One Gas, Inc. · NYSE:OGS
One Gas — Wells Fargo Midstream, Utility & Renewables Symposium 2021
59 slides from One Gas's conference presentation, December 2021
Slide 1: Resilient and Reliable Energy For a Better Tomorrow
Resilient and Reliable Energy For a Better Tomorrow INVESTOR UPDATE December 2021
Slide 2: Forward-Looking Statements
Forward-Looking Statements Statements contained in this presentation that include or refer to Company expectations, our business outlook, our future plans or predictions relating to any matters should be considered forward-looking statements that are covered by the safe harbor provisions of the Priv
Slide 3: Value Creation Strategy
24,413.84 26,275.30 (21.87) | (+762) 13704 6044 (-60.01) (5590)
Slide 4: Sustainable Business Model
Sustainable Business Model • Clear vision, mission, strategy and values-driven culture Focused Business Strategy • 100% regulated natural gas distribution utility • Conservative financial profile (investment-grade credit ratings) • 20+ year vintage pipeline replacement program Capital Horizon & Clar
Slide 5: Mission, Vision, Strategy and Core Values
Mission, Vision, Strategy and Core Values Mission – Why we exist Core Values – Our compass SAFETY We deliver natural gas for a better tomorrow We are committed to operating safely and in an environmentally responsible manner. Vision – What we want to be ETHICS To be a premier natural gas distributio
Slide 6: 100% Regulated Natural Gas Utility
100% Regulated Natural Gas Utility One of the largest publicly traded natural gas distribution companies 72% market share • ~ 2.2 million customers • ~ 3,700 employees • ~ 63,300 miles of distribution mains, services and 88% market share transmission pipelines Estimated 2021 average rate base: $4.34
Slide 7: Capital Horizon & Clarity
: < | CAPITAL HORIZON & CLARITY 3 ; G one Gas
Slide 8: Well-Defined Capital Investment Plan
Well-Defined Capital Investment Plan CAPITAL INVESTMENTS 2021G CAPITAL INVESTMENTS BY STATE (MILLIONS) (MILLIONS) ~$540 $515 $19 $470 $20 $442 $21 $418 $151 $26 $135 $32 $110 Kansas $99 $80 $360 $370 $135 $317 $339 Texas $306 $201 $191* $201 $178 $151 $158 Oklahoma $204 2017 2018 2019 2020 2021G Sys
Slide 9: Rate Base Growth
Rate Base Growth AVERAGE RATE BASE* 2021 ESTIMATED AVERAGE RATE BASE* (B ILLIONS) TOTAL: $4.34 BILLION $4.34 $3.91 $3.62 $1.24 billion $3.18 $3.36 $1.32 billion $1.78 billion 2017 2018 2019 2020 2021G Kansas Oklahoma Texas * For definition of average rate base, see Appendix Expected 11% growth from
Slide 10: Pipeline Replacement
Pipeline Replacement Focusing on Maintaining Safe and Reliable Operations While Reducing Emissions PIPELINE REPLACEMENT (MILES) ACCELERATED Average Annual Est. CAST IRON 2021-2025 120 60 220 400 REPLACEMENT PROGRAM 2020 130 44 7 289 470 COMPLETED IN 2019 2019 4 113 78 2 233 430 2018 21 111 53 5 240
Slide 11: Vintage Pipeline Replacement Program
Vintage Pipeline Replacement Program Replaced an Average of 244 Miles of Vintage Pipe Per Year Since 2014 VINTAGE PIPE AS PORTION OF TOTAL PIPELINE INVENTORY (MILES) All Other Main, Service & Transmission Pipelines Risk-Mitigation & Government 1,100 Relocations 2021-2025E 900 5,180 4,280 2021-2025E
Slide 12: Regulatory Construct
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Slide 13: Comprehensive Regulatory Mechanisms
