INVESTOR UPDATE March 2021
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INVESTOR UPDATE
March 2021
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 Feb.
25, 2021, and are not being updated or affirmed by this presentation.
FORWARD LOOKING STATEMENTS | 2
FEBRUARY 2021 WINTER WEATHER EVENT
Winter Weather Event - Overview
What Happened Company Response
• Extreme record cold temperatures led to a surge in demand for • Deployed Pressure & Measurement technicians to critical
natural gas, both from residential customers and electric generation, locations
at the same time “freeze-offs” at many gas supply wellheads cut off
critical supply • Dispatched mobile CNG trailers and designed 18 over-land
projects capable of providing additional short-term supply to
lower-pressure systems
• Collaborated with elected officials, regulatory officials, customer
groups and emergency response agencies to optimize
communications
• Residential customers were asked to conserve
• Worked with large-volume customers to curtail usage; these
actions were meaningful in maintaining system pressures and
withstanding supply constraints
>9,000 DAILY COLD RECORDS FROM FEB 7-20, 2021
• Oklahoma City recorded its longest period below 20° F, approx. seven
consecutive days, and recorded the coldest temperature since 1899; During the event, ~900 customers (out of 2.2M) lost
Its average low temperature in mid-February is 34° F
gas service, most for less than 24 hours
• Wichita, Kansas spent nine consecutive days colder than 20° F, while
Kansas City spent 11 consecutive days at or below 15° F
FEBRUARY 2021 WINTER WEATHER EVENT | 4
Financial Impact & Response
Additional Liquidity Secured
Impact on Natural Gas Purchases Sources of Liquidity
As of Feb. 24, 2021
• The combination of reduced supply and increased demand led
to unforeseeable and unprecedented market pricing for natural • Term Loan
gas in OK, TX and KS. For example, the spot price in OK rose – $2.5 billion, available and undrawn
to over $1,200/MCF on Feb. 18, versus an average industrial
• Revolving Credit Facilities
price of $3.54/MCF in February of last year
– $700 million
• ~ $2.2 billion - estimated cost of natural gas purchases for
February 2021 – $250 million, 364-day
– Available capacity of $595 million, including cash on hand
New Term Loan
• Entered into Feb. 22, 2021
• $2.5 billion, 2-year
RATING AGENCY RATING OUTLOOK
• Expected use of proceeds
Moody’s* A3 Negative
– Payment for February 2021 natural gas purchases
• Generally due March 25 S&P* BBB+ Negative
– Repayment of indebtedness * As of Feb. 23, 2021
FEBRUARY 2021 WINTER WEATHER EVENT | 5
Regulatory Response
KANSAS OKLAHOMA TEXAS
Kansas Corporation Commission (KCC) Oklahoma Corporation Commission (OCC) Texas Railroad Commission (RRC)
Emergency order issued allowing state utilities Oklahoma Natural Gas filed a motion to seek the Emergency order issued authorizing LDCs to
who incurred extraordinary costs during the authority to record a regulatory asset to account record a regulatory asset to account for the
winter weather event to defer those costs to a for the extraordinary costs incurred during the extraordinary costs associated with the winter
regulatory asset account winter weather event weather event
The extraordinary costs will be subject to review An administrative
The extraordinary costs will be subject to review
for reasonableness and accuracy in future law judge (ALJ) recommended approval of the
for reasonableness and accuracy in future
regulatory proceedings; Kansas Gas Service motion; the recommendation
regulatory proceedings
expects to file its compliance report in Q1 2021 from the ALJ will next be considered by the OCC
FEBRUARY 2021 WINTER WEATHER EVENT | 6
FINANCIAL GUIDANCE
Five-Year Financial Outlook
