Forward-Looking Statements





This report contains forward-looking statements that relate to future
transactions, events or expectations. In addition, Resources may publish
forward-looking statements relating to such matters as anticipated financial
performance, business prospects, technological developments, new products,
research and development activities, operational impacts and similar matters.
These statements are based on management's current expectations and information
available at the time of such statements and are believed to be reasonable and
are made in good faith. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. In order to comply with
the terms of the safe harbor, the Company notes that a variety of factors could
cause the Company's actual results and experience to differ materially from the
anticipated results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties that may affect the
operations, performance, development and results of the Company's business
include, but are not limited to those set forth in the following discussion and
within Item 1A "Risk Factors" in the Company's 2022 Annual Report on Form 10-K.
All of these factors are difficult to predict and many are beyond the Company's
control. Accordingly, while the Company believes its forward-looking statements
to be reasonable, there can be no assurance that they will approximate actual
experience or that the expectations derived from them will be realized. When
used in the Company's documents or news releases, the words, "anticipate,"
"believe," "intend," "plan," "estimate," "expect," "objective," "projection,"
"forecast," "budget," "assume," "indicate" or similar words or future or
conditional verbs such as "will," "would," "should," "can," "could" or "may" are
intended to identify forward-looking statements.



Forward-looking statements reflect the Company's current expectations only as of
the date they are made. The Company assumes no duty to update these statements
should expectations change or actual results differ from current expectations
except as required by applicable laws and regulations.



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RGC RESOURCES, INC. AND SUBSIDIARIES





The three-month and six-month earnings presented herein should not be considered
as reflective of the Company's consolidated financial results for the fiscal
year ending September 30, 2023. The total revenues and margins realized during
the first six months reflect higher billings due to the weather sensitive nature
of the natural gas business.



Overview



Resources is an energy services company primarily engaged in the regulated sale
and distribution of natural gas to approximately 63,200 residential, commercial
and industrial customers in Roanoke, Virginia and surrounding localities through
its Roanoke Gas subsidiary.  Midstream, a wholly-owned subsidiary of
Resources, is an approximate 1% investor in MVP and a less than 1% investor in
Southgate.



Despite certain progress made in response to prior rulings and actions by the
Fourth Circuit, including the denial of challenges to the permit for Virginia
water crossings, construction activities to complete the MVP project continue to
be on hold in part due to the Fourth Circuit's recent action to vacate the West
Virginia water crossing permit on certain issues.  The LLC is actively pursuing
the resolution of the issues raised by the Fourth Circuit.  See the Equity
Investment in Mountain Valley Pipeline section for more information.



The utility operations of Roanoke Gas are regulated by the SCC, which oversees
the terms, conditions, and rates charged to customers for natural gas service,
safety standards, extension of service and depreciation. Nearly all of the
Company's revenues are derived from the sale and delivery of natural gas to
Roanoke Gas customers based on rates and fees authorized by the SCC. These rates
are designed to provide the Company with the opportunity to recover its gas and
non-gas expenses and to earn a reasonable rate of return on investment based on
normal weather. These rates are determined based on various rate applications
filed with the SCC. Generally, investments related to extending service to new
customers are recovered through the additional revenues generated by the non-gas
base rates in place at that time. The investment in replacing and upgrading
existing infrastructure, as well as recovering increases in non-gas expenses due
to inflationary pressures, regulatory requirements or operational
needs, are generally not recoverable until a formal rate application is filed to
include the additional investment and higher costs, and new non-gas base rates
are approved.



Beginning January 1, 2023, Roanoke Gas implemented new, non-gas base rates
designed to provide $8.55 million in additional revenues in response to higher
operating costs and to recover its investment in non-SAVE related projects since
the last non-gas base rate increase.  Revenues from the SAVE Plan and Rider were
incorporated into the new non-gas base rates.  These additional revenues are
subject to refund pending audit and hearing with a final order by the SCC,
expected in the latter part of 2023 or early 2024.  See the Regulatory section
for additional information.



The Company is also subject to regulation from the United States Department of
Transportation in regard to the construction, operation, maintenance, safety and
integrity of its transmission and distribution pipelines. FERC regulates the
prices for the transportation and delivery of natural gas to the Company's
distribution system and underground storage services. In addition, Roanoke Gas
is subject to other regulations which are not necessarily industry specific.



As the Company's business is seasonal in nature, volatility in winter weather
and the commodity price of natural gas can impact the effectiveness of the
Company's rates in recovering its costs and providing a reasonable return for
its shareholders. In order to mitigate the effect of weather variations and
other factors not provided for in the Company's base rates, Roanoke Gas has
certain approved rate mechanisms in place that help provide stability in
earnings, adjust for volatility in the price of natural gas and provide a return
on qualified infrastructure investment. These mechanisms include the SAVE Rider,
WNA, ICC, RNG and PGA.



