National Fuel Gas Company (NYSE:NFG) (“National Fuel” or the
“Company”) announced today that Seneca Resources Corporation
(“Seneca”), its wholly owned exploration and production subsidiary,
and IOG CRV - Marcellus, LLC ("IOG"), an affiliate of IOG Capital,
LP ("IOG Capital"), and funds managed by affiliates of Fortress
Investment Group LLC ("Fortress"), have agreed to a modified
extension of their joint development agreement, which includes a
commitment to develop additional Marcellus Shale natural gas assets
located in Elk, McKean and Cameron counties in north-central
Pennsylvania.
Under the terms of the revised joint development agreement,
Seneca and IOG commit to jointly participate in a program that will
develop a total of 75 Marcellus wells located in the Clermont/Rich
Valley area in Pennsylvania. In December 2015, IOG initially
committed to developing 42 wells with an option to participate in
38 additional wells if elected prior to July 1, 2016. The total
number of wells and pad locations included in the revised joint
development agreement were modified to reflect mutually beneficial
changes in Seneca's drilling and completions schedule resulting
from adjustments to gathering infrastructure plans and other
operational factors. To date, 39 of the 75 joint development wells
have been either completed and turned to sales or drilled and in
the process of being completed, leaving an additional 36 wells to
be developed under the revised joint development agreement. IOG was
also granted an option to participate in a 7-well Marcellus pad
that will be completed prior to December 31, 2017. Should IOG
choose to participate in the 7-well Marcellus pad, the total
commitment under the joint development agreement would reach 82
wells.
IOG continues to hold an 80 percent working interest in all of
the joint development wells, with the remaining 20 percent working
interest held by Seneca. As part of the amended agreement, Seneca
and IOG agreed to make certain modifications to the royalty
structure. Seneca's royalty in the additional 36 wells was reduced
from 10 percent to 7.5 percent, resulting in a net revenue interest
of 26 percent for Seneca and 74 percent for IOG. Consistent with
the initial agreement, Seneca's working interest will increase to
85 percent after IOG achieves a 15 percent internal rate of
return.
At Seneca's current Marcellus well costs, which have averaged an
industry-leading $650,000 per 1,000 feet of completed lateral
fiscal year-to-date, IOG's obligation on the remaining 36 wells is
expected to further reduce Seneca's net capital expenditures by
approximately $35 million in fiscal 2016 and another $120 million
spread across fiscal 2017 and fiscal 2018. In total, IOG is
expected to fund approximately $325 million for its 80 percent
working interest in the 75 joint development wells, which is
approximately $55 million less than what was projected under the
initial joint development agreement. The decrease from the initial
agreement is due to the reduction in the total well count and a
$600,000 per well average improvement in Seneca's actual well costs
versus initial projections.
Seneca will continue to be the program operator, allowing it to
maintain planned activity levels and further optimize Marcellus
drilling and completion efficiencies. Production from all joint
development wells will be gathered by National Fuel's Gathering
segment's Clermont Gathering System. IOG will also continue to
share in Seneca's contracted firm sales and firm transportation
capacity, including the 490,000 dekatherms per day of capacity on
National Fuel's Pipeline & Storage segment's Northern Access
project that is expected to be placed in-service by November
2017.
Ronald J. Tanski, President and Chief Executive Officer
of National Fuel, stated: "National Fuel is very pleased to
extend our relationship with IOG. The joint development arrangement
provides a number of operational and financial benefits to both
parties. For National Fuel, it allows us to leverage the
competitive advantage of our low cost, fee acreage in the Marcellus
and reduce the level of capital investment in our upstream business
over the next two years, while maintaining operational efficiencies
and providing the throughput necessary to support our pipeline
expansion projects. Given National Fuel's large Appalachian
footprint and the alignment of our strategic goals, we think there
could be additional opportunities to work with IOG in the future to
accelerate value creation for our shareholders."
Marc Rowland, Founder and Senior Managing Director of IOG
Capital, stated: "IOG and its partners look forward to this
expanded joint development program with Seneca. Seneca has proven
to be an effective cost efficient operator since the establishment
of our agreement at the end of 2015. IOG’s capital permits
operators to realize the full value of their proven assets through
development drilling, by reducing the initial capital expenditure
burden, and retaining the long term value of a project.”
Capital Expenditure Guidance Update
The Company is revising its fiscal 2016 capital expenditure
guidance to reflect the impact of the joint development agreement.
The Company's Exploration & Production segment's fiscal 2016
capital budget is now expected to be in the range of $120 million
to $160 million, at the midpoint a $35 million reduction from the
previous guidance range of $150 million to $200 million.
Consequently, the Company's total consolidated capital expenditure
guidance for fiscal 2016 is now a range of $415 million to $505
million.
The Company does not expect the revised joint development
agreement to have a material impact on Seneca's production guidance
or the Company's consolidated earnings per share guidance in fiscal
2016.
