RGC Resources Inc. (RGCO, Financial) filed Quarterly Report for the period ended 2012-12-31.
Rgc Resources has a market cap of $86.26 million; its shares were traded at around $18.45 with a P/E ratio of 20.0401 and P/S ratio of 1.4594. The dividend yield of Rgc Resources stocks is 3.82%. Rgc Resources had an annual average earning growth of 0.2% over the past 10 years.
The Company also has an approved rate structure in place that mitigates the impact of financing costs of its natural gas inventory. Under this rate structure, Roanoke Gas recognizes revenue for the financing costs, or carrying costs, of its investment in natural gas inventory. The carrying cost revenue factor applied to inventory is based on the Companys weighted average cost of capital including interest rates on short-term and long-term debt and the Companys authorized return on equity. During times of rising gas costs and rising inventory levels, the Company recognizes revenues to offset higher financing costs associated with higher inventory balances. Conversely, during times of decreasing gas costs and lower inventory balances, the Company recognizes less carrying cost revenue as financing costs are lower. As a result of lower commodity price of natural gas, the price of gas in storage at December 31, 2012 has declined by 22% from the same period last year. The lower average price of gas in storage has resulted in a $117,000 reduction in carrying cost revenues for the first quarter of fiscal 2013 compared to the first quarter of fiscal 2012. Currently, the futures market indicates slightly higher commodity prices than is currently reflected in storage. If such prices manifest during the spring and summer storage fill months, inventory values will begin to increase and the decline in carrying cost revenues as compared to last year should level off by the end of the fiscal year.
Total operating revenues for the three months ended December 31, 2012, compared to the same period last year, increased primarily due to an 8% increase in total natural gas deliveries and the implementation of a non-gas rate increase partially offset by lower natural gas commodity prices. The per unit cost of natural gas reflected in the cost of sales decreased by 6% compared to last year. Contracted services work also contributed to lower gross revenues as the level of these other services were less than last year.
inventory carrying cost revenues declined by $117,000 due to lower average price of gas in storage. Residential and commercial volumes increased by 11% from last years due to an 11% increase in heating degree days. Industrial volumes, which tend to be less weather sensitive than residential and commercial volumes, remained nearly unchanged. Most of the expected non-gas rate increase is reflected in the customer base charge, a flat monthly fee billed to each natural gas customer, which increased by more than $61,000 over the same period last year.
Investing activities are generally composed of expenditures under the Companys construction program, which primarily involves replacing aging bare steel and cast iron pipe with new plastic or coated steel pipe, improvements to the LNG plant, and to a lesser degree expanding its natural gas system to meet customer growth. Cash flows used in investing activities increased by approximately $409,000 due to an increased level of capital expenditures. Total capital expenditures were $2,494,277 and $2,087,493 for the three-month periods ended December 31, 2012 and 2011, respectively. The increase in capital expenditures is attributable to the continued focus by the Company on its pipeline renewal program. The Companys current plan includes a five- to seven-year time horizon to finish replacing the remaining bare steel and cast iron pipe within its natural gas distribution system. In order to meet this goal, the Company expects capital expenditures to remain at elevated levels for the next few years. The depreciation add back to operating cash flows is expected to provide more than 50% of the current years projected capital expenditures, with the balance of funding dependent on other sources, including revenue from the SAVE Plan, net income, available cash and corporate borrowing activity.
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Rgc Resources has a market cap of $86.26 million; its shares were traded at around $18.45 with a P/E ratio of 20.0401 and P/S ratio of 1.4594. The dividend yield of Rgc Resources stocks is 3.82%. Rgc Resources had an annual average earning growth of 0.2% over the past 10 years.
