ONE GAS, INC., 10-Q filed on 10/29/2015
Quarterly Report
Document And Entity Information
9 Months Ended
Sep. 30, 2015
Oct. 20, 2015
Document Information [Line Items]
 
 
Entity Registrant Name
ONE Gas, Inc.  
 
Entity Central Index Key
0001587732 
 
Current Fiscal Year End Date
--12-31 
 
Entity Well-known Seasoned Issuer
Yes 
 
Entity Voluntary Filers
No 
 
Entity Current Reporting Status
Yes 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
52,154,655 
Document Fiscal Year Focus
2015 
 
Document Fiscal Period Focus
Q3 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Sep. 30, 2015 
 
STATEMENTS OF INCOME (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Gross Margin
 
 
 
 
Revenues
$ 225,226 
$ 241,522 
$ 1,158,543 
$ 1,304,538 
Cost of natural gas
54,724 
75,070 
548,226 
701,757 
Net margin
170,502 
166,452 
610,317 
602,781 
Operating expenses
 
 
 
 
Operations and maintenance
98,698 
101,829 
304,681 
309,154 
Depreciation and amortization
33,956 
31,217 
98,592 
93,995 
General taxes
12,897 
14,287 
41,818 
44,348 
Total operating expenses
145,551 
147,333 
445,091 
447,497 
Operating income
24,951 
19,119 
165,226 
155,284 
Other income
166 
1,051 
1,005 
Other expense
(1,884)
(652)
(2,840)
(1,829)
Interest expense, net
(11,233)
(11,160)
(33,592)
(35,886)
Income before income taxes
12,000 
7,315 
129,845 
118,574 
Income taxes
(4,629)
(2,662)
(50,017)
(45,391)
Net income
$ 7,371 
$ 4,653 
$ 79,828 
$ 73,183 
Earnings per share
 
 
 
 
Basic
$ 0.14 
$ 0.09 
$ 1.52 
$ 1.40 
Diluted
$ 0.14 
$ 0.09 
$ 1.50 
$ 1.38 
Average shares (thousands)
 
 
 
 
Basic
52,408 
52,361 
52,627 
52,353 
Diluted
53,072 
53,014 
53,315 
52,848 
Dividends declared per share of stock
$ 0.30 
$ 0.28 
$ 0.90 
$ 0.56 
STATEMENTS OF COMPREHENSIVE INCOME STATEMENTS OF COMPREHENSIVE INCOME Parenthetical (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
STATEMENTS OF COMPREHENSIVE INCOME Parenthetical [Abstract]
 
 
 
 
Pension and other postretirement benefit plans, tax
$ (88)
$ 49 
$ (264)
$ 98 
STATEMENTS OF COMPREHENSIVE INCOME STATEMENTS OF COMPREHENSIVE INCOME (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Net income
$ 7,371 
$ 4,653 
$ 79,828 
$ 73,183 
Other comprehensive income (loss), net of tax
 
 
 
 
Change in pension and postretirement benefit plan liability, net of tax of $(88), $49, $(264) and $98, respectively
141 
(78)
423 
(156)
Other comprehensive income (loss), net of tax
141 
(78)
423 
(156)
Comprehensive income
$ 7,512 
$ 4,575 
$ 80,251 
$ 73,027 
BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2015
Dec. 31, 2014
Property, plant and equipment
 
 
Property, plant and equipment
$ 5,040,313 
$ 4,850,201 
Accumulated depreciation and amortization
1,604,509 
1,556,481 
Net property, plant and equipment
3,435,804 
3,293,720 
Current assets
 
 
Cash and cash equivalents
52,974 
11,943 
Accounts receivable, net
103,406 
326,749 
Materials and supplies
33,400 
27,511 
Income tax receivable
23,725 
43,800 
Natural gas in storage
159,912 
185,300 
Regulatory assets
31,703 
50,193 
Other current assets
12,227 
22,005 
Total current assets
417,347 
667,501 
Goodwill and other assets
 
 
Regulatory assets
440,312 
478,723 
Goodwill
157,953 
157,953 
Other assets
54,905 
51,313 
Total goodwill and other assets
653,170 
687,989 
Total assets
4,506,321 
4,649,210 
Equity and long-term debt
 
 
Common stock, $0.01 par value: authorized 250,000,000 shares; issued 52,598,005 shares and outstanding 52,151,279 shares at September 30, 2015; issued and outstanding 52,083,859 at December 31, 2014
526 
521 
Paid-in Capital
1,762,508 
1,758,796 
Retained earnings
71,746 
39,894 
Accumulated other comprehensive income (loss)
(4,751)
(5,174)
Treasury stock
(19,108)
Total equity
1,810,921 
1,794,037 
Long-term debt, excluding current maturities
1,201,306 
1,201,311 
Total equity and long-term debt
3,012,227 
2,995,348 
Current liabilities
 
 
Current maturities of long-term debt
Notes payable
42,000 
Accounts payable
57,240 
159,064 
Accrued interest
7,647 
18,872 
Accrued taxes other than income
40,429 
44,742 
Accrued liabilities
18,000 
26,019 
Customer deposits
58,331 
60,003 
Regulatory liabilities
41,337 
32,467 
Other current liabilities
10,478 
9,260 
Total current liabilities
233,469 
392,433 
Deferred credits and other liabilities [Abstract]
 
 
Deferred income taxes
907,647 
894,585 
Employee benefit obligations
274,073 
287,779 
Other deferred credits
78,905 
79,065 
Total deferred credits and other liabilities
1,260,625 
1,261,429 
Commitments and contingencies
   
   
Total liabilities and equity
$ 4,506,321 
$ 4,649,210 
BALANCE SHEETS BALANCE SHEETS Parenthetical (USD $)
Sep. 30, 2015
Dec. 31, 2014
Common stock, par value per share
$ 0.01 
$ 0.01 
Common stock, shares authorized
250,000,000 
250,000,000 
Common stock, shares issued
52,598,005 
52,083,859 
Common stock, shares outstanding
52,151,279 
52,083,859 
Treasury Stock, Shares
446,726 
STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Operating activities
 
 
Net income
$ 79,828 
$ 73,183 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Depreciation and amortization
98,592 
93,995 
Deferred income taxes
19,384 
2,828 
Share-based compensation expense
3,863 
5,651 
Provision for doubtful accounts
2,951 
5,019 
Changes in assets and liabilities:
 
 
Accounts receivable
220,392 
216,219 
Materials and supplies
(5,889)
6,238 
Income tax receivable
20,075 
(4,862)
Natural gas in storage
25,388 
(51,192)
Asset removal costs
(33,744)
(34,963)
Accounts payable
(104,948)
(70,063)
Accrued interest
(11,225)
7,521 
Accrued taxes other than income
(4,313)
11,060 
Accrued liabilities
(8,019)
15,977 
Customer deposits
(1,672)
(43)
Regulatory assets and liabilities
64,368 
23,308 
Other assets and liabilities
(15,493)
(49,868)
Cash provided by operating activities
349,538 
250,008 
Investing activities
 
 
Capital expenditures
(199,678)
(224,619)
Cash used in investing activities
(199,678)
(224,619)
Financing activities
 
 
Repayments on notes payable, net
(42,000)
Repurchase of common stock
(24,122)
Issuance of debt, net of discounts
1,199,994 
Long-term debt financing costs
(11,078)
Cash Payment to ONEOK Upon Separation
(1,130,000)
Issuance of common stock
4,471 
1,330 
Dividends paid
(47,178)
(29,121)
Cash provided by (used in) financing activities
(108,829)
31,125 
Change in cash and cash equivalents
41,031 
56,514 
Cash and cash equivalents at beginning of period
11,943 
3,171 
Cash and cash equivalents at end of period
$ 52,974 
$ 59,685 
STATEMENT OF CHANGES IN EQUITY (USD $)
In Thousands, except Share data
Total
Common Stock [Member]
Paid-in Capital [Member]
Retained Earnings [Member]
Treasury Stock [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Retained earnings, beginning balance at Dec. 31, 2014
$ 39,894 
 
