Q3 2021 National Fuel Gas Co Earnings Call
Good day, and thank you for standing by and welcome to the Q3.2021national fuel gas Company earnings Conference call. At this time, all participants are in a listen only mode and I've heard of.
The speakers remarks, there will be a question and answer session.
The question during the session you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero and I would now like to hand, the conference over to your Speaker today, Ken Webster Director of Investor Relations. Please go ahead.
Thank you Celine 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.
And can be yellow treasurer, and principal financial officer, and Justin lowest president of Seneca resources.
At the end of the prepared remarks, we will open the discussion the question.
The third quarter fiscal 2021 earnings release and August 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.
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.
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.
Thanks, Ken Good morning, everyone. The third quarter was another strong 1 for national fuel with our upstream and midstream businesses continuing the positive momentum they established during the first half of the year.
Seneca had a great quarter with production up nearly 50% on the strength of last year's acquisition and its 2021 drilling program.
That growth and production along with higher commodity prices drove a nearly 70% increase in EBITDA from our combined upstream and gathering operations.
The acquisition continues to impress with both production and operating costs better than we expected.
With the near term run up and winter natural gas prices, along with increased confidence around the online date for Leidy, South we've decided to move ups and the completion activity at Seneca.
This will allow us to more fully utilize our leidy south capacity from the start and capture some of the valuable winter premiums and the Transco zone and 6 markets.
As a result, we expect the modest amount of capital the shift forward a few months and while we aren't raising the upper end of guidance, it's likely senecas capital spending for 'twenty, 1 we'll be closer to the high end of our previous range.
Justin will have a full update on Sun because operations later on the call.
And.
And the pipeline and storage business construction of the F. On 100 project has been going well despite of really rainy month of July.
At this point everything remains on schedule for a late calendar 2021 in service day.
Pipeline construction is well underway almost 90% of the pipe has been strong on the right away and nearly 40 percentage on the ground.
The 2 compressor stations are nearing mechanical completion, and once automation and electrical work is complete and commissioning will begin.
I took a tour of the construction side a couple of weeks ago and was really impressed with what the team and our contractors of accomplished in such a short period of time.
Truly a great job by oil.
As I've said in the past this is the great project for National fuel it increases revenues on a regulated pipelines by $50 million a year and when combined with senecas capacity on Transco is companion Leidy, South project will allow for higher E&P production volumes and gathering throughput.
It's the perfect example of the power of our integrated approach to the business and position of national fuel to deliver solid near term growth and sustainable free cash flow.
Turning to the utility or summer construction program is well underway.
And with prior years, our goal is to replace 150 miles of older pipeline and the team is right on track to hit that Mark.
Replacing older pipe goes a long way of reducing methane emissions on our system to date. Our program has been the driver of of 64% reduction and emissions from our delivery system compared to 1990 levels.
Earlier this year, we filed for an extension of our system modernization tracking mechanism and our New York Division, which makes up a little more than 2 thirds of our replacement program.
As you recall that mechanism allows us to recover and near real time, the costs associated with our modernization spending.
It's a great program and that we're able to lower emissions on our system and make it more reliable all without the need to file annual rate cases.
We expect the New York Commission will act on this petition during our fiscal fourth quarter.
Looking to next year on the strength of the EF and 100 project our preliminary guidance for fiscal 'twenty..2 is $4.40 to $4.80 per share and the midpoint of 12% increase from our expected 2021 earnings.
In addition at Nymex pricing of $3.50, and we expect about $250 million and free cash flow, which as well and access of our expected dividend payments and.
Which positions us well to continue to improve our investment grade balance sheet.
Those of you who have followed us for awhile know that we have of disciplined hedging program designed to mitigate price volatility and protect the returns on our upstream and gathering investments the.
Call of that program is to be between 60% and 80% hedged at the beginning of the fiscal year, and we typically layer and those hedges over the preceding 3 to 5 years our.
Our fiscal 'twenty 2 hedging program is right on track with those targets through a combination of physical firm sales and financial instruments, we have hedges on roughly 3 quarters of our expected fiscal 'twenty 2 Appalachian production.
