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Northwest Natural Gas’ (NWN) CEO Gregg Kantor on Q4 2014 Results – Earnings Call Transcript

Northwest Natural Gas Co. (NYSE: NWN ) Q4 2014 Earnings Conference Call February 27, 2015 11:00 AM ET Executives Robert Hess – IR Gregg Kantor – President and CEO Steve Feltz – SVP and CFO Analysts Derek Walker – Bank of America Operator Good morning, and welcome to the Northwest Natural Gas Company’s Fourth Quarter Results Conference Call. All participants will be in listen-only mode. (Operator Instructions) Please note that this event is being recorded. I would now like to turn the conference over to Mr. Bob Hess. Please go ahead, Mr. Hess. Robert Hess Thank you, Dana. Good morning, everybody, and welcome to our fourth quarter and full year 2014 earnings call. As a reminder some of the things that will be said this morning contain forward-looking statements. They are based on management’s assumptions, which may or may not come true, and you should refer to the language at the end of our press release for the appropriate cautionary statements and also to our SEC filings for additional information. We do expect to file our 10-K later today. As mentioned, this teleconference is being recorded and will be available on our website following the call. Please note that these calls are designed for the financial community. If you are an individual investor and have questions, please contact me directly at area code 503-220-2388. Media please can contact, Melissa Moore at area code 503-220-2436. Speaking this morning are Gregg Kantor, President and Chief Executive Officer and Steve Feltz, Senior Vice President and Chief Financial Officer. Gregg and Steve have some opening remarks, and then will be available to answer your questions. Also joining us today are other members of our executive team, who will help answer any questions you may have. With that, let me turn it over to Gregg for his opening remarks. Gregg Kantor Thanks Bob. Good morning, everyone and welcome to fourth quarter and year-end review. I’ll begin today with an overview of 2014 and then turn it over to Steve to provide the financial details for the quarter and the year. I’ll wrap up the call with a look-forward. For Northwest Natural 2014 was a year of both opportunity and challenge. Last year our utility performance was solid, with improvements in customer growth and margin. However, those results were offset by losses associated with our gas cost sharing mechanism and the impact of natural gas prices. We also continued to see weakness in the California storage market hampering the financial returns from our Gill Ranch storage facility. In the midst to be varying factors, we delivered earnings of $2.16 per share and 2014 while providing a total shareholder return of approximately 22%. On the growth front, the Northwest economy made positive gains last year with Oregon’s employment rebounding to prerecession levels and unemployment rates continuing to fall. In 2014, we saw a healthy increase in commercial margins and an uptick in commercial new construction activity. The housing sector also improved with Portland home sales up nearly 4% and the average sale price up 7% last year compared to 2013. In addition, United Van Lines ranged Oregon its top moving destination last year, a positive indicator for future housing sector growth. And in Clark County in Washington, the fastest growing county in our service territory, home sales increased 8% with the average sale price increasing about 10%. These improvements help drive up our customer growth rate to 1.4% last year, and in the process we reached a new milestone adding our 700,000 customer. We believe last year’s healthy market improvements coupled with our substantial price advantage over electricity and oil put us in a strong position for additional customer growth going forward. In 2014 we made significant investments in safety and in reliability of our system. We completed several system reinforcement and facility upgrade projects and we continued our aggressive pipe replacement efforts. In fact we plan to remove the last three miles of bare steel pipe in 2015 making us one of the first utilities in the nation to eliminate both cast iron and bare steel pipe throughout our distribution system. In 2014, we reaped the advantages of having a more modern and robust system when extreme winter weather put us in the test. Last February we set a company record with a send out volume hitting 9 million firms in a 24 hour period. That’s almost double the normal send out for a typical winter day. And I’m pleased to report our pipeline system and storage facilities performed very well. I’m also pleased to report that for the fifth time in eight years we ranked first in the west in the annual J. D. Power Gas Utility Residential Customer Satisfaction Study. Last year also marks the seventh time in eight years that we were among the two highest scoring gas utilities in the nation. Now let me shift to the status of our regulatory agenda. Last year we continued to work through three remaining dockets carried over from our 2012 Oregon rate case. Just last week the OPUC issued its decision regarding how the Company’s environmental site remediation and recovery mechanism would be implemented. In the final order the commission found that all but $33,000 of the $114 million of environment remediation expenses incurred from 2003 through March of 2014 were proved. However due to the application of an earnings test from 2003 through 2012 the OPUC disallowed recovery of expenses totaling $15 million. At the same time the order specifies that insured settlements totaling over $150 million were entered into prudently by the Company. Steve will provide more details on how the mechanism works but let me just say that while the write down is disappointing we view our ability to fully recover future environmental cleanup cost as the key issue in a very complex and tough docket and we’re pleased the environmental spend and insurance settlements were deemed prudent. We do have some questions and implementation issues that we will be working on with the commission, but overall we believe the order provides us with a reasonable path forward. We expect the last two proceedings from our 2012 rate case to also be decided on this year. These are the interstate storage sharing and pension dockets. As you know, last year we amended our gas reserves agreement with Encana in response to their sale of the Jonah field. While the new arrangement ended the original drilling program, it also increased our working interest in Jonah and allows us to continue to invest in the field on a well by well basis. Under the new agreement, in 2014 we invested in seven wells and yesterday we filed with the OPUC to recover those costs as part of our utility hedge portfolio. A final important regulatory milestone last year was the filing of our integrated resource plan in Oregon and Washington. The plan covers a variety of issues associated with our ability to serve customers, including the need for additional system investments in Clark County, Washington and at our Newport LNG plant in Oregon. Just a few days ago we received acknowledgement on the IRP from the Oregon commission and we expect to receive notification from the Washington commission by this summer. With that let me turn it over to Steve. Steve Feltz Thank you, Gregg and good morning everyone. In 2014 we made significant progress on a number of fronts, including operational improvements and some important long term growth initiatives in both the utility and gas storage businesses. Additionally as you’ve heard earlier we received an order from the OPUC on how we would recover future environmental costs, which was a significant financial issue carried over from our last rate case in 2012. I’ll talk more about the financial implications of that order later on. But first let me turn your attention to 2014 results. Earnings for the fourth quarter were $1.04 per share on net income of $28.5 million. That was down slightly from $1.07 per share on $29 million a year ago. Results for the quarter reflect an increase in utility earnings largely due to higher margin and lower operating and maintenance expense. The utility increase was more than offset by a decrease from our gas storage segment which was driven by the re-contracting of Gill Ranch capacity at lower prices due to the depressed market conditions in California. The utility realized margin gains despite significantly warmer weather and lower customer usage. During the quarter, temperatures were 25% warmer than average and delivered volumes were down 13% compared to a year ago. The steady margin gains from our utility reflect our consistent customer growth and the effectiveness of our weather normalization and decoupling mechanisms. Now turning to full year results, consolidated earnings were $2.16 per share on net income of $58.7 million in 2014, as compared to $2.24 per share on $60.5 million a