Good morning. My name is Chantal and I will be your conference operator today. At this time I would like to welcome everyone to the Q3, 2018 National Fuel Gas Company Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. Ken Webster, Director of Investor Relations. You may begin your conference.

Thank you, Chantal, and good morning. We appreciate you joining us on today’s conference call for a discussion of last evening’s earnings release. With us on the call from National Fuel Gas Company are Ron Tanski, President and Chief Executive Officer; Dave Bauer, Treasurer and Principal Financial Officer; and John McGinnis, President of Seneca Resources. At the end of the prepared remarks, we will open the discussion to questions. The third quarter fiscal 2018 earnings release and August Investor Presentation have been posted on our Investor Relations website. We may refer to these materials during today’s call. We would like to remind you that today’s teleconference will contain forward-looking statements. While National Fuel’s expectations, beliefs and projections are made in good faith, and are believed to have a reasonable basis, actual results may differ materially. These statements speak only as of the date on which they are made and you may refer to last evening’s earnings release for a listing of certain specific risk factors. National Fuel will be participating in the Barclays Energy Conference in September. If you plan on attending, please contact me or the conference planners to schedule a meeting with the management team. With that, I’ll turn it over to Ron Tanski.

Thanks Ken. Good morning everyone. Thanks for joining us today. We had another excellent quarter for earnings and things are setting up nicely for both the remainder of this fiscal year and for our 2019 fiscal year. Across all of our reporting segments, operations are going well, as we continue to focus on the basics and each of our business units. The study nature of our businesses also gives us confidence in our earnings forecast for the next fiscal year. As always we’re looking at ways to tweak certain of our operations to make our already safe system even safer and to grow the businesses where it makes sense. With respect to our growth projects and our interstate pipeline business, we’re in the detailed design phase of our Empire North 205,000 dekatherm per day expansion project and we’re still planning for a fiscal 2020 in service date. Last quarter we announced our FM-100 upgrade project where we are working on a companion basis with a Transco project that is also under development. The combined projects will provide up to 330,000 dekatherm per day of additional transport capacity for Seneca for our WDA production. National Fuel is now fully engaged in the pre-filing process with the FDRC or our FM 100 project. As I mentioned last quarter, this pipeline is targeted for completion in late 2021. In addition to these larger projects, we have a number of smaller projects along our Line N corridor that are in various stages of development or early construction planning. Demand for capacity to move gas out of the Appalachian production area remains strong and on our own system we see most available interruptible capacity regularly picked up by various shippers. The filling up in that capacity helps drive our stronger revenues in the pipeline segment…

Thanks Ron and good morning everyone. Seneca produced 44.6 net Bcfe during the third quarter, an increase of 1.9 Bcfe or 4% versus the prior year’s third quarter. In Pennsylvania we produced 40.5 Bcf for the quarter, an increase of 2.6 Bcf or 7% versus the prior year. Quarter-over-quarter our production was down slightly by 0.9 Bcf. This was driven primarily by timing and that we brought on only a single pad towards the end of the quarter. We did have a modest amount of curtailments during the quarter due to low prices associated with maintenance on the Transco system, where prices have since recovered. We now have 11 Utica wells producing in the WDA, 10 in the CRV area, plus our most recent appraisal well on Boone Mountain approximately 30 miles south of CVR. Our two most recent CRV wells are producing at or above our Utica type curve, and Boone Mountain continues to perform in line with our best WDA Utica well located in Rich Valley. This well has now been online for over 90 days and under normalized basis production has been essentially identical to Rich Valley. So based on the performance to-date, we are now increasing our forecasted EUR per 1,000 foot for Boone Mountain at 2.3 Bcf. Our single EDA rig is now located on our Tioga 007 track for the first time since 2014. We’re currently drilling our second of six Utica wells on the same pad as our producing well. We expect drilling to be completed during the first quarter of fiscal ‘19 with first production scheduled to come online late second quarter or early third quarter. In California we produce 600,000 barrels of oil during the third quarter, a decrease of 68,000 barrels from our third quarter last year and down 62,000…

