RGC Resources Inc.

Good morning, everyone. I'm Paul Nestor, President and CEO of RGC Resources, Inc. Thank you for joining us as we discuss RGC Resources' 2022 fourth quarter results. We do have a few administrative items to cover, one of a technical nature. Apparently, the conference call service has not allowed us to mute all lines, so we do ask if you're participating today, if you could mute your line individually, we would greatly appreciate that. Let's review a few other administrative items. 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. Jason Field, our CFO, and Tommy Oliver, our Vice President of Regulatory Affairs and Strategy, as well as Kelsey Davenport, our Director of Finance, are with me on the call this morning. All right, moving over to slide one, we do have forecasts and projections in today's presentation, and our forward-looking statement disclaimer can be found on the first slide. Moving on to slide two, the agenda, we'll start with a review and update of some of our operational results and financial highlights for fiscal 2022, as well as the fourth quarter. And Jason will then cover specially delivered volumes and financial results. Tommy will give us an update on the RNG project and our base rate case that we just filed last week. And I will conclude with a discussion of the outlook for fiscal 2023. Moving to slide three, we just had another outstanding year in our Renault gas subsidiary operationally. Our customer additions are up 11% compared to last year. and we added 6.9 new miles of Maine in the fiscal year. You notice our customer count may appear to be lower than last year and I believe we've talked about this in previous calls but that is due to the service disconnect moratorium which started in the spring of 2020 with the pandemic and lasted until the late summer of 2021. We did not reinstitute our processes of turning off delinquent customers until March of this year. So as we went through the summer, we were able to reestablish those disconnect processes. And now that we're into colder weather here in early December, a lot of those customers, as we've seen in the past, have started to pay their bills and seek service reconnection. We certainly expect our first quarter 2023 customer count number to reflect that change. I would also like to mention a few other operational highlights that are not on the slide. We talk about our saved capital spending, but just wanted to give you a couple of stats from 2022. We renewed 8.3 miles of main and 605 services on the heels of doing 7.8 miles of main in fiscal 21 and 620 service. So in total, in the last 24 months into September 30th, we've renewed over 16 miles of main and 1,225 services, just an outstanding result. A couple of the other initiatives that we undertook this year, we did a really thorough safety culture survey in our operation. Safety is our number one priority and that survey produced good results and has given us some action plans to incorporate throughout our operation. I'll now hand it over to Jason, who will discuss our delivered volumes, financial statements, and capital spending.

Thank you, Paul. We are on slide four. Our fourth quarter delivered volumes were up approximately 181,000 decatherms compared to the fourth quarter of 2021, which was a 14% increase. This increase was largely due to the same industrial customer we've highlighted in the past. This customer has the ability to fuel switch between their natural gas and coal in its construction materials manufacturing process. Their natural gas usage has continued into the first quarter of 2023. Let's move on to slide number five. We ended our year with total delivered volumes that were approximately 4% higher than fiscal 2021 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. In fact, six of our top seven customers by volumes delivered increased their usage over 2021. We move on to slide number six. Our financial results reflect an additional impairment that was recorded in the fourth quarter in our midstream subsidiary. This second impairment, as you recall, the first impairment was taken in March, was a result of a reassessment of the fair value of our investment in the Mountain Valley pipeline as of September 30, 2022. The 10-K provides all of the details, but the most recent hearing in the U.S. Fourth Circuit of Appeals and the timing of permit reissuances drove this assessment. For the fourth quarter of 2022, our operating income of $455,000 was approximately $100,000 less than the fourth quarter of 2021. Non-gas operating expenses for the quarter exceeded the prior year due to higher balances of bad debt expense, professional fees, and general inflationary increases in other costs. Other income for the quarter was higher than the prior year due to the transfer of natural gas distribution assets from a local housing authority. In exchange for the renewed assets, Roanoke Gas assumed responsibility for their operation. For the year, we are pleased to report our operating income of $14,916,000, which is $137,000 higher than 2021. We've experienced increasing costs related to bad debt, professional fees, and other higher operating and maintenance expenses. Our teams continue to do a great job managing these expenses in an overall inflationary environment. Interest expense increased approximately $466,000 due to a combination of higher overall debt balances and an increase in the interest rate on our variable rate debt. Additionally, with no construction on the MVP since November of 2021, There was a significant reduction in equity earnings in our midstream affiliate, which is reflected in our fourth quarter and full year operating results. We move on to slide number seven. To aid in the comparison of our financial performance attributed to operations for the quarter and the year ended 9-30, we've adjusted our gap results for the non-cash impairment loss on our MVP investment that were recorded in the second and fourth fiscal quarters. Our underlying net income for the three and 12 months ending September 30th adjusting for the impairment was a $75,000 net loss for the quarter and $9,179,000 of net income for the year. The decline for both periods was largely the result of the limited growth construction activity of the MVP in the current year compared to 2021. In the prior year, We recognize non-cash AFUDC of approximately $181,000 in the fourth quarter and $1.7 million for the 12 months ending September 30, 2021. Let's move on to slide number eight. We experienced strong investments made by the Roanoke Gas for Utility property for the 12 months of fiscal year 2021, which totaled $25,461,000 an increase of approximately 27.5% over the prior year. The fourth quarter was a robust capital spending quarter due to the RNG project, which Tommy will review in a minute, as well as execution by our teams and favorable construction conditions. For the year, capital expenditures were up, primarily in SAFE, customer growth and system expansion, along with approximately $3.4 million invested on the RNG project. Paul will now discuss the outlook for fiscal 2023.

Yeah, thank you, Jason. And we're on slide nine. Before we review our fiscal 2023 capital spending forecast and our EPS forecast, Tommy will provide a brief overview and update of the RNG project and discuss the recently filed rate case, which will increase the non-gas base rates our customers pay for natural gas service. Tommy?