National Fuel Gas Company (NYSE:NFG) delivered a strong performance in the first quarter of fiscal 2024, with adjusted operating results of $1.46 per share. The company's execution in its Upstream and Gathering segments led to a significant increase in production and throughput. The utilities segment also saw an uptick in earnings due to new delivery rates in Pennsylvania. Despite lower natural gas prices, the company's hedging strategy has effectively shielded its earnings and cash flows. National Fuel Gas Company remains optimistic about its long-term prospects, bolstered by a solid marketing and hedging portfolio and a deep drilling inventory.
Key Takeaways
- National Fuel Gas Company reported Q1 adjusted operating results at $1.46 per share.
- Upstream and Gathering businesses saw an 11% and 15% increase in production and throughput, respectively.
- Hedging practices have mitigated the impact of lower natural gas prices.
- Pennsylvania utility earnings rose by 12% due to new delivery rates.
- The company adjusted its earnings range for the year to $4.90 - $5.20 per share.
- Free cash flow projection for fiscal 2024 reduced by $70 million.
- Strong balance sheet with mid- to high-single-digit earnings growth expected over the next 3 to 5 years.
- Rate case proceedings ongoing in New York, with the company maintaining a strong dividend payout capability.
- Potential for certified responsibly sourced gas to command a premium in Canadian markets.
Company Outlook
- Transition to the Eastern Development Area progressing well, expected to enhance capital efficiency and returns.
- Revised earnings range reflects current natural gas price environment.
- Free cash flow for fiscal 2024 expected to be lower than initial projections.
- Long-term free cash flow generation remains strong.
Bearish Highlights
- Lower natural gas prices have necessitated a revision of earnings range and free cash flow projections.
- Increased spending guidance for utilities due to new wage requirements in New York State.
- Possibility of production curtailment if natural gas prices remain low.
Bullish Highlights
- Strong Q1 performance driven by excellent operational execution.
- Ongoing transition to the EDA expected to yield improved capital efficiency.
- Long-term outlook remains positive with a deep drilling inventory and robust hedging portfolio.
Misses
- Fiscal 2024 free cash flow forecast revised down due to external factors affecting the market.
Q&A Highlights
- Seneca's production trajectory and CapEx discussed for fiscal years 2024 and 2025.
- CapEx expected to decline significantly in the coming fiscal years, with moderate production growth.
- Company has experienced success in selling certified responsibly sourced gas at a premium.
National Fuel Gas Company's first quarter results have laid a strong foundation for the fiscal year, with its disciplined approach to operations and strategic planning. The company's revised earnings forecast and capital expenditure plans reflect a careful adjustment to market conditions while maintaining a focus on long-term growth and shareholder value. With ongoing rate case discussions and a robust drilling inventory, National Fuel Gas Company is poised to navigate the dynamic energy market effectively.
InvestingPro Insights
National Fuel Gas Company (NFG) has demonstrated resilience in its Q1 2024 performance, and the InvestingPro platform provides additional insights that could be valuable for investors considering the stock. An InvestingPro Tip indicates that NFG has raised its dividend for 53 consecutive years, showcasing a commitment to shareholder returns even in a fluctuating market. Moreover, the company is trading at a low earnings multiple, with a P/E Ratio (Adjusted) for the last twelve months as of Q4 2023 at 9.44, suggesting that the stock may be undervalued relative to its earnings.
InvestingPro Data further reveals that the company has a market capitalization of $4.5 billion and a dividend yield as of the 39th day of 2024 at 4.32%, which is competitive in the utilities sector. Furthermore, the company's gross profit margin for the last twelve months as of Q4 2023 stands at a robust 57.84%, highlighting efficient operations. However, it's worth noting that the company is trading near its 52-week low, with the price at 77.28% of the 52-week high, which could indicate a potential buying opportunity for value investors.
For those interested in deeper analysis, there are additional InvestingPro Tips available that delve into the company's financial health and market position. Use coupon code SFY24 to get an additional 10% off a 2-year InvestingPro+ subscription, or SFY241 to get an additional 10% off a 1-year InvestingPro+ subscription, and gain access to a comprehensive set of tools and insights that can aid in making informed investment decisions.
