ONE Gas, Inc 8-K, filed Jan 18, 2022
ONE Gas, Inc. (OGS)
8-K
2022-01-18
For: 2022-01-18
View Original
Added on
April 09, 2026
About this 8-K
ONE Gas, Inc filed this 8-K on January 18, 2022.
Items reported
- Item 2.02: Financial results
- Item 7.01: Regulation FD disclosure
- Item 8.01: Other events
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
| (Date of report) | |||||
| (Date of earliest event reported) | January 18, 2022 | ||||
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction | (Commission | (IRS Employer | ||||||||||||
| of incorporation) | File Number) | Identification No.) | ||||||||||||
(Address of principal executive offices)
(Zip code)
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| The information disclosed in these Items 2.02 and 7.01, including Exhibits 99.1, 99.2 and 99.3 hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act except as expressly set forth by specific reference in such filing. | ||||||||
| Item 2.02 | Results of Operations and Financial Condition | |||||||
| See discussion below regarding 2021 earnings guidance under item 7.01, Regulation FD Disclosure. | ||||||||
| Item 7.01 | Regulation FD Disclosure | |||||||
| On January 18, 2022, we announced that our board of directors declared a cash dividend of 62 cents per share of common stock. We also issued our 2022 financial guidance, narrowed our 2021 financial guidance and updated our five-year growth rates, and posted additional information in an investor presentation, attached hereto, as Exhibit 99.3. These materials are also available on our website, www.onegas.com. The news releases and the investor presentation are furnished as Exhibits 99.1, 99.2 and 99.3 and are incorporated by reference herein. | ||||||||
| Item 8.01 | Other Events | |||||||
| On January 18, 2022, our board of directors declared a cash dividend of 62 cents per share of common stock, payable March 11, 2022, to shareholders of record at the close of business February 25, 2022. | ||||||||
| Item 9.01 | Financial Statements and Exhibits | |||||||
| (d) | Exhibits | |||||||
| Exhibit Number | Description | |||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 99.3 | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |||||||
2
SIGNATURE
Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
| ONE Gas, Inc. | |||||||||||
| Date: | January 18, 2022 | By: | /s/ Caron A. Lawhorn | ||||||||
| Caron A. Lawhorn Senior Vice President and Chief Financial Officer | |||||||||||
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Exhibit 99.1
| January 18, 2022 | Analyst Contact: | Brandon Lohse 918-947-7472 | |||||||||
| Media Contact: | Leah Harper 918-947-7123 | ||||||||||
ONE Gas Increases Quarterly Dividend
TULSA, Okla. - Jan. 18, 2022 - The board of directors of ONE Gas, Inc. (NYSE: OGS) today increased the dividend for the first quarter 2022 by 4 cents per share to 62 cents per share, resulting in an annualized dividend of $2.48 per share.
The dividend is payable March 11, 2022, to shareholders of record at the close of business Feb. 25, 2022.
The company expects an average annual dividend increase of 6% to 8% through 2026, with a target dividend payout ratio of 55% to 65% of net income, subject to its board of directors' approval.
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ONE Gas, Inc. (NYSE: OGS) is a 100% regulated natural gas utility, and trades on the New York Stock Exchange under the symbol “OGS.” ONE Gas is included in the S&P MidCap 400 Index and is one of the largest natural gas utilities in the United States.
Headquartered in Tulsa, Oklahoma, ONE Gas provides a reliable and affordable energy choice to more than 2.2 million customers in Kansas, Oklahoma and Texas. Its divisions include Kansas Gas Service, the largest natural gas distributor in Kansas; Oklahoma Natural Gas, the largest in Oklahoma; and Texas Gas Service, the third largest in Texas, in terms of customers.
For more information and the latest news about ONE Gas, visit onegas.com and follow its social channels: @ONEGas, Facebook, LinkedIn and YouTube.
