Q1 2022 Atmos Energy Corp Earnings Call

Speaker 1: Greetings. Welcome to the Atmos Energy Q1 Earnings Conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad.

Greetings and welcome to the Atmos Energy Q1 earnings Conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.

Speaker 1: Please note this conference is being recorded. I will now turn the conference over to your host, Dan Mazur, Vice President of IR and Treasurer. Thank you. You may begin.

Please note. This conference is being recorded I will now turn the conference over to your host Ms ear, and Vice President of IR and Treasurer. Thank you you may begin.

Speaker 2: Thank you, Hillary. Good morning, everyone, and thank you for joining our fiscal 2022 first quarter earnings call. With me today are Kevin Akers, president and chief executive officer, and Chris Forsythe, senior vice president and chief financial officer.

Thank you Hillary.

Good morning, everyone and thank you for joining our fiscal 2022 first quarter earnings call with me today are Kevin Akers, President and Chief Executive Officer, and Chris Forsythe, Senior Vice President and Chief Financial Officer, Our earnings release and conference call Slide presentation, which we'll reference in our prepared remarks are available at <unk>.

Speaker 2: Our earnings release and conference call slide presentation, which we will reference in our prepared remarks, are available at atmosenergy.com under the investor relations tab.

<unk> dot com under the Investor Relations tab.

Speaker 2: As we review these financial results and discuss future expectations, please keep in mind that some of our discussion might contain forward-looking statements within the meaning of the Securities Act and the Securities Exchange.

As we review these financial results and discuss future expectations. Please keep in mind that some of our discussion might contain forward looking statements within the meaning of the Securities Act and the Securities Exchange Act.

Speaker 2: Our forward-looking statements and projections could differ materially from actual results. The factors that could cause such material differences are outlined on slide 25 and are more fully described in our SEC filings. With that, I will turn the call over to Chris Forsythe, our Senior Vice President and CFO .

Our forward looking statements and projections could differ materially from actual results factors that could cause such material differences are outlined on slide 25 and are more fully described in our SEC filings with that I will turn the call over to Chris <unk>, Our senior Vice President and CFO Chris.

Speaker 2: Thank you, Dan, and good morning, everyone. We appreciate you joining us and your interest in that energy. Yesterday, we reported fiscal 22 first quarter net income of $249 million, a $1.86 per delivered share. Our first quarter performance was in line with our expectations and reflects the ongoing execution of our operating, financial, and regulatory strategy.

Thank you Dan and good morning, everyone. We appreciate you joining us and your interest in Atmos energy yesterday, we reported fiscal 'twenty, two first quarter net income of $249 million.

$1 86 per diluted share our first quarter performance was in line with our expectations reflects the ongoing execution of our operating financial and regulatory strategies.

Speaker 2: Consolidated operating income decreased to $276 million in the first quarter, primarily due to a $39 million decrease in revenues associated with the refund of excess deferred tax liabilities. As a reminder, beginning in the second quarter of fiscal 2021 and through the end of last fiscal year, we reached agreement with regulators in various states to begin refunding excess deferred tax liabilities generally over a three to five-year period.

Consolidated operating income decreased to $276 million in the first quarter, primarily due to a $39 million decrease in revenues associated with the refund of excess deferred tax liabilities.

As a reminder, beginning in the second quarter of fiscal 'twenty, one and through the end of last fiscal year, we reached agreement with regulators in various states to begin to refunding excess deferred tax liabilities generally over a three to five year period.

Speaker 2: These refunds reduce revenues throughout the fiscal year when those revenues are billed. The corresponding reduction in our interim annual effective income tax rate is recognized at the beginning of the fiscal year. Therefore, period over period changes in revenues and income tax expense may not offset within interim periods but will substantially offset by the end of the fiscal year.

These refunds reduced revenues throughout the fiscal year when those revenues are billed the corresponding reduction in our interim annual effective income tax rate is recognized at the beginning of the fiscal year.

Therefore period over period changes in revenues and income tax expense may not offset with an interim periods.

Substantially offset by the end of the fiscal year.

Speaker 2: Excluded the impact of these excess deferred tax liability refunds, operating income increased $16 million over the prior year quarter. One five summarizes the key performance drivers for each of our operating segments.

Excluding the impact of these excess deferred tax liability refunds operating income increased $16 million over the prior year quarter slide five summarizes the key performance drivers for each of our operating segments.

Speaker 2: Rate increases in both of our operating segments, driven by increased safety reliability capital spending, totaled $47 million. Continuing robust customer growth and our distribution segment, increase operating income by $4 million.

Rate increases in both of our operating segments, driven by increased safety and reliability capital spending.

About $47 million continued robust customer growth in our distribution segment increased operating income by $4 million the.

Speaker 2: 12 months ended December 31st, we added 55,000 new customers, which represents a 1.7% increase in sales.

The 12 months ended December 31, we added 55000, new customers, which represents a one 7% increase these.

Speaker 2: These increases are partially offset by a $20 million increase in consolidated O&M expense.

These increases were partially offset by $20 million increase consolidated O&M expense as a reminder, in the prior year quarter, we deferred noncompliant spending into later in the fiscal year as we evaluated our customer load during that time period.

Speaker 2: As a reminder, in the prior year quarter, we deferred non-compliant spending into later in the fiscal year as we evaluated our customer load during that time period.

Speaker 2: Therefore, the period over period variance partially reflects this timing difference.

Therefore, the period over period variance partially reflects this timing difference our fourth quarter increase was primarily driven by increased pipeline maintenance activities.

Speaker 2: force quarter increase is primarily driven by increased pipeline maintenance activity.

Speaker 2: consolidated capital spending increased to $684 million. The $227 million period over period increase reflects increased system modernization spending in our distribution segment, spending to close out phase one of APT's LineX and LineS2 projects, and project timing. We remain on track to spend $2.4 to $2.5 billion in capital expenditures this fiscal year, with more than 80% of this spending focused on modernizing a distribution and transmission network, which also reduces methane emissions.