The SAVE Plan and Rider provides the Company with a mechanism through which it
recovers costs related to SAVE qualified infrastructure investments on a
prospective basis, until a rate application is filed incorporating these
investments in non-gas base rates. The SAVE Plan and Rider was reset effective
January 1, 2023 when the recovery of all prior SAVE Plan investment
was incorporated into the current non-gas rates. Accordingly, SAVE Plan revenues
decreased by approximately $422,000 for the six-month period ended March 31,
2023 compared to the same period last year, reflecting the movement of the SAVE
Plan revenues into the new non-gas base rates effective January 1, 2023.
Management expects to restart the SAVE Plan and Rider in fiscal 2024 in order to
incorporate new qualified SAVE infrastructure investment incurred but not
reflected in the new non-gas base rates.



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The WNA mechanism reduces the volatility in earnings due to the variability in
temperatures during the heating season. The WNA is based on the most recent
30-year temperature average and provides the Company with a level of earnings
protection when weather is warmer than normal and provides its customers with
price protection when weather is colder than normal. The WNA allows the Company
to recover from its customers the lost margin (excluding gas costs) from warmer
than normal weather and correspondingly requires the Company to refund the
excess margin earned for colder than normal weather. The WNA mechanism used by
the Company is based on a linear regression model that determines the value of a
single heating degree day and thereby estimates the revenue adjustment based on
weather variance from normal. Any billings or refunds related to the WNA are
completed following each WNA year, which extends for the 12-month period from
April to March.  For the three and six months ended March 31, 2023, the Company
accrued approximately $2,800,000 and $2,612,000 in additional revenues under the
WNA model for weather that was 28% and 15% warmer than normal, respectively,
compared to approximately $556,000 and $1,800,000 in additional revenues for
weather that was 7% and 13% warmer than normal for the corresponding period last
year.  The current WNA year ended on March 31, 2023 and the $2.8 million
WNA balance will be collected from customers beginning in May 2023.



The Company also has an approved rate structure that mitigates the impact of the
financing costs of its natural gas inventory. Under this rate structure, Roanoke
Gas recognizes revenue by applying the ICC factor, based on the Company's
weighted-average cost of capital, including interest rates on short-term and
long-term debt, and the Company's authorized return on equity, to the average
cost of natural gas inventory during the period. Total ICC revenues increased by
approximately $118,000 and $312,000, respectively, for the three and six month
periods ended March 31, 2023, compared to the corresponding periods last year,
as much higher natural gas commodity prices more than doubled the average price
of gas in storage.  Natural gas commodity futures prices have declined
significantly, which should reduce the level of increases in ICC revenues for
the remainder of the current fiscal year as lower priced natural gas is
delivered into storage during the summer fill season.



In March 2023, Roanoke Gas began the operation of the RNG facility to produce
commercial quality RNG for delivery into its distribution system through a
cooperative agreement with the Western Virginia Water Authority.  With
SCC approval, Roanoke Gas is allowed to recover the costs associated with the
investment in RNG facilities and the related operating costs. The RNG recovery
mechanism is similar to the SAVE Rider where an RNG Rider is added to customer
bills to recover these costs.  The customer benefits from this program through
the monetization of environmental credits generated through the production of
RNG, which are returned to customers through the RNG Rider.  See the Regulatory
section for more information.



The cost of natural gas is a pass-through cost and is independent of the
Company's non-gas rates. Accordingly, the Company's approved billing rates
include a component designed to allow for the recovery of the cost of natural
gas used by its customers. This rate component, referred to as the PGA, allows
the Company to pass along to its customers increases and decreases in natural
gas costs through a quarterly filing, or more frequent if necessary, with the
SCC. Once SCC approval is received, the Company adjusts the gas cost component
of its rates. As actual costs will differ from the projections used in
establishing the PGA rate, the Company will either over-recover or under-recover
its actual gas costs during the period. The difference between actual costs
incurred and costs recovered through the application of the PGA is recorded as a
regulatory asset or liability. At the end of the annual deferral period, the
balance is amortized over an ensuing 12-month period as amounts are reflected in
customer billings.



Results of Operations

The analysis on the results of operations is based on the consolidated operations of the Company, which is primarily associated with the utility segment. Additional segment analysis is provided when Midstream's investment in affiliates represents a significant component of the comparison.





The Company's operating revenues are affected by the cost of natural gas, as
reflected in the consolidated income statement under cost of gas - utility. The
cost of natural gas, which includes commodity price, transportation, storage,
injection and withdrawal fees, with any increase or decrease offset by a
correlating change in revenue through the PGA, is passed through to customers at
cost. Accordingly, management believes that gross utility margin, a non-GAAP
financial measure defined as utility revenues less cost of gas, is a more useful
and relevant measure to analyze financial performance. The term gross utility
margin is not intended to represent or replace operating income, the most
comparable GAAP financial measure, as an indicator of operating performance and
is not necessarily comparable to similarly titled measures reported by other
companies. The following results of operations analyses will reference gross
utility margin.



