National Fuel Gas Q4 2026 Earnings Call Transcript

National Fuel Gas (NYSE:NFG) reported fourth-quarter financial results on Thursday. The transcript from the company’s fourth-quarter earnings call has been provided below.

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Summary

National Fuel Gas reported strong fourth quarter adjusted earnings of $1.22 per share, capping off a fiscal year with $7.55 per share, marking a 9% increase over the previous year.

The company successfully closed a significant acquisition to expand its utility footprint into Ohio and announced plans to separate into two standalone publicly traded companies.

Strategic initiatives included the successful integration of the Ohio business, the initiation of pipeline expansion projects, and the acquisition of Honeoye Storage Corporation.

The company anticipates fiscal 2027 earnings guidance in the range of $6 to $6.40 per share, impacted by lower natural gas prices despite a strong hedge book.

Operational highlights include the completion of the Tioga Pathway and Shippingport Lateral expansion projects, and ongoing modernization and expansion efforts in pipeline and storage segments.

Management remains optimistic about long-term opportunities in the natural gas industry, despite near-term challenges such as lower production and commodity price pressures.

Full Transcript

OPERATOR

If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Ryan Vossler, Director of Investor Relations. Please go ahead.

Ryan Vossler (Director of Investor Relations)

Thank you 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 are Dave Bauer, President and Chief Executive Officer; Tim Silverstein, Treasurer and Chief Financial Officer; and Justin Loweth, President of Seneca Resources and National Fuel Midstream. At the end of today’s prepared remarks, we’ll open the discussion to questions. The fourth quarter and full year fiscal 2026 earnings release and 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 Gas’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.

David Bauer (President and Chief Executive Officer)

Thank you, Ryan, and good morning, everyone. Last night National Fuel Gas reported strong fourth quarter results of $1.22 per share of adjusted earnings. The quarter capped off an excellent fiscal year for the company, one in which we generated adjusted earnings per share of $7.55, an increase of 9% over last year. More importantly, the past year will be remembered as a strategic inflection point for National Fuel Gas. A little over a year ago, we announced a significant acquisition that would expand our utility footprint into Ohio and double our utility rate base.

We successfully closed that acquisition and are well on our way to integrating that business into our operations. We also undertook an extensive strategic review that led to the decision to separate National Fuel into two standalone high-quality publicly traded companies. Both companies will be well capitalized and well positioned to benefit from the broader long-term opportunities across the natural gas industry. Once completed, this separation will be an important step to maximizing the value of our assets.

Before discussing each of our business segments, I want to provide a few updates on the planned separation. As you read in last night’s release, the new public company will operate under the Seneca Resources name. We felt that was important since Seneca is well known and respected in the communities in which it operates. Further, we remain on track with the key early separation work streams, including the Form 10 and IRS private letter ruling processes.

In the coming quarters, we’ll provide further updates, including information on the standalone business profiles, management teams, and Boards of Directors. Beyond this operation, fiscal 2026 was a year of significant progress across our businesses, further positioning each company for long-term success. Starting with our Pipeline and Storage segment, this past weekend we placed into service our Tioga Pathway and Shippingport Lateral expansion projects. These projects highlight the strategic position of our assets in the heart of the most prolific natural gas basin in the country. Together, they will add approximately $30 million in incremental annual revenues. In addition, the line and system upgrade project that we announced last quarter remains on track for a late 2028 in-service date.

This project is expected to add approximately $20 million in annual revenue while allowing us to modernize a key portion of our system. We expect to file our 7(c) application with FERC on this project by the end of the calendar year. Looking beyond the project, we continue to see interest in capacity from power developers and are optimistic we’ll have further expansion opportunities. Also, last week we completed the acquisition of the Honeoye Storage Corporation with a purchase price of approximately $5 million.

