TULSA, Okla., July 29, 2015 /PRNewswire/ -- ONE Gas, Inc.
(NYSE: OGS) today announced financial results for its second
quarter 2015 and affirmed its full-year 2015 guidance.
Highlights include:
- Second-quarter 2015 net income was $12.1 million, or
$0.23 per diluted share, compared
with $9.5 million, or $0.18 per diluted share, in the second quarter
2014;
- Actual heating degree days across the company's service areas
were 487 in the second quarter 2015, 26 percent warmer than normal
and 30 percent warmer than the same period last year;
- A quarterly dividend of 30 cents
per share, or $1.20 per share on an
annualized basis, was declared on July 20,
2015, payable on Sept. 1,
2015, to shareholders of record at the close of business on
Aug. 14, 2015; and
- In July 2015, Oklahoma Natural
Gas filed a request with the Oklahoma Corporation Commission (OCC)
for an increase in base rates, reflecting system investments and
operating costs necessary to maintain the safety and reliability of
its natural gas distribution system.
"Our second quarter results were supported by lower operating
costs and new rates from pipeline system integrity investments,
which were partially offset by the impact of warmer-than-normal
weather," said Pierce H. Norton II,
president and chief executive officer. "I would like to thank our
employees for their continued focus and commitment to serving our
customers safely and reliably while efficiently managing
expenses."
SECOND-QUARTER 2015 FINANCIAL PERFORMANCE
ONE Gas reported operating income of $31.3 million in the second quarter 2015,
compared with $26.8 million in the
second quarter 2014.
Net margin increased by $0.3
million compared with second quarter 2014, which primarily
reflects:
- A $6.1 million increase from new
rates primarily in Oklahoma and
Texas;
- A $1.3 million increase
attributed to residential customer growth primarily in Oklahoma;
- A $2.7 million decrease due to
lower sales volumes, net of weather normalization, primarily from
warmer weather in the second quarter 2015 compared with the second
quarter 2014;
- A $2.2 million decrease in line
extension revenue, from commercial and industrial customers, and
other revenues; and
- A $1.6 million decrease due
primarily to lower volumes from weather-sensitive transportation
customers in Kansas.
Second-quarter 2015 operating costs were $112.5 million, compared with $118.4 million in the second quarter 2014, which
primarily reflects:
- A $4.3 million decrease in
outside service expenses, which includes $2.7 million of lower costs associated with
contractor pipeline maintenance activities and $1.3 million of costs associated with the
separation from ONEOK, Inc. (NYSE: OKE);
- A $1.6 million decrease in bad
debt expense due primarily to warmer weather in Kansas;
- A $1.2 million decrease in legal
costs;
- A $1.2 million decrease in ad
valorem taxes;
- A $0.9 million increase in
employee-related expenses; and
- A $0.9 million increase in
information technology expenses.
Second-quarter 2015 depreciation and amortization was
$33.0 million, compared with
$31.3 million in the second quarter
2014. This increase was due primarily to an increase in
depreciation expense from capital investments placed in
service.
Capital expenditures were $70.5
million for the second quarter 2015, compared with
$82.9 million in the second quarter
2014, due primarily to information technology assets acquired in
2014 due to the separation from ONEOK.
Key Statistics: More detailed information is listed in the
tables.
- Actual heating degree days across the company's service areas
were 487 in the second quarter 2015, 26 percent warmer than normal
and 30 percent warmer than the same period last year;
- Actual heating degree days in the Oklahoma service area were 156 in the second
quarter 2015, 20 percent warmer than normal and 32 percent warmer
than the same period last year;
- Actual heating degree days in the Kansas service area were 300 in the second
quarter 2015, 27 percent warmer than normal and 27 percent warmer
than the same period last year;
- Actual heating degree days in the Texas service area were 31 in the second
quarter 2015, 39 percent warmer than normal and 51 percent warmer
than the same period last year;
- Residential natural gas sales volumes were 11.4 billion cubic
feet (Bcf) in the second quarter 2015, down 16 percent compared
with the same period last year;
- Total natural gas sales volumes were 16.4 Bcf in the second
quarter 2015, down 12 percent compared with the same period last
year;
- Natural gas transportation volumes were 46.8 Bcf in the second
quarter 2015, down 3 percent compared with the same period last
year; and
- Total natural gas volumes delivered were 63.2 Bcf in the second
quarter 2015, down 6 percent compared with the same period last
year.