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Exhibit 99.2
| January 18, 2022 | Analyst Contact: | Brandon Lohse 918-947-7472 | |||||||||
| Media Contact: | Leah Harper 918-947-7123 | ||||||||||
ONE Gas Issues 2022 Financial Guidance;
Narrows 2021 Financial Guidance; and
Announces New ESG Goal for Emissions Reduction
Five-year Financial Growth Rates Updated;
Capital Investments Forecast Increased
TULSA, Okla. - Jan. 18, 2022 - ONE Gas, Inc. (NYSE: OGS) today issued its financial guidance for 2022 and updated its five-year growth rates, narrowed its 2021 financial guidance range and announced a new goal for emissions reduction from its vintage pipeline replacement program.
"We are expanding our core business by capitalizing on the significant organic growth opportunities in our service territory," said Robert S. McAnnally, president and chief executive officer. "Our focus on growth while reducing emissions leverages the unique opportunities presented by our assets to meet our customers' demand for affordable, reliable and renewable energy, now and into the future."
2022 FINANCIAL GUIDANCE
ONE Gas (the Company) expects 2022 net income to be in the range of $215 million to $227 million, with earnings per diluted share of $3.96 to $4.20. The midpoint of 2022 guidance is net income of $221 million and earnings per diluted share of $4.08.
The Company's 2022 earnings guidance includes the benefit of new rates and customer growth, offset by higher operating expenses, including depreciation expense from capital investments, and assumes normal weather.
Capital investments, including asset removal costs, are expected to be approximately $650 million in 2022, a 20% increase from 2021. Over 65% of these expenditures are targeted for system integrity and replacement projects. Capital investments for extensions to new customers are expected to be approximately $190 million, an increase of over 25% from 2021, primarily due to significant growth opportunities in Texas and Oklahoma. The anticipated average rate base for 2022 is $4.64 billion, calculated consistent with utility ratemaking in each jurisdiction.
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ONE Gas Issues 2022 Financial Guidance; Narrows 2021 Financial Guidance; and
Announces New ESG Goal for Emissions Reduction
January 18, 2022
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As previously announced, the ONE Gas board of directors increased the first quarter dividend to $0.62 per share, resulting in an annualized dividend (subject to board of directors’ approval) of $2.48 per share, an increase of 6.9% over 2021.
FIVE-YEAR FINANCIAL GROWTH RATES
For the five years ending 2026, capital investments, including asset removal costs, are expected to be in the range of $650 million to $750 million per year, or approximately $3.5 billion for the five-year period, an increase of 19% from the previous five-year plan. The increase in capital supports estimated average rate base growth of 8% to 9% per year through 2026, an increase from the prior five-year forecast of 7% to 8%.
While continuing to allocate more than 65% of total capital investments to system integrity and replacement projects, the Company anticipates strong growth, primarily in Texas and Oklahoma. Over the five-year period ending 2026, growth capital is estimated to be approximately $1.1 billion, an increase of 23% from the previous five-year plan.
Net income is expected to increase by an average of 8% to 10% annually through 2026, up from 6% to 8%, with diluted earnings per share now at 6% to 8%, up from 5% to 7%.
Operating costs over the five years are expected to increase on average approximately 4% per year.
ONE Gas estimates total net financing needs for the period 2022 through 2026 of approximately $1.6 billion, of which approximately 25% is expected to be equity.
The average annual dividend growth rate is expected to remain 6% to 8% through 2026, subject to board of directors’ approval, with a target dividend payout ratio of 55% to 65% of net income.
2021 FINANCIAL GUIDANCE
The Company also narrowed its 2021 guidance to earnings of $3.83 to $3.87 per diluted share from the previous range of $3.80 to $3.90 per diluted share. Net income is now expected to be in the range of $206 million to $208 million. Capital investments are still expected to be $540 million.
NEW EMISSIONS REDUCTION GOAL
ONE Gas believes that natural gas assets will continue to play a pivotal role in ushering in a cleaner energy future and that it is uniquely positioned to deliver affordable, reliable and renewable energy to customers, now and into the future. The Company continues to lower methane emissions from its distribution operations through pipeline replacement, damage prevention and other operational practices. By 2035, ONE Gas expects to achieve a 55% reduction in emissions due to leaks from its distribution pipelines, measured from a 2005 baseline and accounting for projected system growth. The Company expects to achieve this goal primarily through its vintage pipeline replacement and protection program.
