National Fuel Gas Earnings Call Highlights Growth and Volatility

National Fuel Gas ((NFG)) has held its Q1 earnings call. Read on for the main highlights of the call.

National Fuel Gas Balances Strong Growth With Volatility and Acquisition Costs in Latest Earnings Call

National Fuel Gas struck an overall confident tone on its latest earnings call, emphasizing strong operational execution, material EBITDA growth, and improved capital efficiency, while openly flagging short-term headwinds from extreme natural gas price volatility and near-term costs tied to its Ohio acquisition. Management framed the quarter as one that validates its integrated strategy and long-term growth plan, with hedging, secured equity financing, and pipeline progress helping to offset regulatory nudges and temporary cash-flow and dilution impacts.

First Quarter Results Set a Solid Yearly Foundation

National Fuel Gas reported adjusted earnings per share of $2.06 for the first quarter, described as squarely in line with internal expectations and supportive of its full-year plan. Management portrayed the quarter as a steady start that reinforces confidence in hitting fiscal 2026 targets, rather than a blowout performance, highlighting disciplined execution across segments and no major surprises versus guidance.

Upstream and Gathering Drive 29% EBITDA Growth

The integrated Upstream & Gathering segment delivered a standout performance, with adjusted EBITDA up 29% year-over-year. This growth was driven primarily by higher production volumes and firmer natural gas prices versus the prior-year period. Management presented this as evidence that its integrated model is working as intended, leveraging gathering infrastructure and upstream efficiency to convert higher volumes and price support into outsized cash flow gains.

Double-Digit Production Growth and Reaffirmed Volume Targets

Net production reached 109 Bcf in the first quarter, a 12% increase compared with the same quarter last year. The company reaffirmed its fiscal 2026 production guidance of 440–455 Bcf, signaling confidence in its drilling program and field performance. This volume trajectory underpins both earnings growth expectations and the company’s strategy to increasingly utilize its own firm transportation capacity as it expands market access.

Capital Efficiency Up ~30% Since 2023

Management highlighted continued improvements in capital efficiency, now tracking toward roughly a 30% gain since 2023. The company is simultaneously growing production while keeping capital spending in check, and reaffirmed fiscal 2026 capital guidance of $560–$610 million. This combination of higher output with flat-to-lower capex is central to its value proposition, positioning National Fuel Gas to expand cash generation without stretching its budget.

Hedging Strategy Cushions Downside While Preserving Upside

Against a backdrop of sharp natural gas price swings, National Fuel Gas stressed the role of its hedge book in stabilizing cash flows. Roughly 70% of remaining production is hedged, including about 80 Bcf of collars with a weighted average floor of $3.60 and a cap of $4.75 per Mcf. Importantly for equity investors, the company still retains upside exposure on more than half of its remaining volumes, giving it room to benefit if prices stay elevated while limiting downside if they retreat.

EPS Guidance Reaffirmed and Growth Outlook Intact

The company reaffirmed its fiscal 2026 adjusted EPS guidance range of $7.60–$8.10, with a midpoint of $7.85, and reiterated that this represents roughly 14% year-over-year growth. Management underscored that the strong first-quarter performance supports this trajectory and that the combination of production growth, capital discipline, and risk management provides a durable path to mid-teens earnings expansion, even with some regulatory and acquisition-related friction.

Pipeline Expansion Projects Advance on Schedule

On the midstream front, National Fuel Gas reported tangible progress on key pipeline projects. The Tioga Pathway project has received a notice to proceed from federal regulators and will begin tree clearing, while the Shippingport Lateral has secured all required permits and remains on track for a late-2026 in-service date. Management also noted growing shipper interest for further expansions across its systems, reinforcing the long-term value of its Appalachian infrastructure footprint.

Stable Utility Operations Amid Rate and Regulatory Moves

In the utility segment, National Fuel Gas’s Pennsylvania gas utility filed for an approximate $20 million rate increase, which would translate to about an 11% rise in customer bills if approved. Management argued that even with this increase, rates would remain below inflation since the last rate case, though they acknowledged potential affordability and regulatory scrutiny. In New York, the utility remains in year two of a three-year rate settlement, providing near-term visibility and stability on that side of the business.

Equity Financing in Place for Ohio Acquisition

The company has taken a significant step toward funding its planned acquisition of CenterPoint’s Ohio local distribution company by completing a $350 million private placement of common stock in December. This transaction satisfies the equity portion of the deal’s financing plan, and management said the overall acquisition remains on schedule to close in the fourth quarter of calendar 2026. While the equity raise introduces some near-term dilution, it materially de-risks the funding path for the deal.

Balance Sheet Strategy Targets Lower Leverage Post-Acquisition

National Fuel Gas expects to approach approximately 1.75x net debt-to-EBITDA by the end of fiscal 2026 and plans to issue around $1.5 billion of long-term debt to fund the Ohio acquisition and refinancing needs. Even with the anticipated uptick in leverage after the deal closes, management expressed confidence it can reach the low end of its 2.5–3.0x net debt-to-EBITDA target range within the first year post-close, signaling a commitment to balance sheet strength and investment-grade metrics.

