ONE Gas(US:OGS)2022-02-27 15:13Financial Data and Key Metrics Changes - Net income for Q4 2021 was $60.5 million or $1.12 per diluted share, compared to $58.3 million or $1.09 per diluted share in Q4 2020, reflecting an increase in revenues of $10 million year-over-year [6][8] - For the full year 2021, net income was $206.4 million or $3.85 per diluted share versus $196.4 million or $3.68 per diluted share in 2020 [8] - Operating costs for Q4 2021 were $7.1 million higher than the same period last year, driven by a $13.3 million increase in employee labor and benefits [7][8] - Capital expenditures for Q4 were $161 million, totaling $544 million for the year, an increase from $512 million in 2020 [9][10] Business Line Data and Key Metrics Changes - Revenues less the cost of natural gas for the full year were $40.7 million, including $32 million from new rates and $8.5 million from residential customer growth [8] - The company connected approximately 25,000 new customers during 2021, with an expected average annual customer growth of 1.2% across its service territory over the next five years [18] Market Data and Key Metrics Changes - The average rate base for the year was $4.25 billion, with 41% in Oklahoma, 29% in Kansas, and 30% in Texas [10] - The company anticipates a higher rate base growth of 8% to 9%, up from 7% to 8% previously [11] Company Strategy and Development Direction - The company plans to increase capital investments to $650 million in 2022, a 20% increase over 2021, focusing on system integrity and expansion to new customers [11][12] - Total capital spending for the next five years is anticipated to be $3.5 billion, which is $500 million higher than the previous plan [11] - The company aims for a 55% reduction in emissions from distribution pipeline leaks by 2035, as part of its climate-related goals [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to manage O&M expenses despite inflationary pressures, highlighting proactive supply chain management [28][29] - The company is well-positioned to execute its growth and maintenance plans, with a focus on core values and service delivery [41] Other Important Information - Moody's revised its outlook for the company from negative to stable, affirming its credit ratings [10] - The company expects average annual dividend growth between 6% to 8% through 2026, with a target payout ratio of 55% to 65% [12] Q&A Session Summary Question: Drivers of increased CapEx and CAGR - Management indicated that multiple factors contribute to increased capital spending, including system integrity work, economic development in Texas and Oklahoma, and government-required relocations [24][26] Question: Inflationary impacts on the business - Management acknowledged higher labor and outside service costs but emphasized their preparedness to manage O&M expenses and minimize customer bill impacts [27][29] Question: Renewable Natural Gas (RNG) opportunities - Management expressed excitement about RNG opportunities due to the proximity of feedstock and ongoing projects, highlighting the environmental benefits of capturing fugitive emissions [31][33] Question: Trends in Return on Equity (ROE) - Management noted stable ROE trends in recent years, with expectations for stability despite inflationary pressures and interest rate increases [35][36] Question: M&A outlook - Management remains focused on internal growth opportunities and is not currently pursuing M&A, despite recognizing market dislocations [40][41]