Hello. Thank you for standing by. And welcome to the UGI Corporation First Quarter Fiscal 2022 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advise that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Tameka Morris, Director of Investor Relations. Please go ahead.

Thanks, Josh, and good morning, everyone. And thank you for joining our fiscal 2022 first quarter earnings calls. Today I’m joined by Roger Perreault, President and CEO; Ted Jastrzebski, CFO; and Bob Beard, Executive Vice President, Natural Gas, Global Engineering & Construction, and Procurement. Roger and Ted will provide an overview of our results, and the entire team will then be available to answer your questions. Before we begin, let me remind you that our comments today include certain forward-looking statements, which management believes to be reasonable as of today’s date only. Actual results may differ significantly because of risks and uncertainties that are difficult to predict. Please read our earnings release and our most recent annual report for an extensive list of factors that could affect results. We ask you no duty to update or revise forward-looking statements to reflect events or circumstances that are different from expectations. We’ll also describe our business using certain non-GAAP financial measures. Reconciliations of these measures to the comparable GAAP measures are available within our presentation. Now, I’m pleased to turn the call over to Roger.

Thank you, Tameka, and good morning, everyone. I’ll start today by providing an update on the quarter, including our progress on several strategic initiatives. Ted will then provide an overview of first quarter’s financial results and liquidity position. I believe everyone is aware of the extremely challenging macroeconomic environment experienced in the first quarter, significant increases and volatility in commodity prices, rising inflation and the tight labor market. These factors along with December being the warmest on record in the U.S. allowing to have a negative impact on our results, as we reported adjusted earnings per share of $0.93 for the quarter. AmeriGas despite seeing promising customer growth in several areas reported lower overall volumes due to weather, the impact of customer service challenges from the prior year after establishing the new operating model and the effect of higher commodity prices on customer usage. UGI International had lower average LPG unit margins and lower energy marketing margins that were largely due to higher commodity costs. Our Natural Gas businesses delivered strong results, despite the warmer weather, due to incremental earnings from Mountaineer, the higher gas base rates that went into effect last year and higher margin from renewable energy marketing activities. As per our historical practice, we are not discussing full fiscal year guidance after a single quarter given the amount of heating degree days remaining. However, we are executing on a robust plan, leveraging our proven capabilities of focus margin and expense management, and we expect these actions will have a disproportionate benefit in the back half of the fiscal year. Additionally, we are encouraged that January was colder than normal in the U.S. We are confident in the strength and resilience of our business and our ability to deliver against our long-term commitment to providing 6% to 10%…

Thanks, Roger, and good morning. As Roger mentioned, UGI delivered adjusted diluted EPS of $0.93, compared to $1.18 in the prior fiscal quarter. This table lays out our GAAP and adjusted diluted earnings per share for the quarter in the comparable prior period. As you can see, our adjusted diluted earnings exclude adjustments totaling $1.39. That related to a number of items. First is the impact of mark-to-market changes in commodity hedging instruments, a loss of $1.37 this year versus a gain of $0.40 in the prior year, which is largely attributable to the increases and volatility in commodity prices. Last year we had a $0.07 loss on foreign currency derivative instruments, compared to a $0.02 gain this year. We had a $0.03 loss on the extinguishment of debt associated with a refinancing at UGI International during the quarter. In addition, we adjusted out a penny of expenses associated with the corporate functions transformation in comparison to $0.06 in the prior year for all of the business transformation initiatives. As a reminder, the LPG business transformation initiatives were substantially complete as of the end of fiscal 2021. Therefore, the expenses being adjusted out in the fiscal 2022 solely relate to the transformation of the corporate support functions. On this slide, we provide additional color on the $0.25 decline in the year-over-year quarterly performance by segment. Global LPG was impacted by unprecedented warmer weather in the U.S., the significant increases in volatility and commodity prices, and the effect of customer service challenges from the prior year at AmeriGas. Our Natural Gas businesses reported higher contribution in comparison to the prior year period due to the incremental margin for Mountaineer and higher margin from renewable energy marketing activities. Turning to the individual businesses. AmeriGas reported a $55 million decrease in EBIT over…

Thank you, Ted. In closing, I want to emphasize that our long-term financial commitments of achieving 6% to 10% EPS growth and 4% dividend growth are unchanged. We are leaning into our strong capabilities of focus margin and expense management, and this includes discipline to actions to recover higher commodity costs incurred, control and minimize discretionary expenses across the entire business and accelerate the corporate function transformation that began in fiscal 2020. We have a long runway of growth opportunities ahead and our teams are making tremendous progress on key initiatives across the business. These opportunities and initiatives align with our strategy to deliver reliable earnings growth, invest in renewables and rebalance our business in order to create sustainable value for our shareholders, customers and employees. We thank you for your interest in UGI and your participation in today’s call. And with that, we will open the line for your question. Josh?

Thank you. [Operator Instructions] Our first question comes from Julien Dumoulin-Smith with Bank of America. You may proceed with your question.

Hey. Good morning. This is actually Kody Clark on for Julien. Thanks for taking my question. So, first, wondering if you can quantify the weather impacts overall for the quarter. And also, if you could just give a little bit more detail on the offsets to the weak first quarter for the balance of the year, you talked about some of the inflationary pressures you’re seeing on the expense side. So how much latitude do you see for the balance of the year?

