ONE Gas, Inc. (OGS): Business Model Canvas [11-2024 Updated]

Understanding the business model of ONE Gas, Inc. (OGS) reveals how this essential utility provider operates in the competitive natural gas industry. With a focus on reliable supply and customer satisfaction, OGS leverages key partnerships, a robust infrastructure, and a commitment to safety. This blog post delves into the components of their business model canvas, highlighting their strategies for cost management and revenue generation. Discover how OGS navigates regulatory landscapes and enhances customer relationships to maintain its position as a leader in natural gas distribution.

ONE Gas, Inc. (OGS) - Business Model: Key Partnerships

Collaborations with state regulatory agencies

ONE Gas, Inc. engages with multiple state regulatory agencies, including the Kansas Corporation Commission (KCC), the Railroad Commission of Texas (RRC), and the Oklahoma Corporation Commission (OCC), to ensure compliance with regulations governing natural gas distribution. In 2024, the KCC approved a $33.7 million securitization customer charge to recover costs related to Winter Storm Uri . Furthermore, the RRC and municipalities approved a rate increase of $3.6 million effective September 2024, demonstrating the ongoing interactions with regulatory bodies to adapt to changing market conditions and maintain service reliability .

Partnerships with natural gas suppliers

ONE Gas maintains strategic partnerships with various natural gas suppliers to ensure a stable supply chain. The company reported natural gas sales of $1.29 billion for the nine months ending September 30, 2024, reflecting a decrease of 20% from the prior year due to fluctuating market prices . These partnerships are essential for managing procurement costs and securing favorable pricing, impacting overall operational efficiency and profitability.

Relationships with local construction firms for infrastructure projects

The company collaborates with local construction firms to enhance its infrastructure projects. In 2024, ONE Gas allocated approximately $571.7 million towards capital expenditures, which includes investments in system integrity and extending service to new areas . This collaboration is crucial for maintaining and upgrading the distribution network, ensuring that the infrastructure can support the growing customer base of approximately 2.3 million across Oklahoma, Kansas, and Texas .

Alliances with technology providers for operational efficiency

ONE Gas partners with technology providers to improve operational efficiency and customer service. The adoption of advanced technologies has been a focus area, with significant investments in IT systems to enhance data management and customer interaction capabilities. As of September 30, 2024, operating expenses attributed to operations and maintenance were reported at $385.3 million, an increase from $366.9 million the previous year, indicating ongoing investments in technology to optimize operations .

Partnership Type	Partner/Agency	Impact/Focus Area	Financial Data
Regulatory Collaboration	Kansas Corporation Commission (KCC)	Cost recovery for Winter Storm Uri	$33.7 million approved
Natural Gas Supply	Various Suppliers	Stable supply chain	$1.29 billion in natural gas sales
Construction Partnerships	Local Construction Firms	Infrastructure development	$571.7 million in capital expenditures
Technology Alliances	IT Providers	Operational efficiency	$385.3 million in operation and maintenance expenses

ONE Gas, Inc. (OGS) - Business Model: Key Activities

Natural gas distribution and delivery

ONE Gas, Inc. serves approximately 2.3 million customers across Oklahoma, Kansas, and Texas through its three divisions: Oklahoma Natural Gas, Kansas Gas Service, and Texas Gas Service. For the nine months ended September 30, 2024, the company reported natural gas sales of $1.29 billion, a decrease of 20% from $1.61 billion in the previous year. The average number of residential customers increased to 2,103 from 2,088, contributing to total sales volumes delivered of 98.1 million Mcf for the same period.

Infrastructure development and maintenance

Capital expenditures and asset removal costs for ONE Gas are projected to be approximately $750 million for 2024, up from $539.1 million in 2023. Key investments include pipeline integrity, extending service to new areas, and automated meter reading. In the most recent quarter, capital expenditures were $197.7 million, reflecting a 7% increase year-over-year. The company has invested approximately $355 million in its Central-Gulf service area since its last rate case.

Regulatory compliance and reporting

ONE Gas operates under stringent regulatory oversight, with natural gas sales subject to tariffs and rates approved by regulatory authorities. For the nine months ended September 30, 2024, the company reported total revenues of $1.45 billion, which includes revenues from regulatory mechanisms related to natural gas sales. The company is also engaged in ongoing compliance efforts, including a recent rate case filing for a $25.8 million increase.

Customer service and support operations

Customer service operations are crucial for ONE Gas, with 920 residential and commercial customers served in the latest quarter. The company has implemented various support mechanisms to enhance customer experience, which includes responding to customer inquiries and maintaining service reliability. The average customer count included approximately 5,500 new customer connections during the three months ended September 30, 2024.

