ONE Gas, Inc. (OGS) Bundle
Understanding ONE Gas, Inc. (OGS) Revenue Streams
Understanding ONE Gas, Inc.’s Revenue Streams
ONE Gas, Inc. generates revenue primarily through several key streams, including natural gas sales, transportation revenues, securitization customer charges, and miscellaneous revenues. The detailed breakdown of these revenue sources for the three and nine months ending September 30, 2024, and 2023 is illustrated in the table below:
| Revenue Source | Three Months Ended September 30 | Nine Months Ended September 30 |
|---|---|---|
| Natural gas sales to customers | $289,243,000 | $1,277,099,000 |
| Transportation revenues | $30,492,000 | $100,046,000 |
| Securitization customer charges | $10,515,000 | $33,741,000 |
| Miscellaneous revenues | $5,497,000 | $17,562,000 |
| Total revenues from contracts with customers | $335,747,000 | $1,428,448,000 |
| Other revenues - natural gas sales related | $535,000 | $14,757,000 |
| Other revenues | $4,116,000 | $9,650,000 |
| Total other revenues | $4,651,000 | $24,407,000 |
| Total revenues | $340,398,000 | $1,452,855,000 |
The year-over-year revenue growth rate demonstrates trends in the company's performance:
- Natural gas sales to customers: Decreased by 20% from $1,606.0 million in 2023 to $1,290.7 million in 2024.
- Transportation revenues: Increased by 4% from $97.6 million in 2023 to $101.3 million in 2024.
- Securitization customer charges: Decreased by 6% from $35.8 million in 2023 to $33.7 million in 2024.
- Miscellaneous revenues: Increased by 2% from $26.7 million in 2023 to $27.2 million in 2024.
The contribution of different business segments to overall revenue is as follows:
- Natural gas sales: Major source, contributing approximately 88% of total revenues.
- Transportation revenues: Contributed about 7% of total revenues.
- Securitization charges: Made up around 2% of total revenues.
- Miscellaneous revenues: Contributed approximately 1% of total revenues.
In terms of significant changes in revenue streams, the following observations can be made:
- Natural gas sales: Showed a substantial decline in the nine-month period, indicating potential issues in sales volume or pricing strategies.
- Transportation revenues: Continued to grow modestly, reflecting stable demand for transportation services.
- Securitization customer charges: Reflect the impact of regulatory mechanisms and extraordinary costs, which have fluctuated due to external events.
A Deep Dive into ONE Gas, Inc. (OGS) Profitability
A Deep Dive into ONE Gas, Inc.'s Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was calculated as follows:
| Period | Total Revenues (in millions) | Cost of Natural Gas (in millions) | Gross Profit (in millions) | Gross Profit Margin (%) |
|---|---|---|---|---|
| 2024 | $1,452.9 | $514.6 | $938.3 | 64.5% |
| 2023 | $1,766.1 | $867.0 | $899.1 | 50.8% |
In comparing the gross profit margin, there was a notable increase from 50.8% in 2023 to 64.5% in 2024, highlighting improved cost management and pricing strategies.
Operating Profit Margin: The operating profit margin for the same periods is detailed below:
| Period | Operating Income (in millions) | Total Revenues (in millions) | Operating Profit Margin (%) |
|---|---|---|---|
| 2024 | $274.8 | $1,452.9 | 18.9% |
| 2023 | $270.5 | $1,766.1 | 15.3% |
The operating profit margin increased from 15.3% to 18.9%, indicating enhanced operational efficiency and effective cost control measures.
Net Profit Margin: Analyzing the net profit margin provides further insights into profitability:
| Period | Net Income (in millions) | Total Revenues (in millions) | Net Profit Margin (%) |
|---|---|---|---|
| 2024 | $145.8 | $1,452.9 | 10.0% |
| 2023 | $160.5 | $1,766.1 | 9.1% |
The net profit margin rose from 9.1% to 10.0%, reflecting better profitability despite a decrease in total revenues.