 
$ 39,894 
 
 
Accumulated Other Comprehensive Income (Loss), beginning balance at Dec. 31, 2014
(5,174)
 
1,758,796 
 
 
(5,174)
Total equity, beginning balance at Dec. 31, 2014
1,794,037 
 
 
 
 
 
Paid-in Capital, beginning balance at Dec. 31, 2014
1,758,796 
 
 
 
 
 
Common Stock Issued, beginning balance at Dec. 31, 2014
521 
521 
 
 
 
 
Common Stock Issued (in shares), beginning balance at Dec. 31, 2014
52,083,859 
52,083,859 
 
 
 
 
Treasury stock
(19,108)
 
 
 
(19,108)
 
Net income
79,828 
79,828 
Other comprehensive income
423 
 
423 
Treasury Stock, Value, Acquired, Cost Method
(24,122)
(24,122)
Common stock issued, shares
 
514,146 
 
 
 
 
Common stock issued, value
7,933 
2,914 
5,014 
Common stock dividends - $0.90 per share
(47,178)
798 
(47,976)
Retained earnings, ending balance at Sep. 30, 2015
71,746 
 
 
71,746 
 
 
Accumulated Other Comprehensive Income (Loss), ending balance at Sep. 30, 2015
(4,751)
 
1,762,508 
 
 
(4,751)
Total equity, ending balance at Sep. 30, 2015
1,810,921 
 
 
 
 
 
Paid-in Capital, ending balance at Sep. 30, 2015
1,762,508 
 
 
 
 
 
Common Stock Issued, ending balance at Sep. 30, 2015
$ 526 
$ 526 
 
 
 
 
Common Stock Issued (in share), ending balance at Sep. 30, 2015
52,598,005 
52,598,005 
 
 
 
 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Notes)
SIGNIFICANT ACCOUNTING POLICIES
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Our accompanying unaudited financial statements have been prepared pursuant to the rules and regulations of the SEC. These statements also have been prepared in accordance with GAAP and reflect all adjustments that, in our opinion, are necessary for a fair statement of the results for the interim periods presented. All such adjustments are of a normal recurring nature. The 2014 year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. These unaudited financial statements should be read in conjunction with the audited financial statements and footnotes in our Annual Report. Due to the seasonal nature of our business, the results of operations for the three and nine months ended September 30, 2015, are not necessarily indicative of the results that may be expected for a 12-month period.

Separation - Prior to January 31, 2014, ONE Gas, Inc. was a wholly owned subsidiary of ONEOK and comprised its former natural gas distribution business. On January 31, 2014, we became an independent, publicly traded company as a result of a distribution by ONEOK of our common stock to ONEOK’s shareholders. Our common stock began trading “regular-way” under the ticker symbol “OGS” on the NYSE on February 3, 2014.

We provide natural gas distribution services to more than 2 million customers in Oklahoma, Kansas and Texas through Oklahoma Natural Gas, Kansas Gas Service and Texas Gas Service, respectively. We serve residential, commercial, industrial and transportation customers in all three states. In addition, we also provide natural gas distribution services to wholesale and public authority customers.

Basis of Presentation - Prior to our separation from ONEOK, our financial statements were derived from ONEOK’s financial statements, which included its natural gas distribution business as if we, for accounting purposes, had been a separate company for all periods presented. The financial statements for periods prior to the separation also include expense allocations for certain corporate functions historically performed by ONEOK, including allocations of general corporate expenses related to executive oversight, accounting, treasury, tax, legal, information technology and other services. We believe our assumptions underlying the financial statements, including the assumptions regarding the allocation of general corporate expenses from ONEOK, are reasonable. However, the financial statements may not include all of the actual expenses that would have been incurred by us and may not reflect our results of operations, financial position and cash flows had we been a separate publicly traded company during the periods presented prior to the separation.

All financial information presented after the separation represents the results of operations, financial position and cash flows of ONE Gas. Accordingly:
Our Statements of Income and Comprehensive Income for the three and nine months ended September 30, 2014, consist of the results of ONE Gas for the three and eight months ended September 30, 2014, and the results of ONE Gas Predecessor for the one month ended January 31, 2014.
Our Statement of Cash Flows for the nine months ended September 30, 2014, consists of the results of ONE Gas for the eight months ended September 30, 2014, and the results of ONE Gas Predecessor for the one month ended January 31, 2014.

Use of Estimates - The preparation of our financial statements and related disclosures in accordance with GAAP requires us to make estimates and assumptions with respect to values or conditions that cannot be known with certainty that affect the reported amount of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements. These estimates and assumptions also affect the reported amounts of revenue and expenses during the reporting period. Items that may be estimated include, but are not limited to, the economic useful life of assets, fair value of assets and liabilities, provision for doubtful accounts, unbilled revenues for natural gas delivered but for which meters have not been read, natural gas purchased but for which no invoice has been received, provision for income taxes, including any deferred tax valuation allowances, the results of litigation and various other recorded or disclosed amounts.

We evaluate these estimates on an ongoing basis using historical experience and other methods we consider reasonable based on the particular circumstances. Nevertheless, actual results may differ significantly from the estimates. Any effects on our financial position or results of operations from revisions to these estimates are recorded in the period when the facts that give rise to the revision become known.

Related-Party Transactions - Prior to our separation from ONEOK on January 31, 2014, we had certain transactions with ONEOK, including, but not limited to, natural gas supply, allocated corporate services, employee benefits, cash management, derivatives and long-term lines of credit. Following the separation, any services we receive from ONEOK are now third-party transactions. The remaining related-party transactions are not material.

Segments - We operate in one reportable business segment: regulated public utilities that deliver natural gas to residential, commercial, industrial, wholesale, public authority and transportation customers. The accounting policies for our segment are the same as described in Note 1 of our Notes to Financial Statements in our Annual Report. We evaluate our financial performance principally on operating income. For the three and nine months ended September 30, 2015, and 2014, we had no single external customer from which we received 10 percent or more of our gross revenues.

Goodwill Impairment Test - We assess our goodwill for impairment at least annually as of July 1. At July 1, 2015, we assessed qualitative factors to determine whether it was more likely than not that the fair value of our reporting unit was less than its carrying amount. After assessing qualitative factors (including macroeconomic conditions, industry and market considerations, cost factors and overall financial performance), we determined that no further testing was necessary.

Recently Issued Accounting Standards Update - In August 2015, the FASB issued ASU 2015-15, “Interest-Imputation of Interest (Subtopic 835-30),” which specifically addresses the presentation and subsequent measurement of debt issuance costs associated with line of credit arrangements. We do not expect this issued guidance, which will be adopted concurrently with ASU 2015-03, to have a material impact on our financial statements.

In April 2015, the FASB issued ASU 2015-03, “Interest-Imputation of Interest,” which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. We do not expect this issued guidance, which is required to be adopted for our interim and annual reports for periods beginning after December 15, 2015, to have a material impact on our financial statements.

