ONE Gas, Inc. Q2 FY2025 earnings call

• Regulatory Activities: Oklahoma Corporation Commission approved a $41.1 million revenue increase; Texas Gas Service filed a rate case requesting a $41.1 million rate increase and consolidating service areas; Kansas Corporation Commission approved a $7.2 million increase. - Operations: Second quarter had unusually wet conditions but no material service outages; completed $190 million in capital projects; installed nearly 11,400 new meters through the first half; continuing to pursue opportunities in data centers, advanced manufacturing, etc. - Capital and Equity: Forward sale agreements cover 2025 equity needs and part of 2026 needs, with $226 million in expected proceeds secured; declared a dividend of $0.67 per share unchanged from the previous quarter.

Net income for the second quarter was $32 million or $0.53 per diluted share, compared with $27.2 million or $0.48 in the same period last year. Second quarter revenues reflected an increase of approximately $21.1 million from new rates and $1.5 million from continued customer growth. Operating and maintenance expenses increased by 7.5% year-over-year in the second quarter, primarily due to higher labor-related expenses and timing of other expenses. Excluding amounts related to KGSS-I, interest expense in the second quarter was $1.3 million lower than the same 2024 period. For the full year, net income is expected to be between $261 million and $267 million, and earnings per diluted share between $4.32 and $4.42, with capital expenditures projected at approximately $750 million.

• Raised full year 2025 financial guidance to net income between $261 million and $267 million and earnings per diluted share between $4.32 and $4.42, both 2.5% above initial midpoints. - Project full year operating and maintenance growth consistent with 4% compound annual growth rate (CAGR). - Capital expenditures projected at approximately $750 million for the year.

Q: On House Bill 4384, could you elaborate on how it impacts financials and if the EPS impact is a full run rate annual level?

A: Chris explained House Bill 4384 extends deferrals and accruals of 8.209 to all Texas capital expenditures, adding $4 million to $5 million of annual pretax earnings, and the EPS impact is a full run rate annual level.

Q: Thoughts on using increased growth rate for long-term earnings growth targets?

A: Chris said they'll use the 2025 updated midpoint of guidance as the base for the new 5-year range, consistent with past practice.

Q: Change in capital plans for Texas?

A: Sid and Curtis said they'll respond to opportunities in Texas but won't make significant changes to the capital plan, will respond to community development opportunities across the state.

Q: Update on data center and manufacturing opportunities?

A: Curtis said they're pursuing various opportunities, some close, and will marry with other projects to be efficient with capital.

Q: When will opportunities manifest?

A: Curtis said some are immediate, others take longer, with a long runway of opportunities developing