Full transcript - National Fuel Gas Comp (NFG) Q1 2024:
Operator: Hello, everyone and welcome to the National Fuel Gas Company First Quarter Fiscal 2024 Earnings Conference Call. My name is Bruno, and I’ll be operating your call today. [Operator Instructions] I will now hand over to your host, Natalie Fischer, Director of Investor Relations. Please go ahead.
Natalie Fischer: Thank you, Bruno 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 Principal Financial (NASDAQ:PFG) Officer; and Justin Loweth, President of Seneca Resources and National Fuel Midstream. At the end of prepared remarks, we will open the discussion to questions. The first quarter fiscal 2024 earnings release and February 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.
Dave Bauer: Thank you, Natalie. Good morning, everyone. Before starting, I’d like to take a moment to welcome Natalie as our new Director of Investor Relations. While she is new to the company, she isn’t new to the industry, having worked in PwC’s power and utilities practice early in her career. I’d also like to thank Brandon for his hard work over the past 3 years and wish him well in his new role within our finance organization. Turning to the quarter. Last night, we reported adjusted operating results of $1.46 per share. It was a fairly routine quarter, one in which we continue to see strong execution across our operations. In our Upstream and Gathering businesses, production and throughput were up 11% and 15% respectively compared to last year, on the strength of several great new wells in the EDA. In addition, the benefit of our disciplined approach to hedging was evident this quarter, with our strong book of swaps, collars and firm sales, helping to mitigate the impact of lower natural gas prices on earnings and cash flows. At the regulated businesses, we started to see the impact of new delivery rates in our utilities Pennsylvania jurisdiction, which helped contribute to the 12% increase in year-over-year utility earnings. Looking forward, our plans remain on track in each of our businesses. In the Upstream business, Seneca’s transition to the EDA is going smoothly. Results in Tioga County continue to exceed expectations and were the primary reason for the increase in our production guidance range for fiscal ‘24. We are very excited about the long-term opportunity in this area. At a point in time when many of our peers are moving down the acreage quality spectrum or pursuing M&A to manage depleting inventory, we are in the fortunate position of having many years, well over a decade of inventory in the EDA that is highly economic. We expect that the ongoing transition to Tioga will be the driver of improving capital efficiency and strong returns for many years to come. Additionally, we have a great hedge book in fiscal ‘24 and ‘25 with downside protection well above the forward curve and collars that retain a good portion of the upside. Given the inherent volatility in natural gas prices, we think this is the right approach. Turning to the regulated businesses, settlement discussions and our supply core rate case are ongoing, and I hope to have more to say on that process next quarter. At the utility, last fall, we filed a rate case in our New York jurisdiction, requesting new rates effective October 1 of this year. Testimony from commission staff and other parties is due next month. And once that’s on file, I expect settlement discussions will ensue over the course of the spring and into the summer. Before leaving the utility, a quick word on New York’s energy policy. As you all know, downstate politicians and environmental activist groups continue to push an agenda that seeks to electrify everything as soon as possible, including space heating. And they want to do it solely with new renewable generation despite the high cost and inherent intermittency of wind and solar. Putting the partners in rhetoric to the side, we are at least starting to see a more reasonable approach to the energy transition from some of the policymakers in Albany. In December, the New York Commission issued an order on the plan we submitted in their long-term planning proceeding. Our proposal advocates in all of the above approach to energy that employs enhanced weatherization, hybrid heating solutions and the use of low and no carbon fuels like hydrogen and RNG. The planned balances, affordability, reliability, resiliency and emission reductions and clearly demonstrates that a standalone gas utility can meet the goals of Climate Act. As we expected, given the political environment in Albany, the commission stopped short of approving the plan in full. But it was supportive of many of the most important pillars to our approach, including weatherization and the continued evaluation of hybrid heating and alternative fuels. While it wasn’t exactly what we wanted, the level of support we received from the very agency that oversees utility reliability and affordability lends credence to the notion that if policymakers are rational and consider the facts natural gas utilities can very much be part of a permanent solution that achieves the state’s emission reduction goals. Bringing you back to the quarter. In conclusion, while near-term commodity prices are somewhat of a headwind the longer term outlook for our business remains strong. We have a deep drilling inventory in one of the most prolific areas in Appalachia and a marketing and hedging portfolio that supports our ability to generate sustained free cash flow. In our regulated businesses, we have line of sight to increasing earnings and the ability to deploy ongoing growth capital. On top of that, we have a strong balance sheet that allows us to be opportunistic in allocating capital. Taking these all together, I believe the outlook for National Fuel is outstanding. With that, I will turn the call over to Justin.
