Q3 2023 ONE Gas Inc Earnings Call

Good day and welcome to the one gas 2023 third quarter earnings Conference call.

Today's conference is being recorded.

I would now like to turn the conference over to Erin Bailey. Please go ahead Ms Dani.

Thank you Elliot and good morning, everyone and thank you for joining us on our third quarter 2023 earnings Conference call.

This call is being webcast live and a replay will be available later today.

After our prepared remarks, we are happy to take your questions.

Statements made during this call that might include one gas expectations or predictions should be considered forward looking statements and are covered by the safe Harbor provisions of the private Securities Litigation Reform Act of 1995, The Securities Act of 1933, and the Securities and Exchange Act of 19.

34, H as amended.

Actual results could differ materially from those projected in any forward looking statements.

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

Joining us on the call. This morning are Sid Mcannally, President and Chief Executive Officer, Karen Longhorn Senior Vice President and Chief Financial Officer, and Curtis Dinan, Senior Vice President and Chief operating Officer, and now I'll turn the call over to Ted.

Thanks, Erin and good morning, everyone. Thank you for joining us as we discuss our third quarter performance.

Prudent management and operational execution have kept us on track to achieve the midpoint of our 2023 financial guidance, despite strengthening macroeconomic headwinds affecting affecting our industry.

As our results show, we've met the dual challenges presented by inflation and higher interest rates. This year, while also leveraging process improvements to better balance our capital deployment, putting us ahead of our capital plan for the year.

We continue to effectively meet growing customer demand, while also prioritizing safety and enhancing the reliability of our system.

The investments, we're making position us well to support growing customer needs long into the future.

I've spoken before about the economic growth, we're experiencing in Texas, Oklahoma, and Kansas and effective mix of business friendly government policies access to affordable energy and attractive cost of living are converging to bring new manufacturing and technology based jobs to our region.

Operator: Good day and welcome to the ONE Gas 2023 Third Corps at Learning's Conference Call. This conference is being recorded.

With these jobs come families needing places to live and looking to become parts of our communities.

Erin Dailey: Now this time, our Naluts turn the conference over to Erin Dailey, please go ahead Miss Dailey. Thank you, Elliot. Good morning everyone and thank you for joining us on our third quarter, 2023, Earning Conference Call. This call is being webcast live and a replay will be available later today. After our prepared remarks, we are happy to take your questions.

Economic development of this guide is the most durable variety of growth as it rests on strong and long dated fundamentals.

This type of development also presents growing demand for natural gas for homes for businesses and for industry.

While the jump in interest rates is understandably pressured homebuilding in the near term we remain bullish about the intermediate and long term pillars of growth across our regions as.

Erin Dailey: Statements made during this call that might include one gas expectations or predictions should be considered forward-looking statements and are covered by the state's harbor provision of the Private Security's litigation reform act of 1995, the Securities Act of 1933, and the Securities and Exchange Act of 1934, each as amended. Actual results could differ materially from those projected in any forward-looking statement. For a discussion of factors that could cause actual results to differ, please refer to our SEC filing.

As we deploy capital we remain thoughtful about making the right investments. So our system is capable of reliably serving the growing customer base that we see today and the substantial increase in growth that has to come as always safety remains our top priority.

Now I'll turn it over to Karen to discuss our financial performance for the quarter Karen.

Thanks, Ed and good morning, everyone.

<unk> noted we had solid financial performance this quarter, despite the headwinds posed by rising interest rates and sticky the moderating inflation.

Sid Mcannally: Joining us on the call this morning are Sid McAnnally, President and Chief Executive Officer, Karen Lawhorn, Senior Vice President and Chief Financial Officer, and Curtis Dynan, Senior Vice President and Chief Operating Officer, and now I'll turn the call over to Sid. Thanks, Aaron, and good morning everyone. Thank you for joining us as we discuss our third quarter performance. Prudent management and operational execution have kept us on track to achieve the midpoint of our 2023 Financial Guidance, despite strengthening macroeconomic headwinds affecting our industry.

Our teams have done a great job managing the risks we can control as a result, we are narrowing our earnings guidance with earnings per diluted share now expected to be in the range of $4 <unk> to $4 22.