Thanks John and good morning everyone. The third quarter of fiscal 18 was an excellent quarter for National Fuel with per share earnings up 6% compared to the prior year. Last night’s release does a good job detailing the driver’s relative to last year, so I won’t repeat them here. Our $0.73 per share of earnings was a bit higher than Street estimates for the quarter and there were three main items that contributed to that out performance. First, Seneca’s $0.84 per Mcfe of LOE for the quarter was below the low end of the range of our $0.90 to $1 guidance range. A number of individually small items, all of which were in our favor contributed to this decrease, including lower steam fuel in California and lower utilities and labor expenses in both divisions. We have a few maintenance projects planned that will cause Seneca’s fourth quarter per unit LOE to be in the low $0.90 area, but I feel comfortable lowering our fiscal ‘18 LOE guidance to a range of $0.90 to $0.95 per Mcfe. Looking to fiscal ’19, as low cost east division natural gas production ramps, we expect LOE will continue to decline and forecast a range of $0.85 to $0.90 per Mcfe. Second, at our regulated subsidiaries, O&M expense was several million dollars lower than we had forecast for the quarter. Much of this is related to the timing of spending between the last two quarters of the fiscal year. For example, because winter weather extended well into April, utility restoration work that typically starts in that month was pushed to later in the year. Also, at the pipeline companies certain maintenance projects that had been originally forecast for the third quarter will now take place in the fourth quarter. Even considering these timing issues,…

[Operator Instructions]. Your first question comes from Holly Stewart with Scotia Howard Weil. Your line is open.

Good morning gentlemen.

Good morning.

Maybe just to start off with just a little bit in the weeds, a question for John on the CapEx split between the Marcellus and the Utica in 2019, if you’ve got it? I know you give us a pretty good detail on well count split.

Yeah, I don’t have it broken down by capital expenditures. I can certainly get it. I can walk through how many wells we’ll drill both Utica and Marcellus and completion in each of these areas, but I don’t have it broken down by capital expenditures.

That detail would be great.

Okay. Let’s start in the WDA. For fiscal ‘19 we’ll be drilling 20 Marcellus wells and 22 Utica wells and completing 10 Marcellus wells and 14 Utica wells, so essentially drilling 42 wells completing 24. And then in the EDA our plan currently is to drill 24 wells, completing 21. Most of those will be Marcellus and Lycoming area. We’ll complete six Utica wells in 007 in fiscal ‘19 and then the rest are all Marcellus wells.

That’s great, thank you for that. And then John I didn’t catch, were there any production shut-ins during the quarter?

There were. We had maybe a little under half a Bcf of curtailment. There is some maintenance on the Transco system and so in May was the key – was the main month, but we did have some curtailment over the quarter.

Okay and so you happen to have that year-to-date number at your fingertips.

No, I do not. Ken can get that to you.

Great! And then just maybe one more and you might not want to kind of get this granular into kind of Rich Valley, Boone Mountain well counts. But just thinking about how far south Boone Mountain is, is there any gather – does your gathering system extend that far or would there be any kind of additional needs there from the infrastructure side if you invest more dollars down there. ..?

Yes, definitely. One of the reasons we drilled at Boone is because we could produce it immediately into – what we have some infrastructure there, but it’s very much capacity constrained. As we grow out of Rich Valley south towards Boone Mountain, yes the infrastructural will have to be built.

Okay. Thank you guys.

Your next question comes from the line of Chris Sighinolfi with Jefferies. Your line is open.

Hey, good morning guys.

Good morning Chris.

If I could start in keeping on Seneca for a moment, just curious, I appreciate the update on the EUR expectations in Boone Mountains. Wondering if there were other learnings that you garnered from the appraisal program, either new production or just having a longer period of existing production from the pool of appraisal wells beside the, obviously the EUR matters but just wonder if there’s anything else that you’re learning as you go through that process.

