ONE Gas(OGS) - 2020 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - ONE Gas reported diluted earnings per share of $1.09 for Q4 2020 and$3.68 for the full year, aligning with the revised guidance range of $3.66 to$3.70 [23] - Capital expenditures and asset removal costs for the year were $512 million, consistent with expectations [23] - A dividend of$0.58 per share was declared, marking a 7.4% increase from the previous dividend of $0.54 [23] Business Line Data and Key Metrics Changes - Residential sales net margin increased by 4$144 million, driven by increased economic activity [35] - The company connected 26,400 new customers in 2020, up from 22,300 in 2019, achieving the highest number of meter installations in its history [36] Market Data and Key Metrics Changes - The spot price for natural gas in Oklahoma surged to over $1,200 per Mcf on February 18, compared to an average of$3.54 per Mcf in February of the previous year [18] - Approximately 900 out of 2.2 million customers lost service during the winter storm, with most outages lasting less than 24 hours [21] Company Strategy and Development Direction - The company is focused on improving system resilience, having completed 19 projects for new transmission supply points and 81 projects for system reinforcement since its founding in 2014 [12] - ONE Gas plans to maintain its 5-year growth outlook despite the financial impact of the recent weather event, with 2021 capital investments expected to be approximately $540 million [27][28] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the unprecedented challenges posed by the winter storm and emphasized the importance of safety and resiliency in their operations [39] - The company is actively engaging with regulators regarding the recovery of extraordinary costs incurred during the winter storm, with discussions about potential securitization of these costs [29][31] Other Important Information - The company obtained a$2.5 billion 2-year term loan to enhance liquidity for meeting obligations related to gas purchases [25] - Moody's and S&P downgraded the company's credit ratings following the winter storm, with a negative outlook [26] Q&A Session Summary Question: Details on discussions with regulators regarding recovery of fuel costs - Management indicated that it is early in the process and that final gas costs will be filed once known, with no speculation on recovery periods at this time [43][44] Question: Legislative front on securitization - Conversations about potential legislation for securitization are ongoing, but no actual statutes are in place yet [46] Question: Short-term debt exclusion from regulatory cap structure - Current rate making includes long-term debt and equity, with carrying costs related to gas costs being considered for recovery [48] Question: Hedging program effectiveness during cold spike - Hedging programs were not effective in mitigating costs during the weather event due to reliance on daily pricing [51] Question: Conversations with rating agencies - Management noted that the extent of deferred costs is significant, and clarity on financing will be important for credit evaluations [52] Question: Investigating gas spot market pricing - There have been no direct conversations with regulators about investigating gas spot market pricing, but normal prudency reviews will occur [62] Question: Future gas supply plans and storage - The company will evaluate its gas supply plan and consider changes to its storage profile in response to the recent events [66]