[First Quarter 2024 Overview](index=1&type=section&id=1%20First%20Quarter%202024%20Overview) This section provides a comprehensive review of ONE Gas's financial performance and key operational highlights for the first quarter of 2024 [Executive Summary and Key Highlights](index=1&type=section&id=1.1%20Executive%20Summary%20and%20Key%20Highlights) ONE Gas announced its first quarter 2024 financial results, affirming its 2024 financial guidance and declaring a quarterly dividend. Despite a slight decrease in net income year-over-year and warmer weather, the company remains on track to achieve its annual financial guidance, supported by efficient capital execution and a focus on safe operations First Quarter Net Income and EPS Comparison | Metric | Q1 2024 | Q1 2023 | | :---------------- | :------ | :------ | | Net Income | $99.3 million | $102.6 million | | Diluted EPS | $1.75 | $1.84 | - Weather across service areas was **9 percent warmer than normal**, but the impact on operating income was mitigated by weather normalization mechanisms[4](index=4&type=chunk) - ONE Gas was awarded the American Gas Association Safety Achievement Award for the **seventh consecutive year**[4](index=4&type=chunk) - The board of directors declared a quarterly dividend of **$0.66 per share** ($2.64 annualized), payable on June 4, 2024[4](index=4&type=chunk) - President and CEO Robert S. McAnnally stated the company remains on track to achieve the midpoint of its 2024 financial guidance based on first quarter results[2](index=2&type=chunk) [Detailed Financial Performance](index=2&type=section&id=1.2%20Detailed%20Financial%20Performance) Operating income for Q1 2024 decreased slightly to $145.9 million from $149.2 million in Q1 2023, primarily due to increased employee-related costs and lower sales volumes, partially offset by revenue from new rates. Net interest expense increased due to new debt issuances and repayments, while capital expenditures rose, focusing on system integrity and service expansion Operating Income Comparison | Metric | Q1 2024 (Millions) | Q1 2023 (Millions) | | :--------------- | :----------------- | :----------------- | | Operating Income | $145.9 | $149.2 | - Operating income was positively impacted by an **$11.2 million increase in revenue from new rates**[5](index=5&type=chunk) - Operating income was negatively impacted by an **$8.5 million increase in employee-related costs** and a **$3.7 million decrease in revenue due to lower sales volumes** (net of weather normalization)[10](index=10&type=chunk) - Actual heating degree days were **4,741 for Q1 2024**, **9 percent warmer than normal** and **3 percent warmer than the same period last year**, with impacts mitigated by weather normalization mechanisms[5](index=5&type=chunk) [Operating Income and Revenue Drivers](index=2&type=section&id=1.2.1%20Operating%20Income%20and%20Revenue%20Drivers) Operating income was influenced by new rate revenues, increased employee costs, and lower sales volumes, with weather normalization mitigating impacts Operating Income Drivers (Q1 2024 vs Q1 2023) | Driver | Impact on Operating Income (Millions) | | :------------------------------------ | :------------------------- | | Revenue from new rates | +$11.2 | | Employee-related costs | -$8.5 | | Lower sales volumes (net of weather normalization) | -$3.7 | - Weather across the Company's service areas was **9 percent warmer than normal**, and **3 percent warmer than the same period last year**, with the impact on operating income mitigated by weather normalization mechanisms[5](index=5&type=chunk) [Net Interest Expense and Income Tax](index=2&type=section&id=1.2.2%20Net%20Interest%20Expense%20and%20Income%20Tax) Net interest expense rose due to new debt issuances and repayments, while income tax credit for EDIT amortization saw a slight increase - Net interest expense increased **$1.7 million** for the three months ending March 31, 2024, primarily due to the issuance of **$300 million of 5.10 percent senior notes** in December 2023 and the repayment of **$300 million of 3.61 percent senior notes** and **$473 million of 1.10 percent senior notes** in February and March 2024[6](index=6&type=chunk) Income Tax Expense Credit for EDIT Amortization | Period | Credit Amount (Millions) | | :---------------- | :----------------------- | | Q1 2024 | $10.1 | | Q1 2023 | $9.9 | [Capital Expenditures](index=2&type=section&id=1.2.3%20Capital%20Expenditures) Capital expenditures increased, primarily directed towards system integrity and expanding service to new areas Capital Expenditures and Asset Removal Costs | Period | Amount (Millions) | | :---------------- | :---------------- | | Q1 2024 | $179.4 | | Q1 2023 | $164.6 | - Expenditures primarily represent investments in system integrity and extension of service to new areas[7](index=7&type=chunk) [Regulatory Activities Update](index=2&type=section&id=2%20Regulatory%20Activities%20Update) This section details recent regulatory filings and rate case updates across Oklahoma, Kansas, and Texas service areas [Oklahoma Natural Gas](index=2&type=section&id=2.1%20Oklahoma%20Natural%20Gas) Oklahoma Natural Gas filed its annual Performance-Based Rate Change application in February 2024, seeking a base rate revenue increase, an energy efficiency incentive, and a credit for excess deferred income taxes to customers - Filed annual Performance-Based Rate Change application in February 2024 for the test year ended December 2023[8](index=8&type=chunk) Requested Increases/Credits | Item | Amount (Millions) | | :-------------------------------- | :------------- | | Base rate revenue increase | $31.8 | | Energy efficiency incentive | $2.4 | | EDIT credit to customers (2025) | $12.8 | - A hearing for the application is scheduled for June 4, 2024[8](index=8&type=chunk) [Kansas Gas Service](index=2&type=section&id=2.2%20Kansas%20Gas%20Service) Kansas Gas Service submitted a general rate case in March 2024, requesting a significant increase in net base rates and proposing a performance-based ratemaking mechanism and a new residential customer rate class - Submitted a general rate case in March 2024[9](index=9&type=chunk) Requested Rate Increases | Item | Amount (Millions) | | :------------------------------------------------ | :------------- | | Increase in net base rates | $58.1 | | Total requested increase (including approved surcharges) | $93.1 | | Revenue increase already approved via Gas System Reliability Surcharge | $35.0 | - Proposed a performance-based ratemaking mechanism and a rate class designation for residential customers based on annual usage[9](index=9&type=chunk) [Texas Gas Service](index=3&type=section&id=2.3%20Texas%20Gas%20Service) Texas Gas Service made two Gas Reliability Infrastructure Program (GRIP) filings in February and March 2024, seeking rate increases for its West-North and Central-Gulf service areas - Made a GRIP filing in March 2024 for the West-North service area, requesting an **$8.6 million increase** to be effective in July 2024[11](index=11&type=chunk) - Made a GRIP filing in February 2024 for the Central-Gulf service area, requesting a **$12.3 million increase** to be effective in June 2024[12](index=12&type=chunk) [2024 Financial Guidance](index=3&type=section&id=3%202024%20Financial%20Guidance) ONE Gas reaffirmed its 2024 financial guidance, projecting net income, diluted earnings per share, and capital expenditures for the year - ONE Gas affirmed its financial guidance issued on November 29, 2023[13](index=13&type=chunk) 2024 Financial Guidance | Metric | Guidance Range | | :------------------------------------------ | :------------------- | | Net income | $214 million to $231 million | | Diluted earnings per share | $3.70 to $4.00 | | Capital expenditures (incl. asset removal costs) | Approximately $750 million | [Company Information and Forward-Looking Statements](index=3&type=section&id=4%20Company%20Information%20and%20Forward-Looking%20Statements) This section provides details on the upcoming earnings call, company profile, and important disclaimers regarding forward-looking statements and associated risks [Earnings Conference Call and Company Profile](index=3&type=section&id=4.1%20Earnings%20Conference%20Call%20and%20Company%20Profile) ONE Gas will host an earnings conference call on May 7, 2024. The company is a 100% regulated natural gas utility, serving over 2.3 million customers across Kansas, Oklahoma, and Texas, and is included in the S&P MidCap 400 Index - An