ONE Gas, Inc. (OGS): PESTLE Analysis [11-2024 Updated]

Understanding the multifaceted landscape surrounding ONE Gas, Inc. (OGS) is crucial for investors and stakeholders alike. This PESTLE analysis delves into the political, economic, sociological, technological, legal, and environmental factors that shape the company's operations and strategy. From regulatory changes to technological advancements, each element plays a pivotal role in influencing OGS's business dynamics. Read on to explore how these critical factors impact the natural gas distribution sector and the future of ONE Gas.

ONE Gas, Inc. (OGS) - PESTLE Analysis: Political factors

Changes in regulation of natural gas distribution in key states

In 2024, Oklahoma Natural Gas filed for a revenue increase of $31.8 million, with a settlement recommending a slight reduction to $31.4 million, approved by the OCC on August 27, 2024. Kansas Gas Service's rates were increased by $70 million effective November 1, 2024, following a unanimous settlement agreement with the KCC .

Political stability in operating regions affects operations

ONE Gas operates primarily in Oklahoma, Kansas, and Texas. Political stability in these states is crucial for operations, especially in relation to regulatory compliance and infrastructure investments. The political climate has remained stable, allowing for consistent operational practices and capital expenditure plans, which are projected at around $750 million for 2024 .

Impact of federal pipeline safety regulations

The federal Pipeline and Hazardous Materials Safety Administration (PHMSA) regulations significantly impact ONE Gas's operations. Compliance with these regulations is mandatory and involves ongoing costs related to safety upgrades and inspections, which are factored into their capital expenditures .

Legislative changes influencing energy sector policies

Recent legislative changes have emphasized the need for enhanced safety measures and sustainability practices in the energy sector. ONE Gas must adapt to these evolving policies, which may include increased scrutiny on emissions and infrastructure integrity .

Local government actions and community relations

Local governments in Oklahoma, Kansas, and Texas have engaged with ONE Gas regarding community relations, specifically focusing on infrastructure improvements and service reliability. The company has invested significantly in community engagement programs to foster positive relations and address public concerns .

Influence of public opinion on energy policies

Public opinion regarding energy policies, particularly around climate change and sustainability, influences regulatory frameworks in which ONE Gas operates. The increasing demand for cleaner energy sources has prompted the company to explore alternative energy options and improve its environmental footprint .

State	Regulatory Body	Rate Increase ($ Million)	Effective Date	Settlement Approval Date
Oklahoma	Oklahoma Corporation Commission (OCC)	31.4	June 28, 2024	August 27, 2024
Kansas	Kansas Corporation Commission (KCC)	70	November 1, 2024	October 3, 2024

ONE Gas, Inc. (OGS) - PESTLE Analysis: Economic factors

Fluctuations in natural gas prices affecting revenue

In 2024, ONE Gas, Inc. reported natural gas sales of $289.8 million for the third quarter, showing a slight increase of 1% from $286.0 million in the same period of 2023. However, natural gas sales for the nine-month period declined by 20% to $1.29 billion from $1.61 billion in 2023. The cost of natural gas decreased significantly by 16% to $59.6 million in Q3 2024, compared to $70.9 million in Q3 2023, indicating a reduction in commodity prices.

Economic conditions influencing customer demand for gas

The average number of residential customers increased to 2.1 million in 2024, up from 2.08 million in 2023. This growth reflects a stable demand for gas amid varying economic conditions. Additionally, an increase in operating income of 4% for the three months ended September 30, 2024, was attributed to a rise in residential sales due to net customer growth.

Interest rate changes impacting financing costs

As of September 30, 2024, ONE Gas, Inc. had a weighted-average interest rate of 5.24% on commercial paper, which totaled $951.4 million. The increase in interest expenses was notable, with $39.1 million reported for Q3 2024, compared to $28.0 million in Q3 2023, primarily due to the issuance of $300 million of 5.10% senior notes in December 2023.

Access to capital markets for funding projects

ONE Gas has increased its commercial paper program capacity to $1.35 billion as of October 2024. The company has also maintained access to capital markets through the issuance of senior notes and commercial paper, enabling it to fund ongoing projects and capital expenditures, which are projected to be approximately $750 million for 2024.

Inflation affecting operational costs and expenses

In 2024, operating costs rose by 7% to $149.2 million in Q3, compared to $139.3 million in Q3 2023. This increase can be attributed to inflationary pressures affecting various operational aspects, including employee-related costs, which increased by $6.1 million. The overall inflation impact is reflected in the increase in general taxes and maintenance expenses.

Economic growth in service areas driving demand

Economic growth in service areas contributed to a consistent increase in customer base. The company reported a total of 2.27 million customers across Oklahoma, Kansas, and Texas, marking a growth from 2.25 million in 2023. This growth is crucial for sustaining demand for natural gas, particularly in regions experiencing economic expansion.

