ONE Gas Increases Quarterly Dividend; Narrows 2023 Financial Guidance

Rhea-AI Summary

ONE Gas, Inc. (OGS) increases Q1 2024 dividend by 1 cent per share to 66 cents, with an annualized dividend of $2.64 per share. The company expects a 1-2% annual increase through 2028 and has narrowed its 2023 financial guidance to earnings of $4.12 to $4.16 per diluted share, with net income expected to be in the range of $229 million to $233 million.

Insights

Financial Analyst

The announcement by ONE Gas, Inc. regarding the increase in its quarterly dividend and the updated financial guidance presents a noteworthy development for investors. The dividend hike, albeit modest at 1 cent per share, signals confidence from the board in the company's steady cash flows and commitment to returning value to shareholders. Historically, utility companies like ONE Gas are considered defensive investments, often sought after for their stable dividends rather than capital growth. This increase aligns with the company's projected annual dividend growth of 1% to 2% through 2028, which, although not aggressive, supports a conservative income-focused investment strategy.

Furthermore, the narrowed 2023 earnings guidance suggests management's increased certainty about the company's financial performance. This could be indicative of operational efficiencies or a favorable regulatory environment that has enabled more accurate forecasting. The capital investment projection of approximately $725 million for 2023 should also be noted, as it reflects the company's commitment to maintaining and expanding its infrastructure, which is critical for long-term sustainability in the utility sector.

It is also important to consider the target dividend payout ratio of 55% to 65% of net income. This range is quite typical for the industry, where companies aim to balance reinvestment in operations with shareholder returns. A payout ratio within this range suggests a prudent approach to financial management, ensuring that sufficient funds are retained for future growth and operational needs.

Market Research Analyst

The strategic positioning of ONE Gas within the S&P MidCap 400 Index and its status as one of the largest natural gas utilities in the United States are important factors to consider. The utility sector is generally less volatile than the broader market and companies like ONE Gas benefit from the essential nature of their services, which translates to consistent demand. This is particularly relevant in the context of the energy sector's ongoing evolution, with natural gas often viewed as a bridge fuel during the transition to renewable energy sources.

From a market perspective, investors may interpret the revised financial guidance and dividend increase as positive indicators of stability and potential resilience against economic fluctuations. This could influence the stock's attractiveness to certain investor segments, such as those seeking steady income streams through dividends. Additionally, the company's presence in Kansas, Oklahoma and Texas provides geographical diversification within the U.S. market, which can be advantageous in mitigating region-specific risks.

Energy Sector Analyst

As a 100% regulated natural gas utility, ONE Gas operates within a framework that typically allows for predictable revenue streams, as rates are often set in cooperation with regulatory bodies. This regulatory aspect can provide a level of stability not present in other sectors, which is crucial for maintaining investor confidence, especially in times of economic uncertainty.

The company's focus on reliability and affordability, as mentioned in the context of serving over 2.3 million customers, is central to its business model. The energy sector is increasingly competitive and subject to regulatory and environmental pressures. ONE Gas's investment in infrastructure is a critical component in ensuring compliance with safety and environmental regulations, as well as in facilitating the potential integration of new technologies and energy sources in the future.

Overall, the financial guidance and dividend increase can be seen as aligning with industry norms for regulated utilities, which are generally characterized by moderate but steady growth and a focus on long-term stability rather than short-term gains.

TULSA, Okla., Jan. 23, 2024 /PRNewswire/ -- The board of directors of ONE Gas, Inc. (NYSE: OGS) today increased the dividend for the first quarter 2024 by 1 cent per share to 66 cents per share, resulting in an annualized dividend of $2.64 per share.

The dividend is payable March 8, 2024, to shareholders of record at the close of business Feb. 23, 2024.

The Company expects an average annual dividend increase of 1% to 2% through 2028, with a target dividend payout ratio of approximately 55% to 65% of net income, subject to approval by the board of directors.

2023 FINANCIAL GUIDANCE

The Company also narrowed its 2023 financial guidance to earnings of $4.12 to $4.16 per diluted share from the previous range of $4.06 to $4.22 per diluted share. Net income is now expected to be in the range of $229 million to $233 million. Capital investments for 2023 are expected to be approximately $725 million.

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.

Headquartered in Tulsa, Oklahoma, ONE Gas provides a reliable and affordable energy choice to more than 2.3 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 and the latest news about ONE Gas, visit onegas.com and follow its social channels: @ONEGas, Facebook, LinkedIn and YouTube.