earnings conference call will be hosted on Tuesday, May 7, 2024, at 11 a.m. Eastern Standard Time[14](index=14&type=chunk) - ONE Gas, Inc. (NYSE: OGS) is a **100% regulated natural gas utility**, included in the S&P MidCap 400 Index, and is one of the largest natural gas utilities in the United States[15](index=15&type=chunk) - The company provides natural gas to more than **2.3 million customers** in Kansas, Oklahoma, and Texas through its divisions: Kansas Gas Service, Oklahoma Natural Gas, and Texas Gas Service[16](index=16&type=chunk) [Forward-Looking Statements and Risk Factors](index=3&type=section&id=4.2%20Forward-Looking%20Statements%20and%20Risk%20Factors) This section highlights that the news release contains forward-looking statements regarding future financial performance, operations, and market conditions, which are subject to various known and unknown risks and uncertainties. These factors could cause actual results to differ materially from projections, and readers are cautioned not to place undue reliance on them - The news release contains forward-looking statements related to anticipated financial performance, liquidity, management's plans, business prospects, regulatory and legal proceedings, and market conditions[17](index=17&type=chunk) - These statements are made in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995[17](index=17&type=chunk) - Known and unknown risks, uncertainties, and other factors may cause actual results to be materially different from forward-looking statements, including factors such as the ability to recover costs, cyber-attacks, changes in regulation, economic climate, adverse weather, and access to capital[19](index=19&type=chunk)[20](index=20&type=chunk)[23](index=23&type=chunk) [Appendix - Financial Data](index=6&type=section&id=5%20Appendix%20-%20Financial%20Data) This appendix provides detailed consolidated financial statements, including income, balance sheets, and cash flows, along with specific securitization details and key operational metrics [Consolidated Statements of Income](index=6&type=section&id=5.1%20Consolidated%20Statements%20of%20Income) The consolidated statements of income show a decrease in total revenues and net income for the first quarter of 2024 compared to the same period in 2023, primarily driven by a significant reduction in the cost of natural gas Consolidated Statements of Income (Three Months Ended March 31) | Metric | Q1 2024 (Thousands) | Q1 2023 (Thousands) | | :------------------------ | :------------------ | :------------------ | | Total revenues | $758,320 | $1,032,143 | | Cost of natural gas | $383,003 | $665,799 | | Operating expenses | $229,457 | $217,113 | | Operating income | $145,860 | $149,231 | | Net income | $99,317 | $102,621 | | Diluted EPS | $1.75 | $1.84 | | Dividends declared per share | $0.66 | $0.65 | [Consolidated Balance Sheets](index=7&type=section&id=5.2%20Consolidated%20Balance%20Sheets) The consolidated balance sheets indicate a slight decrease in total assets from December 31, 2023, to March 31, 2024. Key changes include an increase in net property, plant and equipment, a decrease in total current assets, and a significant increase in notes payable within current liabilities Consolidated Balance Sheets (Selected Items) | Metric | March 31, 2024 (Thousands) | December 31, 2023 (Thousands) | | :------------------------------------------ | :------------------------- | :-------------------------- | | Total assets | $7,764,037 | $7,770,994 | | Net property, plant and equipment | $6,237,954 | $6,135,212 | | Total current assets | $663,695 | $765,204 | | Total equity | $2,829,985 | $2,765,877 | | Total long-term debt (excl. current maturities) | $2,146,362 | $2,160,401 | | Total current liabilities | $1,403,524 | $1,477,221 | | Notes payable | $953,400 | $88,500 | [Consolidated Statements of Cash Flows](index=10&type=section&id=5.3%20Consolidated%20Statements%20of%20Cash%20Flows) Cash provided by operating activities significantly decreased in Q1 2024 compared to Q1 2023, largely due to the absence of proceeds from government securitization of winter weather event costs. Investing activities showed an increase in cash used, while financing activities shifted from cash used to cash provided, primarily driven by net borrowings of notes payable Consolidated Statements of Cash Flows (Three Months Ended March 31) | Metric | Q1 2024 (Thousands) | Q1 2023 (Thousands) | | :------------------------------------------ | :------------------ | :------------------ | | Net income | $99,317 | $102,621 | | Cash provided by operating activities | $108,262 | $469,066 | | Cash used in investing activities | $(165,981) | $(149,879) | | Cash provided by (used in) financing activities | $39,804 | $(310,388) | | Proceeds from government securitization of winter weather event costs | $0 | $197,366 | | Borrowings (repayments) of notes payable, net | $864,900 | $(272,000) | [KGSS-I Securitization Details](index=11&type=section&id=5.4%20KGSS-I%20Securitization%20Details) This section provides specific financial details regarding the Kansas Gas Service Securitization I (KGSS-I), which issued $336 million in securitized utility tariff bonds in November 2022, outlining its impact on the consolidated balance sheets and statements of income - Kansas Gas Service Securitization I (KGSS-I) issued **$336 million of securitized utility tariff bonds** in November 2022[34](index=34&type=chunk) Impact of KGSS-I on Consolidated Statements of Income (Q1) | Metric | Q1 2024 (Thousands) | Q1 2023 (Thousands) | | :------------------------ | :------------------ | :------------------ | | Operating revenues | $11,671 | $11,933 | | Operating expense | $(111) | $(110) | | Amortization expense | $(7,385) | $(7,089) | | Interest income | $188 | $75 | | Interest expense | $(4,327) | $(4,809) | | Income before income taxes | $36 | $0 | Impact of KGSS-I on Consolidated Balance Sheets (Selected Items) | Metric | March 31, 2024 (Thousands) | December 31, 2023 (Thousands) | | :------------------------------------------ | :------------------------- | :-------------------------- | | Restricted cash and cash equivalents | $9,963 | $20,552 | | Securitized intangible asset, net | $286,234 | $293,619 | | Securitized utility tariff bonds, excluding current maturities | $268,102 | $282,506 | [Information at a Glance](index=12&type=section&id=5.5%20Information%20at%20a%20Glance) This comprehensive table provides a snapshot of key financial and operational metrics for Q1 2024 and Q1 2023, including detailed breakdowns of revenues, costs, income, capital expenditures, sales volumes, customer counts, and heating degree days across the company's service areas Key Financial Metrics (Q1 2024 vs. Q1 2023) | Metric | Q1 2024 (Millions) | Q1 2023 (Millions) | | :-------------------------------- | :----------------- | :----------------- | | Total revenues | $758.3 | $1,032.1 | | Cost of natural gas | $383.0 | $665.8 | | Operating costs | $152.8 | $145.8 | | Operating income | $145.9 | $149.2 | | Net income | $99.3 | $102.6 | | Capital expenditures and asset removal costs | $179.4 | $164.6 | Volumes Delivered (Bcf) (Q1 2024 vs. Q1 2023) | Metric | Q1 2024 (Bcf) | Q1 2023 (Bcf) | | :------------------------ | :------------ | :------------ | | Natural gas sales | 70.5 | 73.8 | | Transportation | 63.4 | 64.9 | | Total volumes delivered | 133.9 | 138.7 | Average Number of Customers (Thousands) (Q1 2024 vs. Q1 2023) | Metric | Q1 2024 (Thousands) | Q1 2023 (Thousands) | | :---------------- | :------------------ | :------------------ | | Residential | 2,110 | 2,100 | | Commercial and industrial | 165 | 165 | | Total customers | 2,290 | 2,280 | Heating Degree Days (Company-wide) (Q1 2024 vs. Q1 2023) | Metric | Q1 2024 | Q1 2023 | | :-------------------------------- | :------ | :------ | | Actual degree days | 4,741 | 4,872 | | Normal degree days | 5,219 | 5,237 | | Percent colder (warmer) than normal weather | (9.2)% | (7.0)% |

Declares Second Quarter Dividend TULSA, Okla., May 6, 2024 /PRNewswire/ -- ONE Gas, Inc. (NYSE: OGS) today announced its first quarter financial results, affirmed its 2024 financial guidance and declared its quarterly dividend. "Efficient capital execution and our focus on safe operations position us well to serve a growing customer base," said Robert S. McAnnally, president and chief executive officer. "Based on our first quarter results, we remain on track to achieve the midpoint of our 2024 financial gui ...