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Three Months Ended March 31, 2023:





Net income increased by $30,836,315 for the three months ended March 31, 2023,
compared to the same period last year, primarily due to the impairment of the
Company's investment in the LLC recorded during the second quarter of fiscal
2022.  Excluding the after tax effect of the impairment, net income would have
increased by approximately $1,264,000 over the same period last year.



The tables below reflect operating revenues, volume activity and heating
degree-days.



                                            Three Months Ended March 31,         Increase/
                                               2023                2022         (Decrease)       Percentage
Operating Revenues
Gas Utility                               $    38,000,977      $ 29,499,219     $ 8,501,758               29 %
Non Utility                                        28,680            30,464          (1,784 )             (6 )%
Total Operating Revenues                  $    38,029,657      $ 29,529,683     $ 8,499,974               29 %
Delivered Volumes
Regulated Natural Gas (DTH)
Residential and Commercial                      2,560,500         3,221,562        (661,062 )            (21 )%
Transportation and Interruptible                  888,307         1,020,460        (132,153 )            (13 )%
Total Delivered Volumes                         3,448,807         4,242,022        (793,215 )            (19 )%
HDD                                                 1,487             1,918            (431 )            (22 )%




Total operating revenues for the three months ended March 31, 2023, compared to
the same period last year, increased by 29% due to higher natural gas commodity
prices, the implementation of a non-gas rate increase and higher ICC revenues,
offset by a reduction in delivered volumes.  Natural gas commodity prices
averaged nearly $7.00 per dekatherm during the quarter compared to $3.60 per
dekatherm for the corresponding quarter in the prior year.  However, during the
quarter, the high commodity prices began to retreat and the Company adjusted the
PGA component of its rates accordingly.  As discussed above, Roanoke Gas placed
new non-gas rates into effect for natural gas service rendered on or after
January 1, 2023, subject to refund.  These new non-gas rates will generate
approximately $8.55 million in additional annual revenues and includes revenues
previously recorded through the SAVE Plan and Rider.  Approximately 75% of the
non-gas rate increase was allocated to the volumetric component; and as such, a
larger portion of the rate increase was recognized during the quarter due to the
volume of gas consumption.  SAVE Plan revenues declined as the SAVE Rider was
reset due to the incorporation of these revenues into the new non-gas base
rates.  Management expects the SAVE Plan and Rider to resume in fiscal
2024. Additionally, ICC revenues increased due to higher commodity prices of gas
in storage.  As total heating degree days decreased by 22% from the same period
last year, the weather sensitive residential and commercial deliveries declined
by 21%. After accounting for the application of the WNA model for the effect of
weather variation from normal, the WNA adjusted residential and commercial
volumes would have only decreased by approximately 3% compared to the WNA
adjusted volumes for the same period last year.  Transportation and
interruptible volumes declined by 13% as the single, multi-fuel customer that
had been utilizing natural gas as its primary fuel source reduced its
consumption during the quarter.



                          Three Months Ended March 31,
                             2023                2022          Increase        Percentage
Gross Utility Margin
Gas Utility Revenues    $    38,000,977      $ 29,499,219     $ 8,501,758               29 %
Cost of Gas - Utility        21,285,057        14,923,575       6,361,482               43 %
Gross Utility Margin    $    16,715,920      $ 14,575,644     $ 2,140,276               15 %




Gross utility margin increased from the same period last year primarily as a
result of the aforementioned implementation of new non-gas base rates.  Although
total residential and commercial natural gas deliveries decreased substantially
from last year due to warmer weather, the WNA adjusted volumes reflected only a
small decrease as the WNA mechanism normalized the impact of weather on the
delivered volumes for both periods.  In addition, less than half of the revenues
collected through the fixed charge SAVE Rider were incorporated into the
customer base charge increase with the remainder included in the volumetric rate
component.  As a result of this proposed rate design, more of the SAVE Plan
related revenues incorporated into the new non-gas base rates will be recognized
as part of volumetric sales during the heating season and less will recognized
during the summer months.



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The components of and the change in gas utility margin are summarized below:



                           Three Months Ended March 31,         Increase/
                            2023                 2022         (Decrease)
Customer Base Charge   $     4,060,891       $  3,666,318     $   394,573
ICC                            216,037             98,511         117,526
SAVE Plan                            -            743,992        (743,992 )
Volumetric                   9,509,996          9,470,897          39,099
WNA                          2,799,101            556,404       2,242,697
RNG                             83,009                  -          83,009
Other Revenues                  46,886             39,522           7,364
Total                  $    16,715,920       $ 14,575,644     $ 2,140,276




Operations and maintenance expenses decreased by $151,279, or 4%, from the same
period last year primarily due to greater capitalization of overheads and lower
bad debt expense, net of higher compensation costs and contracted
services. Total capitalized overheads increased by approximately $134,000 due to
higher direct construction expenditures related to Roanoke Gas capital
projects.  Bad debt expense decreased by approximately $169,000 as the prior
year reflected higher delinquent balances after emerging from legislative
imposed COVID restrictions.  Compensation costs and contracted services
increased by approximately $194,000 due to the inflationary impact on salary and
contractor costs.



