Earnings call transcript Q4 2022

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Operator

Good day, and welcome to the ONE Gas 2022 Fourth Quarter and Year End Earnings Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Brandon Lohse. Please go ahead, sir.

Brandon Lohse

Good morning, and thank you for joining us on our fourth quarter and year end 2022 earnings conference call. webcast today. a being made will is later available call live replay and be This prepared we'll our After remarks, questions. take your be happy to each ONE Act Private and Act a are amended. made that by the the is should Reminder Securities this provisions covered of Reform considered Gas of Securities Act Harbor include XXXX, the be statements statements and predictions Litigation expectations and of looking that forward XXXX XXXX Safe Exchange or Securities during might call of Actual projected statements. results from any in those could differ materially forward looking

to For please that discussion of could factors to cause filings. actual SEC results differ, our refer

Dinan, on the Chief Operating Vice us Senior McAnnally, Caron President are Sid Officer. Lawhorn, President Curtis and Vice President Joining Financial Senior this Executive Chief Officer; call and Chief and morning and Officer;

I'll over turn call the now to And Sid.

Sid McAnnally

good And Brandon. morning, everyone. Thanks,

monetary reflect Our performance of beginning last fourth team's year. consistent Despite at the delivered altered year, landscape against our during the and factors, year and range the full we communicated the macro of policy earnings quarter a economic which sharply results guidance geopolitical in of executions core with our a line initiatives. growth first just entity, million as our a To put original squarely in this in achievement year capital and standalone deployed to support we XXXX, $XXX plans. million in total context with $XX capital,

our and core of long our our in year growth spent remaining Last present approach quadrupling X.X investment $XXX growth prudent with total, commitment in first XXXX of term dedicated to to execution million and million and We year, managing expansion that our unchanged, began with $XXX a our we times initial the consistent compared businesses strategies. to initiatives, approximately the being year.

also networks distribution we system report all these winter reliably the of Consistent at business in winter behind storm and events on we enhancements we natural December look service Elliot weather to its underscores well such storm in the states learned gas the formidable lessons wake reliable month. above execution Morrow in performed as our It particularly during the as during Leveraging the storm the I'm serve. value underscores loads. pleased logic ours, we winter policies and Uri heating made from energy of winter last

approval On front. represents recognition economic North development our system West the regulatory the our The need a to recent respond rate to integrity for of investments regulators outcome case ongoing Texas of by and and constructive enhance opportunities. regional

surplus working As all it's our sizable a underway budget service legislative supporting continued territory. noting economic in development with in of three capable states, will each worth are of be sessions that our

the over year. With that to and financial Caron? introduction, I'll full turn details discuss for quarter Caron it to the

Caron Lawhorn

fourth in Thanks, with share or share morning, the million, Sid. XXXX per was everyone. period for XXXX. $XX.X Good quarter $X.XX compared or same the diluted Net million, diluted per $X.XX of $XX income

higher Our increase $XX.X the growth. net fourth which last rates period. the costs and to prior quarter million were Employee outside quarter and new million from in operating income million of Operating the reflects were residential $XX.X to results for compared include relatively from an period sales year. costs flat customer $X.X $X.X million compared in year, services same same

million debt lower but than was year million bad year. last expense quarter $X.X the For the higher $X.X for full

securitized the in the Interest same previous due million of $XX.X issued $XXX remeasurement period higher and which of the notes senior on August than utility pension non-service natural increase balances quarter, rates plans expense a costs to quarter last our CP which was calls. and November, to X.XX% of $XXX net of of increase of which April the commercial We XXXX. XXXX. the fourth with X.X% and XX discussed prices our increase reflects fourth both have higher contributed capital for as mentioned million in the working find paper. we Other in tariff quarter, and needs to I in quarter as contributed million our XXXX reduction quarter $X.X prior income $X.X year points storage which the an we in obligations, of gas with natural compared for the or million basis to bonds in in gas increased compared million

Turning to securitization.

amortization on the of of approximately to million related net revenues million completion the of included there quarter, $X.X This directly highlight and financing offset approximately million no securitization. wanted the income by November interest securitized of KGS to I $X.X the was that Service during Kansas expense although Gas $X.X With impact was expense.

earnings We provided financing. impacts balance pending, that Texas securitized we in now the from the expect The be transaction securitization the and released tables statement Kansas to issued still news bonds disclosed yesterday's sheet by is in income April. but

