RGC Resources Q1 Earnings Call Highlights

RGC Resources (NASDAQ:RGCO) executives said the company delivered a “steady” first quarter for fiscal 2026, while also dealing with unusual winter conditions and a sharp spike in natural gas prices that is expected to create a sizable temporary gas-cost undercollection.

Operational activity and customer growth

President and CEO Paul Nester said main extension and renewal activity was steady in the quarter. The company installed 0.6 new main miles and connected 196 new services, nearly matching the 197 new services added in the first quarter of fiscal 2025. Nester noted new main miles were down from 1.1 in the prior-year quarter, attributing part of the difference to weather.

He added the company has an “outstanding backlog” of new main to install of about 13,000 feet, or roughly 2.5 miles. Through its SAVE program, the company renewed 117 services in the quarter, which management said represented an 80% increase versus last year.

Volumes and capital spending

On delivered gas volumes, management said total volumes were flat compared with the first quarter of last year. Nester said one large industrial customer reduced natural gas usage from record levels a year ago, while residential usage increased 8% and other commercial volumes rose, primarily due to an 11% increase in heating degree days versus the year-ago quarter.

Capital expenditures for the first quarter totaled $5.6 million, described as flat compared to the same period last year. Nester said the quarter included mixed weather, including snow and wet conditions in early December that slowed work.

Financial results and balance sheet items

Chief Financial Officer Tim Mulvaney said gas margins were up nominally and interest expense declined as the Federal Reserve lowered interest rates, but those benefits were “more than fully offset” by higher costs for personnel, IT, property taxes, and depreciation.

Net income was $4.8 million, or $0.47 per share, compared with $5.3 million, or $0.51 per share, in the same quarter a year earlier.

Mulvaney also said the company’s investment in the MVP pipeline “continues to perform well,” and year-over-year results from that investment were “as expected and in a similar magnitude to a year ago.”

On the balance sheet, Mulvaney pointed to a $15 million note at Roanoke Gas that matures in August and is now classified in current liabilities. He said the company expects to refinance the note in the coming months and has begun preliminary conversations with its financial institution.

Winter Storm Fern and natural gas price spike

Management spent a portion of the call discussing an extended cold snap in late January and early February. Nester said the National Weather Service named the event “Fern” and noted that from January 24 through February 9, Roanoke was 53% colder than normal by heating degree days, with 680 heating degree days versus a normal of 445.

Nester said the distribution system performed “flawlessly” during the period and that the interstate pipelines serving the company had no issues. He added the company did not lose any customers during the cold snap and praised employees for working safely through “treacherous, icy conditions,” noting that the area had ice on the ground continuously since January 24.

The company’s LNG plant was used again this winter to provide peaking supply on some of the coldest days, according to Nester.

Nester also highlighted what he called an unprecedented spike in natural gas prices at supply pricing points during the event, noting that Henry Hub prices on January 22 through January 24 rose by about a factor of 10. He emphasized that gas costs are passed through to customers “dollar for dollar,” meaning the company does not profit from higher gas costs, but said the event has created an estimated $8 million to $10 million undercollection on gas costs related to Winter Storm Fern.

Management said it plans to work with the commission to incorporate the undercollection into rates “in a reasonable way,” with a goal of collecting it over the next 12 to 18 months. Nester added that interest expense associated with the undercollection is expected to be a headwind.

Rate case update and 2026 outlook

Senior Vice President of Regulatory and External Affairs Tommy Oliver provided an update on Roanoke Gas’s expedited rate case filed December 2. The filing seeks approximately $4.3 million in incremental annual revenue, based on a currently authorized return on equity of 9.9%. Interim rates became effective January 1, 2026, and are subject to refund once the commission adjudicates the case. Oliver said the company expects that process to conclude by the end of the calendar year.

Oliver also said the company began issuing bill credits from January through April to return to customers tax credits resolved with the IRS late in fiscal 2025, which are included in regulatory liabilities on the balance sheet.

For fiscal 2026, Nester reiterated the company’s capital forecast of $22 million, unchanged from its December outlook. However, he said the winter weather is expected to hamper the second quarter, with about two weeks of construction time lost due to snow and ice—roughly 17% of working days in the quarter—and the company will evaluate how much of that can be made up in the spring and summer.

Management also reaffirmed its earnings per share outlook of $1.27 to $1.35 for fiscal 2026, consistent with guidance shared in December. Nester said the rate case is a large factor in that forecast, along with broader economic and political conditions, inflation, and interest rates.

No questions were asked during the call’s Q&A period. The company said it expects to provide an update when it reports second quarter results in May.

About RGC Resources (NASDAQ:RGCO)

RGC Resources, Inc (NASDAQ: RGCO) is a natural gas distribution and transmission company headquartered in Wheeling, West Virginia. Through its regulated subsidiaries, the company provides energy delivery services to residential, commercial and industrial customers across northern West Virginia, western Pennsylvania and parts of Maryland. RGC Resources focuses on maintaining a safe and efficient local pipeline network to ensure reliable supply to its service areas.

The company operates two primary business segments: distribution and transmission.