管理層發言
Good morning, and thank you for joining us on our third quarter 2025 earnings conference call. This call is being webcast live, and a replay will be available later today. After our prepared remarks, we're happy to take your questions. Statements made during this call that might include ONE Gas expectations or predictions should be considered forward-looking statements and 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. Actual results could differ materially from those projected in any forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer to our SEC filings. Joining me on the call this morning are Sid McAnnally, President and Chief Executive Officer; Chris Sighinolfi, Senior Vice President and Chief Financial Officer; and Curtis Dinan, Senior Vice President and Chief Operating Officer. And now I'll turn the call over to Sid.
Good morning. We appreciate your interest in ONE Gas and are pleased to share highlights and key developments from our third quarter. In August, we raised our full year guidance on strong year-to-date financial performance and the expected impact of Texas House Bill 4384. Based on third quarter results and confidence in our outlook for the rest of the year, we've also tightened our 2025 earnings forecast. We now expect earnings per share to be between $4.34 and $4.40. Our three states serve as a cornerstone of the nation's energy supply, producing over one-third of U.S. natural gas. The states we serve are committed to economic growth and actively encourage the use of natural gas for both residential and commercial applications. This strong foundation is fueling continued momentum from both our core residential base and high-growth sectors like data centers, advanced manufacturing, and utility scale power generation.
We are fully leveraging these opportunities to support growth and invest in our system, all while keeping our commitment to customer affordability. One example of our forward-thinking approach to serve this growing customer demand is the Austin System Reinforcement project, which we completed in the third quarter. This project boosts our available winter peak capacity by approximately 25% and provides increased access to natural gas indexed at the Waha hub, which typically trades at a discount to other sources of supply for the Austin metro area. As a result, our customers benefit from enhanced reliability during peak demand periods and improved affordability as we are able to pass on savings from lower cost supply sources. This landmark capital investment, the largest by far in ONE Gas history, was delivered ahead of schedule, under budget, and without any lost time injuries, underscoring our ability to efficiently execute major projects. As we meet the needs of our residential and commercial customers today, we are confidently pursuing growth opportunities. Now I'll turn the call over to Chris for the quarter's financial details.
Thanks, Sid, and good morning, everyone. As Sid noted, we are narrowing our 2025 earnings forecast. We now expect net income to range between $262 million and $266 million, with earnings per diluted share projected between $4.34 and $4.40. There was no change to the respective midpoints of our net income and earnings per share guidance, which, as we discussed during our second quarter call, are above the levels we initially guided. We continue to project capital expenditures of approximately $750 million for the year. Turning to our third quarter financial results, net income was $26.5 million or $0.44 per diluted share compared with $19.3 million or $0.34 in the same period last year. Third quarter revenues reflect an increase of approximately $19.2 million from new rates and $1.4 million from continued customer growth. Third quarter operating and maintenance expenses increased approximately 4.9% year-over-year, consistent with our guidance and primarily reflecting higher labor costs and a decision to execute certain O&M activities earlier than initially planned.
Excluding interest related to KGSS-I securitized bonds, interest expense net decreased $3.4 million year-over-year in the third quarter, primarily due to lower rates on commercial paper borrowings. In August, we issued long-term debt in the form of a $250 million term loan that will mature in 2026. Our next maturity after this is not until 2029. As I mentioned during last quarter's call, we have fully satisfied our 2025 equity needs and covered a portion of 2026 through existing forwards, which in total represent approximately 40% of our planned 5-year equity need. For added clarity, we plan to settle roughly $200 million of forward shares in December and defer approximately $25 million for year-end 2026 settlement. Our balance sheet remains strong with an adjusted CFO to debt ratio projected to be around 19%, which is at the upper end of the range for our current credit ratings. In addition, last week, we enhanced our liquidity by increasing the size of our revolving credit facility to $1.5 billion and extending the facility's maturity to October of 2030. Yesterday, our Board declared a quarterly dividend of $0.67 per share, unchanged from the prior quarter. Curtis, I'll turn things over to you.
Thank you, Chris, and good morning, everyone. On the regulatory front, we completed all 2025 interim filings, including September's approval of a $3.2 million GRIP filing for the Rio Grande Valley service area. As we have noted previously, Texas Gas Service filed a rate case requesting a $41.1 million increase and proposing to consolidate our three service areas into a single jurisdiction. The case remains on track with the procedural schedule and a final decision is expected to be effective during the first quarter of 2026. Turning to operations, we continue to invest in our workforce for the long-term success of our business. Alongside our efforts to bring line locating resources in-house, we are also planning to do the same with our Watch and Protect program. While onboarding and training new employees temporarily increases costs, the long-term benefits are clear. Our teams operate more efficiently, deliver strong performance, create a pipeline of future talent, and reduce our reliance on external contractors.