General taxes decreased by $9,024, or 1%, primarily due to lower property taxes
associated with reductions in the assessed values of property reported by the
SCC more than offsetting an increase in gross utility property.

Depreciation expense increased by $150,837, or 7%, on a comparable increase in utility property balances.





Impairment of unconsolidated affiliates includes $39,822,213 for an
other-than-temporary write down of the Company's investment in the LLC as a
result of the Company's valuation assessment during the prior fiscal year.  See
Equity Investment in Mountain Valley Pipeline for more information regarding the
Company's investment in the LLC and its ongoing valuation assessments.

Other income, net decreased by $222,686, or 65%, primarily due to an increase of approximately $376,000 in the non-service cost components of net periodic benefit costs arising from the effect of much higher interest rates on the actuarial expense calculation. Roanoke Gas also recognized approximately $75,000 in AFUDC related to the RNG project during the current period.

Interest expense increased by $292,018, or 26%, as the weighted-average interest rate on total debt increased from 2.98% during the second quarter of fiscal 2022 to 3.94% during the second quarter of fiscal 2023, while total daily average debt outstanding declined by nearly 5%. The increase in the weighted-average interest rate was primarily associated with Roanoke Gas' variable rate line-of-credit and Midstream's credit facility.

Roanoke Gas' interest expense increased by $59,308 primarily due to the increase
in the interest rate on the variable rate line-of-credit and the issuance of the
delayed draw note in 2022.

Midstream's interest expense increased by $232,710 due to rising interest rates on its credit facility. Total average outstanding debt during the quarter declined by $6.2 million due to the equity infusions from Resources and installment payments on amortizing debt, net of the funding of MVP and Southgate.





Income tax expense increased by $10,622,540 due to the prior year impairment
of the Company's investment in the LLC. The effective tax rate was 23.8% and
26.1% for the three month periods ended March 31, 2023 and 2022, respectively.
Excluding the impairment and the associated tax, the effective tax rate would
have been 24.0% for the second quarter of fiscal 2022. The effective tax rate is
below the combined statutory state and federal rate due to the amortization of
excess deferred taxes and R&D tax credits.



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Six Months Ended March 31, 2023:





Net income increased by $30,508,191 from a $20,909,900 net loss position to a
$9,598,291 net income position for the six months ended March 31, 2023, compared
to the same period last year, due to the prior year impairment of the Company's
investment in the LLC.  Excluding the after tax effect of the impairment, net
income would have increased by approximately $936,000 over the same period last
year.



The tables below reflect operating revenues, volume activity and heating
degree-days.



                                             Six Months Ended March 31,         Increase/
                                                2023              2022          (Decrease)       Percentage
Operating Revenues
Gas Utility                                $   71,253,744     $ 52,730,874     $ 18,522,870               35 %
Non Utility                                        58,248           61,889           (3,641 )             (6 )%
Total Operating Revenues                   $   71,311,992     $ 52,792,763     $ 18,519,229               35 %
Delivered Volumes
Regulated Natural Gas (DTH)
Residential and Commercial                      4,993,739        5,132,292         (138,553 )             (3 )%
Transportation and Interruptible                1,763,608        1,797,901          (34,293 )             (2 )%
Total Delivered Volumes                         6,757,347        6,930,193         (172,846 )             (2 )%
HDD                                                 3,010            3,079              (69 )             (2 )%




Total operating revenues for the six months ended March 31, 2023, compared to
the same period last year, increased by 35% due to higher natural gas commodity
prices, the implementation of a non-gas rate increase and higher ICC revenues,
net of a slight reduction in delivered volumes.  Natural gas commodity prices
averaged approximately $7.00 per dekatherm during the current period compared to
$3.67 per dekatherm for the corresponding period last year.  In January 2023,
Roanoke Gas implemented a non-gas rate increase, subject to refund, which is
expected to provide approximately $8.5 million in additional revenues including
the revenue associated with qualified SAVE investments collected through the
SAVE Rider.  Additionally,  ICC revenues increased due to higher commodity
prices of gas in storage. Residential and commercial deliveries decreased by 3%
corresponding to a 2% decline in heating degree days.  The less weather
sensitive transportation and interruptible volumes declined by 2% as half of the
decline was attributable to a reduction in consumption by the single, multi-fuel
customer that had increased its natural gas utilization during prior quarters.
The consumption pattern for this customer is based on several factors and
therefore is subject to significant fluctuations in usage. SAVE Plan revenues
declined as the SAVE Plan and Rider were reset effective January 1, 2023.



