Hello, everyone and welcome to the National Fuel Gas Company First Quarter Fiscal 2024 Earnings Conference Call. My name is Bruno, and I’ll be operating your call today. [Operator Instructions] I will now hand over to your host, Natalie Fischer, Director of Investor Relations. Please go ahead.

Thank you, Bruno 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 Dave Bauer, President and Chief Executive Officer; Tim Silverstein, Treasurer and Principal Financial Officer; and Justin Loweth, President of Seneca Resources and National Fuel Midstream. At the end of prepared remarks, we will open the discussion to questions. The first quarter fiscal 2024 earnings release and February 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. With that, I’ll turn it over to Dave Bauer.

Thank you, Natalie. Good morning, everyone. Before starting, I’d like to take a moment to welcome Natalie as our new Director of Investor Relations. While she is new to the company, she isn’t new to the industry, having worked in PwC’s power and utilities practice early in her career. I’d also like to thank Brandon for his hard work over the past 3 years and wish him well in his new role within our finance organization. Turning to the quarter. Last night, we reported adjusted operating results of $1.46 per share. It was a fairly routine quarter, one in which we continue to see strong execution across our operations. In our Upstream and Gathering businesses, production and throughput were up 11% and 15% respectively compared to last year, on the strength of several great new wells in the EDA. In addition, the benefit of our disciplined approach to hedging was evident this quarter, with our strong book of swaps, collars and firm sales, helping to mitigate the impact of lower natural gas prices on earnings and cash flows. At the regulated businesses, we started to see the impact of new delivery rates in our utilities Pennsylvania jurisdiction, which helped contribute to the 12% increase in year-over-year utility earnings. Looking forward, our plans remain on track in each of our businesses. In the Upstream business, Seneca’s transition to the EDA is going smoothly. Results in Tioga County continue to exceed expectations and were the primary reason for the increase in our production guidance range for fiscal ‘24. We are very excited about the long-term opportunity in this area. At a point in time when many of our peers are moving down the acreage quality spectrum or pursuing M&A to manage depleting inventory, we are in the fortunate position of having many…

Thanks, Dave and good morning, everyone. Seneca and NFG Midstream both had an excellent start to the fiscal year, driven by strong operational results. Record production of 101 Bcfe, an 8% sequential increase exceeded our estimates. We turned in line 27 wells during the quarter, 19 of which were in the EDA and all of which came online ahead of schedule and collectively, their productivity exceeded expectations. The operational successes that drove Seneca’s increased production, when combined with growing third-party volumes, led to record throughput at NFG Midstream as well. In light of this solid performance in the first quarter, we are increasing our production guidance range to 395 to 410 Bcfe. For the remainder of the year, we expect to turn in line 11 more wells, including a 5-well tiled to Utica pad that is just beginning to flow back and a WDA Utica pad scheduled to flow back towards the end of the fiscal year, likely August or September. Given the majority of turn-in-line activity will occur in the first half of the year, average daily production is expected to peak in Q2 before declining in each of the last two quarters prior to the next wave of pads coming online this fall and into the winter. Turning to natural gas pricing. Our robust marketing and hedging portfolio is well positioned to dampen the impact of lower near-term pricing. For the remainder of fiscal 2024, we have downside pricing protection covering more than 70% of our expected production through a combination of swaps, costless collars and fixed price firm sales. With a weighted average floor price of $3.34 per MMBtu for our NYMEX swaps and collars, we are well positioned relative to current forward prices over the balance of the year. Additionally, we have firm transportation and firm…

Thanks, Justin, and good morning. National Fuel’s first quarter adjusted operating results were $1.46 per share. Dave hit on the high points, but I did want to touch on a few other drivers. Starting at the utility, we are seeing the benefit of a $23 million annual rate increase in Pennsylvania that went into effect last August. The bulk of this increase hits in the winter months when consumption is the highest. Partially offsetting this was the impact of warmer weather relative to last year. With weather normalization mechanisms in both of our utility jurisdictions, we will be largely insulated from weather-driven volatility in the future. Also in the utility, as a result of the long-awaited IRS guidance last year, we saw the benefit of the expanded treatment of certain maintenance capital expenditures related to natural gas transmission and distribution property. With the ability to deduct a larger share of our capital in the year it’s placed in service, we had a nice tailwind on both cash taxes and our effective tax rate. Switching to our non-regulated businesses. As Justin mentioned, from an operational perspective, Seneca and NFG Midstream are firing on all cylinders. Cash operating costs trended lower than expected during the first quarter. And despite modest price-related curtailments in October, our production guidance for the full year is moving higher. There is one atypical item during the quarter. We accrued $3.5 million in expense related to estimated plug-in costs for certain California wells, which we no longer own. These wells were divested in 2004 and are unrelated to our recent exit from the region. The operator of the abandoned wells is no longer in business, so the liability will likely revert to Seneca. Turning to guidance for the year. We are revising our earnings range which is now…

