ONE Gas Inc (OGS)

A. Company Overview

ONE Gas, Inc. is a publicly traded natural gas distribution utility incorporated in Oklahoma. The company's stock is listed on the New York Stock Exchange under the ticker symbol "OGS" and is included in the S&P MidCap 400 Index. Established in 1906 as Oklahoma Natural Gas Company, it became ONEOK, Inc. in 1980 and later separated as an independent entity on January 31, 2014. ONE Gas is headquartered in Tulsa, Oklahoma, and stands as one of the largest natural gas utilities in the United States with a primary focus on regulated natural gas distribution.

The company serves approximately 2.3 million customers across three states: Oklahoma, Kansas, and Texas. It ranks as the largest natural gas distributor in Oklahoma and Kansas and the third largest in Texas by customer base. The operational landscape is divided among three primary divisions: Oklahoma Natural Gas, Kansas Gas Service, and Texas Gas Service, serving an estimated 89%, 71%, and 13% of the respective market's natural gas distribution customers.

ONE Gas plays a critical role in major urban centers, providing distribution services in key markets such as Oklahoma City and Tulsa in Oklahoma; Kansas City, Wichita, and Topeka in Kansas; and Austin and El Paso in Texas.

B. Business Strategy

ONE Gas focuses on a multifaceted business strategy designed to enhance safety, reliability, and customer service while embracing clean energy solutions.

Safe and Reliable Energy: The commitment to safety manifests through rigorous capital expenditure aimed at system integrity and reliability. The company implements a variety of operational procedures to prevent damage, protect assets, and mitigate cyber threats.

High-Performing Workforce: The success of ONE Gas hinges on its workforce, driven by a culture promoting values, engagement, and performance.

Capital Demand Growth: Through targeted capital investments, ONE Gas fosters economic development and enhances the long-term capacity of its distribution system to accommodate rising customer demand.

Clean Energy Solutions: Recognizing the importance of transitioning to cleaner energy, ONE Gas is dedicated to reducing emissions and aiding customers in their emission reduction initiatives.

Serving Customers: The company prioritizes delivering affordable and reliable energy, utilizing technological advancements to enhance operational efficiency while providing programs that promote energy education and the adoption of efficient appliances.

C. Regulatory Overview

ONE Gas operates under strict regulatory oversight from state and local authorities in the regions it serves. Natural gas distribution rates are set by agencies such as the Oklahoma Corporation Commission (OCC), the Kansas Corporation Commission (KCC), and local jurisdictions in Texas.

In Oklahoma, the company utilizes a Performance-Based Rate Change (PBRC) process for streamlined annual rate adjustments. In Kansas, it files periodic rate cases with the KCC and adjusts rates based on the Gas System Reliability Surcharge (GSRS) statute. In Texas, ONE Gas operates under various mechanisms that include annual filings for rate adjustments.

The regulatory environment ensures that customers receive safe and reliable services at reasonable costs while allowing the utility to earn fair returns on investments. Adjustments to rates can include elements for capital investment recovery, operational costs, and compliance measures.

D. Market Conditions and Seasonality

Natural gas supply and pricing directly affect ONE Gas's operations. In 2023, the company purchased significant quantities of natural gas, sourced through competitive processes to ensure reliability and cost-effectiveness. This strategy also aims to minimize risks from supply interruptions and ensure sufficient supply to meet demand fluctuations stemming from adverse weather or economic factors.

Natural gas distribution exhibits seasonality, with higher sales volumes driven by heating requirements from November to March. Weather normalization mechanisms help manage the impact of temperature volatility on customer billing.

Competition exists in various forms, particularly from alternative energy sources like electricity, which impact customer preferences. Industrial customers also have options to procure natural gas from various sources, creating a need for competitive pricing and service offerings.

Additionally, ONE Gas is involved in supplying compressed natural gas (CNG) to fueling stations, meeting the demand for lower-emission fuels in transportation applications. The company actively expands its infrastructure to support clean technologies, including renewable natural gas (RNG) and hydrogen.

E. Environmental and Safety Matters

Environmental considerations are integral to ONE Gas’s operational protocols. The company engages in ongoing assessments of its impact on the environment and complies with all regulatory mandates pertaining to safety and emissions. Precautionary measures are taken to ensure both operational compliance and the well-being of the communities served.

F. Human Capital

As of February 2024, ONE Gas had a workforce of approximately 3,900 employees, including unionized staff. Engaging and developing its workforce is a top priority, reflected in annual employee surveys and wellness initiatives.

The company emphasizes a culture of safety, pursuing a zero-incident approach to workplace health. Training and guidance ensure employees are equipped to maintain safety standards while fostering overall wellness.