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MORGAN STANLEY CONFERENCE – One Gas, Inc.

One Gas, Inc. · Mar 5, 2015 · 38 slides

Investor presentation from the Shale Experts oil & gas presentation and slide database. Every page is imaged and its text indexed for search across operators, plays, basins and time.

Slides

  1. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 1
    New York City March 5, 2015 Morgan Stanley MLP/Diversified Natural Gas, Utilities & Clean Tech Conference
  2. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 2
    Company Overview Key Statistics Third largest publicly traded natural gas distribution company 2.1 million customers 42,500 miles of distribution and transmission pipeline Estimated 2015 average rate base: 2.7 billion* 41% in…
  3. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 3
    Competitive Strengths Page 4
  4. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 4
    Competitive Strengths Sustainable Business Kansas City Topeka 72% market share Focused business strategy Wichita 100% regulated natural gas distribution utility Tulsa Oklahoma City 87% market share Third largest publicly traded…
  5. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 5
    Significant Scale High Percentage of Residential Customers Net Sales Margin* Customer Count* 2014 2014 1% 7% 1% 16% 83% 92% Customer Type Residential Commercial/Industrial Other * Excludes transportation Page 6
  6. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 6
    Significant Scale High Percentage of Fixed Charges Kansas Oklahoma Texas Total Fixed Charges Sales 53% 86% 71% 71% customers Average Annual Heating 4,860 3,317 1,788 - Degree Days Normal Weather Normalization 100% 100% 62% 89%…
  7. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 7
    Proximity to Natural Gas Supply Location Supports Sustainability Kansas Topeka City Close proximity to significant Mississippian Wichita Lime natural gas reserves Granite Wash Tulsa Delivered natural gas costs are Cana- Oklahoma…
  8. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 8
    Natural Gas vs. Electricity 3-to-1 Average Advantage Continues in ONE Gas Territories Average retail price of Natural gas price equivalent ONE Gas delivered cost of Natural gas electricity / kWh (1) of electricity / Dth (1) natural gas…
  9. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 9
    Regulatory Overview Page 10
  10. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 10
    Regulatory Mechanisms Overview Oklahoma Natural Gas Performance-based rate structure with a targeted ROE between 10-11 percent that provides for annual rate reviews between rate cases Kansas Gas Service Gas System Reliability…
  11. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 11
    Regulatory Filing Timeline Oklahoma & Kansas General rate case application filing by August 2015, Pending outcome of rate case, performance-based with new rates effective early 2016, if applicable rates filing anticipated March 2018…
  12. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 12
    Regulatory Filing Timeline Texas El Paso Service Area El Paso Annual Rate Review (EPARR) filing annually, with new rates effective each August, if applicable Other cities in service area adopted EPARR Gas Reliability Infrastructure…
  13. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 13
    Regulatory Update Recent Activity Oklahoma August 2014: New rates approved, includes an increase in base rates of approximately 13.7 million and an energy-efficiency program true-up and a utility incentive adjustment of 0.9 million…
  14. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 14
    Opportunity to Narrow the Gap Return on Equity Goal: Minimize the gap between allowed and actual returns* 2015 ROE estimate: 7.4% 2014 ROE achieved: 7.6% 2013 ROE achieved: 8.0% 2012 ROE achieved: 8.3% * ROE calculations are…
  15. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 15
    Financial Overview Page 16
  16. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 16
    Financial Highlights Commitment to Strong Investment-Grade Ratings Strong liquidity position will support capital Capital Structure expenditure and working capital needs As of December 31, 2014 Stable operating cash flows 700…
  17. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 17
    2015 Cash Flow Sources and Uses Target dividend payout ratio of 55- 365 365 65% of net income Short-term debt and working capital changes Capital expenditures primarily 112 (in millions) funded by cash flow from Capital…
  18. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 18
    2015 Guidance Announced December 2014 Net income: range of 108-118 million Operating Income Earnings growth driven by new rates and customer 233 growth 225 Higher depreciation driven by capital investments 220* 216 Higher pension…
  19. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 19