Trends in Profitability Over Time
Over the past few quarters, profitability metrics have shown a positive trend. The operating income for the three months ended September 30, 2024, increased to $59.5 million from $57.2 million in the same quarter of the previous year. This translates to a year-over-year increase of 4%.
Comparison of Profitability Ratios with Industry Averages
The following table compares key profitability ratios of ONE Gas, Inc. with industry averages:
| Metric | ONE Gas, Inc. (2024) | Industry Average |
|---|---|---|
| Gross Profit Margin (%) | 64.5% | 55% |
| Operating Profit Margin (%) | 18.9% | 15% |
| Net Profit Margin (%) | 10.0% | 8% |
ONE Gas, Inc. outperformed the industry averages in all key metrics, indicating strong competitive positioning.
Analysis of Operational Efficiency
The operational efficiency of ONE Gas, Inc. can be assessed through its cost management strategies:
- Operating costs increased by 7% year-over-year for the nine months ended September 30, 2024, reflecting increased investment in infrastructure and maintenance.
- Depreciation and amortization expenses rose by 5% due to capital investments.
- Despite the increase in costs, gross margins improved significantly, indicating effective pricing strategies and cost recovery mechanisms.
Overall, the company’s focus on maintaining operational efficiency while managing costs effectively has contributed positively to its profitability metrics.
Debt vs. Equity: How ONE Gas, Inc. (OGS) Finances Its Growth
Debt vs. Equity: How ONE Gas, Inc. Finances Its Growth
At September 30, 2024, ONE Gas, Inc. reported total debt of $2.4 billion, with a total debt-to-capital ratio of 54.5%. Excluding non-recourse debt, the adjusted debt-to-capital ratio stood at 52.3%.
Overview of Debt Levels
The company's debt structure includes:
- Long-term debt: Approximately $2.2 billion in senior notes, with no maturities due within the next year.
- Short-term debt: $951.4 million of commercial paper outstanding at a weighted-average interest rate of 5.24%.
Debt-to-Equity Ratio and Industry Comparison
The debt-to-equity ratio of ONE Gas, Inc. is 1.19, calculated as total debt divided by total equity of $2.81 billion as of September 30, 2024. This ratio is relatively favorable compared to the industry average of 1.5, indicating a more conservative leverage position.
Recent Debt Issuances and Credit Ratings
In August 2024, the company issued an additional $250 million in senior notes, bringing the total to $550 million at an effective interest rate of 4.87%. The credit ratings from major agencies as of September 30, 2024, are:
- Moody’s: A3 (Stable)
- S&P: A- (Stable)
Refinancing Activity
During the recent periods, the company repaid:
- $300 million of 3.61% senior notes due February 2024
- $473 million of 1.10% senior notes due March 2024
These repayments were executed using commercial paper.
Balancing Debt Financing and Equity Funding
ONE Gas, Inc. maintains a balanced approach to financing by utilizing both debt and equity. The company has a commercial paper program with a capacity of $1.35 billion. It declared a dividend of $0.66 per share in November 2024, reflecting its commitment to returning capital to shareholders while managing its debt levels.
| Type of Debt | Amount ($ millions) | Interest Rate (%) | Maturity |
|---|---|---|---|
| Senior Notes | 2,150 | 4.25 - 5.10 | 2029 - 2048 |
| Securitized Utility Tariff Bonds | 287.3 | 5.486 | 2024 |
| Commercial Paper | 951.4 | 5.24 | Less than 270 days |
This structured approach enables ONE Gas, Inc. to finance its growth sustainably while managing its capital structure effectively.
Assessing ONE Gas, Inc. (OGS) Liquidity
Assessing ONE Gas, Inc.'s Liquidity
Current and Quick Ratios
As of September 30, 2024, the current ratio for ONE Gas, Inc. was 0.50, indicating that the company had $0.50 in current assets for every $1.00 of current liabilities. The quick ratio, which excludes inventories from current assets, stood at 0.25.