                          Six Months Ended March 31,
                             2023              2022           Increase        Percentage
Gross Utility Margin
Gas Utility Revenues    $   71,253,744     $ 52,730,874     $ 18,522,870               35 %
Cost of Gas - Utility       42,089,210       26,239,980       15,849,230               60 %
Gross Utility Margin    $   29,164,534     $ 26,490,894     $  2,673,640               10 %




Gross utility margin increased from the same period last year primarily as a
result of the aforementioned higher non-gas base rates, net of SAVE and higher
ICC revenues.



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The components of and the change in gas utility margin are summarized below:



                         Six Months Ended March 31,         Increase/
                            2023              2022         (Decrease)
Customer Base Charge   $    7,651,448     $  7,302,995     $   348,453
ICC                           587,576          275,842         311,734
SAVE Plan                   1,049,310        1,471,365        (422,055 )
Volumetric                 17,083,394       15,554,251       1,529,143
WNA                         2,612,454        1,800,421         812,033
RNG                            83,009                -          83,009
Other Revenues                 97,343           86,020          11,323
Total                  $   29,164,534     $ 26,490,894     $ 2,673,640




Operations and maintenance expenses increased by $78,920, or 1%, over the same
period last year primarily due to higher compensation costs and contracted
services and corporate insurance, net of greater capitalized overheads
and lower bad debt expense. Compensation costs and contracted services increased
by approximately $552,000 due to the effects of inflation on salary and
contractor costs.  Corporate insurance premiums related to property and
liability insurance increased by approximately $66,000 due to insurance market
conditions.  Total capitalized overheads increased by approximately $401,000 due
to higher direct construction expenditures related to Roanoke Gas capital
projects and timing of LNG production. Bad debt expense declined by
approximately $113,000 as customer delinquencies improved.



General taxes decreased by $23,183, or 2%, primarily due to lower property taxes
associated with reductions in the assessed values of property reported by the
SCC more than offsetting an increase in gross utility property.

Depreciation expense increased by $299,684, or 7%, on a comparable increase in utility property balances.





Equity in earnings of unconsolidated affiliate decreased by $67,583 due to the
absence of construction activities during the current fiscal year. See Equity
Investment in Mountain Valley Pipeline section below for additional information.



Impairment of unconsolidated affiliates includes $39,822,213 for an
other-than-temporary write down of the Company's investment in the LLC as a
result of the Company's valuation assessment during the prior fiscal year.  See
Equity Investment in Mountain Valley Pipeline for more information regarding the
Company's investment in the LLC.

Other income, net decreased by $470,519, or 71%, primarily due to an increase of approximately $752,000 in the non-service cost components of net periodic benefit costs arising from the effect of much higher interest rates on the actuarial expense calculation. Roanoke Gas also recognized approximately $156,000 in AFUDC related to the RNG project during the current period.





Interest expense increased by $556,326, or 25%, primarily due to the increase in
the interest rates on the Company's variable rate debt including Roanoke Gas'
line-of-credit and Midstream's credit facility.  Total daily average debt
declined by 4% from the same period last year.

Roanoke Gas' interest expense increased by $117,011 primarily due to the increase in the interest rate on the variable rate line-of-credit and the issuance of the delayed draw note in 2022.





Midstream's interest expense increased by $439,315 due to rising interest rates
on its credit facility more than offsetting a $5.1 million decline in the
average daily debt balance outstanding due to the $10 million equity infusion
from Resources in March 2022.



Income tax expense increased by $10,533,690 as a result of the recognition of
the impairment in March 2022 on the Company's investment in the LLC. The
effective tax rate was 23.6% and 26.6% for the  six month periods ended March
31, 2023 and 2022, respectively.  Excluding the impairment and the associated
tax, the effective tax rate would have been 23.7% for the six month period ended
March 31, 2022.  The effective tax rate is below the combined statutory state
and federal rate due to the amortization of excess deferred taxes and R&D tax
credits.



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Critical Accounting Policies and Estimates





The consolidated financial statements of Resources are prepared in accordance
with GAAP. The amounts of assets, liabilities, revenues and expenses reported in
the Company's consolidated financial statements are affected by accounting
policies, estimates and assumptions that are necessary to comply with generally
accepted accounting principles. Estimates used in the financial statements are
derived from prior experience, statistical analysis and management judgments.
Actual results may differ significantly from these estimates and assumptions.

There have been no significant changes to the critical accounting policies as reflected in the Company's Annual Report on Form 10-K for the year ended September 30, 2022.





