ONE Gas Q2 2026 Earnings Call Transcript

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Provided by Quartr
August 5, 2026

Key Takeaways

  • Positive Sentiment: Second-quarter adjusted EPS rose 52% to $0.82 from $0.54 year over year, while first-half adjusted EPS increased 16% despite weather that was 25% warmer than normal.
  • Positive Sentiment: ONE Gas raised its outlook within its existing 2026 range and now expects adjusted net income of $310 million–$314 million, or adjusted EPS of $4.89–$4.95, supported by new rates, cost discipline and Texas House Bill 4384 benefits.
  • Positive Sentiment: Large-load growth is accelerating, with three contracted projects representing approximately $15 million of annual revenue and $175 million of capital; additional late-stage prospects could support major generation, data center and advanced manufacturing demand.
  • Positive Sentiment: Regulatory developments remain supportive, including approved Texas GRIP rates, Oklahoma’s recommended $28.7 million increase and a planned $14.3 million Kansas surcharge filing that benefits from expanded recovery provisions.
  • Negative Sentiment: Second-quarter O&M expense increased 6.6% year over year, driven by elevated line-locating activity and fuel costs; although management expects a meaningful slowdown in the second half, ongoing economic activity and geopolitical-related fuel pressure remain risks.
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Earnings Conference Call
ONE Gas Q2 2026
00:00 / 00:00

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Operator

Good day, everyone. ONE Gas second quarter earnings conference call and webcast will begin shortly. Good day, and welcome to the ONE Gas second quarter earnings conference call and webcast. Today's conference is being recorded. At this time, I would like to turn the conference over to Erin Dailey. Please go ahead, Ms. Dailey.

Erin Dailey
Erin Dailey
Director of Investor Relations and Sustainability at ONE Gas

Thank you, Dennis. Good morning, everyone, and thank you for joining us on our second quarter 2026 earnings conference call. This call is being webcast live, and a replay will be available later today. After our prepared remarks, we're 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 provisions of the Private Securities Litigation Reform Act of 1995, the Securities Act of 1933, and the Securities Exchange Act of 1934, each as amended. Actual results could differ materially from those projected in any forward-looking statement. For a discussion of factors that could cause actual results to differ, please refer to our SEC filings.

Erin Dailey
Erin Dailey
Director of Investor Relations and Sustainability at ONE Gas

This call will include financial results and guidance with respect to adjusted net income and adjusted net income per share, which are non-GAAP financial measures as defined by the SEC. A reconciliation of the company's GAAP net income and GAAP earnings per share to adjusted net income and adjusted net income per share, along with additional disclosures required by Regulation G, are available in the earnings release that we issued yesterday. Joining us this morning are Sid McAnnally, Chief Executive Officer, Chris Sighinolfi, Senior Vice President and Chief Financial Officer, and Curtis Dinan, President and Chief Operating Officer. Now I'll turn the call over to Sid.

Sid McAnnally
Sid McAnnally
CEO at ONE Gas

Thanks, Erin, and good morning, everyone. Our strong second quarter performance reflects solid execution across the business and the continued strength of our growth strategy, supported by constructive jurisdictions. Adjusted EPS was $0.82 for the quarter, compared to $0.54 in the same period last year. Through the first half of the year, we've grown adjusted EPS by 16% over last year, despite weather that was 25% warmer. Importantly, we delivered these results while keeping the average customer bill flat year-over-year and increasing our dividend. This balanced approach to operating a 100% regulated company is intentional. Our strategy is to strengthen our delivery system and grow the business through disciplined investment while keeping our long-term customer bill growth in line with inflation. Combined with the legislative and regulatory framework that supports investment and economic development, we're able to deliver growth that is both durable and sustainable.

Sid McAnnally
Sid McAnnally
CEO at ONE Gas

The opportunity to serve large load customers continues to broaden across our service territory. Rising demand is being driven by ongoing electric load growth and the need for reliable, dispatchable energy. Interest from gas-fired generation, data centers, and advanced manufacturing has grown meaningfully, creating additional avenues for sustainable long-term growth. We expect the factors driving our strong performance in the first half of this year to continue, and we now expect to achieve adjusted earnings within the upper half of our 2026 guidance range. We're confident in our outlook, which is supported by new rates taking effect and continued customer growth, along with ongoing benefits from constructive legislative developments in Kansas and Texas. Now I'll turn it over to Chris to discuss the details of our financial performance and regulatory activities. Chris?

