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Good day, and welcome to the ONE Gas Fourth Quarter and Year End 2024 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.

Thank you, Adam. Good morning, and thank you for joining us to discuss our fourth quarter and year-end 2024 financial results. 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 and Exchange Act of 1934, each as amended. Actual results could differ materially from those projected in any forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer to our SEC filings. Joining me on the call this morning are Sid McAnnally, President and Chief Executive Officer; Chris Sighinolfi, Senior Vice President and Chief Financial Officer; and Curtis Dinan, Senior Vice President and Chief Operating Officer. And now I'll turn the call over to Sid.

Thanks, Erin, and good morning, everyone. I'd like to start this morning by acknowledging and thanking our coworkers, who have been working in heavy snow, ice and wind chills as low as 25 degrees below zero to keep our customers safe and warm. As always, our team in the field is rising to the challenge and remains committed to our primary objectives: providing natural gas service and prioritizing the safety and well-being of our customers and communities. They have our support and our respect. We're pleased to report that 2024 marked another successful year for ONE Gas. We're once again -- we've once again delivered earnings and capital execution as projected in our guidance, thanks to fiscal conservatism and planning our strong execution, has allowed us to perform at expected levels. Last quarter, we raised the midpoint of our EPS guidance from $3.85 to $3.90 as company-wide initiatives produced a faster pace of O&M expense moderation than we had expected and short-term interest rates dropped faster than our plan had forecast. We exceeded the midpoint of this elevated guidance, achieving full year earnings per diluted share of $3.91. We've met or exceeded the midpoint of our year-ahead EPS guidance for the 11th consecutive year, every year since our company separated from ONEOK in 2014. Alongside strong financial performance, we've also made significant strides in modernizing and reinforcing our distribution system. We completed our cast iron replacement plan in 2019, eliminating the most leak-prone pipe from our system. 2024 marked another milestone as we finished our bare steel service line replacement program in Kansas. These projects have made our systems safer and helped us reduce leak-related emissions by over 50% in 2005. Robust customer growth continues. In 2024, we set 23,000 new meters across our service territory, with growth occurring in every major metro area across our three states. There's still a need for new housing in Kansas, Oklahoma and Texas, which, together with focused economic development, is driving increased demand for natural gas across our region, a demand we are well positioned to meet. We are also exploring opportunities to supply natural gas for power generation addressing the needs of data centers, industrial applications and electric providers seeking a reliable power source. Now I'll turn it over to Chris to discuss financial details for the quarter and the year. Chris?