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ONE Gas Issues 2022 Financial Guidance; Narrows 2021 Financial Guidance; and
Announces New ESG Goal for Emissions Reduction
January 18, 2022
Page 3
ONE Gas is pursuing other opportunities to lower net methane emissions, including transporting renewable natural gas (RNG) on its system. To date, the Company has executed eight letter agreements for biogas development projects that are expected to produce up to one billion cubic feet of RNG per year. Also, in its recent rate case, Oklahoma Natural Gas was authorized to spend $5 million annually to purchase RNG as part of its natural gas supply portfolio and recover the cost through its purchased gas-cost mechanism.
INVESTOR PRESENTATION
Additional information can be found in the 2022 Financial Guidance investor presentation on the ONE Gas website at https://www.onegas.com/investors/financials-and-filings/guidance.
Guidance estimates may be impacted by the variables in the forward-looking statements listed
below.
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ONE Gas, Inc. (NYSE: OGS) is a 100% regulated natural gas utility, and trades on the New York Stock Exchange under the symbol “OGS.” ONE Gas is included in the S&P MidCap 400 Index and is one of the largest natural gas utilities in the United States.
Headquartered in Tulsa, Oklahoma, ONE Gas provides a reliable and affordable energy choice to more than 2.2 million customers in Kansas, Oklahoma and Texas. Its divisions include Kansas Gas Service, the largest natural gas distributor in Kansas; Oklahoma Natural Gas, the largest in Oklahoma; and Texas Gas Service, the third largest in Texas, in terms of customers.
For more information and the latest news about ONE Gas, visit onegas.com and follow its social channels: @ONEGas, Facebook, LinkedIn and YouTube.
Some of the statements contained and incorporated in this news release are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. The forward-looking statements relate to our anticipated financial performance, liquidity, management’s plans and objectives for our future operations, our business prospects, the outcome of regulatory and legal proceedings, market conditions and other matters. We make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. The following discussion is intended to identify important factors that could cause future outcomes to differ materially from those set forth in the forward-looking statements.
Forward-looking statements include the items identified in the preceding paragraph, the information concerning possible or assumed future results of our operations and other statements contained or incorporated in this news release identified by words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "should," "goal," "forecast," "guidance," "could," "may," "continue," "might," "potential," "scheduled," "likely," and other words and terms of similar meaning.
One should not place undue reliance on forward-looking statements, which are applicable only as of the date of this news release. Known and unknown risks, uncertainties and other factors may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by forward-looking statements. Those factors may affect our operations, markets, products, services and prices. In addition to any assumptions and other factors referred to specifically in connection with the forward-looking statements, factors that could cause our actual results to differ materially from those contemplated in any forward-looking statement include, among others, the following:
•our ability to recover costs (including operating costs and increased commodity costs related to Winter Storm Uri), income taxes and amounts equivalent to the cost of property, plant and equipment, regulatory assets and our allowed rate of return in our regulated rates;
•our ability to manage our operations and maintenance costs;
•the concentration of our operations in Kansas, Oklahoma, and Texas;
•changes in regulation of natural gas distribution services, particularly those in Oklahoma, Kansas and Texas;
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ONE Gas Issues 2022 Financial Guidance; Narrows 2021 Financial Guidance; and
Announces New ESG Goal for Emissions Reduction
January 18, 2022
Page 4
•regulations in local jurisdictions in which we operate authorizing utilities to record in a regulatory asset account or comparable account the expenses associated with Winter Storm Uri, including but not limited to gas costs, other costs related to the procurement and transportation of gas supply and the associated financing costs;
•the economic climate and, particularly, its effect on the natural gas requirements of our residential and commercial customers;
•the length and severity of a pandemic or other health crisis, such as the outbreak of COVID-19, including the impact to our operations, customers, contractors, vendors and employees, the effectiveness of vaccine campaigns (including the COVID-19 vaccine campaign) on our workforce and customers and the effect of other measures or mandates that international, federal, state and local governments, agencies, law enforcement and/or health authorities may implement to address the pandemic or other health crises, which could (as with COVID-19) precipitate or exacerbate one or more of the above-mentioned and/or other risks, and significantly disrupt or prevent us from operating our business in the ordinary course for an extended period;
•competition from alternative forms of energy, including, but not limited to, electricity, solar power, wind power, geothermal energy and biofuels;
•conservation and energy efficiency efforts of our customers;
•adverse weather conditions and variations in weather, including seasonal effects on demand and/or supply, the occurrence of storms, including Winter Storm Uri in the territories in which we operate, and climate change, and the related effects on supply, demand and costs;
•indebtedness could make us more vulnerable to general adverse economic and industry conditions, limit our ability to borrow additional funds and/or place us at competitive disadvantage compared with competitors;
