MAKING
CONNECTIONS
2016 Annual Report
ONE Gas, Inc. is a 100-percent
regulated natural gas utility,
and trades on the New York Stock
Exchange under the symbol “OGS.”
ONE Gas is included in the
S&P MidCap 400 Index, and is one
of the largest natural gas utilities
in the United States.
Why We Exist
Our mission is to deliver natural gas for a better tomorrow.
What We Want to Be
Our vision is to be a premier natural gas distribution company
creating exceptional value for our stakeholders.
What We Believe in
Our core values are:
Safety
We are committed to operating safely and in
an environmentally responsible manner.
Inclusion and Diversity
We embrace and promote diversity and collaboration; every
employee makes a difference and contributes to our success.
Ethics
We are accountable to the highest ethical standards;
honesty, trust and integrity matter.
Service
We set a standard of exceptional service and make
continuous improvements in our pursuit of excellence.
Value
We create value for all stakeholders, including our
employees, customers, investors and communities.
www.onegas.com
We provide natural gas
distribution services to
more than 2 million
customers in Oklahoma,
Kansas and Texas.
We are headquartered
in Tulsa, Okla.
Our divisions include:
Oklahoma Natural Gas,
the largest natural gas
distributor in Oklahoma;
Kansas Gas Service, the
largest in Kansas; and
Texas Gas Service, the
third largest in Texas, in
terms of customers.
Our largest natural gas
distribution markets
by customer count are
Oklahoma City and Tulsa,
Okla.; Kansas City, Wichita
and Topeka, Kan.; and
Austin and El Paso, Texas.
We serve residential,
commercial, industrial,
transportation and
wholesale customers in
all three states.
1
Natural gas meters measure natural gas usage for
millions of customers throughout the ONE Gas footprint.
To Our Fellow Shareholders:
At ONE Gas, making connections comes naturally for
us. Every day, our employees make connections with
our customers and with the communities where we live
and serve. We connect our customers with the natural
gas service they need to warm their homes, dry their
clothes, cook their meals and heat their water.
Connecting with our communities also helps shape the
better tomorrow that guides our overall mission.
We continually set goals that help us strive for our
vision of being a premier natural gas distribution
company. At the close of our third year as a
publicly traded company, our accomplishments
demonstrate how connecting the interests of all
stakeholders has proven to be the right strategy
for our company.
In 2016, we maintained focus on the fi ve key areas
we previously determined to have the greatest
impact on our company. We chose these areas
strategically because we believe they create a long-
term impact and will remain part of our strategic
focus for years to come.
As always, safety is our top priority. In our industry, we
recognize the importance of keeping our employees,
customers and communities safe, and we take that
responsibility seriously. Our continued commitment to
a “zero harm” culture encourages all employees to hold
each other accountable and remain focused on safety.
This cultural focus had a signifi cant impact on our 2016
results for Total Recordable Incident Rate (TRIR) and
Days Away, Restricted or Transferred (DART).
We are particularly proud that we improved our
TRIR by 30 percent and our DART by 40 percent
from 2015 to 2016. Those are the largest percentage
improvements we’ve seen in the three years since
ONE Gas began.
After two years of decreasing our Preventable Vehicle
Incident Rate, this number increased last year, which
reinforced for us that our work is never fi nished. We are
committed to improving this in 2017, and will remain
diligent in further cultivating our safety culture and
improving all areas of safety.
In 2016, to continue our efforts to develop a
high-performing workforce, our employees had
the opportunity to participate in an employee
engagement survey. Engagement is an important
part of our culture and strategy because we believe
engaged employees better understand that what
they do and how they do it matters. This effort is part
of our strategy to measure and identify long-term
opportunities for development of all our employees.
We will continue to invest in leadership programs to
develop the current and future leaders of our company
with a continued focus on managerial and leadership
development.
Leveraging technology remains a top focus as we
continue to utilize technology and embrace change.
We are expanding the use of technology in key areas of
customer service and operations to increase effi ciency
and reduce expenses to sustainable levels. Following
our launch of a customer mobile app in late 2015, we
began to focus on upgrading our websites to be more
responsive to our customers’ expectations around
their fast-paced lifestyles. Our redesigned customer
websites are also more user-friendly and effi cient
for customers using their smartphones, tablets and
personal computers.
We continue to see results in our utilization of
technology that enables us to evaluate our
distribution system, further strengthening our ability
to make informed and data-driven decisions about
modernizing our system. You may read more about
our system integrity program and accomplishments
later in this report.
In 2016, we spent $309 million for capital expenditures,
of which more than 70 percent went toward system
integrity. These investments enhance our system’s
reliability and lead to growth opportunities including
extending service to new areas to connect even
more customers. We saw an increase in residential
natural gas sales, due primarily to customer growth
in Oklahoma and Texas, and added 20,000 more
residential customers in 2016 compared with 2015.