Thanks, Sid, and good morning, everyone. As Sid noted, with solid fourth quarter results, we surpassed the full year EPS guidance midpoint we revised higher last quarter. GAAP net income for the fourth quarter was $77 million or $1.34 per diluted share, compared with $71 million and $1.27 in the same period in 2023. For the full year, GAAP net income was $223 million or $3.91 per diluted share, compared with -- sorry, $231 million and $4.14 in 2023. Although weather across our service territory in the fourth quarter was approximately 24% warmer than normal, the impact on earnings was not material due to the effective weather normalization mechanisms we have in each of our three states. Fourth quarter revenues reflect an increase of $24.6 million from new rates, thanks to the work of our teams in successfully executing our regulatory strategy. O&M expenses for the year were up approximately 4%, highlighted by just a 2.4% year-over-year increase in the fourth quarter. Our teams have done a great job managing O&M, and the investments we're making support our growth and system modernization strategies. Excluding amounts related to KGSS-I, depreciation and amortization expense was $4.7 million higher year-over-year, reflecting an increase in net property, plant and equipment due to our elevated level of capital investment. Other income net decreased $4.6 million compared with the same quarter of 2023, primarily due to a $1.1 million unrealized decrease in the market value of investments associated with our nonqualified employee benefit plans. Comparatively, in the fourth quarter last year, these investments experienced a $3.2 million increase in value. Excluding amounts related to KGSS-I, interest expense in the quarter was $10.4 million higher year-over-year, primarily reflecting higher rates on long-term debt issuances over the past year and higher commercial paper balances. We benefited from the rate cuts instituted by the Federal Reserve last fall as we had not factored in any rate cuts in 2024. As a reminder, while the market continues to debate the pace and timing and magnitude of additional rate action from the Federal Reserve, our 2025 guidance does not assume any additional rate cuts occur. While we would be pleased to see interest rates decrease even further this year, our forecasts do not assume this will happen. In December, we settled approximately 3.16 million shares of our common stock under our at-the-market equity program and forward contracts for net proceeds of $246 million. As planned, we also amended our forward sale agreements to extend the maturity date on the remaining shares to December 31, 2025. We utilize the proceeds to pay down short-term debt, which is how we fund construction work in progress and gas storage purchases, and for other general corporate purposes. As of December 31, we had $914.6 million of commercial paper outstanding with a weighted average interest rate of 4.77%, and $45.4 million of short-term investments stemming from our equity settlements, which were used to pay down additional CP in the first days of the new year. Our balance sheet remains strong. In December, S&P affirmed its A minus credit rating and stable outlook. And earlier this month, Moody's affirmed its A3 rating and stable outlook. 2024 cash flow metrics were several hundred basis points above our respective downgrade threshold at both agencies. And our financial plan supports similar performance going forward. Our capital expenditures and asset removal costs for the fourth quarter were $190 million, bringing our total for the year to $762 million, compared with $729 million in 2023. The increase is primarily attributable to system integrity projects and the extension of service to new areas to further customer growth. As of year-end, the authorized rate base was approximately $5.4 billion, and we estimate our average rate base for 2025 will be approximately $5.8 billion. In January, the ONE Gas Board of Directors declared a dividend of $0.67 per share, an increase of $0.01 from the prior quarter. And lastly, we reiterate our 2025 financial guidance, including net income of $254 million to $261 million, earnings per diluted share of $4.20 to $4.32, and capital expenditures and asset removal costs of approximately $750 million. With that, Curtis, I'll turn it over to you.

Thank you, Chris, and good morning, everyone. I'll begin with an update on regulatory activity. As a reminder, our regulatory efforts over the past two years enable us to leverage interim mechanisms as we work to recoup our system investments and other cost increases. Texas Gas Service made Gas Reliability Infrastructure Program filings for all customers in the Central Gulf and West North service areas in February. For the Central Gulf region, we are requesting a $15.4 million revenue increase, and for the West North region, we are seeking an $8.2 million increase, both to be effective in June. The Texas GRIP filings allow us to annually seek recovery of the capital investments we are making in our system. In Oklahoma, we are required to file our performance based rate adjustment by March 15th. The PBR mechanism allows us to seek recovery of both capital investments we are making in the system and O&M increases without having to file a full rate case. Switching to an update on commercial activity, we installed just over 23,000 new meters in 2024, continuing to add customers at a healthy rate. We also continue to secure new business and entered this year with a solid pipeline of future meter sets. As we have discussed on the past several calls, the growth is occurring in step with economic development in all three states. We anticipate seeing a similar pace of residential growth in the coming year, and our capital plan is designed to meet that demand, while continuing to invest in the safety and reliability of our system. We are experiencing a significant increase in requests from businesses seeking natural gas for baseload and backup power generation for data centers and industrial load. These applications have a need for a reliable and economic energy source, and natural gas fits that need. The generation opportunities are in addition to the manufacturing growth we are experiencing along the I-35 corridor. Moving on to operations. 2024 capital execution finished strong. We completed over $750 million worth of capital investment projects over the year, with approximately $180 million dedicated to serving our growing customer base. As Sid stated, our coworkers have once again provided excellent customer service to our customers in the face of extreme weather conditions. In addition to the storm blanketing Kansas, Oklahoma and Texas this week, winter storms brought extreme cold, ice and record snowfalls to our service territory this January. As of this morning, our system continues to perform well with no significant service disruptions. The dedication of our teams has kept our customers safe and warm despite fringed temperatures. I want to sincerely thank each of them for their commitment to safety and ensuring that our customers are taken care of during these winter events. The investments we've made since winter storm Yuri, and continue to make, including increasing our storage capacity to over 60 Bcf, implementing system reinforcements and diversifying our gas supply portfolio, have enhanced our system reliability and allowed us to mitigate the impact of price fluctuations on our customers. An example of the investments we're making is the Austin system reinforcement project where we broke ground this month. This project will bring a new source of supply and further leverage our storage contracts to support increased natural gas demand in the Austin market for decades. Our available winter peak capacity will increase by approximately 25%. A new interconnection will provide increased access to natural gas index priced at the Waha Hub, which typically trades at a discount to our current sources of supply for the Austin metro. The Austin system reinforcement project was contemplated in our $750 million capital guidance for 2025 and is expected to be in service during the fourth quarter of this year. And now, I'll turn it over to Sid for closing remarks.

