretty to completion as a input move pricing emissions other big the it’s great there and from that fuel the goals around But there’s go sustainability operations. will a from

the guys. for Thanks Great. color good a year on and really congrats

Thanks.

Thank you.

Haspett the further Thank I’d over Brandon like to call any you. for back to turn remarks.

enter Friday, the for Thank the thank concludes call us this you, November on of please the conference conference Rita. We telephone today. To would our run will visit telephone, A like investor.nationalfuelgas.com, good-bye. on Thank with call replay will this and and you by number This both replay today. afternoon everyone taking and to to call website our at available XXth. time our Investor through and website be X-XXX-XXX-XXXX and by for access access online, Relations ID XXXXXX. business

you conclude today’s Thank for That all joining. call. does

may disconnect lines. now your You