10-Q 1 ogs-20220930.htm 10-Q ogs-20220930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549


FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2022.
OR
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from __________ to __________.

Commission file number  001-36108

ONE Gas, Inc.
(Exact name of registrant as specified in its charter)
Oklahoma46-3561936
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
  
15 East Fifth Street
Tulsa,OK74103
(Address of principal
executive offices)
(Zip Code)

Registrant’s telephone number, including area code   (918) 947-7000

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of exchange on which registered
Common Stock, par value $0.01 per shareOGSNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes        No  

On October 25, 2022, the Company had 54,141,036 shares of common stock outstanding.





























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ONE Gas, Inc.
TABLE OF CONTENTS
Part I.
Financial InformationPage No.
Item 1.
Consolidated Financial Statements (Unaudited)
 
Consolidated Statements of Income - Three and Nine Months Ended September 30, 2022 and 2021
 
Consolidated Statements of Comprehensive Income - Three and Nine Months Ended September 30, 2022 and 2021
 
Consolidated Balance Sheets - September 30, 2022 and December 31, 2021
 
Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2022 and 2021
 
Consolidated Statements of Equity - Three and Nine Months Ended September 30, 2022 and 2021
 Notes to Consolidated Financial Statements
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Item 4.
Controls and Procedures
Part II.
Other Information
Item 1.
Legal Proceedings
Item 1A.
Risk Factors
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.
Defaults Upon Senior Securities
Item 4.
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
Signature
 

As used in this Quarterly Report, references to “we,” “our,” “us” or the “Company” refer to ONE Gas, Inc., an Oklahoma corporation, and its predecessors and subsidiaries, unless the context indicates otherwise.

The statements in this Quarterly Report that are not historical information, including statements concerning plans and objectives of management for future operations, economic performance or related assumptions, are forward-looking statements. Forward-looking statements may include words such as “will,” “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. Although we believe that our expectations regarding future events are based on reasonable assumptions, we can give no assurance that such expectations and assumptions will be achieved. Important factors that could cause actual results to differ materially from those in the forward-looking statements are described under Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Forward-Looking Statements,” and Part II, Item 1A, “Risk Factors” in this Quarterly Report and under Part I, Item IA, “Risk Factors,” in our Annual Report.

3


AVAILABLE INFORMATION

We make available, free of charge, on our website (www.onegas.com) our Annual Reports, Quarterly Reports, Current Reports on Form 8-K, amendments to those reports filed or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act and reports of holdings of our securities filed by our officers and directors under Section 16 of the Exchange Act as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the SEC, which also makes these materials available on its website (www.sec.gov). Our Code of Business Conduct and Ethics, Corporate Governance Guidelines, Certificate of Incorporation, bylaws, the written charters of our Audit Committee, Executive Compensation Committee, Corporate Governance Committee and Executive Committee and our ESG Report are also available on our website, and copies of these documents are available upon request.

In addition to filings with the SEC and materials posted on our website, we also use social media platforms as channels of information distribution to reach public investors. Information contained on our website and posted on or disseminated through our social media accounts is not incorporated by reference into this report.

4


GLOSSARY - The abbreviations, acronyms and industry terminology used in this Quarterly Report are defined as follows:
AAOAccounting Authority Order
ADITAccumulated deferred income taxes
Annual ReportAnnual Report on Form 10-K for the year ended December 31, 2021
ASCAccounting Standards Codification
ASUAccounting Standards Update
BcfBillion cubic feet
CAAFederal Clean Air Act, as amended
CERCLAFederal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended
CISACybersecurity, & Infrastructure Security Agency
Clean Water ActFederal Water Pollution Control Amendments of 1972, as amended
COSACost-of-Service Adjustment
COVID-19Coronavirus Disease 2019
EDITExcess accumulated deferred income taxes resulting from a change in enacted tax rates
EPAUnited States Environmental Protection Agency
EPSEarnings per share
ESGEnvironmental, social and governance
Exchange ActSecurities Exchange Act of 1934, as amended
FASBFinancial Accounting Standards Board
GAAPAccounting principles generally accepted in the United States of America
GRIPGas Reliability Infrastructure Program
GSRSGas System Reliability Surcharge
HCA(s)High consequence area(s)
Heating Degree Day or HDD
A measure designed to reflect the demand for energy needed for heating based on the extent to which the daily average temperature falls below a reference temperature for which no heating is required, usually 65 degrees Fahrenheit
IRA of 2022Inflation Reduction Act of 2022
KCCKansas Corporation Commission
KDHEKansas Department of Health and Environment
KGSS-IKansas Gas Service Securitization I, L.L.C.
LDCLocal distribution company
MAOP(s)Maximum allowable operating pressure(s)
MGPManufactured gas plant
MMcfMillion cubic feet
Moody’sMoody’s Investors Service, Inc.
NPRMNotice of Proposed Rulemaking
NYSENew York Stock Exchange
OCCOklahoma Corporation Commission
ODFAOklahoma Development Finance Authority
ONE GasONE Gas, Inc.
ONE Gas 2021 Term Loan FacilityONE Gas’ $2.5 billion two-year unsecured term loan facility, dated February 22, 2021, which terminated on March 11, 2021
ONE Gas 364-day Credit AgreementONE Gas’ $250 million 364-day revolving credit agreement, dated April 7, 2020, which terminated on March 16, 2021
ONE Gas Credit AgreementONE Gas’ $1.0 billion revolving credit agreement, as amended
PBRCPerformance-Based Rate Change
PHMSAUnited States Department of Transportation Pipeline and Hazardous Materials Safety Administration
PIPES ActProtecting Our Infrastructure of Pipelines and Enhancing Safety (PIPES) Act of 2020
Quarterly Report(s)Quarterly Report(s) on Form 10-Q
RNGRenewable natural gas
RRC
Railroad Commission of Texas
S&PStandard & Poor’s Ratings Services
SECSecurities and Exchange Commission
Securities ActSecurities Act of 1933, as amended
Senior Notes
ONE Gas’ registered notes consisting of $250 million of 0.85 percent senior notes due March 2023, $300 million of 3.61 percent senior notes due February 2024, $550 million of 1.10 percent senior notes due March 2024, $300 million of 2.00 percent senior notes due May 2030, $300 million of 4.25 percent senior notes due 2032, $600 million of 4.658 percent senior notes due February 2044 and $400 million of 4.50 percent notes due November 2048
SOFRSecured Overnight Financing Rate administered by the Federal Reserve Bank of New York
TCEQTexas Commission on Environmental Quality
TPFATexas Public Finance Authority
TSATransportation Security Administration
WNAWeather normalization adjustment(s)
XBRLeXtensible Business Reporting Language
5


PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

ONE Gas, Inc.  
CONSOLIDATED STATEMENTS OF INCOME  
Three Months EndedNine Months Ended
 September 30,September 30,
(Unaudited)
2022202120222021
(Thousands of dollars, except per share amounts)
Total revenues$359,363 $273,923 $1,759,797 $1,214,862 
Cost of natural gas126,197 59,399 954,394 467,169 
Operating expenses
Operations and maintenance113,832 105,732 339,506 320,152 
Depreciation and amortization55,234 51,150 167,414 154,288 
General taxes17,048 15,835 52,105 49,999 
Total operating expenses186,114 172,717 559,025 524,439 
Operating income47,052 41,807 246,378 223,254 
Other income (expense), net793 (1,805)(7,335)(1,758)
Interest expense, net(19,551)(15,392)(51,466)(45,828)
Income before income taxes28,294 24,610 187,577 175,668 
Income taxes(4,593)(4,357)(32,867)(29,746)
Net income$23,701 $20,253 $154,710 $145,922 
Earnings per share
Basic$0.44 $0.38 $2.86 $2.73 
Diluted$0.44 $0.38 $2.85 $2.72 
Average shares (thousands)
Basic54,310 53,710 54,164 53,516 
Diluted54,482 53,793 54,282 53,618 
Dividends declared per share of stock$0.62 $0.58 $1.86 $1.74 
See accompanying Notes to Consolidated Financial Statements.
6


ONE Gas, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 
 Three Months EndedNine Months Ended
 September 30,September 30,
(Unaudited)
2022202120222021
 
(Thousands of dollars)
Net income$23,701 $20,253 $154,710 $145,922 
Other comprehensive income, net of tax    
Change in pension and other postemployment benefit plan liability, net of tax of $(4), $(91), $(33) and $(273), respectively
12 300 111 899 
Total other comprehensive income, net of tax12 300 111 899 
Comprehensive income$23,713 $20,553 $154,821 $146,821 
See accompanying Notes to Consolidated Financial Statements.

7


ONE Gas, Inc.  
CONSOLIDATED BALANCE SHEETS  
 September 30,December 31,
(Unaudited)
20222021
Assets
(Thousands of dollars)
Property, plant and equipment  
Property, plant and equipment$7,647,792 $7,274,268 
Accumulated depreciation and amortization2,172,271 2,083,433 
Net property, plant and equipment5,475,521 5,190,835 
Current assets  
Cash and cash equivalents10,366 8,852 
Accounts receivable, net192,741 341,756 
Materials and supplies66,966 54,892 
Natural gas in storage343,377 179,646 
Regulatory assets316,131 1,611,676 
Other current assets28,845 27,742 
Total current assets958,426 2,224,564 
Goodwill and other assets  
Regulatory assets624,484 724,862 
Goodwill157,953 157,953 
Other assets105,125 103,906 
Total goodwill and other assets887,562 986,721 
Total assets$7,321,509 $8,402,120 
See accompanying Notes to Consolidated Financial Statements.
8


ONE Gas, Inc.  
CONSOLIDATED BALANCE SHEETS  
(Continued)
 September 30,December 31,
(Unaudited)
20222021
Equity and Liabilities
(Thousands of dollars)
Equity and long-term debt
Common stock, $0.01 par value:
authorized 250,000,000 shares; issued and outstanding 54,137,925 shares at September 30, 2022; issued and outstanding 53,633,210 shares at December 31, 2021
$541 $536 
Paid-in capital1,833,480 1,790,362 
Retained earnings618,669 565,161 
Accumulated other comprehensive loss(6,416)(6,527)
   Total equity2,446,274 2,349,532 
Long-term debt, excluding current maturities and net of issuance costs of $14,520 and $12,418, respectively
2,429,053 3,683,378 
Total equity and long-term debt4,875,327 6,032,910 
Current liabilities  
Current maturities of long-term debt250,012 11 
Short-term debt423,400 494,000 
Accounts payable191,117 258,554 
Accrued taxes other than income73,387 67,035 
Regulatory liabilities38,171 8,090 
Customer deposits62,005 62,454 
Other current liabilities66,572 90,349 
Total current liabilities1,104,664 980,493 
Deferred credits and other liabilities  
Deferred income taxes690,146 695,284 
Regulatory liabilities536,612 552,928 
Employee benefit obligations22,151 35,226 
Other deferred credits92,609 105,279 
Total deferred credits and other liabilities1,341,518 1,388,717 
Commitments and contingencies
Total liabilities and equity$7,321,509 $8,402,120 
See accompanying Notes to Consolidated Financial Statements.




