We've also seen good execution on our capital projects, we expect to invest approximately $725 million of capital in 2023 up from the $675 million reflected in our original guidance.

As Chris will discuss in a moment the increase is primarily attributable to system maintenance and reinforcement projects.

Net income for the third quarter was $25 2 million or <unk> 45 per diluted share compared with $23 7 million or <unk> 44 cents per diluted share in the same period 2022.

Sid Mcannally: As our results show, we've met the dual challenges presented by inflation and higher interest rates this year, while also leveraging process improvements to better balance our capital deployment, putting us ahead of our capital plan for the year. We continue to effectively meet growing customer demand, while also prioritizing safety and enhancing the reliability of our system. The investments we're making position us well to support growing customer needs long into the future. I've spoken before about the economic growth we're experiencing in Texas, Oklahoma, and Kansas.

As I have noted in previous quarters, rising interest rates and the inverted yield curve continue to present challenges.

For perspective, excluding amounts related to the securitization interest expense through the first three quarters of 2023 is that approximately 40% from the same period last year.

The increase is primarily attributable to the rising rates on commercial paper and our issuance of $300 million of $4 two 5% senior notes in August 2022.

A reminder, that in the first quarter of 2024, we have $300 million of three 6% notes and $473 million of one 1% notes coming due.

Sid Mcannally: An effective mix of business-friendly government policies, access to affordable energy, and attractive costs of living are converging to bring new manufacturing and technology-based jobs to our region. With these jobs, come families needing places to live and looking to become parts of our communities. Economic development of this kind is the most durable variety of growth, as it rests on strong and long-dated fundamentals. This type of development also presents growing demand for natural gas, for homes, for businesses, and for industry.

We are considering multiple factors such as interest rate yield spreads and our debt to equity ratio as we look to refinance those notes.

As expected employee expenses were also elevated as compared to the third quarter last year due to planned investments in our workforce with operations and maintenance expenses due to labor and benefit costs, increasing $7 5 million.

However, we saw a decrease of $2 $3 million due to lower outside services costs as we continue to in source work previously supported by contractors we.

Sid Mcannally: While the jump in interest rates is understandably pressured home building in the near term, we remain bullish about the intermediate and long-term pillars of growth across our regions. As we deploy capital, we remain thoughtful about making the right investments, so our system is capable of reliably serving the growing customer base that we see today and the substantial increasing growth that is to come. As always, safety remains our top priority.

We anticipate O&M expense increases will continue to moderate as we realize the benefits of in sourcing work and improved internal processes and as inflation continues to ease in line with our assumptions.

We have continued to enter into equity forward sale agreement greatly de risking our anticipated market exposure in September we executed additional forward sale agreements for 138 million shares of our common stock with required settlement by December 31 2024.

Caron Lawhorn: Now I'll turn it over to Caron to discuss our financial performance for the quarter. Thanks Sid and good morning everyone. As Sid noted, we had solid financial performance this quarter despite the headwinds posed by rising interest rates and sticky the moderating inflation. Our teams have done a great job managing the risks we can control.

In total we now have forward sale agreements covering approximately 169 million shares of common stock, which must be settled by the end of this year and approximately $2 9 million shares which must be settled by the end of 2024.

Caron Lawhorn: As a result, we are narrowing our earnings guidance with earnings for diluted share, now expected to be in the range of $4.06 to $4.22. We've also seen good execution on our capital projects. We expect to invest approximately $725 million of capital in 2023 up from the $675 million reflected in our original guidance. As Curtis will discuss in a moment, the increased primarily attributable to system maintenance and reinforcement projects.

All forward shares been settled at September 30th we would've received net proceeds of approximately $351 million in.

Implying an average per share price of roughly $76 45.

Amid continued geopolitical uncertainty we have also taken steps to ensure we have adequate liquidity as we execute our capital plan on October 20th we expanded our credit facility to $1 2 billion from $1 billion.

Yesterday, the one gas board of directors declared a dividend of <unk> 65 per share unchanged from the previous quarter.

Caron Lawhorn: Net income for the third quarter was $25.2 million or $45 cents per diluted share compared with $23.7 million or $44 cents per diluted share in the same period 2022. As I have noted in previous quarters, rising interest rates and the inverted yield curve continue to present challenges. For prospective excluding amounts related to the canned securitization, interest expense to the first three quarters of 2023 is at approximately 40% from the same period last year.

