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)	July 29, 2019	
(Date of earliest event reported)	July 29, 2019	

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. []

1

The information disclosed in Items 2.02 and 7.01, including Exhibit 99.1 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	
 	 	 	
 	 	On July 29, 2019, we announced our results of operations for the second quarter ended June 30, 2019. The news release is furnished as Exhibit 99.1 and incorporated by reference herein.

Item 7.01	 	Regulation FD Disclosure	
 	 	 	
 	 	On July 29, 2019, we announced our results of operations for the second quarter ended June 30, 2019 and updated our 2019 financial guidance. The news release is furnished as Exhibit 99.1 and is incorporated by reference herein.

 	 	 	
Item 9.01	 	Financial Statements and Exhibits	
 	 	 	
 	(d)	Exhibits	
 	 	 	
Exhibit
Number	Description	
 	 	 	
99.1	 	News release issued by ONE Gas, Inc. dated July 29, 2019.	

2

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:	July 29, 2019	By:	/s/ Caron A. Lawhorn	
 	 	 	Caron A. Lawhorn
Senior Vice President and
Chief Financial Officer	

3

Exhibit 99.1

	
				
July 29, 2019	 	Analyst Contact:	Brandon Lohse
918-947-7472	
 	 	Media Contact:	Leah Harper
918-947-7123	
ONE Gas Announces Second-quarter 2019 Financial Results;
Updates 2019 Financial Guidance

TULSA, Okla. - July 29, 2019 - ONE Gas, Inc. (NYSE: OGS) today announced its second-quarter 2019 financial results and updated its 2019 financial guidance.

Highlights include:

•	Second-quarter 2019 net income was $24.5 million, or $0.46 per diluted share, compared with $20.4 million, or $0.39 per diluted share, in the second quarter 2018;	
		
•	Year-to-date 2019 net income was $118.1 million, or $2.22 per diluted share, compared with $111.3 million, or $2.10 per diluted share, in the same period last year;	
		
•	Updated 2019 net income guidance to the range of $180 million to $190 million, compared with the previous guidance range of $174 million to $190 million;	
		
•	Actual heating degree days across the company's service areas were 581 in the second quarter 2019, 9% warmer than normal and 32% warmer than the same period last year; and	
		
•	A quarterly dividend of $0.50 per share, or $2.00 per share on an annualized basis, was declared on July 22, 2019, payable Sept. 3, 2019, to shareholders of record at the close of business on Aug. 12, 2019.	

"In the second quarter, we continued to see the positive impact of new rates on our net margin as a result of capital expenditures on system integrity and expansion, somewhat offset by overall warmer weather,” said Pierce H. Norton II, president and chief executive officer. "In addition, operating costs were slightly lower than the same period last year, as we maintain our focus on managing expenses while safely and reliably serving our customers."

SECOND-QUARTER 2019 FINANCIAL PERFORMANCE

ONE Gas reported operating income of $46.9 million in the second quarter 2019, compared with $41.0 million in the second quarter 2018.

Net margin, which is comprised of total revenues less cost of natural gas, increased by $9.6 million compared with second quarter 2018, which primarily reflects:

•	A $10.4 million increase from new rates; and	
		
•	A $1.5 million increase attributed to net residential customer growth in Oklahoma and Texas; offset by	

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ONE Gas Announces Second-quarter 2019 Financial Results;
Updates 2019 Financial Guidance

July 29, 2019

Page 2

•	A $2.0 million decrease due to lower sales volumes, net of weather normalization, primarily in Kansas.	

Second-quarter 2019 operating costs were $116.1 million, compared with $117.6 million in the second quarter 2018, due primarily to a $2.7 million decrease in employee-related expenses.

Depreciation and amortization expense for the second-quarter 2019 was $45.0 million, compared with $39.8 million in the second quarter 2018, due primarily to an increase in depreciation expense from capital investments placed in service, higher depreciation rates in Kansas and an increase in the amortization of the ad-valorem surcharge rider in Kansas.

For the second-quarter 2019, other expense, net, decreased $1.3 million compared with the same period last year, due primarily to earnings on investments associated with nonqualified employee benefit plans, which offset the increase in costs for the plans included in operating costs.