So we're well hedged we still have considerable upside from natural gas prices.
Every 25 cent change and realized prices impacts cash flows by about $20 million and earnings by about 15 cents per share.
Switching gears as we all know natural gas has been a significant if not the biggest driver of greenhouse gas emissions reductions since 2000 and and 5.
In addition, natural gas and its related delivery systems have consistently prove the reliability resilience and affordability.
And without a doubt consumers recognize and appreciate those benefits.
Notwithstanding the anti fossil fuel commentary from Washington, and Albany, We continue to add customers to our utility system year in and year out.
But in spite of these obvious benefits policymakers, particularly on the coasts are pursuing avenues to restrict consumers access to natural gas, including in some cases outright bans.
Taking and electrify everything approach is neither rationale nor practical.
The natural gas delivery system, as safe and largely underground, which insurers greater reliability and resilience compared with above ground electric infrastructure and.
And this past winter was the textbook example of the importance of resilience.
In addition, unlike the tens of thousands of windmills and millions of solar panels that would be needed to electrify the country's heating load.
The natural gas delivery system already exists and is largely paid for.
To abandon it makes little sense, particularly when you consider that aggressive emissions reduction targets can be met through a mix of energy efficiency measures hybrid heating technologies and low carbon fuels like renewable natural gas and hydrogen.
I'm all in favor of reducing emissions, but and all of the above approach is necessary. If we are to have reliable affordable energy and this country.
Before I give you before I close I'd like to give you a heads up on the second annual edition of our corporate responsibility report, which will be published early next month.
Last year's report was a great first start to our efforts to enhance our ESG related disclosures.
We look to build on it and several important ways this year.
In addition to reporting under the sustainability accounting standards Board framework will also include new disclosure disclosures under the task force on climate related financial disclosures or Tcf the framework.
We're also enhancing our emissions disclosures to include full scope, 1 and 2 C O 2 and methane emissions and importantly will be using this data to establish what we think are very credible and realistic methane and greenhouse gas emissions reduction targets.
And lastly, we're expanding our diversity of disclosures using the E O 1 framework.
Overall, it's a great report that is responsive to the disclosure requests are shareholders have asked for I'd like to send a big Thank you to the team that made of reality.
And closing this is an exciting time for national fuel construction of the largest pipeline and our company's history is on time and on budget.
Senators production is on an all time high and will continue to increase as new capacity on leidy, South and from 100 becomes available.
And at the same time on the stability of our utility business adds to our financial strength.
All the while we remain committed to reducing the emissions profile of our operations.
When you bring it altogether national fuel and a great position to deliver significant earnings and free cash flow to our shareholders.
With that I'll turn it over to Justin.
Thanks, Dave and good morning, everyone.
Seneca had a strong third quarter with operational results slightly ahead of our expectations.
We produced 83, 1 Bcf a day and almost 50% increase from last year, driven by increased Taegu County volumes from our acquisition, which closed in late July 2020 combined with solid results from our Appalachian development program.
We continue to see the benefits of our increased scale with per unit cash operating expenses dropping 6 cents per mcf the versus the prior year.
2 of $1.13 per Mcf, driven by a significant year over year decrease and our per unit G&A expense.
During the quarter, we drilled 12, new wells 5 and the W. D E and another 7 and the <unk>.
Notably this included the commencement of drilling on our first day with county pad from our acquisition.
Similar to our activity and the W. D E over the past few years the type of pad will be of return trip.
Allows us to utilize existing roads pads and gathering infrastructure.
Which significantly enhances our consolidated E&P and gathering returns.
We have approximately 10 additional pads within the acquired acreage footprint, where we believe we can take advantage of similar capital efficiencies.
Further given the contiguous nature of this acreage and continued operational success. We expect most of our time of the Utica wells will exceed 10000 feet treated lateral link generating outstanding returns.
For the remainder of the year, we were on track with our plans to ramp up production to fill leidy, south and capture premium winter pricing.