This is a great little bolt-on for our pipeline business, bringing 5.9 Bcf of FERC-regulated storage capacity and an interconnection with Tennessee Gas Pipeline that provides access to premium Northeast markets. Looking ahead, we see the potential to further optimize this business by connecting it with our nearby Empire system. Lastly, in the pipeline segment, Supply Corporation continues to advance the rate case it filed at the end of April. Settlement discussions are ongoing and I’m optimistic we’ll reach an agreement.

In the meantime, new rates went in place, subject to refund, on November 1st. Turning to our Utility segment, last month we received a final order in our Pennsylvania rate proceeding. As a reminder, given the political backdrop, we had been unable to reach a settlement with the parties involved and, as a result, chose to litigate. In late July, we received a disappointing recommended decision from the Administrative Law Judge, which we strongly opposed and rebutted in its order. The Commission ultimately took a more favorable view than the ALJ, awarding us a $10 million rate increase.

Importantly, the order also reset our distribution system improvement charge, which will allow us to recover on our modernization investments in near real time. I’m happy to say that even after this rate increase, our delivery rates will still be the lowest in Pennsylvania. Our track record on affordability is something we’re very proud of and will continue to be a focus area across all our jurisdictions. We also received a positive regulatory outcome in New York with the approval of our System Modernization Tracker in August.

This will provide real-time recovery on our ongoing modernization investments, which are the bulk of our capital spending. In exchange, we agreed to stay out of a rate case for at least a year. Turning to Ohio, on October 1st, we closed on our acquisition and the business is now operating as National Fuel Gas Distribution of Ohio. As a reminder, our rate settlement contains two key capital spending riders that allow us to recover a return on nearly all of our Ohio capital spending between rate cases. As a result, we don’t expect to file a rate case in Ohio until 2029, when those riders expire. To support a smooth transition, CenterPoint is providing certain back-office services under a Transition Services Agreement for up to 24 months after closing.

Our goal is to complete our integration and exit the TSA well ahead of that, ideally by the end of calendar 2027. Obviously, we’re early in the process, but thus far the transition is going as expected. Overall, the outlook for the regulated businesses is outstanding. We continue to see success expanding our FERC pipeline systems, and at the utility we see a path to continued rate base growth in all three jurisdictions without the need to file new rate cases through at least late 2028.

Switching to Seneca Resources, we remain confident in the long-term value of our deep, high-quality inventory, particularly in Cuyahoga County, where we’ve delivered strong results since shifting development focus there in 2023. However, we face a few challenges in the near term. First, natural gas prices have moved meaningfully lower over the past few quarters. We’re nearly two-thirds hedged this year at prices well above the strip, but as Tim will talk about in more detail later, we do expect lower commodity prices will be a headwind for Seneca’s earnings and cash flows in fiscal 27.

That said, as we look further out, the long-term outlook for natural gas demand is still strong and we remain confident prices will recover. As Justin will discuss later on the call, we also faced some near-term challenges with respect to production that affected both fiscal 26 and our outlook for fiscal 27. But over the long term, we expect that Seneca’s continued refinement of well design, development prioritization, and operating practices should lead to a repeatable and capital-efficient development program.

Most importantly, Seneca’s inventory quality and ability to deliver long-term production and free cash flow growth remain intact. In closing, in addition to delivering outstanding financial results, fiscal 26 served as a pivotal period in the nearly 125-year history of National Fuel Gas. We took significant steps to position our businesses to maximize the long-term value of our assets and capitalize on the growth in the natural gas industry occurring in our own backyard. I’m excited about the future and remain focused on executing on our strategy, which we believe will generate significant value for shareholders.

With that, I’ll turn the call over to Tim.

Timothy Silverstein (Chief Financial Officer & Treasurer)

Thanks, Dave, and good morning, everyone. Last night we reported fourth quarter GAAP earnings of $1.02 per share and adjusted EPS of $1.22 per share. Our adjusted results were flat compared To the prior year. Increased utility margin and higher natural gas price realizations, driven by our strong hedge book, were offset largely by lower Seneca production. As noted in the earnings release, there were also several items impacting comparability related to the Ohio acquisition and the planned separation of Seneca Resources. We expect costs for both to continue through the next year as we work to complete the integration and prepare for the spin.

