ONE Gas (OGS) 2 Aug 222022 Q2 Earnings call transcript

Good day, and welcome to the ONE Gas Second Quarter Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Brandon Lohse. Please go ahead, sir.

Good morning, and thank you for joining us on our second quarter 2022 earnings conference call. webcast today. a being made will is later available call live replay and be This prepared we'll our After remarks, questions. take your be happy to amended. ONE XXXX, Securities are XXXX, and covered made that the Act safe should Reminder of this of by each Act considered Gas' the Exchange of provisions include Securities Private be and statements Securities predictions Reform expectations Act and statements that forward-looking as the harbor of or Litigation during might call XXXX, could from forward-looking materially results statements. any Actual projected in differ those

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

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

more safety fourth while everyone. our added that challenges. investments in good us, resilient for significantly to three in our service. Thanks, firm the moment. customer our significant of expand calling morning, and Gas, challenges, focus responding fifth base. having this growing meet while on for to a maintaining recognized a Oklahoma for those three you'll we The in increased have of in growth ESG focus be territory. a that us Brandon, culture, The employees in American capital we on peers flexible a year. Association earlier stronger the Last hear our teams service customer update and building Texas A And the guidance, service, and serious also opportunities, strong those capacity among rate the consumer we year, to our our committed year, targets, injury three At program Today, an our consecutive our national about tested customer strengthen recognized face research all to last and ONE our the provide organic lowest system, progress and on respond on our outstanding we to excellent commitment, Gas to targets. years

also gas the today's bills. focused and to customer and environment We macroeconomic in of on across cost an inflation respond on call Now, increase impacting customer the we're remain dynamic costs with managing enterprise. to affordability both

future. in Our every commitment be of and way are approach core managing is for growth navigating details simple, term in also Caron? and strong foundation present builds the a that employees for discuss to Gas a execution consistent toward it quarter. remain the in today's to day a I'll the confidence ONE that and business long The turn prudent live strategies. provides financial we challenges the our our over bright courage that With Caron that,

$XX.X income Net or $X.XX diluted diluted everyone. morning, the good $X.XX quarter second and share Sid, million was or compared share, per Thanks, same million per the XXXX. for period with in $XX.X

rates, new second Our This from the second operating due last million increase last increase completed income year. over year. $X.X regulatory half include in or XX% to filings an of primarily $XX.X in quarter same of of the reflects an results period million

Continued an income to contributed operating Oklahoma of residential primarily in $X.X and growth, customer increase in million. Texas

quarter costs XXXX, increase services increased million the operating over $X.X outside of million. second Our $X.X including in an

of in of from increase our pension Other continued offset reflecting prior and expense, million result up net investments. increased our in an costs reduction a offset our million higher reduction an were moment. cost for our employee the of the were costs benefit employee-related increase net, capital I'll a in nonqualified plans. the $X.X our assets $X.X in a which due mark-to-market valuation addition, in expense of which by plans value labor the $X.X for partially the increase by quarter, was million, primarily associated year, obligations, liabilities non-service for a from remeasurement discuss employee largely than to In that includes decline in nonqualified was benefit the expense benefit as employee plant with Depreciation property, equipment, due plans. a The expense higher to and

Our and capital $XXX.X the compared asset expenditures to in million for were million, costs removal second quarter $XXX.X XXXX.

and average the was be approximately we base for on are for as rate approximately Authorized XXXX June million. base full estimate investments million. year $X.X rate capital of $X.XX $XXX our track billion for will Our XX,

we each securitized Curtis the all bonds three will will the year. expect of detail, divisions receive our in As describe proceeds end in securitization before is of states from of progressing more and the issuance

a receive the Storm call due to will like proceeds, Winter we March is of related notes XXXX. of we Uri, which amount $X.X the in billion As

for to no Looking at credit on billion as prices storage, of facility. receivables the and We payables. $XXX are gas and under natural our program gas approximately quarter our of liquidity, higher our our the capital as well we beginning paper see borrowings and million capacity with $X on effect ended natural commercial working investment

of the at-the-market under equity program, guidance the our in million Our for equity quarter. year contemplated $XX the which we first issuance of accomplished