Thank you. [Operator Instructions] Okay. We do have our first question comes from Neil Mehta from Goldman Sachs. Neil, you line is now open.

Yes. Good morning, team and thanks for taking the time.

Good morning.

Great. It’s a first question just on the New York gas base rate increase request – just – can you refresh us in terms of the time line around this? And when you expect to hear from staff and potential commission decision? And how you’re framing what the ask is for as well as you go to the commission?

Sure, Neil. It’s Tim. So from a timing perspective, we will expect to get testimony from staff early next month, so early in March. From there, we will have the opportunity to respond to their testimony, but likely in parallel, we will at least start to have settlement discussions with staff and the other parties involved in the case, still working towards new rates going into effect at the beginning of our fiscal year, so October 1, in advance of next year’s heating season.

Okay. That’s great color. My follow-up is on Slide 6 with the uplift that you anticipate in free cash flow starting in ‘25, but this year being a little bit lower. Just a couple of questions. One is, in a scenario where natural gas prices are lower than what you show here on the slide. How do you think about your ability to pay the dividend from the balance sheet? Or is there any risk around – is there any risk around external financing? And just talk a little bit about the uplift that you anticipate post ‘24, what are some of the drivers that will allow you to grow that free cash flow off the current base? Thank you.

Yes. Thanks, Neil. I’ll start, and I’ll see if Justin and Dave have anything to add. So the increase from ‘24 to ‘25 is really driven by a couple of factors. One is the ongoing reduction that we would expect in our non-regulated capital spending, combined with at least today, the outlook for higher prices plus the increasing value of our hedge book as we move from ‘24 to ‘25. Capital in the other business is expected to be relatively consistent year-over-year and then take on top of that, the impact of the rate case and supply that we have ongoing this year, which will drive a full year of incremental revenues next year as well as the potential impact from the New York rate case. So that certainly positions us well for increasing cash flows. Obviously, we do still have exposure to lower gas prices. That being said, our balance sheet is in really good shape, as I mentioned, both Moody’s and S&P reaffirmed our credit ratings and our – both our upgrade and downgrade thresholds. So we certainly have substantial ability to fund our growing dividend over time. And the reality is the way we look at that is through the cycle. We’ve been able to look at the long-term earnings growth of the regulated businesses, the gathering cash flows that really drive our ability to deploy that cash flow in the form of a dividend over time and look at ways to optimize that going forward.

So is it fair to say...

Or Justin do you have anything else to add?

I think you got it there, Tim. Do you have a follow-up there Tim?

No, just to clarify, there is no need for external financing from an equity perspective, it sounds like, given that – given the balance sheet capacity.

No, not from an equity perspective.

Our next question comes from Zach Parham from JPMorgan. Zach, your line is open.

Good morning. First, just a question on the E&P business. Your guidance assumes $1.70 per M on local pricing we’ve recently seen some of the local basis points trade below $1.50, and I think there are some worries that those could move lower in the near-term. Can you just give us some color on how you think about potential shut-ins or delaying turn-in lines? I know you’ve got the large majority of your volumes hedged in ‘24, but is there a specific price where it doesn’t make sense to flow some of those marginal volumes?

Yes, yes, happy to get into that a little bit. So as you’ve said, yes, there is definitely some of the in-basin pricing is challenged and here we are still in winter and it’s challenged. So Tim mentioned this on the call, I did as well. We fortunately have really minimized that exposure. So I’d start by highlighting that. We’re down to only about round numbers, 30 Bs for the remainder of the fiscal year that would be exposed to kind of that in-basin pricing. I’m hesitant to give you an exact number, but what I will tell you is if prices get very low, let’s just – let’s start with like, say, sub $1, I mean you can, rest assure, we’re not really going to be flowing. But exactly where that brand you say sub $1.70 in our guidance is where we will make that decision. It’s a decision we can make with really limited to really know back to our wells, our future well productivity or cost. So it’s something we will continue [Technical Difficulty]. We will absolutely evaluate flowback of new pads as well. You might recall, we actually did that in fiscal ‘23. Part of the reason for this fantastic Q1 we’ve had was a result of having held back some volumes that we would have flown back, say, in the late summer, but given – or into the shoulder in say, since September, October, but we kind of deliberately waited to get into a better pricing over the winter. So that’s definitely something we will continue to evaluate. We will look to do and we will mitigate it both ways through operations and through our marketing portfolio.

