(Date of report) | October 30, 2017 |
(Date of earliest event reported) | October 30, 2017 |
Oklahoma | 001-36108 | 46-3561936 | ||
(State or other jurisdiction | (Commission | (IRS Employer | ||
of incorporation) | File Number) | Identification No.) |
Item 2.02 | Results of Operations and Financial Condition | |
On October 30, 2017, we announced our results of operations for the third quarter ended September 30, 2017. The news release is furnished as Exhibit 99.1 and incorporated by reference herein. | ||
Item 7.01 | Regulation FD Disclosure | |
On October 30, 2017, we announced our results of operations for the third quarter ended September 30, 2017, affirmed our 2017 financial guidance and our board of directors declared a cash dividend of 42 cents per share of common stock. The news release is furnished as Exhibit 99.1 and incorporated by reference herein. | ||
Item 8.01 | Other Events | |
On October 30, 2017, our board of directors declared a cash dividend of 42 cents per share of common stock, payable December 1, 2017, to shareholders of record at the close of business November 13, 2017. | ||
Item 9.01 | Financial Statements and Exhibits | |
(d) | Exhibits | |
Exhibit Number | Description | |
99.1 |
ONE Gas, Inc. | |||
Date: | October 30, 2017 | By: | /s/ Curtis L. Dinan |
Curtis L. Dinan Senior Vice President, Chief Financial Officer and Treasurer |
October 30, 2017 | Analyst Contact: | Meredith Bartlett | |
Megan Webb 918-947-7011 | |||
Media Contact: | Jennifer Rector 918-947-7571 |
• | Third-quarter 2017 net income was $18.8 million, or $0.36 per diluted share, compared with $12.7 million, or $0.24 per diluted share, in the third quarter 2016; and |
• | The board of directors declared a quarterly dividend of 42 cents per share, or $1.68 per share on an annualized basis, payable on Dec. 1, 2017, to shareholders of record at the close of business on Nov. 13, 2017. |
• | A $5.7 million increase from new rates in Texas and Kansas; |
• | A $1.0 million increase attributed to net residential customer growth in Oklahoma and Texas; and |
• | A $0.9 million increase from the impact of the modified weather-normalization mechanism in Kansas. |
• | A $1.6 million decrease in costs associated with pipeline maintenance activities; and |
• | A $1.3 million decrease in legal expenses. |
• | Residential natural gas sales volumes were 7.4 billion cubic feet (Bcf) in the third quarter 2017, relatively unchanged compared with the same period last year; |
• | Total natural gas sales volumes were 11.5 Bcf in the third quarter 2017, up 2 percent compared with the same period last year; |
• | Natural gas transportation volumes were 46.4 Bcf in the third quarter 2017, up 1 percent compared with the same period last year; and |
• | Total natural gas volumes delivered were 57.9 Bcf in the third quarter 2017, up 1 percent compared with the same period last year. |
• | A $20.0 million increase from new rates in Texas and Kansas; |
• | A $5.5 million increase from the impact of weather-normalization mechanisms, which offset warmer weather in 2017 compared with the same period in 2016; |
• | A $2.7 million increase attributed to residential customer growth in Oklahoma and Texas; and |
• | A $1.7 million increase due primarily to higher transportation volumes from customers in Oklahoma and Kansas. |
• | A $2.4 million increase from the deferral in the first quarter of 2016 of certain information technology services incurred with the separation from ONEOK in 2014, which was approved in Oklahoma as a regulatory asset; |
• | A $1.7 million increase in information technology expenses; |
• | A $1.5 million increase in employee-related expenses; |
• | A $1.0 million increase in bad debt expense; and |
• | A $0.8 million increase in costs associated with pipeline maintenance activities; offset partially by |
• | A $3.1 million decrease in legal expenses. |
