ONE Gas (OGS) 28 Feb 212020 Q4 Earnings call transcript

Good day, and welcome to the ONE Gas fourth quarter year-end earnings conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Brandon Lohse. Please go ahead.

you XXXX us earnings thank quarter our and year-end and conference morning, for on joining fourth Good call. today. This and call later a live, replay will is be made being webcast available happy our to After we remarks, will take questions. prepared your be XXXX call harbor A ONE might securities provision be forward-looking of Gas during covered are of should include statements predictions the that and reminder and or by made that considered statements XXXX. this expectations the acts safe statements. those projected Actual in results could materially forward-looking differ from any

factors cause could of to results SEC refer please discussion differ, a For that filings. actual our to

us McAnnally, to Pierce Vice Caron Senior the Chief Pierce. Vice Operating Chief Senior over Financial Joining now, Lawhorn, on President Officer; Dinan, Sid call Curtis President this President turn and and Chief are Executive the And and call Officer; Norton, Officer. morning Chief Senior Commercial I'll President Vice and and Officer;

employees the begin coldest to endured over most like century morning, ever circumstances our by acknowledging Oklahoma Thanks, today. us intensity Brandon. seen extreme you our I'd our in joining Good all coldest in the Texas City. in Kansas, and the saw this call of winter for the duration Due in storm, and we our areas. service and We jurisdictions. unprecedented day and of and customers recorded to experienced weather thank that the unforeseeable some recently and Oklahoma a

countless and In water stations. Some of long gas breaks. our at were experienced largest formed main cities and grocery brownouts lines store electric Texas, rolling shelves bare

the and to keeping to warm. recovery managing personal faced challenges, our customers' challenges with call, to my long basic meet some adverse employees their and For help, employees' gas take some own storm. our historic customers. this for how them conditions, will winter customers, the express we're resiliency the to our we days, of and as most through the these that like On collectively, teamwork, we today's flowing needs our I'd this X gratitude dealt responsiveness we we cover kept with our opportunity worked and of impact experiencing

We will guidance. also and XXXX our results discuss XXXX

how culture us event. led values recent You and our our through will hear core this

to Sid, call over turn the you. So I'll

Thank Pierce. you,

heard, just event. an week, faced unprecedented you weather our As team last

XX, On between low the since we degrees experienced coldest day XX day, with XX working largest XXXX. experienced in and In in X. minus low degrees wind metro as temperatures February coldest our chills we employees X Fahrenheit below areas, as the Oklahoma,

our range context, lows February in metro areas. and degrees For average normally XX largest between XX

employees primary X all from is supported company remaining to X,XXX Our were our improving gas and on states. Gas safety, of needs the that founded system. ONE by Since challenge, in more the focused natural XXXX, commitments was our our on the regulators service orders responded prioritizing than resilience goals, focused and providing human in

have on We and our supply anticipation our reinforce and customers. transmission to might new successfully challenge focused reliability our events provided that improving of all ability points to in completed provided that XX system, that interconnects XX serve projects projects

models worst-case natural system to that locating system, projects across those would supply reinforcement areas was designing the systems additional need could to for term. forecasts. additional were pressure our weather in As supply points pressures the under overland trailers identify provide updated to developed, the mobile short enhance to engaged compressed XX lower and identify opportunities Engineering that gas additional

were each roads able Customer days. state all Knowing prepared personnel teams scripts just orders messaging gas that a proactively in outlets. service chain supply to provided build meet released locations might calls share executed to projects contacted construction of from we would safely and the Our to information deployed XX advance. pressure critical be and impassable, measurement to few customers team customers. become updated to in materials and the increase that each technicians anticipated safety changed capacity, in centers the adjusted conservation and available with communications response work Call us. emergency across we who shifts The so

to news In customers of officials states. addition, agencies officials, prepare key throughout releases X of teams and The event. affairs a videos series including were duration outlets media regulatory constant local contact community the relations response emergency with and government stakeholders, provided and the all across in governmental to our remained

customers customers, working that critical that possible simultaneously were supply transport information, down their this outages. and stage gas facilities their to protected Our the widespread to Using system prevent protected large prepare help and with in commercial issues only. a opportunity should voluntary and the reductions pressure advising team operations was overall for their to they have flow assets industrial begin way that system