Asset Management



Roanoke Gas uses a third-party asset manager to oversee its pipeline
transportation, storage rights and gas supply inventories and deliveries. In
return for being able to utilize the excess capacities of the transportation and
storage rights, the asset manager pays Roanoke Gas a monthly utilization fee. In
accordance with an SCC order issued in 2018, a portion of the utilization fee is
retained by the Company with the balance passed through to customers through
reduced gas costs. The current asset management agreement ends March 31, 2025.

Equity Investment in Mountain Valley Pipeline

In October 2017, FERC issued the CPCN for the MVP project. In the first quarter of calendar 2018, the LLC received limited notice from FERC to proceed with certain construction activities and commenced construction.





Recent construction activity has been limited based on legal and regulatory
challenges. Although certain permits and authorizations were received, the MVP
project has been subject to repeated, significant delays and cost increases
resulting from legal challenges and regulatory setbacks, particularly in respect
to litigation in the Fourth Circuit, including, on January 25, 2022, the Fourth
Circuit's vacatur and remanding on specific issues of the LLC's then
authorizations related to the Jefferson National Forest (JNF) received from the
Bureau of Land Management and the U.S. Forest Service (USFS) and on February 3,
2022, the Fourth Circuit's vacatur and remanding on specific issues of the then
Biological Opinion and Incidental Take Statement issued by the United States
Department of the Interior's Fish and Wildlife Service (FWS) for the MVP
project.



Given ongoing litigation and regulatory matters, the LLC filed a request on June
24, 2022 with the FERC for an extension of time to complete the project for an
additional four years (relative to a prior obtained extension) through October
13, 2026.  The request was granted on August 23, 2022.



Notwithstanding prior setbacks and ongoing risks, including the risk posed by
pending and future legal challenges in the Fourth Circuit, the LLC continues to
engage in pursuing the authorizations necessary under applicable law from the
relevant agencies to complete the MVP project, including the new authorizations
relating to the JNF and an Individual Permit from the Huntington, Pittsburgh and
Norfolk Districts of the U.S. Army Corps of Engineers to effect approximately
300 water crossings utilizing open cut techniques. In April 2022, the MVP
obtained the FERC's authorization to amend the Certificate to utilize
alternative trenchless construction methods to effect approximately 120 water
crossings. On February 28, 2023, the FWS issued the new Biological Opinion and
Incidental Take Statement for the MVP project.  On October 25, 2022 and January
24, 2023, oral arguments were held in the Fourth Circuit relating to the Section
401 water quality certification approvals received in December 2021 from the
West Virginia Department of Environmental Protection and the Virginia Department
of Environmental Quality, respectively (such approvals, the WVDEP State 401
Approval and the VADEQ State 401 Approval), each in connection with the MVP
project.  The oral arguments were conducted by the same panel of Fourth Circuit
judges as have appeared, and overruled permitting agencies, in numerous prior
matters relating to the MVP.  Although on March 29, 2023, the Fourth Circuit
panel denied project opponents' challenge to the VADEQ State 401 Approval, on
April 3, 2023, the panel, consistent with its posture during the oral argument,
vacated the WVDEP State 401 Approval based on the panel's view that certain
aspects of the WVDEP State 401 Approval did not reflect sufficient explanation
by the WVDEP and that certain additional requirements should have been
incorporated into the WVDEP State 401 Approval. Relating to the JNF, on April
13, 2023, the USFS issued the final Supplemental Environmental Impact Statement
regarding the MVP project. On April 27, 2023, project opponents sought a stay in
the Fourth Circuit of the new Biological Opinion and Incidental Take Statement
for the MVP project, and as of the date of the filing of this Quarterly Report
on Form 10-Q, that proceeding is ongoing.





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In addition to those requested authorizations that remain outstanding described
in the paragraph above, including that the WVDEP must issue a new Section 401
approval, and other relevant regulatory matters, the LLC in order to complete
the project needs to continue to have available the necessary orders previously
issued by the FERC and receive authorization from the FERC to complete
construction work in the portion of the project route currently remaining
subject to the FERC's previous stop work order and in the JNF.



The LLC's managing partner publicly disclosed on May 2, 2023 that based on its
interactions with the agencies and, in the case of the WVDEP State 401 Approval,
also its view of the steps it believes necessary to address the Fourth Circuit
panel's vacatur, the LLC's managing partner expects the agencies will issue the
requisite authorizations by the early summer 2023 and believes that the agencies
are producing authorizations that address points raised by the Fourth Circuit
and exceed standards for the issuance of such authorizations. Given that, the
LLC's managing partner recognizes that there continue to be a number of upcoming
regulatory and litigation milestones that (together with the timing thereof)
will determine whether the LLC may recommence forward construction in 2023
(potentially with the goal of completing the project by end of calendar 2023) or
that will prevent such construction and/or completion in 2023. However, the
LLC's managing partner acknowledges the narrowed path to complete the project by
the end of calendar 2023 in light of various risks (the impacts of which are not
known or reasonably estimable), including ongoing and anticipated litigation in
the Fourth Circuit relating to MVP project authorizations within the Fourth
Circuit's jurisdiction since the LLC's managing partner perceives continued
hostility and risk posed by the Fourth Circuit panel to MVP project-related
authorizations.



