RGC Resources Inc.

Despite the dramatic increase in customer counts as discussed by Paul, our first quarter firm volumes were negatively impacted by the 7% warmer than normal weather that the Roanoke area experienced. As shown on slide four, residential volumes declined by 8% and commercial volumes declined by 5% due to the much warmer December 2021. In fact, it was 32% lower heating degree days in that month compared to normal. Overall, industrial volumes were down primarily due to the large customer that fuel switched to natural gas in 2020. Excluding this multi-fuel customer that switched its primary fuel from natural gas to coal, industrial volumes would have increased. Transition to slide five, where we'll review our capital spending. Our capital spend during the first quarter of the current fiscal year is running slightly ahead of spending during the first quarter of fiscal 2021. The majority of this spending has been on customer growth and system expansion, including our continued investment in the Blue Ridge project, as Paul just mentioned. Paul also talked about our miles of main extensions and new customers a few minutes ago. In addition to these investments, we have spent approximately $1 million on a one-time gas supply infrastructure project. Moving to slide six, where our condensed consolidated statements of income are shown, I'm going to separately review the financial results from our two operating segments, Renault Gas, our regulated utility, and RGC Midstreet. I want to start with the first quarter results for Renault Gas. Operating income for the first quarter of fiscal 2020 showed a modest decline compared to the prior year's quarterly results. Gross margins increased due to the save rider and customer growth, which was offset by higher depreciation expense and receipt of CARES Act money in quarter one of fiscal year 2021. Turning to RGC Midstream, Midstream continued with its significant quarterly year-over-year decline in equity and earnings from the Mountain Valley Partnership. equity and earnings declined by over $1.2 million quarter-over-quarter. With a trailing 12 months, Renault Gas' operating income increased by 12% year-over-year, which is a testament to the outstanding performance by our utility subsidiaries Paul just discussed. Specifically, the increased margin is largely attributable to our SAVE program revenues and customer growth, which, as we discussed, added as we discussed in an earlier slide related to our main extensions and new customer ads. The strong run of gas earnings were offset by a year-over-year $4.6 million decline in equity and earnings for Midstream's investment in the Mound Valley Pipeline, resulting in a $1.08 per year earnings on a consolidated basis compared to $1.38 for the prior 12 months. I'll now turn it back over to Paul, who will discuss the outlook for the remainder of the fiscal year.

Thank you, Tommy. We are on slide seven, which has our agenda for the outlook. Moving on to slide eight, with our capital spending forecast for the fiscal year, we still are at approximately $25 million this year. As we discussed last quarter, this is the largest or will be the largest capital spend in Renault Gas' 139-year history. Momentum on main extensions and new customer additions is continuing and we still expect to spend around $6 million specific to those two items in fiscal 2022. We have started the loan gate station renewal that was remaining in our system. That has already started. We had spending on that in the first quarter. It will be completed in the late summer. We already mentioned phase three of Blue Ridge, and we're preparing to start phase four, which will be another 2,300-foot main extension. Finally, Tommy mentioned the large special project. That project is on schedule and will approximate $5 million by the time it's completed at the end of this fiscal year. We are still planning the public announcement of that project. sidetracked a little here in January with the extreme wet and cold weather and some other matters, but we hope to be able to do that in the very, very near future. Moving on to slide nine, the Mountain Valley Pipeline. Most of you are aware by now of the Fourth Circuit's actions to vacate and remand the Jefferson National Forest and biological opinion permits. Those actions and possible next steps are currently being considered. As we disclosed in our T&Q that we filed yesterday afternoon, there's just not enough information at this time to determine changes to project cost or schedule. Now maybe actually a moment to maybe reflect on the Mountain Valley Pipeline. We've got a beautiful picture in our slide deck if you haven't seen it. It's a portion of the right-of-way that's been completed and restored. If you're listening by phone, I encourage you to visit our website and review the slide deck and review this picture in particular. RGC Resources through RGC Midstream became a partner in the Mountain Valley Joint Venture October 1st, 2015. At that same time, RoNo Gas entered into a precedent agreement to become a shipper on the Mountain Valley pipeline. I think it's probably important to maybe look back and discuss what was our what was our thesis back then all those years ago I think first and foremost the Roanoke region and Southwest Virginia were poised to grow if we think back to 2015 our medical school and many of the things happening in our downtown area really just getting started and we made the determination that our customers both present and then and in the future would require more natural gas. I think, Tommy, we testified to this at some of the hearings in the fall. We've added well over 3,000 customers since October 1, 2015. So our thoughts on this region growing economically and culturally and in many ways, it's really been fabulous over the last six or seven years. turned out to be true, and our thoughts about our customer base growing also turned out to be very true. There was another part of the thesis at that time, that Virginia in particular, really the whole eastern half of the United States, needed more natural gas and gas infrastructure. We believe that is also still true. So back then, you know, we came back to why are we here as Roanoke Gas, the utility, and RGC Resources, the holding company? We're here to serve. We've been here in the Roanoke Valley serving since 1883. That means a lot to us, and we plan to continue to serve. We believe the Mountain Valley Pipeline was critical for us to continue that service. We still feel that way today. Nothing has changed. If anything, our desire to serve and our need to serve, as we've just demonstrated with our customer additions and our main mile extensions, is ever increasing. The average everyday person wants and demands natural gas. So if you step back and maybe just think about the big picture on natural gas, I think there's four things to remember. It is the cleanest of all hydrocarbons. It's affordable. It's available. And it provides long-term energy security. These things have not changed either. So despite the attacks on the pipeline and the attacks on the agencies that permit the pipeline, some of these macro big picture items are in fact unchanged.