The rest of the EPS drivers are straightforward and laid out in detail in the earnings release. As it relates to fiscal 2026 capital, we ended up in the middle of our guidance range. The only thing I’d note is that in the regulated companies we saw modestly higher pipeline storage spending, which was offset by lower utility capital. While we hit our utility modernization mileage targets, we did so at a lower cost per mile than anticipated. On the pipeline expansion side, our projects came in on budget. Where we saw the difference was with the modernization work in Supply Corporation, where we were able to complete more than originally planned.

By the close of the fiscal year, we expect to be able to recover the spending as part of our ongoing rate case. Switching to fiscal 2027, we’ve initiated our earnings guidance with a range of $6 to $6.40 per share. The major driver of the decrease year over year is our $2.85 per MMBtu assumption for natural gas prices. This represents an $0.80 drop in NYMEX prices from the prior year. Despite our strong hedge book, which protects nearly two thirds of our expected production at a weighted average floor of $3.80, the steep drop in pricing will have a negative impact on earnings for the year.

Consistent with past practice, we’ve included sensitivities at different NYMEX prices. At Seneca, production is expected to be in the range of 400 to 435 Bcf, which at the midpoint is relatively flat year over year. Our guidance range incorporates approximately 3 Bcf of voluntary price-related curtailments in October, but does not assume these occur in the future. Justin will have more on the drivers of production later. We are also projecting modest increases in our cash unit costs as a result of normal course expense inflation. DD&A is also expected to be up approximately $0.05 per Mcf.

As I’ve talked about in the past, prior ceiling test impairments artificially lowered our DD&A rate in 2025, and it takes a couple of years for us to trend back to our expected long-term rate, which would be in the mid- to high-$0.80 area. Going in the other direction is the strength we are seeing in our regulated segments, most notably in our pipeline and storage business, where revenues from our newly in-service expansion projects and our pending rate case are expected to drive meaningful growth in 2027. In the utility segment, we are also incorporating the expected full-year impact of our new Ohio business. Our guidance highlights a doubling of operating income in this segment, which is consistent with the increase in rate base resulting from the acquisition.

We’ve also incorporated the impact of our acquisition-related financing, which we had been excluding as an item impacting comparability last year as we had yet to close on the transaction. As you may recall, we indicated that this acquisition would be modestly dilutive in fiscal 2027, particularly with the seller note carrying an above-market interest rate, which is about 100 basis points above where we could issue similar financing. Overall, as we think about the long-term outlook, 2027 is a bit of a transitional year. The integration of our Ohio utility and the ongoing work preparing for the separation will certainly create a bit of noise in the financial statements, particularly as we will have a number of one-time expenses and nonrecurring items as we position each business to operate as a standalone public company.

Moving to capital, we project total spending to be approximately 10% higher than last year. Utility capital is expected to be in a range of $350 to $400 million, which reflects the addition of Ohio-related spending. In the pipeline and storage segment, our range of $140 to $180 million reflects mostly a modernization-only year of activity, as our two major expansions were completed early in the fiscal year. We anticipate returning to a higher level of spending in 2028 as we begin work on our next line IT expansion.

Overall, this spending level keeps us on track to deliver the 5% to 7% rate base growth previously discussed. In our integrated upstream and gathering segment, we are projecting to spend $600 to $640 million. At the midpoint, this is an increase of approximately $30 million year over year. While we are seeing modest inflation due to diesel costs, the increase is largely driven by third-party gathering activity, which will have an associated new revenue stream, along with non-operated activity in Tioga County, which is incremental to our own development program.

Outside of this guidance, we are projecting between $50 and $100 million of discretionary land spending this year. We’ve seen great success with this program to date, deploying $38 million last year. Though as we go through time, we retain the option to toggle this back if commodity prices remain depressed. Our balance sheet exited last year right in line with expectations at 1.9 times debt to EBITDA. This leaves us well positioned to navigate lower near-term natural gas prices. The long-term outlook for natural gas remains strong, and we continue to lock in hedges north of $3.50, a level at which we can generate meaningful free cash flow. Given our positive long-term outlook, we remain optimistic that our planned separation will provide both companies with strong financial foundations, which can position them for long-term success.

