管理層發言
Good morning, and thank you for joining us as we discuss RGC Resources' 2026 third quarter results. I'm Kelsie Davenport, Director of Finance of RGC Resources, Inc. I am joined this morning by Paul Nester, President and CEO of RGC Resources, and Tommy Oliver, Senior Vice President of Regulatory and External Affairs. Tim is under the weather this morning and is unfortunately unable to be with us. Before we get started, let's review a few administrative items. The link to today's presentation is available on the Investor and Financial Information page of our website at www.rgcresources.com. Turning to Slide 1, this presentation contains forecasts and projections. Slide 1 has information about risks and uncertainties, including forward-looking statements that should be understood in the context of our public filings. Slide 2 contains our agenda. We will discuss our operational and financial highlights for the third quarter and first nine months of our fiscal 2026 year. We will then review the outlook for the remainder of 2026, with time allotted for questions at the end. I will now turn the presentation over to Tommy.
Well, thank you, Kelsie, and good morning, everybody. Turning now to operations on slide 3. Main extensions and renewal activity has continued on a steady pace through fiscal 2026. We installed 3.5 miles of new main through the first 9 months of the current fiscal year, a little shy of our installation in the same period of fiscal 2025. In addition, we connected 464 new services in 2026, down from the previous same period last year. We do have a healthy backlog of main extensions, which speaks well of our continued residential development across the region. As shown on the right side of the slide, we renewed 2.7 miles of main and 322 services during the first 9 months of the 2026 fiscal year. While winter weather dampened the main mile renewal compared to the same period last year, the service renewals increased 40%. Let's transition over to slide 4. Slide 4 shows our delivered gas volumes for the quarter.
Weather patterns during the third quarter resulted in some counterintuitive results, especially in May. The quarter was slightly colder than the same period a year ago, as shown on the slide, but those colder days occurred unevenly and, as a result, did not generate the typical gas usage you would expect from cooler weather. It did, however, result in a credit to customers under the weather normalization adjustment. Overall for the quarter, residential and commercial usage was flat. Industrial usage was up more than 25%, mostly attributable to our largest industrial customer. As a reminder, under our tiered rate structure in that customer class, those incremental dekatherms are delivered at our lowest margin. Transition over to slide 5, delivered gas volumes do not tell our exact same story for fiscal 2026 year-to-date. Residential and commercial volumes were down despite heating degree days increasing by 3%.
Many of those heating degree days were generated around the Winter Storm Fern event, with other portions of the year warmer than the equivalent period a year ago. Volumes were up 1%, with the residential and commercial declines offset by industrial increases, again led by that same industrial customer just mentioned. Included within these numbers is the absence this quarter of a longtime top 10 customer who ceased operations in March. We discussed that situation more fully on the previous earnings call. Slide 6 shows CapEx for the first 9 months of fiscal 2026 compared to 2025. Overall investment was $16.1 million in the current year, up approximately 2% over the same period a year ago. As customary, we picked up the pace of capital spending in quarter 3 and made up most of the deficits that arose from weather delays in the prior quarter. We will discuss plans for the full year later in the presentation. I'm going to now turn the presentation back over to Kelsie to review our financial results for the quarter. Kelsie?
Thank you, Tommy. Slide 7 shows both our third quarter and 9-month year-to-date financial results for fiscal 2026. Third quarter results were nominally ahead of the same period a year earlier. Net income was approximately $550,000, or $0.05 per diluted share, driven primarily by higher margins. The interim rates that went into effect January 1, along with the new state revenues, drove the margin increase despite the loss of the large industrial customer we've noted in previous calls and the weather Tommy just discussed. Operating expenses, as shown on the slide, are lower due to gas costs. However, non-gas operating and maintenance expenses are higher versus the fiscal 2025 third quarter, primarily due to inflationary pressures on personnel costs, professional services, and IT support. The year-to-date results are also shown on slide 7. Net income was $14.2 million in the first 9 months of fiscal 2026, or $1.37 per diluted share, compared to $1.31 per diluted share in the first 9 months of fiscal 2025, a 4.6% increase.