We have begun the process of accelerating our completion pace and now have 2 active completion crews, which is the level of activity. We expect to continue throughout the first half of fiscal 'twenty 2.
This will drive our production cadence and the coming quarters with most of our new production coming online towards the end of our current fiscal year and and the first half of next year.
As a result, we expect modestly lower sequential production and Q4 of fiscal 'twenty 1.
Later this quarter, we plan to turn in line 1 operated pad within our Western development area. Additionally.
Additionally, and the next few weeks, we expect to see production brought online 4.6 well non operated pad in Lycoming County.
Seneca holds the 25% working interest and this pad. However, 100 per cent of the production will flow through national Fuel's wholly owned gathering system.
Driving throughput growth and revenues for our sister company.
Moving to fiscal 'twenty 2 of our operations plan is right on track as we expect to turn in line of about 40 wells during the first half of the fiscal year and another 10 or so wells over the balance of the year.
As a result, we expect sequential quarter over quarter production growth and the first 3 quarters of the year with production leveling out and our fourth quarter.
Our increased completion pace, along with our plans to operate 2 drilling rigs throughout fiscal 'twenty..2 is projected to drive an increase and our capital expenditures by $45 million year over year, which is consistent with our prior expectations.
Looking beyond next year, we expect capital to trend downward as we decrease our activity levels and move to of maintenance to low growth mode.
On the marketing front and center, because Appalachian production is well protected and fiscal 'twenty 2 with.
And with firm sales contracts in place for approximately 93% of our expected fiscal 'twenty to production volumes.
Minimizing our exposure to in based on spot pricing.
We also have hedges in place on approximately 3 quarters of our expected Appalachian production.
Overall, the set of remains very constructive for natural gas prices with Appalachian producers currently exercising capital discipline and.
LNG and Mexico exports near all time highs and storage levels remaining below both last year and 5 year inventories.
However, with prices north of $3.50 per M and Btu for our fiscal 'twenty, 2 and $3 for fiscal 'twenty 3 the caveat will be whether this capital constraint will continue over the coming months.
And whether producers will stick to their current focus on free cash flow generation and maintenance production levels.
While I am cautiously optimistic the newfound discipline will hold at Seneca, we expect to continue adhere to our long standing methodical approach to risk management and I layering in additional hedges over the coming quarters.
And at current forward prices, our program will continue to generate attractive returns and significant free cash flow.
Looking out beyond fiscal 'twenty 2.
The activity level will be geared towards generating sustainable free cash flow.
Absent the ability to enter into significant additional long term firm sales or acquire firm capacity that would result in strong realized prices Seneca expects to shift into a maintenance the low growth production mode and focused on fully utilizing our existing and diverse marketing portfolio.
Moving to California, we expect to invest 10 to 15 million of year G.
Generating substantial free cash flow, while moderating production declines and we'll look for ways to increase our activity to the extent oil prices remain at current levels.
That said our opportunities to increase our activity levels remain limited by the challenging regulatory environment and tempered by the lengthy timeline to obtain new permits.
On the renewable side, we're making excellent progress on our new solar plant at our South Midway Sunset field, and California, which.
Which is expected to be completed later this year.
We are also moving forward on and additional solar plant at our South lost Hills production field, which we expect to complete and fiscal 'twenty 2.
With the ability to generate California, low carbon fuel standard credits and reduced grid power consumption of these projects are not only highly economic but they also reduce our emissions.
Upon completion of these projects approximately 20% of our power needs and California will be met with solar.
We also continued to make considerable strides and our sustainability initiatives and Appalachia.
Last month, we commenced a comprehensive real time infield study evaluating the emissions generated by various types of completion equipment.
And just last week, we announced that were and the process of completing a 6 well pad using E Frac technology.
The results of these field trials will provide the Seneca with high quality comparative data on the emissions profile of these completion technologies.
Supporting our efforts to select equipment that aligns with our long term sustainability goals.
Additionally, we are also actively evaluating the various responsibly sourced gas initiatives and expect to move toward 1 or more of these frameworks over the coming months.
As the best in class, operator, and the lowest carbon intensity shale basin in the United States, we are well positioned to be and upstream leader and ESG.
