Michael Stein - CEO Geoffrey Rochwarger - VC and CEO of Genie Oil E&P Avi Goldin - CFO.

David Harrison - GGH Investments Aaron Shafter - Great Mountain Capital Management Kevin Nicholas - Private Investor.

Good morning, and welcome to Genie Energy's Third Quarter 2017 Earnings Call. All participants will be in a listen-only mode. [Operator Instructions]. After today’s presentation by Genie Energy's management, there will be an opportunity to ask questions. [Operator Instructions].

In its presentation, Genie Energy's management team will discuss financial and operational results for the three-month period ended September 30, 2017.

Any forward-looking statements made during this conference call, either in the prepared remarks or in the Q&A session, whether general or specific in nature are subject to risks and uncertainties that may cause actual results to differ materially from those which the company anticipates.

These risks and uncertainties include, but are not limited to, specific risks and uncertainties discussed in the reports that Genie Energy files periodically with the SEC.

Genie Energy assumes no obligation, either to update any forward-looking statements that they have made or may make or to update the factors that may cause actual results to differ materially from those that they forecast. During their remarks, management may make reference to adjusted EBITDA, which is a non-GAAP measure.

Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP.

Management believes that Genie Energy's adjusted EBITDA provides useful information to both management and investors by excluding certain expenses that may not be indicative of Genie Energy's or the relevant segment's core operating results.

Adjusted EBITDA should be considered in addition to, not as a substitute for, or superior to, gross profit, income or loss from operations, cash flow from operating activities, net income or loss, basic and diluted earnings or loss per share or other measures of liquidity and financial performance prepared in accordance with GAAP.

The Genie Energy earnings release including a reconciliation of adjusted EBITDA to net income is available on the Investor Relations page of the Genie Corporation website, www.genie.com. The earnings release has also been filed on the Form 8-K with the SEC. Please note this event is being recorded.

I’ll now like turn the conference over to Michael Stein, Genie's Energy's Chief Executive Officer. Please go ahead, Mr. Stein..

Thank you operator. Welcome to Genie Energy's third quarter 2017 earnings call. This morning we will review our operational and financial results for the three months ended September 30, 2017.

I will lead off with an update on operational progress at Genie Retail Energy, then with or not they are not racial progress Intel energy then Geoff Rochwarger, Genie Energy's Vice Chairman and CEO of Genie E&P will review operations in Israel. After Geoff's remarks Avi Goldin, our Chief Financial Officer will discuss the quarter's financial results.

At the conclusion of Avi's remarks we will take your questions. Before discussing Genie Retail Energy's results I want to take a step back and review some of Genie Energy's strategic priorities.

As we discussed on previous calls we are intent on enhancing shareholder value by expanding our retail customer base through both organic meter growth and synergistic acquisitions adding new markets to diversify our retail service area and thereby reducing our regulatory and weather related risk, diversifying GRE's portfolio of energy solutions to optimize our mix of offerings in each of our markets, characterizing the resource we have identified in Northern Israel and maintaining a strong liquid balance sheet to support investment and growth initiatives.

In keeping with these priorities in the third quarter we achieved tremendous customer growth while further diversifying our markets geographically and expanding our portfolio of energy solutions. In Israel we made significant progress drilling Ness 10. Behind the scenes we continue to integrate Town Square Energy which we acquired last November.

We have more work to do to make our combined operations more efficient to fully leverage Town Square digital channel expertise and to optimize our marketing and sales in the new territories GRE brought us but we are moving well in the right direction. In addition we are working to leverage the acquisition of Mirabito Natural Gas business.

We acquired Mirabito, a Fort Lauderdale commercial gas supplier in August for $3 million plus working capital. Mirabito is our entrée into Florida, the nation's third most populous state and into the commercial energy supply marketplace.

We're optimistic about the long-term opportunity into our commercial supply markets and Mirabito which has a long record of profitable operations represents a careful and low risk way to build the foothold.

In August we formed the joint venture to offer electricity and natural gas service to residential and small business customers in the UK deregulated retail market. In the meantime we have done a great deal of spade work to prepare for market launch.

We plan to start data testing with friends and family later this month and if all goes well to ramp up meter acquisition efforts towards the end of the first quarter in 2018. Turning now to our reported third quarter results, gross meter additions in the third quarter increased by 91% to 111,000 meters compared to 58,000 in the year ago quarter.

