One Gas, Inc. · NYSE:OGS
One Gas — Morgan Stanley and BofA Energy and Power Conference 2024
54 slides from One Gas's conference presentation, Mar 4, 2024
Slide 1: Investor Update
Investor Update March 2024 Delivering Reliable & Affordable Energy
Slide 2: Investor Information
Investor Information Contact Information and 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 cove
Slide 3: About Us
71% market share, the largest in Kansas About Us ONE Gas, Inc. (NYSE: OGS) is a 100-percent regulated 89% market natural gas utility and is one of the largest natural gas utilities in share, the largest in Oklahoma the United States. ONE Gas provides natural gas distribution services to approximatel
Slide 4: Recent Highlights
Recent Highlights Creating Value for a Better Tomorrow Replaced over 500 Added ~23,000 2024 EPS guidance We estimate miles of new customer of $3.70-$4.00 $750 million in transmission, connections & 2024-28 EPS 2024 capital main and service growth of 4-6% investments lines in 2023 Launched Increased
Slide 5: Our Core Values
Our Core Values Safety Ethics Inclusion & Service Value Diversity We are committed to We are accountable to We embrace an inclusive We provide We create value for operating safely and in the highest ethical and diverse culture that exceptional service all stakeholders; an environmentally standards a
Slide 6: Our Strategy
Our Strategy
Slide 7: Our Mission and Strategy
Our Mission and Strategy Mission We deliver natural gas for a better tomorrow Strategy Safe & Reliable Energy High-performing Workforce Capital Demand Growth Clean Energy Solutions Serving Customers OUR STRATEGY | 7
Slide 8: Constructing a Foundation for Growth and Long-term Affordability
Constructing a Foundation for Growth and Long-term Affordability Building Operational Capacity Growth outlook remains solid • Robust backlog of future meter sets • New customer connections have slowed compared to 2022 with elevated interest rates, but growth tied to economic development continues •
Slide 9: Favorable Regional Growth Dynamics
Favorable Regional Growth Dynamics Growing Demand for Natural Gas Provides Long-Term Growth Opportunity Durable residential and commercial development, I-35 corridor anchored to economic growth, is driving system • I-35 corridor fastest expansion growing population in the U.S Strong support for natu
Slide 10: Regional Focus on Economic Development
Regional Focus on Economic Development Attracting large-scale manufacturing Enel North America (Inola, OK) – Announced May 2023 • $1.0 billion solar cell and panel manufacturing plant, largest economic development project in Oklahoma history • 1,800 construction jobs and 1,000 new permanent jobs by
Slide 11: Sustainable Business Model
Sustainable Business Model Focused Business Capital Regulatory Cash Flow Strategy Investments Construct Stability 100% regulated natural 20+ year vintage Territory diversification – High percentage of gas distribution utility pipeline replacement 3 states, multiple fixed charges for program
Slide 12: Sustainable Business Model
Sustainable Business Model Customer Safe & Reliable Clean Energy Affordability Energy Solutions Customer growth helps Industry-leading Committed to ESG moderate per-customer performance in stewardship and costs employee safety sustainability Leveraging technology Demonstrated system Ener
Slide 13: Financial Outlook
(| | oN Hi ll IUMALAAIIN
Slide 14: Five-Year Financial Guidance: 2024 – 2028
Five-Year Financial Guidance: 2024 – 2028 Overview The Company’s outlook remains anchored by proactive investments in system integrity, pipeline replacement, and durable customer growth rooted in regional economic development. The fundamental shifts in baseline economic conditions which emerged in 2
Slide 15: Modeling Assumptions
