John D’Orazio - President, Chief Executive Officer Paul Nester - Chief Financial Officer.

Good morning. I’m John D’Orazio, President and CEO of RGC Resources. Welcome and thank you for joining us as we discuss RGC Resources Third Quarter 2019 Results. First, I’d like to go over a few administrative items. We have muted all lines and ask that all participants remain muted during the presentation.

After the presentation is completed we will take questions. The link to today’s presentation is available on the Investor & Financial Information page of our website at www.rgcresources.com. We begin the presentation with a quick reminder on forward-looking statements as shown on slide one.

Moving on to slide two, today we plan to review key operational and financial highlights, our outlook for the remainder of 2019 and end with Q&A. As shown on slide three, the results for this quarter were on par with prior year. Third quarter 2019 earnings per share are $0.14, which matches our third quarter 2018 results.

Further details of our financial results will be discussed later in the presentation. As slide four highlights, we invested $5.6 million in a regulated utility in the third quarter, a 20% decrease over the same period last year.

We spent approximately $2.8 million on infrastructure replacement, $1.3 million on customer growth and $1.5 million on our capital needs.

The quarter-to-quarter change was primarily due to timing of several 2018 customer growth and system expansion projects, net a nearly $1 million or 47% increase in say infrastructure replacement program expenditures in 2019.

As shown on slide five, our year-to-date capital spending decreased approximately $800,000 over the same period in 2018, primarily due to several system expansion projects that occurred in the third quarter of 2018. Per slide six, we continue to experience steady customer growth.

We added another 124 customers during the third quarter, bringing year-to-date customer additions to 516, a 5.5% increase over 2018 additions. As noted on slide seven, total volumes for the third quarter 2019 decreased as compared to the prior year. This was due to a 42% warmer weather compared to the same period in 2018.

Commercial volumes decreased slightly, while industrial volumes were flat period over period. Over on slide eight, despite 4% warmer weather, year-to-date volumes remained flat compared to the prior year with only a 1% decrease. Commercial and industrial volumes followed the same trend as total volumes.

Now I’d like to introduce Paul Nester, Chief Financial Officer, to review our financial results..

Thank you, John. For those of you following along via the webcast, we are on slide nine. We will begin by reviewing the details of the third quarter. Operating income was approximately $1.6 million. During the third quarter we accrued a rate refund reserve based on the most recent staff report in our rate case.

This combined with lower delivered volumes offset the effects of the rate increase during the quarter. Operating expenses remained flat. Equity earnings in our Mountain Valley pipeline investment increased over $770,000 due to the continued construction. This is an increase of $532,000 over the prior year same quarter.

Interest expense increased due to increased borrowings related to the Mountain Valley pipeline, as well as the March long-term debt placement by Roanoke Gas. Let’s review our nine-month results.

Operating income increased 5% to approximately $11.1 million, primarily due to the revenue lift from the rate case, offsetting higher depreciation and other increases in various operating and maintenance expenses. Equity earnings in the MVP investment increased to approximately $2 million related to continued pipeline construction.

Other income increased by approximately $150,000, primarily due to the impact of revenue-sharing. Net income increased over $1.6 million or 25% compared to the first nine months of the prior year. Trailing 12 net income increased over $2.1 million or 32%. The trailing 12 results are impacted by the same drivers as the quarter and year-to-date periods.

John will now discuss our outlook for the remainder of 2019..

Thank you, Paul. Now let’s review our capital expenditure projections. In fiscal 2019 we are on track to invest approximately $46 million. As highlighted on slide 10, $22 million will be invested in a regulated utility with a focus on infrastructure replacement and customer growth. The remaining $24 million will be invested in MVP.

The Roanoke Gas general rate case staff report was filed in late June. The company’s rebuttal was filed last week, and a hearing is scheduled for mid-August. We anticipate a final order around the end of calendar year 2019. The MVP is approximately 89% complete.

We invested approximately $3 million in the MVP project during the third quarter and approximately $16.4 million year-to-date. We anticipate investing $7.1 million during the fourth quarter. At this time the pipeline is scheduled to go into service in the summer of 2020. Finally, our fiscal 2019 earnings guidance is between $1.02 to $1.07 per share.

Now that concludes our prepared remarks. [Operator instructions].

Good morning, everyone..

Good morning..

Hey, good morning, Mike.

How are you?.

Good and yourself?.

We’re doing great..

We’re doing well, thank you..

Paul, on your slides guys, the CapEx was down a little bit year-over-year.

Was that anticipated at this point?.

Actually we’ve got a little timing in our 2019 projects Mike. We didn’t have those in the comments, but we’re doing some equipment modernization out of a LNG facility, and we had planned for those expenditures to be in the fiscal third quarter. They’ve moved more to the fiscal fourth quarter.

So we do have some timing in the current year in addition to the timing in 2018, as John mentioned. .

And then maybe an update, I mean you did give somewhat of an update on MVP. Just maybe how the environment there in terms of regulatory and anything else that could affect timing out to next year is unfolding..

Yes, so as we’ve discussed on these calls and in the past, one of the big variables of course has been the weather, which impacts all forms of construction and as you recall last year, we had record wet weather which was very difficult on the project. This year we’ve actually had the opposite.

It’s been warm and dry and really just about perfect construction weather and their results in terms of stringing, welding and trenching and laying the pipe in the ground reflect that, and really we think the next couple of weeks is going to be that way as we wind through August.

So the weather has been cooperating, and they are essentially on schedule, with the schedule that they had laid out in the winter time in anticipation of this construction season. The regulatory environment has not really changed a lot over the last two or three months.

The two big issues are still there; the Appalachian Trail crossing and the Nationwide 12 permit to allow the stream crossing tie-ins. Those are proceeding as they had planned right now. Nothing in the schedule change from what’s been publicly disclosed there.

A little small item that our local press reported on with our Virginia Department of Environmental Quality, last week there’s a little two-mile section of the pipeline where there needed to be some further environmental remediation and control. They are working through that and I think that’s ordinary course of business relative to the project.

So again, it’s proceeding well and probably better than what those would have anticipated at this point in the year. .

For you to access gas off the line, will it need to be completely in service or will they bring that on in stages given the length of the line?.

So we are downstream of the Appalachian Trail crossing. We would most likely need that piece of pipe in place Mike for us to receive gas. Could gas be backhauled from Station 165 back to Franklin County in Roanoke? Maybe, yeah if the Appalachian Trail crossing wasn’t there. There hasn’t been any discussion around that point.

I think we all believe and expect that the regulatory matters will be resolved and the pipe will be completed in its entirety and gas will flow the full 303-mile length. .

Yes, the reason for the question, I just wondered, are they going to bring it online in stages and would you be more in the early stage part of both line when they start the compression or would you be at the tail end of the pipeline?.

Yes, unfortunately we’re kind of at the tail end again I think due to that Appalachian Trail crossing. So hypothetically if there was a delay there at the Appalachian Trail, could some other segments be placed in service? Potentially yes. There’s some upstream that that point interconnects with other interstate pipelines as you know..

Okay, that’s all I had gentlemen. Thank you..

Thank you, Mike..

Thank you, Mike..

Alrighty. If there are not any more questions, this concludes our third quarter earnings call. Thank you again for joining us today.

Everybody have a nice day!.