Part I. Financial Information [Item 1. Consolidated Financial Statements (Unaudited)](index=8&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) Presents the unaudited consolidated statements of income, balance sheets, cash flows, and equity for Q1 2025 [Consolidated Statements of Income](index=8&type=section&id=Consolidated%20Statements%20of%20Income) Net income increased to $119.4 million in Q1 2025, driven by a 23.5% rise in total revenues Consolidated Statements of Income (Unaudited) | | Three Months Ended March 31, | | | :--- | :--- | :--- | | (Thousands of dollars, except per share amounts) | **2025** | **2024** | | **Total revenues** | **$935,190** | **$758,320** | | Cost of natural gas | 512,462 | 383,003 | | Total operating expenses | 242,229 | 229,457 | | **Operating income** | **180,499** | **145,860** | | Interest expense, net | (35,697) | (31,357) | | Income before income taxes | 145,320 | 118,011 | | **Net income** | **$119,419** | **$99,317** | | **Diluted EPS** | **$1.98** | **$1.75** | | Diluted average shares (thousands) | 60,266 | 56,800 | [Consolidated Balance Sheets](index=10&type=section&id=Consolidated%20Balance%20Sheets) Total assets were $8.33 billion as of March 31, 2025, with a slight increase in total equity to $3.19 billion Consolidated Balance Sheet Highlights (Unaudited) | (Thousands of dollars) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$8,327,240** | **$8,425,571** | | Net property, plant and equipment | 6,738,620 | 6,645,873 | | Total current assets | 756,238 | 929,881 | | **Total Liabilities** | **$5,142,205** | **$5,321,023** | | Total long-term debt, net | 2,370,402 | 2,385,286 | | Notes payable | 811,900 | 914,600 | | **Total Equity** | **$3,185,035** | **$3,104,548** | [Consolidated Statements of Cash Flows](index=12&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow rose to $277.5 million in Q1 2025, while financing activities used $160.0 million Consolidated Statement of Cash Flows Highlights (Unaudited) | | Three Months Ended March 31, | | | :--- | :--- | :--- | | (Thousands of dollars) | **2025** | **2024** | | **Cash provided by operating activities** | **$277,459** | **$108,262** | | Cash used in investing activities | (167,845) | (165,981) | | Cash provided by (used in) financing activities | (159,963) | 39,804 | | **Change in cash, cash equivalents, and restricted cash** | **(50,349)** | **(17,915)** | [Notes to Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Details key accounting policies, revenue disaggregation, debt, equity, and commitments for the single reportable segment - The company operates in one reportable business segment: regulated public utilities delivering natural gas to approximately **2.3 million customers**[31](index=31&type=chunk)[32](index=32&type=chunk) Disaggregated Revenue (Three Months Ended March 31) | (Thousands of dollars) | 2025 | 2024 | | :--- | :--- | :--- | | Natural gas sales to customers | $875,248 | $689,505 | | Transportation revenues | $43,748 | $39,967 | | Securitization customer charges | $11,637 | $11,671 | | Miscellaneous revenues | $6,624 | $6,308 | | **Total revenues from contracts with customers** | **$937,257** | **$747,451** | - The company has an at-the-market (ATM) equity program with **$225.5 million available** for issuance as of March 31, 2025[54](index=54&type=chunk) - Kansas Gas Service has deferred **$30.8 million** for remediation costs for former MGP sites and requested to increase its recovery cap to $32 million[73](index=73&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes Q1 2025 results, regulatory activities, capital plans, liquidity, and cash flows [Financial Results and Operating Information](index=30&type=section&id=Financial%20Results%20and%20Operating%20Information) Operating income grew by $34.6 million year-over-year, driven by new rates and customer growth Selected Financial Results (Three Months Ended March 31) | (Millions of dollars) | 2025 | 2024 | Increase (Decrease) | | :--- | :--- | :--- | :--- | | **Operating income** | **$180.5** | **$145.9** | **$34.6** | | Total revenues | $935.2 | $758.3 | $176.9 | | Cost of natural gas | $512.5 | $383.0 | $129.5 | | Operating costs | $160.5 | $152.8 | $7.7 | | Depreciation and amortization | $81.7 | $76.6 | $5.1 | - Key drivers for the increase in operating income include a **$51.9 million revenue increase** from new rates and a **$2.3 million increase** from customer growth[119](index=119&type=chunk) - The total number of customers grew by 15,000 year-over-year to **2.305 million**, driven by new connections in all service areas[118](index=118&type=chunk) [Regulatory Activities](index=29&type=section&id=Regulatory%20Activities) The company filed for rate increases in Oklahoma, Kansas, and Texas to recover costs and investments - **Oklahoma:** Filed for a **$41.5 million** base rate revenue increase under the PBRC mechanism[99](index=99&type=chunk) - **Kansas:** Requested a **$7.2 