Second-quarter 2019 interest expense increased $3.4 million compared with the same period last year, resulting primarily from the refinancing of the company's $300 million Senior Notes, at a 2.07% interest rate, with $400 million Senior Notes, at a 4.50% interest rate, due November 2048.

Income tax expense for the second-quarter 2019 includes amortization of excess accumulated deferred income taxes (ADIT) of $2.1 million, which is offset in revenues.

Capital expenditures and asset removal costs increased $6.6 million for the second-quarter 2019 compared with the same period last year, due primarily to increased system integrity activities and extending service to new areas.

Key Statistics: More detailed information is listed on page 12 in the tables.

•	Actual heating degree days across the company’s service areas were 581 in the second quarter 2019, 9% warmer than normal and 32% warmer than the same period last year;	
		
•	Actual heating degree days in the Oklahoma service area were 188 in the second quarter 2019, 2% warmer than normal and 44% warmer than the same period last year;	
		
•	Actual heating degree days in the Kansas service area were 342 in the second quarter 2019, 14% warmer than normal and 30% warmer than the same period last year;	
		
•	Actual heating degree days in the Texas service area were 51 in the second quarter 2019, 2% warmer than normal and 46% colder than the same period last year;	
		
•	Residential natural gas sales volumes were 13.4 billion cubic feet (Bcf) in the second quarter 2019, down 14% compared with the same period last year;	
		
•	Total natural gas sales volumes were 18.9 Bcf in the second quarter 2019, down 13% compared with the same period last year;	
		
•	Natural gas transportation volumes were 51.4 Bcf in the second quarter 2019, down 1% compared with the same period last year; and	

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ONE Gas Announces Second-quarter 2019 Financial Results;
Updates 2019 Financial Guidance

July 29, 2019

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•	Total natural gas volumes delivered were 70.3 Bcf in the second quarter 2019, down 4% compared with the same period last year.	

YEAR-TO-DATE 2019 FINANCIAL PERFORMANCE

Operating income for the six-month 2019 period was $174.5 million, compared with $171.3 million for the same period last year.

Net margin increased by $17.5 million compared with the same period last year, which primarily reflects:

•	A $14.3 million increase from new rates in Kansas and Texas;	
		
•	A $2.9 million increase attributed to net residential customer growth in Oklahoma and Texas; and	
		
•	A $1.3 million increase due to higher sales volumes, net of weather normalization, in Texas; offset by	
		
•	A $0.9 million decrease due to a compressed natural gas federal excise tax credit that was enacted in February 2018 and retroactive to 2017.	

Operating costs for the six-month 2019 period were $240.6 million, compared with $236.4 million for the same period last year, which primarily reflects:

•	A $1.9 million increase in legal-related expenses; and	
		
•	A $1.6 million increase in employee-related expenses.	

Depreciation and amortization expense for the six-month 2019 period was $88.8 million, compared with $78.7 million for the same period last year, due primarily to an increase in depreciation expense from capital investments placed in service, higher depreciation rates in Kansas and an increase in the amortization of the ad-valorem surcharge rider in Kansas.

For the six-month 2019 period, other expense, net, decreased $3.9 million compared with the same period last year, due primarily to earnings on investments associated with nonqualified employee benefit plans, which offset the increase in costs for the plans included in operating costs.

Interest expense increased $6.8 million for the six-month 2019 period compared with the same period last year, resulting primarily from the refinancing of the company's $300 million Senior Notes, at a 2.07% interest rate, with $400 million Senior Notes, at a 4.50% interest rate, due November 2048.

Income tax expense for the six-month 2019 period includes amortization of excess ADIT of $8.9 million, which is offset in revenues.

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ONE Gas Announces Second-quarter 2019 Financial Results;
Updates 2019 Financial Guidance

July 29, 2019

Page 4

Capital expenditures and asset removal costs increased $7.0 million for the six-month 2019 period compared with the same period last year, due primarily to increased system integrity activities and extending service to new areas.

