One Gas, Inc. · NYSE:OGS
One Gas — Investor Presentation (September 2024)
44 slides from One Gas's investor presentation, Sep 6, 2024
Slide 1: Investor Update
Investor Update September 2024
Slide 2: 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 3: Recent Highlights
Recent Highlights Creating Value for a Better Tomorrow 2024 EPS guidance We estimate Replaced >500 miles ~23,000 new meter of $3.70-$4.00 $750 million in of transmission, main sets on a TTM basis & 2024-28 EPS 2024 capital and service lines in as of August 31, growth of 4-6%* investments 2023 2024 ~
Slide 4: Our Strategy
Our Strategy G ONE Gas
Slide 5: Active Regulatory Calendar
Active Regulatory Calendar PROGRESS RATES REQUESTED EQUITY RETURN JURISDICTION FILING DATE (MILLIONS) RATIO ON EQUITY IN Central-Gulf - Rate Case $25.8 M Jun-2024 59.58%1 10.25%1 Kansas - Rate Case $35.0 M (net)2 Mar-2024 N/A2 N/A2 APPROVED RATES EFFECTIVE EQUITY RETURN ON JURISDICTION (MILLIONS) DA
Slide 6: Favorable Regional Growth Dynamics
Favorable Regional Growth Dynamics Growing Demand for Natural Gas Provides Long-Term Growth Opportunity WSJ Top 25 “Hottest Job Economic growth creates durable residential and Markets” lists 4 cities in ONE commercial development and drives system Gas service territory1 expansion #5 Oklahoma City #7
Slide 7: Enhancing Capacity & Improving Operational Efficiency
Enhancing Capacity & Improving Operational Efficiency Constructing a Foundation for Growth Improved processes and workforce investments increase operating capacity and capabilities In-sourcing of work enhances efficiency and helps manage O&M expense Investment in workforce development supports perfo
Slide 8: Financial Outlook
Financial Outlook
Slide 9: Guidance Modeling Assumptions
Guidance 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
Slide 10: 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 11: 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 12: 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 • Dividend raised 1.5% to $2.64 annualized rate with 1Q24 declaration • Ass
Slide 13: Balance Sheet Strength
Balance Sheet Strength Strong credit rating and flexibility Revolving Credit Facility SENIOR DEBT MATURITIES* • $1.275 billion limit, increased in June 2024 (Millions) • Expires March 2028 Commercial Paper Program • $1.275 billion limit, increased in July 2024 RATING AGENCY RATING OUTLOOK * Excludin
Slide 14: Capital Investments
Capital Investments G ONE Gas
Slide 15: 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 16: 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 $1.41 billion $1.79 billion $2.35 billion 2020 2021 2022 2023 2024 Kansas Oklahoma Texas * See Appendix for definition ~8% growth expected in 2024 CAPITAL INVESTMENTS | 16
Slide 17: 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 18: Regulatory Update
Regulatory Update G ONE Gas
Slide 19: Oklahoma Natural Gas
Oklahoma Natural Gas PBRC approved August 2024 Performance-based rate change (PBRC) interim filing for annual rate reviews between full rate cases allows recovery of capital investments and operating expenses 2024 PBRC FILING File PBRC annually in Incremental Revenue $31.4 million annual revenue inc
Slide 20: Kansas Gas Service
Kansas Gas Service Settlement Agreement Filed August 2024; Pending Approval 2024 RATE CASE FILING $35 million1 net increase; $70 million total increase ($35 File GSRS Annually in Incremental Revenue million already recovered through GSRS) August, rate case filing as needed. Next rate Return on Equit
Slide 21: Texas Gas Service
Texas Gas Service Central-Gulf rate case filed in June 2024 CENTRAL-GULF 2024 RATE CASE FILING Incremental Surcharge Revenue $25.8 million annual revenue requested Capital Expenditures $0 million1 Requested Pre-Tax Rate of Return 9.50% File GRIP Annually in Requested ROE 10.25% February, rate case f
Slide 22: Texas Gas Service