Wall Street expects a year-over-year decline in earnings on lower revenues when ONE Gas (OGS) reports results for the quarter ended March 2024. While this widely-known consensus outlook is important in gauging the company's earnings picture, a powerful factor that could impact its near-term stock price is how the actual results compare to these estimates.The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released on May 6. On the other ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023. OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________. Commission file number 001-36108 ONE Gas, Inc. (Exact name of registrant as specified in its charter) Oklahoma 46-3561936 (State or other jurisdict ...

Financial Data and Key Metrics Changes - The company reported net income for Q3 2023 of $25.2 million, or $0.45 per diluted share, compared to $23.7 million, or $0.44 per diluted share in Q3 2022, indicating a year-over-year increase in earnings [31] - Earnings per diluted share guidance has been narrowed to a range of $4.06 to $4.22 for the year [30] - Interest expense through the first three quarters of 2023 is up approximately 40% from the same period last year, primarily due to rising rates on commercial paper and the issuance of $300 million of 4.25% senior notes in August 2022 [8] Business Line Data and Key Metrics Changes - The company expects to invest approximately $725 million in capital for 2023, an increase from the original guidance of $675 million, mainly due to system maintenance and reinforcement projects [7] - Employee expenses increased by $7.5 million due to planned workforce investments, although there was a decrease of $2.3 million in outside services costs as work was insourced [9] Market Data and Key Metrics Changes - The company is experiencing strong economic growth in Texas, Oklahoma, and Kansas, with new manufacturing and technology-based jobs driving demand for natural gas [4][5] - Despite elevated mortgage rates impacting homebuilding, the company remains optimistic about long-term growth in its service territories [29] Company Strategy and Development Direction - The company is focused on prudent expense management and enhancing system reliability while meeting growing customer demand [27] - A significant investment in capital projects is aimed at supporting future customer needs and ensuring safety remains a top priority [29] - The company is actively pursuing regulatory approvals for new tariffs and rate adjustments to recover infrastructure investments [12][13] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by inflation and rising interest rates but emphasized the company's ability to navigate these issues effectively [30] - The company remains confident in the durability of its growth, supported by ongoing economic development in its service areas [20][61] Other Important Information - The company expanded its credit facility to $1.2 billion from $1 billion to ensure adequate liquidity amid geopolitical uncertainties [11] - The company welcomed a new Senior Vice President and Chief Human Resources Officer to enhance workforce development [42] Q&A Session Summary Question: EPS growth outlook amidst recent shifts - Management noted that while there are many moving parts affecting the five-year outlook, they remain confident in the 4% to 6% EPS growth outlook despite recent challenges [18] Question: Timing for 2024 annual guidance slides - Management indicated that they plan to continue the cadence established last year for releasing guidance, aiming for transparency regarding future opportunities [49][64] Question: Customer bill trajectory for winter 2023-2024 - Management projected an 8% to 10% decrease in average customer bills compared to the previous year, which averaged around $81 per month [55] Question: Weather impact on EPS guidance - Management stated that they anticipate normal weather and are largely protected from significant swings due to their weather normalization mechanism, thus not seeing much volatility in EPS [56]

Part I. Financial Information [Item 1. Consolidated Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements for the three and nine months ended September 30, 2023 and 2022 [Consolidated Statements of Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income) Consolidated Statements of Income (Three Months Ended September 30) | Metric | 2023 (Thousands of $) | 2022 (Thousands of $) | | :--- | :--- | :--- | | Total revenues | 335,816 | 359,363 | | Cost of natural gas | 70,910 | 126,197 | | Operating income | 57,203 | 47,052 | | Net income | 25,189 | 23,701 | | Basic EPS | 0.45 | 0.44 | | Diluted EPS | 0.45 | 0.44 | | Dividends declared per share | 0.65 | 0.62 | Consolidated Statements of Income (Nine Months Ended September 30) | Metric | 2023 (Thousands of $) | 2022 (Thousands of $) | | :--- | :--- | :--- | | Total revenues | 1,766,073 | 1,759,797 | | Cost of natural gas | 866,950 | 954,394 | | Operating income | 270,455 | 246,378 | | Net income | 160,499 | 154,710 | | Basic EPS | 2.89 | 2.86 | | Diluted EPS | 2.87 | 2.85 | | Dividends declared per share | 1.95 | 1.86 | [Consolidated Statements of Comprehensive Income](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Consolidated Statements of Comprehensive Income (Three Months Ended September 30) | Metric | 2023 (Thousands of $) | 2022 (Thousands of $) | | :--- | :--- | :--- | | Net income | 25,189 | 23,701 | | Other comprehensive income (loss), net of tax | (1) | 12 | | Comprehensive income | 25,188 | 23,713 | Consolidated Statements of Comprehensive Income (Nine Months Ended September 30) | Metric | 2023 (Thousands of $) | 2022 (Thousands of $) | | :--- | :--- | :--- | | Net income | 160,499 | 154,710 | | Other comprehensive income (loss), net of tax | (1) | 111 | | Comprehensive income | 160,498 | 154,821 | [Consolidated Balance Sheets](index=8&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheets (As of September 30, 2023 vs. December 31, 2022) | Metric | Sep 30, 2023 (Thousands of $) | Dec 31, 2022 (Thousands of $) | | :--- | :--- | :--- | | Total assets | 7,432,447 | 7,776,396 | | Net property, plant and equipment | 5,985,678 | 5,628,840 | | Total current assets | 564,365 | 1,217,608 | | Total equity | 2,646,747 | 2,584,426 | | Total long-term debt, net | 1,862,601 | 2,661,743 | | Total current liabilities | 1,571,698 | 1,189,419 | | Total liabilities and equity | 7,432,447 | 7,776,396 | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows (Nine Months Ended September 30) | Activity | 2023 (Thousands of $) | 2022 (Thousands of $) | | :--- | :--- | :--- | | Cash provided by operating activities | 842,524 | 1,555,826 | | Cash used in investing activities | (489,411) | (412,243) | | Cash used in financing activities | (353,202) | (1,142,069) | | Change in cash, cash equivalents, restricted cash and equivalents | (89) | 1,514 | | Cash, cash equivalents, restricted cash and equivalents at end of period | 18,038 | 10,366 | [Consolidated Statements of Equity](index=11&type=section&id=Consolidated%20Statements%20of%20Equity) Consolidated Statements of Equity (Nine Months Ended September 30, 2023) | Metric | Common Stock Issued (Shares) | Common Stock ($) | Paid-in Capital ($) | Retained Earnings ($) | Accumulated Other Comprehensive Income/(Loss) ($) | Total Equity ($) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | January 1, 2023 | 55,349,954 | 553 | 1,932,714 | 651,863 | (704) | 2,584,426 | | Net income | — | — | — | 102,621 | — | 102,621 | | Common stock issued and other | 96,887 | 1 | 9,870 | — | — | 9,871 | | Common stock dividends | — | — | 952 | (108,601) | — | (107,649) | | September 30, 2023 | 55,450,481 | 555 | 1,943,536 | 703,361 | (705) | 2,646,747 | [Notes to Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) [1. Summary of Significant Accounting Policies](index=14&type=section&id=1.