Modeling Assumptions Given heightened market volatility and consensus rate forecasts which have shifted dramatically over the past two years, we believe there is value in sharing the following modeling assumptions: • A gradual contraction in the Commercial Paper 10-year rate spread over the course o
Slide 16: Financing Requirements
Financing Requirements Retaining Balance Sheet Strength Dividends and capital investments primarily funded by cash flow from operations of approximately $525 - $575 million1 – Expected 2024 short- and long-term financing need of $350 - $375 million, exclusive of two first-quarter maturities: $300 mi
Slide 17: Five-Year Financial Highlights
Five-Year Financial Highlights Investing in a Growing System Capital Investments & Rate Base Average Annual Growth Rates • Capital investments of approximately • Based off full-year 2023 results $4.25 billion • Net income growth of 7 – 9% – $3.0 billion investment in system integrity and - In additi
Slide 18: 2024 Guidance Summary
2024 Guidance Summary* Managing near-term impacts while preserving long-term opportunities Earnings and Dividends Outlook • Net income for 2024 in a range of $214 - $231 million • EPS range of $3.70 - $4.00 per diluted share • Anticipate dividend growth of 1% to 2% in 2024, subject to board approval
Slide 19: Debt Maturity Profile
Debt Maturity Profile Managing near-term impacts while preserving long-term opportunities SENIOR NOTES DUE1 INTEREST RATE AMOUNT (MILLIONS) March 20242 1.10% $473 M Debt maturity April 2029 5.10% $300 M schedule provides flexibility for May 2030 2.00% $300 M financing September 2032 4.25% $300 M Feb
Slide 20: Capital Investments
Capital Investments
Slide 21: Well-Defined Capital Investment Plan
Well-Defined Capital Investment Plan Investments ~ 3x Depreciation CAPITAL INVESTMENTS 2024G CAPITAL INVESTMENTS (MILLIONS) ~$750 BY STATE $729 $26 $26 (MILLIONS) $658 $32 $172 $178 $515 $542 $21 $177 $20 $525 $552 Kansas $138 $169 $135 $449 Texas $360 $383 $288 $234 $252 $191 $202 $216 Oklahoma $29
Slide 22: Rate Base
Rate Base AVERAGE RATE BASE* 2024G AVERAGE RATE BASE* (BILLIONS) BY STATE TOTAL: $5.55 BILLION $5.55 $5.15 $4.69 $4.25 $3.91 $1.79 billion $1.41 billion $2.35 billion 2020 2021 2022 2023 2024 Kansas Oklahoma Texas * See Appendix for definition ~8% growth expected in 2024 CAPITAL INVESTMENTS | 22
Slide 23: Capital Investments
Capital Investments KANSAS OKLAHOMA TEXAS 2024G: 2.1X DEPRECIATION 2024G: 2.9X DEPRECIATION 2024G: 4.2X DEPRECIATION $286 $293 $288 $257 $256 $242 $215 $198 $185 $188 $188 $159 $169 $139 (MILLIONS) $129 $63 $69 $93 $100 $48 $53 $78 $83 $82 $88 $44 $68 $72 $75 $76 2020 2021 2022 2023 2024G 2020 2021
Slide 24: Regulatory Update
Regulatory Update G ONE Gas ’ y ), es V,
Slide 25: Comprehensive Regulatory Mechanisms
Comprehensive Regulatory Mechanisms KEY MECHANISMS: KANSAS OKLAHOMA TEXAS Central-Gulf Dec. 2026 West-North Dec. 2028 General Rate Case Filing Deadline 2030 June 2027 Rio Grande as needed Valley Interim capital recovery GSRS PBRC GRIP Weather normalization ✓ ✓ ✓ Purchased gas riders (including gas c
Slide 26: Regulatory Filings Summary
Regulatory Filings Summary RATES IN PROGRESS REQUESTED FILING DATE (MILLIONS) Kansas - Rate Case $58.1 M (net) March 2024 Oklahoma - PBRC $31.8 M February 2024 Central-Gulf - GRIP $12.3 M February 2024 APPROVED EFFECTIVE DATE OF COMPLETED RATES (MILLIONS) NEW RATES Oklahoma - PBRC $26.3 M June 2023
Slide 27: Oklahoma Natural Gas
Oklahoma Natural Gas PBRC filed February 29, 2024 Performance-based rate change (PBRC) interim filing for annual rate reviews between full rate cases 2024 PBRC – ESTIMATED EFFECTIVE DATE JUNE 2024 File PBRC annually in 1st Quarter. Next rate case required by June Incremental Revenue Recovery $31.8 m
Slide 28: Kansas Gas Service