In April 2015, the FASB issued ASU 2015-05, “Intangibles-Goodwill and Other-Internal-Use Software,” which helps entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement. We are evaluating the impact of this issued guidance, which is required to be adopted for our interim and annual reports for periods beginning after December 15, 2015.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” which clarifies and converges the revenue recognition principles under GAAP and International Financial Reporting Standards. In July 2015, FASB delayed the effective date for one year. We are evaluating the impact of this issued guidance, which is required to be adopted for our interim and annual reports beginning with the first quarter 2018.
REGULATORY ASSETS AND LIABILITIES (Notes)
Schedule of Regulatory Assets and Liabilities
2.
REGULATORY ASSETS AND LIABILITIES

The tables below present a summary of regulatory assets, net of amortization, and liabilities for the periods indicated:
 
 
 
 
September 30, 2015
 
 
 
 
Current
 
Noncurrent
 
Total
 
 
 
 
(Thousands of dollars)
Under-recovered purchased-gas costs
 

 
$
10,354

 
$

 
$
10,354

Pension and postretirement benefit costs (see Note 8)
 

 
19,445

 
429,346

 
448,791

Reacquired debt costs
 

 
812

 
9,122

 
9,934

Other
 

 
1,092

 
1,844

 
2,936

Total regulatory assets, net of amortization
 
 
 
31,703

 
440,312

 
472,015

Accumulated removal costs (a)
 

 

 
(11,846
)
 
(11,846
)
Weather normalization
 
 
 
(5,821
)
 

 
(5,821
)
Over-recovered purchased-gas costs
 

 
(33,363
)
 

 
(33,363
)
Ad valorem tax
 
 
 
(2,153
)
 

 
(2,153
)
Total regulatory liabilities
 
 
 
(41,337
)
 
(11,846
)
 
(53,183
)
Net regulatory assets (liabilities)
 
 
 
$
(9,634
)
 
$
428,466

 
$
418,832

(a) Included in other deferred credits in our Balance Sheets.
 
 
 
 
December 31, 2014
 
 
 
 
Current
 
Noncurrent
 
Total
 
 
 
 
(Thousands of dollars)
Under-recovered purchased-gas costs
 

 
$
28,712

 
$

 
$
28,712

Pension and postretirement benefit costs
 

 
18,108

 
466,684

 
484,792

Reacquired debt costs
 

 
812

 
9,730

 
10,542

Other
 

 
2,561

 
2,309

 
4,870

Total regulatory assets, net of amortization
 
 
 
50,193

 
478,723

 
528,916

Accumulated removal costs (a)
 

 

 
(15,451
)
 
(15,451
)
Weather normalization
 
 
 
(16,516
)
 

 
(16,516
)
Over-recovered purchased-gas costs
 

 
(13,055
)
 

 
(13,055
)
Ad valorem tax
 
 
 
(2,896
)
 

 
(2,896
)
Total regulatory liabilities
 
 
 
(32,467
)
 
(15,451
)
 
(47,918
)
Net regulatory assets (liabilities)
 
 
 
$
17,726

 
$
463,272

 
$
480,998

(a) Included in other deferred credits in our Balance Sheets.

Regulatory assets on our Balance Sheets, as authorized by various regulatory authorities, are probable of recovery. Base rates are designed to provide a recovery of costs during the period rates are in effect, but do not generally provide for a return on investment for amounts we have deferred as regulatory assets. All of our regulatory assets are subject to review by the respective regulatory authorities during future regulatory proceedings. We are not aware of any evidence that these costs will not be recoverable through either riders or base rates, and we believe that we will be able to recover such costs, consistent with our historical recoveries.

Purchased-gas costs include the costs that have been over- or under-recovered from customers through the purchased-gas cost adjustment mechanisms and also include natural gas utilized in our operations, premiums paid and any cash settlements received from our purchased natural gas call options.
CREDIT FACILITIES (Notes)
Short-term Debt [Text Block]
3.
CREDIT FACILITY AND SHORT-TERM NOTES PAYABLE

ONE Gas Credit Agreement - The ONE Gas Credit Agreement contains certain financial, operational and legal covenants. Among other things, these covenants include maintaining ONE Gas’ debt-to-capital ratio of no more than 70 percent at the end of any calendar quarter. The ONE Gas Credit Agreement also contains customary affirmative and negative covenants, including covenants relating to liens, indebtedness of subsidiaries, investments, changes in the nature of business, fundamental changes, transactions with affiliates, burdensome agreements and use of proceeds. In the event of a breach of certain covenants by ONE Gas, amounts outstanding under the ONE Gas Credit Agreement may become due and payable immediately. At September 30, 2015, our debt-to-capital ratio was 40 percent and we were in compliance with all covenants under the ONE Gas Credit Agreement.

The ONE Gas Credit Agreement includes a $50 million sublimit for the issuance of standby letters of credit and also features an option to request an increase in the size of the facility to an aggregate of $1.2 billion from $700 million upon satisfaction of customary conditions, including receipt of commitments from new lenders or increased commitments from existing lenders. Borrowings made under the facility are available for general corporate purposes. The ONE Gas Credit Agreement contains provisions for an applicable margin rate and an annual facility fee, both of which adjust with changes in our credit rating. Based on our current credit ratings, borrowings, if any, will accrue interest at LIBOR plus 79.5 basis points, and the annual facility fee is 8 basis points.

We have a commercial paper program under which we may issue unsecured commercial paper up to a maximum amount of $700 million to fund short-term borrowing needs. The maturities of the commercial paper notes may vary but may not exceed 270 days from the date of issue. The commercial paper notes are generally sold at par less a discount representing an interest factor.

The ONE Gas Credit Agreement is available to repay the commercial paper notes, if necessary. Amounts outstanding under the commercial paper program reduce the borrowing capacity under the ONE Gas Credit Agreement. At September 30, 2015, we had no short-term borrowings, $1.0 million in letters of credit issued under the ONE Gas Credit Agreement and $699.0 million of remaining credit available under the ONE Gas Credit Agreement.
LONG-TERM DEBT (Notes)
Long-term Debt [Text Block]
4.
LONG-TERM DEBT

Senior Notes - We have senior notes, consisting of $300 million of 2.07 percent senior notes due in 2019, $300 million of 3.61 percent senior notes due in 2024 and $600 million of 4.658 percent senior notes due in 2044 (collectively, our “Senior Notes”). The indenture governing our Senior Notes includes an event of default upon the acceleration of other indebtedness of $100 million or more. Such events of default would entitle the trustee or the holders of 25 percent in aggregate principal amount of the outstanding Senior Notes to declare those Senior Notes immediately due and payable in full.
EQUITY EQUITY (Notes)
EQUITY
5.
EQUITY

Dividends - In October 2015, a dividend of $0.30 per share ($1.20 per share on an annualized basis) was declared for shareholders of record on November 13, 2015, payable December 1, 2015.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Notes)
Comprehensive Income (Loss) Note [Text Block]
6.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table sets forth the effect of reclassifications from accumulated other comprehensive income (loss) in our Statements of Income for the periods indicated:
 
 
Three Months Ended
 
Nine Months Ended
 
 
Details about Accumulated Other Comprehensive
 
September 30,
 
September 30,
 
Affected Line Item in the
 Income (Loss) Components
 
2015
2014
 
2015
2014
 
 Statements of Income
 
 
(Thousands of dollars)
 
 
Pension and other postretirement benefit plan obligations (a)
 
 
 
 
 
 
 
 
Amortization of net loss
 
$
12,564

$
8,542

 
$
37,694

$
25,625

 
 
Amortization of unrecognized prior service cost
 
(374
)
(303
)
 
(1,120
)
(909
)
 
 
 
 
12,190

8,239

 
36,574

24,716

 
 
Regulatory adjustments (b)
 
(11,961
)
(8,366
)
 
(35,887
)
(24,970
)
 
 
 
 
229

(127
)
 
687

(254
)
 
Income before income taxes
 
 
(88
)
49

 
(264
)
98

 
Income tax expense
Total reclassifications for the period
 
$
141

$
(78
)
 
$
423

$
(156
)
 
Net income
(a) These components of accumulated other comprehensive income (loss) are included in the computation of net periodic benefit cost. See Note 8 for additional detail of our net periodic benefit cost.
(b) Regulatory adjustments represent pension and other postretirement benefit costs expected to be recovered through rates and are deferred as part of our regulatory assets. See Note 2 for additional disclosures of regulatory assets and liabilities.
EARNINGS PER SHARE (Notes)
Earnings Per Share [Text Block]
7.
EARNINGS PER SHARE

Basic EPS is based on net income and is calculated based upon the daily weighted-average number of common shares outstanding during the periods presented. Also, this calculation includes fully vested stock awards that have not yet been issued as common stock. Diluted EPS includes basic EPS, plus unvested stock awards granted under our compensation plans, but only to the extent these instruments dilute earnings per share.