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 costs, income taxes and amounts equivalent to the cost of property, plant and equipment, regulatory assets and our allowed rate of return in our regulated rates or other recovery mechanisms;
• cyber-attacks, which, according to experts, continue to increase in volume and sophistication, or breaches of technology systems that could disrupt our operations or result in the loss or exposure of confidential or sensitive customer, employee, vendor or Company information; further, increased remote working arrangements have required enhancements and modifications to our information technology infrastructure (e.g. Internet, Virtual Private Network, remote collaboration systems, etc.), and any failures of the technologies, including third-party service providers, that facilitate working remotely could limit our ability to conduct ordinary operations or expose us to increased risk or effect of an attack;
• our ability to manage our operations and maintenance costs;
• the concentration of our operations in Oklahoma, Kansas and Texas;
• 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 customers;
• the length and severity of a pandemic or other health crisis which could significantly disrupt or prevent us from operating our business in the ordinary course for an extended period;
• competition from alternative forms of energy, including, but not limited to, electricity, solar power, wind power, geothermal energy and biofuels;
• adverse weather conditions and variations in weather, including seasonal effects on demand and/or supply, the occurrence of severe storms in the territories in which we operate, and climate change, and the related effects on supply, demand, and costs;
• 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;
• our ability to complete necessary or desirable expansion or infrastructure development projects, which may delay or prevent us from serving our customers or expanding our business;
• operational and mechanical hazards or interruptions;
• adverse labor relations;
• the effectiveness of our strategies to reduce earnings lag, revenue protection strategies and risk mitigation strategies, which may be affected by risks beyond our control such as commodity price volatility, counterparty performance or creditworthiness and interest rate risk;
• the capital-intensive nature of our business, and the availability of and access to, in general, funds to meet our debt obligations prior to or when they become due and to fund our operations and capital expenditures, either through (i) cash on hand, (ii) operating cash flow, or (iii) access to the capital markets and other sources of liquidity;
• our ability to obtain capital on commercially reasonable terms, or on terms acceptable to us, or at all;
• limitations on our operating flexibility, earnings and cash flows due to restrictions in our financing arrangements;
• cross-default provisions in our borrowing arrangements, which may lead to our inability to satisfy all of our outstanding obligations in the event of a default on our part;
• 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 to execute our business strategy;
• 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 and any related financing required to support our purchase of natural gas supply;
• impact of potential impairment charges;
• volatility and changes in markets for natural gas and our ability to secure additional and sufficient liquidity on reasonable commercial terms to cover costs associated with such volatility;
• 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, including our counterparties maintaining ordinary course terms of supply and payments;
• changes in existing or the addition of new environmental, safety, tax and other laws to which we and our subsidiaries are subject, including those that may require significant expenditures, significant increases in operating costs or, in the case of noncompliance, substantial fines or penalties;
• the effectiveness of our risk-management policies and procedures, and employees violating our risk-management policies;
• 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, and economic conditions in these areas' housing markets;
• acts of nature and the potential effects of threatened or actual terrorism and war, including recent events in Europe and the Middle East;
• the sufficiency of insurance coverage to cover losses;
• the effects of our strategies to reduce tax payments;
• changes in accounting standards;
• changes in corporate governance standards;
• existence 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, and shortage of skilled-labor;
• unexpected increases in the costs of providing health care benefits, along with pension and postemployment health care benefits, as well as 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; and
• our 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.

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.

Analyst Contact:	Erin Dailey
	918-947-7411
Media Contact:	Leah Harper
	918-947-7123

 

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SOURCE ONE Gas, Inc.

FAQ

What is the new dividend per share for ONE Gas, Inc. (OGS) for Q1 2024?

The new dividend per share for Q1 2024 is 66 cents.

What is the annualized dividend for ONE Gas, Inc. (OGS) after the increase?

The annualized dividend after the increase is $2.64 per share.

What is the expected annual dividend increase percentage for ONE Gas, Inc. (OGS) through 2028?

The company expects an average annual dividend increase of 1% to 2% through 2028.

What is the narrowed 2023 financial guidance for ONE Gas, Inc. (OGS)?

The narrowed 2023 financial guidance is earnings of $4.12 to $4.16 per diluted share, with net income expected to be in the range of $229 million to $233 million.