Thanks, Justin. Maybe just one more on the E&P business, and you talked a little bit about this in your prepared remarks, but could you give us a little more color on the production trajectory through the year? You took up the full year guidance at the midpoint by about 2.5 Bcf, but you’ve previously talked about 1Q production being relatively flat, and you were up 7 Bcf quarter-over-quarter. So just curious kind of how we should think about shaping the production through the rest of the year and maybe at this point if you would expect to be maybe towards the higher end of that range?

Sure. So, at this point, the reason – or the reasoning on why Q1 did so well was really a combination of really outstanding work from our operations team in terms of setting GPUs, getting all the wells drilled out and getting those flowed back a little faster during the quarter than we had initially envisioned being possible, so really great job by the team in making that possible. And then quite frankly, we just – we had a lot of wells that we brought on in – 27 in total, and in aggregate, they just beat our expected performance. They came online and cleaned up faster and hit rates in excess of what we initially anticipated. So, a great story, it’s a little earlier and strong well productivity. I will note 19 of the 27 were in our Eastern Development Area as well, but really across the board, good performance. Right now in Q2, we are at our peak production. So, we have got all that production flowing. We are still in many respects on a lot of those wells in a very flush period. I mentioned we are just beginning to flow back a Tioga-Utica pad right now. And so we are – Q2 will – is expected to be the high point in our production volumes for the fiscal year. And then we really have nothing happening through Q3 and in the next pad online data is late Q4. August, September is kind of what we are targeting. And that’s a good example. Another one where we will really evaluate pricing at that time and how we have been able to shape our marketing book and make some decisions around the right time to flow it back. So, we feel really good about our current guidance range. I think that’s the right range. And exactly where we are relative to the midpoint of that is probably a little TBD, just depending upon everything I just outlined. And the other thing I will just highlight again is, our guidance does not incorporate a pricing curtailment. So, to the extent some of those that 30-Bs, pricing is really challenged at different times. It’s possible some of that will come out, and we will just hold that back for a future time. But the number I am giving you is a clean – on the – clean number, assuming we flow exactly as I have just outlined it to you.

Got it. Thanks Justin. Appreciate the color.

Our next question comes from Trafford Lamar from Raymond James. Trafford, your line is now open.

Thanks guys and congrats on a great quarter. Just got one quick one, focusing on the equitable origin A-grade, I would love to get your thoughts in the near-term RSG market? And maybe what premium to NYMEX you could see possibly in the next 2 years to 3 years? Thanks.

And you said the – like responsibly sourced gas and premiums, I just want to make sure I heard that correctly.

Yes. That’s correct. It’s being greater than 100%.

Absolutely. Yes. So, the – I would say there are different standards for all of these. Equitable origin is more of an international standard. And so we found particular success selling our certified responsibly sourced gas largely in the Canadian markets. And fortunately, we are piped through National Fuel Supply and Empire into some of those markets. We will continue to pursue those sales. The premiums you get are telling me the exact number. It’s more in the order of magnitude, pennies, not dimes or quarters that you can enjoy. But it’s a great opportunity. I would argue, I think a lot of things we are doing, frankly, position us very well relative to the regulatory environment. And it’s just the way we like to do business. And so it’s nice to be recognized by third-parties. And if we are able to attract certain utilities and end-user customers that are able to see that and pay a premium, it’s a great opportunity for us. And so we have been able to achieve some premiums for that. Again, I would say it’s pennies, not dimes and quarters. And I think we will continue to have that success.

Great. Appreciate the color, Justin.

[Operator Instructions] Our next question comes from John Abbott from Bank of America. John, your line is now open.