• | 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 of natural gas distribution services, particularly those in Oklahoma, Kansas and Texas; |
• | 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, electricity, solar power, wind power, geothermal energy and biofuels; |
• | conservation efforts of our customers; |
• | 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 transportation and supply, including decisions by natural gas producers to reduce production or shut-in producing natural gas wells and expiration of existing supply, and transportation and storage arrangements that are not replaced with contracts with similar terms and pricing; |
• | 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 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 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 existing or the addition of new environmental, safety, tax and other laws, rules and regulations to which we and our subsidiaries are subject; |
• | the uncertainty of estimates, including accruals and costs of environmental remediation; |
• | 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 war; |
• | cyber attacks or breaches of technology systems or information, affecting us, our customers or vendors; |
• | the sufficiency of insurance coverage to cover losses; |
• | the effects of our strategies to reduce tax payments; |
• | the outcomes, timing and effects of litigation and regulatory investigations, proceedings, including our rate cases, or inquiries; |
• | changes in accounting standards; |
• | changes in corporate governance standards; |
• | discovery of material weaknesses in our internal controls; |
• | our ability to comply with all covenants in our indentures and the ONE Gas Credit Agreement, a violation of which, if not cured in a timely manner, could trigger a default of our obligations; |
• | our ability to attract and retain talented employees, management and directors; |
• | declines in the discount rates on, declines in the market value of the debt and equity securities of, and increases in funding requirements for, our defined benefit 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; and |
• | the costs associated with increased regulation and enhanced disclosure and corporate governance requirements pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. |
ONE Gas, Inc. | |||||||||||||||
STATEMENTS OF INCOME | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
(Unaudited) | 2017 | 2016 | 2017 | 2016 | |||||||||||
(Thousands of dollars, except per share amounts) | |||||||||||||||
Revenues | $ | 247,142 | $ | 232,191 | $ | 1,077,239 | $ | 986,479 | |||||||
Cost of natural gas | 58,769 | 52,253 | 404,495 | 344,439 | |||||||||||
Net margin | 188,373 | 179,938 | 672,744 | 642,040 | |||||||||||
Operating expenses | |||||||||||||||
Operations and maintenance | 95,371 | 99,402 | 305,969 | 302,652 | |||||||||||
Depreciation and amortization | 38,423 | 36,241 | 113,293 | 106,490 | |||||||||||
General taxes | 13,799 | 13,403 | 43,518 | 42,311 | |||||||||||
Total operating expenses | 147,593 | 149,046 | 462,780 | 451,453 | |||||||||||
Operating income | 40,780 | 30,892 | 209,964 | 190,587 | |||||||||||
Other income | 1,042 | 911 | 3,163 | 1,345 | |||||||||||
Other expense | (444 | ) | (357 | ) | (1,246 | ) | (1,126 | ) | |||||||
Interest expense, net | (11,495 | ) | (10,809 | ) | (34,281 | ) | (32,504 | ) | |||||||
Income before income taxes | 29,883 | 20,637 | 177,600 | 158,302 | |||||||||||
Income taxes | (11,086 | ) | (7,900 | ) | (61,724 | ) | (60,521 | ) | |||||||
Net income | $ | 18,797 | $ | 12,737 | $ | 115,876 | $ | 97,781 | |||||||
Earnings per share | |||||||||||||||
Basic | $ | 0.36 | $ | 0.24 | $ | 2.21 | $ | 1.86 | |||||||
Diluted | $ | 0.36 | $ | 0.24 | $ | 2.19 | $ | 1.85 | |||||||
Average shares (thousands) | |||||||||||||||
Basic | 52,488 | 52,453 | 52,539 | 52,452 | |||||||||||
Diluted | 52,926 | 52,942 | 52,984 | 52,962 | |||||||||||
Dividends declared per share of stock | $ | 0.42 | $ | 0.35 | $ | 1.26 | $ | 1.05 |
