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Text: Factors that could cause such material differences are outlined on Slide 25 and are more fully described in our SEC filings.
We appreciate you joining us and your interest in Atmos Energy.
Yesterday, we reported fiscal '22 first quarter net income of $249 million, a $1.86 per diluted share.
Our first quarter performance was in line with our expectations, reflecting the ongoing execution of our operating, financial and regulatory strategies.
Consolidated operating income decreased to $276 million in the first quarter, primarily due to a $39 million decrease in revenues associated with the refund of excess deferred tax liabilities.
As a reminder, beginning in the second quarter of fiscal '21 and through the end of last fiscal year, we reached an agreement with regulators in various states to begin refunding excess deferred tax liabilities.
Generally, over a three to five-year period, these refunds reduce revenues throughout the fiscal year when those revenues are billed.
The corresponding reduction in our interim annual effective income tax rate is recognized at the beginning of the fiscal year.
Therefore, period-over-period changes in revenues and income tax expense may not be offset with interim periods that will substantially offset by the end of the fiscal year.
Excluding the impact of these excess deferred tax liability refunds, operating income increased $16 million over the prior-year quarter.
Slide 5 summarizes the key performance drivers for each year operating segments.
Rate increases in both of our operating segments, driven by increased safety reliability capital spending totaled $47 million.
Continued robust customer growth and our distribution segment increase operating income by $4 million.
In the 12 months ended December 31st, we added 55,000 new customers, which represents a 1.7% increase.
These increases are partially offset by a $20 million increase in consolidated O&M expense.
As a reminder, in the prior-year quarter, we deferred non-compliant spending to fight in the fiscal year.
As we evaluated our customer load during that time period.
Therefore, the period-over-period variance partially reflects this time indifference.
The first quarter increase is primarily driven by increased pipeline maintenance activities.
Consolidated capital spending increased to $684 million, a $227 million period-over-period increase reflecting an increased system of modernization spending in our distribution segment.
Spending to close out Phase 1 of APT's Line X and Line X2 projects and project timing.
We remain on track to spend $2.4 billion to $2.5 billion of capital expenditures this fiscal year with more than 80% of the spending focused on modernizing the distribution and transmission network, which also reduces methane emissions.
We're also on track with our regulatory filings.
To date, we have implemented $73 million in annualized regulatory outcomes excluding refunds of excess deferred tax liabilities.
And currently, we have about $36 million in progress.
Slides 17 through 24 summarize these outcomes.
And Slide 16 outlines our planned filings for the remainder of this fiscal year.
To date, we have completed over $1 billion of long-term financing.
Following the completion of the $600 million 30-year senior note issuance in October, we executed four sales rates under our ATM program for approximately 2.7 million shares for $260 million, and we settled forward agreements on 2.7 million shares or approximately $262 million.
As of December 31st, we were probably $295 million in net proceeds available under existing forward sale agreements.
As a result of this activity, we've now priced a substantial portion of fiscal '22 equity needs and anticipate satisfying remaining equity needs through our ATM program.
As a result of this financing activity, direct recapitalization excluding the $2.2 billion of winter storm financing, was 59% as of December 31st.
Additionally, we finished the quarter with approximately $3.1 billion of liquidity.
In January, we completed the issuance of $200 million of long-term debt through [Inaudible] our existing 10-year 2.625% notes due September 2029.
The net proceeds were used to pay off or $200 million term loan that was scheduled to mature in April.
Following this offering, excluding the interim winter storm financing, a weighted average cost of debt decreased to 3.81% and our weighted average maturity increased 19.23 years, which further strengthens our financial profile.
Additional details for financing activities or equity forward arrangements, as well as our financial profile, can be found on Slides 7 through 10.
And we continue to make progress on securitization.
Yesterday, the Texas Railroad Commission unanimously issued a financing order authorizing the Texas Public Financing Authority to issue custom rate relief bonds to securitize costs associated with winter storm Uri over a period not to exceed 30 years.
We currently anticipate the securitization transaction will be completed by the end of our fiscal year.
Upon receipt of the securitization funds, we will repay the $2.2 billion of winter storm financing we issued last March.
And in Kansas, we started our securitization proceedings at the Kansas Corporation Commission in late January.
Based on the current procedural schedule, we are anticipating a financing order by the end of our fiscal third quarter.
Our first quarter performance was a solid start in the fiscal year, the execution of our operational, financial, regulatory plans is on track, which positions us well to achieve our fiscal '22 earnings per share guidance of $5.40 to $5.60.
Details around our guidance can be found in Slides 12 and 13.