Key Activity	Details	Financial Impact
Natural Gas Distribution	Serves 2.3 million customers in three states.	Natural gas sales of $1.29 billion (2024)
Infrastructure Development	Capital expenditures of $750 million planned for 2024.	Recent quarter expenditures of $197.7 million.
Regulatory Compliance	Revenue subject to regulatory oversight.	Total revenues of $1.45 billion (2024)
Customer Service Operations	920 residential and commercial customers served.	5,500 new customer connections in Q3 2024.

ONE Gas, Inc. (OGS) - Business Model: Key Resources

Extensive pipeline and distribution network

ONE Gas operates an extensive pipeline and distribution network, providing natural gas services to approximately 2.3 million customers across Oklahoma, Kansas, and Texas. The total property, plant, and equipment as of September 30, 2024, was valued at $8.94 billion, with a net value of $6.50 billion after accounting for accumulated depreciation.

Skilled workforce and management team

ONE Gas employs a skilled workforce that is critical to maintaining its operations. As of September 30, 2024, the company reported an increase in employee-related costs by $6.1 million compared to the previous year, reflecting the investment in human resources necessary for operational efficiency.

Regulatory licenses and permits

The company operates under various regulatory licenses and permits, which are essential for compliance and operational legitimacy in the natural gas distribution sector. This includes mechanisms in place that allow for the recovery of certain cost changes and adjustments to rates, minimizing the lag in earning a return on capital expenditures.

Financial resources including credit facilities

ONE Gas has significant financial resources, including a credit agreement with a capacity of $1.35 billion as of October 2024, which supports liquidity for working capital and capital expenditures. The company had $951.4 million of commercial paper outstanding at a weighted-average interest rate of 5.24% as of September 30, 2024. The total debt-to-capital ratio stood at 54.5%, demonstrating a healthy balance sheet.

Key Financial Metrics	Value (as of September 30, 2024)
Total Property, Plant, and Equipment	$8.94 billion
Net Property, Plant, and Equipment	$6.50 billion
Employee-Related Cost Increase (YoY)	$6.1 million
Credit Facility Capacity	$1.35 billion
Commercial Paper Outstanding	$951.4 million
Weighted-Average Interest Rate on Commercial Paper	5.24%
Total Debt-to-Capital Ratio	54.5%

ONE Gas, Inc. (OGS) - Business Model: Value Propositions

Reliable natural gas supply to residential and commercial customers

ONE Gas, Inc. provides natural gas distribution services to approximately 2.3 million customers across Oklahoma, Kansas, and Texas. The company operates through three divisions: Oklahoma Natural Gas, Kansas Gas Service, and Texas Gas Service. In 2024, the total revenues reported were $1.452 billion for the nine months ended September 30, compared to $1.766 billion in the same period of the previous year.

Competitive pricing through regulatory mechanisms

ONE Gas employs regulatory mechanisms that enable competitive pricing for its customers. The company's natural gas sales revenue for the nine months ended September 30, 2024, was $1.277 billion, reflecting a decrease from $1.598 billion in 2023, attributed to fluctuations in natural gas prices and consumption. Additionally, the company has mechanisms that allow for the recovery of natural gas costs, ensuring that prices remain stable despite market volatility.

Commitment to safety and environmental standards

ONE Gas places a strong emphasis on safety and environmental standards, which is integral to its operational model. The company has invested approximately $355 million in infrastructure improvements since its last rate case in 2020, enhancing the safety and reliability of its distribution system. Furthermore, the company operates under strict regulations set by the Kansas Corporation Commission, ensuring compliance with state and federal safety standards.

Strong customer support and service quality

Customer service is a cornerstone of ONE Gas’s value proposition. The company reported net income of $145.8 million for the nine months ended September 30, 2024, with a focus on maintaining high service standards. To support its customers, ONE Gas has implemented various initiatives aimed at enhancing customer experience, including improved communication channels and support services.

Value Proposition Aspect	Description	Key Metrics
Reliable Natural Gas Supply	Distribution services to residential and commercial customers	2.3 million customers
Competitive Pricing	Regulatory mechanisms for pricing stability	$1.277 billion in natural gas sales (2024)
Safety and Environmental Standards	Investment in infrastructure for safety	$355 million invested since 2020
Customer Support	Strong focus on service quality	$145.8 million net income (2024)

ONE Gas, Inc. (OGS) - Business Model: Customer Relationships

Ongoing communication through customer service channels

ONE Gas, Inc. utilizes multiple customer service channels to maintain ongoing communication with its customer base. As of September 30, 2024, the company reported approximately 2.27 million total customers across its service areas in Oklahoma, Kansas, and Texas. The customer support strategy encompasses traditional phone support, online chat, and social media engagement, enabling responsive interactions. The company has invested in customer service technology, enhancing its ability to address inquiries and resolve issues efficiently.