Highlight of Business Operations:
Roanoke Gas has in place a weather normalization adjustment mechanism (WNA) based on a weather measurement band around the most recent 30-year temperature average (normal). Because the SCC authorizes billing rates for the utility operations of Roanoke Gas based on normal weather, warmer than normal weather may result in the Company failing to earn its authorized rate of return. Therefore, the WNA provides the Company with a level of earnings protection when weather is significantly warmer than normal and provides its customers with price protection when the weather is significantly colder than normal. The WNA mechanism provides for a weather band of 3% above and below the 30-year normal, whereby the Company would bill its customers for the lost margin (excluding gas costs) for the impact of weather that was more than 3% warmer than normal or refund customers the excess margin earned for weather that was more than 3% colder than normal. The annual WNA period extends from April to March. For the nine month WNA period ended December 31, 2012, weather was approximately 8% warmer than the 30-year average. As a result, the Company recorded approximately $182,000 in additional revenues to reflect the estimated impact of the WNA for the difference in margin not realized for weather between 3% and 8% of the 30-year average. The final surcharge or refund to customers will be dependent on the weather during the second fiscal quarter as the accrued revenues related to the WNA may be adjusted up or down from the amount included in the December 31, 2012 financial statements. The total number of heating degree days during the prior WNA period were approximately 16% less than the 30-year average resulting in an estimated accrual of approximately $577,000 during the quarter ended December 31, 2011.The Company also has an approved rate structure in place that mitigates the impact of financing costs of its natural gas inventory. Under this rate structure, Roanoke Gas recognizes revenue for the financing costs, or carrying costs, of its investment in natural gas inventory. The carrying cost revenue factor applied to inventory is based on the Companys weighted average cost of capital including interest rates on short-term and long-term debt and the Companys authorized return on equity. During times of rising gas costs and rising inventory levels, the Company recognizes revenues to offset higher financing costs associated with higher inventory balances. Conversely, during times of decreasing gas costs and lower inventory balances, the Company recognizes less carrying cost revenue as financing costs are lower. As a result of lower commodity price of natural gas, the price of gas in storage at December 31, 2012 has declined by 22% from the same period last year. The lower average price of gas in storage has resulted in a $117,000 reduction in carrying cost revenues for the first quarter of fiscal 2013 compared to the first quarter of fiscal 2012. Currently, the futures market indicates slightly higher commodity prices than is currently reflected in storage. If such prices manifest during the spring and summer storage fill months, inventory values will begin to increase and the decline in carrying cost revenues as compared to last year should level off by the end of the fiscal year.
Total operating revenues for the three months ended December 31, 2012, compared to the same period last year, increased primarily due to an 8% increase in total natural gas deliveries and the implementation of a non-gas rate increase partially offset by lower natural gas commodity prices. The per unit cost of natural gas reflected in the cost of sales decreased by 6% compared to last year. Contracted services work also contributed to lower gross revenues as the level of these other services were less than last year.
inventory carrying cost revenues declined by $117,000 due to lower average price of gas in storage. Residential and commercial volumes increased by 11% from last years due to an 11% increase in heating degree days. Industrial volumes, which tend to be less weather sensitive than residential and commercial volumes, remained nearly unchanged. Most of the expected non-gas rate increase is reflected in the customer base charge, a flat monthly fee billed to each natural gas customer, which increased by more than $61,000 over the same period last year.
Investing activities are generally composed of expenditures under the Companys construction program, which primarily involves replacing aging bare steel and cast iron pipe with new plastic or coated steel pipe, improvements to the LNG plant, and to a lesser degree expanding its natural gas system to meet customer growth. Cash flows used in investing activities increased by approximately $409,000 due to an increased level of capital expenditures. Total capital expenditures were $2,494,277 and $2,087,493 for the three-month periods ended December 31, 2012 and 2011, respectively. The increase in capital expenditures is attributable to the continued focus by the Company on its pipeline renewal program. The Companys current plan includes a five- to seven-year time horizon to finish replacing the remaining bare steel and cast iron pipe within its natural gas distribution system. In order to meet this goal, the Company expects capital expenditures to remain at elevated levels for the next few years. The depreciation add back to operating cash flows is expected to provide more than 50% of the current years projected capital expenditures, with the balance of funding dependent on other sources, including revenue from the SAVE Plan, net income, available cash and corporate borrowing activity.
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