And with that I'll turn it over to Karen.
Thank you Justin and good morning, everyone National Fuel's third quarter GAAP earnings of 94 cents per share and after adjusting for unrealized gains on our nonqualified benefit plan investments operating results for 93 per share last nights release explains the major drivers for the quarter. So I'll focus on our guidance updates for the remainder of the.
The year and our initial projections for next year.
And with fiscal 'twenty, 1, we're increasing and tightening our earnings guidance to a range of $4.05 to $4 and <unk> 15 per share.
In addition to the strong results from the third quarter, we've incorporated the significant strengthening of natural gas prices for the remainder of the year.
Moving to fiscal 'twenty, 2 we are projecting the 12% increase and earnings at the midpoint with our preliminary guidance and the range of $4 and 40 to 4 day lawyers and 80 cents per share.
At a high level the increase in earnings relative to fiscal 'twenty, 1 can be boiled down to 3 main drivers the.
The first 2 are related to the integrated upstream and midstream development tied to the App and 100 expansion and modernization project.
The first with the pipeline and storage segment, the direct benefit of the project will be approximately $50 million per year of incremental revenues.
Given the late calendar 'twenty 1 in service date, we expect approximately $30 million to $35 million of revenue from.
On this project during fiscal 'twenty 2.
A large portion of this revenue will flow through to the bottom line, but will be partially offset by the associated operating costs and depreciation expense.
In addition, and fiscal 'twenty, 2 we expect a decrease and <unk> that was the crude during the F. On 100 construction period.
And next this project along with its companion Leidy, South expansion will provide the Seneca with the key outlet sports growing natural gas production.
Senecas expected production range for next year is 335 to 365 Bcf a.
The nearly 8% increase relative to fiscal 'twenty..1 we will also benefit our gathering business driving higher throughput and related revenue.
While there is a modest amount of associated expected gathering segment expense. The vast majority of this incremental revenue will flow through to the bottom line.
The third major driver is higher commodity price expectations for fiscal 'twenty, 2 we're assuming $3.50 per M and btu with spot prices of $2.85 and the winter months and $2.25 and the summer period and the oil.
Sell side, we're assuming $65 per barrel.
As Dave mentioned, we're well hedged going into next year, but for reference even with the level of hedges, we had given our base of production changes and price and can impact earnings for the year.
For reference of 25 cent change and natural gas prices is expected to impact earnings by <unk> 15 per share.
<unk> changing oil by the <unk> per share.
Well those are major drivers year over year I'll touch on a few other smaller assumptions around our guidance range and.
And our utility for the first 3 quarters of this year, we averaged about 13% warmer than normal warmer than normal weather.
For fiscal 'twenty, 2 we're forecasting of returned to normal weather and as a result, we expect margin to be higher by approximately $10 million year over year, particularly and our Pennsylvania jurisdiction, where we don't have of weather normalization clause.
This will be largely offset by modestly higher expected O&M expense, which we anticipate the increased $3 to 4% compared to fiscal 'twenty, 1 driven by higher personnel costs principally related to negotiated wage increases with our collective bargaining units along with normal inflationary increases to labor and of.
Other items that we see each year.
And the pipeline and storage business, we expect O&M to increase by 45% versus the fiscal 'twenty 1.
This is principally driven by a 1 time favorable benefits of O&M expense of approximately $4 million and fiscal 'twenty, 1 and that will not recur in fiscal 'twenty 2.
Inside of this item.
Operating expenses related to App, and 100 underlying costs and this business will be relatively flat year over year.
Lastly from a guidance standpoint, we're expecting a modestly lower effective tax rate next year at 25% to 26% the.
The stems from our ability to take advantage of tax credits related to our enhanced oil recovery activities at our California facilities for fiscal 'twenty..2 of these credits are available based upon.
The historical oil prices and given the low pricing environment and calendar 2020, we expect to be able to take advantage of this credit next year. However.
However, where oil prices are today, we would expect this to phase out again practice the.
2023.
