ONE Gas (NYSE:OGS) executives highlighted winter reliability improvements, regulatory developments, and a shift in financial reporting metrics during the company’s fourth-quarter and full-year 2025 earnings call. Management said 2025 results finished in line with revised guidance and introduced a new non-GAAP adjustment meant to better align reported performance with the Texas regulatory model following recent legislation.
Winter storm performance and system investments
CEO Sid McAnnally opened the call by crediting employees for maintaining service during Winter Storm Fern, which he described as the first multi-day, sub-freezing event since Winter Storm Uri in 2021. On the peak day, the company delivered more than 3 billion cubic feet of natural gas with “no supply disruptions,” he said.
2025 financial results and capital spending
CFO Chris Sighinolfi said the company delivered full-year results “squarely in line” with revised guidance. For 2025, ONE Gas reported net income of $264 million, or $4.37 per diluted share, compared with $223 million, or $3.91 per diluted share, in 2024. Capital expenditures were $760 million for the year.
McAnnally noted that in August the company raised the midpoint of its 2025 EPS guidance to $4.37 based on first-half performance and the expected impact of Texas House Bill 4384, and said results finished in line with that midyear expectation. He also said 2025 marked the company’s 12th consecutive year of meeting or surpassing the midpoint of its initial EPS guidance.
New non-GAAP adjustment tied to Texas legislation
Management spent a significant portion of the call explaining new non-GAAP “adjusted” metrics the company plans to emphasize going forward. Sighinolfi said the adjustment is intended to provide “a comprehensive view” of performance within the Texas regulatory model and better reflect returns allowed by regulators.
He explained that Texas Railroad Commission Rule 8.209, adopted in 2011, allows natural gas utilities to defer depreciation expense and ad valorem taxes and accrue a carrying cost on qualifying safety-related capital expenditures between the time a project is placed in service and its inclusion in rates. House Bill 4384, signed into law in June, extends those deferrals and accruals to all capital expenditures in Texas.
Sighinolfi said the carrying cost is calculated using unrecovered gross plant multiplied by a pre-tax weighted average cost of capital (WACC) established in the utility’s most recent rate proceeding. The key difference between regulatory accounting and GAAP accounting, he said, relates to the allowed return on equity component and the timing of when it is reflected in earnings.
While the regulatory-versus-GAAP difference has existed since 2011, Sighinolfi said it was modest when limited to Rule 8.209. He quantified the widening impact following HB 4384:
- Approximately $2 million, or about $0.03 per diluted share, in 2024
- Nearly $7 million, or about $0.11 per diluted share, in 2025
- Anticipated to be about $12 million, or roughly $0.18 per diluted share (about 4% of projected consolidated full-year EPS), with a full-year impact in 2026
For the fourth quarter, the company reported adjusted net income of $90 million, or $1.48 per diluted share, versus $78 million, or $1.35 per diluted share, in the prior-year quarter. For the full year, adjusted net income was $271 million, or $4.48 per diluted share, compared with $225 million, or $3.94 per diluted share, in 2024.
In response to an analyst question about timing, Sighinolfi said the company studied the legislation throughout the period and noted the Railroad Commission had a 270-day window to draft procedural rules. He said final rules were set for approval at a meeting the following Tuesday, and the combination of greater magnitude and regulatory clarity led to the change now rather than earlier.
On capital structure implications, Sighinolfi said the accounting treatment is “more impactful to earnings than it is to cash flow” initially and he did not expect a meaningful change to the company’s capital markets plan in the near term.
2026 guidance, expenses, and balance sheet
ONE Gas said its expected performance has not changed, but it will provide guidance using adjusted results going forward. For 2026, management guided to adjusted net income of $306 million to $314 million and adjusted EPS of $4.83 to $4.95.
Consistent with the previously communicated five-year outlook, the company reiterated expectations for long-term adjusted net income growth of 7% to 9% and adjusted EPS growth of 5% to 7%. Using adjusted 2025 results as the baseline for the 2026–2030 period, Sighinolfi said the plan implies a 2030 adjusted EPS midpoint of roughly $6.
