National Fuel Gas Company Aktie

Hello, everyone. Thank you for joining us, and welcome to the National Fuel Gas Company Second Quarter Fiscal 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Natalie Fischer, Director of Investor Relations. Please go ahead.

Thank you, Karina, 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 second quarter fiscal 2026 earnings release and April investor presentation have been posted on our Investor Relations website. We may refer to these materials during today's call.

We'd 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, and good morning, everyone. National Fuel had a solid second quarter with adjusted earnings per share of $2.71, an increase of 13% from last year. This continues our streak of double-digit EPS growth and keeps us on track to achieve our multiyear 10% plus average annual growth target. I'm also happy to report that during the quarter, we achieved additional milestones across the system that further bolster our long-term earnings outlook.

Our second quarter was a prime example of the strong operational resiliency of our natural gas assets, particularly during severe weather events. In January and February, we experienced an extended cold snap across our operating footprint, where daily low temperatures in some of our regions were below freezing for 19 straight days. A big thank you to our dedicated workforce and contractors who worked through the elements to ensure that the gas continued to flow during this critical time. Overall, our systems held up extremely well with no notable issues at our Utility and Pipeline and Storage businesses.

On the nonregulated side, our production and gathering facilities performed very well with limited freeze-offs. This allowed us to take advantage of some of the strong prices we saw on the coldest days. We did, however, experience some regional road closures over multiple days due to heavy snowfall. During this stretch of weather, we slowed the pace of completions and delayed the flowback of a new pad, which had a modest impact on our production for the quarter and will similarly impact full year production.

On the drilling and completion side, we continue to focus on the optimization of our integrated development program. We've made substantial progress on the testing of both our Gen 4 well designs and our Upper Utica locations and are seeing continued success, which further enhances our long-term outlook. With decades of core inventory locations, a growing marketing portfolio and ongoing improvements in capital efficiency, our Integrated Upstream & Gathering business is positioned to deliver meaningful production and free cash flow growth for years to come. Justin will provide additional details later in the call.

Our outlook for the regulated businesses is also strong. Starting with the Pipeline and Storage segment, we continue to develop new expansion opportunities on our Line N system, which is well positioned to support both behind-the-meter generation that's co-located with data centers and the broader need for electric generation within PJM. Last week, we executed a precedent agreement on a new expansion opportunity that we're calling the Line N system upgrade project. And this project has a dual benefit for us. First, it adds 94,000 dekatherms a day of incremental transportation capacity, all of which was subscribed under a long-term contract with an investment-grade counterparty.

And second, the project allows us to modernize a key 6-mile portion of pipe, ensuring the continued reliability and integrity of that part of our system. The project has an estimated capital cost of $93 million, approximately 70% of which relates to the modernization component of the project, and it's expected to go in service in late calendar 2028.

Also this quarter, construction commenced on our Shippingport Lateral and Tioga Pathway expansion projects, both of which are on track to meet their November 2026 target in-service dates.

Lastly, today, Supply Corporation is filing a new rate case with FERC that seeks an approximately $95 million increase to our cost of service. In addition, our filing proposes a modernization tracker to support the ongoing investment in the safety and reliability of the system. We expect this proceeding to play out along the typical time line and hope to reach a settlement sometime this fall with new rates going into effect late in the calendar year. Collectively, between the rate case and two expansion projects, fiscal 2027 should be a period of significant growth in our Pipeline and Storage business.

Moving to the Utility. Customer affordability remains top of mind, and we continue to work closely with our regulators to ensure we can continue to invest in the modernization of our system while keeping rates reasonable. Our delivery rates are the lowest in both states, and we're doing our best to keep it that way. In New York, we're in year 2 of our 3-year rate plan, which runs through the end of fiscal 2027. As we look beyond 2027, we have over a decade of remaining modernization investments at our current replacement pace. Over the coming months, we'll be proactively working on a solution to recover these important future investments.

In Pennsylvania, our rate case is progressing as expected. Testimony from staff and other intervening parties was filed a few weeks ago. We'll file rebuttal testimony in May and then expect to commence settlement discussions over the summer. Given our modest rate increase request, we're optimistic we'll reach a settlement by the fall. I expect discussions will be constructive. As I said, our rates are the lowest in the state and would continue to be the lowest even if we receive the full $20 million increase we've requested.

Turning to Ohio. The CenterPoint acquisition is on track for a calendar fourth quarter closing. In January, we made our HSR filing and the required waiting period has since passed, completing that regulatory process. In addition, we've given notice of the acquisition to the Public Utilities Commission of Ohio and expect an order from the commission in late spring or early summer. Tim will have more on the acquisition later in the call.

Before closing, a quick word on energy policy in New York State, where we continue to see a growing recognition of the practical role natural gas must play in the state's energy future. While New York remains committed to its long-term climate objectives, recent proposals from Governor Hochul and the adoption of the state energy plan reflect a more balanced common sense approach. Policymakers are increasingly focused on maintaining reliability, protecting affordability for customers and ensuring the system can perform during peak demand periods, particularly during winter weather events. Those discussions underscore what we've long believed. The existing natural gas system remains essential to serving homes and businesses and supporting electric grid reliability and will continue to be a critical part of New York's energy mix for decades.

In closing, National Fuel is well positioned to deliver steady growth in earnings and cash flow in the years ahead. We have a great set of Integrated Upstream and Gathering assets with multiple decades of high-quality development inventory. Our midstream infrastructure is strategically located to provide key support to the significant growth in natural gas-fired electric generation expected in the region. And we have a growing base of utility earnings that will be further enhanced with the completion of our pending Ohio LDC acquisition. Taken together, the National value proposition is as strong as it's ever been. With that, I'll turn the call over to Tim.

Thanks, Dave, and good morning, everyone. National Fuel had record earnings per share in the second quarter, driven in large part by the strength of our natural gas marketing and hedging portfolio. We've intentionally positioned this portfolio to capture meaningful upside from higher winter prices, and we saw that come to fruition in late January and February. Combining this with the steady growth of our regulated businesses, National Fuel's adjusted earnings per share increased 13% for the quarter. We also generated approximately $160 million in free cash flow. This unique combination of EPS growth and significant free cash flow generation differentiates National Fuel from many of our peers.

Diving a bit deeper into the results for the quarter. First, in the Integrated Upstream and Gathering segment, price realizations were up more than $0.50 per Mcf or nearly 20%. While we convert a lot of our marketing portfolio to NYMEX-linked prices, we maintain a bit more exposure in the winter months to markets that have the potential for premium prices as demand spikes. That exposure provided a great tailwind during the quarter. Pairing that with the skew towards collars in the winter months, we were able to capture a nice benefit during the extended cold snap. On the production side, results came in slightly below expectations. As Dave mentioned, the system held up well during the challenging weather. However, road closures impacted our operations, which reduced production for the quarter. Overall, this had a 5 Bcf impact in the quarter.

Lastly, our per unit gathering O&M came in slightly above expectations. This was a result of a new preventative maintenance strategy we deployed on several compressors. In the normal course, we take compressors out of service to perform maintenance. However, in certain instances, it is more beneficial to swap in a new engine to minimize downtime and upgrade the technology. There is minimal cost to doing this, but the accounting rules require us to write down the remaining net book value of the unit being replaced. As a result, we recorded a larger-than-normal expense during the quarter. We now expect gathering O&M to be $0.01 higher at $0.12 per Mcf for the full year. But going the other direction, upstream LOE is expected to be $0.01 lower. On a combined basis, we don't see any impact on our cost structure. On the regulated side of the business, results were ahead of expectations as we continue to see strong execution across the board.

Turning to guidance. The biggest change for the remainder of the year relates to our NYMEX price assumption, which we are now projecting to be $3 per MMBtu, down from $3.75. With the lower pricing, we are also seeing modestly tighter basis differentials over that same period, which we now project to be $0.80 below NYMEX. We are approximately 75% hedged for the rest of the year, with the bulk of that in the form of swaps and fixed price sales. This provides price certainty, which lessens the impact of the lower expected pricing on our earnings guidance, which we now project to be in the range of $7.45 to $7.75 per share. At the midpoint, this represents a 10% increase over last year.

Embedded in our assumptions are a few other changes, including production guidance, which we now expect to be 425 to 440 Bcfe for the full year. This is down 3% from our prior guidance range, but at the midpoint is still expected to be up relative to last year. Longer term, our outlook for production growth remains intact. As a reminder, our guidance does not assume any price-related curtailments. Thus far since winter, we haven't curtailed any volumes. But to the extent we see material in-basin pricing declines, we may decide to do so. At the midpoint of guidance, our spot exposure is limited to approximately 30 Bcf, which minimizes the potential impact on earnings and cash flows for the year.

Lastly, on our fiscal 2026 outlook, we've increased our guidance for Pipeline and Storage segment revenues. During the quarter, as colder weather settled in, we were able to take advantage of the increased demand. We also saw higher revenues tied to a tracker on electric costs, but those are fully offset in O&M. There were a couple of additional tweaks to a few guidance assumptions, all of which are highlighted in our earnings release and IR presentation.

Switching to capital. Our guidance remains the same. However, we are trending towards the higher end of those ranges. In the regulated subsidiaries, we have had great success with our modernization programs and are ahead of schedule on our plans for the year. With our pending rate proceedings, we expect to obtain timely recovery for this spending. Our two pipeline expansion projects are on track as well, both from a timing and budget perspective. The bulk of construction season is still ahead of us, so things may move around a bit as we work through the rest of the fiscal year. Justin will have more on nonregulated spending in a minute.

Overall, our balance sheet is in great shape. We still anticipate generating a significant amount of free cash flow, more than enough to cover our growing dividend and reduce absolute leverage before closing our Ohio LDC acquisition. We expect to end the year below 2x debt-to-EBITDA and approach 50% FFO to debt. This leaves us in a comfortable position to achieve our target of mid-2x debt-to-EBITDA after the first full year post closing.

Sticking with the acquisition, things are moving along well. With the HSR process behind us, our focus is on the notice filing in Ohio. We've had several discussions with commission staff over the past few months, and we expect to complete this process well in advance of closing. Our teams are also working diligently to prepare for an efficient transition of the business, and we are confident that it will be a smooth process for customers. We are also taking the necessary steps to position ourselves to complete the remaining permanent financing prior to closing. We are working to finalize the necessary pro forma financial statements, which we anticipate wrapping up shortly. Once those are ready, we will start to evaluate the market to find the right window to raise the remaining $1 billion we need at closing.

We also plan to refinance our $300 million October maturity and term out a portion of the term loan that we temporarily repaid with the proceeds from our equity issuance completed last December. All told, we expect to raise up to $1.5 billion across multiple tranches. We also recently upsized our committed credit facility, which now provides $1.3 billion of borrowing capacity to support our growing operations. This was well supported by our bank group and provides us with additional financial flexibility in the future.

In conclusion, we expect 2026 to be a key inflection point for National Fuel. We are leveraging our interstate pipeline assets and commercial relationships to significantly expand the FERC-regulated businesses. We have two critical expansion projects under construction and another expansion announced yesterday. Our Ohio LDC acquisition will provide a further avenue for stable, regulated growth. Lastly, our strong balance sheet and significant free cash flow generated by our nonregulated businesses provides the foundation upon which we can deliver further growth. Combining this with our commitment to consistently return an increasing amount of cash to shareholders, National Fuel is positioned to create value for years to come. With that, I'll turn the call over to Justin.

Thanks, Tim, and good morning, everyone. Our Integrated Upstream and Gathering segment had a solid second quarter, delivering record EBITDA of more than $300 million, driven by net production of 102 Bcf and higher natural gas prices during Winter Storm Fern. Through the severe weather conditions, our team and Integrated Upstream and Gathering facilities performed exceptionally well with minimal downtime due to freeze-offs. That said, the heavy snowfall and extreme cold in January and February closed roads, which slowed completions and delayed flowback on a new pad. These weather-driven factors modestly impacted production during the quarter and are expected to have a similar effect on fiscal year production as volumes shift into future periods.

In addition, last fall, we turned in line a 6-well pad in Northwest Tioga and a separate fault block, which included an Upper Utica well and a Lower Utica Gen 4 test, along with 4 older design wells. The 4 wells with older style designs are underperforming our projections. This pad was strategically drilled about 18 months ago in part to hold an almost 20,000-acre parcel of land, but prior to our 3D seismic shoot and incorporation of that data into our broader subsurface model. Today, we have the benefit of an integrated subsurface model and significant other attributes across the vast majority of our core development area, which we expect will lead to superior outcomes going forward.

Going the other way, the Gen 4 and Upper Utica wells on the pad are demonstrating strong productivity in line with our expectations. While the older design wells will modestly impact our production estimate for the balance of fiscal '26, the Gen 4 and Upper Utica results, along with our deep understanding of the subsurface, reinforce our confidence in this area and optimal future well design.

Overall, we are reducing fiscal '26 production guidance by 3% at the midpoint to a range of 425 to 440 Bcf to account for the expected impact of these items. Despite this modest adjustment, we remain confident in durable mid-single-digit production growth over the next several years. Across our operations, we remain focused on continuous improvement and are advancing our testing program to further optimize well design and understand productivity drivers across our core area.

During the quarter, our two best-performing Tioga Utica pads to date, Bauer and Taft, reached cumulative production of 130 Bcf. The 12 wells across these pads, 10 of which incorporated Gen 3 and Gen 4 designs and two of which are Upper Utica wells were turned in line in late 2024 and produced at rate-constrained levels of 25 million to 30 million per day for an extended period. We estimate they will deliver about 900 million per 1,000 foot in 18 months, among the best results in the basin.