For the five years ending Dec. 31, 2025
Expected average annual growth rates:
(2020 base year)
• 7 – 8% Rate base
• 6 – 8% Net income
• 5 – 7% Earnings per diluted share
• 6 – 8% Dividend
• ~3% Operations & maintenance expenses
$3 billion in total capital investments
• ~65 – 70% for system integrity & replacement projects
FINANCIAL GUIDANCE | 8
2021 Guidance Summary
Initiated Jan. 19, 2021
• Net income range of $198 ‒ $210 DILUTED EPS & NET INCOME
million
$3.80**
• EPS range of $3.68 ‒ $3.92 per $3.68
diluted share $3.51
• Estimated average rate base* of $3.25
$4.23 billion $3.08 $204**
$196
– Includes $540 million in capital investments $187
$172
• Assumes diluted shares outstanding $163
of 53.7 million Diluted EPS Net Income (Millions)
* For definition of average rate base, see Appendix
2017 2018 2019 2020 2021G
** Represents midpoint of guidance range as of Jan. 19, 2021
FINANCIAL GUIDANCE | 9
Growing Dividends
Building Shareholder Value
Quarterly Dividend* DIVIDENDS & PAYOUT RATIO
• 58 cents per share in 2021 $2.32*
$2.16
$2.00
$1.84
Target annual payout ratio $1.68
61%**
59%
• 55 – 65% of net income 57% 57%
55%
2017 2018 2019 2020 2021G
7.4% increase over 2020
* Subject to board approval
** Represents midpoint of guidance range as of Jan. 19, 2021
FINANCIAL GUIDANCE | 10Financing Requirements
Before Impact of February 2021 Winter Weather Event
$665 $665
Dividends and capital investments
primarily funded by cash flow from Financing
Financing
requirements
requirements
operations $174
$210
Capital
expenditures and
(MILLIONS)
asset removal
costs
~$1 billion net financing needs Cash flow from $540**
operations*
through 2025 $455
• ~30% expected to be equity
– ATM program established February 2020 Dividends
$125
2021 Sources 2021 Uses
* Before changes in working capital. See non-GAAP information in Appendix.
** Based on midpoint of 2021 capital guidance range.
FINANCIAL GUIDANCE | 11Return on Equity
Before Impact of February 2021 Winter Weather Event
Continue to minimize the gap Earned ROE
between allowed and actual returns 8.6%
8.1% 8.3% 8.1%*
7.9%
Authorized ROE by state:
• Oklahoma ‒ 9% to 10% band, with a 9.5%
midpoint
• Texas ‒ ~ 9.5% weighted average
• Kansas ‒ Not stated due to black box
settlement; KGS estimates ROE embedded in 2017 2018 2019 2020 2021G
GSRS pre-tax carrying charge is ~ 9.3% * Reflects the midpoint of earnings guidance and estimated average rate base
FINANCIAL GUIDANCE | 12CAPITAL INVESTMENTS & RATE BASE
Well-Defined Capital Investment Plan
CAPITAL INVESTMENTS 2021G CAPITAL INVESTMENTS BY STATE
(MILLIONS) (MILLIONS)
~$540
$515 $19
$470 $20
$442
$418 $21 $151
$26 $135
$32 $110
Kansas
$80
$99 $135
$360 $370 Texas
$339
$306 $317 $201
$191 $201
$178
$151 $158
Oklahoma
$204
2017 2018 2019 2020 2021G
System Integrity Customer Growth Other/IT Depreciation
Note: Capital investments include capital expenditures and asset removal costs. Total amounts include accruals. 2020 depreciation includes $3 million of unallocated expenses
Investing ~70% of capital in system integrity and replacement projects;
~90% subject to an annual filing
CAPITAL INVESTMENTS & RATE BASE | 14Capital Expenditures with Asset Removal Costs
KANSAS OKLAHOMA TEXAS
2021: 1.9X DEPRECIATION 2021: 2.5X DEPRECIATION 2021: 4.2X DEPRECIATION
$198 $204 $201
$191 $188
$180
$173
$156
$135 $136
$123 $126 $123 $129 $122
(MILLIONS)
$76 $81
$68 $72 $69 $74
$64 $67
$50 $52 $44 $48
$34 $37 $40
2017 2018 2019 2020 2021G 2017 2018 2019 2020 2021G 2017 2018 2019 2020 2021G
Depreciation
Note: Capital expenditures include accruals
CAPITAL INVESTMENTS & RATE BASE | 15Rate Base Growth
AVERAGE RATE BASE* 2021 ESTIMATED AVERAGE RATE BASE*
(BILLIONS) TOTAL: $4.23 BILLION
$4.23
$3.91
$3.62
$3.18 $3.36
$1.16 billion
$1.32 billion
$1.75 billion
