RGC Resources Inc.

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I'm Paul Nestor, President and CEO of RGC Resources. Welcome and thank you for joining us as we discuss our 2022 second quarter results. We would like to apologize for the technical issues we experienced Monday with our conference call line. We do appreciate your patience and understanding. We believe we have fixed those issues today. With that, 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 and our remarks, we will take questions. The link to today's presentation is available on the investor and financial information page of our website at www.rgcresources.com. With me on the call this morning is Jason Field, our chief financial officer, and Julie Pilello, our controller. Moving to slide one, this presentation does contain forecasts and projections. Slide one is our forward-looking statement disclaimer. The agenda is on slide two. We're going to change the order a little bit this morning from our prior quarters due to the Mountain Valley impairment. We will begin with Jason reviewing the financial statements and results, followed by an update of our operational accomplishments. I will conclude with a discussion of the outlook for the remainder of fiscal 2022. There will be an opportunity for you to ask questions at the end. We are on slide three. Just as a precursor to Jason's comments, we wanted to remind everyone of our corporate structure. We use this slide in our investor presentations. RDC Resources, the NASDAQ-listed holding company, contains two subsidiaries, Roanoke Gas, which is our core business, a regulated local distribution company located in Roanoke, Virginia, serving the natural gas needs of 63,000 customers now in the greater Roanoke Valley. RGC Midstream is our wholly owned subsidiary, which does hold the investments in the Mountain Valley Pipeline and in the MVP Southgate. I would like to make a clear statement at this point before Jason begins. There's no cost or rate impact to Renault Gas customers from Midstream's investment in the Mountain Valley Pipeline and the related impairment that was recorded there. in the second quarter. That's not any different than back in October 2015 when we announced our intention through the Midstream subsidiary to invest in the joint venture. Again, there's never been any cost or rate impact to Renault Gas customers. Jason will now discuss our financial statements, capital spending, and delivered volumes.

Thank you, Paul. We are on slide four. For the second quarter of 2022, our operating income of $7.4 million exceeded the second quarter of 2021 by $344,000, or a 4.8% improvement. The overall net loss for the second quarter reflects the $29.6 million non-cash impairment that we recorded on Midstream's Mountain Valley Pipeline investment. One theme that is common to both the quarter and the trailing 12 months is increased gas costs, which was up approximately 36% and is reflected in the higher revenues and operating expenses. As a reminder, gas costs is a pass-through with no operating income impact. Non-gas costs operating expenses for the three months have increased primarily due to bad debt expense and other inflationary pressures. Excluding bad debt expense, operating and maintenance expenses are up approximately 3%. Our teams have done a great job managing expenses in a difficult environment. For the 12 months ending March 31, 2022, operating income, which is mainly from the Roanoke gas subsidiary, was $14.9 million, a substantial increase of $1.8 million, or 14%, compared to the prior 12 months ending March 31, 2021. Our net loss for the 12 months was $20.3 million, or $2.42 per share. the significant impact of the non-cash impairment of our investment in the MVP. Compared to the prior trailing 12 months, we had a decline of approximately $3.5 million of equity and earnings from the MVP. As shown on slide 5, to aid in the comparison of our financial performance attributed to operations, we have adjusted our gap results for the non-cash impairment loss that was recorded during the quarter. Our underlying net income for the quarter after adjusting for the impairment was $5.1 million and exceeded the prior year quarter net income by $311,000, or 6.5%. For the 12 months ending March 31, 2022, underlying net income of $9.3 million was $1.1 million lower than the prior year, reflecting the reduction in non-cash equity earnings of the MVP. The 12 months ending March 31st, 2021 contains nine months of non-cash equity earnings. You may recall that effective January 1, 2021, the MVP joint venture began recording such earnings commensurate with forward construction activities. If you move to slide six, investments made by Roanoke Gas for utility property for the first half of fiscal year 2022 totaled $10,759,000 and was approximately 20% higher than the first half of last fiscal year. Capital expenditures for main extensions and new customer additions are up $2.5 million from the prior year, driven by the $1.2 million of spending for the Blue Ridge expansion. Save spending was lower in the first six months. In addition to these investments, we have spent approximately $1.2 million on a one-time gas supply infrastructure project, which we expect to be completed this fall. Our overall capital spending is on plan. We move to slide 7. Our second quarter delivered volumes were strong, especially considering the mild winter, which was 4% warmer than 2021. Delivered volumes of 4.2 million decatherms were 5.6% higher than the second quarter of 2021, largely due to a 26% increase by the industrial customer class. The same customer that we highlighted in the summer of 2022 began blending natural gas in their fuel mix in late December and increased natural gas consumption throughout the second quarter. We expect this customer to continue to use comparable volumes of natural gas through the third quarter. On slide 8, you'll see that our year-to-date volumes are 1% higher than the volumes we delivered for the first six months of 2021, in spite of warmer weather. The decline in deliveries to our residential customers, which are weather-related, was generally offset by the increase to our industrial customers. Paul will now discuss our customer and service growth, as well as the outlook for the remainder of our fiscal year.