ONE Gas (NYSE:OGS) released first-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below.
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The full earnings call is available at https://events.q4inc.com/attendee/511969668
Summary
ONE Gas reported a 6% year-over-year growth in adjusted EPS for Q1, despite experiencing one of the warmest winters on record.
The company affirmed its financial guidance with adjusted net income projected between $306 million and $314 million for the year.
Operational highlights include a 20% increase in storage capacity, which saved customers $98 million during Winter Storm Fern.
ONE Gas maintained a strong safety record, winning the Safety Achievement Award from the American Gas Association for the ninth consecutive year.
Strategic initiatives focus on customer growth, with ongoing capital projects and new large load opportunities such as data centers and manufacturing facilities.
The company plans to insource its Watch and Protect function to enhance safety and operational efficiency.
Management emphasized the effectiveness of weather normalization mechanisms despite the unusual weather conditions.
ONE Gas continues to support growth through strategic investments, leveraging existing systems for economic development.
Full Transcript
OPERATOR
Good day and welcome to the One GAS First Quarter Earnings Conference call and webcast. Today’s conference is being recorded at this time. I would like to turn the conference over to Erin Daly. Please go ahead. Ms. Daley thank you.
Regina
Regina Good morning everyone and thank you for joining us on our first quarter 2022 earnings conference call. This call is being webcast live and a replay will be made available later today after our prepared remarks. We are happy to take your questions. A reminder that statements made during this call that might include ONE Gas expectations or predictions should be considered forward looking statements and are covered by the Safe harbor provision of the Private Securities Litigation Reform act of 1995, the securities act of 1933 and the securities and Exchange act of 1934 each as amended. Actual results could differ materially from those projected in any forward looking statement. For a discussion of factors that could cause actual results to differ, please refer to our SEC filings. This call will include financial results and guidance with respect to adjusted net income and adjusted net income per share, which are non GAAP financial measures as defined by the sec. A reconciliation of the Company’s GAAP net Income and GAAP earnings per share to adjusted net income and adjusted net income per share, along with additional disclosures required by Regulation G are available in the earnings release we issued yesterday. Joining us this morning are Sid McInally, Chief Executive Officer, Chris Signalfi, Senior Vice President and Chief Financial Officer and Curtis Dinan, President and Chief Operating Officer. And now I’ll turn the call over to Sid.
Sid McInally (Chief Executive Officer)
Thanks Erin and good morning everyone. We’re glad to be with you to discuss our first quarter results and to affirm our guidance. We delivered strong Results in the first quarter with adjusted EPS growing 6% year over year despite one of the warmest winters in the history of our service territory, 25% warmer than the first quarter last year. Our performance reflects disciplined execution of our long term plan, advancing our regulatory strategy, driving operational efficiencies and supporting growing customer needs. We continue to meet our growth targets while maintaining a strong focus on customer affordability, which was particularly important during a volatile winter. While conditions were historically warm across Kansas, Oklahoma and Texas, we did experience Winter Storm Fern in January, a brief isolated cold event that temporarily drove higher gas prices across our service territory. Our 20% increase in storage capacity since Winter Storm Yuri allowed us to shield customers from price volatility and save $98 million relative to purchasing gas at spot prices. Ultimately, this performance reflects the same focus that guides our business every day safe, reliable and affordable service to our customers and long term value creation for our investors. Safety remains a priority for our company. Our strong performance in 2022, especially in the areas of workplace safety and safe driving, continues to place ONE Gas among the safest natural gas utilities in the nation. The Safety Achievement Award is given each year by the American Gas association to companies who experience the fewest number of serious injuries when compared to peers. Last month, AGA named ONE Gas as the winner of this award. For 2022, the ninth consecutive year, ONE Gas has received the Safety Achievement Award. We’re grateful for the commitment and dedication of our entire workforce to operating safely
Chris Signalfi (Senior Vice President and Chief Financial Officer)
as we serve our customers and support our coworkers. Now I’ll ask Chris to discuss the details of our financial performance and regulatory activities. Chris thanks Sid and good morning everyone. As Sid noted, we delivered strong first quarter financial performance, demonstrating the resilience of our business model during a historically warm winter. This was largely due to new rates taking effect and the impact of Texas House Bill . We are affirming our financial guidance which includes adjusted net income of 306 million to $314 million and adjusted earnings per diluted share of $4.83 to $4.95. Adjusted net income for the first quarter was $133.4 million or $2.11 per diluted share, compared with $120.1 million or $1.99 in the same period last year. First quarter revenues reflect an increase of approximately $27 million from new rates. Depreciation and amortization expenses was down 6% year over year and interest expense was down 9%. Texas and Oklahoma experienced their warmest winters since 1895 when regional temperature tracking began. Kansas had its second warmest winter in that period and its warmest of the past 34 years. While we have effective weather normalization mechanisms that tempered the earnings impact, we were not completely insulated along with earnings impacts. Cash flows were affected as we monetized less gas and storage than we would have under normal conditions. Higher spring storage balances mean we will inject less this retail season. We expect the storage related cash flow impact to normalize as we move through the remainder of the year. First quarter OM expenses increased approximately 8.6% year over year compared with 1.9% year over year growth in the prior year period. The increase was primarily driven by employee related costs. We also experienced elevated line locating activity in particular, more fiber installations led to an increase in line locating tickets. Quarterly O and M naturally fluctuates due to the timing and the nature of our operations and we continue to expect compound annual OM expense growth of 3 to 4% over our five year plan. Other income net decreased by $2.6 million compared with the same period last year in part due to decreases in the market value of investments associated with our non qualified deferred compensation plan. Excluding amounts related to KGSS-1 interest expense was $3 million lower year over year in the first quarter due in part to the impact of Texas House Bill 4384 and 2025 Federal Reserve rate cuts, a reminder that our 2026 guidance did not assume any rate reductions. Turning to liquidity during the first quarter we executed Forward Sale agreements under our at the Market Equity program for approximately 237,000 shares of common stock. We also have roughly 269,000 shares remaining to be issued under a forward Sale agreement executed in May of last year. Had all shares under forward sale agreement been fully settled as of March 31, net proceeds would have totaled approximately $41.5 million. We will continue …
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