Comprehensive Regulatory Mechanisms DESCRIPTION KANSAS OKLAHOMA TEXAS Interim capital recovery ✓ ✓ ✓ Weather normalization ✓ ✓ ✓ Purchased gas riders (including gas cost portion of bad debts) ✓ ✓ ✓ Energy efficiency/conservation programs ✓ ✓* Pension and other post-retirement benefits trackers ✓ ✓ ✓
Slide 14: Interim Recovery of Capital Investments
Interim Recovery of Capital Investments Annual Filings • Oklahoma Natural Gas 2021E CAPITAL RECOVERY TIMING – Performance-based rate change (PBRC) Interim filing for annual rate reviews between full rate cases 7% • Kansas Gas Service – Gas System Reliability Surcharge (GSRS) for safety-related (incl
Slide 15: Filing Timeline
Filing Timeline Oklahoma & Kansas Joint stipulation and settlement agreement reached for $15.3 million increase in general rate case, effective fourth quarter 2021, pending approval* 2020 2021 2022 2023 2024 2025 PBRC filing approved July 2020, PBRC filing in March PBRC filing in March PBRC filing i
Slide 16: Texas Filings – 2021
Texas Filings – 2021 • Central-Gulf Service Area – $10.7 million GRIP approved with new rates effective June 2021 • West Texas Service Area – $9.7 million GRIP approved with new rates effective in August 2021 for the city of El Paso and July 2021 for all other municipalities • Rio Grande Valley Serv
Slide 17: Winter Storm Uri
WINTER STORM URI — Gonecas
Slide 18: Financial Impact and Response
Financial Impact and Response Additional Liquidity Secured Extraordinary Costs Incurred Sources of Liquidity • ~ $2.0 billion extraordinary costs (gas purchases and related As of Sept. 30, 2021 financing and operational costs) deferred as a regulatory asset • Revolving Credit Facility as of Sept. 30
Slide 19: Securitization Update
Securitization Update KANSAS OKLAHOMA TEXAS A bill permitting individual utilities to issue A bill permitting the Oklahoma Development Finance A bill permitting the Texas Public Finance Authority Legislation securitized bonds was signed into law by the Authority (ODFA) to issue securitized bonds was
Slide 20: Cash Flow Stability
CASH FLOW STABILITY G ONE Gas
Slide 21: High Percentage of Residential Customers
High Percentage of Residential Customers 83% Residential 92% Residential 72% of sales NET SALES CUSTOMER margin is MARGIN COUNT fixed (Excludes transportation and other (Excludes transportation) revenues) 17% Non-residential 8% Non-residential Note: Based on 2020 annual results. Net Sales Margin is
Slide 22: Growth in Service Territories
Growth in Service Territories POPULATION GROWTH IN LARGEST AREAS SERVED AVERAGE CUSTOMER COUNT (THOUSANDS) (THOUSANDS) 2,152 2,166 2,179 2,194 2,220 2,400 Austin-Round Rock- 2,200 Georgetown, TX MSA, 2,295 670 680 2,000 650 657 663 1,800 1,600 Oklahoma City, OK MSA, 1,400 871 877 884 895 1,425 865 1
Slide 23: Average Annual Residential Customer Bill
Average Annual Residential Customer Bill AVERAGE ANNUAL RESIDENTIAL CUSTOMER BILL • Over the past 5 years, customers have benefitted from low and stable gas prices • Customers began to see impact $235 $256 $265 $177 of federal tax reform in 2018 and $189 elimination of Kansas state income taxes in 2
Slide 24: Financial Performance & Objectives
FINANCIAL PERFORMANCE & OBJECTIVES
Slide 25: Five-Year Financial Outlook
Five-Year Financial Outlook For the Five Years Ending Dec. 31, 2025 Expected average annual growth rates: (2020 base year) • 7 – 8% Rate base • 6 – 8% Net income • 5 – 7% Earnings per diluted share • 6 – 8% Dividend • ~3% Operations & maintenance expenses $3 billion in total capital investments • ~6
