OGE - Earnings call transcript Q1 2018

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Operator

Good day, ladies and gentlemen, and welcome to the OGE Energy's First Quarter 2018 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Todd Tidwell, please go ahead.

Todd Tidwell

Thank you, Abigail. welcome Energy and XXXX First everyone, Call. Earnings morning, to Corp's OGE Quarter Good Director Relations. of Tidwell, Todd I'm Investor And with Steve me President OGE and today Corp. I have of Energy Energy Sean OGE Corp.; and Merrill, of CEO CFO Trauschke, Chairman,

webcast to will conference will In Sean, you hear website I answer and Steve first your followed today, finally, is and like from from quarter explanation questions. first results along terms remind an as follow call this on of oge.com. of at the being you we that by always, may would we our

slides In that be addition, the conference call website. following and on accompanying call will the archived same

best is requirement will to you a would the states his simply financial Sean? we we the regarding there is statements estimate cannot I This statement that to in Before results, opening financial Sean guarantee direct like SEC your statements. like Appendix. safe date. reconciliation margin presentation, remind but for our call would harbor comments. over attention this to that turn I gross the and forward-looking the G begin to Regulation forward-looking an for also for now I to is

Robert Trauschke

for Thank and night is our complement. through morning. did morning, and be But will to expands tornadoes the you, service yesterday joining all the through storms happy territory And Well, crews and and I'm usual, high in this usually everyone, rain, Todd, and and call. service us report our hail, back full great means May the thank night job, just a and winds today's as working that you on Oklahoma good it in extreme weather. customers

great quarter of Earlier to a reported we per And consolidated accomplished well the share. turning morning, this businesses performed both So deal. earnings and $X.XX quarter. first

rate year's the rate revenues want quarter to and from to a highlight off But in I last impact first start the the discuss from of the great Steve for design utility, will our positive award. benefited we're details year. plan Oklahoma certainly moment. a and now, on At whether achievements. right So

growth state-of-the-art location units development. its serving dates proud close seen of have units more in produced we experiencing rates. NOx and maintains already Energy emission hours. and a legacy Mustang SPP this new required standpoint is powering The sustainable region's to contractors, a more was a This our decrease to workers year. than legacy generation at that's emission Mustang footprint. year From all first Center in the and Our to with critical XXX work is a validates efficient, responsive, customers. million role in starts affordable market communities hundreds new new their been our era scale our usher staggered that months technology reliable economic of megawatts project facilitating a last are providing This an XX% our more their and the availability numerous the and with in importance the than further it the X.X The Energy through new more of power of We're Center units, four did of of communities. and substantial and in operation more

better injury commitment, the executed the under free. than testament and and hard budget time, As incident doesn't and this. It to work project was any on get

at Oklahoma's economic X% experienced is year. X,XXX with sales statistics The industrial average. growing the X.X%, national note, X%. service of rate unemployment customers we new sales. which and grow a increase average the increase last our on we And near a over I quarter-over-quarter, with X% oilfield in to Our in continues territory par should are latest put historical

average, center, all is economic City, Oklahoma load national the below an largest Our outlook. signifying improving

success. our continued has XXXX of start the front, operations the On

been utilized it have saw Our SPP to flexible, improvement This quarter market we've integrated important and their to in commodity the market this entered because reliable and we for combined that adaptable XXXX. availability the are in is our call both had first quarter quarter cycle XX% units demonstrates since the the Safety over market. the how market of changes, and and XXXX. units best

it's getting positive number had to begun small, solar it service. without X we've first benefit performance farm quarter and control. only we good Our of in we're time point, behind from Covington focus that XXX better. that to to in say years weather. feels days results, have is you I and on and positive it have The something What that with weather I is does from make weather. years budget. the Sooner setting an favorable on it changes that weather. project since Albeit with execution a Further excellent Scrubbers been performance. the our complete, record benefit safety And change on going first time is be in the point year is have honest, XX% to us not a the had incident, currently not

