Q1 2020 Earnings Call

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Yeah.

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Good morning.

Hi, Paul Nestor, President and CEO of RTC resources Inc. welcome and thank you for joining us as we discuss or do you see resources first quarter 2020 result.

First I would like to go over a few administrative item.

We have muted all lines and asked that all participants remain muted during the presentation.

After the presentation is completed we will take question.

The link to todays presentation is available on the Investor and financial information page of our website at Www Dot RTC resources Dot com.

Next I would like to introduce our new Chief Financial Officer, Randy Burton.

Randy joins us with more than 20.

Five years experience and financial management accounting audit team.

He was a partner regional accounting firm for the last 12 years, where he worked in varying capacities with many public registry.

We are excited he has decided to join our management team and welcome him welcome him to his first RG see resources earnings call.

Thanks, Paul.

I am happy to be part of the team and look forward to creating.

Value for our shareholders, our customers and our fellow team members. So thanks for having a.

Thank you.

Now, let's begin our presentation.

And as always on slide long, we provide a quick reminder, regarding forward looking statements.

As outlined on slide two our agenda includes review income the highlights from the first quarter and discussing our outlook for the remainder of fiscal 2020.

After the conclusion of the presentation. We also welcome you to ask questions during our Q in a.

Randy is now going to review some key highlights.

Thank you Paul as shown on slide three.

Runner gases customer base continues to grow.

The company has experienced 2% average the customer growth since 2016 and added an additional 184 customers during first quarter of 2020.

As you May recall, we added approximately 670 total customers during all.

Fiscal 2019.

Moving on to slide four total gas volumes sold were consistent quarter over quarter.

As noted on slide four commercial and industrial volumes in combination increased slightly as compared to the first quarter of 2019.

The total.

Total volumes were consistent it is important to consider that Q1 2020 was approximately 8% warmer than Q1 2019, therefore consistent volumes in this environment indicates that customer growth as outpace the effect of an 8% warmer weather.

Moving on to slide five.

We invested 5.8 million in our regulated utility in the first quarter, a 2% increase compared to the same period last year.

As noted on slide five we spent approximately $2.2 million on infrastructure replacement 1.5 million on customer growth and 2.1 million on.

Other capital needs.

The quarter to quarter spending is consistent and aligns with the company has continued focus on maintaining and improving run of gas infrastructure.

Moving to slide six.

We had a strong first quarter with alluded to as increasing 63% over.

First quarter of 2019 quarterly performance improved significantly due to the impact from a rate increase and earnings on our NVP investments.

At this time power review, our financial results in greater detail.

Thank you Randy.

This discussion we have included our condensed consolidated statement of income.

Come on slide seven.

Let's start with more details of our quarter to quarter results.

Operating income increased approximately $1.8 million in the current quarter gas utility margin as defined in our most recently filed 10-Q increased approximately $2.3 million or 25% compared to the same period in the prior year.

Primary driver this increase was higher non gas base rates.

Our first quarter results reflect the final order from the rate case, which we will discuss in more detail later in the presentation.

The increase in margin was offset by increased expense total operating expenses net of the cost of gas increased approximately half a million dollars.

The.

Fees and expenses was primarily driven by Renault gases write down of regulatory assets as required by the FCC and the final order the amortization of regulatory assets and higher corporate insurance premiums.

As well as higher general taxes, and depreciation expense related to continue investment in road gas infrastructure.

The noncash equity earnings in our Mountain Valley pipeline investment doubled to approximately $1.1 million due to construction spending to date.

Increased borrowings resulted in a 33% increase in interest expense.

Borrowings increased related to the continued funding of the MVP investments.

As well as the continued funding of.

Renault gases capital projects.

Income taxes increased $540000 in the current year, primarily driven by the increase in taxable income.

Now, let's review results for the 12 month ended December 31 2019.

Operating income increased approximately $2.3 million to a total of 13 point.

$4 million.

Primary drivers mere those discussed in the quarter to quarter analysis, including revenue lift from the rate case offset by higher expenses from both the amortization and required write down of regulatory assets as well as increases in general taxes and depreciation expense.

Equity earnings in the MVP.

An increase from $1.4 million to approximately $3.6 million related to the significant pipeline construction during the 2019 calendar year.

Income tax expense increased 30% as the company's growth and taxable income.

Outpaced favorable effects of transitioning to the 21%.

Income tax rate.

In combination all of these factors resulted in a 2.6 million dollar or 34% increase in net income for the calendar year ended December 31, 2019, as compared to the same period and 28 team.

We will now shift our focus and.

The outlook for the remainder of physical Twentytwenty team as outlined on slide eight.

First we would like to provide further specifics on the Renno gas rate case.

We received the Virginia Commission final order on January 24th, thereby closing the preceding that had been pending since we filed our.

Great application in October 2018.

The Commission approved an annual increase of $7.25 million in total base rate revenue requirement and established the company's authorized return on equity at 9.44%.

This auto we exceed those established in recent Virginia rate case proceedings.

And is greater than recent national return on equity awards on average.

The final order from the company's need for connections to the MVP and its plans to acquire firm capacity from the pipeline.

A commission provided a detailed analysis of the projects, where its stated and I quote that it was prudent.

For the company to construct the gas stations and the loop line enclosed.

While the revenue requirement excluded the recovery of in process construction costs of the gas stations. The order did allow for the deferral and potential future recovery of the related financing costs.

We anticipate adjusting for these costs in the second quarter.

Now, let's review Renault gases capital expenditure projections in fiscal 2020, we plan to invest approximately $22 million and the regulated utility and to continue our focus on infrastructure replacement and customer growth.

Also in fiscal 2020, we anticipate investing $17 million in mountain.

Valley pipeline through our RDC midstream subsidiary.

Approximately 5 million was invested during the first quarter of 2020 compared to 10 million in the same period last year.

The MVP is approximately 90% complete.

And at this time the pipeline is scheduled to go in service in late 2020.

At our.

Annual meeting on February three 2020 shareholders approved an amendment to the articles and corporation to increase the number of authorized shares of common stock.

The amendment has been approved by the Virginia State Corporation Commission. The company also filed an S. Three with the Securities and Exchange Commission earlier this week seeking to extend our equity shelf registration statement.

Originally filed in August 2017.

S E C approval is pending.

These actions provide the company future flexibility in raising additional capital.

After analyzing information available to us at this time, our current physical 2020 earnings guidance is in the range of.

$1.18 cents per share to $1.28 cents per share.

That concludes our prepared remarks, if you have any questions. Please dial down six to anew your line.

Well just stay on the line for a moment more NK someone has a question again just to pound six to on mute. Your line. If you have a question.

Well very good like I said, we're pleased to have Randy with us and have them on the call today and we look forward to.

Great.

Physical 2020.

If there are no questions. This concludes our first quarter earnings call. We look forward to speaking with you again in May to review, our second quarter results.

Thank you again for joining us and we hope you have a great day.

Yeah.

Yeah.

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