Southwest Gas (US:SWX)2022-05-10 20:41Financial Performance - The Company reported record revenues of $524 million in Q1 2022, an increase of $160 million, or 44%, compared to Q1 2021[142] - Contribution to consolidated net income from natural gas distribution operations was $111,795,000 in Q1 2022, down from $118,715,000 in Q1 2021[143] - Net income attributable to Centuri decreased to $(23.486) million in Q1 2022 from $(859) thousand in Q1 2021[158] - Operating margin increased by $73 million, driven by customer growth contributing $14 million and combined rate relief providing $44 million[151] - Operating margin for regulated operations was $379,418,000 in Q1 2022, compared to $365,911,000 in Q1 2021[143] - Other income decreased by $18.3 million between the twelve-month periods, primarily due to fluctuations in COLI policy cash surrender values[155] Customer and Market Growth - As of March 31, 2022, the Company had 2,171,000 natural gas customers, with 1,161,000 in Arizona, 806,000 in Nevada, and 204,000 in California[133] - Operating margin increased by $14 million quarter over quarter, with approximately $7 million attributable to customer growth from 38,000 first-time meter sets[144] - Utility infrastructure services revenues increased by $159.9 million, or 44%, in Q1 2022, including $113.8 million from Riggs Distler[158] Acquisitions and Investments - The Company completed the acquisition of Dominion Energy Questar Pipeline in December 2021, diversifying its operations with over 2,000 miles of interstate natural gas pipelines[128] - A general rate case application was filed in December 2021 proposing a revenue increase of approximately $90.7 million, reflecting substantial capital investments[170] - The Nevada COYL replacement program was approved in January 2022, allowing capital investments up to $5 million per year for five years[186] - Management estimates that natural gas segment construction expenditures during the five-year period ending December 31, 2026, will be approximately $2.5 to $3.5 billion, with $650 million to $700 million scheduled for 2022[212] Regulatory and Rate Changes - The Nevada general rate case was finalized with rate relief effective April 2022[142] - The Delivery Charge Adjustment (DCA) filing in April 2022 proposed a rate to return $10.5 million, the over-collected balance at the end of Q1 2022[172] - A general rate case filed on August 31, 2021, proposed a combined revenue increase of approximately $28.7 million, with a return on common equity of 9.90%[184] - The Infrastructure Replacement Mechanism allows for the deferral and recovery of costs associated with accelerated replacement of qualifying infrastructure[188] Financial Position and Cash Flow - Cash flows from consolidated operating activities increased by $239 million in the first three months of 2022 compared to the same period in 2021, primarily due to changes in purchased gas costs[202] - The company reported a significant increase in cash and cash equivalents, rising from $223 million as of December 31, 2021, to $625 million as of March 31, 2022, largely due to a $600 million Senior Notes issuance[201] - Net cash provided by consolidated financing activities increased by $163 million in the first three months of 2022 compared to the same period in 2021, primarily due to the issuance of $600 million in notes[206] Expenses and Cost Management - Operations and maintenance expense increased by $43 million, or 10%, primarily due to inflationary impacts and higher costs in customer service and legal claims[152] - Depreciation and amortization expense rose by $17.5 million, or 7%, attributed to a $562 million, or 7%, increase in average gas plant in service[153] - Utility infrastructure services expenses rose by $167.6 million, including $104.1 million incurred by Riggs Distler, due to higher input costs and inflationary pressures[159] Strategic Alternatives and Future Plans - The Company is evaluating strategic alternatives, including a potential sale of the Company or a spin-off of Centuri[142] - The company plans to continue requesting regulatory support for projects aimed at improving system flexibility and reliability, as well as expanding to underserved areas[212] - The company anticipates a decision in 2023 regarding the Carbon Offset Program, which aims to provide customers options to reduce GHG emissions[183] - The company has a proposed annual budget of approximately $3 million for its Conservation and Energy Efficiency plan for 2022-2024[190] Challenges and Risks - The company is facing various regulatory and operational challenges, including changes in rate design and the impact of inflation on costs[231] - There are uncertainties regarding the timing and magnitude of costs necessary to integrate newly acquired operations, particularly for MountainWest[231] - The impact of geopolitical influences and changes in pipeline capacity on operational costs is a concern for the company[231] - There are risks associated with the ability to raise capital in external financings and remain within debt covenants[231] - The company cautions against undue reliance on forward-looking statements due to potential changes in circumstances[232]