The following tables set forth the computation of basic and diluted EPS from continuing operations for the periods indicated:
 
Three Months Ended September 30, 2015
 
Income
 
Shares
 
Per Share
Amount
 
(Thousands, except per share amounts)
Basic EPS Calculation
 
 
 
 
 
Net income available for common stock
$
7,371

 
52,408

 
$
0.14

Diluted EPS Calculation
 

 
 

 
 

Effect of dilutive securities

 
664

 
 

Net income available for common stock and common stock equivalents
$
7,371

 
53,072

 
$
0.14


 
Three Months Ended September 30, 2014
 
Income
 
Shares
 
Per Share
Amount
 
(Thousands, except per share amounts)
Basic EPS Calculation
 
 
 
 
 
Net income available for common stock
$
4,653

 
52,361

 
$
0.09

Diluted EPS Calculation
 
 
 

 
 

Effect of dilutive securities

 
653

 
 

Net income available for common stock and common stock equivalents
$
4,653

 
53,014

 
$
0.09


 
Nine Months Ended September 30, 2015
 
Income
 
Shares
 
Per Share
Amount
 
(Thousands, except per share amounts)
Basic EPS Calculation
 
 
 
 
 
Net income available for common stock
$
79,828

 
52,627

 
$
1.52

Diluted EPS Calculation
 

 
 

 
 

Effect of dilutive securities

 
688

 
 

Net income available for common stock and common stock equivalents
$
79,828

 
53,315

 
$
1.50


 
Nine Months Ended September 30, 2014
 
Income
 
Shares
 
Per Share
Amount
 
(Thousands, except per share amounts)
Basic EPS Calculation
 
 
 
 
 
Net income available for common stock
$
73,183

 
52,353

 
$
1.40

Diluted EPS Calculation
 

 
 

 
 

Effect of dilutive securities

 
495

 
 

Net income available for common stock and common stock equivalents
$
73,183

 
52,848

 
$
1.38


On January 31, 2014, 51,941,236 shares of our common stock were distributed to ONEOK shareholders in conjunction with the separation. For comparative purposes, and to provide a more meaningful calculation of weighted-average shares outstanding, we have assumed this amount and any shares associated with fully vested stock awards that have not been issued to be outstanding as of the beginning of each period prior to the separation presented in the calculation of weighted-average shares.
EMPLOYEE BENEFIT PLANS (Notes)
EMPLOYEE BENEFIT PLANS
8.
EMPLOYEE BENEFIT PLANS

The following tables set forth the components of net periodic benefit cost for our pension and other postretirement benefit plans for the periods indicated:
 
Pension Benefits
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2015
2014
 
2015
2014
 
(Thousands of dollars)
Components of net periodic benefit cost
 
 
 
 
 
Service cost
$
3,497

$
3,554

 
$
10,518

$
9,227

Interest cost
10,652

10,948

 
31,956

32,844

Expected return on assets
(15,363
)
(14,965
)
 
(46,087
)
(44,895
)
Amortization of unrecognized prior service cost
66

137

 
200

411

Amortization of net loss
11,054

7,550

 
33,164

22,649

Net periodic benefit cost
$
9,906

$
7,224

 
$
29,751

$
20,236


 
Other Postretirement Benefits
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2015
2014
 
2015
2014
 
(Thousands of dollars)
Components of net periodic benefit cost
 
 
 
 
 
Service cost
$
849

$
867

 
$
2,547

$
2,908

Interest cost
2,665

2,901

 
7,997

8,703

Expected return on assets
(2,908
)
(2,848
)
 
(8,724
)
(8,544
)
Amortization of unrecognized prior service cost
(440
)
(440
)
 
(1,320
)
(1,320
)
Amortization of net loss
1,510

992

 
4,530

2,976

Net periodic benefit cost
$
1,676

$
1,472

 
$
5,030

$
4,723



We recover qualified pension benefit plan and other postretirement benefit plan costs through rates charged to our customers. Certain utility commissions require that the recovery of these costs be based on specific guidelines. The difference between these regulatory-based amounts and the periodic benefit cost calculated pursuant to GAAP is deferred as a regulatory asset or liability and amortized to expense over periods in which this difference will be recovered in rates, as authorized by the applicable utility commission.

Measurement - In October 2015, plan amendments were approved to merge our frozen cash-balance defined benefit pension plan covering certain Texas Gas Service employees with our defined benefit pension plan covering nonbargaining unit employees and certain bargaining unit employees. In addition, we announced to certain pre-65 participants in our postretirement medical plans a change from a self-insured postretirement medical plan to a plan providing participants an annual benefit that will allow them to select coverage on a healthcare exchange. As a result, we will remeasure the respective plan assets and benefit obligations in the fourth quarter 2015.
COMMITMENTS AND CONTINGENCIES (Notes)
COMMITMENTS AND CONTINGENCIES
9.
COMMITMENTS AND CONTINGENCIES

Environmental Matters - We are subject to multiple historical, wildlife preservation and environmental laws and/or regulations which affect many aspects of our present and future operations. Regulated activities include, but are not limited to, those involving air emissions, storm water and wastewater discharges, handling and disposal of solid and hazardous wastes, wetland preservation, hazardous materials transportation, and pipeline and facility construction. These laws and regulations require us to obtain and/or comply with a wide variety of environmental clearances, registrations, licenses, permits and other approvals. Failure to comply with these laws, regulations, licenses and permits may expose us to fines, penalties and/or interruptions in our operations that could be material to our results of operations. In addition, emission controls and/or other regulatory or permitting mandates under the Clean Air Act and other similar federal and state laws could require unexpected capital expenditures. We cannot assure that existing environmental statutes and regulations will not be revised or that new regulations will not be adopted or become applicable to us. Revised or additional statutes or regulations that result in increased compliance costs or additional operating restrictions could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We own or retain legal responsibility for the environmental conditions at 12 former manufactured natural gas sites in Kansas. These sites contain potentially harmful materials that are subject to control or remediation under various environmental laws and regulations. A consent agreement with the KDHE governs all work at these sites. The terms of the consent agreement allow us to investigate these sites and set remediation activities based upon the results of the investigations and risk analysis. Remediation typically involves the management of contaminated soils and may involve removal of structures and monitoring and/or remediation of groundwater.

We have completed or addressed removal of the source of soil contamination at 11 of the 12 sites according to plans approved by the KDHE. Regulatory closure has been achieved at three of the sites. We have begun site assessment at the remaining site where no active remediation has occurred.

Our expenditures for environmental evaluation, mitigation, remediation and compliance to date have not been significant in relation to our financial position, results of operations or cash flows, and our expenditures related to environmental matters had no material effects on earnings or cash flows during the nine months ended September 30, 2015 and 2014. We do not expect expenditures for these matters to have a material adverse affect on our financial condition, results of operations or cash flows.

Pipeline Safety - We are subject to PHMSA regulations, including integrity-management regulations. PHMSA regulations require pipeline companies operating high-pressure transmission pipelines to perform integrity assessments on pipeline segments that pass through densely populated areas or near specifically designated high-consequence areas. In January 2012, the Pipeline Safety, Regulatory Certainty and Job Creation Act was signed into law. The law increased maximum penalties for violating federal pipeline safety regulations and directs the DOT and the Secretary of Transportation to conduct further review or studies on issues that may or may not be material to us. These issues include, but are not limited to, the following:
an evaluation of whether natural gas pipeline integrity-management requirements should be expanded beyond current high-consequence areas;
a verification of records for pipelines in class 3 and 4 locations and high-consequence areas to confirm maximum allowable operating pressures; and
a requirement to test previously untested pipelines operating above 30 percent yield strength in high-consequence areas.