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) The company operates as a regulated natural gas distribution utility serving approximately 2.3 million customers across three states - The company provides natural gas distribution services to approximately **2.3 million customers** in Oklahoma, Kansas, and Texas through its three divisions: Oklahoma Natural Gas, Kansas Gas Service, and Texas Gas Service[28](index=28&type=chunk) - The company operates in **one reportable business segment**: regulated public utilities that deliver natural gas primarily to residential, commercial, and transportation customers[29](index=29&type=chunk) Allowance for Doubtful Accounts | Date | Amount (Millions of $) | | :--- | :--- | | Sep 30, 2023 | 14.5 | | Dec 31, 2022 | 16.7 | [2. Revenue](index=15&type=section&id=2.%20REVENUE) Total revenues for the nine months ended September 30, 2023, increased slightly year-over-year due to new securitization charges Total Revenues by Source (Three Months Ended September 30) | Revenue Source | 2023 (Thousands of $) | 2022 (Thousands of $) | | :--- | :--- | :--- | | Natural gas sales to customers | 285,373 | 322,444 | | Transportation revenues | 29,535 | 28,035 | | Securitization customer charges | 12,014 | — | | Miscellaneous revenues | 4,812 | 4,991 | | Total revenues | 335,816 | 359,363 | Total Revenues by Source (Nine Months Ended September 30) | Revenue Source | 2023 (Thousands of $) | 2022 (Thousands of $) | | :--- | :--- | :--- | | Natural gas sales to customers | 1,598,466 | 1,640,893 | | Transportation revenues | 97,084 | 92,350 | | Securitization customer charges | 35,754 | — | | Miscellaneous revenues | 17,023 | 14,615 | | Total revenues | 1,766,073 | 1,759,797 | [3. Regulatory Assets and Liabilities](index=15&type=section&id=3.%20REGULATORY%20ASSETS%20AND%20LIABILITIES) The net regulatory balance shifted to a liability due to the securitization of winter weather event costs in Texas Net Regulatory Assets and Liabilities (Thousands of $) | Date | Current | Noncurrent | Total | | :--- | :--- | :--- | :--- | | Sep 30, 2023 | 1,354 | (207,271) | (205,917) | | Dec 31, 2022 | 227,705 | (198,610) | 29,095 | - In March 2023, the TNG Corporation completed the issuance of securitized bonds for Texas Gas Service, and ONE Gas received approximately **$197 million in net proceeds** to repay indebtedness and for general corporate purposes, related to Winter Storm Uri costs[40](index=40&type=chunk) - Regulatory assets are considered probable of recovery, and their amortization resulted in approximately **$11.1 million** and **$6.9 million** for the nine months ended September 30, 2023 and 2022, respectively[36](index=36&type=chunk)[49](index=49&type=chunk) [4. Credit Facility and Short-Term Debt](index=17&type=section&id=4.%20CREDIT%20FACILITY%20AND%20SHORT-TERM%20DEBT) The company's liquidity is supported by a revolving credit facility that was increased to $1.2 billion and extended to March 2028 - In October 2023, the ONE Gas Credit Agreement capacity increased to **$1.2 billion** from $1.0 billion, and its maturity date was extended to March 16, 2028, in March 2023[50](index=50&type=chunk)[113](index=113&type=chunk) - At September 30, 2023, the company had **$998.8 million of remaining credit available** under the ONE Gas Credit Agreement[54](index=54&type=chunk) Commercial Paper Outstanding | Date | Amount (Millions of $) | Weighted-Average Interest Rate | | :--- | :--- | :--- | | Sep 30, 2023 | 327.0 | 5.55% | | Dec 31, 2022 | 552.0 | 4.75% | [5. Long-Term Debt](index=18&type=section&id=5.%20LONG-TERM%20DEBT) Total long-term debt was $2.66 billion as of September 30, 2023, with a debt-to-capital ratio of 53% Long-Term Debt Outstanding (Thousands of $) | Debt Type | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Senior Notes | 2,373,000 | 2,373,000 | | KGSS-I Securitized Utility Tariff Bonds | 315,284 | 336,000 | | Total long-term debt, net | 2,663,026 | 2,682,471 | | Current maturities of other long-term debt, net | 772,911 | 12 | | Current maturities of securitized utility tariff bonds, net | 27,514 | 20,716 | - At September 30, 2023, the company's total **debt-to-capital ratio was 53%**, and 50% excluding the non-recourse debt of KGSS-I[53](index=53&type=chunk)[151](index=151&type=chunk) [6. Equity](index=19&type=section&id=6.%20EQUITY) The company utilized equity forward agreements and an at-the-market program to raise capital, expecting total net proceeds of $351.2 million - In September 2023, the company entered into forward sale agreements for **1.38 million shares** of common stock, and in March 2023, for **2.0 million shares**, with settlement dates up to December 31, 2024[60](index=60&type=chunk)[61](index=61&type=chunk) - In February 2023, the company established an at-the-market equity distribution agreement for up to **$300 million** in common stock, with **$225.5 million available** for issuance at September 30, 2023[62](index=62&type=chunk) - In October 2023, a dividend of **$0.65 per share** was declared, representing an annualized rate of $2.60 per share[65](index=65&type=chunk) Outstanding Forward Sale Agreements (as of September 30, 2023) | Maturity | Shares Sold | Net Proceeds Available (Thousands of $) | Forward Price ($) | | :--- | :--- | :--- | :--- | | At-the-Market Equity Program | 1,215,868 | 95,982 | 78.94 | | Equity Forward Agreements | 3,380,000 | 255,263 | 75.52 | | Total | 4,595,868 | 351,245 | 76.43 | [7. Accumulated Other Comprehensive Loss](index=20&type=section&id=7.%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20LOSS) Reclassifications from accumulated other comprehensive loss to net income were minimal for the nine months ended September 30, 2023 Total Reclassifications from Accumulated Other Comprehensive Loss to Net Income (Nine Months Ended September 30) | Metric | 2023 (Thousands of $) | 2022 (Thousands of $) | | :--- | :--- | :--- | | Amortization of net loss | 1,470 | 14,731 | | Amortization of unrecognized prior service cost | 393 | 185 | | Regulatory adjustments | (1,862) | (14,772) | | Total reclassifications for the period | 1 | 111 | [8. Earnings Per Share](index=21&type=section&id=8.%20EARNINGS%20PER%20SHARE) Basic and diluted EPS increased slightly for the three and nine-month periods ended September 30, 2023, compared to the prior year Earnings Per Share (Three Months Ended September 30) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Basic EPS | $0.45 | $0.44 | | Diluted EPS | $0.45 | $0.44 | | Basic Average Shares (Thousands) | 55,624 | 54,310 | | Diluted Average Shares (Thousands) | 55,975 | 54,482 | Earnings Per Share (Nine Months Ended September 30) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Basic EPS | $2.89 | $2.86 | | Diluted EPS | $2.87 | $2.85 | | Basic Average Shares (Thousands) | 55,576 | 54,164 | | Diluted Average Shares (Thousands) | 55,897 | 54,282 | [9. Employee Benefit Plans](index=22&type=section&id=9.%20EMPLOYEE%20BENEFIT%20PLANS) Net periodic benefit cost for pension plans was a credit of $5.6 million for the nine months ended September 30, 2023 Net Periodic Benefit Cost (Credit) for Pension Benefits (Nine Months Ended September 30) | Component | 2023 (Thousands of $) | 2022 (Thousands of $) | | :--- | :--- | :--- | | Service cost | 5,433 | 8,027 | | Interest cost | 31,821 | 26,495 | | Expected return on assets | (44,637) | (43,887) | | Amortization of unrecognized prior service cost | 279 | 155 | | Amortization of net loss | 1,506 | 14,569 | | Net periodic benefit cost (credit) | (5,598) | 5,359 | Net Periodic Benefit Cost (Credit) for Other Postemployment Benefits (Nine Months Ended September 30) | Component | 2023 (Thousands of $) | 2022 (Thousands of $) | | :--- | :--- | :--- | | Service cost | 549 | 954 | | Interest cost | 6,864 | 4,836 | | Expected return on assets | (7,296) | (9,885) | | Amortization of unrecognized prior service cost | 114 | 30 | | Amortization of net (gain) loss | (36) | 162 | | Net periodic benefit cost (credit) | 195 | (3,903) | - Regulatory deferrals related to net periodic benefit cost were **$4.2 million** and **$3.4 million** for the nine months ended September 30, 2023 and 2022, respectively[71](index=71&type=chunk) [10. Income Taxes](index=22&type=section&id=10.