million** increase related to its Gas System Reliability Surcharge (GSRS)[100](index=100&type=chunk) - **Texas:** Made GRIP filings requesting a total of **$26.8 million** in rate increases across three service areas[101](index=101&type=chunk)[102](index=102&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is maintained via operating cash flow and a $1.35 billion commercial paper program with stable credit ratings - Primary liquidity sources are operating cash flow and a **$1.35 billion commercial paper program**, supported by a $1.35 billion revolving credit agreement[123](index=123&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk) - At March 31, 2025, the total **debt-to-capital ratio was 50.2%**, well below the 70% covenant limit[46](index=46&type=chunk)[126](index=126&type=chunk) Credit Ratings (as of March 31, 2025) | Rating Agency | Long-term Rating | Short-term Rating | Outlook | | :--- | :--- | :--- | :--- | | Moody's | A3 | Prime-2 | Stable | | S&P | A- | A-2 | Stable | [Cash Flow Analysis](index=35&type=section&id=Cash%20Flow%20Analysis) Q1 2025 operating cash flow increased to $277.5 million due to working capital changes Cash Flow Summary (Three Months Ended March 31) | (Millions of dollars) | 2025 | 2024 | Variance | | :--- | :--- | :--- | :--- | | **Operating activities** | **$277.5** | **$108.3** | **$169.2** | | Investing activities | ($167.8) | ($166.0) | ($1.8) | | Financing activities | ($160.0) | $39.8 | ($199.8) | - The increase in operating cash flow was primarily due to **working capital changes** related to the recovery of regulatory assets[140](index=140&type=chunk) - The increase in cash used for financing activities was primarily due to the **repayment of commercial paper**[141](index=141&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risks include commodity prices, interest rates, and credit, which are actively managed and mitigated - Commodity price risk from natural gas price fluctuations is mitigated by **purchased-gas cost adjustment mechanisms**, which pass costs to customers[162](index=162&type=chunk) - Interest-rate risk is associated with commercial paper and new debt financing, and is managed using a **mix of fixed-rate and floating-rate debt**[163](index=163&type=chunk)[164](index=164&type=chunk) - Counterparty credit risk is diversified across approximately **2.3 million customers** and is not considered material[165](index=165&type=chunk) [Item 4. Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal controls over financial reporting were effective - The Principal Executive Officer and Principal Financial Officer concluded that **disclosure controls and procedures were effective** as of the end of the reporting period[166](index=166&type=chunk) - **No material changes** to internal control over financial reporting occurred during the quarter ended March 31, 2025[167](index=167&type=chunk) Part II. Other Information [Item 1. Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) Ongoing litigation from normal business operations is not expected to have a material adverse effect - The company states that it is a party to various litigation matters from the normal course of operations, but believes the probable outcome **will not have a material adverse effect** on its financial condition[168](index=168&type=chunk) [Item 1A. Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) Refers to the company's Annual Report on Form 10-K for a detailed discussion of relevant risk factors - Investors are advised to refer to the **Risk Factors section in the company's Annual Report** for a comprehensive discussion of risks affecting the business[169](index=169&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section is not applicable for the reporting period - Not applicable[170](index=170&type=chunk) [Item 5. Other Information](index=42&type=section&id=Item%205.%20Other%20Information) No directors or Section 16 officers adopted or terminated Rule 10b5-1 trading plans during the quarter - **No director or Section 16 officer** adopted or terminated a Rule 10b5-1 trading plan during the quarter[173](index=173&type=chunk) [Item 6. Exhibits](index=42&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the report, including certifications and XBRL interactive data files - A list of all exhibits filed with the Form 10-Q is provided, including **certifications and XBRL data files**[175](index=175&type=chunk)[176](index=176&type=chunk)

ONE Gas, Inc. (OGS) reported first-quarter 2025 operating earnings per share (EPS) of $1.98, which beat the Zacks Consensus Estimate of $1.85 by 7%. The figure also came in 13.1% higher than the year-ago quarter’s earnings of $1.75. (See the Zacks Earnings Calendar to stay ahead of market-making news.)OGS’ RevenuesONE Gas recorded revenues of $935.2 million, which surpassed the Zacks Consensus Estimate of $804 million by 16.4%. The top line also increased 23.3% from $758.3 million in the prior-year quarter. ...