The company ended the second quarter 2019 with $11.1 million of cash and cash equivalents, $293.0 million of commercial paper outstanding and $698.8 million of remaining credit available under its $700 million credit facility. The long-term debt-to-capitalization ratio at June 30, 2019, was 38%, and the ratio of total debt-to-capitalization was 43%.

> View earnings tables
 
REGULATORY UPDATE

Oklahoma

In March 2019, Oklahoma Natural Gas filed its third annual Performance-Based Rate Change (PBRC) application following the general rate case that was approved in January 2016. This filing was made in compliance with the January 2019 Oklahoma Corporation Commission (OCC) order settling tax issues resulting from the Tax Cuts and Jobs Act of 2017. This order requires that all earnings, including amounts attributable to tax savings, occurring in the 2018 calendar year that are above the authorized return on equity of 9.5% be returned to customers, with interest at the cost of capital rate. A settlement was reached, and a joint stipulation has been filed. This stipulation includes a PBRC credit of $15.6 million to be spread over a 12-month period and a credit of $12.7 million associated with excess ADIT. In June 2019, the Administrative Law Judge recommended that the OCC approve the joint stipulation. An order from the OCC is expected in the third quarter 2019.

As required, PBRC filings are made annually on or before March 15, until the next general rate case, which is required to be filed on or before June 30, 2021, based on a calendar 2020 test year.

Texas

West Texas Service Area

In March 2019, Texas Gas Service made Gas Reliability Infrastructure Program (GRIP) filings for all customers in the West Texas service area. The Texas Railroad Commission (RRC) and the cities agreed to an increase of $4.1 million, and new rates became effective in July 2019.

Central Texas Service Area

In March 2019, Texas Gas Service made GRIP filings for all customers in the Central Texas service area. The RRC and the cities agreed to an increase of $5.5 million, and new rates became effective in June 2019.

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ONE Gas Announces Second-quarter 2019 Financial Results;
Updates 2019 Financial Guidance

July 29, 2019

Page 5

2019 FINANCIAL GUIDANCE UPDATED

ONE Gas updated its 2019 financial guidance, with net income expected to be in the range of $180 million to $190 million, compared with its previously announced range of $174 million to $190 million. Earnings per diluted share is expected to be approximately $3.39 to $3.57, compared with its previously announced range of $3.27 to $3.57 per diluted share.

Capital expenditures, including asset removal costs, are still expected to be approximately $450 million in 2019, with about 70% of these expenditures targeted for system integrity and replacement projects.

Additional information is available in the guidance table on the ONE Gas website.

EARNINGS CONFERENCE CALL AND WEBCAST

The ONE Gas executive management team will conduct a conference call on Tuesday, July 30, 2019, at 11 a.m. Eastern Daylight Time (10 a.m. Central Daylight Time). The call also will be carried live on the ONE Gas website.

To participate in the telephone conference call, dial 888-208-1711, pass code 1661802, or log on to www.onegas.com .

If you are unable to participate in the conference call or the webcast, a replay will be available on the ONE Gas website, www.onegas.com , for 30 days. A recording will be available by phone for seven days. The playback call may be accessed at 888-203-1112, pass code 1661802.

LINK TO EARNINGS TABLES

http://www.onegas.com/~/media/OGS/Earnings/2019/Q2_2019_OGS_Mm32_o982Cfg_2dF.pdf

NON-GAAP INFORMATION

ONE Gas has disclosed net margin in this news release, which is considered a non-GAAP financial metric used to measure the company's financial performance. Net margin is comprised of total revenues less cost of natural gas. Cost of natural gas includes commodity purchases, fuel, storage, transportation and other gas purchase costs recovered through our cost of natural gas regulatory mechanisms and does not include an allocation of general operating costs or depreciation and amortization. In addition, these regulatory mechanisms provide a method of recovering natural gas costs on an ongoing basis without a profit. Therefore, although our revenues will fluctuate with the cost of natural gas that we pass through to our customers, net margin is not affected by fluctuations in the cost of natural gas. Accordingly, we routinely use net margin in the analysis of our financial performance. We believe that net margin provides investors a more relevant and useful measure to analyze our financial performance as a 100% regulated natural gas utility than total revenues because the change in the cost of natural gas from period to period does not impact our operating income. A reconciliation of net margin to the most

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Updates 2019 Financial Guidance

July 29, 2019

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directly comparable GAAP measure is included as a table at the end of the earnings tables accompanying this release.

