Good day, ladies and gentlemen, and welcome to the First Quarter 2015 National Fuel Gas Company Earnings Conference Call. My name is Katena, and I will be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. Brian Welsch, Director of Investor Relations. Please proceed.

Thank you, Katena, 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 today from National Fuel Gas Company are Ron Tanski, President and Chief Executive Officer; Dave Bauer, Treasurer and Principal Financial Officer; and Matt Cabell, President of Seneca Resources Corporation. At the end of the prepared remarks, we will open the discussion to questions. This morning, we posted a new slide deck to our Investor Relations website. We may refer to it 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 Ron Tanski.

Thanks, Brian. Good morning, everyone. Well, for the first quarter of our 2015 fiscal year, everything went pretty much according to plan, except for commodity prices. Build activities in all of our operating companies have been generally moving along according to design. In our Upstream business, Seneca continues to drill and complete wells. Our Midstream companies continue to install gathering lines and plan for large-diameter transmission projects that will provide an outlet for Marcellus production. And despite a like effect snow storm that piled up 5 to 7 feet of snow across a band of our utility service territory over a few days in November, our Utility employees have managed to keep the gas flowing to all of our customers. Focusing on our quarterly earnings. There was increased throughput in our Gathering business and additional short-term contracts in our gas transmission business that pushed our earnings above last year's levels. Part of the throughput increase was due to the completion of our Mercer compression project that went into service on November 1 as planned. That project has 105,000 decatherms a day of throughput for a third-party and should generate annual revenues of $5.3 million. Throughput also increased in our Gathering systems where Seneca's production increased as more wells along our Trout Run gathering system were brought online. In our downstream marketing company, lower commodity prices helped the National Fuel Resources achieve higher margins during the quarter. On the flip side, it was lower average commodity prices during the quarter that reduced earnings at Seneca. Looking forward through the rest of the fiscal year, because of the lower prices we're seeing in the forward commodity strips, we've lowered our capital spending plans accordingly. Matt and Dave will give a little more color on the revised CapEx budget that we highlighted in…

Thanks, Ron, and good morning, everyone. Seneca had a strong quarter of production growth despite some price-related curtailments. Production was 48.2 Bcfe, 30% higher than last year's first quarter. We curtailed over 6 Bcf due to low-spot pricing in Pennsylvania. In California, production was 890,000 barrels equivalent for the quarter, up 6% versus last year. Given the sharp drop in oil prices, we are now planning on a much reduced capital spending plan for California. Total West Division CapEx is now forecast to be $40 million to $50 million, a $35 million cut at the midpoint. Our current plans are focused primarily on maintenance spending and on development drilling at Midway Sunset field, which is economic at today's oil price. Despite the spending decrease, we expect fiscal '15 production in California to be flat or up slightly as compared to fiscal '14. Moving on to our East Division. In the Utica, Point Pleasant play, we have drilled and completed our Tract 007 well #73H in Tioga County. The well has 4,500 feet of completed lateral length and 30 frac stages. We expect to have a rig and a snubbing unit on location in about 2 weeks to draw out this well and a Marcellus well on the same pad and should commence flare testing by the end of the month. Also in Tioga County, we brought on a new 6-well pad at Tract 595. One of the 6 wells was a Geneseo Shale well, which had a 24-hour peak rate of 7.8 million cubic feet per day. You may recall that we tested a Geneseo well last year at Tract 100 with an IP of 14.1 million cubic feet per day. With these 2 well tests, we are becoming increasingly confident that we have meaningful Geneseo resource potential across much…

Thank you, Matt, and good morning, everyone. Considering the drop in commodity prices, the first quarter was a very good start to our fiscal year. Earnings were $1 per share, up $0.03 over last year's first quarter, largely on the strength of our Midstream businesses, where earnings were up a combined $0.09 per share. Excluding the impact of lower oil and gas prices, Seneca had a terrific quarter as well, with production up 30%. As expected, the utilities earnings were down slightly, mostly because of increased operating costs associated with the development of our new customer billing system. Earnings for the quarter were a bit higher than street estimates, and there were 3 principal areas that contributed to that outperformance. First, Seneca's per unit DD&A, LOE and G&A expenses were all either below or towards the low end of the range of our guidance. Combined, these expense reductions contributed about $0.06 per share to earnings. Second, our FERC-regulated Pipeline and Storage segment had another terrific quarter, driven mostly by continued high demand for short-term capacity, as well as incremental surcharges from shippers using alternate transportation paths on our system. As a result, revenues for the quarter were over $3 million higher than we had planned. Lastly, as Ron indicated, NFR, our nonregulated gas marketing subsidiary, had a really good quarter, with earnings a couple of cents per share higher than we had expected. So, all in all, it was a great quarter. While we're very happy with our results, the drop in commodity prices and crude oil, in particular, will be a significant headwind in the last 9 months of the year. Our new earnings guidance range for fiscal '15 is $2.65 to $2.90 per share at the midpoint down $0.43 from the previous range. Several factors contributed to this…

[Operator Instructions] Your first question comes from the line of Kevin Smith representing Raymond James.