Bringing it all together, our underlying business fundamentals are strong. The regulated companies are executing at a very high level. Momentum continues to build around future pipeline expansion projects, and we are optimistic that we will reach a successful resolution to our Supply Corp rate proceedings. We also have a long runway of modernization opportunities in our utility business, all of which are underpinned by supportive ratemaking mechanisms.

Taken together, we can continue to deliver on our growth plans while staying out of rate cases in each of our jurisdictions for multiple years, and we can do this without the need for external equity financing. We see this outlook as a benefit to both customers and shareholders, as we can deliver strong growth without dilution while also continuing our long track record on customer affordability. At Seneca Resources, we expect this year to be a bit of an inflection point, as all the work the team is doing to maximize long-term development value is expected to start to materialize later this year. We are laser-focused on optimizing our development, minimizing capital spending, and generating sustainable and growing free cash flow. We’re excited about the future and the broader evolution of National Fuel’s business model, which we believe will benefit shareholders over the long term.

With that, turn the call over to Justin.

Justin Loweth (President of Seneca Resources and National Fuel Midstream)

Thanks, Tim, and good morning, everyone. Fiscal 26 was an important year for our integrated upstream and gathering business. We generated more than $1 billion in EBITDA, increased our SEC reserve base to 5.2 Tcfe, and replaced approximately 150% of production. However, our development program did not deliver the production we expected, with full-year production of 419.5 Bcf coming in just below the low end of our revised guidance range. Looking ahead, we expect fiscal 27 production to be approximately flat with fiscal 26.

Among the key drivers are underperformance on a Lycoming Marcellus development pad, weaker-than-anticipated Upper Utica appraisal results, and greater-than-anticipated frac interactions in the Lower Utica. Collectively, these had a modest impact in the fourth quarter and will have a greater impact in fiscal 27. We’ve taken a hard look at these results, adjusted our forecasting assumptions, and incorporated what we’ve learned into our future development plans.

Digging in a bit further, I’ll start with our Marcellus development pad in the Gamble area of Lycoming County, which was the most surprising of these results. This area is almost fully developed and, despite its significant production history and very strong historical results, this six-well Marcellus pad meaningfully underperformed our expectations. We are still evaluating the cause but have not seen similar performance elsewhere in the region. With limited remaining inventory in Lycoming, we view this pad as an anomaly with no material impact on long-term value.

Turning to the Upper Utica at the TAF 2 and Webster Co development pads, the wells are delivering solid results, although not at the exceptional productivity levels we saw from our earlier standalone Upper Utica appraisal wells. These results do not change our view that the Upper Utica provides attractive inventory, but they do change how and when we expect to develop it. With EURs of approximately 2 Bcf per thousand feet and attractive returns, we expect the Upper Utica to remain part of Seneca’s long-term development plan, but the higher-return Lower Utica will be our near-term development priority.

Lastly, we saw greater-than-anticipated frac interactions between offset Lower Utica wells. We are adjusting development sequencing, well design, and operations to mitigate these interactions going forward. For instance, delaying the TIL of a well until offset completion activity is finished may allow us to maintain near-wellbore pressure and reduce this risk. For fiscal 27, we plan to use our Gen 3 well design across much of the program. Based on our testing to date, the more intensive Gen 4 completion design has not consistently delivered enough incremental EUR to justify the additional cost and can increase the potential for frac interactions.

We therefore expect Gen 3, or variations of that design, to form the basis of our development program while continuing to optimize where appropriate. While our development strategy is becoming more focused, fiscal 27 still includes targeted appraisal and optimization work already underway. Of the 20 to 26 wells we expect to turn in line, approximately eight will involve appraisal or testing, including three Upper Utica delineation and infill wells, a four-well Lower Utica pad testing GPU size to 40 million per day, and a Lower Utica appraisal well in a new fault block that could further expand our inventory.

