Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934



(Date of report)	January 22, 2020
(Date of earliest event reported)	January 21, 2020

ONE Gas, Inc.
(Exact name of registrant as specified in its charter)



Oklahoma	001-36108	46-3561936
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

15 East Fifth Street; Tulsa, OK

(Address of principal executive offices)

74103

(Zip code)

(918) 947-7000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

☐ 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. ☐



The information disclosed in Items 2.02 and 7.01, including Exhibits 99.1, 99.2 and 99.3 hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act except as expressly set forth by specific reference in such filing.

Item 2.02		Results of Operations and Financial Condition

		See discussion below regarding 2019 earnings guidance under item 7.01, Regulation FD Disclosure.

Item 7.01		Regulation FD Disclosure

		On January 21, 2020, we announced that our board of directors declared a cash dividend of 54 cents per share of common stock.

		We also issued our 2020 financial guidance, narrowed our 2019 financial guidance, updated our expected five-year growth rates, increased our guidance for capital expenditures, including asset removal costs, and posted additional information in an investor presentation, attached hereto, as Exhibit 99.3. These materials are also available on our website, www.onegas.com.

		The news releases and the investor presentation are furnished as Exhibits 99.1, 99.2 and 99.3 and incorporated by reference herein.

Item 8.01		Other Events

		On January 21, 2020, our board of directors declared a cash dividend of 54 cents per share of common stock, payable March 6, 2020, to shareholders of record at the close of business February 21, 2020.

Item 9.01		Financial Statements and Exhibits

	(d)	Exhibits

Exhibit Number		Description

99.1		Dividend news release issued by ONE Gas, Inc. dated January 21, 2020.

99.2		Financial Guidance news release issued by ONE Gas, Inc. dated January 21, 2020.

99.3		Investor presentation issued by ONE Gas, Inc. on January 21, 2020.

104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURE

Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.



			ONE Gas, Inc.

Date:	January 22, 2020	By:	/s/ Caron A. Lawhorn
			Caron A. Lawhorn Senior Vice President and Chief Financial Officer

Exhibit 99.1



January 21, 2020	Analyst Contact:	Brandon Lohse 918-947-7472
	Media Contact:	Leah Harper 918-947-7123

ONE Gas Increases Quarterly Dividend

TULSA, Okla. - Jan. 21, 2020 - The board of directors of ONE Gas, Inc. (NYSE: OGS) today increased the quarterly dividend by 4 cents per share to 54 cents per share, effective for the first quarter 2020, resulting in an annualized dividend of $2.16 per share.

The dividend is payable March 6, 2020, to shareholders of record at the close of business Feb. 21, 2020.

The company expects an average annual dividend increase of 6% to 8% between 2019 and 2024, with a target dividend payout ratio of 55% to 65% of net income, all subject to its board of directors' approval.

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ONE Gas, Inc. (NYSE: OGS) is a 100% regulated natural gas utility, and trades on the New York Stock Exchange under the symbol “OGS.” ONE Gas is included in the S&P MidCap 400 Index and is one of the largest natural gas utilities in the United States.

ONE Gas, headquartered in Tulsa, Oklahoma, provides natural gas distribution services to more than 2 million customers in Kansas, Oklahoma and Texas. Its divisions include Kansas Gas Service, the largest natural gas distributor in Kansas; Oklahoma Natural Gas, the largest in Oklahoma; and Texas Gas Service, the third largest in Texas, in terms of customers.

For more information, visit the website at www.onegas.com.

###

Exhibit 99.2



January 21, 2020	Analyst Contact:	Brandon Lohse 918-947-7472
	Media Contact:	Leah Harper 918-947-7123

ONE Gas Issues 2020 Financial Guidance;

Narrows 2019 Guidance

Five-year Financial and Dividend Growth Rates Updated;

Capital Expenditures Forecast Increased

TULSA, Okla. - Jan. 21, 2020 - ONE Gas, Inc. (NYSE: OGS) today announced that its 2020 net income is expected to be in the range of $186 million to $198 million, or $3.44 to $3.68 per diluted share. The midpoint of 2020 net income guidance for ONE Gas (the Company) is $192 million, or $3.56 per diluted share.

The Company also narrowed its 2019 guidance to earnings of $3.49 to $3.53 per diluted share from the previous range of $3.39 to $3.57 per diluted share. Capital expenditures, including asset removal costs, are expected to be approximately $470 million in 2019.

