Steady gas utility, concrete large-load execution
- ONE Gas is a 100% regulated natural gas distributor with about 2.3 million customers.
- The company earns mainly from delivery rates, not from marking up the gas commodity.
- The 2026 plan calls for about $800 million of capital spending, which remains the core growth driver.
- Management signed three high-volume projects, securing about $15 million in new annual revenue.
- The upside is real, but Finn stays cautious because regulation, financing costs, and valuation still matter.
Slow utility, new demand lane
ONE Gas is a plain utility business. It owns pipes, delivers natural gas, and earns regulated returns on the money it spends to keep and expand that system. That makes earnings steadier than a normal energy company, because the company is not trying to win on gas prices.
The new twist is large-load demand execution. Management recently announced three high-volume projects are now under contract, representing about $15 million of incremental annual revenue. One is an Oklahoma data center expected to be in service this quarter. Five more projects remain in late-stage discussion.
The base case is still rate base growth. ONE Gas expects about $800 million of capital expenditures and asset removal costs in 2026. The company recently raised full-year guidance to the upper half of its range, helped by a $0.42 per share expected benefit from Texas House Bill 84.
The bear case is not hard to see. Regulators can deny or delay recovery. Higher interest costs can make the capital plan harder to fund. Long term, electrification and decarbonization could slow demand for gas in homes and buildings. The large-load story also needs more signed contracts before it becomes dependable earnings.
Paid to deliver gas
ONE Gas charges customers to deliver natural gas through its local pipeline network. The cost of the gas itself is generally passed through to customers. The profit pool comes from regulated delivery rates.
Those rates are set by regulators in Oklahoma, Kansas, and Texas. Regulators allow the company to recover operating costs and earn a return on its rate base. Rate base means the pipes, meters, systems, and other assets regulators allow the utility to earn on.
This model creates a local moat. A second company is not likely to build a duplicate gas network in the same streets. The tradeoff is that ONE Gas cannot freely set prices. A bad rate case can slow earnings even if the company spends well.
Weather matters, because gas use is higher in winter. ONE Gas has weather normalization mechanisms in all service areas, which help smooth the impact of warmer or colder weather on delivery revenue.
What runs through the pipes
Residential gas delivery
This is the core service for households in Oklahoma, Kansas, and Texas. It is seasonal, but weather normalization helps soften swings from warm winters.
Commercial gas delivery
ONE Gas serves businesses that use natural gas for heat, cooking, and operations. Growth follows local economic activity and customer additions.
Transportation service
Large customers can buy gas from another supplier and pay ONE Gas to move it through its system. This is the service type tied to the signed Oklahoma data center agreement.
Large-load projects
Data centers, advanced manufacturing sites, and power generation could become a new growth lane. Three high-volume projects are under contract.
CNG fueling supply
ONE Gas also supplies compressed natural gas fueling stations for motor vehicles. This is smaller than the core utility business, but it uses the same gas delivery system.
Three state utilities
ONE Gas reports one business segment: regulated natural gas utilities. The mix below uses the latest disclosed division rate base from the 2025 10-K: Oklahoma $2.453 billion, Kansas $1.468 billion, and Texas $1.887 billion, so it is not a revenue mix.
What could break the case
Rate case disappointment
High impact · Medium oddsONE Gas depends on regulators to approve cost recovery and allowed returns. The 2025 Texas case ended with a $14.5 million revenue increase after the company had requested $41.1 million, which shows the risk clearly. Near term, Oklahoma and Texas filings are important tests.
Large-load projects stall
Medium impact · Medium oddsThe data center and manufacturing opportunity is promising, and three projects are signed. However, five remain in discussion. If these customers delay, cancel, or need less gas than expected, the growth story falls back to normal utility spending.
Higher financing costs
High impact · Medium oddsONE Gas is capital intensive. It expects about $800 million of capital spending and asset removal costs in 2026. If debt and equity become more expensive, funding that plan can pressure earnings and the balance sheet.
Electrification pressure
High impact · Medium oddsNatural gas utilities face long-term pressure from building electrification and climate policy. If more homes and businesses switch to electric heating, customer usage could weaken over time. This risk may move slowly, but it can change how regulators view new gas investment.
Pipeline, weather, and cyber events
High impact · Low oddsA gas utility carries safety and reliability risk. Leaks, ruptures, severe weather, third-party damage, or cyberattacks can raise costs and harm trust. Regulators may not allow full or fast recovery of every cost after a major event.
In one breath
Does ONE Gas make money when natural gas prices rise?
Usually no. ONE Gas mainly earns from delivering gas, while the commodity cost is passed through to customers. Its earnings are driven more by regulated rates, customer growth, and approved capital investment.
Why do data centers matter for ONE Gas?
Data centers and related power needs can require large, steady energy supply. ONE Gas has secured contracts with high-volume projects, opening a new revenue path beyond standard utility delivery.
Is ONE Gas a growth stock?
Not in the usual sense. It is a regulated utility with modest growth from rate base investment, plus a boost from large-load customers. Finn's view remains cautious because the stock still carries regulatory, financing, and long-term gas demand risks.