In-sourcing line locating has delivered significant operational improvements as total excavation damages have decreased by 13% year-over-year, even though we've seen an 8% increase in ticket volumes. Capital execution remains strong. We have completed approximately $575 million in capital projects through the third quarter, keeping us on pace to deliver our $750 million full year budget. This included the Austin System Reinforcement project, which represents our most significant project to date. This pipeline installation was technically challenging, requiring three complicated riverbores while working in a busy metro area. Ultimately, we installed approximately 50,000 feet of pipe, introducing a new source of supply and expanding system capacity to support system reliability and to meet growing demand in the Austin area. Delivering this large and complicated project ahead of schedule and under budget demonstrates our ability to effectively execute the many utility scale generation, advanced manufacturing, and data center opportunities that are moving forward across our three states.
For many of these large-scale projects, partnering with us as the utility is a natural fit. Our proximity to major natural gas production and existing pipeline infrastructure allows us to provide fast, cost-effective service whether through new connections, short line extensions, or system upgrades. We are able to serve these customers under our fully regulated framework and in most cases, with only modest increases to our forecasted capital budgets, all while keeping natural gas service affordable for our residential customers. To provide greater clarity on these opportunities, we are working across all three of our states on significant utility scale power generation projects, approximating 1.5 gigawatts of capacity. Customers are now progressing through the mid- to late stages of their investment decisions, and we are ready to execute these projects as they advance. Other examples include providing natural gas to a 200-megawatt fabrication plant and data center and a project we announced earlier this year that supplies natural gas for on-site power generation and receives renewable natural gas from the customer's facility.
Our approach to these opportunities is deliberate, prioritizing projects that enhance our system, position us for additional growth opportunities, and provide benefits for all customers. We will provide more details once final agreements are in place. With that, I'll turn it back to Sid.
Thank you, Curtis. As we pursue these new large-scale projects that will support our region's economy, we remain committed to our current customers, providing them with safe, reliable, and affordable natural gas to keep their homes warm and their businesses running. With winter approaching, I want to thank all of our coworkers whose dedication allows us to deliver comfort and value to our 2.3 million customers. I'm proud to work alongside each of them. Operator, we're now ready for questions.
分析師問答
The first question comes from Julien Dumoulin-Smith with Jefferies.
Maybe just to start at the highest level here. How are you thinking about the long-term 4% to 6% given both, obviously, the tailwind of the legislation as well as some of these recent Fed cuts? And maybe, Chris, specifically, I'd love to get your thoughts about what's reflected in guidance and especially what this means for forward-looking views given the latest Fed actions here.
Thanks, Julien. I’ll address your question in reverse order. Regarding interest rates, we use commercial paper to finance our initial investments in rate base before they are included in regulatory outcomes. Currently, we carry about $800 million in commercial paper throughout the year. A few years back, when the Fed's policy rate was at 5.5%, our commercial paper rates were between 5.6% and 5.7%. We had anticipated 10 to 25 basis points of rate cuts by the end of 2027. Following the Fed's recent cut, we have already seen six of those 10 cuts, which occurred sooner than we expected. We believe that once we reach a total of 10 cuts, the rate will normalize according to what the Federal Reserve considers its own policy rate. We still anticipate four additional cuts in the coming years, aligning with the Fed's normalization forecast. In terms of magnitude, with $800 million of average commercial paper and our tax rate, each 25 basis point cut over a full year could increase earnings per share by about $0.025.
Our projections had already factored in a normalization in monetary conditions, and we have observed this happening more quickly than we thought. We do expect further progress. Regarding our guidance of 4% to 6% for earnings per share, this year we aim to be at the high end of that range due to strong performance and the signing of the Texas House bill in June. We updated our forecast in September's Investor Relations presentation to reflect that we would exceed the high end of that range as a result of these developments. We will provide a refreshed five-year outlook and a more specific outlook for 2026 ahead of Utility Week in December.
Totally excellent. If I can follow that up, and I don't mean to nitpick too much, but any color on the tightening of the '25 guidance range? Just you took $0.02 off the top. Like I don't mean to nitpick, but curious to juxtapose that against the comments you just provided a second ago.
If you note in my prepared remarks, Julien, it's a good question. I noted that some of our O&M experience this year was the result of doing some activities earlier than we had previously planned to do them. For example, there are certain environmental remediation projects where we received permits to take action earlier than we had expected to. And so there's a couple of million dollars of additional O&M that we expect to bear this year that was not originally in the forecast.
Got it. It seems like more of a timing issue than anything there.
We now turn to David Arcaro with Morgan Stanley.
I was wondering about the growth rate you've indicated would be above 6% through the plan. Do you consider that to be a structural higher growth outlook for the core of the business? Could this be viewed as long-term growth? Will we see growth continue at that rate, or is 4% to 6% still the appropriate level? Does it depend on the starting year in how you think about this?