Financial Metrics	Q3 2024	Q3 2023	Change (%)
Natural Gas Sales	$289.8 million	$286.0 million	+1%
Cost of Natural Gas	$59.6 million	$70.9 million	-16%
Operating Income	$59.5 million	$57.2 million	+4%
Interest Expense	$39.1 million	$28.0 million	+39.6%
Total Customers	2.27 million	2.25 million	+0.89%
Capital Expenditures	$750 million (2024 projection)	N/A	N/A

ONE Gas, Inc. (OGS) - PESTLE Analysis: Social factors

Sociological

Shifts in consumer preferences towards sustainable energy

In 2024, consumer preferences are increasingly shifting towards sustainable energy solutions. ONE Gas, Inc. (OGS) is responding to this trend by investing in infrastructure that supports renewable natural gas (RNG) and exploring partnerships with renewable energy companies. This focus is reflected in their capital expenditures, which are projected to reach approximately $750 million in 2024, with a portion allocated towards sustainability initiatives.

Demographic changes in customer base impacting service needs

As of September 30, 2024, ONE Gas serves approximately 2.3 million customers across Oklahoma, Kansas, and Texas. The demographic shift towards younger, more environmentally conscious consumers is influencing service offerings, with a noted increase in demand for energy efficiency programs and green energy options. The average number of residential customers has increased, as shown in the following table:

State	Residential Customers (2024)	Residential Customers (2023)	Change
Oklahoma	842	836	+6
Kansas	595	592	+3
Texas	666	660	+6
Total	2,103	2,088	+15

Public awareness of environmental issues influencing operations

Public awareness of environmental issues is significantly influencing OGS's operations. The company has implemented several initiatives to reduce its carbon footprint, including investments in pipeline integrity and modernization projects. These efforts are expected to drive operational improvements and enhance public perception.

Community engagement and corporate social responsibility initiatives

ONE Gas is committed to community engagement and corporate social responsibility (CSR). In 2024, OGS has allocated $1.4 million for community programs, including educational initiatives on energy efficiency and environmental stewardship. The company also engages in volunteer activities, with employees contributing over 4,000 hours to community service.

Impact of health crises, like pandemics, on service delivery

The COVID-19 pandemic has reshaped service delivery models at OGS. The company adopted remote work policies and enhanced digital customer service options, which have proven effective. As of September 30, 2024, the company reported a 27% increase in online customer interactions compared to pre-pandemic levels.

Trends in urbanization affecting natural gas demand

Urbanization trends are driving demand for natural gas, particularly in metropolitan areas served by ONE Gas. The increasing population density in urban regions has led to a projected growth in natural gas demand, with OGS expecting a 4% annual increase in consumption over the next five years.

ONE Gas, Inc. (OGS) - PESTLE Analysis: Technological factors

Advancements in pipeline technology improving safety

ONE Gas, Inc. has invested significantly in pipeline safety technologies, including advanced inspection and monitoring systems. In 2024, the company reported capital expenditures of approximately $197.7 million, focusing on enhancing pipeline integrity and safety measures. These advancements are crucial as they help reduce the risk of leaks and failures, ensuring compliance with federal regulations set forth by the Pipeline and Hazardous Materials Safety Administration (PHMSA).

Implementation of smart grid technologies for efficiency

In 2024, ONE Gas is actively implementing smart grid technologies to improve operational efficiency. These technologies include automated meter reading systems and real-time monitoring capabilities, which enhance data accuracy and customer service. The company has allocated a portion of its capital expenditures to these initiatives, reflecting a commitment to modernization.

Cybersecurity measures to protect operational data

Cybersecurity is a top priority for ONE Gas, given the increasing threats to operational data integrity. The company has enhanced its cybersecurity framework, investing in advanced security protocols and training for employees. In 2024, the company reported an increase in operational costs, which includes expenditures on cybersecurity measures.

Innovations in natural gas extraction and delivery methods

ONE Gas is exploring innovative extraction methods to improve the efficiency of natural gas delivery. This includes advancements in hydraulic fracturing and drilling technologies, which have shown to increase production rates while minimizing environmental impact. The company has also reported a focus on pipeline expansions to improve delivery capabilities across its service areas.

Adoption of renewable energy technologies as competition

As competition in the energy sector intensifies, ONE Gas is monitoring the adoption of renewable energy technologies. The company recognizes the need to adapt to market trends and is considering strategic partnerships and investments in renewable energy sources, such as biogas and hydrogen.

Research and development in energy efficiency initiatives

Research and development (R&D) in energy efficiency is a critical focus for ONE Gas. The company has launched various initiatives aimed at enhancing energy conservation for its customers. In 2024, the company reported an increase in operating expenses related to R&D efforts, reflecting its commitment to sustainability and energy efficiency.

Technological Initiative	Investment ($ Millions)	Impact
Pipeline Safety Technologies	197.7	Improved leak detection and compliance with PHMSA regulations
Smart Grid Technologies	Part of total capital expenditures	Enhanced operational efficiency and customer service
Cybersecurity Enhancements	Included in operating costs	Protection against data breaches and operational disruptions
Renewable Energy R&D	Part of increased operating expenses	Adaptation to market trends and competition

ONE Gas, Inc. (OGS) - PESTLE Analysis: Legal factors

Compliance with environmental and safety regulations

ONE Gas, Inc. is subject to stringent federal and state environmental regulations, including those enforced by the Pipeline and Hazardous Materials Safety Administration (PHMSA). The company has incurred $13.6 million for remediation of manufactured gas plant sites as of September 30, 2024. Compliance costs have not materially affected earnings or cash flows during the nine months ended September 30, 2024.