Consolidated capital spending increased to $684 million or $2 $27 million period over period increase reflects increased system rguest modernization spending in our distribution segment extended to closeout phase one of Apt's line next in line is two projects and project timing.

We remain on track to spend two four to $2 $5 billion in capital expenditures this fiscal year with more than 80% of this spending focused on modernizing our distribution and transmission network, which also reduces methane emissions.

Speaker 2: We are also on track with our regulatory filings. Today, we have implemented $73 million in annualized regulatory outcomes, actually refunds of excess deferred tax liability.

We're also on track with our regulatory filings to date, we have implemented $73 million in annualized regulatory outcomes actually refunds of excess deferred tax liabilities and currently we have about $36 million of progress slide 17 through 24 summarize these outcomes.

Speaker 2: and currently with about $36 million in progress, slide 17 through 24 summarized these out.

Speaker 2: slide 16 outlines or plan filings for the remainder of the fiscal year. To date, we have completed over $1 billion.

Slide 16 outlines our planned filings for the remainder of the fiscal year.

To date, we've completed over $1 billion of long term financing.

Speaker 2: following the completion of the $600 million, 30-year senior notice from October . We exited four sales arrangements under ACM program for possibly 2.7 million shares for $260 million. And we settled four agreements on 2.7 million shares for possibly $260 million.

Following the completion of the $600 million 30 year senior note issuance in October we executed four sales ratings under our ATM program for approximately two 7 million shares for $260 million and we settled forward agreements on two 7 million shares for approximately $262 million.

Speaker 2: As of December 31st, we were approximately $290,000,000 in that proceed available under the existing Ford sale agreement.

As of December 31, we have approximately $295 million in net proceeds available under existing forward sale agreements as a result of this activity. We've now priced at a substantial portion of our fiscal 'twenty two equity needs and anticipate satisfying our remaining equity needs through our ATM program.

Speaker 2: As a result of this activity, we have now priced a substantial portion of our fiscal 22 equity needs and anticipate satisfying our remaining equity needs through our ATM program.

Speaker 2: As a result of disfinancing activity or equity capitalization, excluding the $2.2 billion of winter storm financing with 59% as of December 31st. Additionally, we finished the quarter with approximately $3.1 billion of the liquidity.

As a result of this financing activity our equity capitalization, excluding the $2 $2 billion of winter storm financing was 59% as of December 31 <unk>.

Additionally, we finished the quarter with approximately $3 $1 billion of.

Liquidity.

Speaker 2: In January , we completed the issuance of $2 million among term debt through a tax or a very existing 10-year 2.625% notes due September 2029. In that proceeds, we used to pay off a $2 million term loan that was scheduled to mature and April .

In January we completed the issuance of $200 million of long term debt through a tap or existing tenure to six 5% notes due September 2029.

The net proceeds were used to pay opportune a million dollars term loan that was scheduled to mature in April .

Speaker 2: Following this offering, excluding the interim winter storm financing, our weighted average cost of debt decreased 3.81% and our weighted average maturity increased at 19.23 years, which further strengthens our financial profile.

Following this offering excluding the interim winter storm financing, our weighted average cost of debt decreased 381%.

Weighted average maturity increased to $19 two to three years, which further strengthens our financial profile.

Speaker 2: Additional details for financing activities or equity forward arrangements, as well as a financial profile, can be found on slides 7 through 10.

Additional details of our financing activities, our equity forward arrangements as well as our financial profile can be found on slides seven through 10 and.

Speaker 2: and we continue to make progress on securitization. Yesterday, the Texas Railroad Commission unanimously issued a financing order authorizing the Texas Public Financing Authority to issue customer rate relief bonds to securitize cost, facility with winter storm year-y over period not to exceed 30 years. We currently anticipate the securitization transaction will be completed by the end of our fiscal year.

And we continue to make progress on securitization.

Yesterday, the Texas Railroad Commission unanimously issued a financing order authorizing the Texas public financing authority to issue customer rate relief bonds to securitize cost associated with winter storm Uri over a period not to exceed 30 years. We currently anticipate the securitization transaction will be completed by the end of our fiscal year.

Speaker 2: Public seated the Securitization Funds, we will repay the $2.2 billion of Winter Storm Fencing we issued last March. And in Kansas, we start our Securitization Proceedings of the Kansas Corporation Commission in late January .

Receipt of the securitization funds, we will repay the $2 $2 billion of winter storm fencing, we issued last March and in Kansas, We started our securitization proceedings with the Kansas Corporation Commission in late January .

Speaker 2: Based on the current procedural schedule, we are anticipating a financing order by the end of our fiscal third quarter.

Based on the current procedural schedule, what you're anticipating a financing order by the end of our fiscal third quarter.

Speaker 2: Our first quarter performance was a solid start to the fiscal year. The execution of our operational financial regulatory plans are in track, which positions us well to achieve our fiscal 22 earnings to shirt guides of $5.40 to $5.

Our first quarter performance was a solid start in fiscal year, the execution of our operational financial and regulatory plans are on track, which positions us well to achieve our fiscal 'twenty two earnings per share guidance of $5 40 to $5 60 sets details around our guidance can be found on slides 12 and 13.

Speaker 2: Details around our guidance can be found in slides 1213.

Speaker 2: Thank you for your time this morning. I will now turn the call over to Kevin for his closing remarks. Kevin?

Thank you for your time this morning, I'll now turn the call over to Kevin for his closing remarks, Kevin.

Speaker 3: Thank you, Chris, and good morning, everyone. Before I begin my update today, I want to take just this opportunity to recognize and say thank you to all 4,700 admiss energy employees. It is through your dedication, your focus and effort that we safely provide natural gas service to 3.2 million customers in 1,400 communities across our eight states. Thank you for all you do every day for admiss energy. and ever. By all 4,700 admiss HEARING location in the center,

Thank you, Chris and good morning, everyone before I begin my update today I want to take this opportunity.