Chris Sighinolfi
Chris Sighinolfi
Senior VP and CFO at ONE Gas

Thanks, Sid, good morning, everyone. Adjusted net income for the second quarter was $52.1 million, or $0.82 per diluted share, compared with $32.7 million, or $0.54, in the same period last year. A 52% increase. On a GAAP basis, EPS was $0.74, compared with $0.53 last year, a nearly 40% increase. These results were supported by approximately $16 million of new revenue from new rates and greater than anticipated benefits from Texas House Bill 4384. As we have discussed previously, the Texas House Bill supports economic development by allowing natural gas utilities to defer depreciation expense and ad valorem taxes and accrue a carrying cost on capital expenditures between the time of project in-service and its inclusion in rates. The impact will fluctuate by quarter based on the timing and amount of eligible capital placed into service.

Chris Sighinolfi
Chris Sighinolfi
Senior VP and CFO at ONE Gas

Given the cadence of our annual GRIP filing, we generally expect the second quarter to represent a larger share of the annual benefit with a smaller contribution in the third quarter. This timing reflects how eligible investments are accrued before the annual GRIP filing takes effect. Once the filing is reflected in customer rates, the amount recognized through accruals declines in the third quarter before building again. With first half 2026 results complete, we now expect House Bill 4384 to contribute approximately $0.42 to full-year adjusted EPS. This expectation, along with new rates and ongoing cost discipline, gives us confidence in raising our financial expectations for the full year. As I noted on our last quarter call, the warm winter weather created some positive offsets, which we expected to see play out later in the year, that has proven true.

Chris Sighinolfi
Chris Sighinolfi
Senior VP and CFO at ONE Gas

We consumed less gas for storage this winter than we would have under normal conditions, finishing the first quarter with inventory levels about 25% higher than we had planned. Higher spring storage balances mean we have less to inject this refill season, creating the opportunity for capacity release in Kansas, the revenues from which we share 50/50 with customers. Net to our interests, we recognized about $900,000 in related revenue during the second quarter and have realized a total of $2.8 million in capacity release revenues year to date. We believe an incremental $1.2 million in capacity release opportunities remain through the injection season. Second quarter O&M expenses increased approximately 6.6% year-over-year, moderating from the first quarter increase. Line-locating tickets, largely related to fiber installation activity, remain elevated, reflecting continued construction and economic activity across our service territories.

Chris Sighinolfi
Chris Sighinolfi
Senior VP and CFO at ONE Gas

We have also experienced increased fuel costs from our fleet due to geopolitical unrest. We are not changing our 3%-4% long-term guidance for annual O&M increases, however, and expect the sequential growth in overall O&M expenses to move meaningfully lower over the back half of this year. Excluding amounts related to KGSS-I, second quarter interest expense decreased by $3.8 million compared with the prior year, due in part to lower commercial paper rates. Turning to equity, we have forward sale agreements in place which total approximately $41.5 million, roughly half our need for this year. We will continue to be opportunistic about issuing equity as we meet our remaining needs, which, given our trading liquidity, can easily be funded through our ATM program. Yesterday, the ONE Gas Board of Directors declared a dividend of $0.68 per share, unchanged from the previous quarter.

Chris Sighinolfi
Chris Sighinolfi
Senior VP and CFO at ONE Gas

Our financial guidance for the year remains adjusted net income of $306 million-$314 million and adjusted EPS of $4.83-$4.95. With strong first half performance and the impact of the Texas legislation, we expect to achieve adjusted earnings within the upper half of these ranges, or $310 million-$314 million and $4.89-$4.95. Now I'll turn to regulatory activities. Oklahoma Natural Gas filed its annual performance-based rate change application in February, seeking a $28.7 million rate increase. At the hearing in June, the administrative law judge recommended approval of the application as filed. Interim rates subject to refund were implemented in late June. Texas Gas Service made its Gas Reliability Infrastructure Program filing in March, requesting a $36.9 million revenue increase. In June, the Texas Railroad Commission approved the requested increase, and new rates became effective in July.

Chris Sighinolfi
Chris Sighinolfi
Senior VP and CFO at ONE Gas

This was our first statewide GRIP filing and the first to reflect the expanded benefits of Texas House Bill 4384. Kansas Gas Service filed an application under the Gas System Reliability Surcharge statute in July, seeking an approximately $14.3 million increase, with rates expected to take effect in October.

