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ONE Gas(OGS) - 2023 Q3 - Earnings Call Transcript
OGSONE Gas(OGS)2023-11-01 00:28
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Financial Data and Key Metrics Changes - The company reported net income for Q3 2023 of 25.2million,or25.2 million, or 0.45 per diluted share, compared to 23.7million,or23.7 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 4.06to4.06 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 300millionof4.25300 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 675million,mainlyduetosystemmaintenanceandreinforcementprojects[7]−Employeeexpensesincreasedby675 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 2.3millioninoutsideservicescostsasworkwasinsourced[9]MarketDataandKeyMetricsChanges−ThecompanyisexperiencingstrongeconomicgrowthinTexas,Oklahoma,andKansas,withnewmanufacturingandtechnology−basedjobsdrivingdemandfornaturalgas[4][5]−Despiteelevatedmortgageratesimpactinghomebuilding,thecompanyremainsoptimisticaboutlong−termgrowthinitsserviceterritories[29]CompanyStrategyandDevelopmentDirection−Thecompanyisfocusedonprudentexpensemanagementandenhancingsystemreliabilitywhilemeetinggrowingcustomerdemand[27]−Asignificantinvestmentincapitalprojectsisaimedatsupportingfuturecustomerneedsandensuringsafetyremainsatoppriority[29]−Thecompanyisactivelypursuingregulatoryapprovalsfornewtariffsandrateadjustmentstorecoverinfrastructureinvestments[12][13]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementacknowledgedthechallengesposedbyinflationandrisinginterestratesbutemphasizedthecompany′sabilitytonavigatetheseissueseffectively[30]−Thecompanyremainsconfidentinthedurabilityofitsgrowth,supportedbyongoingeconomicdevelopmentinitsserviceareas[20][61]OtherImportantInformation−Thecompanyexpandeditscreditfacilityto2.3 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]