Kansas Gas Service GSRS rates effective Dec. 1, 2023 Gas System Reliability Surcharge (GSRS) for investments in safety- related projects (includes physical and cyber security) and government-mandated relocations made between rate cases File GSRS Annually in 2023 GSRS – EFFECTIVE DEC. 1, 2023 August,
Slide 29: Kansas Gas Service
Kansas Gas Service Rate Case Filed March 1, 2024 2024 RATE CASE FILING $58.1 million net increase; $93.1 million total increase requested ($35 Incremental Revenue million already recovered through GSRS) Capital Expenditures ~$600 million ($297 million already recovered via GSRS) File GSRS Annually i
Slide 30: Texas Gas Service
Texas Gas Service Central-Gulf GRIP filed in February 2024 Gas Reliability Infrastructure Program (GRIP) allows for recovery of capital investments made between rate cases CENTRAL-GULF 2024 GRIP FILING File GRIP Annually in Incremental Surcharge Revenue $12.3 million annual revenue request February,
Slide 31: Texas Gas Service
Texas Gas Service West-North GRIP effective June 2023 Gas Reliability Infrastructure Program (GRIP) for capital investments made between rate cases WEST-NORTH 2023 GRIP FILING File GRIP Annually in $7.3 million annual revenue increased 1st Quarter, rate case Incremental Surcharge Revenue approved fi
Slide 32: Texas Gas Service
Texas Gas Service Rio Grande Valley Rate Case approved January 2024 General Rate Case to recover costs incurred in providing natural gas services to operate and maintain its distribution system RIO GRANDE VALLEY 2023 RATE CASE FILING $5.9 million annual revenue approved, Annual rate filing in Increm
Slide 33: Cash Flow Stability
Cash Flow Stability G ONE Gas
Slide 34: 2.6-to-1 Average Advantage in ONE Gas Territories
2.6-to-1 Average Advantage in ONE Gas Territories 3 Natural Gas Price Advantage Over Electricity KWH EQUIVALENT ELECTRICITY VS. NATURAL GAS 14.32¢ 13.62¢ 12.28¢ 2.3x advantage3 2.6x advantage3 2.8x advantage3 6.17¢ 4.70¢ 4.79¢ Texas Oklahoma Kansas ¹ Avg. retail price of electricity/kWh ² ONE Gas de
Slide 35: Average Annual Residential Customer Bill
Average Annual Residential Customer Bill AVERAGE MONTHLY Cash Flow Stability RESIDENTIAL CUSTOMER BILL • ~92% of customers are residential $81 • ~70% of revenue less the cost of gas $73 $70 * is fixed charges $60 $58 Gas Prices Trending Lower in 2024 $55 $54 $43 $50 $51 $50 $33 $28 $46 • Assumes ~$5
Slide 36: Clean Energy Solutions
Clean Energy Solutions
Slide 37: Clean Energy Solutions
Clean Energy Solutions CLEAN ENERGY is achieved through: 1) Reducing Scope 1 emissions 2) Advancing energy efficiency 3) Supporting RNG as an alternative energy source 4) Developing green tariffs 5) Participating in alternative fuels research and application - Partnering with: H2@Scale, Clean Hydrog
Slide 38: Emissions Reduction Pay Metric
Emissions Reduction Pay Metric Incentive program tied to emissions goal • Short-term incentive (STI) metrics include one financial metric and four operational metrics focused on safety. • STI metric (new in 2023) is tied to our emissions reduction goal, which is driven by our pipeline replacement an
Slide 39: Emissions Reduction Strategy
Emissions Reduction Strategy Aligned with overall strategy • Tightening our system – Pipeline replacement and protection replaces higher emitting pipe with lower-emitting pipe – Advanced leak detection reduces time leaks are active • Reducing customer gas usage – Expansion of energy efficiency progr
Slide 40: Emissions Reduction Beyond Pipeline Replacement
Emissions Reduction Beyond Pipeline Replacement Supporting reductions in Scope 1 emissions through: • Third-party pipeline damage prevention • Advanced leak detection technology • Reduction of vented or flared methane releases from pipeline maintenance • Use of CNG for fleet vehicles Supporting deve
Slide 41: ESG Ratings & Company Recognition