Chris Sighinolfi
Chris Sighinolfi
Senior VP and CFO at ONE Gas

The filing reflects the expanded recovery provisions under House Bill 2435, which broadened eligible investments to all direct capital investments in Kansas, increased the maximum residential monthly surcharge to $1.35 from $0.80, and shortened the review period to 90 days from 120 days. We do not have any full rate cases planned until we file the Oklahoma rate case in 2027, as required by tariff. Now, Curtis, I'll turn things to you.

Curtis Dinan
Curtis Dinan
President and COO at ONE Gas

Thank you, Chris, and good morning, everyone. I'll start with an update on growth and capital deployment. We completed $188 million worth of capital projects this quarter, relatively in line with the same period last year. Growth across our service territory remains broad-based. Through July, we installed 11,000 new meters, led by Oklahoma City and El Paso. Beyond this ongoing residential growth, we are advancing large load opportunities and currently have three high-volume projects under contract. Together, they represent roughly $15 million of incremental annual revenue and $175 million of associated capital within service dates spanning the second half of 2026 through 2028. One of these projects is the Western Farmers gas-fired generation project, which was announced late last year. We are preparing to bid the construction contract and expect to begin installation early in 2027. The project remains on track for a Q3 2028 in-service date.

Curtis Dinan
Curtis Dinan
President and COO at ONE Gas

It includes the construction of a 43 mi, 24 in pipeline in Southern Oklahoma. The other two contracted projects are already in construction or commissioning. One of the projects is in El Paso to serve an advanced manufacturing facility, and the other will serve a data center in Oklahoma. Both are expected, excuse me, to be placed in service this quarter. On our last earnings call, we noted six additional projects in late-stage discussions that, in aggregate, could support approximately three gigawatts of generation and up to 1 Bcf/d of demand across Kansas, Oklahoma, and Texas. One of those six projects is the Oklahoma data center that I just mentioned, which is now not only under contract but expected to be in service this quarter. This project highlights one of our strategies in pursuing large load opportunities.

Curtis Dinan
Curtis Dinan
President and COO at ONE Gas

By leveraging our existing pipeline network, we can respond quickly to meet customer needs and create value for all customers. The remaining five projects are in late-stage discussions and project scoping and represent our highest conviction prospects. We have 17 additional opportunities in early stages of evaluation and will provide updates as the projects advance. Turning to O&M, our coworkers continue to drive improvements in workforce efficiency and safety. Second quarter line locating activity increased approximately 7% year-over-year, while damages declined 6%. This highlights the operational benefits of bringing certain work in-house. In addition to the insourcing progress on our line locating function, we have also insourced 40% of the watch and protect function in Oklahoma and are on track to have that fully insourced by year-end.

Curtis Dinan
Curtis Dinan
President and COO at ONE Gas

This initiative further demonstrates our focus on operational excellence by enhancing safety and system integrity while driving more effective management of O&M expenses. Now I'll turn it back over to Sid for closing remarks.

Sid McAnnally
Sid McAnnally
CEO at ONE Gas

Thanks, Curtis. We operate in a region that continues to experience residential growth driven by economic development. Kansas, Oklahoma, and Texas have business-friendly policies and regulatory frameworks that attract investment and support growth. Our states also enjoy abundant natural gas resources and extensive infrastructure, creating an attractive environment for large load customers. We are well-positioned to serve this growing demand, driving sustainable growth and shareholder value, all while maintaining our commitment to safety and affordability. Our performance over the first half of the year reflects the strength of our strategy, the quality of our execution, and our ability to capitalize on the opportunities before us. The disciplined focus of our coworkers and their commitment to safety and operational excellence continues to drive our success. I want to thank each of them for their contributions and dedication to serving our customers and our communities.

Sid McAnnally
Sid McAnnally
CEO at ONE Gas

As we look forward, we continue to see a clear runway for growth and remain focused on serving our customers while generating attractive returns for our investors. With that, we'll open the call for questions.

Operator

Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We will pause for a moment to allow everyone an opportunity to signal for questions. Your first question's from the line of Constantine Lednev with Wells Fargo. Please go ahead.

Analyst at Wells Fargo

Hey, good morning. It's actually Alex on for Constantine. Thanks for taking our questions. Just in terms of the capital allocation strategy on a go-forward basis with some of the improved regulatory constructs you've highlighted see maybe a CapEx shift or pull forward of capital into better constructs with less ROE lag? Maybe just to frame that, would you provide an accretive opportunity within your current 5%-7% longer term?