year ago. From the utility, net income for 2014 was $58.6 million, up from $54.9 million a year ago. A $12 million increase in margin was driven by customer growth, incremental use by commercial customers on higher margin rate schedules and added rate base recovery from new investments. These margin gains more than offset the impact of weather, a $2.1 million loss from our regulatory gas cost incentive sharing mechanism in Oregon and a $3.2 million increase in depreciation expense. From an operational standpoint, total gas delivery by the utility decreased 5% to 1.09 billion terms. The decrease was largely driven by 13% warmer than average weather and by declining average use for the customer. Despite the 5% decrease in volumes, utility margin increased by more than 3% over last year, including adjustments totaling $19 million from our weather normalization and decoupling mechanisms in Oregon. From our gas storage segment, net income in 2014 was a loss of $400,000, as compared to a gain of $5.6 million a year ago. The $6 million decrease in storage net income primarily reflect an $8.9 million decrease in operating revenues and a $1.8 million increase in operating expenses. As mentioned earlier, the decline in storage revenues was largely tied to lower prices at our Gill Ranch facility in California. Meanwhile, operating expenses at that facility increased, partly due to higher power cost for storage resale following significant withdrawals from last year and higher repair cost. Recently we’ve seen some improvement in summer-winter spreads for the upcoming storage year and because we have short-term contracts for a majority for our capacity, we should realize slightly higher prices in California this year compared to last year. But despite this improvement, we expect continuing challenges in 2015 as current storage values remain lower than the pricing on our original multi-year contract. With regard to operating expenses, for the quarter our O&M costs were 8% or $3.1 million lower than the same period last year. On a full year basis, O&M increased by less than 1% compared to a year ago. The year-over-year increase was mostly attributed to the previously mentioned higher power and repair cost at Gill Ranch, but that was largely offset by lower payroll and other cost savings at the utility. Cash provided by operations during 2014 was $216 million, up from $176 million in 2013. The main differences from year ago were the receipt of $103 million from insurance proceeds partly offset by increases in the deferred gas cost due to higher prices and other changes to working capital accounts. The insurance proceeds in particular helped to improve our liquidity position. With respect to our gas reserves program, we invested $27 million in 2014. Of that total $10 million was under the new amended ownership agreement with Jonah Energy, which we refer to as our post carry well. We recently filed with the OPUC a request to recover the revenue requirement associated with the post carry wells, thereby adding these gas reserves to our utility gas hedge portfolio. Our investment in gas reserves, both from the original contract with Encana and under the new agreement with Jonah Energy totaled $187 million since inception. Before providing earnings guidance for 2015, I’d like to explain some of the financial impacts of the recently issued regulatory order on the recovery of past and future environmental costs. First, the order results in an immediate onetime $15 million pre-tax charge for past environmental costs which we’ll record in the first quarter of 2015. The Oregon commission disallowed this amount based on its determination of how an earnings test should apply to past years from 2003 through 2012. As part of its review, the commission ruled that all but $33,000 of the $114 million in total cost through March 2014 or were deemed to be prudently incurred. Second, the commission ordered that the insurance proceeds received by the Company which amount to about $150 million in total be allocated to past and future costs with one-third of the total supplied for the recovery of past costs through December 2012. The remaining two-thirds would be placed into a secure account earning interest with those amount supplied for the recovery of future cost. In the order, the commission also concluded that all insurance settlement entered into by the Company through March of 2014 for were deemed prudent. After applying roughly $50 million of insurance proceeds towards past costs and deducting the $15 million disallowance, the commission order allows for full recovery of the remaining balance of past cost through 2012, which amount to roughly $30 million. The $30 million of past cost will go into the recovery mechanism which allows for these costs to be collected from customers over a rolling five year amortization period beginning this year. In addition to recovery in our past cost from customers and insurance, the commission also ordered the full recovery of future environmental cost as follows. First, the company will recover the first $5 million each year from customers through a tariff writer effective 2013. The Company will then apply an additional $5 million from the insurance account plus interest accrued on the account during the year to the next portion of environmental cost also effective 2013. If our environmental costs are less than $10 million plus interest, then any unused insurance will roll forward into the next year. If however our annual environment costs exceed the $10 million plus any insurance roll forward from the prior year then the excess will be fully revered through the environmental recovery mechanism. However if the Company earns above its authorized ROE, then the Company would be required to use the amount of earnings above its ROE to cover environmental expenses greater than the $10 million plus any insurance roll forward. In effect the company is provided full recovery of its environmental cost going forward. Today the Company is initiating its 2015 earnings guidance in the range of $1.77 to $1.97 per share for 2015. After adjusting for the one-time $15 million pretax charge previously discussed our earnings guidance for 2015 is $2.10 to $2.30 per share. The Company’s 2015 guidance assumes customer growth from our Utility segment, average weather conditions, slow recovery of the gas storage market in California and no significant changes in prevailing legislative and regulatory policies or outcomes. With that I’ll turn the call back over to Gregg for his concluding remarks. Gregg Kantor Thanks Steve. In 2014 our utility performance was solid with improvements in customer growth and added rate based returns on gas reserves and other system investments. We also made progress on our other growth initiatives. Earlier this month we received approval from Portland General Electric to move forward with the permitting demand acquisition work required for a potential expansion project at Mist, our underground gas storage facility. The project would be designed to provide no notice storage services to PGE’s natural gas bio-generating plants at Port Westward in Oregon. The potential expansion would include a new reservoir providing up to 2.5 billion cubic feet of available storage, an additional compressor station with design capacity of 120,000 dekatherms of gas per day and a 13 mile pipeline to connect the PGE’s gas plants at Port Westward. In 2015 our team will be working to obtain all the required permits and certain property rights and assuming successful completion of those necessary elements the current estimated cost of the expansion is approximately $125,000 million with a potential in service date in the 2018, 2019 winter season, depending on I should say the permitting process in construction schedule. As you may recall Oregon passed a bill effective last year that allows the OPUC to incent natural gas utilities to undertake projects that will reduce greenhouse gas emissions. We view this legislation as an exciting opportunity to make a positive environmental impact while potentially serving our customers and communities in new ways. In 2014 we worked through a rulemaking effort with the OPUC staff and customer advocates rules for what we are referring to as the carbon solutions program were then passed by the Oregon Commission this past December. In parallel to that rulemaking effort last year we began assessing a number of possible projects spanning several areas. Examples of potential projects involve reducing methane emissions during pipeline maintenance and repair, residential oil conversion program and distributed generation projects that use natural gas to increase energy efficiency. At this point, we are refining concepts and meeting with interested stakeholders to discuss our ideas, including the OPUC staff, customer advocates and energy efficiency groups. Our goal this year is to file several projects with the Oregon Commission to consider and hopefully to approve. In my view the carbon