David, it's Chris again. Yes, I do believe it is structural in nature. That's why we've outlined it that way. Again, 4% to 6%, the initial high end of that range. And then with some of the changes in the environmental backdrop suggesting in our Investor Relations materials in September that we would be above the high end of that range for the duration of the 5-year period. I think you can look, as your question assumes, at those component items as being structural in nature and having a carryforward effect that we believe is durable.
Excellent. Yes, that helps. And then I appreciate the update here on the large load activity that you're seeing. I was wondering if you could talk about maybe just any other clarity on where you're seeing that 1.5 gigawatts come in and what the potential investment opportunities might look like on the back of potentially finalizing some of those new large load projects.
David, this is Curtis. As I mentioned earlier, we are noticing opportunities to provide service across all three states to different entities looking for larger-scale solutions than we have offered in the past, which is integrated into our existing systems. It’s crucial to highlight that we are leveraging our current system and workforce to meet these customer inquiries. There is certainly an abundance of market opportunities, which we can read about daily, but we are maintaining discipline in selecting the projects we pursue. This disciplined approach results in lower capital requirements since our infrastructure and personnel are already in place, enabling us to respond rapidly to customer needs. Quick response is often essential for our customers, and we believe we are well-positioned to meet that demand. We will keep an eye on new opportunities, but we have a specific set of criteria for evaluation before committing significant resources. Thus, my comments regarding the minimal impact on our capital forecast relate directly to our ability to utilize our existing systems and the established relationships with our upstream providers to address these requests efficiently.
We now turn to Gabe Moreen with Mizuho.
I just wanted to ask about, I think, the additional investment in bringing stuff in-house. Will that impact, you think, O&M upfront? I know you've been really successful at line locating and maybe you just had a little more cost upfront for savings later. Is it going to be kind of a similar sort of cadence with this and how material would it be?
Gabe, this is Curtis. One of the items that Chris was talking about earlier on some of the things that we pulled forward, it's a continuation of those initiatives. We're opportunistic when we do it, looking at a couple of things, our past experience and where we are in the maturity of those folks that have joined the company and developed and gotten their qualifications to be able to go into full service. And then it's looking at what's available in the market. We've seen a lot of opportunities to hire some really quality individuals to join our company as well as having really good experience of the folks that we've brought in, allowing us to get ahead. We realized some of the benefits quicker. And so that's given us the confidence to move a little earlier to in-source some of those additional activities. So it's somewhat episodic in terms of when those larger classes are brought in and we go through that process. But as you said, at the front end of it, it's a little bit higher investment, but it's yielding really good benefits for us. And we continue to expect even more benefits in the longer term.
So Gabe, this is Sid. You're wise to compare this to line locating. We shared with you a number of years ago that we believe there would be a benefit to in-sourcing line locating from both an execution standpoint and building additional capacity that we could deploy when there was no line locating to be done. Over the last three or four years, we've really proven that. We've seen the value add. We've seen it be accretive, and we've also seen the quality of the work. So Watch and Protect is just another step in that direction, and we wanted to be transparent about it. But we believe, given the fact that we've presented a theory, tested the theory, and proven it, now we can go on this with a pretty high level of confidence and run the same play with Watch and Protect. To your question about materiality, the scale of Watch and Protect is much less than line locate. So the impact will be less, but you're right that there's a front-end cost in bringing people along and doing the training on the front end.
Got it. And then maybe if I can ask on '26 CapEx. You grew rate base a little bit less than I think your intended CAGR in '25. You also finished up that big Austin project. But is it right to assume there'll be some sort of acceleration in '26? And are there any discrete other projects you'd point to around '26 CapEx plans?
Gabe, it's Chris. I think you're right, given the commentary from Curtis about activities in the territory, to think about an upward sloping trajectory of capital expenditure. There might be a more punctuated step-up next year. Again, full details for that, I'd hold your patience until we come out with that formally in about a month's time. But you're thinking about the component items in the way I would if I were you.
One of the other things to think about is in some of those capital projects too, depending upon the type of contract that it is, the term of service that a customer wants, they may be actually the ones paying the capital in those situations. So to derisk the exposure to us and to all of our other customers in the longer term, that may hold a lid on capital somewhat compared to what you might think it would be given the activity levels.
We now turn to Bill Appicelli with UBS.
Just a question on the benefits of the legislation in Texas. I don't know if you can quantify what that's been year-to-date and maybe what that would be on a full year run rate?