Recognize and say thank you to all 4700 Atmos energy employees.

It is through your dedication your focus and effort that we safely provide natural gas service to $3 2 million customers and 1400 communities across our eight states.

Thank you for all you do every day for Atmos energy.

I also want to take this time to thank our hometown heroes.

Speaker 3: our first responders and emergency responders where they continue dedication and support for all of us. And as you just...

First responders and emergency responders.

Their continued dedication and support for all of us.

And as you just heard we're off to a great start the results Chris summarized reflect the commitment of all 4700 Atmos energy employees as we work together to continue modernizing our natural gas distribution transmission and storage systems on our journey to be the safest provider of natural gas services.

Speaker 3: The results Chris summarized reflected commitment of all 4,700 Admission Energy employees as we work together to continue modernizing our natural gas distribution transmission and storage systems on our journey to be the safest provider of natural gas service.

Speaker 3: During the first quarter, we achieved several project milestones that further enhanced the safety, reliability, versatility, and supply diversification of our system.

During the first quarter, we achieved several project milestones that further enhance the safety.

Liability versatility and supply diversification of our system for.

Speaker 3: For example, at APT we placed into service phase one of a two phase pipeline integrity project that will replace 125 miles of line X.

For example at a P. T. We placed into service phase one of a two phase pipeline integrity projects that will replace 125 miles of Linux.

Speaker 3: As a reminder, line X runs from Wal-Haw to Dallas and is key to providing reliable service for the local distribution companies behind APT systems.

As a reminder line excellence from wall Hot to Dallas and is key to providing reliable service to the local distribution companies behind a P T system.

Speaker 3: Phase one replaced 63 miles of 36 inch pipe.

Phase one replaced 63 miles of 36 inch pipeline.

Speaker 3: Phase two includes an additional 62 miles of 36 inch pipeline and is anticipated to be completed like this calendar year.

<unk> two includes an additional 62 miles of 36 inch pipeline and is anticipated to be completed late this calendar year.

Speaker 3: Additionally, we completed the first of a three phase project to replace our existing Line S2.

Additionally, we completed the first of a three phase project to replace our existing line S too.

Speaker 3: This 91 mile 36 inch project will provide additional supply from the Hainesville and Con Valley Shell Place to the east side of the growing Dallas Fort Worth Metro Place.

This 91 mile 36 inch project will provide additional supply from the Haynesville and cotton Valley shale plays.

The east side of the growing Dallas Fort worth Metroplex.

Speaker 3: Phase one replaced 21 miles of this line, and phase two will replace an additional 18 miles and is expected to be completed late this calendar year. Phase three, which will replace remaining 52 miles, is expected to be in service in 2023. Phase three, which will replace remaining 52 miles and is expected to be completed late this calendar year.

Phase one replaced 21 miles of this line and phase two we will place an additional 18 miles.

And is expected to be completed late this calendar year.

Phase three which will place the remaining 52 miles is expected to be in service in 2023.

Speaker 3: During the completion of Phase 1 for Line X and Phase 1 for Line S2, our teams used recompression practices to avoid vending reflaring over 70,000 metric tons of carbon docks out equipment.

During the completion of phase one for Linux and phase one per line as to our teams used recompression practices to avoid venting or flaring over 70000 metric tons of carbon dioxide equivalent this.

Speaker 3: This is an excellent example of how admiss energy's environmental strategy is being integrated into our daily operation. This is an excellent example of how admiss energy is being integrated into our daily operation.

This is an excellent example of how Atmos Energy's environmental strategy is being integrated into our daily operations.

Speaker 3: APT's third salt dome cavern project at Bethel is now approximately 80% complete and remains on track to be placed in service late this calendar year.

A P T third salt Dome Cavern project at Battle is now approximately 80% complete and remains on track to be placed in service late this calendar year.

Speaker 3: As a reminder, this project is anticipated to provide an additional five to six BCF of cavern storage capacity.

As a reminder, this project is anticipated to provide an additional five to six bcf of cavern storage capacity.

Speaker 3: As I mentioned during our November call, we have started work on a 22 mile, 36 inch line that will connect a southern end of APT system with the 42 inch Kinder Morgan Permian Highway line that runs from Wauha to Katie.

As I mentioned during our November call. We have started work on a 22 mile 36 inch line that will connect the southern end of a P. T system with a 42 inch Kinder Morgan's Permian Highway line that runs from warlord of Kt.

Speaker 3: This new line will support the forecasted growth and increase supply diversity to the north of Austin in both Weeds and Travis County in Texas.

This new line will support the forecasted growth and increased supply diversity to the north of Austin, and both Williamson and Travis County in Texas.

Speaker 3: This line is expected to be in service late December of this year.

This line is expected to be in service late December of this year.

Speaker 3: In addition to those system modernization projects, we continue to make progress in advancing our comprehensive environmental strategy that is focused on reducing scope one, two, and three emissions and reduce our environmental impact from our operations in the following five key areas. Operations fleet, facility, gas supply and gas.

In addition to those system modernization projects, we continue to make progress in advancing our comprehensive environmental strategy.

It is focused on reducing scope, one two and three emissions.

And reduce our environmental impact from our operations in the following five key areas.

Operations fleet facility gas supplying customers.

Speaker 3: For example, across our storage facilities, we utilize advanced methane detection technologies, including guests.

For example across our storage facilities, we utilized advanced methane detection technologies.

<unk> gas cloud imaging.

Speaker 3: acoustic monitoring, forward looking infrared handheld cameras, and laser based remote methane lead detectors.

Acoustic monitoring.

Forward looking amperage handheld cameras and laser based remote methane leak detectors.

Speaker 3: At APT Storage Fields, we are making progress with the installation of the remaining gas cloud imaging cameras for continuous methane monitoring and anticipate completion by the end of this fiscal year.