Justin Loweth: Thanks, Dave and good morning, everyone. Seneca and NFG Midstream both had an excellent start to the fiscal year, driven by strong operational results. Record production of 101 Bcfe, an 8% sequential increase exceeded our estimates. We turned in line 27 wells during the quarter, 19 of which were in the EDA and all of which came online ahead of schedule and collectively, their productivity exceeded expectations. The operational successes that drove Seneca’s increased production, when combined with growing third-party volumes, led to record throughput at NFG Midstream as well. In light of this solid performance in the first quarter, we are increasing our production guidance range to 395 to 410 Bcfe. For the remainder of the year, we expect to turn in line 11 more wells, including a 5-well tiled to Utica pad that is just beginning to flow back and a WDA Utica pad scheduled to flow back towards the end of the fiscal year, likely August or September. Given the majority of turn-in-line activity will occur in the first half of the year, average daily production is expected to peak in Q2 before declining in each of the last two quarters prior to the next wave of pads coming online this fall and into the winter. Turning to natural gas pricing. Our robust marketing and hedging portfolio is well positioned to dampen the impact of lower near-term pricing. For the remainder of fiscal 2024, we have downside pricing protection covering more than 70% of our expected production through a combination of swaps, costless collars and fixed price firm sales. With a weighted average floor price of $3.34 per MMBtu for our NYMEX swaps and collars, we are well positioned relative to current forward prices over the balance of the year. Additionally, we have firm transportation and firm sales in place for over 90% of our expected production, leaving less than 10% of our gas exposed to index in pricing. We continue to focus our marketing and hedging efforts on mitigating downside risk, optimizing the price received for our production and generating free cash flow throughout the commodity price cycle. Moving to capital for fiscal 2024. While first quarter capital came in slightly below our expectations, we are maintaining Seneca’s capital guidance range of $525 million to $575 million. As I previously mentioned, our turn-in-line and development activity is front end loaded and we expect to drop to 1 rig this spring, a level which we plan to maintain for at least a couple of quarters. So capital will moderate over the remainder of the year. Overall, we see more tailwinds than headwinds on capital for the year. And once we have another quarter under our belt, we will look to tighten our capital guidance range. Longer term, Seneca’s development plans remain unchanged. We are moderating our activity levels and continuing our transition to the capital-efficient EDA, where we have more than a decade of highly prolific inventory. Our fiscal ‘24 capital is decreasing over last year. And this downward capital trend is expected to continue into fiscal 2025. Putting it altogether, we are right on track to meet our long-term capital reduction targets. Regarding our sustainability initiatives, Seneca and NFG Midstream continued to demonstrate its leadership in this area through our proactive emissions reduction efforts and best practices. Last month, Seneca was recognized as best-in-class with the independent reverification of 100% of our assets under the EO100 Standard for responsible energy development. We are the first and only public operator to have attained an A grade demonstrating scores of 98% or higher across all 5 principles of the standard. In conclusion, we are off to a great start to the fiscal year. Our integrated upstream and midstream model remains core to our success. Allowing us to pursue a coordinated development plan focused on enhancing returns and optimizing our cost structure. Further, our ongoing transition to the EDA, solid operational execution and robust hedging and marketing portfolio sets us up for enhanced capital efficiency and growing free cash flow generation in the years to come. With that, I’ll turn the call over to Tim.
