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OGS ONE Gas

Participants
Brandon Lohse Director, Investor Relations.
Curtis Dinan Senior Vice President, Chief Financial Officer and Treasurer
Pierce Norton President, Chief Executive Officer
Sarah Akers Wells Fargo
Chris Sighinolfi Jefferies
Tim Winter Gabelli
Call transcript
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Operator

Good day, everyone, and welcome to the ONE Gas First Quarter Earnings Conference Call. Today's conference is being recorded. And at this time, I'd like to turn the conference over to Mr. Brandon Lohse. Please go ahead.

Brandon Lohse

you conference us call. thank quarter our and earnings XXXX morning, for on joining first Good as of My pleased joined team to is have new name Brandon just the Lohse, ONE Relations. Investor and I'm a Director Gas a This made will available. live be replay call webcast is being and After our questions. will to take be prepared happy remarks, your we provision expectations acts covered statements be considered should XXXX that you call by remind predictions safe during this securities that and or are of might and 'XX. I made include of the harbor ONE the Gas forward-looking results forward-looking could differ in Actual materially from statements. projected those any

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

Our first of President, Treasurer ONE Vice speaker Gas. Curtis? Senior this is, Dinan, Financial and Curtis Chief Officer morning

Curtis Dinan

with everyone, our for us. or share $X.XX $XX.X in Thanks, slightly same the welcome per $X.XX results. of first Brandon, financial but which per impact below and with diluted to $X.XX strong the quarterly $XX.X resulted in thank in morning, diluted Beginning joining net and we million with than ONE share million we prospectively per our $X.XX income Good share period positive The compared impact million the Net positively we was team. benefit compared or $X.X last year. share million accounting the share per that January you XXXX, for Gas the Texas that first effects the guidance in warmer XX% a in transportation to by from approved normalization first basis affected normal, or on new Weather for prior last period results reflect Oklahoma being XXXX. in indicated in weather than of to share-based an our resulting to rates colder tax mechanism in X% recorded were compensation X, that and a year, Kansas quarter earnings important note It's higher on margin new the same XXXX, volumes Kansas customers. and quarter and from tax was January, income was $X.X standard while year. adopted XXXX. the expense, per $X.XX the in increases net than quarter in $X.XX in it higher recorded income Due the

of As new million the heavily future period same for share depend impact weighted the versus of by spending. last year indicated, more we to standard compared lower the mix $XX our will with the $X.X previously and Operating was accounting quarter this million same performance. were year, projects period with on capital compared expenditures spending first increased capital last costs as operational

We operating improve several continue to is over end of technology and QX, XXXX, and into reduces to or infrastructure, automated to efficiencies reduced our equipment were invest in cost. operating This the efficiencies been levels. and of of This reducing around penetration as goal to was operating has years. we the investment sustainable XX%. costs, meter and additional our One make AMR helping over At XX% and technology we our other improved beneficial and assets, cost continue investment of achieve will expenses AMR translates which meter reduce our next investments reading. such example of the in end labor,

$XX.X reduction new in expected we XX% a the between million been in first impact but on based have results taxes income In reverse our the difference Accounting regulatory income in million is and reform. the offset income difference tax and This regulatory tax to have quarter resulted impact the included reduction quarter in establishment million $X.XX The created positive net rate. the in our XXXX established tax the tax, federal year $X.X each expense. statutory liability our income a in in our $XX.X to timing for expense our Orders or jurisdictions, tax that of of Regarding statutory rates tax compliance by this by in of with revenue this a the reduction our a deferral rate Authority XX% liability regulatory revenues a calculated end.

effect reform near-term While is profile. the negligible, the the impact in it long-term of earnings timing our of and distribution tax will quarterly

in be to has Our earnings earnings positively some versa. reform will of accentuated profile higher, are seasonal and seasonality tax so it, quarters impact the vice where

declared with ONE the XXXX. the the Directors as dividend for the Moving on dividend per is Board quarter. guidance Gas from company's consistent $X.XX of a tax reform. same Yesterday, of previous share, This

we've X% previously, XXXX of and targeted to annual XX% of dividend to net XX% income. XXXX, a with between the expect ratio average As dividend be increase we indicated to X% payout