The potential capital and operating expenditures related to this legislation, the associated regulations or other new pipeline safety regulations are unknown.

Legal Proceedings - 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, 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.
DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Notes)
Fair Value Disclosures
10.
DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Accounting Treatment - We record all derivative instruments at fair value, with the exception of normal purchases and normal sales that are expected to result in physical delivery. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, the reason for holding it, or if regulatory rulings require a different accounting treatment.

If certain conditions are met, we may elect to designate a derivative instrument as a hedge to mitigate the risk of exposure to changes in fair values or cash flows.

The table below summarizes the various ways in which we account for our derivative instruments and the impact on our financial statements:
 
 
Recognition and Measurement
Accounting Treatment
 
Balance Sheet
 
Income Statement
Normal purchases and
normal sales
-
Recorded at historical cost
-
Change in fair value not recognized in earnings
Mark-to-market
-
Recorded at fair value
-
Change in fair value recognized in, and
recoverable through, the purchased-gas cost adjustment mechanisms

We have not elected to designate any of our derivative instruments as hedges. Premiums paid and any cash settlements received associated with the commodity derivative instruments entered into by us are included in, and recoverable through, the purchased-gas cost adjustment mechanisms.

Determining Fair Value - We define fair value as the price that would be received from the sale of an asset or the transfer of a liability in an orderly transaction between market participants at the measurement date. We use the market and income approaches to determine the fair value of our assets and liabilities and consider the markets in which the transactions are executed. We measure the fair value of a group of financial assets and liabilities consistent with how a market participant would price the net risk exposure at the measurement date.

Fair Value Hierarchy - At each balance sheet date, we utilize a fair value hierarchy to classify fair value amounts recognized or disclosed in our financial statements based on the observability of inputs used to estimate such fair value. The levels of the hierarchy are described below:
Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 - Significant observable pricing inputs other than quoted prices included within Level 1 that are, either directly or indirectly, observable as of the reporting date. Essentially, this represents inputs that are derived principally from or corroborated by observable market data; and
Level 3 - May include one or more unobservable inputs that are significant in establishing a fair value estimate. These unobservable inputs are developed based on the best information available and may include our own internal data.

We recognize transfers into and out of the levels as of the end of each reporting period.

Determining the appropriate classification of our fair value measurements within the fair value hierarchy requires management’s judgment regarding the degree to which market data is observable or corroborated by observable market data. We categorize derivatives for which fair value is determined using multiple inputs within a single level, based on the lowest level input that is significant to the fair value measurement in its entirety.

Derivative Instruments -  At September 30, 2015, we held purchased natural gas call options for the heating season ending March 2016, with total notional amounts of 38.1 Bcf, for which we paid premiums of $11.6 million, and had a fair value of $4.4 million. At December 31, 2014, we held purchased natural gas call options for the heating season ended March 2015, with total notional amounts of 16.0 Bcf, for which we paid premiums of $6.4 million, and had a fair value of $0.1 million. The premiums paid and any cash settlements received are recorded as part of our unrecovered purchased-gas costs in current regulatory assets as these contracts are included in, and recoverable through, the purchased-gas cost adjustment mechanisms. Additionally, changes in fair value associated with these contracts are deferred as part of our unrecovered purchased-gas costs in our Balance Sheets. Our natural gas call options are classified as Level 1 as fair value amounts are based on unadjusted quoted prices in active markets including NYMEX-settled prices. There were no transfers between levels for the three and nine months ended September 30, 2015 and 2014.

Other Financial Instruments - The approximate fair value of cash and cash equivalents, accounts receivable and accounts payable is equal to book value, due to the short-term nature of these items. Our cash and cash equivalents are comprised of bank deposits and money market accounts, and are classified as Level 1.

Short-term notes payable and commercial paper are due upon demand and, therefore, the carrying amounts approximate fair value and are classified as Level 1. The book value of our long-term debt, including current maturities, was $1.2 billion at both September 30, 2015 and December 31, 2014. The estimated fair value of our long-term debt, including current maturities, was $1.2 billion and $1.3 billion at September 30, 2015 and December 31, 2014, respectively. The estimated fair value of our Senior Notes at September 30, 2015 and December 31, 2014, was determined using quoted market prices, and are considered Level 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
Basis of Presentation - Prior to our separation from ONEOK, our financial statements were derived from ONEOK’s financial statements, which included its natural gas distribution business as if we, for accounting purposes, had been a separate company for all periods presented. The financial statements for periods prior to the separation also include expense allocations for certain corporate functions historically performed by ONEOK, including allocations of general corporate expenses related to executive oversight, accounting, treasury, tax, legal, information technology and other services. We believe our assumptions underlying the financial statements, including the assumptions regarding the allocation of general corporate expenses from ONEOK, are reasonable. However, the financial statements may not include all of the actual expenses that would have been incurred by us and may not reflect our results of operations, financial position and cash flows had we been a separate publicly traded company during the periods presented prior to the separation.

All financial information presented after the separation represents the results of operations, financial position and cash flows of ONE Gas. Accordingly:
Our Statements of Income and Comprehensive Income for the three and nine months ended September 30, 2014, consist of the results of ONE Gas for the three and eight months ended September 30, 2014, and the results of ONE Gas Predecessor for the one month ended January 31, 2014.
Our Statement of Cash Flows for the nine months ended September 30, 2014, consists of the results of ONE Gas for the eight months ended September 30, 2014, and the results of ONE Gas Predecessor for the one month ended January 31, 2014.

Use of Estimates - The preparation of our financial statements and related disclosures in accordance with GAAP requires us to make estimates and assumptions with respect to values or conditions that cannot be known with certainty that affect the reported amount of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements. These estimates and assumptions also affect the reported amounts of revenue and expenses during the reporting period. Items that may be estimated include, but are not limited to, the economic useful life of assets, fair value of assets and liabilities, provision for doubtful accounts, unbilled revenues for natural gas delivered but for which meters have not been read, natural gas purchased but for which no invoice has been received, provision for income taxes, including any deferred tax valuation allowances, the results of litigation and various other recorded or disclosed amounts.

We evaluate these estimates on an ongoing basis using historical experience and other methods we consider reasonable based on the particular circumstances. Nevertheless, actual results may differ significantly from the estimates. Any effects on our financial position or results of operations from revisions to these estimates are recorded in the period when the facts that give rise to the revision become known.
Related-Party Transactions - Prior to our separation from ONEOK on January 31, 2014, we had certain transactions with ONEOK, including, but not limited to, natural gas supply, allocated corporate services, employee benefits, cash management, derivatives and long-term lines of credit. Following the separation, any services we receive from ONEOK are now third-party transactions. The remaining related-party transactions are not material.
Segments - We operate in one reportable business segment: regulated public utilities that deliver natural gas to residential, commercial, industrial, wholesale, public authority and transportation customers. The accounting policies for our segment are the same as described in Note 1 of our Notes to Financial Statements in our Annual Report. We evaluate our financial performance principally on operating income. For the three and nine months ended September 30, 2015, and 2014, we had no single external customer from which we received 10 percent or more of our gross revenues.
Goodwill Impairment Test - We assess our goodwill for impairment at least annually as of July 1. At July 1, 2015, we assessed qualitative factors to determine whether it was more likely than not that the fair value of our reporting unit was less than its carrying amount. After assessing qualitative factors (including macroeconomic conditions, industry and market considerations, cost factors and overall financial performance), we determined that no further testing was necessary.
Recently Issued Accounting Standards Update - In August 2015, the FASB issued ASU 2015-15, “Interest-Imputation of Interest (Subtopic 835-30),” which specifically addresses the presentation and subsequent measurement of debt issuance costs associated with line of credit arrangements. We do not expect this issued guidance, which will be adopted concurrently with ASU 2015-03, to have a material impact on our financial statements.