As we close out the year, we will remain focused on prudent expense management as we serve our customers.

Curtis I'll turn it over to you.

Thank you Karen and good morning, everyone.

I'll start with an update on our regulatory activities.

Last December we filed a request for a voluntary renewable natural gas tariff in Oklahoma, which will give customers the opportunity to purchase the environmental attributes of RMG.

A unanimous settlement agreement recommending approval of the tariff was filed and a hearing before an administrative law judge was held on October 19th and.

Caron Lawhorn: The increase is primarily attributable to the rising rates on commercial paper and our issuance of $300 million of $4.25% senior notes in August 2022. A reminder that in the first quarter of 2024, we have $300 million of $3.6% notes and $473 million of 1.1% notes coming due. We are considering multiple factors such as interest rates, yield spreads, and our debt to equity ratio as we look to refinance those notes. As expected, employee expenses were also elevated as compared to the third quarter last year due to planned investments in our workforce, with operations and maintenance expenses due to labor and benefit costs increasing $7.5 million.

An order is expected before year end, which will allow us to implement the program.

In Texas, we filed a gas reliability infrastructure program for the consolidated West North region in March.

The Railroad Commission and all municipalities, except for three approved a $7 3 million increase or allowed it to take effect with no action.

Texas gas service appealed the three municipalities denial and implemented the new rates in June subject to the outcome of the appeal.

In August the Railroad Commission granted the appeal and approved the increase.

Caron Lawhorn: However, we saw a decrease of $2.3 million due to lower outside services costs as we continued to in-source work previously supported by contractors. We anticipate O&M expense increases will continue to moderate as we realize the benefits of in-sourcing work and improved internal processes and as inflation continues to ease in line with our assumptions. We have continued to enter into equity forward sale agreements, greatly de-risking our anticipated market exposure. In September, we executed additional forward sale agreements for 1.38 million shares of our common stock with required settlement by December 31, 2024.

Finally in August Kansas Gas service submitted an application to the Kansas Corporation Commission requesting an increase of approximately $8 million pursuant to the gas system reliability surcharge statute.

Which allows Kansas gas service to file for a rate adjustment to recover and earn a return on qualifying infrastructure investments incurred between rate filings. The Casey has until late December to issue an order.

Caron Lawhorn: In total, we now have forward sale agreements covering approximately 1.69 million shares of common stock which must be settled by the end of this year and approximately 2.9 million shares which must be settled by the end of 2024. Had all forward shares been settled as September 30, we would have received net proceeds of approximately $351 million, implying an average per share price of roughly $76.45. Amid continued geopolitical uncertainty, we have also taken steps to ensure we have adequate liquidity as we execute our capital plans.

Turning to commercial and operating activities as Karen noted, we expect to surpass our planned capital deployment for the year in part due to process changes that have improved project planning and execution.

Those improvements along with mild winter weather allowed us to complete more of our planned work in the force in the first quarter and.

And we have maintained this pace throughout the year.

Of note, we are nearing completion of our <unk> phase II project. The last of the major reinforcement projects to arise out of our evaluation of winter storm Yuri.

The diligence of our operations Engineering and project management teams to execute our work plan puts us in an even stronger position as we head into the winter heating season.

Caron Lawhorn: On October 20, we expand our credit facility to $1.2 billion from $1 billion, dollars.

Caron Lawhorn: Yesterday, the ONE Gas Board of Directors declared a dividend of 65 cents per share unchanged from the previous quarter. As we close out the year, we will remain focused on prudent expense management as we serve our customers.

Looking at growth, we continue to see a slight deceleration in the pace of new meter sets as elevated mortgage rates impact the immediate term decisions of homebuilders and potential buyers.

Curtis Dinan: Curtis, I'll turn it over to you. Thank you, Karen.

Year to date through September our meter sets have matched the pace set in 2021.

Curtis Dinan: Good morning, everyone. I'll start with an update on our regulatory activities. Last December, we filed a request for a voluntary renewable metro gas tariff in Oklahoma, which will give customers the opportunity to purchase the environmental attributes of RNG. A unanimous settlement agreement recommending approval of the tariff was filed in a hearing before an administrative law judge was held on October 19th and order is expected before year end, which will allow us to implement the program.