Yes, Bill, I would refer you back to the comments from last quarter's call. What we aimed to provide was context based on our experience with the long-standing safety-related 8.209 regulatory structure in Texas. Since the accounting treatment under this framework now applies to all capital, we offered insight into how you could extrapolate this on a full-year basis. We indicated that 8.209 resulted in a $4 million to $5 million operating income benefit for about 25% of our capital deployment, and this will now apply to 100% of that deployment in Texas. It's important to note that capital deployment is not uniform; we don't invest the same amount every day throughout the year. Projects that close in January will have a different impact compared to those closing in December. Therefore, I'm hesitant to link any specific quarter to the overall performance. I wouldn't want you to view the third quarter as representative of every quarter, as variations will occur. However, if you refer back to the comments made on the second quarter call, that will serve as the best representation I can provide.
Does this influence the capital plan moving forward in terms of project sequencing or investment levels because of this mechanism? I’m not sure how much of this was considered when the original guidance was provided last year and the expected earnings range target. We will receive an update on this in the coming weeks. Any insight on how this has become a useful tool that influences capital allocation decisions, or should we not assign it too much importance?
Yes. Bill, it's fair. Your observation about the landscape having changed since we offered guidance for 2025 is accurate. And you'll see that reflected as we share our guidance in just a few weeks. In terms of the impact of the Texas legislation on our forward planning, we allocate our system integrity investments based on system needs. There's no attempt to leverage anything external. It's really looking at what the system needs and where we need to invest to keep operating a system that's safe and reliable. On the growth side, as Curtis said, we've been pretty disciplined around how we analyze projects that come our way. We're thinking about not only where can we find an opportunity to be supportive of economic development across our footprint but where does this fit our forward plans for our system overall. So there's enormous growth in Texas, but we also see growth in Oklahoma as the Dallas area continues to grow north. There are many opportunities for us. I guess the safest thing for me to say to you is we are grateful for the Texas legislation, but it will not restrict our spending in terms of system integrity or growth. We're going to pursue opportunities using the same strategy that we have before. We just have more opportunities and at a greater scale.
We now turn to Selman Akyol with Stifel.
I appreciate the comments and the results you're getting on the line locating and bringing that in-house. And I heard you loud and clear in terms of the Watch and Protect program being somewhat less. But just curious, are there other opportunities you see beyond those two as we think longer term?
Yes. Selman, this is Curtis. You're absolutely right. There are other things that we're looking at. In addition to the Watch and Protect, we still have more to go in what we want to get to from a line locating process. So I think that opportunity will continue for a few more years in addition to Watch and Protect. There are other areas that we have been using more internal crews to complete around some of our construction projects. So we've been growing our capabilities in that regard, both from an engineering standpoint as well as our execution in the field. We've relied on those internal resources more, and we've added to those crews to be able to respond to it. Like our thought processes around the line locating and the Watch and Protect, we'll continue to look for those types of opportunities where it makes sense for us and where we can get more value out of bringing those in-house and again, at the same time, grow our capabilities as a company. So it's a really good spot to be in, continuing to invest and grow in that regard. We've proven we can do it, and we're seeing the benefits of having taken those actions.
Got it. I'm curious about your discussions regarding large load and data center opportunities. Do your conversations extend to 2026 and 2027, or do they go as far out as 2030 for when these services might be implemented? Also, I'm thinking about your growth profile—does this opportunity set influence it positively? Additionally, is everything you've mentioned being conducted within the regulatory framework, or is there potential for achieving higher returns outside of that?
Yes, there are several aspects to your question. Some of the larger projects will involve multiple phases, which means they will deploy a number of generators over several years and will lead to larger opportunities. This is also true for some advanced manufacturing facilities we are in discussions with. They have an initial project load but plan to expand over the next four to five years, indicating a growth trajectory. Additionally, there are smaller projects, like one we announced earlier this year, which will be operational in the fourth quarter. This project has a much shorter timeline from contract execution to completion. It exemplifies our strategy of pursuing projects within our system. It was not a significant investment to serve that customer with gas from our system, and as they produce renewable natural gas (RNG), they can return that gas to our system to benefit from the value of the RNG credits.
While my answer may seem broad, it really varies in size and timing regarding project development. Concerning our regulated model, we are not exploring options outside of it. We see strong opportunities in continuing to serve our existing customers. For instance, the Austin System Reinforcement project not only reinforces our system in that area but also enhances the supply for additional growth. Other similar projects will also support the supply to our existing communities while pairing with growth opportunities, be it generation or data centers. We believe we can operate more efficiently by addressing multiple opportunities together, solving various customer needs, which adds more value and helps grow our company. The overall benefit is increased reliability for our existing customers, as seen in the Austin project. We are excited about the positive developments occurring within our regulated model.
That concludes the question-and-answer session. I would now like to hand back to the ONE Gas team for closing remarks.
Thank you all again for your interest in ONE Gas. We look forward to seeing many of you at conferences in New York the second week of December. Our quiet period for the fourth quarter will start when we close our books in early January and extend until we release earnings in mid- to late February. We'll provide conference call details at a later date. Have a wonderful day.
This concludes the ONE Gas Third Quarter Earnings Conference Call. You may now disconnect.