In April 2015, the FASB issued ASU 2015-03, “Interest-Imputation of Interest,” which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. We do not expect this issued guidance, which is required to be adopted for our interim and annual reports for periods beginning after December 15, 2015, to have a material impact on our financial statements.

In April 2015, the FASB issued ASU 2015-05, “Intangibles-Goodwill and Other-Internal-Use Software,” which helps entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement. We are evaluating the impact of this issued guidance, which is required to be adopted for our interim and annual reports for periods beginning after December 15, 2015.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” which clarifies and converges the revenue recognition principles under GAAP and International Financial Reporting Standards. In July 2015, FASB delayed the effective date for one year. We are evaluating the impact of this issued guidance, which is required to be adopted for our interim and annual reports beginning with the first quarter 2018.
DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Policies)
Accounting Treatment - We record all derivative instruments at fair value, with the exception of normal purchases and normal sales that are expected to result in physical delivery. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, the reason for holding it, or if regulatory rulings require a different accounting treatment.

If certain conditions are met, we may elect to designate a derivative instrument as a hedge to mitigate the risk of exposure to changes in fair values or cash flows.

The table below summarizes the various ways in which we account for our derivative instruments and the impact on our financial statements:
 
 
Recognition and Measurement
Accounting Treatment
 
Balance Sheet
 
Income Statement
Normal purchases and
normal sales
-
Recorded at historical cost
-
Change in fair value not recognized in earnings
Mark-to-market
-
Recorded at fair value
-
Change in fair value recognized in, and
recoverable through, the purchased-gas cost adjustment mechanisms

We have not elected to designate any of our derivative instruments as hedges. Premiums paid and any cash settlements received associated with the commodity derivative instruments entered into by us are included in, and recoverable through, the purchased-gas cost adjustment mechanisms.
Determining Fair Value - We define fair value as the price that would be received from the sale of an asset or the transfer of a liability in an orderly transaction between market participants at the measurement date. We use the market and income approaches to determine the fair value of our assets and liabilities and consider the markets in which the transactions are executed. We measure the fair value of a group of financial assets and liabilities consistent with how a market participant would price the net risk exposure at the measurement date.

Fair Value Hierarchy - At each balance sheet date, we utilize a fair value hierarchy to classify fair value amounts recognized or disclosed in our financial statements based on the observability of inputs used to estimate such fair value. The levels of the hierarchy are described below:
Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 - Significant observable pricing inputs other than quoted prices included within Level 1 that are, either directly or indirectly, observable as of the reporting date. Essentially, this represents inputs that are derived principally from or corroborated by observable market data; and
Level 3 - May include one or more unobservable inputs that are significant in establishing a fair value estimate. These unobservable inputs are developed based on the best information available and may include our own internal data.

We recognize transfers into and out of the levels as of the end of each reporting period.

Determining the appropriate classification of our fair value measurements within the fair value hierarchy requires management’s judgment regarding the degree to which market data is observable or corroborated by observable market data. We categorize derivatives for which fair value is determined using multiple inputs within a single level, based on the lowest level input that is significant to the fair value measurement in its entirety.
REGULATORY ASSETS AND LIABILITIES (Tables)
SCHEDULE OF REGULATED ASSETS AND LIABILITIES
The tables below present a summary of regulatory assets, net of amortization, and liabilities for the periods indicated:
 
 
 
 
September 30, 2015
 
 
 
 
Current
 
Noncurrent
 
Total
 
 
 
 
(Thousands of dollars)
Under-recovered purchased-gas costs
 

 
$
10,354

 
$

 
$
10,354

Pension and postretirement benefit costs (see Note 8)
 

 
19,445

 
429,346

 
448,791

Reacquired debt costs
 

 
812

 
9,122

 
9,934

Other
 

 
1,092

 
1,844

 
2,936

Total regulatory assets, net of amortization
 
 
 
31,703

 
440,312

 
472,015

Accumulated removal costs (a)
 

 

 
(11,846
)
 
(11,846
)
Weather normalization
 
 
 
(5,821
)
 

 
(5,821
)
Over-recovered purchased-gas costs
 

 
(33,363
)
 

 
(33,363
)
Ad valorem tax
 
 
 
(2,153
)
 

 
(2,153
)
Total regulatory liabilities
 
 
 
(41,337
)
 
(11,846
)
 
(53,183
)
Net regulatory assets (liabilities)
 
 
 
$
(9,634
)
 
$
428,466

 
$
418,832

(a) Included in other deferred credits in our Balance Sheets.
 
 
 
 
December 31, 2014
 
 
 
 
Current
 
Noncurrent
 
Total
 
 
 
 
(Thousands of dollars)
Under-recovered purchased-gas costs
 

 
$
28,712

 
$

 
$
28,712

Pension and postretirement benefit costs
 

 
18,108

 
466,684

 
484,792

Reacquired debt costs
 

 
812

 
9,730

 
10,542

Other
 

 
2,561

 
2,309

 
4,870

Total regulatory assets, net of amortization
 
 
 
50,193

 
478,723

 
528,916

Accumulated removal costs (a)
 

 

 
(15,451
)
 
(15,451
)
Weather normalization
 
 
 
(16,516
)
 

 
(16,516
)
Over-recovered purchased-gas costs
 

 
(13,055
)
 

 
(13,055
)
Ad valorem tax
 
 
 
(2,896
)
 

 
(2,896
)
Total regulatory liabilities
 
 
 
(32,467
)
 
(15,451
)
 
(47,918
)
Net regulatory assets (liabilities)
 
 
 
$
17,726

 
$
463,272

 
$
480,998

(a) Included in other deferred credits in our Balance Sheets.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables)
Reclassification out of Accumulated Other Comprehensive Income [Table Text Block]
The following table sets forth the effect of reclassifications from accumulated other comprehensive income (loss) in our Statements of Income for the periods indicated:
 
 
Three Months Ended
 
Nine Months Ended
 
 
Details about Accumulated Other Comprehensive
 
September 30,
 
September 30,
 
Affected Line Item in the
 Income (Loss) Components
 
2015
2014
 
2015
2014
 
 Statements of Income
 
 
(Thousands of dollars)
 
 
Pension and other postretirement benefit plan obligations (a)
 
 
 
 
 
 
 
 
Amortization of net loss
 
$
12,564

$
8,542

 
$
37,694

$
25,625

 
 
Amortization of unrecognized prior service cost
 
(374
)
(303
)
 
(1,120
)
(909
)
 
 
 
 
12,190

8,239

 
36,574

24,716

 
 
Regulatory adjustments (b)
 
(11,961
)
(8,366
)
 
(35,887
)
(24,970
)
 
 
 
 
229

(127
)
 
687

(254
)
 
Income before income taxes
 
 
(88
)
49

 
(264
)
98

 
Income tax expense
Total reclassifications for the period
 
$
141

$
(78
)
 
$
423

$
(156
)
 
Net income
(a) These components of accumulated other comprehensive income (loss) are included in the computation of net periodic benefit cost. See Note 8 for additional detail of our net periodic benefit cost.
(b) Regulatory adjustments represent pension and other postretirement benefit costs expected to be recovered through rates and are deferred as part of our regulatory assets. See Note 2 for additional disclosures of regulatory assets and liabilities.
EARNINGS PER SHARE (Tables)
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]
The following tables set forth the computation of basic and diluted EPS from continuing operations for the periods indicated:
 
Three Months Ended September 30, 2015
 
Income
 
Shares
 
Per Share
Amount
 
(Thousands, except per share amounts)
Basic EPS Calculation
 
 
 
 
 
Net income available for common stock
$
7,371

 
52,408

 
$
0.14

Diluted EPS Calculation
 

 
 

 
 

Effect of dilutive securities

 
664

 
 

