Good morning, my name is Virgil and I will be your conference operator today. At this time, I would like to welcome everyone to the National Fuel Gas Company Earnings Conference Call. [Operator Instructions] Thank you. Brian Welsch, Director of Investor Relations, you may begin your conference.

Thank you, Virgil, 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 Principal 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 second quarter fiscal 2017 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'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 American Gas Association Financial Forum later this month in Orlando March. If you plan on attending, please contact me directly to schedule a meeting with management. And with that I'll turn it over to Ron Tanski.

Thank you, Brian. Good morning everyone. I just saw on our earnings release last evening we have another strong quarter both financially and operationally. In our upstream exploration and production business, commodity pricing in Appalachia has improved to the point where since October none of our producing wells have been shut in due to pricing. As a result, our produced volumes have been trending at the high-end of the range of our production guidance which is helped drive earnings higher in our exploration and production segment and our gathering segment. So I will give a little more detail on our near-term production marketing plans that we expect will allow us to continue our production trend at the higher end of our guidance range for the rest of the year. The higher earnings in our upstream and gathering businesses offset the slight declines in the earnings of our other business segments and Dave Bauer will give more detail on the earnings drivers in those segments later in the call. Overall, our operating folks are doing a great job in all of our business segments. Seneca continues to be a leader in keeping down drilling and completion costs in the Marcellus. And our gathering pipeline folks continue to be ready with the pipelines that can take production to market as soon as each well pad is completed. In the transmission pipeline business, we've been successful in securing new offtake business on our Line N system in Pennsylvania to service a new load for the shell cracker plant that is now under construction. Last evening we commenced an open season for yet another 215 MMBtu expansion in Pennsylvania for end-use markets on our Line N system. In addition, we were successful in signing up and anchor shipper for the base load capacity on…

Thanks Ron, and good morning everyone. Seneca enjoyed another solid quarter. Natural gas prices remains strong in Pennsylvania and as a result we had no price related curtailments during the quarter. Seneca produced 45.6 Bcfe during the second quarter, an increase of 6.4 Bcfe or 16% versus the prior year second quarter. In Pennsylvania, we produced 40.8 Bcf for the quarter, an increase of 6.7 Bcf or 20% versus the prior year. This increase was driven by stronger than expected Marcellus well performance and no curtailments due to continued strength in the spot market. Therefore, we are again increasing our production guidance for the year to now range between 165 to 180 Bcfe, an increase of 7.5 Bcfe at the midpoint from last quarter's guidance. Since Northern Access was not plan to be operational until fiscal '18, there will be no immediate impact on Seneca's fiscal 17 activity level. As planned, we added a second rig this month and it will begin drilling in Lycoming as we prepare for our Atlantic Sunrise capacity mid-2018. The rate will then move to a DCNR 007 tract in Tioga County to begin a Utica development program. Our Utica appraisal well in Tioga continues to outperform expectations, and this well has now produced over 2 Bcf in less than six months. Based on the strength of this well, we believe we have around TCF of potential resource within the Utica on this tract. We have decided to accelerate our 007 Utica drill program and this will be an area of significant production growth over the next few years. First, production from this program is now forecasted to occur in early fiscal '19. Our current rig will remain in the Western development area drilling both Marcellus and Utica wells over the next 18 months with…

Thanks John, good morning everyone. Putting aside the regulatory challenges Ron outlined earlier, the second quarter was a good one for National Fuel with earnings up $0.07 per share over the last year. The quarter also highlights the benefits of a diversified business model as the outstanding performance of our non-regulated operations more than offset a modest dip in our regulated businesses. Seneca had a great quarter with significant improvements across the board. Net production in Appalachia was up nearly 20% which contributed $0.15 to Seneca's earnings and was the main driver of our gathering businesses $0.03 per share increased in earnings. Spot prices in Appalachia were strong averaging approximately $2.60 per MMBtu not more than a $1.40 over last year. Lastly, Seneca saw a significant improvements in per unit operating expenses with combined DD&A, G&A and LOE down 20% versus last year. In addition to being lower than the prior year's amounts these costs all came in towards the low-end of the range of our previous guidance. All in, it was a terrific quarter for Seneca with recurring earnings nearly doubling over last year. Going in the other direction, Utility earnings were down $0.08 per share compared to last year. A large portion of this decrease was attributable to our new customer billing system which as we discussed on prior calls increased both depreciation and personnel related expenses. We began recovering a portion of these costs in our New York division when new rates went into effect on May 1. Also contributing to the decrease in earnings was warmer weather in the Pennsylvania division of our utility and higher pension expense. In the pipeline and storage segment, earnings were down $0.03 per share largely because of lower revenues. This decrease was not a surprise, most of it was due…

[Operator Instructions] Your first question comes from the line of Holly Stewart with Scotia Howard Weil. Please go ahead.