%20INCOME%20TAXES) Income tax expense included credits from the amortization of regulatory liability associated with Excess Deferred Income Taxes Income Tax Credits from EDIT Amortization (Thousands of $) | Period | 2023 | 2022 | | :--- | :--- | :--- | | Three Months Ended September 30 | 2,500 | 1,600 | | Nine Months Ended September 30 | 15,500 | 12,500 | [11. Other Income and Other Expense](index=23&type=section&id=11.%20OTHER%20INCOME%20AND%20OTHER%20EXPENSE) Other income improved significantly year-over-year, driven by higher returns on investments for nonqualified employee benefit plans Other Income (Expense), Net (Thousands of $) | Component | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net periodic benefit credit other than service cost | 1,154 | 1,430 | 3,025 | 2,209 | | Earnings (losses) on investments associated with nonqualified employee benefit plans | (1,278) | (1,789) | 1,609 | (9,241) | | Other, net | 179 | 1,152 | 176 | (303) | | Total other income (expense), net | 55 | 793 | 4,810 | (7,335) | [12. Commitments and Contingencies](index=23&type=section&id=12.%20COMMITMENTS%20AND%20CONTINGENCIES) The company is managing environmental remediation at former Manufactured Gas Plant sites, with deferred costs in Kansas exceeding the current cap - The company has legal responsibility for environmental conditions at **12 former MGP sites in Kansas** and one in Texas, subject to remediation under environmental laws[78](index=78&type=chunk)[81](index=81&type=chunk) - Deferred investigation and remediation costs for Kansas MGP sites were **$32.0 million** at September 30, 2023, exceeding the **$15.0 million cap**, necessitating a future application to the KCC[79](index=79&type=chunk) Reserve for MGP Site Remediation (Millions of $) | Date | Amount | | :--- | :--- | | Sep 30, 2023 | 14.6 | | Dec 31, 2022 | 12.7 | [13. Derivative Financial Instruments and Fair Value Measurements](index=24&type=section&id=13.%20DERIVATIVE%20FINANCIAL%20INSTRUMENTS%20AND%20FAIR%20VALUE%20MEASUREMENTS) The company uses natural gas swaps and call options to mitigate commodity price risk, with costs recoverable through regulatory mechanisms - The company uses over-the-counter **natural gas fixed price swaps and call options** as derivative instruments to manage commodity price risk[91](index=91&type=chunk)[92](index=92&type=chunk) - As of September 30, 2023, the company held natural gas fixed-price swaps for **7.7 Bcf** and call options for **0.7 Bcf**, with premiums paid of $0.8 million[91](index=91&type=chunk)[92](index=92&type=chunk) - Derivative instruments are **not designated as accounting hedges**; their fair value changes and premiums are recoverable through purchased-gas cost adjustment mechanisms[93](index=93&type=chunk) [14. Variable Interest Entity](index=26&type=section&id=14.%20VARIABLE%20INTEREST%20ENTITY) A wholly-owned subsidiary, KGSS-I, was formed as a variable interest entity to issue securitized bonds for Winter Storm Uri cost recovery - KGSS-I is a special-purpose, wholly-owned subsidiary formed to issue securitized bonds for recovering extraordinary costs from **Winter Storm Uri in Kansas**[101](index=101&type=chunk) - KGSS-I's assets cannot be used to settle ONE Gas' obligations, and **bondholders have no recourse** against ONE Gas[101](index=101&type=chunk) Impact of KGSS-I on Consolidated Statements of Income (Three Months Ended September 30, 2023) | Metric | Amount (Thousands of $) | | :--- | :--- | | Operating revenues | 12,014 | | Operating expense | (113) | | Amortization expense | (7,489) | | Interest income | 259 | | Interest expense | (4,548) | | Income before income taxes | 123 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes the company's financial condition and operating results, including recent developments, regulatory activities, and liquidity [RECENT DEVELOPMENTS](index=28&type=section&id=RECENT%20DEVELOPMENTS) Recent activities include a Texas securitization transaction, new equity forward agreements, and an expanded credit facility - In March 2023, the company received approximately **$197 million** from the Texas securitization transaction for Winter Storm Uri costs, used to repay indebtedness and for general corporate purposes[106](index=106&type=chunk) - Equity forward agreements entered in September and March 2023 are expected to generate approximately **$255.3 million in net proceeds** upon full settlement[108](index=108&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk) - The at-the-market equity program, renewed in February 2023, allows for the issuance of up to **$300 million** in common stock, with **$225.5 million available** at September 30, 2023[111](index=111&type=chunk) - The ONE Gas Credit Agreement was increased to **$1.2 billion** and its maturity extended to March 16, 2028[113](index=113&type=chunk) - A dividend of **$0.65 per share** was declared in October 2023, payable on December 1, 2023[114](index=114&type=chunk) [REGULATORY ACTIVITIES](index=29&type=section&id=REGULATORY%20ACTIVITIES) The company engaged in various regulatory activities, including rate adjustments and program approvals across its service territories - Oklahoma Natural Gas received OCC approval for a **$26.3 million base rate revenue increase** and a **$12.6 million EDIT credit**, with new rates effective June 29, 2023[115](index=115&type=chunk) - Kansas Gas Service submitted an application to the KCC requesting an **$8.0 million increase** related to its Gas System Reliability Surcharge (GSRS)[117](index=117&type=chunk) - Texas Gas Service completed the securitization of Winter Storm Uri costs, receiving approximately **$197 million** in March 2023, and will act as a collection agent for securitization charges starting October 2023[120](index=120&type=chunk) - Texas Gas Service implemented GRIP filings resulting in an **$11.5 million increase** in the Central-Gulf service area and a **$7.3 million increase** in the West-North service area[121](index=121&type=chunk)[122](index=122&type=chunk) [FINANCIAL RESULTS AND OPERATING INFORMATION](index=30&type=section&id=FINANCIAL%20RESULTS%20AND%20OPERATING%20INFORMATION) Net income and operating income increased due to new rates and customer growth, offsetting the impact of warmer weather Selected Financial Results (Three Months Ended September 30) | Metric | 2023 (Millions of $) | 2022 (Millions of $) | Increase (Decrease) (Millions of $) | Increase (Decrease) (%) | | :--- | :--- | :--- | :--- | :--- | | Total revenues | 335.8 | 359.4 | (23.6) | (7)% | | Cost of natural gas | 70.9 | 126.2 | (55.3) | (44)% | | Operating income | 57.2 | 47.1 | 10.1 | 21% | | Capital expenditures and asset removal costs | 184.3 | 174.9 | 9.4 | 5% | Selected Financial Results (Nine Months Ended September 30) | Metric | 2023 (Millions of $) | 2022 (Millions of $) | Increase (Decrease) (Millions of $) | Increase (Decrease) (%) | | :--- | :--- | :--- | :--- | :--- | | Total revenues | 1,766.1 | 1,759.8 | 6.3 | —% | | Cost of natural gas | 867.0 | 954.4 | (87.4) | (9)% | | Operating income | 270.5 | 246.4 | 24.1 | 10% | | Capital expenditures and asset removal costs | 539.1 | 446.9 | 92.2 | 21% | - Operating income increased by **$10.1 million** for the three months and **$24.1 million** for the nine months ended September 30, 2023, primarily due to new rates and residential sales growth[134](index=134&type=chunk) - Weather across service territories was **13.9% warmer** than the prior year for the nine months ended September 30, 2023, with the impact on operating income mitigated by weather normalization mechanisms[134](index=134&type=chunk) Average Number of Customers (Thousands) (Three Months Ended September 30) | Customer Type | 2023 | 2022 | Increase (Decrease) | | :--- | :--- | :--- | :--- | | Residential | 2,076 | 2,068 | 8 | | Commercial and industrial | 160 | 161 | (1) | | Total customers | 2,251 | 2,244 | 7 | Average Number of Customers (Thousands) (Nine Months Ended September 30) | Customer Type | 2023 | 2022 | Increase (Decrease) | | :--- | :--- | :--- | :--- | | Residential | 2,088 | 2,079 | 9 | | Commercial and industrial | 163 | 163 | — | | Total customers | 2,266 | 2,257 | 9 | [CONTINGENCIES](index=34&type=section&id=CONTINGENCIES) Management believes that potential losses