Slide 26: 2021 Guidance Summary
2021 Guidance Summary Updated Nov. 1, 2021 • Net income range of $204 ‒ $209 DILUTED EPS & NET INCOME million $3.85** • EPS range of $3.80 ‒ $3.90 per $3.68 $3.51 diluted share $3.25 $3.08 $207** • Estimated average rate base* of $187 $196 $4.34 billion $172 $163 – Includes $540 million in capital i
Slide 27: Growing Dividends
Growing Dividends Building Shareholder Value • Quarterly Dividend DIVIDENDS & PAYOUT RATIO – 58 cents per share in 2021 $2.32 $2.16 $2.00 $1.84 • Target annual payout ratio $1.68 60%* 59% – 55 – 65% of net income 57% 57% 55% 2017 2018 2019 2020 2021G 7.4% increase over 2020 * Represents midpoint of
Slide 28: Operating Cost Control
Operating Cost Control Building a Foundation for Long-term Affordability OPERATING COSTS* • Managing expenses: (MILLIONS) $509 – Leveraging technology $471 $489 $494 $457 – Increasing efficiency and optimizing processes – Making it easier for customers to self- serve Expected average annual operatin
Slide 29: Return on Equity
Return on Equity • Continue to minimize the gap Earned ROE between allowed and actual 8.3% 8.6% 7.9% 8.1% 8.1%2 returns • Authorized ROE by state: – Oklahoma ‒ 8.9% to 9.9% band, with a 9.4% midpoint1 – Texas ‒ ~ 9.5% weighted average – Kansas ‒ Not stated due to black box settlement; Kansas Gas Ser
Slide 30: Financing Requirements
Financing Requirements Excluding Winter Storm Uri Financing $665 $665 • Dividends and capital Financing Financing investments primarily funded Financing requirements requirements by cash flow from operations requirements $169 $210 $174 Capital • ~$1 billion net financing needs expenditures and (MILL
Slide 31: Long-term Debt Profile
Long-term Debt Profile As of Sept. 30, 2021 SENIOR DEBT MATURITIES (MILLIONS) $1,400 $1,000 $1,000 0.850% $700 $600 1.100% $400 $400* $300 $300 4.658% Floating 4.500% 2.000% 3ML+61bps 3.610% 2023 2024 2030 2044 2048 Long-term debt exclusive of Winter Storm Uri financing Long-term debt associated wit
Slide 32: Safety & Reliability
) SAFETY & RELIABILITY G ONE Gas
Slide 33: Safety & Reliability
Safety & Reliability Employee & Community Cyber/Physical System Pipeline Safety Security Reliability Safety • Continuously refine training, processes, • Utilize technology, training and best practices to • Collaborate on industry • Minimize frequency and procedures and culture as we strive for zero
Slide 34: Environmental, Social & Governance
ENVIRONMENTAL, SOCIAL & GOVERNANCE
Slide 35: 2021 ESG Report Highlights
2021 ESG Report Highlights Environmental Vintage Pipe Renewable Innovation & End-Use Conservation Disclosures Replacement Natural Gas Technology • Reduce emissions through vintage • Expand • Provide CNG • Optimize existing • Identify & invest in • Align with SASB, pipeline replacement program and en
Slide 36: Social & Governance
2021 ESG Report Highlights Social & Governance Community Governance Employee Engagement Customer Care Investment Practices • Support employees through physical, • Improve customer experience through • Utilize ONE Gas Foundation • Maintain best practices in social emotional and financial programs inn
Slide 37: Renewable Natural Gas Technology and Innovation
Renewable Natural Gas Technology and Innovation Current Initiatives • October 2021 – Executed eight letter agreements for biogas development projects – Expected to produce up to ~ 1 Bcf of RNG per year, or the equivalent of serving ~15,000 homes • Vanguard Renewables alliance announced – Initiative