Matt, I guess my first question, and Dave, you touched on this a little bit as well. But can you talk about maybe the duration of your drilling and completion and service contracts. Just trying to gauge your ability to further reduce activity, if prices warrant.

Yes, Sure. On the completion side, while we have a contract, there's no minimum requirement for our completion activity. On the drilling side, we've got 3 rigs, 3 horizontal rigs. The first one goes off its current contract about the end of this year. And then after that, they are staggered about 6 months apart.

Okay. So those are going to be under contract all for the full calendar year, no matter what, really, right?

That's correct.

Okay, fair enough. And then how much do you think you're going to be able to lower service costs in the next 6 to 9 months and I guess -- is any of that cost reduction baked into your E&P CapEx forecast?

It is, to some degree, Kevin. Our frac contract is extremely competitive. I don't anticipate a big change in the cost of our pressure pumping. But there are numerous other vendors that we are currently negotiating with to reduce our costs. So I am hesitant to predict a specific number, but we've baked in something that's a little lower than where we are today.

Got you. And then one question, just on your utilities, and I'll jump off. But is January's impact really going to have any sort of movement in your Pennsylvania Utility earnings, as far as the cold weather that we saw?

Kevin, I don't think it will be a huge impact. I mean, weather has been cold, but it's been not that different than normal and our forecast assumes normal weather.

Your next question comes from the line of Carl Kirst representing BMO Capital Markets.

I just -- maybe kind of following off of Kevin's question with cost and potential reduction. This is really speaking to the dynamic of curtailments. And Matt, I know there's no bright line, if you will, but we've always generally thought of $2 perhaps is the area where curtailments may start. Is that still generally something we should be looking at going forward? Or does that number have perhaps a downward bias to it?

Yes, Carl, again, I always hesitate to put a real specific number on it, but you're in the right ballpark.

Okay. Maybe a question -- one on Northern Access, could you all remind me how much of Northern Access is predicated on third-party volumes? And if the low commodity price environment, I mean, obviously, there's need for more takeaway just given the basis, but I didn't know producers' willingness to sign long-term contracts in the current market if that were shifting conversations at all?

Well, Seneca.

Yes, Carl, the current design for that project right now is the 350,000 decatherms per day, and Seneca has signed up for all of that. As you know, we constantly look at opportunities to add more capacity on our system throughout the system, and the Northern Access is no exception. But right now, the project that we have outlined in the slide deck, again, that was refreshed and filed last night, is 350 for Seneca.

Great. And then last question, if I could, and this is just a clarification, I guess, as we look forward. And this is perhaps internal dynamics here between the Midstream, Gathering and Seneca. But if there are -- if the current levels of curtailments, for instance, were to be extended and you all were to come at the lower end of the production guidance range, is the Midstream segment, is that being paid on a unit feet basis such that, that EBITDA, for instance, may be down from first quarter as well? Or is the Midstream, I would assume like Northern Access, is more of a take or pay? How should we think about that?

It's a per unit rate, Carl.

[Operator Instructions] Your next question comes from the line of Timm Schneider representing Evercore ISI.

I just have one quick question on the timing around the MLP. I know you said some there's new stuff that you guys need in terms of approval and filings. So when do you think you will make a decision by -- in order to have this structure in place for the funding of Northern Access?

Well, okay, again, the first thing -- one of the first things to do is to file with FERC in order to change the structure from a C-Corp to an LLC. That -- we're in the process of drafting those documents now. The next thing is obviously the S-1. But again, as I said, the timing of all this should really coincide with the receipt of the FERC certificate. And we're talking around January or the first quarter of calendar '16.

Okay, got it. And then the other question I just had, in the West, on your oil production, I mean, despite the decline of crude oil prices, the nature of how that stuff is flowing, we shouldn't really expect a decrease in production there, right? That's kind of what you guys are -- basically flattish?

Basically flattish, yes. We will drill fewer wells than we would have, which has a minor impact kind of toward the end of the year, but production will be pretty flat.

I mean, because prices have come off that much, do you think there's more willing sellers out there now? Even -- and I know you said it's tough to add acreage, but are you guys seeing anything around your acreage?

