8-K: ONE Gas Raises Long-Term EPS Growth, Details 2026 Guidance

ONE Gas, Inc. announced its 2026 financial guidance and updated five-year growth rates, including a raised long-term diluted earnings per share growth rate.

Summary

• ONE Gas, Inc. issued financial guidance for 2026, expecting net income between $294 million and $302 million, and diluted earnings per share (EPS) between $4.65 and $4.77.
• The company raised its long-term diluted EPS growth rate to 5% to 7% for the five years ending 2030, up from the previous 4% to 6%.
• Capital investments for 2026 are projected to be approximately $800 million, with $230 million allocated to customer growth and the remainder for system integrity and replacement projects.
• The anticipated average rate base for 2026 is $6.3 billion, with an estimated average annual rate base growth of 7% to 9% through 2030.
• Total capital investments for the five years ending 2030 are expected to be approximately $4.3 billion, including $1.2 billion for growth capital.
• Operating costs over the five-year period are expected to increase by an average of 3% to 4% per year, a reduction from the 4% average annual increase indicated in the 2025 guidance.
• Net long-term financing needs for 2026 through 2030 are estimated at approximately $1.3 billion, with about 30% expected to be equity.
• The company has outstanding forward sale agreements covering approximately 2.9 million shares of common stock at an average price of approximately $78 per share, with $205 million expected to settle at year-end 2025.
• An average annual dividend growth rate of 1% to 2% is expected through 2030, subject to board approval.

Sentiment

Score: 8

Explanation: The company provided strong financial guidance for 2026 and significantly raised its long-term diluted EPS growth rate, indicating confidence in future performance, strategic investments, and a favorable operating environment.

Positives

• Raised long-term diluted earnings per share (EPS) growth rate to 5% to 7% from the previous 4% to 6%, signaling strong future performance expectations.
• Robust capital investment plan of approximately $800 million in 2026, with significant allocation to customer growth and system integrity, supporting long-term asset base expansion.
• Projected average annual rate base growth of 7% to 9% through 2030, indicating a healthy and expanding regulated asset base.
• Reduction in the expected average annual operating cost increase to 3% to 4% over the five-year period, demonstrating improved cost management.
• Strong balance sheet with stable credit ratings (Moody's A3, S&P A-) and significant liquidity, including a $1.5 billion revolving credit facility.
• Favorable regional dynamics in Kansas, Oklahoma, and Texas, characterized by strong in-migration, robust economic development, and supportive regulatory frameworks.

Negatives

• The benefits of new rates and customer growth in 2026 are partially offset by higher operating expenses and depreciation expense resulting from capital investments.

Risks

• Ability to recover costs, income taxes, and allowed rate of return in regulated rates or other recovery mechanisms.
• Potential for cyber-attacks or breaches of technology systems that could disrupt operations or expose confidential information.
• Changes in regulation of natural gas distribution services, particularly in Oklahoma, Kansas, and Texas.
• Impact of the economic climate on the natural gas requirements of residential and commercial customers.
• Competition from alternative forms of energy, including electricity, solar, wind, geothermal, and biofuels.
• Adverse weather conditions and variations, including severe storms and climate change effects on supply, demand, and costs.
• Indebtedness could increase vulnerability to adverse economic conditions and limit ability to borrow additional funds.
• Ability to secure reliable, competitively priced, and flexible natural gas transportation and supply.
• Operational and mechanical hazards or interruptions in the natural gas distribution system.
• Availability of and access to funds to meet debt obligations and fund operations and capital expenditures, including obtaining capital on commercially reasonable terms.

Future Outlook

ONE Gas projects strong financial performance for 2026 with net income between $294 million and $302 million and diluted EPS between $4.65 and $4.77. The company has raised its long-term diluted EPS growth rate to 5% to 7% through 2030, driven by significant capital investments of approximately $4.3 billion over five years, targeting system integrity, replacement projects, and customer growth. An average annual rate base growth of 7% to 9% is expected, supported by a reduction in operating cost increases to 3% to 4% annually. The company anticipates $1.3 billion in net long-term financing needs, with 30% from equity, and plans for 1% to 2% annual dividend growth.

Management Comments

• "As we enter 2026, we are fully leveraging opportunities to support customer growth and invest in our system, all while maintaining our commitments to safety and customer affordability."
• "We remain focused on meeting evolving customer needs and advancing investments that position us for ongoing, sustainable growth."

Industry Context

ONE Gas operates in a favorable regional environment across Kansas, Oklahoma, and Texas, characterized by strong in-migration and robust economic development. Natural gas is positioned as a core energy resource, supported by energy choice legislation in all jurisdictions. The company is seeing emerging opportunities to support gas-fired power generation for manufacturing, electric grid, and data center needs, with approximately 30% of U.S. natural gas produced in Texas and Oklahoma. Coordinated infrastructure planning with state and local stakeholders is positioning the company to efficiently serve incremental load, including $87 billion in new manufacturing projects announced since 2022 and approximately 23,000 new meter sets over the trailing 12 months.

Comparison to Industry Standards

• ONE Gas is one of the largest natural gas utilities in the United States, serving over 2.3 million customers.
• The company holds significant market share in its operating regions: 71% in Kansas (largest), 89% in Oklahoma (largest), and is the third largest in Texas (13% market share) in terms of customers.
• ONE Gas is included in the S&P MidCap 400 Index, indicating its standing among mid-sized U.S. companies.
• The average monthly residential customer bill CAGR of ~2.3% since the company's spin-off is below the pace of general inflation (CPI-U) over the same period, suggesting competitive affordability for customers compared to broader economic trends.

Stakeholder Impact

• Shareholders: Expected to benefit from a raised long-term EPS growth rate (5-7%) and consistent dividend growth (1-2% annually), indicating potential for increased returns.
• Customers: The company's focus on safety, customer affordability (average monthly bill CAGR below inflation), and significant investment in system integrity and replacement projects aims to ensure reliable and affordable natural gas service.
• Employees: Continuous investment in workforce excellence, developing talent, and advancing capabilities supports employee growth and operational efficiency.
• Communities: Strategic investments and expansion opportunities support regional economic development, particularly in areas with strong in-migration and new manufacturing projects.

Next Steps

• ONE Gas executive management team will conduct a conference call on Tuesday, December 2, 2025, at 8 a.m. Eastern Standard Time to discuss the guidance.
• The company expects to settle approximately $205 million of its outstanding equity under forward sale agreements at year-end 2025.
• The remaining balance of forward sale agreements is expected to be rolled forward for settlement at year-end 2026.
• The Texas Gas Service rate case, where a partial settlement has been reached, is pending a final decision by the Railroad Commission in January 2026.

Key Dates

Recommendation

The company's decision to raise its long-term diluted EPS growth rate, coupled with a robust capital investment plan focused on both system integrity and customer growth, signals strong confidence in its future performance. The stable regulatory environment, favorable regional economic dynamics, and commitment to customer affordability further enhance its investment appeal. The strong balance sheet and consistent dividend growth make ONE Gas an attractive opportunity for long-term investors seeking sustainable returns in the utility sector.

Keywords

Natural Gas Utility, Financial Guidance, EPS Growth, Capital Investments, Rate Base, ONE Gas, OGS, Energy, Oklahoma, Kansas, Texas