ONE Gas, Inc.

Good morning and thank you for joining us on our second quarter 2024 earnings conference call. This call is being webcast live and a replay will be available later today. After our prepared remarks, we are 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 of the Private Securities Litigation Reform Act of 1995, the 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 filing. Joining us on the call this morning are Sid McAnally, President and Chief Executive Officer, Chris Dignolfi, Senior Vice President and Chief Financial Officer, and Curtis Steinen, Senior Vice President and Chief Operating Officer. And now I'll turn the call over to Sid.

Thanks Erin, and good morning everyone. We're happy to be with you today to share our second quarter results. Our performance through the first half of the year is consistent with our financial plans, and the expectations we shared when we issued guidance last November. We enter the second half of the year with positive momentum and constructive regulatory activity in all of our jurisdictions. Curtis will speak to the latest activity, a unanimous settlement agreement in the Kansas Gas Service full rate case. We continue to fulfill our commitment to deliver affordable and reliable natural gas to our customers while effectively managing the business. One example of our focus on execution is our line locating project. When we updated our five-year outlook in November 2022, we projected an average O&M increase of 5% over the five-year guidance period, due primarily to wage increases and investments we were making to bring certain services like line locating in-house in those locations where there was an opportunity for efficiencies. In that guidance, We noted that we expected the increase in O&M expenses to be front end loaded as we hired new employees and trained them to perform line locating and other skills. And then expected to see expenses decrease as those employees not only replaced contractors in certain areas, but also could be deployed to do other work as needed. That is exactly what we've seen as outside service costs related to line locating have been reduced by an amount greater than the cost related to insourcing. While we saw a 7% year-over-year total O&M increase in the second quarter, this year those same expenses increased to just 3% year-over-year as we begin to realize the benefit of line locating and other investments. Now I'll turn it over to Chris to discuss financial details for the quarter. Chris?

Thanks, Sid, and good morning, everyone. net income for the second quarter was $27 million or 48 cents per diluted share compared with $33 million or 58 cents per diluted share in the same period 2023. Revenue from new rates contributed $14.7 million to operating income year over year, while continued growth in our residential and commercial customer base, primarily in Oklahoma and Texas, contributed $1.6 million. Although weather across our service territories for the second quarter was 40% warmer than normal, our weather normalization mechanisms again mitigated the impact on earnings. As Sid noted, our operations and maintenance expenses increased 3% over the second quarter 2023 due primarily to expected increases in employee-related costs, which we have mitigated in part through our insourcing efforts. Excluding the impact of the Kansas securitization, depreciation and amortization expenses were approximately $5 million higher than the prior year, reflecting an increase in net property, plant, and equipment due to our higher level of capital investments. Excluding the impact of Kansas securitization, interest expenses in the quarter were approximately $10 million higher than the same period in 2023, which primarily reflects the issuance of $300 million of 5.1% senior notes in December, and the maturity of lower coupon notes in February and March, which we repaid with commercial paper. Our capital expenditures and asset removal costs for the second quarter were approximately $195 million compared to $190 million in 2023. Expected capital investments for the full year remain on track with our $750 million forecast. As planned, we have satisfied our 2024 equity needs through the forward settlement agreements that we issued last year. Those agreements cover approximately 3.6 million shares of our common stock with settlement by year end at an average price of approximately $77 per share. Had all forward shares been settled at quarter end, we would have received net proceeds of approximately $275 million. On July 15th, the One Gas Board of Directors declared a dividend of 66 cents per share unchanged from the prior quarter and lastly we reaffirm our 2024 financial guidance including net income of 214 million dollars to 231 million dollars and earnings per diluted share of three dollars and seventy cents to four dollars curtis i'll now turn it to you thank you chris and good morning everyone i'll start with a brief update on our regulatory activities as we discussed last quarter