Q2 2024 RGC Resources Inc Earnings Call
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Speaker Change: Good morning, and thank you for joining us as we discuss RTC resources, Inc.
Speaker Change: 24 second quarter results and Tommy Oliver Senior Vice President regulatory and external affairs for RTC resources I am joined this morning by Paul Nester, President and CEO of <unk> resources and Camel, Tim Mulvaney.
Paul W. Nester: Our treasurer and CFO.
Speaker Change: Before we get started I wanted to review a few administrative items.
Speaker Change: We have muted all lines I'd ask that all participants remain muted.
Speaker Change: The link to today's presentation is available on the Investor and financial information page on our website at Www RPC.
Speaker Change: RBC resources Dot com.
Speaker Change: At the conclusion of the presentation in our remarks, we will take questions.
Speaker Change: Let's start on slide one.
Speaker Change: This presentation contains forecasts and projections.
Speaker Change: Slide one has information about risks and uncertainties, including forward looking statements that should be understood in the context of our public filings.
Speaker Change: Slide two contains our agenda.
Speaker Change: We will review our quarterly operational and financial results provide an update on our rate case, and the MVP and discuss the outlook for the full year fiscal 2024 with time allotted for questions at the end.
Speaker Change: So turning to slide three total billed customers at the end of April we're 63660.
Speaker Change: This reflects our continued steady growth within our historic footprint main extensions for the first six months of the 2020 for fiscal year totaled $1 two mile and we connected 317, new services during that same period.
Speaker Change: Slide four shows our delivered gas volumes for the quarter volumes overall were 9% higher compared to last year's second quarter attributable to colder weather in the second quarter of the 2020 for fiscal year <unk>.
Gas volumes were up in total residential and commercial volumes were higher as a result of more heating degree days.
Speaker Change: It was enhanced by a year over year increase in industrial throughput as natural gas prices are at historic level.
Speaker Change: Slide five shows the same two charges for the year to date total.
Speaker Change: Total volumes were up modestly for the first half of fiscal 2020 forward despite fewer heating degree days.
Speaker Change: As in the quarter delivered gas volumes were lower.
Speaker Change: Now we are on slide six our capex spending totaled $11 3 million for the first six months of fiscal 2024 compared to $12 9 million last year at the same time.
Speaker Change: This decrease is attributable to the $3 1 million dollar spent in 2023 related to the R&D facility offset by current year spending for the MVP interconnections.
Speaker Change: Excluding the R&D spend our overall capital spend is up $1 7 million over last fiscal year's comparable peer expanding.
And Paul will discuss the full year capital spending projection shortcomings.
Speaker Change: But now I'm going to turn it over Tim Mulvaney, our treasurer, and CFO, who will discuss our financial results Tim.
Thank you Tani.
Timothy J. Mulvaney: We're moving on to slide seven.
Timothy J. Mulvaney: <unk> had a steady quarter against inflationary headwinds.
Timothy J. Mulvaney: Second quarter operating income decreased 960000, or approximately 10% to $8 6 million in the second quarter.
Timothy J. Mulvaney: Compared to the second quarter of 2023.
Timothy J. Mulvaney: We continue to experience cost pressures across the board, but particularly in personnel and related costs.
We expect this pressure to continue in the third quarter.
Timothy J. Mulvaney: With rates under the February 2nd filed rate case, taking effect July one.
Timothy J. Mulvaney: Tommy will discuss the rate case in more detail shortly.
Timothy J. Mulvaney: Equity in the earnings of unconsolidated affiliates was $1 2 million pre tax Judy.
Timothy J. Mulvaney: Due to noncash ASU, DC, which resulted from our investment in the MVP.
Timothy J. Mulvaney: This ASU DC will taper off as the construction on various sections is completed and ultimately cease as the pipeline goes into service.
Timothy J. Mulvaney: Interest expense increased 170000, due to higher interest rate environment, which is impacting our floating rate debt, which supports our investment in mountain valley pipeline as well as the Roanoke gas line of credit.
Our net income was $6 4 million in the second quarter of this year compared to $6 3 million in the same quarter a year ago.
Timothy J. Mulvaney: The presence of the ASU D C from the MVP this year drove the strong results.
Timothy J. Mulvaney: EPS was <unk> 63 per diluted share for the second quarter of this year compared to 64 cents per diluted share in the quarter a year ago.
Timothy J. Mulvaney: The year to date numbers are also on slide seven.
