ONE Gas (OGS) 8 May 212021 Q1 Earnings call transcript

Good day, and welcome to the ONE Gas First Quarter Earnings Conference Call. Today's conference is being recorded. And now at this time, I'd like to turn the conference over to Mr. Brandon Lohse. Please go ahead, sir.

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

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

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

Brandon, good morning, Thanks, everyone. and

wanted Winter quarterly an aftermath the Before discussing on update results, of providing by to Uri. financial start Storm our I

as final closer As and could purchases of natural through $X.X ended of for month costs flowed $XXX to call, during usual. February previous mechanisms that to being our million amount $X.X The approximately estimated billion, gas GAAP that amount, the billion. up our we we purchase allocated normal shared aggregated approach conference and GAAP was

authority to these as regulators other as relates our to the associated operational the costs and the regulatory well given assets. costs it As financing gas costs defer us our have which related with storm, extraordinary as includes costs,

Kansas approximately $X.X million in billion Oklahoma, including of in of deferrals in XX, million billion, As $X $XXX we Texas. deferred $XXX March have and approximately

billion with be where proceedings. The deferred consisting In February, senior two-year additional will our we commitments closing Our after unsecured proceeds rate tariffs reduced we senior costs over On used These or provide of with fixed of we each term will of term purposes, notes we purchase liquidity these proceeds these recoverable three-year including through $X.X or net obligations. redeemable XX, and period $X.X notes loan two-year us The costs for notes. whole and March notes, meet of gas gas was $XXX concurrently rate costs. in the floating operate. XXXX. recover of in future under terminated XX, the from general which offering. the determined to which are state of were part are billion million a two- in into billion entered corporate loan, to notes in on September purchased gas payment $X.X The regulatory issued

issued legislation been that legislature by you'll our us file passed Texas As the with issue being Gas a hear to has Curtis, in and in state or the is execution. for to a for feature lower in with the take advantage having March different would in Accordingly, of achieve. winter at state cost we we storm us the with each the considered agency to finance and permanently than to redemption able costs for regulators bonds otherwise securitized bonds of timetable permission flexibility Oklahoma from ONE associated provides each the Kansas to a allows securitization be either

metrics, to it clarity working details we credit agencies with but around expect we be the be will gain gets our around impacts finalized, positively. viewed to the As rating securitization to

of or income compared $XX.X our Moving the diluted first financial XXXX. million $X.XX the $XX.X share in $X.XX quarter, with share on per first million for or was highlights to per and quarter results net diluted

was in $X.X increase sales impact to same primarily lower of in Net Texas new due rates as customer net increased net margin part weather result an normalization, Our the margin million volumes. first and the of of quarter growth a million year, over period from $X.X and in reflect Oklahoma. results last

the are difference and adjustments based weather normal normalization weather between Our degree measured actual on days. by heating

For delivered our we weather than in to When with in by generally customers. volumes the see net a to these in are is back towards actual with colder adjustments weather actual sales margin not us most reduction impacted pickup a volumes bring normalization net resulting associated normal, part, margin normal.

in believe year, up quarter, our sales than During heating we in contributed the weather Winter XX%. to from This to less positive three higher to is quarter Uri. across customer an normalization, volumes due, part, despite XX% behavior increase to XX% the first states of were adjustment during degree the this compared We experienced days negative first Storm from volumes. exceeding impact last

customers conserve prices to higher extent can the the to our gas both we to natural and we their to asked service possible, on gas the minimize of maintain usage natural usage their During storm, and bills. impact ensure

net cost their furnaces the the $X.X employee-related expenses, the including at or plans change the expenses with X% COVID-related addition, training, cost that benefit due operating compared costs pandemic. and normalize related areas expense, Operating our quarter employee savings the to which liability the certain of to we electrical XXXX In in direct in guidance. our in there last million and increase includes in were five-year the employee X.X%, all. running an prevented When the outages associated travel is XXXX costs, with of same the bad which first closer and consistent from period of COVID-XX for were of increase to benefit from plans, nonqualified with the year nonqualified customers pandemic, value is higher primarily and our impact debt

included already value employee-related nonqualified This largely increase which, million investments resulting impacted primarily is plans the the due in net, reduction compared liability with last other expense associated period plans, benefit also in year Our benefit same which plans. by mentioned, a nonqualified million from of associated an decreased expense in in with the offset is in $X.X change employee to reduction employee the $X.X costs. expense the for as

in billion, were and now Our rate unsecured recent our $XXX filings. for XX% in that March filings, costs our as interim capital agreement of Oklahoma, removal base Also rate rate XX% this restated million previous Kansas approved regulatory in the rate reflected with approximately cases previous with to other in approximately XXXX. XX. unchanged year in credit the of as our all $X yet with ONE in in not activity, we We project under decreased completed proceedings, is regulatory average and is will rate of authorized defined first the per expires Yesterday, base XX% are quarter. facility regulatory unrelated In a $XXX commitments storm, that to and our dividend revolving credit Texas. as reflecting Gas that agreement, XXX billion additional last $X.XX and quarter facility compared connection rate the a March, the our base, in base, Board investments that Directors reflected day, base from in changes March our million is quarter asset $X.X components including estimated amended $X.XX the timing. rate base the XXXX, be with execution terminated. share, of system declared winter Authorized billion simply and full rate due which of expenditures defined Authorized plus