Our remaining Upper Utica activity has specific objectives. Two wells will help determine optimal infill spacing around existing Upper and Lower Utica development, while a third well will test a new fault block where our data indicates the potential for higher gas in place. To execute this development plan, we expect to run a one- to two-rig program and a dedicated frac crew. Turn-in-line activity is concentrated in the second quarter beginning in January with a four-well Lower Utica pad with average TILs of approximately 18,000 ft, our longest Utica wells to date. With that TIL cadence, we expect production to increase from the first quarter through the third quarter before declining toward year-end. The development changes we are implementing in fiscal 27 should position us to resume production growth beginning in fiscal 28 with development increasingly focused on our core Lower Utica and Marcellus in Tioga County.

Over the longer term, we believe this more repeatable development approach will improve capital efficiency, supporting stronger free cash flow as production grows. Turning to gathering, our focus remains on supporting Seneca’s production while maximizing the value of our integrated business. We are sequencing upcoming pipeline projects with Seneca’s development schedule and employing new design standards that are already generating savings of 5% to 10% per facility. We are also advancing a new centralized station and associated pipeline corridor in Northwest Tioga with construction expected to begin in early calendar 2027.

We continue to pursue third-party gathering growth with volumes expected to remain relatively steady in fiscal 27 and additional opportunities being advanced in Tioga County. Together, these initiatives should lower costs and position gathering to efficiently support both Seneca and future third-party growth. Pivoting to natural gas markets, we expect the market to remain somewhat oversupplied through 2027 with a more constructive outlook as LNG demand ramps in 28 and beyond. Our marketing portfolio positions us well in this environment with more than 90% of expected fiscal 27 production supported by physical firm sales and/or firm transportation, leaving limited exposure to in-basin spot pricing. This provides meaningful protection during periods of regional price weakness while preserving upside as market conditions improve.

That position was further strengthened by the recent in-service of the Tioga Pathway project, providing another valuable transportation outlet for Seneca’s gas. In closing, we see a clear path to long-term value creation as we continue to optimize our development program and expand our inventory. With more than 25 years of development inventory with PV-10 breakevens below 2.25 per MMBtu at our current drilling pace, supported by our integrated gathering infrastructure, we believe we have the resource depth, economics, and increasingly optimized development planning to drive long-term shareholder value. With that, I’ll turn the call back to the operator to open the line for questions.

OPERATOR

We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from Neil Mehta with Goldman Sachs.

Please go ahead.

Neil Mehta (Analyst)

Yeah, thanks so much for the rundown here, and I want to start with you, Justin, on slide 18. This was very helpful in mapping out some of the challenges that you might be having in the 27 development plan. Maybe you can simplify it for us. What are the key things that you’re looking to do in 27 during that transition year, and what is the confidence level that you’re back on track by 28?

Justin Loweth (President of Seneca Resources and National Fuel Midstream)

Yeah. Good morning, Neil. Thank you. So the focus has been 26 had a lot of, as I noted in my remarks, a lot of testing and appraisal work, a lot of focus on completion design in the Lower Utica, a lot of focus on the Upper Utica co-development. As we move into 27, we’ll have more limited work in the Upper Utica and really completing that appraisal program and testing program. There’s three wells that we have. Two of them will kind of come back in to help us understand long-term how infill wells, whether it’s adjacent to an existing Upper Utica or above longer-producing Lower Utica, how those wells behave and productivity and so forth.

And then another well that actually would potentially expand our inventory base more because it’s into a new fault block where we have not included locations. So those are key things there. Generally, though, we’re overall pivoting to a Lower Utica- and Marcellus-focused strategy. A lot of the things in 2027 were already in flight. When you think about the long lead-time nature of our integrated gathering and upstream business in that you’re planning out 12, 18, 24 months in advance when you’re building out those corridors and so forth. So a lot of it was in flight. But as we move to 28 and beyond, we will have much more Lower Utica as our core focus of the development.