ONE Gas, Inc. | ||||||||
BALANCE SHEETS | ||||||||
September 30, | December 31, | |||||||
(Unaudited) | 2017 | 2016 | ||||||
Assets | (Thousands of dollars) | |||||||
Property, plant and equipment | ||||||||
Property, plant and equipment | $ | 5,643,136 | $ | 5,404,168 | ||||
Accumulated depreciation and amortization | 1,730,857 | 1,672,548 | ||||||
Net property, plant and equipment | 3,912,279 | 3,731,620 | ||||||
Current assets | ||||||||
Cash and cash equivalents | 6,872 | 14,663 | ||||||
Accounts receivable, net | 127,689 | 290,944 | ||||||
Materials and supplies | 38,789 | 34,084 | ||||||
Natural gas in storage | 157,641 | 125,432 | ||||||
Regulatory assets | 99,548 | 83,146 | ||||||
Other current assets | 15,014 | 20,654 | ||||||
Total current assets | 445,553 | 568,923 | ||||||
Goodwill and other assets | ||||||||
Regulatory assets | 411,653 | 440,522 | ||||||
Goodwill | 157,953 | 157,953 | ||||||
Other assets | 43,625 | 43,773 | ||||||
Total goodwill and other assets | 613,231 | 642,248 | ||||||
Total assets | $ | 4,971,063 | $ | 4,942,791 |
ONE Gas, Inc. | ||||||||
BALANCE SHEETS | ||||||||
(Continued) | ||||||||
September 30, | December 31, | |||||||
(Unaudited) | 2017 | 2016 | ||||||
Equity and Liabilities | (Thousands of dollars) | |||||||
Equity and long-term debt | ||||||||
Common stock, $0.01 par value: authorized 250,000,000 shares; issued 52,598,005 shares and outstanding 52,273,444 shares at September 30, 2017; issued 52,598,005 and outstanding 52,283,260 shares at December 31, 2016 | $ | 526 | $ | 526 | ||||
Paid-in capital | 1,735,638 | 1,749,574 | ||||||
Retained earnings | 221,185 | 161,021 | ||||||
Accumulated other comprehensive income (loss) | (4,329 | ) | (4,715 | ) | ||||
Treasury stock, at cost: 324,561 shares at September 30, 2017 and 314,745 shares at December 31, 2016 | (21,028 | ) | (18,126 | ) | ||||
Total equity | 1,931,992 | 1,888,280 | ||||||
Long-term debt, excluding current maturities, and net of issuance costs of $8,239 and $8,851, respectively | 1,193,052 | 1,192,446 | ||||||
Total equity and long-term debt | 3,125,044 | 3,080,726 | ||||||
Current liabilities | ||||||||
Notes payable | 174,000 | 145,000 | ||||||
Accounts payable | 68,184 | 131,988 | ||||||
Accrued interest | 7,742 | 18,854 | ||||||
Accrued taxes other than income | 44,658 | 42,571 | ||||||
Accrued liabilities | 18,535 | 22,931 | ||||||
Customer deposits | 59,643 | 61,209 | ||||||
Other current liabilities | 19,466 | 21,380 | ||||||
Total current liabilities | 392,228 | 443,933 | ||||||
Deferred credits and other liabilities | ||||||||
Deferred income taxes | 1,089,061 | 1,038,568 | ||||||
Employee benefit obligations | 282,904 | 303,507 | ||||||
Other deferred credits | 81,826 | 76,057 | ||||||
Total deferred credits and other liabilities | 1,453,791 | 1,418,132 | ||||||
Commitments and contingencies | ||||||||
Total liabilities and equity | $ | 4,971,063 | $ | 4,942,791 |
ONE Gas, Inc. | ||||||||
STATEMENTS OF CASH FLOWS | ||||||||
Nine Months Ended | ||||||||
September 30, | ||||||||
(Unaudited) | 2017 | 2016 | ||||||
(Thousands of dollars) | ||||||||
Operating activities | ||||||||
Net income | $ | 115,876 | $ | 97,781 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 113,293 | 106,490 | ||||||
Deferred income taxes | 61,329 | 59,771 | ||||||
Share-based compensation expense | 6,930 | 9,341 | ||||||
Provision for doubtful accounts | 4,508 | 3,521 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | 158,747 | 107,762 | ||||||
Materials and supplies | (4,705 | ) | 3,227 | |||||
Natural gas in storage | (32,209 | ) | (2,077 | ) | ||||
Asset removal costs | (37,928 | ) | (40,715 | ) | ||||
Accounts payable | (65,983 | ) | (32,923 | ) | ||||
Accrued interest | (11,112 | ) | (11,182 | ) | ||||
Accrued taxes other than income | 2,087 | 2,670 | ||||||
Accrued liabilities | (4,396 | ) | (13,658 | ) | ||||
Customer deposits | (1,566 | ) | 100 | |||||
