Q2 2020 Earnings Call

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Morning.

I bought a master presidency of or do you see resources Bank welcome and thank you for joining us as we discuss RTC resources second quarter 2020 result.

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

You need it all lines and asked at all participants remain muted.

After the presentation is completed we will pay questions.

And the link to today's presentation is available on the Investor in financial information page of our website Www Dot R.G.C. resources Dot com.

Now, let's begin our presentation.

Slide wanted presents are forward looking statements disclaimer. This presentation does contain forecasts and projections.

Have outlined on the fly to we all began with a review a second quarter result, followed by a discussion at the impacts on the cover 19 pandemic.

Conclude what the outlook for the remainder of physical 2020, we will take questions. After the presentation.

As noted on the fly three through the first six months of physical 2020, Renault gas continue to experience consistent growth in its customer base.

<unk> 19 pandemic restrictions instituted in the second half of March broke this trend.

From delivered volumes were down approximately 18% from the prior year due to 19% warmer weather as noted on flat for.

Transportation Uninterruptible volumes were strong in the current quarter, primarily driven by a multi fuel customer that significantly increased tenfold actually it's natural gas usage during the quarter.

As shown on the slide five physical 2020 year today total volumes delivered decline seven per cent compared to last year marrying the trends are the quarter of the first six months, a physical 2020 was 14% warmer than the prior year again, the increase in industrial volumes all set to decrease in our residential and commercial classes.

And we're primarily attributable to the customer just mentioned.

Moving on to five six.

The pandemic restrictions have not yet impacted our capital project plan plans enhance our capital spending.

We have that that approximately 10.4 million in front of gas utility plant during the first half a physical 2020. This is a 5% decrease crease compared to the same period and 2019.

Second quarter of 2019 was slightly elevated due to materials purchases for our two M.V.P. interconnects or gate stations Ah.

I would like to highlight one project the Blue Ridge main extension, they 7000 foot six inch steel pipe in 4500 foot four inch and two inch plastic pipe project one of the largest capital projects by a dollar value in Rado gas history, and the largest capital project plan for physical 2020.

It is on schedule with 1.8 million of spending fiscal year today.

Randy Barton R.C.S., though he's with me today will now walk us through our earnings highlights Randy.

Thanks, Paul and good morning.

Down slot seven resources attic strong first half a physical 2020.

Solidity, P.S., increasing 35% over the prior year to $1.19 per share.

Formants improve significantly due to favorable utility margins in earnings on R.M.V.P. investment.

Now, let's turn to an overview of are operating results.

Two eight in this discussion we have included African dance consolidate statements of income on slide eight.

Let's start with our quarter over a quarter of results.

Operating income increased approximately point 8 million in the corridor.

This increase reflects the higher gas you totally margin of approximately 1.3 million or 11% compared to the same period in the prior year.

As addressing our 10 Q. gas utility margin is a non gap measure defined as gas utility revenue last costs of gas.

The margin increases they result of the implementation of the non gas base rates from our recent general Ratecase discussion, our first quarter call.

The increase in margin was offset by increased operating expenses of approximately 491000.

This was primarily driven by accelerated vesting I've are restricted stock related to our previously as retirement professional services and bad debt expense as well as higher general taxes and appreciation expanse related to continue to investment and run out of gas the infrastructure.

Noncash equity earnings from our G. sees midstreams.

<unk> Mountain Valley pipeline increase 70% to approximately 1.2 million do do construction spending today.

The increase in the other income reflects the recognition that they F.U.D.C. lay it too.

Capital spending on the two NVP interconnect projects.

As we discussed on our first quarter call. The S.C.C. allowed run of gas do this for for potential future recovery carrying costs related to the NDP Interconnects stations. Therefore, I F.U.D.C. was recognized during the quarter based on construction spending from the effective date of the final order indirect case.

Interest expense increase during the quarter due to the higher overall borrowings related to investment in the P.

The increase in the interest expense was offset by recognition of the financing component of the A.F.U.D.C. discussed earlier.

Income taxes increase 326000 for the second quarter, primarily I result of increase taxable income.

Overall net income for the quarter increase to 5.7 million or 70 cents per share compared to 4.7 million or 50 80 cents per share for the prior quarter.

Now let's discuss.

With the results for the six months ended March 31st 2020.

Operating income increased approximately 2.6 million three total of 12.1 million.

The primary drivers mirror those discussed in the quarter over a quarter of analysis, including revenue left from the final order in the right case offset by higher expenses from the amortization and first quarter ride down of regulatory assets accelerated <unk> stock and to be lesser extent increase in professional services.