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10


ONE Gas, Inc.  
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
(Unaudited)
20222021
 
(Thousands of dollars)
Operating activities  
Net income$154,710 $145,922 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization167,414 154,288 
Deferred income taxes(21,498)29,224 
Share-based compensation expense8,286 8,076 
Provision for doubtful accounts3,885 8,128 
Proceeds from securitization of winter weather event costs1,330,582  
Changes in assets and liabilities:
Accounts receivable149,533 166,474 
Materials and supplies(12,074)128 
Natural gas in storage(163,731)(72,832)
Asset removal costs(34,386)(35,195)
Accounts payable(84,404)(17,244)
Accrued taxes other than income6,352 5,574 
Customer deposits(449)(8,595)
Regulatory assets and liabilities - current16,324 (273,659)
Regulatory assets and liabilities - noncurrent60,650 (1,651,445)
Other assets and liabilities - current(23,051)(10,537)
Other assets and liabilities - noncurrent(2,317)(8,884)
Cash provided by (used in) operating activities1,555,826 (1,560,577)
Investing activities  
Capital expenditures(412,519)(347,701)
Other investing expenditures(2,419)(3,374)
Other investing receipts2,695 1,676 
Cash used in investing activities(412,243)(349,399)
Financing activities  
Borrowings (repayments) on short-term debt, net(70,600)(82,225)
Issuance of debt, net of discounts297,591 2,498,895 
Long-term debt financing costs(2,695)(35,110)
Issuance of common stock37,104 24,104 
Repayment of long-term debt(1,300,000)(400,000)
Dividends paid(100,386)(92,832)
Tax withholdings related to net share settlements of stock compensation(3,083)(4,382)
Cash provided by (used in) financing activities(1,142,069)1,908,450 
Change in cash and cash equivalents1,514 (1,526)
Cash and cash equivalents at beginning of period8,852 7,993 
Cash and cash equivalents at end of period$10,366 $6,467 
See accompanying Notes to Consolidated Financial Statements.

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ONE Gas, Inc. 
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
Common Stock IssuedCommon StockPaid-in Capital
 (Shares)
(Thousands of dollars)
January 1, 202253,633,210 $536 $1,790,362 
Net income   
Other comprehensive income   
Common stock issued and other456,607 5 34,135 
Common stock dividends - $0.62 per share
  274 
March 31, 202254,089,817 $541 $1,824,771 
Net income   
Other comprehensive income   
Common stock issued and other47,400  5,636 
Common stock dividends - $0.62 per share
  271 
June 30, 202254,137,217 $541 $1,830,678 
Net income   
Other comprehensive income   
Common stock issued and other708  2,531 
Common stock dividends - $0.62 per share
  271 
September 30, 202254,137,925 $541 $1,833,480 
January 1, 202153,166,733 $532 $1,756,921 
Net income   
Other comprehensive income   
Common stock issued and other78,278  (1,705)
Common stock dividends - $0.58 per share
  260 
March 31, 202153,245,011 $532 $1,755,476 
Net income   
Other comprehensive income   
Common stock issued and other254,226 3 21,175 
Common stock dividends - $0.58 per share
  260 
June 30, 202153,499,237 $535 $1,776,911 
Net income   
Other comprehensive income   
Common stock issued and other85,089 1 8,324 
Common stock dividends - $0.58 per share
  241 
September 30, 202153,584,326 $536 $1,785,476 
See accompanying Notes to Consolidated Financial Statements.


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ONE Gas, Inc. 
CONSOLIDATED STATEMENTS OF EQUITY
(Continued)
(Unaudited)
Retained EarningsAccumulated Other Comprehensive LossTotal Equity
 
(Thousands of dollars)
January 1, 2022$565,161 $(6,527)$2,349,532 
Net income98,934  98,934 
Other comprehensive income 69 69 
Common stock issued and other  34,140 
Common stock dividends - $0.62 per share
(33,559) (33,285)
March 31, 2022$630,536 $(6,458)$2,449,390 
Net income32,075  32,075 
Other comprehensive income 30 30 
Common stock issued and other  5,636 
Common stock dividends - $0.62 per share
(33,806) (33,535)
June 30, 2022$628,805 $(6,428)$2,453,596 
Net income23,701  23,701 
Other comprehensive income 12 12 
Common stock issued and other  2,531 
Common stock dividends - $0.62 per share
(33,837) (33,566)
September 30, 2022$618,669 $(6,416)$2,446,274 
January 1, 2021$483,635 $(7,777)$2,233,311 
Net income95,575  95,575 
Other comprehensive income 300 300 
Common stock issued and other  (1,705)
Common stock dividends - $0.58 per share
(31,142) (30,882)
March 31, 2021$548,068 $(7,477)$2,296,599 
Net income30,093  30,093 
Other comprehensive income 299 299 
Common stock issued and other  21,178 
Common stock dividends - $0.58 per share
(31,163) (30,903)
June 30, 2021$546,998 $(7,178)$2,317,266 
Net income20,253  20,253 
Other comprehensive income 300 300 
Common stock issued and other  8,325 
Common stock dividends - $0.58 per share
(31,287) (31,046)
September 30, 2021$535,964 $(6,878)$2,315,098 
See accompanying Notes to Consolidated Financial Statements.