Slide 38: Hydrogen Technology and Innovation
Hydrogen Technology and Innovation Looking to the Future • Commissioned two actively working • Stakeholder in “Demonstration and hydrogen groups: Framework for H2@Scale in – Exploring technical matters Texas and Beyond” • Engineering – U.S. Department of • Policies and procedures Energy-funded proje
Slide 39: Compressed Natural Gas (CNG)
Compressed Natural Gas (CNG) Key Statistics • Over half of OGS’ light-duty fleet consists of CNG- CNG VOLUME capable vehicles (DTH – MILLIONS) • Operating 28 fueling stations accessible to the 151 stations supplied 150 stations 147 stations supplied 151 stations public, 6 private stations 143 statio
Slide 40: Appendix
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Slide 41: COVID-19 Update
COVID-19 Update As of Sept. 30, 2021 EMPLOYEES CUSTOMERS • COVID-19 related employee absences not • Customer disconnects resumed in all areas as of significantly impacting operations June 2021 • Cross-functional task force supporting COVID-19 • Relative to 2020, bad debt expense remains lower respon
Slide 42: Corporate Structure
Corporate Structure INCORPORATED ENTITY 100% regulated natural gas distribution No levered holding company; all debt issued by ONE Gas, Inc Division capital structures match Corporate capital structure APPENDIX | 42
Slide 43: State Statistics
State Statistics As of Dec. 31, 2020 KANSAS OKLAHOMA TEXAS GAS TOTAL GAS SERVICE NATURAL GAS SERVICE Average Number of Customers 645,049 894,227 680,181 2,219,457 Distribution – Miles* 11,600 19,000 10,600 41,200 Transmission – Miles* 1,500 700 300 2,500 Fixed Charges – Sales customers** 55% 87% 70%
Slide 44: Capital Expenditures
Capital Expenditures Including Asset Removal Costs KANSAS OKLAHOMA TEXAS 2021: 1.9X DEPRECIATION 2021: 2.5X DEPRECIATION 2021: 4.2X DEPRECIATION $198 $204 $201 $191 $188 $180 $173 $156 $135 $136 $123 $126 $123 $129 $122 (MILLIONS) $76 $81 $68 $72 $69 $74 $64 $67 $50 $52 $44 $48 $34 $37 $40 2017 2018
Slide 45: Authorized Rate Base
Authorized Rate Base KANSAS1 OKLAHOMA2 $1,616 TEXAS2 $1,475 $1,407 $1,202 $1,257 $1,133 $1,033 $1,068 $986 $1,047 $925 $947 $895 $822 $745 (MILLIONS) 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 1 Kansas Gas Service’s most recent rate case, approved in February 2019, wa
Slide 46: Rate Base Definition
Rate Base Definition Authorized Rate Base $3.99 billion (as of Sept. 30, 2021) • Includes capital investments authorized in most recent rate cases and interim filings • Excludes any capital investments since last approved rate cases or filings 2021 Estimated Average Rate Base $4.34 billion • Average
Slide 47: Regulatory Construct
Regulatory Construct Governance KANSAS OKLAHOMA TEXAS “Home Rule” with five jurisdictions; Texas Kansas Corporation Commission Oklahoma Corporation Commission Railroad Commission has appellate authority Appointed by the governor to four-year staggered Railroad Commission elected to six-year Elected
Slide 48: Recent Regulatory Activity
Recent Regulatory Activity EFFECTIVE RATE PRE-TAX RETURN EQUITY DIVISION JURISDICTION DATE OF BASE2 RATE OF ON RATIO2 LAST ACTION1 (MILLIONS) RETURN2 EQUITY 2 Oklahoma Natural Gas3 Oklahoma Pending approval $1,726 8.95% 59% 9.40% Kansas Gas Service4 Kansas December 2021 $1,197 8.60% N/A 9.30% Texas
Slide 49: Kansas Gas Service