solutions program offers an excellent opportunity for us to demonstrate our spirit of innovation to showcase the important role natural gas can play in helping our region meet its environmental goals and add to the Company’s bottom line. In the months ahead we intend to make progress in a number of areas as I’ve said, continuing to grow our utility customer base, completing the last two remaining dockets from our 2012 rate case proceedings, advancing the north Mist expansion project, and doing all of this while continuing to provide safe and reliable service to our customers. Thanks again for joining us this morning and now I’d be happy to open it up for questions. Question-and-Answer Session Operator We will now begin the question-and-answer session (Operator Instructions). Gregg Kantor It’s hard to believe we were that clear on all of this stuff, but it doesn’t appear there are any questions. We’ll wait another few seconds here. Operator Our first question is from Derek Walker of Bank of America. Mr. Walker? Derek Walker Just I appreciate the color going through the order on the environmental piece here. Just a quick follow-up and there was a lot of nuances to it about conditions associated with it, but I think in general in the past or at least at times you’ve been able to achieve little bit above sort of allowed ROE, but does this new mechanism effectively to limit your ability to go slightly above that, the 9.5%? Gregg Kantor It does in those instances where we spend more than what is in the in the tariff writer and the insurance. So we’re spending more than that amount, which is $10 million, it will limit going above our allowed return on equity. Derek Walker And as far as the — just given on the commodity backdrop, as far as additional wells being drilled is there — I guess what you’re seeing on that development side? Gregg Kantor Well, as I said in the remarks we do have the ability to drill on a well-by-well basis. But the way that works though is that Jonah Energy Inc. proposes wells to us and then we get to evaluate and make a decision about on a well-by-well basis whether we’re going to proceed with those wells. Right now there haven’t been any proposed to us, not exactly certain if there will be this year and again we take them on a well-by-well basis. I don’t expect that there will be — even if they do propose wells that they will be large. Again last year there were 10 that were proposed to us. So I don’t think that’s going to be a very large amount if there are wells proposed. The other part of it is that we continue to look at a second overall gas reserve deal as part of a discussion we’re having with the commission on what’s the right amount of gas reserves to have. We call that our hedging docket which was — is going to be open this year and hopefully completed this year and that will tell us whether we’ve got the right amount of gas reserves in our portfolio or not and hopefully we’ll get through that this year and it will give us some direction on a future deal. Maybe just a little bit more follow-up on the first part of your question Derek, which was about over earning, it does in most cases where we’re as I said spending more than $10 million, prevent us from over earning in those years. But I would also say that the important part of this docket I kind of want to underscore was the costs of this are large for the company in the future and our goal here was to make sure we got full recovery and the order does do that and we really believe that this is a very reasonable path forward for us. Operator (Operator Instructions). Gregg Kantor Well, if there are no other questions, thank you all for joining us this morning. We really appreciate your interest in our Company and look forward to seeing you down the road. Thanks. Operator The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited. 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Cold Weather Drove Up UNG – What’s Next?

Summary The price of UNG have risen by 10% since the beginning of the month. The colder-than-normal weather is pushing up the price of UNG. The storage is projected to be 7% higher than the 5-year average by the end of the extraction season. Even though the energy market – mainly oil – continues to struggle, the natural gas market showed some early signs of recovery in recent weeks; shares of the United States Natural Gas ETF (NYSEARCA: UNG ) added 10% to their value since the beginning of the month. Will the ongoing colder-than-normal weather could keep pushing up the price of UNG? Despite the contango in natural gas futures markets, this hasn’t had a strong adverse impact on the price of UNG. Since the beginning of the year, the price of UNG underperformed the price of natural gas by only 0.4%. Looking forward, if the contango continues to expand, this could widen the gap between natural gas prices and UNG prices. (Data Source: EIA and Google Finance) In the past week, the extraction from storage was close to market expectations with a 111 Bcf withdrawal, which brought the total storage levels to 2,157 Bcf. This is 2.8% higher than the 5-year average and 45.8% above the levels recorded in the same week last year. The low extraction from storage was despite the spike in demand for natural gas in the northeast in recent weeks. In the past week, the demand for natural gas spiked by 23.1%, and was nearly 21.2% higher than the demand listed in the same week in 2014. Most of the gain was in the residential and commercial sectors. (Data Source: EIA) Assuming the extraction from storage were to remain 15% lower than the 5-year average (during the past 14 weeks, on average, the withdrawal from storage was 17% lower than the 5-year average), this could bring the storage levels to around 1,800 Bcf by the beginning of April (the time of injection season). This will be roughly 7-8% higher than normal. This week, the extraction from storage is likely to be, yet again, well below the 5-year average: The average deviation from temperatures was 5.07, which implies lower demand for natural gas for heating purposes than normal. In the next two weeks, temperatures are projected much lower than normal, mainly in the Midwest and Northeast. This means, at face value, another spike in demand for natural gas in the near term. This assessment is also strengthened by the expected sharp rise in heating degree days across the U.S. From the supply side, gross production remained flat, and most of the gain in supply came from higher imports from Canada. The recent update from Baker Hughes showed a cut down of 11 gas rigs in the last week, so the total rigs reached 289 rigs. So on the one hand, the rise in demand and the on the other the stagnation in the production contributed to the rally of UNG in recent weeks. The recent recovery in UNG is driven by lower-than-normal temperatures that are increasing the demand for natural gas for heating purposes. But the extraction from storage is still low and could bring the storage levels to well above normal levels by the end the extraction season. This factor could curb the recovery of UNG down the line. In the short term, unless the weather forecasts come to fruition (i.e. the weather will be hotter than expected), the price of UNG is likely to keep pushing upward. For more see: ” Has the Weakness in the Oil Market Fueled the Decline of UNG? ” Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Laclede Group’s (LG) CEO Suzanne Sitherwood on Q1 2015 Results – Earnings Call Transcript

Laclede Group, Inc. (NYSE: LG ) Q1 2015 Earnings Conference Call February 4, 2015 10:00 AM ET Executives Scott Dudley – Director of Investor Relations Suzanne Sitherwood – President and Chief Executive Officer Steven Rasche – Executive Vice President, Chief Financial Officer Steven Lindsey – Executive Vice President, Chief Operating Officer of Distribution Operations Analysts Daniel Eggers – Credit Suisse Stephen Byrd – Morgan Stanley Sarah Akers – Wells Fargo Securities LLC Selman Akyol – Stifel Nicolaus Felix Carmen – Visium Asset Management Operator Good day, and welcome to today’s webinar entitled The Laclede Group First Quarter Fiscal 2015 Earnings Webcast. My name is Caroline, and I will be your web event specialist today. At the end of today’s presentation, we will have a question-and-answer session, and questions will be taken over the telephone conference. [Operator Instructions] Additional instructions will follow at that time. It is now my pleasure to turn today’s webcast over to Scott Dudley, Managing Director of Investor Relations. Scott, the floor is yours. Scott Dudley Well, thank you and good morning, and welcome to our earnings conference call for the first quarter of fiscal 2015. We issued a news release this morning announcing our financial results. And you may access that release on our website at thelacledegroup.com, and that will be under the News Releases tab. Today’s call is scheduled for one hour and will include a discussion of our results, and as mentioned the question-and-answer