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ONE Gas, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Our accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC. These statements also have been prepared in accordance with GAAP and reflect all adjustments that, in our opinion, are necessary for a fair statement of the results for the interim periods presented. All such adjustments are of a normal recurring nature. The 2021 year-end consolidated balance sheet data was derived from audited consolidated financial statements but does not include all disclosures required by GAAP. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes in our Annual Report. Our significant accounting policies are described in Note 1 of our Notes to Consolidated Financial Statements in our Annual Report. Due to the seasonal nature of our business, the results of operations for the nine months ended September 30, 2022, are not necessarily indicative of the results that may be expected for a 12-month period.

We provide natural gas distribution services to our approximately 2.3 million customers through our divisions in Oklahoma, Kansas and Texas through Oklahoma Natural Gas, Kansas Gas Service and Texas Gas Service, respectively. We primarily serve residential, commercial and transportation customers in all three states.

Use of Estimates - The preparation of our consolidated financial statements and related disclosures in accordance with GAAP requires us to make estimates and assumptions with respect to values or conditions that cannot be known with certainty that affect the reported amount of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements. These estimates and assumptions also affect the reported amounts of revenue and expense during the reporting period. Items that may be estimated include, but are not limited to, the economic useful life of assets, fair value of assets and liabilities, provisions for doubtful accounts receivable, unbilled revenues for natural gas delivered but for which meters have not been read, natural gas purchased but for which no invoice has been received, provision for income taxes, including any deferred income tax valuation allowances, the results of litigation and various other recorded or disclosed amounts.

We evaluate these estimates on an ongoing basis using historical experience and other methods we consider reasonable based on the particular circumstances. Nevertheless, actual results may differ significantly from the estimates. Any effects on our financial position or results of operations from revisions to these estimates are recorded in the period when the facts that give rise to the revision become known.

Segments - We operate in one reportable business segment: regulated public utilities that deliver natural gas primarily to residential, commercial and transportation customers. The accounting policies for our segment are the same as those described in Note 1 of our Notes to Consolidated Financial Statements in our Annual Report. We evaluate our financial performance principally on net income. For the three and nine months ended September 30, 2022 and 2021, we had no single external customer from which we received 10 percent or more of our gross revenues.

Property, Plant and Equipment and Asset Removal Costs - Accounts payable for construction work in process and asset removal costs decreased by approximately $4.0 million and $7.5 million for the nine months ended September 30, 2022 and 2021, respectively. Such amounts are not included in capital expenditures or asset removal costs in our consolidated statements of cash flows.

Goodwill Impairment Test – We assess our goodwill for impairment at least annually on July 1, unless events or changes in circumstances indicate an impairment may have occurred before that time. As part of our goodwill impairment test, we may first assess qualitative factors (including macroeconomic conditions, industry and market considerations, cost factors and overall financial performance) to determine whether it is more likely than not that the fair value of our reporting unit is less than its carrying amount. If further testing is necessary or a quantitative test is elected to refresh our recurring qualitative assessments, we perform a quantitative impairment test for goodwill. We did not identify any impairment indicators for our goodwill and determined that no further testing was necessary.

Accounts Receivable - Accounts receivable represent valid claims against nonaffiliated customers for natural gas sold or services rendered, net of allowances for doubtful accounts. We assess the creditworthiness of our customers. Those customers who do not meet minimum standards may be required to provide security, including deposits and other forms of collateral, when appropriate and allowed by our tariffs. With approximately 2.3 million customers across three states, we are not exposed materially to a concentration of credit risk. We maintain an allowance for doubtful accounts based upon factors surrounding the credit risk of customers, historical trends, consideration of the current environment and other information. We recover natural
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gas costs related to accounts written off when they are deemed uncollectible through the purchased-gas cost adjustment mechanisms in each of our jurisdictions. At September 30, 2022 and December 31, 2021, our allowance for doubtful accounts was $15.6 million and $18.7 million, respectively.

Recently Issued Accounting Standards Update - In November 2021, the FASB issued ASU 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance,” which will require disclosure about government assistance in the notes to the financial statements. The amendment requires annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy, including information about the nature of the transactions and the related accounting policy used to account for the transactions, the line items on the balance sheet and income statement that are affected by the transactions and the significant terms and conditions of the transactions, including commitments and contingencies. The amendment became effective for us beginning January 1, 2022. As the guidance is related only to disclosures in the notes to the financial statements, we do not anticipate any impact on our financial position, results of operations or cash flows. See Note 3 for additional discussion regarding our transaction in Oklahoma with the government that is accounted for by applying a grant accounting model by analogy.

2.REVENUE

The following table sets forth our revenues disaggregated by source for the periods indicated:
Three Months EndedNine Months Ended
September 30,September 30,
2022202120222021
(Thousands of dollars)
Natural gas sales to customers$322,444 $240,591 $1,640,893 $1,105,835 
Transportation revenues28,035 25,342 92,350 87,760 
Miscellaneous revenues4,991 4,363 14,615 12,091 
Total revenues from contracts with customers355,470 270,296 1,747,858 1,205,686 
Other revenues - natural gas sales related427 545 2,658 849 
Other revenues 3,466 3,082 9,281 8,327 
Total other revenues3,893 3,627 11,939 9,176 
Total revenues$359,363 $273,923 $1,759,797 $1,214,862 

Accrued unbilled natural gas sales revenues at September 30, 2022 and December 31, 2021, were $79.2 million and $183.2 million, respectively, and are included in accounts receivable on our consolidated balance sheets.

