ATO - Earnings call transcript Q1 2020 | Atmos Energy Corporation

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Operator

Greetings and welcome to the Atmos Energy First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It's now my pleasure to introduce your host, Jennifer Hills, Vice President, Investor Relations for Atmos Energy. ahead. go please Jennifer,

Jennifer Hills

and This everyone, live call internet. Kevin, for on thank joining us. is good you, and morning, you the Thank being webcast

earnings atmosenergy.com under which Investor Relations slide our Our remarks, the conference reference prepared at will in presentation, available are tab. and release we call

Exchange expectations, and meaning our we contain discussion Act. As future forward-looking these the of mind in statements results financial keep review the the might Act Securities that Securities discuss within and please some of

and are statements materially are actual slide forward-looking our differ Our projections cause from in and results. could could SEC that such XX filings. more described The outlined factors fully material differences on

Senior Our CFO President and Energy. first Forsythe, of speaker is Vice Chris? Chris Atmos

Chris Forsythe

us in Energy. Thank you, Jennifer, and good morning, your joining Atmos and everyone. you We interest appreciate

fiscal our of or $XXX reported to start. a Our is share, million, with expectations. off income solid in first net XXXX Yesterday, year line quarter diluted $X.XX per we

in our both storage reported of segments. We in quarter. each to pipeline income growth by Consolidated recovery segments. key continued operating $XXX and driven operating businesses, summarizes the drivers rose performance both distribution rate Slide first in customer our for X% growth and and million distribution four and

DFW as and million. Louisiana our most Mississippi rose for in our incremental the jurisdictions. have service provided notably some distribution population of and growth to Operating we income growth Metroplex. reliability spending, continued the Texas, strong areas, driven X.X% Customer Rate incremental to business by $XXX increases, capital safety benefit primarily million, in $X increased $XX in our from contributed million,

weather employee-related Texas and growth business growth million mechanisms XX, due went effect $X.X work eight-state we Consumption across O&M and management colder declined year in months and into X.X% ended costs. our X.X% distribution experienced the before integrity higher increased customer last December net weather with XX to expenses footprint. associated normalization modestly our the net customer distribution North For

pipeline the integrity and by filing, the to related well increase for timing to million, from income primarily grew $XX.X work. a offset of partially X% million our GRIP implementation $X $XX rates storage of the Operating due to business in O&M, a new increase by driven million XXXX

grew safety spending spending billion this and reliability modernize XX% our spending to with $X.XX We billion of track between capital our $XXX year. directed Consolidated to million, fiscal and XX% system. remain on towards invest $X.XX to

We well-established focused regulatory have a reducing strategy, lag. on

earning million we In currently all the six fiscal spending a to details in in begin Slides $XX within XX about XXXX, these of of we of $XX XX regulatory provide have expect months implemented outcomes annualized Year-to-date, progress. for million XX% end. period to our have and on return filings. test we

our planned the activities the fiscal for outlines XX year. remainder Slide of

expenditure our long-term to our plan. maintaining of program, strength sheet, capital fund attract the the ability is the our balance to Our execution critical of strategic to financing necessary while successful

X.XX%. the of During $X.X billion XX-year effective at rate net $XXX XX-year of received we activities. $X notes an financing of and notes million long-term October, in In proceeds from first million issued all-in quarter, we

able X.XX%. were average to we reduce result, weighted of debt to a As our cost

benefit Our from these customers low rates. to continue historically

Additionally, until we maturity XXXX. material maturities to weighted and do have not XX increased our years average a

ATM new an shares for of settled anticipated shares, million proceeds forward equity for approximately X.X executed proceeds an From XXX,XXX agreements perspective, forward net on and arrangements with net approximately sales we million. million we in $XX approximately our $XXX under

be the fiscal forward December XX, million utilized As that under remaining our must of $XXX arrangements year. of end about by had we equity