I wouldn't say that we've seen a lot already, Timm, but that may change. One thing to keep in mind, California is primarily controlled by some fairly substantial companies, companies like Chevron, Era, OXY, or I should say Cal Resources. But we're certainly going to be on the lookout for good opportunities.

Your next question comes from the line of Tim Winter representing Gabelli Company.

I was wondering if you could talk a little bit about your either hedge position or firm sales positions out into '16 and '17, and if you had any prices as well.

Sure, Tim. The -- our positions are contained in our -- the new IR deck that's out on the web. On Page, well, I guess, Page 29. We're -- from a hedge standpoint we're -- I mean, we haven't given our production guidance for '16 yet, but we're generally called in that, call it, 35% to 45% range hedged for natural gas for '16.

Is that still in that roughly 377 area? Or...

The 377 -- that fixed price contract does extent through our fiscal '16. Actually, that price goes -- extends through the period at which the Atlantic Sunrise project goes in service.

Okay, okay. And then I was wondering on the Northern Access 16 if -- who the ultimate customers are? Is there any work that needs to be done on that end? Or it's pretty much just Seneca taking the output good enough to get that project going?

Oh, with respect to the supply?

Output, yes.

With respect to the Supply Corporation building the project, we're comfortable with Seneca as the shipper.

Your next question comes from the line of Holly Stewart representing Howard Weil.

Just a couple of quick ones here. Can you give us the breakdown between the WDD -- WDA and EDA production volumes for the quarter? And then maybe, while you you're looking for that, just trying to bridge a few gaps here. I'm assuming the revenue decline that we're seeing now in 2015 on the Gathering side is related to the EDA system. I'm just trying to bridge the gap between growing production volumes into the Northern Access System, the cut to production in 2015 and then the cut to the Gathering revenue assumption.

Yes, so I don't know that breakdown precisely off the top of my head. Tim, I don't know if that's something we can calculate?

Yes, I mean, rough order magnitude, Holly, the EDA would be around 3 -- 34 to 35 Bcf.

The EDA? Okay.

Yes. And then I was a little confused by your -- the revenue question.

So I think you provided new Gathering, let's see, Gathering revenue of $75 million to $90 million. And previously, it was higher.

Right. And so that's just a factor of the midpoint of our production guidance coming down. So if you think of the $75 million would be the level of revenue at the low end of the range of Seneca's production guidance, the $95 million would be at the high end.

Okay, we'll maybe rephrase and maybe this goes to Matt. Just in terms of the production guidance then, is the impact, I'm assuming, is related to the curtailments. So it's on -- would be on the EDA system versus the WDA system?

Actually, Holly, virtually all of our production, EDA and WDA, flows through Gathering that was built by our sister company. So it doesn't really matter where it is. It's either the Covington system, the Trout Run system or the Clermont system. They are all our Midstream company.

Okay. So it's just lower volume in general?

Yes.

Okay. And then I missed part of Carl's question, Matt. I think he was trying to get to the curtailments number that was in the guidance, but I didn't hear it all. So you've got 6 Bcf that you curtailed. In the fiscal first quarter, the new guidance, the new production guidance, do you have a number that you're assuming within there for total curtailments for the year?

Yes, think about it this way. The low end is minimal, pretty close to 0. The high end is we're going to sell 35 Bcf, spot.

Spot, right.

Right. So -- which would be essentially no curtailments at that high end from today forward. The 6 Bcf is just first quarter. As of today, we've curtailed about 11 Bcf year-to-date -- fiscal year-to-date. For reference, Holly, we sold 12 Bcf with spot in the first quarter.

Your next question comes as a follow-up from the line of Timm Schneider representing Evercore ISI.

Just one quick question or follow-up on Northern Access. I noticed TransCanada was having a steep dispute with NEV. I was just wondering if that's all figured out with that last stretch of pipe from Chippawa to Dawn. If you guys have come to an agreement with them?

Yes, that pretty much all got all settled out. All of the customers -- or yes, all of the TransCanada's customers agreed to the settlement. So that's all squared away, and we're set to go with that portion. As you know, we've picked up capacity, both on TransCanada and on Union, to get all the way back to Dawn. So, yes, that's set.

With no further questions at this time, I would now like to turn the call back to Mr. Brian Welsch for closing remarks.

Thank you, Katena. We'd like to thank everyone for taking the time to be with us today. A replay of this call will be available at approximately 3 p.m. Eastern Time on both our website and by telephone, and will run through the close of business on Friday, February 6, 2015. To access the replay online, please visit our Investor Relations website at investor.nationalfuelgas.com. And to access by telephone, call 1 (888) 286-8010 and enter passcode 80321376. This concludes our conference call for today. Thank you, and goodbye.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.