At a P T storage fields, we are making progress with the installation of the remaining gas cloud imaging cameras will continuous methane monitoring and anticipate completion by the end of this fiscal year.

Speaker 3: Our RNG strategy focuses on identifying opportunities to transport RNG for our customers.

Our R&D strategy focuses on identifying opportunities to transport RMG for our customers.

Speaker 3: We currently transport approximately a BCF a year and anticipate another four projects to come online within the next 12 to 18 months.

We currently transported approximately eight bcf a year and anticipate another four projects to come online within the next 12 to 18 months.

Speaker 3: Those four projects are expected to provide an additional BCF year of R&G.

Those four projects are expected to provide an additional bcf a year of RMG capacity.

Speaker 3: Furthermore, we are evaluating approximately 20 opportunities that could further expand our RNG transportation.

Furthermore, we are evaluating approximately 20 opportunities that could further expand our R&D transportation.

Speaker 3: Two zero net energy homes are underway in Texas. One in Taylor.

Two zero net energy homes are underway in Texas.

And Tyler and the other in Dallas.

Speaker 3: The home and tailors being developed through our partnership with the Williamson County Habitat for Humanity and we estimate the home to be completed in late March. And in Dallas, we are working with the Dallas Habitat for Humanity and estimate construction of this zero net energy home to begin mid March.

The home and Taylor's being developed through our partnership with the Williamson County habitat for humanity, and we estimate the home to be completed in late March and then Dallas, we are working with the Dallas habitat for humanity and estimate construction of this zero net energy home to began mid March these.

Speaker 3: These homes use high efficiency natural gas appliances coupled with rooftop solar panels and insulation to minimize the home's carbon footprint.

These homes Gene's high efficiency natural gas appliances doubled with rooftop solar panels in insulation to minimize the homes carbon footprint.

Speaker 3: These zero net energy homes demonstrate the value and vital role in natural gas play in helping customers reduce their carbon footprint in affordable manner.

Zero net energy homes demonstrate the value and vital role of natural gas play and helping customers reduce their carbon footprint.

Portable manner.

Speaker 3: Providing these families with a natural gas home that is environmentally friendly and cost efficient is just one way how does energy fuel safe and thriving communities.

Providing these families with a natural gas home that is environmentally friendly and <unk>.

Cost efficient is just one way atmos energy fuels safe and thriving communities.

Speaker 3: And finally, over the next five years, we will invest 13 to $14 billion in capital support to replacement of 5,000 to 6,000 miles of our distribution transmission pipe, or about 6 to 8% of our total fifth.

And finally.

For the next five years, we will invest $13 billion to $14 billion in capital support to replacement.

5000 to 6000 miles of our distribution and transmission pipe or about 6% to 8% of our total system.

Speaker 3: We will also replace 100 to 150 steel service lines, which is expected to reduce our inventory by approximately 20%.

We will also replace 100 to 150 steel service lines, which is expected to reduce our inventory by approximately 20%.

Speaker 3: This level replacement work is expected to reduce methane emissions from our system by 15 to 20% over the next five years.

This level of replacement work is expected to reduce methane emissions from our system by 15% to 20% over the next five years.

Speaker 3: Our first quarter activities and initiatives reflect the continued successful execution of our strategy to modernize our natural gas distribution, transmission and storage systems as we continue our journey to be the safest provider of natural gas service.

Our first quarter activities and initiatives reflect the continued successful execution of our strategy to modernize our natural gas distribution.

<unk> mission and storage systems as we continue our journey to be the safest provider of natural gas services.

Speaker 3: These efforts along with the strength of our balance sheet, our strong liquidity, have admins energy well positioned to continue serving the vital role we play in every community. That is delivering safe, reliable, efficient, and abundant natural gas to homes, businesses, and industries. The fuel our energy needs now and in the future.

These efforts along with the strength of our balance sheet, our strong liquidity.

And the synergy well positioned to continue serving the vital role we play in every community.

That is delivering safe reliable efficient and abundant natural gas to homes businesses and industries to fuel our energy needs now and in the future.

Speaker 3: We appreciate your time and interest this morning when now open the call for questions.

We appreciate your time and interest this morning, we'll now open the call for questions.

Speaker 1: Thank you. At this time, we will be conducting a question and answer.

Thank you.

Time, well be conducting a question and answer session.

Speaker 1: If you would like to ask a question, please press star one on your telephone keypad. A confirmation tunnel indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment.

To ask a question. Please press star one on your telephone keypad a confirmation.

Information that will indicate your line isn't a question Kim you May press Star two Athena dietary linear question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star one.

One moment please poll for questions.

Okay.

Speaker 1: Our first question is from Richard Sunderland of J.P. Morgan. Please proceed with your questions.

Our first question is from Richard Sunderland with Jpmorgan. Please proceed with your question.

Speaker 2: Hi, good morning. Thanks for taking my questions. Maybe just starting on O&M, how is the balance of work and timing tracking versus expectations? Is it curious if you have any early sense here? I guess directly where expenses are putting you in the guidance range.

Hi, good morning, Thanks for taking my questions, maybe just starting on O&M, how is the balance of work and timing tracking versus expectations. Just curious if you have any early sense here I guess directionally, where expenses are putting you in the guidance range.

Speaker 2: Yeah sure, Richard. This is Chris. Good morning. Yeah, really the on-end spending was generally in line with our expectations. As I mentioned, my preparator marks, when you look at our current year compared to the prior quarter, the prior quarter was a bit of a low mark. So when you look at where we are now.

Yes sure Richard This is Chris good morning.

The O&M spending was generally in line with our expectations as I mentioned in my prepared remarks, when you look at our current year compared to the prior year quarter. The prior year quarter was a bit of a low mark. So when you look at where we are now.

