Good day and thank you for standing by. Welcome to the OGE Energy Corp's Second Quarter 2022 Earnings Call. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Jason Bailey, Director of Investor Relations. Please go ahead.

Thank you, Hope, and good morning, everyone, and welcome to OGE Energy Corp's Second Quarter 2022 Earnings Call. With me today, I have Sean Trauschke, our Chairman, President and CEO; and Bryan Buckler, our CFO. In terms of the call today, we will first hear from Sean, followed by an explanation from Bryan of financial results. And finally, as always, we will answer your questions. I'd like to remind you that this conference is being webcast and you may follow along at oge.com. In addition, the conference call and accompanying slides will be archived following the call on that same website. Before we begin the presentation, I'd like to direct your attention to the Safe Harbor statement regarding forward-looking statements. This is an SEC requirement for financial statements and simply states that we cannot guarantee forward-looking financial results, but this is our best estimate to date. I'll now turn the call over to Sean for his opening remarks. Sean?

Thank you, Jason. Good morning, everyone. Thank you for joining us. Certainly great to be with you this morning. Earlier this morning, we reported second quarter utility earnings of $0.50 per share, which represents an increase of $0.08 per share over the same period last year. Overall, we reported consolidated earnings of $0.36 per share, which includes $0.05 loss from the holding company and the $0.09 loss from natural gas midstream operations. The second quarter was very productive and included the following. Through the end of July, we've exited 77% of our energy transfer investment at an average sales price of $11.09 per unit, which represents a 33% premium to where the units were when we closed the transaction last December. Interestingly, we've already received more net proceeds than the value of our investment on the transaction closed date and we haven't even completed the exit. We're pleased with the pace of our progress and the value that we've captured for our shareholders. Bryan will go into more details shortly. Regarding the Oklahoma rate review. At the end of June, we reached an uncontested settlement to rate review pending before the Oklahoma Corporation Commission and the ALJ has recommended approval of the settlement. We await a final order from the Commission, which will likely be this quarter. Moving to winter storm Yuri. In early May, the Oklahoma Supreme Court authorized the sale of bonds, the state of Oklahoma issued the bonds and we received the proceeds two weeks ago. In Arkansas we had a productive quarter where we implemented new rates on April 1 associated with our fourth formula rate filings. We continue to work through a five-year extension of the formula rate plan in Arkansas. Also we filed a request to recover approximately 80 million of Yuri-related costs over…

All right. Thank you, Sean. Thank you, Jason and good morning everyone. Starting with second quarter results on slide six, we reported consolidated earnings of $0.36 per share, compared to $0.56 per share in the same period in 2021. OG&E, the electric utility contributed earnings of $0.50 per share in this Second quarter compared to $0.42 per share in the same period in 2021. The increase was primarily driven by higher sales volumes and increased recoveries of capital investments. These favorable drivers were partially offset by expected higher depreciation on a growing asset base. ET was flagged this quarter compared to the same period in 2021, reflecting our employees continued focus on cost management. Our natural gas midstream segment experienced a loss of $0.09 per share in the second quarter, compared to earnings of $0.16 per share in the same period in 2021. The decrease in net income was primarily due to mark-to-market adjustments on our energy transfer units, coupled with the elimination of equity and earnings of Enable. On a year-to-date basis, however, we've seen significant appreciation in the fair value of ET units, as I'll discuss in a moment. Other operations including our holding company experienced a loss of $0.05 per share compared to a loss of $0.02 per share in the same period in 2021. The increase in net loss was primarily due to the partial reversal of the consolidating tax benefit recorded in the first quarter of the year. Turning to our economic indicators and load results on Slide seven, customer numbers grew 1.1% over the past 12 months, and in line with our expectations, reflecting the attractiveness of our service territory in Oklahoma and Arkansas. We continue to see our load rates draw businesses to our service territory in 2022. As of June 30, we…

Thank you. [Operator Instructions] Our first question comes from Shahriar Pourreza with Guggenheim Partners.

Good morning Sean and team. It's actually Constantine here for Shah. Congrats on a great quarter.

Hey, thank you Constantine. Good to hear from you. Hope all is well.

My first question on the progress addressing generation needs for OG&E. There's a few RFPs that are out there, including existing resources. And given some of the near-term kind of generation needs, and now that you've monetized the majority of the ET shares and you have some dry powder. Any thoughts on accelerating the investment in new or existing resources? And how interchangeable do you anticipate the RFPs to be just in light of the changing economics and supply chain conditions?

Yes, I think that's certainly a factor Constantine. I mean, that's why we want to get all the RFPs in and kind of stack them up and look at them all in terms of availability and costs. Obviously, mentioned in my remarks, the increasing reserve margin requirements at the SPP, we're certainly watching that. We're certainly watching whether the IRA gets approved and passed that can have an impact on the RFP results and the benefit to our customers. So, we want to see the results. We're going to stack all these up, and we're going to go from there. I don't think the balance sheet per se is the driver, I think was the driver is just the availability and the economics coming out of these RFPs.