Kansas Gas Service Recent Regulatory Activity 2021 GSRS – NEW RATES EFFECTIVE DECEMBER 2021 Incremental Surcharge Revenue $7.6 million annual revenue Capital Expenditures $76.4 million Pre-Tax Carrying Charge 8.60% ; ROE embedded in GSRS pre-tax carrying charge is estimated to be ~9.30% Customer Imp
Slide 50: Oklahoma Natural Gas
Oklahoma Natural Gas Recent Regulatory Activity GENERAL RATE CASE HIGHLIGHTS* – SETTLEMENT AGREEMENT REACHED Base Rates $15.3 million rate increase Operating Income Impact $14.7 million $0.34 per month increase (for typical residential customer, including one-time annual credit for excess Customer I
Slide 51: Texas Gas Service
Texas Gas Service Recent Regulatory Activity CENTRAL-GULF SERVICE AREA GRIP – WEST TEXAS SERVICE AREA GRIP – NEW RATES EFFECTIVE JUNE 2021 NEW RATES EFFECTIVE JULY/AUGUST 2021 Incremental Revenue $10.7 million increase Incremental Revenue $9.7 million increase Capital Expenditures $97 million Capita
Slide 52: Economic Snapshot – Austin
Economic Snapshot – Austin NET MIGRATION OF U.S. 50 LARGEST METROS UNEMPLOYMENT RATES BY METRO AREA PER 10,000 POPULATION, 2010-2019 AUSTIN 1,600 NOT SEASONALLY ADJUSTED, AS OF SEPTEMBER 2021 • #1 fastest growing major Domestic International metro in the U.S. 1 1,200 National Average: 4.8% • #3 best
Slide 53: Economic Snapshot – El Paso
Economic Snapshot – El Paso 2020-2021 BUSINESS ANNOUNCEMENTS Company Employees • #1 exporting state for the Wiwynn (2021) 200+ UNEMPLOYMENT RATES BY METRO AREA 19th consecutive year1 Everest Rehabilitation Hospital expansion (2021) ~120 NOT SEASONALLY ADJUSTED, AS OF SEPTEMBER 2021 Eastlake Marketpl
Slide 54: Economic Snapshot – Oklahoma City
Economic Snapshot – Oklahoma City NET MIGRATION OF U.S. 50 LARGEST METROS 1,600 2021 NEW BUSINESSES/EXPANSIONS PER 10,000 POPULATION, 2010-2019 • 14th fastest growing major Company Description Jobs Domestic International metro in the U.S. (+1.1%)1 1,200 Created 800 Carvana New inspection and 350+ OK
Slide 55: Economic Snapshot – Tulsa
Economic Snapshot – Tulsa UNEMPLOYMENT RATES BY METRO AREA MAJOR EMPLOYERS BY INDUSTRY • #2 most affordable big city NOT SEASONALLY ADJUSTED AS OF SEPTEMBER 2021 in the U.S. (Rocket Homes, National Average: 4.8% Industry 1,000+ Employees 2021) Tulsa 2.1% • #5 top metro for job Unemployment rate (%)
Slide 56: U.S. Energy Flowchart
U.S. Energy Flowchart APPENDIX | 56
Slide 57: Non-GAAP Information
Non-GAAP Information ONE Gas has disclosed in this presentation cash flow from operations before changes in working capital and net margin, which are non-GAAP financial measures. Cash flow from operations before changes in working capital is used as a measure of the company's financial performance.
Slide 58: Non-GAAP Reconciliation
Non-GAAP Reconciliation Cash Flow From Operations Before Changes in Working Capital 2021 (MILLIONS) GUIDANCE* Net income $ 207 Depreciation and amortization 207 Deferred taxes 60 Other 22 Cash flow from operations before changes in working capital $ 496 * Amounts shown are estimated midpoints as con
Slide 59: Non-GAAP Reconciliation
Non-GAAP Reconciliation Net Margin (MILLIONS) 2020 Total revenues $ 1,530.3 Cost of natural gas 537.4 Net margin $ 992.9 (MILLIONS) 2020 Natural gas sales Residential $ 711.1 Commercial and industrial 132.8 Other 7.9 Net margin on natural gas sales (net sales margin) $ 851.8 Transportation revenues
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