Release Date: November 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ONE Gas Inc (OGS, Financial) delivered quarterly results in line with expectations, benefiting from company-wide efforts and constructive regulatory outcomes.
- The company raised and narrowed its EPS guidance for 2024 to a range of $3.85 to $3.95, reflecting a 5-cent increase at the midpoint.
- Successful regulatory settlements in Kansas and Texas allow ONE Gas Inc (OGS) to recoup investments and earn a fair rate of return.
- The company benefited from a favorable interest rate environment, particularly from the Fed's 50 basis point rate cut in September.
- Operational efficiencies and cost management initiatives have led to a moderation in O&M expenses, with a year-to-date increase of just 5%.
Negative Points
- Net income for the third quarter decreased to $19.3 million or 34 cents per diluted share, compared to $25.2 million or 45 cents in the same period last year.
- Interest expenses increased by $11.5 million, primarily due to refinancing impacts experienced in the first quarter.
- Operations and maintenance expenses were higher compared to the previous year, mainly due to increased labor-related costs.
- The company faces ongoing concerns about the US election, US deficit, and treasury market dynamics, which have caused longer-term rates to rise.
- Customer growth is affected by higher mortgage rates, impacting home buyers and builders, leading to slower activity in new meter installations.
Q & A Highlights
Q: Can you provide an update on the timing of your 2025 guidance?
A: Sid McAnnally, President and CEO, stated that ONE Gas plans to issue guidance before the December utility week meetings, maintaining the same cadence as previous years to serve both the company and the investment community well.
Q: Should we expect a declining trajectory in O&M expenses moving forward?
A: Christopher P. Sighinolfi, CFO, confirmed that a declining trajectory in O&M expenses is expected. The company has been successful in moderating costs and anticipates further moderation as they move forward.
Q: Are there any planned rate filings in Oklahoma or Kansas?
A: Curtis Dinan, COO, explained that in Oklahoma, a full rate case is required by June 30, 2027, with interim PBR filings each year until then. In Kansas, they have just completed a rate case and will continue with annual GSRS filings to capture capital expenditures.
Q: Can you discuss the customer growth trends and expectations?
A: Curtis Dinan noted that while higher mortgage rates have slowed activity, there has been a positive pickup in housing permits. This suggests a potential recovery in customer growth, although not a rapid acceleration.
Q: What is the current balance between commercial paper and long-term debt, and what are the future plans?
A: Christopher P. Sighinolfi stated that the company uses commercial paper for investments not yet in authorized rate base. They plan to settle equity forwards at year-end to reduce commercial paper balance, satisfying long-term financing needs with retained earnings and long-term debt.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
