ONE Gas, Inc. came out this week with a financial guidance for 2022 and an update of its five-year growth rates.
The company said it had narrowed its 2021 financial guidance range and had a new goal for emissions reduction from its vintage pipeline replacement program.
“We are expanding our core business by capitalizing on the significant organic growth opportunities in our service territory,” said Robert S. McAnnally, president and chief executive officer. “Our focus on growth while reducing emissions leverages the unique opportunities presented by our assets to meet our customers’ demand for affordable, reliable and renewable energy, now and into the future.”
2022 FINANCIAL GUIDANCE
ONE Gas expects 2022 net income to be in the range of $215 million to $227 million, with earnings per diluted share of $3.96 to $4.20. The midpoint of 2022 guidance is net income of $221 million and earnings per diluted share of $4.08.
The company’s 2022 earnings guidance includes the benefit of new rates and customer growth, offset by higher operating expenses, including depreciation expense from capital investments, and assumes normal weather.
Capital investments, including asset removal costs, are expected to be approximately $650 million in 2022, a 20% increase from 2021. Over 65% of these expenditures are targeted for system integrity and replacement projects. Capital investments for extensions to new customers are expected to be approximately $190 million, an increase of over 25% from 2021, primarily due to significant growth opportunities in Texas and Oklahoma. The anticipated average rate base for 2022 is $4.64 billion, calculated consistent with utility ratemaking in each jurisdiction.
As previously announced, the ONE Gas board of directors increased the first quarter dividend to $0.62 per share, resulting in an annualized dividend (subject to board of directors’ approval) of $2.48 per share, an increase of 6.9% over 2021.
FIVE-YEAR FINANCIAL GROWTH RATES
For the five years ending 2026, capital investments, including asset removal costs, are expected to be in the range of $650 million to $750 million per year, or approximately $3.5 billion for the five-year period, an increase of 19% from the previous five-year plan. The increase in capital supports estimated average rate base growth of 8% to 9% per year through 2026, an increase from the prior five-year forecast of 7% to 8%.
While continuing to allocate more than 65% of total capital investments to system integrity and replacement projects, the Company anticipates strong growth, primarily in Texas and Oklahoma. Over the five-year period ending 2026, growth capital is estimated to be approximately $1.1 billion, an increase of 23% from the previous five-year plan.
Net income is expected to increase by an average of 8% to 10% annually through 2026, up from 6% to 8%, with diluted earnings per share now at 6% to 8%, up from 5% to 7%.
Operating costs over the five years are expected to increase on average approximately 4% per year.
ONE Gas estimates total net financing needs for the period 2022 through 2026 of approximately $1.6 billion, of which approximately 25% is expected to be equity.
The average annual dividend growth rate is expected to remain 6% to 8% through 2026, subject to board of directors’ approval, with a target dividend payout ratio of 55% to 65% of net income.
2021 FINANCIAL GUIDANCE
The Company also narrowed its 2021 guidance to earnings of $3.83 to $3.87 per diluted share from the previous range of $3.80 to $3.90 per diluted share. Net income is now expected to be in the range of $206 million to $208 million. Capital investments are still expected to be $540 million.
NEW EMISSIONS REDUCTION GOAL
ONE Gas believes that natural gas assets will continue to play a pivotal role in ushering in a cleaner energy future and that it is uniquely positioned to deliver affordable, reliable and renewable energy to customers, now and into the future. The Company continues to lower methane emissions from its distribution operations through pipeline replacement, damage prevention and other operational practices. By 2035, ONE Gas expects to achieve a 55% reduction in emissions due to leaks from its distribution pipelines, measured from a 2005 baseline and accounting for projected system growth. The Company expects to achieve this goal primarily through its vintage pipeline replacement and protection program.
ONE Gas said it was pursuing other opportunities to lower net methane emissions, including transporting renewable natural gas (RNG) on its system. To date, the Company had executed eight letter agreements for biogas development projects that are expected to produce up to one billion cubic feet of RNG per year. Also, in its recent rate case, Oklahoma Natural Gas was authorized to spend $5 million annually to purchase RNG as part of its natural gas supply portfolio and recover the cost through its purchased gas-cost mechanism.
Source: press release