National Fuel Gas Company (NFG) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A session reflect a positive outlook. The company has a strategic plan for growth, with increased production and new projects in the pipeline. The Ohio Gas utility acquisition and increased firm transportation agreements are promising. Despite equity and debt financing for acquisitions, the company is poised for long-term growth. The Q&A session revealed optimism about market opportunities and growth potential. Although there are some uncertainties, such as cost increases and financing, the overall sentiment is positive, suggesting a likely stock price increase in the short term.
Key Financial Performance
Adjusted Earnings Per Share (EPS) $2.06, a 14% increase year-over-year. This growth was driven by higher production and natural gas prices, as well as strong performance in regulated businesses due to a 3-year rate settlement at the New York utility and a pipeline modernization tracker at the Pennsylvania utility.
Adjusted EBITDA 29% increase year-over-year. This was attributed to higher production and natural gas prices.
Net Production 109 Bcf, a 12% increase year-over-year. This growth was driven by the Tioga Utica program and a focus on capital efficiency.
Capital Efficiency 30% improvement since 2023. This was achieved through optimization in the Tioga Utica program and well design testing.
Rate Case in Pennsylvania A proposed $20 million increase in rates, which would result in an 11% increase in customer bills. This is to address general cost inflation and reset the modernization tracking mechanism.
Equity Financing $350 million raised through a private placement of common stock to fund the Ohio utility acquisition.
Debt Financing Approximately $1.5 billion in long-term debt planned for the Ohio utility acquisition and refinancing needs.
Natural Gas Prices Recent fluctuations with February contracts settling at $7.50, a 140% increase from two weeks prior. This volatility is attributed to weather-driven impacts and strong structural demand.
Methane Reduction Certificates A 10-year agreement to provide 250,000 MMBtu per day of MiQ certified methane reduction certificates to a European utility, highlighting sustainability efforts.
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Operating Highlights
Tioga Utica Program: Significant production growth paired with lower capital spending highlights the strength of the Tioga Utica program. Testing to further optimize well designs is expected to yield additional productivity gains.
Upper and Lower Utica Co-development: Testing of co-development pads is underway to optimize future development. Results will guide the highest returning integrated development program.
Methane Reduction Certificates: Executed a 10-year agreement to provide 250,000 MMBtu per day of MiQ certified methane reduction certificates to a European utility.
Natural Gas Demand: Demand for natural gas is at all-time highs, driven by LNG feed gas and new baseload power generation.
Ohio Utility Acquisition: Acquisition of CenterPoint's Ohio LDC is on track to close in Q4 2026. Regulatory approvals and financing are progressing as planned.
Capital Efficiency: Capital efficiency is on track for a 30% gain since 2023, significantly outpacing peers.
Pipeline Expansion Projects: Tioga Pathway and Shippingport Lateral projects are progressing on schedule, with additional expansion opportunities being explored.
Rate Cases: Pennsylvania division filed for a $20 million rate increase to address cost inflation and reset modernization tracking mechanisms.
Energy Policy Advocacy: Advocating for an all-of-the-above energy approach, with growing bipartisan support and policy shifts in New York favoring natural gas infrastructure.
Debt and Equity Financing: Completed $350 million private placement of common stock to fund Ohio utility acquisition. Plans to issue $1.5 billion in long-term debt for acquisition and refinancing needs.
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Risk or Challenges
Operational Disruptions: Challenging winter weather conditions were mentioned, but the systems held up well with minimal disruptions at Seneca and no significant issues on transmission and distribution systems.
Regulatory Risks: The company faces potential regulatory hurdles, including a rate case filing by Supply Corporation to recover costs related to modernization and inflation, and a new rate case in Pennsylvania requesting a $20 million increase in rates. Additionally, the All-electric Buildings Act in New York is delayed but could pose future challenges depending on litigation outcomes.
Economic and Inflationary Pressures: General cost inflation is impacting operations, necessitating rate increases in Pennsylvania and New York. The company is also addressing expense inflation since its last rate increase two years ago.
