OGS — ONE Gas, Inc.

ONE Gas Q4 2025 Earnings Call Summary

1. Key Financial Results and Metrics

• Net Income: $264 million for 2025, up from $223 million in 2024.
• Earnings Per Share (EPS): $4.37 for 2025, compared to $3.91 in 2024.
• Adjusted Net Income: Q4 adjusted net income was $90 million ($1.48 per diluted share), up from $78 million ($1.35) in Q4 2024. Full-year adjusted net income was $271 million ($4.48 per diluted share) versus $225 million ($3.94) in 2024.
• Capital Expenditures: Totaled $760 million for the year.
• Operating and Maintenance (O&M) Expenses: Increased by approximately 5% year-over-year, slightly above the 4% CAGR guidance.

2. Strategic Updates and Business Highlights

• Winter Storm Response: Successfully managed the delivery of over 3 billion cubic feet of gas during Winter Storm Fern with no supply disruptions, showcasing improved winter peak capacity due to prior investments.
• Regulatory Adjustments: Introduced non-GAAP adjustments to financial reports to better reflect earnings allowed by regulators, particularly due to Texas House Bill 4384, which expanded the types of capital expenditures eligible for deferral.
• Growth Initiatives: Announced a $120 million pipeline project to support a new natural gas generation plant in Oklahoma and a project for an advanced manufacturing plant near El Paso.
• Customer Growth: Added approximately 23,000 new residential customers annually, aiding in cost efficiency.

3. Forward Guidance and Outlook

• 2026 Guidance: Expected adjusted net income between $306 million and $314 million, with adjusted EPS projected in the range of $4.83 to $4.95.
• Long-term Growth: Anticipated adjusted net income growth of 7% to 9% and adjusted EPS growth of 5% to 7% from 2026 to 2030, using 2025 results as the baseline.

4. Bad News, Challenges, or Points of Concern

• O&M Expense Increase: The rise in O&M expenses slightly exceeded guidance, indicating potential cost management challenges.
• Regulatory and Legislative Risks: While supportive legislation is in progress in Kansas, the outcome remains uncertain, and the company is navigating a complex regulatory environment.
• Competitive Pressures: Facing competition from midstream providers for new projects, necessitating a clear competitive advantage in regulatory transparency and existing asset proximity.

5. Notable Q&A Insights

• Non-GAAP Adjustments: Management explained the rationale behind introducing non-GAAP adjustments due to the significant impact of Texas House Bill 4384 on financial reporting.
• Legislative Impact: The proposed Kansas legislation could significantly enhance capital recovery mechanisms, but its passage is still pending.
• Market Conditions: Current favorable treasury market conditions could benefit future capital raising efforts, although management remains cautious about future market fluctuations.

Overall, ONE Gas reported strong financial performance for 2025, supported by strategic investments and effective storm management, while also navigating regulatory changes and competitive pressures. The outlook for 2026 remains positive, with growth expectations anchored in adjusted financial metrics.