ONE Gas, Inc. (OGS) | The Buildout — AI Infrastructure
The Verdict
ONE Gas is a fully regulated natural gas distribution utility. It does not sell compute, software, chips, or data-center equipment. It matters to the AI buildout because new gas-fired generation, data centers, and advanced manufacturing in its Oklahoma, Kansas, and Texas service territories need local gas transportation and meter infrastructure, and ONE Gas can connect those loads using its existing distribution and transmission system.
| Market Cap | — |
| Revenue (TTM) | $2.3B |
| Revenue Growth | +2.8% |
| EBITDA Margin (TTM) | 33.5% |
| Net Debt | $3.4B |
| Earnings Beats | 2 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- 100% regulated utility with 2.3 million customers across three states and no single customer above 10% of gross revenues.
- First-half 2026 adjusted EPS rose 16% despite weather 25% warmer than prior year.
- Three contracted large-load projects add roughly $15M incremental annual revenue and $175M associated capital.
- Texas HB 4384 expected to contribute about $0.42 to full-year adjusted EPS.
- Regulatory recovery is expanding: Oklahoma $28.7M PBRC, Texas $36.9M GRIP approved, Kansas $14.3M GSRS filed.
What We’re Watching
- H2 O&M step-down unproven; Q1 +8.6% and Q2 +6.6% versus 3%–4% long-term target.
- Only 3 large-load projects are contracted; 5 late-stage and 17 early-stage opportunities remain optionality, with signings possibly slipping into early 2027.
- HB 4384 cadence faces a tough back-half comparison after the Austin system reinforcement project entered service in Q3 2025, with no similar-sized Texas project planned for the back half of 2026.
- September 2026 $250M term loan maturity and $759.7M commercial paper at 4.14% expose interest-rate risk.
The thesis is strengthening: new rates, constructive Texas and Kansas regulatory recovery, and early large-load contracts lifted H1 results and moved management to the upper half of guidance. The key open question is whether O&M growth steps down in H2 as management expects; if it does not, the above-algorithm earnings growth may look more episodic.
Earnings
For the June 30, 2026 quarter, management did not disclose total revenue or gross margin; adjusted EPS was $0.82, up 52% from $0.54 a year earlier, on adjusted net income of $52.1 million versus $32.7 million. Management attributed the step-up to roughly $16 million of new rate revenue and greater-than-anticipated Texas HB 4384 benefits.
| Metric | Q1 FY2026 | Q4 FY2025 | Q1 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $832M | $689M | $935M | −11.1% |
| Gross margin | 52.7% | 96.3% | 30.7% | +2200bps |
| EBITDA | $266M | $219M | $262M | +1.6% |
| EPS | $2.04 | $1.42 | $1.98 | +2.8% |
| Capital deployed | $188M | $170M | n/a | — |
Adjusted EPS was $0.82 for the quarter, compared to $0.54 in the same period last year. Through the first half of the year, we have grown adjusted EPS by 16% over last year. Despite weather that was 25% warmer. Importantly, we delivered these results while keeping the average customer bill flat year over year and increasing our dividend.— Robert S. McAnnally, CEO, August 5, 2026
Management tone: Management shifted from affirming guidance in Q1 to stating in Q2 that it expects the upper half of the range, while quantifying the Texas HB 4384 benefit and large-load contracts. The tone was confident, detailed, and increasingly assertive about growth, but management remained disciplined about not discussing un-contracted projects.
Management Guidance
Formal FY2026 guidance remains adjusted net income of $306 million to $314 million and adjusted EPS of $4.83 to $4.95; management now expects the upper half, $310 million to $314 million and $4.89 to $4.95. Guidance assumes no rate reductions, and no full rate cases are planned until the Oklahoma rate case in 2027. The company expects 2026 capital investments, including asset removal costs, of approximately $800 million.
Trajectory
Reported revenue fell to $831.7M in Q1 FY2026 from $935.2M a year earlier because gas commodity costs and volumes fell, but operating income still rose to $189.6M from $180.5M. The code-computed signals show revenue decelerating and gross and operating margins expanding, while trailing EBITDA margin is compressing. The underlying driver is regulatory rate recovery and cost discipline rather than volume growth.
The Model
The model projects FY+1 revenue of $2,460M and EBITDA of $812M (33.0%), and FY+2 revenue of $2,580M and EBITDA of $864M (33.5%). The near-term is anchored by recent rate actions and the contracted large-load book; FY+2 assumes continued regulated rate-base growth and a modest margin increase. Dispersion across runs is 11% for FY+1 revenue and 16% for FY+2 revenue.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $2.4B | $2.5B | $2.6B |
| YoY Growth | — | +1.3% | +4.9% |
| EBITDA | $775M | $812M | $864M |
| EBITDA Margin | 31.9% | 33.0% | 33.5% |
Projections are the median of 5 independent model runs. The model’s revenue sits 0.6% above analyst consensus.