session at the end. Prior to opening up the call for questions, the operator will again provide instructions on how to join the queue to ask your question. Presenting on our call today are Suzanne Sitherwood, President and CEO; and Steve Rasche, Executive Vice President and CFO. Also in the room with us today is Steve Lindsey, Executive Vice President and Chief Operating Officer of Distribution Operations. Before we begin, let me cover our Safe Harbor statement and use of non-GAAP earnings measures. Today’s earnings conference call, including responses during the Q&A session, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Our forward-looking statements speak only as of today and we assume no duty to update them. Although our forward-looking statements are based on reasonable assumptions, various uncertainties and risk factors may cause future performance or results to be different than those anticipated. A description of the uncertainties and risk factors can be found in our Annual Report on Form 10-K, and quarterly report on Form 10-Q, which will be filed later today. In our comments, we will be discussing financial results in terms of net economic earnings and operating margin which are non-GAAP measures used by management when evaluating the company’s performance. Net economic earnings exclude from net income, the after-tax impacts of fair value accounting and timing adjustments associated with energy-related transactions as well as the impacts related to acquisition, divestiture and restructuring activities, including costs related to the acquisition and integration of Missouri Gas Energy and Alabama Gas Corporation. Operating margin adjusts operating income to include only those costs that are directly passed on to customers and collected through revenues, which are the wholesale cost of natural gas and propane and gross receipts taxes. A full explanation of the adjustments and a reconciliation of these non-GAAP measures to their GAAP counterparts are contained in the news release we issued this morning. So with that, I will turn the call over to Suzanne. Suzanne Sitherwood Thank you, Scott. And I welcome those who’ve joined us this morning. After completing a very successful year in 2014, including executing on our growth strategy and delivering on the commitments we made to our investors and other stakeholders, we are off to a solid start in Fiscal 2015. We continue to implement our growth strategy by completing two transformative acquisitions and doing the other things we said we would do. So let’s take a minute – few minutes to update everyone on our progress to date. Steve Rasche will follow me with a more detailed discussion of our operating results and financial position as well as a review of our outlook for this year and beyond. This morning, we reported first quarter net economic earning of $1.6 per share, compared to a $1.11 per share last year. The change from last year reflects the shift and the quarterly distribution of our earnings per share. That shift is due to the addition of Alagasco. The additional shares outstanding issued to finance the deal, and a change in MGE’s rate design to include a small usage base component. Despite, all these moving parts, let me confirm upfront, we are on track for achieving our full year earnings target and we remain confident in our about ability to deliver long-term growth of 4% to 6% annually and exceeding that range this year and next. Also as a reminder, our growth strategy includes investing in pipeline replacement and infrastructure, organically growing our existing businesses, acquiring other gas utilities and assets, and developing and investing in CNG fueling and other emerging technologies. As I take a moment here to update you on each of these initiatives, I want to also note some refinements we have made to our leadership team, to ensure continued success in executing our strategy. With regard to pipeline replacement, we’re coming off of a strong year in 2014 in which we replaced the total of a 139 miles of our distribution infrastructure. That effort included a 20% increase at Laclede Gas compared to 2013 and more miles replaced to MGE in 2014, than the prior three years combined. As we mentioned many times, investing in the safety and reliability of our pipeline infrastructure continues to be an important driver of our business. Our efforts this year includes further ramping up the infrastructure replacement in Missouri and developing our plan in Alabama that builds on and enhances Alagasco’s current replacement program. We are on the right pace to meet our targets to the year at all of our utilities. As you know, in Missouri, we have an Infrastructure System Replacement Surcharge or ISRS, a regulatory mechanism that allows for more timely recovery of our investment and pipeline replacement. Last Friday, both MGE and Laclede Gas filed with the Missouri Public Service Commission to increase their ISRS cost recovery based upon the construction completed since our last billing. Laclede Gas filed for an additional $5.3 million and MGE filed for $2.6 million. If approved, the existing ISRS cost recovery of $9.8 million annually for Laclede Gas and $2 million for MGE would increase by the above amount. Value for shareholders and customers is, as I just described, achieved by investing in utility, pipeline replacement, and infrastructure, and it also is achieved by investing in strategic infrastructure, including the right transportation, storage, and supply assets and investing in relationships in the up-stream and mid-stream markets. As we mentioned before, we are continuing our analysis of how best to invest in assets, and use our expertise to create additional value for customers and shareholders. Given the shift over the years in market fundamentals, system reliability is the primary objective of our analysis. I should note here that the analysis that’s being conducted under the direction of Mike Geiselhart, who – he was recently promoted to Senior Vice President, Strategic Planning and Corporate Development. In addition to his planning and development duties that include leading our M&A team for both of our acquisitions, Mike now also has responsibility for integrations. Reporting to Mike and leading the integration effort is a newly promoted Vice President who has been the team lead on our integration effort as a Managing Director. Now, with regard to organic growth in the utilities, Steve Lindsey recently announced a Vice President level role to lead this effort. The executive will start mid-February bringing with him industry experience as well as customer intelligence and marketing analysis expertise from his current experience with AIG. We look forward to his contributions to our organic growth efforts. In addition to growing organically, a major component of our growth strategy has obviously been our two successful gas utility acquisitions. While we will continue our disciplined evaluation of opportunities to acquire other gas utilities and assets, we are heavily focused on completing the MGE integration plans and continuing to move through our integration model and process for Alagasco. So, let met cover Alagasco first. The functional integration team, which include members from both Laclede and Alagasco, have been hard at work on the detailed integration planning and design since early last September and their efforts will continue through the first half of calendar 2015. This approach in many ways is very similar to how we manage the integration of MGE. First, we plan our work, and then we work our plan. However, the pacing of our process in Alabama is different than MGE, due in large part to Alagasco’s history as a strong standalone gas company. It’s deep understanding of the rate setting construct in Alabama and the structure of the acquisition itself. Our goal in both instances is the same to identify efficiencies, implement best practices across our utility footprint and improve safety and customer service quality. With regard to the MGE integration, as we discussed last quarter we achieved several milestones last year and actually ended 2014 ahead of plan. I’m pleased to note that the process continues to go extremely well. The main focus right now is the integration of the customer care and billing systems as well as the work in asset management system. We are on track to complete these information technology integration milestones this summer as planned. Given we have integrated MGE into Laclede, and a 39-year veteran of MGE is retiring, we are also pleased to promote a leader from Alagasco with 20 years of gas industry experience to Vice President over MGE’s Field Operation. This promotion demonstrates our commitment to leveraging expertise and best practice knowledge wherever it exists across our broader organization. Now, let me turn to Spire, our initiative to provide fueling solutions for compressed natural gas vehicles. Our first Spire station at Lambert-St. Louis. International Airport celebrated its first