One of the largest pure-play natural gas utilities in the US, ONE Gas delivers natural gas to homes and businesses through three local brands: Oklahoma Natural Gas, Kansas Gas Service, and Texas Gas Service. The company was created in 2014 when its former parent ONEOK spun off its gas distribution arm, and its roots stretch back to the Oklahoma Natural Gas Company, founded in 1906. The "One" in its name keeps the branding of ONEOK, which itself took its name from Oklahoma Natural Gas.
New rates and customer growth lifted Q2 net income 46% to $46.8M, but higher employee costs narrowed the operating gain.
New rate of $16.4M drove the quarter. rose 46% to $46.8M, or $0.74 per diluted share, as the rate benefit and customer growth in Oklahoma and Texas more than offset a $7.4M increase in employee-related costs. The company remains on a path of steady rate-base growth, but rising operating expenses are consuming a growing share of each new rate dollar.
Key takeaways
rose 15% to $82.7M, driven by $16.4M in new rate and $1.4M from residential customer growth in Oklahoma and Texas.
The operating gain was partially offset by a $7.4M increase in employee-related costs, along with higher outside services and fleet expenses.
increased 46% to $46.8M, with up 40% to $0.74, as the improvement flowed through to the bottom line.
Section summaries
Management's Discussion and Analysis
Q2 2026 net income rose 46% to $46.8M driven by new rates and customer growth, partially offset by higher employee costs.
⌄
increased $10.7M (15%) in Q2 2026, primarily from $16.4M in new rate and $1.4M in residential customer growth in Oklahoma and Texas.
Higher employee-related costs ($7.4M), outside services ($1.1M), and fleet expenses ($1.1M) partially offset the gains.
Total revenues decreased 3% to $411.6M, a move driven entirely by a 23% decline in the cost of natural gas passed through to customers, which does not affect .
turned positive at $37.5M, up from a negative $9.1M a year ago, reflecting the seasonal improvement in cash generation.
The company reported an adjusted of $52.1M, or $0.82 per share, which adds back deferred carrying costs on Texas plant assets not yet included in rates.
What changed
The pace of new rate realizations moderated from the $27.3M contributed in Q1 2026 to $16.4M in Q2, a normal seasonal pattern as fewer rate cases take effect mid-year.
Employee-related costs rose $7.4M , an acceleration from the $6.8M increase in Q1, suggesting cost pressures are building even as rate steps down sequentially.
improved to a positive $37.5M from a negative $9.1M a year ago, a seasonal swing that keeps the company on track to fund its $800M capital plan without a sharp increase in external financing needs this quarter.
The long-outstanding Kansas securitization application for Winter Storm Uri deferred regulatory assets remains unresolved, with no progress noted in the filing, leaving a potential non-operating cash inflow still unavailable.
What to watch
Whether the pace of new rate realizations in upcoming cases can cover the combined rise in employee costs, , and as the $800M capital plan adds to the .
The trajectory of as the company manages its commercial paper program under the $1.5B , particularly with at $2.34B and floating-rate exposure still elevated.
Whether the $800M capital plan for 2026 requires drawing on the remaining $204.4M at-the-market equity program or the 2.5 million share forward sale agreement, and the effect on the .
Any progress on the Kansas securitization application for Winter Storm Uri deferred regulatory assets, which would provide a non-operating cash inflow and reduce reliance on commercial paper.
Total revenues decreased 3% to $411.6M, while cost of natural gas fell 23% to $90.4M, reflecting lower pass-through gas costs that do not impact .
, which adds back deferred carrying costs on Texas plant not yet in rates, was $52.1M ($0.82/share) vs. $32.7M ($0.54/share) a year ago.
Liquidity remains strong with $1.5B available under the ; full-year 2026 are expected to be approximately $800M.
Quantitative and Qualitative Disclosures About Market Risk
Commodity risk from natural gas is passed to customers via regulatory mechanisms; interest-rate risk is managed through debt mix and swaps.
⌄
Commodity price risk is driven by natural gas and mitigated by purchased-gas cost adjustment mechanisms that pass costs to customers without profit.
The company uses fixed-price contracts, derivatives, and seasonal storage to reduce winter price volatility for customers, with gains or losses recoverable through regulatory mechanisms.
Interest-rate risk arises from commercial paper, credit agreements, and future debt financing, managed through a mix of fixed-rate and floating-rate debt and .
Fixed-rate swaps may be used to reduce exposure to rising rates, while floating-rate swaps may convert fixed-rate borrowings to variable rates.
Counterparty credit risk is limited by a broad customer base of approximately 2.3 million across three states, with security required for customers not meeting minimum credit standards.
We are a party to various litigation matters and claims that have arisen in the normal course of our operations. While the results of litigation and claims cannot be predicted with certainty, we believe the reasonably possible losses from such matters, 38 Table of Contents indiv…
⌄
We are a party to various litigation matters and claims that have arisen in the normal course of our operations. While the results of litigation and claims cannot be predicted with certainty, we believe the reasonably possible losses from such matters,
38
Table of Contents
individually and in the aggregate, are not material. Additionally, we believe the probable final outcome of such matters will not have a material adverse effect on our results of operations, financial position or cash flows.
Our investors should consider the risks set forth in Part I, Item 1A, Risk Factors, of our Annual Report that could affect us and our business. Although we have tried to discuss key factors, our investors need to be aware that other risks may prove to be important in the future.…
⌄
Our investors should consider the risks set forth in Part I, Item 1A, Risk Factors, of our Annual Report that could affect us and our business. Although we have tried to discuss key factors, our investors need to be aware that other risks may prove to be important in the future. New risks may emerge at any time, and we cannot predict such risks or estimate the extent to which they may affect our financial performance. Investors should carefully consider the discussion of risks and the other information included or incorporated by reference in this Quarterly Report, including “Forward-Looking Statements,” which are included in Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations.