Brandon Lohse Director-Investor Relations
Curtis Dinan Senior Vice President and Chief Financial Officer
Caron Lawhorn Senior Vice President, Commercial
Pierce Norton President and Chief Executive Officer
Sid McAnnally Senior Vice President, Operations
Aga Zmigrodzka UBS
Chris Sighinolfi Jefferies
Call transcript
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Good day, and welcome to the ONE Gas Fourth Quarter and Year-End 2018 Earnings Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Mr. Brandon Lohse. Please go ahead, sir.

Brandon Lohse

you XXXX us earnings thank quarter our and year-end and conference morning, for on joining fourth Good call. today. This and call later a live replay will is be made being webcast available happy our to After we remarks, will take questions. prepared your be XXXX call Harbor A ONE might Security provision be forward-looking of Gas during covered are of should include statements predictions the that and reminder and or by made that considered statements XXXX. this expectations the Acts Safe statements. those projected Actual in results could materially forward-looking differ from any

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

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

Curtis Dinan

you compared income million was or $XX fourth us and Good Beginning today. everyone, share, our $XX $X.XX net period diluted Thanks, for Brandon. diluted quarter with morning, results, per the for joining same XXXX share last million year. per $X.XX thank or with

quarter fourth higher customer in and Texas Texas and with new results weather rates residential compared Oklahoma in costs. offset colder partially growth operating XXXX, and by Kansas, reflect Our

compared employee-related results deferral of in December to $XXX a manufactured the in costs. in accrued offset XXXX tax and primarily revenue impacted also received rate adjustments with order costs same due million previously authority partially for impact Kansas, related Operating we expense. were due period onetime last plant by the Our by from million accounting cost, to decrease by gas quarter offset resulting a quarter tax fourth $XXX the were however, income reform, deferrals was lower fourth the year,

$X.XX share, net million $XXX million with per XXXX. diluted per full year $XXX income share was for For diluted XXXX, or $X.XX compared or

of reform growth XXXX that expense. weather for from from and plant higher Full primarily by net related benefit impacted in the sales higher year mentioned than deferrals results included customers, previously weather gas by customer volumes tax residential deferral. and normalization Kansas, colder from Texas the the results and revenue rates offset costs new Oklahoma year were full was and were also in higher volumes due to in transportation Our and full higher Texas manufactured year due to lower tax expenses employee-related income rate adjustments Operating XXXX.

the for tax While employee with regulatory completed update service our of income in-sourced from The tax was that full an to revenues XXXX. also in our million an between liability we jurisdictions, Kansas in rates we in liability XXXX year. million difference reversed partially earnings outside fully that some Kansas estimate of filings our regulatory first Including establishment This return our and deferral by resulting excess services. had has over in to quarters related $X.XX costs timing been of the reduction all $XX established rate our the expense tax recent in deferred the $XX those jurisdictions that contracted The costs difference credit higher, to statutory three rates. In in taxes our address indicated expense. Oklahoma our resulted guidance. reduction ended revenue Texas, In and across year and XXXX, disclosed adjustments two the we now included authority by in the were Oklahoma the in offset reform. reduction previously impacts this as federal of income and was a a the recall impact has each the tax our income expect has quarter orders customers. our as in in effect customers from of been to on of we and including drop filings lower the of a XXXX our income our the in this in earnings now created in the change from now of a orders compliance And last positive and taxes tax approximately regulatory the orders accounting mitigated The guidance. orders for on in for reflected

carryforwards, Recall While to although per approximately to Directors this and loss loss share. XXXX. expense. future that it neutral $XX the the bonus the or depreciation has of of million with cash from will of paying of both accelerated ONE flow, amount we taxes. Board Last in our timing declared earnings credits of After utilizing impact adjustment will a revenue share, Gas continue by previous taxes cash we dividend years affects in net These $X.XX of our tax now the be as will increase $XX an vary is $X.XX $X.XX million increasing income approximately year-to-year. per dividend cash the compared X.X% forecast when start operating the XXXX, month,

of earned January, dividend the expect annual XXXX per share earnings to dividend XXXX XX% X% our a $X.XX we We and with increase announced payout be X% to targeted share of to ROE XX% $X.XX ratio with income. net to XXXX of between average guidance an per X.X%. Also expected of in

Please base. million and as previous note CapEx rate from removal is be are expenditures asset increase Both $XXX removal inclusion this removal costs asset projected the change a of costs asset capital XXXX costs. disclosures. Our including to CapEx

our asset be removal more to over cost items combine Going increase significant it the demonstrates the CapEx and base clearly will as rate that forward, practice time.

of safety to areas. focused service predominantly spending Our new on XXXX extending the capital reliability will and maintaining our systems and remain

need to from proceedings reflecting XXXX, estimated is that continue technology rate and increase regulatory our the average guidance in Oklahoma O&M regulatory financial we in approved XXXX components in needs latest will Authorized our is a any yet Authorized that in $X.XX be including in reflected not make which regulatory as average investments billion $XXX equity credit approximately Texas. regulatory And forecasted the in approximately it Kansas X% activity now, rate rate are its plus or additional XX% completed XXXX. financing facility, authorized filings, form base, the defined in will rate ended annual capital base Vice our efficiencies. base system and you approximately with of five-year full not changes President Caron with in and is over in $X.XX Lawhorn, equity. cases filings. I’ll also defined in in million base of to From million base, our recently needs project in Commercial, $XXX XXXX anticipate approximately of to XX% X% Caron? the improve million anticipate Kansas, XXXX, ONE turn to with XX% Embedded rate of Gas to Oklahoma, to XXXX. of $XXX other We update. of revolving market net is of to and we do billion. interim our rate in capacity our provide for reflected with investments as that and a one/third rate rate Senior We base XXXX to being

Caron Lawhorn

morning, Thanks, everyone. Curtis, and good

PBRC the for Corporation base Company’s midpoint $XX.X January rates activity million equity. in performance-based with reduces base change customer Commission in return annually filing, of beginning our or requiring XXXX an the Oklahoma February to XXXX, our the prospective of In a authorized XXXX. regulatory rates X.X% start in issued on order rate reduction Oklahoma. This Let’s

that filing, order the midpoint, any addition, in X.X% the that next in above as In PBRC returned to earnings the XXXX customers. requires determined were be

next filing XX, March XXXX. Our will by be made

of the results XXXX our XXXX earnings indicated, impact reflect and Curtis this guidance order. As final

a Following rate the one to full PBRC before more be case have XXXX is required XXXX filed XXXX. we in filing filing, in will PBRC

is Moving XXXX related general Surcharge recovering this $X.X reflects GSRS. order System Therefore, Kansas million refund recovery, on or base GSRS Gas total through KCC, provided rate already taxes. million Commission, amortization Service’s rate a base of $XX.X million. Reliability Gas June Kansas increase February of with In an Corporation to for Kansas and our of case XXXX, credit filing. combined Kansas. deferred represents an Gas for the net issued order accumulated $XX.X rate the to income the increase The excess a Service order, or

X.X%. future the with accordance Kansas amount Gas the to will until liability Kansas the carrying of accrued pretax In KCC In be whether is addition, customers outstanding charge pursuant will law, to regulatory refund reform required the has order. for tax be Bill on Service accounting GSRS rule to the filings to tax KCC the refund. Monday

September year, apply which Looking ahead our was in to The the expanded plan we expenditures, the August legislation through GSRS capital all eligible file covering XXXX the period XXXX. June new in filing. definition that last Kansas, of will included passed in GSRS for expenditures next to

excess our filings tax rate in Pierce our Texas, discussion. Kansas address during our orders it With commission resulting recent Pierce? wrap the that, this the associated to mentioned, Norton taxes in to through previously will or deferred regulatory address of reform. and with turn liability separate up jurisdictions. each either over Oklahoma I’ll XXXX from income In we issue cases As accumulated

Pierce Norton

Caron. you, Thank

transferred, sets the celebrated a spun look arrival recordable the we preventable for safety company, the a incident new for industry few metrics, days and that injuries; second Gas the off up I’d next spend company standard restricted February, brief vehicle near accomplished minutes of quartiles first is our or were With the AGA, a company how of to our measure or the incidents. DART, anniversary. being we the severity years. fifth its When which American third three and we and five Association, taking back like what away, rate; as at total those of

first the DART the metrics the large three in performance quartile for United for all achieved utilities and now are We in recently top States.

challenge, integrity $X focused of we’ve continuing new vintage five capital expenditures for the Environmental processes pipe, as to improve Agency’s methane’s chance and the in by We to customers. give us published those replaced our achievements, striving years achieve helped of ESG XX,XXX and as incidents. XXXX, zero. begin miles reliability, emissions, X,XXX Since found place the we’re proud to to added zero Protection spent first over system next best put billion reduce nearly ever we’re to While report challenge on

While could then improvements and important on, every and can’t more stop sit go to now we reflect come do made. how and always There’s I come to from. we be we on it where But still. and is to

years, continue strategy, same we next forward look XXX% will the five executing I a our on regulated As utility. to

to most gas core is customers, Our service provide to safest, our the reliable natural that our focus business. remains

in We of last the pipe iron system to remaining end the replace by expect year. cast our this

Our program approach risk-based replacement ensure advanced continue will projects. our modeling an pipeline prioritization to asset to follow replacement of

gas first to X,XXX employees than base. more committed five acknowledge over We years, capital close, also reliable deliver and our safe I would natural to continue our our the we for deploy and will achievements and customer to as than And and expand past for for like service and year now events their during to this finally, upcoming Thank more in focus you we joining Operator, visiting in the you forward our valued ready future. seeing customers. look morning, all the X office the you we’re to of out we’re questions. with as us for million


Instructions] Zmigrodzka now Thank from We go UBS. first Please you. Aga will from our question [Operator take ahead.

