RGC Resources (NASDAQ:RGCO) reported fiscal 2026 third-quarter net income of about $550,000, or $0.05 per diluted share, as higher margins supported results despite uneven weather patterns, increased operating expenses and the loss of a large industrial customer.
For the first nine months of fiscal 2026, the company reported net income of $14.2 million, or $1.37 per diluted share, compared with $1.31 per diluted share in the comparable fiscal 2025 period. The 4.6% per-share increase was driven largely by the company’s non-gas base rate increase, which had a greater effect during the winter heating season because of higher energy demand.
Operating expenses declined due to lower gas costs, Davenport said, though non-gas operations and maintenance expenses increased from the prior-year quarter. She cited inflationary pressures affecting personnel costs, professional services and information technology support.
Gas volumes and capital activity
Tommy Oliver, Senior Vice President of Regulatory and External Affairs, said residential and commercial gas usage was flat during the third quarter, despite the period being slightly colder than a year earlier. Cooler days occurred unevenly, particularly in May, and did not produce the typical increase in gas consumption. The weather patterns also resulted in a credit to customers under the weather normalization adjustment.
Industrial usage increased more than 25% in the quarter, primarily because of the company’s largest industrial customer. However, Oliver noted that incremental volumes in that customer class are delivered at the company’s lowest margin under its tiered rate structure.
Year to date, total delivered gas volumes increased 1%. Residential and commercial volumes declined even as heating degree days rose 3%, as much of the increase was associated with Winter Storm Fern while other periods were warmer than the prior year. Industrial growth, again led by the largest industrial customer, offset the declines. The figures also reflect the absence of a long-time top-10 customer that ceased operations in March.
RGC Resources installed 3.5 miles of new main and connected 464 new services during the first nine months of fiscal 2026, both below the prior-year pace. Oliver said the company maintains a healthy backlog of main extensions tied to residential development in its service area. The company also renewed 2.7 miles of main and 322 services; service renewals rose 40% from the prior-year period, while winter weather reduced main renewal activity.
Capital expenditures totaled $16.1 million for the first nine months, up about 2% from a year earlier. The company maintained its full-year capital spending forecast of approximately $22 million, although it shifted spending categories and accelerated a Mountain Valley Lafayette main extension project into fiscal 2026.
Rate settlement and financing
Roanoke Gas reached a settlement with Virginia State Corporation Commission staff on July 1 concerning its expedited rate case. The company had sought about $4.3 million in incremental annual revenue based on its authorized 9.9% return on equity and 59% equity ratio.
The settlement provided for $3.85 million in stipulated incremental revenue. Interim rates had been effective since Jan. 1, subject to refund, and lower rates resulting from the settlement began Aug. 1. As of June 30, RGC Resources had accrued $275,000 for customer refunds.
Oliver said costs associated with a structural event at the company’s liquefied natural gas facility were not addressed in the rate case. The company has established a regulatory asset and expects to seek recovery in a future proceeding.
During the quarter, RGC Resources refinanced a $15 million note that was due to mature later in the month. The replacement forward-starting note and related interest-rate swap are fixed for three years at 5.13%.
LNG facility assessment continues
President and CEO Paul Nester said the company continues to assess structural damage at its LNG facility following icing around the tank during Winter Storm Fern in February. The icing caused the tank to move slightly and resulted in structural damage, though Nester said there were no leaks or unsafe conditions.
The tank entered service in 1972 and is approximately 200,000 gallons, or about 220,000 dekatherms. Nester said engineers specializing in tanks are evaluating repair options, including potential modernized tank-holding equipment, and the company remains in contact with regulators and its insurance carrier.
RGC Resources has been replacing the peak-shaving supply previously provided by the facility through additional capacity on Columbia Gas Transmission, a project to move more Mountain Valley Pipeline gas into the Roanoke distribution system, and procured trucked LNG. Nester said the company’s goal is to restore on-system storage and peak-shaving capability for the 2027-2028 winter season.
The company narrowed its fiscal 2026 earnings outlook to $1.29 to $1.32 per diluted share and expects a small loss in the fiscal fourth quarter, reflecting the seasonal effect of lower delivered volumes and margins outside the winter heating period.
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.