Acquisition and Financing Risks: The acquisition of CenterPoint's Ohio LDC involves transaction-related costs, integration readiness costs, and financing risks, including earlier dilution and incremental interest expenses. The company plans to issue approximately $1.5 billion in long-term debt, which could pose financial risks.
Market Volatility: Natural gas price volatility is a significant risk, with prices fluctuating dramatically due to weather-driven impacts. This volatility affects earnings and operational planning.
Supply Chain and Infrastructure Challenges: The company is advancing pipeline and infrastructure projects, such as the Tioga Pathway and Shippingport Lateral projects, but these are subject to permitting, regulatory approvals, and construction risks.
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Guidance & Outlook
Natural Gas Market Outlook: The outlook for natural gas is strong, with demand at all-time highs. There is a growing need for LNG feed gas and new baseload power generation, primarily produced using natural gas. Bipartisan support for an all-of-the-above energy approach is increasing.
Integrated Upstream and Gathering Segment: Seneca's inventory expansion and capital efficiency improvements are on track for a 30% gain since 2023. The company is conducting Upper and Lower Utica co-development tests to guide long-term strategy. Production guidance for fiscal 2026 is reaffirmed at 440 to 455 Bcf, with capital expenditures of $560 million to $610 million.
Pipeline Business Expansion: The Tioga Pathway project and Shippingport Lateral Project are progressing on schedule, with the latter expected to be in service by late 2026. Additional expansion opportunities are being explored, and a rate case will be filed later this year to recover modernization costs.
Utility Business Developments: A new rate case in Pennsylvania requests a $20 million increase in rates, with customer bills expected to rise by 11%. The acquisition of CenterPoint's Ohio LDC is on track to close in Q4 of calendar 2026. Regulatory improvements in Ohio are expected to reduce rate case timelines and provide greater certainty in achieving allowed returns.
Financial Guidance: Adjusted EPS guidance for fiscal 2026 is reaffirmed at $7.60 to $8.10, with a midpoint of $7.85. Natural gas prices remain a variable, but the company has hedged 70% of its remaining production for fiscal 2026. Capital expenditures and cash flow are in line with previous expectations.
Future Production and Marketing: Production is expected to increase in Q3 of fiscal 2026 and remain steady through the end of the year. The company is enhancing its marketing portfolio and firm transportation capacity, which will grow from 1 Bcf/day to 1.5 Bcf/day over the next few years.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Do you have any ability to take advantage of local prices that have spiked over the last week or so due to cold weather and freezeouts?
A:Yes, the company has a marketing portfolio that allows them to keep a small portion of gas open daily to take advantage of high prices in markets like non-New York and Z5 on the Transco system. They benefited from the recent price spikes.
Q:What is the potential for future growth projects in the pipeline business beyond Tioga Pathway and the Line N Lateral?
A:The company sees additional opportunities over time due to the strategic location of their pipelines. They are in active dialogue with other parties and believe there will be more opportunities for growth.
Q:What are your thoughts on federal permitting reform bills targeting changes to NEPA and the Clean Water Act?
A:The company supports the bills as they would benefit both the pipeline and renewable industries. They believe permitting reform would lead to projects being built sooner, though it may not change their overall view on pipeline development.
Q:How can we think about the D&C costs of the Seneca Gen 4 design, and how does it compare to costs shown on Slide 50?
A:The Gen 4 design involves wider inter-well spacing and increased proppant loading, adding $150 to $175 per foot. The company is testing the design and expects meaningful uplift in pad-based IRRs and EUR. They are also exploring facilities to hold wells flat at higher rates.
Q:What is the optimal production growth rate for the company over the next several years?
A:The company targets mid-single-digit growth (3% to 7% per year) when gas prices are in the $3 to $5 range. Growth may accelerate with higher prices or slow with sustained lower prices. Interstate pipeline capacity is a key constraint.
Q:Are there plans for further delineation or testing to unlock more locations in the Upper Utica zone?
A:Yes, the company is appraising and delineating both upper and lower Utica zones. They have over 400 locations and see potential for further expansion. They balance leading-edge appraisal wells with drilling well-delineated inventory.
Q:What alleviates natural gas market volatility?