We share also of share. per to $X.XX earnings our XXXX guidance $X.XX per affirmed

with However, Officer. And regulatory With the latest our that with of in Gas changes President our rate At that full system established of in over regulatory base billion. rate to filings turn Oklahoma, and Kansas, rate since of range. strong base the in base have that investments filings, occurred Norton, as we now and XX% base, in that rate quarter $X will cases the Pierce? project rate it we XXXX, Executive Texas. more us our being approximately in in $X.X our I'll the scenario current proceedings, our those puts and average in approximately the first our XXXX additional XX% and Chief rate authorized interim Pierce believe base half upper defined likely in rate XX% billion including XX, that was components March other ONE

Pierce Norton

morning, everyone. service Curtis, our good on in Thanks, areas. activity update regulatory I'd a an recent you give like to and

filed was application with of reform. begin rate annual tax $X.X since March, a performance let's the that rate January Oklahoma. identified to our rates in So general the We base case impact XXXX. based million in change our second credit associated we In of approved

in order of third do Our an procedural approved, quarter been yet the anticipate XXXX. schedule has not we but

GSRS expenditures of In mechanism Surcharge under System Reliability the Beginning statute to investments was be bill expanded the April, Gas January capital the on of would safety approved. scope XXXX, Kansas. the Now that the X, to scope expanding legislative include or enhance qualify related assets. also components facilities, as projects the will expenditures the modernize physical system of and or obsolete Safety-related integrity well investments that for useful to such include upgrade extend of life as pipeline cybersecurity. replace,

on wait the In This general cap or GSRS to begin per capital on increased month us the rate per to addition, legislation to of through with case. from surcharge filings the capital the residential for will be expanded earning the definition sooner having $X.XX. $X.XX eligible allows instead

in for paces recovery already support are updated spending spending, plan. capital While of the accelerated the will at scope of we Kansas assist to in timing long-term GSRS our

pace will cast have We the cast iron to steel to more dollars is miles Kansas XX capital of of the have only remove pipe all out system and iron cast those end of After by are removed, remaining on be our bare in next all iron year. shifted pipe.

implemented. rate an System Gas our Texas, West tax industry new increase We refund million rate. the the sorry, And are $X.X – million are onetime expecting the by A in for onetime July X, pipe component being the request million in program XXXX natural service. in requested rate of the income million for when reduction tax provider the due January by approved, a to of Reliability material gas offset earnings. our a customers, become file the an request increase, decreased XXXX, $X.X through in ONE income on the we Similar requesting Texas under tax a for West tax customers rate on Area changes expect made federal which in a offset spent am the safe, capital Filings between between integrity for Service the also in X, changes will filings The our filings Kansas Texas West effective is If July reliable to gas also filed date the Grande reinvest for expected based expected were $X area, made GRIP in is refund distribution rates on case to XXXX. filings when all projects. requested we we general the being XXXX, the to important filings is Rio A to strategy the to This million decrease in to billion of focused rates Gas new reduction be in which to more leading both and Service impacts for period Texas is due is both for rates also not are become for rate. $X.X the increase while approximately incorporate expect for to the of a In year. are XXXX million service to decreased expenditures Central of to all Valley January to our tax $X.X federal million. in replacement If than $XXX date implemented. system and and to but cost facilities. are for are for also our to on July be tax reform Texas Area, the the $X.X rates next spend we've test and systems XXXX period requesting XX% to into we've effective natural XXXX reflected spend through of Texas, will before rates made Central I XXXX. customers reform infrastructure approved, $X.X

and now like their We reliably and our for product, to commitment ready our reliable our our we're customers delivering XXXX thank improvements safest I'd for which upgrading Operator, safely on and and stakeholders. distribution to regulators that system of to and based all continue all employees systems, analyzing a take benefit answer focusing To of continuous our expect. close, most and to engagement, questions. the approach to any risk dedication that creates

Operator

to And at first Instructions] we'll [Operator you. go Wells Thank Fargo. Akers Sarah

Sarah Akers

Hey, good morning.

