ONE Gas, Inc.

Good day and welcome to the one guest heard 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 third quarter 2021 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 of the statements made during this call that might include one guess, expectations, or predictions should be considered forward-looking statements and are covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Securities Act of 1933, and the Securities and Exchange Act of 1934, each as amended. Actual results could differ materially from those projected in any forward-looking statement. 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 Sid McAnally, President and Chief Executive Officer Karen Lawhorn, Senior Vice President and Chief Financial Officer, and Curtis Dinan, 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 2021 financial guidance. Net income is now expected to be in the range of $204 million to $209 million, and earnings per diluted share is expected to be in the range of $3.80 to $3.90. Our guidance for capital expenditures and asset removal costs remains $540 million for the year. Our actual results for the third quarter include net income of $20.3 million or 38 cents per diluted share compared with $21.1 million or 39 cents per diluted share in the same period 2020. Our third quarter results reflect an increase in net margin of $10.4 million over the same period last year which is primarily due to $7 million from new rates and $2.1 million in sales from net residential customer growth. Operating costs for the third quarter were $6.1 million higher compared to the same period last year, driven primarily by increases in outside services, employee-related costs, and bad debt expense. It appeared in the second quarter that our bad debt expense was beginning to moderate, But our third quarter expense has ticked back up and we're currently $8.1 million of expense year to date compared to $8.8 million last year. We continue to execute well on our procedures for managing past due accounts, including connecting customers with payment assistance. In fact, we have currently received over $11 million or 88% more in energy assistance payments for our customers than at this time last year. Our capital expenditures and asset removal costs were $20.6 million higher quarter over quarter, and we remain on track to achieve our capital plans for the year. Authorized rate base, which is rate base reflected in completed regulatory proceedings, including full rate cases and interim rate filings, is approximately $4 billion as of September 30th. We project that for 2021, our estimated average rate base, which is 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 $4.34 billion with 41% in Oklahoma, 29% in Kansas, and 30% in Texas. We ended the quarter with $336 million of commercial paper outstanding and no borrowings under our credit facility. If you'll recall, in March we issued $2.5 billion of fixed and floating rate notes to cover costs related to winter storm. Actual costs deferred ended up being closer to $2.1 billion. These notes became callable in September, and we redeemed $400 million of the two-year floating rate notes in order to line up our financing with the final cost estimate. Year-to-date, we sold $21.4 million of common stock under the $250 million at-the-market equity program we put in place in 2020, and we have no additional sales planned for the balance of the year. As a result of the significant costs incurred due to the winter storm, which will be deductible for tax purposes in 2021, we expect to generate a net operating loss carry forward, which will also reduce taxable income in future years. Our current estimate of cash taxes for 2022 is $21 million. Yesterday, the One Gas Board of Directors declared a dividend at 58 cents per share unchanged from the previous quarter. Now, I'll turn it over to Curtis for an update on the latest from regulatory, commercial, and operations.