Good morning. My name is Mike and I will be your conference operator today. At this time I would like to welcome everyone to the Q1 2017 National Fuel Gas Company Earnings Conference Call. [Operator Instructions] I will now turn the call over to Brian Welsch, Director of Investor Relations. You may begin your conference.

Thank you, Mike, 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 Ron Tanski, President and Chief Executive Officer; Dave Bauer, Treasurer and Principle Financial Officer; and John McGinnis, President of Seneca Resources Corporation. At the end of the prepared remarks, we will open the discussion to questions. The first quarter fiscal 2017 earnings release and February investor presentation have been posted to 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'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. National Fuel will be presenting at the Scotia Howard Weil Energy Conference in New Orleans later this March. If you plan on attending, please contact the conference planners or me directly to schedule a meeting with management. With that I'll turn it over to Ron Tanski.

Thanks, Brian, and good morning, everyone. Our 2017 fiscal year is off to a great start. And it's nice to have completed a quarter where the commodity prices that go into the formulas that we use to value our reserves, leveled out to the point that did not require us to make any ceiling test or balance sheet adjustments. In fact, spot pricing in the basin improved to the point where Seneca brought a number of wells back online and increased production by a healthy amount. While we have seen an improvement in near-term NYMEX pricing, further out, the futures curve remains backwardated, and although we continue our standard practice to layer in some hedges for our future production at adequate prices, our biggest opportunity to increase the value of the company hinges on the installation of more pipeline infrastructure to move gas out of both our Western Development area and Eastern Development area. The current pipeline capacity constraints on our producing regions, puts us at risk for high basis differentials at various points during the year. We have recently received good news for pipeline projects out of both the EDA and WDA. The Atlantic Sunrise Project received its final Environmental Impact Statement from FERC at the end of December and Williams has indicated a target completion date of mid-2018 for the project. Seneca has contracted for a 189.4 thousand dekatherm per day of capacity on that project. It is expected to be able to fill that capacity right away. On Our Northern Access Project, we've received our Water Quality Certification for the Pennsylvania portion of our project from the Pennsylvania Department of Environmental Protection, and they have informed us that they will be issuing the remaining state permits this month. In New York, the New York Department of Environmental…

Thanks, Ron, and good morning, everyone. Seneca had a great quarter all around. Revenues were above forecast given higher production and improved pricing while our continued focus on expenses resulted in quarterly LOE below guidance on a per unit basis. Seneca produced 44.9 Bcfe during the first quarter, an increase of 6.8 Bcfe or 18% versus the prior year's first quarter. This increase was driven entirely by higher gas production in Pennsylvania where we produce 39.8 Bcf for the quarter, an increase of 7 Bcf or 21% versus the prior year. The increase in production was largely due to significant spot sales in November and December as a result of improved prices in the basin and better than expected well performance related to wells that have been shut in for several months. We produced 7.1 Bcf net into the spot market this past quarter. This compares to 7.5 Bcf over the entire year in fiscal 2016. Strong spot pricing has continued into the second quarter. In addition, as a result of the improved pricing, during the quarter we entered into additional firms sales effectively reducing our spot exposure for the remainder of this year. We added 6 Bcf, net of firm sales at prices between $2 to $3, and it's important to note that these prices are net to Seneca with no further transportation or other deductions. Because of our increased production during the quarter and additional firm sales for the remainder of the year, we are raising our annual production guidance to now range between 155 to 175 Bcfe, an increase of 7.5 Bcfe at the midpoint. For the remainder of our fiscal year, we had 87 Bcf or over 80% of our gas production locked in at an average realized price of around $3.10 which leaves about 20…

Thanks, John, and good morning, everyone. National Fuel had a great first quarter, with earnings of $1.04 per share. In addition to being up significantly over last year, earnings for the quarter were well ahead of both the Street and our own forecasts. This strong performance was driven largely by the increase in spot production that John just mentioned, which contributed to higher earnings at both our E&P and gathering operations. As you know, we produced very little in the way of spot volumes in fiscal 2015 and 2016. That led us to be conservative in our approach to forecasting production. Our initial fiscal 2017 guidance assumed we sold only 50% of our spot volumes at a price of $1.50 per MMBTU. What a difference a quarter can make. Starting in early November, pricing strengthened to sustained levels not seen in a couple of years, and we've been producing all out ever since. For the quarter, we sold spot volumes for an average of $2.20 per MMBtu, or nearly 50% better than we had forecast. Seneca's earnings also benefited from improved operating expenses. Per unit LOE and G&A were both below the low end of the range of our guidance. While most of the drop in those items was caused by higher than forecast production in the East, LOE also benefited from lower workover and steam-related expenses in California. And G&A benefited from lower personnel expense. Per unit DD&A at $0.65 per Mcfe continues to inch lower and now roughly approximates our long-term expectations for F&D costs in the East. Large ceiling test impairments are hopefully behind us. So I don't expect a lot of volatility in that rate. Earnings from our gathering business more than doubled from last year on the strength of Seneca's increased throughput, particularly in the…

[Operator Instructions] Your first question is from Holly Stewart from Scotia Howard Weil.