Excellent. And just a quick follow up, load has obviously been very, very strong trend in 2Q and 22 in general, both weather normalized and in absolute terms. And while customer accounts kind of continued around that 1%. Do you anticipate, like actual C&I usage to continue growing in excess of customer accounts, especially as we're kind of looking at the oilfield segment and starting to see some activity picking up? And would that cause you to track a little bit ahead of kind of what's the assumptions that are contemplated for 23?

Bryan, you want to tackle that?

Sure. Sure. Perhaps Constantine load results have been strong. And for this year, as expected, I would say, on a commercial front, we do anticipate being around that kind of double-digit area for growth this year. As I mentioned in my comments, we have really strong momentum in that sector and believe there's a good chance that will carry over into 2023. As you look to oilfield, you can see -- you may recall that we had about 2% year-over-year growth in the first quarter in oilfield sector on a year-to-date basis, that's bumped up to 3.7%. So you're seeing some improved volumes and activities in that sector and versus 2019, we're actually still below our 2019 levels in oil field. So that gives you a sense that there's still room to grow just from pre-pandemic levels. So certainly we expect that momentum in oilfield to continue. The industrial sector was strong in the second quarter for us from fertilizing companies and our steel manufacturer. So those two sectors have been strong for us and overall, we're starting to get more and more confidence that 2023 could be another year of above 1% load growth.

That's a great quarter. Thanks for taking questions.

Thanks, Constantine.

Thanks, Constantine.

Thank you for your question. Please hold while we load the next Q&A. Our next question comes from Julien Dumoulin-Smith with Bank of America.

Hey, good morning. It's actually Cody on for Julian, thanks for taking my questions.

Good morning, Cody.

Good morning, Cody.

So just following up on Constantine's question around load, your expectation on 2022 growth looks like that's down at the top end. Can you talk through some of the drivers there? Maybe crypto is stepping down and just as we look forward to 2023 and this kind of gets to your point in the previous question, but just wondering if you can share a little bit more about your C&I, customer sentiment on the current economic backdrop and in any conversations that you've had recently.

Yes. Bryan, you want to tackle the first part of that? And then I'll tackle the second part of that.

Yes, absolutely. So Cody you are right, we were looking at a broader range of potential load growth for the year up 3.5% to 5%. The delta between that and where we're currently forecasting is around the data mining companies in particular, as I mentioned in my comments, they had some supply chain issues getting some of their mining equipment on a timely basis. So that's coming in a little slower than we thought. We did see a strong pickup towards the end of first quarter and here in July as far as connections. And we had built very little margin from those customers into our financial plan this year. So it's not really having much of an impact to this year. And in fact, as I spoke to earlier, given the recent momentum, we think this gives us some nice tail winds going into 2023.

In Cody, I would just in terms of longer term, as I speak to people around the state, the economic development activity, I've never experienced the pipeline or the backlog that's out there. And some of the potential projects that are coming in, that are in early stages. So I think this is something, this commercial segment and just looking at the starts and looking at certain site preparations and things like that. This is something we think is going to continue.

Great. Thanks. I'm curious if you can share any updated thoughts on the solar RFP that's outstanding. And I think you're previously pointing to new generation not being available until at least 2025. But with a tariff waiver, are you seeing resources available sooner?

Yes. We haven't seen a material change in that to this extent, is going to affect our RFP. But again, we're going to look at all three of the RFPs and stack them all up together and proceed down that path in terms of what's available to meet our capacity requirements. So but no, I haven't seen a material change in that.

Okay. And one last one, if I can just squeeze it in quickly, as it relates to the EPAs potential, stricter NOx regulations, how are you thinking about accelerated retirement versus retrofitting your plans and [indiscernible] you factored into analyzing the results of the ongoing RFPs?

Absolutely. And I think that's -- we've been through Casper once before. And once we review that, we'll wait to see if it is actually filed. As you remember the last time, they went through a lot of legal hoops and delays and stages and things like that. We'll see. There's a bunch of different alternatives to be able to address that rule. You mentioned retirements, but I think your conclusion there's spot on. That's -- we will certainly see that and factor that into our analysis of all the RFPs as well.

Awesome. That's all I had. Very helpful. Thanks for your time.

Cody, take care.

Thank you for your question. Please stand by. Our next question comes from Insoo Kim with Goldman Sachs.

Hey, guys. Good morning. I hope you guys are cool.

Yes. So far. We have a great electricity provider here. So we're going to be plenty cool.

That’s right. Maybe too cold, right, when you're inside. Just going back to the RFP process and the three RFPs that are out there, can you just give a little bit more of a color on the next set of timelines? And ultimately, whether it's '23 or beyond? What type of -- when we could see that, the purchase or the capital spent?

