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RGC Resources, Inc. | NASDAQ: RGCO
Investor Presentation
May 2017
1
Forward-Looking Statements:
The statements in this presentation by RGC Resources, Inc. (the "company") that are not historical facts constitute “forward-looking
statements” made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995 that involve risks and
uncertainties. These statements include the company's expectations regarding earnings per share, EBITDA, future expansion opportunities,
natural gas reserves and potential discoverable natural gas reserves, technological advances in natural gas production, comparison of natural
gas consumption and natural gas production, cost of natural gas, including relativity to other fuel sources, demand for natural gas, possibility of
system expansion, general potential for customer growth, relationship of company with primary regulator, future capital expenditures, current
and future economic growth, estimated completion dates for Mountain Valley Pipeline ("MVP") milestones, potential of MVP to provide
additional source of natural gas, additional capacity to meet future demands, increased capital spending and area expansion opportunity,
potential new customers and rate growth in potential expansion area. Management cautions the reader that these forward-looking statements
are only predictions and are subject to a number of both known and unknown risks and uncertainties, and actual results may differ materially
from those expressed or implied by these forward-looking statements as a result of a number of factors. These factors include, without
limitation, financial challenges affecting expected earnings per share and EBITDA, technical, political or regulatory issues with natural gas
exploration, production or transportation, impact of increased natural gas demand on natural gas price, relative cost of alternative fuel
sources, lower demand for natural gas, regulatory, legal, technical, political or economic issues frustrating system or area expansion,
regulatory, legal, technical, political or economic issues that may affect MVP, delay in completion of MVP, increase in cost to complete MVP,
including by an increase in cost of raw materials or labor to due economic factors or regulatory issues such as tariffs, economic challenges that
may affect the service area generally and customer growth or demand and deterioration of relationship with primary regulator, and those risk
factors described in the company’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission, which is
available at www.sec.gov and on the company’s website at www.rgcresources.com. The statements made in this presentation are based on
information available to the company as of the date of this presentation and the company undertakes no obligation to update any of the
forward-looking statements after the date of this presentation.
2
Key investment highlights
Demonstrated track
record of delivering
shareholder value
Total shareholder return of 302% since 2007, compared with 98% for the S&P 500
Announced record earnings LTM earnings for Q2’17, attributable to:
Improved utility margins associated with infrastructure replacement programs
Customer growth
Midstream investment through Mountain Valley Pipeline (MVP)
Significant growth
potential
Attractive cost recovery mechanisms and opportunities for rate base growth
Service territory centered in the largest metropolitan area in Western Virginia
Additional growth opportunities from investment in MVP, including service territory
expansion
Highly stable business
model
Very constructive relationships with VA State Corporation Commission (SCC)
72 years of consecutive dividend payments
13 consecutive years of dividend increases
Pass-through fuel costs
6% increase in operating margin since 2014
Experienced
management team
30 average years of experience
CEO is member of the AGA Board of Directors
Numerous leadership positions within industry organizations
Attractive fundamental
backdrop
The U.S. has become a global powerhouse in natural gas production
Natural gas enjoys a significant structural cost advantage to other fuel sources
Significant infrastructure and modernization programs underway
Overview of RGC Resources and Roanoke Gas
Business description
Local distribution company (LDC) located in Roanoke, VA,
founded in 1883, that transports natural gas to residential
and commercial/industrial end users
Publically listed on Nasdaq in 1994
98% earnings from Roanoke Gas – regulated natural gas
utility
60,700 customers in Virginia
‒ 55% industrial/commercial/other by volume
‒ 45% residential
126 active employees
RGC Midstream – Est. $35 million investment in Mountain
Valley Pipeline – FERC regulated interstate pipeline
Public market overview ($mm)
Organizational chart & trading statistics Service territory
Sources: Company filings as of 3/31/2017. Bloomberg market data as of 5/10/17.
Notes: RGCO EBITDA and EPS figures represent company provided estimates. ‘17E EBITDA = $18mm. ’17E and ’18E EPS = $0.85 and $0.93, respectively. Diluted share count
assumes all outstanding RSUs are fully dilutive.
Share price (as of 5/10/17) $24.49
Diluted shares outstanding 7.3
Market cap $179
Plus: debt, NCI, preferred 50
Less: cash (1)
Enterprise value $229
% of 52-week high 100%
% off 52-week low 67%
Trading multiples
Price / 2017E EPS 28.7x
Price / 2018E EPS 26.2x
Current dividend yield 2.4%
Credit metrics
Total debt / 2017E EBITDA 2.8x
Total debt / book cap 46%
Total liquidity (cash and avail. RLOC) $37
Current service territory
Future expansion
opportunity
RGC
Resources, Inc.