Turning to our capital plans for next year, we're projecting of roughly 10% decreased relative to fiscal 'twenty..1 and this is driven by the completion of the $280 million at the 100 project really and the year, we expect that reduction of the somewhat offset by modestly higher upstream and associated gathering spending that we had been planning for.
For the past year as a reminder, Seneca added second drilling rig in January and we expect to see an increase and our completion pace. This fall and advance of new transportation capacity.
With respect to our cash position as we've discussed previously we expect to live within cash flows. This year. When you consider the proceeds of our timber sale and our dividend payments.
And changed as the slightly higher expected spending at the midpoint of our updated guidance is largely offset by higher cash flows from the expected increase in earnings for the year.
We started the year with a modest amount of short term borrowings and well we had roughly a $120 million of cash on hand at the end of June we expect to be back and the borrowing position as we continue to spend on the F. On 100 project.
As we look to fiscal 'twenty, 2 assuming of $3.50, Nymex natural gas price, we expect funds from operations to exceed capital expenditures by roughly $250 million.
The more than covers our dividend and is expected to leave us nearly $100 million of excess cash flow positioning us well going into fiscal 'twenty 3.
Well our balance sheet is already and the good spot we expect the combination of higher EBITDA and increased cash flows along with lower leverage to lead to continued improvement and our investment grade credit metrics.
The stacked over the course of fiscal 'twenty 2 to trend towards 2.5 times debt to EBITDA and with sustainable free cash flow beyond next year to see further improvement beyond that level.
With this leverage trajectory, we will have significant flexibility to deploy capital, whether that's and making growth investments of returning cash to shareholders. We will look to deploy capital and the most value accretive manner for our shareholders.
With that I'll close and ask the operator to open the line for questions.
Yeah.
Yes.
Thank you at this time and I would like to remind everyone and arc. Our task of question Press Star then the number 1 on your telephone keypad and again that is star then the number 1 on your telephone keypad, we'll pause for just a moment of compile the Q&A roster.
We have our first question coming from the line of Holly Stewart and your line is open.
Hey, good morning, gentlemen, and Karen.
Good morning.
Sure I'll start, it's either Dave or Karen just on the the free cash flow guidance I appreciate the details of it at different commodity prices.
Maybe on that $250 million target since that's kind of where we're trending right. Now can you just give some of the detailed assumptions behind that meaning you know which of the different business units are contributing to that total.
Yes, So Hollywood, it's yes, if you want to split it may between our regulated and nonregulated is about 60% on the nonregulated side and about 40% and the regulated side, obviously on the regulated side or our pipeline and storage is.
As contributing on a bigger amount than and then our utility side.
And that's pretty much the the breakdown if that helps.
Got it.
Okay.
And you think of it.
And sort of bringing bringing on that production.
And our ramp up of the Leidy South project.
Should we see that split here going forward between kind of W. D E and EBITDA.
And all of you cut out a fair amount, while you're asking that second question.
It might be best to say it again, if you don't mind.
Is that better.
Much better. Thank you, okay, sorry about that.
Yeah, no worries of questions just on.
Just on Leidy, South bend, and bringing that down that volume on line with the with the pipeline. So as we look at kind of 2020, 2 and beyond how should we think about that split between W. D E and EBITDA.
Sure so.
Yet we've really.
1 of them the best benefits of the Leidy South project as we're able to utilize the with all 3 of our major operating production areas.
Generally speaking and we intend to keep really pretty balanced plan between the E D E and the W. D. A.
So I think you should you should expect that we're going to be.
Utilizing that and and our other capacity kind of from all 3 production areas, maybe weighted a little bit more between tayo, the development and and the W. D. A V.
Versus like Homey, just just given our significant inventory and both Toyota and.
And the W. Day. So that's that's how I would I would kind of best position it but relatively balanced between the EDW day.
Okay. Okay. That's helpful maybe.
Maybe just a follow up on your you made a comment within.
Within your prepared remarks on a non op.
I think you said, 25% working interest per 100% working interest on the gathering side.
Can I ask you Uh huh.
