RGC Resources Inc (RGCO) 2026 Q1 法說會逐字稿

(Operator Instructions)

Good morning and thank you for joining us as we discuss RGC Resources 2026 First quarter results. I am Kelsey Davenport, Director of Finance for RGC Resources Inc. I am joined this morning by Paul Nestor, President and CEO of RGC Resources, Timothy Mulvaney , our VP, treasurer, and Chief Financial Officer, and Lawrence T Oliver Oliver, our senior Vice President of Regulatory and External Affairs.

I will now turn the presentation over to Paul.

Thank you, Kelsey, and good morning. We are on slide 3 Main extensions and renewal activity in the first quarter of fiscal 2026 was steady. We installed 0.6 New main miles in the first quarter and connected 196 new services, which is almost exactly the same as last year with 197 new services in the first quarter of 2025.

Just a comment there. The main miles are down a little bit. Last year we had 1.1 new Maine miles. Some of that's dependent on weather. We've actually got an outstanding backlog of new Maine to install approximately 13,000 ft or 2.5 miles.

In addition, we renewed through our save program 117 services in the first quarter of this year, which is an increase of 80% over last year. Together, this investment demonstrates our continued commitment to enhance safety and reliability for our customers as we've been doing for many years now.

Slide 4 shows our delivered gas volumes for the quarter. Total volumes were flat compared to Q1 last year. One large industrial customer decreased their natural gas usage from their record levels of a year ago. However, residential usage was up 8% and other commercial volumes increased primarily due to the 11% increase in heating degree days compared to quarter 1 last year.

Slide 5 shows capital expenditures for the first quarter of fiscal 2026, and those are compared to the prior year. Total spending of $5.6 million was flat to the same period of last year. Weather was mixed in the quarter this year. We did have some snow and, wet weather in early December, which hampered us a little bit.

I will now turn the presentation over to our Chief Financial Officer, Timothy Mulvaney, to review the financial results for the quarter. Tim.

Thank you, Paul. Moving to slide 6, we had a steady quarter with ROA gas margins up nominally and lower interest expense as the Fed lowered interest rates. This was more than fully offset by higher costs for personnel, IT, property taxes, and depreciation.

Net income of $4.8 million or $0.47 per share compared to a net income in the same quarter a year ago of $5.3 million or $0.51 per share. We filed an expedited, excuse me, expedited rape case in December with interim rates that began on January 1st.

Tommy will discuss the rate case in greater detail in just a minute. The MVP pipeline continues to perform well and our year over year financial results from our investment were as expected and in a similar magnitude to a year ago.

Our balance sheet remains strong. One item to bring to your attention is that $15 million note, which matures in August for runup gas, is now in current liabilities. We fully expect to refinance this note in the coming months and have begun preliminary conversations with our financial institution.

I will pass the presentation back to Paul and Tommy to address some of the developments in late January's code stamp across the eastern half of the United States, as well as our expectations for 2026, including the rape case, capital, and earnings per share. We will then take your questions Paul

Yeah, thank you, Tim. We are on slide 7. calendar 2026 has started with a number of really interesting developments. There's a lot of activity in both the international, national, and even our local landscapes and economies. We'll get to the weather, in just a moment, but here in Virginia, we have a new governor and legislature that has been seated and they are in session, presently, and there's been a lot of activity there, a lot of new legislation, a lot of discussion about this term of affordability and even data centers, as most of Virginia is considered the data center capital of the world.

Fortunately, most of this new legislation is not focused on limiting or stymieing natural gas usage or development. We are happy about that. and we are, not only monitoring all this legislative activity, but we're actively engaged with our senators and delegates on any pertinent legislation.

The local economy does continue to be solid, or even good, but, there was a press release recently of a top 5 industrial customer, a very large manufacturer who's been prominent in the Roanoke Valley for almost 60 years.

They recently announced an operations change that will likely lead to, plant closure later in calendar 2026. We have discussed or started discussions with the commission staff to address this in our pending rape case. As Tim said, Tommy will review the rape case momentarily. We're actually on slide 9 now, my apologies. I think I said slide 7 earlier.