response to infrastructure, more to the We'll that improve allow distribution resiliency future. be well able everyone more existing grid is the smart Another restart grid plan grid with of will focus technologies in respond to We upgrading energy on This in seamlessly as in in at quarter following with us modernization. Oklahoma significant this Arkansas reliability begin and by for company. XXXX. operation. customers Grid replacing as deployment, well the focus improving, cost execution here systems the to our quickly our initiative of solid as next in deployment connect reduce modernization on as will our and year, new efficient outages step and our we

applications our and position will most As demands we will customers. forward, us to territory reliability that system and optimize to and customer our This ideas the improve enable across move our benefit we service and the for meet to our provide infrastructure future. to

regulatory. to Turning

is rate Mustang the And general Rate Formula Energy October. the Arkansas filed of primary with Oklahoma review recovery Commission that of The we Center. her January. know, first we'll a you in in As filing filing make purpose

of the for to currently that of anticipate the in in case end scrubber first and then fact, in Sooner Oklahoma is work will be scrubber recovery in June, We XXXX We first tie to service Scrubbers. the underway. in file at the another the

last work the the this scrubbers of a not the used. ruling resolve intent commission filing the does Finally, the year. they to commission did statue not week was Sooner issued this preapproval to approval to authority later against our the the under the with of and we'll our our This OCC, change or unanimous in plan, have of reasonableness finding grant at

to on Moving Enable.

reported the quarter. first gathered all-time strong reported they quarterly and yesterday, basins. call results volumes, strong activity in high volumes their processed the for rig Anadarko Ark-La-Tex by On and supported They gas natural

or you Year-to-date, increased to key contracted know, reflect they their are XXXX. capacity. have agreements Quarter-over-quarter, nearly XXX,XXX also volumes stronger an multiple XX% this of with natural business. processed even They've volumes As volumes to day dekatherms over outlook XX%. gas transportation the gathered and re-contracted updated increased a

be OGE. the their So -- to a quarterly CapEx distributions million. Enable I of as the of $XXX pleased building. kept this dividend our has is since a This sponsor us to will equity and unencumbered of performance totaling OGE and out not businesses. cash growth. with formation reiterate both I to received than by supported In the markets how am want Enable and more with of closing, continue make $XX but we Last, the team be This distribution week $XX will Board distributed least, approved Enable performance of of which million the what Enable, pleased

our dividend We have a of to utility long-term continue XX% an to at industry-leading rate rate a through of year X% growth X% XXXX. grow and

our As business, value our Steve? and you, a for Thank strategy I'll all long-term of call shareholder over our on creating team, to shareholders. the to turn continue executing growing Steve management financial results and now to we're our the for communities committed our quarter. growing review to

Stephen Merrill

Sean, and you, good Thank morning.

For quarter, of per slide. the for or $XX unit share per million by net net share $X.XX reported At in $XX first quarter income was OG&E, per income million XXXX. comparative compared income on as million to $X.XX listed XXXX. The share income a as basis net $X.XX or $XX the is in $X.XX to the compared on business million or net share of or per of $XX we contribution

First approximately which gross increased million, I margin slide. next at $XX the utility the will quarter discuss on

the quarter drivers, $X for the expense O&M for rate due million, variance timing timing of The March's plan. driver Oklahoma to is decreased at million. related $XX first the key O&M maintenance. other primarily Depreciation on increased to year Looking order. primary expense last plant is

we to income. due additional million $X decreased due partially increased will of recall, tax X increase tax corporate $XX quarter long-term credits approximately of booked approximately expense tax in first Income reduction million As XXXX. adjustment, million, state XXXX's the depreciation of and to months issued August XXXX. rate debt the Interest in expense and by the $X an offset March of higher pretax in the generated, federal you

increase. Utility There XXXX. main approximately first are first for to X gross the Turning to increased $XX of million compared in quarter margins XXXX quarter the drivers margin. the

impact Oklahoma First the is of the order. rate

rates. XXXX new margins under we old therefore, that Under rates was recall the rate You'll shifted first more the revenue in quarter the into the new quarter. methodology, implemented were design in of first XXXX, May of

per $XX small curve. to annual of for way accounted the is or margin say our share. $X.XX revenue smoothing change Another this This of million

