RGC Resources Inc (RGCO) 2019 Q1 法說會逐字稿

Welcome to RGC Resources first quarter earnings call. I'm John D'Orazio, President and CEO of RGC Resources. Thank you for taking the time out of your morning to attend. (Operator Instructions) Also, the link to today's presentation is available on our website at rgcresources.com on the Investor & Financial Information page. Before we begin, just a reminder on forward-looking statements as shown on Slide 1.

Moving on to Slide 2. All right, let me repeat. So moving on to Slide 2, we plan to review key operational financial highlights, our outlook for 2019 and take any questions.

As shown on Slide 3, first quarter 2019 earnings per share are $0.30, which is a $0.02 or 7% improvement over first quarter of 2018.

As Slide 4 highlights, we invested $5.7 million in a regulated utility in the first quarter, a 6% increase over the same period last year. We spent approximately $1.4 million on infrastructure replacement, $2.9 million on customer growth and $1.5 million on other capital needs. The quarter-to-quarter change was primarily due to elevated spending related to customer growth.

We continued to experience steady customer growth as shown on Slide 5. We added 213 new customers in the first quarter.

On Slide 6, our total volume increased 5%, and our commercial and industrial volumes increased 4% in the first quarter compared to the same period last year.

We're on Slide 7. The MVP project was over 70% complete, coming into January of 2019. The targeted in-service date is the end of 2019. We invested approximately $10 million in the MVP project in the first quarter. We anticipate investing a total of $23 million in fiscal 2019. The MVP Southgate project, which is a 70-mile, 24- and 16-inch pipeline was filed with FERC in November of 2018. MVP Southgate is projected to be in service at the end of 2020.

Now I'd like to introduce Paul Nester, our Chief Financial Officer. He will review our financial results.

Thank you, John. For those of you following along via webcast, we are on Slide 8. We will begin by reviewing first quarter results. Operating income is approximately $3.3 million. We experienced top line increases in infrastructure replacement Rider or SAVE revenue and revenues related to customer growth and industrial volume. These were offset by increases in depreciation expense and various operating and maintenance expenses. Equity earnings in our Mountain Valley Pipeline investment increased approximately $414,000 over the prior year due to the increasing investment in the project. Other operating income is favorable when compared to first quarter 2018, primarily due to the $156,000 pretax, impact of revenue sharing. Due to tax reform, income tax expense for the first quarter was $433,000 favorable.

Let's review our trailing 12-month results. Operating income is below the prior year due to the $919,000 increase in excess revenue from tax reform adjustments. Without the adjustment, operating income increased approximately $286,000, primarily due to the increases in the SAVE Rider revenue and revenues related to customer growth and industrial volumes.

Primary driver for increased operating expenses is an increase in gas costs related to increased commodity prices. Equity earnings in the Mountain Valley Pipeline increased $867,000. Interest expense increased approximately $595,000 in 2019 on higher borrowing and higher rates. The trailing 12-month net income increased over $1.6 million or 27% compared to the prior year.

John will now provide the 2019 outlook.

Thank you, Paul. Let's review our capital expenditure projections. In fiscal 2019, we are on track to invest approximately $45 million. As highlighted on Slide 9, $22 million will be invested in our regulated utility with the focus on infrastructure replacement and customer growth. The remaining $23 million will be invested in MVP. Roanoke Gas filed a general rate case in early October. The case is currently under commission review. Proposed rates went into place January 1, 2019. The staff report is expected in May, and we hope to have a final order by late summer. Finally, our fiscal 2019 earning guidance remains between $1 to $1.04 per share. That concludes our prepared remarks. We would now like to take any questions from the audience.

So does anybody have any questions?

It's Michael Gaugler from Janney. Just one, John, on MVP. Looks like you're getting really close to finishing that line. Just wondering if there's anything outstanding, legal concerns or otherwise, that we should be watching as that project looks to wrap up here this year?

I mean there are couple of things out there that the MVP team is working on to resolve. One of those has to do with the forestry service and the permit there. They're working with the forestry service as well as the Bureau of Land Management to resolve that and anticipate resolving that probably towards the end of -- well, probably right around mid-summer. I would say June to July time frame. On the stream-crossing permits, they're working with BEQ as well as West Virginia BEQ. What's the other one?

Corps of Engineers.

Corps of Engineers. And they're -- they've been working on that for the last couple of months, and they hope to resolve that and be able to start getting back until the streams, probably in the March, April time frame of this year. Based on all that, their schedule -- with that schedule, they firmly are committed to have that in service at the end of 2019.

Okay. And then I take it they really can't get moving on MVP Southgate until FERC issues are closed? And -- or can they actually start Southgate if they get all the approvals before MVP is completed?

If FERC issues an order for it then they can start the Southgate project. And they can do that before MVP is completed.

That would be nice.

Yes, it would be great.

Does anybody else have any questions?

There are no other questions. I want to thank everybody for attending our first quarter earnings call. And I wish everybody to have an enjoyable morning and afternoon. With that, thank you.