Workflow
National Fuel Gas pany(NFG) - 2023 Q1 - Earnings Call Transcript
NFGNational Fuel Gas pany(NFG)2023-02-03 19:29
Filings
Slide

Financial Data and Key Metrics Changes - The company reported adjusted operating results of 1.84pershare,a241.84 per share, a 24% increase compared to the previous year [17][59] - EBITDA increased by 29% due to an 11% rise in production in Appalachia and a 0.50 per Mcf improvement in natural gas price realizations [60] - Full-year earnings guidance was lowered to a range of 5.35to5.35 to 5.75 per share, primarily due to a drop in natural gas prices [20] Business Line Data and Key Metrics Changes - Seneca's production increased by 11%, contributing to a 6% increase in gathering EBITDA [60][85] - The Utility business saw an increase in underlying customer margin by about 6million,drivenbyinfrastructuremodernizationandincreasedusageduetocolderweather[64]MarketDataandKeyMetricsChanges−ThecompanyexpectsNYMEXpricingtoaverage6 million, driven by infrastructure modernization and increased usage due to colder weather [64] Market Data and Key Metrics Changes - The company expects NYMEX pricing to average 3.25 per MMBtu for the last three quarters of the year, a significant decrease from previous estimates [20][66] - The Appalachian basis differentials are expected to average 1perMMBtufortheremainderoftheyear,showingmodestimprovement[20]CompanyStrategyandDevelopmentDirection−Thecompanyremainscommittedtoadisciplinedhedgingstrategytoprotectearningsandcashflowsfromcommoditypricevolatility[67]−Long−termgrowthisanticipatedduetonewLNGexportfacilitiescomingonlineandatransitionfromcoaltogasgeneration[65][68]−Thecompanyisfocusedonbalancingcapitalefficiency,growth,andfreecashflowgeneration[51]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedoptimismaboutlong−termnaturalgaspricing,particularlyinfiscal′25andbeyond[12]−ThecompanyhighlightedthechallengesposedbyNewYork′sClimateActionCouncil′sscopingplan,whichcouldleadtoincreasedelectricitydemandwithoutguaranteedreliability[72][77]−Managementemphasizedtheimportanceofresilientinfrastructure,especiallyinlightofrecentextremeweatherevents[70][71]OtherImportantInformation−Thecompanyhashedgesinplacefornearly701 per MMBtu for the remainder of the year, showing modest improvement [20] Company Strategy and Development Direction - The company remains committed to a disciplined hedging strategy to protect earnings and cash flows from commodity price volatility [67] - Long-term growth is anticipated due to new LNG export facilities coming online and a transition from coal to gas generation [65][68] - The company is focused on balancing capital efficiency, growth, and free cash flow generation [51] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about long-term natural gas pricing, particularly in fiscal '25 and beyond [12] - The company highlighted the challenges posed by New York's Climate Action Council's scoping plan, which could lead to increased electricity demand without guaranteed reliability [72][77] - Management emphasized the importance of resilient infrastructure, especially in light of recent extreme weather events [70][71] Other Important Information - The company has hedges in place for nearly 70% of expected remaining fiscal '23 natural gas production, with only about 10% exposed to in-basin pricing [4][21] - Capital spending guidance remains unchanged at 830 million to $940 million for the full year [22][65] Q&A Session Summary Question: Potential deal opportunities and funding - Management indicated that any potential deal would ideally be of a size manageable within the balance sheet or with modest equity involvement [30][31] Question: Future cash taxes - Cash taxes are expected to increase to the lower teens based on current strip pricing for 2024 and 2025 [33] Question: CapEx and inflation environment - Service costs have likely peaked, and the company feels insulated from further inflation due to locked-in contracts [36][37] Question: Bolt-on opportunities for Seneca - The company remains interested in opportunities that fit well with existing acreage and has not seen many new opportunities due to market volatility [38][39] Question: Engagement with regulators on decarbonization - Management is actively participating in discussions with regulators regarding the future of the gas business and has made constructive filings [44]