Speaker 2: It's roughly a 15% increase, quarter of a quarter, but when you look to the midpoint of our guidance compared with last year's O&M levels, that's about a 3% increase. So right now we're still seeing an O&M trending in that $6.00 on the $7.10 million range. And we believe that at least we're where we are as we said today, that spending will continue to be in line with those expectations.

Roughly a 15% increase quarter over quarter, but when you look to the midpoint of our guidance compared with last year's O&M levels. That's about a 3% increase so right now we're still seeing O&M trending in that 600 to 710 $7 million to $10 million range and we believe that at least with where we are as we sit today.

But that spending will continue to be in line with those expectations.

Okay.

Speaker 2: God, thanks for the color there. And the mids set a high level. The outline is the expected timing and major base rate cases over the X-Sate through the three years, including the ATT system.

Got it thanks for the color there and then maybe just at a high level could you outline the expected timing of major biggest rate cases over the next say two to three years, including the <unk>.

Speaker 2: Sure, I mean, again, we typically execute 18 to 20 to 22 annual regulatory filings. The fiscal second quarter is our busiest filing period. So we'll be making a number of grit filings.

Sure I mean.

We typically execute 18 to 2022 annual regulatory filings the fiscal second quarter is our busiest filing period, so we'll be making a number of grip filings.

Speaker 2: at APT as well as in our mid-tex and West Texas division.

T as well as in our mid Tex and West, Texas divisions will also be making a regulatory filing annual regulatory filings in Mississippi and in early March as well as at Louisiana, and a secondary filing in July and loose in Mississippi, So lot of activity to be coming over the next several months much of this.

Speaker 2: We'll also be making a regulatory filing and regulatory filing in Mississippi and early March, as well as in Louisiana, and a secondary filing in July in Mississippi. So live activity to be coming over the next several months. Much of this will be implemented by the end of the fiscal year. We will also file our West Texas and Mid-Tex, our end filing.

This will be implemented by the end of the fiscal year. We will also file our west, Texas and mid Tex our IND filings generally at the end of March 1st part of April and those are scheduled to become implemented.

Speaker 2: Generally at the end of March, first part of April , and those are scheduled to become implemented on around October 1st of, so that's really, it's started the next fiscal year. With respect to ATK, the general rate case is scheduled to begin in our fiscal 2023 time period. So we've factor that into our five year plan. So the red file that we'll make here in mid February will be the last red file before that and your rate proceeding next year.

On or around October one.

That's really a start of the next fiscal year.

With respect to ADT.

General rate case is scheduled to begin in our fiscal 2023 time period. So we've factored that into our five year plan. So the grip filing that we'll make out here in mid February will be the last grip filing before that the annual rate proceeding next year.

Got it thanks for outlining all of that thank you for the time today.

Speaker 4: Thank you, Richard.

Thank you Richard.

Yeah.

Speaker 1: Our next question is from Julian Dumoulin Smith, a Bank of America. Our next question is from Julian Dumoulin Smith, a Bank of America.

Our next question is from Julien Dumoulin Smith.

Bank of America. Please proceed.

I understand.

Speaker 5: Hey, good morning team. Thanks for the time. Congratulations on everything here. Just a following up here. Good morning. Just following up on Kansas here. Obviously the process came off here. Can we talk a little bit about the expectations on the tenor ultimately on that proceeding in frankly anything else that using relevant that we should be talking about in terms of parameters? Obviously kudos on getting the RSC finalized chair.

Hey, good morning team, thanks for the time and congratulations on everything here.

Just following up here good morning, just following up on Kansas here, obviously, the process kicked off here.

Can you talk a little bit about.

The expectations on the tenor ultimately on that proceeding and frankly anything else that you think relevant that we should be talking about in terms of parameters, obviously kudos on getting the RSC finalized here.

Speaker 2: Well, thank you. So on Kansas, as I said, we're having an early stages right now. I'm beginning the securitization proceedings, you know, in terms of tenors.

Well. Thank you so on Kansas as I said work happening in early stages, right now, but getting into securitization proceedings.

In terms of tenders.

Speaker 2: It will depend upon what market conditions look like. We're obviously going to be looking to seek a triple-way rating on that. And we will be working with our banking partners as well as with the staff to determine the appropriate period to make these business securitization costs, if you will, as affordable as we can for our hands and customers. But it's still too early to tell where we are at this point.

It will depend upon what market conditions look like we're obviously going to be looking to seek a AAA rating on that.

We will be working with our with our banking partners as well as with the staff to determine the appropriate period to make these.

The securitization cost if you will as affordable as we can for our Kansas customers, but it's still too early to tell where we are at this point.

Speaker 5: Got it, understood. And actually related, especially considering the progress that you made of the RSC, I mean, how are you thinking about the rating age of disease moving forward here on removing the outlook here, removing the negative outlook?

Got it understood and actually related, especially considering the progress that you've made to the RSC I mean, how are you.

Thinking about the rating agencies moving forward here.

When removing the outlook here, removing the negative outlook to be specific.

Speaker 2: Yeah, the dialogue we've had with both Moody's and S&T has been basically been telling us we're going to wait to see what the Texas Rail Commission financing where it looks like. That was issued yesterday. I'm sure they have a copy of that else. We're anticipating conversations with those Randy Aidenzees. Hopefully here this second fiscal quarter.

Yes, the dialogue, we've had with both Moody's and S&P has been basically been telling us we're going to wait to see what the Texas Railroad Commission financing, where it looks like that was issued yesterday I'm sure. They have a copy of that else, we're anticipating conversations with those rating agencies hopefully here this second fiscal quarter.

Speaker 5: Got it. And a quick last one here, just on tax rate. Obviously depressed here, just, the comments in the, in the transcript here, to the extent which that you should expect to continue to see this, this, this rate going forward, the lower rate, just given the, um, the tax liability.

Got it and then quick last one here just on tax rate.

Obviously depressed here just.

The comments on the.