We our continue we satisfy believe through to XXXX that fiscal can program. needs our ATM

our equity XX and agencies. the $X our liquidity the and recognized XX.X% strength forward of our billion December our equity rating be activity, facilities continues quarter financial to with of by was as and credit plan of credit financing this of five-year sheet result a finished balance under agreements. approximately we The As capitalization

to stable our a activities debt on through profile Details can seven In upgraded and long-term Moody's rating. rating our outlook our AX be our and December, financial of found financing with A XX. slide S&P credit reaffirmed

us Our first share to positioned quarter to target. per performance meet leaves growth well earnings X% X% our

our share. As a result, earnings per of in per $X.XX yesterday, we share guidance to reaffirmed XXXX fiscal range $X.XX diluted the

I Thank his you Akers for closing your over to remarks. now call Kevin turn for time will this morning. the

Kevin Akers

Thank you, Chris.

a remain while we we and storage operational investment results, we gas track safely can earnings on perspective, you start our we distribution fiscal natural proven our strategy capital our growth systems year, spending from of From meet well. As to operating targets. goals good as the to are see modernize quarter focused remain on executing to reliably, first off an as and transmission our

We while our efficiently, next and $XX technologies investments process and are Energy people, to investing will enable to continuing years. Atmos in scale safely $XX billion the that over five billion

our of we the Bethel which and in one highlight Salt in XXXX Dome project, to be fiscal estimated began to is like investments, would larger completed I XXXX.

$XXX Bethel in As million project a North invest facility. Texas between meet million storage we've and plan to third This develop existing the two caverns and will the us work enable growing salt-dome our market. regulatory previously, safely discussed cavern to perform on $XXX to we demand compliance at our

the XX work and process facilities, caverns leaching power them The and and we on The months in three required to estimated XXXX. have XX compliance have anticipate began and service we completed is by and in process late mid-December. take finishing construction leaching our all of leaching been the between

our we states in particularly in our Mississippi Kentucky divisions, this in the is mid spirits economic and have gas sector the in and automotive manufacturing Natural an industry. and important of grow driver seen industrial business growth country

Bcf clean, these new supported industrial online, two additional and quarters, the we of efficient over natural to to deliver years, next gas few fueled last the these come annually existing has development. transport projects customers. Over expansion lead facilities fully Once expansion expect project an few and affordable the

addition in Colorado. customer new of with to expand Additionally, we CNG continue deliveries a to customers the

a to expects our nearly of diesel replace fuel customer XX,XXX gallons annually. As result,

a December, our quarter, on Responsibility website to and During sustainability the and section Corporate we enhance on stakeholders. provide safety we long-term focus various launched highlight meet capabilities. our to disclosure needs the sustainability are first continued of our our greater how reporting to of we working to In

reliable, also can published Reports. Responsibility We and under both the methane our second Corporate which an found as responsibility updated report emissions of in continued section as The well corporate sustainability report, be and transmission our natural systems natural industrial residential, distribution, public all continue gas. to will of abundant and authority customers modernization gas commercial, efficient access ensure help affordable, have to and storage

of the in We to by alliance look reduction as One working voluntary we across XX% and methane chain, week, coalition, joined gas methane we we policy leading XXXX. a announce supply to continued drive that focused a One pleased Future Future To support forward move this toward effort, last of companies technology natural were on the achieving emissions with of improvement reduction emissions. to our in target

to where and take our We are to customer may work. providing questions and closing, every X,XXX our want we day this now who appreciate have. employees operating safely I exceptional system, live the you any morning we In thank time back will dedicated communities and your to service giving

Operator

now is of from Our We'll be first from coming Bank Ciciarelli you. Richard conducting question question-and-answer Thank [Operator session America. a Instructions]

Your live. now line is

Richard Ciciarelli

Hey good morning. me Can hear okay? you guys

Kevin Akers

doing? you are How Richie. morning good Yes,

Richard Ciciarelli

X% seems year. just Doing a X% just sizable employees given O&M to the profile. question through for this curve but a I how managing like shape was the was uptick like outlook due that increased appreciate It on the And some intend like to to it had well. growth you faster the towards? you're growth the curious like I O&M of the that