Turning to development activity during Q2. We turned in line our first Tioga co-development pad with 3 Upper and 3 Lower Utica wells, and we have another pad planned to come online toward the end of the fiscal year. On this pad, we also utilized production facilities that allowed us to flow a single Tioga Utica well rate constrained at 40 million per day, well above the 25 million to 30 million per day we held on Bauer and Taft. It's early, but this is an encouraging data point. And the team is doing a great job expanding what we believe is possible on well deliverability.

Finally, at the very end of the quarter, we began flowing back our first fully bounded Lower Utica Gen 4 pad with a total of 5 wells. Expanding the capacity of our surface equipment, understanding co-development influences and building confidence in optimal well design are key components of our continuous improvement focus. Pulling it all together, these data points inform our long-term development planning, and we'll remain deliberate in testing variables and applying what we learned to further optimize the program over time.

Turning to capital. We're maintaining our prior guidance of $560 million to $610 million. Our drilling team is driving efficiencies that may result in more wells being drilled this year. While this is very positive and reduces our cost per foot, it has the potential to bring forward capital. On the land side, we've been extremely active, making a number of strategic moves to further bolster our acreage position given our confidence in the Utica resource. We are also seeing emerging cost headwinds tied to the conflict in Iran, particularly higher oil and diesel prices flowing through drilling, completions and logistics, especially long-haul intensive activities.

Altogether, these items have us trending towards the high end of the range. In our gathering operations, construction activities are well underway with seasonal pipeline and infrastructure construction expected to continue into the summer months. Near-term activity continues to support Seneca's production growth while advancing opportunities for incremental third-party volumes in Tioga County. We have multiple projects underway to expand pipeline and compression capacity in our core area. And throughput continues to track Seneca's production closely with third-party volumes steady and in line with our full year projections.

Turning to the broader natural gas outlook. We are bullish on the long-term setup and see fundamentals supportive of higher prices over time. LNG exports are near record levels of around 20 Bcf per day with additional capacity coming online. And recent global events continue to highlight the value of reliable, low-cost U.S. natural gas. Domestically, demand is building in the Northeast and the Mid-Atlantic regions, driven by gas-fired power generation, data centers and AI-related load growth. At the same time, producer discipline is keeping supply growth in check, particularly in Appalachia, where pure curtailments are effectively limiting near-term volumes in excess of demand.

Overall, we expect a more balanced market and improving long-term price realizations for high-quality Appalachian supply, especially for operators with strong market access and flexibility like Seneca. Against this backdrop, we're executing our multiyear marketing strategy to reach premium markets and added flexibility, both in-basin and out of basin. Over the next few years, we expect total firm transport capacity to grow approximately 50% to more than 1.5 Bcf per day. Just this month, we gained access to our new 50 million per day of firm transportation that reaches the Gulf Coast. During the second quarter, we added another 50 million per day of long-term firm capacity along the same route that will go in service over the next few years, doubling our Gulf Coast exposure over time on similarly attractive terms.

Our inventory depth in Northeast Pennsylvania, which is arguably deeper than any peer in the region, positions us well to be a disciplined acquirer of transportation capacity as it becomes available. With increasing access to the Gulf, the soon-to-go in service Tioga Pathway project and the EGT Project Stratum, which reaches premium markets in Western Pennsylvania and Leidy Hub, we're taking strategic steps to support long-term growth through valuable pipeline capacity contracts. We see additional opportunities ahead and remain confident in our ability to deliver growth at premium price realizations over time.

In closing, the underlying strength of our asset base is clear. Our testing program continues to validate acreage depth and quality and will help optimize development for years to come. We've remained disciplined on capital despite emerging headwinds and our recent marketing and midstream investments support future growth and greater access to premium markets. Overall, we remain well positioned to deliver durable production growth, increasing free cash flow and long-term value for our stakeholders.

With that, I'll turn it back to the operator to open the line for questions.

We now turn the line open for questions.

[Operator Instructions]

Your first question comes from the line of Zach Parham with JPMorgan.

First wanted to ask on curtailments. Tim, I think you mentioned in your prepared remarks that NFG didn't have any curtailments in the current guide. Another Appalachian producer talked about some curtailments in 2Q. I know you've got the large majority of your volume hedged, but can you talk about how you're thinking about curtailments? Is there a price level in the in-basin where you think about shutting in some volumes and maybe what -- where about is that price level?

Zach. Like I said, we have approximately about 30 Bcf exposed into the spot market. And as we've said in years past, especially when we've seen lower prices, we don't specifically talk about the price level at which we curtail. I think what we've said historically is that prices north of $2, we're still flowing gas. Prices well below $1, we're definitely curtailing somewhere in there is where we typically make the decision. So we don't give that specific price. But again, we're very limited exposure and each day that passes, we're continuing to flow gas right now.

Then my follow-up is maybe for Justin. You talked about flowing one of the new wells at 40 million a day versus the 25 million to 30 million that I think you flowed in some of the older wells. Can you talk about, one, your expectations on how long these wells can hold that plateau period at the higher rate? And two, how having the equipment in place to flow at a higher rate impacts both cost and potential returns from pulling forward some volumes?

Yes. Sure, Zach. So a couple of things. I mean, one, in terms of the ultimate sustained period, we're going to have to do more work and look at it, but it should be relatively linear with wells that we produce at 30 million. We would expect to get some sort of cume in total drawdown over a period of time. Of course, if you're flowing at 40 million versus 25 million or 30 million, that period of time will be a little bit shorter. But it also brings forward value. And so one of the things we're really looking for and trying to optimize on, and I think this goes back to your cost question, is that we believe that we're close on a design where we'll be able to flow at those higher rates and do it at the exact same production facility cost that we have today, potentially even less as we continue to optimize and improve those designs.

And what we're really balancing is that particularly if we have a pad with less overall wells, let's say, it's 4 or 5 wells on that pad, and they're very long laterals, which we've been moving towards recently, we're actually -- recently here just finished casing some wells that will be approaching 20,000-foot TLL. With wells like that, the opportunity to flow at a higher rate restricted rate, even if it's for ultimately a little shorter period can pull a lot of value forward. And so we're trying to understand kind of what that relative balance is and what the overall deliverability makes sense.

But look, we're encouraged by it. We know from the wells we've drilled that there's plenty of pressure and plenty of opportunity to do more. It's just going to be this balancing act. And the other thing that we, of course, factor into all of this is our gathering infrastructure and what makes the most sense from an integrated investment and capital allocation decision. So those are the kind of guiding principles that we're looking at in it. But this was a great opportunity to just have a well where we could pretty easily and inexpensively really validate this test for ourselves, and it was successful.

Your next question comes from the line of Tim Rezvan with KeyBanc Capital Markets.

I wanted to follow up on upstream. The release highlighted the 6-well pad and in comments, it sounds like 4 wells underperformed expectations with an older completion design. I was curious if you could provide more insight on what happened. Was it simply under stimulation? Was there a downhole issue? And kind of where I'm going with this is, when do you think the team might be comfortable just using the Gen 4 design as your standard recipe going forward?

Tim, thanks for your question. These wells, you said it right, it was a 6-well pad. It's kind of on the western side of our core development area. Several factors here that play into it. The first one is we have a lot of 3D seismic coverage across our acreage. This area, though, was one we had acquired in 2023, and we're in the process of capturing that 3D seismic and then ultimately processing that and integrate it into our broader subsurface model. So at the time when we were drilling these wells, we didn't have the benefit of that knowledge.

Today, we have all of that, and we have tremendous understanding and visibility into this area. And so when they were drilled, which was also tied to holding a very important lease that captured about 20,000 acres of land, when they were drilled, we had a -- we were earlier in our days. We were still drilling both well design in terms of interwell spacing as well as proppant loading. We were still testing and doing our Gen 2 designs and then working towards our Gen 3 and Gen 4 designs.

If I could go back in time, these would all be Gen 3, Gen 4 because the Upper Utica well in the pad and the Gen 4 design in the pad are very strong performers, right in line with our expectations. These 4 wells, though, that were older Gen 2 designs, just have underperformed. And so we've got a lot better understanding in this area. Like I said, I mean, we've got now -- we've got a lot of wells across our broader portfolio, a lot more information, a lot better understanding, and that's informing the decisions we're making today.

So as part of that, the idea of going all the way to a Gen 4 design we're trending in that direction. But what I'll tell you is we are going to continue to challenge ourselves between Gen 4 and Gen 3 or any other future generation design to really optimize for the best overall return between our upstream and gathering business. And a Gen 4 design is a little bit more expensive than a Gen 3 design, and we want to see additional results from these Gen 4s that we're drilling, including I mentioned at the very end of this Q2, we brought online our first 5-well fully bounded Gen 4 design pad.

We want that kind of data to really help inform us on if we're moving all the way towards the Gen 4 design or something in between that could be even better. But ultimately, we're going to be led by the economics between our Integrated Upstream and Gathering, getting the most gas for the least amount of overall capital.

That's a great detailed answer. And as my follow-up, I was curious to learn kind of if you all could give more color on the long-term expansion opportunities for Supply Corp. You highlighted a third project with the Line N upgrade. How many projects are out there? And how do you decide which to pursue? And then on top of that, you mentioned in the slide deck, there's potentially more to do with Line N's potential incremental expansions. And can you talk more about the likelihood that you think you can capture that?

Sure. Yes, we've had a great run of doing expansions on Line N over the years. And given its location, I think that we're going to have lots more opportunities in the future. Our current focus right now, if you will, in the Line N area is on power gen, both with behind-the-meter type projects like with our Shippingport project as well as other, call it, just power gen that would go into PJM. And there's a lot of opportunities there. The dialogues that we've had with developers has been productive. As you may know, the Shippingport project, which is initially starting at 200 million a day, could grow to as much as 800 million a day if the project developer was successful in fully building it out. So that certainly would be a big opportunity.

And then other opportunities along the line are sizable as well, right? Our plants use a lot of gas. And Line N isn't the only spot that we're looking at. Our Empire line that goes from Tioga County north into New York and then ultimately connecting to Canada is another area that we could expand. I think the region is just generally short electric generation. Certainly, in PJM, we see the results of their auctions. But in New York, where there's been such underinvestment in energy infrastructure, at some point, I really believe that we're going to need more generation within the state.

And as much as policymakers would like that to be wind and solar, those just don't work for baseload power. And I think we're looking at needing more baseload power and natural gas is the logical choice for that. And our pipelines, particularly the Empire is really well suited for serving that new generation.

Your next question comes from the line of John Freeman with Raymond James.

First question, Justin, you touched on some of the maybe headwinds that you're seeing on the CapEx side on the diesel prices and things like that. Could you give just any more kind of color just on a leading-edge basis outside of like diesel prices, if you're seeing anything that's either supply chain type factors as a result of what's going on and then just any potential pressure on the service cost side?

Yes. Sure, John. Thanks for the question. The short answer is you're hitting at kind of the main element, which is more diesel, which obviously haul-intensive activities are going to be impacted by that and various surcharges that are baked into a lot of contracts that us as well as many other operators across the country have with their various vendors. In terms of real supply chain issues, we've actually been talking to all of our counterparties, digging into this, trying to ensure that there's no war-impacted challenges. At this point, we don't believe there are.

One, we've looked kind of potentially across like, for example, charges to the extent you have more explosives that potentially could get hung up and tied into Defense Production Act or otherwise needs. And we're just not seeing it. So we think we're pretty well insulated from, I'll call it, the same shocks that a lot of people went through back coming out of COVID, where you had an inability of the supply chain to deliver what you need. It's much more about some pricing headwinds.

And the reality is we don't -- it's so early in this conflict and don't have a lot of visibility when it's going to end and how that works. So we're evaluating it and working on it. And we're not seeing anything specific as it relates to drilling or completions. I would just note that those generally are longer-term contracts for us. We have a long-term frac provider. And similarly, we generally contract our rigs for 12 to 18 months at a time when we're bringing them in.

And then, Dave, I wanted to follow up on some comments you made previously. It seems like over the last couple of quarters, increasingly, we're hearing more and more of a focus on kind of the behind-the-meter kind of projects like what you have done with Shippingport. And I'm just curious, when you look out like at the opportunity set over the next several years and we sort of think about the opportunities behind the meter versus kind of the traditional grid-based solutions, kind of how you see that mix playing out?

I think the focus is switching more towards broader generation within PJM. I mean there still certainly is interest in behind-the-meter generation. I think that tends to go over better with the policymakers. But from a practical standpoint, having -- like I said just a minute ago, having more generation just generally in the region is going to require the build-out of new gas-fired generation, and we're going to be there to support it.

[Operator Instructions] Your next question comes from the line of Neil Mehta with Goldman Sachs.

Can you hear me okay?

Yes.

Sorry about that. So just your perspective on the gas macro would be terrific. I mean we've obviously seen a softening relative to where we were when we connected a couple of months ago and part of that could be the shoulder. Part of it seems like it's just production beats. I mean just your perspective on -- as you think about the balance of this year, we set up for exits in October. How do you think about the setup here? And how is that shaping the way you're approaching activity and hedging?

Thanks, Neil. I mean, just big picture, nothing has really changed fundamentally about our views. Tim spoke to some of this in his remarks. We've really built the portfolio to go through periods of both high and low prices. And as you're alluding to, that's exactly what we've seen. To go from a February settle of almost 750 and then the settle we just saw here from May of 256 is pretty tremendous volatility. We hedge. We've always hedged. We're methodical about that and thoughtful about it. We use collars to capture the upside. And then we have a marketing portfolio that's designed to capture premium markets at the end, but also minimize in-basin exposure.

