ONE Gas, Inc. Q4 FY2024 earnings call

• Acknowledged and thanked coworkers for working in extreme weather to keep customers safe. - 2024 was a successful year with earnings and capital execution as projected, exceeding EPS guidance midpoint. - Completed cast iron replacement plan in 2019 and bare steel service line replacement in Kansas in 2024, reducing leak-related emissions by over 50% since 2005. - Set 23,000 new meters in 2024 with growth in major metro areas across three states. - Exploring natural gas supply for power generation, including data centers and industrials. - Made regulatory filings in Texas and Oklahoma, and made capital investments in system reinforcement like the Austin system reinforcement project.

In the fourth quarter, GAAP net income was $77 million or $1.34 per diluted share, compared with $71 million and $1.27 in the same period in 2023. For the full year, GAAP net income was $223 million or $3.91 per diluted share, versus $231 million and $4.14 in 2023. Capital expenditures and asset removal costs for the fourth quarter were $190 million, bringing the total for the year to $762 million, compared with $729 million in 2023. Revenue for the fourth quarter reflected an increase of $24.6 million from new rates due to successful regulatory strategy execution.

• 2025 financial guidance includes net income of $254 million to $261 million, earnings per diluted share of $4.20 to $4.32, and capital expenditures and asset removal costs of approximately $750 million. - 2025 guidance does not assume additional Federal Reserve rate cuts. - Amended forward sale agreements to extend the maturity date on remaining shares to December 31, 2025, and utilized proceeds to pay down short-term debt, fund construction work in progress, gas storage purchases, and other general corporate purposes.

• Weather conditions can impact operations, though the company's investments have enhanced system reliability. - Interest rate fluctuations not factored into the 2025 guidance, as the forecast does not assume further rate cuts unless explicitly stated.

Q: Inquiries about the timeline of data center opportunities and how they fit into capital plans.

A: Timelines for data center opportunities vary, with some quicker than others, and the company can leverage its existing system and future investments.

Q: Impact of warm weather in the fourth quarter on working capital and commercial paper balance.

A: Warmer weather in the fourth quarter led to less liquidation of storage inventories than contemplated, but cold weather in the first quarter brought storage back in line with plans, expected to result in a strong cash flow quarter.

Q: Outlook for O&M in 2025.

A: The fourth quarter O&M was solid at about 2-2.5% due to ahead-of-schedule initiatives, and there is no change to the 2025 O&M guidance.

Q: Impact of Texas transmission system decisions (765 kV vs 345 kV) on data center opportunities.

A: These transmission system decisions do not impact the data center opportunities the company is seeing, as the inquiries are about providing gas for baseload generation initially, not contingent on transmission line decisions.