Yes. So, the bid on the second two RFPs. The bids are due in August and September. We're going to evaluate all those, stack them up. Certainly, we'll have the benefit of -- if anything comes out of the Inflation Recovery Act, we'll see how that impacts things. The previous question talked about Casper, we'll certainly be cognizant of that. But we're going to go through all those. And so the other point that is, I think is relevant here is just in terms of availability, when these could be slotted in and fill some of these gaps. And so, availability or timing is going to be a key component. We're going to lay all that out. And then when we finished that, will certainly communicate to you and make any requisite filings at the various commissions based on those results. But I don't want to -- I mean, I would expect to have an idea of what we're going to do and recommendation by year end. But we'll see.

Got it. And then, whatever capital you end up spending as part of these RFPs. Is it so -- is it a bit of -- it’s too early to think about the mix of financing for those incremental capital?

Yes. We certainly haven't layered those in. And I think it all goes back to that timing point I was making before in terms of availability. And but yes, we'll certainly when we make our decision, there will be an adjustment in terms of how we categorize the capital, and certainly how we finance that.

Got it. And relating to that balance sheet strength, as you get these better than expected cash flows from the ET sale, your balance sheet was already one of the better ones in the industry, with [indiscernible] in the high teens. Obviously, becoming a more fully regulated utility over the next 12, 18 months, let's say the credit thresholds may become even looser. I'm sure I know, you've gotten this question before, but as a bunch of capacity continues to remain strong. Besides the organic upside utility investments that exist, what are the thoughts do you have to utilize this capacity, and maybe it is just even more utility CapEx that we're not really counting above and beyond the IRP and RPS items?

Yes. I think I appreciate the question there. And I think we've not commented on strategic transactions, I think that's a distraction. But I don't think there's any wavering in our commitment to grow the company. We have a lot of investment opportunities in this company. And we've talked about that for many, many years. And I think what is unique here is, we have investment opportunities that we're going to be able to spread out for many, many years. This is not a three-year short-term, peak in terms of the investment opportunities. We've got a lot of opportunities to invest in our communities. And we also like the idea about this affordability, I mean, for last four years, we've either been the lowest or the second lowest rates in the country. And that's paying dividends in terms of recruiting businesses. So I am very confident and very bullish on the organic growth here at the company and that's what we're focused on.

Got it. Just one more if I could, maybe for Bryan, in terms of the guidance of the year in the upper half of the utility range. You have the $0.05 drive from the Hoko and other for the year, how much of the Hoko other maybe drag on EPS is embedded in that range, if any?

Yes. Hi. And so yes, our guidance is based on utility only. So when we talked about the $1.87 to $1.97, it's the utility guidance. We did, at the beginning of the year talk about the holding company being a $0.01 to $0.02 drag. That number is still roughly in the range, interest rates been a little higher, perhaps that looks more like $0.03 for the full year. But as we talked about, the ET unit sales have gone very well. And that exit has progressed, perhaps even faster than we first anticipated. So our holding company debt levels have gone somewhere close to zero. And so that drag will go away for a bit. And then ultimately will longer term or you'll see it pick back up as we grow the company. But think of that guidance range as the utility and then a very minimal drag from the holding company for the rest of this year and certainly the first half of next.

Got it. That's all for me. Thanks, guys.

All right. Thank you have a great day, Insoo.

[Operator Instructions] Our next question comes from Brandon Lee with Mizuho Group.

Hey, god morning, Sean. Good morning, Bryan. Most of my questions have been asked I just had a quick one. Can you just discuss whether you're seeing any inflationary pressures or supply chain issues in your capital spending this year? And whether you anticipate any in the near future?

Yes, I think it's, we are. I mean, we certainly are seeing inflation in terms of some of our labor markets, some of our commodity markets, some of our materials and supplies. But what I would say is, it's our job and it's our mission to mitigate this as much as possible. And I think, Brandon the great thing about the opportunity set that we have around investment is there are not any big singular projects or bets out there. So we're able to adapt and move investments around to really help mitigate the inflationary pressures. But I think it's our job and our mission to do the best we can to mitigate it, but I think it's real, and it's out there.

Great. That's all I had. Thanks for taking my question.

Thank you, Brandon. Take care.

Our final question comes from Gregg Orrill with UBS.

What is it that would accelerate the timing of the RFP capacity coming online? What are those things that would do that?

I think it's availability. Right. I mean, if we talked before was some of the constraints coming out of our solar RFP. That wasn't going to be as timely as we'd hoped. So I think I keep coming back to it's really about availability and how we're going to be able to layer all these in over a number of years.

Okay, thanks.

All right. Thank you, Gregg.

See you, Gregg. Thank you.

At this time, I would like to turn it back to Jason Bailey for closing remarks.

Yes, thank you for joining us on the call today and I hope you guys have a safe day.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.