Yeah. Thanks. Thanks, Kody, for your question this morning. So, maybe just a couple of things. So, we don’t typically go into that level of detail, talking about specifics on weather, but as you know, December has the highest amount of heating degree days in the first quarter and we did see an all time record warm December across the U.S. So, while our business is certainly designed to manage some weather volatility, we did see unprecedented warm weather this particular quarter and especially in December. So I’d like to highlight, though, that despite this, our Natural Gas businesses did deliver some pretty strong results and this speaks to the benefits of the diversification of our business, and the fact that we have these attractive fee-based structures in the Midstream business.

Okay. Got it. And then looking at UGI International, just wondering if you can kind of expand on that margin impact attributable to the fluctuations in commodity prices, I know you’ve shown how you’ve managed margins at Global LPG over time and you had some volume up there on the colder weather, yet, it was more than offset by the margin impact?

Yeah. So let me just provide a bit more color on the energy marketing margin impact that we saw. So we really did see unprecedented and an accelerated increase in natural gas costs and electricity costs. So I think everybody can see that it’s been a very well known fact over the year -- over the quarter. So our business is one where we signed the two-year to three-year deals. And when we do, customers want a fixed price, so when we lock in our fixed price, we hedge it. And therefore there’s this margin shift that occurs, where in the short-term, we won’t see the margin, but we certainly recover that margin over the longer period. So the first quarter was impacted by margin shift. The other item that we pointed out is that, we did have some customers that took volumes that were in excess of what we previously took. And that created a scenario where we had to buy products from the market at spot prices and that also created some margin erosion in the first quarter. Now, our teams have been hard at work at preventing that or minimizing that going forward, through commercial arrangements with customers, where we’re really looking at, if they take in additional volume, we have the commercial attitude to go in and make sure that we recover excess cost as much as possible going forward. So that’s one of the action items we’ve been very much focused on. And also really minimizing the type of -- the amount of renewal -- renewals that we will do that will provide this opportunity for customers to take excess product above what we agreed to and what we are able to hedge.

Okay. Understood. And lastly, on Midstream if I can, just wondering how you’re thinking about opportunities for organic versus inorganic growth, where’s the focus now? And similarly, can you quantify, either revenue or BCF, how much capacity you have on the existing Midstream system and what you see as available for expansion there?

Yeah. Kody, thanks, as well, for that question. I’ll pass it over to Bob Beard who is here with us to answer that question.

Good morning. Yeah. We see significant opportunities in the Southwestern part of the state. If you give me a second, excuse me, I will tell you the capacity of the systems that we have. Sorry about that. Yeah, sure. So on the Midstream system, in total, we have total vaporization capacity of about 360,000 decatherms per day, liquefaction of about 22,500 decatherms per day and a total pipeline capacity of over 4 BCF a day. So what we’re seeing in this, go ahead, I’m sorry.

No. I was just going to ask the second part on the organic versus inorganic growth.

Yeah. We’re seeing -- it was about a month and a half ago that we saw a statistic come out of EIA, that the prior six months was the highest production out of the Marcellus in the history of Marcellus production in Utica. So we’re seeing strong activity continuing and we continue to see -- using our Utility as a proxy, for instance, we continue to see, I’m going to say, single-digit percentage increase of capacity out of the Marcellus. And as a proxy, the Stonehenge system that we reach -- recently purchased, we’ve seen increases in production out of that system over the last four years or five years of about 40% or 50%. So, when we look at the Midstream system, we look at our Utility as a proxy, right? So our Utility system continues to add anywhere between 8,000 and 16,000 customers a year. We continue to see existing customers grow their load. And for the first time in my career, we’re seeing industry locate to the Appalachian Basin as opposed to move out of it. So if we use our Utility as a proxy and Mountaineer as a proxy as well, we see continued strong growth out of the Marcellus. So we’re bullish on it. As far as organic growth, yes, I think the rig count was up last month by one over the prior year. As prices stabilize at what we believe to be reasonable for decatherm rates, I think, we’ll continue to see interest in production out of the Marcellus.

Okay. That’s all I had. Thanks again for the time.

Thank you, Kody.

Thank you. [Operator Instructions] And I’m not showing any further questions at this time. I would now like to turn the call back over to Roger Perreault for any further remarks.

Yeah. Thank you, Josh. So, just in closing, I’d like to share a few additional remarks today. So, as we highlighted during the call, we don’t discuss guidance after the first quarter, it’s just too early in the year, given the amount of heating degree days that we have ahead of us. That being said, we can say that January in the U.S. was a colder than usual than the normal month. The other thing I’d like to highlight is that the first quarter was a tough quarter. A lot of headwinds at the same time that with the warm December in the U.S., a lot of volatility in commodity costs, the residual effects from customer service challenges that we spoke about. So we are clearly disappointed with the first quarter, but our team’s really sprung to action. We are absolutely managing margins and being proactive with margin management, as we continue to execute through the next quarters. We are controlling expense and reducing discretionary expenses, while keeping a very keen eye on safety and customer service. So these -- all of these actions will lead to recovery over the remainder of the years. We really expect recovery through Q2, Q3 and Q4. So, with that, I’d like to thank you for your participation today and your questions, and we look forward to the next earnings call. Thank you very much.

Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.