Slide 1: Resilient and Reliable Energy For a Better Tomorrow
Resilient and Reliable Energy For a Better Tomorrow INVESTOR UPDATE March 2022
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
31,246.04. 24,413.84 26,275.30 (21.87) | (+762) 13704 6044 e [aie ——— — | ama \ | 143,653.64 | 150,028.94 150 oT | pegs) | (+444)
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 with investment-grade credit ratings • 20+ year vintage pipeline replacement program using risk-based ap
Slide 5: Mission, Vision, Strategy and Core Values
Mission, Vision, Strategy and Core Values MISSION – Why we exist CORE VALUES – Our compass We deliver natural gas for a better tomorrow Safety: We are committed to operating safely and in an environmentally responsible manner. VISION – What we want to be Ethics: We are accountable to the highest eth
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 • ~ 3,600 employees 88% market share • ~ 64,200 miles of distribution mains, services and transmission pipelines • Over 51 Bcf of natural gas storage ca
Slide 7: Capital Horizon & Clarity
\ | CAPITAL HORIZON & CLARITY ; G one cas
Slide 8: Well-Defined Capital Investment Plan
Well-Defined Capital Investment Plan Investments Exceed 3x Depreciation CAPITAL INVESTMENTS 2022G CAPITAL INVESTMENTS BY STATE (MILLIONS) ~$650 (MILLIONS) $25 $542 $515 $470 $21 $190 $442 $20 $21 $138 Kansas $26 $135 $145 $110 $435 $99 $360 $383 Texas $339 $317 $250 $202 $213 $178 $191 $158 Oklahoma
Slide 9: Capital Investments – Customer Growth
Capital Investments – Customer Growth Growing Demand for Natural Gas • Key drivers: GROWTH CAPITAL – Commercial and residential development, (MILLIONS) $190 particularly in Austin and Oklahoma City metro areas, driving system expansion $138 – Projecting five-year average annual customer growth of 1.
Slide 10: Vintage Pipeline Replacement Program
Vintage Pipeline Replacement Program Replaced an Average of 231 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 Relocations 1,200 750 2022-2026E 4,250 2022-2026E 5,000
Slide 11: Rate Base
Rate Base AVERAGE RATE BASE* 2022G AVERAGE RATE BASE* (BILLIONS) TOTAL: $4.64 BILLION $4.64 $4.25 $3.91 $3.62 $1.23 billion $3.36 $1.47 billion $1.94 billion 2018 2019 2020 2021 2022G Kansas Oklahoma Texas * See Appendix for definition Over 9% growth from 2021 to 2022 CAPITAL HORIZON & CLARITY | 11
Slide 12: Regulatory Update
' |) tela se ) REGULATORY UPDATE G ONE Gas al ae
Slide 13: Securitization Update
Securitization Update KANSAS OKLAHOMA TEXAS In November 2021, the RRC approved an order authorizing Texas Gas Service to recover all of its costs from Winter Storm Uri. The order authorizes $197 million of cost On Jan. 25, 2022, the OCC approved a financing order On Feb. 8, 2022, the KCC issued an o
Slide 14: Interim Recovery of Capital Expenditures
Interim Recovery of Capital Expenditures Annual Filings • Oklahoma Natural Gas 2022E CAPITAL EXPENDITURES – Performance-based rate change (PBRC) Interim filing for RECOVERY annual rate reviews between full rate cases 8% • Kansas Gas Service – Gas System Reliability Surcharge (GSRS) for safety-relate
Slide 15: Filing Timeline
Filing Timeline Oklahoma & Kansas $15.3 million general rate case approved, new rates effective November 2021 2021 2022 2023 2024 2025 2026 PBRC filing in March PBRC filing in March PBRC filing in March PBRC filing in March 2022 2023 2024 2025 2021 2022 2023 2024 2025 2026 $7.6 million GSRS approved
Slide 16: Texas Filings – 2022
Texas Filings – 2022 • Central-Gulf Service Area – $9.1 million GRIP filed February 2022; new rates expected to be effective June 2022 • West Texas Service Area – GRIP expected to be filed March 2022 – Rate case required by Dec. 31, 2022 • Rio Grande Valley Service Area – COSA expected to be filed A