YEAR-TO-DATE 2015 FINANCIAL PERFORMANCE
Operating income for the six-month 2015 period was $140.3 million, compared with $136.2 million for the same period last year.
Net margin increased by $3.5
million compared with the same period last year, which
primarily reflects:
- A $14.9 million increase from new
rates primarily in Oklahoma and
Texas;
- A $2.6 million increase
attributed to residential customer growth primarily in Oklahoma;
- A $5.0 million decrease due to
lower sales volumes, net of weather normalization, primarily from
warmer weather for the six-month 2015 period compared with the same
period last year;
- A $3.1 million decrease in line
extension revenue, from commercial and industrial customers, and
other revenues;
- A $2.9 million decrease in rider
and surcharge recoveries due to a lower ad-valorem surcharge in
Kansas and the expiration of the
take-or-pay rider in Oklahoma,
both of which were offset by lower amortization expense; and
- A $2.6 million decrease due
primarily to lower transportation volumes from weather-sensitive
customers in Kansas.
Operating costs for the six-month 2015 period were $234.9 million, compared with $237.3 million for the same period last year,
which primarily reflects:
- A $5.1 million decrease in
outside service expenses, which includes $2.4 million of lower costs associated with
contractor pipeline maintenance activities and $2.6 million of costs associated with the
separation from ONEOK;
- A $3.0 million decrease in legal
and workers' compensation expense;
- A $1.6 million decrease in bad
debt expense due primarily to warmer weather in Kansas;
- A $1.4 million decrease in ad
valorem taxes;
- A $4.9 million increase in
employee-related expenses; and
- A $2.9 million increase in
information technology expenses.
Depreciation and amortization for the six-month 2015 period was
$64.6 million, compared with
$62.8 million for the same period
last year. This increase was due to a $5.1
million increase in depreciation expense from capital
investments placed in service, offset partially by a $2.6 million decrease associated with the
ad-valorem surcharge rider in Kansas and take-or-pay rider in Oklahoma.
Capital expenditures for the six-month 2015 period were
$125.4 million, compared with
$148.6 million for the same period
last year, due primarily to information technology assets acquired
in 2014 due to the separation from ONEOK.
The company ended the second quarter with $135.9 million of cash and cash equivalents, no
short-term borrowings and $1.0
million in letters of credit, leaving $699 million of credit available under its
$700 million credit facility. The
total debt-to-capitalization ratio at June
30, 2015, was approximately 40 percent.
> View earnings tables
REGULATORY ACTIVITY
Oklahoma
In July 2015, Oklahoma Natural Gas
filed a request with the OCC for an increase in base rates,
reflecting system investments and operating costs necessary to
maintain the safety and reliability of its natural gas distribution
system. Oklahoma Natural Gas' request, if approved, represents an
increase of $50.4 million in base
rates and would result in a typical residential customer paying
$4.98 more per month for the
utility's natural gas service.
In accordance with Oklahoma
law, the OCC has 180 days to consider Oklahoma Natural Gas'
proposed rate changes.
Texas
In March 2015, Texas Gas Service
filed under the El Paso Annual Rate Review (EPARR) requesting an
increase in revenues of $9.4 million
in the City of El Paso and
surrounding incorporated cities. The filing included a request to
include a payroll adjustment, which would increase revenues by an
additional $1.8 million, for a total
increase in revenues of $11.2
million. If approved, new rates will become effective in
August 2015.
The EPARR provides for a streamlined review of Texas Gas
Service's revenue requirement on an annual basis, and is in lieu of
a filing under the Gas Reliability Infrastructure Program (GRIP)
statute with the City of El
Paso.
GRIP is a capital-recovery mechanism that allows for a rate
adjustment providing recovery of and a return on incremental
capital investments made between rate cases.
Texas Gas Service received approval for rate relief under the
GRIP statute with the City of Austin,
Texas, and surrounding communities in May 2015, for approximately $3.7 million. The new rates became effective in
June 2015.