executing utilize by stock, would ATM X, our second XXXX. arrangements XXX,XXX or net approximately Given the proceeds liquidity million sale and these our conditions, quarter January common for be needs $XX.X to $XX.XX of program we current market must future forward or agreements share. we of our which shares Had per XX, of as on we continued settled these sold have all under generated June in before shares

give available equity as sources position we liquidity optimize these the We and of have $XXX.X to us believe under our financing seek well plans. us of flexibility ATM We for issuance program. million

the $X.XX Board ONE unchanged Gas Directors declared for quarter. the quarter, from of dividend Lastly, share, a the previous of per

relate reaffirming which to the of were of comment balance market first not I our to conditions. guidance, events guidance. look on year, the to are we would in like As we our both that contemplated

value liabilities associated seen I reduction the we as with mentioned market assets employee and nonqualified our have plans. First, earlier, in benefit of a net

For XX, the impact of ended $X.X the six months million. adjustments these non-cash was expense June of net

amended our previously projected on in pension calendar an view is eligible XXXX. be lowers rate. a our plans variable of does to We our triggered approximately obligation. is of items XXXX a April expense. XX of rate, expenses primarily due expense which the the remeasurement net pension what for impact reduction to two component of expected This participants a $X.X impact these effective the to The for our increase event million, benefit adjustments been non-cash to materially of not remeasurement non-cash Another living pension cost fixed had of of convert The pension obligations. discount

conditions economic of to expect the the challenging We balance for remain year.

our plan, Our of the costs and equity and control, focus markets, managing can on rates, possible we control, on and the capital team where mitigating interest continues the managing our cannot of inflation. performance executing things on the impact we and to things safety,

through and the Curtis Given months balance in the regulatory performance our And of and of on our six the for are solid activities. guidance can it year, the range. confident see an business first we now, commercial for over to Curtis? update turn what we I'll

The activity. third good Board issue Authority September be and Gas will approved, be In company update validation bond brief I'll bonds July the a XX, a and in issued can reached for financing agreement, in Commission to quarter. bonds. you, of of are scheduled issuance the be years. expected Thank and regulatory being between July bond the proceeds the to until has the began KCC securitization Ratepayer the bonds. morning, Texas Utility tariff the XXXX. the seven The process process a to recent bonds, by with of received XX, order and the issued Kansas the Staff marketing which the on issuance we Public quarter in process a if Corporation ODFA and settlement securitized Service, begin is received expected utility Supreme Caron, the On to and Authority final Development fourth and start Court. maturity issuing XX led by the Kansas Finance Texas, completed the XX Oklahoma Oklahoma, Citizens' allowing with is of And the issue Oklahoma Finance On everyone.

Performance-Based Natural to rates. Corporation million. an refund, for Commission by May, new filed scheduled Pursuant pending its March statements reflecting base is increase. the subject our Staff approval XX, increase on In interim Oklahoma $XX.X a expected $XX.X General's and new the million supporting tariff, regulatory to rates into be Oklahoma July increase went final in Change Turning filed revenue XX, to the A million September. therefore, to in and, the matters, are application both other hearing office commission. on the rates effect $XX.X Gas of Rate Attorney Those

Program filings Infrastructure made During and of areas, and the $X.X quarter, Texas Service all the increases Gas Texas Gas West in Reliability million, service $X first customers respectively. requesting for million Central-Gulf

action Central-Gulf effect effect On increase, all Service allowed Railroad the took no new service in city's the New West In to rates to El rates other area requested appealed in Commission. June. city service with and approved the the or denied Gas municipalities Texas Railroad July area, while the Paso of Commission the them the take the XX, action. Texas

Texas to effect of rates the in requesting approved, single area Gas an implemented areas filed August. in Valley a Gas million. to effect the increase with Service Texas of consolidate Paso and are the West If outcome into take the service adjustment filed rates Grande June, were in In two area In West-North pending a a million, expected Rio rate and $X.X seeking early case the approved additional New rate taking appeal. XXXX. $XX El cost-of-service of a rates in service new April, increase July, Texas and Service during service cities