3.    REGULATORY ASSETS AND LIABILITIES

The tables below present a summary of regulatory assets and liabilities, net of amortization, for the periods indicated:
September 30, 2022
CurrentNoncurrentTotal
(Thousands of dollars)
Winter weather event costs$243,232 $342,997 $586,229 
Under-recovered purchased-gas costs28,193  28,193 
Pension and postemployment benefit costs4,010 245,637 249,647 
Reacquired debt costs811 3,528 4,339 
MGP remediation costs98 29,767 29,865 
Ad-valorem tax12,779  12,779 
WNA10,555  10,555 
Customer credit deferrals14,595  14,595 
Other1,858 2,555 4,413 
Total regulatory assets, net of amortization316,131 624,484 940,615 
Income tax rate changes (536,612)(536,612)
Over-recovered purchased-gas costs(38,171) (38,171)
Total regulatory liabilities(38,171)(536,612)(574,783)
Net regulatory assets and liabilities$277,960 $87,872 $365,832 
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December 31, 2021
CurrentNoncurrentTotal
(Thousands of dollars)
Winter weather event costs$1,536,054 $428,023 $1,964,077 
Under-recovered purchased-gas costs31,863  31,863 
Pension and postemployment benefit costs11,507 260,559 272,066 
Reacquired debt costs812 4,070 4,882 
MGP remediation costs98 29,841 29,939 
Ad-valorem tax8,561  8,561 
WNA10,044  10,044 
Customer credit deferrals10,685  10,685 
Other2,052 2,369 4,421 
Total regulatory assets, net of amortization1,611,676 724,862 2,336,538 
Income tax rate changes (552,928)(552,928)
Over-recovered purchased-gas costs(8,090) (8,090)
Total regulatory liabilities(8,090)(552,928)(561,018)
Net regulatory assets and liabilities$1,603,586 $171,934 $1,775,520 

Regulatory assets in our consolidated balance sheets, as authorized by various regulatory authorities, are probable of recovery. Base rates and certain riders are designed to provide a recovery of costs during the period such rates are in effect, but do not generally provide for a return on investment for amounts we have deferred as regulatory assets. All of our regulatory assets are subject to review by the respective regulatory authorities during future regulatory proceedings. We are not aware of any evidence that these costs will not be recoverable through either riders, base rates, or securitization.

Winter weather event costs - In February 2021, the U.S. experienced Winter Storm Uri, a historic winter weather event impacting supply, market pricing and demand for natural gas in a number of states, including our service territories of Kansas, Oklahoma, and Texas. During this time, the governors of Kansas, Oklahoma, and Texas each declared a state of emergency, and certain regulatory agencies issued emergency orders that impacted the utility and natural gas industries, including statewide utility curtailment programs and orders requiring jurisdictional natural gas and electric utilities to do all things possible and necessary to ensure that natural gas and electricity utility services continued to be provided to their customers. Due to the historic nature of this winter weather event, we experienced unforeseeable and unprecedented market pricing for natural gas in our Kansas, Oklahoma, and Texas jurisdictions, which resulted in aggregated natural gas purchases for the month of February 2021 of approximately $2.1 billion.

Oklahoma - Beginning in the first quarter 2021, Oklahoma Natural Gas began deferring to a regulatory asset the extraordinary costs associated with this unprecedented winter weather event, including commodity costs, operational costs and carrying costs in accordance with an order issued by the OCC in March 2021. In April 2021, a bill permitting the state of Oklahoma to pursue securitized financing of extraordinary expenses, such as fuel costs, financing costs and other operational costs incurred by regulated utilities during extreme weather events, was signed into law. This law gives the OCC the authority to approve amounts to be recovered from the issuance of ratepayer-backed securitized bonds by the ODFA.

In April 2021, Oklahoma Natural Gas submitted an initial application requesting a financing order pursuant to the securitization legislation in Oklahoma. On January 25, 2022, the OCC approved the financing order that reflected the terms of a settlement agreement reached in November 2021, which includes an agreement that all extreme gas purchase and extraordinary costs incurred as a result of Winter Storm Uri were reasonable and prudent and a financing order should be issued to recover these costs through securitization. Pursuant to the securitization statute in Oklahoma, the Oklahoma Supreme Court validated that the bond issuance proposed by the ODFA complied with the securitization statute and the laws of Oklahoma in May 2022.

On August 25, 2022, the ODFA completed the issuance of $1.35 billion in ratepayer-backed bonds with varying scheduled final maturities over 30 years, consistent with the OCC order. The bonds are limited and special revenue obligations of the ODFA, payable solely from the securitization bond collateral and are not an obligation of Oklahoma Natural Gas or any of its affiliates.

The proceeds received by Oklahoma Natural Gas from the ODFA were approximately $1.3 billion, which represents the amount of the securitization bonds issued less issuance costs. The receipt of these proceeds represents Oklahoma Natural Gas’ recovery of the approximately $1.3 billion of authorized extraordinary natural gas purchase costs and other operational costs incurred during Winter Storm Uri, as well as carrying costs. GAAP does not provide comprehensive recognition and
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measurement guidance for many forms of government assistance received by business entities. Accordingly, we have accounted for the proceeds received from the ODFA by analogy to International Accounting Standards No. 20, “Accounting for Government Grants and Disclosure of Government Assistance” consistent with a grant related to income. The proceeds received and the corresponding recognition of the deferred regulatory asset have been reflected in cost of natural gas in our Consolidated Statements of Income. As the proceeds reflect the recovery of our winter weather event regulatory asset, there was no material impact to earnings. Beginning September 1, 2022, Oklahoma Natural Gas will act as a servicer, with responsibility for collecting the securitization charges from Oklahoma customers that are then submitted to the ODFA to repay the securitization bonds. The collection and remittance of these funds on behalf of the ODFA are recorded in other current liabilities in our consolidated balance sheets.