XX% were million last impacts the main we're we as The and There above order $XX.X anticipated for been margin have this was the year. the but degree is periods, well. year $X.XX days the XXXX rate of for XX plan this that driver comparative and accounted line bottom or on per share for other weather. from

in our to investment Turning Enable.

the XXXX, share by strong. earnings effectively. DCF million, volumes. distribution remains the distributions or execution also Enable ratio of quarterly the and in on with $XX the million Enable a controlling amount $X.XX points and Adjusted XXXX. the million Enable to For their year, had to per $XX commodities. They are increased quarter to coverage their $XX focused and the $XX quarter set business solid million the first $XX first of and or a same guidance recovery increased Enable approximately capital compared which cash million gathering increased financial quarter of records per first for X.Xx. XXXX. of and made of $X.XX continued contributed received of Enable for ended quarter deploying quarter of Enable all-time costs processing EBITDA metrics share, in first compared in XXXX.

outlook. to XXXX Turning

These This answer ranges. concludes our guidance recognition reclassifications our and do questions. pension the remarks, initial your this are we'll affect third know, income utility assumptions statement weather, the updated we we're and normal have the current our for you the guidance occur and assuming in with In the earnings guidance. Appendix, As of second changes. majority quarters year prepared following now comfortable revenue accounting and and not

Operator

[Operator Instructions].

line Merrill Our first the Lynch. Bank with question from of comes America Josephine of Moore

Josephine Moore

mentioned on that You sales we side. curious, industrial is continue? Or strong growth the see was that temporary? could just I

Robert Trauschke

a about here a I have service the oilfield in at good of for both is we inflection the territory. have our sales, service a lot think some point assets in territory. in quarters -- an count economic They improving new increase to outlook number our We businesses an for Steve and saw of Todd have rig Enable. of pipeline service this territory. mentioned the our And relocating been mentioned

Friday, in part company that who last manufacturing a the steel had groundbreaking territory. we Just rebar of service our is new commissioned for and southern the relocated

improving good be that inflection very But there'll hopeful more come. economy. I to we're an a this think point for So is

Josephine Moore

I guidance towards with for the comfortable Enable's the guidance? mean the you in the Great. weather and feel high-end quarter, that, strong coming maybe do last the of then quarter first in strong

Robert Trauschke

at the second the as weather the be will the extent really small. the And utility, Steve the And the occur in come quarter. and benefit first mentioned, where earnings, quarter, was while to and in the still majority is favorable -- in weather second that it it specifically of Yes, third will was third favorable pretty benefit our quarter.

through any very we're about confident plan. But we So pronouncements we'll feel guidance. that those on quarters make we before get

Josephine Moore

And then question. just X last

can you give case the there? Oklahoma, underway rate us in updates On any

Robert Trauschke

this will go that certainly The accordingly. night, was no evaluate we and point. last proceed so Really intervenor at updates due testimony that through and

Operator

question next comes from line Our of Ridzon the Paul with KeyBanc.

Paul Ridzon

I off? that think were -- the rates interim was of 'XX, of impact what was impact you booking for year rolling the last What

Stephen Merrill

we quarter, related $X.XX to and booked the In XXXX. XXXX first about

flushed pretty quarter. that of the kind much So first all through

Paul Ridzon

-- taxes looks reserved though things as it one but lower if called that the Is of I the you And read -- was queue against you are properly? out that?

Stephen Merrill

where rate certainly over-collecting from rates tax middle we in have Well, currently because are now. to refund we're of the case, we're a

to begin do commission. mechanism the give an to have that to so. that reserving once don't they to until we're from So do over-collection give order that back an order we a get We

Paul Ridzon

benefit you against it? the in from did reserved you not But quarter taxes lower because

Stephen Merrill

That's correct. correct. That's

Robert Trauschke

There's no us. P&L impact for

Operator

the of from comes question Pourreza Shar next line Our Partners. with Guggenheim

Shahriar Pourreza

hear me? you Can

Stephen Merrill

Yes.