The transcript here.

The extent to which that you should expect to continue to see this rate going forward the lower rate just given the tax liabilities.

Speaker 2: Sure, so our effective tax rate for the first quarter was about 5.9% that we're anticipating, including the excess deferred tax liabilities. And then effective income tax rate in the 7 to 9%. Given that we are refunding these excess deferred tax liabilities over the next three to five years, that effective tax rate should be in place in that general range over that time period. So when you back out the impact of the excess deferred tax liability refund.

Sure. So our effective tax rate for the first quarter was about five 9% that we're anticipating including the excess deferred tax liabilities.

Effective income tax rate in the 7% to 9% given that we are refunding. These excess deferred tax liabilities over the next three to five years that effective tax rate should be in place in that in that general range over that time period, but when you back out the impact of the excess deferred tax liability refunds.

Speaker 2: The marginal effective income tax rate is in the S22 to 24.

Marginal effective income tax rate is in the 20% to 24% range.

Speaker 5: Right. Yeah. Indeed. Thank you for clarifying that. Sorry. Actually, if I can clarify the last question on APCHR. I mean, how are you seeing customer growth trend here? I mean, some of your peers are talking pretty robustly of late. Just curious to see what you're seeing, especially as it impacts some of your other jurisdictions here, like APCHR.

Right. Yeah. Indeed, thank you for clarifying that actually if I can clarify the last question.

I mean, how are you seeing customer growth trend here I mean, some of your peers are talking pretty robustly of late just curious to see what's your what youre seeing especially as it impacts some of your other jurisdictions here like like <unk>.

Speaker 3: You're talking about particularly here in the Metroplex, Julian, as Chris mentioned in his opening remarks. We've been growing just a little bit north of that 1.7% here in the Metroplex.

Are you talking about particularly here in the Metroplex Julien as we as Chris mentioned in his in his opening remarks, we've been growing just a little bit north of that one 7% here in the natural collect.

Speaker 3: probably in the 40 to 45,000 customer range per year. It's a lot of residential growth. And as you get those rooftops, as you know, you'll have the supporting commercial businesses as well. We do have a few industrial customers that come in in the metroplex area.

Probably in the 40 to 45000 customer range per year.

It's a lot of residential growth and and as you get those rooftops as you know you'll have the supporting commercial businesses as well, we do have a few industrial customers that come in in the Metroplex area.

Speaker 3: A lot of this is also showing up in residential rooftops down in the Austin corridor as well. Again, that's why we're putting in that permitting connector line down there.

A lot of this is also showing up in residential rooftops down in the Austin corridor as well again, that's why we're putting in that Permian connector line down there.

Speaker 3: forecasted growth forecasted demand expansion down there with all of the people moving in from various locations across the country. That's what we're seeing at least here in Texas across the other jurisdictions as we talked about. It's been a really good, diverse make.

Forecasted growth forecasted demand expansion down there with all of the people moving in from various locations across the country. That's what we're saying at least here in Texas across our other jurisdictions as we've talked about it's been a really good diverse mix of not only residential but as well as our.

Speaker 3: not only residential but as well as industrial growth as well. I reported I think at a fourth poll recall that we added 45 industrial customers last year that we anticipate once they're fully online or you'll have summer between 12 and 14 BCF of natural.

Dusty real growth as well reported I think that our fourth quarter call that we added 45 industrial customers last year that we anticipate once they are fully online or utilize somewhere between 12 and 14 Bcf of natural.

Natural gas that equates to around 200000 residential customers and these are customers that are in the metals and the health care than the auto industry. A good variety of distilling. So we're getting a good mix of natural gas demand and response for the product across all sectors whether thats.

Speaker 3: That equates to around 200,000 residential customers.

Speaker 3: And these are customers that are in the metals, they're in the health care, they're in the auto industry, a good variety of distilling. So we're getting a good mix of natural gas, demand, and response for the product across all sectors, whether that's Kentucky, Tennessee, Mississippi, good industrial growth. We continue to see good residential growth in our Colorado properties of people coming from the west coast into Colorado. And then again, outside of Olathe, Kansas property.

Kentucky, Tennessee, Mississippi, Good industrial growth, we continue to see good residential growth in our Colorado properties with people coming from the West coast into Colorado, and then again outside of life.

Kansas property.

Speaker 5: Excellent. Thank you guys. Appreciate it. I'll let it pass it on.

Got it excellent. Thank you guys I appreciate it I'll pass it on.

Speaker 1: Our next question is from INSU Kim of Goldman Sachs.

Our next question is from and Kim of Goldman Sachs. Please proceed with your question.

Speaker 2: Yeah, thank you. My first question is just on cost overall, I think you've recorded the first fiscal first quarter, the distribution death cost of over $7 per MTS, versus I think $4 is strange last year. And thinking about that and other potential inflation factors, whether it's labor or other.

Yeah. Thank you my first question.

On costs overall, I think you've recorded in the first fiscal fourth first quarter distribution gas cost of over $7 per Mcf.

I think $4 range last year.

Thinking about that another potential and frankly, the inflationary factors, whether it's labor or other.

Speaker 2: and come out for a cat-bex. Any, we need to do the math, any concern there in your ability to achieve your, you know, whether it's a 22 or beyond cat-bex while managing the bill impact.

Modest capex any when you do the math any concern there and your ability to achieve your whether it's a <unk> 22 or beyond capex, while managing the bill impact.

Speaker 3: Yeah, and so I'll start out and then hand over to Chris. Short answer is

Yeah, So I'll start out and then hand over to Chris The short answer is.

Speaker 3: No, on that, as you've heard us talk about at the end of the last quarter when we kind of rolled out our five year plan and forward looked there.

No on that.

As you've heard us talk about at the end of last quarter, when we kind of rolled out our five year plan and forward look there.