commercial constraints meaningful thank XX, of we same natural to to through our large gas stabilize to the by the who, unexpected Mcf. we ability gas Over manage commercial large prices supply increasing its of reductions, $X,XXX before. to gas when volume gas XX, February On use Despite in continuously By the spot price in of was led with that transport want These the supply to health volume for territory. to natural and consistently protect market temperatures the to led customers pressures system customers to weekend, to issues with allowed protecting supply combination time the across on formal never that wellheads production The gas natural take focus restricted to the February were many curtailments, highest. to withstand and rose of seen at and at demand these conservation over maintain health increased we freeze-offs the duration of across upstream our these safety, natural constrained. sub-freezing issued the addition experienced. volumes. week, efforts, curtailment Oklahoma this a was us and all demand per to X customers severely volume residential coordinated those Throughout notices states. opportunity customers, I following saved the our through and customers and safety

$X.XX average comparison, the price natural Mcf. year in February For gas last industrial per was

by plans system shedding brownouts, a Texas. we of executing highly load by Oklahoma our instituted consider remodeled utilities the concentration created with pressures outages electric in impact electric the As and variable of cycling to

February outages. measures utilities main withstand patrols clear potential damage extended We our order by to it normal also that numerous began third any they and critical breaks impacts our watch cities. prevention minimize water system negative added our experience the significant without was infrastructure to parties, in including to storm in would By XX, water as

those gas over to into the sustained volumes We've our customers service returned part the of to starting weekend increase and a subject this customers to As as increase, first working with curtailments. possible, and and soon supply showed as large we storm-related large week. all to began

usage This our critical entirety of of less it to conditions, the gas to of most natural customers maintain gas of mile lost worked service hours. of facilities. since than in over to event, XX XXX operations and the system customers employees The most work who, field service, cases the across ensure I'll tirelessly our many was coming the challenging to who turn improvement the and that of states, approximately who in million conserved our residential across serve result company to our Caron. for to the For elements XXXX, care team, our the we X.X continued And dedication goodwill provide X their performance customers now, extra went system together: the

Sid, Thanks, everyone. morning, and good

full of $X.XX. financial share we the let's for revised with $X.XX discuss announced to per quarter XXXX These weather year. close were I fourth our winter on XXXX. of Before also range, the diluted which EPS impact and of in XXXX earnings for guidance Yesterday, results of the was event, the $X.XX loop $X.XX line the

of X.X% previous we've the to questions for number XXXX increase let's questions share. Directors in dividend $X.XX per may event, asset $X.XX or address weather about $X.XX for line the costs capital but you $XXX that. our removal the and Board compared of with received In also happy a already with Gas were January, given per We're declared any turn share, an expenditures the of the year to of Our winter expectations. of ONE million, dividend

market X-K in Monday, month costs a and the purchases $X.X February our in normal As multiples of for in higher gas February aggregated approximately liquidity. available we and would we for gas unprecedented of natural for of resulted in the jurisdictions billion, shared issued expect than excess we pricing our unforeseeable the what then

we costs gas purchased are state Our through recoverable tariffs in each the where operate.

February's for winter transportation of gas this costs on the authority in Oklahoma. natural recover determined to generally gas similar the period procurement are and defer including future natural in will costs purchases Kansas, and related receive deferred proceedings. and we supply purchases costs the weather to with in extraordinary have March Texas event, over regulatory Payments expect which we We will be gas XX. to due these The associated authority and

under We have billion the With to obtained existing credit to commitments these XX, to $X.X available approximately billion X-year and we that our meet of billion obligations. financing, $XXX facilities had total in term need approximately in provide including us as we the new on $X.X access million additional hand. a and loan February liquidity, $X.X cash liquidity term under loan

entering existing upon The $XXX term lead include A. revised working costs term and existing unsecured outlook our upsize negative new loan, AX XXX-day and from these expiration X best to facilities Tier from from stable. the our X we to from XX, with what recovered to will how our over expires our determine deferred downgraded sufficient Both to XXX-day us S&P the bank loan our revolver, Subsequent our April before a how on downgraded for to the facilities credit be ratings facility. term AX million us liquidity regarding We're on into revolver downgraded rating clarity paper with BBB+ million have the Our X. commercial until Tier will and to loan. and credit we February which $XXX period refinance the to senior Moody's provide of