Shahriar Pourreza

Sorry this about that, a there're morning. couple of this calls -- going addressed, it's was on

Just filing of sort Is -- sort CapEx of, in as you're us thinking and Arkansas? grid remind think it you far just of, big What sort that's, beyond. of about sort how Can about the when in on piece the your Oklahoma. mod it's filings. 'XX as recovery? you Would of, necessitate another podium a FRP happening it within your

I of, process educational importantly, in more sort guess, on mod going the And grid especially Oklahoma? how's on,

Robert Trauschke

But so program. those making we game and on of and And -- In were And as question. we sure process, Oklahoma. dialogue the make to through commissioners benefits environmental I includes it And Arkansas, have that bridge we you because restart projects point Oklahoma right, exactly how the staff delayed that are beforehand. Arkansas, But good in to we'll after Sooner of, plan. this use recognize that. recover probably educate rider, our full you're we discussion this that. annual this really as can't if begin a up is they kind the So of an in with make lot we'll plan we'll federal and think pathway requirement. begin to FRP. constructive out we'll Remember, there. we It's we laid whether the basis that's job we pick a of them Mustang going this formal a compliance be we, our your will And will the complete we'll I when a that get that recovery, filings of right. whether We'll kind see see develop then think that and cross includes sure rate-making exactly that and

Shahriar Pourreza

this just right. as any the looking far And it, sort OCC how then have looking And just at any how on and there implemented Oklahoma's, regulatory updates construct, of case interim with viewpoint What year. their that accounts be, there? sort in Is Got sort sort as is of a your everything are of, proceedings? rates Oklahoma rate the on middle and as groups helpful. that's status of then is of as should I we Is guess, in the the -- there focus for sometime settlement? revisiting potentially that the far potential or going

Robert Trauschke

Sure.

So good question.

year, task So the the final elections. as Governor and that and think, due force this November release then, I to know their initiated Xth-or-so of I think report it was last the is the relates going the summer conducting I to interim is they're after the they're interviews report by plan

comes out And where that so we'll at. see

So I proceeding. think that process is

right. referring point. us that's that that far we exactly get would I As to case would guess summer, could you're on implement I as hopeful rates not we the before to this you're have timeframe Mustang, that we XXX-day this right, be

case this we recall, Mustang of be customers. you is tax benefits the of filing to our industrial incorporate no to to investment delayed residential impact going As There the reform. or for this

think And nicely before teed to it to resolved. And is done so we very this rates. I'm can get implement get hopeful we up have that

Shahriar Pourreza

leads just to And that question. last just X me

have from -- the Scrubbers could far what conversion, the retail do there? the upcoming indication is a impact as of filing be rate the perspective any as from rate the there -- On you preliminary and

Robert Trauschke

You're on the talking about Scrubbers?

Shahriar Pourreza

Correct.

Robert Trauschke

do that kind probably large right a now. working And not premature that there as So out But to, a of, view too impact. put through I bit number that it's soon. we're

Operator

of from Evercore comes line the with And your next Greg ISI. Gordon question

Unidentified Analyst

Greg. on is [indiscernible] actually This for

the So answered. guys my questions already you on case have rate

target Just on the does so through dividend, -- that that is when get XX% 'XX. Is reviewed?

Stephen Merrill

we would look next I mean, be indications sometime want would it at we're through to then a something taking the filing, certainly some Mustang but on address that, and we get Sooner have already year. early

Unidentified Analyst

-- last in call. increased then And you the so your on CapEx guys Perfect. the just

metric? a Just get either sheet wanted what have that excess balance targeting? does high put trying CapEx? much understanding to you've increased your So I'm in may are now to of CFO-to-debt get an you capacity at how that And terms to where you level, you

Stephen Merrill

Sure.

FFO keep you'd we investment company with -- FFO-to-debt strong manage with with to our we'll that to XX%. impact what not our we've think we've get little be of on we strong and is put in for credit start a through been FFO-to-debt, of debt a rate. where We to kind service. was CapEx recovery in that see assets of our look line any I consistent historically, to as how kind that so staying year been. have Last working we've stress on our would put CapEx, that's Yes, where the highest that to north and obviously, these metrics

Unidentified Analyst

It goes XX%? north of

Stephen Merrill

Yes.