The Company's 2020 earnings guidance includes the benefit of new rates, offset by higher depreciation expense from capital investments and assumes normal weather. For 2019, the Company's preliminary estimate is that the net income impact of colder weather on sales volumes, net of weather normalization mechanisms, was an increase of $4.9 million.

Capital expenditures, including asset removal costs, are expected to be approximately $475 million in 2020, with approximately 70% of these expenditures targeted for system integrity and replacement projects.

The Company expects to achieve an 8.4% return on equity in 2020, which assumes an average rate base of $3.9 billion calculated consistent with utility ratemaking in each jurisdiction.

Earnings per share is expected to increase by an average of 5% to 7% annually between 2019 and 2024; however, the timing and frequency of regulatory filings will impact the growth rate in any individual year.

Capital expenditures, including asset removal costs, are expected to be in the range of $475 million to $525 million per year between 2020 and 2024, leading to rate base growth averaging 7% per year between 2019 and 2024.

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ONE Gas Issues 2020 Financial Guidance

January 21, 2020

Page 2

The average annual dividend growth rate is expected to be 6% to 8% between 2019 and 2024, with a target dividend payout ratio of 55% to 65% of net income, all subject to board of directors’ approval.

See Table 1 below for details of 2020 earnings guidance. Additional information can be found in the 2020 Financial Guidance investor presentation on the ONE Gas website at https://www.onegas.com/investors/financials-and-filings/guidance.

Guidance estimates may be impacted by the variables in the forward-looking statements listed below.

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For more information, visit the website at www.onegas.com.

Some of the statements contained and incorporated in this news release are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. The forward-looking statements relate to our anticipated financial performance, liquidity, management’s plans and objectives for our future operations, our business prospects, the outcome of regulatory and legal proceedings, market conditions and other matters. We make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. The following discussion is intended to identify important factors that could cause future outcomes to differ materially from those set forth in the forward-looking statements.

Forward-looking statements include the items identified in the preceding paragraph, the information concerning possible or assumed future results of our operations and other statements contained or incorporated in this news release identified by 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.

One should not place undue reliance on forward-looking statements, which are applicable only as of the date of this news release. Known and unknown risks, uncertainties and other factors may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by forward-looking statements. Those factors may affect our operations, markets, products, services and prices. In addition to any assumptions and other factors referred to specifically in connection with the forward-looking statements, factors that could cause our actual results to differ materially from those contemplated in any forward-looking statement include, among others, the following:


•	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 and energy storage 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;

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ONE Gas Issues 2020 Financial Guidance

January 21, 2020

Page 3


•	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, which may be affected by risks beyond our control such as commodity price volatility and counterparty creditworthiness;


•	our ability to generate sufficient cash flows to meet all our liquidity 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 local distribution company 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 to which we and our subsidiaries are subject;


•	the uncertainty of estimates, including accruals and costs of environmental remediation;


•	advances in technology, including technologies that increase efficiency or that improve electricity’s competitive position relative to natural gas;


•	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 and war;


•	cyber attacks or breaches of technology systems that could disrupt our operations or result in the loss or exposure of confidential or sensitive customer, employee or company information;


•	the sufficiency of insurance coverage to cover losses;


•	the effects of our strategies to reduce tax payments;


•	the effects of litigation and regulatory investigations, proceedings, including our rate cases, or inquiries and the requirements of our regulators as a result of the Tax Cuts and Jobs Act of 2017;


•	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, Inc.; 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.

These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other factors could also have material adverse effects on our future results. These and other risks are described in greater detail in Part 1, Item 1A, Risk Factors, in our Annual Report. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these factors. Other than as required under securities laws, we undertake no obligation to update publicly any forward-looking statement whether as a result of new information, subsequent events or change in circumstances, expectations or otherwise.

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ONE Gas Issues 2020 Financial Guidance

January 21, 2020

Page 4



TABLE 1
ONE Gas, Inc.
EARNINGS GUIDANCE


(Unaudited)	2020
(Millions of dollars, except per share amount)
Total revenues*	$	1,567
Cost of natural gas	574
Operating expenses
Operations and maintenance	435
Depreciation and amortization	190
General taxes	61
Total operating expenses	686
Operating income	307
Other income (expense), net	(7		)
Interest expense	(67		)
Income before income taxes	233
Income taxes	(41		)
Net income*	$	192
Earnings per share, diluted*	$	3.56

*Represents midpoint of guidance range.