Implementation of loyalty programs for residential customers

ONE Gas has implemented loyalty programs aimed at residential customers to enhance customer retention. In 2024, the company introduced a rewards program that incentivizes timely bill payments and referrals. This initiative is designed to promote customer engagement and satisfaction. The financial implications of these programs are reflected in the customer growth metrics, as the average number of residential customers increased by 20 customers year-over-year across its three service states.

Educational initiatives on energy efficiency and safety

ONE Gas actively engages in educational initiatives focused on energy efficiency and safety. The company conducts workshops and online seminars to inform customers about reducing energy consumption and ensuring safe natural gas usage. In 2024, ONE Gas invested approximately $2 million in these educational programs. These initiatives not only help customers save on their utility bills but also enhance the overall safety and reliability of natural gas usage in households.

Adaptation to customer feedback for service improvement

ONE Gas places significant emphasis on customer feedback to drive service improvements. The company utilizes customer satisfaction surveys and feedback forms, analyzing the data to identify areas for enhancement. In 2024, the company reported a 75% satisfaction rate among surveyed customers, up from 70% in the previous year. This feedback loop has led to operational changes, including improvements in response times and the expansion of service hours for customer support.

Initiative	Details	Investment (2024)	Customer Impact
Customer Service Channels	Multiple channels including phone, online chat, and social media	N/A	2.27 million customers served
Loyalty Programs	Rewards for timely payments and referrals	N/A	Increased customer retention
Educational Initiatives	Workshops and online seminars on energy efficiency	$2 million	Improved energy savings and safety awareness
Customer Feedback Adaptation	Surveys and feedback analysis to improve services	N/A	75% customer satisfaction rate

ONE Gas, Inc. (OGS) - Business Model: Channels

Direct billing and online account management portal

ONE Gas, Inc. utilizes a direct billing system that allows customers to receive their invoices electronically. The online account management portal enables customers to manage their accounts, view billing history, and make payments conveniently. As of September 30, 2024, the total revenues from natural gas sales to customers were $289.2 million for the quarter, contributing significantly to the overall revenue stream.

Customer service hotlines and in-person service centers

ONE Gas maintains customer service hotlines that operate 24/7, providing immediate assistance for inquiries and emergencies. In-person service centers are available across its service areas in Oklahoma, Kansas, and Texas. The average number of residential customers served across these states was approximately 2.1 million as of September 30, 2024.

Marketing through local community events

Marketing strategies include participation in local community events, which help to enhance brand visibility and customer engagement. ONE Gas actively engages in community sponsorships and educational initiatives to promote energy conservation and safety. This grassroots marketing approach contributes to customer loyalty and brand recognition.

Digital platforms for service updates and information

ONE Gas leverages digital platforms to provide timely updates on service interruptions, maintenance schedules, and new services. The company utilizes social media and its official website to disseminate critical information to customers. As of September 30, 2024, the company had a total of $340.4 million in revenues, with ongoing investments in digital infrastructure to enhance customer communication.

Channel Type	Description	Revenue Contribution (Q3 2024)	Customer Interaction Volume
Direct Billing	Electronic invoicing and online management	$289.2 million	2.1 million residential customers
Customer Service	Hotlines and service centers	N/A	24/7 hotline availability
Community Marketing	Local events and sponsorships	N/A	Various community engagements
Digital Platforms	Website and social media updates	$340.4 million (total revenues)	Ongoing digital engagement

ONE Gas, Inc. (OGS) - Business Model: Customer Segments

Residential customers in Oklahoma, Kansas, and Texas

ONE Gas, Inc. serves approximately 2.3 million customers across its service areas, with a significant portion being residential customers. As of September 30, 2024, the average number of residential customers was:

State	Average Number of Residential Customers
Oklahoma	842,000
Kansas	595,000
Texas	666,000
Total	2,103,000

The increase in residential customers is attributed to new customer connections resulting from the extension and expansion of the natural gas distribution system.

Commercial businesses requiring natural gas for operations

Commercial customers represent a vital segment for ONE Gas, providing essential demand for natural gas. As of September 30, 2024, the average number of commercial customers was:

State	Average Number of Commercial Customers
Oklahoma	77,000
Kansas	51,000
Texas	35,000
Total	163,000

Commercial customers include businesses that rely on natural gas for heating, cooking, and other operational needs. The total revenue from commercial and industrial gas sales amounted to approximately $26.2 million for the nine months ended September 30, 2024 .

Industrial clients needing large-volume gas supply

ONE Gas also caters to industrial clients that require large volumes of natural gas, which is critical for manufacturing and other heavy-duty applications. The industrial customer base is less frequent but significant in terms of volume and revenue. For September 30, 2024, the average number of industrial customers was:

State	Average Number of Industrial Customers
Oklahoma	—
Kansas	—
Texas	3,000
Total	3,000

Industrial customers contribute significantly to the overall demand for natural gas, impacting revenue streams and operational planning.

