• Adjusted Operating Results: $0.77 per share for Q4 fiscal 2024.
• Hedge Book Gain: $61 million gain during the quarter.
• Seneca Production: Record production of 392 Bcfe, a 5% increase over fiscal 2023.
• Reserves: Grew to 4.8 Tcfe with net additions and revisions of over 600 Bcfe.
• NFG Midstream Throughput: Increased 6% to a record 480 Bcf in fiscal 2024.
• Pipeline and Storage Rate Increase: $56 million annual rate increase effective February 2024.
• New York Utility Revenue Requirement Increase: $86 million phased over three years.
• GAAP Earnings: Reported a loss of $1.84 per share due to noncash impairments.
• Impairment Charge: $34 million related to the Northern Access project.
• Fiscal 2025 Production Guidance: 400 to 420 Bcfe.
• Fiscal 2025 Capital Guidance: Midpoint $20 million below fiscal 2024.
• Fiscal 2025 Adjusted Operating Results Guidance: $5.50 to $6 per share.
• Hedge Portfolio: 63% hedged for fiscal 2025 with an average floor price of $3.44.
• Share Buyback: 1.4 million shares repurchased at an average price of $57 per share.
• Debt-to-EBITDA Ratio: Approximately 2.25 times.
• FFO to Debt: 37%.

• Warning! GuruFocus has detected 8 Warning Signs with NFG.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• National Fuel Gas Co (NYSE:NFG) reported strong hedge book performance, delivering a $61 million gain during the quarter, which helped mitigate the impact of low natural gas prices.
• The company achieved a 5% increase in production year over year while reducing Seneca Capital by 10%, indicating improved operational efficiency.
• NFG's pipeline and storage business benefited from a $56 million annual rate increase from the Supply Corporation rate settlement.
• The company reached a favorable three-year settlement in its New York rate case, resulting in an $86 million annual revenue requirement increase phased over three years.
• NFG's sustainability efforts are noteworthy, with Seneca surpassing its 2030 methane intensity reduction goal seven years ahead of schedule and achieving high certification levels for environmental standards.

Negative Points

• NFG reported a GAAP loss of $1.84 per share due to noncash impairments, including a $34 million impairment related to the Northern Access project.
• The company faced higher operating and maintenance costs in its regulated segments, partly due to pipeline integrity program expenses and prevailing wage requirements in New York.
• Natural gas prices remain a challenge, with continued pressure expected in the first half of fiscal 2025, potentially impacting earnings.
• NFG decided to cease further development of the Northern Access project due to increased expected project costs, resulting in a significant write-down.
• The company's 2025 adjusted EPS guidance was revised lower due to a decrease in natural gas pricing assumptions, reflecting ongoing market volatility.

Q & A Highlights

Q: Can you provide your thoughts on the regulatory environment and any changes following recent election results? A: David Bauer, President and CEO, stated that the company is designed to thrive regardless of political changes. However, he noted that some administrations are more favorable to the energy industry. At the federal level, the Trump administration is expected to create a better regulatory environment. No significant changes are anticipated at the state level in New York and Pennsylvania.

Q: The 2025 adjusted EPS guidance was revised lower due to natural gas pricing assumptions. What would drive improvement if gas prices were constant? A: Timothy Silverstein, Principal Financial Officer, explained that the biggest driver is the change in the DD&A rate due to an impairment taken in the fourth quarter. Additionally, there are small improvements in operating costs across the system, which collectively provide a tailwind for guidance if pricing remains constant.

Q: Is there a chance that the DD&A rate for 2025 could be revised up? A: Timothy Silverstein indicated that the DD&A rate is more likely to be revised slightly lower due to an expected additional ceiling test impairment in the first quarter of fiscal 2025, which would reduce the amount to deplete over time.

Q: Can you discuss the sensitivity of your activity cadence and whether it can be adjusted based on gas prices? A: Justin Loweth, President of Seneca Resources and Midstream, confirmed that there is flexibility to adjust the plan based on price signals. The company is positioned to accelerate or decelerate activities depending on market conditions, with nearly 90% of fiscal 2025 gas locked in, minimizing exposure to price fluctuations.

Q: CapEx was at the low end of the guidance range for this year. What are the drivers for CapEx variance next year? A: Justin Loweth highlighted two main drivers: operational efficiencies and planning optimization. The company has achieved significant cost savings through improved drilling efficiencies and water management. Additionally, ongoing optimization of development plans is expected to continue reducing capital requirements while maintaining or increasing production.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.