ONE Gas, Inc.

And welcome to the One Gas Second Quarter Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Brandon Locey. Please go ahead, sir.

Good morning, and thank you for joining us on our Second Quarter 2020 Earnings Conference Call. This call is being webcast live, and a replay will be made available later today. After our prepared remarks, we will be happy to take your questions. A reminder that statements made during this call that might include one gas expectations or predictions should be considered forward-looking statements and are covered by the Safe Harbor Provision and Securities Acts of 1933 and 1934. Actual results could differ materially from those projected in any forward-looking statements and include, among others, statements about the length and severity of a pandemic or other health crisis, such as the outbreak of COVID-19. For discussion of factors that could cause actual results to differ, please refer to our SEC filings. Joining us on the call this morning are Pierce Norton, President and Chief Executive Officer, Karen Lawhorn, Senior Vice President and Chief Financial Officer, Curtis Dinan, Senior Vice President and Chief Commercial Officer, and Sid McAnally, Senior Vice President and Chief Operating Officer. And now I'll turn the call over to Karen.

Thanks, Brandon. Good morning, everyone. Yesterday we announced that we have reaffirmed our 2020 earnings guidance, which was originally issued on January the 21st, 2020, With net income expected to be $186 million to $198 million, with a midpoint of $192 million, and diluted earnings per share of $3.44 to $3.68 and a midpoint of $3.56. I will elaborate on that in a moment, but we'll first review highlights from the quarter. Net income for the second quarter was $25.3 million, or $0.48 per diluted share, compared with $24.5 million or 46 cents per diluted share in the same period 2019. Our second quarter results reflect an increase in net margin of $2.8 million over the same period last year, which includes new rates in Kansas and Texas and a net increase in the number of residential customers. The increase in net margin includes a reduction of $1.9 million due to lower late payment, reconnect, and collection fees, primarily related to the moratoriums on disconnects for nonpayment Thank you for joining us today. and a $1.1 million decrease in employee-related costs. As you may recall, our non-qualified employee benefit plans impact both operating costs, which reflect the expense associated with plan liabilities, as well as other income or expense, which reflects the increase or decrease in the value of the associated investments. We've experienced quarter-to-quarter swings in the net income impact of these plans in 2020 that was primarily driven by volatility in the financial markets. However, on a year-to-date basis, the impact is not material. We now have COVID-related accounting orders for all jurisdictions, but as of June the 30th, we have not recorded any regulatory assets for financial reporting purposes. Although there are nuances among the states, these orders generally allow us to defer, for regulatory accounting purposes, net incremental expenses and certain lost revenues due to COVID-19. In order to record a regulatory asset for financial accounting purposes, we must identify and quantify amounts that qualify for regulatory treatment in accordance with the accounting order. In addition, we must conclude that such amounts are probable of recovery. This evaluation is ongoing. Our capital expenditures and asset removal costs increased $16.4 million this quarter compared with the same quarter last year due to both system integrity activities including government relocation projects and extension of service to new areas. Authorized rate base, reflecting our recent regulatory activity, is approximately $3.71 billion as of June the 30th. Authorized rate base is defined as the rate base reflected in completed regulatory proceedings, including full rate cases and interim rate filings. We project that for 2020, our estimated average rate base, which is defined as authorized rate base plus additional investments in our system and other changes in the components of our rate base that are not yet reflected in approved regulatory filings, will be approximately $3.91 billion, with 42% of that in Oklahoma, 29% in Kansas, and 29% in Texas. In April, we issued $300 million of senior notes due 2030 at a coupon of 2%. The proceeds from the issuance were used primarily to reduce our outstanding commercial paper balance. We ended the quarter with adequate liquidity, which includes nearly $470 million of capacity in our commercial paper program and all of the capacity under our $250 million, 364-day credit facility. The one-guest board of directors declared a dividend on July 20th at 54 cents per share, which is unchanged from the previous quarter. This dividend is consistent with our guidance for 2020. Moving on to financial guidance, you'll recall that last quarter we indicated we could be below the midpoint of our earnings guidance range. At that time, we were still in the early stages of dealing with the pandemic. Three months later, we have an additional quarter of actual results behind us, as well as more insight into how the pandemic is impacting OneGas, both financially and operationally, as well as our customers. Although there is still uncertainty, we believe we are on track to achieve results in line with our original guidance for 2020. Our reaffirmed earnings guidance does not assume that we will record any regulatory assets for financial reporting purposes pursuant to the accounting orders we have received addressing the impacts of COVID-19. We are also updating our expectation for capital expenditures, including asset removal costs. We are increasing our estimated capital outlay for 2020 to a range of $500 million to $525 million, up from our original guidance of $475 million. This increase is primarily due to extensions of service to new customers in Texas and Oklahoma above the levels we had anticipated. Now I'll turn it over to Curtis for the commercial update.