And so Look, I think across the country, we're going to have more gas coming out of the Permian, particularly as these new pipeline projects go in service. Haynesville, a bit of a wildcard, exactly how that moves and exits through the year. But coming back closer to home for us and what really matters are the flows coming out of Appalachia and the relative demand. And I think our view is that, generally speaking, there's just a lot more discipline these days than there has been if you go back several years ago.

And by discipline, what I'm referring to is just producers in Appalachia understanding that we have a specific amount of storage. We have a specific amount of demand that will fluctuate based upon winter and summer temperatures, of course. But generally, the market stays more balanced and maintains, I'll call it, reasonable differentials to NYMEX Henry Hub. And then look, longer term, Henry Hub, I'll just hit at that briefly. We're still very much in the camp that we're -- we've entered a market where, generally speaking, we're going to see Henry Hub prices between $3 and $5.

And we would expect that there will be short periods of time that could be above or below that level. And that's really our fundamental view. What's great is that with those kind of prices, with the longer-term $3 to $5, we do fantastic. We generate a lot of free cash flow, a lot of earnings. And as we continue to make forward progress on our capital efficiency trends, that's just going to translate to more and more cash flow. So yes, I mean, very constructive with air pockets along the way, both highs and lows along the way.

Yes, certainly volatile. I appreciate that. And then just your thoughts around maximizing Gulf Coast exposure and any firm takeaway opportunities down to premium end markets would be good. I mean we saw that you layered in a little bit more here. But how big could that opportunity set be for you guys as you look out over the next couple of years?

So I mean, we've been at it now for a few years, really trying to further bolster our takeaway capacity in the form of new firm transportation. When we saw the depth and quality of this Utica resource that we have, it was clear to us we needed to protect the pathway to grow and do that through finding our way into premium markets. I spoke about some of those today. We've got the Tioga Pathway service -- coming in service later this year. We've got the EGT Project Stratum coming in, in a few years. And then what we've been able to selectively grab are these Gulf Coast new capacity contracts that you're alluding to.

Getting that first 50 million, getting that first olive out of the jar took a long time. We've been working on that for 18 months. And then we were successful here this last quarter at executing a contract to pick up another 50 million. And so over time, we'll have about 100 million going there. And then a lot of our overall FT portfolio, when you think about the $1.5 billion, it gets pretty balanced. We've got a nice chunk that's going to Gulf Coast or to, I'll call it, the Mid-Atlantic markets down as far as Z4, which would be in Alabama, but also Z5 South.

We've got some great capacity that gets us into kind of the New York, non-New York markets. And then we've got some access to some premium PA markets where we see continued, in particular, power gen. There's going to be a lot -- there are a lot of plants under development right now and PJM is short power, and we strongly believe that where we're moving this gas is going to be moving right to it. And then through the northern markets, whether that's Canada or Northern New York.

So we really like the portfolio setup. We're going to keep chipping away. I'm confident we'll find more ways to continue to expand it. If that's Gulf Coast, awesome. If it's something else, that's great, too. And we're -- but I'm confident we'll keep chipping away. But we've made huge strides. I mean, growing our portfolio by 50% over the last few years in terms of how much capacity we'll have as we get out to 2029.

There are no further questions at this time. I will now turn the call back to Natalie for closing remarks.

Thank you, Karina. We'd like to thank everyone for taking the time to be with us today. A replay of the call will be available on the website later today. 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.

This concludes today's call. Thank you for attending. You may now disconnect.

Hello, and welcome to the National Fuel Gas Company First Quarter Fiscal 2026 Earnings Call. My name is Harry, and I'll be coordinating your call today. [Operator Instructions] I will now hand the call over to Natalie Fischer, Director of Investor Relations. Please go ahead.

Thank you, Harry, and good morning. We appreciate you joining us on today's teleconference 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 first quarter fiscal 2026 earnings release and January 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. I want to start by taking a moment to recognize the fantastic job by our operations team, who are braving incredibly challenging winter weather conditions. As you'd expect, our systems are holding up extremely well with no operational disruptions at Seneca and no significant issues on our transmission and distribution systems. Thank you to everyone for your hard work. I really appreciate it.

Moving to our results. The first quarter was a solid start to the fiscal year with adjusted earnings per share of $2.06, right in line with our expectations. Our integrated Upstream and Gathering business continues to perform well with higher production and natural gas prices, driving a 29% increase in adjusted EBITDA compared to the prior year. Our regulated businesses also delivered strong results, driven in part by our 3-year rate settlement at our New York Utility and our pipeline modernization tracker at our Pennsylvania utility.

Overall, we're pleased with our first quarter results, which provide a great foundation for the balance of the year. Looking ahead, the outlook for natural gas is as strong as it's ever been with demand at all-time highs. On top of that, there's a growing need for LNG feed gas and new baseload power generation, most of which will be produced using natural gas. And from a policy perspective, there is a rising tide of bipartisan support for an all-of-the-above approach to energy.

Against that positive background, our focus remains on operational excellence and the continued growth of National Fuel. At our Integrated Upstream and Gathering segment, we continue to expand Seneca's inventory and significantly improved capital efficiency, which is on track for a 30% gain since 2023, far outpacing our peers. Well results from our Lower Utica program in Tioga County remain among the basin's best and success in delineating the Upper Utica over the last couple of years has essentially doubled our core Tioga inventory estimate.

We'll remain disciplined in how we leverage our integrated operations as we develop this region over the coming decades. Our upper and lower Utica co-development test will offer critical insights to guide our long-term strategy. And Justin will speak more to this later in the call. Switching to our pipeline business, our near-term expansion projects are progressing well. The Tioga Pathway project is moving forward according to schedule. We received our notice to proceed from FERC earlier in the month and will begin preclearing in the next few weeks.

Additionally, our Shippingport Lateral Project has now received all its required permits, keeping it on track for a late calendar 2026 in service date. Beyond these 2 projects, we're seeing increasing interest in other expansion opportunities across our systems, and I'm optimistic we'll have additional projects to talk about in the coming year. Before leaving the pipeline business, 1 quick comment on rate making. Supply Corporation expects to file a rate case later this year to recover costs related to our modernization program, and general expense inflation since our last rate increase 2 years ago. I'll keep you up to date on our plans with respect to timing as we move through the fiscal year.

Turning to the Utility business. Yesterday, our Pennsylvania division filed a new rate case that requests an approximately $20 million increase in rates. In addition to addressing general cost inflation, the case will reset our modernization tracking mechanism, which will allow us to maintain the cadence of that program. If approved, customer bills will go up by about 11%, which is below the rate of inflation we've seen over the 3 years since we last increased delivery rates.

Customer affordability has been and always will be a top priority for us. We currently have the lowest rates in Pennsylvania and fully expect will maintain that position after this case. We're the lowest cost provider in New York as well. The utility is in year 2 of a 3-year rate settlement that extends through the end of fiscal 2027. Even with the increases approved as part of that settlement, our delivery rates are still the lowest in the state. In fact, over the last 20 years, the rate of increase in our customer bills is well below the rate of inflation.

And with the cost that's 3.5x more affordable than electricity, natural gas is unquestionably the fuel of choice for space heating in Western New York. New York policymakers are increasingly in favor of an all-of-the-above approach to energy. The state's energy plan, the final version of which was published in December, acknowledges the difficulty in meeting the targets required by the Climate Act and emphasizes the need for continued investment in natural gas infrastructure to support New York energy demand.

Further, the state has agreed to delay implementation of the all Electric Buildings Act pending resolution of ongoing litigation. The delay is expected to last at least 1 year and could be permanent if the court rules in the industry's favor. We've long advocated that an all-of-the-above approach to energy is the most effective way to both reduce emissions and maintain the affordability and reliability of energy supplies. I'm encouraged to see Policymakers begin to move in that direction.

Lastly, at utility, we're making great progress on our acquisition of CenterPoint's Ohio LDC, which remains on track to close in the fourth quarter of calendar '26. With respect to financing in December, we completed a well-executed $350 million private placement of common stock, which satisfies our equity need for the transaction. With respect to regulatory approvals, both the HSR and Public Utility Commission of Ohio notice filings were made earlier this month. And the National Fuel and CenterPoint teams are working closely to ensure a smooth transition for customers and employees.

We're really excited about this transaction and the value creation opportunity it offers. Tim will have more details on the acquisition and our financing plans later in the call. Bringing it all together, it's an exciting time to be in the natural gas industry. National Fuel has a unique set of integrated assets in the most prolific gas region of the country. Add to that a strong investment-grade balance sheet, and we are very well positioned to help develop the resource and build the infrastructure needed to serve the growing demand for natural gas.

With that, I'll turn the call over to Tim.

Thanks, Dave, and good morning, everyone. National Fuel had a great start to the fiscal year with adjusted EPS of $2.06, which keeps us on track to achieve our full year guidance. Since Dave hit on the high points for the quarter, I'll just briefly explain 2 items impacting comparability that result from our pending Ohio utility acquisition. The first relates to costs incurred ahead of the expected calendar fourth quarter closing. This is a combination of transaction-related costs, items such as legal fees and regulatory filings as well as integration readiness costs to prepare us for post-close operations.

We expect that a fair amount of the integration cost can be recovered in the future, particularly those tied to the development of IT systems to replace those that will remain with CenterPoint after closing. The second item is related to financing costs. While raising permanent financing ahead of closing, derisked the acquisition, there is an associated cost in the form of earlier dilution and incremental interest expense, both of which we plan to present as an item impacting comparability so investors can better see the results from current operations.

Switching to the outlook for the remainder of the year. All of our previous assumptions remain unchanged. We are reaffirming our adjusted EPS guidance range of $7.60 and to $8.10 or $7.85 at the midpoint. We are seeing some tailwinds that could favorably impact full year results, particularly on our integrated upstream and gathering cost structure, and in-basin prices, which have improved with recent cold weather. Natural gas prices remain the biggest variable for our outlook. And if the past few months are any indication, we expect to see more near-term weather-driven impacts. For example, yesterday, the February contract settled at almost $7.50, a 140% increase from just 2 weeks ago. This was a record move in the 35-year history of a NYMEX natural gas contract.

Over the same time period, we saw prices for the balance of the fiscal year as low as $3 and more recently in the $3.75 to $4.25 area. Given this dynamic, we decided to maintain our previous $3.75 assumption for the remainder of the fiscal year. Prices will likely keep moving around, and as a result, we will continue to provide earnings sensitivities at various levels. While pricing fluctuations will likely persist, our hedge book provides downside protection and 70% of our remaining production for the fiscal year, while allowing for us to capture upside to the extent higher prices persist.

Within our 2026 portfolio, we have approximately 80 Bcf of collars with an average weighted floor of $3.60 and a cap of $4.75. These collars, along with our unhedged volumes, provide us with exposure to higher prices on more than 50% of our expected remaining production. Looking beyond this fiscal year, we were opportunistic in the fall when the longer end of the curve moved up quickly. Across fiscal '27 and '28 weighted swap layers between $4 and $4.25 and collars with weighted average floors in the high $3 area and caps well north of $5.

At these prices, we are locking in strong cash flows and high returns. Switching to capital, the outlook is unchanged from our prior guidance. Collectively, with earnings, capital and cash flow in line with previous expectations, we are confident in the strength of our balance sheet, which we expect to approach 1.75x net debt to EBITDA as we exit Fiscal '26. This outlook played into our decision to stay below the high end of the range of equity needed to fund our Ohio utility acquisition.

As Dave mentioned, in December, we issued $350 million of common equity via a private placement. Coming out of the acquisition announcement, we had broad support for the transaction and its strategic merits. We received several unsolicited inbounds expressing interest in a transaction that could be executed in advance of our original public offering time line. Given the strong demand we were able to take equity risk off the table at a 2% to 3% discount to our market price at that time. This transaction took care of our expected equity needs for this acquisition.

When combined with our current business outlook, we are confident that by the end of the first year, post closing, we will be able to achieve the low end of our previously disclosed 2.5 to 3x net debt-to-EBITDA range. With equity needs solved, our focus turns to debt financing. Between the remaining proceeds needed for the acquisition at closing as well as refinancing our term loan and October long-term debt maturity we expect to issue approximately $1.5 billion in long-term debt.

As a reminder, any public offering tied to acquisition financing of this size drives underwriters to require pro forma financial statements, which in turn are contingent on audited financials of the acquired asset. We expect to receive those audited financials in the next month or so and will have the pro formas shortly thereafter, at which point, we can begin evaluating the timing of our transaction.

Sticking with CenterPoint, Dave gave a high-level update on the major work streams, but I want to touch on a few more points. First, the Ohio Commission issued its final order in CenterPoint's rate case where they modified a few key terms of the proposed settlement. First, they slightly lowered the agreed-upon ROE to 9.79%, a 6 basis point reduction from the proposed settlement. This will have a fairly small impact on near-term earnings, roughly $500,000 per year.

The other action the commission took was to extend the amortization period of deferrals related to various modernization trackers from 15 to 25 years. In the near term, this has no impact on earnings, but does modestly reduce cash flows. Longer term, this is actually a benefit as we will be able to earn on a larger rate base amount, which is a tailwind to our long-term earnings and cash flows.

More broadly, the Ohio regulatory environment has further positive trends developing. Most notably, the Ohio Governor recently signed into law a bill that modernizes the natural gas rate making process. We were optimistic this would occur in the near term, but didn't incorporate it into our overall valuation. The new construct significantly shortens the rate case time line, which typically took 15 to 18 months, but now is required to be completed in 360 days. It also moves from a historic test year to a 3-year fully projected test year, with annual true-ups to authorized ROEs. These are nice improvements from the current approach as they minimize regulatory lag and provide greater certainty in achieving allowed returns.

