ONE Gas, Inc. Q3 FY2024 earnings call

• Company delivered quarterly results in line with expectations due to company-wide efforts and constructive regulatory outcomes.
• Narrowed and raised financial guidance for 2024, with EPS expected to be in the range of $3.85 to $3.95, midpoint $0.05 higher than original guidance.
• Anticipate capital expenditures of $750 million this year.
• Completed significant regulatory activity, including settlement of Kansas rate case with $35 million net increase and Central-Gulf rate case settlement in Texas with $19.3 million rate increase.
• Benefiting from multiyear focus on O&M expense management, with O&M up just 5% year-to-date due to cost moderation initiatives like in-sourcing line locating.
• Bad debt expense favorable to plan due to lifting of COVID moratoria and lower gas prices.

No specific product segment breakdown provided. Third quarter net income was $19.3 million or $0.34 per diluted share compared with $25.2 million or $0.45 in the same period last year. Third quarter net income included $17.5 million in revenue from new rates, partially offset by an $11.5 million increase in interest expense excluding KGSS-I. O&M expenses were higher compared to the third quarter last year, primarily related to labor-related costs, but year-to-date O&M up just 5% due to cost moderation initiatives.

• Expect EPS to be in the range of $3.85 to $3.95, midpoint $0.05 higher than original guidance.
• Anticipate capital expenditures of $750 million this year.
• Guidance raised due to Fed rate cut effect on commercial paper rates, constructive regulatory outcomes, O&M expense management, and favorable bad debt expense.

• Factors causing actual results to differ from forward-looking statements as per SEC filings.
• Concerns about U.S. election, U.S. deficit, and treasury market dynamics affecting longer-term rates.

Q: Should we expect 2025 guidance in December?

A: Yes, they plan to follow the same cadence as before to issue guidance before December Utility Week meetings.

Q: Should we expect a declining trajectory in O&M on a go-forward basis?

A: Yes, they see the opportunity for moderation in the cadence of O&M expenses going forward.

Q: Is there any planned filing in Oklahoma?

A: Under Oklahoma tariff, required to file a full rate case by June 30, 2027, with interim PBR filings each year until then.

Q: How much more of the bad debt expense progress do you see to go?

A: At this point, it's normalized and back to normal functioning, with no big changes expected from here.

Q: What's baked into the guidance regarding rate cuts?

A: Assumed no cuts in 2024, expected 100 basis points of reduction in 2025, and examined Federal Reserve's balance sheet for normalization to get to sub 20% of GDP level.