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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 .

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;	
		
•	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;	

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ONE Gas Announces Second-quarter 2019 Financial Results;
Updates 2019 Financial Guidance

July 29, 2019

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•	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 Announces Second-quarter 2019 Financial Results;
Updates 2019 Financial Guidance

July 29, 2019

Page 8

	
																	
ONE Gas, Inc.	 	 	 	 	 	 	 	 	
CONSOLIDATED STATEMENTS OF INCOME	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	Six Months Ended	
 	 	June 30,	 	June 30,	
(Unaudited)	 	2019	 	2018	 	2019	 	2018	
 	 	(Thousands of dollars, except per share amounts)	
 	 	 	 	 	 	 	 	 	
Total revenues	 	$	290,560		 	$	292,521		 	$	951,560		 	$	930,985		
 	 	 	 	 	 	 	 	 	
Cost of natural gas	 	82,588		 	94,159		 	447,664		 	444,578		
 	 	 	 	 	 	 	 	 	
Operating expenses	 	 	 	 	 	 	 	 	
Operations and maintenance	 	101,482		 	102,995		 	209,757		 	205,660		
Depreciation and amortization	 	44,943		 	39,757		 	88,789		 	78,647		
General taxes	 	14,656		 	14,567		 	30,840		 	30,767		
Total operating expenses	 	161,081		 	157,319		 	329,386		 	315,074		
Operating income	 	46,891		 	41,043			174,510			171,333		
Other expense, net	 	(865	)	 	(2,194	)	 	(436	)	 	(4,358	)	
Interest expense, net	 	(15,399	)	 	(12,003	)	 	(31,185	)	 	(24,355	)	
Income before income taxes	 	30,627		 	26,846			142,889			142,620		
Income taxes	 	(6,157	)	 	(6,427	)	 	(24,759	)	 	(31,366	)	
Net income	 	$	24,470		 	$	20,419			$	118,130			$	111,254		
 	 	 	 	 	 	 	 	 	
Earnings per share	 	 	 	 	 	 	 	 	
Basic	 	$	0.46		 	$	0.39		 	$	2.23		 	$	2.11		
Diluted	 	$	0.46		 	$	0.39		 	$	2.22		 	$	2.10		
 	 	 	 	 	 	 	 	 	
Average shares (thousands)	 	 	 	 	 	 	 	 	
Basic	 	52,890		 	52,692		 	52,858		 	52,648		
Diluted	 	53,215		 	52,899		 	53,210		 	52,898		
Dividends declared per share of stock	 	$	0.50		 	$	0.46		 	$	1.00		 	$	0.92		

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ONE Gas Announces Second-quarter 2019 Financial Results;
Updates 2019 Financial Guidance

July 29, 2019

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ONE Gas, Inc.	 	 	 	 	
CONSOLIDATED BALANCE SHEETS	 	 	 	 	
 	 	 	 	 	
 	 	June 30,	 	December 31,	
(Unaudited)	 	2019	 	2018	
Assets	 	(Thousands of dollars)	
Property, plant and equipment	 	 		 	 		
Property, plant and equipment	 	$	6,241,105		 	$	6,073,143		
Accumulated depreciation and amortization	 	1,840,457		 	1,789,431		
Net property, plant and equipment	 	4,400,648		 	4,283,712		
Current assets	 	 	 	 	
Cash and cash equivalents	 	11,114		 	21,323		
Accounts receivable, net	 	169,801		 	295,421		
Materials and supplies	 	50,344		 	44,333		
Natural gas in storage	 	88,235		 	107,295		
Regulatory assets	 	38,372		 	54,420		
Other current assets	 	18,946		 	20,495		
Total current assets	 	376,812		 	543,287		
Goodwill and other assets	 	 		 	 		
Regulatory assets	 	424,304		 	437,479		
Goodwill	 	157,953		 	157,953		
Other assets	 	86,889		 	46,211		
Total goodwill and other assets	 	669,146		 	641,643		
Total assets	 	$	5,446,606		 	$	5,468,642		

