Hello, and welcome to the National Fuel Gas Company Q3 Fiscal 2025 Earnings Conference Call. My name is Alex, and I'll be coordinating today's call. [Operator Instructions] I'll now hand over to Natalie Fischer to begin. Please go ahead.

Thank you, Alex, 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 Dave Bauer, President and Chief Executive Officer; Tim Silverstein, Treasurer and Chief Financial Officer; and Justin Loweth, President of Seneca Resources and National Fuel Midstream. At the end of today's prepared remarks, we will open the discussion to questions. The third quarter fiscal 2025 earnings release and July 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. With that, I'll turn it over to Dave Bauer.

Thank you, Natalie. Good morning, everyone. National Fuel had an excellent third quarter. We're seeing great execution across the company, and our momentum continues to build. At Seneca, our Eastern development area continues to exceed expectations. Production for the quarter was up 16% from last year. And based on our updated guidance, we expect full year production to be up approximately 8% versus fiscal 2024. We're also seeing ongoing improvements in cash operating costs, furthering our position as a low-cost operator with top-tier breakeven economics. Looking to fiscal '26, I expect Seneca will deliver further improvements in capital efficiency. We've initiated production guidance of 440 to 455 Bcf, which is a projected increase of 6% at the midpoint. Equally as important, we expect to spend 4% less capital to achieve that growth. We have a great operational team that continues to improve well productivity, most recently with our Gen 3 well design, while at the same time, driving our D&C cost per foot lower and reducing overall capital expenditures. It's clear that our E&P assets, which include more than 2 decades of high-quality inventory, will drive significant value creation in the years ahead. Justin will have more to say on our nonregulated operations later in the call. Our outlook on the regulated side of the business is equally exciting. We've recently seen significant growth through ratemaking activity. And looking forward, we expect to deliver mid-single-digit rate base growth over the next several years as we continue to invest in system modernization. On top of that, we've also seen meaningful pipeline expansion opportunities develop in recent months. On prior calls, I've talked about the need for infrastructure to support the growing demand for energy and about Pennsylvania's suitability for data center development. With over $90 billion of new investment in Pennsylvania…

Thanks, Dave, and good morning, everyone. We had a great third quarter with adjusted operating results increasing 66% versus last year. The main drivers were higher natural gas prices, lower per unit operating costs at Seneca and continued growth in production and gathering throughput. Moving to the outlook for the business. I'll start with fiscal 2025, where we've narrowed our earnings guidance to a range of $6.80 to $6.95 per share. While we've reduced our NYMEX forecast from $3.50 to $3.25 for the fourth quarter, our other guidance updates highlight the positive momentum we are seeing across the company. Strong well results in the EDA allowed us to move up our production guidance to the high end of our previous range. We are also seeing tailwinds with respect to Seneca's cost structure, where both G&A and LOE are expected to be lower for the year. Looking at fiscal 2026, we've provided preliminary guidance. Given the evolving supply and demand fundamentals, we are showing earnings per share ranges at various NYMEX gas prices. Using a $4 price, which closely approximates the current strip, we'd expect earnings to be in a range of $8 to $8.50 per share. At the midpoint, this reflects a 20% increase from fiscal 2025. This anticipated earnings growth is supported by a solid hedge book with nearly 2/3 of our production protected at strong prices through a mix of swaps, collars and fixed price sales. Our collars with an average floor of $3.50 and an average ceiling of $4.75 provide the opportunity to capture higher pricing, such that at $5 NYMEX, we would expect earnings of $10 per share at the midpoint, an increase of nearly 50% from our estimate this year. Sticking with the nonregulated businesses, I'll highlight a few other key assumptions. As Dave mentioned,…

