国家燃气 (NFG) 2026财年第四季度业绩电话会: 2027财年业绩指引与Seneca分拆

核心要点

• 国家燃料天然气公司公布2026财年第四季度GAAP每股收益为1.02美元，调整后每股收益为1.22美元。全财年调整后每股收益同比增长9%至7.55美元。
• 管理层给出的2027财年每股收益指引为6.00至6.40美元，基于2.85美元/MMBtu的NYMEX天然气价格假设，较2026财年假设低0.80美元。
• 塞内卡资源预计2027财年产量为400至435 Bcf，按中值计算基本持平。预期产量中有近三分之二已进行对冲，加权平均保底价为3.80美元/MMBtu。
• 随着新管道扩建项目、供应公司（Supply Corporation）费率案以及新收购的俄亥俄州公用事业资产对2027财年业绩产生积极贡献，受规管业务预计将进一步增强。
• 国家燃料天然气公司仍按计划推进在2027日历年下半年将塞内卡资源分拆为独立的上市公司。首份保密Form 10申请预计将于2026日历年年底前提交。
• 在油气井产出不达预期及压裂相互干扰影响了2026财年产量和2027财年展望后，塞内卡资源计划优先开发下尤蒂卡以及泰奥加县马塞勒斯区域。

关键财务数据

业务与运营表现

管道与储气业务

Tioga Pathway和Shippingport Lateral扩建项目在财年末不久后投入运营。管理层预计这两个项目合计将每年增加约3000万美元营收。

N线系统升级项目仍计划于2028年末投运，预计每年带来约2000万美元营收。国家燃料天然气公司计划在2026日历年年底前向FERC提交7(c)条款申请。

公司还以约500万美元收购了Honeoye Storage Corporation。该资产增加了受FERC规管的5.9 Bcf储气能力，并与田纳西天然气管道相连。管理层认为未来有望将其与附近的Empire系统相连。

供应公司的新费率已于11月1日生效（附带退款条件），其费率案的和解谈判仍在进行中。

公用事业业务

国家燃料天然气公司在宾夕法尼亚州获批上调费率1000万美元。该裁决还重新设定了配气系统改造费用，从而能够更及时地收回现代化改造投资。

在纽约州，系统现代化跟踪机制获批，允许对符合条件的现代化支出进行实时成本回收。作为交换，该公用事业机构同意在至少一年内不提起费率诉讼案。

俄亥俄州公用事业资产收购于10月1日完成，该业务现以National Fuel Gas Distribution of Ohio的名义运营。管理层预计，收购的业务将在2027财年使公用事业板块的营业利润增长约一倍，与费率基数的增幅保持一致。

根据过渡期服务协议，中心点能源将提供长达24个月的部分后台服务。国家燃料天然气公司的目标是在2027日历年年底前完成整合并退出该协议。

塞内卡资源

塞内卡2026财年的产量受到不利影响，主要原因包括莱康明县马塞勒斯的一个六井平台产出不及预期、上尤蒂卡评价结果弱于预期，以及下尤蒂卡井间压裂干扰超出预期。

公司正将近期开发重心转向回报率更高的下尤蒂卡。第三代井身设计将构成2027财年方案主要依据，因为强度更高的第四代设计未能稳定带来足以抵消额外成本的增量预估可采储量，并且可能会增加压裂干扰风险。

塞内卡预计2027财年将有20至26口井投产，其中包括约8口评价井或测试井。产量预计将从第一季度到第三季度持续攀升，随后在临近财年末时回落。

随着开发工作进一步聚焦于下尤蒂卡和泰奥加县马塞勒斯，管理层预计产量增长将在2028财年恢复。公司表示，按目前的钻井速度计算，其井位储备超过25年，且在NYMEX天然气价格低于2.25美元/MMBtu时即可实现PV-10保本。

2027财年预期产量的90%以上均有实物确定性销售和/或确定性运输管容支撑。确定性运输管容的下一次显著增长预计将在2029财年初到来。

管理层业绩指引

该产量展望包含了10月份因价格因素自愿减产的约3 Bcf，但假设未来不会发生进一步减产。

受常规费用通胀影响，管理层预计现金单位成本将略有上升。折旧、折耗与摊销（DD&A）预计将增加约0.05美元/Mcf，长期费率预计将回归至0.80美元中高段区间。

俄亥俄州资产收购预计将在2027财年带来小幅稀释。卖方票据的利率比国家燃料天然气公司认为其发行类似融资能够获得的利率高出约100个基点。

受规管业务仍维持5%至7%的费率基数增长目标。管理层表示，该计划无需进行外部股权融资。

风险与关注领域

• 尽管拥有对冲投资组合，但天然气价格低迷预计仍将令塞内卡2027财年的收益与现金流承压。
• 管理层预计天然气市场在2027年底前仍将保持一定程度的供大于求格局，但随着LNG需求在2028年及之后回升，市场前景将更具建设性。
• 塞内卡的产量前景面临运营层面的不确定性，主要来自油气井产出不达预期、上尤蒂卡产能表现以及下尤蒂卡压裂相互干扰。
• 俄亥俄州业务整合以及塞内卡分拆的筹备工作，将在2027财年产生一次性费用和非经常性财务报表项目。
• 分拆时间表部分取决于SEC对Form 10的审查进度以及美国国税局私人裁决函程序的完成情况。
• 在供应公司的费率诉讼程序尚未达成最终和解前，新管道费率目前仍附带退款条件。

