Good morning. My name is Brianna, and I will be your conference operator today. At this time, I would like to welcome everyone to the National Fuel Gas Company Third Quarter Fiscal 2024 Earnings Conference Call. Please note that this call is being recorded. All lines have been placed on mute to prevent any background noise. [Operator Instructions]. I will now turn the call over to Natalie Fischer, Director of Investor Relations. You may begin your conference.

Thank you, Brianna, 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, our 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 today's prepared remarks, we will open the discussion to questions. The third quarter fiscal 2024 earnings release and July 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. Overall, the third quarter was a good one for National Fuel, one in which we saw a continued operational success across the system. Apart from natural gas prices, our financial results for the quarter were right in line with expectations. Tim and Justin will get into some more of the details of the quarter. So I'll focus my time highlighting our future growth opportunities and the value proposition National Fuel offers to investors. In short, our strong return on capital our visibility to significant growth in earnings and free cash flow and our long-standing commitment to returning an increasing amount of capital to shareholders positions us very well to deliver significant value in the coming years. Last night, we initiated our preliminary guidance for fiscal 2025 of $5.75 to $6.25 per share at the midpoint, a nearly 20% increase over fiscal 2024. And we expect that this will be a system-wide increase in earnings with each of our major operating segments seeing improved results. In addition to our outlook for 2025, we've added multiyear outlooks for several key financial metrics to our updated investor presentation. In particular, as you can see on Page 9 of our updated IR deck, we're now guiding to compound annual consolidated earnings growth of better than 10% for at least the next three years. Importantly, as we expect will be the case in 2025, each of our businesses across the system should contribute to our improved outlook. In our regulated utility and pipeline and storage businesses, we expect a 7% to 10% average annual growth in earnings per share over the next three years. Much of next year's growth will come from the Supply Corp rate case we settled earlier this year, along with the impact of our ongoing…

Thanks, Dave, and good morning, everyone. As you saw in last night's release, for the third quarter, National Fuel reported a GAAP loss of $54 million or $0.59 per share. The decline in natural gas prices over the past 12 months caused Seneca to record a noncash full cost ceiling test impairment charge that amounted to a loss of $1.58 per share. Excluding this impairment as well as a couple of other smaller items impacting comparability, adjusted operating results for the quarter were $0.99 per share. Growth from our regulated segments combined with our strong hedge book, mitigated nearly all the impact of lower natural gas prices, which were down approximately $0.20 per MMBtu compared to last year's third quarter. In our regulated segments, we continue to see the positive impact from our recent ratemaking activity. In the utility, we saw an increase in Pennsylvania margin related to our 2023 rate settlement, along with continued growth in revenues related to our two systems modernization trackers in New York. In the Pipeline & Storage segment, this was the first quarter where we saw the full benefit of our Supply Corp rate case, which is expected to increase annual revenues by approximately $56 million. In our non-regulated segments, while natural gas pricing was a headwind, our methodical approach to hedging limited the overall impact. Our hedge book delivered a $75 million gain during the quarter, which more than offset lower NYMEX and in-basin pricing. As we've discussed in the past, when in-basin pricing reaches a certain threshold, we view it as prudent to curtail our spot gas until prices improve. During the quarter, nearly 6 Bcf of production was curtailed due to pricing. Despite this, Seneca's production of 97 Bcf was an increase of 2% compared to last year, which also contributed…