As we discussed on our second quarter call. Our region continues to enjoy strong economic growth with new employers moving into our territories, bringing jobs people and an ongoing need for new housing.

In fact, we are on pace to post a record number of new meter sets for the month of October Despite 30 year mortgage rates cresting, 8% earlier this month.

This illustrates both the challenges in forecasting when baseline conditions remain volatile and the durability of the regional growth story said described earlier.

Curtis Dinan: In Texas, we filed a gas reliability infrastructure program for the consolidated West North region in March. The Railroad Commission and all municipalities, except for three, approved a $7.3 million increase or allowed it to take effect with no action. Texas Gas Service appealed the three municipalities denial and implemented the new rates in June subject to the outcome of the appeal. In August, the Railroad Commission granted the appeal and approved the increase. Finally, in August, Kansas Gas Service submitted an application to the Kansas Corporation Commission requesting an increase of approximately $8 million, pursuant to the gas system reliability surcharge statute, which allows Kansas Gas Service to file for a rate adjustment to recover and earn a return on qualifying infrastructure investments incurred between rate filings. The KCC has until late December to issue an order.

We remain prepared to meet the growing demand for gas that accompanies that economic development.

Now I'll turn it over to Sid for closing remarks.

Thank you both.

A high performing workforce is the foundation of the essential work that we do.

Over the last three years, we've come through a global pandemic and multiple winter storms events that ultimately strengthened our commitment to one another and to the customers we serve.

The high levels of service maintained through those challenges strengthened our customers' confidence in the reliability of our service and across the one gas footprint. Our team shared the experience of providing an essential service to our customers in a way that reinforced the value of culture and connection.

At the end of September we welcomed Angela Copeland to one gas as senior Vice President and Chief Human Resources officer to help us navigate the changing workplace and to continue our investment in our primary asset the people that we work alongside.

Curtis Dinan: Turning to commercial and operating activities, as Karen noted, we expect to surpass our planned capital deployment for the year in part due to process changes that have improved project planning and execution. Those improvements, along with mild winter weather, allowed us to complete more of our planned work in the first quarter and we have maintained this pace throughout the year. Of note, we are nearing completion of our MoPAC phase two project, the last of the major reinforcement projects to arise out of our evaluation of winter storm Yuri.

Angela brings deep executive experience and a passion for developing people and we look forward to the contribution she will make to our company as we focus on ensuring that one gas continues to be a place where we can all contribute grow and thrive.

In closing I. Thank each of my coworkers for their commitment and dedication to delivering safe and reliable natural gas to our two 3 million customers.

Thank you all for joining us this morning, operator, we're now ready for questions.

Curtis Dinan: The diligence of our operations, engineering and project management teams to execute our work plan puts us in an even stronger position as we head into the winter heating season. Looking at growth, we continue to see a slight deceleration in the pace of new meter sets as elevated mortgage rates impact the immediate term decisions of home builders and potential buyers. Year to date through September, our meter sets have matched the pace set in 2021.

Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad.

Using a speaker phone. Please make sure your mute function is turned off to allow your signal to reach our equipment.

Again press Star one to ask a question.

We'll close from moment to allow everyone an opportunity to signal for questions.

Our first question comes from Gabe Moreen with Mizuho. Your line is open.

Curtis Dinan: As we discussed on our second quarter call, our region continues to enjoy strong economic growth with new employers moving into our territories, bringing jobs, people and an ongoing need for new housing. In fact, we are on pace to post a record number of new meter sets for the month of October, despite 30-year mortgage rates cresting 8% earlier this month. I think this illustrates both the challenges and forecasting when baseline conditions remain volatile and the durability of the regional growth stories said described earlier.

Hey, good morning, everyone appreciating that there's a lot of moving parts that probably will go into your refreshed five year outlook, but can you just speak a little bit and I don't want to front run it.

Sid Mcannally: We remain prepared to meet the growing demand for gas that accompanies that economic development, and now turn it over to Sid for closing remarks. Thank you both.

To how you're feeling about your 4% to 6% EPS growth outlook over that the last time you issued a given the.