Net of churn by September 30th we had increased our customer base by 84,000 RCE's from the year ago total 325,000 RCEs and increased our meter served count by 63,000 meters over the same period to 446,000 meters. Back in January and February of 2014 the polar vortex caused a spike in retail customer churn and resulting dip in our meter counts.

I'm very pleased that we have now rebuilt our meter base to the point where we are serving over 300,000 RCEs for the first time since then. Sequentially we added 36,000 RCEs and 15,000 meters net.

The larger jump in RCEs compared to meters primarily reflect the acquisition of Mirabito which added nearly 13,000 natural gas RCEs on less than 1000 gas meters. The year-over-year increases include the impact of both Mirabito and Town Square Energy acquisitions.

The strong increase meter adds drove the corresponding increase in average monthly churn during the third quarter to 6.9% up from 6% in the year ago quarter and 6.3% in the second quarter.

Churn rates are highest among new customers and we've celebrated our customer acquisition throughout the year enrolling 293,000 new meters through the first nine months of 2017. Looking ahead last quarter I discussed certain regulatory changes we anticipate in New York.

As you may remember the New York Public Service Commission or PSE have finalized an order prohibiting low income residents of the state from enrolling with any retail energy provider.

The order requires Genie and other retail energy providers to turn out low income customers over to the incoming utility upon the expiration of their current contract terms. After industry backup fuels were denied, a Federal class action suit filed by low income customers won a temporary stay of the order until Federal Guilds Panel can hear them out.

In the meantime the PSE is moving forward on a broader reexamination of the role of competitive energy markets with an evidentiary that may lead to other significant regulatory changes impacting our business.

In response we continue to support industry efforts to promote and protect competitive retail energy markets and consumer choice in New York and the to the Ministry. In fact the regulatory changes in the state could hazard [ph] our operations.

Nevertheless unfavorable outcome in the cross action suit or subsequent New York PSE orders could materially impact our results going forward.

To wrap up the third quarter was a productive one with the exciting developments including strong organic RCE and meter growth, the addition of our first commercial meters and preparations for a soft launch in United Kingdom later this year.

While the regulatory landscape in New York remains a wildcard, we are working diligently to minimize the impact at us. And finally yesterday I had the privilege to be named the Chief Executive Officer of Genie Energy. I want to thank Howard Jonas and Genie's Board for the honor of leading the outstanding Genie organization.

With our retail energy business poised to open new markets and Afek drilling Ness 10, I'm looking forward to working with the Board and our management teams to fully exploit the abundant opportunities before us. I appreciate the confidence shown in me, and I am excited to help achieve our goals.

Now here's Geoff Rochwarger to discuss the Afek operational results. .

Thank you Michael. I will begin with a quick overview of our progress on the exploration program to get any new investors up to speed. In April of this year Afek began drilling the sixth well of our oil and gas exploratory program in Northern Israel.

This well Ness 10 is the first well in the Northern portion of our licensed area and will help us determine whether the hydrocarbon source rock found in each of the five wells we previously drilled in the Southern portion of our licensed area is also present in the North.

We also expect to learn whether the expected increase in the depth of a source rock and other geologic features in the northern portion of the licensed area correlate with fully matured hydrocarbons.

Our to put it another way we want to determine the likelihood that any hydrocarbons that are or that may have been present in the Northern area source rock are fully matured and whether they are stone plays or have migrated within the formation. When I last updated you Ness 10 had reached a depth of 900 meters.

We were preparing to resume drilling through a very thick layer of heavy and sticky clay to a target depth of 1900 meters. We have successfully drilled approximately 1000 meters since our last call and have reached that initial target depth.

As discussed in our previous calls we are constantly adjusting our models to incorporate drilling results in real time and based on this new information the models now indicate that the clay layer was significantly bigger than originally projected.

This means that we now project the target zones to extend roughly from our current position down to an adjusted target depth of 2400 meters.

On a positive note the additional depth could suggest that any resource that may be present in the source rock is more likely to be further matured than in the Southern portion of our exploration area as a result of a significant increase in the depth of the rock.

I am optimistic that by employing managed flow rate drilling processes as we move through the target zone, we will be able to complete drilling operations and provide some preliminary answers as to the presence of the source rock and other conditions that would impact the maturation of any resource by our next quarterly call in early March.

Meanwhile Atit [ph] our drilling services startup is negotiating with third parties to drill water wells in Israel following the completion of Ness 10.

