Hello, everyone, and welcome to the National Fuel Gas Company Q2 Fiscal 2024 Earnings Conference Call. My name is Charlie, and I'll be coordinating the call today. [Operator Instructions] I'll now hand over to our host, Natalie Fischer, Director of Investor Relations. Natalie, please go ahead.

Thank you, Charlie, 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 the prepared remarks, we will open the discussion to questions. The second quarter fiscal 2024 earnings release and May 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. Last night, National Fuel reported solid second quarter results that are yet another great indicator of the strong long-term outlook for the company. Adjusted operating results were $1.79 per share, an increase of 16% from the prior year's second quarter. The combination of significant growth in our regulated businesses, which delivered a 36% increase in earnings per share, along with double-digit growth in Seneca's production and the Gathering segment's throughput drove the increase. While natural gas prices were a headwind during the quarter, our long-standing hedging program helped mitigate this impact. Tim and Justin will hit on the details of the quarter and the near-term outlook, but I want to take a few minutes to highlight the long-term opportunity set for National Fuel. Last night, we published a major refresh of our Investor Relations slide deck. The goal of this update is to highlight what we think is a very compelling value proposition, one that delivers strong investment returns relative to both our peers and the broader market, generates significant expected long-term growth in earnings and free cash flow and returns capital to shareholders through both our long-standing dividend and opportunistically through our recently announced share buyback program. The foundation for this is our integrated model, with each of our businesses contributing to this simple value proposition. As we saw this past quarter, much of our near-term growth will occur in our regulated utility and pipeline businesses where rate-making activity is expected to drive tangible increases in both earnings and free cash flow. This past February, our FERC-regulated Supply Corporation subsidiary reached a settlement with its shippers to resolve the rate case we filed last summer. New rates designed to increase annual revenues by $56 million or about 15% of last year's total revenue…

Thanks, Dave, and good morning, everyone. Seneca and NFG Midstream continued last quarter's momentum with a third consecutive quarter of record production and throughput supported by strong operational results. During Q2, we turned in line 6 EDA wells, all of which demonstrated excellent initial productivity. Quarterly production was 103 Bcfe, a 10% increase over the second quarter of fiscal '23, and in spite of voluntary pricing curtailments of over 5 Bcf due to low in-basin pricing. We're also seeing positive momentum in achieving our capital reduction target. As announced last night, Seneca is reducing the top end of its fiscal '24 guidance by $20 million to a range of $525 million to $555 million. The midpoint of guidance now represents an almost $50 million reduction over last year. There are 2 principal drivers of this decrease. First, we are incorporating service cost reductions, both realized and expected, through the balance of the year. Second, operational efficiencies associated with our transition to the EDA are exceeding initial expectations, which should provide continued benefits in the years to come. Turning to production. As a result of voluntary pricing curtailments during the quarter, we are decreasing Seneca's fiscal '24 production guidance by 5 Bcf to a range of 390 to 405 Bcfe. Please recall that we do not incorporate the impact of potential future pricing curtailments into our production guidance. In anticipation of higher gas prices, we plan to delay the turn-in-line date for 1 pad until next fiscal year, thus we assume a modest sequential decline in production throughout the rest of this year. However, we do retain flexibility in our program to accelerate TIL activity later this summer should prices rebound. Given the near-term supply/demand and storage fundamentals, we believe that natural gas prices will remain under pressure over the near…

Thanks, Justin, and good morning, everyone. National Fuel had a great second quarter with adjusted operating results increasing 16% from the prior fiscal year. It was evident from these results that our inflection towards meaningful and predictable growth in our regulated subsidiaries, combined with increasing capital efficiency in our Upstream and Gathering businesses, can deliver strong results well into the future. Starting with our regulated businesses. Pipeline & Storage segment earnings were up 29% versus last year. This was driven by significant top line growth with revenues up $13 million largely as a result of the settlement reach in our Supply Corporation rate case. In addition, we recorded $3.5 million in revenue related to the true-up of a surcharge that permitted us to recover costs related to certain pipeline safety and greenhouse gas-related expenditures. As a result of our new rate settlement, the surcharge mechanism ended. We are also running ahead of our projections with respect to short-term revenue. Given our optimally located infrastructure in the heart of the Appalachian Basin, we are well positioned to take advantage of periods of increasing volatility, both in storage valuations as well as basis differentials, across the region. We've made a concerted effort to capitalize on this. And as a result, we've seen a decent amount of success this year largely from marketers willing to be opportunistic with shorter-term contracts. Taken together, the settlement of our Supply Corp. rate case and the success we've achieved in our short-term business have allowed us to increase our full year revenue guidance by $10 million at the midpoint. In our Utility, the growth we've been projecting is coming to fruition. Earnings improved meaningfully, up 41% compared to last year's second quarter. Principally driving this strong performance was growth in margin, which was up $14 million. Much…

[Operator Instructions] Our first question comes from Zach Parham of JPMorgan.