We remain excited about the Ohio utility acquisition. And as we spend more time with the employees that support this business, we've seen that we're not only acquiring a great asset, but also a great team. Overall, the outlook for our business is as strong as ever. Fiscal '26 adjusted EPS is projected to grow 14% over last year. And the setup for 2027 is for even more growth across the organization. Our balance sheet remains strong, which provides flexibility to capitalize on further growth opportunities that may arise.

Overlaying us with the broader tailwinds across the natural gas industry, and you can see why we are excited about our ability to continue to create significant long-term value for shareholders. With that, I'll turn the call over to Justin.

Thank you, Tim, and good morning, everyone. I want to begin by echoing Dave's appreciation for our dedicated employees and contractors. Your planning, communication and teamwork throughout the recent storm and ongoing extreme cold weather has been exceptional. Thank you for keeping our gas flowing and doing so safely.

Turning to the quarter, our integrated Upstream and Gathering business delivered a strong start to fiscal '26 driven by consistent execution across our operating teams. Net production was 109 Bcf, an increase of 12% over the first quarter of fiscal '25. This significant production growth paired with lower capital spending highlights the strength of our Tioga Utica program and our relentless focus on capital efficiency. As we continue testing to further optimize well designs, we expect additional productivity gains in the quarters to come.

We are reaffirming fiscal '26 guidance with production of 440 to 455 Bcf and capital of $560 million to $610 million. We expect capital to be relatively steady throughout the year. Looking ahead, starting in the second half of the year, Seneca will maintain its plans to operate a single drilling rig and a full-time frac crew, and gathering will ramp up seasonal construction of pipelines and other infrastructure over the summer months. The only other item of note is the timing of activity for a joint development path, which could pull forward about $10 million of capital into fiscal '26.

On production cadence, we anticipate Q2 volumes will be slightly down from Q1 and in part due to TIL timing and deferring some activity during the recent storm. Moving into Q3, we expect production to increase and then hold relatively steady through the end of the fiscal year as we bring online some large Tioga Utica pads during that time frame. Looking ahead, we have several important initiatives underway to optimize future development. First, we are advancing our Tioga Utica well design through Gen 4 testing. This spring, a 5-well lower Utica pad featuring wider inter-well spacing and larger completion designs is expected to come online, enabling us to assess productivity and cost impacts, what we refer to as bang for our buck.

In the Upper Utica, we are piloting similar larger completions to evaluate whether the improved performance we have seen in the Lower Utica can be replicated. Above ground, we are enhancing facility designs, to support higher initial rates up to $40 million per day on longer laterals while minimizing incremental capital. Second, we are just beginning to flow back our first full upper and lower Utica co-development pad and have more tests planned over the next 12 to 18 months.

While the Lower Utica is our current operational plan based on slightly better economic performance, our testing program is designed to confirm that view over a broader set of results and well designs. As results come in, we will preserve flexibility across both development paths and remain focused on identifying the highest returning integrated development program.

Turning to Gathering. Our focus remains on supporting Seneca's volumes while adding new third-party production in Tioga County. Our near-term plan leverages existing facilities with target additions of new pipelines and compression. We are also building for the future and recently completed pad construction for the Kraft Hollow station, which is located in the northwestern section of our development area. The buildout of this large centralized station and its associated pipeline network is designed to meet expected growth in both Seneca and third-party volumes over many years.

Turning to the natural gas markets, winter storm, Fern has brought very cold weather to a large portion of the U.S. and with it natural gas price volatility. We believe this kind of price fluctuation is the new normal and will persist in the coming years. Strong structural demand from LNG exports and power generation combined with limited new storage and pipeline infrastructure supports a price environment in the $3 to $5 range with potential for weather-driven deviations lasting weeks or months.

Given this outlook, we will maintain disciplined risk management practices and an emphasis on retaining upside during periods of peak demand. Our increasing future production is supported by a diversified and growing portfolio of firm transportation and firm sales. Our total firm transportation capacity will grow from 1 Bcf a day to 1.5 Bcf a day over the next few years with recently announced interstate pipeline projects and capacity releases we have secured. However, we are not stopping there and are actively evaluating opportunities to further expand our marketing portfolio.

More near term, we are tactically protecting our production with roughly 80% of our remaining volumes covered by physical firm sales that link our price realization to mostly NYMEX and premium out of basin markets. On the sustainability front, I want to highlight a significant achievement. We recently executed a first-of-its-kind 10-year agreement to provide 250,000 MMBtu per day of MIQ certified methane reduction certificates to a European utility. This agreement reinforces Seneca's leadership in responsibly sourced gas and provides a framework for similar transactions in the future.

In closing, our integrated upstream and Gathering business entered 2026 from a position of strength, and our momentum continues to build. Our focus on capital efficiency through well-designed testing, co-development pilots and ongoing operational optimization, provides us -- positions us to further enhance long-term value. Combined with our integrated gathering assets and diversified marketing portfolio, these efforts support best-in-class margins and growing free cash flow in the years ahead.

With that, I'll ask the operator to open the line for questions.

[Operator Instructions]

Our first question today will be from the line of Zach Parham with JPMorgan.

First, just wanted to ask on if you have any ability to take advantage of local prices that have spiked over the last week or so, we've seen some of the local basis points spike into the triple digits on some days, given the cold weather and the free ups we've seen. Do you have any ability to flow incremental volumes and take advantage of that? Just curious if you were able to benefit at all there.

Yes, Zach. It's been a remarkable time hasn't it. The pricing has been historic highs. We've got a fantastic marketing portfolio. And so we do always keep open a little bit of gas daily, daily including to markets like non-New York and Z5 on the Transco system, which saw some of those extremely high prices.

So absolutely. It's not -- there's a good base of our gas that we really just tie back to NYMEX, but we do keep a small portion open to try to take advantage of those prices when they happen. So it was it was a pretty interesting weekend, an exciting time. We're still seeing fantastic in-basin pricing today, too.

Then my follow-up, I just wanted to ask more broadly on the pipeline side. Could you talk about the potential for future growth projects in the pipeline business beyond Tioga pathway and the line in lateral that you've announced. I know there's a lot of infrastructure development going on in the basin. Just curious what the opportunity set there can look like to drive further growth from the pipeline business?

Yes, I definitely think we'll have additional opportunities over time. You look at where our pipelines are located, I mean, they're in pretty much the best area in the country for doing projects, whether it's proximity to the resource itself or the infrastructure to deliver it. So we've had continued interest in projects in and around our Line and system. We tend to be pretty conservative when we announce projects, but we are in active dialogue with other parties and fully believe we'll have additional opportunities down the road.

Your next question will be from the line of Noah Hungness with Bank of America.

For my first question here, there is a few bills working their way through the Senate regarding federal permitting reform, a couple of targeting changes to NEPA and the Clean Water Act. I was just wondering your all thoughts if those bills do end up passing, how would that change how you think of regulated pipeline projects and other projects that may be able to be green lead?

Yes. Well, I think it would be great if they were passed both for the pipeline industry and and the renewal industry for that matter. I'm not sure that it would change our view on pipeline development, right? I mean we've got a great team that runs all the traps on getting these projects developed.

And for us, the permitting reform issue has generally, at least in Pennsylvania, been a question of time as opposed to whether projects get built or not. So I think the net outcome of permitting reform would be projects we get built sooner.

Great. And then for my second question, this is probably for you, Justin, how can we think about the D&C costs of the Seneca Gen 4 design? And how does that compare to some of the costs shown on Slide 5. And also, could you talk about what D&C costs would look like for the larger upper Utica frac would that also be similar to a Gen 4 design?

Yes, sure, Noah. So -- there are several things going on with the Gen 4 design that we're looking at. But if I really boil it down to, I think, the 2 biggest factors, it's a little bit wider inter-well spacing. And then obviously, the upsized proppant loading and completion design going to 3,000 pounds per foot more or less. So really, the main cost that you have when you do something like that or you're pumping a little bit more fluid, you're pumping a little bit more sand and you've got a little more pump time. And so ballpark, that adds probably $150 to $175 a foot, something like that.

We see in the -- we've got a couple of tests in the ground now where we did this on a pad and had a single well where we kind of tested out the Gen 4 design. We're now moving to the place where we're testing these out, we're all the wells on a pad are going to be Gen 4 designs to kind of see it. But we think there's a pretty meaningful uplift that is significantly in excess of that incremental cost in terms of overall pad-based IRRs and ultimately EUR that we would get out of these wells.

And so right now, we're we're excited to kind of see that play out. I noted in my remarks, we've got this spring, our first well that will be our first pad excuse me, that will be a true pad Gen 4 design. It will come online, we expect later in the spring. And so that will be a great opportunity to really see how these wells do. I will note we already rate constrained and rate restrict all of our wells. We kind of hold them flat around that usually 25 million, 30 million a day.

And the other element, though, on Gen 4 and just generally is we're looking at facilities where we would hold them flat at up to 40 million a day. So there's a lot of things playing into that. But holistically, what I'd tell you is we think there's a lot of opportunity here, and we're going to continually evaluate is this a better economic answer kind of balancing the increased productivity, the EUR versus the cost.

On the uppers, it's a similar amount, and we're earlier in that testing. We used to have less wells, but it will go through kind of a similar process where we test out moving to maybe a larger completion design.

And I'm sorry, any early thoughts on the Gen 4 productivity uplift?

I would say we haven't really put in like a detail on that, but that will come. But I guess what I'm sharing with you is just expect that you would take a curve where it will be rate restricted for a period but would have probably a longer flat period and then ultimately a higher EUR. And so you would have pick up, say, after you exit that flat period 6 to 12 months out, and you just be holding flat longer.

So you're getting back a lot of this value near term and with an increased deliverability and productivity we may rate restrict them at a higher rate during the initial flat period.

Next question today will be from the line of Greta Drefke with Goldman Sachs.

As you've noted, natural gas pricing has continued to be incredibly volatile. But as you think about the outlook for NFG on more of a through-cycle basis, what is the optimal production growth rate for the company over the next several years? Is mid-single-digit growth still a fair starting point? Or if we go into a less constructive gas price environment maybe over time, would you be inclined to maybe slow down some of that growth if we have to work through some periods of pricing weakness?

Yes. Thanks, Greta. A couple of things on that. One, I would say we feel pretty good about our outlook on gas kind of being in that $3 to $5 range. And when it's in that $3 to $5 range, we earn fantastic returns, and that's kind of just to continue on go forward. If we saw prices outside of that range and not consistently and in a forward curve, or frankly, even to the high end of that range, I think we would be looking for ways to go a little bit faster. But the real governor for us is interstate pipeline capacity.

So we need more -- I've talked about this in the past, we either need to see a little bit more attrition from other operators, particularly in Northeast PA, where some of the inventory there is more mature. And so we think there's a market share opportunity for us. Or we need new pipes, either through modernizations, expansions or new builds. That's really going to be the governor. Certainly, if we saw sustained prices below that $3 to $5 we would be looking at ways to maybe moderate on the margin. But overall, our base plan is to continue in that mid-digit range kind of 3% to 7% per year on average.

Great. And then just for our next question. Last quarter, you announced 220 location additions in the upper Utica zone. As you spend a little bit more time with that geology, can you speak to if there are any plans for further delineation or testing that could unlock even more locations and expand that upper Utica inventory across the portfolio?

Sure. So there's opportunity to further expand our inventory count, both in the upper, but also in the lower. And we're continuing to appraise and delineate. So we've got over 400 Utica locations between uppers and lowers that we feel really good about and have largely appraised and delineated. We think there probably is some opportunity to have upside to that as we go forward in potentially uppers and lowers. And so that's something we'll -- we will -- we've got a lot of inventory. So it's always a balance on how much money you want to put into call it, a leading-edge appraisal well where you're moving into, say, a different fault block versus drilling the inventory you have that's very well delineated.

But we're looking to continue to expand our position here and grow to have as many future development locations as possible. And so I think we'll find ways to do that. We have a lot of smart people and our subsurface teams that are working through this and we'll be testing some areas that expand potentially the boundaries of our current well-delineated 400 count upper and lower locations to date.

The next question will be from the line of Timm Schneider with the Schneider Capital Group..

So most of my questions have actually been answered, so I'll follow up on a comment that I think Justin made in terms of volatility expected to stay here in natural gas markets. So as you kind of look at that, what do you think going forward alleviates that issue? Is it more steel in the ground, either via pipelines or storage? Or is there something else that needs to happen as well?

Yes. Tim, this is Dave. I think it's more steel on the ground, right? I mean you look at at gas prices and electric prices in the Northeast are just incredible this past week. And the easiest way to get that down, whether it's gas or electricity is building more pipeline infrastructure. And we've got the resource without question by using more of it, we can damp down a lot of that volatility.

Got it. And obviously, putting in steel, storage, whatever is a lot tougher in the Northeast and then there's in other parts of the country. Have you guys looked at rates that it would cost that you would need in order to put new storage assets in the ground in the Northeast to the extent that is even possible?

Yes. And we have looked at that. It is quite high. Our focus is on optimizing our existing storage facilities, right? So either drilling say, horizontal wells or doing other things that can either increase the amount of gas we can get downhole or improve the deliverability rates that we see when we're bringing gas out.

And then lastly for me, can you remind us what percentage of your storage is merchant versus kind of contracted?

It's 100% contracted understates [indiscernible] Yes.

[Operator Instructions] The next question today will be from the line of John Freeman with Raymond James.