The refinancing the moderating O&M meter sets and customer growth. So I'm, just curious kind of how you're feeling about that given also the shifts that have occurred since you issued the last part of your plan.

Okay. That's good to hear from you and of course, we appreciate the question as you point out. This call is really pointed at third quarter and prior year performance and so we will not provide guidance today, but I think you look at the performance of the company and the way that we've been able to navigate a challenging <unk>.

Sid Mcannally: A high-performing workforce is the foundation of the essential work that we do. Over the last three years, we've come through a global pandemic and multiple winter storms, events that ultimately strengthened our commitment to want another and to the customers we serve. The high levels of service maintained through those challenges, strengthened our customers' confidence and the reliability of our service, and across the ONE Gas footprint, our team shared the experience of providing an essential service to our customers in a way that reinforced the value of culture and connection.

Environment this year.

Curtis spoke to the.

The in sourcing and Karen talked about the financial impact of the in sourcing that we've done that's looked at how we manage and increasing cost of outside services and we've talked before about the fact that when we have the opportunity to bring work inside the company.

Ken compete both from a performance and a cost standpoint, we'll do that and I think that's borne fruit for us that's a strategy that is likely to continue.

Sid Mcannally: At the end of September, we welcomed Angela Copeland to ONE Gas as Senior Vice President and Chief Human Resources Officer to help us navigate the changing workplace and to continue our investment in our primary asset. The people that we work alongside. Angela brings deep executive experience and a passion for developing people, and we look forward to the contributions she will make to our company as we focus on ensuring that ONE Gas continues to be a place where we can all contribute, grow and thrive.

<unk> also spoke to the way that we are looking at managing our financial structure and I think the way. The company has utilized the ATM in block sales demonstrates that we will be opportunistic as we think about the rest of this year.

Demonstrated by the way that we've performed.

Earlier in the year, Karen anything you'd add.

Sid Mcannally: In closing, I thank each of my co-workers for their commitment and dedication to delivering safe and reliable natural gas to our 2.3 million customers. Thank you all for joining us this morning.

I think that's a great summary.

And we look forward to talking more after we release guidance about our view of what.

What's the next few years look like given this continued higher for longer interest rates.

Operator: Operator, we're now ready for questions. Thank you. If you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We will pause for a moment to allow everyone an opportunity to signal questions.

Continued inversion of the yield curve, which everyone is grappling with.

Gabe the only other thing that I would mentioned before passing to Curtis is.

So in the prepared remarks about the durability of our growth.

And the one thing that we have confidence in us.

Demonstrated by our recent performance with mortgage rates, where they are.

As the longer term story, we have a significant amount of clarity into growth in our service territory going forward.

Gabriel Moreen: Our first question comes from Kate Maureen, Whitney Suho. Your line is open. Hey, good morning everyone. I'm appreciating that there's a lot of moving parts that probably will go into your refreshed 5-year outlook. Can you just speak a little bit and I don't need to frontrun it to how you're feeling about your 4-6% VPS growth outlook over that last time you should have given the refinancing, the moderating O&M, the meter sets and customer growth. I'm just curious kind of how you're feeling about that given all the shifts that have occurred since you should last 5-year plan.

And we think durability is an important factor of that growth. When we look at the underlying mechanics of economic development in our service territory and the knock on growth that comes with that we've got a pretty clear picture about what we need to do as we think about preparing for that and I think we've demonstrated that with the attention that we pay to our capital.

Process and why you see the over performance in our capital performance.

To date Curtis anything you'd add.

Yes.

So just around.

The growth activity that we see we have seen again this year a little bit of a deceleration in meter sets, but October was a bit of a.

Sid Mcannally: Okay, it's good to hear from you and of course we appreciate the question. As you point out, this call is really pointed at third quarter in prior year performance and so will not provide guidance today. But I think you look at the performance of the company in the way that we've been able to navigate a challenging environment this year. Curtis spoke to the in sourcing and Karen talked about the financial impact of the in sourcing that we've done that's looked at how we manage an increasing cost of outside services.

Positive turn for US we do continue to see developers and builders active in our territory. So while there may be a pause.

We really view that as more temporary than than long lasting so maybe October is starting to show the signs of that.