Chris Forsythe

Yes.

a of that's We period. five-year X% already plan Some X.X% through XXXX. CAGR -- We had over a five-year -- of that baked that to into that's to couple things. got and X% -- the our X.X%

as an already So, had we quarter. hiring a noted we you O&M anticipated had result in in that the obviously first uptick additional year of as the this

work As kind to in a that more out was pipeline bit you first four did the accelerated quarters some have well integrity difficult. little segment We that over timing try storage some can of that and quarter. particularly around our turn into be

published to still we we when time. guidance this point in for at XXXX, O&M feel So, track at that are we that like fiscal look achieve on the we

Richard Ciciarelli

All right. sense. all had. you. That's Thank I of a lot It makes

Operator

you. Thank

is question Insoo from Kim Sachs. next from coming Our Goldman

Your line is now live.

Insoo Kim

Thank you. at look of pipeline like whatnot, and you in in how Gulf segment. is how does but the When magnitude how that And versus the does place you've My the your year-over-year volumes the expected year? first segment you does Coast given for compare your that of magnitude expectations? fare I expected the the this growth that versus decrease terms transportation question expectation? Express of of online pipeline at that some know

Chris Forsythe

what little a with line up in much saw pricing expected we And we was but a pretty expectations. it's versus just down. bit pick honestly, Yes, our volumes bit little

expectations. in with were we line net-net So,

And as the we continue we'll to market conditions. forward, look monitor

You're point this still our as of out income and ongoing we think supply very well Permian guidance an are at just we that dynamics well Basin still and is our in But we'll aware the on that demand eye net there good. that. the have keep as

Insoo Kim

I energy so your the bit your of taken U.S. a plays And Kevin hold on that little story could know gas second but decline a view in how share grid our prepared with existing touched you grid? upon base? see role in potential this new or market, do in your you on the in that electrification ESG And recently and Understood. also maybe having thoughts gas the remarks more customer shift of the of you future a secular creating the usage

Kevin Akers

Yes. I appreciate your question.

low I'm particularly here as let all, XX, wind-chill the me gas of heating First for home their in we natural in is business the so receiving to and reliable safe Dallas, proud in our morning sit the showers well. as say be are hot have this customers that

of what proud product a and very able standpoint. our very, efficiency we're reliability from So, do and to we're

in way a adding at people that's require so solution in or growth as Texas But today a so see population gas diversified U.S. you as headed part going of population period XXXX, XXX with it by million we the look to million XXX natural or about portfolio That's energy forward. a million we XX-year move a about the the as to like there. we year that towards a and about X.X energy vital see at

affordable, of it's flexible it's be and that's to it's XXXX. energy to before, meet There's efficient, this reliable, growing it's that's said like As flexible. fuel it it's required not by we another going abundant, demand

it can it, You out There's it abundant and store compress, liquefy can that's can there. nothing today reliable you can you ground. can that's below like you it it, you decompress transport it,

we stewards distribution and environment. responsibly operating having gas role our good natural a as And being utility our embraced transmission interstate assets, of

modernization our with monitoring capability us before, our to responsibly we As say system, technology as of equipment our and possible. efficiently as and we tighten operating to a are heard up system across working deploy in as make both you've to infrastructure sure we're and our continue capability

to well our as we'll our our to as partner practices like GTI storage. burner available And tip what from to available or to continue the tell not work getting that we're only but today business, partners our that's into incorporate going story, in you groups saw look joining carbon carbon technology best or as upstream with with at measure perspective to look of maybe perspective are technology at on that ONE whether industry is AGA the also a capture and Future with and both

it gas. a see flexible by future It the the reliable XXXX. and that energy we demand it growth in portfolio continued efficient. meet to see natural the Again plays now a energy that's -- we there's in energy future viable into of well trying as now as like role as and nothing So

about commercial as and our there, the then in with areas. industrial load, X.X good well side well. you on industrial good expansion in as % we see So new mention residential X.X% continuing talked And as my side, the on out demand the in script addition growth growth to of to market we're Chris heard industrial net