2
Our success as a company is also based on maintaining
collaborative relationships with our regulators. In order
to have a successful regulatory strategy, we must
ensure we are always providing safe and reliable service
in the most cost-effective way. In our fi rst three years
as a publicly traded company, we have completed rate
cases for approximately 95 percent of our rate base.
In 2016, we saw a revenue increase from new rates of
$44 million compared with 2015.
In our service territories, the natural gas competitive
price advantage is 3-to-1 compared with electricity.
Because of this, we believe that natural gas is the
smart choice for decades to come. We are fulfi lling
a social responsibility by balancing economics and
environmental impact, which is aligned with our goal
of adding value for all stakeholders.
Whether we’re serving our customers by connecting
them with our product, serving our communities by
connecting our volunteers with organizations in need,
or connecting you, as shareholders, to the overall value
of your investment, it’s important for us to remember
that our company is about making connections.
John W. Gibson
Chairman, ONE Gas, Inc.
Pierce H. Norton II
President and Chief Executive Offi cer,
ONE Gas, Inc.
April 5, 2017
2016 HIGHLIGHTS
Our employees continued to
deliver results in our third
year as a public company.
Below are just a few of the
successes we can att ribute to
their eff orts and dedication.
We delivered a total shareholder
return of approximately 30 percent
in 2016, outperforming our peer
group and the S&P MidCap Utilities
Index. Shareholder returns refl ect
solid operating and fi nancial results
and the continued investments in
our assets.
We increased the quarterly
dividend by 7 cents per share to
42 cents per share, effective for the
fi rst quarter 2017, an increase of
20 percent, resulting in an annualized
dividend of $1.68 per share.
We expect an average annual
dividend increase of 8 to 10 percent
between 2016 and 2021, while
maintaining a targeted 55 to 65
percent dividend payout ratio.
We expect net income and earnings
per share to increase by an average
of 5 to 7 percent annually between
2016 and 2021.
3
FINANCIAL OVERVIEW
SIGNIFICANT SCALE
High Percentage of Residential Customers
2016 SUMm ARY
83% Residential
16% Commercial /
Industrial
7% Commercial /
Industrial
92% Residential
We reported full-year 2016 net income of $140.1 million,
or $2.65 per diluted share, compared with $119.0 million,
or $2.24 per diluted share, in 2015; and full-year 2016
capital expenditures of $309.0 million, compared with
$294.3 million in 2015.
Our operating income was $269.1 million, compared
with $239.1 million in 2015, while net margin increased
by $43.7 million compared with last year.
Net margin increases in 2016 primarily refl ected new
rates in Oklahoma and Texas along with an increase
in our average residential customer count in
these states.
On January 17, 2017, the ONE Gas Board of Directors
increased the quarterly dividend by 7 cents per share
to 42 cents per share, effective for the fi rst quarter
2017, resulting in an annualized dividend of $1.68 per
share. Our average annual dividend growth rate is
expected to increase 8 to 10 percent between 2016
and 2021. This dividend level is consistent with our
targeted 55 to 65 percent dividend payout ratio.
1% Other
1% Other
NET SALES MARGIN
(Excludes transportation)
CUSTOMER COUNT
(Excludes transportation)
Highlights
2016
2015
2014
OKLAHOMA
KANSAS
TEXAS
AVERAGE
Earnings and Dividends
Net Income (thousands)
Earnings Per Share of Common Stock
Basic
Diluted
Dividends Per Share
Margin, Volumes and Weather
Net Margin (thousands)
Total Volumes Sold (Bcf)
Total Volumes Delivered (Bcf)
Actual Heating Degree Days
Normal Heating Degree Days
Customers and Employees
$ 140,095
$ 119,030
$ 109,790
$
$
$
2.67
2.65
1.40
$
$
$
2.26
2.24
1.20
$
$
$
2.10
2.07
0.84*
$ 885,435
141.0
349.1
8,314
9,909
$ 841,733
154.0
358.8
9,114
9,962
$ 826,957
166.3
379.8
10,615
9,965
Average Number of Customers (thousands)
Total Employees
2,152
3,400
2,140
3,400
2,127
3,300
Common Stock
4
Market Value Per Share – Year-End Closing Price
Average Shares of Common Stock, Outstanding (thousands)
Basic
Diluted
$
63.96
$
50.17
$
41.22
52,453
52,963
52,578
53,254
52,364
52,946
* $0.28 per share in each of our second, third and fourth quarters
2016 Fixed Charges
Sales Customers*
88%
55%
70%
74%
Average Annual
Heating Degree
Days – Normal
3,264
4,860
1,785
Weather
Normalization**
100%
100%
100%
100%
* Fixed percentage of total net margin on natural gas sales
** Percent of sales customers who are in jurisdictions with weather normalization adjustment mechanisms
5
natural gas is moving
forward
connecting customers to clean, affordable energy.