Formal FY2026 guidance remains adjusted net income of $306 million to $314 million and adjusted EPS of $4.83 to $4.95; management now expects the upper half, $310 million to $314 million and $4.89 to $4.95. Guidance assumes no rate reductions, and no full rate cases are planned until the Oklahoma rate case in 2027. The company expects 2026 capital investments, including asset removal costs, of approximately $800 million.
What Could Go Right — and Wrong
- Remaining 5 late-stage large-load projects convert, expanding contracted annual revenue and capital beyond $15M and $175M.
- O&M growth steps down in H2 and in-sourcing pushes future annual growth toward the 3%–4% target.
- Fall 2026 planning update raises the 2027 or five-year outlook, or accelerates the dividend growth "point of liftoff."
- Kansas GSRS becomes effective October 2026 and works as designed, shortening regulatory recovery lag.
- Additional Texas project activity benefits from HB 4384 and the statewide GRIP framework.
- H2 O&M does not moderate, keeping growth above the 3%–4% target.
- Large-load signings slip beyond early 2027 and the 17 early-stage opportunities remain conversations.
- HB 4384 contribution declines after the Austin project comparison rolls off, with no comparable Texas project planned.
- Oklahoma 2027 full rate case becomes contentious, disrupting the constructive regulatory story.
- Higher interest rates pressure commercial paper costs and the September 2026 term loan refinancing.
Looking Ahead
The next 12 months turn on regulatory execution and large-load conversion. Kansas GSRS rates are expected effective October 2026, the company reports Q3 2026 earnings, and fall planning should update the 2027 outlook, five-year plan, and dividend discussion. Management sees possible further large-load signings before the end of 2026 or in the first part of 2027, with Western Farmers construction expected to begin early 2027 and the Oklahoma full rate case required in 2027.
- Q3 2026Large-load in-service — El Paso and Oklahoma data center projects expected in service; tests initial large-load revenue.
- October 2026Kansas GSRS effective — Tests expanded surcharge recovery and the shortened 90-day review period.
- Q3 2026Q3 earnings release — Tests H2 O&M step-down and upper-half guidance trajectory.
- Fall 2026Five-year plan update — Tests 2027 outlook, growth framework, and dividend liftoff discussion.
- End 2026 / early 2027Large-load signings — Shows whether the five late-stage projects convert to contracts.
- Early 2027Western Farmers construction — Tests execution on the largest contracted project before Q3 2028 in-service.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $2.1B | $2.4B | $2.3B | +16.5% |
| Gross Margin | 39.1% | 62.0% | 68.0% | +2,288bps |
| EBITDA | $696M | $775M | $5.6B | +11.4% |
| EBITDA Margin | 33.4% | 31.9% | 33.5% | 147bps |
| Net Income | $223M | $264M | $274M | +18.6% |
| Free Cash Flow | −$333M | −$128M | −$1.6B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)68.0%
- EBITDA Margin (TTM)33.5%
- Net Margin (TTM)11.8%
- ROIC5.4%
- FCF Conversion-28.2%
- SBC / Revenue0.6%
The Company
ONE Gas is a 100% regulated natural gas distribution utility headquartered in Tulsa, Oklahoma. It serves approximately 2.3 million customers through Oklahoma Natural Gas, Kansas Gas Service, and Texas Gas Service. It delivers natural gas primarily to residential, commercial, and transportation customers, and is the largest natural gas distributor in Oklahoma and Kansas and the third largest in Texas, measured by customers.
It operates one reportable business segment: regulated public utilities. The system spans 43,200 miles of distribution mains and 2,200 miles of transmission pipelines, for 45,400 total miles. Gas commodity costs are passed through to customers without profit, so OGS earns through regulated rates on invested utility plant. Capital allocation is driven by asset integrity management, operating efficiency, growth opportunities, and government-requested pipeline relocations, not geography.
Business Segments
Competitive Landscape
ONE Gas operates as a 100% regulated natural gas distribution utility and describes itself as one of the largest publicly traded natural gas utilities in the United States. The provided source material does not document direct competitive dynamics; each division operates under a regulated service-territory model.
Supply Chain
ONE Gas sits as the local regulated distribution link between upstream gas supply and end customers. The source material contains no direct supplier or customer quotes naming OGS, so most supply-chain relationships are inferred.
More on OGS: Earnings recap