Curtis Dinan
Curtis Dinan
President and COO at ONE Gas

Yeah, Alex, this is Curtis. Let me just talk first a little bit about how we think about capital in general. The first thing our capital focus is on is our system integrity spending, and that typically represents about 60%-70% of our capital budget. That is agnostic to regulatory treatment in any of our jurisdictions. That's purely driven by the needs of our system and the replacements we need to make. In terms of allocating other capital, our growth capital, that's driven mostly by what customer needs are and where those growth opportunities are taking place. We're seeing that in all three of our states and across the different types of projects that I mentioned in my comments and Sid also mentioned in his, whether that's utility scale generation, it's advanced manufacturing or it's data center opportunities. Again, that exists in all three states.

Curtis Dinan
Curtis Dinan
President and COO at ONE Gas

We're seeing a little bit higher level of activity with customers in the state of Texas, which as your question suggests, that's beneficial to us because of the legislation that we talked about earlier. Where the greater opportunities are are in Texas. That, again, is driven a lot by what the customer needs are and being able to respond to what's in the marketplace.

Sid McAnnally
Sid McAnnally
CEO at ONE Gas

Alex, to your second question, you can expect us to continue to be very open-handed in the reports that we offer the Street relative to the capital projects in front of us. We have a great deal of confidence in our execution going through the remainder of this year, but we don't see limitations in the years to come. Your question about our 5%-7%, we offered that guidance in December of 2025. We will continue to execute this plan and look forward to the opportunity to speak to the investment community about 2027 later this year.

Analyst at Wells Fargo

Got it. That makes sense. Just touching on the dividend policy, it's been credit-supportive. Does the current policy of 1%-2% growth still make sense with the improving cash flow metrics and where do you want to be over the longer term relative to your peers? Thanks.

Chris Sighinolfi
Chris Sighinolfi
Senior VP and CFO at ONE Gas

Alex, this is Chris. That is a Board decision. It's a discussion with them on a quarterly basis. The five-year plan that we communicated last December, the same plan Sid just referenced, did contemplate a 1%-2% growth rate in the dividend annually through the duration of that plan. So through 2030. We think about it in a cash flow modeled basis. 100% regulated company as we are, where we have actual capital structure in our rate designs in all three states. We believe the best return on investment and the fastest earnings per share growth rates can be achieved as we self-fund a greater percentage of our capital investments. The strategy around the dividend, the deceleration in dividend growth, which we put in place three years ago, was really driven to pivot our funding structure to be more self-funded from an equity perspective.

Chris Sighinolfi
Chris Sighinolfi
Senior VP and CFO at ONE Gas

You've seen the payout ratio fall from 68% a couple of years ago to an implied 57% on a GAAP basis this year. That will continue to moderate as our plan runs through. The point of liftoff in terms of when are we satisfied that we have internally funded the growth strategy of the business and when can elevated levels of dividend growth be offered, that's going to be an active conversation as we come into the planning process this fall.

Analyst at Wells Fargo

Great. I'll leave it there. Thank you.

Sid McAnnally
Sid McAnnally
CEO at ONE Gas

Thanks for your questions, Alex.

Operator

Your next question is from the line of Richard Sunderland with Truist Securities. Please go ahead.

Richard Sunderland
Richard Sunderland
Analyst at Truist Securities

Hey, good morning. Thank you for the time today. I wanted to go back to the start of the script and that opportunity around the large load customers. You talked about interest across a number of avenues, and growth there. Is that reflective of new inbounds you are seeing across generation data centers, advanced manufacturing, or is this a continued trend that you've been speaking to for several quarters now? Just trying to get a sense of the customer side and maybe how that feeds into the 17 projects in other stages of evaluation, also offered in the script.

Curtis Dinan
Curtis Dinan
President and COO at ONE Gas

Hey, Richard, this is Curtis. These are normally kind of longer lead type of developments. These are customers that we've been working with for a period of time, developing the projects, trying to understand what their needs are and as they go through their investment decision process, where they're supporting them to think about options and how to approach the different opportunities. There are other projects in that mix of 17 that have come up much more quickly, have gone very quick to we know that there's limited capacity in this area, and we want to secure that supply as we continue to finalize their investment decisions. It's a mix of those, and again, that's across all three states and each of those different types of categories that I was describing earlier.