分析师问答要点

管理层表示，2027财年将完成塞内卡剩余的大部分上尤蒂卡评价工作，同时将整体开发方案转向下尤蒂卡和泰奥加县马塞勒斯。公司预计，这一更具可复制性的开发组合将有助于提高资本效率，并从2028财年起推动产量重拾增长。

在确定性管容方面，塞内卡表示当前运力与近期产量契合良好。下一次大幅增长预计将在2029财年初，以支持公司的长期增长规划。

第三方集输仍属于机会性业务，并不意味着转向专门的第三方集输模式。当周边气量能够以经济可行的方式利用现有基础设施运力时，塞内卡将推进相关项目。

关于计划中的分拆，管理层预计首份保密Form 10申请将于2026日历年年底前提交，并可能在2027年3月或4月左右进行公开申报。分拆目标时间仍锁定在2027日历年下半年，且可能偏向该阶段的前半段。

业绩电话会完整纪要

完整财报电话会议逐字稿

管理层陈述

Operator

Hello, everyone. Welcome to the National Fuel Gas Company Fourth Quarter and Full Year Fiscal 2026 Earnings Call. My name is Rebecca, and I'll be coordinating the call today. [Operator Instructions] I will now hand the conference over to Ryan Vossler, Director of Investor Relations. Please go ahead.

Ryan Vossler

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 Company 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 will 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'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

Thank you, Ryan, and good morning, everyone. Last night, National Fuel reported strong fourth quarter results of $1.22 per share of adjusted earnings. 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. 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've 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 stand-alone 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 stand-alone business profiles, management teams and Boards of Directors.

Beyond the separation, 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 N 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 Line N project, we continue to see interest in capacity from power developers and are optimistic we'll see -- 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 1.

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 have 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 1, 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 Tioga 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 2/3 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. We took significant steps to position our businesses to maximize the long-term value of our assets and capitalize on the growth in 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

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 this 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 2/3 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 should 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 have 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 onetime expenses and nonrecurring items as we position each business to operate as a stand-alone 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 million to $400 million, which reflects the addition of Ohio-related spending. In the Pipeline and Storage segment, our range of $140 million 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 N expansion. Overall, the spending level keeps us on track to deliver the 5% to 7% rate base growth we've previously discussed.

In our Integrated Upstream and Gathering segment, we are projecting to spend $600 million to $640 million, which at the midpoint 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 nonoperated activity in Tioga County, which is incremental to our own development program. Outside of this guidance, we are projecting between $50 million and $100 million of discretionary land spending this year. We've seen great success with this program to date, deploying $38 million last year. Those who 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 1.9x 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 rate-making 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, I'll turn the call over to Justin.

Justin Loweth

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 the 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 6-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 Taft 2 and Webster co-development pads, the wells are delivering solid results, although not at the exceptional productivity levels we saw from our earlier stand-alone 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 1,000 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 8 will involve appraisal or testing, including 3 Upper Utica delineation and infill wells, a 4-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 1- to 2-rig program and a dedicated frac crew. Turn-in-line activity is concentrated in the second quarter, beginning in January with a 4-well Lower Utica pad with average TLL of approximately 18,000 feet, 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 NYMEX at our current drilling pace, supported by our integrated gathering infrastructure, we believe we have the resource depth, economics and increasingly optimized development plan to drive long-term shareholder value. With that, I'll turn the call back to the operator to open the line for questions.

Operator

[Operator Instructions]

Your first question comes from Neil Mehta with Goldman Sachs.

分析师问答

Neil Mehta

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

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. One -- 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 in 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, 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

All right. That's great. And then 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. So just your early perspectives on how we, as an investment community, should be thinking about some of these changes and any thoughts?

David Bauer

Yes. It was an interesting week indeed. At the state level, really, I don't see any change in New York. It's been a one-party rule 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, 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.

Operator

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

Timothy Rezvan

I guess my first one is for Justin. I know you all have put out the 2030 outlook where you'll have basically 1.5 Bs 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.

Justin Loweth

Sure. So the FT that we have today matches our kind of existing and projected, I'll call it, near-term next year or so production quite well, protects us from some of these headwinds we're facing, frankly, on some of the in-basin pricing and 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 '29. So it's out there a little bit, more or less a couple of 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, '26 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.

Timothy Rezvan

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

Justin Loweth

Sure, Tim. Yes. It's more happenstance than 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 in an area where we could expand our gathering system to provide 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 1 plus 1 equals 3 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 1 plus 1 equals 3 type approach.

Timothy Rezvan

Okay. I appreciate that. And then 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 1 or an October 1 kind of event in 2027. Any color there would be helpful.

David Bauer

I'll let -- Tim is sort of driving that process. So I'll let him answer that.

Timothy Silverstein

Yes, Tim. 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, our intent is to get the -- this calendar year, that is, get the Form 10 on file, that first confidential submission. From there, there's a number of back and forths 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 time frame. 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. It'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.

Operator

Your next question comes from Sebastian Almodovar with Raymond James.

Sebastian Cuchi-Almodovar

I guess my first question has to do with your Gen 3 design going back to 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 next year?

Justin Loweth

Yes. So we have a lot of wells in the ground with our Gen 3 design. So it's a relatively developed approach. What we've been looking at was the increased design of the Gen 4, which was 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 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 Cuchi-Almodovar

Great. 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

Yes. I would just refer you back to what we said in the last call. That will ultimately come out in the Form 10. But given where commodity prices are and continue to move around, that's something that 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.

Operator

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

Ryan Vossler

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.