•our ability to secure reliable, competitively priced and flexible natural gas transportation and supply, including decisions by natural gas producers to reduce production or shut-in producing natural gas wells and expiration of existing supply and transportation and storage arrangements that are not replaced with contracts with similar terms and pricing;
•our ability to complete necessary or desirable expansion or infrastructure development projects, which may delay or prevent us from serving our customers or expanding our business;
•operational and mechanical hazards or interruptions;
•adverse labor relations;
•the effectiveness of our strategies to reduce earnings lag, margin protection strategies and risk mitigation strategies, which may be affected by risks beyond our control such as commodity price volatility, counterparty performance or creditworthiness and interest rate risk;
•the capital-intensive nature of our business, and the availability of and access to, in general, funds to meet our debt obligations prior to or when they become due and to fund our operations and capital expenditures, either through (i) cash on hand, (ii) operating cash flow, or (iii) access to the capital markets and other sources of liquidity;
•our ability to borrow funds, if needed, to meet our liquidity needs including raising the funds on commercially reasonable terms, or on terms acceptable to us, or at all;
•limitations on our operating flexibility, earnings and cash flows due to restrictions in our financing arrangements;
•cross-default provisions in our borrowing arrangements, which may lead to our inability to satisfy all of our outstanding obligations in the event of a default on our part;
•changes in the financial markets during the periods covered by the forward-looking statements, particularly those affecting the availability of capital and our ability to refinance existing debt and fund investments and acquisitions to execute our business strategy;
•actions of rating agencies, including the ratings of debt, general corporate ratings and changes in the rating agencies’ ratings criteria;
•changes in inflation and interest rates;
•our ability to recover the costs of natural gas purchased for our customers, including those related to Winter Storm Uri and any related financing required to support our purchase of natural gas supply, including the securitized financings currently contemplated in each of our jurisdictions;
•impact of potential impairment charges;
•volatility and changes in markets for natural gas and our ability to secure additional and sufficient liquidity on reasonable commercial terms to cover costs associated with such volatility;
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ONE Gas Issues 2022 Financial Guidance; Narrows 2021 Financial Guidance; and
Announces New ESG Goal for Emissions Reduction
January 18, 2022
Page 5
•possible loss of local distribution company franchises or other adverse effects caused by the actions of municipalities;
•payment and performance by counterparties and customers as contracted and when due, including our counterparties maintaining ordinary course terms of supply and payments;
•changes in existing or the addition of new environmental, safety, tax (including imposition of a carbon, methane or similar tax) and other laws to which we and our subsidiaries are subject, including those that may require significant expenditures, significant increases in operating costs or, in the case of noncompliance, substantial fines or penalties;
•delays, increase pricing or unavailability of certain products, goods, and materials due to global supply chain issues;
•the effectiveness of our risk-management policies and procedures, and employees violating our risk-management policies;
•the uncertainty of estimates, including accruals and costs of environmental remediation;
•advances in technology, including technologies that increase efficiency or that improve electricity’s competitive position relative to natural gas;
•population growth rates and changes in the demographic patterns of the markets we serve, and conditions in these areas’ housing markets;
•acts of nature and the potential effects of threatened or actual terrorism and war;
•cyber-attacks, which, according to experts, have increased in volume and sophistication since the beginning of the COVID-19 pandemic, or breaches of technology systems that could disrupt our operations or result in the loss or exposure of confidential or sensitive customer, employee or Company information; further, increased remote working arrangements as a result of the pandemic have required enhancements and modifications to our IT infrastructure (e.g. Internet, Virtual Private Network, remote collaboration systems, etc.), and any failures of the technologies, including third-party service providers, that facilitate working remotely could limit our ability to conduct ordinary operations or expose us to increased risk or effect of an attack;
•the sufficiency of insurance coverage to cover losses;
•the effects of our strategies to reduce tax payments;
•the effects of litigation and regulatory investigations, proceedings, including our rate cases, or inquiries and the requirements of our regulators as a result of the Tax Cuts and Jobs Act of 2017;
•changes in accounting standards;
•changes in corporate governance standards;
•discovery of material weaknesses in our internal controls;
•our ability to comply with all covenants in our indentures and the ONE Gas Credit Agreement, a violation of which, if not cured in a timely manner, could trigger a default of our obligations;
•our ability to attract and retain talented employees, management and directors, and shortage of skilled-labor;
•unexpected increases in the costs of providing health care benefits, along with pension and postemployment health care benefits, as well as declines in the discount rates on, declines in the market value of the debt and equity securities of, increases in funding requirements for, our defined benefit plans; and
•the ability to successfully complete merger, acquisition or divestiture plans, regulatory or other limitations imposed as a result of a merger, acquisition or divestiture, and the success of the business following a merger, acquisition or divestiture.