Just following up on the upper Utica topic. Justin, have you determined sort of like what's the appropriate sort of codevelopment type strategy going forward? I assume there's been some testing, maybe wide rock type, maybe there's some others just kind of where you are in that process.

Yes, John. Thanks for the question. So we think about it a lot. Right now, our base development plan. What we think about is to go with a lower Utica development first because it has a slightly better economic edge. That being said, we really want to challenge that thesis in that result. So what we're doing is literally here right now, we're going to begin flowback on a true co-development upper lower Utica pad. We've got another one planned for later this year. And we're going to take that data and that information and really use it to assess the right development plan.

And as I mentioned, our lean right now is towards go ahead and do the lowers initially and come back and do the uppers in time. But we don't want to just make that assumption. And so we're keeping our options open. We've got the ability to pivot to go one way or the other. But we want to be led and informed by data and results. And so that's what we're in the process of doing, and we'll be doing so over the next kind of 12 to 18 months before making a conclusive decision.

Got it. And then just kind of a bigger picture question. There's been a healthy amount of upstream sort of M&A by some of your peers over the last like 6 months. I'm curious if you all M&A focus will remain on more of the regulated businesses or following CenterPoint closing if we could see maybe a shift of M&A focus back towards whether it's upstream or just your unregulated businesses.

Yes. John, I mean you're right. Going into CenterPoint, we were focused on the regulated side of the business and we're able to do a great transaction. I'd still like us to be a bigger company. And I think the CenterPoint deal kind of rebalances the company a bit and it gives us the flexibility to look at transactions on both the regulated and nonregulated side of the business. I don't know that I'd say that I have a particular priority one way or the other, other than to to invest capital in ways that get the best returns for our shareholders.

Thanks. Appreciate it. Nice quarter.

The next question will be from the line of Geoff [indiscernible] with Daniel Energy Partners.

I had 2 questions. First question, Justin, just on the frac barrier between the upper and the lower, how variable is that? Or is it not? I just kind of an assessment of how that frac barrier looks across your acreage? That's my first question.

Yes. At a big picture level, what I would share with you is that this is a regionally unique feature that we have due to some series of or singular seismic events that happened several hundred million years ago. The thickness, we've got really good well control and understanding of the thickness of that seismic barrier across our acreage position. It does vary in the depth -- excuse me, in the size of it, but the overall characteristics of that largely impermeable barrier is consistent across our acreage from everything we've seen.

So we think it's -- everything we've delineated in the uppers and you can see, and we've tried to provide a map in our latest IR deck, you can just get a sense of the aerial extent of our testing. We feel like it's a very effective barrier across that position that we fully delineated.

Great. Second question, can you guys speak a little bit more broadly just in terms of -- you kind of touched on a little bit just incremental takeaway industry-wide out of the basin, I hear some comments about kind of more gas that can move west out of Pennsylvania into Ohio, a lot of data center development there. Just broadly speaking, what's your sense on kind of brownfield takeaway out of the basin going west and maybe if you have any view on volumes going south.

Sure. I'd say, I mean, for the first time in a while, there's actually projects that are kind of happening more, right? So there are -- within the basin, I would put it into a few categories. I mean, the brownfield is is happening. I mean that's this new capacity that Seneca has signed up for that will go in service in 2028 is a good example. The type of pathway project that supply -- National Fuel Supplies building this year. That will serve Seneca is another good example.

So combination of brownfield and quasi-greenfield kind of intrabasin or moving a bit out of basin, but to more premium markets. That's great. I think the potential for really big greenfield pipe is still pretty challenged. We're really encouraged with the news out of both FERC and New York that seems to have greenlit messy getting built. That's also a very important project for us specifically because we move a lot of our gas through our Atlantic Sunrise and Lake South capacity exactly into that market, and this will create a new significant pull on demand and should further support the pricing there.

And then there is the in-basin demand. I mean there's been a number of significant power gen and/or power gen data center related projects that have been announced and that are in various stages of construction. So that will keep growing the demand. So I think it's kind of all those things. And the last one I would put in there is that we think there's still a big opportunity, particularly for some of the very large interstate pipelines that have -- that move well out of the basin you can pick on different names, whether it's a Transco or Tennessee or others, where they likely have some real opportunities to further debottleneck their pipe by doing some minor modernizations or compression ads even beyond in the basin that could free up more gas to get out of Appalachian.

And I think, as Dave said just a minute ago, what we need is more steel and more takeaway in order to help dampen some of this volatility. And so those are the very projects that could really help do that. And frankly, our position at Seneca and Midstream is interconnected to where that takeaway would start. So we're watching it closely. We're participating in it through the projects we're doing, and I'll call it cautiously optimistic we'll see more of that.

Thank you. This will conclude today's Q&A session. I will now hand the call back to Natalie Fischer for closing remarks.

Thank you, Harry. 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, February 5. 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.

This concludes today's call. Thank you for joining the National Fuel Gas Company First Quarter Fiscal 2026 Earnings Call. You may now disconnect your lines.

Hello, and welcome to the National Fuel Gas Company Fourth Quarter and Full Year Fiscal 2025 Earnings Call. My name is Harry, and I'll be your operator today. [Operator Instructions] I would now like to hand the conference over to Natalie Fischer, Director of Investor Relations. Please go ahead.

Thank you, Harry, 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 fourth quarter and full year fiscal 2025 earnings release and November investor presentation have been posted on our Investor Relations website. We may refer to these materials during today's call. We'd 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.

Thank you, Natalie. Good morning, everyone. As we reported in last night's release, National Fuel had a great fourth quarter with adjusted earnings per share of $1.22, an increase of 58% from last year. The quarter capped an excellent fiscal year where each of our segments delivered meaningful growth. On a consolidated basis, adjusted earnings per share increased 38% compared to fiscal 2024.

At our integrated Upstream and Gathering businesses, we continued our impressive trend in capital efficiency, a trend that is unmatched by our Appalachian peers and perhaps across the industry. Since we began our EDA transition in mid-2023, we've grown production by approximately 20% while reducing our overall capital spending by 15%, which is a testament to both the quality of our Tioga County assets and our team's dedication to operational improvement and execution. Given the productivity of our acreage and the depth of our inventory, I fully expect our capital efficiency will continue to improve in the coming years.

To that end, last night, we announced a significant expansion of our Tioga County inventory, adding approximately 220 prospective well locations in the Upper Utica formation. Over the past few years, we've been testing this horizon across our Tioga acreage and the strong performance from the 4 highly productive wells turned in line to date in the Upper Utica give us the confidence to increase our inventory in this area.

The addition of Upper Utica locations nearly doubles our inventory in the EDA. At our current pace, we now have almost 20 years of development locations that are economic at NYMEX prices below $2 per MMBtu. As we've discussed in the past, another key driver for future growth at Seneca is additional firm transportation and firm sales to ensure we have an end market for our production.

Consistent with that objective, in September, we signed a proceeding agreement with a third-party pipeline that will provide us with an additional 250 million a day of takeaway capacity out of Tioga County starting in late 2028. This new capacity, along with the Tioga Pathway project that should come online in late 2026, underpins the mid-single-digit production growth we've been signaling for the past year or so. Justin will have a full update on Seneca later in the call.

Turning to our regulated operations. Momentum continues to build at Supply Corporation, which has 2 great growth opportunities in progress. First is the Tioga Pathway project for Seneca that I just mentioned. Development of that project remains on schedule. We received our certificate in May and are on track for a spring construction start. Second is the Shipping Port lateral off of our Line N system in Western Pennsylvania.

Supply Corp made its prior notice filing in late August, and we expect to receive FERC authorization in the coming weeks. In addition, we recently ordered the key materials and awarded the construction contract for the project, keeping us on schedule for a fall 2026 in-service date. As a reminder, this $57 million data center-driven project will create 205 million a day of new delivery capacity and generate $15 million in annual revenue.

As I've said on prior calls, I'm optimistic that we can provide additional transportation capacity to the Shipping Port site as it advances its development. The potential for pipeline expansion doesn't end with shipping port. We're in dialogue with multiple parties on expansion projects across our system. Our unique portfolio of pipelines in the Appalachian producing region are well positioned to provide speed to market for potential data centers.

Our interconnectivity with numerous long-haul pipelines and our significant experience in developing and constructing infrastructure in the region are competitive advantages that position us well to deliver projects on an accelerated time frame. I'm confident we'll have additional such projects in the years to come.

Switching to our utility business. As we announced a few weeks ago, we've entered into a definitive agreement with CenterPoint to acquire their Ohio Gas LDC. At closing, this highly strategic acquisition will double our utility rate base, add significant customers in a state that is supportive of natural gas and provide us with another opportunity to recycle the substantial free cash flow from our Upstream and Gathering businesses into an enterprise that adds both scale and future earnings.

We're excited about this transaction and the value creation potential that it offers. The assets are high quality and have a strong outlook for continued rate base growth. Further, they're operated by a talented workforce that will be a great fit with National Fuel. We had the chance to meet most of the Ohio team last week, and it was clear that they share our dedication to safe and reliable natural gas service. We look forward to working with CenterPoint to ensure a seamless integration of the Ohio assets into the National Fuel organization.

Before closing, a quick word on energy policy in New York State, where the momentum towards an all-of-the-above approach to energy continues to build. In both public statements and publications like the draft State Energy Plan, elected officials and policymakers are at last beginning to acknowledge the importance of natural gas as a reliable and affordable source of energy that supports economic development in the state.

They readily admit New York won't meet the Climate Act goals on the time frame originally required and have even seen fit to suggest that lawmakers modify the Climate Act in the months to come. From the beginning, we've advocated an all of-the-above approach to energy, and I'm confident that policymakers will ultimately reach that conclusion as well.

In closing, fiscal 2025 was a terrific year for National Fuel. Our financial results were the best in the company's history. And perhaps more importantly, we took actions across each of our businesses that lay the foundation for long-term growth and continued operational excellence. The outlook for the company is as strong as it's ever been, and I'm excited to execute upon our strategy in the years to come. With that, I'll turn the call over to Tim.

Thanks, Dave, and good morning, everyone. We ended fiscal 2025 with a strong fourth quarter. As Dave highlighted, adjusted earnings per share increased 58% from the prior year, driven primarily by excellent results in our Upstream and Gathering operations. For the quarter, production increased 21% from the prior year as Tioga Utica well performance exceeded our expectations.

In addition, our realized price after hedging increased by 9% on the back of improved commodity prices, while total per unit operating expenses were lower. Altogether, adjusted earnings per share in our integrated Upstream and Gathering business increased 70% year-over-year. These great results were also supported by continued operational excellence in our regulated businesses, where lower-than-expected expenses led us to beat our projections.

Before I discuss our outlook for the business, I want to highlight a change in our segment reporting structure. Historically, we've reported our Exploration and Production and Gathering segments separately. We've streamlined our financial reporting by combining those 2 segments into one, which we are calling our Integrated Upstream and Gathering segment. We believe this approach best aligns with how we make capital allocation decisions, how we think about the integrated cost structure benefits and how we will continue to manage the businesses going forward.

Shifting to fiscal 2026. All of our underlying operating assumptions and capital spending ranges remain consistent with last quarter's guidance initiation. Over the past few weeks, NYMEX prices have averaged approximately $3.75. So we are using that assumption to initiate formal guidance. At that price, adjusted earnings are expected to be within the range of $7.60 to $8.10 per share. As you may recall, with the natural gas price volatility we saw over the summer, we provided preliminary EPS guidance at various NYMEX prices.

Volatility on the front end of the curve remains, so we're sticking with the same approach. While prices move around in the near term, the long-term outlook remains strong, and we've continued to lock in additional hedges to protect earnings and cash flows at prices that are highly economic for our development program. We've modestly added to our fiscal 2026 position and now sit at 65% hedged with a base of NYMEX swaps at an average price of approximately $4 and a similar level of collars with an average floor of $3.60 and cap of $4.80.

More recently, we've been focused on fiscal 2027 and 2028, where we've added a number of swaps north of $4 and collars with floors in the mid- to high $3 area. At these prices, we generate strong returns and free cash flow, while the collars allow us to capture upside potential to prices.

Sticking with free cash flow, at our current NYMEX assumption, we expect to generate $300 million to $350 million in fiscal 2026. This is well in excess of what we generated last year. In addition to fully covering our dividend, the additional cash will be directed to further strengthen our balance sheet as we move towards the closing of our Ohio Gas utility acquisition in the fourth quarter of calendar 2026.

Notably, we are able to generate this level of free cash flow while increasing the amount of growth spending during the year. As a reminder, capital expenditures are expected to increase approximately 10% from fiscal 2025, driven principally by growth-related spending on our Tioga Pathway and Shipping Port lateral pipeline projects.

In addition to the revenue from these projects, which is expected to total approximately $30 million annually starting in early fiscal '27, we also expect to see an increase in earnings from rate cases that we plan to file. First, Supply Corporation is targeting a FERC rate case in the second half of the fiscal year. As you may recall, we reached a settlement on our last rate case and new rates went into effect in February 2024.

We did not agree to any stay-out provision as part of the settlement. We've seen a continued need to invest in modernization to maintain the safety and reliability of our system and have also seen the ongoing impacts of inflation. This puts us in a position to seek an increase in our rates to account for those impacts and ensure we earn an adequate return for our shareholders. We are also likely to file a rate case in our Pennsylvania utility division this fiscal year.

Our last rate settlement was in 2023, and we've done a good job over the past 2 years controlling costs and deploying capital in line with our modernization tracker. However, we expect to exceed the revenue cap on this tracker in early fiscal 2027, and therefore, plan to file for a base rate increase in advance of that to achieve timely rate relief.