So the to both area. good continue through markets we see residential industrial growth

Insoo Kim

much. very you Thank it. Got

Operator

Morningstar is question Charles from next Fishman Research. coming from Our

Your line is live. now

Charles Fishman

sure morning. Good I want understand this. to just make I

pipeline On the you about quarter talked impacting pipeline income. coming on, competitor and the storage last pipeline new operating

you this if last And you quarter. darn last provide year? obviously, say that on-track. pipeline mean when but storage good, color do more it's what might could the anticipate that track I that flattish statement then a roughly versus being we the and in pretty was you on Or year didn't It made little be? see you

Chris Forsythe

the Chris. middle Sure. of comments Yes. couple around quarter. Charles came in the quarter online this is that. A of Last GCX

in will, the opportunities So we half strong if to first that had results. of which quarter quarter's pricing fourth year some last you the contributed

pipeline per also that we're forward our targets. on same As reiterated we well. our as is I'll and contribution our business earnings going morning this And share of track the with roughly be between storage we as move say distribution to

X/X So and pipeline that's distribution the side. X/X storage roughly on

range segments as will. that look between So roughly X/X allocation, continue to to X% be that XXXX the we out business through certainly we XXXX, if we to for our two X% and X/X, grow mix you as expect that in in

So it but can see of ebb-and-flow continued lot a we a little growth. bit, still

And storage system. you that work our on safety talks of facility. doing segment most continued the storage the earnings about in think are when and pipeline and is that APT reliability about drivers Bethel the Kevin we

a or the the from what safety as driven growing needs by based it's the trying meeting Dallas-Fort as fundamental accomplish Worth result growth Metroplex. of perspective, supply So as well the to -- we're a of rate

Charles Fishman

Okay.

the business know So well since Chris pipeline even is is of same and competitor you're that, the is is this pretty mix answer growing takeaway seeing I distribution though your really and staying growing from that storage pipeline? the mean we means

Chris Forsythe

pipeline competitive REV on APT, the years, existence of this overall of remember the been due pipeline non-tariff the businesses small a relatively piece mechanism. that And too that run correct. talking this couple we've the primarily Rider about a for puzzle That's represents to of a for and through

distribution flows in to tend our activity to customers on pipe regulated a Division side in we XX% the commercial of on whatever our the in Texas. up, benefit So Mid-Tex North that business of terms pick back

of it years, you heard over and the performance. here could have an It term. don't and a pick driver fundamental say our long little don't So we bit we but they impact -- to consistently given source of of growth as the view don't little that in look up certainly when a dynamics year, a us a a there, pricing but for bit as material given

Charles Fishman

-- ask could I if And Okay. go ahead.

John Akers

going was with Again the exactly pipeline. Gulf add area the of as just I competitor its its Coast down Well, Chris direction mainly there. is on out that. don't that We see to Permian it's focused to right. heading, takeaway to a

responsibility it really those as a our the So side serving core we and see by itself pipeline competitor core don't nature those because is markets on markets.

Charles Fishman

Okay. Got it.

from of storage that's more developed that that the mean cetera? can question on assume new the lot Now a I ask would how if one is I does just I being your dome benefit for work distribution regulatory standpoint? et a of system Mid-Tex

Kevin Akers

reliability the mechanism. so for It's we customers our to have All of demands or that Correct. the continue through APT. are -- to that eligible costs the into that meet investments contractual -- grip and those making those sure behind recovery

Charles Fishman

Okay.

under it's grip. So it. Got

Okay.

Kevin Akers

Correct.

Charles Fishman

it. much. That’s very Thank you

Kevin Akers

Thank you, Charles.

Operator

you. Thank

from Ryan Citi. Our next question coming Levine is from

now is live. line Your

Ryan Levine

Good morning.

Kevin Akers

Hey, Ryan.