a term in the the of a provision event and ratings. change pricing include facilities credit Our adjust in to loan our

ratings $XXX net capital Despite the guidance, weather borrowing our will planned million we to our we $XXX $XXX of Last of financial million. of these fundamentals will cost allow haven't changed. the access of slightly, $X.XX the income confident share investment-grade markets event, terms operations. our to to $X.XX month, Although support capital diluted business and of that level continue us investments earnings of announced increase per and XXXX will to on are current including our million,

our evidence in As for the affirming of operational and business XXXX. our we we ranges are guidance commercial capabilities, confidence have outlook and

We growth X-year are not outlook. our withdrawing

weather forecast. recovery longer-range Once variability to our provided range our financial our separation a we exceeded. impacts greater any degree for XXXX, of annual that regulatory metrics, the deferred to for in assess forecast ONEOK period However, X-year growth event we on potential has costs, introduced recent we have have attained recognize the the have the impact clarity or financial outlook. which can we we Since from a generally of of

demonstrated integrity and focused, system We primarily our ability extend long-range have reliability. also to consistently cost-conscious geared growth investments outlook safety, via towards an

resiliency in month Our our the and this systems to of those historic of testament teams is a work of the customers. the investments, cooperation face hard stresses our

nor our changed The and from not challenges timing incurred of the execute from to we has has forecasting focus entirely event. isolated commercial weather stem opportunities. recovery this I source of the ability cost note Our

regulatory with securitizing on orders regarding the Curtis potential cost our and we discussions obligation. over the others updates the our as the is forthcoming. remain transparent for been hallmark has of to As latest. turn event for to you and it provide I'll the Curtis? having with X, of weather regulators deferral update extraordinary and We're you the information will day productive since

regulatory Caron, and on and morning, legislative by and a Thank other storm-related regulatory commercial brief of overview give I'll good our an you, everyone. and providing then current start activity update activities.

necessary the described, utilities and and system This incurred natural of gas to and to issued related the Corporation orders related supplies, as the other Commission storm. the stability all transporting authorizing Railroad Kansas and includes defer emergency costs. our As to ensure state a all Commission both of gas of costs procuring reliability costs costs winter Caron financing Texas result

have an filed at Corporation Oklahoma motion Corporation We that Attorney seek an also the by The yesterday law comparable Commission and before the Commission. the hearing, to and supported be by judge ALJ conclusion regulatory Oklahoma a occurred company, of accounting recommended order The the hearing of the administrative with commission recommendation interim approval next staff General's will considered office. the the was deferrals.

the to mentioned develop to governments Caron lessen regulatory rates government As securitization assets and commissions the have our with staff and customers. legislation earlier, been to relations to regulatory of impact regulatory related our and working our state help

lower are able issue whereby finance legislative storm to of finding responding affected While cost payers a securitized be the rate Rate utilities early run. payers credit the debt will securitized solution hopeful the also will benefit financing storm. positive winter we will winter benefit to benefit by the and from utilities in cost in of will process, the from vehicle, long the bonds the a of to which

our a related approval Service in to for taking to regulatory Kansas with million surcharge filing Gas received switching normal rates Now system increase In activity. its effect $X.X gas reliability new December. November,

infrastructure will $X.XX to per first filing of offset resulted became August, a bill or capital this month, The on Texas in a for $XX.X new the a third as reliability customers' with As reminder, statutory revenues case be reduction monthly to XX the effective. In a million be the will Area, year XXXX. a by its reminder, be revised KCC in Service rates residential XXXX, XXXX spending this GSRS In the $X.X made tax full requesting have was for month. our year, filing This the million Gulf the June reduce a to required below approved on we file application customers $X.XX of reflect in based Central increase not Oklahoma, increase are effective the impact in by the Gas net which since income limit Service Kansas under KCC which to is income a test approximately Kansas to material And all X, expense. taxes a to Gas effective December, state utilities. income in to quarter a year. reduction gas calendar the submitted full on tariff rate reduction, as expected before elimination program in rates Service base January the an of statute

of Moving on to a summary commercial activities. XXXX our

customers, warmer-than-normal While to than flat. X% relatively In year. weather, consistent territories due new growth, in our up An from service sales continued XXXX lower of to with residential, sales includes customer reach the remained the to commercial margin industrial spending was to extending economic growth XXXX across XX% and volumes and margin million. were was were commercial and our has which Capital increase base. and industrial residential sales prior $XXX up volumes spite in net activity year-over-year transport COVID, related in from resulted net margins

year, we compared the customers in connected XX,XXX with XX,XXX During new XXXX.