from various litigation matters and claims arising from normal operations are not material - The company is a party to various litigation matters and claims that have arisen in the normal course of operations[145](index=145&type=chunk) - Management believes that the reasonably possible losses from such matters, individually and in the aggregate, **are not material** and will not have a material adverse effect on results of operations, financial position, or cash flows[145](index=145&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=34&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company maintains liquidity through operating cash flow and commercial paper, supported by a $1.2 billion credit facility and stable credit ratings - The company relies primarily on **operating cash flow and commercial paper** for liquidity and capital resource requirements[146](index=146&type=chunk) - The ONE Gas Credit Agreement provides a **$1.2 billion revolving unsecured credit facility**, extended to March 16, 2028[150](index=150&type=chunk)[149](index=149&type=chunk) - The company expects to contribute approximately **$1.4 million** to its defined benefit pension plans in 2023[164](index=164&type=chunk) Credit Ratings (as of September 30, 2023) | Rating Agency | Rating | Outlook | | :--- | :--- | :--- | | Moody's | A3 | Stable | | S&P | A- | Stable | [CASH FLOW ANALYSIS](index=37&type=section&id=CASH%20FLOW%20ANALYSIS) Operating cash flows decreased due to the timing of securitization, while investing cash flows increased from higher capital expenditures Cash Flow Summary (Nine Months Ended September 30) | Activity | 2023 (Millions of $) | 2022 (Millions of $) | Variance (Millions of $) | | :--- | :--- | :--- | :--- | | Operating activities | 842.5 | 1,555.8 | (713.3) | | Investing activities | (489.4) | (412.2) | (77.2) | | Financing activities | (353.2) | (1,142.1) | 788.9 | | Change in cash, cash equivalents, restricted cash and equivalents | (0.1) | 1.5 | (1.6) | - **Operating cash flows were lower** for the nine months ended September 30, 2023, primarily due to the timing of winter weather event regulatory asset recovery through securitization[168](index=168&type=chunk) - **Cash used in investing activities increased** due to higher capital expenditures for system integrity and extension of service to new areas[169](index=169&type=chunk) - **Cash used in financing activities decreased** due to the repayment of long-term debt related to Winter Storm Uri in August 2022[169](index=169&type=chunk) [ENVIRONMENTAL, SAFETY AND REGULATORY MATTERS](index=37&type=section&id=ENVIRONMENTAL%2C%20SAFETY%20AND%20REGULATORY%20MATTERS) The company is subject to extensive environmental and pipeline safety regulations, with ongoing remediation efforts at former MGP sites - The company is subject to multiple environmental laws and regulations, including those related to air emissions, waste disposal, and hazardous materials, and pipeline safety statutes regulated by PHMSA[170](index=170&type=chunk)[178](index=178&type=chunk) - Deferred investigation and remediation costs for 12 former MGP sites in Kansas were **$32.0 million** at September 30, 2023, exceeding the **$15.0 million cap**[173](index=173&type=chunk) - The PIPES Act reauthorized PHMSA through 2023 and directs the agency to issue new regulations that may impose more stringent requirements, potentially leading to **material expenditures**[179](index=179&type=chunk) [IMPACT OF NEW ACCOUNTING STANDARDS](index=39&type=section&id=IMPACT%20OF%20NEW%20ACCOUNTING%20STANDARDS) Information regarding the impact of new accounting standards is included in the Notes to Consolidated Financial Statements - Information about the impact of new accounting standards, if any, is included in **Note 1** of the Notes to Consolidated Financial Statements[181](index=181&type=chunk) [CRITICAL ESTIMATES AND ACCOUNTING POLICIES](index=39&type=section&id=CRITICAL%20ESTIMATES%20AND%20ACCOUNTING%20POLICIES) The preparation of financial statements requires management to make estimates and assumptions that affect reported amounts - The preparation of consolidated financial statements requires management to make estimates and assumptions that affect reported amounts, which could **differ materially from actual results**[182](index=182&type=chunk) - Information about critical estimates and accounting policies is included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, 'Estimates and Critical Accounting Policies,' in the **Annual Report**[183](index=183&type=chunk) [FORWARD-LOOKING STATEMENTS](index=39&type=section&id=FORWARD-LOOKING%20STATEMENTS) This report contains forward-looking statements regarding future performance, and actual results may differ materially due to various risks - Forward-looking statements relate to anticipated financial performance, liquidity, future operations, business prospects, regulatory and legal outcomes, and market conditions[184](index=184&type=chunk) - Actual results may differ materially from forward-looking statements due to factors such as **cost recovery, cyber-attacks, regulatory changes, economic climate, competition, adverse weather, indebtedness, and capital market access**[187](index=187&type=chunk)[188](index=188&type=chunk) - The company **undertakes no obligation to update** publicly any forward-looking statement unless required by securities laws[189](index=189&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks include commodity prices, interest rates, and counterparty credit, which are actively managed - **Commodity price risk**, primarily from natural gas price fluctuations, is mitigated by purchased-gas cost adjustment mechanisms and derivative instruments (swaps and call options)[191](index=191&type=chunk) - **Interest-rate risk** is associated with commercial paper, credit agreement borrowings, and new debt, managed through fixed-rate debt, floating-rate debt, and interest-rate swaps[192](index=192&type=chunk)[193](index=193&type=chunk) - **Counterparty credit risk is not materially concentrated** due to approximately 2.3 million customers across three states, with provisions for doubtful accounts and recovery of fuel-related bad debts through regulatory mechanisms[194](index=194&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's disclosure controls and procedures were deemed effective, with no material changes in internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were **effective** as of September 30, 2023[195](index=195&type=chunk) - **No material changes** in internal control over financial reporting occurred during the third quarter ended September 30, 2023[196](index=196&type=chunk) Part II. Other Information [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) Management believes that potential losses from litigation and claims arising in the normal course of business are not material - The company is a party to various litigation matters and claims that have arisen in the normal course of its operations[198](index=198&type=chunk) - Management believes the reasonably possible losses from such matters **are not material** and will not have a material adverse effect on financial results, position, or cash flows[198](index=198&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) Investors should consider the risks detailed in the company's Annual Report and this Quarterly Report, as new risks may emerge - Investors should consider risks outlined in the **Annual Report** and the 'Forward-Looking Statements' section of this Quarterly Report[199](index=199&type=chunk) - **New risks may emerge**, and their extent or impact on financial performance cannot be fully predicted[199](index=199&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable to the current report - This section is **not applicable**[200](index=200&type=chunk) [Item 3. Defaults Upon Senior Securities](index=40&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the current report - This section is **not applicable**[201](index=201&type=chunk) [Item 4. Mine Safety Disclosures](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the current report - This section is **not applicable**[202](index=202&type=chunk) [Item 5. Other Information](index=40&type=section&id=Item%205.%20Other%20Information) This item is not applicable to the current report - This section is **not applicable**[203](index=203&type=chunk) [Item 6. Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the report, including governance documents, agreements, and Sarbanes-Oxley certifications - Exhibits include corporate governance documents (Amended Certificate of Incorporation, Amended and Restated By-Laws), underwriting and forward sale agreements, and a commitment increase agreement for the ONE Gas Credit Agreement[206](index=206&type=chunk) - Certifications by the CEO and CFO pursuant to **Sections 302 and 906 of the Sarbanes-Oxley Act of 2002** are included as exhibits[206](index=206&type=chunk) - **XBRL-related documents** for the consolidated financial statements are attached as Exhibit 101[206](index=206&type=chunk)[207](index=207&type=chunk) Signature

