Q3 2021 RGC Resources Inc Earnings Call

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Any of the let them reopening.

The leader has muted your line to unused your line press pound 6.

Good morning.

Paul Nester, President and CEO of <unk> resources, and cooperate and thank you for joining US we hope your Monday morning on your weak is off to a good start with me today are Tommy Oliver Our Chief Financial Officer, and David Garcia, Our director of Finance.

Welcome again, and thank you for joining us as we discuss our fiscal 2021 third quarter results.

We do have a few administrative items to review, we have muted all lines and ask that all participants remain muted. After the presentation is completed we will be happy to take questions. The.

The link to today's presentation is available on the Investor and financial information page of our website at Www Dot <unk> resources Dot com.

Let's go ahead and get started over on slide 1 our our forward looking statements disclaimer of this presentation does contain forecasts and projections.

This morning's agenda is on slide 2 we will review, our third quarter and year to date operational and financial results followed by our outlook for the fourth quarter and full year 2021 results.

We will conclude with an opportunity for you to ask questions.

Moving on to slide 3 we are pleased with the third quarter and year to date results of Roanoke gas customer growth and delivered volumes were strong and capital spending is right on plan as noted on slide 3 our year to date customer growth.

The number of 460 is 11% better than last year.

We have previously discussed our new main miles as expected we completed another $1.7 miles on the third quarter of bringing the year to day totaled of 5 miles, which exceed fiscal 2020 about 2.7 times fiscal 2020 as a reminder, we only had 2.3 miles of new main extensions.

Moving on to slide 4.

Third quarter for firm volumes were similar to the prior year.

The overall industrial volumes continue to be down primarily due to the large customer the fuel switch to natural gas in 2020.

Customer has in fact switched back to coal in 2021. However, many of our top 10 industrial customers have increased their gas consumption in 2021, when compared to the prior year.

On slide 5 year to date firm volumes are up and stronger than weather norms building suppliers.

Manufacturing and consumer products manufacturing continue to have noticeable year over year increases.

Let's review capital spending on slide 6.

We are $2 million lower than 2020, almost entirely due to project timing signature project in 2020 of the Blue Ridge main extension add approximately $3.5 million of spending through the June quarter in 2020.

Phase 2 of that project has kicked off.

In July of 2021.

2 of our other key projects for 2021, the Carillion expansion support project in the Mason station renewal are underway and should be complete by fiscal year end.

We would like to highlight our new business capital on this relates to those.

The main extension of miles with just discussed new customer remains in services the capital to support that as the increased 54% from $2020 to $4.3 million were very happy with with that.

Tom will now provide additional details of our financial results.

Thank you Paul and good morning, everybody to aid in this discussion we have included our condensed consolidated statements of income on slide 7.

Let's start with our third quarter and year to date comparisons <unk>.

Resources completed the third quarter of fiscal 2021 with the earnings of 7 per diluted share compared to <unk> 15 from the.

The same quarter of the prior year.

Year to date earnings were $1.23 per diluted share compared to $1.30 for for the prior period.

Operating income increased by 15% quarter to quarter, and 6% year to date, largely attributable to customer growth day revenues and firm volumes.

And as Paul stated, we are very pleased with the performance for a run of gas subsidiary.

The decline in net income and earnings per share for the 2 comparative periods as the result of the reduction in equity in earnings from the Mountain Valley Joint venture, which was ceased in the second quarter commensurate commensurate with limited growth construction.

Lets review results from the trailing 12 months of June 32021.

As we discussed on our last quarter's earnings call operating income was favorably impacted by customer growth day revenues and firm volumes. However, this was offset by a prior year write off of a regulatory asset COVID-19 related bad debt as well as maintenance initiatives in the last half of fiscal 2020.

We will now take a moment to discuss the service disconnection moratorium.

As we discussed in prior earnings calls utilities in the Virginia are operating under a moratorium, which prohibits disconnection of residential customers for non payment the <unk>.

Moratorium will expire on August 32021, absent action by the General Assembly, which is currently meeting in special session. At this juncture on extension of appears unlikely in the week and we are planning accordingly.

In addition, there is also a possibility of Roanoke gas along with other utilities in the state will be allocated additional funds by the state to help our customers with the <unk>.

I will now turn it back over to Paul.

