ONE Gas(OGS) - 2025 Q1 - Quarterly Report

Part I. Financial Information Item 1. Consolidated Financial Statements (Unaudited) Presents the unaudited consolidated statements of income, balance sheets, cash flows, and equity for Q1 2025 Consolidated Statements of Income Net income increased to $119.4 million in Q1 2025, driven by a 23.5% rise in total revenues Consolidated Statements of Income (Unaudited) | | Three Months Ended March 31, | | | :--- | :--- | :--- | | (Thousands of dollars, except per share amounts) | 2025 | 2024 | | Total revenues | $935,190 | $758,320 | | Cost of natural gas | 512,462 | 383,003 | | Total operating expenses | 242,229 | 229,457 | | Operating income | 180,499 | 145,860 | | Interest expense, net | (35,697) | (31,357) | | Income before income taxes | 145,320 | 118,011 | | Net income | $119,419 | $99,317 | | Diluted EPS | $1.98 | $1.75 | | Diluted average shares (thousands) | 60,266 | 56,800 | Consolidated Balance Sheets Total assets were $8.33 billion as of March 31, 2025, with a slight increase in total equity to $3.19 billion Consolidated Balance Sheet Highlights (Unaudited) | (Thousands of dollars) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $8,327,240 | $8,425,571 | | Net property, plant and equipment | 6,738,620 | 6,645,873 | | Total current assets | 756,238 | 929,881 | | Total Liabilities | $5,142,205 | $5,321,023 | | Total long-term debt, net | 2,370,402 | 2,385,286 | | Notes payable | 811,900 | 914,600 | | Total Equity | $3,185,035 | $3,104,548 | Consolidated Statements of Cash Flows Operating cash flow rose to $277.5 million in Q1 2025, while financing activities used $160.0 million Consolidated Statement of Cash Flows Highlights (Unaudited) | | Three Months Ended March 31, | | | :--- | :--- | :--- | | (Thousands of dollars) | 2025 | 2024 | | Cash provided by operating activities | $277,459 | $108,262 | | Cash used in investing activities | (167,845) | (165,981) | | Cash provided by (used in) financing activities | (159,963) | 39,804 | | Change in cash, cash equivalents, and restricted cash | (50,349) | (17,915) | Notes to Consolidated Financial Statements Details key accounting policies, revenue disaggregation, debt, equity, and commitments for the single reportable segment - The company operates in one reportable business segment: regulated public utilities delivering natural gas to approximately 2.3 million customers[31][32] Disaggregated Revenue (Three Months Ended March 31) | (Thousands of dollars) | 2025 | 2024 | | :--- | :--- | :--- | | Natural gas sales to customers | $875,248 | $689,505 | | Transportation revenues | $43,748 | $39,967 | | Securitization customer charges | $11,637 | $11,671 | | Miscellaneous revenues | $6,624 | $6,308 | | Total revenues from contracts with customers | $937,257 | $747,451 | - The company has an at-the-market (ATM) equity program with $225.5 million available for issuance as of March 31, 2025[54] - Kansas Gas Service has deferred $30.8 million for remediation costs for former MGP sites and requested to increase its recovery cap to $32 million[73] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes Q1 2025 results, regulatory activities, capital plans, liquidity, and cash flows Financial Results and Operating Information Operating income grew by $34.6 million year-over-year, driven by new rates and customer growth Selected Financial Results (Three Months Ended March 31) | (Millions of dollars) | 2025 | 2024 | Increase (Decrease) | | :--- | :--- | :--- | :--- | | Operating income | $180.5 | $145.9 | $34.6 | | Total revenues | $935.2 | $758.3 | $176.9 | | Cost of natural gas | $512.5 | $383.0 | $129.5 | | Operating costs | $160.5 | $152.8 | $7.7 | | Depreciation and amortization | $81.7 | $76.6 | $5.1 | - Key drivers for the increase in operating income include a $51.9 million revenue increase from new rates and a $2.3 million increase from customer growth[119] - The total number of customers grew by 15,000 year-over-year to 2.305 million, driven by new connections in all service areas[118] Regulatory Activities The company filed for rate increases in Oklahoma, Kansas, and Texas to recover costs and investments - Oklahoma: Filed for a $41.5 million base rate revenue increase under the PBRC mechanism[99] - Kansas: Requested a $7.2 million increase related to its Gas System Reliability Surcharge (GSRS)[100] - Texas: Made GRIP filings requesting a total of $26.8 million in rate increases across three service areas[101][102] Liquidity and Capital Resources Liquidity is maintained via operating cash flow and a $1.35 billion commercial paper program with stable credit ratings - Primary liquidity sources are operating cash flow and a $1.35 billion commercial paper program, supported by a $1.35 billion revolving credit agreement[123][128][129] - At March 31, 2025, the total debt-to-capital ratio was 50.2%, well below the 70% covenant limit[46][126] Credit Ratings (as of March 31, 2025) | Rating Agency | Long-term Rating | Short-term Rating | Outlook | | :--- | :--- | :--- | :--- | | Moody's | A3 | Prime-2 | Stable | | S&P | A- | A-2 | Stable | Cash Flow Analysis Q1 2025 operating cash flow increased to $277.5 million due to working capital changes Cash Flow Summary (Three Months Ended March 31) | (Millions of dollars) | 2025 | 2024 | Variance | | :--- | :--- | :--- | :--- | | Operating activities | $277.5 | $108.3 | $169.2 | | Investing activities | ($167.8) | ($166.0) | ($1.8) | | Financing activities | ($160.0) | $39.8 | ($199.8) | - The increase in operating cash flow was primarily due to working capital changes related to the recovery of regulatory assets[140] - The increase in cash used for financing activities was primarily due to the repayment of commercial paper[141] Item 3. Quantitative and Qualitative Disclosures About Market Risk Primary market risks include commodity prices, interest rates, and credit, which are actively managed and mitigated - Commodity price risk from natural gas price fluctuations is mitigated by purchased-gas cost adjustment mechanisms, which pass costs to customers[162] - Interest-rate risk is associated with commercial paper and new debt financing, and is managed using a mix of fixed-rate and floating-rate debt[163][164] - Counterparty credit risk is diversified across approximately 2.3 million customers and is not considered material[165] Item 4. Controls and Procedures Management concluded that disclosure controls and internal controls over financial reporting were effective - The Principal Executive Officer and Principal Financial Officer concluded that disclosure controls and procedures were effective as of the end of the reporting period[166] - No material changes to internal control over financial reporting occurred during the quarter ended March 31, 2025[167] Part II. Other Information Item 1. Legal Proceedings Ongoing litigation from normal business operations is not expected to have a material adverse effect - The company states that it is a party to various litigation matters from the normal course of operations, but believes the probable outcome will not have a material adverse effect on its financial condition[168] Item 1A. Risk Factors Refers to the company's Annual Report on Form 10-K for a detailed discussion of relevant risk factors - Investors are advised to refer to the Risk Factors section in the company's Annual Report for a comprehensive discussion of risks affecting the business[169] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section is not applicable for the reporting period - Not applicable[170] Item 5. Other Information No directors or Section 16 officers adopted or terminated Rule 10b5-1 trading plans during the quarter - No director or Section 16 officer adopted or terminated a Rule 10b5-1 trading plan during the quarter[173] Item 6. Exhibits Lists all exhibits filed with the report, including certifications and XBRL interactive data files - A list of all exhibits filed with the Form 10-Q is provided, including certifications and XBRL data files[175][176]