These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other factors could also have material adverse effects on our future results. These and other risks are described in greater detail in Part 1, Item 1A, Risk Factors, in our Annual Report. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these factors. Other than as required under securities laws, we undertake no obligation to update publicly any forward-looking statement whether as a result of new information, subsequent events or change in circumstances, expectations or otherwise.
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Resilient and Reliable Energy For a Better Tomorrow January 18, 2022 2022 FINANCIAL GUIDANCE
FORWARD LOOKING STATEMENTS| 2 Forward-Looking Statements Statements contained in this presentation that include or refer to Company expectations, our business outlook, our future plans or predictions relating to any matters should be considered forward-looking statements that are covered by the safe harbor provisions 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. All statements, other than statements of historical facts, included in this presentation are forward-looking statements. Words such as “anticipates,” “expects,” “projects,” “intends,” “goals,” “plans,” “potential,” “might,” “believes,” “target,” “objective,” “strategy,” “opportunity,” “pursue,” “budgets,” “outlook,” “trends,” “focus,” “on schedule,” “on track,” “poised,” “slated,” “seeks,” “estimates,” “forecasts,” “guidance,” “scheduled,” “continues,” “may,” “will,” “would,” “should,” “could,” “likely,” and variations of such words and similar expressions are intended to identify such forward-looking statements. One should not place undue reliance on forward-looking statements. In addition, statements that refer to or are based on estimates, forecasts, projections, uncertain events or assumptions, including statements relating to market opportunities, future products or processes and the expected availability and benefits of such products or processes, and anticipated trends in our businesses or the markets relevant to them, including those developments relating to regulation and litigation trends and developments, also identify forward-looking statements. Such statements are based on management's expectations as of the date of this investor presentation, unless an earlier date is indicated, and involve many risks and uncertainties, known and unknown, that could cause actual results, performance or achievements to differ materially from those expressed or implied in these forward-looking statements. It is important to note that the actual results could differ materially from those projected in such forward-looking statements. Important risks and uncertainties that could cause actual results to differ materially from the company's expectations include, but are not limited to, our ability to recover, manage and maintain costs; the concentration of our operations in Kansas, Oklahoma and Texas; regulatory or legislative changes in the jurisdictions in which we operate; the length and severity of unpredictable events, including, but not limited to, the COVID-19 pandemic, threatened terrorism, war or cyber-attacks or breaches, or extreme weather events, including those related to climate change; the competitive implications of alternative sources of energy and efforts to conserve energy; our competitive position, including, but not limited to our ability to secure competitive sourcing and pricing and our ability to compete with respect to expansion and infrastructure; the economic climate and our comparable economic position; our access to capital and the restrictions that result from our current capital arrangements; the effectiveness of our risk mitigation and compliance efforts; the uncertainties of any estimates or assumptions we use in our projections; our strategic and transactional efforts and future plans; and costs and uncertainties relating to our workforce, and other risks and uncertainties, including those that are set forth in ONE Gas’ earnings release dated Nov. 1, 2021, which is included as an exhibit to ONE Gas’ Form 8-K furnished to the SEC on such date. For additional information regarding these and other factors that could cause actual results to differ materially from such forward-looking statements, refer to ONE Gas’ Securities and Exchange Commission filings., including the Company's most recent reports on Forms 10-K and 10-Q. Copies of the Company’s Form 10-K, 10-Q and 8-K reports may be obtained by visiting our “Investors” website under “Financials & Filings” at https://www.onegas.com/investors/financials-and-filings/quarterly-results/default.aspx or the SEC’s website at www.sec.gov. Other unpredictable or unknown factors not discussed in this presentation could also have material adverse effects on the Company, its operations or the outcomes described in the forward- looking statements in this presentation or in the Company’s filings with the Securities and Exchange Commission. All future cash dividends discussed in this presentation are subject to the approval of the ONE Gas board of directors. All references in this presentation to guidance are based on news releases issued on or before Jan. 18, 2022, and are not being updated or affirmed by this presentation. ONE Gas does not undertake, and expressly disclaims any duty, to update any statement made in this presentation, whether as a result of new information, new developments or otherwise, except to the extent that disclosure may be required by law.
