ogs-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2022.

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to __________.

Commission file number 001-36108

ONE Gas, Inc.

(Exact name of registrant as specified in its charter)


Oklahoma		46-3561936
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

15 East Fifth Street
Tulsa,	OK	74103
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (918) 947-7000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of exchange on which registered

Common Stock, par value $0.01 per share

OGS

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

On April 25, 2022, the Company had 54,089,905 shares of common stock outstanding.

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ONE Gas, Inc.

TABLE OF CONTENTS


Part I.	Financial Information	Page No.
Item 1.	Consolidated Financial Statements (Unaudited)	6
	Consolidated Statements of Income - Three Months Ended March 31, 2022 and 2021	6
	Consolidated Statements of Comprehensive Income - Three Months Ended March 31, 2022 and 2021	7
	Consolidated Balance Sheets - March 31, 2022 and December 31, 2021	8
	Consolidated Statements of Cash Flows - Three Months Ended March 31, 2022 and 2021	11
	Consolidated Statements of Equity - Three Months Ended March 31, 2022 and 2021	12
	Notes to Consolidated Financial Statements	14
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	44
Part II.	Other Information	45
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3.	Defaults Upon Senior Securities	45
Item 4.	Mine Safety Disclosures	45
Item 5.	Other Information	45
Item 6.	Exhibits	45
Signature		47

As used in this Quarterly Report, references to “we,” “our,” “us” or the “Company” refer to ONE Gas, Inc., an Oklahoma corporation, and its predecessors and subsidiaries, unless the context indicates otherwise.

The statements in this Quarterly Report that are not historical information, including statements concerning plans and objectives of management for future operations, economic performance or related assumptions, are forward-looking statements. Forward-looking statements may include words such as “will,” “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. Although we believe that our expectations regarding future events are based on reasonable assumptions, we can give no assurance that such expectations and assumptions will be achieved. Important factors that could cause actual results to differ materially from those in the forward-looking statements are described under Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Forward-Looking Statements,” and Part II, Item 1A, “Risk Factors” in this Quarterly Report and under Part I, Item IA, “Risk Factors,” in our Annual Report.

AVAILABLE INFORMATION

We make available, free of charge, on our website (www.onegas.com) our Annual Reports, Quarterly Reports, Current Reports on Form 8-K, amendments to those reports filed or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act and reports of holdings of our securities filed by our officers and directors under Section 16 of the Exchange Act as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the SEC, which also makes these materials available on its website (www.sec.gov). Our Code of Business Conduct and Ethics, Corporate Governance Guidelines, Certificate of Incorporation, bylaws, the written charters of our Audit Committee, Executive Compensation Committee, Corporate Governance Committee and Executive Committee and our ESG Report are also available on our website, and copies of these documents are available upon request.

In addition to filings with the SEC and materials posted on our website, we also use social media platforms as channels of information distribution to reach public investors. Information contained on our website and posted on or disseminated through our social media accounts is not incorporated by reference into this report.

GLOSSARY - The abbreviations, acronyms and industry terminology used in this Quarterly Report are defined as follows:


AAO			Accounting Authority Order
ADIT			Accumulated deferred income taxes
Annual Report			Annual Report on Form 10-K for the year ended December 31, 2021
ASC			Accounting Standards Codification
ASU			Accounting Standards Update
Bcf			Billion cubic feet
CAA			Federal Clean Air Act, as amended
CERCLA			Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended
CISA			Cybersecurity, & Infrastructure Security Agency
Clean Water Act			Federal Water Pollution Control Amendments of 1972, as amended
COSA			Cost-of-Service Adjustment
COVID-19			Coronavirus Disease 2019
EDIT			Excess accumulated deferred income taxes resulting from a change in enacted tax rates
EPA			United States Environmental Protection Agency
EPS			Earnings per share
ESG			Environmental, social and governance
Exchange Act			Securities Exchange Act of 1934, as amended
FASB			Financial Accounting Standards Board
GAAP			Accounting principles generally accepted in the United States of America
GRIP			Gas Reliability Infrastructure Program
GSRS			Gas System Reliability Surcharge
Heating Degree Day or HDD			A measure designed to reflect the demand for energy needed for heating based on the extent to which the daily average temperature falls below a reference temperature for which no heating is required, usually 65 degrees Fahrenheit
HCA(s)			High consequence area(s)
KCC			Kansas Corporation Commission
KDHE			Kansas Department of Health and Environment
LDC			Local distribution company
LIBOR			London Interbank Offered Rate
MAOP(s)			Maximum allowable operating pressure(s)
MGP			Manufactured gas plant
MMcf			Million cubic feet
Moody’s			Moody’s Investors Service, Inc.
NPRM			Notice of Proposed Rulemaking
NYSE			New York Stock Exchange
OCC			Oklahoma Corporation Commission
ODFA			Oklahoma Development Finance Authority
ONE Gas			ONE Gas, Inc.
ONE Gas 2021 Term Loan Facility			ONE Gas’ $2.5 billion two-year unsecured term loan facility, dated February 22, 2021, which terminated on March 11, 2021
ONE Gas 364-day Credit Agreement			ONE Gas’ $250 million 364-day revolving credit agreement, dated April 7, 2020, which terminated on March 16, 2021
ONE Gas Credit Agreement			ONE Gas’ $1.0 billion second amended and restated revolving credit agreement dated March 16, 2021, which expires on March 16, 2026
PBRC			Performance-Based Rate Change
PHMSA			United States Department of Transportation Pipeline and Hazardous Materials Safety Administration
Quarterly Report(s)			Quarterly Report(s) on Form 10-Q
RNG			Renewable natural gas
RRC			Railroad Commission of Texas
S&P			Standard & Poor’s Ratings Services
SEC			Securities and Exchange Commission
Securities Act			Securities Act of 1933, as amended
Senior Notes			ONE Gas’ registered notes consisting of $1.0 billion of 0.85 percent senior notes due March 2023, $400 million of floating-rate senior notes due March 2023, $700 million of 1.10 percent senior notes due March 2024, $300 million of 3.61 percent senior notes due February 2024, $300 million of 2.00 percent senior notes due May 2030, $600 million of 4.658 percent senior notes due February 2044 and $400 million of 4.50 percent notes due November 2048
SOFR			Secured Overnight Financing Rate
TCEQ			Texas Commission on Environmental Quality
TPFA			Texas Public Finance Authority
TSA			Transportation Security Administration
WNA			Weather normalization adjustment(s)
XBRL			eXtensible Business Reporting Language

PART I - FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS


ONE Gas, Inc.
CONSOLIDATED STATEMENTS OF INCOME
	Three Months Ended
	March 31,
(Unaudited)	2022		2021
	(Thousands of dollars, except per share amounts)

Total revenues	$	971,459	$	625,293

Cost of natural gas	639,946		314,069

Operating expenses
Operations and maintenance	115,095		110,886
Depreciation and amortization	57,137		52,266
General taxes	18,524		17,727
Total operating expenses	190,756		180,879
Operating income	140,757		130,345
Other expense, net	(4,145)		(405)
Interest expense, net	(15,595)		(15,440)
Income before income taxes	121,017		114,500
Income taxes	(22,083)		(18,925)
Net income	$	98,934	$	95,575

Earnings per share
Basic	$	1.83	$	1.79
Diluted	$	1.83	$	1.79

Average shares (thousands)
Basic	53,922		53,372
Diluted	54,030		53,515
Dividends declared per share of stock	$	0.62	$	0.58

See accompanying Notes to Consolidated Financial Statements.


ONE Gas, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended
	March 31,
(Unaudited)	2022		2021
	(Thousands of dollars)
Net income	$	98,934	$	95,575
Other comprehensive income, net of tax
Change in pension and other postemployment benefit plan liability, net of tax of $(19) and $(91), respectively	69		300
Total other comprehensive income, net of tax	69		300
Comprehensive income	$	99,003	$	95,875

See accompanying Notes to Consolidated Financial Statements.