Curtis Dinan
Curtis Dinan
President and COO at ONE Gas

We continue to make progress on them, and as I said in my comments, we'll share more once additional projects reach final investment decisions and they're under contract with us.

Richard Sunderland
Richard Sunderland
Analyst at Truist Securities

Understood. That's helpful there. Thanks for running through that. Just on the numbers themselves and I guess some of the O&M commentary in particular, you spoke to 1H versus 2H dynamics. Could you parse that a little bit more in terms of the O&M trajectory on a 2H basis that you're expecting? Is there any kind of knock-on effects into 2027 on how you're staging some of that activity this year versus next?

Sid McAnnally
Sid McAnnally
CEO at ONE Gas

Yeah, Rich, let me offer just a little bit of context and then ask Chris to go into detail in responding to your question. We started some years ago looking at the opportunities that we had to insource certain work, and as we piloted those programs, we realized that not only could we match or beat the cost that we were experiencing externally, we saw a significant step up in the quality of the work that was being done. Over the last few years, we've been fairly aggressive in insourcing line locating, and we're coming to a point in that project where we're finding the balance that we saw a few years ago when we started. As Curtis said, we've shifted that over now to watch and protect.

Sid McAnnally
Sid McAnnally
CEO at ONE Gas

That's where we send folks out to watch our system when we know that there's construction around critical areas of the system, we're seeing the same level of performance there. As we signaled both in our first quarter call and in this call, we knew that we would see escalated O&M related in part to increased insourcing, we continue to recognize the efficiencies of that as we go through the remainder of the year. The shape of O&M through the year is something that we've attempted to signal all along, we continue to be committed to the fact that we're going to see a pretty significant reduction in the second half. Chris?

Chris Sighinolfi
Chris Sighinolfi
Senior VP and CFO at ONE Gas

Yeah. Hey, Rich. How are you? To follow on from Sid's comment, I mentioned in the prepared remarks that we expected, as you look at a sequential growth in O&M from the prior period to the current period, to see a meaningful step down in the back half. We were 8+% in the first quarter and 6% and change in the second quarter. Your expectation should be meaningfully below that in the third and fourth quarters. There are external factors. Curtis mentioned line locate activity up 7% year-over-year. There's a lot of economic growth going on in our territories. That's a cost that we bear, that we have to respond to locate our assets on behalf of others who are digging. I mentioned in my prepared remarks, fuel costs.

Chris Sighinolfi
Chris Sighinolfi
Senior VP and CFO at ONE Gas

We're paying close attention to what refined product inventories look like and the dynamics associated with that. We travel about 10 million miles a quarter in company-owned vehicles. You think about the $9-ish million of additional O&M expense this quarter versus last year in the second quarter. About 15% of that was fuel. Elevated fuel year-over-year. We've baked all of that in to the expectations that I'm offering you. As you think about cascade in the future, we talked about a 3%-4% long-term O&M growth rate. As you think about it will cascade to lower levels of annual O&M growth in future periods. Some of that is driven by the benefits of the insourcing effort that Curtis has noted, primarily line locating, but now watch and protect, and they continue to explore other functions that are worthwhile for insourcing.

Richard Sunderland
Richard Sunderland
Analyst at Truist Securities

Great. Thank you for running through all of that, and thanks for the time.

Sid McAnnally
Sid McAnnally
CEO at ONE Gas

You bet, Rich. Thanks for the question.

Operator

Your next question is from the line of Julien Dumoulin-Smith with Jefferies. Please go ahead.

Luke Fenker
Luke Fenker
Analyst at Jefferies

Hey, guys. Nice to be on the call. This is Luke Fenker on for Julien. I just wanted to ask if you could quantify the benefits from HB 4384 this quarter and how that showed up across D&A and interest expense. If not, maybe color on how we should think about cadence for the rest of the year after the July GRIP reset would be helpful. Thanks.

Chris Sighinolfi
Chris Sighinolfi
Senior VP and CFO at ONE Gas

Hey, Luke. This is Chris. I don't have it for the quarter. If you thought about it, maybe in the first half of the year, across both the elements included in GAAP and then the non-GAAP adjustment, which reflects the equity return, it's about $0.28-$0.29. As you think about the back half, one thing to note is the accrual benefits, I spoke about this in my prepared commentary, is driven by capital and service in Texas. A reminder, the largest project that we've completed as a company was the Austin System Reinforcement project, which was in Austin, as the name implies, and was placed into service in the third quarter of last year. The first full quarter for which this legislative benefit was available, our largest project took effect. We don't have projects in Texas of that caliber planned for the back half of this year.

