ONE Gas(OGS) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company raised its earnings per share (EPS) guidance for 2024 to a range of $3.85 to$3.95, which is $0.05 higher at the midpoint than the original guidance [5] - Net income for the third quarter was$19.3 million or $0.34 per diluted share, compared to$25.2 million or 0.45 in the same period last year [12] - Operations and maintenance (O&M) expenses were up 5% year-to-date compared to 2023, consistent with long-term guidance but slightly favorable to the 2024 plan [9][12] Business Line Data and Key Metrics Changes - The company experienced a 17.5 million increase in revenue from new rates, partially offset by an $11.5 million increase in interest expense [12] - The Kansas rate case settlement resulted in a net increase of$35 million, with new rates effective from November 1 [16] - The Central Gulf rate case in Texas is pending final commission approval, which includes a $19.3 million rate increase [17] Market Data and Key Metrics Changes - The company noted a firming in customer activity towards the end of 2024, although higher mortgage rates have slowed down homebuyer movement [25][26] - There has been a pickup in housing permits, indicating a potential recovery in the market [26] Company Strategy and Development Direction - The company plans to continue executing its financial plan in line with the updated guidance and aims to finish 2024 within the planned capital budget of$750 million [18][15] - The focus remains on operational execution and regulatory outcomes to support growth and maintain a strong balance sheet [5] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about a strong finish to the year and the opportunities that await in 2025 [19] - The company is not assuming any further rate cuts for 2024 in its guidance, despite recent Fed actions [32] Other Important Information - The Board of Directors declared a dividend of $0.66 per share, unchanged from the prior quarter [15] - The company has satisfied its 2024 equity needs through forward settlement agreements covering approximately 3.6 million shares [13] Q&A Session Summary Question: Timing of 2025 guidance - Management confirmed that guidance for 2025 will be issued in December, following a cadence established to allow for open discussion before the December Utility Week meetings [20] Question: O&M expense trajectory - Management indicated that a declining trajectory in O&M expenses is expected moving forward, with successful cost management efforts yielding favorable results [21] Question: Rate base cadence and filings - Management stated that a full rate case filing in Oklahoma is required by June 30, 2027, and that Kansas will continue with annual GSRS filings [22][23] Question: Customer growth trends - Management noted a slight firming in customer activity but acknowledged the impact of higher mortgage rates on homebuyer movement [25][26] Question: Interest expense and long-term debt - Management discussed plans to reduce commercial paper balances through upcoming financing settlements and emphasized the importance of matching long-term financing needs [27][28] Question: Bad debt expense normalization - Management indicated that bad debt expenses have normalized and are back to regular functioning, with no significant changes expected [29]