ONE Gas, Inc. Q1 2026 Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended March 31, 2026. ONE Gas, Inc. operates as a regulated public utility providing natural gas distribution services to approximately 2.3 million customers across Oklahoma, Kansas, and Texas. The company operates in a single reportable segment.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Total Revenues | $831.7 million | $935.2 million |
| Net Income | $128.7 million | $119.4 million |
| Diluted EPS | $2.04 | $1.98 |
| Operating Income | $189.6 million | $180.5 million |
| Operating Cash Flow | $176.3 million | $277.5 million |
| Capital Expenditures | $156.5 million | $166.6 million |
| Total Debt (Long-term + Current) | $2.87 billion | $2.89 billion |
| Debt-to-Capital Ratio (excl. KGSS-I) | 47.1% | N/A |
| Cash and Equivalents | $23.0 million | $28.2 million |
Material Changes vs. Prior Period
- Revenue Decline: Total revenues decreased 11% ($103.5 million) primarily due to a 23% reduction in the cost of natural gas passed through to customers and lower sales volumes. Weather in Q1 2026 was 24.6% warmer than the prior year, reducing heating demand.
- Profitability Increase: Despite lower revenues, Net Income increased 8% ($9.3 million) and Operating Income increased 5% ($9.1 million). This was driven by a $27.3 million revenue increase from new rates, partially offset by higher employee-related costs ($6.8 million) and lower volumes.
- Interest Expense: Net interest expense decreased by $3.3 million due to lower weighted-average interest rates on commercial paper and the implementation of Texas House Bill 4384.
- Cash Flow: Operating cash flows decreased $101.2 million year-over-year, primarily due to working capital changes related to an increase in regulatory assets.
Guidance, Outlook, and Risks
- Capital Expenditure Guidance: Full-year 2026 capital expenditures and asset removal costs are expected to be approximately $800 million.
- Dividend: A quarterly dividend of $0.68 per share was declared, payable June 2, 2026.
- Regulatory Developments:
- Oklahoma: Filed a Performance-Based Rate Change (PBRC) application requesting a $28.7 million base rate revenue increase.
- Kansas: House Bill 2435 was signed into law, expanding infrastructure investments eligible for recovery via the Gas System Reliability Surcharge (GSRS) and increasing the maximum residential surcharge.
- Texas: Filed a Gas Reliability Infrastructure Program (GRIP) application requesting a $36.9 million increase effective July 2026.
- Recent Tax Refund: Received a $64.3 million federal income tax refund and interest in April 2026 related to the amendment of the 2022 tax return.
- Risks: Key risks include the ability to recover costs through regulatory rates, environmental remediation costs at former Manufactured Gas Plant (MGP) sites (currently capped at $32.0 million in Kansas), pipeline safety regulations, and commodity price volatility.
Investor Verification Checklist
- Verify the status and potential approval of the Oklahoma PBRC application and Texas GRIP filing to confirm future rate recovery.
- Monitor the $32.0 million cap on Kansas MGP remediation costs and any potential need for future rate filings if costs exceed this limit.
- Review the impact of warmer weather on Q2 and Q3 volumes, noting the reliance on weather normalization mechanisms to stabilize earnings.
- Confirm the utilization of the $1.5 billion revolving credit facility and commercial paper program given the $759.7 million outstanding commercial paper balance.
- Assess the execution of the At-the-Market (ATM) equity program, which has $204.4 million remaining available for issuance.