Kansas - In March 2021, the KCC issued an order adopting the KCC staff’s recommendation to open company-specific dockets to accept each utility’s filing of financial impact compliance reports and permit the KCC staff to conduct a review of the utility’s compliance report and its actions during Winter Storm Uri. In April 2021, a bill permitting the utilities to pursue securitization to finance extraordinary expenses, such as fuel costs incurred during extreme weather events, was signed into law by the Kansas governor. The law gives the KCC the authority to oversee and authorize the issuance of ratepayer-backed securitized bonds issued by a public utility.

In May 2021, Kansas Gas Service filed a motion in its company-specific docket opened by the KCC, requesting a limited waiver of the penalty provisions of its tariff to eliminate the multipliers in the penalty calculation when calculating the penalties to assess on marketers and individually-balanced transportation customers for their unauthorized natural gas usage during Winter Storm Uri. In October 2021, a nonunanimous settlement agreement was filed with the KCC to reach a resolution on these penalties. Prior to a hearing on the amended settlement in January 2022, all parties reached a unanimous settlement, which was filed with a motion requesting approval of the unanimous settlement. Under the terms of the unanimous settlement, the carrying charge on assessed penalties was reduced to two percent, consistent with the nonunanimous agreement in the financial docket. On March 3, 2022, the KCC issued an order approving the settlement which modified the penalty provisions of Kansas Gas Service’s tariffs and included a carrying charge of two percent on amounts due to Kansas Gas Service. Amounts collected from these penalties will reduce the regulatory asset for the winter weather event, up to $52.6 million. Through September 30, 2022, we have collected $49.4 million of these penalties.

In July 2021, Kansas Gas Service submitted its financial plan to the KCC as required by the company-specific docket opened by the KCC in March 2021. The plan includes a proposal for a newly formed, bankruptcy remote subsidiary of the Company to issue securitized bonds to recover the extraordinary costs resulting from Winter Storm Uri from Kansas Gas Service’s customers. On February 8, 2022, the KCC issued an order approving a unanimous settlement agreement that allows Kansas Gas Service to recover extraordinary costs, net of any penalties recovered from marketers and individually-balanced transportation customers, plus carrying costs, by seeking a financing order from the KCC for the issuance of securitized utility tariff bonds.

On March 31, 2022, Kansas Gas Service submitted its application for a financing order to the KCC as contemplated by the unanimous settlement agreement, requesting approval to issue securitized bonds to recover extraordinary costs resulting from Winter Storm Uri and flexibility to recover the costs. On July 14, 2022, Kansas Gas Service, the KCC Staff and the Citizens’ Utility Ratepayer Board reached a settlement agreement for the issuance of a financing order allowing a newly formed, bankruptcy remote subsidiary of the Company to issue securitized utility tariff bonds in the amount of approximately $328.0 million plus issuance fees. The final amount to be securitized will be provided in the final issuance advice letter. The agreement provides for the issuance of bonds with a scheduled final maturity of between 7 and 10 years with flexibility within that range, if necessary, to achieve a AAA rating. On August 18, 2022, the KCC issued an order approving the agreement and also issued a financing order.

As part of the settlement agreement, we created KGSS-I, a special-purpose, wholly-owned subsidiary of ONE Gas, and filed a registration statement with the SEC, for the purpose of issuing securitized bonds. After the SEC declares the registration statement effective, KGSS-I expects to begin the process to issue the bonds.

At September 30, 2022, Kansas Gas Service has deferred approximately $339.6 million in extraordinary costs, net of penalties billed, attributable to Winter Storm Uri. The amount deferred at September 30, 2022, in excess of the amount securitized, primarily includes accrued costs for natural gas purchases that have not been paid as we work with our suppliers to resolve discrepancies in invoiced amounts. These amounts will be recovered through our purchased gas cost mechanisms or other regulatory filings and may be adjusted as the differences are resolved.

Texas - Pursuant to securitization legislation enacted in Texas as a result of Winter Storm Uri and a June 2021 RRC Notice to Gas Utilities, Texas Gas Service submitted an application to the RRC on July 30, 2021, for an order authorizing the amount of extraordinary costs for recovery and other such specifications necessary for the issuance of securitized bonds.
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In November 2021, the RRC approved a unanimous settlement agreement between Texas Gas Service, the other natural gas utilities in Texas participating in the securitization process, the staff of the RRC and all intervenors. The settlement agreement provides that all costs incurred by Texas Gas Service to purchase natural gas during Winter Storm Uri were reasonable, necessary and prudently incurred.

On February 8, 2022, the RRC issued a single financing order for Texas Gas Service and other natural gas utilities in Texas participating in the securitization process, which included a determination that the approved costs will be collected from customers over a period of not more than 30 years. The TPFA formed the Texas Natural Gas Securitization Finance Corporation, a new independent public authority, that will issue the securitized bonds, which are expected to be issued in the fourth quarter of 2022. At September 30, 2022, Texas Gas Service has deferred approximately $246.7 million in extraordinary costs associated with Winter Storm Uri, which includes $47.8 million attributable to the West Texas service area. Pursuant to the approved settlement order, in January 2022, Texas Gas Service began collecting the extraordinary costs, including carrying costs, associated with Winter Storm Uri attributable to the West Texas service area from those customers.