Natural gas is known as a foundation fuel of the U.S. energy
economy for its ability to serve as a clean, effi cient, affordable
and abundant domestic fuel source.
In our service territories, more than 2 million customers, including
many of our own employees, enjoy the comfort and affordability
of natural gas, and the numbers continue to increase.
The average home uses 50 percent less natural gas than it did
40 years ago due in part to installation of tighter-fi tting windows
and doors, better insulation and more effi cient natural gas
appliances made possible for even more customers through
energy-effi ciency programs.
Our mission to deliver natural gas for a better tomorrow means
we are working today to connect customers to the benefi ts and
savings of natural gas.
6
ONE Gas employs more than 3,400 employees in
the areas we serve. Many of our employees are
active members in their communities along with
being natural gas consumers.
7
CONNECTING
MORE CUSTOMERS
to a bett er tomorrow.
8
CONNECTING CUSTOMERS
WITH EFFICIENCY
More homes with natural gas service offer
us more opportunities to connect customers
with affordable and efficient appliances.
In addition to our ongoing energy-effi ciency
programs in Oklahoma and Austin, Texas,
in 2016, we announced a new program in
the Rio Grande Valley, offering more than
15 different rebates to help customers choose
the most effi cient natural gas appliances for
their home and business needs.
In 2016, our combined energy-efficiency
programs issued more than 111,000 rebates
totaling more than $11.5 million.
We are committed to growth that aligns with our
long-term strategy. Part of that strategy involves
the installation of new main and service lines to
provide more residential and commercial customers
access to clean, effi cient and affordable energy.
In 2016, economic and population growth,
predominately in our seven major metropolitan areas,
has afforded us opportunities to connect 20,000
new customers through a variety of projects across
our footprint. This growth included the connection
of more than 8,000 new customers in Oklahoma.
Areas, such as the Rio Grande Valley in south Texas,
are developing state-of-the-art, master-planned
communities designed to offer residents modern
conveniences close to work, school and recreation.
In 2016, our Texas Gas Service division began work
to provide the 2,571-acre development of Tres Lagos
with natural gas service. This new development in
McAllen, Texas, includes single- and multi-family
homes, commercial and retail space, health care
facilities and top-rated schools.
Additionally, Texas Gas Service completed project
commitments in the city of Dripping Springs,
providing three new developments with the option
to use natural gas.
Kansas Gas Service began expansion projects to
provide natural gas service to larger neighborhoods
in Overland Park, including Sundance Ridge. The
division also completed a main line extension to
increase distribution capabilities at Logistics Park,
a 1,500-acre master-planned distribution and
warehouse development in the Kansas City area.
Strategic growth also includes connecting
customers with natural gas for use in transportation.
In 2016, we delivered 2.5 million dekatherms (Dth) to
143 compressed natural gas (CNG) fueling stations,
including 30 we operate, which represented a
7-percent increase compared with 2015. Large fl eets
operating in our service areas, including two of the
largest parcel package distribution companies in
the country, continue to invest in CNG vehicles and
infrastructure to take advantage of the lower cost
and environmental benefi ts of natural gas.
9
REINVESTING IN
OUR SYSTEM
for a bett er tomorrow.
We have a focused system integrity strategy to
make us even more effi cient and proactive in
providing safe and reliable natural gas service
while also considering the impact we have on
the environment.
With a clear focus on more effi cient and
proactive risk management, we use enterprise-
wide technology to evaluate our assets and
projects. By using a consistent risk management
framework, we are more effi cient and effective
in the ways we evaluate and plan for work,
while ensuring we are prudent with our capital
expenditures.
We have designed our system integrity processes
to allow us to continuously improve and refi ne our
abilities to optimize risk reduction and comply
with regulations.
System integrity investments accounted for
70 percent of our capital expenditures and that
commitment is increasing.
We retired or replaced approximately 390 miles
of distribution and transmission facilities in
2016. This included 22 miles of cast iron pipe,
leaving a total of 48 miles of cast iron pipe
remaining, which we have committed to replace
by the end of 2019.
In addition to the elimination of cast iron in
our system, over the next fi ve years we expect
to replace 1,100 miles of other vintage pipe
materials. This overall commitment to the
health and long-term sustainability of our
system connects to our mission to deliver
natural gas for a better tomorrow.
See a chart on page 13 for a history of vintage material
replaced by type.