Chris Sighinolfi
Chris Sighinolfi
Senior VP and CFO at ONE Gas

As you think about sequentially back half last year to back half this year, I would just note to you that we had a very large project take effect in the third quarter that we don't see this year. I did note a $0.42 full-year impact anticipated given what we now know from first-half performance.

Luke Fenker
Luke Fenker
Analyst at Jefferies

Got it. Yeah, that helps. Maybe, you previously discussed evaluating low-cost rate protection, including a SOFR collar for commercial paper. Can you update us on where that evaluation stands and whether you expect to put any hedge structures in place this year, just given expectations with rising rates? Thanks.

Chris Sighinolfi
Chris Sighinolfi
Senior VP and CFO at ONE Gas

Thanks, Luke. We did explore that. You're right to raise it. We are not of the mind to pursue it at the moment. It's something that's available to us. As we thought about the cost of that structure and some of the complexities around it, mainly some of the volatility that it may introduce to our earnings reports on a quarterly basis, we didn't feel like it presented the value that we maybe initially thought it might. In addition, as we thought about the voting members of the FOMC, yes, the markets focus a lot on, is the next move a 25 basis point hike, or how many hikes might we have through the balance of the year? The expectations were for three rate cuts at the beginning of the year, now the market expectation is for two rate hikes.

Chris Sighinolfi
Chris Sighinolfi
Senior VP and CFO at ONE Gas

If you watch the dot plot and think about where each of the FOMC voting members is positioned for future expectations, they all see a lower Fed funds rate as you scroll out through 2027 into 2028 and 2029. They all represent the current level of Fed funds rate as restrictive relative to a broadly 3% neutral rate. With all of those factors, it's not something that we have decided to take action on today, it still represents an option to us.

Luke Fenker
Luke Fenker
Analyst at Jefferies

Got it. Makes total sense. Thanks so much, Chris. I'll leave it there.

Operator

Your next question is from the line of David Arcaro with Morgan Stanley. Please go ahead.

Analyst at Morgan Stanley

Hi, this is Amanda on for Dave. Thanks so much for taking our questions. Maybe just on the expectation raise, anything that you could speak to in terms of specific aspects that give you confidence to land in that upper half? I know, Chris, you mentioned the Texas House Bill contribution. Just wondering if there are any other specific moving pieces that you would point to for the raise.

Chris Sighinolfi
Chris Sighinolfi
Senior VP and CFO at ONE Gas

Hi, Amanda. Well, that's one of them. Another is some of the solidification of some of the projects that Curtis mentioned. He mentioned one that had moved from sort of prospect to in-service this quarter that will start contributing in a way that we were not totally certain about before. As I talked about O&M and a real focus internally coming off the winter. We had spent some time on last quarter's call about levers we thought were available to us that could help us moderate from a cost standpoint and overcome some of the margin hit that we took in the first quarter with the weakness in the weather dynamics. As we've walked through that with teams throughout the company, we have a greater level of confidence and cost discipline to the back half of the year.

Sid McAnnally
Sid McAnnally
CEO at ONE Gas

Amanda, this is Sid. I'd just add that the capacity release program has been a real success and credit to our gas supply team for the way that they've taken advantage of what was excess supply coming out of a relatively warm winter with the exception of one significant storm. I also want to point back to a question in Chris's comment. When you think about the way that these projects come into service, they come in in a way that we have some visibility around, but not perfect visibility around. The funnel that Curtis speaks to is one that will allow us to have ongoing projects. We do have forward visibility into what the marketplace looks like in terms of projects and the probability of those projects.

Sid McAnnally
Sid McAnnally
CEO at ONE Gas

We've been very intentional in building a funnel that allows us to evaluate opportunities and to take advantage of those that we think are beneficial, not only to our investors, but also to our customers in the way that they are positively impacted by some of the projects that we've already talked about and projects that we're working for the future. The Austin System Reinforcement Project came online last year, and there are other projects of scale in addition to Western Farmers. They're just, to Curtis's point, not to the point that we want to talk about them publicly because we don't talk about projects publicly until we have contracts in place and a high level of certainty.