Our drilling rig and associated assets which we continued to upgrade provide capabilities that current competitors cannot match and are proving to be a real advantage as Israel seeks to reach strong demand from new sources of water. Now Genie Energy's Chief Financial Officer, Avi Goldin will review the third quarter's financial results..

Thank you Geoff and thanks to everyone on the call for joining us this morning. My remarks cover our financial results for the third quarter of 2017, a three month period ended September 30th. Except for indicated otherwise all comparisons in my remarks attribute to the results for the corresponding period in 2016.

Consistent with my approach in prior quarters I will focus on year-over-year comparisons rather than sequential comparisons in order to remove from consideration the seasonal fluctuations that characterize our retail energy business.

This quarter was highlighted by the significant operational developments including an increased pace in investment in organic meter acquisition, the acquisition of Mirabito Natural Gas, the launch of our UK venture, and in Israel the exploratory drilling of Ness 10.

Genie Retail Energy again generated all of Genie Energy's revenue, direct cost of revenues and gross profit.

Genie Retails revenue increased the $69.5 million, the highest level in over two years and $57.2 million primarily as a result of the growth of our electricity customer base following the acquisition of Town Square Energy in the fourth quarter of last year and the subsequent sales and marketing efforts in the new Town Square territories.

Not that in the quarter we have accrued $1.5 million related to a pending regulatory matter in New Jersey. The accrue reduced revenue by $1.3 million in increased expense by $200,000. Electricity sales increased to $66.2 million from $55.1 million.

We served on average during the quarter 28% more electric meters than in a year ago quarter while consumption for the year decreased 12%. Natural gas sales increased to $2.8 million from $1.8 million, on increased revenue per drum sold an increased in per meter consumption.

In addition sales generated by Mirabito Natural Gas which we acquired in August accounted $700,000 of the $1 million revenue increase. Although our gross margin percentage narrowed to 31.3%, consolidate gross profit increased to $21.8 million from $20.2 million on the increase in electricity sales.

The gross margin percentage on the sale of electricity decreased to 31.6%, and the average cost per kilowatt hour sold increased more rapidly than average sale price per kilowatt hour.

The gross profit on electricity sales increased to $21.6 million from $20 million as the impact of gross margin deduction was more than offset by 13% increase in kilowatt hours sold from our expanded customer base.

Gross margin percentage in natural gas sales increased to 18.7% and the gross profit on gas sales increased to $1.2 million from a small loss in the year ago quarter. Recall that last year's third quarter was impacted by write downs of natural gas and storage.

Consolidated SG&A expense increased to $19.3 million from $14.9 million primarily as a result of the costs associated with the significant increase in gross meter acquisitions that Michael covered in his remarks. As well as increases in payroll expense, consulting and professional fees.

Corporate SG&A was $2.2 million substantially unchanged from the year ago quarter. Exploration expense in Kraval [ph] ex-operations in Northern Israel was $750,000 compared to $1.3 million in the year ago quarter. Afek also capitalized $2.3 million in exploration costs compared to $126,000 in the year ago quarter as we spudded Ness 10.

Consolidated income from operations was $1.4 million compared to a loss from operations of $37.1 million in the year ago quarter when we wrote off all the capitalized exploration expense we had incurred yearly in the Southern portion of Afek licensed area to that point.

Adjusted EBITDA decreased to $3.3 million from $5.2 million in the year ago quarter as the increase investment in Mirabito [ph] acquisition more than offset the increase in gross profit. Genie retail energy contributed adjusted EBITDA of $5.4 million in the third quarter compared to $8 million in the year ago quarter.

Through the first three quarters of the year Genie Retail has generated $7.5 million in adjusted EBITDA including the impact of $10.5 million in accruals for legal and regulatory matters that we booked in the second and third quarters of this year.

Despite the significant investment Mirabito [ph] this quarter we are still comfortable with the lower end of our annual guidance for Genie Retail of $20 million to $25 million in adjusted EBITDA exclusive of these accruals.

Net income attributed to Genie common stockholders after non-controlling interest and preferred stock dividends from third quarter was $400,000 or $0.02 per share compared to a net loss of $32.5 million or $1.43 per share in the year ago quarter.

Our balance sheet remains strong with $31.1 million in cash, cash equivalents, and restricted cash of $33.4 million in net capital and long-term debt of just $2.5 million. Based on our financial and operating results this quarter Genie's Board of Directors again declared a quarterly dividend or common stock of $0.075 a share.

As we disclosed in the earnings release filed this morning we identified an error in our financial statements for the first and second quarters of this year.