Financial Data and Key Metrics Changes - The company reported net income of $119 million or $1.98 per diluted share, an increase from $99.3 million or $1.75 in the same period last year [5][9] - Revenues increased by approximately $52 million from new rates and $2 million from continued customer growth [9] - First quarter O&M expenses were approximately 2% higher than the first quarter last year, with a projected 4% CAGR in O&M expenses across the five-year plan [10][54] Business Line Data and Key Metrics Changes - The company completed $178 million worth of capital projects this quarter, consistent with the same period last year [14] - Nearly 8,000 new meters were installed through April, driven by new housing developments in major metropolitan areas [17] Market Data and Key Metrics Changes - Weather across service territories was 5% colder than normal and 16% colder than the first quarter last year, contributing to strong customer demand [9] Company Strategy and Development Direction - The company aims for an earnings per share CAGR of approximately 6% through 2029, with reduced capital intensity and related funding needs [7] - The company is focused on in-sourcing activities to improve efficiency and reduce costs, with ongoing efforts in line locating services [48] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the upper half of stated guidance ranges due to strong financial performance and effective expense management [9] - The company is well-positioned to respond to ongoing demand for new housing and is exploring opportunities to serve power generation needs [18] Other Important Information - The Board of Directors declared a dividend of $0.67 per share, unchanged from the previous quarter [11] - The company received the American Gas Association Safety Award for having the lowest rate of significant injuries among peers for the eighth consecutive year [8] Q&A Session Summary Question: O&M expenses and sustainability - Management noted that O&M expenses have been managed effectively, achieving a 1.9% year-over-year increase in Q1, and expressed caution about future trends due to labor market conditions [21][23] Question: Legislative impacts in Texas - Management indicated that proposed legislation could benefit the company by improving recovery rates on investments, but emphasized a cautious and opportunistic approach to legislative changes [26][27] Question: Guidance for the year - The guidance increase is attributed to strong margins from customer demand and better-than-expected cost management [35] Question: Project details in Austin - The project in Austin is not a significant investment but highlights the company's strategic approach to linking initiatives for growth [36] Question: Tariff impacts on operations - Management stated that the company is insulated from tariff impacts due to direct supplier relationships established before COVID-19 [39] Question: Weather impact on working capital - Strong demand due to weather conditions has increased working capital needs, but management expects some relief as the company moves out of winter [46] Question: Future of in-sourcing program - The in-sourcing program will continue, with a focus on efficiency and innovation, but will not be rushed to completion [49]

Financial Data and Key Metrics Changes - The company reported net income of $119 million or $1.98 per diluted share, an increase from $99.3 million or $1.75 in the same period last year [4][10] - Revenues increased by approximately $52 million from new rates and $2 million from continued customer growth [10] - First quarter O&M expenses were approximately 2% higher than the first quarter last year, with a projected 4% CAGR in O&M expenses across the five-year plan [10][52] Business Line Data and Key Metrics Changes - The company completed $178 million worth of capital projects this quarter, consistent with the same period last year [14] - Nearly 8,000 new meters were installed through April, driven by new housing developments, particularly in major metropolitan areas in Texas and Oklahoma [16] Market Data and Key Metrics Changes - Weather across service territories was 5% colder than normal and 16% colder than the first quarter last year, contributing to strong customer demand [9] - The company expects to achieve the upper half of its stated guidance ranges, including net income of $254 million to $261 million and earnings per diluted share of $4.20 to $4.32 [9] Company Strategy and Development Direction - The company aims for an earnings per share CAGR of approximately 6% through 2029, with reduced capital intensity and related funding needs [6] - The company is focused on growth opportunities in power generation and system reinforcement, particularly in response to new housing demands [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in expense management and the ability to remain insulated from material tariff impacts through 2025 [5][39] - The company remains committed to safely and reliably delivering natural gas to customers, supported by a highly engaged workforce [7] Other Important Information - The Board of Directors declared a dividend of $0.67 per share, unchanged from the previous quarter [11] - The company is actively monitoring legislative developments that could impact gas investments in Texas [26][27] Q&A Session Summary Question: O&M expense sustainability in an inflationary environment - Management noted that while O&M expenses have come in lower than expected, they remain cautious about future trends due to labor market influences [22][24] Question: Impact of Texas legislation on capital spending - Management indicated that proposed legislation could enhance recovery rates but would not significantly alter capital spending plans [26][29] Question: Factors driving guidance increase - The increase in guidance was attributed to strong customer demand, growth in the customer base, and better-than-expected cost management [35] Question: Weather impact on working capital - Management confirmed that strong demand due to weather has increased working capital needs, but they expect some relief as they move into warmer months [46] Question: Future of the in-sourcing program - The in-sourcing program will continue, with ongoing evaluations to identify further opportunities for efficiency [48][49] Question: O&M expense expectations for the year - Management anticipates O&M expenses will align with the 4% growth target, factoring in employee costs and efficiency gains [52][53]