Thank you, both. In December, we detailed our 2025 and five-year financial outlook, highlighting the stability of our growth and the derisking of our financial plan. We will continue to strategically manage O&M while maintaining safe operations and delivering excellent customer service. Our financial plan also fosters the ongoing customer growth that Curtis mentioned, while maintaining the reliability and affordability our customers enjoy. As we begin 2025, we renew our commitment to create long-term value for all of our stakeholders. We're fortunate to operate in a region where natural gas is highly valued and in demand. And as the Austin system reinforcement project demonstrates, we're building the infrastructure and providing the energy to meet that growing demand. The dedication of our 3,900 coworkers drives our success, and I'm privileged to work alongside them every day. Thank you all for joining us this morning. Operator, we're now ready for questions.

Thank you. [Operator Instructions] Our first question comes from Julien Dumoulin-Smith from Jefferies. Julien, your line is open. Please go ahead.

Hi, guys. It's James Ward on for Julien. How are you?

Good morning, James.

Good. Thank you.

Good to hear from you this morning.

Good morning. Likewise. It's another one of those busy Thursdays. I think there's about nine companies that also had to get in the mix today. So we wanted to make sure that we had a presence here on your call.

We're glad you could join.

Thank you for that. We have some questions. You mentioned in the prepared remarks around potential upside around an opportunity set akin to data centers. I guess, I'm using that tangentially because it's not the direct capacity that you'd be building, but it's obviously integral to the functioning and to them choosing to locate in the area. What we're trying to understand is a three-year rule. So we've been told by several management teams, at several utilities that, when they sign a deal and announce it, it's going to be about three years until the data center is finished, and that's where they would look to line up when they would have generation online, transmission lined up, et cetera. Are you hearing similar to the opportunity set you're looking at? Or how should we think about if something were to come to fruition when it might fit into your capital plans? Thank you.

James, thank you for the question. Before asking Curtis to speak specifically to data centers, I want to just highlight the fact that we are fortunate to be in states, particularly Oklahoma and Texas that have robust economic development opportunities and are well-funded to pursue those opportunities. So one of the things that's interesting about our service territory is the diversity that we see. That's why we mentioned not only data center opportunities, but also industrials, electric generation. We're just seeing a broad range of opportunities presented to us and it gives us the opportunity to be selective in what we choose to pursue. Curtis?

James, what I would say about those is the opportunity set -- the timeframe of the opportunity set varies. There are some that are a little bit quicker than what you described and then there are some in the situation closer to what you described. And I think the difference is, and it fits with the type of opportunities we're pursuing, those that are in and around our system where we can leverage the system that we already have, as well as future plans we have around other growth opportunities or investments we're making in the system. So for us, it's more of an opportunity to get the investments that line up several of our objectives, not just a single opportunity to serve a data center, industrial load or something of that nature.