Thanks, Tim, and good morning, everyone. Last night, we reported another quarter of record production and throughput at Seneca and NFG Midstream, underscoring the quality of our prolific Eastern development area wells, excellent operational planning and continued strong execution in the field. Production increased 6% from the prior quarter to 112 Bcf, driving gathering throughput to a new quarterly high of 133 Bcf. As shown on Slide 21 of our latest investor presentation, enhanced Tioga Utica, Tioga Utica well designs are delivering significantly improved results with both estimated ultimate recoveries and cumulative production per 1,000 feet increasing by 20% to 25% with our Gen 3 well design. Based on our strong performance year-to-date and expectations for the remainder of the year, we are updating our production, capital and cash operating expense guidance for fiscal '25. For production, we have raised our guidance to a new target range of 420 to 425 Bcf, an 8% increase at the midpoint year-over-year. In terms of capital, we have tightened guidance by $5 million on both ends to a new range of $500 million to $510 million. We forecast a meaningful step-up in fourth quarter spending as we enter our peak construction season with substantial activity focused on pads, roads and infrastructure projects as well as 2 rigs running. Regarding expenses, we have revised our LOE guidance to reflect successful cost management initiatives and higher production expectations, lowering the range to $0.67 to $0.68 per Mcf, a $0.01 reduction on both ends. Additionally, we anticipate projected per unit G&A of $0.18 per Mcf, which represents the low end of our prior guidance range. Looking ahead to next year, our initial guidance highlights continued progress across key operational and financial metrics. For production, we are establishing a range of 440 to 455 Bcf, representing a…

Our first question for today comes from Zach Parham of JPMorgan.

First, I just wanted to ask on the buyback, which you paused this quarter. Can you talk about the drivers of that? The stock has moved significantly higher. It's now pretty close to all-time highs. But you also mentioned preserving balance sheet flexibility for optionality for growth projects. Can you just talk about the moving pieces on the decision to pause that buyback program?

Yes. Yes, it's entirely driven by our capital allocation priorities. Our philosophy on capital return hasn't changed where we have our dividend that's funded largely by the regulated businesses and then a buyback program that is largely funded by the free cash flows of the nonregulated businesses. When you look at our capital allocation priorities, as we've said consistently, is first, get our balance sheet in good shape, which is we've done. And then second, grow the company. And then -- but absent growth opportunities, we have excess free cash flow, give the cash back to shareholders. Of late, we've been looking at different opportunities. And as you said, want to keep balance sheet flexibility.

And then, Tim, maybe a follow-up on cash taxes. Can you just quantify that impact of cash taxes in 2026 and beyond? I think, previously, you talked about mid- to high teens cash taxes. Where does that move with the passage of the tax bill?

Yes. So Zach, what ultimately will happen is, as I alluded to, we were expecting to be a corporate AMT payer starting around 2027. So the impact will be bigger as you move out in time. Call it, 400, 500 basis points of cash tax rate. In the near term, it's probably, say, in the 200 to 300 basis point area. So I think as we look out to this year, we're in the high single digits from a cash tax perspective. Next year, we'll be in the sort of low to mid-single-digit cash tax rate, ultimately, depending on where prices go, that can cause it to move around a little bit.

Our next question comes from Greta Drefke of Goldman Sachs.

My first is just on the change in operations in fiscal '26 versus fiscal '25 and the ramp-up of the Tioga Pathway and Shippingport projects. I appreciate the details you provided of both in the slides. Just focusing in on the Tioga Pathway project, though, to the extent you're able to, can you talk about the cadence of spending for the project in fiscal '26, some key next steps and maybe the most impactful modernization pieces?

Well, we'll kick off construction in the spring and then with free clearings and other prep type work. And then the bulk of the spending will be in the summer on the contractors and installing the lines. In terms of modernization, there is an element of modernization to that project, and it's part of our ongoing roughly, call it, $75 million to $100 million a year type program.

Great. Appreciate the detail. And then I just wanted to follow up maybe more broadly on industry trends. There's been a lot of moving pieces in the outlook for D&C costs across the industry. Can you speak a bit about your current sense of the balancing of potential service cost deflation, especially as oil rigs continue to come off and potentially higher input costs such as steel from tariff impacts?

Yes, sure, happy to, Greta. So I'll start with the service cost inflation, for example, on steel. We had expectations going back when some of the tariffs talk really began and got moving that we would see prices move up. in part due to lower overall activity levels and in part due to the mills just keeping up with demand and things kind of lessening in terms of the impact, we're really not seeing a lot of inflationary pressure on the steel side of things. We think kind of where we are is where we'll be as we look out over the coming months. I'd also just note, as a company, we're quite insulated from most of that, certainly over the near and intermediate term. More broadly across the industry, I think that there's probably more tailwinds than headwinds when you think about overall service costs. I'm not expecting any material increases really across the board. I'm not expecting big material decreases either. But if I had to gauge the overall direction, I'd say slightly down to neutral is kind of how we think about the world broadly across the services.

Our next question comes from Noah Hungness of Bank of America.

For my first question here, I was hoping to ask, how are you thinking about signing up for a supply agreement if we see new egress coming out of Northeast Pennsylvania? I mean, given that you're the only company in the area that is growing production, has really deep inventory along with an IG credit rating, just how does that position you in the event that this new egress -- some of these projects go?