We're on slide. 9, and the recent, winter weather that Tim mentioned has a name. The National Weather Service has, attached Fern to, this incredible cold snap that we've had. Just a little statistic here, beginning January 24th, through yesterday, February 9th, here in Roanoke, by heating degree day statistic, we have been 53%Colder than normal, really quite incredible.

We've had 680 heating degree days versus a normal 445. I'm just very pleased to say up to this point, our distribution system has performed flawlessly. The interstate pipelines.

That serve us have performed without issue. I think one of the great stories to come out of Fern will be what natural gas has meant, not only here to us in Roanoke, but in our state, but around the country, particularly in the PGAM RTO, natural gas was providing on any given day approximately 45% to 50% of the fuel for electricity generation during this period.

Again, I think we'll hear more about that in the days and weeks ahead. We did not lose any customers. We're happy about that, proud of that, and we're especially proud about how our folks work safely through treacherous icy conditions.

In fact, we've had ice on the ground continually since January 24th, and that we haven't had a slip or fall or a car accident is something I'm especially pleased with. Our LNG plant was in fact necessary again this winter, providing needed peaking supply on some of the coldest days.

One effect of, Fern was, at least in my tenure, an unprecedented spike in natural gas prices at the various pricing points, particularly the pricing points that form our, supply.

We've attached, a chart here on slide 10 showing you the, Henry hub price and no the computer didn't go crazy drawing that chart as you can see there on January 22nd, 23rd, 24th, prices in fact multiplied by a factor of approximately 10 really remarkable and as you know and especially if you've read our Q's and K's, natural gas costs are passed through to customers, dollar for dollar, there's no profit or loss there.

So we have a pretty, we believe estimated to be $80 to $10 million dollar under collection on gas costs just related to winter storm. Fern will work with the commission to, try to build those into rates in a reasonable way and hopefully collect those over the next 12 to 18 months. With that, I'd like to ask Tommy to provide an update on the rape case filing, Tommy.

Well, thank you, Paul, and good morning everybody. We're on slot 11 now. As we discussed in our last earnings call, Renault Gas filed an expedited rate case on December second seeking approximately $4.3 million in incremental annual revenue, and that's based on a currently authorized ROE of 9.9%. The interim rates were effective January 1st, 2026, and those are subject to refund once the commission fully adjudicates the case. We expect that to occur by the conclusion of this calendar year.

And as we also mentioned back in December, offsetting the new rates, we began making credits to customer bills over the next 4 months, January through April, to return to customers tax credits that we resolved with the IRS late in fiscal 2025 and are now included with our regulatory liabilities on the balance sheet. Paul, I'm going to turn it back over to you now.

Thank you, Tommy, and I appreciate all the great work Tommy and his team are doing on the Ray case filing. We are now on slide. 12 And, sharing with you our capital forecast for this fiscal year. We're still at $22 million which was the same as we, forecasted in December on the year-end call. Just to note though, obviously this winter weather is going to, hamper the second quarter.

It's going to be weaker. We've essentially lost two weeks of construction again due to all that snow and ice that is still on the ground. It's approximately 17% of the working days in the quarter. We'll see how that, when the weather breaks in the spring and summer, how much of that we can make up, but, it is possible 2 weeks is a lot to make up across all of the crews, but we're watching and monitoring that.

Moving to slide 13, our earnings per share forecast is also the same as we shared with you in December, the range of $1.27 to $1.35. Certainly, the, rate case that Tommy mentioned is a large factor in that. Some of the economic and political and inflation and interest rate variables that we're all experiencing also play a part in that. There's going to be some interest expense with that under collection that we just talked about, that's, going to work against us.

I'd like to conclude my remarks just one more time by thanking all of our employees, each and every single one of them, for everything they've really done, all winter, but especially here in Winter Storm Fern to serve our customers and not have an outage and to be safe.

we really are excited, again, once the weather breaks, again, we've got a lot of main miles, stacked up, new main miles stacked up to get into the ground and add customers we're excited about. The overall growth and health of our region.

And we also, of course, want to thank you for your continued interest and support in RGC Resources. That does conclude our prepared remarks, and if you have.

(Operator Instructions)

Okay. Well, Thank you again for taking your time to participate in our 1st quarter call and we certainly look forward to being back together with you in May to discuss the second quarter results. We hope everyone has a safe and of the week.

Thank you.