Speaker 3: We did have some of this contemplated in our ONM projection that Chris just talked about As well You've heard it also talked about we worked very hard throughout the procurement team To stay ahead of some of our needs. We try and keep at least a six-month inventory We're trying to increase that now whether that's at our supplier or in our own warehouse

We did have some of this contemplated in our O&M.

Projection that Chris just talked about.

Well you've heard US also talk about we work very hard for other procurement team.

To stay ahead of some of our needs, we try and keep at least a six month inventory, we're trying to increase that now whether that's at our supplier or in our own warehouses.

Speaker 3: And as you may have heard it say before, all of our steel pipe needs for this fiscal year, all those projects that we just talked about, all that pipe is on site at location.

As you may have heard us say before all of our steel pipe needs for this fiscal year all of those projects that we just talked about all of that pipe is onside at location. So we feel like we're in really good shape. We stay ahead of our our needs through our vendors. So at this point I think given the work for them.

Speaker 3: So we feel like we're in really good shape. We stay ahead of our needs through our vendors. So at this point, I think given the work of our procurement team, given that we've got our pipe needs, at least our steel pipe needs covered, at this point, we anticipate that our O&M

Chairman team given that we've got our pipe needs at least or steel pipe needs covered at this point, we anticipate that.

Our O&M.

Speaker 3: level that we have baked in right now should be able to handle what we're seeing right now. She not have any impact on our capital spend going going forward in the short run.

The levels that we have baked in right now should be able to handle what we're seeing right now and should not have any impact on our capital spend going going forward in the short range.

Speaker 2: Thanks for that reminder and that's a good color. My second question is kind of related to that, maybe on the other side, I think we've seen the gas bases and...

Got it alright, Thanks for that reminder, and that's good color. My second question is kind of related to that maybe on the other side you have I think we've seen.

The gas bases in.

Speaker 2: in your Texas region, kind of wide and now, again, given talks about, you know, take away capacitors and turns. You know, you're obviously working on a line to connect with the Kender line there. But any of you use on, you know, future gas costs forecast is in your Texas jurisdiction and any opportunity to potentially take advantage of that spread in the near or longer term. And now, I'm just saying that, you know, from a hedging perspective, I know you're limited on kind of what you can do.

And your Texas region kind of widen out again, given talks about takeaway capacity concerns.

We're obviously working on a line to connect with the Kinder line, there, but any views on future gas cost forecast.

Your Texas jurisdiction and any opportunity to potentially take advantage of that spread in the near or longer term acknowledging that from a hedging perspective. I know you are limited on kind of what you can do.

Speaker 3: Yeah, I'll start out and again, we'll see Chris want to add anything here. I'm looking at, you know, the wall haul price of this morning cash prices. And we're setting that $3.00 to $60 cents out there. You know, the forwards for wall haul, if you're taking a look at that for the April off period.

Yeah, I'll start out and again, we'll see if Chris wants to add anything here I'm looking at.

While hog prices this morning cash prices and we're sitting at a $3.60 out there the forwards.

Four wall Hall, if youre, taking a look at that for the April off period.

Speaker 3: is around $3.45 and something like that. So no crystal ball here, obviously, but I think when you look at the rig count that we're seeing just last week of well over 600 rigs in the US working about half those in the Permian.

Is around three $3 45, something like that so no crystal ball here, obviously, but I think when you look at the rig count that we're seeing just last week of well over 600 rigs in the U S. Working about half those in the Permian, We're seeing production levels that are now in the fourth.

Speaker 3: We're seeing production levels that are now in the 14 to 14 in the quarter BC, F a day range with.

14.

<unk> to <unk> 14 in the quarter Bcf, a day range with projections I think by the end of this calendar year first of 23 in the 16 Bcf per day range.

Speaker 3: projections I think by the end of this calendar year first of 23 and the 16 BC F or day range. I would hope that kind of supply.

I would hope that kind of supply.

Speaker 3: pushes these prices down even further, but we'll have to wait and see on that piece of it, but very first again, by the number of rigs that supply that's coming online.

Pushes these prices down even further but we will have to have to wait and see on that piece of it but very encouraged again by the number of rigs the supply that's coming online.

Speaker 3: And just one last comment there on the basis differential. Remember, but that's part of our writer ref mechanism. We have on APT and 75% of that goes directly back to the customer to reduce those rates. So that is a sharing mechanism there for those customers' benefits.

And just one last comment there on the basis differential remember, but that's part of our router RAF.

Mechanism, we have on <unk> and 75% of that goes directly back to the customer.

To reduce those rates so that that is a sharing mechanism there.

Those customers benefit.

Speaker 2: Chris anything personal Yeah, I think the as a writer of comments on Kevin, you know, we don't we we certainly think about that in our planning process We just found a material portion of a APT's business

Chris anything rational.

Yes, I think the other rider Rev comment is spot on Kevin We don't we certainly think about that in our planning process, because it's not a material portion of Apt's business.

Speaker 6: got it. But at least it would help with the billheadroom. So I guess indirect and I said on that front. Got it. Thank you so much.

Got it.

It would help with the bill headroom, so I guess indirectly benefit on that front got it. Thank you so much.

Thank you.

Speaker 1: As a reminder, if you would like to ask a question, please press star one on your telephone keypad. The confirmation terminal indicate your line is in the question key.

As a reminder, if he would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.

Speaker 1: Let us hear the music back for a second.

If I talk to anything secret Clinton and may be necessary to pick up your handset before pressing the star one.

One moment, please I would call for additional questions.

Yeah.

Speaker 1: our next question is from Ryan Levine of City. Please proceed with your questions.

Our next question is from Ryan Levine of Citi. Please proceed with your question.

Speaker 5: Good morning. I'm going to make just a follow up on the APT expansion to remain expressed. Can you elaborate on the kind of timeline on terms of executing on that project? And if you're seeing any other commercial development opportunities off of APTs that are getting more traction?

Good morning.

