straga/iStock via Getty Images National Fuel Gas Company ( NFG ) is an interesting hybrid of upstream, midstream, and downstream (utility) with a little heavy oil thrown in. The stock price is up 44% since my last analysis a year ago.
In the most recent quarter of October-December 2021, almost half of the company’s adjusted EBITDA came from exploration and production. The company expects good returns due to high oil and natural gas prices in 2022.
In addition to vertical integration, a few other factors set NFG apart. A mostly-gas operation, its revenues reflect weather seasonality, with more revenues in the October-March than in April-September. Potential investors should be aware that gas stock prices thus often peak in the winter.
NFG has adapted to this seasonality with a non-traditional financial reporting schedule: the company’s fiscal first quarter starts October 1: t he most recent results, for October-December 2021, are thus styled as 1Q22 results.
NFG’s four reporting segments span upstream, midstream, and downstream: exploration and production (Seneca Resources);
pipeline and storage (National Fuel Gas Supply and Empire Pipeline);
gathering (National Fuel Gas Midstream);
utility (National Fuel Gas Distribution).
Current dividend yield is 3.1%.
I have changed my ranking from buy to hold . Existing investors may want to continue holding National Fuel Gas. Assuming an easing of the winter gas price spike and thus a correspondingly lower stock price, potential dividend and utility investors may choose to revisit the company in a few months. First Quarter 2022 (Quarter Ending Dec. 31, 2021) Results and Guidance
In NFG’s first fiscal quarter of 2022 (October 2021-December 2021), GAAP net income was $132.4 million, or $1.44/share, compared to GAAP net income of $77.8 million or $0.85/share in the prior year.
Adjusted operating results, a non-GAAP measure, for October-December 2021 quarter were $1.48/share, an increase of 40% compared to $1.06/share in the prior year.
Adjusted EBITDA for the quarter was $298.2 million, an increase of 18% over the prior year.
Oil production was 548,000 barrels or about 6100 barrels per day (BPD). At an average price per barrel (after hedging) of $64.29/barrel, this represents $392,000/day of oil revenue.
Gas production for the quarter averaged 909 MMCF/D. At a weighted average price (after hedging) of $2.52/MCF, this represents $2.3 million/day of natural gas production revenue.
Cash flow results for October-December 2021: Net cash provided by operating activities was $171 million.
Net cash used in investing activities was -$170 million, including -$213 million of capital expenditures.
Net cash used in financing was -$43 million, including dividend payouts of -$41.5 million.
The chart below shows the relative size of adjusted EBITDA by segment, including the outperformance of exploration and production, for October-December 2021 (1Q22). National Fuel Gas & Starks Energy Economics, LLC The company projects fiscal 2022 earnings of $5.20-$5.50/share. This is based on an expected NYMEX natural gas price of $4.50/MMBTU and a NYMEX oil price of $80.00/barrel. Reserves At September 30, 2021, National Fuel Gas’ Seneca Resources had total proved reserves of 21.5 million barrels of central California heavy oil and 3.7 trillion cubic feet (TCF) of mainly Appalachian natural gas.The SEC PV-10 net cash flow value of the company’s proved developed and undeveloped reserves on September 30, 2021, was $2.35 billion. This is double the value of a year ago due to higher natural gas and oil prices. Data by YCharts US Gas Production and Prices The February 4, 2022 natural gas closing price was $4.57/MMBTU at Henry Hub, Louisiana.However, for the week ending February 2, 2022, the Henry Hub spot price was $6.44/MMBTU. The price for Marcellus natural gas at Tennessee Zone 4 was $5.73/MMBTU. The price at the Eastern Gas South hub, also a benchmark for Appalachian supply, was $5.75/MMBTU.The Energy Information Administration (EIA) projects Appalachian volumes of 35.1 BCF/day in February 2022 , over a third of total US gas production. The Appalachian area is the combination of the green-colored Marcellus and the orange-colored Utica in the graph below. EIA Natural Gas Weekly However, higher gas prices have not meant more drilling in the Marcellus. The EIA attributes this to constrained pipeline takeaway capacity, e.g. NIMBY on new or expanded regional pipelines means less ability to move natural gas. EIA Natural Gas Weekly The map below illustrates the Marcellus formation. Penn State Marcellus Center for Outreach and Research Current Central California Oil Price The February 3, 2022, Midway Sunset spot oil price was $86.53/barrel. National Fuel Gas Operations NFG’s gas utility operation serves 750,000 customers in western New York and northwestern Pennsylvania, including Buffalo, NY […]
source Mixed-Sector National Fuel Gas May Interest Utility Investors
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