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ONE Gas Announces Second-quarter 2019 Financial Results;
Updates 2019 Financial Guidance

July 29, 2019

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ONE Gas, Inc.	 	 	 	 	
CONSOLIDATED BALANCE SHEETS	 	 	 	 	
(Continued)	 	 	 	 	
 	 	June 30,	 	December 31,	
(Unaudited)	 	2019	 	2018	
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 52,734,222 shares at June 30, 2019; issued
   52,598,005 and outstanding 52,564,902 shares at December 31, 2018	 	$	527		 	$	526		
Paid-in capital	 	1,725,843		 	1,727,492		
Retained earnings	 	387,077		 	320,869		
Accumulated other comprehensive loss	 	(4,984	)	 	(4,086	)	
Treasury stock, at cost: 33,103 shares at December 31, 2018	 	—		 	(2,145	)	
   Total equity	 	2,108,463		 	2,042,656		
Long-term debt, excluding current maturities, and net of issuance costs of $11,159 and $11,457, respectively	 	1,285,811		 	1,285,483		
Total equity and long-term debt	 	3,394,274		 	3,328,139		
Current liabilities	 	 	 	 	
Notes payable	 	293,000		 	299,500		
Accounts payable	 	67,578		 	174,510		
Accrued taxes other than income	 	37,312		 	47,640		
Regulatory liabilities	 	46,534		 	48,394		
Customer deposits	 	58,831		 	61,183		
Other current liabilities	 	75,098		 	67,664		
Total current liabilities	 	578,353		 	698,891		
Deferred credits and other liabilities	 	 		 	 		
Deferred income taxes	 	673,939		 	652,426		
Regulatory liabilities	 	508,877		 	520,866		
Employee benefit obligations	 	168,387		 	178,720		
Other deferred credits	 	122,776		 	89,600		
Total deferred credits and other liabilities	 	1,473,979		 	1,441,612		
Commitments and contingencies	 	 	 	 	
Total liabilities and equity	 	$	5,446,606		 	$	5,468,642		

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ONE Gas Announces Second-quarter 2019 Financial Results;
Updates 2019 Financial Guidance

July 29, 2019

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ONE Gas, Inc.	 	 	 	 	
CONSOLIDATED STATEMENTS OF CASH FLOWS	 	 	
 	 	Six Months Ended	
 	 	June 30,	
( Unaudited )	 	2019	 	2018	
 	 	( Thousands of dollars )	
Operating activities	 	 	 	 	
Net income	 	$	118,130		 	$	111,254		
Adjustments to reconcile net income to net cash provided by operating activities:	 	 	 	 	
Depreciation and amortization	 	88,789		 	78,647		
Deferred income taxes	 	9,401		 	30,546		
Share-based compensation expense	 	4,911		 	4,080		
Provision for doubtful accounts	 	3,557		 	4,071		
Changes in assets and liabilities:	 	 	 	 		
Accounts receivable	 	122,063		 	130,730		
Materials and supplies	 	(6,011	)	 	3,548		
Natural gas in storage	 	19,060		 	49,672		
Asset removal costs	 	(24,324	)	 	(25,774	)	
Accounts payable	 	(109,340	)	 	(68,428	)	
Accrued taxes other than income	 	(10,328	)	 	(6,393	)	
Customer deposits	 	(2,352	)	 	438		
Regulatory assets and liabilities	 	25,948		 	105,967		
Other assets and liabilities	 	1,667		 	(18,401	)	
Cash provided by operating activities	 	241,171		 	399,957		
Investing activities	 	 	 	 	
Capital expenditures	 	(184,349	)	 	(175,834	)	
Other investing expenditures	 	(3,583	)	 	—		
Other investing receipts	 	598		 	—		
Cash used in investing activities	 	(187,334	)	 	(175,834	)	
Financing activities	 	 		 	 		
Repayments of notes payable, net	 	(6,500	)	 	(172,215	)	
Issuance of common stock	 	2,536		 	2,390		
Dividends paid	 	(52,687	)	 	(48,272	)	
Tax withholdings related to net share settlements of stock compensation	 	(7,395	)	 	(7,859	)	
Cash used in financing activities	 	(64,046	)	 	(225,956	)	
Change in cash and cash equivalents	 	(10,209	)	 	(1,833	)	
Cash and cash equivalents at beginning of period	 	21,323		 	14,413		
Cash and cash equivalents at end of period	 	$	11,114		 	$	12,580		