Tim Silverstein: Thanks, Justin, and good morning. National Fuel’s first quarter adjusted operating results were $1.46 per share. Dave hit on the high points, but I did want to touch on a few other drivers. Starting at the utility, we are seeing the benefit of a $23 million annual rate increase in Pennsylvania that went into effect last August. The bulk of this increase hits in the winter months when consumption is the highest. Partially offsetting this was the impact of warmer weather relative to last year. With weather normalization mechanisms in both of our utility jurisdictions, we will be largely insulated from weather-driven volatility in the future. Also in the utility, as a result of the long-awaited IRS guidance last year, we saw the benefit of the expanded treatment of certain maintenance capital expenditures related to natural gas transmission and distribution property. With the ability to deduct a larger share of our capital in the year it’s placed in service, we had a nice tailwind on both cash taxes and our effective tax rate. Switching to our non-regulated businesses. As Justin mentioned, from an operational perspective, Seneca and NFG Midstream are firing on all cylinders. Cash operating costs trended lower than expected during the first quarter. And despite modest price-related curtailments in October, our production guidance for the full year is moving higher. There is one atypical item during the quarter. We accrued $3.5 million in expense related to estimated plug-in costs for certain California wells, which we no longer own. These wells were divested in 2004 and are unrelated to our recent exit from the region. The operator of the abandoned wells is no longer in business, so the liability will likely revert to Seneca. Turning to guidance for the year. We are revising our earnings range which is now expected to be between $4.90 and $5.20 per share. Our outlook for lower LOE and higher production were more than offset by the near-term drop in natural gas prices, which we now assume will average $2.40 per MMBtu for the remainder of the fiscal year. Since last quarter, we entered a tranche of $3 swaps to our hedge book, which further improved our downside protection. At the midpoint of guidance, we now are 72% hedged for the remainder of the year. As Justin mentioned, we were also active on the marketing front and have reduced our spot exposure to approximately 30 Bcf, and we expect to further chip away at this in the coming months. Given the volatility in pricing for reference, a $0.25 change in NYMEX prices for the balance of the year will impact earnings by approximately $0.17 per share. As it relates to capital for fiscal ‘24, we’ve increased our spending guidance for the utility while maintaining the prior outlook for our other segments. The change relates to a new prevailing wage requirement for utility contractors in New York State that was enacted late last summer. The newer rule requires contractors to pay prevailing wages to non-union employees for any project that requires a permit to operate in a public right of way. This encompasses a large portion of our utility modernization activity. We are still assessing the final impact, but as of now, we expect to increase our utility capital by $20 million to $25 million this year. While this will have a near-term effect on cash flows, it has the benefit of increasing rate base and longer-term earnings growth. We’ve updated our pending New York rate case proceeding to account for this, and we expect to obtain recovery of these costs when new rates go into effect at the start of fiscal ‘25. Bringing this all together, the impact of higher utility capital spending and lower natural gas prices are driving our expected fiscal ‘24 free cash flow to be $70 million lower than we previously projected. Despite this, our ability to generate free cash flow in the future remains strong. We have growing regulated earnings and cash flows. In the near-term, this is driven by ongoing rate-making activity and longer-term as a result of the continued need for modernization and the potential for further interstate pipeline expansions, such as our Tioga Pathway Project. Adding this to the outlook for higher prices and further expected capital reductions in our Upstream and Gathering businesses, we remain confident in our ability to generate durable free cash flow generation over the long-term. In addition, our balance sheet remains in great shape. Both S&P and Moody’s recently reaffirmed our investment-grade rating and upgrade thresholds. We are very close to reaching these thresholds. However, the broader natural gas macro will likely push out any potential rating improvements into the future. In the meantime, we have significant financial flexibility, which positions us well to make prudent capital allocation decisions as we move through the coming quarters and years. In conclusion, the combination of meaningful growth in our regulated businesses and the improving capital efficiency of our non-regulated assets should drive mid- to high single-digit compound earnings growth over the next 3 to 5 years, assuming the long-term outlook for natural gas prices. Coupling significant growth and strong returns with our investment-grade balance sheet and outlook for increasing free cash flow, we are positioned to extend our track record of returning a growing amount of capital to investors while continuing to prudently invest in growth opportunities. Taken together, we believe this will drive long-term value for our shareholders. With that, I’ll ask the operator to open the line for questions.
Operator: Thank you. [Operator Instructions] Okay. We do have our first question comes from Neil Mehta from Goldman Sachs. Neil, you line is now open.
Neil Mehta: Yes. Good morning, team and thanks for taking the time.
Dave Bauer: Good morning.
Neil Mehta: Great. It’s a first question just on the New York gas base rate increase request – just – can you refresh us in terms of the time line around this? And when you expect to hear from staff and potential commission decision? And how you’re framing what the ask is for as well as you go to the commission?