of fourth counts higher While the skewed average slightly customer for were than the our able suspension meters quarter and full to in previous year to more history. year we any year were disconnects, set due last

be projects. team complete Our also as additions that builders set future market XX,XXX will meter and developers secured development

CapEx. for million, guidance, now, it XXXX, And back investments Pierce to that customer growth, into we we to growth a capital trend XX% of Going equates approximately remarks. concluding recent turn XXXX increase In XXXX this financial announced continuing. which are see our expected over for $XXX nearly be to XX% with I'll

the Curtis, and for and Caron this how shown want thank to that event. leadership I extraordinary Sid, navigated you've we've you

the overlapped occur, how back-to-back with really in core employees, about in events people face weeks company extremely for reflect We the experienced when past by my together is people to is this short play such of work witnessed But come run pleased communities. I What is working Safety we've as our customers we the between of stood of our last As natural initial Gas coming of have weather uncertainty. company out. the of diversity. face facilities. resiliency. responsibility What you of we the most appreciation their the like strong company: of in taking how our and we employees continued they for a time. events the in gas have give winter Both words latest values month primary on of care resolve express safety for period to completed see proud the drills. of incredible under conditions professionalism commitment stress, extraordinary poise to care and and February. demonstrated in of our accomplished I'd is dwellings them our strength a this From their distribution X to my collaboratively I'm each storm, a in these What thank X critical I'm the plan their together, severe like our in ONE severe crisis, and unprecedented. and to employees onset and mind I'd the customers. winter recognize I pandemic storm. XX of the the days our special event, the a XXX-year

this this this all for a testimony Our company. is for ready questions. And joining Thank morning. operator, of to event now culture to response the we're you

Instructions]. [Operator

Richard comes question first with from America. Our Bank Ciciarelli of

all I early And a costs will if fuel amortization expectations opening bit policymakers little curious but that customer replaced detail financing your like? recovery costs your light line of on more costs. discussions fully the you here, these on what the and for be on the could in level of Appreciate regulators remarks the billing time with was Any just impact? can provide look and period confidence what's

So process. We're in Richard, early Curtis. this very that is

working exactly will we similar order in final the heard those we invoicing those have the actually are process. numbers to known. March, be and and final complete filing first yet in begin once And even costs the pricing through won't process until in remarks, and In Oklahoma step gas case, Kansas balancing in the that asking. orders issued you commissions you're questions get their Texas to to my and the in As have address we're a each

and complete, do to so. as to to how which with time frame that's well collection in costs recommendation commissions file a all as the of approach those once the we'll So as

really it'd speculate may premature or So try on what comment those periods be to be. to

I Okay. securitization. to legislative you mentioned a time the a breakdown separately I it's jurisdiction? that? recognize And passed makes per frame what's cost bill the what Yes, be guess, just early front, or, And state? then least, the need each on on kind that broadly of you fuel provide at for sense. here. in can And

dealt the place any parts in just storm, have today, So like at legislation the statutes in that. seen of about would until country, primarily they've that actual to there I'm not most discussions similar been, utilities been related situations of utility that There you've Historically, apply gas preliminary there's to and aware as opportunities to that electric hasn't costs. to different event. with recent this storm look since different that