Thank you for the question Gabe.

Our next question comes from James <unk> with Guggenheim Partners. Your line is open.

Okay.

Good morning, guys how are you.

Sid Mcannally: And we've talked before about the fact that when we have the opportunity to bring work inside the company and can compete both from a performance and a cost endpoint, we'll do that. And I think that's born fruit for us. That's a strategy that is likely to continue. Karen also spoke to the way that we are looking at managing our financial structure. And I think the way that the company has utilized the ATM and block sales demonstrates that will be opportunistic as we think about the rest of this year.

Well, Jamie how are you this morning.

Doing well thank you.

Just jumping a bit ahead first I want to ask you with in that.

But.

In terms of timing should we expect the 2024 annual guidance slides at the end of November again like they came last year or would you be reverting back to releasing in January so we get a sense of when do you expect.

Yes.

Jamison.

And this ties back to our answer to <unk> question.

Sid Mcannally: And it demonstrated by the way that we performed earlier in the year. Karen anything you'd ask. I think that's a great summary, and we look forward to talking more after we release guidance about our, you know, view of what the next few years look like, given this continued hire for longer interest rates and the continued version of the yield curve which everyone is grappling with. Gave the only other thing that I would mention before passing to Curtis is I spoke in the prepared remarks about the durability of our growth and the one thing that we have confidence in as demonstrated by recent performance with mortgage rates where they are is the longer term story we have a significant amount of clarity into growth in our service territory going forward.

We believe the more clarity we can provide.

Now the future opportunities that the company has the better off we are and being clear about.

The future and the better off you are in being able to ask us questions, we try to be as transparent as possible.

Our past behavior demonstrates that we think transparency is always a good policy, but it's particularly helpful. When you have the kind of forward story that we have so we thought the cadence worked very well last year, particularly because it gave us the opportunity in the December investor meetings to speak to the forward year.

Sid Mcannally: And we think durability is an important factor of that growth when we look at the underlying mechanics of economic development in our service territory and the knock on growth that comes with that. We've got a pretty clear picture about what we need to do is we think about preparing for that and I think we've demonstrated that with the attention that we've paid to our capital process and why you see the overperformance in our capital performance to date.

So right now our plans are to continue the cadence that we started last year, because we think it was helpful to everyone.

Perfect. That's great I mean, we'd always rather have information sooner rather than later I don't think anyone on discrete.

Yes.

Thank you for answering that.

One more on.

Specific to the $50 million of incremental Capex when should we be assuming that that spending in particular begins earning a return.

Sid Mcannally: Curtis anything you'd add? So just around the growth activity that we see we have seen, you know, again this year a little bit of a acceleration in meter sets but October was a bit of a positive turn for us. We do continue to see developers and builders active in our territory so other may be a pause. I think we really view that as more temporary than than long lasting so maybe October is starting to show the sides of that. Thank you for the question, Gabe.

Jamie This is Curtis and if you look back in 2023 of the cadence of our filings whether it was grip filings in Texas, our PBR filing in Oklahoma or <unk> in Kansas will be following that same cadence in the coming years as we have for each of the <unk>.

Last few years.

So the spending was kind of.

<unk> gold across all categories that it wasn't specific to any particular bucket that might have a nearer term recovery period or.

Thing else, we could model or factor in.

Jamieson Ward: Our next question comes from Jameson Warth with Susan Hympathness. Your line is open. Morning guys, how are you? We're well, Jameson. How are you this morning? Doing well. Thank you. Just jumping a bit ahead first.

Just.

To clarify there.

All of our capital goes into the grip filings all of our capital goes into the PBR filings and the majority of our capital spend in Kansas goes into the GSR S filings.

Sid Mcannally: We want to ask you what's in it, but in terms of timing, should we expect the 2024 annual guidance slides at the end of November? Again, like they came last year or would you be reverting back to releasing in January? So we get a sense of when to expect. Jameson and this ties back to our answer to Gabe's question. We believe the more clarity we can provide about the future opportunities that the company has, the better off we are in being clear about the future and the better off you are in being able to ask us questions.

And most of the increase.

As it relates to this year was more system maintenance.

Type of spending so that's what would qualify in Kansas as well.