Analyst at Morgan Stanley

Great. Thanks so much for the color. To the extent that you can, maybe just a follow-up on that in terms of maybe timing of those large load opportunities between generation data centers and manufacturing. I guess you pulled one of the projects forward, but kind of what does that look like for the remaining five projects in late stage and the 17 in the early stage?

Curtis Dinan
Curtis Dinan
President and COO at ONE Gas

I think I made the comment on the first call, Amanda, this is Curtis, about the ones that we put in the late stage. We thought there was a decent probability that those would move into a contracted stage here in fiscal 2026. In fact, one of those did. We're still working on the other projects, and we could be in a position where they're signed and announced before the end of the year. If not, it would likely be in the first part of 2027. In terms of the other 17 that I mentioned, those are, again, a little bit earlier stages of evaluation, working with the customers to figure out exactly what their needs are and what their timing is going to be. That's really what will drive getting to a final point where we speak publicly about them specifically.

Analyst at Morgan Stanley

Okay, great. Thanks so much.

Sid McAnnally
Sid McAnnally
CEO at ONE Gas

Thank you.

Operator

Your next question is from the line of David Paz with Wolfe Research. Please go ahead.

David Paz
David Paz
Analyst at Wolfe Research

Good morning. Looking out to the back half of your plan, have the better results this year pushed you to the upper half of that 5%-7%, say, in 2029, 2030 off your current 2025 base?

Sid McAnnally
Sid McAnnally
CEO at ONE Gas

Yes, David. Thank you for the question. As you heard in our prepared remarks, we were confident moving into the upper half of the range, given performance in the first half. We have a fairly high degree of confidence as we go into the first half and are engaged in our planning for 2027. We look forward to coming back to you at the appropriate time with more insight into what 2027 looks like in the forward five-year guidance. Anything you'd add, Chris?

Chris Sighinolfi
Chris Sighinolfi
Senior VP and CFO at ONE Gas

No, I think that's right. David, if you think about, we've had some developments this year that we did not anticipate in the plan last year. The expansion of our GSRS mechanism in Kansas is one we've talked with you and others about. The conversion of some of the large load, and I think some of the maturation of what exists in the funnel and continues to be added to the funnel is additive in a way different than we thought about nine months ago, 12 months ago. Those are supportive functions that I think you're wise to pay attention to.

David Paz
David Paz
Analyst at Wolfe Research

Got it. Just following up, when you do give your update this fall, I believe, do you expect to rebase it off of a new year? Should we assume still 2025, given 2026 and 2027 are, I don't know if you want to say abnormal, but they're not in that 5%-7% range.

Chris Sighinolfi
Chris Sighinolfi
Senior VP and CFO at ONE Gas

No, you should expect from us a consistency where we would use as the base the current guidance at that time for 2026. That has been our practice since we separated from ONEOK. One of the things that you understand if you back test is that if we achieve what we aim to achieve, which is the upper half of this range, and you look at where we started in 2014, you will see a compound annual growth rate of adjusted EPS that's north of 7%, yet we've never really guided that level. The consistent outperformance that we've generated has gotten baked into the historical performance in a way that maybe doesn't get fully captured by the forward guidance.

Chris Sighinolfi
Chris Sighinolfi
Senior VP and CFO at ONE Gas

We ratchet forward every year, which means outperformance like this year, or we outperformed last year, and we outperformed in 2024, sometimes gets overlooked by forward guidance in a way when you compare it to the peer set. I think that would just focus your attention on that.

David Paz
David Paz
Analyst at Wolfe Research

Okay. All right. Thank you.

Operator

That concludes the question and answer session. I would now like to hand it back to the ONE Gas team for closing remarks.

Erin Dailey
Erin Dailey
Director of Investor Relations and Sustainability at ONE Gas

Thank you again to everyone for your interest in ONE Gas. Our quiet period for the third quarter starts when we close our books in early October and extends until we release earnings on November 2nd. We'll provide details about the conference call at a later date. Have a great day.

Operator

This concludes the ONE Gas second quarter earnings conference call and webcast. You may now disconnect.

Executives
    • Erin Dailey
      Erin Dailey
      Director of Investor Relations and Sustainability
    • Sid McAnnally
      Sid McAnnally
      CEO
    • Chris Sighinolfi
      Chris Sighinolfi
      Senior VP and CFO
    • Curtis Dinan
      Curtis Dinan
      President and COO
Analysts
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