10-K: ONE Gas Reports Fiscal Year 2024 Results, Navigates Regulatory Landscape and Invests in Infrastructure

ONE Gas, Inc. reports its fiscal year 2024 financial results, highlighting strategic capital investments and navigating regulatory mechanisms across its service territories.

Summary

• ONE Gas, Inc., a 100-percent regulated natural gas distribution utility, reported net income of $222.9 million, or $3.91 per diluted share, for the year ended December 31, 2024.
• This compares to $231.2 million, or $4.14 per diluted share, for 2023, and $221.7 million, or $4.08 per diluted share, for 2022.
• The company's strategy focuses on workforce engagement, safe operations, capital investments, customer service, and delivering foundational energy.
• Capital expenditures and asset removal costs increased to $762.1 million in 2024, driven by investments in system integrity and extending service to new areas.
• The company anticipates capital expenditures and asset removal costs to be approximately $750 million for 2025.
• ONE Gas operates under regulatory oversight in Oklahoma, Kansas, and Texas, with rates and charges established by the OCC, KCC, and local municipalities or the RRC, respectively.
• The company utilizes various regulatory mechanisms, including PBRC, GSRS, and GRIP, to adjust rates between rate cases.
• Weather normalization mechanisms are in place in all service areas to mitigate the impact of weather on natural gas sales.
• The company purchased 149 Bcf of natural gas supply in 2024 and has 60.8 Bcf of natural gas storage capacity under contract.
• ONE Gas supplies natural gas to 164 CNG fueling stations and is evaluating opportunities in alternative fuels like RNG and hydrogen.
• The company employed approximately 3,900 people as of February 1, 2025, with approximately 700 subject to collective bargaining agreements.
• ONE Gas is committed to a zero-incident safety culture and tracks operational safety measures such as TRIR, DART, and PVIR.
• The company has an Inclusion and Diversity Council and employee-led resource groups to foster an inclusive culture.
• In January 2025, ONE Gas declared a dividend of $0.67 per share ($2.68 per share on an annualized basis).

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While net income decreased, the company is making significant capital investments and navigating the regulatory landscape effectively. The dividend declaration is also a positive sign.

Positives

• The company is committed to a zero-incident safety culture.
• ONE Gas has an Inclusion and Diversity Council and employee-led resource groups to foster an inclusive culture.
• The company utilizes various regulatory mechanisms, including PBRC, GSRS, and GRIP, to adjust rates between rate cases.
• Weather normalization mechanisms are in place in all service areas to mitigate the impact of weather on natural gas sales.
• The company has 60.8 Bcf of natural gas storage capacity under contract.

Negatives

• Net income decreased from $231.2 million in 2023 to $222.9 million in 2024.
• The company is subject to regulatory requirements for pipeline integrity, pipeline and cyber security, and environmental compliance, which impact operating expenses and capital expenditures.

Risks

• The company's financial performance is contingent on regulatory constructs, natural gas consumption, customer growth, operating performance, and the perceived value of natural gas.
• ONE Gas is subject to regulatory requirements for pipeline integrity, pipeline and cyber security, and environmental compliance.
• The company faces competition from other energy alternatives and local distribution companies.
• Unfavorable economic and market conditions could adversely affect the company's financial condition, earnings, and cash flows.
• The inability to access capital or significant increases in the cost of capital could adversely affect the company's results of operations, cash flows, and financial condition.

Future Outlook

The company expects capital expenditures and asset removal costs to be approximately $750 million for 2025.

Industry Context

The announcement reflects the ongoing trends in the natural gas distribution industry, including regulatory scrutiny, infrastructure investments, and the exploration of alternative fuels.

Comparison to Industry Standards

• The company regularly ranks in the top quartile for similar-sized LDCs for TRIR, DART and PVIR metrics.
• The ONE Gas peer group used in this graph is the same peer group that will be used in determining our level of performance under our 2024 performance units at the end of the three-year performance period and is comprised of the following companies: Alliant Energy Corporation; Atmos Energy Corporation; Avista Corporation; Black Hills Corporation; CenterPoint Energy, Inc.; Chesapeake Utilities Corporation; CMS Energy Corporation; New Jersey Resources Corporation; NiSource Inc.; Northwest Natural Holding Company; NorthWestern Energy Group, Inc.; Southwest Gas Holdings, Inc.; and Spire Inc.

Stakeholder Impact

• Shareholders will receive a dividend of $0.67 per share ($2.68 per share on an annualized basis).
• Customers will benefit from investments in system integrity and reliability.
• Employees are subject to collective bargaining agreements and benefit from the company's commitment to safety and inclusion.

Next Steps

• Texas Gas Service made a GRIP filing for all customers in the West-North service area, requesting a $8.2 million increase to be effective in June 2025.
• Texas Gas Service made a GRIP filing for all customers in the Central-Gulf service area, requesting a $15.4 million increase to be effective in June 2025.
• Kansas Gas Service requested to increase the cap on the AAO from $15 million to $32 million on January 3, 2025.

Key Dates