RGC Resources Inc.

Good morning. I'm Paul Nestor, President and CEO of RGC Resources. Thank you for joining us as we discuss RGC Resources 2022 third quarter results. Let's review a few administrative items. We've 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. Joining me today is Jason Field, our Chief Financial Officer, Tommy Oliver, our Vice President of Regulatory Affairs and Strategy, and Kelsey Davenport, our Director of Finance. Okay, let's go to slide one. We do have forward-looking projections and forecasts in this presentation and this is our disclaimer of such. The agenda is on slide two. We're going to start with an update of our operational results for the quarter. Jason will then discuss our delivered natural gas volumes and financial results. Tommy is going to give us a nice update on our renewable natural gas project. And I will conclude with a discussion of the outlook for the remainder of physical 2022. Moving to slide three, our operational results continue to be impressive in 2022. Customer additions are up 17% for the first nine months when compared to 2021. New main miles are ahead 12% of 2021, totaling just over five and a half miles. You may recall that last year was also a significant increase over historical norms for new customers in main miles. Since October 2020, we've installed over 12 miles of new main. It's just an outstanding result. We believe the new customer and main addition trends should continue through physical year end. If you reviewed our recently filed T&Q carefully, you may have noticed that from the March quarter to the June quarter, our total customer count receded from 63,000 in March to approximately 62,400 or 600 customers. This is due to customer turnoffs for nonpayment. And as this change is more pronounced than prior periods, we thought it worth discussing. The service disconnection moratorium, which prohibited customer turnoffs for nonpayment during the pandemic, was lifted in late summer of 2021. However, we did not begin turning off customers until the winter season concluded here in March of 2022. But from March of 2022 to June of 2022, we turned off just over 900 customer accounts for non-payment. If pre-pandemic history is an indicator, we expect a large number of these customers to make necessary payments and request service this fall with the arrival of colder weather. There's no question the pandemic and the moratoriums that were associated with that have had a Noticeful change in customer behavior from pre-pandemic experiences. Jason will now discuss our delivered volumes, financial statements, and capital spending.

Thank you, Paul. We are on slide four. Our third quarter delivered volumes were strong with 2 million decatherms delivered for the quarter, up almost 200,000 decatherms compared to the third quarter of 2021, or an 11% increase. This increase was largely due to customer volumes in the industrial class. The same customer that we highlighted in our second quarter earnings call continued blending natural gas in their fuel mix, and we expect that customer to continue to use natural gas in their manufacturing process through the summer. If you move to slide five, our year-to-date total volumes are 3% higher than the volumes we delivered through June 30th of last year. That's in spite of a 6% decline in heating degree days. The decline in weather-related deliveries to our residential customers was offset by the increase in our industrial transportation volumes, again, impacted by that same customer that's been utilizing natural gas to a greater extent this year compared to last year. If you move to slide six, our financial results for the third quarter of 2022, our operating income of $1.6 million exceeded the third quarter of 2021 by about $98,000 or 6.3%. The overall net income, however, for the quarter of $593,000 was a decline from the third quarter of 2021, approximately $18,000 or a penny a share. This was generally due to the decline in equity earnings of our investment in the Mountain Valley Pipeline held by our wholly owned subsidiary, Midstream. One theme that is common to the quarter, the nine months, and the 12 months ending June 30 is increased gas costs and is reflected in the higher revenues and operating expenses of each period. As a reminder, gas costs is a pass-through with no operating income impact. Non-gas operating expenses for the three months have increased primarily due to higher corporate insurance premiums, professional services, and bad debt expense. net of higher capitalized overheads. For the nine months ending June 30, 2022, operating income, which is mainly from the Roanoke Gas subsidiary, was $14.5 million, an increase of $238,000. Our net loss for the nine months and 12 months reflected the significant impact of the non-cash impairment on our investment in the Mountain Valley Pipeline, which we recorded in the second quarter. Both the nine and 12 months that ended June 2022 reflected a net loss that was $20.3 million. And we had no net income in the fourth quarter of 2021. That's why those numbers are the same at $20.3 million. Let's discuss our underlying financial results on slide seven. To aid in the comparison of our financial performance attributed to operations for the nine months and 12 months ended June 30th, we have adjusted our gap results for the non-cash impairment loss on our MVP investment that was recorded in the second quarter. Our underlying net income for the nine months and 12 months ending June 30th, adjusting for the impairment, was $9.3 million for both periods and represented a decline of $847,000 and $517,000, respectively. The decline for both periods was generally the result of the limited growth construction activity of the MVP in the current year compared to 2021. In the prior year, we recognized non-cash AFUDC of over $1.4 million for the nine months and $2.8 million for the 12 months ending June 30, 2021. Let's transition to slide eight. This represents our year-to-date capital expenditures and investments made by Roanoke Gas for Utility Property for the nine months of fiscal year 2022 totaled $17,431,000 and was approximately 17% higher than last year. Capital expenditures are up primarily in customer growth and system expansion, which includes approximately $2.5 million spent during the year on our renewable natural gas project, which Tommy will describe in greater detail detail later in the presentation. Paul will now discuss the outlook for the remainder of the fiscal year.

Thank you, Jason. As we said on previous calls, our teams continue to just do an outstanding job. The financial results, particularly in our reno gas subsidiary, continue to reflect that. We are on slide 9, and slide 9 contains a rendering of our renewable natural gas or RNG equipment and Tommy is going to give us a nice overview of that exciting project. Tommy?