2017 2018 2019 2020 2021G Kansas Oklahoma Texas
* For definition of average rate base, see Appendix
Expected 8% growth from 2020 to 2021
CAPITAL INVESTMENTS & RATE BASE | 16REGULATORY TIMELINE
Filing Timeline
Oklahoma & Kansas
General rate case application filing on or before June 30, 2021,
with new rates effective early 2022, if applicable
2020 2021 2022 2023 2024 2025
PBRC filing approved July 2020, PBRC filing in March 2023 PBRC filing in March 2024
$9.7 million increase; new rates
effective June 2020
2020 2021 2022 2023 2024 2025
$7.5 million GSRS approved, GSRS filing annually in August; rate cases as needed
with new rates effective
December 2020
REGULATORY TIMELINE | 18Texas – 2021
Central-Gulf Service Area Borger /
Skellytown
• $10.7 million GRIP filed in February 2021; new rates
expected to be effective in the third quarter 2021
North
Texas
West Texas (El Paso)
West Texas Service Area
• GRIP expected to be filed March 2021 Central-
Gulf
Central-Gulf
(Austin)
Remainder of Texas
Rio
• Annual COSA or GRIP filings Grande
• Rate cases as needed Valley
REGULATORY TIMELINE | 19APPENDIX
COVID-19 Update
EMPLOYEES CUSTOMERS
• COVID-19 related employee absences have not • Currently, customer disconnections temporarily
significantly impacted operations suspended in OK, KS and TX
• Cross-functional task force supporting COVID-19 • In 2020, ONE Gas experienced higher bad debt
response expense, as well as reduced revenues from
• ~50% of employees working remotely lower late payment, reconnect and collection
• Following established safety protocols using fees
guidelines from CDC, OSHA and third-party • ONE Gas Foundation made $428,000 in
subject matter experts donations to organizations providing relief to
communities
REGULATORY INCREMENTAL EXPENSES
• Accounting orders received for deferral of • In 2020, experienced an increase in expenses
COVID-19 related expenses, including bad debts related to pandemic response, offset partially by
and certain lost revenues reduced travel and employee training expenses
• No regulatory assets recorded as of Dec. 31,
2020 or assumed in 2021
APPENDIX | 21Authorized Rate Base
KANSAS1 OKLAHOMA2 $1,616 TEXAS2
3 $1,475
$1,407
$1,202 $1,257
$1,133
$1,033 $1,068 $986
$1,047
$925 $947
$895
$822
$745
(MILLIONS)
2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020
1 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.
2 Reflects authorized rate base as of Dec. 31, 2020. These amounts are not necessarily indicative of current or future rate bases.
3 Reflects the 2018 PBRC filing, approved in January 2019.
APPENDIX | 22Rate Base Definition
Authorized Rate Base
$3.80 billion (as of Dec. 31, 2020)
• Includes capital investments authorized in most recent
rate cases and interim filings
• Excludes any capital investments since last approved
rate cases or filings
2021 Estimated Average Rate Base
$4.23 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
APPENDIX | 23Non-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 investment
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 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, this calculation may not be comparable with similarly titled measures of other companies.
A reconciliation of cash flow from operations before changes in working capital to the most directly
comparable GAAP measure is included in this presentation.
APPENDIX | 24Non-GAAP Reconciliation
Cash Flow From Operations Before Changes in Working Capital
2021
(MILLIONS)
GUIDANCE*
Net Income $ 204
Depreciation and amortization 206
Deferred taxes 35
Other 10
Cash flow from operations before changes in working capital $ 455
* Amounts shown are estimated midpoints as contemplated in 2021 guidance issued on Jan. 19, 2021
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