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ONE Gas Announces Second-quarter 2019 Financial Results;
Updates 2019 Financial Guidance

July 29, 2019

Page 12

	
																
ONE Gas, Inc.	 	 	 	 	 	 	 	 	 	 	 	
INFORMATION AT A GLANCE	 	 	 	 	 	 	 	 	
 	Three Months Ended	 	Six Months Ended	
 	June 30,	 	June 30,	
( Unaudited )	2019	 	2018	 	2019	 	2018	
 	 	 	 	
Financial (in millions)	 	 	 	 	 	 	 	 	 	 	 	
Net margin	$	208.0		 	$	198.4		 	$	503.9		 	$	486.4		
Operating costs	$	116.1		 	$	117.6		 	$	240.6		 	$	236.4		
Depreciation and amortization	$	45.0		 	$	39.8		 	$	88.8		 	$	78.7		
Operating income	$	46.9		 	$	41.0		 	$	174.5		 	$	171.3		
Capital expenditures	$	101.0		 	$	89.2		 	$	184.3		 	$	175.8		
Asset removal costs	$	13.2		 	$	18.4		 	$	24.3		 	$	25.8		
 	 	 	 	 	 	 	 	 	 	 	 	
Net margin on natural gas sales	$	176.1		 	$	166.0		 	$	429.6		 	$	411.6		
Transportation revenues	$	24.1		 	$	24.1		 	$	59.1		 	$	57.6		
Other revenues	$	7.8		 	$	8.3		 	$	15.2		 	$	17.2		
 	 	 	 	 	 	 	 	 	 	 	 	
Volumes ( Bcf )	 	 	 	 	 	 	 	 	 	 	 	
Natural gas sales	 	 	 	 	 	 	 	 	 	 	 	
Residential	 	13.4		 	 	15.6		 	 	79.1		 	 	76.6		
Commercial and industrial	 	5.1		 	 	5.9		 	 	24.4		 	 	23.9		
Wholesale and public authority	 	0.4		 	 	0.4		 	 	1.5		 	 	1.2		
Total sales volumes delivered	 	18.9		 	 	21.8		 	 	105.0		 	 	101.7		
Transportation	 	51.4		 	 	51.8		 	 	117.0		 	 	116.7		
Total volumes delivered	 	70.3		 	 	73.6		 	 	222.0		 	 	218.4		
 	 	 	 	 	 	 	 	 	 	 	 	
Average number of customers ( in thousands )	 	 	 	 	 	 	 	 	 	 	 	
Residential	 	2,022		 	 	2,008		 	 	2,024		 	 	2,013		
Commercial and industrial	 	160		 	 	159		 	 	161		 	 	159		
Wholesale and public authority	 	3		 	 	3		 	 	3		 	 	3		
Transportation	 	12		 	 	12		 	 	12		 	 	12		
Total customers	 	2,197		 	 	2,182		 	 	2,200		 	 	2,187		
 	 	 	 	 	 	 	 	 	 	 	 	
Heating Degree Days	 	 	 	 	 	 	 	 	 	 	 	
Actual degree days	 	581		 	 	858		 	 	6,412		 	 	6,120		
Normal degree days	 	639		 	 	664		 	 	5,948		 	 	5,975		
Percent colder (warmer) than normal weather	 	(9.1	)%	 	 	29.2	 %	 	 	7.8	 %	 	 	2.4	 %	
 	 	 	 	 	 	 	 	 	 	 	 	
