Atmos Energy Corporation

Greetings and welcome to the ATO fourth quarter earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dan Mazur, Vice President of Investor Relations and Treasurer. Thank you, sir. You may begin.

Thank you, Maria. Good morning, everyone. Thank you for joining our fiscal 2022 fourth quarter earnings call. With me today are Kevin Akers, President and Chief Executive Officer, and Chris Forsythe, Senior Vice President and Chief Financial Officer. Our earnings release and conference call slide presentation, which we will reference in our prepared remarks, are available at atmosenergy.com under the investor relations tab. As we review these financial results and discuss future expectations, please keep in mind that some of our discussion might contain forward-looking statements within the meaning of the Securities Act and the Securities Exchange Act. Our forward-looking statements and projections could differ materially from actual results. The factors that could cause such material differences are outlined on slide 39 and are more fully described in our SEC file. With that, I will turn the call over to Kevin.

Thank you, Dan, and good morning, everyone. We appreciate your interest in Atmos Energy and are glad you joined us this morning. As tomorrow's Veterans Day, I would like to take this opportunity to thank you and to say thank you to those who served in our own forces and approximately to the 300 of our Atmos Energy teammates as part of the nearly 20 million Americans who have bravely served our country. Thank you for your service. Yesterday, we reported earnings per share of $5.60, which represents the 20th consecutive year of earnings per share growth. Chris will provide some additional color around our financial results later in the call. I will begin today's call with a review of our fiscal 22 accomplishments, provide an update on key pipeline projects, and we'll close with some thoughts about fiscal 23. Our success in fiscal 2022 was once again reflected by the commitment and ongoing effort of all 4,800 Atmos Energy employees. I've said it before and I will say it again. They are the heart and soul of Atmos Energy and provide the foundation for the sustained long-term success of our company. Fiscal 22 was our 11th year of executing our proven investment strategy of operating safely and reliably while we modernize our natural gas distribution, transmission, and storage systems. Over that 11-year period, we invested over $15 billion in modernizing and expanding our natural gas systems, replacing approximately 6,300 miles of distribution pipeline, approximately 440,000 steel service lines, and over 1,200 miles of transmission pipeline. Over that same 11-year period, we added nearly 400,000 customers, including over 62,000 customers during fiscal 22. And we continue to see strong natural gas demand from new and expanding industrial customers. In fiscal 2022, we added approximately 50 new industrial customers with an estimated annual load of 20 BCF, per year once they are fully operational. Over the last three years, we have added nearly 120 industrial customers with an estimated annual load of 35 BCF. And these customers are from various industries, manufacturing, food processing, hospitals, automotive, and distilleries. Our physical 22 capital investment of over $2.4 billion supported the modernization of our distribution and transmission systems through the replacement of 715 miles of distribution pipe, the replacement of more than 47,000 service lines, of which 24,000 were steel service lines, and over 155 miles of transmission pipe. all to further enhance system safety and reliability. Additionally, we installed over 200,000 wireless meter reading devices and now have over 2 million such devices across our system. I want to take this opportunity to highlight and thank our procurement team for their focus, dedication, and continued outstanding efforts to have the necessary materials and resources available for our distribution transmission, and storage projects. Just as they had done throughout the past decade, their strategic planning efforts have us well positioned for continued execution upon our strategy in fiscal 23. For example, we currently maintain about six months of inventory for our distribution and transmission operations needs and have ordered all of our anticipated steel pipe needs for fiscal year 23. We continue to coordinate with our vendors and pipe mills as we place our FY24 steel pipe orders. Now I want to provide you an update on a few of our larger Atmos Pipeline Texas projects and highlight their value in safety, reliability, versatility, and supply diversification that they provide APT and its customers. We are nearing the completion of APT's third salt dome cavern project at Bethel, which will provide more than six BCF of additional working gas storage capacity. We began filling the new cavern this week and remain on track to place the cavern in service by the end of the calendar year. We are also nearing completion of the second phase of our Line X integrity replacement project. which we will replace 63 miles of 36 inch pipeline. This project is also on track to be completed by the end of this calendar year. As a reminder, Line X runs from Walhaw to Dallas and is key to providing reliable service to the local distribution companies behind APT system, as well as transportation customers that move gas from Walhaw to Katy. We continue to make good progress with our Line S2 project that has three phases. As a reminder, Line S2 brings supply from the Hainesville and Cotton Valley Shell Place to the east side of the growing Dallas-Fort Worth Metroplex. Phase one of the project replaced 21 miles of 14-inch pipeline with 36-inch pipeline and was placed into service the first quarter of fiscal 2022. And phase two of line S2 will replace 17 miles of 14 inch pipeline with 36 inch pipeline. We expect this to be in service late calendar this year. The