Unidentified Analyst

forecast your through XXXX? CapEx that's Or And period? through

Stephen Merrill

forecast through period. No, the CapEx

Operator

Our of question comes the Avon Advisers. next Joe Capital Zhou with from line

Andrew Levi

Levi. Andy It's

Just two questions.

acquisition not and but Enable of Vectren. CenterPoint's on bid -- the Just bid,

any or not affect thinking how Enable? also your on on Just thoughts Enable? that may may And

Robert Trauschke

Well, on thinking Enable. our change it doesn't

comfortable We we that Enable, it we with are like doesn't thinking on understand very our business, change business, that Enable. so

what does to But with agree in CenterPoint's I the that. fairness, regard the Enable you to It That's to with need their responsibility to the decision, exposure to their it's CenterPoint. process think I you. actually probably bring do ask forefront happens as back far Andy, and there, as units. communicate

Andrew Levi

last staff filed, rate or intervenor on the you intervenor? just well include was does current just then case, night And said as testimony Okay. so that

Robert Trauschke

what happens, right it and so now. yes, late was it's we'll putting was it said. I everyone -- it they're think was it deadline loading and the system through yesterday go on made what public, out soon and the as so yes, that figure afternoon as Yes, all all But

Andrew Levi

that and -- the Okay, staff? includes again that

Robert Trauschke

Yes, yes, it does.

Andrew Levi

just like June so understand takes something from the in conference of to place I that? the here, settlement week And process guess or first

Robert Trauschke

X. set at to that's It's June Andy doesn't have that to productive schedule, -- for But an we'll there the extent that comes correct. we opportunity That's and in the evaluate where procedural everything will. is discussions,

Andrew Levi

X, June Before you're talking?

Robert Trauschke

Yes.

Andrew Levi

I sense. understand, makes that

the the now way to, put each so down filed and Okay, it's talk, everyone time other's for has good basically it, no to sit that if since and fair? positions want better been testimony parties knows a is to

Robert Trauschke

Yes.

Andrew Levi

hopefully something. optimistic that guess settle Okay. we're And fairly you will guys I

Robert Trauschke

No, no, I agree, keep going.

Operator

And the KeyBanc. Paul of we line a have Ridzon with from follow-up

Paul Ridzon

interim to go Just wanted to rates. back the

imply we $X.XX shifting throughout of saw that $X.XX that year? plus does the So mentioned rate really design you the the

Stephen Merrill

Well, the the in of first quarter $X.XX XXXX. was

You the of impact in quarter. did see rate this design current

Paul Ridzon

I a normal was [indiscernible]. got is year it. and quarter This last

Stephen Merrill

right, that's exactly that's Yes, right.

Paul Ridzon

got of over you the kind course out And okay, how Okay, that do $X.XX the it. see reversing of year?

Stephen Merrill

second, it the third out and year. really into shifting quarter. the slight kind -- AFUDC first need play really will But a quarters, just is will mean this what probably you be fourth adjust of through have wouldn't for you to I

Paul Ridzon

pennies Okay, quarter? so a couple of each

Stephen Merrill

That's probably far not off, too yes.

Operator

[Operator Instructions].

the have Lynch. of Bank with America Josephine of a follow-up from Moore line We Merrill

Josephine Moore

follow-up very one come we basis, your the a or...? to rate O&M your there comes guidance. OpEx Are in run expecting uptick a On quarters in Just pretty on below meaningful later seems quick here. in total -- or

Stephen Merrill

out guidance, plan timing it's with actually a really just issue. really particularly it's on maintenance. of plant Yes, expenditures, for we just timing what We're put

months in in and summer tend outages to Your fall. the occur the

Josephine Moore

online too, is driver a then there? And coming also Sooner it. that Got

Stephen Merrill

absolutely. Yes, Sure.

Robert Trauschke

There associated with will be that. some OpEx

Operator

would questions. the no showing further this turn remarks. like for At call closing to Trauschke to I'm Sean back I time,

Robert Trauschke

call Corp. thank OGE great for Have on for being Energy today. a the day. And interest and Abigail. all you, your in Thank you

Operator

your program today's thank a you the now concludes may participation This Have and and you great day. gentlemen, in Ladies for disconnect. conference.

OGE Energy (OGE) 6 May 182018 Q1 Earnings call transcript