Jeffrey Schauger GENERAL MANAGER INTERSTATE MARKETING NATIONAL FUEL GAS SUPPLY CORPORATION National Fuel Gas Supply Corporation Empire Pipeline, Inc. Marcellus Shale: Changing Gas Supply Dynamics and Pipeline Infrastructure A Pipeline & Storage Perspective
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Jeffrey Schauger GENERAL MANAGER INTERSTATE MARKETING NATIONAL FUEL GAS SUPPLY CORPORATION
National Fuel Gas Supply Corporation Empire Pipeline, Inc. Marcellus Shale: Changing Gas Supply Dynamics and Pipeline Infrastructure A Pipeline & Storage Perspective. Jeffrey Schauger GENERAL MANAGER INTERSTATE MARKETING - PowerPoint PPT Presentation
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Jeffrey SchaugerGENERAL MANAGER
INTERSTATE MARKETING
NATIONAL FUEL GAS SUPPLY CORPORATION
National Fuel Gas Supply Corporation Empire Pipeline, Inc.
Marcellus Shale: Changing Gas Supply Dynamics and Pipeline Infrastructure
A Pipeline & Storage Perspective
Safe Harbor for Safe Harbor for Forward Looking StatementsForward Looking Statements
This presentation may contain “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995, including statements regarding future prospects, plans, performance and capital structure, anticipated capital expenditures and completion of construction projects, as well as statements that are identified by the use of the words “anticipates,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “predicts,” “projects,” “believes,” “seeks,” “will,” “may,” and similar expressions. Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. The Company’s expectations, beliefs and projections contained herein are expressed in good faith and are believed to have a reasonable basis, but there can be no assurance that such expectations, beliefs or projections will result or be achieved or accomplished.
In addition to other factors, the following are important factors that could cause actual results to differ materially from results referred to in the forward-looking statements: changes in economic conditions, including economic disruptions caused by terrorist activities, acts of war or major accidents, and downturns in economic activity including national or regional recessions; changes in demographic patterns and weather conditions, including the occurrence of severe weather such as hurricanes; changes in the availability and/or price of natural gas or oil and the effect of such changes on the accounting treatment of derivative financial instruments or the valuation of the Company’s natural gas and oil reserves; uncertainty of oil and gas reserve estimates; ability to successfully identify, drill for and produce economically viable natural gas and oil reserves, including shortages, delays or unavailability of equipment and services required in drilling operations; significant changes from expectations in the Company’s actual production levels for natural gas or oil; changes in the availability and/or price of derivative financial instruments; changes in the price differentials between various types of oil; inability to obtain new customers or retain existing ones; significant changes in competitive factors affecting the Company; changes in laws and regulations to which the Company is subject, including changes in tax, environmental, safety and employment laws and regulations; governmental/regulatory actions, initiatives and proceedings, including those involving acquisitions, financings, rate cases (which address, among other things, allowed rates of return, rate design and retained gas), affiliate relationships, industry structure, franchise renewal, and environmental/safety requirements; unanticipated impacts of restructuring initiatives in the natural gas and electric industries; significant changes from expectations in actual capital expenditures and operating expenses and unanticipated project delays or changes in project costs or plans; the nature and projected profitability of pending and potential projects and other investments, and the ability to obtain necessary governmental approvals and permits; occurrences affecting the Company’s ability to obtain funds from operations, from borrowings under our credit lines or other credit facilities or from issuances of other short-term notes or debt or equity securities to finance needed capital expenditures and other investments, including any downgrades in the Company’s credit ratings; ability to successfully identify and finance acquisitions or other investments and ability to operate and integrate existing and any subsequently acquired business or properties; impairments under the SEC’s full cost ceiling test for natural gas and oil reserves; changes in the market price of timber and the impact such changes might have on the types and quantity of timber harvested by the Company; significant changes in tax rates or policies or in rates of inflation or interest; significant changes in the Company’s relationship with its employees or contractors and the potential adverse effects if labor disputes, grievances or shortages were to occur; changes in accounting principles or the application of such principles to the Company; the cost and effects of legal and administrative claims against the Company or activist shareholder campaigns to effect changes at the Company; changes in actuarial assumptions and the return on assets with respect to the Company’s retirement plan and post-retirement benefit plans; increasing health care costs and the resulting effect on health insurance premiums and on the obligation to provide post-retirement benefits; or increasing costs of insurance, changes in coverage and the ability to obtain insurance.