year of operations last December. We have been very pleased with the performance of this station, which has far surpassed our expectation. Last quarter, we announced ground breaking on our second Spire station located in Greer, South Carolina. The station to be a collocated with the QuikTrip travel center will serve tractor-trailers in a busy traffic corridor at the intersection of Interstate 85 and Highway 101. We expect the station to be in commercial operation sometime in the summer. And we look forward to welcoming a new set of customers to Laclede to via Spire. Before I turn the call over to Steve, I want to note just a couple of other items. Last Thursday, Laclede held its annual shareholder meeting and the board of directors held its regular quarterly meeting. At the annual meeting, Chairman William Nasser announced his retirement from the board. We are deeply grateful for the 21 years of leadership and expertise that Bill has provided us, including the last three as Chairman. His guidance has helped us achieve outstanding growth and success as a company, while staying focused on the demands of running a natural gas enterprise safely, efficiently, and profitably. At his meeting, the board appointed Ed Glotzbach as Chairman. Ed has served on The Laclede board for 10 years, most recently as a member of the Audit Committee and Chairman of the Compensation Committee. We look forward to working with Ed and the rest of the board as we continue to execute our growth strategy and deliver a shareholder value. And one of the key ways we deliver shareholder value is through dividends. As announced last week, the board declared a common stock dividend of $0.46 per share payable in April. This is the same rate declared last quarter, when the annualized dividend was increased to 4.5%, making 2015 the 12th consecutive year of increasing dividends. On that note, let me now turn the call over to Steve Rasche to review our fiscal 2015 first quarter results. Steve? Steven Rasche Thanks, Suzanne, and good morning, everyone. Let me review our operating results for the first fiscal quarter of 2015 and give a few other updates. I’ll start with our first quarter income statement. Total operating revenues were $620 million. Operating margin or earnings contribution after gas cost and gross receipts tax of $231 million was $75 million or 48% higher than last year. By business segment, Gas Utility margins of $226 million were up $72 million from the prior year, with approximately $68 million of that increase due to the addition of Alagasco. The remaining $4 million was the result of higher MGE margins, incremental ISRS revenues and modest customer growth, offset in part by lower asset optimization activity compared to last year. Gas marketing generated a quarterly operating margin of $5.1 million, up $2.9 million from a year ago. All of this increase was due to fair value accounting adjustments. And removing those adjustments, LERs margins decreased $700,000 in the quarter. This decline reflects current market conditions of low price volatility and regional basis differentials, as well as the expiration of a supply contract in late 2013. Operating and maintenance expenses of $97 million were up $35 million, $32.6 million of that increase is the addition of Alagasco. The remaining increase reflects higher customer service expenses and professional fees, offset in part by lower salary and benefit costs as a result of the warmer weather we experienced in the first quarter compared to last year. Depreciation and amortization of $32 million was up $12 million from last year, essentially the addition of Alagasco. And similarly, taxes and other income of $38 million was higher by $9.4 million of which $8.8 million was Alagasco. Interest expense for the quarter of $19.2 million was higher year-over-year by $8.7 million, reflecting the debt assumed and issued in order to complete the Alagasco deal. Income tax expense for the quarter was $22 million, compared to $18.5 million last year, due to higher pre-tax earnings. And the effective tax rate for the quarter was 32.2%, down 200 basis points from first quarter last year and consistent with our guidance for the 2015 effective tax rate. The resulting GAAP net income was $47.1 million. Net economic earnings for the quarter was $45.7 million, up 26% from the $36.3 million last year. Looking at net economic earnings by segment, the Gas Utility segment delivered net economic earnings of $49.8 million compared to $35.8 million a year ago. This increase reflects the additional earnings from Alagasco and as we discussed at year-end, the change in the quarterly earnings distribution of our new larger Gas Utility business. The principle driver of this change is the higher concentration of Alagasco earnings falling in the quarter ending March 31, as a result of rate design and the timing of the heating season in Alabama. This comparison with last year also recognizes that MGE’s rate design after our 2014 rate case now more closely tracked to the design at Laclede Gas with a small portion of its overall cost recovery tied to usage. The net effect of these factors is to increase the percentage of earnings in our fiscal second quarter and decrease the percentage than the other three fiscal quarters. Gas Marketing’s net economic earnings were $400,000, down from $800,000 last year as lower margins were offset in part by lower operating costs. And while not a business unit, our other segment reported net after-tax expenses of $4.5 million representing group interest related to the Alagasco acquisition. On a per share basis first quarter net economic earnings were $1.06 for fully diluted share compared to $1.11 per share last year. This comparison reflects a change in the distribution of our earnings as well as the addition of $10.4 million shares and group debt issued to finance the Alagasco deal last August. It is important to reiterate that the delta from prior year is really about resetting our earnings pattern to our new larger business and we remain on track for our full-year earnings targets including delivering accretion anticipated from the Alagasco acquisition. Switching to the cash flow statement of balance sheets, cash flow used by operating activity for the first quarter, was $34.1 million, up from $15.7 million a year ago. The increase was driven by seasonally high customer billings and the timing of gas purchases and collections under our purchase gas adjustment clause in Missouri. These increases were offset in part by reductions in other working capital accounts, higher net income, and depreciation. Capital spend for the first quarter was $60 million, up $25.4 million from a year ago, with the addition of Alagasco making up $15.5 million of that increase and the remaining $9.9 million reflecting added capital spend in Missouri. Our balance sheet at December 31 remains very strong with solid long-term capitalization that improved from last quarter and stand essentially at 50-50 long-term debt and equity. Short-term borrowings did increase this quarter by $110 million as the end of our calendar year generally represents our peak working capital needs. Even with that increase, we have excellent liquidity with overall capacity in our credit facilities and commercial paper program of approximately $350 million and from this position of strength we are actively pursuing ways to take advantage of the current interest rate environment. In January, we called nearly $35 million of high rate Alagasco debt. And earlier this week, the Alabama Public Service Commission approved our application to hedge our interest rate risk for this future offering as well as the $80 million of Alagasco debt maturing later this year. So, stepping back and looking at the first quarter, our operating results reflect our significant progress in our integration of both MGE and Alagasco. As we progress, we continue to refine our view of the distribution of our quarterly earnings per share. In our year-end conference call, we offered estimated percentage ranges by quarter for 2015. Now, with a quarter behind us, our updated view is that, we will fall just below the ranges we established for both Q1 and Q2 earnings per share, with those earnings shifting to the second half, principally as a lower loss in our fourth fiscal quarter. As mentioned earlier, this change better reflects our understanding of the rate design and regulatory processes at our new utilities. As a further point of clarification, we are comfortable with the first column being estimated for the quarter ending March 31, as the midpoint of a range are plus or minus couple of cents. And again to reiterate, we remain on track for our earnings targets for the fiscal year. And we will certainly get there at a different path than last year, as this winter’s weather appears to be much closer to normal, perhaps a bit warmer than normal, which enables us to better manage operating and maintenance expenses to offset any margin we might lose on off-system sales