Pierce Norton

Sarah. morning, Good

Sarah Akers

qualifies the Kansas, Can us a there give versus qualify percentage now in sense for will CapEx GSRS that the of what beginning recovery percentage next year now? you

Curtis Dinan

XX% that capital will is qualify this Hey, about Curtis. of Sarah, program. our into And

Sarah Akers

current it. increase Got Is to a significant that the pretty levels?

Curtis Dinan

or been XX% to XX%. Yes, closer historically we've

Sarah Akers

there? it. Oklahoma, is proposed million Got in is reform embedded or then there in rate that a $X.X reduction, to the related tax And rate base solely change also Great.

Pierce Norton

Yes, a Sarah, number. net that's

from tax base change PBR there's through more by going gets offset than that the reform. and rate the then So a mechanism

rates. net reduction a in it's overall, So

Sarah Akers

Okay.

to increase So enough - was rate low but in ROE actually requested triggered Oklahoma? a the base

Pierce Norton

That's correct.

Sarah Akers

Okay. Great. a lot. Thanks

Pierce Norton

you. Thank

Curtis Dinan

Thanks, Sarah.

Operator

Jefferies. we'll Sighinolfi next go Chris And to at

Chris Sighinolfi

guys. Hey. Good morning,

Pierce Norton

Chris. Morning,

Chris Sighinolfi

I maybe out. to Sarah left up where want just follow

in applicability. Kansas Just on GSRS, definition expanded guess, I or the the

in In efforts, terms couple the plastic. your presentations you now cast curious I had of both the vintage longer capital estimation slide your iron, of in years, qualify. the that was Pierce, the the bare modernization on sort a of will last also term steel,

of work miles just of, I And system it amount you sort Kansas of pipe. think that defined based in - specific. the presentation that expand just curious definitions you a But the for in of not to this likely the had changes out did in? program, Or have there? was number be any was on, wide the total expand

Pierce Norton

it neighborhood new $X.XX. expenditures revenue would would Chris. $X.X the to capital $XX still impact that, expenditures test No, in with, program, begin a at to total revenues associated if The the $XX that XX, customer about with instead of million. a resulting $X.XX. was looked million, something under $X.X before million, June to year thing of under though for customer in that the We're around million, additional with about increased you $XX It was point million $X.XX. XXXX, the is, million number about be I an are out the Under the of impact program, about you which raises the point capital old $X.X of

We're an expect don't some that accelerate and is the sort we accelerated past. that comes in of PHMSA a need on unless to things to pace. So anything out some we regulation there says do already

case going at it there, didn't us is under way reset rate it is what's kind case. recoveries, it filing. to just don't expand quick in be, everything this to rate really that So A annual look the and year's of have picture you gives big

is of our in timeframe. impacts effectively, this what future So kind that XXXX does earnings

have it does long-term, on us. So an impact

So hopefully question. that answers your

Chris Sighinolfi

Okay. No, helpful. it that's does, Pierce,

terms of it of greater in recovery, opportunities But a absolute faster identified So certainty time that you'd for your profile a... the as the recovery.

Pierce Norton

Right. That's correct.

Chris Sighinolfi

what just and what I at the Are that in comments, and those EPS, there given should implies based $X.XX maybe back will that implications for the terms at year on attention the reform, and the earnings disproportionately about following guidance more assuming helpful. That's impact be the a your might the on from of items thinking the Okay. quarter large talked - you we tax I all profile degradation? something other Curtis on low the I'm even earnings we record attention at seasonality look guess if impact I'm XQ, in end step there pro-seasonal. bit of there I for posted of it the making a the to? very in the about top first look should just at up quarters? pay half XQ profits negative of other pay in to your half. items that Chris, tax Are back year-on-year cause curious that

Curtis Dinan

which the is tax it'll exactly the will for bit probably we even reverse $X.XX that before you're second the more piece, little typically. little that, quarter Yes, quarters us so $X.XX and reverse right into stronger on third earnings a in get bit a quarter, than the fourth and

would So thing that's I to. first point the

is or that that was rates from the having had rates effect went the quarter, The into XXXX. the second that impact - from half first thing from of rate positive in we in that we're that cases last

And a about of lot this ago over so first capital XXXX I activity full the quarter in replacing first here and year in the as little a our we to is, in the bit been effects The behind were we're year. there's past we've second And thing year. annualized on a mention talking would compared quarters. last not that the getting

projects which up in as more that of first capital. is think the our of bit This spread comment evenly operating-type year little why I more capital heavily mix the to last the to is I we're projects made opposed half first our weighted year, quarter. was in

are type see differently a little we'll spread projects the operations years. the So still bit of same and mix capital just between

it's the factors describing. those of you're So situation creating that really a are that three combination

Chris Sighinolfi

your that lines? to we'll that regards mix Is that O&M we see show with see in most so likely deployment where And shift, capital up it?