Producer is and then is there a change and activity I don't recall you guys talking about such.
Such a split in the past.
Sure. So this is this is something that we've been working on for a for a long time, great project for the company.
Where we would work with Alta.
And to extend our our trout run and like this is Lycoming County, it's our trout run gathering system, which extends into 2 some acreage that they have.
To the north and to the east of our existing tract 100.
Area and.
And we were not only able to gather all of this and extend our gathering system to leverage that but.
And Seneca, we we executed a joint operating agreement and effectively farmed in 2 of.
The chunk of acreage there as well and then similarly, we have another another area outside of <unk>.
Jason to Archrock and hundred Gamble area, where we're the operator.
No.
It's a good relationship and 1 we expect to continue here with with EQT on of Great kind of synergy for 2 companies working together to kind of the credo, 1 plus 1 equals 3 type of approach.
Okay. That's great and then maybe last 1 from me just 1 on California.
You talked about trying to maintain production there I think historically, you've been able to do some bolt ons.
And as well, but obviously the environment kind of continues to become more difficult. Just wondering you know and maybe the C. Even for day of 2 just bigger picture, how youre thinking about Seneca feature and California.
Sure. So I mean, a couple of things 1 is that we did we did successfully kind of farm and slash acquire.
Areas, and and Coalinga, North Midway and south midway over the last several years.
And and we've got quite a bit of development to still do across those 3 areas. It just takes a really long time to permit wells and get all of that done.
Fortunately, we've got a great team out there theyre able to to navigate that process, where we're planning out 2 and 3 years in advance for our activity levels. So it means we can't really ramp up quickly, but we can be kind of thoughtful and methodical about how we how we develop the the assets and kind of approach those longer term developments.
It just doesn't have the cycle time, and then generally.
As we think about the division.
California's been of Great business for Us and we've got a great team out there that manages.
And the day to day very economists Lee.
And we've generated historically tremendous amount of free cash flow, we're continuing to do that.
And then we will we'll continue to look for opportunities to kind of help differentiate ourself across other California operators with some of our sustainability initiatives, including our solar investments that we've been making since 2016, so and that's that's how we're approaching that it's been a good place force.
Okay. That's great. Thank you guys.
You bet.
Okay and in order to ask the question. It seems the press Star and then the number 1 on your telephone keypad that of Star then the number 1 on your telephone keypad.
We are of our next question coming from the line of only 2 of Hari with Goldman Sachs and co. Your line is open.
Hi, good morning, and thank you for taking my questions.
Good morning.
I appreciate all the detail on 2020.2 and.
And quarterly run rate and what you're expecting over the course of next fiscal year.
I would I would I wanted to talk a little bit more about beyond where you do need to would love to hear your thoughts on the projects, which are evaluating right now which can allow for sustained earnings growth and so I would appreciate any thoughts on any organic opportunities, including RMG, our inorganic opportunities through consolidation.
Sure so.
On the regulated side I think we're going to be able to continue to grow.
Both the pipeline and and the utility of.
And maybe not at the at the rate that we're going to grow from from 'twenty 1 into 'twenty 2.
But I think we still are going to have opportunities to do expansions on our our pipeline system.
As you know we tend to wait until we have a.
And our project on file or announced before we include it in our IR decks.
But but the team is chasing a number of opportunities.
That range from further expansions of our Empire line, you'll recall, we did the Empire North project this year.
Skus me last year, we think that there's the opportunity to do another expansion there.
And we're also change the chasing a number of expansion opportunities on off of the line and a portion of our system. That's the the line that goes north South along the the Ohio border and it's it ranges from the.
On the variety of of.
<unk> there that I.
And I expect we'll be announcing and and.
And the quarters to come.
At the same time, we're going to have our modernization programs both at the <unk>.
The pipeline companies and the and the utility and that will be of.
A modest amount of capital that will we will continue to to grow rate base.
Albeit maybe in more of the the low single digit to mid single digit range, but still still upward slope and so so long run on.
I am confident and the ability to grow the the regulated side of the business.
And as Justin said on the the nonregulated side, we are.