Good morning, gentlemen. Ron, maybe the first question is sort of bigger picture, thinking through Constitution and their appeal. How would a decision, which, I think, is expected in the next few months, impact you guys just positive or negatively on the process of your appeal for Northern Access?

Well, that's interesting, Holly, because the denial in constitution at least appeared to be on the basis that they did not present enough information. So it's hard to say where the court will come out on that. Ours on the other hand was based on all the information that we did submit, and they thought that impacted the water quality of the state. Now, who knows, it seems to be a moving target given that the DEC just permitted Algonquin to install 42 inch pipeline is in the same construction methods that were deemed unacceptable for our project. I mean it just indicates how arbitrary the decision-making can be. So it’s hard to say what the constitution decision could mean for us. We're all scratching our heads here right now to say the least.

No absolutely, maybe an extension on that. I know you think Northern Access is the best foot forward. Any new thoughts on Nexus? Any maybe ultimately like they still have some capacity- taking this capacity on that project.

Yes. We’ve talked about other routes before our plan B. Right now our plan B seems to be working out just fine with respect to getting fixed price sales in the basin. That frankly have improved because of the rover and the installation of other outlets for production in the basin. So I mean that’s the immediate Plan B. But, yes, our engineers are looking at ways to expand pipelines across Pennsylvania through our WDA, possibly west for interconnection there. But as we’ve stated before, you get into the situation of pan-caking additional rates and that will affect the ultimate economics of our drilling in the WDA.

Okay, great. And then, maybe one for John, just on the new 10% 3-year CAGR that you hit out. Can you maybe just talk about the kind of embedded assumptions with that, whether it's rig count or wells to sales, or kind of how you guys are coming up with that growth rate?

Sure. Obviously we've done a number of forecast based on the two rigged case. We’ll talking about that next quarter when we at least put out our fiscal '18 forecast. But from a big picture, with respect to '18, since removing the completion of 12 of the joint development wells into next year, and because we’re just now adding the second rig this month, I don't see or I don't think we'll see annual production growth significantly above 10% next year. Having said that moving into the fiscal '19, Atlantic Sunrise will be on the entire year. Our Tioga Utica production should be ramping up in Q1, Q2 of fiscal '19 and we’ll be bringing online many more a 100% working interest wells in the Western development area. So I see, at least in '19, I could see that we could - it will be 10, at least 10 if not greater than that.

That’s great. Thanks, guys.

Your next question comes from the line of Graham Price from Raymond James. Please go ahead.

Hi guys, good morning, and thanks for taking my question. So looking at Slide 26 of the presentation, it looks you’ve done a great job layering in the current sales contract so far as. I was just wondering if we could get a little more color on what the landscape looks for bearing in even more contract going forward?

Absolutely. We’ve been very active in the market. As Ron said in his section of the earnings release, we've already layered in an additional 45 million a day, a double of seven development program. We are actively layering in fixed sales, firm sales at Clermont Rich Valley. But mostly focusing on fiscal '18. And over the next few months, we’ll begin to push that into layering in fiscal '19 and '20 volumes as well. The market has been fantastic. We’ve been able to get prices that we feel will generate a rate return of 30+ on all of our development programs. So we think that at least for the next 6 to 12 months that this is going to be an active market, and we’ll have plenty of opportunity to close that gap that you see on that slide.

Okay, perfect. That sounds very positive. And for a quick follow up, we’re just wondering if there is anything specific that you could point to regarding that UR up with the Utica wells that you mentioned.

The decline has been a lot less than we anticipated. We’re comparing these wells to some of the decline curve that we see through Potter into Tioga, and the two wells that we have online -- now it’s only been four months, so we still have a ways to go. But the decline is just been a lot less than we’ve seen in other areas. That's what driving the increase.

Thanks guys.

Your next question comes from the line of Tim Winter from Gabelli. Please go ahead.

Good morning and thanks for taking my question. I was wondering if you guys had any recourse regarding Northern Access with FERC to perhaps supersede the state.

Yes, Tim. If you read the back and forth that we already had with -- not back and forth with FERC, but our filings with FERC and then response by the New York TEC with respect to that. Yes, I mean, we think there is a possible avenue for preemption by the FERC or through the FERC process. Unfortunately in order to achieve that, FERC has to get back up to a quorum which we expect won’t be happening until probably late summer, early summer, maybe late summer for them to be able to do that. But, yes, I think I mean our arguments were quite clear in the paperwork that we filed with FERC with - on hearing. So, yes, that’s absolutely a path.

Okay. And then back to the New York Public Service Commission. What is your regulatory strategy going to be going forward? Are you going to be maybe refile or just sort of stay away?