Timothy J. Mulvaney: The story, while similar to the second quarter is more favorable net income was $11 5 million or $1 13 per diluted share of $3 six months of fiscal 2024, compared to $9 6 million or <unk> 97 cents per diluted share in fiscal 'twenty three.
Timothy J. Mulvaney: While the inflationary pressures and higher interest rates were present as they were in the second quarter of fiscal 2024.
Timothy J. Mulvaney: Revenues from the prior year rate case, where precedent for all six months of fiscal 2004, but only for three months in fiscal 'twenty three.
An additional note related to the balance sheet, we had nearly $34 million in debt supporting our investment in the MVP coming due in 2024 that we refinanced in two pieces with new maturities at the end of 2025 and in 2026. The details are in our Form 10-Q.
Timothy J. Mulvaney: That we filed on Friday.
Timothy J. Mulvaney: Finally, we renewed our operating line of credit at Roanoke gas in March.
Timothy J. Mulvaney: I will now turn the presentation back to Tommy to discuss our latest rate case, Tommy Yeah. Thank you Tim rental gas like most consumers and businesses continue to experience upward expense pressure accordingly, as we discussed in our prior earnings call on February 2nd we filed a general rate case with the Virginia State Corporation Commission.
Tommy Oliver: And which we are seeking an increase in base rates of approximately $4 3 million or about a 5% increase in total revenues. The increase include a projected rate base through June 32025, and an increase in our authorized ROE to 10 three five.
Tommy Oliver: Which reflects current capital market conditions. The commission has all the commission has authorized the new rates to go into effect July one subject to refund the $4 3 million in incremental revenue does not include the roll in of save or RMG capital and revenues as we had received authority.
Tommy Oliver: For a new five year save plan this past October.
Tommy Oliver: Since the R&D facility by statute qualifies for 100 basis point adder to our ROE, we do not expect the R&D facility to be ever rolled into base rates.
SEC staff for a review of our rate cases underway and a hearing with the commission is set for November seven we.
Tommy Oliver: We do not expect final resolution until the second quarter of 2025, I will now pass the presentation to Paul Nester, President and CEO of <unk> resources to discuss the MVP.
Paul W. Nester: Good morning, Thank you Tommy we're on slide nine.
Paul W. Nester: We truly are excited about the progress in what we believe to assume the the commercial operation of the Mountain Valley pipeline. The MVP filed with FERC recently for permission to initiate operations and requested a may 23rd.
Paul W. Nester: 2024, and service date, so just two five weeks away.
Paul W. Nester: If the schedule holds this would make the shipper contracts for the pipeline active June 1st.
Paul W. Nester: You know gas will interconnect with the pipeline in two locations Lafayette Gate station will see a picture in just a moment is substantially complete and we are doing final testing on that station.
Speaker Change: Im amused station.
Speaker Change: Down in Franklin County is nearing substantial completion, and we expect it to be ready when MVP gas flows again.
Speaker Change: Actually you are seeing on slide nine is actually from.
Speaker Change: Just about a week ago.
Speaker Change: The installation of the first distribution company natural gas main in the history of Franklin County.
Speaker Change: Picture is in to some of your business Park very close to the gates station, we're just thrilled.
Speaker Change: Finally be installing this pipe.
Speaker Change: Approaching.
Speaker Change: Service to a customer in some of your park. It really is a historic moment in.
Speaker Change: Something we're pleased to be partnering with the county, and the business community.
Speaker Change:
Speaker Change: Alright, moving on to slide 10.
Let's just take a look at where we think we're going to in 2024 with respect to our capital spending as well as our earnings and this is the picture I just mentioned of the Lafayette day space and as you can see it looks fantastic.
We're so happy to have it.
Speaker Change: <unk>, 100% and service.
Speaker Change: Moving on to slide 11.
Speaker Change: 2020 for Reno gas capital investment plan is holding steady up only slightly.
Speaker Change: We have been of course, feeling pressure in capital expenditure, just like our operating and maintenance expenditures as Tim or Tom you had mentioned a few moments ago.
Speaker Change: However, our overall spend is.
Speaker Change: Lower than 2023.
Speaker Change: Because of the completion of the R&D project I just want to know.
Speaker Change: We're hitting our targets on our save and renewals spending as well as our <unk>.
Speaker Change: Customer growth and system expansion plans there.
Speaker Change: I want to complement our entire operation, we just continue to work safely and the investments we're making in our system.