There also are potential, future legislative developments that may impact MVP
forward construction or completion timing, as the LLC continues to urge the
United States Congress to expeditiously pass, and for there to be enacted,
federal energy infrastructure permitting reform legislation that specifically
requires the completion of the MVP project, similar to MVP-specific aspects of
legislation proposed in 2022 by each of United States Senators Joseph Manchin
and Shelley Moore Capito and ideally in sufficient time for the LLC to complete
construction in 2023. However, while as of the date of the filing of this
Quarterly Report on Form 10-Q, the LLC believes that there remain prospects and
continuing significant bipartisan support for federal energy infrastructure
permitting reform legislation favorable to the MVP project, the LLC recognizes
that to such date attempts to enact such legislation have failed and that
differences between and within the Republican and Democratic parties continue to
exist as to the scope and terms of any such reform, and such differences have
impeded and could further impede the prospect of legislation being enacted,
including in sufficient time for the LLC to complete construction in 2023.



The LLC's managing partner believes that the LLC will complete the four to five
months of remaining construction activity as promptly as practicable once
authorized and fully mobilized and that the total project cost would be
approximately $6.6 billion (excluding AFUDC) if that completion is achieved in
2023.



Management conducted an assessment of its investment in the LLC in accordance
with the provisions of ASC 323, Investments - Equity Method and Joint Ventures.
This assessment included a third-party valuation.  As a result of its
evaluations in fiscal 2022, management concluded that the investment in the LLC
sustained other-than-temporary declines in fair value as of February 22, 2022
and as of September 30, 2022 and recorded pre-tax impairment losses of
approximately $39.8 million and $15.3 million in its second and fourth quarter
operating results, respectively. Management re-evaluated its investment as of
March 31, 2023 and concluded that its investment was fairly stated and no
additional impairment was required.  Management will continue monitoring the
status of MVP for circumstances that may lead to future impairments, including
further delays or denials of necessary permits and approvals. If necessary, the
amount and timing of any further impairment would be dependent on the specific
circumstances, including changes to probabilities of completion, and changes in
the assumed future cash flows, and discount rate at the time of evaluation.





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Midstream has utilized the $23 million of borrowing capacity under its
non-revolving credit facility, which matures in December 2023. Effective
November 1, 2021, the borrowing capacity under this credit facility was reduced
to $33 million as $8 million of the outstanding balance was re-financed through
a separate unsecured promissory note.  Effective March 31, 2022, the borrowing
capacity under the credit facility was further reduced to its current $23
million level as $10 million of the outstanding balance was paid.  See Note
9 for more information.



On May 4, 2023, Midstream agreed with the LLC's managing partner and primary
interest owner to make Midstream's future capital contributions to the LLC up to
the point of project in-service or cancellation, as a result of which
Midstream's ownership interest percentage in the LLC as it relates to the MVP
project will be proportionately adjusted.



If the legal and regulatory challenges, including any future challenges, are not
resolved in a timely manner and/or restrictions are imposed that impact future
construction, the cost of the MVP may increase, and Midstream may incur further
dilution accordingly.  See Investment in Mountain Valley Pipeline, LLC Risk
Factor under Item 1A of the Company's Form 10-K for the year ended September 30,
2022.



Regulatory



On December 2, 2022, Roanoke Gas filed an application with the SCC seeking an
$8.55 million annual increase in its non-gas base rates, of which $4.05 million
was being recovered through the SAVE Rider.  Since the Company is seeking to
recover the costs associated with its SAVE Plan through interim non-gas base
rates effective January 1, 2023, the Company discontinued its SAVE Plan and
Rider for the remainder of the current fiscal year.



On December 21, 2022, the SCC issued its Order for Notice and Hearing,
which authorized the Company to put its proposed rates into effect, on an
interim basis and subject to refund, on January 1, 2023, and set the matter for
hearing. The Company expects final resolution of the rate case to occur in late
calendar 2023 or early 2024.



The Company has recorded a provision for refund, including interest, associated
with customer billings under the new non-gas rates.  As the SCC audit is still
in progress, the Company based its estimate for refund in part on the history of
final awards in previous rate filings, as well as other factors.  The amount of
the accrued refund is an estimate, and the final order could result in a rate
award that is either more or less than the amount currently reflected in the
financial statements.  Management will refine its estimates as more information
becomes available.