Good morning, gentlemen.

Good morning, Holly.

Ron, maybe just a quick comment or two on the project -- sorry, on Northern Access and this, maybe tonight or today, maybe tonight and if not, you mentioned in your prepared remarks you could still get it done if there was just a three-month hold. Maybe just talk around that and kind of the expectations that we could see over the next few months?

Yes, I guess -- it's funny, the Rover order, which some might have thought was just behind us in the queue, since they received their environmental -- final environmental impact statement in July, the same month that we received our EA, came out late last night, sometime around 11. So it is possible that they are still working on the details of ours to see today. But if we don't get it, then we had a lot of talk about this at a recent INGA meeting, where we went through the timeline of nominations and the Senate hearings to confirm nominations for FERC Commissioners. And it's reasonable given the President's interest in moving along infrastructure build out in the US to actually get that done in April. So -- and I think, people feel good about that possibility and really, there's -- as far as we know, we haven't gotten any other requests for information in our filings. So we expect the staff is pretty close to being able to put out an order in our project.

Okay, and Ron, maybe just a clarification, you said you'd get that done in April, you are meaning get another commissioner onboard?

Yes, getting another commissioner onboard, and then get the quorum and then be in a position to be putting out more certificates.

Yes, so theoretically, you just need a certificate. Let's say we don't get it tonight. You just need a certificate before you can clear trees come August. Is that correct?

That's right, right.

Okay, okay, just trying to get all the moving pieces. And then, John, maybe just on -- can you just remind us on the Joint Development Agreement, it looks like 75 wells, 66 you've drilled, 58 online. Will everything be online by year end? And I think we're just trying to figure out what's the best way to think about the NRI in 2018.

Yes, we're actually drilling our final pad which is a fairly large pad, about 12 wells, and once that's done, that will be completed later this year but it shouldn't be online until our second quarter of fiscal year of 2018. I think March was the target date for that, to have it on by then. So we will continue to be drilling and completing wells early into next fiscal year.

Okay, great. And then just one quick follow-up on that, the IRR hurdle rate there, I'm assuming with commodities -- with commodity prices coming up that hurdle is getting closer. So I'm just trying to -- how do we think about that hurdle rate on the joint venture agreement?

It obviously helps. Three months is a pretty short timeframe. If prices stayed healthy for quite a bit longer than that, then it would certainly, I think, make progress on getting further towards that hurdle, but three months just is not long enough to really impact it significantly.

Okay, great. Thanks, guys.

The next question is from Graham Price from Raymond James.

Hey, guys. Congratulations on the quarter end thanks for taking my question. So you've done a great job layering in additional firm sales contracts in 2017, and I guess, given the delay in the Northern Access Project, I was just wondering what the strategy is for layering in even more contracts potentially in 2018. And I guess, sort of how much of the shortfall can be covered there?

Sure. In fact, I'll speak to both receipt points, since we saw delays both on Northern Access and Atlantic Sunrise. At CRV, we essentially have between 13 and 14 Bcf of firm sales at Dawn already. And so our effort over the next few months is going to be more towards converting those firm sales to the receipt point at Clermont. We're already well over -- a little over 20% of those conversions and we will continue to work on that. If necessary, we will add firm sales again at -- on Tennessee but really our early focus is going to be converting Dawn sales to our receipt point. And then on Transco, over the quarter, we added about 15 Bcf net of firm sales at over $2 to cover our fiscal 2018, to bridge that Atlantic Sunrise delay. So we're actually in pretty good shape there already as well thanks to this first quarter.

Okay, got you. Thank you. That's definitely helpful. And then, I guess a quick follow-up, you indicated previously that well pressures were pretty strong for the previously shut-in wells that you brought online. I guess I was just wondering then if we might see a little bit of a drop off in future quarters as that affect kind of dissipates over time, or when you see those strong volumes [technical difficulty]?

Yes, the flush volumes -- they pretty much produce out within two to three months. And so going forward we will fall into more of that natural decline that we see across all of those areas. So it's -- certainly we see that flush early, but within a short period of time, that it falls into a more natural decline.

Okay, got you. Thank you, guys.

The next question is from Chris Sighinolfi from Jefferies.

Hey, good morning, guys.

Good morning, Chris.