ONE Gas, Inc.
CONSOLIDATED BALANCE SHEETS

	March 31,		December 31,
(Unaudited)	2022		2021
Assets	(Thousands of dollars)
Property, plant and equipment
Property, plant and equipment	$	7,365,981	$	7,274,268
Accumulated depreciation and amortization	2,102,368		2,083,433
Net property, plant and equipment	5,263,613		5,190,835
Current assets
Cash and cash equivalents	12,447		8,852
Accounts receivable, net	494,696		341,756
Materials and supplies	54,187		54,892

Natural gas in storage	78,945		179,646
Regulatory assets	1,600,034		1,611,676

Other current assets	34,161		27,742
Total current assets	2,274,470		2,224,564
Goodwill and other assets
Regulatory assets	651,931		724,862
Goodwill	157,953		157,953

Other assets	119,667		103,906
Total goodwill and other assets	929,551		986,721
Total assets	$	8,467,634	$	8,402,120

See accompanying Notes to Consolidated Financial Statements.


ONE Gas, Inc.
CONSOLIDATED BALANCE SHEETS
(Continued)
	March 31,		December 31,
(Unaudited)	2022		2021
Equity and Liabilities	(Thousands of dollars)
Equity and long-term debt
Common stock, $0.01 par value: authorized 250,000,000 shares; issued and outstanding 54,089,817 shares at March 31, 2022; issued and outstanding 53,633,210 shares at December 31, 2021	$	541	$	536
Paid-in capital	1,824,771		1,790,362
Retained earnings	630,536		565,161
Accumulated other comprehensive loss	(6,458)		(6,527)

Total equity	2,449,390		2,349,532
Long-term debt, excluding current maturities and net of issuance costs of $12,229 and $12,418, respectively	2,283,620		3,683,378
Total equity and long-term debt	4,733,010		6,032,910
Current liabilities
Current maturities of long-term debt	1,400,011		11
Short-term debt	505,165		494,000
Accounts payable	209,756		258,554

Accrued taxes other than income	75,153		67,035

Regulatory liabilities	32,822		8,090
Customer deposits	61,105		62,454
Other current liabilities	84,754		90,349
Total current liabilities	2,368,766		980,493
Deferred credits and other liabilities
Deferred income taxes	698,765		695,284
Regulatory liabilities	542,622		552,928
Employee benefit obligations	28,468		35,226
Other deferred credits	96,003		105,279
Total deferred credits and other liabilities	1,365,858		1,388,717
Commitments and contingencies
Total liabilities and equity	$	8,467,634	$	8,402,120

See accompanying Notes to Consolidated Financial Statements.

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ONE Gas, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
	Three Months Ended
	March 31,
(Unaudited)	2022		2021
	(Thousands of dollars)
Operating activities
Net income	$	98,934	$	95,575
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	57,137		52,266
Deferred income taxes	(6,849)		18,567
Share-based compensation expense	2,695		2,587
Provision for doubtful accounts	1,338		3,754
Changes in assets and liabilities:
Accounts receivable	(154,278)		9,640
Materials and supplies	705		1,619
Natural gas in storage	100,701		49,625

Asset removal costs	(9,554)		(9,885)
Accounts payable	(56,863)		87,202

Accrued taxes other than income	8,118		2,059

Customer deposits	(1,349)		(10,787)
Regulatory assets and liabilities - current	36,374		20,466
Regulatory assets and liabilities - noncurrent	66,002		(1,946,526)
Other assets and liabilities - current	(12,438)		(20,698)
Other assets and liabilities - noncurrent	(23,037)		(14,729)
Cash provided by (used in) operating activities	107,636		(1,659,265)
Investing activities
Capital expenditures	(113,307)		(99,093)
Other investing expenditures	(608)		(2,351)
Other investing receipts	549		241
Cash used in investing activities	(113,366)		(101,203)
Financing activities
Borrowings (repayments) on short-term debt, net	11,165		28,775
Issuance of debt, net of discounts	—		2,498,895
Long-term debt financing costs	—		(35,110)
Issuance of common stock

SEC Form 10-Q filed by ONE Gas Inc.