Speaker Change: Keep it safe and reliable are paying dividends.
Speaker Change: All right on slide 12, our consolidated earnings guidance, we Havent changed this from what we shared with you in the first quarter.
Speaker Change: As Tim mentioned in the results of the <unk> from the Mountain Valley project has been a little higher so far this year than we expected obviously the <unk>.
Slight changes in the in service date in the slightly prolonged construction has influenced that the.
Speaker Change: <unk> case.
Speaker Change: Tommy just described with the interim rates that began July one as a real driver for the second half of the year and in particular, the physical fourth quarter.
Speaker Change: So.
Speaker Change: With that we can clued are.
Speaker Change: <unk> remarks, if you have questions. Please dial pound pound one or.
Speaker Change: Our hashtag hashtag one.
Speaker Change: On mute your line.
Speaker Change: We'll hold for just another.
Speaker Change: 15, or so seconds to see if anyone has a question.
Speaker Change: Round pound, one and mute your line.
Speaker Change: Good morning, everyone.
Speaker Change: Hey, Mike how are you today.
One little foggy here.
Speaker Change: Hurt yourself.
Speaker Change: Well.
Speaker Change: Cleared cleared up a little today, we did have a foggy rainy weekend, but it's sub.
Beautiful spring morning today.
Speaker Change: Yeah just.
Speaker Change: Just I guess one question on gas supply.
Speaker Change: When you're looking at mountain Valley gas coming into the system here shortly.
Speaker Change: We've already got gas prices.
Speaker Change: Pretty cheap levels is there a big step down in the cost of your gas supply on mountain Valley starts mixing in given where prices are today.
Speaker Change: Yes.
Speaker Change: Great question, Mike and you're right our earlier comments alluded to the really historically low natural gas prices, particularly when youre looking at the Henry hub Nymex.
Speaker Change: Right now.
Speaker Change: Coming out of the warm winter gas prices are still low industrial and commercial demand is still strong, which I think makes sense based on those low prices.
Since mountain valleys.
Coming online if you will in a warmer period Mike.
Speaker Change: We don't see a lot of.
Speaker Change: Change in our overall natural gas basket or a portfolio of pricing that are State Corporation Commission approved.
Speaker Change:
How it rolls through the winter is something we're carefully analyzing and looking at.
Speaker Change: Just a small regulatory tidbit, which we alluded to I think an hour.
Speaker Change: Thank you that.
Speaker Change: We have incorporated the mountain valley demand charges into our purchased gas adjustment.
Speaker Change: Actually starting this quarter.
Speaker Change: As approved by the Commission.
Speaker Change: Okay and.
Speaker Change: And just kind of a follow up.
Speaker Change: Does it make sense for you.
Speaker Change: To take every molecule you can get out of MVP.
Speaker Change: Versus the other pipes.
Speaker Change: That's a good question.
Speaker Change: Utilize an asset manager.
Speaker Change: <unk>.
Speaker Change: Optimize our natural gas supply as it relates to our capacity for our customers' benefit Mike.
Mike: I think Ana.
Mike: Today today nominating basis now.
Mike:
Mike: Again do what they always do which is the most cost efficient for the customer.
Mike: So as you know it will depend on market conditions on a day to day basis, and how the pricing hubs are moving realm.
Mike: Relative to our <unk>.
Mike: <unk> basket I think Tommy.
Mike: Even pricing point, a pricing point in our basket.
Mike: Yes.
Mike: So it'll all that.
All of that Mike will come together on the daily daily basis, So I don't I don't know that its.
Mike: 100% certain every single day that they would.
Mike: Take full MVP capacity versus in this case east, Tennessee or.
Mike: Transcanada.
Mike: Okay.
Well, thank you much appreciated.
Mike: Congrats on.
Mike: And MVP in service date, or I guess, there's going to be quite a party.
Mike: [laughter].
Mike: Well. Thank you we haven't had time to plan the party yet, but we'll let you know.
Speaker Change: Alright. Thank you. Thank you so much.
Speaker Change: Do we have any other questions.
Speaker Change: Pound pound want a mute your line.
Speaker Change: Okay.
Speaker Change: Hearing none we thank everyone for <unk>.
Speaker Change: Joining us this morning, and reviewing our second quarter, we as.
As always look forward to being with you in about three months as we review our third quarter results wishing everyone, a safe and Pleasant Monday and rest of their work week. Thank you very much.
Okay.