Yeah, nothing the since the last quarter Chris. We are planning on drilling another appraisal well in fiscal ’19, but whether that’s going to be located in Boone Mountain to test a different formation or deeper formation or in a different location has yet to be decided.

Okay. And in terms of the production profile John, for next year, I’m assuming with Atlantic Sunrise coming out in September, you obviously had to step up here in fiscal 4Q. I can imagine in 1Q will be quite strong in terms of a year-on-year growth, and quarter-on-quarter. But just wondering how the rest of year looks in terms of your expectations at this point. Anything you can talk about, from a modeling…

Yeah definitely Lycoming will be – at least in the first quarter will be our largest growth area. We don’t have additional pads coming on until towards the end of the first quarter, yeah end of the first quarter in the WDA. So that will be towards the back half of the first. Early second quarter we’ll see some growth in the WDA, but again that will be pretty late.

Okay, so ramp early and then sustain through the balance of the year, is a decent view of the profile, is that right.

Yeah, our first six months will be fairly flat, except for the – obviously the initial bump very early in Lycoming. Then towards the mid and back half is when you start to really see significant growth.

Okay and Dave had mentioned some of the things which you know I think helped explain the reduction in the per year operating cost. It sounds like at least for fiscal ’19 some of that has to do with the move towards EDA production at a lower cost with Atlantic Sunrise, but I’m curious if there are other noteworthy items. Certainly third quarter cost reductions were key, at least relative to how we had things molded. So just curious any help on that front in terms of other items that are effecting this cost improvement.

Sure. Actually we are split pretty evenly, at least a year-over-year between California and Pennsylvania. The drivers out in California where the sales of Sespe was a big piece of it; that was a fairly high LOE field. We had lower steam fuel costs year-over-year and much more limited well work overs than we were last year. If you remember last year, about third quarter going into fourth quarter, we began to ramp-up that work over activity out there as oil prices began to ramp-up, so that was a big driver. And then in the east, we did see lower compression costs in Tioga and really what drove that was we transferred those compression facilities to our midstream company and then we also saw lower road maintenance, which fairly high in salt water disposal costs. When we took over as operator from the EOG assets, we were able to get in and we focused quite a bit of attention on trying to reduce the salt water or the disposal costs there and so that also made a difference.

Okay, and so a lot of those things obviously carry forward into ‘19 as well.

Yes, yeah.

I guess I on the cost in front of you, if you can stay there for a moment, obviously we are seeing a pretty tight labor market nationwide. You guys are forecasting not only at Seneca but the other businesses as, and acceleration activity as we move into next year. I’m just curious how you guys feel in general about staffing levels, ability to procure talent and the cost of it.

Actually I feel pretty comfortable. We’ve been – at least on the Seneca side we’ve been during the downturn, we run a fairly lean shift and so there wasn’t a lot of change even during that period. And we’ve been able to add individuals as we’ve ramped up our activities. So we just haven’t seen that issue.

And Chris on the pipeline side, we have added some engineers, lately. I mean but really it’s been pretty steady all the way through with respect to the construction planning and design of those systems. The real pick up will obviously be in the contractors when we have third party contractors that are doing the construction. So that shouldn’t impact our overall headcount going forward that much.

Okay. Just the actual field crews will come with the contracting staff, so they're ex-NFG, but they are driving your project. Okay, I understand.

Right.

I guess switching gears if could, just two questions Dave related to tax, obviously the effective earnings tax rate declined. I think you did a brief review of some of the details that you said in the prepared remarks. I’m just curious, I don’t think I heard it all, so if you don’t mind just indulging me in a quick review of that and then you’ve noted 25%, that’s where the guided range for ’19. I’m curious if that’s also a good range to assume in the years beyond it, knowing what you know now.

Yeah, well starting with your last question. Yeah based on what we know now, 25% of the – what we’d expect long term. We didn't really have a whole lot more to say on taxes beyond the 25% rate that we expect for ‘19 and for ’18. I guess the other thing I mentioned was AMT credits that are refundable that we expect a to recoup about $45 million of those in ‘19.