For a discussion of these risks and other factors that could cause actual results to differ materially from results referred to in the forward-looking statements, see “Risk Factors” in the Company’s Form 10-K for the fiscal year ended September 30, 2009 and and the Company’s Form 10-Q for the quarter ended December 31, 2009. The Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
National Fuel Gas CompanyNational Fuel Gas CompanyPrincipal BusinessesPrincipal Businesses
Marcellus Shale Production Marcellus Shale Production ForecastForecast
(Based on Conservative 50 Tcf Recoverable Reserve Estimate)(Based on Conservative 50 Tcf Recoverable Reserve Estimate)
Other Telling Indicators….Other Telling Indicators…. What large players are saying:
“…We continue to ramp up our activities in the Marcellus…” “…accelerate sharply our development of the Marcellus.. “ “…able to utilize new drilling techniques that allows (us) to affordably
reach gas supplies in the Marcellus…that previously had been too expensive to tap.’
Producers taking on firm capacity positions to ensure production flows: Range, EQT, Chesapeake, Statoil, Cabot, East Resources, Fortuna
Majors and investors jumping into the Marcellus fray
Pittsburgh area exploding – tightening labor market
TGP 300 Line
EASTHEREFORD
EASTHEREFORD
DRACUTDRACUT
DOVERDOVER BROOKFIELDBROOKFIELD
RAMAPORAMAPOELLISBURGELLISBURG
LEIDYLEIDY
DAWNDAWN
NIAGARANIAGARA
CHIPPAWACHIPPAWA
NAPIERVILLENAPIERVILLE
IROQUOISIROQUOIS PHILLISBURGPHILLISBURG
ST. CLAIRST. CLAIR
Eastern Mainline Export Points and Other Major Pipelines
Pre-Marcellus Gas Supply Sources in North America
Pre-Marcellus Gas Supply Sources in North America
Pre-Marcellus Gas Supply Sources to the Northeast
LEIDY
Pennsylvania
New York
Traditionally gas supply sources have come from Canada, the Rockies, and the Gulf Coast Region.
NIAGARA
ONTARIO
Rockies
Midcontinent
Southeast/ Gulf
Displacem
ent
Displacement
Displacement
D
ispl
acem
ent
Appalachia
Post Marcellus Gas Supply Sources in North America
Post-Marcellus Gas Supply Sources to the Northeast
Planned Capacity 40,000 Dth/d (I)50,000 Dth/d (II)
Planned Compression (2 units) 1,150 HP (I)1,700 HP(II)
Anticipated In-Service Date July 2010 (I)June 2011 (II)
Estimated CAPEX Investment ~$6 MM~$7 MM
LAMONTCOMPRESSOR
STATION PHASE I & II
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LINE “N”EXPANSION PHASE I & II
PIPELINE & STORAGE EXPANSION INITIATIVES
Line “N” Expansion Phase I & II
Planned Capacity 160,000 Dth/d (I)150,000 Dth/d (II)
Planned Compression 4,700 HP (I)13,000 HP (II)
Anticipated In-Service Date Sept 2011 (I)Nov 2012 (II)
Estimated CAPEX Investment $23 MM (I)$30 MM (II)
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NATIONAL FUEL PIPELINE & STORAGE EXPANSION INITIATIVES
NORTHERN ACCESS EXPANSION
Northern Access Expansion
Planned Capacity 320,000 Dth/d
Planned Compression- Ellisburg 12,000 HP
Planned Compression- East Aurora 2,300 HP
Anticipated In-Service Date Fall 2012
Estimated CAPEX Investment $60 MM
Full Producer Commitment
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PIPELINE & STORAGE EXPANSION INITIATIVES
Tioga County Extension Phase I & II
Planned Capacity 350,000 Dth/d (I)260,000 Dth/d (II)
Anticipated In-Service Date September 2011 (I)2012/2013 (II)
Estimated CAPEX Investment $47 MM (I)$125 MM (II)
TIOGACOUNTY
EXTENSION PHASE I & II
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WEST TO EAST
APPALACHIANLATERAL
LAMONTCOMPRESSOR
STATION PHASE I & II
TIOGACOUNTY
EXTENSION PHASE I & II
LINE “N”EXPANSION PHASE I & II
PIPELINE & STORAGEEXPANSION INITIATIVES
NORTHERN ACCESS EXPANSION
Y-M53 DIRECT INTERCONNECTS
Infrastructure and Transporter-Infrastructure and Transporter-related Challengesrelated Challenges
GQ
Creditworthiness
Timelines
Shifting Pipeline Grid Dynamics & Valuation
Producer risk tolerances
IC requests
On the Horizon….On the Horizon….
New supply areas will continue crowd out traditional ones “Non-firm” production eventually at risk All bets off with regard to traditional flows, basis, and
commodity pricing - price and gas supply-driven changes Certain oversupplied producing areas/pipes could see
price bloodletting Canadian markets will soon gain access to Marcellus
supply Large need for midstream/gathering infrastructure Utilities: encouraged by proliferation of Marcellus gas