In the normal course of business, Texas Gas Service has received
approval for increases totaling $3.0
million in 2015 for rate relief under the GRIP and
cost-of-service adjustments in other Texas jurisdictions to address investments in
rate base and changes in cost of service.
Kansas
Kansas Gas Service is expected to file a rate case in mid-2016
based on a 2015 test year, with new rates effective January 2017.
2015 FINANCIAL GUIDANCE AFFIRMED
ONE Gas affirmed its 2015 financial guidance, with net income
expected to be in the range of $108 million
to $118 million.
Capital expenditures are expected to be approximately
$300 million in 2015. More than 70
percent of these expenditures are targeted for system integrity and
replacement projects.
EARNINGS CONFERENCE CALL AND WEBCAST
The ONE Gas executive management team will conduct a conference
call on Thurs., July 30, 2015, at
11 a.m. Eastern Daylight Time
(10 a.m. Central Daylight Time). The
call also will be carried live on the ONE Gas website.
To participate in the telephone conference call, dial
888-661-5167, pass code 5380939, or log on to www.onegas.com.
If you are unable to participate in the conference call or the
webcast, a replay will be available on the ONE Gas website,
www.onegas.com, for 30 days. A recording will be available by phone
for seven days. The playback call may be accessed at 888-203-1112,
pass code 5380939.
LINK TO EARNINGS TABLES
http://www.onegas.com/~/media/OGS/Earnings/2015/OGS_Q2Earnings-$w$CbK95.ashx
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ONE Gas, Inc. (NYSE: OGS) is a natural gas distribution company
and the successor to the company founded in 1906 as Oklahoma
Natural Gas Company, which became ONEOK, Inc. (NYSE: OKE) in 1980.
On Jan. 31, 2014, ONE Gas officially
separated from ONEOK into a stand-alone, 100 percent regulated,
publicly traded natural gas utility.
ONE Gas trades on the New York Stock Exchange under the symbol
"OGS," and is included in the S&P MidCap 400 Index.
ONE Gas provides natural gas distribution services to more than
2 million customers in Oklahoma,
Kansas and Texas. ONE Gas is one of the largest publicly
traded, 100 percent regulated, natural gas utilities in
the United States.
ONE Gas is headquartered in Tulsa,
Okla., and its companies include the largest natural gas
distributor in Oklahoma and
Kansas, and the third largest in
Texas, in terms of customers.
Its largest natural gas distribution markets by customer count
are Oklahoma City and Tulsa, Okla.; Kansas
City, Wichita and
Topeka, Kan.; and Austin and El Paso,
Texas. ONE Gas serves residential, commercial, industrial,
transportation and wholesale customers in all three states.
For more information, visit the website at
http://www.ONEGas.com. For the latest news about ONE Gas,
follow us on Twitter @ONEGasInc.
Some of the statements contained and incorporated in this news
release are forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange
Act. The forward-looking statements relate to our anticipated
financial performance, liquidity, management's plans and objectives
for our future operations, our business prospects, the outcome of
regulatory and legal proceedings, market conditions and other
matters. We make these forward-looking statements in reliance
on the safe harbor protections provided under the Private
Securities Litigation Reform Act of 1995. The following
discussion is intended to identify important factors that could
cause future outcomes to differ materially from those set forth in
the forward-looking statements.
Forward-looking statements include the items identified in the
preceding paragraph, the information concerning possible or assumed
future results of our operations and other statements contained or
incorporated in this news release identified by words such as
"anticipate," "estimate," "expect," "project," "intend," "plan,"
"believe," "should," "goal," "forecast," "guidance," "could,"
"may," "continue," "might," "potential," "scheduled," and other
words and terms of similar meaning.
