ATMOS ENERGY Q1 FY26 earnings call ATO

Atmos Energy's entire business, including Distribution, Transmission, Atmos Pipeline Texas (APT), underground storage, and gas supply, performed to design expectations during Winter Storm Fern. The company reported minimal supply issues, effectively backfilling with storage to maintain reliable natural gas service. Management highlighted that the storm's impact was not as significant as Winter Storm Uri, and no material financial impact from gas supply costs is anticipated.

The company continues to execute its system modernization strategy, with over 85% of Q1 capital expenditures focused on enhancing safety and reliability. Key APT project milestones include the completion of 55 miles of 36-inch pipeline from Bethel storage to Groesbeck, and 13 miles of Phase 2 Line WA Loop. Additionally, APT doubled takeaway capacity at its Bethel Salt Dome storage facility and added 700,000 Mcf per day of natural gas supply through two interconnect projects, significantly enhancing supply optionality and reliability.

Atmos Energy continues to experience steady customer growth, adding nearly 54,000 new customers in the 12 months ending December 31, 2025, with 42,000 of those in Texas. The company also added over 1,100 commercial and 3 new industrial customers in Q1. Customer satisfaction remains high at 98%, with the company recognized by J.D. Power and Escalent as a leader in customer satisfaction in the South and Midwest regions, where over 96% of its customers are located.

Since the beginning of the fiscal year, Atmos Energy has implemented $123 million in annualized operating income increases in its distribution segment. The company has 5 filings in progress seeking an additional $81 million and plans another filing for approximately $400 million in annualized increases. Management actively engages with regulators on affordability, emphasizing the necessity of investments for system reliability and safety, and reports no negative feedback on this front.

During the quarter, Atmos Energy completed over $1 billion in long-term debt and equity financing, including a $600 million long-term debt financing and the settlement of $472 million in equity forward agreements. The company maintains a strong financial position with 60% equity capitalization as of December 31, no short-term debt outstanding, and $4.6 billion in available liquidity. Approximately $1.1 billion in net proceeds from existing forward sale agreements are expected to cover remaining FY26 and a portion of FY27 equity needs.

Regarding the Mississippi rate case, the company is in dialogue with the commission to implement the tariff reflecting the late 2025 order, with a decision on the tariff and deferral mechanisms expected soon. Atmos Energy is also evaluating the impact of shifting to a historical test basis for its annual filing mechanism and has filed a public notice of intent to appeal the decision to the State Supreme Court. Mississippi constitutes approximately 5% of the company's business.