Obviously, the cost pressures or an increased investment as a result of our modernization programs will always have us looking at the possibility of a new case. As we pointed out in the 10-Q that we just filed or will file later on. We’re also looking at a possible appeal of that decision with respect to the disparate treatment that we received versus other utilities in the state. So any number of avenues to look at there. Overall, we’re going to continue our practice of providing the best service to our customers in the state, and watching costs as we do that as a result. That’s why we’ve been able to achieve the lowest rates as I mentioned before any of the utilities in the state. So we've obviously got a business to run as I said before we think it's a lousy decision but we’ll continue to operate and do the best we can.

Okay, great. Thank you and congrats on the quarter other than the regulatory treatment.

Your next question comes from the line of Chris Sighinolfi with Jefferies. Please go ahead.

Hi, good morning guys. Ron thanks for the color, I wanted to maybe at least picked up where Tim left off just on the regulatory climate I mean, clearly I've been following it quite as long as you have and it certainly seems like we taken a couple of steps back in the last couple of years culminating with the things that you talked about the 401 permit analysis and constitution on your own project, the NFGB decision. lowest authorized ROE of any gas utility in decades. I guess I'm just wondering it seems like it's no very political agenda which is produced those I guess but leading politics aside and just thinking about from a business perspective. I guess I have a couple questions, first it seems like you agree with that assessment given the commentary you also had prepared remarks I am just wondering how you and Dave and the board think about how that shapes your capital allocation decisions around New York investments. And then second just given that you do have other businesses within national fuel which exist outside of New York how it sort of shapes the relative trade-off the regulatory risk issues in New York and then just I guess wondering if there is any potential divestiture opportunities of your New York businesses?

While there is a number of the questions in there Chris, so let me try to tackle it. If you look any historical period and then let's look back over say five to nine years and over nine years we've invested over $6.2 billion in all of our businesses through the years 14% to 16% of that was invested in New York and over the same timeframe 74% - 77% was invested in Pennsylvania with our Northern Access project we were looking at a substantial increase investment in New York State. And let’s be clear we still love to achieve some sort of a negotiated solution for that project but when the governor won't take 10 minutes to respond to repeated requests of the CEO of New York headquartered company with 1,200 employees in the state and the commissioner of the DC won't return my calls I mean who are we going to negotiate with. So since it appears that our growth investments are not necessarily welcome percentage of investments in New York will continue to decline. Now as I said before we’ll continue to make investments in our pipelines to make sure they're safe I've already gone through those numbers before but our growth capital will be continue that with Seneca in Pennsylvania and California and incremental pipelines are likely avoid New York. Now you might find a counterintuitive that we would consider investing more in California for environmental regulations are just as or maybe more stringent than New York. But in California the regulations are consistently interpreted and we know what to expect.

So again it’s New York will probably decline and the real question gets to be whether we’ll be able to attract capital and the usual investors for a long-term debt our insurance companies that are risk-averse and by directing our investments to areas that are more predictable, we think the capital markets will be fine when we visit them. So I’m not sure that that answer your question but it’s kind of generally where we see things going.

No I mean itself helpful I think we’ve seen parallel cases this is probably going back a decade with some of the companies active in states like Arizona and working commission structure there was like the end predictability of outcomes led to their decisions to invest heavily in other regions so I was assuming the answer was going to be similar for you that just helpful to hear from you directly on it. I guess switching gears a little bit and extrapolating from I think you had mentioned or David mentioned sort of $500 million or $600 million your consolidated CapEx run rate number in your plan sort of excluding any lumpy expansion related capital needs. I guess on our modeling that suggests free cash flow over the next several years. So I'm curious with a credit ratings where they are with that cash flow profile the appetite to expand the footprint in areas outside New York that may be present greater growth avenues but I don’t know if M&A would feature in that if there is something we could discuss that might be on our wish list. And then this has been a very long time since you discussed Ron but your buyback program I think you still have like 7 million shares authorized via your purchase. At what point does that maybe come back into - could be something which you consider?

I think with respect to the buyback, we’ve obviously always been watching that’s been out there since I think 2007 obviously we stop that during the capital markets issues in 2008. But we do have that available I guess we prefer again always rather than shrinking the company prefer to grow the company and having some dry powder for opportunities that frankly come up on a regular basis on the expiration of production side and we were always looking at things as you can imagine. Our history has been all across the natural gas value chain and what we'd love to have more pipeline investments that you can serve a dual purpose to grow the company it doesn't appear that that's going to happen anytime soon in New York, but we’ll still push obviously as I said in the prepared comments Northern Access everything makes sense from a number of point of view it’s from energy security in the state to helping grow the New York headquartered company, that’s makes a lot of sense. But if we can't we’ll be looking at things likely across Pennsylvania or in and it always as we've looked at M&A on the utility side. It's always been a joining service territories that make the most sense where you can achieve the most synergies and extract costs and higher earnings from. So we’ll be looking at that, but given where the multiples are these days I’m not particularly aware of any imminent opportunities on the utility side.