Hey, Ron, I really appreciate all the color on the political and regulatory fronts and the potential impact on Nat Fuel. Obviously, a lot is still subject to how specifically the administration plays it, but very helpful to know some of the facets of what you're looking at and the fact that you're paying attention. So appreciate all of that color. I think with regard to -- where I want to start -- I appreciate the color you offered to Holly in response to FERC process. I just maybe have two follow-up questions for you on that. One, you mentioned Rover appears to have perhaps jumped ahead of you in the queue. I think it was either Atlantic Bridge or Leach that seemingly did the same. So I'm just wondering your thoughts on maybe why that's occurring, if they are -- if you have any. And then second, you and Ron Kramer have followed this space for a long time. Just curious -- there's two commissioners after Bay leave today. Obviously the full commission is five. Are we just expecting one nominee and then that nominee's confirmation means FERC certificates start filling [ph] again, or do you suspect Trump might try and fill it all up?

Well, I -- we -- the whole industry thinks that we'd like to get it filled up, because later on, the next, Commissioner Honorable term would be up, I think, this summer. And so it's always nice to have a full complement. What we've been hearing, and at least the talk during the INGA meeting was that there were discussions about -- and actually Acting Chair, LaFleur's hope to get somebody with pipeline experience on the commission. So I mean I think there's enough buzz about that going on inside the Beltway that, that's a strong possibility of happening. With respect to the order of the certificates, Chris, I wish we knew. Given the fact that once you've filed, you can't have direct or individual conversations with the FERC staff because that would be considered ex parte. We don't have a real good handle on their thought process. So I guess that's about all I can say.

Okay. And I lied; one follow-up on just this regulatory world. You had mentioned to Holly, sort of, as long as we have the FERC certificate by the time we can recommence tree clearing. That's sort of the point at which it would be problematic again. I'm just curious, are the New York State and federal processes completely sort of exclusive of one another, or is there the potential where your new timetable agreement with New York State in April, if there is not a FERC certificate by that point, it interferes in any way?

Well, I mean we still need the FERC certificate and the notice to proceed before we'd be in a position to be doing any work on the ground. I think the -- I'm not exactly sure what you're asking, but for example, Pennsylvania, independently, was able to issue its water quality certification, notwithstanding the fact that we don't have a FERC certificate. So I --.

Okay, that is what I was asking, if the state would feel comfortable giving that authority or giving that approval in advance of you receiving federal approval.

Yes, I mean in previous certificates where we've seen the issue come up, particularly in New York, obviously, and we're very well-versed in what's been happening with Constitution and Millennium, the DEC would unlikely issue a certificate if the FERC did not get their environmental assessment done beforehand. But as you know, we already received our EA in July. So -- and the New York DEC did indicate that our application was complete in their notice of complete application and that's why they are ready to go ahead with their public statement hearings next week.

Okay, great. Thank you for all of that. I guess switching gears a little bit, John, just curious, any update -- if I missed this, I apologize, but spot sales quarter-to-date in the fiscal second quarter?

Yes, I don't have that number with me. We typically don't announce that until the end of the quarter.

Okay.

We've been flowing -- let's just put it this way -- have been flowing full 100% all of January.

Okay, that's hopeful. And I guess -- obviously, you were talking about primary goal moving the Dawn from sales to Clermont. Just curious, as you are thinking about, I guess, the delay in Northern Access and your first half production numbers for 2018, is that -- are firm sale agreements something counterparties are willing to entertain at any point in the year, or is there sort of a season in which it's optimal to try and secure those commitments? Are we in that now or is that something we could expect to add over the course of the summer?

We can layer in firm sales at any time through the year. Having said that, it certainly makes more sense to be more active when prices -- during a period when prices have rebounded. As we move into the shoulder months and into summer, depending on what kind of summer we have, those prices and especially the basis differentials could erode. So we'd certainly pay attention to that. That's why we're trying to pay attention to this as early as possible.

Okay, and then your -- the cadence of your field operations, it seems like from your prepared remarks there's no change in that given the delay. So I am imagining what we should just assume if the Northern Access Project holds to its fiscal 2Q 2018 schedule, it's just that it might fill up faster than we otherwise would have assumed. Is that correct?

Exactly. Yes, there's no change whatsoever. We would need the well inventory in the WDA. So we have to get a rig out there to begin.

Got it. Okay. Thanks so much for the time this morning, guys.

Thanks, Chris.

[Operator Instructions] And there are no further questions at this time. I will turn the call back over to Brian Welsch for closing remarks.

Thank you, Mike. 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 3:00 PM Eastern time on both our website and by telephone and will run through the close of business on Friday, February 10. To access the replay online please visit our investor relations website at investor.nationalfuelgas.com. And to access by telephone call 1-855-859-2056 and enter the conference ID number 47888632. This concludes our conference call for today. Thank you and goodbye.

This concludes today's conference call. You may now disconnect.