Roanoke Gas
Company
RGC Midstream,
LLC
Shares out (mm) 7.3
% insider owned 8.1%
Float (mm) 6.2
% short interest 0.04%
3
4
Natural gas is an increasingly attractive fuel source
A
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After decades of decline, new reserve discoveries in the
past 10 years and technological advances have made the
U.S. a global powerhouse in natural gas production
Natural gas enjoys a significant structural cost advantage
to other fuel sources, made durable by more than 100
years of proved reserves in North America
369 Trillion cubic feet (Tcf) of proved natural gas
reserves in the U.S.; over 2,500 Tcf estimated total
potential recoverable reserves
30 Tcf current annual natural gas production/supply
in the U.S. compares favorably with current
consumption of 26.7 Tcf
Households that use natural gas for heating, cooking, and
clothes drying spend an average of $840 less per year
than homes using electricity for those applications
...Demand for the fuel source continues to grow
Natural Gas Usage by Segment
As the supply of cheaper natural gas has expanded...
Source: American Gas Association 2016 Playbook, EIA
Residential
21%
Commercial
14%
Industrial
31%
Electricity
Generation
34%
62,000
67,000
72,000
77,000
82,000
87,000
92,000
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
N
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(Mmc
f/
d
)
N
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s
p
ric
e ($/M
m
b
tu
)
Henry Hub gas price
Daily production
10%
20%
30%
40%
50%
60%
201620152014201320122011201020092008200720062005
Fu
el
so
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e
fo
r
U
.S.
P
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w
er
Pr
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Coal Natural Gas
Natural gas becomes
primary fuel source
5
Utility cost recovery and return on rate base
St
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Utility base rates recover operating costs and investment in fixed assets, allowing the utility to earn a
reasonable rate of return on equity
Infrastructure riders – Steps to Advance Virginia’s Energy (SAVE)
A mechanism to recover investments in infrastructure replacement based on future expenditures
Trued-up and modified annually to adjust for over/under recovery
Approved through 2021
System expansion - Available
Weather normalization adjustment factor (WNA)
Gas volumes adjusted to 30-year normal; removes firm margin volatility associated with weather
Purchased gas adjustment factor (PGA)
Commodity is a pass-through, VA allows quarterly true-up
$17.9
$20.3
$18.7 $18.0 $18.4
$16.9
$0
$5
$10
$15
$20
$25
2016A 2017E 2018E 2019E 2020E 2021E
$ mill
io
n
s
Utility Maintenance Customer Growth
SAVE Rider & Station Replacement Advanced Metering
6
Stable regulation environment for gas utility segment
Established, productive relationships with VA SCC
9.75% authorized ROE
100% cast iron and bare steel pipe replaced
Advanced meter reading
Roanoke Gas capital expenditure plan
Forecast period (FYE)
SAVE Rider & Station Replacement $44.6 48%
Customer Growth $24.4 26%
Utility Maintenance $17.2 19%
Advanced Metering $6.2 7%
Total $92.4 100%
Forecast totals through 2021
St
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es
s m
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Infrastructure Replacement Rider - SAVE
Approved through 2021
First Generation Plastic: $35mm
3 interconnect stations: $3mm
Coated steel tubing: $6mm
7
RGC’s service area is enjoying an uptick in economic growth
Focus on innovation: Virginia Tech and Carilion to build research hub in Roanoke
The Roanoke Times – 3.19.16
UPS announces plans to deploy new CNG vehicles in 15 cities,
including Roanoke, VA
UPS Pressroom – 4.1.15
Ballast Point closes on Greenfield building for its East
Coast brewery The Roanoke Times – 9.9.16
Deschutes to open brewery in Roanoke
The Roanoke Times – 3.22.16
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Home to over 300,000 people and an economic hub for more than one
million people throughout western Virginia
Ranked in the Top 100 Best Places for Business and Careers and Top 15
Most Affordable Places for Doing Business by Forbes.com
High concentration of higher education institutions, with 25 colleges and
universities within a 60-mile radius
More than 70 trucking lines serve the Roanoke Region with local, state,
and interstate freight service, considered a foreign trade zone
Eldor Corp. picks Botetourt as a new site for
business The Roanoke Times – 3.15.16