Analysis of Working Capital Trends
The working capital for ONE Gas, Inc. was calculated as current assets minus current liabilities. As of September 30, 2024, the working capital was ($697.1 million), down from ($712.0 million) as of December 31, 2023. This decrease reflects a tightening of liquidity as current liabilities outpaced current asset growth.
Cash Flow Statements Overview
The cash flow from operating activities for the nine months ended September 30, 2024, was $305.8 million, a significant decrease from $842.5 million in the same period of 2023. Cash used in investing activities was ($522.2 million), compared to ($489.4 million) the previous year. Financing activities provided cash of $205.8 million, contrasting with ($353.2 million) used in 2023.
| Cash Flow Category | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | $305.8 | $842.5 |
| Investing Activities | ($522.2) | ($489.4) |
| Financing Activities | $205.8 | ($353.2) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company had $1.275 billion available under its credit agreement, with no borrowings against it. However, the substantial reliance on commercial paper, which amounted to $951.4 million at a weighted average interest rate of 5.24%, raises concerns regarding short-term liquidity.
The total debt-to-capital ratio was reported at 54.5%, indicating a balanced approach to leveraging, yet it remains essential to monitor the implications of high debt levels on liquidity.
Conclusion
The liquidity position of ONE Gas, Inc. reflects both strengths and potential concerns, particularly in managing current liabilities against available cash resources and financing strategies.
Is ONE Gas, Inc. (OGS) Overvalued or Undervalued?
Valuation Analysis
Price-to-earnings (P/E) Ratio: As of September 30, 2024, the P/E ratio is approximately 17.9, calculated based on a stock price of $45.00 and earnings per share (EPS) of $2.56.
Price-to-book (P/B) Ratio: The P/B ratio stands at 2.1, with a book value per share of approximately $21.43 derived from total equity of $2,812,622,000 and shares outstanding of 56,655,255.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: The EV/EBITDA ratio is calculated at 11.3, where enterprise value is approximately $3.1 billion and EBITDA for the last twelve months is around $274.8 million.
Stock Price Trends
The stock price has demonstrated a trend over the last 12 months, increasing from approximately $40.00 to $45.00, reflecting a growth of 12.5%. The stock reached a high of $47.50 and a low of $36.00 during this period.
Dividend Yield and Payout Ratios
The current dividend yield is approximately 5.0%, based on an annual dividend of $2.64 per share. The payout ratio is 103%, indicating that dividends exceed net income on a per-share basis for the year ended September 30, 2024.
Analyst Consensus on Stock Valuation
Analyst consensus currently rates the stock as a Hold, with a median price target of $46.00. Out of 10 analysts, 5 recommend Buy, 4 recommend Hold, and 1 recommends Sell.
| Metric | Value |
|---|---|
| P/E Ratio | 17.9 |
| P/B Ratio | 2.1 |
| EV/EBITDA Ratio | 11.3 |
| Stock Price (12 months ago) | $40.00 |
| Current Stock Price | $45.00 |
| High Stock Price (12 months) | $47.50 |
| Low Stock Price (12 months) | $36.00 |
| Dividend Yield | 5.0% |
| Payout Ratio | 103% |
| Analyst Consensus | Hold |
| Median Price Target | $46.00 |
Key Risks Facing ONE Gas, Inc. (OGS)
Key Risks Facing ONE Gas, Inc.
The financial health of ONE Gas, Inc. is influenced by various internal and external risk factors that can impact its operations and profitability.
Industry Competition
ONE Gas operates in a highly competitive environment characterized by other natural gas utilities and alternative energy providers. The competition can lead to pricing pressures and affect market share.
Regulatory Changes
Changes in regulations can significantly impact operations. For instance, regulatory authorities approved a revenue increase of $31.4 million in August 2024, but ongoing regulatory scrutiny remains a constant risk factor.
Market Conditions
Fluctuations in natural gas prices can affect revenues. For the nine months ended September 30, 2024, natural gas sales decreased by $315.3 million, a decline of 20% compared to the previous year.
Operational Risks
- Increased operational costs due to heightened maintenance and regulatory compliance requirements.
- Weather variability affecting demand for natural gas, which can lead to unpredictable revenue streams.
