What ONE Gas (OGS) Said on Its Q3 Earnings Call

Key Points

• ONE Gas raised its 2026 outlook after third-quarter adjusted EPS rose 13% year over year to $0.53. It now expects adjusted EPS of $4.95–$5.01 and adjusted net income of $313 million–$317 million.
• Operating and maintenance expense was flat year over year in Q3 despite higher activity and costs, improving from a 7.5% increase in the first half. New rates, customer growth, Texas regulatory changes and cost controls contributed to stronger operating income.
• ONE Gas is pursuing a growing large-load project pipeline, with eight late-stage projects representing about 3 gigawatts of generation and potential demand of up to 1 billion cubic feet per day. The company is targeting roughly $800 million in 2026 capital investment and says its financing needs for the year are covered.

ONE Gas NYSE: OGS raised its full-year 2026 earnings outlook after reporting third-quarter adjusted earnings per share of $0.53, up 13% from $0.47 in the prior-year period. Management cited new rates, customer growth, lower regulatory lag in Texas and improved operating expense performance as key contributors.

The company now expects 2026 adjusted earnings per share of $4.95 to $5.01 and adjusted net income of $313 million to $317 million. The updated EPS range is above the company’s previously raised forecast and entirely above its original 2026 guidance, Chief Executive Officer Sid McAnnally said.

“Our strategy is working,” McAnnally said, pointing to constructive regulatory frameworks, disciplined cost management and continued customer growth. He also said the company’s financing plan for 2026 is complete and that it has no additional equity needs this year.

Operating Expenses Hold Flat Despite Higher Activity

Senior Vice President and Chief Financial Officer Chris Sighinolfi said no single item drove the quarter’s improvement. New rates, customer growth, benefits from Texas House Bill 4384 and a better operating and maintenance expense trend all contributed to higher operating income.

O&M expense was essentially flat from a year earlier in the third quarter, an improvement from the 7.5% year-over-year increase recorded during the first half of 2026. The company faced higher activity and cost pressures during the quarter, including a more than 7% increase in line-locate ticket volumes, nearly $1.5 million in additional auto fuel expense and higher employee-related costs.

Sighinolfi attributed the expense performance to insourcing initiatives, tighter work planning and daily cost controls. ONE Gas expects moderate O&M growth in the fourth quarter and reaffirmed its longer-term expectation for annual O&M growth of 3% to 4%.

The company also recorded $3.7 million in capacity-release benefits through the first nine months of the year, with an equal amount captured by customers under applicable sharing mechanisms. Sighinolfi said the gas supply team used available transportation capacity after entering refill season with more storage gas than planned.

Rate Mechanisms Add Revenue Visibility

ONE Gas said its 2026 interim rate filings are complete, with current rates in Kansas, Texas and Oklahoma reflecting the full amounts requested in the respective filings.

• In Kansas, the Gas System Reliability Surcharge took effect in October and provides a $14.3 million annual revenue increase.
• In Texas, the company’s first statewide Gas Reliability Infrastructure Program filing became effective in July and provides a $36.9 million annual revenue increase.
• In Oklahoma, interim rates under the company’s Performance-Based Rate Change application became effective in June and provide a $28.7 million annual revenue increase.

Sighinolfi said Texas House Bill 4384 remains an important earnings driver because it reduces regulatory lag for eligible capital placed into service between rate filings. While the third-quarter contribution was smaller than in earlier quarters, he said the eligible capital balance is expected to build again as additional investments enter service.

The Oklahoma Corporation Commission approved an administrative law judge’s recommendation in mid-October related to the company’s Performance-Based Rate Change application. ONE Gas expects to file its next Oklahoma general rate case in 2027, as required by its tariff.

Capital Plan and Large-Load Pipeline

President and Chief Operating Officer Curtis Dinan said the company completed about $229 million of projects in the third quarter and $587 million through September. ONE Gas continues to target roughly $800 million in capital investment for the full year, with most spending supporting system integrity, safety and reliability.

Management also emphasized an expanding set of commercial, industrial and large-load opportunities. Dinan said four projects under development represent approximately $22 million in additional annual revenue and $200 million of associated capital.

A data center project in Oklahoma City is complete, with the customer expected to initiate service in November. The company also completed a project for an advanced manufacturing facility in El Paso that will support 100 megawatts of on-site generation.

In Texas, ONE Gas is finalizing an LNG-related project that was not in its funnel during the second-quarter call. The company expects construction to begin during the fourth quarter and for the project to enter service in the first quarter of 2027. Dinan said the project primarily uses existing infrastructure, reducing execution time and incremental capital needs.

The company’s Western Farmers project remains its largest development project and is still expected to enter service in the third quarter of 2028. The project involves construction of a 43-mile, 24-inch pipeline to support a gas-fired generation facility in southern Oklahoma.

ONE Gas has eight projects in late-stage development representing approximately 3 gigawatts of generation and up to 1 billion cubic feet per day of potential demand, Dinan said. It also has 20 additional opportunities in earlier stages of evaluation. Management did not provide capital estimates for the eight late-stage projects, citing ongoing commercial negotiations and varying levels of customer funding.

Financing and Outlook

The company said its 2026 equity needs are covered by existing forward sale agreements at approximately $82 per share. In August, ONE Gas issued 10-year senior notes with a 5.45% coupon, addressing its long-term credit financing needs for the year. Its next debt maturity is not due until the second quarter of 2029.

Sighinolfi said that, at average planned commercial-paper levels, a hypothetical 100-basis-point full-year change in the federal funds rate would affect full-year adjusted EPS by roughly $0.09. The company said long-term debt costs are recoverable through customer rates.

The board declared a quarterly dividend of $0.68 per share, unchanged from the previous quarter. ONE Gas plans to provide 2027 guidance and an updated long-term outlook in early December.

About ONE Gas (NYSE:OGS)

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