Regulatory assets and liabilities | 11,448 | (18,726 | ) | |||||
Other assets and liabilities | (13,915 | ) | 19,053 | |||||
Cash provided by operating activities | 302,404 | 290,435 | ||||||
Investing activities | ||||||||
Capital expenditures | (249,057 | ) | (231,336 | ) | ||||
Other | 617 | 492 | ||||||
Cash used in investing activities | (248,440 | ) | (230,844 | ) | ||||
Financing activities | ||||||||
Borrowings (repayments) of notes payable, net | 29,000 | 28,500 | ||||||
Repurchase of common stock | (17,512 | ) | (24,066 | ) | ||||
Issuance of common stock | 2,208 | 1,983 | ||||||
Dividends paid | (65,996 | ) | (54,923 | ) | ||||
Tax withholdings related to net share settlements of stock compensation | (9,455 | ) | (9,005 | ) | ||||
Cash used in financing activities | (61,755 | ) | (57,511 | ) | ||||
Change in cash and cash equivalents | (7,791 | ) | 2,080 | |||||
Cash and cash equivalents at beginning of period | 14,663 | 2,433 | ||||||
Cash and cash equivalents at end of period | $ | 6,872 | $ | 4,513 |
ONE Gas, Inc. | |||||||||||||||
INFORMATION AT A GLANCE | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
(Unaudited) | 2017 | 2016 | 2017 | 2016 | |||||||||||
(Millions of dollars, except as noted) | |||||||||||||||
Financial | |||||||||||||||
Net margin | $ | 188.3 | $ | 179.9 | $ | 672.7 | $ | 642.0 | |||||||
Operating costs | $ | 109.1 | $ | 112.7 | $ | 349.4 | $ | 344.9 | |||||||
Depreciation and amortization | $ | 38.4 | $ | 36.3 | $ | 113.3 | $ | 106.5 | |||||||
Operating income | $ | 40.8 | $ | 30.9 | $ | 210.0 | $ | 190.6 | |||||||
Capital expenditures | $ | 94.4 | $ | 86.5 | $ | 249.1 | $ | 231.3 | |||||||
Net margin on natural gas sales | $ | 159.9 | $ | 152.1 | $ | 577.4 | $ | 548.5 | |||||||
Transportation revenues | $ | 21.5 | $ | 21.2 | $ | 73.1 | $ | 72.2 | |||||||
Net margin, excluding other revenues | $ | 181.4 | $ | 173.3 | $ | 650.5 | $ | 620.7 | |||||||
Volumes (Bcf) | |||||||||||||||
Natural gas sales | |||||||||||||||
Residential | 7.4 | 7.4 | 69.6 | 69.7 | |||||||||||
Commercial and industrial | 3.8 | 3.6 | 23.0 | 22.4 | |||||||||||
Wholesale and public authority | 0.2 | 0.3 | 1.2 | 1.5 | |||||||||||
Total volumes sold | 11.5 | 11.3 | 93.8 | 93.6 | |||||||||||
Transportation | 46.4 | 46.0 | 156.6 | 154.9 | |||||||||||
Total volumes delivered | 57.9 | 57.3 | 250.4 | 248.5 | |||||||||||
Average number of customers (in thousands) | |||||||||||||||
Residential | 1,983 | 1,970 | 1,994 | 1,982 | |||||||||||
Commercial and industrial | 156 | 155 | 158 | 158 | |||||||||||
Wholesale and public authority | 3 | 3 | 3 | 3 | |||||||||||
Transportation | 12 | 13 | 13 | 12 | |||||||||||
Total customers | 2,154 | 2,141 | 2,168 | 2,155 | |||||||||||
Heating Degree Days | |||||||||||||||
Actual degree days | 17 | 24 | 4,580 | 5,088 | |||||||||||
Normal degree days | 61 | 55 | 6,011 | 5,967 | |||||||||||
Percent colder (warmer) than normal weather | (72 | )% | (56 | )% | (24 | )% | (15 | )% | |||||||
Statistics by State | |||||||||||||||
Oklahoma | |||||||||||||||
Average number of customers (in thousands) | 865 | 859 | 872 | 866 | |||||||||||
Actual degree days | 3 | 3 | 1,577 | 1,730 | |||||||||||
Normal degree days | 2 | 2 | 1,968 | 1,968 | |||||||||||
Percent colder (warmer) than normal weather | * | * | (20 | )% | (12 | )% | |||||||||
Kansas | |||||||||||||||
Average number of customers (in thousands) | 633 | 632 | 639 | 638 | |||||||||||
Actual degree days | 13 | 19 | 2,344 | 2,459 | |||||||||||
Normal degree days | 58 | 52 | 2,980 | 2,965 | |||||||||||
Percent colder (warmer) than normal weather | * | * | (21 | )% | (17 | )% | |||||||||
Texas | |||||||||||||||
Average number of customers (in thousands) | 656 | 650 | 657 | 651 | |||||||||||
Actual degree days | 1 | 2 | 659 | 899 | |||||||||||
Normal degree days | 1 | 1 | 1,063 | 1,034 | |||||||||||
Percent colder (warmer) than normal weather | * | * | (38 | )% | (13 | )% |
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