ONE Gas Inc. Ratings Affirmed On Continuing Effective Regulatory Risk Management Despite Weaker Financial Measures


  • Tulsa, Okla.–based ONE Gas Inc. recently reported its 2018 financial results. As part of the release, the company indicated it expects its capital spending to be elevated over the next few years and that it has mostly resolved its tax reform-related filing issues.
  • We expect that the combination of these factors will modestly weaken the company's financial measures, supporting our decision to revise our financial risk profile assessment to significant from intermediate.
  • However, the company's credit metrics, including its funds from operations (FFO)-to-debt ratio of 19%-20%, remain robust for the significant financial risk profile category.
  • We are affirming all of our ratings on ONE Gas Inc.
  • The stable outlook reflects our expectation that the company will continue to effectively manage its regulatory risk and maintain the strong operating performance of its gas distribution system while sustaining FFO to debt consistently in the 19%-20% range.
NEW YORK (S&P Global Ratings) March 14, 2019--S&P Global Ratings today took 
the ratings actions listed above. The affirmation follows the company's recent 
release of its 2018 operating results, which indicated that ONE Gas' expects 
its capital spending to increase over the next few years. In addition, the 
company announced that it recently resolved certain outstanding tax 
reform-related regulatory matters in key states, including Oklahoma and 
Kansas. Specifically, the company's Kansas rate order incorporated the effects 
of tax reform and resulted in a rate increase of approximately $22 million. We 
expect the combination of these factors to modestly weaken ONE Gas' financial 
measures and cause its FFO-to-debt ratio to decrease to about 19%-20%, which 
compares with the company's historical range of close to 24%. The reduction in 
the company's FFO to debt led us to revise our assessment of its financial 
risk profile to significant. Despite our expectation that ONE Gas' financial 
measures will decline modestly, the company's credit metrics remain robust for 
a significant financial risk profile.

The stable outlook on ONE Gas reflects our expectation that the company will 
continue to effectively manage its regulatory risk and maintain the strong 
operating performance of its gas distribution system while sustaining FFO to 
debt consistently in the 19%-20% range.

We could lower our ratings on ONE Gas over the next 12-24 months if the 
company's FFO to debt consistently weakens below 19%. This could occur if the 
company does not receive sufficient and timely recovery of its costs or if it 
disproportionately funds its growth spending with leverage.

Although unlikely, we could raise our ratings on ONE Gas over the next 12-24 
months if the company improves its financial measures such that its FFO to 
debt remains consistently above 25% with no deterioration in its regulatory 
risk management.
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