RGC Resources Inc. Q2 2023 Earnings Call

Recording this meeting.

Your line muted.

Press pound pound won or have cash one to speak.

Good morning, everybody I'm, Tommy Oliver Senior Vice President of regulatory and external affairs for RTC Resources, Inc.

Thank you for joining us as we discuss RBC resources 2023 second quarter results.

But before we get started let's review a few administrative items.

We have muted all lines and ask that all participants remain muted.

At the conclusion of the presentation in our remarks, we will take questions.

Lastly, the link to today's presentation is available on the Investor and financial information page on our website at Www Dot RCC resources Dot com.

So turning to slide one.

This presentation contains forecasts and projections.

<unk> is a forward looking statement disclaimer.

Slide two contains our agenda.

I'll review, our quarterly operational and financial results and discuss the outlook for the remainder of fiscal 2023 with time allotted for questions at the end.

I would like to introduce Paul Nester, President and CEO of <unk> resources Paul.

Thank you Tom and good morning, and thank you to everyone for joining us and I would also like to thank Chelsea Davenport, our director of finance and Jason <unk>, our CFO for putting today's.

Presentation together, we're on slide three.

We're off to a good start in the first half of physical 2023, particularly in our operations and customer service area and I would like to mention our gas utility in particular has too.

Mangle. The first goal of course is safety and customer safety employee safety public safety and then second lead customer service. We are here to serve the customer as a public service Corporation.

In the state of Virginia, I would also like that I know we've talked about this on.

Previous calls and the chart indicates this with our 336 new services in our $2 seven miles of main extension, we continue to see.

Individual and commercial interests from natural gas.

As you know there are a lot of headlines, particularly recently with what's going on in New York State about natural gas bands that are contrary to our experience on a day to day basis, and we are proud to continue.

Fulfilling that demand with affordable reliable.

Natural gas.

Our customer count is right in line with where we expect it to be of course. The chart shows a little aberration from 2022, you may recall, we had the pandemic related service disconnection moratorium in 2020 in 2021, and we're now returning and resuming to normal.

Activities in terms of our collection processes, but the customer count is exactly where we expect it to be our main extensions are.

Settling back into more historical norms, you may recall in 2021 and 2022, we had two outstanding years of main miles this year should be tampered down a little bit from those years, but again more in line with pre pandemic.

Norms I will now hand, it back over to Tommy So he can update us on.

Our new R&D facility, Tommy well, Thank you Paul let's move to slide four.

As we discussed on last quarter's earnings call in January we did receive commission approval of the project and cost recovery through a new a new rider rider RMG, we began billing the rider in March construction also concluded in March of this year at which time, we put the project in service. The project was completed on time and.

Largely within budget.

While we have spent some time since commercial operation fine tuning in sync in the R&D facility with the water authority as equipment. The Orange facility is operating as designed and we're very pleased with it.

I'll now introduce Jason field, our CFO and Treasurer, Jason will review, the quarterly and year to date financial results Jason.

Thank you Tommy you could move to slide five our second quarter natural gas volumes were down reflective of the mild winter we experienced in the mid Atlantic region heating degree days in the Roanoke Valley were 22% lower than the second quarter of 2022, which resulted in 19% lower delivery of total volumes compared to the second.

Order of last year <unk>.

Commercial and industrial volumes were similarly, lower than the prior year due to the warmer weather.

To transition to slide six.

Lower natural gas volumes in the second quarter offset the higher gas volumes, we experienced in the first quarter overall, our volumes for the six months of the fiscal year were 2% lower in line with the 2% fewer heating degree days for the same period in our region commercial.

Industrial volumes were also 2% lower.

Year to year compared to last year.

If you move to slide seven our financial results are highlighted for.

For the quarter, our operating income of $9 million $292000 was up over $2 million compared to the second quarter of 2022. The increase we experienced was associated with customer growth and the implementation of new non gas rates on January one.

Our net income for the quarter was $6 million $342000 compared to the net loss, we experienced in the second quarter of 2022, which reflected the noncash impairment we recorded at our midstream affiliate on the Mountain Valley pipeline.

To aid in the comparison of our quarter financials and the trailing 12 month results. We've represented our financial results on an underlying basis, which youll find on slide eight.

The results of our second quarter net income on an underlying basis was $1 $264000 higher than the underlying income of the second quarter of 2023.

Hum.

'twenty two excuse me and that represented a 25% increase from 2022.

Mentation of new non gas rates moved a portion of our customer base charge to a volumetric charge, resulting in higher revenues in the second quarter.

The trailing 12 month underlying net income of $10 million $116000 was up $840000 or just about 9%.

Let's move to slide number nine.

We experienced continued strong investment in our utility run out of gas overall, we invested $12 $9 million in utility property for the two quarters of this fiscal year and that was up approximately $2 $1 million compared to the first quarter of 2022.

The increase was primarily the result of the investment we made in the R&D projects and other renewal projects.

Paul will now discuss the outlook for the rest of the rest of the fiscal year.

Thank you Jason.

Again has had an outstanding first six months of the year I'm really proud of our employees and their their efforts on several of these significant projects as Tommy mentioned the R&D project.

Being on schedule and on budget is a noteworthy achievement.

Obviously, a very unique project. It wasn't it was unique the process is unique and so for that project to come in on time and on budget is an outstanding result.