Tim Silverstein: Sure, Neil. It’s Tim. So from a timing perspective, we will expect to get testimony from staff early next month, so early in March. From there, we will have the opportunity to respond to their testimony, but likely in parallel, we will at least start to have settlement discussions with staff and the other parties involved in the case, still working towards new rates going into effect at the beginning of our fiscal year, so October 1, in advance of next year’s heating season.
Neil Mehta: Okay. That’s great color. My follow-up is on Slide 6 with the uplift that you anticipate in free cash flow starting in ‘25, but this year being a little bit lower. Just a couple of questions. One is, in a scenario where natural gas prices are lower than what you show here on the slide. How do you think about your ability to pay the dividend from the balance sheet? Or is there any risk around – is there any risk around external financing? And just talk a little bit about the uplift that you anticipate post ‘24, what are some of the drivers that will allow you to grow that free cash flow off the current base? Thank you.
Tim Silverstein: Yes. Thanks, Neil. I’ll start, and I’ll see if Justin and Dave have anything to add. So the increase from ‘24 to ‘25 is really driven by a couple of factors. One is the ongoing reduction that we would expect in our non-regulated capital spending, combined with at least today, the outlook for higher prices plus the increasing value of our hedge book as we move from ‘24 to ‘25. Capital in the other business is expected to be relatively consistent year-over-year and then take on top of that, the impact of the rate case and supply that we have ongoing this year, which will drive a full year of incremental revenues next year as well as the potential impact from the New York rate case. So that certainly positions us well for increasing cash flows. Obviously, we do still have exposure to lower gas prices. That being said, our balance sheet is in really good shape, as I mentioned, both Moody’s and S&P reaffirmed our credit ratings and our – both our upgrade and downgrade thresholds. So we certainly have substantial ability to fund our growing dividend over time. And the reality is the way we look at that is through the cycle. We’ve been able to look at the long-term earnings growth of the regulated businesses, the gathering cash flows that really drive our ability to deploy that cash flow in the form of a dividend over time and look at ways to optimize that going forward.
Neil Mehta: So is it fair to say...
Tim Silverstein: Or Justin do you have anything else to add?
Justin Loweth: I think you got it there, Tim. Do you have a follow-up there Tim?
Neil Mehta: No, just to clarify, there is no need for external financing from an equity perspective, it sounds like, given that – given the balance sheet capacity.
Justin Loweth: No, not from an equity perspective.
Operator: Our next question comes from Zach Parham from JPMorgan. Zach, your line is open.
Zach Parham: Good morning. First, just a question on the E&P business. Your guidance assumes $1.70 per M on local pricing we’ve recently seen some of the local basis points trade below $1.50, and I think there are some worries that those could move lower in the near-term. Can you just give us some color on how you think about potential shut-ins or delaying turn-in lines? I know you’ve got the large majority of your volumes hedged in ‘24, but is there a specific price where it doesn’t make sense to flow some of those marginal volumes?
Justin Loweth: Yes, yes, happy to get into that a little bit. So as you’ve said, yes, there is definitely some of the in-basin pricing is challenged and here we are still in winter and it’s challenged. So Tim mentioned this on the call, I did as well. We fortunately have really minimized that exposure. So I’d start by highlighting that. We’re down to only about round numbers, 30 Bs for the remainder of the fiscal year that would be exposed to kind of that in-basin pricing. I’m hesitant to give you an exact number, but what I will tell you is if prices get very low, let’s just – let’s start with like, say, sub $1, I mean you can, rest assure, we’re not really going to be flowing. But exactly where that brand you say sub $1.70 in our guidance is where we will make that decision. It’s a decision we can make with really limited to really know back to our wells, our future well productivity or cost. So it’s something we will continue [Technical Difficulty]. We will absolutely evaluate flowback of new pads as well. You might recall, we actually did that in fiscal ‘23. Part of the reason for this fantastic Q1 we’ve had was a result of having held back some volumes that we would have flown back, say, in the late summer, but given – or into the shoulder in say, since September, October, but we kind of deliberately waited to get into a better pricing over the winter. So that’s definitely something we will continue to evaluate. We will look to do and we will mitigate it both ways through operations and through our marketing portfolio.