Thank you Tommy.

So let's discuss the remainder of fiscal 2021, starting with <unk> gas capital on slide 9.

We expect the end this fiscal year of $21.5 million of total spending.

The momentum on main extensions and new customer additions is continuing through the fourth quarter and we expect that to continue into the first quarter of physical 2022.

As stated earlier several key projects are underway. We have started the renewal of Mason station, which is 1 of our older day stations.

Of this renewal is included in this year's save plan with a total project cost of approximately $750000.

We already mentioned phase II on Blue Ridge, which is an approximate $1 million 6800 foot main extension that will be over and above the 5 miles. We discussed previously some of the spending for that project will spillover for the first quarter of physical 2022.

Moving on to Slide 10, we do want to give you a brief update on on Mountain Valley, and we say brief because there's not really been significant change since the last quarter.

Is the good thing so construction is still ongoing actually.

Part of Virginia on upland work as allowed them for miscible they've had a good construction season of the weather here has really been hot and dry which has been which has been helpful.

There's really not been any change in the status of.

Of the permits or any of the other legal proceedings.

The last quarter of the project budget is also still of the same with the targeted in service date of the.

Summer 2022.

Moving to slide 11, and wrapping up.

Just to review our earnings guidance for this fiscal year.

As Tommy already discussed year to date earnings per share of $1.23. However, we are still expecting our full year earnings to be on the $1.10 to $1.14 range, driven primarily by that equity and earnings.

The decline that Tommy discussed related to the mountain Valley investment.

As you can see on the slide midstream year to date earnings per share. We believe will be about 2 <unk>, which is down from the <unk> at June <unk>.

That's primarily due to the difference between interest expense for the investment and.

The as equity and earnings in the fourth quarter. We also just want to give a little little node in guidance that we may.

<unk> be in a position to make some additional operating and maintenance expense investments in this fourth quarter of similar too.

Last year.

There could be a little more bad debt expense come in as the Tommy discussed, we're not 100% sort of on how the moratorium service residential service moratorium disconnect will go.

But we are making plans operationally around that and also trying to manage our reserve for bad debt as it pertains to that.

More to come on that as we complete the physical year.

That concludes our prepared remarks do you have any questions. Please dial pounds 6.

On mute your line.

Okay.

Good morning, everyone.

Okay.

Good morning, Mike how are you.

Doing good share yourselves.

Doing well thank you for joining us.

My pleasure.

Yes, 2 questions the first.

On the large customer.

Switched back to coal was that John strictly on price or was there. Another reason they decided to move off the gas.

Yes. It truly is an economic consideration Michael as you probably know and recall last year in 2020 with the.

The severe economic impact related to the pandemic natural gas prices hit historic lows in fact.

At the Henry hub, well below $2 per <unk> and.

This.

Manufacturer was able to enjoy.

That low cost <unk>.

Last year of the part of their manufacturing process as we know the demand for natural gas significantly is.

The increase this year and we're in vaccine Henry hub prices over the $4 of Deca farm range and so they did in fact.

Which back to coal now interestingly enough. There's also pretty significant demand in the coal markets right now the spot price for coal is.

Also.

At a level that has not been seen in quite a bit.

Quite some time, so we're watching that situation carefully with this the company we have a great relationship with them and we will do everything we can to.

So for them and help them be.

Successful and.

Particularly with regards to their fuel of choice.

Your comment on coal pricing is why I asked the question.

I'm guessing you guys have a pretty good idea now whats the delta needs to be in terms of of the gas price versus the coal price for them too and then the switchover.

And with coal price is going up.

You might be close to that.

Hey, guys switching points.

Yeah.

The the other thing I wanted to ask was on the in the.

The service more on that.

Buyers on what day I apologize if <unk> got a little little fuzzy there I didn't I didn't catch the date.

Let's start by the Michael It's August 30 at the end of this month.

Okay.

Alright, gentlemen, that's all ahead of us.

Thank you.

Well thank you.

We have any other questions you can on mute your line by using pounds 6.

The happy to entertain the few more questions if anyone has any.

Well it doesn't appear there are any more questions of this concludes our third quarter earnings call we do.

Again, thank you for joining us and we look forward to speaking with you again in December.

To review our full year results. We do hope you have a great day on a great week. Thank you so much.

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