Ongoing litigation risks related to environmental issues

While specific ongoing litigation cases were not disclosed, the company recognizes the risk of fines and penalties associated with non-compliance with environmental laws, which could impact its operations and financial standing.

Changes in laws affecting taxation and financial reporting

In December 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-09, which enhances income tax disclosures. These changes are expected to impact reporting starting after December 15, 2024. Additionally, regulatory liabilities related to income tax rate changes amounted to $483.3 million as of September 30, 2024.

Regulatory challenges in rate-setting processes

ONE Gas has faced regulatory challenges in rate-setting, including a filed request for a $31.8 million base rate revenue increase in Oklahoma. Kansas Gas Service has also submitted a request for a $70 million total base rate increase. The Kansas Corporation Commission approved the settlement agreement on October 3, 2024, increasing base rates effective November 1, 2024.

Legal implications of mergers and acquisitions

As of now, there have been no significant announcements regarding mergers or acquisitions that would have legal implications for ONE Gas. However, the company maintains a $1.35 billion credit facility for potential acquisitions and capital needs.

Adherence to labor laws and employment regulations

ONE Gas is required to comply with various labor laws and employment regulations. The company’s total employee benefit obligations were reported at $20.03 million as of September 30, 2024. There are no reported violations or ongoing disputes related to labor laws in the recent filings.

Legal Factor	Details
Environmental Compliance Costs	$13.6 million for MGP site remediation
Regulatory Liabilities (Tax)	$483.3 million related to income tax rate changes
Oklahoma Rate Increase Request	$31.8 million
Kansas Rate Increase	$70 million total base rate increase approved
Employee Benefit Obligations	$20.03 million
Credit Facility for Acquisitions	$1.35 billion

ONE Gas, Inc. (OGS) - PESTLE Analysis: Environmental factors

Impact of climate change on natural gas supply and demand

Climate change is increasingly impacting the natural gas sector. In 2023, natural gas consumption in the United States was approximately 84.8 billion cubic feet per day (Bcf/d), with expectations of fluctuating demand due to changing weather patterns. A report from the U.S. Energy Information Administration (EIA) predicts that natural gas demand could rise to about 95 Bcf/d by 2050 if current trends continue, influenced by shifts toward cleaner energy sources and regulatory frameworks favoring lower emissions.

Regulatory compliance regarding emissions and waste management

ONE Gas is subject to various federal and state regulations regarding emissions. As of 2024, the company reported compliance costs related to emissions and waste management at approximately $3.5 million annually. New regulations under the Pipeline and Hazardous Materials Safety Administration (PHMSA) mandate enhanced leak detection and repair programs, potentially increasing compliance costs by 10-15% over the next five years.

Environmental remediation responsibilities at former sites

As of September 30, 2024, ONE Gas maintained a reserve for remediation of its Manufactured Gas Plant (MGP) sites totaling $13.6 million, down from $14.3 million in December 2023. The company is actively involved in remediation efforts that align with the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) standards, with ongoing projects expected to be completed by 2026.

Public scrutiny over environmental practices

Public scrutiny of environmental practices has intensified, particularly regarding methane emissions. In 2024, ONE Gas faced scrutiny from environmental groups, leading to a report by the Environmental Defense Fund indicating that the company’s methane emissions were approximately 2.5% of its total natural gas throughput. This is slightly above the industry average of 2.3%, prompting the company to enhance its transparency and reporting on emissions.

Initiatives for reducing carbon footprint and enhancing sustainability

ONE Gas has initiated several sustainability programs aimed at reducing its carbon footprint. In 2024, the company invested $10 million in renewable natural gas (RNG) projects, with a goal to increase RNG sourcing by 20% by 2030. Additionally, the company is implementing energy efficiency measures expected to reduce operational emissions by 15% over the next decade.

Year	Investment in Sustainability Initiatives (in millions)	Projected Reduction in Emissions (%)	Renewable Natural Gas Sourcing (%)
2024	$10	15%	20%
2023	$8	10%	15%
2022	$5	5%	10%

Effects of extreme weather events on infrastructure resilience

Extreme weather events have significant implications for infrastructure resilience. Following Winter Storm Uri in 2021, ONE Gas reported an increase in capital expenditures to enhance infrastructure resilience, totaling $571.7 million in 2024, a 7% increase from the previous year. The company has implemented advanced weatherization techniques and emergency response protocols, which are expected to mitigate risks associated with future severe weather events.

In summary, the PESTLE analysis of ONE Gas, Inc. (OGS) reveals that the company's operations are significantly influenced by a complex interplay of factors. From political regulations and economic fluctuations to evolving sociological trends and technological advancements, OGS must navigate a dynamic landscape. Legal compliance and environmental considerations also play crucial roles in shaping its strategic direction. Adapting to these challenges while capitalizing on opportunities will be essential for OGS to ensure sustainable growth and maintain its competitive edge in the energy sector.

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.