Let's move to slide 10.

Our earnings guidance. This slide depicts the earnings from our two operating segments, as Tommy mentioned, the Renault Gas Utility and RGC Midstream. I do want to note, Midstream's earnings for 2022 assume a level of non-cash AFUDC that's commiserate with resumption of MVP growth construction. We have not changed that assumption from our earlier guidance as of today again as we just discussed a moment ago we do not really have enough information at this point in time to change that guidance would of course refer you to our T&Q and our disclosures about the project as well as our subsequent event footnote footnote number 15 and the financial statement so at this time our forecast For Roano Gas, the Roano Gas segment 2022 earnings is unchanged as well. Okay, that concludes our prepared remarks. If you have any questions, please dial pound six to unmute your line and we would be happy to entertain those.

Pound six to unmute your line. Good morning. Hey, Mike. Good morning. How are you? I'm good, sir. Yourself? We're doing just fine, thank you.

I'm looking at the guidance and I'm guessing that in terms of volumes that you're going to see through rolling up gas for the heating season, you're still probably thinking that those are largely unchanged so that January offsets December, is that right?

Yeah, that's a good question. December by heating degree day statistic was 32% warmer than normal and the volumes abnormally low for that month. In fact, Tommy, I think we looked at our most recent 30-year history, it was the second warmest December in that 30-year history. Correct. As Tommy mentioned and the slide showed, Mike, we were off on volume, but January has been colder than normal by statistic. In fact, we've had a few very cold days. We never approached the single digits of low temperatures, but we had many, many days in the mid and upper teens, what we call good or great gas days. We're still closing the books for January, but we think we, and we know roughly what our delivered volumes are for January. They were quite strong. Yeah, we believe, and February's turned out to be cold so far as well.

We'll see what the rest of the quarter holds. Okay.

Then one on Mountain Valley, the recent changes in terms of the court decision. That wouldn't keep them entirely out of the field, would it? I mean, they can still go back into the field and perform some work. I'm guessing that just has to do with the Jefferson National Forest. Is that correct?

You know, Mike, I don't know the exact answer to that question right now. I think that's still being determined based on the biological opinion result as well. probably more more to come on that from the joint venture as they know more okay they uh when would they typically be heading back into the field april yeah so it depends on uh the weather you know we've actually been very uh wet we had a tremendous snow in the middle of january that is just now leaving the ground and we had a lot of rain yesterday so it's It's good old-fashioned winter weather. It's not conducive to construction. So I think, yes, I think a reasonable person would say they weren't going to be back in the field in the next few weeks. It would need to be a little bit drier, a little bit better for conditions.

That's all I had, gentlemen. Thank you. Well, thank you, Mike. If you have any other questions, you can

unmute your line by using pound six pound six well if there are no more questions this concludes the first quarter earnings call thank you for joining us and we look forward to speaking with you again in May to discuss the second order We hope you all have a safe and wonderful day. Thank you.