So, I been have work guess, we to in those early I And to but date. characterize would processes very the process conversations systems. the continue normal positive as those have just to it let through

in Got that me. each to solution potential Can in of from jurisdictions? short-term cap regulatory each... just due And it. is one last That's for you us roll helpful. a your just comes term it could be once that structure loan And remind then excluded if debt your forward

in each to those our mentioned, Oklahoma other directly Richard, current that related contemplated. costs our it these of in long-term is in are place are to gas that our is costs In debt X supply and I cap equity the and related ensure structure. cost carrying the rate So one and that making, orders, the

not direct it's carrying but the just related those. also cost, costs So to it's the

or actual recovery. isolate to is asset financing that event same a that's the And longer of that gas normal part cost think the a that to do I good our way record all cost to regulatory term. the then So really of through

to a and changes would change and necessarily really core that later, solution. each intact made, well that. the from that If makes to as clear opportunity even have capitalizing of And company more perspective, the how pretty think those need think I a is that's in be securities Caron way, you're long-term business so doing lot a the securitized approach the drastic that issued a It there's is good to point In be it states. doesn't good made. not because work it of how to will recovered, would there that's I our

in So it appropriate to really term. that the be longer totally wouldn't change

Sarah Fargo. next with comes Wells Our Akers question from

Can during you are cold even gas, bit talk program whether spike? effective hedging approved your hedging a commissions practices and hedges the about were for by little whether the

This is Caron.

part we So our on use of index. month year. first supply gas hedges commissions our call that present we programs of yes, to hedging every our settled plans for options are are The the that

is and providing So pricing much gas prices they for because in a of of were experienced effective the in this event most mitigation not spot the weather that market. prices result we daily

the agencies. Okay. And rating shifting then to

just how some rating contacts the gain negative, can need to in and conversations regulatory to Given they see agencies with the outlooks of the you rating confidence are share are credit going the what here?

are can't costs apparent what value really it have will final are I And I we how our the be extent evaluating to any talk the making of think is is understand costs you would about But someone tell want the meaningful. in to quite Well, -- those these it's who's I -- conversations the that before creditworthiness the with long-term going deferred dollar financed agencies. decisions. be reasonable for to

that the given provide integrity the to are that, is financial clarity And there the maintain urgency utilities? cognizant there the then some of of and commissions sense

utilities on that address with the reactions emergency willingness through commissions, the from process, basis how these longer-term the the quickly could what Oklahoma, term Curtis. quickly, is and that work we've normal Sarah, have expedited very deal an -- going customers. to to to I the say with issuing this impact Texas seen in long but their shows this very that that you is orders would on And for Kansas and

costs these parties So the time I over in think all be to frame approach a through to considering involved. we'll reasonable able appropriate in an state each collecting work

[Operator Instructions].

Zmigrodzka question from Aga next Our comes with UBS.

that last that maybe their versus of you prepared in the part their really, talk evaluations I year remarks. that view My ask change agency mentioned is first and to downgrade? scenario, know could comprehensive credit asset the people happened overview for you you Thank is what week -- question But a with way. the when mention last the question securitization. different

think for not long-term as would I'm to that customers. obligation would the Curtis a described, speak but tell I benefit Caron. we our way to would securitization very a and agencies, It's positive development this going finance be you, just good

but So will to I development, would up that positive be would them. that assume it be a

percent have but know provide any immediately recovered sense any you what be March? you of are or $X.X actually, trying can from get that immediately could that you bills the Do to sense XX%, billion meters, you actually XX%, on recover the you any said I numbers in still with sense, is that? it can

Curtis Aga, get for again. updating way set gas this the gas to upon month's month in the set, the advance costs is gas unrecovered purchases, point actual our prior And time. that they costs get in total based of

be February previously and that January rate purchases, that cost, you forward. that rolling costs gets keep gas the in an gas can our And sets would to unrecovered average February So plus applied bills.

no February, we impact was rate that at any action that be the And applied incorporate would assuming purchases. March gas would regulatory do there that this that February through earliest to the April costs bills. would would customer, would plus the So of be unrecovered filing that new end

we've already to And commissions as would through would affect again, the the costs earliest well. extraordinary recovery once that costs But we'll the bill that of work determine we to numbers, with Oklahoma orders to see appropriate gas the customers. in these the expecting any average and these be that get periods. Kansas in following cost and start got up the defer then in you we So actual that Texas, have we're to to

extreme energy sooner? like Or attitude you And could passed you how gas think change do days? we'll peak these events, see towards legislation think more the you in change have weather gas any towards the do heating natural post attitude winter heard choice natural toward

is So Aga, Pierce. this

to and is step I event. think taking doing just at looking event extraordinary this other any and we incident do back just see on everyone post like a a extraordinary analysis, just going what you're

regulators. done by going the that's think be I So to

it's natural of importance I gas would going was I've but when be the It's tell, certainly through that distribution be think say too officials. out energy the what our natural of that bore certainly look going energy was I the by just to is And it's needed a of at because the done gas to the out this of I early amount you magnitude companies. done was state company. supplied the think by little seen to