Net income available for common stock and common stock equivalents
$
7,371

 
53,072

 
$
0.14


 
Three Months Ended September 30, 2014
 
Income
 
Shares
 
Per Share
Amount
 
(Thousands, except per share amounts)
Basic EPS Calculation
 
 
 
 
 
Net income available for common stock
$
4,653

 
52,361

 
$
0.09

Diluted EPS Calculation
 
 
 

 
 

Effect of dilutive securities

 
653

 
 

Net income available for common stock and common stock equivalents
$
4,653

 
53,014

 
$
0.09


 
Nine Months Ended September 30, 2015
 
Income
 
Shares
 
Per Share
Amount
 
(Thousands, except per share amounts)
Basic EPS Calculation
 
 
 
 
 
Net income available for common stock
$
79,828

 
52,627

 
$
1.52

Diluted EPS Calculation
 

 
 

 
 

Effect of dilutive securities

 
688

 
 

Net income available for common stock and common stock equivalents
$
79,828

 
53,315

 
$
1.50


 
Nine Months Ended September 30, 2014
 
Income
 
Shares
 
Per Share
Amount
 
(Thousands, except per share amounts)
Basic EPS Calculation
 
 
 
 
 
Net income available for common stock
$
73,183

 
52,353

 
$
1.40

Diluted EPS Calculation
 

 
 

 
 

Effect of dilutive securities

 
495

 
 

Net income available for common stock and common stock equivalents
$
73,183

 
52,848

 
$
1.38


EMPLOYEE BENEFIT PLANS (Tables)
Schedule of Net Benefit Costs [Table Text Block]
The following tables set forth the components of net periodic benefit cost for our pension and other postretirement benefit plans for the periods indicated:
 
Pension Benefits
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2015
2014
 
2015
2014
 
(Thousands of dollars)
Components of net periodic benefit cost
 
 
 
 
 
Service cost
$
3,497

$
3,554

 
$
10,518

$
9,227

Interest cost
10,652

10,948

 
31,956

32,844

Expected return on assets
(15,363
)
(14,965
)
 
(46,087
)
(44,895
)
Amortization of unrecognized prior service cost
66

137

 
200

411

Amortization of net loss
11,054

7,550

 
33,164

22,649

Net periodic benefit cost
$
9,906

$
7,224

 
$
29,751

$
20,236


 
Other Postretirement Benefits
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2015
2014
 
2015
2014
 
(Thousands of dollars)
Components of net periodic benefit cost
 
 
 
 
 
Service cost
$
849

$
867

 
$
2,547

$
2,908

Interest cost
2,665

2,901

 
7,997

8,703

Expected return on assets
(2,908
)
(2,848
)
 
(8,724
)
(8,544
)
Amortization of unrecognized prior service cost
(440
)
(440
)
 
(1,320
)
(1,320
)
Amortization of net loss
1,510

992

 
4,530

2,976

Net periodic benefit cost
$
1,676

$
1,472

 
$
5,030

$
4,723

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Significant Accounting Policies [Line Items]
 
 
 
 
Number of natural gas distribution services customers
2,000,000 
 
2,000,000 
 
Segment Reporting, Disclosure of Major Customers
REGULATORY ASSETS AND LIABILITIES (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2015
Dec. 31, 2014
SCHEDULE OF REGULATED ASSETS AND LIABILITIES [Line Items]
 
 
Regulatory Assets, Current
$ 31,703 
$ 50,193 
Regulatory Assets, Noncurrent
440,312 
478,723 
Regulatory Liability, Current
(41,337)
(32,467)
Net regulatory assets (liabilities), current
(9,634)
17,726 
Net regulatory assets (liabilities), noncurrent
428,466 
463,272 
Net Regulatory Assets
418,832 
480,998 
Accumulated removal costs [Member]
 
 
SCHEDULE OF REGULATED ASSETS AND LIABILITIES [Line Items]
 
 
Regulatory Liability, Current
Regulatory Liability, Noncurrent
(11,846)
(15,451)
Regulatory Liabilities
(11,846)
(15,451)
Weather normalization [Member]
 
 
SCHEDULE OF REGULATED ASSETS AND LIABILITIES [Line Items]
 
 
Regulatory Liability, Current
(5,821)
(16,516)
Regulatory Liability, Noncurrent
Regulatory Liabilities
(5,821)
(16,516)
Over-recovered purchased-gas costs [Member]
 
 
SCHEDULE OF REGULATED ASSETS AND LIABILITIES [Line Items]
 
 
Regulatory Liability, Current
(33,363)
(13,055)
Regulatory Liability, Noncurrent
Regulatory Liabilities
(33,363)
(13,055)
Ad valorem tax [Member]
 
 
SCHEDULE OF REGULATED ASSETS AND LIABILITIES [Line Items]
 
 
Regulatory Liability, Current
(2,153)
(2,896)
Regulatory Liability, Noncurrent
Regulatory Liabilities
(2,153)
(2,896)
Total regulated liabilities [Member]
 
 
SCHEDULE OF REGULATED ASSETS AND LIABILITIES [Line Items]
 
 
Regulatory Liability, Current
(41,337)
(32,467)
Regulatory Liability, Noncurrent
(11,846)
(15,451)
Regulatory Liabilities
(53,183)
(47,918)
Under-recovered purchased-gas costs [Member]
 
 
SCHEDULE OF REGULATED ASSETS AND LIABILITIES [Line Items]
 
 
Regulatory Assets, Current
10,354 
28,712 
Regulatory Assets, Noncurrent
Regulatory Assets
10,354 
28,712 
Pension and postretirement benefit costs [Member]
 
 
SCHEDULE OF REGULATED ASSETS AND LIABILITIES [Line Items]
 
 
Regulatory Assets, Current
19,445 
18,108 
Regulatory Assets, Noncurrent
429,346 
466,684 
Regulatory Assets
448,791 
484,792 
Reacquired debt costs [Member]
 
 
SCHEDULE OF REGULATED ASSETS AND LIABILITIES [Line Items]
 
 
Regulatory Assets, Current
812 
812 
Regulatory Assets, Noncurrent
9,122 
9,730 
Regulatory Assets
9,934 
10,542 
Other regulatory assets [Member]
 
 
SCHEDULE OF REGULATED ASSETS AND LIABILITIES [Line Items]
 
 
Regulatory Assets, Current
1,092 
2,561 
Regulatory Assets, Noncurrent
1,844 
2,309 
Regulatory Assets
2,936 
4,870 
Total regulatory assets, net of amortization [Member]
 
 
SCHEDULE OF REGULATED ASSETS AND LIABILITIES [Line Items]
 
 
Regulatory Assets, Current
31,703 
50,193 
Regulatory Assets, Noncurrent
440,312 
478,723 
Regulatory Assets
$ 472,015 
$ 528,916 
CREDIT FACILITIES (Details) (USD $)
9 Months Ended
Sep. 30, 2015
Dec. 31, 2014
Line of Credit Facility [Line Items]
 
 
Ratio of Indebtedness to Net Capital
0.4 
 
Commercial paper maximum borrowing capacity
$ 700,000,000 
 
Commercial Paper
42,000,000 
Letters of Credit Outstanding, Amount
1,000,000 
 
Line of Credit Facility, Remaining Borrowing Capacity
699,000,000 
 
Line of Credit [Member]
 
 
Line of Credit Facility [Line Items]
 
 
Debt Instrument, Covenant Description
The ONE Gas Credit Agreement contains certain financial, operational and legal covenants. Among other things, these covenants include maintaining ONE Gas’ debt-to-capital ratio of no more than 70 percent at the end of any calendar quarter. The ONE Gas Credit Agreement also contains customary affirmative and negative covenants, including covenants relating to liens, indebtedness of subsidiaries, investments, changes in the nature of business, fundamental changes, transactions with affiliates, burdensome agreements and use of proceeds. In the event of a breach of certain covenants by ONE Gas, amounts outstanding under the ONE Gas Credit Agreement may become due and payable immediately. 
 