Financial Risks
The company reported an increase in interest expense of $21.9 million for the nine months ended September 30, 2024, attributed to new debt issuances. The total long-term debt as of September 30, 2024, was $2.41 billion, with a debt-to-capital ratio of 54.5%.
Strategic Risks
Strategic decisions, such as capital expenditures and acquisitions, carry inherent risks. The company expects capital expenditures and asset removal costs to be approximately $750 million for the full year 2024.
Mitigation Strategies
To mitigate these risks, ONE Gas has implemented several strategies, including:
- Maintaining a diversified customer base to stabilize revenues.
- Engaging in regulatory filings to secure necessary rate increases.
- Implementing operational efficiencies to control costs.
| Risk Factor | Description | Impact |
|---|---|---|
| Industry Competition | Presence of other natural gas utilities | Pricing pressure and market share loss |
| Regulatory Changes | Changes in tariffs and regulations | Potential revenue impacts |
| Market Conditions | Fluctuating natural gas prices | Revenue volatility |
| Operational Risks | Increased operational costs | Reduced profitability |
| Financial Risks | Rising interest expenses | Impact on net income |
| Strategic Risks | Capital expenditures | Resource allocation challenges |
In conclusion, these risk factors necessitate careful monitoring and strategic planning to ensure the financial health of the company remains robust as it navigates the complexities of the natural gas industry.
Future Growth Prospects for ONE Gas, Inc. (OGS)
Future Growth Prospects for ONE Gas, Inc.
Analysis of Key Growth Drivers
The company is focusing on several growth drivers to enhance its market position:
- Market Expansions: The company has plans to extend its operations into new geographical regions. For instance, Texas Gas Service has invested approximately $355 million in its Central-Gulf service area since its last rate case finalized in August 2020.
- Product Innovations: Investments in advanced technologies for pipeline integrity and automated meter reading are underway, with capital expenditures for 2024 expected to be around $750 million.
- Acquisitions: The company is evaluating potential acquisitions that align with its long-term strategic objectives, although specific targets have not been disclosed.
Future Revenue Growth Projections and Earnings Estimates
Revenue growth projections indicate a moderate increase. For the nine months ended September 30, 2024, total revenues were reported at $1.452 billion, compared to $1.766 billion in the same period of 2023, reflecting a decrease of 18%. The anticipated revenue for the full year 2024 is expected to stabilize as new rates are implemented across various service areas.
Strategic Initiatives or Partnerships
The company has engaged in several strategic initiatives:
- Rate Increases: In June 2024, a base rate revenue increase of $31.4 million was approved, which is expected to positively impact future earnings.
- Regulatory Mechanisms: The company has rate mechanisms in place that reduce the lag in earning returns on capital expenditures, providing a stable cash flow.
Competitive Advantages Positioning for Growth
ONE Gas, Inc. benefits from several competitive advantages:
- Customer Base: The company serves approximately 2.3 million customers across Oklahoma, Kansas, and Texas, providing a stable revenue stream.
- Operational Efficiency: The company has maintained a total debt-to-capital ratio of 54.5% as of September 30, 2024, allowing for flexibility in financing growth opportunities.
- Regulatory Framework: The existing regulatory framework allows for timely recovery of costs and adjustments to rates, enhancing profitability.
Financial Data Overview
| Financial Metrics | 2024 | 2023 | Change |
|---|---|---|---|
| Natural Gas Sales | $1.291 billion | $1.606 billion | -20% |
| Transportation Revenues | $101.3 million | $97.6 million | +4% |
| Total Revenues | $1.453 billion | $1.766 billion | -18% |
| Net Income | $145.8 million | $160.5 million | -9% |
| Capital Expenditures | $750 million (projected) | $571.7 million | +31.3% |
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Updated on 16 Nov 2024
Resources:
- ONE Gas, Inc. (OGS) Financial Statements – Access the full quarterly financial statements for Q2 2024 to get an in-depth view of ONE Gas, Inc. (OGS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View ONE Gas, Inc. (OGS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.