ogs-20210331

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, 2021.

☐ 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 26, 2021, the Company had 53,245,144 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, 2021 and 2020	6
	Consolidated Statements of Comprehensive Income - Three Months Ended March 31, 2021 and 2020	7
	Consolidated Balance Sheets - March 31, 2021 and December 31, 2020	8
	Consolidated Statements of Cash Flows - Three Months Ended March 31, 2021 and 2020	11
	Consolidated Statements of Equity - Three Months Ended March 31, 2021 and 2020	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	44
Item 4.	Controls and Procedures	45
Part II.	Other Information	46
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3.	Defaults Upon Senior Securities	46
Item 4.	Mine Safety Disclosures	46
Item 5.	Other Information	46
Item 6.	Exhibits	46
Signature		49

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 “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 or 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) copies of our Annual Report, Quarterly Reports on Form 10-Q, 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). Copies of 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 Sustainability 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 or 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 tax
Annual Report			Annual Report on Form 10-K for the year ended December 31, 2020
ASC			Accounting Standards Codification
ASU			Accounting Standards Update
Bcf			Billion cubic feet
CERCLA			Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended
Clean Air Act			Federal Clean Air Act, as amended
Clean Water Act			Federal Water Pollution Control Amendments of 1972, as amended
Code			Internal Revenue Code of 1986, as amended
COVID-19			Coronavirus Disease 2019
DOT			United States Department of Transportation
EDIT			Excess accumulated deferred income taxes resulting from a change in enacted tax rates
EPA			United States Environmental Protection Agency
EPS			Earnings per share
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
GPAC			Gas Pipeline Advisory Committee
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.
Net margin			Non-GAAP measure defined as total revenues less cost of natural gas
NPRM			Notice of Proposed Rulemaking
NYSE			New York Stock Exchange
OCC			Oklahoma Corporation Commission
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 billion second amended and restated revolving credit agreement, which expires on March 16, 2026
ONE Gas 2017 Credit Agreement			ONE Gas’ $700 million amended and restated revolving credit agreement, dated October 5, 2017, which was amended and restated on March 16, 2021
PBRC			Performance-Based Rate Change
PHMSA			United States Department of Transportation Pipeline and Hazardous Materials Safety Administration
PPE			Personal protective equipment
Quarterly Report(s)			Quarterly Report(s) on Form 10-Q
RNG			Renewable natural gas
ROE			Return on equity, calculated consistent with utility ratemaking principles in each jurisdiction in which we operate
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 billion of 0.85 percent senior notes due 2023, $800 million of floating-rate senior notes due 2023, $700 million of 1.10 percent senior notes due 2024, $300 million of 3.61 percent senior notes due 2024, $300 million of 2.00 percent senior notes due 2030, $600 million of 4.658 percent senior notes due 2044 and $400 million of 4.50 percent notes due 2048
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)	2021		2020
	(Thousands of dollars, except per share amounts)

Total revenues	$	625,293	$	528,168

Cost of natural gas	314,069		226,139

Operating expenses
Operations and maintenance	110,886		104,839
Depreciation and amortization	52,266		47,513
General taxes	17,727		16,473
Total operating expenses	180,879		168,825
Operating income	130,345		133,204
Other income (expense), net	(405)		(5,788)
Interest expense, net	(15,440)		(15,693)
Income before income taxes	114,500		111,723
Income taxes	(18,925)		(20,046)
Net income	$	95,575	$	91,677

Earnings per share
Basic	$	1.79	$	1.73
Diluted	$	1.79	$	1.72

Average shares (thousands)
Basic	53,372		53,007
Diluted	53,515		53,268
Dividends declared per share of stock	$	0.58	$	0.54

See accompanying Notes to Consolidated Financial Statements.


ONE Gas, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended
	March 31,
(Unaudited)	2021		2020
	(Thousands of dollars)
Net income	$	95,575	$	91,677
Other comprehensive income, net of tax
Change in pension and other postemployment benefit plan liability, net of tax of $(91) and $(74), respectively	300		224
Total other comprehensive income, net of tax	300		224
Comprehensive income	$	95,875	$	91,901

See accompanying Notes to Consolidated Financial Statements.


ONE Gas, Inc.
CONSOLIDATED BALANCE SHEETS

	March 31,		December 31,
(Unaudited)	2021		2020
Assets	(Thousands of dollars)
Property, plant and equipment
Property, plant and equipment	$	6,915,000	$	6,838,603
Accumulated depreciation and amortization	2,004,345		1,971,546
Net property, plant and equipment	4,910,655		4,867,057
Current assets
Cash and cash equivalents	704,911		7,993
Accounts receivable, net	279,591		292,985
Materials and supplies	51,147		52,766

Natural gas in storage	44,321		93,946
Regulatory assets	43,944		56,773
Other current assets	34,757		35,406
Total current assets	1,158,671		539,869
Goodwill and other assets
Regulatory assets	2,346,816		366,956
Goodwill	157,953		157,953

Other assets	105,809		96,877
Total goodwill and other assets	2,610,578		621,786
Total assets	$	8,679,904	$	6,028,712

See accompanying Notes to Consolidated Financial Statements.


ONE Gas, Inc.
CONSOLIDATED BALANCE SHEETS
(Continued)
	March 31,		December 31,
(Unaudited)	2021		2020
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 53,245,011 shares at March 31, 2021; issued and outstanding 53,166,733 shares at December 31, 2020	$	532	$	532
Paid-in capital	1,755,476		1,756,921
Retained earnings	548,068		483,635
Accumulated other comprehensive loss	(7,477)		(7,777)

Total equity	2,296,599		2,233,311
Long-term debt, excluding current maturities and net of issuance costs of $12,976 and $13,159, respectively	4,082,661		1,582,428
Total equity and long-term debt	6,379,260		3,815,739
Current liabilities
Notes payable	447,000		418,225
Accounts payable	227,955		152,313

Accrued taxes other than income	65,859		63,800

Regulatory liabilities	23,398		15,761
Customer deposits	57,241		68,028

Other current liabilities	57,583		78,952
Total current liabilities	879,036		797,079
Deferred credits and other liabilities
Deferred income taxes	685,901		656,806
Regulatory liabilities	537,129		547,563
Employee benefit obligations	89,860

SEC Form 10-Q filed by ONE Gas, Inc.