    Five-year Financial Outlook Updated December 2014 Expected average annual net income growth of 5-8% between 2014 and 2019 Driven by capital investments and customer growth Rate base expected to grow an average of 5-6% per year…
  20. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 20
    Capital Expenditures Capital Spending Exceeds Depreciation 297 300 280 287 Majority of capital expenditures for safety, 243 reliability and efficiency 184 213 219 195 (in millions) System integrity and replacements 182…
  21. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 21
    Creating value for stakeholders Page 22
  22. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 22
    Creating Value for Stakeholders Strategic Focus Capital investments targeted toward safety, reliability and efficiency Approximately 70% of annual forecast Efficiency projects reduce expenses to sustainable levels Minimize gap…
  23. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 23
    Compressed Natural Gas (CNG) Current Environment Currently operate 26 fueling stations Benefits accessible to the public Use of CNG increases load Currently providing supply to 46 retail and 37 One vehicle is equivalent to one home…
  24. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 24
    Summary Key Investment Considerations Focused business strategy 100% regulated natural gas distribution utility Constructive regulatory environment Multiple mechanisms and riders Significant scale 2.1 million customers High…
  25. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 25
    Appendix Page 26
  26. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 26
    Customer and Asset Mix Key Statistics as of Dec. 31, 2014 Kansas Oklahoma Texas Total Average Number of Customers 634,128 853,533 639,840 2,127,501 Number of Employees 1,000 1,100 700 3,300* Miles of Service Lines 8,100 5,000 5,200…
  27. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 27
    Projected Rate Base By State 2015 Estimated Rate Base Projected rate base consists of: Total: 2.7 billion* + Property, plant and equipment + Working capital 25% + Other rate base items +/ 41% Accumulated deferred income taxes…
  28. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 28
    Regulatory Information By State as of Dec. 31, 2014 Rate Base Authorized Authorized (in millions) Rate of Return Return on Equity Oklahoma Natural Gas 938 8.535% 10-11% Kansas Gas Service 781 N/A N/A Texas Gas Service 542 8.14%…
  29. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 29
    Authorized Rate Base Historical by State Oklahoma Kansas Texas CAGR 5.8% CAGR 1.6% CAGR 16.9% 938 896 843 793 764 770 781 744 (in millions) 542 504 416 339 2011 2012 2013 2014 2011 2012 2013 2014 2011 2012 2013…
  30. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 30
    Capital Expenditures By State Oklahoma Kansas Texas 136 133 126 123 100 86 90 83 85 82 78 74 75 (in millions) 62 68 68 53 57 49 52 41 42 41 45 39 21 25 16 18 20 2011 2012 2013 2014 2015G 2011 2012 2013 2014 2015G…
  31. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 31
    Regulatory Constructs By State Mechanism Oklahoma Kansas Texas* Performance-based rates X Capital investments; safety-related riders X** X X Weather normalization X X X Purchased Gas Adjustment/Cost of Gas riders X X X Energy…
  32. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 32
    Cost of Gas Passed Through to Customers Actual costs of the commodity, transportation and storage of natural gas are passed through to customers without markup Natural gas used in operations is recovered in Purchased Gas or Cost of…
  33. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 33
    Economic Environment Unemployment Rates Unemployment Rate Continue to trend below national average 5.6% 2015 estimated job growth 5.4% 6.0% 4.9% 4.6% Kansas: 1.8% 4.2% 4.2% Oklahoma: 1.7% Texas: 2.4% Kansas Oklahoma Texas…
  34. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 34
    Diverse Employment Mix State Employment by Sector* Kansas Oklahoma Texas Mining/Logging Mining/Logging Mining/Logging Construction Other Services Financial 1% Construction 4% 3% 4% 5% Activities 5% 5% Financial Construction…
  35. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 35
    Customer Growth Projected 2015 Customer Growth 0.5% to 1% Average Customer Count 2,127 2,114 2,101 2,090 (in thousands) 2011 2012 2013 2014 Page 36
  36. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 36
    Non-GAAP Information ONE Gas has disclosed in this presentation cash flow from operations before changes in working capital, which is a non-GAAP financial measure. Cash flow from operations before changes in working capital is used as a…
  37. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 37
    Cash Flow From Operations Before Changes In Working Capital* 2015 2014 (Millions of dollars) Change Guidance Actual Net Income 113 110 3 Depreciation and amortization 135 126 9 Deferred taxes (8) 50 (58) Other 13 14 (1) Cash…
  38. MORGAN STANLEY CONFERENCE – One Gas, Inc. – slide 38

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