Slide 17: Cash Flow Stability
)) CASH FLOW STABILITY a G one Gas
Slide 18: High Percentage of Residential Customers
High Percentage of Residential Customers 93% Residential 70% Fixed AVG. SALES NATURAL GAS CUSTOMER SALES COUNT REVENUES (Excludes cost of natural gas recovery) 7% Non-residential 30% Variable Note: Based on 2021 annual results. CASH FLOW STABILITY | 18
Slide 19: Average Annual Residential Customer Bill
Average Annual Residential Customer Bill • Over the past 5 years, AVERAGE MONTHLY RESIDENTIAL CUSTOMER BILL customers have benefitted from low and stable gas prices $59 $54 $54 $52 • Customers began to see impact $48 of federal tax reform in 2018 and $23 elimination of Kansas state $20 $21 $22 $15 i
Slide 20: 3.3-to-1 Average Advantage in ONE Gas Territories
3.3-to-1 Average Advantage in ONE Gas Territories Natural Gas Price Advantage Over Electricity KWH EQUIVALENT ELECTRICITY VS. NATURAL GAS 3.7x 3.6x 2.7x 12.39¢ 12.95¢ 12.04¢ 4.43¢ 3.48¢ 3.47¢ Texas Oklahoma Kansas ¹ Avg. retail price of electricity/kWh ² ONE Gas delivered cost of natural gas/kWh ³ N
Slide 21: Financial Performance & Objectives
FINANCIAL PERFORMANCE & OBJECTIVES
Slide 22: Five-Year Financial Highlights
Five-Year Financial Highlights 2022 through 2026 Capital Investments & Rate Base Average Annual Earnings Growth Rates • Capital investments of approximately • Net income of 8 – 10% (up from 6 – 8%) $3.5 billion, a 19% increase over previous – In addition to capital investment, key drivers include: f
Slide 23: 2022 Guidance Summary
2022 Guidance Summary Initiated Jan. 18, 2022 • Net income range of $215 ‒ $227 DILUTED EPS & NET INCOME million • EPS range of $3.96 ‒ $4.20 per $4.08** diluted share $3.68 $3.85 $3.51 $3.25 • Estimated average rate base* of $4.64 billion $221** $196 $206 – Includes $650 million in capital investme
Slide 24: Growing Dividends
Growing Dividends Building Shareholder Value • Quarterly Dividend DIVIDENDS & PAYOUT RATIO $2.48* – 62 cents per share in 2022* $2.16 $2.32 $2.00 $1.84 • Target annual payout ratio 61%** 60% 59% – 55 to 65% of net income 57% 57% 2018 2019 2020 2021 2022G 6.9% increase over 2021 * Subject to board ap
Slide 25: Conservative Financial Profile
Conservative Financial Profile Strong Balance Sheet & Capital Structure Sources of Liquidity CAPITAL STRUCTURE* As of Dec. 31, 2021 DECEMBER 31, 2021 • Revolving Credit Facility – $1 billion – Expires March 2026 • $504 million available under commercial paper Long-term Debt program 40.3% Equity 59.7
Slide 26: Financing Requirements
Financing Requirements Excluding Winter Storm Uri Financing $784 $784 • Dividends and capital Financing Financing Financing requirements investments primarily funded requirements requirements $210 $280 by cash flow from operations $174 Capital expenditures and (MILLIONS) • ~$1.6 billion net financin
Slide 27: Long-term Debt Profile
Long-term Debt Profile As of Dec. 31, 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 with
Slide 28: Environmental, Social & Governance
ENVIRONMENTAL, SOCIAL & GOVERNANCE
Slide 29: 2021 ESG Highlights
2021 ESG 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 energy fu
Slide 30: 2021 ESG Highlights
2021 ESG 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 innovation
Slide 31: Renewable Natural Gas Opportunities
Renewable Natural Gas Opportunities Current Initiatives • 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 – Evaluating 14 additional projects – Identified ~175 Bcf of potential RNG feedst
Slide 32: Appendix
APPENDIX (2) G ONE Gas
Slide 33: 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 | 33
Slide 34: State Statistics