Thank you very much that's all I have.

Thank you for your question.

As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad now.

We now plan to tonnage James with Bank of America. Your line is open.

Hi, good morning.

Good morning, gentlemen.

Do you.

Do you guys have any visibility for plans for terming out some of the upcoming maturities.

Sid Mcannally: We try to be as transparent as possible. I think our past behavior demonstrates that we think transparency is always a good policy, but it's particularly helpful when you have the kind of forward story that we have. So we thought the cadence worked very well last year, particularly because it gave us the opportunity in the December investor meetings to speak to the forward year. So right now our plans are to continue the cadence that we started last year because we think it was helpful to everyone. Perfect. That's great. I mean, we'd always rather have information sooner rather than later. I don't think anyone will disagree. Thank you for answering that.

Versus your short term debt and then.

You've kind of mentioned a little bit in the question and the answer to Jameson, but.

How should we think about the cadence of your.

Formal rate case filings in timing on your ability to recover the portion that is recoverable.

Great. Thank you.

Yes, let's go to Curtis to speak to right cadence and then Karen can speak to your initial question Tanner Curt Let me just go state by state.

So the capital spending everything we spend in Texas qualifies for the grip filing.

And if you saw the cadence that we had here in 'twenty three in February we filed central tax in March we filed.

Curtis Dinan: I just have one more. On the specific to the 50 million of incremental capex, when should we be assuming that that spending in particular begins earning a return? James and this is Curtis. And if you look back in 2023, the cadence of our filings, whether it was grip, filings in Texas, our PBR filing in Oklahoma or GSRS in Kansas, we'll be following that same cadence in the coming years as we have for each of the past few years.

West Tex and then we have the rate case and RGB instead of the rate case next year, we would have a xhosa filing and you can look at cadence in prior years to have a sense of that and Oklahoma all of our capital is recovered through the PBR filing, which we typically do at the end of February.

And in Kansas The capital that we've spent in 2023 through the end of June was a part of the filing that we did just a couple of months ago in August.

Our next filing for <unk> in Kansas would be next August you can do one every 365 days sooner than that and that will pick up all capital spending through June 30 of next year, all capital spending that qualifies for for that mechanism, which is the majority of our spending in Kansas.

Curtis Dinan: So this spending was kind of sprinkled across all categories, then it wasn't specific to any particular bucket that might have a newer term recovery period or or anything else we could model or factor in. Just to clarify there. No, all of our capital goes into the grip filings, all of our capital goes into the PBR filings and the majority of our capital spending in Kansas goes into the GSRS filing. And most of the increase as it relates to this year was more system maintenance type of spending. So that's what would qualify in Kansas as well. Thank you very much.

And so just a question on the refinancing I really don't have much more to add than what I said in the comments that we're looking at all factors.

Rates and spreads where they are different tenors.

How that impacts our maturity profile.

How it impacts our capital structure, which supports our regulatory contract all of those things are things that we're looking at and balancing as we refinance that debt.

Yes, the only thing I would add is.

Speak to how we have prepared and are preparing for the challenges that we think we will face going forward.

Operator: That's all I have. Thank you for your question. As a reminder, if you'd like to ask a question, please press star one on your telephone keypad now.

We have.

<unk> increased the capacity of our regulatory group recognizing that the cadence of rate activity will increase and that started.

Tanner James: We now turn to Tanner James with Bank of America. Your line is open. Hi, good morning. Good morning, Tanner. Do you guys have any visibility for plans for terming out some of the upcoming maturities versus your short term debt? And then you kind of mentioned a little bit in the question or in the answer to James. But how should we think about the cadence of your formal rate case filings and timing on your ability to recover the portion that is recoverable?

Last year really early last year.

We've also done the same when you look at the financial side of the house. So we think we built capacity to take on the challenges in the short term debt continuing to support the opportunities that we have in the long term.

Okay.

Understood. Thank you and then.

Commodities declining here, how do you how do you estimate the customer build trajectory for the upcoming winter 'twenty three to 'twenty four.