Aga Zmigrodzka

higher growth is per the that above you long-term growth discuss long-term of your Good higher about morning. rate My expected please first Could base outlook. growth? key question drivers share earnings

Pierce Norton

and let key drivers going us Aga, what are. I’m to kind morning those as of to through Thank good well. you walk you, Curtis

Curtis Dinan

bit growth clarity Really asset item taxes we period costs this then there’s to little CapEx our morning, And excess two on that five-year biggest of deferred Good our return the income CapEx compared things, our better were than is customers. have and a guidance. previous removal Aga. the being over the second to higher primary the our

taxes you know, are a rate deferred as in as reduction So income treated base.

return deferred growth you in that rate base. also taxes, as income So creates your those

the those being driving of base bit rate earnings growth bit two a higher. little the a combination higher So a factors and little growth being are

Aga Zmigrodzka

rate provide growth? you color growth earnings why your than higher But base could is more per share

Curtis Dinan

at we allow to that talked about make which what call out drive from to us investments of to of that we’ve in changes, look at it’s technology of to both process us factors we more Well, cost look the continue business many efficient sustainable continuing the levels.

it’s as our not the efficient, So growth line we well. with revenue, more get it’s controlling happening about top of just expenses what’s all as

of factors. combination those a really So all

Pierce Norton

a Aga, And you some is of give the tangible to one Sid efforts. Pierce. of of efficiency of example this – want I those

Sid? So

Sid McAnnally

service gains execution the customer Aga, the me had which on-time also our we appointments. were technicians serves or And our Last to examples, of optimized We system Pierce. you, give significant let a cost total optimizing smoother in had those but Thank additional a miles routes customer that system reduce orders a headcount, we one to decrease Without number there on specifically, Pierce you and looks service that year, that spending on also are that the of at customer in significant but focused additional compliance we XXXX. driven technicians, our recognize safety mentioned we goals able by to earlier. appointments. served

are Curtis that a opportunity without we still number increases. these think have we optimize mentioned, there So systems as to significant of cost the

Aga Zmigrodzka

approved Thank you one capital Could and please provide equity case. for the color rate color. or ROE that structure? on on more And Kansas you more

Pierce Norton

Aga, area let so us. and commercial, regulatory I answer of joined our think She’s has Caron head question. that the I’ll her

Caron Lawhorn

morning. Good

settlement. a we Kansas, have in black-box So

So there ROE or stated structure capital is that. with no associated

that to rate GSRS, to equity structure. about of an is our XX% roughly be in and and equates X.XX% about X.X% for forward the However, going capital going of ROE approved

Aga Zmigrodzka

that color. you taking for And additional my for thank question. Thanks

Pierce Norton

you, Thank Aga.


next Instructions] Sighinolfi comes question Jefferies. Please ahead. Our from [Operator Chris from go

Chris Sighinolfi

Hey, good guys. morning,

Pierce Norton

Good Chris. morning,

Chris Sighinolfi

just accessing is remind you financing. of Curtis, out have total outlook but think said can could related I there joined equity markets? the and when me and point talking you’re you at five-year little figured equity an a call you then question a Or you comes would and about Can you. the wait terms were I do when about in to had of remind in the I from, program? review portion I me, was you and was ATM guess joined I it I projecting? what you joining a how transcript also have late earnings another

Curtis Dinan

morning. you. Good Chris, good A no points. to couple hear XXXX. needs One, from of in external

later in and offering so third then bond XXXX, do XXXX. XXXX, that our of but none efficient that is not would bond through the we need that’s of $XXX those in form that needed $XXX the to likely of so financing million plus point, to at equity. that and would added a net significant $XXX program about $XXX that in be million pre-refinanced XXXX a had we total, to equity, of be we liquidity which the From that. pretty an really approach way of We So raising million do, to ATM anticipate nothing million most maturity have in would go of years about raise that a

Chris Sighinolfi


there and we Okay. the debt-to-cap any No, that’s year, is do of in are really debt manage mean, about levels you’d might I driver appreciate present a think bit a sort helpful. And not think I for you and I when or pull levels? as about that this but road where that how guess – it as the down how needed? and either that it’s you

Curtis Dinan

those sheet and as is filings that. our into a So approach our really into sure how efficient go we make is several go factors can balance of regulatory piece that Certainly, strategy be it we is to wanting as as one.

standpoint. how maintain structure we our one credit is from The a capital second do

there that our we’re to So and various rated in to order need help sheet metrics the to the credit keep we balance meet able that right the be raises on.

Chris Sighinolfi

all the a around. for XXXX, heard company, added Thanks really like go the it We down so great. color. the I mentioned nice Pierce, old job anniversary. you And Okay, about totally looks to saved models. five-year back I different mean I

Pierce Norton

Thank you very much, Chris.


no hosts There further questions turn any floor currently [Operator remarks. or there to Instructions] questions, are additional now closing back signaled. the As no further for will are I your

Brandon Lohse

in Thank ONE your Gas. interest you all, again, for

earnings April the for early first extends in books starts our close we May. Our early we when quiet release quarter and period until in

great date. Have a conference We the will day. call details of your at a provide rest later on


for Thank Ladies conclude today’s call. you will gentlemen, now may your disconnect. That participation. and you