Looking at this in total, our 2026 consolidated earnings per share guidance represents a solid 14% growth at the midpoint. With additional growth expected in fiscal '27, we remain on track to comfortably exceed our multiyear earnings guidance we initiated last year. While our outlook for organic growth remains strong, we expect a further benefit when we close on the acquisition of CenterPoint's Ohio Gas utility.

The significant scale provided by this acquisition will enhance our long-term outlook for regulated earnings growth. We're excited about this opportunity and in the near term, are focused on working through the regulatory approval process, which we expect to kick off early next year. Over the past few weeks, we've also made progress on the financing front with the successful syndication of our bridge facility. We had overwhelming support from our bank group.

As a result, we bifurcated the initial bridge into 2 components. The first is a 364-day term loan commitment and an amount equivalent to the proceeds due at closing. Funds, if needed, wouldn't be received until closing, and we would have 364 days from that point to repay. Relative to a traditional bridge facility, this structure reduces our costs and provides additional optionality around the execution of our permanent financing strategy.

Second, we will also maintain the traditional bridge facility that aligns with the size and maturity of the promissory note that will be issued to CenterPoint. With the syndication process behind us, we will move into executing our permanent financing strategy, which we expect to commence in the spring. Bringing it all together, this is an exciting time for National Fuel.

Our underlying business is very strong. Our industry is flourishing, which creates great opportunities across each of our businesses. Our balance sheet is in great shape and the acquisition of CenterPoint's Ohio Gas utility provides an additional avenue to reinvest free cash flow into rate base growth. We expect to be able to drive meaningful growth in earnings per share over the long term, supporting our commitment to returning capital to shareholders via our growing dividend. We are excited about the future of our industry and the growing role National Fuel will play within it. With that, I'll turn the call over to Justin.

Thank you, Tim, and good morning, everyone. As Dave mentioned earlier, fiscal '25 marked another year of strong operational and financial performance for our integrated Upstream and Gathering business. We grew our [indiscernible] reserve base to nearly 5 Tcfe and achieved record net production of 427 Bcfe, surpassing the high end of guidance and growing 9% year-over-year. This meaningful growth was achieved with capital expenditures of $605 million. A reduction of approximately $35 million from the prior year.

Since 2023, we've achieved a 30% improvement in capital efficiency, highlighting the strength of our asset base, the effectiveness of our development strategy and our strong operational execution. And we expect this capital efficiency trend to continue to improve in the years ahead. Beyond capital efficiency improvements, over the past year, we've made substantial strides in further increasing our peer-leading inventory depth. As noted in last evening's earnings release and our updated investor presentation, we've significantly increased our core Tioga Utica development inventory.

Our delineation efforts have unlocked additional resource potential in the Upper Utica, a distinct zone separated by a large frac barrier from the Lower Utica. We currently have 4 producing Upper Utica wells, each of which was codeveloped on a pad with lower Utica development wells, which allowed us to delineate a large swath of acreage over a multiyear period. As such, we have significant production history and all wells have demonstrated productivity on par with our Gen 3 Lower Utica wells.

This successful appraisal campaign more than doubles our Tioga Utica inventory to approximately 400 future development locations. We estimate net recoverable gas from the future Tioga Utica development of over 10 Tcf, underpinned by an approximately 300-foot Utica resource column. In addition, we have approximately 60 Marcellus locations in Tioga and Lycoming counties. Combined, we now have almost 2 decades of core EDA development inventory with breakevens below $2 NYMEX, a depth of high-quality core inventory that is unmatched by our peers in Appalachia.

Looking ahead to fiscal '26, we expect continued improvement in well results and resource recovery, driven by key well design tests on 3 upcoming pads. These tests will include higher-intensity fracs, wider inter-well spacing, upsized gas processing units and co-development of the upper and lower Utica zones, all aimed at enhancing capital efficiency and maximizing long-term value.

Turning to guidance. We are maintaining forecasted production between 440 and 455 Bcfe, representing a 5% increase at the midpoint year-over-year. Operationally, we plan to run 1 to 2-rig program and a dedicated frac crew throughout the year. Regarding capital, integrated Upstream and Gathering segment expenditures are expected to be $550 million to $610 million this year, down 3% at the midpoint compared to fiscal '25 and more than $100 million lower versus fiscal '23.

Longer term, we anticipate capital further decreasing to $500 million to $575 million per year for this segment with average annual production growth in the mid-single digits. Pivoting to the natural gas market, we anticipate a constructive pricing environment in 2026, supported by a tightening supply-demand balance.

Production growth has been slowing across key gas-producing regions, while deferred volumes have been absorbed amid accelerating demand from LNG exports and power generation. Weather remains one of the most unpredictable impactful variables, driving continued volatility in the forward natural gas strip. Seneca is well positioned to manage these pricing fluctuations through our marketing and hedging strategy, which offers price stability while maintaining upside exposure.

Approximately 85% of our expected fiscal '26 volumes are covered by physical firm sales and/or firm transportation, leaving only a minimal amount of our production exposed to spot pricing. Where possible, we have also sculpted our spot exposure to capture higher expected in-basin pricing during winter and summer months when in-basin demand is strongest.

To further strengthen our long-term access to premium markets and support Seneca's growing production and core inventory, in September, we entered into a preceding agreement for new firm transportation. This capacity expected to be in service in late calendar 2028 provides an incremental 250 million a day of new takeaway from our core Tioga producing area to advantaged markets elsewhere in Pennsylvania, giving us access to growing data center-driven demand areas and additional connectivity to long-haul pipes that reach back to the Gulf.

This is yet another great step forward in securing access to premium markets for our growing production and something we've been working towards for well over a year. I'm optimistic we'll find additional opportunities to expand our marketing portfolio through additional firm transport and/or long-term firm sales in the quarters ahead. Switching gears, we remain focused on developing gathering infrastructure to support our growth while pursuing incremental third-party opportunities.

In fiscal '25, we executed an amendment with a third-party shipper to gather production from 2 additional pads. This amendment will add an expected 40 Bcf of throughput and approximately $15 million in revenue over the next 5 years. We also remain focused on enhancing system reliability and capacity and have completed and placed into service a number of pipeline projects as well as commissioned the first compressor unit at our [indiscernible] station.

2025 also marked a significant year with respect to sustainability. NFG Midstream improved its Equitable Origin rating from A- to A, while Seneca maintained its Equitable Origin rating of A and also maintained its MiQ certification of an A grade. These results reflect our unwavering dedication to environmental stewardship and responsible practices and provide an opportunity to capture additional margin through our responsibly sourced gas sales.

In conclusion, fiscal '25 was a transformative year for our integrated Upstream and Gathering business. We achieved record production and throughput while driving meaningful improvements in capital efficiency and significantly expanding our core inventory. These operational gains were complemented by a strong and growing marketing portfolio that provides reliable long-term access to premium markets.

Underlying these results is our large-scale integrated asset base, which enables a differentiated low-cost structure and reinforces our ability to realize strong returns across commodity cycles. As we enter fiscal '26, we are energized by the opportunities ahead and remain focused on executing with discipline, innovating across our operations and delivering strong results. With that, I'll turn the call back to Natalie.

You may open the line for questions.

[Operator Instructions] Our first question will be from the line of Greta Drefke with Goldman Sachs.

I first wanted to touch on the incremental core inventory and the economics of the Upper Utica. Can you provide more details on how long you've been examining the Upper Utica zone and what was the process like that has given you confidence that these 220 locations are competitive with the rest of the portfolio?

Greta, thanks for your question. This has been something we've been working on for years. Our team saw this opportunity early on in our initial integration of the Shell acquisition and frankly, our prior results. So it's something we've seen the possibility of for a long time. We really began delineating it and getting a better understanding starting within the last 3 years.

And so over a period of time, we were able to drill test wells while drilling lower Utica development pads. And so the opportunity we had in front of us was to test this, do it very efficiently and very effectively from a capital efficiency perspective and then bring these wells on at the same time as we were bringing on the balance of the production from these pads.

So we've had a lot of opportunity to cover both a large swath of our acreage position and also to have a significant production history. And what we see is outstanding results. The other thing just to note about this that's very exciting to us is we're developing these and going to co-develop them in the future exactly where we're developing the Lower Utica now.

So as an integrated Upstream and Gathering company, we will also capture additional margin and efficiencies by reutilizing our midstream infrastructure. So this is yet another step forward in our driving lower capital and increasing production over the long term.

Great. And I also wanted to ask on your outlook for in-basin demand a little bit more broadly. Beyond the Shipping Port project, are you continuing to see interest from other potential project partners for opportunities in basin? And how beneficial would you characterize NFG's fully integrated operations in these discussions relative to producers that might just have Upstream supply?

Yes, Greta, we've had some really good interest from other data center developers, from other entities pursuing power projects, we're really excited about it. The momentum really continues to build behind it. As I said in my remarks, I think we -- our integration gives us a big advantage because we can offer a whole suite of alternatives, ranging from basic plain [indiscernible] pipeline service to gas supply to any combination of those things. So we're real optimistic about the future and I think we'll have multiple opportunities going forward.

The next question today will be from the line of Noah Hungness with Bank of America.

For my first question here, this is maybe for you, Justin. How can we think about when the Upper Utica will become a larger part of the NFG program?

Yes. Noah, thanks. We are already incorporating some Upper Utica into our 4 plants. And so I think what you should expect is that we're really going to continue to do what we've been doing with our lower Utica development, which is trying to optimize our operational planning to allocate capital that we deem to be the highest integrated returns between Seneca and Gathering.

We're going to look at the Upper Utica and that same -- through that same prism. -- where we're going to focus on the balance of uppers and lowers that optimize both the land use in terms of the pads we're building, the midstream infrastructure we're building and optimize our development plan along that. So while our program to date has been certainly focused on a lower Utica, we will start having more uppers in our plan as we move forward.

Well, I guess my question was, if you guys are going to pill 26 wells this year and let's say, 25 are the Tioga Utica, what percent of that would be uppers? And is that a good number to assume moving forward into '27 and beyond?

Yes. So we will have a number of Upper Utica wells over the course of '26. It will be a much smaller percentage relative to the lowers. And then as we go into '27 and '28, I would expect the team to continue to optimize to figure out the right mix.

I think near term, you should expect that we'll certainly have more lowers, but then over time, that may become more balanced between uppers and lowers. Hopefully, that answers your question more and certainly know over time, we can dig into that more with you and others.

Yes. No, that's very helpful. And then the next question here is just on debt. I mean with the CenterPoint deal, you guys are obviously going to be taking on a large amount of debt. The utility can only handle so much. So how are you thinking about allocating the remainder of that debt across the rest of your business?

That's a good question. I mean the reality is we do all of our financing at the parent company. So the credit rating agencies look at the total debt at the holding company level relative to the entire cash flows of the system. So we'll look across the system as to where those cash flows are being generated, and we'll issue intercompany promissory notes.

But at the end of the day, all of that debt is fungible amongst the segments. And so it's a bit of a balancing act looking at cash flows, looking at capital structures at the various segments as it relates to ratemaking and a whole bunch of considerations. But I'd really stay focused on the capital or the debt being at the parent company and looking at the aggregate cash flows of the entire NFG system.

[Operator Instructions] And our next question will be from the line of Timothy Winter with Gabelli & Company.

Congrats on another strong update. A couple -- one real quick one though, Tim. The Supply Corp going in for a rate case, what are the returns you're earning currently on the Supply Corp?

Yes. I mean, typically, think of a rate-making return there and recognizing everything is a black box settlement in kind of the low double digits is a typical ratemaking return. So north of the utility ratemaking ROEs, but in that general ZIP code.

Under an assumption of a 50-50 structure equity?

Yes. Yes, 50-50, you have the ability to earn a little bit higher there. And given where our cap structure is north of 50-50, we believe we can earn on that. But again, it's all black stock settlement. So you typically lose the identity of the individual components.

Okay. And then with the update and new numbers in, are you still looking at $300 million to $400 million of equity for the CenterPoint, Ohio? And any more thinking on the timing or how you're going to go about that?

Yes. I mean if you look at the outlook for the business, which commodity prices being the bigger near-term driver, they're still pretty consistent with where we were a couple of weeks ago when we announced the transaction. So I'd expect that sizing to be similar to what we talked about. And as I mentioned on the call, around the acquisition, we will need pro forma financial statements for the offerings. And so that will take a little bit of time to put together. So we're still looking towards later in the first quarter or spring time frame for accessing the capital markets.

Okay. Okay. And that assumes the free cash flow, I guess, what you're talking about the $300 million to $350 million generated. Is there any more thought on like a creative way to finance it? As I think I mentioned in the last call, maybe like sell a portion of Seneca or any assets that are less core that you could consider to use as equity?

Yes. Tim, this is Dave. I don't think we have much in the way of noncore assets anymore to consider selling. And in terms of, call it, alternative or creative ways to finance things, I think given the amount of equity that we're looking at in this transaction, it's probably a little small to really change the -- our whole approach to financing it.

But that's today. As we go through time, if other opportunities come along, we're certainly going to do the -- we're going to finance them in the way that shareholders will get the best answer.

With no further questions on the line at this time. I would now hand the call back to Natalie Fischer for closing remarks.

Thank you, Harry. 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, November 13. 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.

This will conclude the National Fuel Gas Company Fourth Quarter and Full Year Fiscal 2025 Earnings Call. You may now disconnect your lines.