Noah, thanks. Look, I mean, we're excited about those opportunities, and we've got lots of active dialogue. Your thesis and philosophy there on our company is exactly right. We've got the perfect trifecta when you think about all the things you need to be successful in being a supplier to a future data center and power infrastructure. So we're actively engaged in that sort of dialogue. As you mentioned, we've got a really deep inventory of, frankly, some of the best inventory across the basin, across the country. And it is broadly across national fuel, we've just got all the pieces to find ways to participate in that. So we're going to continue what we've done, which is move very methodically, have a lot of dialogue and then probably talk about things when they're done as opposed to when they're being speculated or potentially looked at. So stay tuned, and we'll continue working it. And hopefully, we'll see some development over in our core upstream production areas, whereas this first kind of wave has been more on the western side of the state, which has also been great for our company.

That's great color. And then for my second question, I'm sure as you guys know, we're very constructive on the Tioga Utica as well. And I see you reiterated your productivity estimates for the Gen 3 design, but it does look like the 2 most recent pads are trending above that type curve. Should we think that there is upside risk to the current productivity estimates?

Yes. So no, I think what we'll do is we'll continue to assess those curves. We did want to be more transparent in part because of all the questions we've had. And so we wanted to include some more data in our investor materials and make sure we're really highlighting just how great these wells are. In time, and you can see it, those last 2 pads have been excellent. We're continuing to tweak and modify and methodically evaluate completion design. And as I've alluded to previously, there might be a Gen beyond Gen 3. We've kind of already started testing various variables on that. And so look, the rock we have is awesome. We're finding ways to get more gas out of it, both in terms of ultimate recoveries and near-term deliverability. And I think we'll continue to move forward on that and credit to our broader subsurface team on really thinking through this and how we can be methodical and driving the best returns. And so yes, leading-edge wells are a bit better than our type curve, and we'll look to continue that performance. And when we think it makes sense to make adjustments, if that happens, we'll certainly do so. But we're -- we continue to be extremely encouraged with what we're seeing in the resource.

Our next question comes from John Freeman of Raymond James.

Both the Constitution and Northeast Supply Enhancement pipelines get more attention as Williams looks to try and revitalize those projects. I believe if you all had to pick, I believe NESE is sort of the bigger benefit to you all. But if you could maybe kind of elaborate on that sort of the gives and takes of those projects just as it relates to kind of you all's exposure?

Thanks, John. So NESE, the Northeast Supply Enhancement project, that would be a great project to see that get completed. I mean, beyond even just ourselves, both these projects are really needed in New York and in New England broadly. NESE does have some pretty meaningful, we think, positive implications if it moves forward regarding some of our existing firm transportation and how that would likely significantly benefit just given it would create even incremental demand. That could not only free up the benefits we have on our existing FT, but also create an opportunity to have more firm sales or other FT projects that connect into it in time. So NESE is a great one. On Constitution, that's interesting as well. That's a part of the basin that's had a lot of gas. There's certainly some challenges there that need to be worked through, but a lot of really good discussion and positive momentum and seemingly from both the shippers and the developer, a lot of encouraging news coming out of them in terms of what they're seeing in the possibility. So that would also benefit us. It would probably move more gas off -- would move more gas out of kind of Bradford, Susquehanna and in doing so, probably take in-basin pricing up, particularly on Tennessee 300 line Zone 4 and likely also some on Eastern, which would benefit our portfolio as well and create more pathways for additional growth. So both projects would be great. We're hugely supportive of all new infrastructure development and hopeful those start to move forward.

And then I guess just following up on what you mentioned earlier, Justin, where you're continuing to sort of look at this kind of evolution of whether you want to call it Gen 3+ or Gen 4. And I guess I'm trying to think about in your -- in the '26 guidance, is there any sort of additional well productivity gains that are baked into that guidance? Or does it sort of reflect just kind of current -- where you currently sit on well productivity?