Gas XXXX. Service Gas covering the expects System to through July a filing Surcharge for Kansas XXXX period June Lastly, August Reliability file in

market on risen housing service rates beginning national our while Moving territories robust. to remains commercial down, activity, in and is activity to interest the have slow

dollar see available between remains. inventory to expected jobs demand investments announcements, development and multi-billion imbalance generate regional An growth. long-term characterized and population of to thousands continue economic new low corresponding housing We by

over For year. XX,XXX customer XX, added we the during connections, the of approximate is we six-month period which June period last added the new ending ahead same XX,XXX

as quarter, significant continue to commercial the As progress energy with I'd to Report, of schedule. projects more June to gas, will transition anticipated in that and part integral and touch reduction growth. natural renewable moment last we several strategy we mentioned Those our plans. are residential a an mainline our reiterate emissions support constructing Shifting Sid on ESG XXXX RNG of release is on and extensions

We to meaningful make and make territory within feedstock a sufficient system a long-term to environmental positive have using progress to impact. our access service our

inflation finally, And existing file are on Gas projects the quarter, Oklahoma and to spoke past quarters identifying and efforts supply make impacts past challenging RNG by chain initiative RNG success to chain it's in and our tariff by during to few been on We year-end. over we've has new Natural disruptions continue track We've times. few off This initial had developing of mitigate progress by last further an our the the paid the to and resource suppliers. group management these over discussed the I years our supply diversifying our operations. about voluntary

a chain return in supply our have normal, I'll turn and And execute. not to While we seen investment closing confident and remarks. to over in improvements it our Sid ability forecast for to capital remain now, some

relevant to grateful and Thank our you, of progress Report, report philosophy standards. by encouraged diligently TCFD more we expand in additional tenets so the worked to strategy efforts we lays SASB and work XXXX this out next in even continued report report and disclosures XX, includes published reporting progress, produce to alignment I'm who while and the compared as our I The those previous this ESG of important forward publications. area. and all provides look our I'm metrics further our ESG for in with both. year's help On disclosures June which

event. the You've cost-efficient States no United in heard event disaster to real natural you Recently, technology the patent about us us pipeline be to problem, problems which employees with inventing before of technology talk a that have to a impacted a opportunity group areas way. a at new solve to new assets exists, the respond ONE by for technologies innovative. overlaying of for the received the When Gas a application allows by our time in identify you

clear, allowing example, an For the efficiency inspected. is of to by earthquake, location provide closing, customers work each safety identify new work the in and that natural pipeline and I'm impact earthquake also need role improved be available day. the innovation ability grateful one examples and communities. dedication of now gas there for safety, system, and privileged This employees their against responsible us each for is Thank their is that to And assets and you captured our possible to our way. ingenuity we Operator, and this is many to work customers bring of while automatically for all to every In commitment employees. of morning. alongside and our the and of well-being technology productivity, an is growth of by our to overlaid improving our our to if X,XXX them our questions. and are the to their one of joining us safely reliability prioritize of environmentally made this

with [Operator Bank of Julien America. Instructions] Our from first question Smith is

questions. everyone. morning, Clark good It's Thanks on my Hi, for taking Julien. for Kody

Kody. morning, Good

morning. Good

as little guidance, you're the more moving given you color plays there? your So, plan, Can little color the how well the just view So bit pieces give discussed? but benefit as 'XX into nonqualified within bit little a you about first, can of you reiterated, thinking talk thinking more a Thanks. the the know results maybe can range, about a you you how if give on pension. some guidance? about bit more I that EPS on

those expense is, This Kody. market the balance or we of about But as I think the is to of negative six six the don't remeasured the nonqualified We've mark-to-market of a plan, to With range. decline experienced the we through to the Good assets We've in we course, morning, liability on mark-to-market positive the mean determined Caron. months. in the months, include respect value the the Related that our remeasurement plans, for by what guidance don't year. And the that's we've guidance. for assume plan. pension of pension on fixed. the the and balance impact

- will about year. for it's next end XXXX at $X said, and million XX/XX We'll again I the the As of plan that remeasure remain. pension for