Hello and welcome to the National Fuel Gas Company acquisition of CenterPoint's Ohio Natural Gas Utility Conference Call. My name is Alex. I'll be coordinating the call today. [Operator Instructions]. I now hand it over to Natalie Fischer, Director of Investor Relations, 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 National Fuel's acquisition of CenterPoint Energy's Ohio Natural Gas Utility business. A press release and accompanying investor presentation have been posted to our Investor Relations website. We may refer to these materials during today's call.

With us on the call from National Fuel Gas Company are Dave Bauer, President and Chief Executive Officer; and Tim Silverstein, Treasurer and Chief Financial Officer. At the end of today's prepared remarks, we will open the discussion to questions. Please note that if you have any media-related inquiries, contact Karen Merkel after the call.

Before we begin, I'd 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 this morning's press release as well as our IR presentation for a listing of certain specific risk factors. With that, I'll turn it over to Dave Bauer.

Thank you, Natalie. Good morning, everyone. Thanks for joining us today. Last evening, we entered into a definitive agreement to acquire 100% of the equity interest in CenterPoint Ohio's natural gas utility business for $2.62 billion on a cash-free, debt-free basis, which implies a valuation of approximately 1.6x estimated rate base at year-end 2026. The transaction will add 335,000 customers, over 5,900 miles of natural gas transmission and distribution pipelines and $1.6 billion in rate base. We expect to close the acquisition in the fourth quarter of calendar 2026, subject to HSR review and the completion of a notice filing and review process with the Public Utility Commission of Ohio.

As I've said previously, growing the company through M&A, particularly on the regulated side of the business, has been a strategic priority. In addition to adding scale, which is an attribute value by investors in the credit market, it better balances our business mix and bolsters our investment-grade credit profile, which over the long run, should provide continued -- should provide support for continued growth on both the regulated and nonregulated sides of our business.

In this environment, it's an effective use of balance sheet capacity and an efficient redeployment of free cash flows from our nonregulated operations and the long-duration rate base growth.

CenterPoint Ohio meets all our criteria for a great utility acquisition. First, it has the right amount of scale. It doubles the size of our existing utility business and yet it's small enough that we can do it mostly with balance sheet capacity. Second, it's located in the cold weather climate and is geographically proximate to our existing operations. Third, it operates in a favorable jurisdiction with strong political support in a constructive regulatory framework that enables timely recovery of ongoing investments in system modernization. And lastly, it has a stable customer base and a talented operating workforce that provides outstanding customer service.

With respect to financing, we have a strategy that we anticipate will generate long-term value for shareholders. As Tim will discuss later, post close, this acquisition is expected to be immediately accretive to the company's regulated earnings per share, excluding transaction-related expenses.

As you know, we generally look to the earnings and cash flows of our regulated subsidiaries to support our long-standing dividend and the incremental earnings we expect from this transaction will only enhance our ability to extend our 55-year streak of dividend growth.

On a consolidated basis, at current natural gas prices, we expect adjusted operating results to be neutral in fiscal 2028, the first complete year after closing and accretive thereafter. Looking beyond the near term, our ability to fund rate base growth, utilizing free cash flow from our integrated upstream and gathering operations is a truly unique value proposition.

While most of our peer utilities are operating with thin cushions to their credit ratings and are issuing equity to fund growth, National Fuel can finance our rate base growth through free cash flow. This is a significant benefit of our integrated model.

At today's multiples, every dollar of nonregulated free cash flow that we invest in rate base should translate to about $1.60 in value. Over time, this should create significant value for shareholders and further improve our investment-grade credit metrics. And obviously, a strong balance sheet gives us flexibility to fund future and inorganic growth when the opportunity arises.

With nearly 125-year history of providing safe, affordable and reliable energy supplies, we're excited to expand into the Dayton, Ohio region and look forward to serving its 335,000 natural gas customers. We also look forward to further engaging with the approximately 200 employee workforce of CenterPoint Ohio and seamlessly integrating them into the National Fuel family. Throughout this process, we've had the opportunity to engage with many of them, and it's clear they share our commitment to safety and customer service.

In summary, CenterPoint Ohio is a great acquisition for National Fuel. It checks all the boxes and what we're looking for in a regulated asset and adds to our already great runway of organic growth opportunities, including Seneca's continued development of the EDA, where we have well over a decade of high-quality inventory, and our pipeline expansion projects like the Tioga Pathway and shipping port lateral projects. All of this should create meaningful long-term value for shareholders.

The outlook for National Fuel is very bright. I'm excited for the future and look forward to building on our legacy in the natural gas business at a time when the outlook for the industry is as strong as we've seen in a very long time. With that, I'll turn the call over to Tim to walk through the financial highlights in terms of the transaction.

Thanks, Dave, and good morning, everyone. To reiterate what Dave said, this acquisition is highly strategic for National Fuel, adding significant scale to our regulated operations. I'll talk a bit more about the business itself and our approach to financing the acquisition, which we expect will comfortably maintain our existing investment-grade credit ratings.

Starting with the regulatory and statutory framework, as Dave said, Ohio is a constructive ratemaking jurisdiction and very supportive of investing in natural gas infrastructure. For example, several -- similar to several other states, the Ohio legislature approved the ban on natural gas bands in 2021. On the ratemaking front, the Ohio Commission has a robust set of mechanisms that balance the needs of customers and shareholders.

They use a straight fixed variable rate design similar to what we see in our FERC-regulated pipelines. This provides a high degree of certainty on rate recovery regardless of weather and usage trends. The commission has also approved and supported cost recovery for nearly 100% of its capital investments through various riders, which allow operators to recover in real-time amounts related to this spending including an associated return.

Also, in 2024, CenterPoint Ohio filed a rate proceeding, reaching a proposed settlement in July of this year with the commission. Approval is expected in early 2026. With an agreed-upon revenue increase of nearly $60 million and an extension of the critical riders through 2029, this settlement will provide further certainty into future cash flows and earnings for the remainder of the decade.

With the strength of this outlook, we expect to continue our long-term 5% to 7% regulated earnings per share growth well into the future, even starting with a significantly higher base of earnings post closing. Just as National Fuel has built strong relationships with our regulators in New York and Pennsylvania, we look forward to building upon CenterPoint's similarly strong relationships in Ohio and expect to actively engage with key stakeholders across the state.

Moving to the financing plans for this acquisition. The structure is a bit unique with National Fuel issuing a promissory note to CenterPoint for $1.2 billion at closing. The remainder of the purchase price will be paid in cash. The note was CenterPoint's preferred structure and is designed to help CenterPoint time the cash proceeds to meet their own financing needs. The note will have a maturity date approximately 1 year post closing, and will carry an interest rate of 6.5%, both of which were incorporated into our valuation.

Over the coming quarters, National Fuel intends to begin executing its permanent financing, inclusive of the amount to repay the note to CenterPoint. We plan to fund the transaction through approximately $300 million to $400 million in common equity, along with the issuance of long-term debt, as well as expected future free cash flow from the company's integrated upstream and Gathering businesses.

Even though the CenterPoint note structure is not common for an investment-grade buyer, it does provide additional benefits to National Fuel. Given the longer time line until the note's maturity, we can leverage our upstream and gathering free cash flow to fund a larger share of the proceeds. We expect to raise capital in 2 tranches, with the first being prior to closing and the second being closer to the maturity of the promissory note.

We've also backstopped this transaction through a fully committed bridge facility for the entire purchase price inclusive of the repayment of the note at CenterPoint. The goal of our financing strategy is to maximize flexibility and protect against outside risk, and we believe we achieved that. Based on extensive dialogue with the rating agencies, we've designed this ultimate financing mix to maintain a strong credit profile that supports our investment-grade credit rating.

Looking a little deeper at the terms of this deal, the transaction will be structured with a 338(h)(10) election for tax purposes, allowing National Fuel to step up the tax basis of this business. We do not anticipate any impact of this election on ratepayers.

As we look ahead, we are confident in our ability to execute on the integration of these assets and deliver meaningful value to all of our stakeholders, including customers, communities, employees and shareholders. We are fully aligned with CenterPoint on ensuring a smooth integration and we'll have the benefit of working through the process alongside an experienced counterpart who has a track record as a great utility operator and has also successfully divested multiple gas LDCs over the past few years.

In closing, I'd like to first thank the team we worked with at CenterPoint. It is clear they take pride in maintaining quality operations in Ohio. We are excited to work with them throughout the transition process and welcome the Ohio team into the National Fuel family.

I also want to thank our entire team here at National Fuel. The depth of knowledge, dedication and collaboration have allowed us to execute on the strategic opportunity that complements our existing portfolio of assets. It's not every day that a business comes to market that so clearly meets our strategic acquisition criteria. But here, we have the unique opportunity to acquire a high-quality business that we believe will be accretive to earnings per share and credit supported over the long term.

It expands our operations into a neighboring cold weather state with a constructive regulatory and political backdrop. Supported by this strong foundation, we are confident that our acquisition of CenterPoint Ohio will deliver long-term value for all of our stakeholders for decades to come.

With that, operator, I'd like to open the call for Q&A.

[Operator Instructions]. Our first question for today comes from Zach Parham of JPMorgan.

Congrats on the deal. First, just wanted to ask on the equity portion of financing, why do you believe $300 million to $400 million is the right amount? And any thoughts on timing of that potential financing?

Yes. Thanks, Zach. We've done a lot of work around this. We've had a lot of conversations with the rating agencies. And we think that a $300 million to $400 million, it really balances the desire to keep our balance sheet in strong shape, consistent with how we've always operated the business. And so through those conversations, we really landed on that number being the right number as we sit here today.

As it relates to timing, we -- given the size of this transaction, there are some requirements that we will need to accomplish, particularly around putting together pro forma financial statements. And so we don't expect that we will be going to the market for raising capital until the early part of next year, at the earliest. So that's the plan as it sits today.

Thanks, Tim. And then my follow-up, you mentioned 2.5 to 3x leverage expected post the deal close. Are you comfortable going forward at that level of leverage? Or would the plan be to further reduce leverage from that level with free cash flow generation? Just trying to think about how you'll allocate free cash flow on a pro forma basis going forward.

Yes. That's a good question. So we expect to come out of the gate, if you look at the strip today, closer to that 2.5x debt to EBITDA. And then you look at the profile of our business and the success we're seeing on the upstream and gathering side and the cash flow generation, that gives us a lot of flexibility to push our credit metrics and deploy that cash flow towards the balance sheet, first and foremost, until we're in a very comfortable spot. And so that would be the immediate plan. But obviously, we'll continue to evolve that as we continue to stay focused on our capital allocation strategy, which is, first and foremost, balance sheet strength and then looking at other ways to deploy that capital in the future.

Our next question comes from Neil Mehta of Goldman Sachs.

Yes. Just first question is better understanding some of the areas where you will be deploying incremental capital to drive rate pace at CNP Ohio. So I think your capital program is expected to be $150 million to $200 million. Where do you expect those dollars to be spent? What are specific projects or opportunities that you're excited about in terms of driving rate base higher?

It's a good question, Neil. The nice thing about the CenterPoint Ohio assets, it looks very similar to the set we have today in Western New York and Northwestern Pennsylvania. It's very much a modernization, safety, reliability investment strategy. But there's also some good opportunities we see down the road for growth. This service territory is situated right between Columbus and Cincinnati. And so you're seeing a lot of sprawl and investment in Ohio, around those 2 regions, and we see some nice growth opportunities as we look out to the latter part of the decade as a way to deploy some growth capital. But that baseline $150 million to $200 million is really principally tied to their ongoing modernization and investing in safety and liability.

Okay. And then I know with any regulated transaction, approvals tend to take a little bit longer. So can you just remind us again what approvals will be required and will you have to work with the PUCO around getting this transaction done?

Yes. So there's a notice requirement or I guess, more -- less of an approval requirement but more of a practical notice to the commission. And so we'll plan to file that here in the coming months. And if we look at some of the precedent that has historically taken, say, in that 4- to 6-month area to seek approval which would put us comfortably in line to reach the closing date that we've talked about, which is the fourth quarter of calendar '26.

[Operator Instructions] Our next question comes from Kalei Akamine of Bank of America.

In your materials, you mentioned that the impact on adjusted operating results will be neutral in fiscal 2028. So my question is, what is the earnings from this business today? Is it growing under CenterPoint stewardship? And then after you take it over, this growth didn't inflect into fiscal 2029.

Yes. I think I got your question there, Kalei. They have, as we put in our materials, historically, net income of about $65 million. As we talked about in our remarks, they're in the process of finalizing a rate case, that will have a couple of things. One, we'll have a general step-up in base rates but it also has built-in riders, like I alluded to, that really allowed the continued investment and corresponding growth over the next 5 years. Those riders extend through 2029. So there will be the ability to deploy that capital over the next 5 years and have essentially built in increases that are supported and agreed upon by the commission CenterPoint when they negotiated it and all the other intervening parties.

Okay. So there are some things in motion there. The other thing I noticed about this deal is that it's a step out geographically. So in West PA, Western New York, you guys operate an upstream position. Are there any benefits to establishing an upstream business in Ohio, noting that there are several packages on the market today?

Yes. We think the geographic proximity in a neighboring state is certainly a good benefit for us overall. We think it fits with our existing business and how we operate our business. We aren't expecting a lot of significant benefits in terms of cost structure in the immediate term. But we do believe that we will be able to create value for both shareholders as well as customers over the long term as we get through the broader integration of this business.

Our next question comes from Timothy Winter of Gabelli & Company.

Congratulations on the transaction. I have 2 questions, Tim. One, can you clarify the earnings accretion, the time line for the regulated utility and the difference as to why it's neutral on a consolidated basis in 2018?