Baghdad expanse general taxes and appreciation.

Equity earnings on the M.V.P. investment increased.

1.3 million to approximately 2.3 million again related to construction Spencer date.

Other incur.

Increase night, 2% primarily related to the second quarter recognition of A.F.U.D.C. as earlier discussed.

Increase borrowings result resulted in 824% increase in interest expense.

Growing levels increased over the same period of the prior year do they continued funding of our NVP investment as well as fun run it gases capital projects.

Income tax expense increase due to the company's growth in taxable income.

In combination all these factors factors resulted in a 2.6 million or 36% increase in net income for the first half a physical 2020 as compared to the same period of physical 2019.

This includes a review of financial results I will now and the presentation packet.

Thank you Randy we were on slide nine let's further discuss the impacts of the kind of 19 pandemic in particular on our community and our company today the great around a valley, which is the run of gas service territory has had fewer cases and deaths.

Per capita attributable to the virus and some of the larger metropolitan areas of our state and country. We've also been very fortunate to not have any known cases in our company ranks.

Previous investments in upgrades to technology that strength in customer interactions and improve operational communication and execution in combination with implementing our pandemic plan have a while the complete company to safely and effectively provide uninterrupted natural gas service.

I'd like to take this opportunity to thank all of our employees and our contracting partners for their efforts and dedication to our customers and our company. During these trying times. They have adapted in adjusted and stepped up where needed and when I asked I'm very proud of them.

Let's briefly just discuss liquidity as with our operations that employees, we are well positioned unprepared, we have sufficient availability in our Renault gas line of credit, which we are currently out of Andy already see midstream credit facility that supports the NVP investment.

<unk> the at the market program in early February provides immediate and cost efficient access to the equities market as needed.

However, the negative impact from restrictions shut downs enclosures in our service territory is meaningful two of our largest industrial customers associated with the automotive industry have had extended shutdowns.

Our major hospital systems, which which there are three of them and they are in our top 15 customer list.

Forced to reduce staffing and pay levels.

The hospitality and tourism industry has completely altered.

There are a few bright spots.

Boot camp manufacturer also one of our largest customers has greatly increase their production and natural gas usage one of the textile mills operating in our service territory is converted to making much needed.

Operating room gowns, which are also used by cope at 19 patients.

The fact is the pandemic continues to create significant uncertainty for the foreseeable future. We believe the economic effects will negatively impact our results of operations primarily through lost revenue for the last six months of our fiscal year ended September 30th 2020.

We are still in the process of analyzing our daily usage data in the recently completed April billing cycle too assistant projecting pandemic influenced usage trends and natural gas margins.

Based on our latest estimates we believe net income for the third and fourth quarters of physical 2020 will be lower than the corresponding periods of 2019.

We are withdrawing previous earnings guidance for fiscal 2020 and 2021 at this time based on all of these factors.

We will now shift our focus and discuss the other components of our outlook for the remainder of fiscal 2020 as outlined on slot in.

First let's rewrite of gases capital expenditure projections.

For physical 2020, we plan to invest approximately 22 million in the regulated utility and to continue our focus on infrastructure replacement and customer grows the the Blue Ridge project. We mentioned earlier, we are categorizing as customer growth as it is serving like previously Unserved area.

And physical 2020, we also anticipate investing a total of 13 million in mountain Valley pipeline through our our G.C. mid stream subsidiary.

Approximately 5.9 million was invested during the first half of physical 2020 compared to 13.2 million in the same period prior thing period last year.

Project is not yet return to construction and is still working through the various permit issues as well as a weighting the cow pasture ruling from the Supreme Court.

Yeah. The P. is still targeting a light calendar 2020 in service day.

Finally, we want to reaffirm our commitment to deliver shareholder value.

One of the ways. Our company has done this rubber 75 consecutive years is through the quarterly dividend.

This meeting last week the board of directors declared the next quarterly dividend to be paid.

Log is first 2020.

That concludes our prepared remarks, if you have any questions.

Please dial pounds six to you July pound six on each year line.

Do we have any questions. This morning.

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Randy novel Hang on for just.

A little bit longer in case someone has a question.

Around six to <unk>.

Okay.

Well, if we don't have any questions this conclude or.

Second earnings call a physical 2020, we look forward to speaking with you again in August review, our third quarter results.

And thank you again for joining us and and we do please urge you to stay safe and healthy as we all work to continue reducing the spread of the virus. We hope you have a great day and a great weekend. Thank you.

Mm.

Yeah.

No leader disconnected the conference will be terminated.

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