Commercial and Sustainability Gains in Responsibly Sourced Gas

The company also touted a notable commercial and environmental milestone: a 10-year agreement to supply 250,000 MMBtu per day of MiQ-certified methane reduction certificates to a European utility. This deal underscores National Fuel Gas’s push into responsibly sourced gas and differentiates its product in a market where ESG performance is increasingly tied to commercial opportunity, particularly with international buyers.

Firm Transportation Capacity to Support Future Growth

National Fuel Gas expects its total firm transportation capacity to increase from 1.0 Bcf per day to 1.5 Bcf per day over the next several years. This expansion, driven by interstate pipeline projects and capacity releases, is critical to supporting the company’s planned production growth and enhancing market optionality. By securing more takeaway, the company aims to mitigate some regional basis risk and better connect its Appalachian volumes to premium demand centers.

Extreme Gas Price Volatility Remains the Key Wild Card

Management spent considerable time discussing the extreme near-term volatility in natural gas markets. The February NYMEX contract recently settled near $7.50 per Mcf—a roughly 140% jump in just two weeks—yet the company is using a more conservative $3.75 price assumption for the remainder of the fiscal year due to persistent uncertainty. Executives were clear that gas prices remain the single largest variable in their outlook, even with significant hedging protection in place.

Near-Term Acquisition Costs and Dilution Pressure Earnings

While the Ohio acquisition is expected to be strategically and financially attractive over the long term, National Fuel Gas acknowledged that upfront transaction costs, legal and integration spending, and early permanent financing will weigh on near-term results. These items are leading to earlier dilution and incremental interest expense ahead of closing, and the company plans to present them as items impacting comparability, so investors can better distinguish underlying performance from deal-related noise.

Ohio Regulatory Order Moderately Dampens Near-Term Cash Flow

The final order from Ohio regulators included small but tangible adjustments to the economics of the future utility business. The allowed return on equity was reduced by six basis points to 9.79%, trimming anticipated earnings by about $500,000 per year, and the amortization of modernization deferrals was extended from 15 to 25 years. While these changes modestly reduce near-term cash flow, management framed the overall impact as manageable within the broader acquisition economics.

Short-Term Production Cadence Disruption and Capital Timing

Investors were cautioned that second-quarter volumes are likely to come in slightly below the first quarter due in part to well completion timing and deferred field activity during recent extreme weather. In addition, certain planned activities and a joint development pad could pull roughly $10 million of capital spending into fiscal 2026. Management positioned these as timing issues rather than structural changes, with full-year and multi-year production guidance unchanged.

Infrastructure and Storage Constraints Amplify Price Swings

National Fuel Gas highlighted how limited new storage capacity and constrained pipeline takeaway in its region are magnifying price volatility. Building new storage in the Northeast is both expensive and challenging from a permitting standpoint, so the company is prioritizing storage optimization and existing infrastructure utilization over greenfield storage projects. These constraints underscore the importance of its pipeline expansions and firm transportation strategy for smoothing cash flows and managing basis risk.

Financing Costs and Equity Discount Weigh on Existing Holders

The December private placement came at a roughly 2–3% discount to the prevailing market price, reflecting issuance costs and creating modest dilution for existing shareholders. On top of that, the planned $1.5 billion in long-term debt will temporarily elevate leverage. While framed as necessary steps to fund growth and the Ohio acquisition, these financing moves add a near-term drag that investors will weigh against the company’s longer-term earnings and cash-flow upside.

Customer Rate Pressures and Regulatory Scrutiny

The proposed 11% bill increase in Pennsylvania, while still below cumulative inflation since the last rate hike, could raise affordability concerns and regulatory scrutiny. Management acknowledged this dynamic, emphasizing a focus on maintaining service reliability and infrastructure investment while being sensitive to customer impacts. That balancing act will be critical for maintaining constructive regulatory relationships as the company grows its utility footprint.

Outlook and Guidance: Growth Intact Despite Volatility

Management reaffirmed fiscal 2026 adjusted EPS guidance of $7.60–$8.10, with a midpoint of $7.85 and an expected ~14% year-over-year increase, supported by 440–455 Bcf of production and $560–$610 million of capital spending. The company is assuming a conservative $3.75/Mcf gas price for the remainder of the year and relies on a hedging portfolio that protects roughly 70% of remaining volumes through collars and swaps while preserving upside on more than half of production. On the balance sheet, National Fuel Gas expects to exit fiscal 2026 near 1.75x net debt-to-EBITDA, then move toward the low end of its 2.5–3.0x leverage target within a year of closing the Ohio acquisition, which will be funded by the completed $350 million equity placement and about $1.5 billion of long-term debt. Regulatory items, including Ohio’s 9.79% allowed ROE and extended amortizations, are expected to have only a modest drag on the broader growth and cash-flow trajectory.

In sum, National Fuel Gas’s earnings call painted a picture of a company executing well operationally, bolstering its infrastructure platform, and securing financing to support a transformative utility acquisition, even as it navigates pronounced commodity volatility and short-term regulatory and financing headwinds. For investors, the story hinges on whether the company can translate its production growth, capital efficiency gains, and midstream build-out into the reaffirmed mid-teens EPS growth, while managing acquisition-related dilution and regulatory dynamics along the way.