I would like to make one other note one of the things that frequently discussed at the macroeconomic level is workforce.

We were no different than others coming out of the pandemic.

With some retirements and other things.

Struggling to find workforce, but I would like to complement our human resources and recruiting department on.

Doing a really good job in the last 12 months of hiring fantastic quality employees and retaining the great quality of employees that we have and we feel like our workforces and in excellent shape as we move toward the second half of physical 2023.

We're going to talk about.

Gas growth in capital, we're going to also give just a brief and VP update and then talk about our earnings per share guidance.

Moving on to slide 11, Jason.

Jason just review the year to date capital as you can see we plan to hit about $22 million of total spending.

This year as normal we will be.

Strong in our renewal efforts and the summer construction months as well as customer growth.

And some utility maintenance as we get through the remaining six months of the year.

I'd like to talk about Mountain Valley before we discuss the.

Earnings guidance.

Mountain Valley, the permitting is in progress and in fact.

We had a good result at the end of February with the fish and Wildlife service reissuing the biological opinion the U.

<unk> four service issued their sedimentation analysis.

In mid April and the managing partner <unk> announced last week on their earnings call the schedule related to the permits and the project, which is exciting we think.

The remaining three firm has the right of way access for the Jefferson National Forest.

We hope we should see by the end of this month, we think.

U S Army Corps of engineer permit hopefully by the end of.

June thereabout, along with the West Virginia water quality certification again, hoping to resume construction around.

End of June early July give or take so again their forecast on that was exelon and something we're much excited about.

Running down.

Different track, but in the same direction is permitting reform.

Theres been much press about that over the last.

A couple of weeks and there does seem to be bipartisan support in the United States Congress for permitting reform in both houses.

It also seems the white houses.

Supportive of that we were particularly pleased with secretary Grand homes letter directly supporting the Mountain Valley pipeline.

<unk> just issued in the last few days so.

We are optimistic on on the project and look forward to hopefully resuming construction here in the very near future.

If you are on slide 12 with US that contains our earnings guidance, we Havent Havent changed our physical 2023 earnings guidance.

And as Jason noted earlier 2022 that is our underlying number.

Fact of the impairments in 2022 has been.

Remove we're still expecting about a $2 million loss in the midstream subsidiary.

Primarily due to interest costs.

Which are still slightly rising due to the higher interest rate environment and the.

Lack of offsetting income from the Mountain Valley.

The rate case.

Is still.

And progress and.

We don't have any indication at this point of the result of that we're probably about what would you say tell me about halfway through that process right now yes halfway.

And you May recall, we had the large.

Equity offering in March of 2022, which is diluting us approximately <unk> <unk> per share and physical 2023, we haven't issued any 2020 for guidance at this point.

We're hopeful that as things again progressed through the summer with mountain Valley that will be in a place maybe by the third quarter to start getting.

You the investors some indication of physical 2024.

That concludes our prepared remarks.

Do you have any questions. Please dial.

Pound pound or hashtag hashtag to mute your line bound pound on mute your line.

Okay.

Good morning, everyone.

Mike Good morning, So a nice to have you join us hope you're well.

I am sorry, I hope you're well as also.

Looking at the.

Good results here that in the first half of the year.

Taking into account your comments on rising interest expenses associated with mountain Valley and the remainder of the year.

Just wondering I know that this is a busy.

Your commercial industrial customers one in particular is going to start getting busy probably about now.

Just wondering if that could offset given.

It would seem logical there'll be burning a lot of guests.

The summer months, given where gas prices are.

Yes. Thank you for the question.

And maybe let's talk a minute about gas prices.

There was actually a large article in the Wall Street Journal today about about gas prices and how the.

Producers in particular are not.

Holding back on on the drilling and production because they see that there's going to be a future rise, but at the moment gas prices are in the low to mid $2 <unk> range, which is approximately one third of where they were last year at this time, so that's fantastic for our residential and commercial customers.

But to your question, Mike certainly some of our <unk>.

Commercial customers, which we have several who are in the.

Building supplies.

Sector, and who use natural gas as a part of their process should benefit greatly from those low prices and we do expect them to take advantage of these.

Low cost energy.

Prices. This summer. So we are looking forward to that we don't have an.

An exact forecast on the usage at this time, but we do expect it to be pretty solid.

Okay, and then you had mentioned.

We're about halfway through the rate process.

You're expecting to wrap it up I would I would think right at the beginning of 'twenty four than fiscal 'twenty four.

Mike It just depends on how that plays out staff <unk> testimony in late August we fall a rebuttal.

Three weeks after that.

Depending on how it plays out it's important to note that we don't have an intervenor and the case this year. So I think.

The settlement is.

It is a good possibility if that happens hopefully resolve it well before the.

Beginning of next year, otherwise if it goes to a full hearing.

Only be early next year before it's resolved.

Okay.

Alright, Thats all I had.

Quarter guys great.

Thank you Michael.

Have you with us.

Does anyone else have any questions.

So dow pound down too.

Land.

We will stay on for just a few more.

Seconds here to see if anyone else has any questions.

Yeah.

Alright.

Transactions that does.

Conclude our second quarter earnings call. We're so delighted to have you with us and we hope everyone has a wonderful week and we look forward to joining you again in August to discuss our third quarter results.

<unk>.

<unk>.

Okay.