Good morning, just a follow up on the <unk> expansion to Permian Express can you elaborate on the kind of timeline in terms of executing on that project and if youre seeing any other commercial development opportunities.

<unk> that are getting more traction.

Speaker 3: Well, as I said, I'm opening remarks there. This is going to be a 22 mile line, 36 inch. Certainly will help us meet the forecasted growth in that Austin quarter, both in Williamson and Travis counties down there. And we anticipate this line to be in service like this calendar year could be first of next year. We're well on our way with all the necessary aspects to get that project rolling forward.

Well as I said in my opening remarks. There. This is going to be a 22 mile line 36 inch certainly will help us meet the forecasted growth in that Austin corridor, both in Williamson and Travis County is down there and.

And we anticipate this line to be in service late this calendar year could.

Could be first of next year.

Well on our way.

With all the necessary aspects to to get that project rolling forward.

Speaker 3: So, right now those are the projects outlined.

So.

Right now those are the projects outlined.

Speaker 3: Phase two, X two, phase two, and phase three of S two. And then this project here are the major projects we have on tap for APT along with the

Two X two phase two.

Phase III of S too and then there's this project here are the major projects, we have on tap for <unk> along with the.

Speaker 3: finalization of that third cavern there. And those all, again, will bring that diversity, reliability, and versatility to APT system. Many areas to bring supply and increase capacity.

Finalization of that third cavern, there and that was all again I'll bring that diversity.

Reliability and.

Versatility to ADT system.

Any areas to bring supply and an increased capacity.

Speaker 5: And do you have all the right of ways and supplies already procured to help execute on that project?

And do you have all the right of ways and supply is already procured to help execute on that project.

Speaker 3: that we have the majority of what we need to begin work on at this time.

Yes, we have the majority of what we need to begin work on that at this time.

Speaker 5: In switching gears in terms of the financing plan, you outlined your maturity schedule, like there's a bigger maturity due next year with some floating rate that curious how you're thinking about staggering your debt of maturity going forward and also in context of the recent decision from yesterday.

Okay.

And switching gears in terms of the financing plan you outlined your maturity schedule looks like there is a bigger maturity due next year with some floating rate debt I'm curious, how youre thinking about staggering your debt maturities going forward.

And also in context of the recent decision from yesterday.

Speaker 2: Sure, so the big maturity that you see next year is the $2.2 billion interim winter storm finance that we executed last last March We're anticipating with the completion of the Texas curitization process

Sure Ryan So the big maturity that you see next year is the $2 2 billion.

Interim winter storm financings, we executed last.

Last March.

Anticipating with the completion of the Texas securitization process by the end of the fiscal year that we would use the net proceeds received from that securitization process to repay that $2 $2 billion. So again setting aside the $2 $2 billion. When you look at it our weighted average maturity of 19 three years, we're in a.

Speaker 2: By the end of the fiscal year that we would use the net proceeds received from that securitization process to repay that $2.2 billion. So again, setting aside the $2.2 billion when you look at it our way of average maturity of 19.23 years, we're in a very, very good spot. And as we continue to execute the five year financing plan,

Very very good spot.

We continue to execute the five year financing plan.

Speaker 2: Dan, his team are looking at all the options that are on the table in terms of laddering and maturity schedules all in with the idea of trying to minimize costs for our customers.

<unk> and his team are looking at all the options that are on the table.

In terms of the lateral maturity schedules are all in with the idea of trying to minimize costs for our customers.

Speaker 5: Okay, and then last question for me, there continues to be talk of LBC assets in the market for sale. Curious if there's any change in how you're looking at deals and if you're spending any more time contemplating it.

Okay and then last question for me there continues to be talk of LDC assets in the market for sale I'm curious if there's any change in how you're looking at deals and if if you're spending any more time contemplating acquisitions.

Speaker 3: All right, as we've said before, we certainly don't have our heads in the sand here. We're always

Well Ryan as we've.

Said before where we certainly don't have our heads in the sand here were always got our eyes and ears open on the market and what's going on but we believe we have the best properties out there and we're in very supportive natural gas states communities, we have very supportive regulatory.

Speaker 3: We've got our eyes and ears open on the market and what's going on.

Speaker 3: We believe we have the best properties out there and we're in very supportive natural gas states communities. We have very supportive regulatory and legislative jurisdiction that you know with six of our eight states having all fuels bills. Another one Virginia, I believe has something in the legislature this year along the lines of an all fuels bill. So that could move us to seven of our eight jurisdiction.

And legislative jurisdiction that you know with six of our eight states, having all fuels bills. Another one Virginia I believe has something in the legislature this year.

Along the lines of an all fuels bill so that could move us to seven of our eight jurisdictions as.

Speaker 3: As we talked about this morning, these communities are growing. They're expanding both residential commercial and industrial.

As we talked about this morning. These communities are growing theyre expanding.

Both residential commercial and industrial.

Speaker 3: And as we talked about before, we don't need a acquisition to meet our six to 8% earnings per share growth that we've talked about in our plan.

And as we've talked about before we don't need a acquisition to meet our 6% to 8% earnings per share growth that we've talked about in our plan. So at this point, we remain focused on executing our system modernization strategy as we continue our journey to be the safest.

Speaker 3: So at this point, we remain focused on executing our system modernization strategy as we continue our journey to be the safest provider of Africa. So we should decide.

Provider of natural gas.

Appreciate the time thank you.

Thank you.

Okay.

Speaker 1: We have reached the end of the question and answer session. I will now turn the call back over to Dan Miser for closing remarks.

We have reached the end of the question and answer session I will now turn the call back over some bandwidth for closing remark.

Speaker 3: We appreciate your interest in Atmos Energy, and again, thank you for joining us. Our recording of this call is available for reply on our website through March 31st of 2022. Have a good day.

We appreciate your interest in Atmos energy and again, thank you for joining us a recording of this call is available for replay on our website through March 31, 2020 to have a good day.

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