$XXX share reaffirming we business XXXX earnings net income financial despite of diluted changed. million, $X.XX fundamentals investments $XXX per million capital We to haven't of our guidance, including of weather events, $X.XX, $XXX reiterate to our the are million. that Finally, and the of

business. update you Curtis to I'll it and turn regulatory the on on of to our over sides Now latest developments the commercial

and you, morning, good Thank Caron, everyone.

Let's regulatory activity. overview with and brief a current winter of start storm-related legislative

of During authorizing includes as require to our related procuring recovery extraordinary the regulatory costs. clear stability bills Those are in reliability and costs make related costs. future we'll natural supplies, ensure This a impact costs the orders storm-related the those customer second filings us quarter Oklahoma necessary first filings making jurisdiction, emergency anticipate and financing received gas and the and orders and system cost. quarter, requesting Texas of have of of indication including transporting recovery those deferred gas defer each we during to in the period other utilities We Kansas, filings processed. to to

return earn As straight the legislators the is for to aligned be customers a finding we and pass-through solution did storm-related regulators cost on a to allows of a in gas. best It our reminder, the Company, and not our recovery. cost customers,

relations develop legislation Caron and and three government staff to As state our assets cost indicated, the securitization regulatory earlier. to regulatory with states working deferred in of been commissions governments described related regulatory all have

Public and Development financing the finance from individual Uri. Authority considering that process currently with associated to oversee permitting that utilities to next complete entails are to a events. be in this the OCC expenses. for bill intends And rates testimony the the of issue from process submitted supporting Bill to important permits nuances the benefit finance by financing April, securitization into a securitized the days cost. XX subsequent financing issuance extraordinary Within to authority Texas authorization legislation. have Ratepayers note. report issue provides be authorize whereby order. Securitized requesting to Oklahoma an months pleased pursuant order, gives XXX to an There Natural long Kansas Service this existing and The will to use bonds. the the will bills bonds In begin That by issued of utilities On will has bonds bonds state extraordinary Oklahoma, to the finance approved, the costs bill Once signed begin been to the Once ratepayer-backed the benefiting to bonds. debt rate interest securitized from are Oklahoma, than Kansas with motion, Senate. a application. a the application April positively Commission subsequent of motion was would securitize Oklahoma the order. We Natural the bill similar code will related public approved, to to an that to each Gas process utilities requesting rather The to financing cost a Texas Corporation Financing issue benefit to vehicle, consider to are have will legislation for application authority The rating to has bonds. Oklahoma Oklahoma agency, XXX issuing have weather securitized Texas, the to to run. and house process issue application, lower issued, issue submitting has order would of to days extraordinary Gas in which proposed to a XX, XXXX, in its passage ratepayer-backed of extreme Commission will securitized an up to law legislature utilities credit-positive bill pursue companies, Upon to application bonds. a Authority the file Gas ratepayer-backed days we to Texas securitization order payers the is this the KCC Storm and utility. of securitized financing a will the to these gas Commission and if to to the The a and Winter to lower Kansas KCC XX are the the Railroad legislation, the Corporation in receive consider agencies. expenses state Oklahoma amends RRC days thereby allow Finance in credit submit Texas viewed XX committee the will assigned the filing passed House

Oklahoma, If And Texas our take in we area, North approved, become to to million program $X.X August in expected both Infrastructure and of we in in a If July activity. and Texas rates areas, a to we for Texas adjustments Valley to $XX.X filed the In to are in effect Central are effective increase on requesting year. rate new this Gas a June case Service XXXX. would Grande service before XXXX. respectively. In area. Gas file finally, service effective a approved, its an April, of for our $X.X Gulf rate June February, West shifting performance-based related million, Rio XX be $X.X the regulatory In service on Reliability filed Now XXXX. or by GRIP full required tariff in service will be filing increase calendar rate case year. made March, the test XXXX The million based million cost

the choose to our Lastly, law, in recently Kansas, Kansas XX customers the Act Choice became in Energy will Senate natural service. the retain ability Bill gas ensuring to

currently in Kansas With of consideration under a similar the choice both place and have law, bill legislation energy Oklahoma legislature. is passage in this and Texas now the

in base activities. and growth period in to of customer added Moving we across service on in the sustained compared pace have more our Continuing customers XXXX. to commercial our record-setting same territories XXXX, the XXXX