Operating or was from the per million share XXXX. includes million $XXX.X For net full year, which rates income residential $X or million $XX.X XX% approximately growth. versus $XX.X million diluted was customer $X.XX income or in and diluted $X.XX per million new share $XXX.X from

million primarily year and outside Operating as labor benefits. and employee costs result of XXXX costs for $XX.X higher service were than in a the increases

XXXX. primarily and Our in $XXX.X projects capital to to system new fourth for asset service attributable expenditures of areas. $XXX.X increase and extension million million, to bringing million integrity year total the to $XXX.X is our removal for The were quarter costs the compared

discuss rate Kansas with and billion base Curtis completed of base, rate Average North a year as Texas. approximately for base rate yearend. is proceedings, moment in in XX% was regulatory $X.XX Authorized of case and Oklahoma, West including XX% reflected that which in the will XX% was in billion the that rate $X.XX

was capital than equipment increase the Service plant an as higher associated million net mentioned. expense the result Kansas higher is level year, Gas I and in previously reflecting securitization the property, increase and a $XX.X investment. amortization to prior contributing Depreciation of Also a with transaction amortization of

our borrowings $X capacity commercial program billion Turning to of no and under facility. the our our year liquidity. million with credit We ended paper $XXX under

over issued our and sold under stock for we shares common million of the $XX year XXX,XXX at equity program. market the During

shares, executed X.X approximately million also shares. forward of for we of nearly XX, settled X.X $XX December these generating We about sales proceeds million. agreements million On

registration We replace our expect expiring equity statement and distribution to agreement.

In Directors of Gas approximately of $X.XX of from previous Board per increase declared the an or dividend quarter. a X% ONE the $X.XX share January,

Now, I'll commercial turn it over to operations and an front. Curtis for on regulatory the update

Curtis Dinan

month issued Gas you, next application its morning, will the $XX.X XXXX Commission effect went and new Oklahoma Thank in Natural an March, rate performance November, Last Natural tariff in using relief. filed Oklahoma as order for change into $XX.X gas Caron. file pilot rate July, natural program year. The Oklahoma and our application If performance based be And rates will Pursuant good change Oklahoma an for earlier next in in test In voluntarily Corporation tariff. rate allow of XXXX request through to million approving industrial third everyone. its residential small a approved, all million. based period to voluntary is December, the the proposed RNG. Gas purchase for order a filed tariff the no expected sales effect tariff commercial Natural will pilot Gas customers XXXX than renewable and the quarter

X. of a January, received $X.X with $X.X Gas August order million service for in equity million system the December authorizing and an railroad In an and Texas filed service the proposed on area ratio of increase Kansas effective last commission equity a return Service a approved reliability increase was surcharge Texas the consolidation million West $X.X rate gas XX.XX%. X.X% of authorized area of and North common November a

an infrastructure finally reliability Gas program filings June New month. customers rates Service million made $XX.X all be this took XXXX. guess area, central to And effect requesting on effective Texas the in increase the first service of for in Gulf

to ice operations, to extreme Mara and Elliot our storm snow and on recently as winter winter service both territories. Moving storm cold, Sid mentioned, brought more

XXXX, storm supply and As processes well with in co-workers adding with disruptions. to learned no and our Uri portfolio to since we've from investments made and reliability lessons and our have service our contributed diversifying winter enhanced the performed storm system winter least storage resiliency. system Uri including The we capacity, further significant system,

we to with these opportunities we were further during winter our evaluate to reinforce events, continue performance pleased operations. While extreme our

teams customer for over finish broad quick on a compared compelling a growth The up is XX% meter nearly marking our of as commercial I'll Gas. to sets at we the with new XXXX based and annual commercial continues of record territories. the new in work fruit XXXX added XX,XXX Equally connections to update nature activity. our bear ONE across

Texas XXXX meter year in connections New up new marking Kansas X% in the a and grew new record nearly with compared new sets customer jumped connections and meters from set increase. annual almost XXXX. the Oklahoma XX% prior in XX,XXX customer XX% roughly year, from

record a and meter We backlog. also future ended continued our with secure the to sets business new of in number year

in year, the two last approach to call opportunities. new addressing measured I market are quarter we our On scale projects first taking large illustrate highlighted

of of in phased position would and to to the immediate of more meet this developers identified the over the million area. at accommodate serve incremental months the more later, time, of seven project project the One building than I next the was lots planned these support $XX the multi City to a five Oklahoma to years. the Metro, said needs XX,XXX residential development in by this now have to future customers to opportunity we that of size growth population us commercial and increase the have XX% Nine planned waves area. project growth an

manage growth our our it allows opportunity approach set, positioning phased longer while to is disciplined strategy, for present expansion. This term us prudently of also as system emblematic

demonstration. kitchen ONE food and Finally, area. equipment and training Gas commercial filming, this for offers opened month This we service education commercial cooking residential the space

latest teams just commercial on to to testing. of cooking business. innovation It our our technology Our and already example the are the of another space the showcase and efficiency the through are is and bringing energy creativity demonstrations support natural teams hands leveraging growth and continued gas