capacity release or at LAR. These purchasing pulls are no unusual, there are the operating challenges that we and our industry successfully tackle every year. All other aspects of our 2015 outlook remain unchanged from last quarter, including our long-term earnings per share growth target and the fact that after adjusting for LAR’s weather benefit this year or last year, we should grow above that range this year and in fiscal 2016. We remain on track with our capital spend target of $300 million for this year, supporting our 5-year capital forecast of $1.5 billion. Rest assured, we remain focused on delivering against our goals for the year and we look forward to updating you on our progress next quarter. Let me turn it back over to you, Suzanne. Suzanne Sitherwood Thank you, Steve. We are, indeed, off to a solid start in 2015, and are executing well against our growth objectives for the year, including hitting our milestone for the MGE and Alagasco integration. I also announced last quarter that in order to accommodate our growth, we would be relocating our offices in Downtown, St. Louis. This is both a newly renovated space and a different kind of space for Laclede. One fosters creativity, collaboration, and efficiency, as we work to deliver on our strategy, and it’s consistent with our shared services model. I’m pleased to report that our relocation will be largely completed in the month of February. We are excited about our new home and believe it will further enable us to work better for the sake of our customers and our shareholders. We’re now ready to take questions. Question-and-Answer Session Operator Thank you. And at this time, we would like to take any questions that you might have for us today. [Operator Instructions] Your first question comes from Dan Eggers with Credit Suisse. Daniel Eggers Hey. Good morning, guys. Suzanne Sitherwood Hey, Dan. Steven Rasche Good morning, Dan. Daniel Eggers Hey, Suzanne I guess first question kind of on the, can you give a little more color on the Alagasco process for kind of laying out the synergies and how you are looking at doing it? can you just –what processes are going on between now and say the summer when you guys think you have your plan and then how you are going to talk to us on the Street, as far as what those numbers look like and how you are going to achieve them? Suzanne Sitherwood Yes, sure. As I mentioned before, it’s similar process, really the same process that we took with MGE and we pulled together implementation teams with co-leads from both side utilities, and basically, they take their current work processes at both companies and map those out. Then they look for best practices and technology deployment to improve efficiencies as well as improving business metrics, if you will, around customer services and then safety and that sort of thing. So they really are working through their existing processes and then they overlay what are the best practice processes. So that’s what we call the design phase, that should be wrapped up around the end of March, and we started all that in September. And then we go through really consolidating those plans and Q1 master plan. And so, as we get towards the end of the summer, we’ll know pretty well what the trajectory is in terms of the way that we plan on implementing those individual plans to create what I call the master plan. That’s the process that we took with MGE and that’s when I referenced the MGE integration plan and that we are on plan, in fact, we exceeded our plans last year with MGE in terms of our target and as well the timing of our implementation. So again, it’s similar. And as I mentioned in my formal remarks, Alagasco is a standalone utility, where MGE put an asset purchase, so they were more the activity that ET and Sag were here again at standalone, so mapping those processes take a little bit more time. And – but we are very comfortable, in fact, I meant – I use the word confident, I’m confident where we are with those proposals and meeting our objectives. It’s a little longwinded, but I thought a little color might help. Daniel Eggers No, that’s good. I guess if we were going to translate that down to what you guys are thinking about for an O&M cost inflation outlook maybe for 2015, or maybe 2015, 2016, 2017, or some time horizon, where do you guys think you can manage costs? Suzanne Sitherwood Yes. For Alagasco, when you are specifically talking about integration, I have to bring you back really to the RSE structure there and us managing based on the 30-year investment model that Alabama has in place, it creates rate stability. We will manage Alagasco consistent with that RSE program and that way that it’s been managed in the past. And then at a group level, as Steve Rasche has shared and I’ve talked about the 4% to 6% earnings target – net economic earnings target over time and leading into the high-end of that in the short-term in the next couple of years is the way to think about that. Now, I’ll ask Steve, anything to add… Steven Rasche Yes. Dan, I don’t think I can add anything except to clarify that the RSE mechanism in Alabama gives us a clear path to how if we can keep the O&M cost out, how we can share the benefit of those lower costs with our shareholders and with the customers in Alabama. And that taking that regulatory question off the table makes it a lot easier as we go through our planning, both integration now and as we plan for the future over the next few years. Daniel Eggers Got it, thanks. I guess just on the – Steve, maybe on the quarterly allocation of earnings and the mix is going to come out a little bit different this year than maybe you thought coming into the year, this new pattern you are discussing now, should we assume that’s kind of the normalized view, or do you think we are going to take 2015 as a learning experience with Alagasco to figure out what the right combination of quarterly contribution is going to be? Steven Rasche Great question, and it is a learning year, this year. And I think when we entered the year, we knew that there was going to be a shift in earnings, and it was largely going to benefit the second quarter, the quarter ended March, and to take away from earnings in the other three quarters. And I think as we’ve gone through especially the integration process this quarter, we learned a few things that don’t change our view of the accretion of the year overall, or of the attractiveness of either the MGE or the Alagasco deal, but it does change how we think about the earnings falling in the individual quarters. And we’ll – I think we’ve got a good view of what a normal year would look like with normal weather in each of the four quarters, and hopefully, we’ve clarified that with everybody this morning. The only caveat I always say and anybody in our industry would say that is, the big question is always weather. We always manage through that, as a company and as an industry, both when it’s really, really cold like it was a year ago, or when it was really, really warm, as it was in 2012, and we just have a way of managing the puts and takes. And as we look at the rest of this year, we see that the takes being a little bit less opportunity to sell excess molecules in the market, because there is not a lot of value for excess gas this year, for all the reasons that have been well documented in the industry. But at the same time, we’ve got a much better line of sight in O&M costs and we’ve been able to manage those down a little bit better. Daniel Eggers I guess, one last one, Suzanne, just on the Spire expansion in South Carolina project, what are you seeing as far as additional stations to be built? Are we going to have more announcements this year and kind of what is your goal from a deployment perspective? Suzanne Sitherwood Yes, we don’t have quote a goal of X number of stations by a time certain. We are being very slow on the particle to make sure that we can, one, that we’re conducting the right analysis on these stations. Two, that we exceed expectations in terms of the volume, if you will, that are running through those stations. So the other piece on the customer side is, we want to make sure that we are engineering and operating and managing those stations in a way that it meets our customer expectations. We’ve had a lot of great learning from both stations, in fact, to the point of customers tell us in essence all the stations they use, they like these the best, they’re fast fulfilled, they are always operating. And at the Spire station alone we’ve far exceeded our expectations, in fact, in year two we got to our fifth year level of expected volumes. And we are seeing some of the same interest at the Greer station too. I think it’s important to our company and our industry to be focused on natural gas vehicle applications, which is why it’s one of our growth pillars. But we don’t have stations – X number of stations by a time certain, our approach is more as I described. Daniel Eggers Great. Thank you very much. Steven