Okay. Really appreciate the color, I guess one final question for me and just switching gears and for John and there was familiar question on it. But I just wanted some help in how we think about, you know the process of converting those Dawn firm sales contracts and basing contracts, you've mentioned the new contracts you’ve added. And I realized this whole process is similar to what you did couple years ago when you voluntarily delayed Northern Access but I guess two questions one the dynamics on t how you do the conversions. And then second how deep is that market your comments about the needing an evacuation or physical exam route is what would sort of underpin meaningful long dated growth Seneca. So how do you run a program depending how deep from sales agreements with that can we sign 2020 right now or is the market just not there for?

Actually the market is there a lot of our firm sales that we've been layering in at 007 for our Utica development in Tioga most of those are three to five year contracts the terms are. So it's there the market is there to layer in those kind of at least those kind of terms. As far as converting Dawn-based firm sales back to CRV we've been actively doing that for a number of months. We've done it I think 100% through March of next year and actually it's a pretty good time to be doing it and honest slipped a little bit we converted to NYMEX and then layer in a basis differential off of NYMEX at our at our, Clermont/Rich Valley receipt point. So it's actually we’re seeing some pretty good prices so we will be aggressively trying to get that done over a multiyear term over the next month or two. The only thing we need to be careful of a little bit as Tennessee is a very large pipe it moves a lot of gas every single day. The way we have been successful in locking in acceptable and really nowadays attractive pricing is by taking our time. If we try to get into the market and layer in 50 to 100 million a day over a single week or couple days then we see that we can impact pricing. But the way we typically done is we’ll layer in anywhere from 10 million, 20 million and 30 million a day. We’ll do it over to two, three, four, five months and we have zero impact on the market. And we've been able to just rollup attractive pricing. So it just going to be over the next six months plus it’s just going to be just an activity that were aggressively paying attention to or actively paying attention to and honestly I really don't think we'll have any issues and sort of locking in prices to update our production which have gone forward.

Okay great. One final clean up question for me. 528 in your deck which is term sales I just wanted to clearly the NYMEX portion you listed it looks like that includes the SP unit now versus your entire quarter debt at this I just wanted to confirm exactly I am seeing that correctly?

Yes.

Okay, great. Thanks lot guys I appreciate the time.

Your next question comes from the line of Becca Followill of U.S. Capital Advisors. Please go ahead.

Good morning guys. You made a comment about having the ability to generate free cash flow long-term, what do you define as long-term in that by 2019, I know within cash flow this year?

It will be over three to five year period back there we’d generating free cash flow.

Any magnitude.

At this point we haven't initiated guidance but has the potential to be meaningful.

Okay, that's what we get. So I wanted to double check with that, second on the long-term gathering CapEx, its around the $55 million for this year is that a good number or would you may be transition to Utica program is it lower than that?

Our gathering spend will be - we’ve got some compression to build in track 100 in Lycoming that will be done next year. We’ve got some gathering to build that 007 though because the Tennessee 300 line goes right through the Procter the spending there would be pretty minimal. And then at CRV if we transition to a Utica program, we’d have next to no capital investment there because we would be using the exact same lines, the exact same compressors.

So, the 55 million maybe going into '18 but after that dropping off?

Yes, that’s right I guess I didn't completely answer your question right, so maybe staying at about the same level that we are now and then trending downward.

Okay. Thank you. And then lastly back to the rate case that you worked, was there any rationale given for the ultralow ROE and the low equity layer?

Well the New York commission is reliant on a ROE model that they are inflexible on. It spits out a number and they adhere to that, that's on the ROE side. And then on the capital structure side, they’re pretty firm on using the parent capital structure and when you look at where we've been with our ceiling test impairments that's made a difference on our equity component.

Got you. Okay, thank you. That’s all I had.

Your next question comes from the line of Timm Schneider from Evercore. Please go ahead.

Hi guys, just one follow up from me. Is there any interest on your side to maybe sign-up on any other pipelines going out of the baseline of your capacity on Nexus of Rover anything like that or if that if under exploration necessarily?

I mean geographically those are quite bit removed from our area of production Timm, so it will in the first instance it would be tough getting over there. But yes, for a long-term as I talked about before with Chris, if we're looking at continued pipeline investments we’ll have to avoid New York. They are either going to be going West sales or East. So into that space what would be really interesting is finding a way to get there right away right now because we think there is going to be some on used capacity at the outset that could probably be gain pretty cheaply but right now there's just no physical way to get it there. And over the long term given the amount of construction that's involved and it have to be a bigger or kind of different project then just getting Seneca's production over to those markets. So our engineers have been busy looking at various options but we don't have anything solidified enough to have a meaningful talk about it.

Okay. Thank you.

There are no further questions at this time. I will turn the call back over to the presenters.