So, I guess that’s my other question on the tax aside. Cash tax side, you had about being on a net refund position. You mention those $45 million of AMT credit. Is that – I guess what is the – I don’t know if you are willing to share, but what is – as you had it model now the total net refund that you are expecting. Is it the $45 million or is the credits and it’s something less.

So you’re saying just for ‘19 or all of the AMTs credits over time.

No just, as I’m trying to get my cash flow statement and model close to yours. I’m curious how much of the net refund from a tax cash perspective you assume.

Yeah, about $50 million in total.

Okay, okay. Great, thanks a lot for the extra time this morning guys. I appreciate it.

Your bet.

Your next question comes from Becca Followill with U.S. Capital Advisors. Your line is open.

Good morning. I’m I know it’s hard to say since the FERC doesn't show their hands, but any thoughts on what’s taking the FERC so long in Northern Access. They’ve already ruled on constitution. I think you put in a request for them once again for them to look at it. Any thoughts on that, and whether or not going from five commissioners to four is going to have an impact?

Good question Becca. No, the only thing we can say is obviously and we’ve always pointed this out that the frats in our case are different from those the constitution had. So FERC needs to take a different look in our situation, so that’s what’s driving it. Obviously there’s philosophically now with Powelson leaving, there will be a kind of split philosophically between two and two. But that philosophical split really shouldn’t affect the issues that were in our case. So I mean with respect to our particular in Northern Access, no we don’t think that’ll impact us.

Thank you, and then also preliminary, but on a National Fuel Gas supply with the latest decision from the FERC, any thoughts on what you guys plan to do, what option you would you like to take once you file your 501-G.

Yeah, we’re still evaluating that Becca. We have until December to make that filing and we’ll do so. You know from a practical standpoint, Supply Corporation has a rate case that it has to file by the end of next year. I think its likely everything will get all rolled into one proceeding if you will.

Thank you and the last one. Some of the other companies on the E&P side have talked about some downward pressure on service costs. Have you seen any of that?

We have not yet.

Thank you, that’s all I had.

[Operator Instructions]. Your next question comes from George Wang with Citigroup. Your lien is open.

Hey you guys, congrats on a strong quarter.

Thank you.

Just a couple of questions. Firstly, if you guys have any thoughts on kind of the strategic initiatives, just to unlock value for various different segments, whether it's E&P kind of utility, gathering.

Hi George. I guess we kind of lay out basically our thoughts on that in the first few pages of the investor deck that we filed also last night and as we look at it going forward, given the efficiencies that we see between all of the operating segments, our first focus or focus is, our near term focus is developing the fee acreage that Seneca has and building out the gathering systems in order to get Seneca’s production to market. So both of those, the timing and the working on those projects together helps us, really planned our CapEx, so we don’t have you know wells waiting on pipeline or we don’t have pipe sitting waiting to be filled. So I guess first and foremost that’s our focus here for the near term.

Right, got you. And also on the E&P side, just you know you guys mentioned kind of generating cash flow, and also you guys guided kind of funding CapEx internally to drain your cash. So I mean is this going to be the guide line of limitation for the kind of future growth going forward, especially in terms of further developing the Utica acreage. Do you think kind of you know spending in line with cash flow is going to be the yardstick going forward.

Yeah, I think that’s our plan for over the next few years given where pricing ours to you know I would say generally live with in cash. I think our 20% growth rate is pretty good, but that’s all within cash flows.

Okay, thanks a lot.

Yep.

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

Thank you, Chantal. We like to thank everyone for taking the time to be with us today. A replay of this call will be available at approximately 3:00 p.m. Eastern Time on both our website and by telephone and will run through the close of business on Friday, August 10. To access the replay online, please visit our Investor Relations website at www.investor.nationalfuelgas.com and to access by telephone call 1-800-585-8367 and enter conference ID number 1984229. This concludes our conference call for today. Thank you and goodbye.

This concludes today’s conference call. You may now disconnect.