Zach Parham: Thanks, Justin. Maybe just one more on the E&P business, and you talked a little bit about this in your prepared remarks, but could you give us a little more color on the production trajectory through the year? You took up the full year guidance at the midpoint by about 2.5 Bcf, but you’ve previously talked about 1Q production being relatively flat, and you were up 7 Bcf quarter-over-quarter. So just curious kind of how we should think about shaping the production through the rest of the year and maybe at this point if you would expect to be maybe towards the higher end of that range?
Justin Loweth: Sure. So, at this point, the reason – or the reasoning on why Q1 did so well was really a combination of really outstanding work from our operations team in terms of setting GPUs, getting all the wells drilled out and getting those flowed back a little faster during the quarter than we had initially envisioned being possible, so really great job by the team in making that possible. And then quite frankly, we just – we had a lot of wells that we brought on in – 27 in total, and in aggregate, they just beat our expected performance. They came online and cleaned up faster and hit rates in excess of what we initially anticipated. So, a great story, it’s a little earlier and strong well productivity. I will note 19 of the 27 were in our Eastern Development Area as well, but really across the board, good performance. Right now in Q2, we are at our peak production. So, we have got all that production flowing. We are still in many respects on a lot of those wells in a very flush period. I mentioned we are just beginning to flow back a Tioga-Utica pad right now. And so we are – Q2 will – is expected to be the high point in our production volumes for the fiscal year. And then we really have nothing happening through Q3 and in the next pad online data is late Q4. August, September is kind of what we are targeting. And that’s a good example. Another one where we will really evaluate pricing at that time and how we have been able to shape our marketing book and make some decisions around the right time to flow it back. So, we feel really good about our current guidance range. I think that’s the right range. And exactly where we are relative to the midpoint of that is probably a little TBD, just depending upon everything I just outlined. And the other thing I will just highlight again is, our guidance does not incorporate a pricing curtailment. So, to the extent some of those that 30-Bs, pricing is really challenged at different times. It’s possible some of that will come out, and we will just hold that back for a future time. But the number I am giving you is a clean – on the – clean number, assuming we flow exactly as I have just outlined it to you.
Zach Parham: Got it. Thanks Justin. Appreciate the color.
Operator: Our next question comes from Trafford Lamar from Raymond James. Trafford, your line is now open.
Trafford Lamar: Thanks guys and congrats on a great quarter. Just got one quick one, focusing on the equitable origin A-grade, I would love to get your thoughts in the near-term RSG market? And maybe what premium to NYMEX you could see possibly in the next 2 years to 3 years? Thanks.
Justin Loweth: And you said the – like responsibly sourced gas and premiums, I just want to make sure I heard that correctly.
Trafford Lamar: Yes. That’s correct. It’s being greater than 100%.
Justin Loweth: Absolutely. Yes. So, the – I would say there are different standards for all of these. Equitable origin is more of an international standard. And so we found particular success selling our certified responsibly sourced gas largely in the Canadian markets. And fortunately, we are piped through National Fuel Supply and Empire into some of those markets. We will continue to pursue those sales. The premiums you get are telling me the exact number. It’s more in the order of magnitude, pennies, not dimes or quarters that you can enjoy. But it’s a great opportunity. I would argue, I think a lot of things we are doing, frankly, position us very well relative to the regulatory environment. And it’s just the way we like to do business. And so it’s nice to be recognized by third-parties. And if we are able to attract certain utilities and end-user customers that are able to see that and pay a premium, it’s a great opportunity for us. And so we have been able to achieve some premiums for that. Again, I would say it’s pennies, not dimes and quarters. And I think we will continue to have that success.
Trafford Lamar: Great. Appreciate the color, Justin.
Operator: [Operator Instructions] Our next question comes from John Abbott from Bank of America. John, your line is now open.
John Abbott: Good morning and thank you for taking our questions. Our first question is to Tim. It’s on the Roadway Excavation Quality Assurance Act. So, in your remarks, Tim, you said that you were still assessing the impact on that. Is the risk that, that goes higher? Is there a risk that, that goes lower? And then just sort of a follow-on, how do you – when you think about that bump-up in CapEx for the utility business, how do we think about – what is your latest thoughts around long-term CapEx for the utility business and then the impact to the free cash flow to the utility business?
