ONE Gas(OGS) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net income for Q2 2023 was $32.7 million or$ 0.58 per diluted share, compared to $32.1 million or$ 0.59 per diluted share in Q2 2022, indicating a slight increase in net income year-over-year [13] - Operating income increased by $5.4 million year-over-year, driven by a$ 14.1 million increase from new rates and growth in the customer base [13] - Operations and maintenance expenses rose by $8 million compared to Q2 2022, primarily due to a$ 6.7 million increase in employee-related costs [15] Business Line Data and Key Metrics Changes - The company set approximately 25,800 new customer connections in the 12 months ended June 30, 2023, which is a 2% increase year-over-year [23] - Capital expenditures for Q2 were approximately $190 million, up from$ 149 million in 2022, with full-year capital investments on track for a forecast of $675 million [25] Market Data and Key Metrics Changes - Weather conditions were 7% warmer than the prior year and 11% warmer than normal, but the impact on earnings was mitigated by a weather normalization mechanism [14] - The average commercial paper balance was down 60% compared to last year, but the weighted average interest rate was approximately 5.5%, significantly higher than the 1.3% rate in Q2 2022 [24] Company Strategy and Development Direction - The company is focused on safely operating a growing system while cultivating long-term value, with an emphasis on efficiency and workforce development [7][9] - The company is actively managing macroeconomic conditions and has modified its approach to damage prevention and line locating to reduce costs and improve outcomes [9] Management's Comments on Operating Environment and Future Outlook - Management noted that inflation pressures are cooling at a national level, but the timeline for normalization may be elongated [45] - The company remains optimistic about managing the impact of inflation on operating and maintenance expenses going into 2024 and 2025 [45] Other Important Information - The Board of Directors declared a dividend of$ 0.65 per share, unchanged from the previous quarter [27] - The company has appointed Deborah Hersman to the Board, bringing significant safety-related experience [37] Q&A Session Summary Question: How does inflation in service territories compare to national levels? - Management indicated that inflation in their territories is in line with national averages, as many contracts are priced based on national CPI [44] Question: Is there an ability to pull forward operating and maintenance expenses? - Management stated that there is limited opportunity to manipulate O&M expenses due to the need for a steady workflow [46] Question: What is the outlook for EPS growth if inflation normalizes? - Management expressed confidence in their positioning and ability to manage short-term challenges while focusing on long-term value creation [49] Question: Update on the energy efficiency program in Texas? - Management is working with the commission to clarify the rollout of the energy efficiency program tailored to specific service areas [58] Question: Timing for full general rate cases? - Management highlighted the recent rate case filed in the Rio Grande Valley service area as the main update [60]