Yes, it's a good question, John. I mean the short answer is the results, and as I mentioned, they've continued to exceed our expectations. So I think there's a couple of dynamics at play here that are really interesting to tease out. And one is the deliverability and the rates at which we restrict the wells. We generally are going to restrict these wells at around 25 million a day, at times 30 million a day, and we'll hold them flat. I think where we're seeing the biggest opportunity for continued positive bias upward is the time in which these wells hold flat. And so the pressure drawdown we've seen even at those very high per well rates has been low. And so we've been able to successfully hold these wells at flat levels for now at times in excess of a year. And so the productivity bias is more how long that flat period can last -- and I think we've got a lot of great engineering work going on, on this, and we're working through exactly what we think that's going to look like, both for the current wells and future wells. And so what I'm really getting at is the day 1 production and the day 90 production is probably about the same because we're going to deliver a lot of gas. And frankly, the day 180 production is about the same. It's really a question of what do we look like at day 270 and 365 and 1.5 years in, how long are these wells holding at flat rates and consistently doing so. That can create some further opportunity. We baked some of that in. But quite frankly, the jury is a bit out. So we're not -- we haven't maybe gone all the way.

Our next question comes from Timothy Winter of Gabelli.

And congrats on another strong quarter. Dave, I'm trying to better understand the growth opportunities you guys are considering. Can you just talk a little bit more about what the potential for regulated pipeline investment is? Shippingport in Tioga are great, but are relatively small. Are there more material opportunities of that are out there? And how do you weigh that as against other regulated investments like some of the LDCs that could be for sale? I know, ones in Ohio is for sale. And then also that against like the potential for behind-the- meter gas plants in the hot of Pennsylvania. If you could just talk a little bit about your thinking...

Yes. There's a lot in that question. I guess the way I would summarize it is that we look at a lot of things. Our top priority would be growing organically, right? I mean, to be able to spend $1 on rate base is the most cost-effective way to grow. And so shipping port and Tioga Pathways are certainly great projects. We call those the singles and doubles type projects that over time add up to a lot of growth for the company. I do think there will be opportunities beyond those 2 projects. You look on a map that where existing coal-fired plants that have been retired are located. They're not far from our system, both in Pennsylvania and in New York. So I think there's going to be the real opportunity for that. And I think, if we -- if the government got serious about permitting reform, the potential for larger-scale projects out of the basin are certainly there, right? I mean you look at the demand that's forecasted for natural gas, we're going to need to get that production from somewhere. And Appalachian is the lowest cost natural gas basin and be able to get more pipes out of there, I think, is long run, a good thing. But I think we're going to need permitting reform before you see a lot of really big projects get built.

Okay. And just to emphasize, we agree organically is the best way to grow, and it's great to see utility that's getting free cash flow from the other businesses to grow rate base. But separately, given the increased sentiment for gas, the spotlight on Pennsylvania's energy hotbed, does it make any sense or have you considered, say, floating like a 15% piece of Seneca to the market to use as to help fund a regulated acquisition? Just talk a little bit about if that makes any sense.

Who knows? I mean, we look at -- when we approach financing the business, we look at all different options. And I wouldn't want to comment on one specific circumstance like that.

[Operator Instructions] Our next question comes from Geoff Jay of Daniel Energy Partners.

I guess looking at the capital efficiency, I'm just kind of curious, obviously, well productivity is playing a role and service costs are likely playing a role. I'm just wondering, if you can kind of help me frame the efficiencies you've seen year-to-date on both the drilling and completion side and how big a factor that's been.

Yes, Geoff, thanks for the question. Look, definitely, we have seen improvements in our overall costs in terms of D&C per foot over the last 12 months. And -- what I would tell you is, I mean, I think a lot of that -- we haven't seen a lot of service cost deflation over that 12-month period. And so that's largely just been driven by enhanced operational efficiencies. I think, the other thing I would note just generally and potentially uniquely to our company and our development is that we're still pretty early days in terms of the number of these Tioga, Utica wells we've drilled. And so there's still opportunity for us to get better and better. And that evolution continues. We are very much focused on continuous improvement, and we'll have that mindset and culture within our business, looking to drive, continue to drive those dollar per foot cost down lower and lower, irrespective of changes in the overall service cost environment. So I'd say we're still -- we still see opportunity to get better that's just going to be driven by really, really good planning and work, particularly in our D&C teams to find ways to do more with less.

At this time, we currently have no further questions. So I'll hand back to Natalie Fischer for any further remarks.

Thank you, Alex, and we'd like to thank everyone for taking the time to be with us today. A replay of this call will be available this afternoon on both our website and by telephone and will run through the close of business on Thursday, August 7. Please feel free to reach out, if you have any follow-up questions. Otherwise, we look forward to speaking with you again next quarter. Thank you, and have a nice day.

Thank you all for joining today's call. You may now disconnect your lines.