Last Friday National Fuel Gas Company (NFG), the parent company for Seneca Resources and Empire Pipeline, issued its latest quarterly update for the quarter ending Dec. 31 (NFG's first quarter 2021, everyone else's fourth quarter 2020). Among the pearls of good news for NFG is that the company is adding a rig back in Tioga County, PA to drill on acreage NFG purchased from Shell. The added rig is due to a pipeline project coming online. Pipeline giant Williams is expanding capacity along its mighty Transco pipeline. In December 2018, Williams announced a new project to increase capacity along the Transco pipeline in PA by an extra 582 MMcf/d. The purpose of Leidy South is to connect huge supplies of natural gas in the Marcellus and Utica producing regions in Pennsylvania with markets along the Atlantic Seaboard by the 2021-2022 winter heating season. Some of the extra capacity along the Transco as a result of the Leidy South expansion is contracted by NFG. Last December Williams reported that 125 MMcf/d of the 582 MMcf/d expansion had already come online (see Two Williams Projects Online Early: Leidy South & Southeastern Trail). Because Leidy South is now partially online with the rest coming online this year, NFG has decided to add a rig back in Tioga County, to begin drilling in that area. Ace reporter Paul Gough from the Pittsburgh Business Times brings us the story: One of the state’s biggest natural gas producers has added another drilling rig to its operations over the past several weeks as it sets up to supply a new natural gas pipeline. Seneca Resources, the third-biggest natural gas producer in Pennsylvania, saw a year-over-year production increase of 36%, or 21 billion cubic feet, in the fiscal first quarter ended Dec. 31 due to increases in drilling on its existing wells and acreage and the acquisition of Royal Dutch Shell’s wells and acreage in northcentral Pennsylvania at the end of the year. That’s despite a 4 billion cubic feet curtailment in October and November when prices for natural gas fell. The driller, which is owned by New York-based National Fuel Gas (NYSE: NFG), said the majority of its production in 2021 will come out of its western Pennsylvania operations. It expects to drill 25 wells and complete 30, with most of the activity occurring in the first half of the year. National Fuel Gas CEO David Bauer in a conference call Friday said the goal of employing the second rig, which will be in Tioga County where the Shell acquisition was made, will be to fill the company’s share on the Leidy South pipeline when it becomes operational. It will also complete wells to supply the pipeline later in the year and early next year. Bauer was bullish about the prospects for the expansion project that will carry gas from Pennsylvania into New York. He said that even with the change in administration, he didn’t think the pipeline would be impacted. “We don’t see any cause for concern,” Bauer said. He said he believed natural gas’ part in the power mix was secure and that improvements in technology, including the use of alternate fuels like renewable natural gas and hydrogen, as well as driving down the carbon footprint of pipelines and other parts of the production process, would help. “We have some work to do, but at the end of the day, I’m confident that natural gas will have a prominent role in our energy needs,” Bauer said. National Gas also sees further expansion in revenue from a pipeline, called Line N, that heads south to the Pittsburgh region to supply ethane to the Shell petrochemical plant in Beaver County from the gas out of Seneca’s wells. An increase in production will occur in 2021. National Fuel Gas said that it expects to produce between 310 billion cubic feet and 335 billion cubic feet per year, up 33% from last fiscal year. That’s due to producing natural gas for the pipelines. (1) NFG's top brass held a conference call with analysts on Friday. CEO Dave Bauer had these prepared opening remarks about the company's performance in the previous quarter: David Bauer Good morning, everyone. National Fuel's first quarter was a great start to our fiscal year, with operating results up 5% year-over-year. Operationally, we had a really strong quarter, particularly at Seneca and NFG Midstream, where in spite of 4 Bcf of pricing-related curtailments, production and the associated gathering throughput was up 36% over last year. Most of that growth was the result of last year's Tioga County acquisition, which continues to trend better than our initial expectations. The team has been focused on high-grading our consolidated development program, optimizing our firm sales and transportation portfolio and driving down unit costs. You can see our success in Seneca's updated guidance. We increased the midpoint of our production range and lowered our forecasted unit costs, all while holding our capital range constant. Seneca added a second drilling rig in January, with first production permit scheduled to come online in early fiscal 2022. The goal is to fill our Leidy South capacity as soon after it goes in service, and thereby, capture the premium winter pricing in the East Coast markets. The second rig will focus principally on Tioga County. We're at $2 netback prices, our consolidated returns on Utica wells are north of 65%. Looking beyond fiscal '22, absent new firm takeaway capacity, Seneca's program will likely average between 1.5 and 2 rigs, which will keep our production flat to slightly growing. Our focus will be on generating free cash flow. As you can see from our updated slide deck at a $2.75 NYMEX price, we expect our Upstream and Gathering businesses will generate approximately $115 million to $125 million in free cash flow in 2021. As our production grows in '22 and '23, we expect this level of free cash flow to similarly increase. Obviously, our ability to generate cash is heavily dependent on the direction of commodity prices. As you know, we have an active hedging program and continue to methodically layer in hedges with the goal of protecting our investment in PDPs and locking in the strong rates of return generated by our unique integrated development program. Switching gears, our FERC-regulated pipeline businesses had a great quarter, with earnings up nearly 25%. This was driven by the Supply Corporation rate case settlement that went into effect last February, coupled with the new revenues from our Empire North expansion project that was placed in service at the end of fiscal '20. Our FM100 expansion and modernization project is on track to continue this momentum into fiscal '22 and '23. As a reminder, this project will add $50 million in annual revenue, once it goes in service, which I expect will occur late in this calendar year. We're waiting on a few remaining state permits, which we anticipate receiving in the next few weeks. All of the necessary federal permits have been received. We've awarded the job to contractors in order to the necessary long lead time items, including pipeline and compressor units. Once all permits are in hand, we'll file for our notice to proceed with FERC and start construction shortly thereafter. With respect to the recent change in leadership at FERC, we don't see any cause for concern on FM100. As you know, FM100 is a companion project to Transco's Leidy South expansion. And though the latter project is a little ahead of ours in the permitting process, FERC views them as essentially 1 project. Just last week, Transco received the notice to proceed from FERC for a portion of their project, which gives us confidence that ours will receive similar treatment when we file for our notice to proceed in the next few weeks. Switching to the Utility, warmer-than-normal weather and the impact of the pandemic on our operating costs weighed on earnings for the quarter. These were somewhat offset by the continued growth in revenues from our New York jurisdiction's system modernization tracking mechanism. As we continue to face the COVID pandemic, the safet