Yes, Tim, sure. I can take that. So from a regulated perspective, it's immediately accretive, and it's pretty significant from an overall earnings per share at the regulators. I mean we expect double-digit accretion within those businesses right out of the gate. Obviously, it's a sizable transaction for us doubling the utility rate base and increasing their overall rate base by 50%. And so that, as Dave and I talked about, will be an immediate benefit right out of the gate.

From a consolidated perspective, there's a couple of moving pieces there. We expect consolidated EPS to be neutral in 2028 based on the first full year of operations after the expected closing. It's possible it could be accretive as well. Ultimately, we'll come down to the placement of the cost of capital and our long-term debt as well as where natural gas prices go. And if there's more free cash flow that we can put into the financing mix over long-term debt, for example. So it's possible it could be better than neutral in 2028 and then obviously, thereafter, we expect it to be meaningfully accretive as we look out to the future.

Okay. Got you. And then what -- the acquisition you mentioned you're going to be 40% to 50% regulated. As you look longer term, is there a targeted business mix that you guys are looking for? And with current gas prices, do you expect the E&P business to grow faster than the regulated utility business?

Yes. Tim, this is Dave. We don't have a specific target for each of the businesses. Rather, over time, we do our best to invest capital in ways that will best benefit our shareholders, right? So in the 2010s, we were really growing our Marcellus program. That's matured, and we find ourselves in a good spot now where we've got balance sheet capacity and a lot of free cash flow and an opportunity to acquire an asset on the regulated side of the business that is going to be great for us over time because it will make us a bigger company with better earnings and a better credit profile.

So now it's the right time in our view to invest in this asset. And then over time, depending on where gas spaces go, depending on what opportunities are out there, we'll deploy capital in the parts of the business that we'll get the best returns for our shareholders.

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

Thank you for your interest in learning more about this exciting acquisition for National Fuel. A replay of this call will be available later today on both our website and by telephone, then we'll run through the close of business on Tuesday, October 28. Please reach out to me as the team and I are available to answer any questions you may have. Thank you, and have a great day.

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

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 announced 2 weeks ago, it's clear that this is becoming a reality, and National Fuel is as well positioned as anyone to participate in that growth.

To that point, earlier this month, we announced our Shippingport Lateral Project, which is an approximately 7-mile pipeline expansion off of our Line N system in Western Pennsylvania that's designed to deliver a significant portion of the natural gas supply for the Shippingport power station and a new co-located data center.

Speed to market is critical on these types of projects. And thanks to FERC's recent increase in blanket certificate project cost limits, we should be able to build the project on an expedited basis and include more robust facilities that provide incremental capacity. We currently have a preceding agreement in place to provide 205,000 dekatherms per day of capacity starting in the fourth quarter of calendar 2026.

And again, this is the largest amount of capacity that we can build in the shortest amount of time. Over time, Shippingport plans to bring online over 3 gigawatts of generation. So there is the very real potential for us to provide significant additional pipeline capacity to the facility in future years.

In May, our Tioga Pathway project received FERC approval and remains on track for an early fiscal 2027 in-service date. As a reminder, this 190,000 dekatherm per day project provides an outlet for Seneca's EDA production volumes to more premium pricing markets. Construction for both the Tioga Pathway and Shippingport Lateral Projects is expected to begin in the first half of calendar 2026. While both expansions are individually modest in size, together, we expect they'll generate north of $30 million of new revenue annually, which represents about 7% of our current pipeline and storage segment revenues. So in short, between modernization and expansion projects, the outlook for our pipeline business is very strong.

Turning to our capital return programs. Based on our strong results for the year and high degree of confidence in our long-term outlook, in June, we raised our dividend for the 55th consecutive year to an annual rate of $2.14 per share. With respect to the buyback program, we've made good progress with repurchases, but recently hit pause as we evaluate opportunities to grow the company, which, as I've said on earlier calls, is our top priority. Should those opportunities not come to fruition, I fully expect we'll complete the buyback program in 2026.

Switching to state energy policy. Pennsylvania is clearly embracing economic development. The Energy and Innovation Summit held earlier this month in Pittsburgh was attended by leaders from top energy, technology and financial companies as well as President Trump and several cabinet members. The summit highlighted the tens of billions of dollars of investment in the state committed to by data center developers.

With our unique set of assets, including a deep inventory of high-quality drilling locations and an integrated midstream and downstream business, we're very well positioned to support the infrastructure build-out that is anticipated across the Commonwealth. Hopefully, our Shippingport project is the first of many such projects. While New York hasn't quite taken the same steps as its neighbor, the pendulum there is starting to swing back towards a more pragmatic approach to energy policy.

Last week, the State Energy Planning Board released their draft energy plan, something they're required to do every 5 years, but have not done since 2015. This draft plan acknowledges that the state will not meet some of its interim targets set in the 2019 Climate Act, and it takes positive steps towards acknowledging the importance of an all-the-above approach to energy.

Instead of being driven solely by aggressive short-term decarbonization targets, the draft plan moves in a direction that will better balance the critical objectives of energy reliability, affordability and emission reductions. While it stops short of embracing new natural gas generation as a way to achieve the state's decarbonization goals, it clearly acknowledges the importance of continuing to invest in the natural gas system while leaving open the potential for new investment in natural gas generation.

In closing, it's a great time to be in the natural gas industry. Demand for natural gas is at all-time highs, both domestically and abroad, and production is increasing in lockstep. The notion that wind and solar can power everything in just a few short years is largely in the rearview mirror. Without question, natural gas is the foundational fuel that will be key to powering our nation's growth for decades to come.

National Fuel has some of the best acreage in the lowest cost basin -- lowest cost natural gas basin in the country. We have a pipeline network that's incredibly well located to support rising regional demand and a highly talented workforce that's eager to grow the company. All of this should translate to meaningful opportunities for the company and in turn, value creation for our shareholders. With that, I'll turn the call over to Tim.

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, we are guiding to a 6% increase in production at the midpoint of our range. While production is anticipated to grow, it is worth noting that next year, we're expecting a slight decrease in our gathering revenues.

Our near-term development program includes a single 6-well Tioga Utica pad scheduled to come online late this fiscal year, which will flow through a third-party system. After this pad, all of our TILes next year will utilize our own gathering system, which will drive volume growth into 2027. From a unit cost perspective, we anticipate maintaining the lower levels of cash unit costs achieved during the current year, while DD&A is set to increase. The impairments recognized over the past year temporarily lowered our DD&A rate below our long-term F&D cost.

Over time, DD&A should trend back towards Seneca's F&D costs, which are approximately $0.70 per Mcf. Switching to our regulated subsidiaries. At the utility business, we are expecting a 5% to 6% increase in customer margin next year. This is due to the step-up in rates as part of our 3-year rate settlement in New York, along with higher revenues from our modernization tracker in Pennsylvania.

In the Pipeline and Storage segment, revenues are expected to remain relatively flat in fiscal 2026. We are evaluating the timing of a rate case in Supply Corporation, the larger of our 2 FERC-regulated companies. We will look to file at some point in fiscal 2026. But as of today, we are not projecting any incremental associated revenue from this rate case until early fiscal 2027.

On the cost side, outside of general inflationary trends, there are 2 factors driving the anticipated year-over-year increase. The first relates to utility customer receivables in arrears. In the New York rate settlement, we established an uncollectible tracker and agreed to accelerate write-offs. With this acceleration, we were able to write off a large amount of our arrears, a good portion of which were the result of statewide policies implemented during the pandemic.

The uncollectible tracker permits us to defer and recover write-offs that exceed a certain threshold, both this year and next. We've exceeded that threshold this year, and as a result, have reversed a portion of the previously accrued bad debt expense. The second unique expense item relates to collective bargaining agreements with our unions. Between contract extensions with 2 of our unions earlier this year and upcoming negotiations in 2026 for the remaining covered employees, we expect to see year-over-year increases as wages true up to current market levels.

Taken together, we expect utility O&M to increase by approximately 5%, which for our spending levels in New York is generally in line with what was included in the second year of our 3-year settlement. In the Pipeline and Storage segment, costs are projected to be up 4% to 5%. Longer term, regulated O&M increases should trend in the low single-digit range. From a cash tax perspective, the recently passed federal reconciliation bill provides several tailwinds for us. The reinstatement and permanent extension of 100% bonus depreciation will be a benefit to cash tax expense starting this year.

In addition, there were changes made to the calculation of the corporate AMT. Without these changes, our forecast would have had us paying higher cash taxes starting in fiscal 2027. But with the new law, we do not expect any corporate AMT payments for at least the next 5 years. Switching to capital. Our consolidated spending guidance for fiscal 2025 is unchanged. Given the timing of some projects, there was a modest shift in spending between the Utility and Pipeline segments. But other than that, we are still on track with our prior consolidated guidance level.

Looking at fiscal 2026, Dave already highlighted the continued positive trend in capital efficiency across the nonregulated businesses. In the regulated subsidiaries, we are expecting a modest increase in utility spending, which is related to general cost inflation as our activity levels are consistent year-over-year. In the Pipeline and Storage segment, we are projecting an increase of $100 million at the midpoint. This increase is driven by spending on the Tioga Pathway and Shippingport lateral projects.

On the rate-making front, as I said earlier, we anticipate filing a rate case next year for Supply Corporation. At the utility, our capital and O&M levels in New York are generally in line with what is embedded in our 3-year settlement, allowing us to achieve our allowed returns. For Pennsylvania, our DIS mechanism covers the targeted fiscal 2026 modernization spending. But given we are approaching the cap on that mechanism, we are looking to file a rate case next year with new rates effective in early fiscal 2027.

Bringing it all together, next year is expected to be a great one for National Fuel. Earnings are projected to be meaningfully higher, up approximately 20% at current strip pricing. And we have a great hedge book that protects to the downside, while leaving significant opportunity to capture higher prices. The outlook for free cash flow is strong. At $4 NYMEX, we project to generate between $350 million and $400 million, all while investing in significant growth.

And looking further ahead, we remain confident in our ability to deliver mid-single-digit production growth on decreasing capital spending and to grow rate base by an average of 5% to 7% annually through the end of the decade. In addition, the strength of our investment-grade balance sheet, disciplined approach to capital allocation and consistent returns of cash to shareholders further support the ability of National Fuel to create meaningful long-term value in the years to come.

With that, I'll turn the call over to Justin.

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 6% increase at the midpoint year-over-year. We plan to drill and turn in line approximately 25 to 27 wells with a steady cadence for most of the year before a modest decline in the fourth quarter. With respect to capital, we forecast to spend $470 million to $500 million next year, a $20 million or 4% reduction relative to the midpoint of our fiscal 2025 range.

Our development plan includes a 1- to 2-rig program with capital expenditures expected to decline in the second half of the year based on planned activity levels. Going forward, we anticipate continued gains in capital efficiency as our long-term development program remains on track to deliver mid-single-digit production growth alongside further reductions in capital spending. Comparing fiscal 2023, when we began our transition to an EDA-focused development strategy to our fiscal 2026 guidance, we project 20% production growth against an 18% overall capital reduction.

This multiyear trend of continuous significant capital efficiency improvements is unique among peers and complemented by our multi-decade inventory of core development locations. A recent independent analysis by Enverus rank Seneca's inventory at the top of the Appalachian peer group with nearly 20 years of drilling locations at breakeven NYMEX prices below $2.50 per MMBtu. This third-party analysis is consistent with our internal assessments and a testament to our competitive position in the industry.

Turning to the natural gas market. We maintain a constructive outlook for prices, supported by strong supply and demand fundamentals. While U.S. gas production has increased over the past 12 months, much of that growth appears to be driven by the drawdown of DUC inventories and deferred TILes accumulated during the period of lower prices experienced in 2024.

Despite this added supply, storage levels have remained near the 5-year average, highlighting resilient structural demand. LNG exports and gas-fired power generation have reached record highs with U.S. LNG demand recently exceeding 16 Bcf per day and power sector gas burn hitting record seasonal peaks.

Against this backdrop, we are well positioned through our marketing and hedging strategy, which offers price stability while maintaining upside exposure. Over 85% of our expected volumes through the end of fiscal 2026 are backed by our marketing portfolio of firm transportation and firm sales, ensuring both financial resilience and positive leverage to potentially higher prices.

Pivoting to NFG Midstream, we continue to gather increasing volumes through our system. To support our EDA development, we were installing additional gathering pipelines, expanding existing stations and building centralized facilities in multiple locations to enable future growth. We are also continuing to advance the engineering designs for our 2026 projects to accommodate Seneca's increasing well productivity and deliverability.

We've moved from designing infrastructure based on individual well rates of 18 million to 20 million per day to now 25 million to 30 million per day. Additionally, not only are the individual well rates higher, but the wells are sustaining at those choke-restricted rates for long periods of time, in some instances, for well over 1 year, highlighting the prolific nature and deliverability of our Tioga Utica inventory.

With respect to third-party volumes, we're actively working with the Tioga County producer to gather new production as part of a recently signed interconnect agreement and continue to advance discussions with other third-party producers to leverage and fully utilize our significant gathering infrastructure and associated facilities. We see opportunity to further grow this business over time.

In closing, our strong results reflect the strength of our team and the quality of our assets, both of which continue to exceed expectations. Our focus on development planning, operational excellence, combined with an integrated business model and a deep inventory of high-quality drilling locations is driving greater capital efficiency and growing free cash flow.

Over the past 5 years, we have transformed the nonregulated business of National Fuel through our acquisition of Shell's upstream and midstream business, divestiture of our California division and transition to an EDA-focused development strategy. In fiscal 2026, we expect to build on that momentum and reinforce a long-term trajectory of sustained operational and financial growth. With that, I'll ask the operator to open the line for questions.

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.