It is through your dedication, your focus, and the effort that we safely provide natural gas sales to 3.2 million customers in 1,400 communities across our eight states.
And as you just heard, we're off to a great start.
The results, Chris summarized, reflect the commitment of all 4,700 Atmos Energy employees as we work together to continue modernizing our natural gas distribution, transmission, and storage systems on our journey to be the safest provider of natural gas services.
During the first quarter, we achieved several project milestones to further enhance the safety, reliability, versatility, and supply diversification of our system.
For example, at APT, we placed into service Phase 1 of a 2-phase pipeline integrity project that will replace 125 miles of Line X. As a reminder, Line X runs from Waha to Dallas and is key to providing reliable service to the local distribution companies behind the APT system.
Phase 1 replaced 63 miles of 36-inch pipeline.
Phase 2 includes an additional 62 miles of 36-inch pipeline and is anticipated to be completed late this calendar year.
Additionally, we completed the first of a 3-phase project to replace our existing Line S2.
This 91-mile 36-inch project will provide additional supply from the Haynesville and Conn Valley shale plays to the east side of the growing Dallas-Fort Worth Metroplex.
Phase 1 replaces 21 miles of this line and Phase 2 will replace an additional 18 miles and is expected to be completed late this calendar year.
Phase 3, which will replace the remaining 52 miles is expected to be in service in 2023.
During the completion of Phase 1 for Line X and Phase 1 for Line S2 our teams used recompression practices to avoid venting or flaring over 70,000 metric tons of carbon dioxide equivalent.
This is an excellent example of how Atmos Energy's environmental strategy is being integrated into our daily operations.
APT's third salt-dome cavern project at Bethel is now approximately 80% complete and remains on track to be placed in service late this calendar year.
As a reminder, this project is anticipated to provide an additional five to six Bcf of Cavern storage capacity.
As I mentioned during our November call, we have started work on a 22-mile 36-inch line that will connect the southern end of the APT system with a 42-inch Kinder Morgan Permian Highway line that runs from Waha to Katy.
This new line will support the forecasted growth and increased supply diversity to the north of Austin in both Williston and Travis County in Texas.
This line is expected to be in service in late December of this year.
In addition to those system modernization projects, we continue to make progress in advancing our comprehensive environmental strategy that is focused on reducing Scope 1, 2, and 3 emissions and reducing our environmental impact from our operations in the following five key areas, operations, fleet, facility, gas supply, and customers.
At APT storage fields, we are making progress with the installation of the remaining gas cloud imaging cameras for continuous methane monitoring and anticipate completion by the end of this fiscal year.
Our RNG strategy focuses on identifying opportunities to transport RNG for our customers.
We currently transport approximately eight Bcf a year and anticipate another four projects to come online within the next 12 to 18 months.
Those four projects are expected to provide an additional Bcf a year of RNG capacity.
Furthermore, we are evaluating approximately 20 opportunities that could further expand our RNG transportation.
Two, zero net energy homes are underway in Texas, one in Taylor and the other in Dallas.
The home in Taylor is being developed through our partnership with the Williamson County Habitat for humanity, and we estimate the home to be completed in late March.
And in Dallas, we are working with the Dallas habitat humanity and estimate construction of this zero net energy home to begin mid-March.
These homes use high-efficiency natural gas appliances doubled with rooftop solar panels and insulation to minimize the home's carbon footprint.
The zero net energy homes demonstrate the value and the vital role natural gas plays in helping customers reduce their carbon footprint in an affordable manner.
Providing these families with a natural gas home that is environmentally friendly and cost-efficient is just one-way Atmos Energy fuels safe and thriving communities.
And finally, over the next five years, we will invest $13 billion to $14 billion in capital support, the replacement of 5,000 to 6,000 miles of our distribution transmission pipe, or about 6% to 8% of our total system.
We will also replace 100 to 150 steel service lines, which is expected to reduce our inventory by approximately 20%.
This level of replacement work is expected to reduce methane emissions from our system by 15% to 20% over the next five years.
Our first quarter activities and initiatives reflect the continued successful execution of our strategy to modernize our natural gas distribution, transmission, and storage systems as we continue our journey to be the safest provider of natural gas services.
These efforts, along with the strength of our balance sheet, our strong liquidity, have atmos energy well-positioned to continue serving the vital role we play in every community that is delivering safe, reliable, efficient, and abundant natural gas to homes, businesses, and industries to fuel our energy needs now and in the future.

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compname reports q1 earnings per share of $1.86.
q1 earnings per share $1.86.

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