One, maybe for Justin first, can you talk a little bit more about your outlook for curtailment? One of your peers in Appalachia had talked about curtailments for 2Q of the calendar year that were expected to be about twice the size of 1Q curtailments. We're already through 1 month of the quarter, and local pricing was pretty weak in April. Just trying to get a sense of what curtailments could look like this quarter.

Yes, sure, Zach. I'd start just by highlighting that from April forward to the balance of our year, we really have minimal exposure, our -- credit to our operations and marketing teams on getting ahead of this. We were pretty concerned about kind of what in-basin pricing could look like, and we're very active in locking a lot of our exposure. So now through the balance of the year, we only have about 10 Bcf exposed. So we've kind of locked in and quantified what the likely max impact could be. And that's relatively evenly split between Q3 and Q4. You kind of take half and half of that kind of 11-ish Bcf number of what would be exposed to the midpoint of our guidance. It's overall minimal. You're not going to see -- we're not expecting those -- like you've heard from others, we're not expecting those kinds of curtailments. We really got ahead of it. So I think we're in a good spot.

And then maybe one just on the Utility. You guided to Utility operating income growth of 7% to 10% year-over-year. That compares to the prior guide at 15% year-over-year growth. I know part of this is weather related, but can you just walk us through the moving pieces there that are driving that change?

Sure, Zach. Yes. I mean to your point, it wasn't anything fundamentally changing within -- in the business. It's really 2 pieces. One is weather. As Dave noted, that it minimizes volatility, but it doesn't eliminate it. So for example, in Pennsylvania, we have a plus or minus 3% dead band. And given where weather was in the second quarter, we were certainly outside of that dead band. So there was a weather impact in our PA jurisdiction. In New York, the way weather norm works there, it's a bit more complicated. But needless to say, when you get more wider variability in temperatures, the weather normalization doesn't fully protect you. So together in the quarter, that was roughly $3 million or so. And then the other item is in our New York jurisdiction, dating back to our last rate case, we have this mechanism in place where we're allowed to recover our lost and unaccounted-for gas if below a certain threshold. And given the success of our modernization program, we've been able to take advantage of that. But there's really 2 components to that mechanism. One is volume, which is consistent and in line with our expectation; but the other is pricing, and it's driven by the price that our customers are ultimately paying for gas, which is obviously meaningfully lower since we started the fiscal year. So those 2 together make up the bulk of it, and then I hit on the O&M headwinds we're facing, and that's sort of what's driving the range between 7% and 10%.

[Operator Instructions] Our next question comes from Neil Mehta of Goldman Sachs.

Yes. A nice quarter here. Just first question would be just how you're thinking about M&A in the current environment, it's something we've talked about in the past about whether it makes sense to continue to grow the utility business. Just any broad perspectives on that?

Yes, Neil. It's something we're still interested in. Really no change in our views on that. Adding regulated assets, we think, would be a good thing for the company. And we keep our eye open for opportunities that will be out there.

We'll be looking. And then staying on the regulated side, how should we think about modeling the rate increases here over the course of the next year? Any guidance in terms of trajectory? And any idiosyncrasies that we need to be thinking about from a modeling perspective?

Yes, Neil, PA, like we talked about, obviously, we know that increase the rates both for PA and ultimately for New York once we hopefully reach a settlement there. The impact is volumetrics, obviously, a bigger impact in Q1 and Q2 and a smaller impact in Q3 and Q4. Whereas in the pipeline business, it's a bit more ratably spread over the course of the year.

[Operator Instructions] At this stage, we have no further questions registered via the telephone lines. So I'll hand back over to Natalie Fischer for any final or closing remarks.

Thank you, Charlie. We'd like to 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, May 9. 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 407920. This concludes our conference call for today. Thank you, and have a nice day.

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