Tim Silverstein: Yes. I will start with the first question on the potential bias higher or lower. I would say, we have been in pretty active dialogue with our contractors. So, we think this is reasonable what we – based on what we know today. I think I wouldn’t say it’s biased one way or another at this point. It could go up a little bit. It could go down a little bit. But I think we will know a lot more as we get into the meat of the construction season this summer, to better understand exactly how the contractors will respond. As it relates to longer term run rate on capital and what that means from a free cash flow perspective, I think I had mentioned previously that we were in the $125 million to $150 million area. Long-term run rate from a capital perspective, I would bump that up by about $25 million more in the $150 million to $175 million area as a result of this. So, certainly, from an immediate perspective that has a drag on cash flows in the near-term. But I think you need to take a step back and look at a couple of factors. One is it will drive longer term rate base growth. So, you will have not only earnings, but additional cash flows in our rate cases going forward, including the one we have on file right now. In addition, much of this capital is eligible for the repairs deduction that we – that I have talked about the last couple of quarters. And that has an immediate benefit to free cash flow in the form of lower cash taxes. So, I think when you take that all together, while capital might be up $20 million to $25 million, the growth in earnings and the savings from a free cash – from a cash tax perspective will offset a good chunk of that.
John Abbott: That is very helpful. And the next question, I think it goes to you, Justin here. So, the plan is out, so for 2025, you are going to start moderating activity, and when you sort of think about the 2024 trajectory, I mean we have a bump up here in the first half of the year and a decline in the second half of the year. As we start to think about activity in 2025, granted, it’s kind of early, how do you think about on an annual basis, the trajectory of production and of CapEx? Is it going to be ratable, front-end loaded? How do you think about those factors as we sort of look to 2025 and beyond?
Justin Loweth: Sure. Yes, happy to address that. So, as you may recall, in fiscal ‘23, Seneca’s total capital was approximately $583 million. The midpoint of our guidance here in fiscal ‘24 is $550 million. I noted we did come in slightly below our internal estimates in Q1 and we are spending a lot of time as a team looking at our activity over the rest of the year, and of course into ‘25, and looking for ways to continue to moderate. I noted we are dropping a rig, which we will do here later this – into the spring. And we will stay at that activity level at least for a couple of quarters, at least that’s our current expectation. And so for fiscal ‘24, Q1 was our biggest capital quarter. And I would expect a pronounced decline in capital even into Q2 and on into Q3 and Q4, generally somewhat flat and at a lower level. As we look out to ‘25, you should expect that overall level of capital to continue to go down. I have spoken about on a combined basis, Seneca and NFG Midstream, if you start at that ‘23, as we look to ‘24, at the midpoint, we are already dropping somewhere between kind of $30 million and $40 million. We are going to keep working on that as we moderate activity right now over the coming months. And then as we look to fiscal ‘25, we are targeting to be somewhere between $50 million to $150 million, and I would bias that towards $75 million to $100 million already should be achieved when we get into fiscal ‘25. So, we are on a downward trend. Obviously, we will keep looking hard at gas prices and in our hedge book and everything else. And then from a production perspective, we have got quite a bit of nice growth expected this year. It’s on the back of some of the wells we brought on recently and some of the activity we have underway. Definitely would expect that growth to moderate into ‘25 from ‘24 and a continued moderation beyond there. Somewhere between flat and 5% per annum growth is probably good round numbers to think about. But we are definitely in a process now of high grading to the EDA that will drive capital efficiency. That leads to a lot of the lower capital spend while dampening our overall growth that we have had from a production perspective over the last few years.
John Abbott: Thank you. Very, very helpful.
Operator: We currently have no further questions. So, I would like to hand the call back to Natalie Fischer for closing remarks. Thank you.
Natalie Fischer: Thank you, Bruno. We would like 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 15th. To access the replay online, please visit our Investor Relations website at investor.nationalfuelgas.com. And to access by telephone, call 1-866-813-9403 and provide access code 385109. This concludes our conference call for today. Thank you and have a great day.
Operator: Ladies and gentlemen, this concludes today’s call. Thank you for joining. You may now disconnect your lines.
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