Good morning and thank you for taking our questions. Our first question is to Tim. It’s on the Roadway Excavation Quality Assurance Act. So, in your remarks, Tim, you said that you were still assessing the impact on that. Is the risk that, that goes higher? Is there a risk that, that goes lower? And then just sort of a follow-on, how do you – when you think about that bump-up in CapEx for the utility business, how do we think about – what is your latest thoughts around long-term CapEx for the utility business and then the impact to the free cash flow to the utility business?

Yes. I will start with the first question on the potential bias higher or lower. I would say, we have been in pretty active dialogue with our contractors. So, we think this is reasonable what we – based on what we know today. I think I wouldn’t say it’s biased one way or another at this point. It could go up a little bit. It could go down a little bit. But I think we will know a lot more as we get into the meat of the construction season this summer, to better understand exactly how the contractors will respond. As it relates to longer term run rate on capital and what that means from a free cash flow perspective, I think I had mentioned previously that we were in the $125 million to $150 million area. Long-term run rate from a capital perspective, I would bump that up by about $25 million more in the $150 million to $175 million area as a result of this. So, certainly, from an immediate perspective that has a drag on cash flows in the near-term. But I think you need to take a step back and look at a couple of factors. One is it will drive longer term rate base growth. So, you will have not only earnings, but additional cash flows in our rate cases going forward, including the one we have on file right now. In addition, much of this capital is eligible for the repairs deduction that we – that I have talked about the last couple of quarters. And that has an immediate benefit to free cash flow in the form of lower cash taxes. So, I think when you take that all together, while capital might be up $20 million to $25 million, the growth in earnings and the savings from a free cash – from a cash tax perspective will offset a good chunk of that.

That is very helpful. And the next question, I think it goes to you, Justin here. So, the plan is out, so for 2025, you are going to start moderating activity, and when you sort of think about the 2024 trajectory, I mean we have a bump up here in the first half of the year and a decline in the second half of the year. As we start to think about activity in 2025, granted, it’s kind of early, how do you think about on an annual basis, the trajectory of production and of CapEx? Is it going to be ratable, front-end loaded? How do you think about those factors as we sort of look to 2025 and beyond?

Sure. Yes, happy to address that. So, as you may recall, in fiscal ‘23, Seneca’s total capital was approximately $583 million. The midpoint of our guidance here in fiscal ‘24 is $550 million. I noted we did come in slightly below our internal estimates in Q1 and we are spending a lot of time as a team looking at our activity over the rest of the year, and of course into ‘25, and looking for ways to continue to moderate. I noted we are dropping a rig, which we will do here later this – into the spring. And we will stay at that activity level at least for a couple of quarters, at least that’s our current expectation. And so for fiscal ‘24, Q1 was our biggest capital quarter. And I would expect a pronounced decline in capital even into Q2 and on into Q3 and Q4, generally somewhat flat and at a lower level. As we look out to ‘25, you should expect that overall level of capital to continue to go down. I have spoken about on a combined basis, Seneca and NFG Midstream, if you start at that ‘23, as we look to ‘24, at the midpoint, we are already dropping somewhere between kind of $30 million and $40 million. We are going to keep working on that as we moderate activity right now over the coming months. And then as we look to fiscal ‘25, we are targeting to be somewhere between $50 million to $150 million, and I would bias that towards $75 million to $100 million already should be achieved when we get into fiscal ‘25. So, we are on a downward trend. Obviously, we will keep looking hard at gas prices and in our hedge book and everything else. And then from a production perspective, we have got quite a bit of nice growth expected this year. It’s on the back of some of the wells we brought on recently and some of the activity we have underway. Definitely would expect that growth to moderate into ‘25 from ‘24 and a continued moderation beyond there. Somewhere between flat and 5% per annum growth is probably good round numbers to think about. But we are definitely in a process now of high grading to the EDA that will drive capital efficiency. That leads to a lot of the lower capital spend while dampening our overall growth that we have had from a production perspective over the last few years.

Thank you. Very, very helpful.

We currently have no further questions. So, I would like to hand the call back to Natalie Fischer for closing remarks. Thank you.

Thank you, Bruno. We would like thank everyone for taking the time to be with us today. A replay of this call will be available this afternoon on both our website and by telephone and will run through the close of business on Thursday, February 15th. To access the replay online, please visit our Investor Relations website at investor.nationalfuelgas.com. And to access by telephone, call 1-866-813-9403 and provide access code 385109. This concludes our conference call for today. Thank you and have a great day.

Ladies and gentlemen, this concludes today’s call. Thank you for joining. You may now disconnect your lines.