Ryan Levine

What's both in Hey. given invest of of build-out infrastructure your to objectives appetite stated RNG footprint AGA the Atmos? and and your

Kevin Akers

opportunities what are perspective those rate it structures but business. everything we're from of like regulatory opportunities that the that that way to mechanisms, a I that as annual to our or it that by look a a look in a today have our want at at at recovery investment we as those may future. pipe look take regulations Again, over in or around operate We up we if exist and time, of out the done we've well investment and our sort on take mechanisms things the you exist that are our look what at laws going we're responsibly. look else what -- about how want set to we mean to And take is there,

it. said how enterprise. we'll other We're partners across with with see seeing looking environment with our sure regulatory at is industry keeping our So, it we're and all we and and doing when working legislative tied to an like that our to we how make customers environment And are on of us interest structure plays it are on the we out those. is to move other what eye that forward states to benefits ready on the that But it. out plays say, and see the something recovery investment or the the rate up rest of those

Ryan Levine

terms then what XXXX. versus the new PHMSA the impact another XXXX of was cost for in have in increase. wondering And one O&M guidance Okay. your I regulation increased

Chris Forsythe

the calendar see year. You O&M of that put there guidance out already this anticipated effect we've rules July of we those kind PHMSA have in into beginning coming

in forecast in XXXX. that in already XXXX will have So a basis O&M continue fiscal -- our in beginning we've a and roll impact it's through contemplated muted going But on be full and year to XXXX. to

Ryan Levine

way to the were versus impact other an from items Is a magnitude there that of highlighted question? the quantify that earlier

Chris Forsythe

that We have available. readily don't information

Ryan Levine

the in headroom then last And guide. in in jurisdictions is for of Okay. And XXXX some versus with terms customer have gas regulatory curious your your Curious you builds? the what your price assumption your weakness question guidance much how me. in basis spot of

Chris Forsythe

it in from out Well, and all-in our and we're storage transportation inclusive transportation we've put an usually you'll $X of fall, got at between this price costs. -- that current see and think, $X.XX Analyst Day we -- deck $X.XX. I to anywhere Storage $X.XX is last $X.XX

$X pricing. So commodity $X, on range we a assumed high the low

sources working lower the able to have team a we've good got that the And capture across gas function customers. in is of that our to to to the a it's we services our flows extent back So very shared of obviously our pricing supply various benefit we're that cost enterprise. gas minimize gas, from that

Ryan Levine

Okay. you. Great. Thank

Operator

[Operator Barclays. Our coming Marc is from question next you. today Instructions] Thank from Solecitto

now Your live. line is

Marc Solecitto

Hi. Good morning.

Chris Forsythe

morning. Good

Marc Solecitto

of some XQ? from the year-over-year basis differentials on impact up earlier you Waha the fiscal Kind questions, quantify of in following can

Chris Forsythe

$X item million. MDA, three-system through down it's not our to our about line in a on flows our -- our that in but pipeline, look It's roughly line Mid-Tex line, you it's $XXX,XXX our it's it's If item.

the it's there XX-Q. So in out

Marc Solecitto

Got it.

terms then of Waha million year-over-year EPS Okay. FY think, guidance, XXXX I tailwind your And were $XX in in fiscal spreads XXXX.

said benefit assumption XXXX Just maybe your budget? that what you in your to upside fiscal if captured guidance. any in XXXX the Or curious embedded was differently would fiscal represent

Chris Forsythe

plan details. conditions a but put we the time upon those together that made market released summer, based specific the last we call haven't We at

Marc Solecitto

Got it.

Okay. Thank you.

Operator

comments. any Thank of back our management question-and-answer for you. floor turn over I'd session. closing end We've the like to to or reached further the

Jennifer Hills

us. Thank recording you, Goodbye. you available Kevin. call replay XXXX. We through appreciate for joining May thank this our is X, of for your Atmos A and in Energy interest on website

Operator

Thank you. That does conclude today's teleconference.

You may at participation. your wonderful and day. this time line a thank have you for disconnect We your

Atmos Energy (ATO) 5 Feb 202020 Q1 Earnings call transcript