Financial Performance - ONE Gas reported revenue of $935.19 million for the quarter ended March 2025, reflecting a 23.3% increase year-over-year [1] - Earnings per share (EPS) for the quarter was $1.98, up from $1.75 in the same quarter last year [1] - The reported revenue exceeded the Zacks Consensus Estimate of $803.58 million by 16.38%, while the EPS also surpassed the consensus estimate of $1.85 by 7.03% [1] Key Metrics - Natural Gas Sales - Transportation volumes reached 65,300 MMcf, exceeding the average estimate of 64,475.83 MMcf [4] - Total Sales Volumes Delivered for Natural Gas were 79,300 MMcf, compared to the average estimate of 72,123.38 MMcf [4] - Total Volumes Delivered for Natural Gas amounted to 144,600 MMcf, surpassing the average estimate of 136,632.5 MMcf [4] - Residential Natural Gas Sales volumes were 58,900 MMcf, higher than the estimated 56,064.04 MMcf [4] - Revenue from Natural Gas Sales was $870.40 million, exceeding the average estimate of $719.29 million [4] Stock Performance - ONE Gas shares have returned +6.6% over the past month, outperforming the Zacks S&P 500 composite's +0.4% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Group 1: Earnings Performance - ONE Gas reported quarterly earnings of $1.98 per share, exceeding the Zacks Consensus Estimate of $1.85 per share, and up from $1.75 per share a year ago, representing an earnings surprise of 7.03% [1] - The company posted revenues of $935.19 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 16.38%, compared to year-ago revenues of $758.32 million [2] Group 2: Stock Performance and Outlook - ONE Gas shares have increased by approximately 13.3% since the beginning of the year, while the S&P 500 has declined by 3.3% [3] - The current consensus EPS estimate for the upcoming quarter is $0.55 on revenues of $407.66 million, and for the current fiscal year, it is $4.26 on revenues of $2.34 billion [7] Group 3: Industry Context - The Utility - Gas Distribution industry is currently ranked in the top 12% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - Another company in the same industry, Northwest Natural, is expected to report quarterly earnings of $2.09 per share, reflecting a year-over-year change of +23.7%, with revenues anticipated to be $478.17 million, up 10.3% from the previous year [9][10]

Financial Performance - First quarter 2025 net income was $119.4 million, or $1.98 per diluted share, compared to $99.3 million, or $1.75 per diluted share in Q1 2024, representing a 20.5% increase in net income [2]. - Operating income for Q1 2025 was $180.5 million, up from $145.9 million in Q1 2024, reflecting a 23.6% increase [3]. - Total revenues for Q1 2025 were $935.2 million, compared to $758.3 million in Q1 2024, indicating a 23.3% year-over-year growth [20]. - Net income for the same period rose to $119.4 million, compared to $99.3 million in the prior year, reflecting a year-over-year increase of about 20.4% [33]. - Operating income for the three months ended March 31, 2025, was $180.5 million, up from $145.9 million, marking an increase of about 23.7% [33]. - Natural gas sales reached $870.4 million, an increase from $694.1 million, indicating a growth of approximately 25.4% [33]. Dividends and Guidance - The board declared a quarterly dividend of $0.67 per share, an increase from $0.66 per share in the previous year, with an annualized dividend of $2.68 [2]. - The company expects to achieve the upper half of its 2025 financial guidance, projecting net income between $254 million and $261 million, and earnings per diluted share of $4.20 to $4.32 [8]. Capital Expenditures and Investments - Capital expenditures for Q1 2025 were $177.7 million, slightly down from $179.4 million in the same period last year, focusing on system integrity and service extension [4]. - Capital investments for 2025 are anticipated to be approximately $750 million, primarily for system integrity and replacement projects [9]. - Capital expenditures and asset removal costs totaled $177.7 million for the first quarter of 2025, slightly down from $179.4 million in the same period last year [33]. Customer Growth and Weather Impact - The average number of residential customers increased to 2,125,000, compared to 2,110,000 in the prior year, reflecting a growth of approximately 0.7% [33]. - The company reported a 5% colder than normal weather impact on operating income, which was mitigated by regulatory weather normalization mechanisms [2]. Assets and Equity - Total current assets decreased to $756.2 million as of March 31, 2025, down from $929.9 million at the end of 2024, a decline of about 18.6% [24]. - Total assets decreased to $8,327.2 million as of March 31, 2025, compared to $8,425.6 million at the end of 2024, a reduction of approximately 1.2% [24]. - Total equity increased to $3,185.0 million as of March 31, 2025, up from $3,104.5 million at the end of 2024, representing a growth of about 2.6% [24]. Regulatory Filings - Kansas Gas Service has requested a $7.2 million increase related to its Gas System Reliability Surcharge, with a decision expected by August 2025 [5]. - Oklahoma Natural Gas filed for a $41.5 million increase in its Performance-Based Rate Change application, reflecting net customer growth in Oklahoma and Texas [6]. Cash Flow - Cash provided by operating activities for the three months ended March 31, 2025, was $277.5 million, significantly higher than $108.3 million in the same period last year [26].