Local governments and municipalities

Local governments and municipalities also form an essential customer segment for ONE Gas. These entities utilize natural gas for public facilities, street heating, and other municipal services. The revenue from local government customers is included in the overall customer category, but specific numbers are generally aggregated with other commercial revenues. The total revenues from contracts with customers, including local governments, were approximately $1.43 billion for the nine months ended September 30, 2024 .

ONE Gas, Inc. (OGS) - Business Model: Cost Structure

Operational costs including labor and maintenance

For the nine months ended September 30, 2024, operating costs totaled $442.3 million, an increase of $20.9 million or 5% compared to the same period in 2023. This includes:

• Employee-related costs increased by $16.5 million.
• Outside services costs increased by $2.0 million.
• Depreciation and amortization expenses were $221.2 million, up from $207.2 million in the same period last year, reflecting a $14 million increase due to additional capital investments.

Capital expenditures for infrastructure upgrades

ONE Gas's capital expenditures and asset removal costs for the nine months ended September 30, 2024, amounted to $571.7 million, a 6% increase compared to $539.1 million during the same period in 2023. The breakdown includes:

• Approximately $750 million expected for full-year capital expenditures in 2024, focusing on pipeline integrity, service extensions, and system capabilities.
• Specific expenditures for system integrity and service extensions contributed to the increase of $32.6 million compared to the previous year.

Category	2024 (YTD)	2023 (YTD)	Increase/Decrease
Capital Expenditures	$571.7 million	$539.1 million	+6%
Depreciation and Amortization	$221.2 million	$207.2 million	+7%

Regulatory compliance costs

Regulatory compliance costs are embedded within the operating expenses. As of September 30, 2024, total operating expenses, including compliance-related costs, reached $663.5 million, up from $628.7 million in the prior year. This includes:

• General taxes of $57.0 million, an increase from $54.5 million in 2023.
• Compliance costs associated with environmental and safety regulations, which are critical in maintaining operational licenses and avoiding penalties.

Interest expenses on debt financing

ONE Gas incurred interest expenses totaling $107.5 million for the nine months ended September 30, 2024, compared to $85.6 million in the same period last year, marking an increase of $21.9 million. This increase is primarily attributed to:

• The issuance of $300 million of 5.10% senior notes in December 2023.
• The repayment of $300 million of 3.61% senior notes and $473 million of 1.10% senior notes, which were due in early 2024, funded through commercial paper.

At September 30, 2024, total long-term debt stood at $2.414 billion, with a long-term debt-to-capital ratio of 46%, reflecting the company's leveraged position to support capital expenditures and operational needs.

ONE Gas, Inc. (OGS) - Business Model: Revenue Streams

Natural gas sales to residential and commercial customers

For the nine months ended September 30, 2024, ONE Gas, Inc. reported natural gas sales of $1,290.7 million, down from $1,606.0 million for the same period in 2023, reflecting a decrease of approximately 20% year-over-year . The company serves approximately 2.3 million customers across Oklahoma, Kansas, and Texas, with residential sales accounting for a significant portion of total revenues .

Period	Natural Gas Sales ($ Million)
Q3 2024	289.8
Q3 2023	286.0
9M 2024	1,290.7
9M 2023	1,606.0

Transportation revenues from gas delivery services

Transportation revenues for the nine months ended September 30, 2024, amounted to $101.3 million, up from $97.6 million in the same period of the previous year, indicating a growth of approximately 4% . This revenue stream is derived from contracts with customers through tariffs and rates approved by regulatory authorities, reflecting the essential service provided by ONE Gas in delivering natural gas .

Period	Transportation Revenues ($ Million)
Q3 2024	30.6
Q3 2023	29.6
9M 2024	101.3
9M 2023	97.6

Charges related to securitization of costs from extreme weather events

ONE Gas has implemented securitization customer charges to recover extraordinary costs incurred during weather events, such as Winter Storm Uri. For the nine months ended September 30, 2024, these charges generated $33.7 million, a decline from $35.8 million in the same period of 2023, representing a 6% decrease .

Period	Securitization Customer Charges ($ Million)
Q3 2024	10.5
Q3 2023	12.0
9M 2024	33.7
9M 2023	35.8

Miscellaneous service fees and regulatory adjustments

Miscellaneous revenues, which include service fees and regulatory adjustments, totaled $27.2 million for the nine months ended September 30, 2024, compared to $26.7 million for the same period in 2023, showing a slight increase of approximately 2% . These revenues arise from various service charges defined by regulatory tariffs and other operational adjustments.

Period	Miscellaneous Revenues ($ Million)
Q3 2024	9.5
Q3 2023	8.2
9M 2024	27.2
9M 2023	26.7

Updated on 16 Nov 2024

Resources:

1. 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.
2. 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.