The effect of the non-gas base rate increase was noticeable in the second quarter, largely driving our year-to-date results as the additional revenues affected the volumetric component. Thus, a larger portion of the increase was recognized during the winter heating season due to the higher energy demands. Accordingly, when delivered volumes are lower in the second half of the fiscal year, margin and net income are also lower. The items that have led to increased expenses in the quarter are also driving higher expenses in the year-to-date results. Moving to slide 8, our balance sheet remains strong. During the quarter, we refinanced a $15 million note that matures later this month and carries a 2% interest rate. It is classified as long-term debt at June 30. This forward starting note and its attendant interest rate swap is fixed for a 3-year term at 5.2%. I did want to add a few comments on the Mountain Valley Pipeline investment.
The MVP mainline has been in service for just over 2 years now and is operating safely and reliably as expected. Our share of the joint venture earnings is comparable this year to a year ago, and we continue to receive excess cash distributions on a quarterly basis. To enhance future cash flow from MVP, there are 2 projects underway, Southgate and Boost. Southgate will move gas from the end of the mainline into North Carolina, and Boost will enable a 30% increase in the amount of gas that can be transported through the mainline. Southgate is in the construction phase and progressing as expected. Boost is actively working on its permits and has placed orders for equipment. We have invested just over $1 million in the fiscal year for these projects, with the funding coming from lines of credit that we established in September of last year. We are pleased with the progress and prospects of both projects. I will now pass the presentation to RGC's CEO, Paul Nester. Paul?
Thank you, Kelsie, and good morning. Thank you for joining us for the third quarter earnings call. We're on Slide 9. We have a few items to discuss as we are close to wrapping up fiscal 2026. We're going to start on Slide 10 with an update on our LNG facility. If you were with us last quarter, and if you've read our 10-Q, we've disclosed that we did have some structural damage in the fiscal second quarter at the LNG facility. Our teams are still there working to assess that damage and to keep that facility safe. They're doing a great job. I'd like to thank them for all their fantastic work over the last 6 months. We continue to be in touch with the State Corporation Commission on that matter as well as our insurance carrier. Certainly, when we have more information to disclose, we'll do that appropriately. We, as you can see on the slide, have been aggressively working to replace the peak shaving supply that our LNG facility provided.
You may recall that facility was used by the company on the coldest winter days to supplement our interstate pipeline volume. Without the facility being available, you can see we've added gas through one of our primary interstate pipelines, the Columbia Pipeline, or referred to as TCO. We're excited about that and grateful for that. We're going to talk about a capital project that's now underway that's going to bring more Mountain Valley gas further into the Roanoke Gas distribution system. That project's begun as well, and we're in the process of procuring truck LNG. That's something we've done in the past, particularly before Mountain Valley was completed. Moving on to slide 11, we've kept the capital forecast for 2026 about the same as what we showed you last quarter at $22 million. We have changed some of the buckets, if you will, of that spending. We have pulled forward again this Mountain Valley-Lafayette main extension into this year.
That project was in our 5-year capital forecast, so it was something that the company fully intended to do, but we've now pulled that forward a little bit into 2026. When we start showing you our 2027 capital forecast, it's going to be a larger component of that. I would now like to ask Tommy to address the recent rate case results and some other regulatory happenings. Tommy?
Yes, thank you, Paul. We're on Slide 12 now. As we discussed in our most recent earnings call, Roanoke Gas filed an expedited rate case on December 2 of last year seeking approximately $4.3 million in incremental annual revenues based on our currently authorized return on equity of 9.9% and a 59% equity ratio. Rates became effective January 1, 2026, subject to refund. Happy to report that we reached a settlement with the SCC staff on July 1, 2026, that resolved all issues in the case. We did participate in the scheduled hearing on July 15, 2026. The stipulated incremental revenue agreed to in the settlement was $3.85 million, and we began charging those lower rates that resulted from the settlement beginning August 1. We are pleased to have reached agreement and believe this was a reasonable outcome. As of June 30, we have $275,000 accrued for refunds to customers related to the rates charged beginning January 1, 2026. The ongoing cost associated with the LNG facility event was not addressed in this case, however. We continue to update the staff and work with them through the process. We have established a regulatory asset, and we expect recovery in some future proceedings.
