NFG
#Thanks, <UNK>, and good morning, everyone.
Thanks for joining us for today's call.
As you saw in our earnings release last evening, we had a pretty steady second-quarter, although earnings were slightly down from last year.
Earnings in our Utility segment were lower due to warmer-than-normal weather, and lower commodity prices decreased earnings in our Exploration and Production segment.
<UNK> <UNK> will go into the details of the major earnings drivers later in the call.
Overall, activities in the field for each of our operating segments moved right along as planned.
We are just gearing up for the construction season for our regular pipeline renewal projects in our Utility and our Pipeline and Storage segments.
At the same time, we've slowed the drilling activities at Seneca Resources by moving to a single-rig drilling program.
Our reduced drilling level, combined with getting a partner to fund a large portion of this year's drilling program, has cut our spending to allow us to live within cash flow for the year.
Our current plans allow us to stay at a single-drilling rig for at least a year before we need to ramp up drilling and completion activities again, in order to have enough production to fill the pipeline capacity that will come online in November of 2017, the targeted completion date of our Northern Access pipeline.
With respect to our Northern Access project, we received some good news from the Federal Energy Regulatory Commission.
On April 14th, FERC issued its Notice of Schedule for Environmental Review for the project, and it confirmed their intention to develop an Environmental Assessment, or EA, for the project, and announced a July 27, 2016 target date for the EA.
Now that fits within our timeline for a November 2017 in-service date.
The other recent news on the regulatory front is the denial by the New York DEC of the Federal Water Quality Certification for the Constitution Pipeline project in Southeastern New York.
We submitted our own permit filings to the New York DEC, the Pennsylvania Department of Environmental Protection, and the U.S. Army Corps of Engineers for our project just last month.
We delayed our filing by three months after a number of prefiling meetings with the staff of the DEC, in order to make sure that our application was complete and addressed their stated concerns.
Based on those prefiling meetings, and gleaning what information we can from the Constitution denial letter, we feel our application is in pretty good shape.
A big plus for our project is that more than 75% of the pipeline route will be co-located along existing utility corridors.
We also believe that we've worked well with the DEC in the past.
We already own and operate thousands of miles of pipeline assets in the state.
And during our ongoing maintenance and renewal of those lines, we've dealt with them on a regular basis, addressing many project-specific issues.
Suffice it to say that we are confident that our project will continue to move along.
On the federal rate regulatory front, our team has been busy filing the required cost and revenue study for our Empire Pipeline, and answering interrogatories from FERC staff regarding the filing.
The schedule set out by the Administrative Law Judge is a target completion date for the proceeding set for February of 2017.
So we'll keep you posted in future calls if anything major happens in that case.
Switching to our utility and state rate regulation, our utility rate team filed a request for a rate increase in New York yesterday.
This is the first rate increase request the utility has made since early 2007.
The filing supports a $41.7 million increase in base rates, an increase of approximately $5.75 per month for an average residential customer.
As is typical in a New York rate proceeding, any new rates would not become effective for 11 months, so we wouldn't expect any earnings impact until the second-half of next fiscal year.
We have a pretty clear line of sight through the end of this fiscal year with respect to our earnings projections, and you can see that we've tightened up our earnings guidance range.
With respect to our oil and gas production, we are well-hedged for the remainder of this fiscal year and next fiscal year.
And as you can see in the back pages of our earnings release, we are continuing our normal practice of layering in hedges for our oil and gas production as commodity prices in the futures market for our fiscal 2018 and beyond have begun to firm up.
We see the market getting more bullish on commodity prices in the out-years, as production volumes have started to level off and the rig count stays low.
For the foreseeable future, we will continue to watch our spending, protect our balance sheet, and work to get our Northern Access pipeline built that will deliver Seneca's production to an attractive pricing point.
Now I'll turn the call over to <UNK> <UNK>, who will be stepping into the role of President at Seneca when Matt Cabell's retirement becomes effective next week.
Yes, I think it's actually down to two rigs now.
I was just looking at that the other day.
So it continues to fall.
We haven't seen any help on the capacity side as of yet.
It's ---+ whether producers are bringing on wells that they had shut in, we just ---+ we haven't seen additional ---+ at least significant additional capacity available in that part of the state.
Well, assuming that it takes the full year, <UNK>, it would be the beginning of March of 2017.
Again ---+
You know, I think we've ---+ that's kind of what we have planned at the outside.
We had the luxury of being on 98% of the route sites, so that we had what we think was a very, very complete application.
Whether the state will move it along any faster, we can't guarantee; we just know that there is a year time-frame for filing.
So that's what we are planning on.
Well, it's ---+ we're working through that.
We did have a good open season for the Empire North project.
It was ---+ to a certain degree, it was oversubscribed, because certain parties tried to put together different combinations of transportation routes.
And so that's really what we're working through, <UNK>, in order to kind of rationalize the best flows and the best combination, and get that worked into precedent agreements.
We don't have any of them signed just yet, and we just continue to work away at that.
Well, the relationship is great.
We drilled 30 of the 42 wells, with those pads just ---+ they're early; they're just now coming online.
Our costs have been about 10% or more down, which they are pleased with.
You know, we have conversations around entering into the second tranche, but really that's a decision that they are going to make in July.
So ---+ and that's really all I can speak to right now on that.