Rasche Thanks, Dan. Operator Your next question comes from Stephen Byrd with Morgan Stanley. Stephen Byrd Good morning. Steven Rasche Good morning, Stephen. Suzanne Sitherwood Good morning, Stephen. Stephen Byrd I wanted to just cover a couple of topics, just at Alagasco, as you look at the business and think about the integration process, I think, you’ve given a lot of very good color around that. I’m just curious, your impressions so far in terms of certain areas where you might want to emphasize more in terms of greater spending whether that be on pipeline replacement or anything else, just I know you are still in the process, but just any initial impressions as you, at this point in the process? Suzanne Sitherwood Yes. Well, from a pipeline replacement perspective and investment Steven Lindsey is here, and in talking to him, because he has done a lot of homework on that, I think he can quickly get to the response you are looking for? Steven Lindsey Sure. Really I think we are taking the same approach that we’ve had here in Missouri. As we noted in the earlier comments, we had a 20% increase at Laclede, and really at MGE in our first year of operation, we replaced more pipes than the previous three years combined. So I think in Alabama, they’ve being doing a good job of replacing pipe, but I think there is opportunity there. We’ve met with their operational management team and there is a lot of projects that they have in the queue. So I think a capital deployment plan there is exactly similar to what we looked at in Missouri, so very good opportunity there. Stephen Byrd Okay, that’s great. I wanted to switch over to just the gas price and volatility outlook. I’m just curious, you all live in this world in this business and know it better than we do. I’m just curious of your impressions in terms of volatility that we’ve seen, volatility has fallen. Do you expect that to change, or is this the sort of new normal we are in? What could kind of change that volatility or the price dynamics down the road? Suzanne Sitherwood I assume you are asking the question from an LER perspective? Stephen Byrd Yes. Suzanne Sitherwood And yes, we’ve talked about their – it is just about – it’s the new norms, if you will. And from LER perspective, I think they’ve sort of rolled out of the history and now they have a current business model they are operating under and it’s very service oriented to customers. They are pretty sophisticated at what they do and not all customers are as sophisticated and so oftentimes they can see a customer’s need in the market and they take advantage of that. But it is very service oriented, it’s matching a physical assets with a commodity and providing that service that could be either daily, monthly or what have you. They are generally power generators, manufacturers helping on the supply side with – those are the time you get those supply to market, those types of services. And so we are satisfied that we are happy as to where they are and they play a significant role here as you’ve heard me talk about in the past. Stephen Byrd Okay, great. And just lastly, just given the kind of growth that you are experiencing and the outlook looks quite good over the next couple of years, any general commentary on the dividend policy and growth in the dividend given the kind of growth that you are experiencing? Steven Lindsey Hi, Stephen, this is Steve. I think you can look back over the last couple of years and what we’ve done in the dividend, and we were percolating along a couple of years ago at about a 2.5% growth every year and we’ve stepped that up by a 4%, 100 basis points every year, as we continue to chart our future and as we continue to improve our growth profile. So I think you can look at that trend and rest assured that we understand that investors when they look at investing in Laclede look at not only the growth profile, but they also look at the dividend yield and the growth in the dividend, and we have a great track record of 12 years now of increasing our dividend 4.5% last year. And I think it was important from our board’s perspective, and it was important for us to send the right message to our investors to increase that dividend and step into that increase a little bit more and it shouldn’t be lost that that increase now falls, at least, in the bottom end of that range of our long-term growth guidance. And we will continue to look at that, we don’t make those dividend decisions in a vacuum one-year at time, we look over our long-term plan, and we want to make the right steps that we feel we can honor consistently going forward. In terms of how we think about the dividend mechanically, we always look to the utilities as the support for that dividend, LER and our other non-regulated businesses are great businesses to be in, but they’re not dividend paying entities and we want to take whatever capital they generate and be able to invest that back in the business. And we like where we are in terms of our payout ratio. Historically, we’ve been 55% to 65% payout ratio. We are right and about the middle of that range right now, which is a good strong place to be. It’s not something that’s going to put anything at risk from a cash flow standpoint, but gives us plenty of headroom and upside, as we continue to go forward. Stephen Byrd Great. That’s very helpful. Thank you very much. Suzanne Sitherwood Thank you. Operator: Your next question comes from Sarah Akers with Wells Fargo. Sarah Akers Good morning. Suzanne Sitherwood Hey, Sarah. Steven Rasche Hi, Sarah. Sarah Akers A question on the supply chain analysis. When do you expect to conclude that study, and then based on what you’ve done to-date, do you think there will be new infrastructure projects coming out of that? Suzanne Sitherwood So the quote supply analysis just for a little bit more clarity as supply storage and transportation, we are not talking about supply chain. Although, we do have a supply chain analysis going on with our integration, but we should finish that early summer in terms of getting a holistic look and we are starting with the Missouri analysis for a system reliability. And so late spring, early summer we should have that analysis completed. And that analysis will help us answer your very question, Sarah. So what makes sense given the changing market dynamics. And given that we’ve got Laclede Gas and MGE, 90% of the customers in the state. And what are the right combinations of supply sources and storage for peaking purposes, and of course the transportation services as well. There is more to come on that, I’ve just been trying to shadow a little bit for everybody that we are working on that project and you can expect more conversation on it, as we move forward. Sarah Akers Great. And then shifting to Missouri, with the current legislative session, are you aware of any bills, or do you anticipate any proposals that might impact Laclede there? Suzanne Sitherwood Yes, we – as you know, it was a bill that was introduced a couple of years ago and it failed, and I think that’s what you are referencing. We are still highly supportive of a change in the ISRS current structure to five years. We think it makes sense to stay out of rate cases for as long as possible. We are holding down our cost structure. It’s expensive and time consuming to protect rate cases, it’s a little bit inefficient for management, obviously because they’re very focused on that, and that is occurring. But most importantly, it holds the cost down for customers, because it takes the expense of conducting those cases. And if you look nationally, there is few states that you can turn to require rate cases every three years. So we just think it makes sense to keep the cost to customer stable and stay out again to a longer period of time. Sarah Akers Great. And then last question, what are you seeing these days in terms of customer growth and sales growth in Missouri? Suzanne Sitherwood Yes, because Steve Lindsey is so proud of this, I’m going to let him talk about that we are excited to see that last year on a go-forward, we are seeing some growth and, of course, Steve has made an announcement recently too, so… Steven Lindsey Hey, Sarah, this is Steve Lindsey, thanks for the question. This past year, we actually did see positive net growth in all of our jurisdictions. And we are staying very closely in touch with our builders, developers, both residential and commercial and starting to see some good signs from those builders and developers. As a matter of fact, we were even talking earlier this week around some of our construction crews are actually having to make some decisions between cash earning replacement and new business, which are very good decisions they have to make though. And as Suzanne mentioned, we are going to have a very strong focus on organic growth in our existing businesses. And so that’s the traditional type growth we talk about with residential, commercial, but also expanding service offerings to our customers, both at a