As you're some to what far just sources and I that, sure and electric happened think different business. about what go the and energy happened as to going be look there's all of there's But have the and through analysis think that improvements. side, the to to I'm on going do I exactly at side on be back see going discussion it some

with next Mizuho Gabe Moreen Our comes question Securities. from

sort about, prudence market justifying regulators, what if any talk know the whether I thus lot of investigating spot of I with investigating some been ask the see there's have players of to wanted the happened to of in your or or chatter point, upstream here. gas on conversations a the my guess, and questions cost what far gas happened this asked at but I just

conversations those if to are wondering kind topics? just those I'm extending So of

our So conversations assume been with regulators, purchase when make and which commissions that we're say on the sources I we And supply getting and market straight are -- out of meaning whatever a with gas, sure that that from for that gas you're you Gabe, into to that customers our our there's behalf passes so that. we the we're -- reminder, supply, when parties, to secure securing the get no through that third just not price markup supply. There's about find is pay the know, commissions, the to on as can the and that And going we're multiple doing for we that customer. market as we're try cost you to that. we a

it change we course normal through you're the about amount a extraordinary very topic haven't go a time. as we prudency you year normal prices they out regulators, also in If as And direct have would that be you're talking look had conversations the for come wouldn't surprise review, an at because that which we to It of such other every that say, to about the cost. in was gas our quick on a of do highlighting.

will course well. its as that in So run process normal

is Pierce. And based add will the the demand. past I'm was to understanding the side, the would did supply the was other the only that very look into is to supply thing on levels And that comparing they wellheads to between were freeze-offs past on I pretty shortage events the important Gabe, what to is went from which that these a certain delta, on analysis that -- an I didn't in true be there this think that end, what get the and then on prices was the demand. the and comparison why system. The what difference that is going the to spreads be true that temperatures, And

certain relatively in there companies will and doing are interested that that I'm So analysis. many people be many that

a gas as rate to the hedging, contracting mean, or to if future of but whether storage? more helped storage I that's sort build gas significantly here, or access about conversation. trying maybe having own know just there your And I'm have follow-up, earlier was wondering question base Understood. I just of a part

of be kind definitely That plan. gas Pierce's McAnally. at We'll was Sid it's supply what point Gabe, follows the earlier. looking

work to price on execute are our volatile. you earlier, curve was to that our plan was heard plans and done review gas for regulators the unabated, presented that As supply although the went

events we does have to look at change it we'll to like profile as make any at, our that sense other respond look opportunities better to So we this. storage

Instructions]. [Operator

comes D'Ambrisi question from Our Stephen with Granite Lane. next

prepared to in wanted remarks. of one just the was that the on things I follow-up

You a regulatory defer you're around potential greater just long-term mentioned talk into to just it Or is able higher Is I but CAGR, bill about? I was CapEx? what can financing wondering variability I potentially the you about out costs if guess, concerned driving asset. you're, crowding what guess, variability. pressure that

Caron. is This

is gets if to the we'll get have recovered concerned. result. be that dollars to I we a So of great how we're it what over it. we don't, period of that And in will how in it determine just financed. It's if say and But just ultimately we terms question wouldn't the securitization, finance magnitude

financed. to we're about how how we're liability that so be about And thoughtful be and gets transparent trying and just it thinking

[Operator back for Mr. now it Instructions]. I'd remarks. no Brandon There closing to additional currently at Lohse questions like turn time. to are this

Thank your in Gas. you for again interest ONE all

starts on Our our earnings at quiet for a we later release call books and day. provide beginning date. details until of when a quarter at the the We'll conference May. Have period great in April first we early extends close the

presentation. and gentlemen, ladies you, concludes Thank this today's

You may now disconnect.