Steel Dynamics to invest $28 million at the Roanoke
Bar Division The Roanoke Times – 2.2.17
8
Mountain Valley Pipeline (MVP) – project overview & timeline
RGCO is a 1% owner of the $3.5bn MVP
300 miles of 42” underground natural gas open-access pipeline
spanning from northwestern West Virginia to southern Virginia
MVP expected to provide up to two billion cubic feet (2Bcf) of natural
gas per day of transmission capacity to New York, Mid- and South-
Atlantic markets
MVP has secured firm commitments for the full capacity of the
project under 20-year contracts
Milestone Estimated completion
Final EIS June 2017
FERC approval Fall 2017
Construction begins Late 2017
Targeted in-service date End 2018
Project partners (% ownership)
MVP overview
G
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w
th
p
o
ten
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45.5%
BBB-
10%
A+
12.5%
A-
1%
31%
A-
$18 $20 $19 $18 $18 $17
$2 $5
$25
$4
$19 $25 $44 $22 $18 $17
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
2016A 2017E 2018E 2019E 2020E 2021E
($
m
m
)
Roanoke Gas CapEx
Mountain Valley Pipeline
9
MVP – benefits to Roanoke Gas
Provide a third source of gas with 2 interconnects
Provide additional capacity to meet future demands
Increase capital spending in 2017 through 2019
Provide expansion opportunities into Franklin County
Potential to add 1,500 new customers
Rate base growth of $10 million
Natural gas is 30% - 50% cheaper than propane and fuel oil
MVP will: Franklin County Expansion
Total
Estimated $4.8mm annual EBITDA contribution
G
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FYE
$12,739
$14,313 $15,143
$21,180
$0
$5,000
$10,000
$15,000
$20,000
$25,000
2014 2015 2016 2017
19.6x 19.6x 19.1x
28.4x
0.0x
5.0x
10.0x
15.0x
20.0x
25.0x
30.0x
2014 2015 2016 2017Current
10
Financial highlights
EPS Trailing P/E
ROE Plant growth
Sources: Bloomberg, SNL. Company filings.
Notes: Stock price as of 5/10/17. Income statement data is TTM as of 3/31. Balance sheet data as of 3/31. Net plant growth = sum of last four quarters capex on utility
plant without allowance for funds used during construction (AFUDC). Fi
n
an
ci
al
pr
o
fi
le
Note: TTM P/E as of calendar year end. Current as of 5/10/17
21.7x 4yr avg
$0.65
$0.69
$0.75
$0.86
$0.49
$0.50 $0.53
$0.56
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
$0.80
$0.90
2014 2015 2016 2017
Dividends/Share
8.9% 9.0%
9.7%
10.6%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
2014 2015 2016 2017
11
Comparable company benchmarking
Fi
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pr
o
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Current dividend yield
Sources: Bloomberg. Company filings.
Notes: Current dividend yield as of 5/10/17. EPS CAGR calculated using TTM EPS as of 3/31/2015 – 3/31/2017. Forward P/E calculated using share price as of
5/10/17 and Bloomberg consensus estimates for current fiscal year EPS. RGCO 2017E EPS of $0.85 represents company provided estimate.
2015 – 2017 EPS CAGR
Forward price / earnings
3.10%
2.76% 2.56% 2.46% 2.37%
1.81%
0.00%
1.00%
2.00%
3.00%
4.00%
SJI DGAS NJR WGL RGCO CPK
19.1%
7.9%
1.0%
0.2%
(0.4%) (0.7%) (5.0%)
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
NJR RGCO SJI CPK WGL DGAS
23.0x 23.3x 24.7x
26.9x 28.7x
34.2x
0.0x
10.0x
20.0x
30.0x
40.0x
NJR CPK WGL SJI RGCO DGAS
12
Comparable company benchmarking
Fi
n
an
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pr
o
fi
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Total debt / TTM EBITDA
Debt / 3-31-17 book capital
RGCO maturity profile
Sources: Bloomberg, SNL. Company filings.
Notes: Balance sheet data as of 3/31/17. TTM EBITDA as of 3/31/17.
-
10,000
20,000
30,000
40,000
$
0
0
0
2.6x 2.8x 2.8x
4.3x 4.4x
5.1x
0.0x
2.0x
4.0x
6.0x
8.0x
DGAS RGCO CPK WGL NJR SJI
38.7% 43.0%
45.5% 50.2% 50.7%
56.3%
0.0%
20.0%
40.0%
60.0%
80.0%
DGAS CPK RGCO SJI NJR WGL
$0.40
$0.45
$0.50
$0.55
$0.60
$0.65
$7.00
$9.00
$11.00
$13.00
$15.00
$17.00
$19.00
$21.00
$23.00
D
ivi
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en
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s
p
er
s
h
ar
e
($
)
Sh
ar
e
p
ri
ce
(
$
)
Share price Dividends/share
13
RGC Resources has delivered significant shareholder value
Demo
n
st
ra
ted
t
ra
ck
r
ec
o
rd
Source: Bloomberg data as of 5/10/2017
Notes: Total returns include total dividends paid over the time period
11/28/16: RGCO
announced 7.4%
dividend increase
RGCO total returns
6mo 51%
1yr 71%
3yr 110%
5yr 162%
10yr 302%
3/1/17: Three-
for-two stock
split effective
$24.49 current
share price
14