Yes, thank you, Tommy. It's a great result, and I just want to thank Tommy and his team and the rest of the RGC team on that. That truly is a company-wide effort. It reflects the investment in the system to continue making it safe—or keeping it safe and reliable, I should say. A lot of support across the company goes into the ratemaking. And we're really pleased with this result. I think it's fair and appropriate at this point in time. We're of course always mindful, Tommy, of the impact on the customer and what it means to customer bills.
Absolutely, yes. Thank you.
Before we open the line for questions, let's review our 2026 forecast. We've narrowed the range from what we presented last quarter, largely due to unusual weather patterns and natural gas delivery issues in May. We now show the low end at $1.29 and the high end at $1.32. Similar to 2025, we are projecting a small loss in the fiscally typical fourth quarter; Kelsie and Tommy both discussed that. The volumetric nature of our rates tends to produce higher margins in the first and second quarters, and lower margins in the third and fourth quarters. There has been a lot of discussion about interest rates and inflationary pressure in recent weeks. I think most people now believe there may be a rate increase later this year. A year ago there were projections of three to four rate decreases, which now seems unlikely given inflationary pressures. Kelsie mentioned the note we refinanced; that was a great effort by the team and we appreciate our bank partners.
Tommy discussed housing starts and residential development. The Roanoke Valley economy continues to be overall positive. We noted a large industrial customer that ceased operations in March, but otherwise conditions remain positive. The Google data center is moving forward. There continues to be investment in the medical complex, notably the Taubman Cancer Center; the construction there is phenomenal, along with other nearby developments, so we are excited. A large foreign direct investment was announced at the end of the third quarter; the company will spend about $85 million and add almost 500 jobs, which we are also excited about. As always, we want to thank our customers first and foremost; without them we would not be here. I’d also like to thank our employees. We had another quarter of working very safely, and I am proud of their efforts. With that, we will open the line for questions.
分析師問答
Good morning, everyone.
Good morning. So nice to have you with us.
Looking across your slide here on the LNG update, I was wondering if you could give us a little more color as to what the problem really is and potential solutions for it. I mean, is this a situation where the tank has to come out and be replaced or is it something else?
Yes, happy to answer that question, Mike. In February, around the Winter Storm Fern event where we had really extraordinarily cold weather for an extended period of time, and of course, that cold weather enveloped most of the country, as you know, we did have what is known as icing around the base of the tank, and that caused the tank to move slightly and incur some structural damage. One term to consider is metal fatigue. Now, we did not have any leaking or any unsafe condition as a result of that, thankfully, and we're again very grateful for that. The tank was constructed and put in operation in 1972, so it's 54 years old. While it's approximately a 90- to 95-year asset, if you will, it's about halfway through that and had some metal and structural compromise. So we're working with engineers we've retained who are tank specialists to help us ascertain what our options are, Mike, for the tank.
Are we able to make repairs in some of those spots where there was metal stress? Or are we evaluating, for example, possibly newer, more modern tank holding apparatus? As a reminder, our tank is approximately a 200,000-gallon tank, which also equates to approximately 220,000 dekatherms. I would say it has been well-sized, if not maybe a little larger than what we've needed in the Roanoke Gas system, which again is a great thing. It's been wonderful for resilience and reliability over many, many years. So we're still evaluating what the future looks like and what our future options are for storage. For sure, we want on-system storage to help with peak shaving. We're fortunate now to have the third pipeline, Mountain Valley. And you may remember over many years ago, we always talked about if something were to happen to one component of our supply, having that additional supply source available would make the difference, and that's truly the case today.
So you think you'll have, obviously not for this winter season, but the next winter season? If it's taken care of?
That's the plan right now. We're working to have that peak shaving capability via on-system storage for the 2027-2028 winter season. Correct. That's our goal right now. Any other questions? We'll wait just one more moment to see if there are any further questions. Okay. Hearing none, this concludes the third quarter earnings call. Again, we just want to thank each and every one of you for taking time to be with us, and we very much look forward to you listening. We look forward to being with you in December when we share the full year 2026 results. As Kelsie and Tommy reported, we're off to a good first 9 months and look forward to completing the fiscal year. Wishing everyone a safe and happy weekend. Thank you.