final phase of this project is anticipated to be in service late calendar 2024. And again, this project will provide additional supply from the Shell Place East and bring that gas into the growing Dallas-Fort Worth Metroplex. To support the forecasted growth and increase supply diversity to the north of Austin and Williamson County, Texas, we have begun work on a 22-mile, 36-inch line that will connect the southern end of APT's system with the 42-inch Permian Highway line that runs from Wauha to Katy. This line is currently expected to be placed into service during the second quarter of fiscal year 2023. As you've heard in my previous updates, our customer service agents and service technicians provide exceptional customer service and support. During fiscal year 22, our agents and technicians received a 98% satisfaction rating from our customers. Thank you team for taking exceptional care of our customers every day. Our strategic focus on digital bill delivery and payment options is yielding benefits as over 50% of our customers are receiving electronic bills while the utility industry average is 33%. And 81% of the total payments we received as of September 30 this year were electronic methods of payment, such as bank drafts, credit cards, and online banking. During fiscal 22, we provided approximately 260,000 hours of training. And in September, we reached a milestone of delivering 2 million training hours since the opening of our Charles K. Vaughan Training Center in 2010. In fiscal 2022, we continued enhancing our comprehensive environmental strategy, focused on reducing our scope one, two, and three emissions. and environmental impact from our operations in the five key areas of operations, fleet, facilities, gas supply, and customers. Our efforts in fiscal 22 to reduce emissions and our environmental impact included our ongoing distribution and transmission system modernization programs that I mentioned earlier. And at our five APT storage fields, we completed the installation of gas cloud imaging technology. These 360-degree fixed-face cameras will continuously monitor our compression and storage field assets for methane emissions. And if necessary, the technology will send alerts including images to our plant operations employees in addition to text and email alerts. Additionally, in fiscal 22, we continued our installation of advanced wellhead leak detection at our distribution storage facilities. And we expanded our system monitoring technologies by adding additional advanced mobile leak detection vehicles, as well as implemented technology to capture methane emissions from pipeline maintenance activities. From a fleet and facilities perspective, we began transitioning our fleet to gasoline hybrid light duty vehicles and to CNG for our heavy-duty vehicles. Additionally, we are adding CNG refueling stations at our Fort Worth and Round Rock facilities, both of which are scheduled for completion by end of this calendar year. At our corporate data center, we installed a natural gas-powered fuel cell to generate high-efficiency, grid-independent electricity with low emissions. The fuel cells reduced our emissions at the data center by 27%. This is truly another example of how natural gas plays a pivotal role in lowering greenhouse gas emissions while increasing reliability to our critical facility. We have two new service centers that are pending leadership in energy and environmental design or LEED certification. If certified as expected, this would bring the total number of LEED certified facilities we have to 17, or approximately 11% of our total facilities. We are currently transporting approximately eight BCF a year of RNG across our system for end use customers. And we are evaluating over 30 opportunities that could further expand the amount of RNG that we are transporting today. Finally, we are partnering with local Habitat for Humanity organizations in each of our eight states to provide families with zero net energy homes. These homes use high efficiency, natural gas appliances, rooftop solar panels, and advanced insulation materials to produce more energy than they consume. During fiscal 22, we completed five new zero net energy homes in Texas and one home in Owensboro, Kentucky. And we are scheduled to complete a home in Jackson, Mississippi this December. We recently broke ground on a home in Dublin, Virginia and expect to complete construction in the spring of 2023. The seven Z&E homes that we have completed in the last 14 months demonstrate the value and vital role natural gas plays in helping customers reduce their carbon footprint in a cost-effective manner. To wrap up fiscal 22, A 4,800 Atmos Energy employees through our Feeling Safe and Thriving Communities initiatives made a difference in the lives of others by supporting schools and students with books, meals, and snacks. We honored our healthcare workers and first responders by supporting more than 140 nonprofits dedicated to taking care of our hometown heroes, supplying them with meals and needed supplies. We planted trees and worked in our community gardens. Our team hosted utility fairs and energy assistance blitzes to support our Share the Warmth program for over 11,000 customers and donated $7 million of financial support. And for 300 local food banks and shelters, the financial and volunteer resources our team provided translated into nearly 9 million meals. for our neighbors in need across our 1400 communities. I am very proud of our team because of their investment of time, talent, and resources. We are making a difference in our communities. A successful fiscal 2022 has us well positioned as we move into the second decade of our strategy. I'll now turn the call over to Chris who will provide some additional color around our fiscal 2022 financial results. and discuss our fiscal 2023 guidance and updated five-year plan through fiscal 2027. I will then return with some closing comments. Chris, over to you.