On expenses, Sighinolfi said operations and maintenance (O&M) expense rose about 5% year over year in 2025, slightly above the company’s 4% compound annual growth rate guidance. He attributed the increase to executing some projects earlier than planned, while reiterating that the long-term O&M outlook remains 3% to 4% CAGR.
He also said that excluding amounts related to KGSS I, quarterly interest expense was $2.9 million lower than the prior year, primarily due to lower commercial paper rates and the implementation of HB 4384. Management said it benefited from Federal Reserve rate cuts in 2024 and 2025, which occurred faster than assumed in the company’s plan, while noting it assumes no further rate cuts in 2026.
Sighinolfi added that the company’s balance sheet remains strong, citing credit rating affirmations: S&P affirmed an A- rating with stable outlook in December, and Moody’s affirmed an A3 rating with stable outlook earlier in the month. He said 2025 cash flow metrics were “several hundred basis points above” downgrade thresholds and the financial plan supports similar performance going forward.
Regulatory updates and growth projects
COO Curtis Dinan said the company received a final order in its Texas rate case. The Texas Railroad Commission approved a $14.4 million revenue increase, a 9.8% return on equity, and a 59.9% equity ratio. Dinan also said the commission approved consolidation of the company’s three remaining Texas jurisdictions into a single statewide division. He said ONE Gas plans to make one GRIP filing for Texas Gas Service and a PBR filing in Oklahoma later in the quarter, with a Kansas GSRS filing planned for April. No full rate cases are planned until an Oklahoma filing in 2027, as required by tariff.
Dinan also discussed proposed Kansas legislation that would allow more efficient recovery of capital invested in the Kansas Gas Service system. In response to an analyst question, he said the bill had cleared the Kansas House and would move to the Senate, characterizing the process as still in the “early innings.” As described on the call, the bill would expand the types of capital eligible for inclusion in GSRS filings to essentially all capital invested directly in Kansas, and increase the monthly customer impact cap from $0.80 to $1.35. Dinan noted that currently, eligible items largely include safety-related expenditures and cybersecurity, and that at the existing $0.80 cap, the company’s annual GSRS filing has been about $8 million.
On commercial activity, Dinan said the company completed $760 million in capital investment projects during 2025, including $170 million dedicated to serving a growing customer base. He pointed to a pipeline announced in December where ONE Gas expects to invest about $120 million to deliver more than 100 Bcf of natural gas annually to Western Farmers Electric Cooperative in southeastern Oklahoma to support a new gas-fueled generation plant and future growth. He also said the company broke ground on a project to serve an advanced manufacturing plant outside El Paso that is on track to be in service by the third quarter of the year; both projects were included in guidance. Dinan added that the utility continues adding about 23,000 new residential customers each year.
In response to questions on competition for large projects, Dinan said the company uses an early screening process to determine whether it has a geographic advantage based on nearby assets. Where the company and midstream providers are similarly positioned, he said the utility’s regulatory structure and tariff transparency can be a “tiebreaker” in winning opportunities.
Management also highlighted efforts to manage gas costs and improve efficiency, including sourcing at the Waha Hub, increasing storage by 20%, and using physical and financial hedges to mitigate temporary price fluctuations. Dinan discussed an insourcing program under which the company performed about 40% of 1.3 million line locates in-house in 2025. He said total excavation damages per 1,000 locates decreased by more than 14% year over year despite an 8% increase in ticket volumes. Dinan said the company has kept its cumulative residential bill CAGR below inflation at just under 2% while delivering “top-tier” safety performance.
McAnnally closed by announcing that Dinan will assume an expanded role as president and chief operating officer, saying the move supports the company as it grows and undertakes larger projects.
About ONE Gas (NYSE:OGS)
ONE Gas, Inc is a publicly traded natural gas utility company focused on the regulated distribution of natural gas to residential, commercial and industrial customers. Headquartered in Tulsa, Oklahoma, the company owns and operates an integrated system of transmission and distribution pipelines, storage facilities and compressor stations designed to deliver safe, reliable energy to end users. Its operations are governed by state utility commissions, which set rates and service standards in the markets the company serves.
The company’s service territory spans three states: Oklahoma, Kansas and the Texas Panhandle.
