National Fuel Gas Company

Good day, and thank you for standing by. Welcome to the Q2 2021 National Fuel Gas Company Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Mr. Ken Webster, Director of Investor Relations. Thank you, sir. Please go ahead.

Thank you, Brenda, 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 of Karen Camiolo, Treasurer and Principal Financial Officer, and Justin Lowitt, President of Seneca Resources. At the end of the prepared remarks, we will open the discussion to questions. The second quarter fiscal 2021 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 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 to 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, Ken. Good morning, everyone. National Fuel had an excellent second quarter with operating results of $1.34 per share, up 38% year-over-year. During the quarter, we saw the benefits of the ongoing expansion of our FERC-regulated interstate pipeline systems, including significant incremental revenues from our Empire North project, which went into service last September. In addition, last summer's Tyler County acquisition continues to exceed our expectations, with gathering throughput and Appalachian production up over 45%. Entry-scale throw cash to $4.05 per share. At the midpoint, an increase of 35% from the prior year. across all our operations we continue to successfully execute on our near-term growth plans our fm 100 expansion and modernization project received its notice to proceed from perc in late february and construction commenced in early march we finished the critical path tree clearing on schedule and construction is underway on both compressor stations we expect to begin construction on the pipeline portion of the project later this month based on our progress to date we're confident the project will be finished on time for a late calendar 21 in service day once complete this project will generate about 50 million dollars of annual revenue for us and along with transco's companion lighting south project will provide seneca with another valuable long-term outlet for its appalachian production with limited additional appalachian takeaway capacity stated to come online in the near term We believe that Seneca's firm transportation portfolio, which accesses diverse and liquid markets, will provide significant value in the years ahead. To maximize the value of this new capacity, Seneca is operating two drilling rigs in Pennsylvania, with first production from its recent rig addition in our eastern development area, scheduled to come online just ahead of the Lighting South in service day. This timing will allow Seneca to capture the premium winter pricing typically seen in the Transco Zone 6 market. This next leg of growth, underpinned by the FM100 project, positions us differently from our Appalachian peers. This project will enhance scale and profitability across our upstream, gathering, and regulated pipeline businesses and is a great example of the value of our integrated business model. Switching gears, the utility also had a good quarter. The warmer than normal weather did have an impact on earnings. That debt expense, which continues to trend a little higher, was also a factor. And Karen will have more to say on that later on in the call. Before moving on, I wanted to take a minute and acknowledge the exceptional performance of our utility and pipeline operations teams during the winter heating season, during which time natural gas service was available to our customers more than 99.9% of the time. This is an impressive achievement that's a testament to the hard work of our dedicated workforce. Across the nation, policymakers are seemingly in a race to transition the nation's energy supply towards intermittent renewable resources. However, the events that transpired during February's superstorm Uri in Texas in the Midwest clearly underscore the need for an all-of-the-above energy strategy. And this is particularly the case in national fuels operating footprint, where the low temperatures that crippled Texas for just a few days are really pretty much the norm for the three coldest months of winter. It becomes readily apparent that there is a long-term need for reliable, weather-hardened infrastructure to serve the energy needs of our region. And I firmly believe that natural gas, with its resilient and safely operated pipeline delivery infrastructure, will remain an important part of the nation's energy solutions. In March, we published our Utilities Pathways to a Low-Carbon Future report, which demonstrates pretty convincingly that natural gas and its associated infrastructure can in fact have a role in a low-carbon world. The report, which was developed using the findings of a study performed by Guidehouse, an independent consulting firm, evaluated scenarios for meeting New York State's aggressive decarbonization targets, focusing on the interplay of energy efficiency, electrification, hybrid heating solutions, and low-carbon fuels to leverage existing utility infrastructure and provide cost-efficient solutions. The study validates that by focusing policy on an all-of-the-above carbon reduction approach, we can achieve significant decarbonization that meets emissions goals while preserving access to low-cost, reliable, and resilient energy for consumers. Also in March, our utility announced greenhouse gas emissions reduction targets for its delivery system of 75% by 2030 and 90% by 2050, both from 1990 levels. The targets rely on our commitment to the continued modernization of our utility infrastructure, which to date has led to a reduction in EPA subpart W emissions of well over 60%. Importantly, our regulators have been supportive of these ongoing modernization efforts, particularly in New York, where our system modernization tracker has allowed us to recover these investments in our system on a timely basis. While we started with the utility, National Fuel is in the process of developing a plan to reduce its overall carbon footprint across the rest of our operations. This plan will include establishing credible emissions reduction targets for our midstream and upstream businesses, as well as enhancing our sustainability disclosures to include additional climate-focused information in line with the TCFC framework. In conclusion, National Fuel is in great shape. Our FM100 project is under construction and on schedule, which positions our pipeline, upstream, and gathering businesses for significant near-term growth. At the same time, our utility business continues to modernize its infrastructure, which will drive meaningful emissions reductions and provide an opportunity for ongoing rate-based growth. Looking to fiscal 22 and beyond, our capital spending requirements will be substantially reduced, particularly in our FERC-regulated pipeline business, which will lead to significant free cash flow and increased financial flexibility. Add to that a half a century of dividend growth and a solid investment-grade balance sheet, and I think you'll find it tough to match National Fuel's long-term value proposition. With that, I'll turn it over to Justin for an update on our upstream operations.