We’ll have some Marcellus, very little, very little if any Upper Utica. And that should lead to more consistent, repeatable results, improving capital efficiency, and a resumption of our production growth trends.

Neil Mehta (Analyst)

All right, that’s great. And then Dave, Dave and team, obviously it was a consequential week from a political perspective, including the states you operate in, Pennsylvania, Ohio, and New York at the gubernatorial level. Just your early perspectives on how we as an investment community should be thinking about some of these changes and any thoughts?

David Bauer (President and Chief Executive Officer)

Yeah, it was an interesting week indeed. You know, at the state level, really I don’t see any change in New York. You know, it’s been a one-party-ruled state for a while. I guess on the optimistic side, I think the administration is starting to realize that gas isn’t going to go anywhere anytime soon and has been less hostile towards us. In Pennsylvania, you know, obviously the Senate flipped Democrat, which isn’t a positive for the industry. But at the end of the day, the governor seems to be a pretty reasonable person, so I’m not expecting any real surprises there.

And then in Ohio, the governorship did go Democrat, but the House and the Senate are still very much Republican-controlled, and so they have a long history of really supporting natural gas. They have a constructive regulatory environment and really don’t see that changing. And overall, what I’d say is we build our business to go through the cycle, right? And so we’ll have periods where we’ll have politicians in favor of us and others where they’re not in favor of us, but our business is designed to go through that cycle.

Neil Mehta (Analyst)

That makes sense. Thank you, Dave.

OPERATOR

Your next question comes from Tim Rezvan with KeyBanc Capital Markets. Please go ahead.

Tim Rezvan (Analyst)

Good morning, folks. Thank you for taking our questions. I guess my first one is for Justin. I know you all have put out the 2030 outlook where you’ll have basically one and a half B a day of FT to support growth. Can you kind of walk through the timing of when that comes on, if you could just update us on that? And where I’m going with this is, if the oversupplied conditions persist into 2028, how do you think about organic growth, and could you look to find third-party volumes to kind of meet that FT?

Just trying to understand sort of the outlook. Thanks.

Justin Loweth (President of Seneca Resources and National Fuel Midstream)

Sure. So the FT that we have today matches our kind of existing and projected near-term, next year or so, production quite well. It protects us from some of these headwinds we’re facing, frankly, on some of the in-basin pricing overall, and that’s of course buttressed by a really strong hedge portfolio protecting the realized price. Looking out to 2030, the next material increase in expected FT happens in early fiscal 29th, so it’s out there a little bit, more or less a couple years.

So we’ve got a plan that works towards utilizing that as that becomes available. So I think it all still ties together really nicely with our long-term projections. As I mentioned, 2026 into 27, relatively flat production expected at the midpoint, and then as we move to 28 and, principally, a Lower Utica and Tioga Marcellus-focused program, would expect to see production resume growth and that continuing in the years beyond.

Tim Rezvan (Analyst)

Okay, that’s helpful context, I appreciate that. And then as a follow-up, you’ve mentioned a couple times in prepared comments about initiatives on third-party gathering. This seems to be sort of an evolution of your strategy. Is this related to the separation? Is this an opportunity that you felt like you wanted to capitalize on? Can you talk more about that?

David Bauer (President and Chief Executive Officer)

Sure, Tim. Yeah, it’s more happenstance that it happens to be now. We’ve been working with a third party for quite some time, and they had an opportunity to develop some resource that’s proximate to our gathering system and in an area where we could expand our gathering system to provide a service to them. And so it’s a great project for us to add some capital but get a really attractive return to provide that third-party service. We’re not looking to become a true gathering company for third parties.

It’s always kind of a one-plus-one-equals-three type approach. If we have the capacity within our system that’s not being utilized by Seneca, it’s economic for us, and we can reach out to those third parties that are proximate to our systems, we always look to do that. It’s really, again, just think of it as a one-plus-one-equals-three type approach.