Thanks, Tim, and good morning, everyone. Seneca and NFG Midstream delivered solid results for the quarter as our transition to an EDA focused development program continues to exceed expectations. All Seneca pads turned in line in the first half of the year have demonstrated strong productivity trends, and we are seeing increased capital efficiency across our operations, allowing Seneca to reduce its fiscal 2024 capital guidance for the second quarter in a row. Starting with production. Tim hit on the high points for the quarter and our updated guidance assumptions. So I’ll take a minute to discuss the underlying operational plan and production cadence. Our operations plan remains unchanged. With only a few wells expected to be turned in line before the next fiscal year. As such, we expect a modest decline in production in this year’s fourth quarter. As we look out to fiscal 2025, we plan to turn in line 17 wells during the first half of the year to take advantage of expected stronger pricing as winter arrives, and LNG exports ramp up. Overall, we expect production for fiscal 2025 to increase over the winter and spring months than modestly decline by the end of the year. Turning to natural gas pricing. We believe longer-term fundamentals are setting up for a favorable price environment despite near-term headwinds. Over the next few quarters, we expect that the combination of resilient production and persistently high inventory levels will continue to constrain natural gas prices likely into the fall. In order to limit our pricing risk during this period, we have methodically layered in both physical firm sales and strong financial hedges over the past several years, which provides a balance of downside protection and upside price participation. For the remainder of fiscal 2024, we have downside pricing protection covering…

Thank you. [Operator Instructions]. Our first question comes from Zach Parham with JPMorgan. Please go ahead.

Thanks for taking my questions. I guess first, Justin, one for you. We've heard from a lot of E&Ps about efficiency gains in the field and also hearing about some modest cost deflation. Can you talk about what NFG is seeing on both efficiency gains and deflation? And maybe give us an update on where your leading-edge D&C cost per foot are?

Sure, Zach. Yes, thanks for the question. A couple of things on that. One, I attribute a good chunk of our operational efficiencies that we've been gaining is really related to part of our move to an EDA focused development plan. Our operations team has been laser-focused on planning in particular. So really optimizing the pads we're going to, the order in which we do it, the amount of infrastructure we need, and then importantly, a lot of the elements. So I'm getting into like every last detail of how we go about planning our operations and our future development. And that leads to finding ways to lower your costs. As well as really good execution in terms of all of our drilling and completions. We have had some tailwinds over the last, I'd say, nine months to 12 months related to some service costs. We don't see a whole lot of that going forward. I'd say on balance, it would be something that we'd see being net-net in our benefit, a decrease would be expected, but not significant decreases. So a lot of this has been about managing both the planning around our development as well as the execution of how we're actually moving forward with our development and particularly what we've been able to accomplish in Tioga County.

And any color on D&C cost and kind of where those are now?

Sure. Yes, happy to. So I was just getting there. In terms of D&C, the Tioga Utica costs are in the vicinity of around $1,300 a foot, Marcellus wells there are more like around $1,000 a foot, maybe lower, depending upon the exact lateral length. And that's where the majority of our activity will be focused. So those will be the two most relevant areas. And we see continued trends on both of those moving downward as we go forward.

Thanks. And just on my follow-up, I wanted to ask on well productivity, which you mentioned in your prepared remarks, if I look at the state data, it does look like your well productivity took a modest step down on the lateral foot adjusted basis in 2023 versus prior years. Some of that's in the WDA, but also to some extent in the EDA. I know the state data is perfect and there are probably some curtailments impacting the data. But can you just give us your broader thoughts on well productivity and how you would expect productivity to trend going forward?

Sure. So I think your comment there is exactly right. Within the state data, there can be some nuances to look at, if you focus on really where, as I've said, I mean, the vast majority of our activity is going to be, which would be Tioga Utica, Tioga, Marcellus and also in Lycoming on Marcellus wells, we're – we've had the other – those areas are all looking very good. They're right in line and in some instances, in excess of what we would expect. I think some of the nuances you're seeing in data is probably related to, frankly, the voluntary pricing curtailments we pursue at time, which can obviously impact what you're seeing versus what we're really seeing in terms of the pressure drop over time. But the wells we have are all looking really good to us. And I think you'll see as additional months and quarters of data come out, you'll just continue to see those trends moving exactly as we laid out in our investor deck.

Thanks, Justin. Really appreciate the color.

Sure.

[Operator Instructions]. Our next question comes from Greta Drefke with Goldman Sachs. Please go ahead.