General - In accordance with these regulatory orders associated with the winter weather event, our regulatory asset totaled approximately $586.2 million in extraordinary costs for natural gas purchases, related financing and carrying costs and other operational costs that have not been recovered at September 30, 2022. The amounts deferred include invoiced costs for natural gas purchases that have not been paid as we work with our suppliers to resolve discrepancies in invoiced amounts. The amounts deferred may be adjusted as the differences are resolved. In addition, as a result of Winter Storm Uri, we were assessed penalties as a result of over- or under-deliveries of natural gas during periods that operational flow orders were imposed on us. Additionally, Kansas Gas Service assessed penalties under the modified penalty provisions of its tariff on marketers and individually-balanced transportation customers, or their agents, as approved by the KCC in March 2022. Amounts recorded reflect management’s best estimate of the amounts we may pay or receive and may be adjusted in future periods as the disposition of disputed invoices and the collectability of such penalties is determined. As these amounts are related to the extraordinary gas purchase costs associated with Winter Storm Uri, which are deferred, future adjustments to the amounts deferred are not expected to have a material impact on earnings.

Other regulatory assets and liabilities - Purchased-gas costs represent the natural gas costs that have been over- or under- recovered from customers through the purchased-gas cost adjustment mechanisms, and includes natural gas utilized in our operations and premiums paid and any cash settlements received from our purchased natural gas call options.

The OCC, KCC and regulatory authorities in Texas have approved the recovery of pension costs and other postemployment benefits costs through rates for Oklahoma Natural Gas, Kansas Gas Service and Texas Gas Service, respectively. The costs recovered through rates are based on the net periodic benefit cost for defined benefit pension and other postemployment costs. Differences, if any, between the net periodic benefit cost, net of deferrals, and the amount recovered through rates are reflected in earnings. We historically have recovered defined benefit pension and other postemployment benefit costs through rates. We believe it is probable that regulators will continue to include the net periodic pension and other postemployment benefit costs in our cost of service.

We amortize reacquired debt costs in accordance with the accounting guidelines prescribed by the OCC and KCC.

Weather normalization represents revenue over- or under- recovered through the WNA rider in Kansas. This amount is deferred as a regulatory asset or liability for a 12-month period. Kansas Gas Service then applies an adjustment to the customers’ bills for 12 months to refund the over-collected revenue or bill the under-collected revenue.

Ad-valorem tax represents the difference in Kansas Gas Service’s taxes incurred each year above or below the amount approved in base rates. This difference is deferred as a regulatory asset or liability for a 12-month period. Kansas Gas Service then applies an adjustment to customers’ bills to refund the over-collected revenue or bill the under-collected revenue over the subsequent 12 months.

The customer credit deferrals and the noncurrent regulatory liability for income tax rate changes represents deferral of the effects of enacted federal and state income tax rate changes on our ADIT and the effects of these changes on our rates. See Note 10 for additional information regarding the impact of income tax rate changes.

See Note 12 and “Environmental, Safety and Regulatory Matters” in Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information regarding our regulatory assets for MGP remediation costs.

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We have received accounting orders in each of our jurisdictions authorizing us to accumulate and defer for regulatory purposes certain incremental costs incurred, including bad debt expenses, and certain lost revenues, net of offsetting expense reductions associated with COVID-19. Pursuant to these orders, the recovery of any net incremental costs and lost revenues will be determined in future rate cases or alternative rate recovery filings in each jurisdiction. For financial reporting purposes, any amounts deferred as a regulatory asset for future recovery under these accounting orders must be probable of recovery. At September 30, 2022, no regulatory assets have been recorded. In Oklahoma, the test period for our recently completed rate case included the impacts of COVID-19 on our cost of service in determining new rates that became effective in November 2021. In addition, annual PBRC filings, including the PBRC filing made in March 2022, allow us to include any impacts from COVID-19 in our test period cost of service to determine the impact on our rates. In Kansas and Texas, we continue to evaluate the impacts of COVID-19 on our business and will record regulatory assets for financial reporting purposes at such time as recovery is deemed probable.

Recoveries of regulatory assets through rates were not material for the three months ended September 30, 2022 and 2021, respectively. Recovery through rates resulted in amortization of regulatory assets of approximately $6.9 million and $4.4 million for the nine months ended September 30, 2022 and 2021, respectively.

4.CREDIT FACILITY AND SHORT-TERM DEBT

On March 16, 2022, we entered into the first amendment to the second amended and restated ONE Gas Credit Agreement, which was previously amended and restated on March 16, 2021. The amendment extends the maturity date of the ONE Gas Credit Agreement to March 16, 2027, from March 16, 2026, and amends the ONE Gas Credit Agreement to provide that we may extend the maturity date, subject to the lenders’ consent, by one year two additional times. The amendment also changes the benchmark rate defined in the ONE Gas Credit Agreement to SOFR. All other material terms and conditions of the ONE Gas Credit Agreement remain in full force and effect.

The ONE Gas Credit Agreement provides for a $1.0 billion revolving unsecured credit facility and includes a $20 million letter of credit subfacility and a $60 million swingline subfacility. We can request an increase in commitments of up to an additional
$500 million upon satisfaction of customary conditions, including receipt of commitments from either new lenders or increased commitments from existing lenders. The ONE Gas Credit Agreement is available to provide liquidity for working capital, capital expenditures, acquisitions and mergers, the issuance of letters of credit and for other general corporate purposes.

The ONE Gas Credit Agreement contains certain financial, operational and legal covenants. Among other things, these covenants include maintaining ONE Gas’ total debt-to-capital ratio of no more than 70 percent at the end of any calendar quarter. At September 30, 2022, our total debt-to-capital ratio was 56 percent and we were in compliance with all covenants under the ONE Gas Credit Agreement. We may reduce the unutilized portion of the ONE Gas Credit Agreement in whole or in part without premium or penalty. The ONE Gas Credit Agreement contains customary events of default. Upon the occurrence of certain events of default, the obligations under the ONE Gas Credit Agreement may be accelerated and the commitments may be terminated.