Line of Credit Facility, Interest Rate Description
Borrowings, if any, will accrue interest at LIBOR plus 79.5 basis points.  
 
Line of credit facility sublimit
50,000,000 
 
Line Of Credit Facility Option To Increase Borrowing Capacity
1,200,000,000 
 
Line of Credit Facility, Maximum Borrowing Capacity
$ 700,000,000 
 
Line of Credit Facility, Commitment Fee Description
The annual facility fee is 8 basis points. 
 
LONG-TERM DEBT (Details) (USD $)
9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Debt Instrument [Line Items]
 
 
Cash payment to ONEOK upon separation
$ 0 
$ (1,130,000,000)
Note Payable Due 2019 [Member]
 
 
Debt Instrument [Line Items]
 
 
Debt Instrument, Covenant Description
The indenture governing our Senior Notes includes an event of default upon the acceleration of other indebtedness of $100 million or more. Such events of default would entitle the trustee or the holders of 25 percent in aggregate principal amount of the outstanding Senior Notes to declare those senior notes immediately due and payable in full. 
 
Long-term Debt, Gross
300,000,000 
 
Debt Instrument, Interest Rate, Stated Percentage
2.07% 
 
Note Payable Due 2024 [Member]
 
 
Debt Instrument [Line Items]
 
 
Debt Instrument, Covenant Description
The indenture governing our Senior Notes includes an event of default upon the acceleration of other indebtedness of $100 million or more. Such events of default would entitle the trustee or the holders of 25 percent in aggregate principal amount of the outstanding Senior Notes to declare those senior notes immediately due and payable in full. 
 
Long-term Debt, Gross
300,000,000 
 
Debt Instrument, Interest Rate, Stated Percentage
3.61% 
 
Notes Payable Due 2044 [Member]
 
 
Debt Instrument [Line Items]
 
 
Debt Instrument, Covenant Description
The indenture governing our Senior Notes includes an event of default upon the acceleration of other indebtedness of $100 million or more. Such events of default would entitle the trustee or the holders of 25 percent in aggregate principal amount of the outstanding Senior Notes to declare those senior notes immediately due and payable in full. 
 
Long-term Debt, Gross
$ 600,000,000 
 
Debt Instrument, Interest Rate, Stated Percentage
4.658% 
 
EQUITY DIVIDENDS (Details)
3 Months Ended
Sep. 30, 2015
Dividends Declared [Line Items]
 
Common Stock, Dividends, Per Share, Declared
$ 0.30 
Common Stock, Dividends, Declared, Annualized Basis
$ 1.20 
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Accumulated Other Comprehensive Income (Loss) [Line Items]
 
 
 
 
Amortization of net loss
$ 12,564 
$ 8,542 
$ 37,694 
$ 25,625 
Amortization of unrecognized prior service cost
(374)
(303)
(1,120)
(909)
Reclassification adjustment, before tax and regulatory adjustments
12,190 
8,239 
36,574 
24,716 
Regulatory adjustments
(11,961)
(8,366)
(35,887)
(24,970)
Reclassification adjustment, before tax
229 
(127)
687 
(254)
Reclassification adjustment, Tax
(88)
49 
(264)
98 
Reclassification adjustment, net of tax
$ 141 
$ (78)
$ 423 
$ (156)
EARNINGS PER SHARE (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Dec. 31, 2014
Jan. 31, 2014
EARNINGS PER SHARE [Line Items]
 
 
 
 
 
 
Common stock, shares issued
52,598,005 
 
52,598,005 
 
52,083,859 
51,941,236 
Basic EPS Calculation
 
 
 
 
 
 
Net income available for common stock
$ 7,371 
$ 4,653 
$ 79,828 
$ 73,183 
 
 
Weighted Average Number of Shares Outstanding, Basic
52,408,000 
52,361,000 
52,627,000 
52,353,000 
 
 
Earnings Per Share, Basic
$ 0.14 
$ 0.09 
$ 1.52 
$ 1.40 
 
 
Diluted EPS Calculation
 
 
 
 
 
 
Net income available for common stock
7,371 
4,653 
79,828 
73,183 
 
 
Effect of dilutive securities on income
$ 0 
$ 0 
$ 0 
$ 0 
 
 
Effect of dilutive securities on shares
664,000 
653,000 
688,000 
495,000 
 
 
Weighted Average Number of Shares Outstanding, Diluted
53,072,000 
53,014,000 
53,315,000 
52,848,000 
 
 
Earnings Per Share, Diluted
$ 0.14 
$ 0.09 
$ 1.50 
$ 1.38 
 
 
EMPLOYEE BENEFIT PLANS (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Components of net periodic benefit cost:
 
 
 
 
Amortization of unrecognized prior service cost
$ (374)
$ (303)
$ (1,120)
$ (909)
Amortization of net loss
12,564 
8,542 
37,694 
25,625 
ONE Gas Pension Plans [Member]
 
 
 
 
Components of net periodic benefit cost:
 
 
 
 
Service cost
3,497 
3,554 
10,518 
9,227 
Interest cost
10,652 
10,948 
31,956 
32,844 
Expected return on assets
(15,363)
(14,965)
(46,087)
(44,895)
Amortization of unrecognized prior service cost
66 
137 
200 
411 
Amortization of net loss
11,054 
7,550 
33,164 
22,649 
Net periodic benefit cost
9,906 
7,224 
29,751 
20,236 
ONE Gas Postretirement Benefit Plans [Member]
 
 
 
 
Components of net periodic benefit cost:
 
 
 
 
Service cost
849 
867 
2,547 
2,908 
Interest cost
2,665 
2,901 
7,997 
8,703 
Expected return on assets
(2,908)
(2,848)
(8,724)
(8,544)
Amortization of unrecognized prior service cost
(440)
(440)
(1,320)
(1,320)
Amortization of net loss
1,510 
992 
4,530 
2,976 
Net periodic benefit cost
$ 1,676 
$ 1,472 
$ 5,030 
$ 4,723 
COMMITMENTS AND CONTINGENCIES (Details)
Sep. 30, 2015
Commitments and Contingencies [Line Items]
 
Number Of Former Manufactured Gas Sites Where We Own Or Retain Legal Responsibility For Environmental Conditions
12 
Number of sites where we have completed or addressed removal of the source of soil contamination according to plans approved by KDHE
11 
Number of sites where regulatory closure has been achieved
Percentage yield of high consequence pipeline areas
30.00% 
DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Details) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2015
MMcf
Sep. 30, 2014
Sep. 30, 2015
MMcf
Sep. 30, 2014
Dec. 31, 2014
MMcf
Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
 
 
 
 
 
 
Derivative, Nonmonetary Notional Amount
38,100 
 
38,100 
 
16,000 
 
Premiums recorded in other current assets on natural gas contracts held
$ 11,600,000 
 
$ 11,600,000 
 
$ 6,400,000 
 
Fair Value Assets, Transfers between Levels
 
 
Long-term Debt, including current maturities
1,201,306,000 
 
1,201,306,000 
 
1,201,311,000 
 
Cash and Cash Equivalents, at Carrying Value
52,974,000 
59,685,000 
52,974,000 
59,685,000 
11,943,000 
3,171,000 
Long-term Debt
1,200,000,000 
 
1,200,000,000 
 
1,200,000,000 
 
Fair Value, Inputs, Level 1 [Member]
 
 
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
 
 
 
 
 
 
Fair value, natural gas call options
4,400,000 
 
4,400,000 
 
100,000 
 
Fair Value, Inputs, Level 2 [Member]
 
 
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
 
 
 
 
 
 
Long-term Debt, Fair Value
$ 1,200,000,000 
 
$ 1,200,000,000 
 
$ 1,300,000,000