I'll remarks. Sid now over for turn to closing And it

Sid McAnnally

pace three and face us, the Thank costs and and the securitization flexible to generations storm spiking inflation the seen From impacts you years of tested be of not gas resilient tightening in labor have extraordinary Uri pandemic our evolving requiring COVID-XX the challenges. in supply force chain and of both. to monetary last company several and its winter the to

meet challenges, our to in capacity culture, organic service maintaining committed capture targets; our a growth We've territory. three service, safety strong while on these to customer building and focus the excellent

plan shifted efforts on Our despite financial XXXX resilience team showcase we success throughout as an our landscape, our delivered our year. economic significantly the the results which of and of the

detailed conditions. XXXX altered we discussing business actions our our November, would outlooks in open to and condition response the and conditions the macro those impact and take our economic financial five handedly how would year In company

reliability volatility business That mind. in with work economic conditions we remain the and of the direction co-workers. is managing uncertain and to magnitude on value I'm XXXX sustainable of and for focused commitment day. changes dedication I'm possible safety, privileged our growth, creation always term every one them made are While by of future to alongside grateful our their in work long each

Director earnings in ONE Finally, Gas speaking of his we'll On our He's marks Financial thank the Chief co-workers, the wish behalf the electric him next last I new to appointed call today and for cooperatives relations. his position been Arkansas, of company, and Brandon of investor Officer want service of all that Brandon's best family, month. of role. assume is to the

all Thank Operator, us now available morning. for for you joining we're questions. this

Operator

go Instructions] you. Paul to Paul, Bank please today [Operator Our goes ahead. of Zimbardo first Thank question America. of

line Your is open.

Paul Zimbardo

luck best morning. And and Thank you. of good congratulations. Hi,

Sid McAnnally

Thanks, Paul. appreciated. Much

Paul Zimbardo

few growth time strategy of ago, a significant long gas that prices. in that comprehensive update, it within case and And luck. ago, but around term natural know I you you had the regulatory contemplate a long like of feels course guidance previously just just Does or just for the given rate anything change pretty decrease range? best outlook a months Thanks

Caron Lawhorn

is really and Good certainly us Caron. No that morning our for this customers. Paul, is for great pullback news it doesn't. And

talk that When back current really which guidance November. to we That's our we in customer that translates reduction is a our had estimate customers, on the the into impact Just relative which released anticipated. is good. about month we for based in what strip, to

and needs has storage impact our course, on also our Working Of it injections. flow. a cash capital positive

good have eye our it's that factor So we news, many we're while just that's really among one on.

Paul Zimbardo

the just short And benefits quantify for lower 'XX you great. Okay, the the follow debt working just costs? up gas what the perhaps balance like on anticipate on capital year to given could term that, improvement and end

Caron Lawhorn

have. and prices I important, one Like pieces are but puzzle. moving of of there's number piece don't a said parts that just gas I

Paul Zimbardo

next about XX think of that you heard you drawing XX% commercial the there. I over then And the project, great. on on Okay, there that potential to Are manifest could that similar that update increase board you any that XX projects have development the kind months?

Curtis Dinan

in still I ones number Paul But Curtis. in in commercially, they're are the I just and more projects design identify And whether phases, And we're there the highlighted year. various the them sometimes one opportunities phases. the further phase, or to construction past like ability is highlighted, haven't phases, we the in of a this execution do we all expand over they're developing when they're those.

economic the gas we three our a the in very and natural to see service So activity robust. for continues demand And states we be high provide.

