Yahoo Finance National Fuel Gas Co (NFG) (Q2 2024) Earnings Call Transcript Highlights: Robust Growth and ...
Adjusted Operating Results: $1.79 per share, up 16% year-over-year.
Regulated Business Earnings: 36% increase in EPS.
Pipeline & Storage Segment Revenue Increase: New rates increase annual revenues by $56 million.
Utility Revenue Increase: Higher rates contribute to a $23 million increase.
New York Rate Case: Requests $89 million increase in annual revenue.
Seneca Production: 103 Bcfe, up 10% from previous year.
Seneca Capital Expenditure Guidance: Reduced to $525 million - $555 million.
Seneca Production Guidance: Adjusted to 390 - 405 Bcfe.
NFG Midstream Throughput: Increased 15% year-over-year to approximately 126 Bcf.
Quarterly Financial Results: Strong performance with significant growth in regulated subsidiaries and increasing capital efficiency.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Adjusted operating results increased by 16% from the previous year, demonstrating strong financial performance.
Significant growth in regulated businesses, with a 36% increase in earnings per share from these segments.
Successful hedging strategy mitigated the impact of lower natural gas prices, providing financial stability.
Continued development and expansion of regulated assets, such as the Tioga Pathway Project, expected to drive future growth.
Strong focus on capital efficiency and cost management, leading to reduced capital expenditure guidance and improved free cash flow.
Negative Points
Natural gas prices were a headwind during the quarter, affecting overall profitability despite hedging efforts.
Regulatory challenges and environmental compliance are increasing costs, potentially impacting future profitability.
Volatility in natural gas prices expected to continue, posing risks to financial stability despite hedging strategies.
Operational challenges such as the need for modernization investments and compliance with new regulations could increase expenses.
Exposure to local spot markets remains, with about 10 Bcf potentially affected by in-basin pricing volatility.
Q & A Highlights
Q: 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. A: (Justin I. Loweth - President of National Fuel Gas Midstream Company, LLC & Seneca Resources Company, LLC) Yes, from April forward to the balance of our year, we really have minimal exposure. We were proactive in locking a lot of our exposure, so now through the balance of the year, we only have about 10 Bcf exposed. It's relatively evenly split between Q3 and Q4. You're not going to see those kinds of curtailments as we really got ahead of it.
Q: 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? A: (Timothy J. Silverstein - CFO & Treasurer) It wasn't anything fundamentally changing within the business. It's really two 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.
Q: Yes. A nice quarter here. Just first question would be just how you're thinking about M&A in the current environment is 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? A: (David P. Bauer - President, CEO & Director) 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.
Q: 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? A: (Justin I. Loweth - President of National Fuel Gas Midstream Company, LLC & Seneca Resources Company, LLC) Yes, Neil, P&A, 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, 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.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