One should not place undue reliance on forward-looking
statements, which are applicable only as of the date of this news
release. Known and unknown risks, uncertainties and other
factors may cause our actual results, performance or achievements
to be materially different from any future results, performance or
achievements expressed or implied by forward-looking
statements. Those factors may affect our operations, markets,
products, services and prices. In addition to any assumptions
and other factors referred to specifically in connection with the
forward-looking statements, factors that could cause our actual
results to differ materially from those contemplated in any
forward-looking statement include, among others, the following:
- our ability to recover operating costs and amounts equivalent
to income taxes, costs of property, plant and equipment and
regulatory assets in our regulated rates;
- our ability to manage our operations and maintenance
costs;
- changes in regulation, including the application of market
rates by state and local agencies;
- the economic climate and, particularly, its effect on the
natural gas requirements of our residential and commercial
industrial customers;
- competition from alternative forms of energy, including, but
not limited to, solar power, wind power, geothermal energy and
biofuels;
- variations in weather, including seasonal effects on demand,
the occurrence of storms and disasters, and climate change;
- indebtedness could make us more vulnerable to general adverse
economic and industry conditions, limit our ability to borrow
additional funds and/or place us at competitive disadvantage
compared with competitors;
- our ability to secure reliable, competitively priced and
flexible natural gas supply;
- the mechanical integrity of facilities operated;
- operational hazards and unforeseen operational
interruptions;
- adverse labor relations;
- the effectiveness of our strategies to reduce earnings lag,
margin protection strategies and risk mitigation strategies;
- our ability to generate sufficient cash flows to meet all of
our cash needs;
- changes in the financial markets during the periods covered by
the forward-looking statements, particularly those affecting the
availability of capital and our ability to refinance existing debt
and fund investments and acquisitions;
- actions of rating agencies, including the ratings of debt,
general corporate ratings and changes in the rating agencies'
ratings criteria;
- changes in inflation and interest rates;
- our ability to purchase and sell assets at attractive prices
and on other attractive terms;
- our ability to recover the costs of natural gas purchased for
our customers;
- impact of potential impairment charges;
- volatility and changes in markets for natural gas;
- possible loss of LDC franchises or other adverse effects caused
by the actions of municipalities;
- payment and performance by counterparties and customers as
contracted and when due;
- changes in regulation of natural gas distribution services,
particularly those in Oklahoma,
Kansas and Texas;
- changes in law resulting from new federal or state energy
legislation;
- changes in environmental, safety, tax and other laws to which
we and our subsidiaries are subject;
- advances in technology;
- population growth rates and changes in the demographic patterns
of the markets we serve;
- acts of nature and the potential effects of threatened or
actual terrorism, including cyber attacks and war;
- the sufficiency of insurance coverage to cover losses;
- the effects of our strategies to reduce tax payments;
- the effects of litigation and regulatory investigations,
proceedings, including our rate cases, or inquiries;
- changes in accounting standards and corporate governance;
- our ability to attract and retain talented management and
directors;
- the results of financing efforts, including our ability to
obtain financing on favorable terms, which can be affected by
various factors, including our credit ratings and general economic
conditions;
- declines in the market prices of debt and equity securities and
resulting funding requirements for our defined benefit pension
plans;
- the ability to successfully complete merger, acquisition or
divestiture plans, regulatory or other limitations imposed as a
result of a merger, acquisition or divestiture, and the success of
the business following a merger, acquisition or divestiture;
- the final resolutions or outcomes with respect to our
contingent and other corporate liabilities related to the natural
gas distribution business and any related actions for
indemnification made pursuant to the Separation and Distribution
Agreement with ONEOK;
- our ability to operate effectively as a separate, publicly
traded company; and
- the costs associated with increased regulation and enhanced
disclosure and corporate governance requirements pursuant to the
Dodd-Frank Wall Street Reform and the Consumer Protection Act of
2010.
These factors are not necessarily all of the important factors
that could cause actual results to differ materially from those
expressed in any of our forward-looking statements. Other
factors could also have material adverse effects on our future
results. These and other risks are described in greater detail
in Item 1A, Risk Factors, in our Annual Report. All
forward-looking statements attributable to us or persons acting on
our behalf are expressly qualified in their entirety by these
factors. Other than as required under securities laws, we undertake
no obligation to update publicly any forward-looking statement
whether as a result of new information, subsequent events or change
in circumstances, expectations or otherwise.
Analyst
Contact:
|
Andrew
Ziola
|
|
918-947-7163
|
Media
Contact:
|
Jennifer
Rector
|
|
918-947-7571
|
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SOURCE ONE Gas, Inc.