The error related solely to the timing of revenue across the revenue between the two periods and impacted revenue by about $2 million, adjusted EBITDA by $1.2 million, and net income by $1.1 million lowering the first quarter and raising the second quarter by the same amount. There was no impact on the cumulative year-to-date totals.

We are in a process of comparing amended Form 10-Qs for the effected period and expect to file them shortly. That concludes my remarks on the third quarter financial results. Now Michael, Geoff and I will be glad to take your questions on our operational or financial results. I will now turn the call back to the operator for Q&A..

[Operator Instructions]. Our first question comes from David Harrison with GGH Investments. Please go ahead. .

Yes, I was wondering it was absent two months ago for the drilling and that's all taken care of and nothing more is going on with that, do you have any approximate time frame of when you think you might actually have -- information on just the drill, when we get down to [indiscernible] and you have information on that if that is actually good or not?.

Sure, hi David. So as we reported the last call we did have the Afek [ph] related suspended operations for approximately three months. As we thought and as I mentioned in the last call we expected within a week or so to receive our green light to precipitated drilling which we did.

We think that time we drilled over 1000 meters in the well, it brought us to just shy of 1900 meters up until about a week or two ago. We did some additional equipment which came on site.

We are resuming drilling this week and as I said in my comments the real time cuttings and other information from the actual drill now indicate that the target depth at the end of the well is 2400 meters rather than the initial 1900 meters that we thought. So, we expect drilling to be ongoing and take us the next several weeks to complete..

Okay, several weeks. Thank you very much. .

You're welcome..

The next question comes from Aaron Shafter with Green Mountain Capital Management. Please go ahead. .

It is Great Mountain Capital Management. First, congratulations on another profitable quarter. My questions are probably all for Geoff as they relate Afek and Ness 10.

I didn't catch the end of your answer there about a few weeks or something like that?.

Yes, so the last part of my answer was that we did drill approximately 1900 meters with some additional equipment we can now drill to our updated target depth of approximately 2400 meters.

So obviously depending on the amount of time that we can successfully drill those meters as well as utilizing the managed pressure drilling equipment that we have to better understand what might be in the target zone, I anticipate let's say to the end of this month, first project right now barring any other issues. .

So you believe you'll reach the target depth by the end of this month, that's your current prediction?.

That is my rough projection. Everything else remaining normal. .

Okay, so assuming no interruption or anything like that are you through the clay level?.

We are through the clay level and the deposit news is that once we finish with the clay level which is represented by proximately 850 meters our next question was answered which is once we finish with that we did start to see the subsurface layers that were present in our other five wells that we drilled.

So the question was answered that the large clay level that was not present in any of our other wells seems to be in addition and not instead of the expected geologic levels that we want. So what we do see right now is that hopefully we can confirm that there are organics there and that they'll be at a level of maturation that we need.

The good news is that it is deeper than we had originally thought..

Okay, have you discovered any organic so far?.

No, the layers that we have successfully unearthed have not had any organics or hydrocarbons as in the prior wells. And that is what should hopefully be coming forward in the next several weeks. .

Okay, alright, that is all my questions. Thank you very much. Good luck. .

Thank you. .

The next question comes from Kevin Nicholas an investor. Please go ahead..

Hi, I was wondering about the use of arcade [ph] outside of any drilling operation done assuming this means that you don't plan on drilling further wells or using this rig to further drill at Ness 10, I was just hoping to get some more color on that?.

So the assets that we're using right now in terms of drilling Ness 10, as I had mentioned previously we did acquire prior to drilling this well which in fact from an economic perspective really helped us in the three months that we were suspended actually saved us just about the same amount of money that it cost us to purchase the assets.

We are as I mentioned previously during part of the hiatus before drilling Ness 10, we did successfully drill as a subcontractor a water well at one of our other sites Ness 12 and that is water municipality there, we are finding demand and have perhaps spoken to several different companies about the potential use of our assets to drill other water wells for other private companies as well as other municipalities..

Thanks, I guess one question was more, I suppose if you are not planning on using that equipment for any cleaning operation, not meaning that you're not planning to drill another well in the Northern portion or otherwise you did for your company?.

You know at this point and based on the license that we have for exploration we are looking at Ness 10 to be the well to hopefully prove true that there is a commercial resource but short of that there are no other contemplated wells that we're looking at the drills..

Great, thank you..

[Operator Instructions]. At this time this will conclude our question-and-answer session as well as the conference call. Thank you for attending today's presentation. You may now disconnect..