Financial Data and Key Metrics Changes - Net income for Q2 2023 was $32.7 million or $0.58 per diluted share, compared to $32.1 million or $0.59 per diluted share in Q2 2022, indicating a slight increase in net income year-over-year [13] - Operating income increased by $5.4 million year-over-year, driven by a $14.1 million increase from new rates and growth in the customer base [13] - Operations and maintenance expenses rose by $8 million compared to Q2 2022, primarily due to a $6.7 million increase in employee-related costs [15] Business Line Data and Key Metrics Changes - The company set approximately 25,800 new customer connections in the 12 months ended June 30, 2023, which is a 2% increase year-over-year [23] - Capital expenditures for Q2 were approximately $190 million, up from $149 million in 2022, with full-year capital investments on track for a forecast of $675 million [25] Market Data and Key Metrics Changes - Weather conditions were 7% warmer than the prior year and 11% warmer than normal, but the impact on earnings was mitigated by a weather normalization mechanism [14] - The average commercial paper balance was down 60% compared to last year, but the weighted average interest rate was approximately 5.5%, significantly higher than the 1.3% rate in Q2 2022 [24] Company Strategy and Development Direction - The company is focused on safely operating a growing system while cultivating long-term value, with an emphasis on efficiency and workforce development [7][9] - The company is actively managing macroeconomic conditions and has modified its approach to damage prevention and line locating to reduce costs and improve outcomes [9] Management's Comments on Operating Environment and Future Outlook - Management noted that inflation pressures are cooling at a national level, but the timeline for normalization may be elongated [45] - The company remains optimistic about managing the impact of inflation on operating and maintenance expenses going into 2024 and 2025 [45] Other Important Information - The Board of Directors declared a dividend of $0.65 per share, unchanged from the previous quarter [27] - The company has appointed Deborah Hersman to the Board, bringing significant safety-related experience [37] Q&A Session Summary Question: How does inflation in service territories compare to national levels? - Management indicated that inflation in their territories is in line with national averages, as many contracts are priced based on national CPI [44] Question: Is there an ability to pull forward operating and maintenance expenses? - Management stated that there is limited opportunity to manipulate O&M expenses due to the need for a steady workflow [46] Question: What is the outlook for EPS growth if inflation normalizes? - Management expressed confidence in their positioning and ability to manage short-term challenges while focusing on long-term value creation [49] Question: Update on the energy efficiency program in Texas? - Management is working with the commission to clarify the rollout of the energy efficiency program tailored to specific service areas [58] Question: Timing for full general rate cases? - Management highlighted the recent rate case filed in the Rio Grande Valley service area as the main update [60]

Part I. Financial Information [Consolidated Financial Statements (Unaudited)](index=8&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) The company presents unaudited financial statements for Q2 and H1 2023, showing stable net income and total assets of $7.34 billion Consolidated Statements of Income Highlights (in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $398,114 | $428,975 | $1,430,257 | $1,400,434 | | Operating income | $64,022 | $58,569 | $213,252 | $199,326 | | Net income | $32,689 | $32,075 | $135,310 | $131,009 | | Diluted EPS | $0.58 | $0.59 | $2.42 | $2.42 | Consolidated Balance Sheets Highlights (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total cash, cash equivalents and restricted cash | $39,338 | $18,127 | | Net property, plant and equipment | $5,856,628 | $5,628,840 | | Total assets | $7,335,122 | $7,776,396 | | Total long-term debt, excluding current maturities | $1,876,212 | $2,661,743 | | Total equity | $2,654,826 | $2,584,426 | Consolidated Statements of Cash Flows Highlights (Six Months Ended, in thousands) | Metric | June 30, 2023 | June 30, 2022 | | :--- | :--- | :--- | | Cash provided by operating activities | $748,742 | $286,677 | | Cash used in investing activities | ($321,416) | ($251,501) | | Cash used in financing activities | ($406,115) | ($36,643) | [Notes to Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section details accounting policies, financing activities, and the impact of the Texas storm cost securitization - The company operates as a single reportable business segment, delivering natural gas to approximately **2.3 million customers**[29](index=29&type=chunk)[30](index=30&type=chunk) - In March 2023, the company received approximately **$197 million in net proceeds** from the securitization of extraordinary costs related to Winter Storm Uri in Texas[42](index=42&type=chunk) - The company entered into a forward sale agreement for **2.0 million shares** and has **$226.1 million available** for issuance under its at-the-market equity program[61](index=61&type=chunk)[62](index=62&type=chunk) - The reserve for Manufactured Gas Plant (MGP) site remediation was **$14.8 million** as of June 30, 2023[80](index=80&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes financial results for H1 2023, highlighting increased operating income driven by new rates and key regulatory events Financial Results Summary (in millions) | Financial Results | Q2 2023 | Q2 2022 | Y/Y Change | H1 2023 | H1 2022 | Y/Y Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Operating income | $64.0 | $58.6 | $5.4 | $213.3 | $199.3 | $14.0 | | Capital expenditures | $190.2 | $149.1 | $41.1 | $354.8 | $272.0 | $82.8 | - The increase in operating income for Q2 2023 was primarily due to a **$14.1 million increase from new rates**, partially offset by a $6.7 million increase in employee-related costs[127](index=127&type=chunk) - For the first six months of 2023, operating income increased due to **$31.4 million from new rates**, partially offset by higher employee costs and bad debt expense[127](index=127&type=chunk) - Full-year 2023 capital expenditures and asset removal costs are expected to be approximately **$675 million**[134](index=134&type=chunk) [Regulatory Activities](index=28&type=section&id=REGULATORY%20ACTIVITIES) The company details recent regulatory outcomes, including rate increases in Oklahoma and Texas and storm cost recovery - Oklahoma Natural Gas implemented a **$26.3 million base rate revenue increase** in June 2023 following an approved settlement[109](index=109&type=chunk) - Texas Gas Service received approximately **$197 million in net proceeds** in March 2023 from the securitization of Winter Storm Uri costs[113](index=113&type=chunk) - Texas Gas Service implemented an **$11.5 million rate increase** in its Central-Gulf service area and a **$7.3 