Good morning and thank you for taking my questions. Given the way of consolidation we've seen so far, I was wondering if you could provide your updated views on the M&A landscape, the opportunity set you see for NFG? And your thoughts on the broader macro environment? Thank you.

Sure. Well, we're interested in very much interested in continuing to grow the company and M&A is certainly a way that would be interesting for us to do it. I think looking at our company, as I've said on previous calls, I think doing a regulated – adding to our regulated assets would be a priority in the near term to kind of balance out the system. But having said that, we do continue to look at, call it, smaller bolt-on acquisitions on the E&P side, similar to the ones that we did last year where we were consolidating our acreage position. So I'm optimistic that deals will come along that will be of interest to us.

Got it. Thank you. And my next question is, you've added your 2026 hedging position and have been hedging through 2028. Can you speak a bit on any updated views to your outlook on hedging in the longer term? And how your thoughts on the natural gas landscape more broadly has impacted your framework? Thank you.

Yes. I mean just broadly on the natural gas macro, I think, in the near term, things are going to be pretty challenging. We've got high storages, kind of higher production. Weather it doesn't really seem to be driving things very much, but it obviously can be variable. But the longer term, as we move into next year and beyond, we're confident that prices are going to recover as new LNG comes online. But obviously, the timing of when that supply comes online relative to demand, probably isn't going to be exactly lined up. So there could be some volatility. So we feel good about our hedge book being kind of that 60% area. As you point out, we continue to add positions in taking advantage of the Contango curve, which will, over time, cause our net price realizations to increase.

Thank you.

Our next question comes from John Daniel with Daniel Energy Partners. Please go ahead

Hey, good morning. Thank you for including me. Justin, I just got a big picture question for you. There are different estimates out there regarding the potential LNG and AI demand opportunities. But overall, the estimates point to higher demand for natural gas. I'm not looking for your specific view on what that demand will be, but when you look at the differing estimates, do you see Seneca having to ramp activity in the 2016 and beyond time frame to meet this demand? Or how do you see – what do you think the call on D&C activity will be to meet it? Any thoughts?

Sure, John. Happy to talk about that. So we've looked at this. We have active dialogue with a number of parties to try to better assess exactly what this demand could look like, where it could be both talking downstream on these hyperscalers and then also looking at other opportunities more approximate. I guess the way I would characterize kind of our company's stance and view on it is that, we have a really deep inventory. We're an investment-grade credit. We're a great counterparty for anyone interested in getting long and building a plant that relies on reliable, sustainable, affordable natural gas. So we've got the ability to do that. We're going to be very active in those dialogues. We've also got capacity that connects to markets that should be net-net increasing demand centers. So I think the company is favorably positioned. We'll continue to be evaluating it. But I'd also just say it's early days. I think this is really an evolving story and something that your point about maybe it's on 2026, 2027 is out there. But our operations team and flexibility and depth of resource are going to be standing by to take advantage.

Okay. But simplistically, when they – and maybe don't speak for Seneca yourself. But it would seem – as you look at a lot of the comments from the E&P industry right now, is essentially calling for flattish activity next year, right, because of efficiency gains and so forth. And I'm just wondering if we're setting up for a challenge in 2026 because the industry is not ready to push down the accelerator, if you will, in terms of [indiscernible] activity. That's all. It's just a thought.

Sure. Yes. It's hard for me to speculate on others too much. But certainly, within our business, we have ample capacity to accelerate, and we're really benefited by the fact of having an integrated model in – with the midstream business and FERC pipes as well. So I'm not exactly sure how others can respond to it, but I feel really good about our depth of resource and the other kind of factors I mentioned earlier.

I appreciate the response and let me in the call.

Thank you.

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

Thank you, Brianna. 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, August 8. Please feel free to reach out if you have any follow-up questions. Otherwise, we look forward to speaking with you again next quarter. Thank you, and have a nice day.

This will conclude today's conference call. Thank you for your participation. You may now disconnect.