ONE Gas (OGS) 5 Nov 24 2024 Q3 Earnings call transcript
AInvestWednesday, Nov 6, 2024 12:43 pm ET
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ONE Gas reported a strong third quarter performance, with earnings in line with expectations and a raise in earnings per share guidance. The company attributed this success to operational execution, regulatory outcomes, and a favorable interest rate environment. ONE Gas now expects EPS to be in the range of $3.85 to $3.95, a $0.05 increase at the midpoint from their original guidance. The company's financial health is robust, with a balance sheet that remains strong and a projected adjusted CFO to debt ratio projected to end the year above 19%.

Regulatory Successes and Operational Efficiency

The quarter saw significant regulatory achievements, with the conclusion of the Kansas rate case and the settlement of the Central Gulf rate case in Texas. These outcomes allowed ONE Gas to recoup investments in its system and earn a fair rate of return on equity embedded in its capital structure. The company's operational focus on cost management, particularly in O&M expenses, has been instrumental in achieving these results. Initiatives like the in-sourcing of line locating across much of the service territory have saved dollars, improved efficiency, and enhanced productivity.

Looking Ahead: 2025 Guidance and Capital Deployment

ONE Gas is planning to maintain its financial plan for the remainder of the year, with a focus on capital deployment and operational capabilities to meet the needs of its growing service territory. The company expects to finish 2024 within its planned capital budget of $750 million. Looking ahead, the focus is on preparing for the opportunities that await in 2025.

Managing Interest Rates and Customer Growth

The company is closely monitoring interest rate dynamics, with the potential for further rate cuts. While ONE Gas had not anticipated rate cuts in 2024, the recent reduction has provided some benefits. Customer growth, particularly in the housing market, has shown signs of recovery, with a pickup in housing permits. However, higher mortgage rates and the impact on home buyers and builders remain challenges.

Strategic Financing and Dividend

ONE Gas has maintained a strong balance sheet, with a focus on strategic financing. The company has satisfied its 2024 equity needs through forward settlement agreements and a reopening of its 5.1% senior notes. The dividend for the quarter remained unchanged at $0.66 per share.

Conclusion

ONE Gas's strong third quarter performance and raised earnings guidance reflect the company's operational efficiency, regulatory achievements, and strategic financial management. With a focus on capital deployment and customer growth, ONE Gas is well-positioned to navigate the challenges and opportunities ahead. As the company prepares for 2025, investors and analysts will be closely watching the trends and developments in the natural gas sector.

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