Got it. Thank you very much. Hope talking with you again.

The next question comes from Christopher Jeffrey from Mizuho. Christopher, your line is open. Please go ahead.

Good morning, everyone. Thanks for taking my question. Maybe just shifting more towards first quarter and 2025. We had some warm weather in 4Q, the weather has gotten significantly colder in 1Q. Just kind of curious the impact on your working capital as far as monetizing storage and potentially lowering that or addressing the commercial paper balance and kind of maybe where the commercial paper balance compares to your expectations originally with the '25 guide.

Yes. Thanks, Chris. You'll note, as I detailed in the prepared remarks, we were a little bit elevated at the end of the year relative to what we had discussed last fall. And a primary component of that is the dynamic you spoke about, 24% warmer-than-normal weather dynamic in the fourth quarter meant, we did not liquidate as quickly the storage inventories that we had contemplated. In addition, you'll note, we're a little bit higher than the $750 million capital budget at $762 million. And then I did note, hopefully, you picked up on it, the short-term investments that were used to settle CP in the early days of January. If you think about storage inventory, we began this year, about 500 basis points wide of our plan. But with the cold weather, it was very cold in January, it's been very cold so far, colder than normal in January and in February, we are now in line with our plans in terms of storage. And so we'll see that as that gets built out and paid off, we'll see that come in. It should be very strong cash flow quarter here in the first quarter.

Great. Thank you, Chris. And then maybe just touching on O&M, kind of came in pretty solid for 4Q at about 2%, 2.5%. Just kind of curious, any updated thoughts on '25 kind of versus that 4% number you've thrown out for the longer-term plan?

Chris, this is Curtis. And what I would say is, we came in better in the fourth quarter. We just achieved some of the goals that we had for some of the initiatives that we've talked about in the past several calls. And so we were a little bit ahead of schedule, and that helped us in the fourth quarter. At this point, our guidance for 2025 and what's included in the 5 years, we don't have a change to any of either of those numbers.

Great. Thanks guys.

The next question comes from Paul Fremont from Ladenburg. Paul, your line is open. Please go ahead.

Great. Congratulations on a good fourth quarter. Can you give us a sense of where you would expect to end this year within the guidance range that you've given out? I know that you had originally talked about sort of wanting to be at the high end of your 4 to 6. Does that apply to the range that you've given for this year as well?

Hi Paul, this is Chris. No, not specifically. I do think, to take note of what Sid mentioned in his prepared remarks around the historical performance of the company would be worthwhile. Sid had noted, there have been 11 years of independent financial results since we separated in 2014, and in all 11, we've achieved at least the midpoint of our year ahead guidance. That's, I think, as much as I would point you to in terms of specificity around the range. You're right to highlight that over the 5-year plan, we were pretty explicit about the plan calling for the absolute high end of that range over the '25 to '29 period.

And then the other question for me is, I guess, there are 2 transmission systems that are being considered by Texas, a 765 kV versus a 345. Does that impact at all the prospects for data center development in the areas or in the opportunities that you're seeing?

Paul, this is Curtis. And it does not. These are independent of those projects. The inquiries that we're getting are really around providing gas to run baseload generation initially and, maybe over the long term, transmission lines get built. But that's not the initial focus of these projects and what the requests are for service.

Right. No, my question is more, do you see a significant difference in your opportunities to provide gas to new generation based on which transmission decision ERCOT makes in May?

The opportunities we're responding to are not contingent upon that. They're in developed areas where it's not waiting on the decision you're referencing.

Great. Thank you.

Thanks for the question, Paul.

[Operator Instructions] This concludes the question-and-answer session. I would now like to hand it back to the ONE Gas team for closing remarks.

Thank you all again for your interest in ONE Gas. We look forward to seeing many of you in New York in March. Our quiet period for the first quarter starts when we close our books in early April and extends until we release earnings in May. We'll provide details on the conference call at a later date. Have a great day.