ONE Gas, Inc.

Good day, and welcome to the One Gas Third Quarter Earnings Conference Call. Today's conference is being recorded, and at this time, I'd like to turn the conference over to Mr. Brandon Locey. Please go ahead, sir.

Good morning, and thank you for joining us on our Third 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'll be happy to take your questions. A reminder that these statements made during this call that might include one gas expectations or predictions should be considered forward-looking statements and are covered under the safe harbor provision of the 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 updated our 2020 financial guidance with net income and earnings per diluted share expected to be near the upper end of the ranges, which are $186 to $198 million for net income and $3.44 to $3.68 for earnings per share. Our guidance for capital expenditures and asset removal costs remains $500 to $525 million for the year. Turning to our actual results, Net income for the third quarter was $21.1 million, or $0.39 per diluted share, compared with $17.5 million, or $0.33 per diluted share, in the same period 2019. Our third quarter results reflect an increase in net margin of $5.2 million over the same period last year, which is primarily due to $3.7 million from new rates and $2.7 million in residential sales from net residential customer growth. Operating costs for the third quarter were $0.8 million higher compared to the same period last year. This includes an increase of $1.8 million in expenses related to our response to the COVID-19 pandemic and a $1.5 million increase in employee-related costs. Offsetting a portion of those cost increases is a reduction in expenses of dollars for travel and employee training costs that have been impacted by the pandemic. We have not recorded any regulatory assets for financial accounting purposes pursuant to the accounting orders received in all jurisdictions that allow us to defer, for regulatory purposes, certain net increases in expenses and lost revenue due to COVID-19. We continue to evaluate whether amounts expected to be recoverable under these accounting orders are both measurable and probable of recovery, and we'll record such amounts for financial accounting purposes when we meet that hurdle. Our guidance for 2020 does not assume that we will record any regulatory assets by the end of the year. Our capital expenditures and asset removal costs decreased this quarter compared with the third quarter last year simply due to timing. Yesterday, the one guest board of directors declared a dividend of 54 cents per share. Authorized rate base. reflecting our recent regulatory activity, is approximately $3.71 billion as of September 30. 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. We ended the quarter with adequate liquidity, which includes approximately $391 million of capacity in our commercial paper program and all of the capacity under our $250 million 364-day credit facility. Additionally, as of September 30, 2020, We've issued approximately $13 million of equity under the $215 million at-the-market equity program we put in place earlier this year. We have no plans to issue equity for the remainder of 2020. Now, I'll turn it over to Curtis for our regulatory and commercial update.