million increase** in its West-North service area[114](index=114&type=chunk)[115](index=115&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company maintains liquidity through a $1.0 billion credit facility and commercial paper, with a total debt-to-capital ratio of 52% - The company extended its **$1.0 billion revolving credit facility** maturity to March 16, 2028, with a total debt-to-capital ratio of **52%** as of June 30, 2023[142](index=142&type=chunk)[144](index=144&type=chunk) - The company has outstanding forward sale agreements for a total of **3,215,868 shares**, which could generate net proceeds of approximately **$248.7 million** upon settlement[156](index=156&type=chunk) Debt and Credit Ratings (as of June 30, 2023) | Item | Value | | :--- | :--- | | Commercial Paper Outstanding | $217.1 million | | Senior Notes Outstanding | $2.4 billion | | Credit Rating (Moody's) | A3 (Stable) | | Credit Rating (S&P) | A- (Stable) | [Cash Flow Analysis](index=38&type=section&id=CASH%20FLOW%20ANALYSIS) Operating cash flow increased significantly in H1 2023 due to Texas securitization, while investing and financing cash usage also grew Cash Flow Summary (Six Months Ended June 30, in millions) | Cash Flow Activity | 2023 | 2022 | Variance | | :--- | :--- | :--- | :--- | | Operating activities | $748.7 | $286.7 | $462.0 | | Investing activities | ($321.4) | ($251.5) | ($69.9) | | Financing activities | ($406.1) | ($36.7) | ($369.4) | - The significant increase in operating cash flow for H1 2023 was primarily due to the **recovery of the winter weather event regulatory asset** for Texas Gas Service through securitization[160](index=160&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks include commodity prices, interest rates, and credit, which are managed through various mitigation strategies - Commodity price risk from natural gas price fluctuations is mitigated by passing costs to customers through **regulatory purchased-gas cost adjustment mechanisms**[184](index=184&type=chunk) - **Interest-rate risk** is associated with commercial paper, credit agreement borrowings, and new debt financing, and is managed through a mix of debt instruments[185](index=185&type=chunk) - **Counterparty credit risk is not considered material** due to a large customer base of approximately 2.3 million and established credit control measures[186](index=186&type=chunk) [Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management confirmed the effectiveness of disclosure controls and procedures with no material changes to internal controls in Q2 2023 - The CEO and CFO have concluded that **disclosure controls and procedures were effective** as of the end of the reporting period, June 30, 2023[187](index=187&type=chunk) - **No changes in internal control over financial reporting** occurred during the second quarter of 2023 that have materially affected, or are reasonably likely to materially affect, internal controls[188](index=188&type=chunk) Part II. Other Information [Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) Ongoing legal proceedings from normal business operations are not expected to have a material adverse effect on the company - The company states that ongoing legal proceedings arising from normal operations are **not expected to have a material adverse effect** on its financial results, position, or cash flows[189](index=189&type=chunk) [Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the comprehensive risk factor disclosure in the company's Annual Report on Form 10-K - The report directs investors to the **Risk Factors section in the company's Annual Report** for a comprehensive discussion of risks affecting the business[190](index=190&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is reported as not applicable for the period - Not applicable[191](index=191&type=chunk) [Defaults Upon Senior Securities](index=44&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is reported as not applicable for the period - Not applicable[192](index=192&type=chunk) [Mine Safety Disclosures](index=44&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is reported as not applicable for the period - Not applicable[193](index=193&type=chunk) [Other Information](index=44&type=section&id=Item%205.%20Other%20Information) This item is reported as not applicable for the period - Not applicable[194](index=194&type=chunk) [Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the report, including SOX certifications and XBRL interactive data files - Lists filed exhibits, including officer certifications pursuant to **Sarbanes-Oxley Sections 302 and 906**, and XBRL data files[197](index=197&type=chunk)

Financial Data and Key Metrics Changes - Net income for the first quarter was $102.6 million or $1.84 per diluted share, compared to $98.9 million or $1.83 per diluted share in the same period of 2022, despite a 14.5% increase in weather warmth [9][10] - Operating income increased by $8.4 million or 6% year-over-year, driven by new rates from regulatory filings [28] - Average commercial paper balance decreased slightly, but the weighted average interest rate rose to 4.9% from 0.47% in Q1 2022 [11] Business Line Data and Key Metrics Changes - Operating and maintenance expenses rose by $11.6 million compared to Q1 2022, primarily due to employee-related costs and bad debt expenses [10] - Capital expenditures for the first quarter were approximately $165 million, up from $123 million in 2022 [30] Market Data and Key Metrics Changes - The company reported a significant increase in customer growth, with more than 50,000 future meter sets captured, representing a 10.7% increase year-over-year [57] - The average customer bill was reported at just under $75 before securitization charges [65] Company Strategy and Development Direction - The company is focused on executing its strategic plan, enhancing safety and reliability, and reducing emissions [24] - A new project in the Austin area aims to diversify the supply portfolio and improve storage capabilities [25] - The company is expanding its contracted storage capacity to meet winter demand and prepare for growth [34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in executing the capital plan despite economic developments and inflationary pressures [17][52] - The company affirmed its 2023 financial guidance, projecting net income between $224 million and $238 million [54] Other Important Information - The completion of securitized financing in Texas marks the end of the securitization process across service territories, benefiting customers [8] - The company received recognition for having the lowest rate of significant injuries among peers for six consecutive years [37] Q&A Session Summary Question: Customer bill trajectory given lower natural gas prices - Management indicated that the average customer bill is just under $75 before securitization charges [65] Question: Impact of securitization on spending plans - Management clarified that capital spending decisions are driven by system needs and customer growth rather than securitization [42] Question: Thoughts on Texas legislative priorities - Management is monitoring several bills, including a statewide energy efficiency program, which they view positively for customers [45] Question: Future equity financing strategy - Management confirmed that forward sales will continue to be part of the equity financing strategy, alongside the new ATM program [72][86] Question: Update on regulatory filings in Oklahoma - Management confirmed that the annual performance-based rate change application is still active and anticipated to be completed later in the year [76] Question: Trends in operating and maintenance expenses - Management noted that strategic in-sourcing and inflation are contributing to the increase in O&M expenses [78]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2023. OR ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from __________ to __________. Commission file number 001-36108 ONE Gas, Inc. (Exact name of registrant as specified in its charter) Oklahoma 46-3561936 (State or other juri ...