###

Exhibit 99.3 2020 FINANCIAL GUIDANCE January 21, 2020

Forward-Looking Statements Statements contained in this presentation that include company expectations or predictions should be considered forward-looking statements that are covered by the safe harbor provisions of the Securities Act of 1933 and the Securities and Exchange Act of 1934. It is important to note that the actual results could differ materially from those projected in such forward-looking statements. For additional information that could cause actual results to differ materially from such forward-looking statements, refer to ONE Gas’ Securities and Exchange Commission filings. All future cash dividends discussed in this presentation are subject to the approval of the ONE Gas board of directors. All references in this presentation to guidance are based on news releases issued on or before Jan. 21, 2020, and are not being updated or affirmed by this presentation. 2 | ONE Gas, Inc.

2020 Guidance Summary Initiated Jan. 21, 2020 DILUTED EPS 2020 $3.51 $3.56 • Net income range of $186 ‒ $198 million $3.25 • EPS range of $3.44 ‒ $3.68 per diluted share $3.08 • Estimated average rate base of $3.91 billion $2.65 • Average rate base growth of 7% between 2019 ‒ 2024 2016 2017 2018 2019G* 2020G* *Represents midpoint of guidance range, updated Jan. 21, 2020 Expected average annual EPS growth of 5 – 7% between 2019 and 2024 3 | ONE Gas, Inc. FINANCIAL GUIDANCE

Growing Dividends Building Shareholder Value DIVIDENDS & PAYOUT RATIO Quarterly dividend: $2.16 $2.00 54 cents per share in 2020* $1.84 • $1.68 • Target dividend payout ratio $1.40 57% 61% of 55 ‒ 65% of net income 57% 55% 53% *Subject to board approval 2016 2017 2018 2019G 2020G Expected average annual growth of 6 – 8% between 2019 and 2024 4 | ONE Gas, Inc. FINANCIAL GUIDANCE

Return on Equity 8.1% 8.3%* 8.4%* Continue to minimize the gap between allowed 7.7% 7.9% and actual returns Authorized ROE by state: • Kansas ‒ Not stated due to black box settlement; KGS estimates ROE embedded in GSRS pre-tax carrying charge is ~ 9.3% • Oklahoma ‒ 9% to 10% band, with a 9.5% midpoint 2016 2017 2018 2019G 2020G • Texas ‒ ~ 9.5% weighted average * Reflects the midpoint of earnings guidance and estimated average rate base 5 | ONE Gas, Inc. FINANCIAL GUIDANCE

Cash Flow Sources and Uses $591 $591 Dividends and capital expenditures primarily funded by Financing cash flow from operations requirements $174 Capital ) expenditures and $700 million revolving credit facility supports financing asset removal ILLIONS costs needs through the commercial paper program (M Cash flow from $475 operations* $417 ~$850 ‒ $900 million net financing needs through 2024 • ~25% expected to be equity Dividends $116 2020 Sources 2020 Uses * Before changes in working capital. See non-GAAP information in Appendix. 6 | ONE Gas, Inc. FINANCIAL GUIDANCE

Manageable Debt Profile Strong Liquidity Position – Sept. 30, 2019 DEBT MATURITIES LIQUIDITY PROFILE (MILLIONS) (MILLIONS) $600 $700 $400 $300 4.658% $396 4.500% 3.610% 2024 2044 2048 Credit Facility Short-term Borrowings* * Includes commercial paper and letters of credit 7 | ONE Gas, Inc. FINANCIAL GUIDANCE

CAPITAL EXPENDITURES & RATE BASE

Well-Defined Capital Investment Plan CAPITAL INVESTMENTS* 2020E CAPITAL RECOVERY TIMING (MILLIONS) $485-$525/year $470 $475 10% $442 $418 $178 $190 $158 $151 90% 2017 2018 2019G 2020G 2021-2024 Subject to annual filings Other Depreciation *Totals include capital expenditures and asset removal costs Investing ~70% of capital in system integrity 9 | ONE Gas, Inc. CAPEX & RATE BASE

Capital Expenditures with Asset Removal Costs OKLAHOMA TEXAS KANSAS 2019: 2.5X DEPRECIATION 2019: 3.6X DEPRECIATION 2019: 1.9X DEPRECIATION $191 * $180 $181 * $173 $166 * $156 * $126 $128 * $149 $123 $123 * $136 $122 $105 $106 $67 ) $64 $78 $52 $69 $74 $47 $50 ILLIONS $67 $64 $40 $43 (M $34 $37 $29 2016 2017 2018 2019G 2020G 2016 2017 2018 2019G 2020G 2016 2017 2018 2019G 2020G * Represents midpoint of guidance, updated Jan. 21, 2020 Note: Capital expenditures include accruals Depreciation 10 | ONE Gas, Inc. CAPEX & RATE BASE