FINANCIAL OUTLOOK
FINANCIAL OUTLOOK | 4 Five-Year Financial Highlights Capital Investments & Rate Base • Capital investments of approximately $3.5 billion, a 19% increase over previous five-year plan – Continued investment in system integrity and replacement projects, representing more than 65% of annual capital investment – Growth capital of approximately $1.1 billion, an increase of 23% over previous five-year plan • Rate base growth of 8 – 9% (up from 7 – 8%) For the Five Years Ending Dec. 31, 2026 Average Annual Earnings Growth Rates • Net income of 8 – 10% (up from 6 – 8%) – In addition to capital investment, key drivers include: • Regulatory outcomes including recent Oklahoma rate case and annual filings in all jurisdictions • Average annual sales customer growth of 1.2%, led by Texas with 1.9% • Operating cost increases averaging 4% annually • Earnings per diluted share of 6 – 8% (up from 5 – 7%) • Dividend increase of 6 – 8%, subject to board approval
FINANCIAL OUTLOOK | 5 ** Represents midpoint of guidance range as of Jan. 18, 2022 * For definition of average rate base, see Appendix 2022 Guidance Summary • Net income range of $215 ‒ $227 million • EPS range of $3.96 ‒ $4.20 per diluted share • Estimated average rate base* of $4.64 billion – Includes $650 million in capital investments • Assumes diluted shares outstanding of 54.2 million Initiated Jan. 18, 2022 (Millions) $3.25 $3.51 $3.68 $3.85** $4.08** $172 $187 $196 $207** $221** 2018 2019 2020 2021G 2022G DILUTED EPS & NET INCOME Diluted EPS Net Income
FINANCIAL OUTLOOK | 6 Growing Dividends • Quarterly Dividend – 62 cents per share in 2022* • Target annual payout ratio – 55 to 65% of net income Building Shareholder Value $1.84 $2.00 $2.16 $2.32 $2.48* 2018 2019 2020 2021 2022G DIVIDENDS & PAYOUT RATIO 57% 57% 59% 60%** 61%** * Subject to board approval ** Represents midpoint of guidance range as of Jan. 18, 2022 6.9% increase over 2021
FINANCIAL OUTLOOK | 7 Financing Requirements • Dividends and capital investments primarily funded by cash flow from operations • ~$1.6 billion net financing needs through 2026, of which ~ 25% is expected to be equity issuances – $215 million remaining and available for issuance under the existing ATM program Excluding Winter Storm Uri Financing * Before changes in working capital. See non-GAAP information in Appendix. ** Based on 2022 guidance. Financing requirements $174 Financing requirements $210 2022 Sources 2022 Uses (M IL LI ON S) Dividends $134 Capital expenditures and asset removal costs $650**Cash flow from operations* $504 $784 $784 Financing requirements $280
CAPITAL INVESTMENTS & RATE BASE
CAPITAL INVESTMENTS & RATE BASE | 9 $317 $339 $360 $380 $435 $99 $110 $135 $140 $190 $26 $21 $20 $20 $25 $158 $178 $191 $201 $213 2018 2019 2020 2021G 2022G CAPITAL INVESTMENTS (MILLIONS) System Integrity Customer Growth Other/IT Depreciation $442 $470 $515 ~$540 ~$650 Well-Defined Capital Investment Plan Over ~65% for System Integrity and Replacement Projects Kansas $145 Oklahoma $255 Texas $250 2022G CAPITAL INVESTMENTS BY STATE (MILLIONS) Note: Capital investments include asset removal costs and accruals. 2020 depreciation includes $3 million of unallocated expenses. 20% increase over 2021G