Sid McAnnally

the created our just these and the in and pursuing is that three of Paul, states we we development industries opportunities to the growth have add we And on migration pursuing reason engaging that about, mentioned economic opportunities. affordable that at the by And we active the surpluses knock energy. very see also states become I development, see economic patterns see with we continue that year. end in The talked

the continue to So for and we us, for that. think we bright future prepare remains

Paul Zimbardo

Great, excellent. much. Okay, you all very thank

Sid McAnnally

questions. Thank you bet. You for the

Operator

go Thank Guggenheim the next of Pourreza you. Shar go Shar And ahead. Partners. please question, to

Your you line guys? Ward it's James is are How open. on for Hi, Shar. actually

Sid McAnnally

James. are well Thank you. We

Unidentified Analyst

Terrific.

million regions really of bit backdrop thinking capital So kind rate should customer Basically, another shrinks, shape and I and going seen the you customer the ask We're then of portion the budget of in as this do you, how how the the we've that And maybe new it's what on think and in that's just $XXX I'll of as take it backlog. macro Paul, obviously in the the fulfill backlog had look we connect that just it's there. change long with slowed the dropped, that year? growth. to I next And with one questions to after of How sort of sort the had trying CapEx? year Texas. key to are a like? year that

Sid McAnnally

statistics, region region we in the think needs continue to to observation, inventory stock affordability scale, showed most available continue low. we specific National still of speak that to months, in growth you a is theory at were when that territory, but scarcity and will be We take country as degree, the when numbers migration, population to well, the And fact migration it shorter the out. a we have of inventory like whole question, housing, in add? James, to while would confidence and term of Realtors the that housing. Sure, context existing in to to Curtis, our that think we build does your the end with at whole. morning replenished economic And about and in the supports you see to that one looking larger pursue see continue what housing live this it. as X.X I'll all to historically the in affordable to region bodes which our is you about speak macro continue of available our the country all the impact some we ask service Curtis some this we just of to Association

Curtis Dinan

thing, one James, Just in of future the is, from with the to a and wanted items record ended I my clarify sets that comments, number year backlog. our we meter of one

of all they're City the still that for very in of just much marketplace was And immediate positive have service describing Oklahoma is meeting our has. not to new larger. And our my Sid So developers are at what some them win projects, us. success on to declining, in that's continued exactly active is they it's continue commercial going building And some like But teams because them growing. smaller, continue it example, there territories. that demand

Unidentified Analyst

detail color, you. a to, That's Got get just helpful bit guess, to I more there.

believe you just X.X%. Just Last it over sure led your was period to sales that I guiding make year, XX year customer think annual it I I'm that understanding average with was correctly. Texas X.X%, was to was two, ending the growth by under five were

'XX end from then the in it's last year, the And now of guidance X%.

lower points with X.X. basis XX So at Texas

understanding lower had is I could it it it if guidance from correctly, Don't a customer be class real wrong, a sure of just why year of rate sort the revise I now? you're last problem to get how make of is growing. that understand I'm that backlog are end point still of it's the to Or being high if kind help declining? not just you able in growing guess meet the opportunity backlog you're good So return thinking of customer might to seeing previously the to It's growth problem. have. And to where been? based might an still on me what growth want you a at me time, there

Sid McAnnally

How should it? we about think

Curtis Dinan

I Sure. James, pull a answering let at me back questions me if in. stab all those take skipped

So to, when guidance, initial at mortgage by we slow we that bit. at last slow really economic landscape that's guidance we from as thought increase a alluded question in of the just hot rates, XXXX a your seeing little gave were end perhaps would the the things, piece. and just But a the torrid looking to year pace things or

We what little anticipating rates were might impact. that less in we a have So saw that than mortgage bit 'XX.

projects and a because it's months that see, continuing, the think continue things activity later, building positive just it We little have. down I allowed that a several up few caught have to get they is to slowed builders a developers bit on

of term. from we our long about we term separate when kind So got to backlog, the talk the short

sometimes longer. quicker, those talking year we're just City sometimes backlog, to are that Oklahoma a my might out our example be when bit additions little like about build So seven five

economic thought to And in backdrop that less, lot a gauge at still trying the little the a we really we activity still a describing. bit And In our that with ‘XX demonstrates term, might 'XX. would the happening of what as activity we pace. backlog to increase be see were near in impact you good of were there's but compared even

all So are counting. in that did hit questions anything your you points were I skip the

Unidentified Analyst

was That for appreciate questions. was. you much. terrific. Thank That and you really thank very taking my I clarification the

Sid McAnnally

for Thank you question. the

Operator

you. Thank

further We remarks. for back questions. I'll Brandon hand closing to have no any

Brandon Lohse

we period in April you starts all release. we for acquired the close interest in again extends quarter when Gas early books our ONE first until Thank your for and

conference call great will the Have details We on later provide a day. a date.

Operator

Thank fourth so yearend Gas joining Thank conference earnings for webcast. This XXXX quarter disconnect. call concludes now ONE you. and me and the you much

ONE Gas (OGS) 23 Feb 232022 Q4 Earnings call transcript