Jefferies 2014 Global Energy Conference November 11, 2014
Pierce Norton President and Chief Executive Officer Page 2
Key Points Highlights Competitive Strengths 100% regulated natural gas utility focus Third largest publicly traded natural gas distributor Regulatory Overview Mechanisms and timelines Financial Maintain conservative financial…
Competitive Strengths Page 5
Competitive Strengths Sustainable Business Kansas City Topeka 69% market share Focused business strategy Wichita 100% regulated natural gas distribution utility Tulsa Oklahoma City 87% market share Third largest publicly traded…
Significant Scale High Percentage of Residential Customers Net Sales Margin* Customer Count 2013 2013 1% 7% 1% 16% 83% Customer Type 92% Residential Commercial/Industrial Other * Excludes transportation margin Page 7
Significant Scale High Percentage of Fixed Charges Kansas Oklahoma Texas Total Fixed Charges Sales 51% 83% 70% 69% customers Average Annual Heating 4,860 3,316 1,785 - Degree Days Normal Weather Normalization 100% 100% 62% 87%…
Proximity to Natural Gas Supply Location Supports Sustainability Kansas Topeka City Close proximity to significant natural gas Mississippian Wichita Lime reserves Granite Wash Tulsa Delivered natural gas costs are Cana- Oklahoma…
Regulatory Overview Page 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…
Regulatory Filing Timeline Oklahoma & Kansas New performance-based rates Pending outcome of rate case, performance-based approved and effective August 2014 rates change filing anticipated March 2017 2014 2015 2016 2017 2018 ONG…
Regulatory Filing Timeline Texas El Paso Service Area El Paso Annual Rate Review (EPARR) filing annually, with new rates effective each August, if applicable Gas Reliability Infrastructure Program (GRIP) filings in remainder of…
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…
Opportunity to Narrow the Gap Return on Equity Goal: Minimize the gap between allowed and actual returns* 2014 ROE estimate: 7.6% 2013 ROE achieved: 8.0% 2012 ROE achieved: 8.3% *ROE calculations are consistent with utility…
Financial Overview Page 16
Financial Highlights Maintain Conservative Posture ONE Gas will maintain a conservative financial posture Prudent capital investment results in steady rate base growth Financial metrics necessary to maintain strong investment-grade…
Balance Sheet Commitment to Strong Investment-Grade Ratings Strong investment-grade credit ratings, consistent with peers Moodys: A2 (Stable) S&P: A- (Stable) Capital structure Long-term debt-to-capitalization ratio of 40%…
Cash Flow 2014 Sources and Uses Target dividend payout ratio of 55- 65% of net income 329 329 Short-term debt: 20 Capital expenditures primarily Cash funded by cash flow from 60 (in millions) operations Capital expenditures…
2014 Guidance Increased Financial Net income: increased range to Operating Income 105-110 million 223 Colder-than-normal weather 220* 216 Residential customer growth (in millions) Lower interest expense 200 Higher operating…
Capital Expenditures Capital Spending Exceeds Depreciation 280 287 285* Majority of capital expenditures for safety, 243 reliability and efficiency 219 195 172 System integrity and replacements (in millions) 182 Efficiency…
Creating value for stakeholders Page 22
Creating Value for Stakeholders Identify and Pursue Growth Opportunities Capital investments targeted toward safety, reliability and efficiency Approximately 70% of annual forecast Efficiency projects reduce expenses to sustainable…
Compressed Natural Gas (CNG) Current Environment Currently operate 27 fueling stations Benefits accessible to the public Use of CNG increases load Currently providing supply to 45 retail and 36 One vehicle is equivalent to one home…
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…
Questions
Appendix Page 27
Customer and Asset Mix Key Statistics as of Dec. 31, 2013 Kansas Oklahoma Texas Total Average Number of Customers 632,638 847,023 634,251 2,113,912 Number of Employees 1,000 1,100 700 3,100* Miles of Service Lines 8,000 4,600 5,700…
Projected Rate Base By State Projected rate base consists of: 2014 Rate Base* Total: 2.5 billion + Property, plant and equipment + Working capital + +/ Other rate base items 25% 42% Accumulated deferred income taxes Accumulated…
Regulatory Information By State as of Sept. 30, 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 8.55%…
Authorized Rate Base Historical by State Oklahoma Kansas Texas CAGR 6.3% CAGR 1.7% CAGR 21.9% 896 843 793 744 764 770 (in millions) 504 416 339 2011 2012 2013 2011 2012 2013 2011 2012 2013 Rate bases presented in…
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…
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…
Non-GAAP Information ONE Gas has disclosed in this presentation targeted long-term debt-to-EBITDA and EBIT-to-interest ratios, which are calculated using amounts disclosed in our financial statements in accordance with generally accepted…
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