commercial and industrial level, and also looking at the potential for some small municipal acquisitions. So we’re trying to put together a larger portfolio of how we grow our existing businesses, but I think, we are pretty optimistic that the future looks good for us. Sarah Akers Great. Thanks a lot. Steven Rasche Thanks, Sarah. Suzanne Sitherwood Thanks, Sarah. Operator Your next question comes from Selman Akyol with Stifel. Selman Akyol Thank you. Good morning. Suzanne Sitherwood Good morning. Steven Rasche Good morning. Selman Akyol On the CapEx for $300 million, can you talk about how much of that is going to be recoverable under ISRS mechanisms? Steve Rasche Yes, Selman, this is Steve. About 50% of our annual spend will be recoverable through ISRS mechanisms and the other caveat I would make is, when you think about Alabama, it’s really – it’s a different recovery mechanism essentially, because we’re in a jurisdiction with forward rate making. All of the spend is factored into the rate. So in some ways a 100% of that is recoverable in the rates down in Alabama. But when you talk about Missouri, it’s about half of the spend that comes out of Missouri is going to be pipeline replacement and other expenditures that are qualified for ISRS recovery. Selman Akyol All right. Can you also breakdown the $300 million between the three utilities? Steve Rasche Yes, I can. The – got to think about it for a second here. If you look at it right now down in Alabama, about $85 million of the total $300 million is going to be Alagasco related. About $10 million of it is non-regulated businesses, which would be NGV fueling stations and other items. And so the remaining amount of just over $200 million, about $205 million is Laclede. So roughly about $100 million of that you could ring-fence for ISRS recoverability. Selman Akyol Got you. And then, not that it’s huge here, but just in terms of Spire, is lower oil prices a challenge for you guys? Is it changing any of the tenure of the conversations you are having at this point? Suzanne Sitherwood No, not really, to be frank and we talk to a lot of customers all the time and mostly the focus is on diesel conversion and sort of point to point tractor trailer and return to base diesel. And which the per gallon equivalent is higher on a diesel conversion and plus there is the air quality aspect and just a longer line of sight on that. So who has got the crystal ball on when prices will start flipping and going out, in fact, all of us heard on the news this morning the news went the other way today, so and the market is reacting. So we’ve got a long line of sight on that and it’s definitely the economics have to work for the customer, but they are still working at these prices. Selman Akyol All right. And then just given you are still digesting two acquisitions, has anything changed, or is your outlook hunger strong, as it is, your ability to integrate, can you do another one at this point I mean? Suzanne Sitherwood Well, you said it and I said it in my opening remarks. We are manically focused on integrating and executing our plans on these two acquisitions. In 2014, we did very well with MGE and that we are on track with Alagasco and I feel very confident where we are. And I’ve also shared, in fact, Mike Geiselhart I mentioned in my opening remarks, he manages that group and we have a model and database and exercise it, and all the time, so that we stand based on public information, so we stand ready, but we’re very focused on integrating these two acquisitions. And I guess time will tell, what’s available in the market, but regardless, if it’s not strategic and multiple levers to create value then we move on. So that’s just how we think about it. Selman Akyol All right. Thank you very much. Steve Rasche Thanks, Selman. Operator [Operator Instructions] Your next question comes from Felix Carmen with Visium Asset Management. Felix Carmen Good morning. Steven Rasche Good morning, Felix. Suzanne Sitherwood Good morning. Felix Carmen Steve, do you mind just providing a little bit more clarity on the allocation of earnings? Are you seeing the second quarter come in more around 65%, or what does the new distribution look like? Can you provide some more clarity on that? Steven Rasche Thanks, Felix. Let me give you a view on the first couple of quarters. And again the important caveat is, we’re still comfortable with the main estimate, our first call for the year. So nothing has changed, it’s really about how you ship between the various quarters. And if you look at the first quarter, we probably traded about a 0.5% below the bottom of the range, we gave a range of 34% to 36%, we probably traded less than a point below that range. So good enough for horseshoes, but we certainly want to get better about that. As I look at the second quarter, we’re probably trading down by about 1.5 point at the bottom of the range, and we’ve given a range of 69% to 71%. So that would give you a good feel for the second quarter. And then the last two quarters and really the fourth quarter is what’s going to benefit from the shift in earnings. And that’s really related to, as I talked about earlier to the rate design in Alabama and Missouri and our deeper knowledge of how that the earnings actually fall in a quarter-by-quarter basis. Felix Carmen And as you look out into 2016 and beyond, do you envision this allocation’s thing this new way or do you look at a kind of the way you initially guided? Steven Rasche Great question, I think based on where we stand today, I think the new allocation between the quarters makes more sense, just based upon rate design, which doesn’t change. And again, always within that you have the caveat of weather and the way weather generally works in our industry. And most of the folks on the phone know that is it impacts margin first and then it also gives us the opportunity to manage our O&M cost. And you just have to go back a couple of years to 2012, which was the warmest winter on record than anybody cares to keep records on over 100 years. And our margin shortfall that year was well in excess of $10 million in the deep winter quarter and we were able to make all that up by reducing our operating expenses. And part of that is just logical, because if it’s warmer there is less stress on the system, there is less leaks, and less of the maintenance cost that we have to perform on the system, which gives us more opportunity to manage those costs, less overtime, less unproductive time, and more time to do construction work, which is ultimately what’s going to help us keep our O&M cost down. And Felix, one other point, and again I mentioned it on the – in the prepared remarks, if you look at the quarter and especially if you look at the second quarter and I understand where you all are from the standpoint of trying to model a year and this is a new bigger company, so there is some complexity with having three different utilities and not a lot of history. So that’s why we anchored back to the mean estimate for the second quarter as a good point and which to put in the middle of your range if you want to think about it in a dollars per share standpoint. As another way to kind of test your models is you think about how the earning is going to fall on a quarter-by-quarter basis. Felix Carmen Okay. Thank you. And I’m sorry if you’d mentioned this before. What was the weather impact for the quarter? Steven Rasche We didn’t really talk about the weather impact per se. I think as we look at the first two quarters, it’s clear that we’re going to have – well, we’re going to have a warmer winter than last year. But at that – that’s an easy comparison. But it looks at least so far like it’s a little bit warmer than normal. We didn’t call it out specifically, because I’m not sure that in the grand scheme of things, that normal weather variations say inside the 10% plus or minus range isn’t what we deal with that every day. But I think what you’ll see is, as you look at the numbers for the quarter and then you think about the second quarter is, so clearly some of the margins that were driven from off system sales capacity release in LER will be under some stress, because there is not a lot of value in excess molecules. This year those have no value, last year they had tremendous value. But we’re also very confident in our ability to manage the O&M costs, so that when you get to the bottom-line, we still get to the same answer. Felix Carmen Okay. Thank you, guys. Suzanne Sitherwood Thank you. Operator [Operator Instructions] There are no further questions. Scott Dudley Okay. Great. Well, thank you all for joining us. I know it’s a busy earnings day in the sector. So I appreciate your time and look forward to catching up with you later today. If you have any questions please feel free to give us a call. Thanks so much, bye-bye. Operator Ladies and gentlemen, thank you to all of our participants for joining today. This does conclude our webcast. And you may now disconnect. Have a good day.