Tim Rezvan (Analyst)

Okay, I appreciate that. And if I could just add one more, maybe this is for David. I know on the separation it’s a lengthy process. The big gating factor seems to be the Form 10 filing. I know that’s confidential, but can you give any color on when that might get filed or where you stand in that process? I know you’re trying to sort of tie this to a quarter-end, so just trying to understand if maybe that’s a July 1st or an October 1st kind of event in 2027.

Any color there would be helpful. Thank you.

David Bauer (President and Chief Executive Officer)

I’ll let Tim—Tim’s sort of driving that process, so I’ll let him answer that.

Timothy Silverstein (Chief Financial Officer & Treasurer)

Yeah, Tim, you know, just overall, we’re still not specific to anything other than the second half of calendar 2027 for the actual effective date of the spin. But from a practical standpoint, in the near term, likely before the end of this year—this calendar year, that is—our intent is to get the Form 10 on file, that first confidential submission. From there, there’s a number of back and forth with the SEC on that, so usually it will take a number of months to get that ultimately to a position where we can flip that public and share that with the broader investment community.

That’s likely in the March–April timeframe. But that’s sort of what we’re working towards. Some of that’s within our control and then some of that’s within the SEC’s control. The other process that goes in parallel is the private letter ruling process. That’s actually probably a little bit longer than the Form 10 ultimately, but I still think where we sit today, everything leaves us on track for something in the second half of next year, if not towards the earlier part of that.

Tim Rezvan (Analyst)

Okay. Okay. I know you’re limited in what you can say, but that’s helpful. Thanks, everybody.

OPERATOR

Okay, your next question comes from Sebastian Almondovor with Raymond James. Please go ahead.

Sebastian Almondovor (Analyst)

Hi, good morning, and thank you for taking my questions. I guess my first question has to do with your Gen 3 design, going back to it in 2027. How confident are you right now on your spacing assumptions, or anything that you might have to do, or make any changes to it going into next year?

Justin Loweth (President of Seneca Resources and National Fuel Midstream)

Yeah, so we have a lot of wells in the ground with our Gen 3 design, so it’s a relatively developed approach. What we’d been looking at was the increased design with the Gen 4, with slightly wider interval spacing but quite a bit more proppant loading. So we think that, frankly, this is something we evaluated. I’ve spoken about this in the past. We wanted to look at Gen 4, see if we saw the productivity uplift, meaning more near-term and long-term, ultimate EUR per foot of well that would justify the incremental cost.

And what we saw through our appraisal and testing work is that we get some of that uplift that would justify that cost at times, but we don’t get it consistently enough to really justify it overall as the investment. And we also were experiencing more frac risk, hit risk associated with that larger design. I mean, the reality is that the Gen 3 looks good. We’ve got a really good rock quality in the Lower Utica. It concentrates that, that frac energy. There’s clearly some natural fracturing in the reservoir. And so we think that’s a really solid design that will give us solid economics and really good recoveries as we move forward.

Sebastian Almondovor (Analyst)

Great, thank you for that. And just as a quick follow up, I’m not sure if you can speak to this at a high level already, but how should we think about the appropriate leverage you would be targeting post separation of both companies?

Timothy Silverstein (Chief Financial Officer & Treasurer)

Yeah, I would just refer you back to what we said in the last call. You know, that’ll ultimately come out in the Form 10, but, you know, given where commodity prices are and continue to move around, that’s something that we’ll, we’ll continue to evaluate as we get towards the public flip on the Form 10. But everything that we said a few weeks ago still remains true.

Sebastian Almondovor (Analyst)

Okay, great. Thank you.

OPERATOR

There are no further questions at this time. I will now turn the call back to Ryan Vossler for closing remarks.

Ryan Vossler (Director of Investor Relations)

Thank you. We’d like to thank everyone for taking the time to be with us this morning. A replay of the call will be available on our website later today. Please feel free to reach out if you have any follow up questions. Otherwise, we look forward to speaking with you again next quarter. Thank you. Have a great day.

OPERATOR

This concludes today’s call. Thank you for attending. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.