Once we have leidy, south filled will be moving to to more of a low of maintenance to low growth mode that the count on say low mid single digit type growth rate.
So that was 1 part of your question.
You also asked about.
About RMG I think.
And whether we could could would be interested and that business and the answer the areas yes.
Find RMG interesting.
It's a good ESG story, it's good for the environment.
And when you look at our service territory.
And in Western New York, and Northwestern Pennsylvania, There's a there's a lot of dairy farms and so so there is the opportunity to do development there.
It is something that we are are considering and I'll be honest. The the biggest thing we got to get our arms around is the is the fact that the entire investment and supported by.
Low carbon fuel type credits that are really of a bureaucratic fiat and could could.
Could go away.
You know.
Just based on new regulations and.
And trying to get our arms around the <unk> the.
The appropriate.
Risk premium that we would need for that type of investment, but it's something that we're we're.
And we're interested in and.
And pursuing.
And I'm not sure if there are other elements of the of your.
Of your question, sorry, I should've written it down.
And with that there was a long question.
Wanted to talk about.
And organic opportunities, which you the.
And also pursuing and looking at which can flood the throw the business improved though the.
Earnings power of the business.
Yeah, I mean, we've we've certainly looked at assets says as they've come on the market and.
And I don't.
And want to comment on specific transactions that we've that we've we've looked at but we.
We think on the the upstream side that theres going to be opportunities for further consolidation within the within the basin.
And then across the the midstream and and and downstream side.
And.
With.
It's likely and our mind the good assets will become available that we chase and if it if its additive.
And so the company.
And we're certainly on a pursue it.
Okay.
Great. Thank you and me and my last question was around the Appalachia and like how do you see the.
And this should be this risk how do you see the risk evolving over time and 1 of the kids.
Kits, which you are evaluating today beyond the hedges to kind of mitigate that risk.
Sure so.
I think our our view on it and and I know and talk to us a little bit and some of my prepared remarks, but that.
Where we are you really only have a minimal amount of new takeaway capacity coming into the basin. So of course, the <unk> from 100, Leidy, South which we're anticipating towards the end of this calendar year as 1.
And we're really pleased to have such a large portion of that.
And then the otherwise MVP, which is still.
Obviously has quite a few hurdles before it's put in service.
And so are our house view is that Appalachia will generally speaking be be somewhat constrained and.
The basis will largely depend on the behavior of the largest producers and so.
If this capital discipline continues then.
I think basis will be will be wide, but not.
Not to the levels we've seen.
And at different times, where production got out ahead of the the takeaway capacity and the basin.
But.
If people try to grow theyre going to be growing into and based on spot prices.
1 thing I noted is that at least our portfolio our fiscal 'twenty..2 we have 93% of our forecasted production locked in through firm sales that mitigates that risk for us and longer term. Our approach is absolutely going to be to utilize that diverse marketing portfolio.
<unk> that we have to.
And to continue to minimize that risk.
We do we have been successful for many years and believe we will continue to be successful at modest incremental layers through the combination of fixed price and fixed basis firm sales, that's where we work with typically of marketing counterparty.
Who holds the capacity through and Ami.
Where we can work with them to create multi year.
Firm sales insulating us from that basis risk.
But our general view would be it's largely going to and I think for us that's our plan longer term and that will the <unk>.
Success around the firm sales will dictate whether were purely maintenance or this low growth mode.
And.
And we think as long as producers kind of behaved and we should see.
Differentials like I said wider than we have maybe the most recently, but not extreme.
That's very natural thank you.
Thank you there are no further questions at this time I will now turn the call back over to Ken Webster for any closing comments.
Thank you Celine 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 of our website and by telephone and will run through the close of business on Friday August 13th to <unk>.
Access the replay online please visit our Investor relations website at Investor Dot National fuel gas dot com and to access by telephone call..1 805, 858, and 367 and enter conference I'd number 1 and 3.6 to 8.1 and 7.5.
This concludes our conference call for today, Thank you and goodbye.
This concludes today's conference call. Thank you for participating you may now disconnect.
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