ONE Gas, Inc.

What they do

ONE Gas distributes natural gas to residential, commercial, and transportation customers through three divisions: Oklahoma Natural Gas, Kansas Gas Service, and Texas Gas Service. It is the largest natural gas distributor in Oklahoma and Kansas and the third largest in Texas by customers, with major markets including Oklahoma City, Tulsa, Kansas City, Wichita, Topeka, Austin, and El Paso. The company does not earn a profit on the natural gas commodity itself, which is passed through to customers at cost; revenues come from regulated delivery rates and charges set by state and local authorities.

Revenue drivers

• Natural gas sales — Largest revenue line at $357.8 million in Q2 2026 and $1,127.7 million in the first half of 2026; includes recovery of natural gas costs passed through at cost plus fixed and variable rate components, with the variable portion tied to consumption and weather.
• Transportation revenues — Generated $31.8 million in Q2 2026 and $71.9 million in the first half of 2026 from delivering gas for transportation customers; the first half of 2026 included $1.8 million from released transportation capacity to other shippers in Kansas.
• Securitization customer charges — Contributed $10.9 million in Q2 2026 and $21.9 million in the first half of 2026, down from the prior-year periods, tied to securitized bond charges such as KGSS-I.
• Other revenues — Smallest line at $11.1 million in Q2 2026 and $21.8 million in the first half of 2026, including items such as line extension revenue in Oklahoma.

Recent performance

For the three months ended June 30, 2026, ONE Gas reported net income of $46.8 million, or $0.74 per diluted share, versus $32.0 million, or $0.53 per diluted share, a year earlier, while adjusted net income was $52.1 million, or $0.82 per diluted share. First-half 2026 net income was $175.5 million, or $2.78 per diluted share, compared with $151.5 million, or $2.51 per diluted share, in the first half of 2025; adjusted net income was $185.5 million, or $2.94 per diluted share. Q2 2026 operating income was $82.7 million versus $71.9 million a year earlier, driven by $16.4 million in new-rate revenue, partially offset by higher employee-related, outside services, and fleet costs. Weather for the quarter was 42 percent warmer than normal and 28 percent warmer than the prior year, with the operating income impact mitigated by weather normalization mechanisms. Capital expenditures and asset removal costs were $188.3 million in Q2 2026, down slightly from $190.1 million a year earlier.

Strategy

ONE Gas describes its strategy around safe operations, capital investments in system safety, integrity, and reliability, customer service, and delivering natural gas as a foundational energy source. In December 2025 it announced an infrastructure initiative in southeast Oklahoma: a 43-mile pipeline connecting to the Bennington Natural Gas Hub, expected to deliver over 100 Bcf annually and to serve Western Farmers Electric Cooperative's Hugo generation plant, at an investment of approximately $120 million, with completion expected by the third quarter of 2028. It has expanded financial capacity, raising the ONE Gas Credit Agreement to $1.5 billion with a term to October 30, 2030, and increasing commercial paper capacity to $1.5 billion. The company has also raised equity, settling forward sale agreements for 2,633,700 shares for net proceeds of $205.0 million in December 2025, with a separate 2,500,000-share forward sale agreement outstanding as of the 10-K. Management uses adjusted net income and adjusted EPS as non-GAAP measures to evaluate performance, specifically for regulatory mechanisms designed to mitigate regulatory lag.

Risks

• Operational hazards — Leaks, accidents, pipeline ruptures, third-party damage, equipment failures, and catastrophic events such as severe weather could cause legal liability, repair and remediation costs, regulatory fines, and increased capital expenditures, and insurance is subject to limits, deductibles, and exclusions.
• Regulatory lag and rate outcomes — Rates are set through rate cases and adjustment mechanisms by the OCC, KCC, Texas cities, and the RRC, and there is an inherent lag between investments or costs incurred and recovery, with some costs not recoverable at all.
• Weather variability — The variable component of rates depends on natural gas consumption, which is driven primarily by weather, and weather normalization mechanisms cover only a portion of the year except in Kansas and do not offset all usage fluctuations.
• Changing integrity and environmental requirements — Pipeline integrity, pipeline and cyber security, and environmental compliance requirements affect operating expenses and capital expenditures, and the company spends to comply with no assurance about if, or over what period, recovery will be permitted.

Outlook

On August 4, 2026, ONE Gas raised its 2026 adjusted net income expectations to the upper half of the previously announced $306 million to $314 million range and its adjusted earnings per diluted share expectations to the upper half of the $4.83 to $4.95 range. Management cited strong second-quarter and first-half results, continued execution of its growth strategy, and the benefits of operating in constructive jurisdictions, while maintaining focus on reliability and affordability. The company also declared a third-quarter dividend of $0.68 per share, or $2.72 annualized, payable August 31, 2026. Separately, the southeast Oklahoma infrastructure initiative is expected to be completed by the third quarter of 2028.