State Statistics As of Dec. 31, 2021 KANSAS OKLAHOMA TEXAS GAS TOTAL GAS SERVICE NATURAL GAS SERVICE Average Number of Customers 647,000 905,000 689,000 2,241,000 Distribution – Miles* 11,700 19,200 10,700 41,600 Transmission – Miles* 1,500 600 300 2,400 Fixed Charges – Sales customers** 55% 88% 68%
Slide 35: Pipeline Replacement
Pipeline Replacement Focusing on Maintaining Safe and Reliable Operations While Reducing Emissions PIPELINE REPLACEMENT (MILES) ACCELERATED Average Annual Est. CAST IRON 2022-2026 105 45 240 390 REPLACEMENT PROGRAM 430 COMPLETED IN 2021 100 35 5 290 2019 2020 130 44 7 289 470 2019 4 113 78 2 233 430
Slide 36: Capital Investments
Capital Investments KANSAS OKLAHOMA TEXAS 2022: 1.9X DEPRECIATION 2022: 2.9X DEPRECIATION 2022: 5.0X DEPRECIATION $255 $250 $215 $198 $191 $188 $188 $145 $180 $139 $126 $129 $156 $123 $136 (MILLIONS) $82 $87 $68 $72 $75 $69 $74 $76 $64 $52 $44 $48 $51 $37 $40 2018 2019 2020 2021 2022G 2018 2019 2020
Slide 37: Authorized Rate Base
Authorized Rate Base KANSAS1 OKLAHOMA2 TEXAS2 $1,726 $1,616 $1,475 $1,407 $1,197 $1,257 $1,239 $1,068 $1,133 $1,047 $1,033 $986 $947 $895 $822 (MILLIONS) 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 1 Kansas Gas Service’s most recent rate case, approved in February 2019
Slide 38: Rate Base Definition
Rate Base Definition Authorized Rate Base $4.16 billion (as of Dec. 31, 2021) • Includes capital investments authorized in most recent rate cases and interim filings • Excludes any capital investments since last approved rate cases or filings 2022 Estimated Average Rate Base $4.64 billion • Average
Slide 39: 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 40: 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 41: Recent Regulatory Activity
Recent Regulatory Activity EFFECTIVE RATE PRE-TAX RETURN EQUITY DIVISION JURISDICTION DATE OF LAST BASE RATE OF ON RATIO ACTION1 (MILLIONS) RETURN EQUITY Oklahoma Natural Gas2 Oklahoma November 2021 $1,726 8.95% 59% 9.40% Kansas Gas Service3 Kansas December 2021 $1,197 8.60% N/A 9.30% Texas Gas Serv
Slide 42: 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 Impa
Slide 43: Oklahoma Natural Gas
Oklahoma Natural Gas Recent Regulatory Activity GENERAL RATE CASE HIGHLIGHTS – NEW RATES EFFECTIVE NOVEMBER 2021 Base Rates $15.3 million rate increase Operating Income Impact $14.7 million Customer Impact $0.34 per month increase (for typical residential customer, including one-time annual credit f
Slide 44: Texas Gas Service
Texas Gas Service Recent Regulatory Activity CENTRAL-GULF SERVICE AREA GRIP – WEST TEXAS SERVICE AREA GRIP – FILED FEBRUARY 2022 NEW RATES EFFECTIVE JULY/AUGUST 2021 Incremental Revenue $9.1 million increase Incremental Revenue $9.7 million increase Capital Expenditures $77 million Capital Expenditu
Slide 45: Hydrogen Technology and Innovation
Hydrogen Technology and Innovation • 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 project at • System integri
Slide 46: 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) 151 stations • Operating 27 fueling stations accessible to the supplied 150 stations 145 stations supplied public, 6 private stations 147 stations supplied s
Slide 47: Non-GAAP Information
Non-GAAP Information ONE Gas has disclosed in this presentation cash flow from operations before changes in working capital, which is a non-GAAP financial measure. Cash flow from operations before changes in working capital is used as a measure of the company's financial performance. Cash flow from
Slide 48: Non-GAAP Reconciliation
Non-GAAP Reconciliation Cash Flow From Operations Before Changes in Working Capital 2022 (MILLIONS) GUIDANCE* Net income $ 221 Depreciation and amortization 220 Deferred taxes 43 Other 20 Cash flow from operations before changes in working capital $ 504 * Amounts shown are estimated midpoints as con