Core Insights - ONE Gas, Inc. reported strong financial results for the first quarter of 2025, with expectations to achieve the upper half of its previously announced financial guidance for the year [1][10] - The company declared a quarterly dividend of $0.67 per share, reflecting a commitment to returning value to shareholders [9] Financial Performance - Operating income for Q1 2025 was $180.5 million, up from $145.9 million in Q1 2024, driven by effective regulatory strategies and disciplined expense management [3][30] - Net income for the first quarter was $119.4 million, or $1.98 per diluted share, compared to $99.3 million, or $1.75 per diluted share, in the same period last year [9][20] - Total revenues increased to $935.2 million in Q1 2025 from $758.3 million in Q1 2024, with natural gas sales contributing significantly to this growth [30] Capital Expenditures and Investments - Capital expenditures and asset removal costs for Q1 2025 were $177.7 million, slightly down from $179.4 million in the same period last year, focusing on system integrity and service extension [4][30] - The company anticipates total capital investments of approximately $750 million for 2025, primarily for system integrity and replacement projects [10] Regulatory Activities - Kansas Gas Service submitted a request for a $7.2 million increase related to its Gas System Reliability Surcharge, with a decision expected by August 2025 [5] - Oklahoma Natural Gas filed for a $41.5 million base rate revenue increase, with a hearing scheduled for June 12, 2025 [6] Customer Metrics - The average number of customers increased to 2.305 million in Q1 2025, up from 2.290 million in Q1 2024, indicating growth in customer base across service areas [30][31] - The company experienced colder weather conditions, with actual degree days being 5% colder than normal, which positively impacted natural gas demand [9][31]

Group 1 - Spire (SR) and ONE Gas (OGS) are being considered as potential undervalued stocks in the Utility - Gas Distribution sector [1] - The Zacks Rank system indicates that SR has a rank of 2 (Buy) while OGS has a rank of 3 (Hold), suggesting a more favorable outlook for SR [3] - Value investors analyze various metrics to determine if a company is undervalued, including P/E ratio, P/S ratio, earnings yield, and cash flow per share [4] Group 2 - SR has a forward P/E ratio of 17.01, while OGS has a forward P/E of 18.45, indicating that SR may be more attractively priced [5] - The PEG ratio for SR is 2.60, compared to OGS's PEG ratio of 3.32, suggesting SR has a better earnings growth outlook relative to its price [5] - SR's P/B ratio is 1.37, while OGS's P/B ratio is 1.43, further supporting SR's stronger valuation metrics [6] Group 3 - SR's improving earnings outlook is a significant factor in its favorable Zacks Rank, making it a potentially superior value option compared to OGS [7]

Company Overview - ONE Gas (OGS) is expected to report a year-over-year increase in earnings, with a projected EPS of $1.85, reflecting a +5.7% change, and revenues anticipated at $803.58 million, up 6% from the previous year [3][12] - The stock's performance may be influenced by how actual results compare to these estimates, with a potential stock price increase if results exceed expectations [1][2] Earnings Estimates and Revisions - The consensus EPS estimate has been revised 2.23% lower over the last 30 days, indicating a reassessment by analysts [4] - The Most Accurate Estimate for ONE Gas is higher than the Zacks Consensus Estimate, resulting in a positive Earnings ESP of +0.11%, suggesting a likelihood of beating the consensus EPS estimate [10][11] Earnings Surprise History - In the last reported quarter, ONE Gas had an expected EPS of $1.33 but delivered $1.34, resulting in a surprise of +0.75% [12] - Over the last four quarters, ONE Gas has only beaten consensus EPS estimates once [13] Industry Context - In the Zacks Utility - Gas Distribution industry, Spire (SR) is expected to post earnings of $3.70 per share, indicating a +7.3% year-over-year change, with revenues projected at $1.09 billion, down 3% from the previous year [17] - The consensus EPS estimate for Spire has been revised 1.5% higher, but with an Earnings ESP of 0.00%, it is difficult to predict a beat against the consensus EPS estimate [18]