Texas Gas Service Rio Grande Valley GRIP approved August; rates effective September Gas Reliability Infrastructure Program (GRIP) allows for recovery of capital investments made between rate cases RIO GRANDE VALLEY 2024 GRIP FILING File GRIP Annually in Incremental Surcharge Revenue $3.6 million ann
Slide 23: Texas Gas Service
Texas Gas Service West-North GRIP approved June; rates effective July Gas Reliability Infrastructure Program (GRIP) allows for recovery of capital investments made between rate cases WEST-NORTH GRIP FILING File GRIP Annually in Incremental Surcharge Revenue $8.5 million annual revenue increase appro
Slide 24: Texas Gas Service
Texas Gas Service Central-Gulf GRIP approved May; rates effective June 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 $12.2 million annual revenue appro
Slide 25: Customer Affordability
Customer Affordability G ONE Gas
Slide 26: 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 27: 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 is fixed $73* charges $67* $60 $58 $55 $54 $43 $50 $51 $50 $33 $25 $46 Gas Prices Trending Lower in 2024 $32 $22 $23 $
Slide 28: Clean Energy Solutions
— 4 —_, Solutions/ G ONE Gas | a | |
Slide 29: Reducing Emissions
Reducing Emissions Operating in an environmentally responsible manner Emissions Reduction Goal By 2035, we expect to achieve a 55% reduction in Scope 1 emissions due to leaks from mains and services, measured from a 2005 baseline and accounting for projected system growth. As of December 31, 2023, w
Slide 30: 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 programs
Slide 31: ESG Ratings & Company Recognition
ESG Ratings & Company Recognition Robust Disclosures RATING ORGANIZATION 2024 2023 2022 • Full alignment with SASB • Following TCFD recommendations MSCI AAA AA AA • Disclosure of Scope 1 and 2 emissions Sustainalytics 25.8 28.6 30.9 Additional governance documents and reports ISS Corporate Rating C+
Slide 32: Appendix
Appendix G ONE Gas
Slide 33: Sustainable Business Model
Sustainable Business Model Focused Business Capital Regulatory Cash Flow Strategy Investments Construct Stability ▪ 100% regulated natural ▪ 20+ year vintage ▪ 3 states, multiple ▪ ~ 70% of fixed charges gas distribution utility pipeline replacement jurisdictions for recovery of revenue ▪ Conservati
Slide 34: Sustainable Business Model
Sustainable Business Model Customer Safe & Reliable Clean Energy Affordability Energy Solutions ▪ Customer growth helps ▪ Industry-leading ▪ Committed moderate per-customer performance in to sustainability costs employee safety ▪ Energy efficiency and ▪ Leveraging technology ▪ Demonstrated system ed
Slide 35: 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 36: Authorized Rate Base
Authorized Rate Base As of August 31, 2024 KANSAS1,2 OKLAHOMA2 TEXAS2 $2,273 $2,067 $1,854 (MILLIONS) $1,616 $1,726 $1,528 $1,710 $1,330 $1,330 $1,133 $1,197 $1,261 $1,239 $1,336 $1,047 2020 2021 2022 2023 2024 2020 2021 2022 2023 2024 2020 2021 2022 2023 2024 1 Kansas Gas Service’s most recent comp
Slide 37: Rate Base Definition
Rate Base Definition Authorized Rate Base $5.31 billion (as of Aug. 31, 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 38: Comprehensive Regulatory Mechanisms
Comprehensive Regulatory Mechanisms KEY MECHANISMS: KANSAS OKLAHOMA TEXAS Central-Gulf as needed West-North Dec. 2028 General Rate Case Filing Deadline 2030 June 2027 Rio Grande Feb. 2030 Valley Interim capital recovery GSRS PBRC GRIP Weather normalization ✓ ✓ ✓ Purchased gas riders (including gas c
Slide 39: 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 40: ESG Highlights
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 41: ESG Highlights
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 42: 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 43: 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 44: 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