ESG Ratings & Company Recognition Enhanced disclosures in 2023 ESG Report • Full alignment with SASB • Following TCFD recommendations • Disclosure of Scope 1 and 2 emissions RATING ORGANIZATION 2023 2022 Published additional governance documents and reports MSCI AA AA • Statement on Human Rights (20
Slide 42: Appendix
Appendix
Slide 43: Corporate Structure and State Figures
Corporate Structure and State Figures INCORPORATED ENTITY 100% regulated natural gas distribution No levered holding company; all debt issued by ONE Gas, Inc. 1 Division capital structures match Corporate capital structure KEY FIGURES 2: Average Number of Customers 648,000 918,000 699,000 Distributi
Slide 44: Authorized Rate Base
Authorized Rate Base KANSAS1,2 OKLAHOMA2 TEXAS2 $2,067 $1,854 (MILLIONS) $1,616 $1,726 $1,475 $1,528 $1,261 $1,330 $1,239 $1,366 $1,068 $1,133 $1,197 $1,047 $986 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 1 Kansas Gas Service’s most recent rate case, approved in Febru
Slide 45: Rate Base Definition
Rate Base Definition Authorized Rate Base $4.92 billion (as of March 1, 2024) • Includes capital investments authorized in most recent rate cases and interim filings • Excludes any capital investments since last approved rate cases or filings 2024 Estimated Average Rate Base $5.55 billion • Average
Slide 46: Approved Regulatory Filings
Approved Regulatory Filings Annual Filings Approximately 90% of capital expenditures are subject to annual rate filings EFFECTIVE DATE PRE-TAX RATE BASE EQUITY RETURN ON DIVISION JURISDICTION OF LAST RATE OF (MILLIONS) RATIO EQUITY ACTION1 RETURN Oklahoma Natural Gas2 Oklahoma July 2023 $2,067 8.94%
Slide 47: Regulatory Construct
Regulatory Construct Governance KANSAS OKLAHOMA TEXAS “Home Rule” with three 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: ESG Highlights: Environmental
ESG Highlights Environmental Vintage Pipe Renewable Natural Innovation & End-Use Conservation Replacement Gas Technology • Reduce emissions through • Provide CNG fueling • Expand energy • Facilitate customer access to • Engage and evaluate new Strategy vintage pipeline replacement for fleet and tran
Slide 49: ESG Highlights: Social & Governance
ESG Highlights Social & Governance Community Governance Employee Engagement Customer Care Investment Practices • Support employees through physical, • Improve customer experience through • ONE Gas Foundation and • Maintain best practices in social emotional and financial programs innovation and tech
Slide 50: Compressed Natural Gas (CNG)
Compressed Natural Gas (CNG) Key Statistics • ~40% of OGS’ light-duty fleet consists of CNG-capable CNG VOLUME vehicles (DTH – MILLIONS) • Operating 27 fueling stations accessible to the public,10 150 stations 145 stations 147 stations 152 stations private stations supplied 151 stations supplied sup
Slide 51: Renewable Natural Gas (RNG)
Renewable Natural Gas (RNG) Strong market potential • Access to ~175 Bcf of annual production feedstock within service territory and increasing developer engagement Competitive interconnection operating costs • Interconnects to OGS allow for lower development costs compared with connections to high-
Slide 52: Hydrogen Technology and Innovation
Hydrogen Technology and Innovation Collaborating on research and strategic projects Alliance with GTI on the viability for increased hydrogen integration – The project will identify hydrogen transportation fueling opportunities with potential for use in fleet operations, particularly for heavy-duty
Slide 53: Non-GAAP Reconciliation
Non-GAAP Reconciliation Cash Flow From Operations Before Changes in Working Capital 2024 (MILLIONS) GUIDANCE* Net income $ 223 Depreciation and amortization 267 Deferred taxes 32 Other 23 Cash flow from operations before changes in working capital $ 545 * Amounts shown are estimated midpoints as con
Slide 54: 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
ONE Gas — Morgan Stanley and BofA Energy and Power Conference 2024 on 6ix