the use do with execute may As as opportunities projects. to opportunities. have while and we greenhouse ultimately that customers a Initial for escape is the farm-based low-carbon farm-based important of anaerobic will access transport these and Vanguard It trend we gas finally, sources and that announce of resulting seen in manage XXXX, you energy with gas steps Gas And otherwise alliance across renewable project through waste recycling expand our into a wastes atmosphere, digestion. into Renewables the that ONE customers commercialization this these gas-producing the food fertilizer recent of remainder to strategy are and partner potential ahead pleased enhances RNG provide projects natural while a system to the Oklahoma delivery emissions, can of include reduced landfills down. incineration, renewable and RNG we from into look development our RNG would not option develop to to slowing alliance on energy. to This press see diverting our This Texas. methane Kansas, renewable offering we from release, instead, clean

generate treatment of also on to RNG service city-owned capturing the incremental operations. plants facilities transportation five We wastewater a system. in the those for for over emission and for quick opportunities And the I'll cities. emissions possibility from on Sid landfills our our now revenue their turn farm-based with goals are within it methane areas help these also meet municipalities projects, to discussions Similar active and update about will

by Thanks, Curtis. capital first a bit our of quarter. adding the color execution start I'll regarding in

first to to our As due more guidance year. projects differential it's quarter the last to capital-intensive spend our for Caron first to a positioned weather, year. lower capital planned quarter this schedule later but matter last of is year spend. than scheduled than more capital the The mentioned, of was with our partially timing well We're and begin meet execute

reducing previously, replacement us improve which shared both ranking, greenhouse rated reliability driven by the projected we've our probabilistic ability is our program gives replacing to risk by also As gas pipe. higher system leak while emissions

work. and allows in leak detection categorize Turning emissions. to field operations. of we execution We're Last identify piloted to efficiently year, technology always the looking sources more successfully for opportunities to advanced our of that us leverage technology

with We now technology will our we in our safety our and supporting I'll closing activities for and impacts to development continue field technology risk planning our remarks. maintenance it over this program, positively and deployment deployed throughout turn goals probabilistic replacement of highly Pierce efficient territory, both meaning operations, goals. our have that that, environmental combined capital ranking

impact the events conduct to occurs, and and that Curtis Thank the the an to everyone the you, Caron, similar Winter it Storm extreme in-depth event, in to greatest mitigate variables of future. analysis When effects had opportunity determine an how to Sid. an Uri like post-incident gives determine

natural unforeseen of during offs; than as to our of designed, the than load in systems customers the Uri losing prices extremely gas disruptions winter due reminder, extreme the a about performed for hours. normal extraordinary demand unique was gas that production freeze we What own XXX industry's fewer generation load they were supply XX gas storm, and and demand natural Storm was combination systems; the our Winter sustained were and gas months. exceeded less As drove reliable on three experienced supply the things: electric

opportunities to already our and harden evaluation post-instant within explore have over take gas portfolio evaluate that to begun supply time. control are time, those around will our supply variables ideas processes thorough Although we

close As couple progress to talking today, to component. about the minutes like a on E primarily spend we our of I'd related ESG,

emissions. capital For systems we've of we More decades, further has reliability, reduced improve to innovative our invested the deployed reduce emissions. also our technologies to majority recently, have dollars which

our through sustainability reporting website We report. are progress and our annual

we're before what long-term approach to We can to communicating it understand our to we potential taking environmental However, want goals. comes commit different we achieve. a our when

reduce for commercial to time urgency reach led us to along allow and such our with our of is to lines sense the will teams us third-party consultants that and which our understand both our by we being first indirect and opportunities direct identify emissions, quantify we strategy, developing are goals. While technical possible

Our the existing utilize strategy will be available, in grounded how to understanding resources assets. our best already of includes the and technologies which

we deploying and vintage program, our and fundamental be greenhouse near our around demand with optimizing energy Our the to which core our to continue our term, practices gas will plan. programs, efficiency systems. continue In side, emissions through replacement like operational revolves conservation confidence delivery in-use pipeline efforts best will is our gas reduction

are in beyond emissions toward resilient initiatives energy and natural all net incorporate Delivering It share our must reliable commitment supported existing clear, low-cost and are reporting committed to innovative sustainable longer-term And and course, also Our hydrogen renewable clean to transparency. of the a gas of natural utilizing future ongoing such disclosures, we energy impact reaching is researching and reaching delivery future. include the and infrastructure. To our be aspiration zero part and doing data energy the gas through on with quality solutions, our as this improving goes systems. a by environment.