CAPITAL INVESTMENTS & RATE BASE | 10 Capital Investments Spending 3x Depreciation $126 $123 $129 $135 $145 $52 $64 $68 $72 $75 2018 2019 2020 2021G 2022G KANSAS 2022: 1.9X DEPRECIATION $180 $191 $198 $215 $255 $69 $74 $76 $81 $87 2018 2019 2020 2021G 2022G OKLAHOMA Depreciation 2022: 2.9X DEPRECIATION $136 $156 $188 $190 $250 $37 $40 $44 $48 $51 2018 2019 2020 2021G 2022G TEXAS 2022: 5.0X DEPRECIATION (M IL LI ON S) Note: Capital investments include asset removal costs and accruals
CAPITAL INVESTMENTS & RATE BASE | 11 $1.23 billion $1.94 billion $1.47 billion 2022 ESTIMATED AVERAGE RATE BASE* TOTAL: $4.64 BILLION Kansas Oklahoma Texas Rate Base $3.36 $3.62 $3.91 $4.25 $4.64 2018 2019 2020 2021G 2022G AVERAGE RATE BASE* (BILLIONS) * For definition of average rate base, see Appendix Expected 9% growth from 2021 to 2022
APPENDIX
APPENDIX | 13 Authorized Rate Base $1,257 $1,407 $1,475 $1,616 $1,726 2017 2018 2019 2020 2021 OKLAHOMA2 1 Kansas Gas Service’s most recent rate case, approved in February 2019, was settled without a determination of rate base and reflects Kansas Gas Service’s estimate of rate base contained within the settlement; these amounts are not necessarily indicative of current or future rate base. 2 Reflects authorized rate base as of Dec. 31, 2021. These amounts are not necessarily indicative of current or future rate bases. (M IL LI ON S) $947 $1,033 $1,068 $1,133 $1,197 2017 2018 2019 2020 2021 KANSAS1 $822 $895 $986 $1,047 $1,239 2017 2018 2019 2020 2021 TEXAS2
APPENDIX | 14 Rate Base Definition Authorized Rate Base $4.16 billion (as of Dec. 31, 2021) • Includes capital investments authorized in most recent rate cases and interim filings • Excludes any capital investments since last approved rate cases or filings 2022 Estimated Average Rate Base $4.64 billion • Average of rate base per book at beginning and end of year • Includes capital investments and other changes in rate base not yet approved for recovery
APPENDIX | 15 Non-GAAP Information ONE Gas has disclosed in this presentation cash flow from operations before changes in working capital, which is a non-GAAP financial measure. Cash flow from operations before changes in working capital is used as a measure of the company's financial performance. Cash flow from operations before changes in working capital is defined as net income adjusted for depreciation and amortization, deferred income taxes, and certain other noncash items. This non-GAAP financial measure is useful to investors as an indicator of financial performance of the company to generate cash flows sufficient to support our capital expenditure programs and pay dividends to our investors. ONE Gas cash flow from operations before changes in working capital should not be considered in isolation or as a substitute for net income or any other measure of financial performance presented in accordance with GAAP. This non-GAAP financial measure excludes some, but not all, items that affect net income. Additionally, this calculation may not be comparable with similarly titled measures of other companies. A reconciliation of cash flow from operations before changes in working capital to the most directly comparable GAAP measure are included in this presentation.
APPENDIX | 16 (MILLIONS) 2022 GUIDANCE* Net income $ 221 Depreciation and amortization 220 Deferred taxes 43 Other 20 Cash flow from operations before changes in working capital $ 504 Non-GAAP Reconciliation Cash Flow From Operations Before Changes in Working Capital * Amounts shown are estimated midpoints as contemplated in 2022 guidance