ONE Gas, Inc. — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing; it does not provide standalone fourth-quarter financial results. ONE Gas is a fully regulated natural-gas distribution utility serving approximately 2.3 million customers in Oklahoma, Kansas and Texas.
Financial results and key metrics
| Metric | 2022 | 2021 |
|---|---|---|
| Total revenue | $2.578 billion | $1.809 billion |
| Operating income | $350.0 million | $310.3 million |
| Net income | $221.7 million | $206.4 million |
| Diluted EPS | $4.08 | $3.85 |
| Operating cash flow | $1.571 billion | $(1.536) billion |
| Capital expenditures | $609.5 million | $495.2 million |
| Dividends declared per share | $2.48 | $2.32 |
- Natural-gas sales revenue includes commodity costs passed through to customers without profit. Cost of natural gas rose 88% to $1.459 billion as the average gas cost rate increased to $8.22/Mcf from $4.87/Mcf; these pass-through costs do not directly affect operating income.
- Operating income increased 13%, primarily from new rates, customer growth and lower bad-debt expense, partly offset by higher outside services, depreciation and employee costs. Interest expense increased $17.2 million to $77.5 million.
- Cash from operations was unusually high in 2022, principally reflecting about $1.331 billion of Oklahoma Winter Storm Uri securitization proceeds. The prior-year operating cash outflow largely reflected Uri-related gas purchases and deferred costs.
- At year-end, cash and restricted cash totaled $18.1 million; commercial paper outstanding was $552 million. Long-term debt, including securitized tariff bonds and current maturities, had a carrying value of approximately $2.7 billion. Total debt-to-capital was 56%; long-term debt-to-capital was 51%. The company reported $998.8 million of unused revolving credit availability and compliance with debt covenants.
- Capital expenditures and asset-removal costs were $656.5 million. Net property, plant and equipment was $5.629 billion. The filing does not provide a standalone quarterly cash-flow or margin figure.
Material changes and financing
- Revenue rose 43%, substantially reflecting higher commodity gas costs passed through to customers; net income rose 7% and diluted EPS rose from $3.85 to $4.08.
- Oklahoma’s securitization generated approximately $1.3 billion for recovery of authorized Uri-related costs. Kansas Gas Service’s special-purpose subsidiary issued $336 million of 5.486% tariff bonds. Proceeds supported repayment of short-dated senior notes; ONE Gas also issued $300 million of 4.25% notes due 2032.
- Texas Gas Service had approximately $243.1 million of Uri-related costs deferred at year-end; securitized financing was expected by April 2023. Across the company, the remaining Uri-related regulatory asset was approximately $258.2 million.
- ONE Gas issued shares and settled forward-sale agreements during 2022, generating net proceeds of approximately $128.5 million in total. Shares outstanding increased to 55.35 million at year-end from 53.63 million.
Outlook, risks and unusual items
- Management expected approximately $675 million of capital expenditures and asset-removal costs in 2023. No earnings or EPS guidance is stated in the supplied filing text.
- In January 2023, the company declared a quarterly dividend of $0.65 per share, or $2.60 annualized.
- Key exposures include regulatory decisions and timing of cost recovery, severe weather and climate-related events, pipeline safety and integrity spending, cybersecurity and physical security, labor availability, inflation and interest rates, and competition from alternative energy. Weather-normalization mechanisms mitigate, but do not eliminate, usage variability.
- Environmental remediation reserve for former manufactured-gas-plant sites was $12.7 million at year-end. Kansas site investigation and remediation costs deferred under an accounting order totaled $29.8 million; recovery and future remediation requirements remain subject to regulatory processes. Management described ordinary-course litigation losses as not material.
- The company reported effective disclosure controls and internal control over financial reporting. The auditor issued unqualified opinions on the financial statements and internal controls; regulatory accounting was identified as a critical audit matter.
Important facts for investors to verify
- Progress and final cash recovery from the expected Texas Uri securitization, and the status of the remaining $258.2 million Uri-related regulatory asset.
- Whether regulators continue to approve timely recovery of capital investment, operating costs and environmental remediation, and how rate cases and interim adjustment mechanisms affect returns.
- 2023 capital spending, financing needs and dividend coverage, considering higher borrowing costs and the company’s capital-intensive investment program.
- Actual operating-cost, customer-growth and weather trends; reported revenue growth is affected substantially by pass-through gas prices.
- Potential changes in pipeline-safety, environmental and emissions rules, and any resulting costs not recoverable through customer rates.