Statistics by State	 	 	 	 	 	 	 	 	 	 	 	
Oklahoma	 	 	 	 	 	 	 	 	 	 	 	
Average number of customers ( in thousands )	 	885		 	 	877		 	 	886		 	 	880		
Actual degree days	 	188		 	 	337		 	 	2,265		 	 	2,207		
Normal degree days	 	191		 	 	191		 	 	1,966		 	 	1,966		
Percent colder (warmer) than normal weather	 	(1.6	)%			76.4	 %			15.2	 %			12.3	 %	
 	 	 	 	 	 	 	 	 	 	 	 	
Kansas	 	 	 	 	 	 	 	 	 	 	 	
Average number of customers ( in thousands )	 	641		 	 	642		 	 	644		 	 	644		
Actual degree days	 	342		 	 	486		 	 	3,093		 	 	2,975		
Normal degree days	 	396		 	 	419		 	 	2,924		 	 	2,947		
Percent colder (warmer) than normal weather	 	(13.6	)%			16.0	 %	 	 	5.8	 %	 	 	1.0	 %	
 	 	 	 	 	 	 	 	 	 	 	 	
Texas	 	 	 	 	 	 	 	 	 	 	 	
Average number of customers ( in thousands )	 	671		 	 	663		 	 	670		 	 	663		
Actual degree days	 	51		 	 	35		 	 	1,054		 	 	938		
Normal degree days	 	52		 	 	54		 	 	1,058		 	 	1,062		
Percent colder (warmer) than normal weather	 	(1.9	)%			(35.2	)%	 	 	(0.4	)%	 	 	(11.7	)%	

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ONE Gas Announces Second-quarter 2019 Financial Results;
Updates 2019 Financial Guidance

July 29, 2019

Page 13

	
																	
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Reconciliation of total revenues to net margin (non-GAAP)	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	Six Months Ended	
 	 	June 30,	 	June 30,	
(Unaudited)	 	2019	 	2018	 	2019	 	2018	
 	 	(Thousands of dollars)	
Total revenues	 	$	290,560		 	$	292,521		 	$	951,560		 	$	930,985		
Cost of natural gas	 	82,588		 	94,159		 	447,664		 	444,578		
Net margin	 	$	207,972		 	$	198,362			$	503,896			$	486,407		

 	 	 	 	 	 	 	 	 	

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ONE Gas Announces Second-quarter 2019 Financial Results;
Updates 2019 Financial Guidance

July 29, 2019

Page 14

	
												
ONE Gas, Inc.	 	 	 	 	 	
EARNINGS GUIDANCE	 	 	 	 	 	
 	Updated	 	Previous	 	 	
 	2019	 	2019	 	 	
(Unaudited)	Guidance	 	Guidance	 	Change	
 	(Millions of dollars, except per share amounts)	
Total revenues	$	1,656		 	$	1,588		 	$	68		
Cost of natural gas	694		 	643		 	51		
Operating expenses	 	 	 	 		
   Operations and maintenance	425		 	413		 	12		
   Depreciation and amortization	182		 	182		 	—		
   General taxes	60		 	60		 	—		
Total operating expenses	667		 	655		 	12		
Operating income	295		 	290		 	5		
Other income (expense), net	(6	)	 	(9	)	 	3		
Interest expense	(65	)	 	(65	)	 	—		
Income before income taxes	224		 	216		 	8		
Income taxes	(39	)	 	(34	)	 	(5	)	
Net income*	$	185		 	$	182		 	$	3		
Earnings per share, diluted*	$	3.48		 	$	3.42		 	$	0.06		
*Represents midpoint of guidance range.	 	 	 	 	 	

 	 	 	 	 	 	
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE	 	 	 	 	 	
 	 	 	 	 	 	
Reconciliation of total revenues to net margin (non-GAAP)	 	 	 	 	 	
 	Updated	 	Previous	 	 	
 	2019	 	2019	 	 	
(Unaudited)	Guidance	 	Guidance	 	Change	
 	(Millions of dollars)	
Total revenues	$	1,656		 	$	1,588		 	$	68		
Cost of natural gas	694		 	643		 	51		
Net margin	962		 	945		 	17