Tanner James: Great. Thank you. Yeah, let's go to Curtis to speak to rate cadence and then Karen can speak to your initial question, Tanner Curtis. Let me just go state by state. So the capital spending everything we spend in Texas qualifies for a grip filing. And if you saw the cadence that we had here in 23 in February, we filed central tax in March. We filed West tax and then we had the rate case in RGB instead of the rate case next year.

Jamison, our tenor excuse me we've seen.

Just on average across our territory last year, we saw an average bill of somewhere in the $81 range per month.

This year, we see somewhere around.

Maybe 8% to 10% decrease from that.

Tanner James: We would have a coast of filing and you can look at cadence in prior years to have a sense of that in Oklahoma. All of our capital is recovered through the PBR filing, which we typically do at the end of February. And in Kansas, the capital that we've spent in 2023 through the end of June was a part of the filing that we did just a couple of months ago in August.

Great. Thanks, and then lastly in the press release, you called out the year to date.

Weather impact net of normalization.

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Have you how do you how do you quantify that on an EPS basis, and then what are the are there any offsets built into your guidance for that.

Tanner James: Our next filing for GSRS in Kansas would be next August. You can do one every 365 days, no sooner than that. And that will pick up all capital spending through June 30 of next year, all capital spending that qualifies for that mechanism, which is the majority of our spending in Kansas. And to address your question on the refinancing, I really don't have much more to add than what I said in the comments.

Okay.

So as we plan.

Guidance for the year, we anticipate normal weather.

And we're largely protected from those big swings because of our weather normalization mechanism.

So it's.

Because of that protection, we don't see a lot of volatility associated with it.

Matt I don't have the EPS.

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Tanner James: We're looking at all factors, was raised in spreads where they are, different tenors, how that impacts our maturity profile, how it impacts our capital structure which supports our regulatory construct, all of those things are things that we are looking at and balancing as we refinance that debt. Yeah, tenor, the only thing I would add is to speak to how we have prepared and are preparing for the challenges that we think will face going forward.

Great. Thank you very much.

Thank you for the questions.

We have a follow up question from Gabe Moreen with Mizuho. Your line is open.

Thanks, everyone. My question actually cut answer got answered thank you.

Thank you Gabe.

This concludes our Q&A.

And back to the management team for closing remarks.

Okay.

Tanner James: We have increased the capacity of our regulatory group recognizing that the cadence of rate activity will increase and that started last year, really early last year. We've also done the same when you look at the financial side of the house. So we think we've built capacity to take on the challenges in the short term that continue to support the opportunities that we have in the long term.

Thank you again for your interest in one gas our quiet period for the fourth quarter starts when we close our books in early January and extends until we release earnings in late February we will provide details on the conference call at a later date have a great day.

Okay.

This.

There was the one gas 2000, Twenty's range third quarter earnings conference call and webcast you may now disconnect.

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Curtis Dinan: Understood, thank you. And then with commodities declining here, how do you estimate the customer build trajectory for the upcoming winter 23 to 24? Jameson or tenor, excuse me, we've seen just on average across our territory last year, we saw an average bill of somewhere in the $81 range per month. And this year we see somewhere around maybe 8 to 10 percent decrease from that. Great, thanks. And then lastly, in the press release, you called out the year to say whether it impacts the net of normalization.

Okay.

Okay.

Curtis Dinan: How do you quantify that on an EPS basis? And then what are the, are there any offsets built into your guidance for that? So as we plan guidance for the year, we anticipate normal weather. And you know, we're largely protected from those big swings because of our weather normalization mechanism. So it's, because of that protection, we don't see a lot of volatility associated with it. I don't, I don't have the EPS impact of that. Great, thank you very much. Thank you for the questions.

Gabriel Moreen: We have a follow-up question from Gabe Marine with me. Your line is open.

Gabriel Moreen: Thanks everyone, my question actually got answered. Got answered. Thank you. Thank you, Gabe.

Sid Mcannally: This concludes our Q&A on our hand-backed management team for closing remarks. Thank you again for your interest in one gas. Our quiet period for the fourth quarter starts when we close our books in early January, and extends until we release earnings in late February. We'll provide details on the conference call at a later date.

Operator: Have a great day.

Unknown Executive: This concludes the one gas 2023 third quarter earnings conference call and webcast. You may now disconnect. Christopher Sighinolfi, Curtis Dinan, Paul Zimbardo