National Fuel is a diversified energy company headquartered in
Western New York that operates an integrated collection of natural
gas and oil assets across five business segments: Exploration and
Production, Pipeline and Storage, Gathering, Utility, and Energy
Marketing. Additional information about National Fuel is available
at www.nationalfuelgas.com.
IOG Capital, LP is a Dallas, Texas based energy investment firm
that manages oil and gas real assets partnered with funds managed
by affiliates of Fortress Investment Group LLC (NYSE: FIG), and
other institutional investors. Founded in 2014, IOG now has
approximately $1 billion in accessible capital. The Firm seeks to
invest in upstream development oil and gas projects located onshore
in the United States through non-operated joint development
agreements and traditional joint operating agreements. Additional
information about IOG Capital is available at
www.iogcapital.com.
Jefferies LLC acted as the exclusive financial advisor to Seneca
for this transaction and Kirkland & Ellis acted as legal
counsel. Jackson Walker, LLP acted as legal counsel for IOG.
Certain statements contained herein, including statements
identified by the use of the words “anticipates,” “estimates,”
“expects,” “forecasts,” “intends,” “plans,” “predicts,” “projects,”
“believes,” “seeks,” “will,” “may” and similar expressions, and
statements which are other than statements of historical facts, are
“forward-looking statements” as defined by the Private Securities
Litigation Reform Act of 1995. Forward-looking statements involve
risks and uncertainties, which could cause actual results or
outcomes to differ materially from those expressed in the
forward-looking statements. The Company’s expectations, beliefs and
projections contained herein are expressed in good faith and are
believed to have a reasonable basis, but there can be no assurance
that such expectations, beliefs or projections will result or be
achieved or accomplished. In addition to other factors, the
following are important factors that could cause actual results to
differ materially from those discussed in the forward-looking
statements: impairments under the SEC’s full cost ceiling test for
natural gas and oil reserves; changes in the price of natural gas
or oil; financial and economic conditions, including the
availability of credit, and occurrences affecting the Company’s
ability to obtain financing on acceptable terms for working
capital, capital expenditures and other investments, including any
downgrades in the Company’s credit ratings and changes in interest
rates and other capital market conditions; delays or changes in
costs or plans with respect to Company projects or related projects
of other companies, including difficulties or delays in obtaining
necessary governmental approvals, permits or orders or in obtaining
the cooperation of interconnecting facility operators; factors
affecting the Company’s ability to successfully identify, drill for
and produce economically viable natural gas and oil reserves,
including among others geology, lease availability, title disputes,
weather conditions, shortages, delays or unavailability of
equipment and services required in drilling operations,
insufficient gathering, processing and transportation capacity, the
need to obtain governmental approvals and permits, and compliance
with environmental laws and regulations; changes in laws,
regulations or judicial interpretations to which the Company is
subject, including those involving derivatives, taxes, safety,
employment, climate change, other environmental matters, real
property, and exploration and production activities such as
hydraulic fracturing; governmental/regulatory actions, initiatives
and proceedings, including those involving rate cases (which
address, among other things, target rates of return, rate design
and retained natural gas), environmental/safety requirements,
affiliate relationships, industry structure, and franchise renewal;
changes in price differential between similar quantities of natural
gas or oil sold at different geographic locations, and the effect
of such changes on commodity production, revenues and demand for
pipeline transportation capacity to or from such locations; other
changes in price differentials between similar quantities of
natural gas or oil having different quality, heating value,
hydrocarbon mix or delivery date; the cost and effects of legal and
administrative claims against the Company or activist shareholder
campaigns to effect changes at the Company; uncertainty of oil and
gas reserve estimates; significant differences between the
Company’s projected and actual production levels for natural gas or
oil; changes in demographic patterns and weather conditions;
changes in the availability, price or accounting treatment of
derivative financial instruments; changes in economic conditions,
including global, national or regional recessions, and their effect
on the demand for, and customers’ ability to pay for, the Company’s
products and services; the creditworthiness or performance of the
Company’s key suppliers, customers and counterparties; economic
disruptions or uninsured losses resulting from major accidents,
fires, severe weather, natural disasters, terrorist activities,
acts of war, cyber attacks or pest infestation; significant
differences between the Company’s projected and actual capital
expenditures and operating expenses; changes in laws, actuarial
assumptions, the interest rate environment and the return on
plan/trust assets related to the Company’s pension and other
post-retirement benefits, which can affect future funding
obligations and costs and plan liabilities; increasing health care
costs and the resulting effect on health insurance premiums and on
the obligation to provide other post-retirement benefits; or
increasing costs of insurance, changes in coverage and the ability
to obtain insurance. The Company disclaims any obligation to update
any forward-looking statements to reflect events or circumstances
after the date thereof.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160613005309/en/
National Fuel Gas CompanyAnalysts:Brian M.
Welsch, 716-857-7875orMedia:Karen L.
Merkel, 716-857-7654
National Fuel Gas (NYSE:NFG)
Historical Stock Chart
From Jun 2024 to Jul 2024
National Fuel Gas (NYSE:NFG)
Historical Stock Chart
From Jul 2023 to Jul 2024