ONE Gas(US:OGS)2020-04-28 21:47Financial Data and Key Metrics Changes - Net income for Q1 2020 was $91.7 million or $1.72 per diluted share, compared to $93.7 million or $1.76 per diluted share in Q1 2019, reflecting a slight decrease [12] - Net margin increased by $6.2 million year-over-year, driven by new rates in Kansas and Texas and residential customer growth, although warmer weather contributed to a $5 million decrease in net margin from lower volumes [12] - Operating costs decreased by $3.1 million compared to the same period last year, including a $4.3 million reduction in expenses related to non-qualified employee benefit plans [12] Business Line Data and Key Metrics Changes - The company experienced no material financial impact from the COVID-19 pandemic in Q1 2020, maintaining strong performance across its business lines [11] - Capital expenditures and asset removal costs increased by $29 million compared to Q1 2019, with expectations of approximately $475 million in capital spending for the full year [13][14] Market Data and Key Metrics Changes - Approximately 12,000 transport customers represented $114 million or 12% of net margin in 2019, with two major customers temporarily suspending operations due to COVID-19, leading to an anticipated revenue impact of about $100,000 per month [28][29] - The moratorium on disconnects had a slight impact on first-quarter totals, but customer growth rates remained strong [27] Company Strategy and Development Direction - The company is focused on maintaining its capital spending and operational integrity despite the challenges posed by COVID-19, with a strong emphasis on safety and employee health [16][34] - Regulatory activities include filings for rate increases in Oklahoma and Texas, aimed at improving recovery of capital expenditures and addressing the regulatory asset establishment for COVID-19 related expenses [31][32] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the significant impact of COVID-19 on the economy and emphasized the importance of their business continuity plan, which is based on anticipation, awareness, and agility [8][9] - The company expects a reduction in revenues from customers affected by the pandemic, higher bad debts due to disconnect moratoriums, and incremental expenses related to COVID-19, but also anticipates reductions in some areas such as travel expenses [35][36] Other Important Information - The Board of Directors declared a dividend of $0.54 per share, unchanged from the previous quarter, consistent with the company's guidance for 2020 [14] - As of March 31, 2020, the company had $235.2 million in short-term liquidity available, supported by a $700 million credit facility [38] Q&A Session Summary Question: Impact of weather on sales forecast and growth numbers - Management noted that the disconnect moratoriums would delay the ramp-up to normal operations, and they always assume normal weather in their guidance [45][49] Question: Long-term view on regulatory outcomes and ROEs - Management indicated that recent filings are intended to close the ROE gap and improve timely recovery of capital expenditures [50][51] Question: Fixed charges and their fluctuation throughout the year - Management explained that fixed charges typically increase as volumetric charges decrease in lower demand months, but they do not provide specific quarterly guidance [54] Question: Impact of social distancing on pending rate cases - Management confirmed a slight impact on the timeline of one rate case due to remote working conditions but did not foresee significant delays [55] Question: Equity issuance under the ATM program - Management stated that they plan to issue equity this year but have not specified the amount or timing, allowing for opportunistic market access [56] Question: Non-employee contract labor and operational changes - Management confirmed that they coordinated closely with contractors to ensure safety and continued operations without anticipated constraints [60][61] Question: Bad debt expense and its management - Management discussed the increase in bad debt expense and the need to work with regulators to determine the appropriate amounts to defer [84][86]