A:The company believes more pipeline infrastructure ('steel in the ground') is needed to reduce volatility. They focus on optimizing existing storage facilities rather than building new ones, as new storage is costly.
Q:What percentage of your storage is merchant versus contracted?
A:100% of the company's storage is contracted under straight variable rates.
Q:What is the appropriate co-development strategy for the Upper and Lower Utica zones?
A:The company currently leans towards developing the Lower Utica first due to better economics but is testing co-development strategies. They plan to use data from ongoing tests to make a conclusive decision within 12 to 18 months.
Q:What is the company's M&A focus following the CenterPoint deal?
A:The company is open to M&A opportunities in both regulated and nonregulated businesses, focusing on investments that provide the best returns for shareholders.
Q:How variable is the frac barrier between the Upper and Lower Utica zones?
A:The frac barrier is a regionally unique feature with consistent characteristics across the company's acreage. Its thickness varies, but it is largely impermeable and effective across the delineated area.
Q:What is the company's view on incremental takeaway capacity out of the basin?
A:The company sees opportunities in brownfield and quasi-greenfield projects, as well as in-basin demand growth. They are optimistic about projects like NEE and believe further debottlenecking of large interstate pipelines could help reduce volatility.
Q:Review of Unclear Management Responses
A:Management avoided providing specific early productivity uplift details for the Gen 4 design, stating that detailed data would come later. They also did not provide a clear priority between regulated and nonregulated M&A opportunities, emphasizing flexibility instead.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
CenterPoint
Commission
Lower Utica
Ohio utility
Upper
Utility
York utility
acquisition financing
affordability
approach energy
bill rate
case modernization
comparability
customer bill
delivery rate
employee
equity need
favor approach
filing
financials
gas industry
integration
interest
item
line expectation
notice
offering
placement
policymakers
rate inflation
region
tailwind
term cash
term debt
test
timeline
track calendar
transaction
utility acquisition
weather
NFG Transcript
National Fuel Gas Company (NFG) Q1 2026 Earnings Call Transcript
Positive1-29
The earnings call summary and Q&A session reflect a positive outlook. The company has a strategic plan for growth, with increased production and new projects in the pipeline. The Ohio Gas utility acquisition and increased firm transportation agreements are promising. Despite equity and debt financing for acquisitions, the company is poised for long-term growth. The Q&A session revealed optimism about market opportunities and growth potential. Although there are some uncertainties, such as cost increases and financing, the overall sentiment is positive, suggesting a likely stock price increase in the short term.
National Fuel Gas Company (NFG) Q4 2025 Earnings Call Transcript
Positive11-6
The earnings call highlights strong financial performance, including a 21% production increase, 9% higher realized prices, and a 38% rise in EPS. Optimistic guidance for fiscal 2026 and strategic pipeline projects bolster future growth prospects. The dividend increase and paused buyback program reflect shareholder value focus. Despite some uncertainties in the Q&A, the overall sentiment is bolstered by record high production and efficient capital spending, indicating a strong positive outlook.
National Fuel Gas Company (NFG) Q3 2025 Earnings Call Transcript
Positive7-31
The earnings call summary and Q&A indicate strong production growth, improved cash operating costs, and effective capital management. While there are some concerns about capital allocation and cash taxes, the overall sentiment is positive due to optimistic EPS and free cash flow projections, a resumption of the share buyback plan, and strategic positioning in market expansions. The company's hedging strategies and well productivity gains further support a positive outlook, likely resulting in a stock price increase in the 2% to 8% range over the next two weeks.
Earnings call transcript: National Fuel Gas exceeds Q2 2025 earnings expectations
Positive5-1
The earnings call highlights strong financial performance with a 30% earnings increase and a 32% rise in adjusted operating results. Despite macroeconomic uncertainties, the company maintains a positive outlook with increased production guidance and improved capital efficiency. The Q&A section raised concerns about infrastructure hurdles and buyback delays, but overall sentiment remains positive due to optimistic guidance and strong financial metrics. The absence of market cap data suggests a moderate positive impact, predicting a stock price increase of 2% to 8%.
NFG Slides
NFG Report
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