affordable many for that energy most together, reliable, types into of energy as that We our know We has are its transformed a natural part of future the serve transform an will of innovative systems will require secure, solutions an role the a and everyone. sources we collaborating provides itself gas future, course cleaner delivery cleaner one and industry, over which history. critical energy

for dedicated their reliable Thank to is customers you and living to core gas joining I'd in focus safe like natural day million day. Thank out engaged to commended. customers commitment communities more provide than you for be all our and employees, for express and service serving to X.X every Finally, this morning. our values, our our my X,XXX every and us gratitude

operator, ready questions. we're Now for

[Operator from with Instructions] And question our Mizuho. we'll Gabe Moreen take first

customer in could the Maybe impacts annual if the the on talk were forward jurisdictions? securitization various you trajectory terms what comfortable And implement you able bill that's an there. a you path maybe out I that you just also be in and whether you once or ultimately laid will customer the expect, to you had on? that your start you're about CapEx by of previously, those second I whether think five-year to can part you impacts of question, question on guess, sort securitization based talk still something maybe bill basis can Can the not execute about

amounts So impact, and premature filings the that the those to wants And also through minimize continue to And we everyone when is the as Gabe, until time. it's better to really impacts. I'll start able initial sense way and the of well nearer but our to reasonable get take work one filings, to discussion we'll around it we as be make to within a collect process. get of as we our Obviously, those the those bill period this a Curtis, first customer know making regulators. with

fundamental and reiterated In don't comments, over on program. our the in we that the longer changed, spending terms capital impact the term, capital as cost of Caron our see business impacting hasn't her

something any to you it going guess, I your to that's maybe are regulated it customers? standpoint recovery? an venture an and to can of looking sort of is in Is potentially Or investment trying standpoint figure do with to I'm investment to an going how joint base return work Vanguard, to I try work to those just jurisdictions? how rate outside really RNG some the pivot if sort from, the that Maybe of out looking from it's making basically, earning to to and investment pass your construct investments? on Or of of you're

longer is And the course. There's about in that preset not think is question, a really Great Gabe. term. the Sure. way to precluded nothing

of the those as part into can so demand of in volumetric an customer alliance analysis sources service first the both to of all product. where that opportunities The that well across bringing our Vanguard and system are, RNG potential for high-grade is the the we complete of our as of terms assessing with ease territories, the

of have are a that be corporations, So interested types for these emission goals be there focus example, will projects, so in that will on there reduction those.

initial part of potential we terms get until So inventory complete and like, projects your best standpoint. what in second really then in of place position from to start a regulatory to question work that projects assessment and those -- answer can't that that how I would through look the

think on are way So it through about continue those. all work board, I think easiest those the is the and to we'll options to

a follow-up [Operator question with Zmigrodzka UBS. from Instructions] take Aga We will

other from color year? if more provide please in impacts the impact pandemic rest of for you covered expect And Can on the the the XQ? you any

our Aga, Caron. impact the not We We're quarter. first this have significant expense. did is debt bad monitoring in still

We just Texas. are Oklahoma now and Kansas, and resuming disconnects in suspended still they're in

out a to our on we as load. we're bad expense, any the not So already significant side. all bad on other were that the impact expected. are impacts And the -- customers those they year, seeing and plan and -- debt working The than our adverse for guidance debt and we're seeing still those not direct in expenses, be turning cleaning considered COVID are

don't expect guidance, into So don't we debt this the the see else like material impacts. expenses can we material and bad backed What anything point. we at our see,

[Operator take a Instructions] We'll follow-up Mizuho. Moreen Gabe with from

where trending on and maybe securitization follow-up wondering that's push made one of in near there? just the are changes be has any Just for jurisdiction, sort sort discussions of by regulators big -- going term. I thoughts But could, color discussions to me, the if more know around with around what gas supply on I the where and and the been

I say some have So at around this they're Gabe, detailed point. that. real conversations wouldn't been there

that, to those. still we're indicated, through Pierce post-incident our our and And talk regulators As would make expect review. changes completing we about to

those and well. we'll some been over our developing So make happening short And some as investigation short, recommendations. be changes of We're and some see still completing our term, questions. of yes, the that long-term will there in we have

The I'd since all add Gabe, opportunities our of this only we've to connect to XXXX, is for is we in cities. pipelines, thing -- to that ever Pierce. around to look and continued that other

Those the of up think served at XX I be the we'll being characters go of ends look be the somewhere take interconnects. We'll us storage. connections storage. looking supply We'll interconnects connections back. a made. normal cast take some also, well. is total at, our All extremely kind side just to elaborate, additional we'll additional around and we at this at that We'll look on its the and looking innovative what maybe point, I harden really can't to potentially and ideas a

session. conclude does That turn back remarks. over to closing to conference the additional like any you. or Mr. Thank for Lohse today's question-and-answer I'd

again Thank your Gas. you ONE for all in interest

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

you. does you thank That your We participation. do Thank all for conclude today's conference.

may now disconnect. You