Rate Base Growth ESTIMATED AVERAGE RATE BASE* 2020 ESTIMATED AVERAGE RATE BASE (BILLIONS) TOTAL: $3.91 BILLION* $3.91 $3.62 $3.18 $3.36 $2.96 $1.14 billion $1.65 billion $1.12 billion 2016 2017 2018 2019G 2020G Oklahoma Kansas Texas * For definition of estimated average rate base, see Rate Base Definition slide Expected average annual growth of 7% between 2019 and 2024 11 | ONE Gas, Inc. CAPEX & RATE BASE

APPENDIX

2020 Guidance Table (Unaudited) 2020 (Millions of dollars, except per share amount) Total revenues* $ 1,567 Cost of natural gas 574 Operating expenses Operations and maintenance 435 Depreciation and amortization 190 General taxes 61 Total operating expenses 686 Operating income 307 Other income (expense), net (7) Interest expense (67) Income before income taxes 233 Income taxes (41) Net income* $ 192 Earnings per share, diluted* $ 3.56 *Represents midpoint of guidance range 13 | ONE Gas, Inc. APPENDIX

Authorized Rate Base OKLAHOMA¹ KANSAS² TEXAS¹ $1,475 4 $1,407 3 $1,257 $1,202 4 $1,033 $1,068 4 $947 $986 $979 $925 $895 $826 $822 $781 $745 $639 ) ILLIONS (M 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 ¹ Rate bases presented in this table are those from the last approved rate filings for each jurisdiction. These amounts are not necessarily indicative of current or future rate bases. ² KGS’ most recent rate case, approved in February 2019, was settled without a determination of rate base and reflects Kansas Gas Service’s estimate of rate base contained within the settlement; these amounts are not necessarily indicative of current or future rate base. 3 Reflects the 2018 PBRC filing, approved in January 2019 4 As of December 2019 14 | ONE Gas, Inc. APPENDIX

Rate Base Definition Authorized Rate Base – $3.63 billion (as of December 2019) • Includes capital investments authorized in most recent rate case and interim filings • Does not include any capital investments since last approved rate case or filings 2020G Estimated Average Rate Base – $3.91 billion • Average of rate base per book at beginning and end of year • Includes capital investments and other changes in rate base not yet approved for recovery 15 | ONE Gas, Inc. APPENDIX

Non-GAAP Information ONE Gas has disclosed in this presentation cash flow from operations before changes in working capital, which is a non-GAAP financial measure. Cash flow from operations before changes in working capital is used as a measure of the company's financial performance. Cash flow from operations before changes in working capital is defined as net income adjusted for depreciation and amortization, deferred income taxes, and certain other noncash items. This non-GAAP financial measure is useful to investors as an indicator of financial performance of the company to generate cash flows sufficient to support our capital expenditure programs and pay dividends to our investors. ONE Gas cash flow from operations before changes in working capital should not be considered in isolation or as a substitute for net income, total revenue or any other measure of financial performance presented in accordance with GAAP. This non-GAAP financial measure excludes some, but not all, items that affect net income. Additionally, these calculations may not be comparable with similarly titled measures of other companies. Reconciliations of cash flow from operations before changes in working capital to the most directly comparable GAAP measure is included in this presentation. 16 | ONE Gas, Inc. APPENDIX

Non-GAAP Reconciliation Cash Flow From Operations Before Changes in Working Capital* 2020** (MILLIONS) GUIDANCE Net Income $ 192 Depreciation and amortization 190 Deferred taxes 20 Other 15 Cash flow from operations before changes in working capital $ 417 * Amounts shown are midpoints of ranges provided ** As of Jan. 21, 2020 17 | ONE Gas, Inc. APPENDIX

DEI 8-K (Details)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934



(Date of report)	January 22, 2020
(Date of earliest event reported)	January 21, 2020

ONE Gas, Inc.
(Exact name of registrant as specified in its charter)



Oklahoma	001-36108	46-3561936
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

15 East Fifth Street; Tulsa, OK

(Address of principal executive offices)

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

☐ Emerging growth company