Understood. on And growth meet half as the of the 'XX second just that year of that, midpoint kind 'XX any you're curious that following to offsets Okay. this up over XX% a guidance. there if targeting half is second of implies

about any levers that you is move half. we range the there if wondering Just the thinking would for higher that second should be within

impact the going The pension number, balance we've year. - and So, second by tackling. pointed regulatory activity have for is will million some far, the the biggest of $X to impact on be this that, Other quarter. the is it's to that blocking which than the basic

team. Got time, Okay. and the it. Thanks Sid for

Thank you.

with Securities. Our next from Mosca question is Robert Mizuho

Hi. Good morning, everyone.

morning. Good

Just guys for Paso's of wondering group about the if genesis increase. you denial can El talk the rate maybe

before. I - has think been had issues there you've there

dynamic wondering of that of Just happenings? kind what an term that is area is or is, that concern run-of-the-mill just longer and

had and approved. as is the others earlier. go as Commission point all We we few out, happened this approved and we that take through again, to deemed to we're as filing. that's like go did in only because Commission year. And through be the thing the and qualify process allowed those that - effect the And for filed last it rates happened years went Robert, and do the Curtis. effect rates the once the a as proper you those already The year just effect, is had that it net into now, had them to last filing you were appeal

happened we has a deal community. just and with times situation few it's it that So, in the

tracking if quarter. wondering any how you Got you've or the laid in things side, inflation out changes of just last it. seen O&M Understood. maybe And on your just kind are expectations if

that We a any built some. more assuming else anyone It's I in inflation say question. marketplace. around had visibility plan the than an we interesting can't

adjusted heard accordingly and As you confident, captures of Caron in the look progresses we've go remarks, our we inflation guidance But forward. the our that we the are plans as we'll year. you as watching remainder how in said, join for the year forward

only problems, this underway, we we conscious but That's of so our the recognize on one do focused that that efficiency customer service. that to we impede of O&M, organization. bills, also are in focused address through many projects opportunities in gave customer efficiency but in doesn't way The to into might to very with commitment a as to get In remain we terms wanted around the examples of not ways programs a environment. received, to way that that of savings, meaningful our that and innovative on being being employees affordability, introduces really dedicated are demonstrate around to around together continued all how that and focused company activity patent we've who find way communicating we customers trying fact a work the the highlighted across because are to we we got example on

That's And time. thanks, helpful. Great. everyone. the Appreciate

the for you Thank question.

question Our [Operator Instructions] from will next Partners. Ward Guggenheim with come Jamieson

Hi, guys. it How's going?

Thanks. Fine.

Excellent.

was clarify, just going cost So, this you be in then of are for will quarter, of present have that different - then itself end to and going out. it on from the it drag to will the way, decrease, market kind How quarter from not it same guidance? the performance of Maybe one-time two maybe the in think you right and the charge it first wanted you that the that's But investments and again, to out net at excluded forward? where end the - about $X.XX. way? else have I results of you repeat might kind present Are think year, about we $X.XX a plans that you're around to way should it think your results be pieces going as from the items then to these and out, down - seemed and it you it So the would one-time be either netting market's would that the Is those from and a you benefit on a impact up. periodic which seemed year as the even $X.XX back to of have though It are and if item. going here like everything going about moving obviously, how stayed the now, you year. show the way, or next

each today, much mark-to-market for Jamieson, the where and the XXXX the we noncall other. impact XXXX plans of for negate the on impact of sit remeasurement the pretty

year -- as the think So, about we

Okay.

Okay? All right.

So, if is you're impact. out, here the negative on same everything saying from no there else stayed

wrap If be treated were just also if be would flat? be were in sure improvement we wrapping would you'd treat you and head the So, of would quarters. plan make investments see would one-time you fourth all. how on any you then, in my - based properly that something That's change the to that market trying or to further Just performance around - book? as the third

item. non-operating look just So, is typically, historically you quantified typically it's non-cash, this material the related when impact GAAP a not - not with the stuck the it's have hugely non-GAAP mark-to-market year. to We at mark-to-market, earnings of for you a our been We've number. and because, provided any number full

doing So, differently. at don't anticipate point, that this - handling I any that

you much. very Thank Understood. Very clear.

for question. you your Thank

speakers further to call I'll appears questions have back we remarks. now turn our It the no today. for closing over

for in ONE again your all interest Gas. you Thank

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

concludes today's conference. This

You lines. may please disconnect your