In the final order from the last non-gas base rate increase, the SCC allowed
Roanoke Gas to defer the related financing costs of two gate stations that would
interconnect to MVP for possible future recovery. As a result, the Company began
recognizing AFUDC during the second quarter of fiscal 2020 during the
construction phases. Beginning January 2021, Roanoke Gas temporarily ceased
recording AFUDC on these projects until such time as construction activities
resume.  The Company is assuming completion of its MVP related assets, and
therefore is seeking rate recovery in the non-gas base rate filing and, if
approved, will permanently stop accruing AFUDC on these assets.







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The Company filed an application with the SCC for a new five-year SAVE Plan and
Rider on March 31, 2023 for recovery of costs associated with SAVE eligible
investments.  The Company's proposal encompasses SAVE eligible investments
beginning October 1, 2023.  The application seeks recovery of costs associated
with $8.5 million in SAVE eligible investments for the initial year ending
September 30, 2024 and cumulative investments of $49.5 million over the five
year SAVE Plan ending September 30, 2028.



On May 16, 2022, Roanoke Gas announced a cooperative agreement under which
Roanoke Gas and the Western Virginia Water Authority will produce commercial
quality RNG from biogas produced at the regional water pollution control plant.
In August 2022, Roanoke Gas filed an application with the SCC seeking approval
of a rate adjustment clause under which the Company will recover the costs
associated with constructing, owning, operating and maintaining the renewable
natural gas facility.  The application was filed under Chapter 30 of Title 56 of
the Code of Virginia. Chapter 30 allows the Company to accrue AFUDC on the RNG
project.  In connection with the RNG project, Roanoke Gas began accruing AFUDC
in fiscal 2022 associated with construction of the facility. As of March 31,
2023, the Company has recognized approximately $273,000 of AFUDC revenue since
inception of the RNG project.  The Company received a final order from the
SCC on January 23, 2023 approving the Company's application. The RNG project
became operational in March 2023.  The Company began billing customers the RNG
rate adjustment on March 1, 2023, at which time the Company ceased recording
AFUDC.



On June 2, 2022, Roanoke Gas filed an application with the SCC to acquire
certain natural gas distribution assets from a local housing authority.  Under
this application, the Company requested the approval to acquire such facilities
at five separate apartment complexes, located in the Company's service
territory, that were under housing authority management.  Under the proposed
plan, the housing authority would renew existing natural gas distribution
facilities to include mains, services and meter installations and then transfer
ownership of these facilities to Roanoke Gas.  In turn, Roanoke Gas would assume
responsibility for the operation and maintenance of these assets and recognize a
gain related to the asset acquisition equal to the cost associated with the
renewal.



On July 19, 2022, the SCC approved the application and on August 4, 2022, the
housing authority transferred the assets from two apartment complexes to Roanoke
Gas. Roanoke Gas recorded these assets and recognized a pre-tax gain of
approximately $219,000 during the Company's fourth quarter of fiscal 2022. The
housing authority expects to complete the upgrade and subsequent asset transfer
at one more apartment complex in fiscal 2023.  The authority is awaiting future
funding to complete the two remaining apartment complexes.  The timing of
funding and the completion of the asset renewals for these two complexes is
unknown at this time.

In November 2021, Roanoke Gas received $859,000 in ARPA funds and applied the full amount to customer arrearages in December 2021.

Capital Resources and Liquidity





Due to the capital intensive nature of the utility business, as well as the
impact of weather variability, the Company's primary capital needs are the
funding of its capital projects, investment in the LLC, the seasonal funding of
its natural gas inventories and accounts receivables, payment of dividends and
debt service.  The Company anticipates funding these items through its operating
cash flows, credit availability under short-term and long-term debt agreements
and proceeds from the sale of its common stock.



Cash and cash equivalents increased by $1,727,059 for the six-month period ended
March 31, 2023 compared to an increase of $7,913,673 for the six-month period
ended March 31, 2022. The following table summarizes the sources and uses of
cash:



                                                        Six Months Ended March 31,
Cash Flow Summary                                         2023              2022
Net cash provided by operating activities             $  16,965,342     $

12,992,906


Net cash used in investing activities                   (14,350,139 )     (14,278,880 )
Net cash provided by (used in) financing activities        (888,144 )       9,199,647
Increase in cash and cash equivalents                 $   1,727,059     $   7,913,673

Cash Flows Provided by Operating Activities:





The seasonal nature of the natural gas business causes operating cash flows to
fluctuate significantly during the year as well as from year to year. Factors,
including weather, energy prices, natural gas storage levels and customer
collections, all contribute to working capital levels and related cash flows.
Generally, operating cash flows are positive during the second and third fiscal
quarters as a combination of earnings, declining storage gas levels and
collections on customer accounts all contribute to higher cash levels. During
the first and fourth fiscal quarters, operating cash flows generally decrease
due to increases in natural gas storage levels and rising customer receivable
balances.



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