At September 30, 2022, we had $1.2 million in letters of credit issued and no borrowings under the ONE Gas Credit Agreement, with $998.8 million of remaining credit, which is available to repay any of our commercial paper borrowings.

In June 2021, we increased the size of our commercial paper program to permit the issuance of commercial paper to fund short-term borrowing needs in an aggregate principal amount not to exceed $1.0 billion outstanding at any time. Prior to this increase, our commercial paper program permitted us to issue commercial paper in an aggregate principal amount not to exceed $700 million outstanding at any time. The maturities of the commercial paper vary but may not exceed 270 days from the date of issue. Commercial paper is generally sold at par less a discount representing an interest factor. At September 30, 2022 and December 31, 2021, we had $423.4 million and $494.0 million of commercial paper outstanding with a weighted-average interest rate of 3.53 percent and 0.38 percent, respectively.

In connection with the second amendment and restatement of the ONE Gas Credit Agreement on March 16, 2021, all commitments under our ONE Gas 364-day Credit Agreement, dated as of April 7, 2020, were terminated and all obligations under the ONE Gas 364-day Credit Agreement were paid in full and discharged.

5.LONG-TERM DEBT

Senior Notes - On August 8, 2022, ONE Gas issued $300 million of 4.25 percent senior notes due 2032. The proceeds from the issuance were used to repay amounts outstanding under our commercial paper program and for general corporate purposes.

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In March 2021, we issued $1.0 billion of 0.85 percent senior notes due March 2023, $700 million of 1.10 percent senior notes due March 2024, and $800 million of floating-rate senior notes due March 2023. The net proceeds from the issuance were used for payment of gas purchases and related costs resulting from Winter Storm Uri and general corporate purposes.

In September 2021, we called $400 million of the floating-rate senior notes due March 2023 at par, using a combination of cash on hand and commercial paper. We did not have the right to call these senior notes prior to September 11, 2021.

On August 25, 2022, we called $750 million of the $1.0 billion of 0.85 percent senior notes due March 2023, $150 million of the $700 million of 1.10 percent senior notes due March 2024 and the remaining $400 million of outstanding floating-rate senior notes due March 2023, using the proceeds received from the securitization transaction for Oklahoma Natural Gas. See Note 3 of the Notes to Consolidated Financial Statements in this Quarterly Report for additional discussion of the securitization transaction. We expect to use the proceeds from the issuance of securitized bonds in Kansas and Texas, as discussed in Note 3, to call the outstanding senior notes due March 2023 and a portion of the senior notes due March 2024.

The indenture governing our Senior Notes includes an event of default upon the acceleration of other indebtedness of $100 million or more. Such events of default would entitle the trustee or the holders of 25 percent in aggregate principal amount of the outstanding Senior Notes to declare those Senior Notes immediately due and payable in full.

ONE Gas 2021 Term Loan Facility - In February 2021, we entered into the ONE Gas 2021 Term Loan Facility as part of the financing of our natural gas purchases in order to provide sufficient liquidity to satisfy our obligations as a result of Winter Storm Uri. The net proceeds of the March 2021 debt issuance reduced the commitments under the ONE Gas 2021 Term Loan Facility on a dollar-for-dollar basis, and as a result no commitments remained outstanding and the facility was terminated concurrently with the closing of the debt issuance.

6.EQUITY

At-the-Market Equity Program - In February 2020, we initiated an at-the-market equity program by entering into an equity distribution agreement under which we may issue and sell shares of our common stock with an aggregate offering price up to $250 million (including any shares of common stock that may be sold pursuant to the master forward sale confirmation entered into in connection with the equity distribution agreement and the related supplemental confirmations). Sales of common stock are made by means of ordinary brokers’ transactions on the NYSE, in block transactions or as otherwise agreed to between us and the sales agent. We are under no obligation to offer and sell common stock under the program. For the nine months ended September 30, 2022 and 2021, we issued and sold 403,792 shares and 281,124 shares of our common stock for $35.0 million and $21.4 million, generating proceeds, net of issuance costs, of $34.7 million and $21.1 million, respectively.

For the nine months ended September 30, 2022, we executed forward sale agreements for shares of our common stock. No shares of common stock have been settled under these forward sale agreements. Had we settled all shares under the forward agreements as of September 30, 2022, we would have generated net proceeds of $93.9 million, as detailed below:

MaturityShares AvailableNet Proceeds Available
(in thousands)
Forward Price
September 29, 2023570,335 $45,890 $80.46 
January 2, 2024591,736 48,052 81.21 
Total1,162,071 $93,942 $80.84 

At September 30, 2022, we had $85.1 million of equity available for issuance under the program.

Dividends Declared - In October 2022, we declared a dividend of $0.62 per share ($2.48 per share on an annualized basis) for shareholders of record as of November 15, 2022, payable on December 1, 2022.

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7.ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table sets forth the effect of reclassifications from accumulated other comprehensive loss in our consolidated statements of income for the periods indicated:
Three Months EndedNine Months EndedAffected Line Item in the
Details About Accumulated OtherSeptember 30,September 30,Consolidated Statements
Comprehensive Loss Components2022202120222021of Income
(Thousands of dollars)
Pension and other postemployment benefit plan obligations (a)
Amortization of net loss$2,278 $11,474 $14,731 $34,422 
Amortization of unrecognized prior service cost (credit)103 (70)185 (210)
2,381 11,404 14,916 34,212 
Regulatory adjustments (b)(2,365)(11,013)(14,772)(33,040)
16 391 144 1,172 Income before income taxes
(4)(91)(33)(273)Income tax expense
Total reclassifications for the period$12 $300 $111