Curtis Dinan

right. That's

Chris Sighinolfi

Okay. Go ahead.

Curtis Dinan

projects. lot in labor internal capital our a We of use

labor we projects. operating for higher it as more have we're that spending So capitalizing opposed therefore gets capital expensing labor capitalized. of that When to type

Chris Sighinolfi

Okay. I that understand. for on And me I guess final question is front.

the should from But attention improvement improvement remains done on And or you've certainly, to, what the other that really you - I fantastic whole cost. You know you've guess and new us incremental the made improvement since since to line... technological - on automated help commentary what guys hold that Pierce work your back of holding cost in of pay we line the you XXXX, things identified terms just job offered meter and adoption I curious a that in should that communicate one or might done the have either you've the I'm areas there. on spinout already operating readings

Pierce Norton

improve our Okay. is Well, continually the that thing Chris, surprised one of to me, ability ways the operating find to has efficiencies. people our

bring data entry in and do allow office. our to having the as lot technology spot data And to so on lot in to we a to back of things a to deploy people the do quicker opposed much continue of

lot on-site. stuff So of of, that a we kind done, get

continue people. the We multitude that, one and not that we improvement going of processes into I in that deliver future. deployed. the to service It's way efficiency just It's our our to a think any do continue and in particular that's we technology the thing. improve deploying continuous

a basically from as the year I AMR, basically XX% We we mentioned, going also four XX% did that have, over to period.

as safety have improving We're years continue stuff to the improve we as also well. many in as to So it still relates to left AMR well.

we're really combination to is that the area. laser leading in just of but focused everything, what's So Chris, that,

Chris Sighinolfi

plan I in impressive. outlined and that I upon answer, had have the I ways of spend that found advance you've been mean the too. admitted just you in you us you And think So And spend. your guess, or that, surprised they've - in it's Pierce, surprised the

I this so I'm is color avenues time anyway channels different what just so morning, the guys. to the curious that the - continue, helpful. And for and are appreciate

Pierce Norton

Thank you, Chris.

Operator

Tim next Gabelli. at we'll from hear Winter And

Tim Winter

clear strategy. simple you ask a Good on just quarter. with good question. working really know well. was I regulated guys. And congrats But straightforward all regulated like wondering been that wanted opportunities very seeing anything assets, with you've updated like might there's a say pretty morning, any I or I there? some or another assets the - lead if you're thinking to it's And whether strategic issues, to and if find pipeline MLP storage assets

Pierce Norton

We're and morphed would the assets started in We go now, not structure. you lot if they seeing right I off all then of back not Tim. corps, MLP Chris but mean, room, into anything in of most our in way C these Chris. this a history the -

So that distributions. be of distributed kind those earnings to through captures structure MLP their

term, was don't probably radar overall, And if of out assets so see some assets opportunities screen. in distribution morph We territories. back kind right corps, but our these anything bought be hard of seeing now those might things to to companies, it and our there. get could in be C on I'm any long brought out But immediately not of to there that back there,

Tim Winter

Thank Very good. you. Okay.

Pierce Norton

Tim. Thanks,

Operator

have [Operator it sir. I'll Mr. additional over at back I And no Instructions] turn questions this the to appears time. program Lohse you,

Brandon Lohse

morning. you Thank us joining this for

Financial of Have of me many conference starts when day. chance seeing provide release call the quiet weeks, Forum at a person. extends in your early to Our in earnings in later early a August. until rest at you a hopefully in which for meet our the we provide to We July for we many second of AGA books and great few you close details period date. quarter forward on will We'll look a the

Operator

to conclude I'd joining does conference. everyone that again, for like us And, today. ladies And gentlemen, today's and thank once again,