10
PIPELINE SAFETY COMPLIANCE
PROGRAM CONNECTS COMPLIANCE
TO OPERATIONAL PROCESSES
As safety and compliance with all federal,
state and local regulations continue to be a top
priority for the company, a new Pipeline Safety
Compliance team was created in mid-2016. The
new team works alongside Operations to review
procedures, records and documentation to
verify compliance with all applicable pipeline
safety regulations in support of the company’s
commitment to establish processes and
procedures that foster 100-percent compliance.
Enterprise-wide Technology
Our system integrity program uses
technology to evaluate assets using a
consistent risk management framework.
Using Smart Pigs
Our crews use pigs (pipeline inspection
gauges) to perform various maintenance
tasks and inspections on certain pipelines.
11
REDUCING
EMISSIONS
CONn ECTS US ALl
to a bett er tomorrow.
Maintaining our assets in a way that is
environmentally responsible is part of our
commitment to connect a new generation with
natural gas that is abundant and affordable.
by the program, which requires we annually replace
at least 2 percent of our total inventory of the
classes of vintage pipe the EPA has identifi ed as
having the highest emission rates.
As we continue to implement our work plans to
replace the remaining vintage pipe materials
throughout our system, we expect to see further
reduced emissions. As a distribution industry,
vintage materials account for a majority of the
overall methane emissions released by natural gas
distribution systems. By concentrating on replacing
these assets with newer materials, we are literally
laying a foundation that will have a signifi cant
impact on the environment for many years into
the future.
In 2015, along with more than 40 other natural
gas utilities, we became a founding partner in
the U.S. Environmental Protection Agency’s (EPA)
Natural Gas STAR Methane Challenge Program.
This voluntary program provides a mechanism for
companies to publicly identify specifi c goals to
reduce methane emissions and annually report
progress toward meeting those goals. Our fi ve-year
commitment is to reduce emissions companywide
by utilizing a Best Management Practice, identifi ed
Even though the fi rst full year of reporting to the
EPA will be in 2018 for calendar year 2017, we are
proud to report, in 2016, we met our 2 percent
annual goal to reduce our inventory of the classes
of vintage pipe with the highest overall emissions.
Connecting Integrity, Safety and
Environmental Stewardship to an
Overall Vision
This clear focus on system integrity connects
customers to a safer, more reliable infrastructure
delivered by a company that is actively working to
reduce its environmental footprint.
This is good news for the areas where we serve.
Not only are we working to ensure the safety and
reliability of our system for decades to come, but
we are also making progress toward environmental
goals that will help ensure affordable energy
remains available for the next generation.
12
VINTAGE MATERIALS REPLACED
Measured in Miles
MATERIAL TYPE
Cast Iron
Unprotected Bare Steel
Protected Bare Steel
Vintage Plastic
Total Vintage Materials Replaced
2014
21
282
44
5
352
2015
24
194
25
2
245
2016
22
192
43
2
259
MONITORING OUR PROGRESS
In addition to a focused system integrity
program, we also properly monitor assets
once projects are complete.
Leak detection and repair (LDAR) involves
the performance of on-site surveys to identify
leaks or other opportunities to improve the
safety and reliability of the system.
We apply a risk-based methodology to our
LDAR program, which meets or exceeds
requirements as defined at federal, state and
local levels. Flame Ionization and Remote
Methane Leak Detection methods are used
by our professional leak survey crews on a
routine schedule, which considers key factors,
such as type, age, condition and history of our
pipeline facilities.
13
Our Commitment
to zero
As an organization, we believe that “Zero Is
Achievable” when it comes to injuries and
incidents, and that is our goal every day.
Even though our overall numbers are trending in
the right direction, even one incident means that
someone we know suffered harm. Safety is vital to
the overall success of our company, and we believe
in setting examples both through behavior-based
safety programs for employees and as an industry
leader among our peers.
This focus on ZERO is a driving factor in our 2016
results for Total Recordable Incident Rate (TRIR)
and Days Away, Restricted or Transferred (DART).
In 2016, we improved our TRIR by 30 percent and our
DART by 40 percent from 2015, which we attribute to
the attention of our employees and their efforts to
keep this commitment top of mind.
We had excellent results regarding incident rates,
but we know there is always work to be done. Our
2016 Preventable Vehicle Incident Rate increased
after two consecutive years of improvement.
Although this rate increased, we are unwavering
in our commitment to continue cultivating a high-
performing workforce with a focus on the safety of
our employees, customers, assets and the general
public for the long term.
Our plan to continuously improve includes a clear
strategy to prevent vehicle incidents through
companywide training using the Smith System®
driving program, which is centered on keeping drivers
engaged with their surroundings and focused on the
task at hand.
In 2016, we also launched an employee
communications strategy called Safety Matters,
a weekly reminder sent to our entire organization
that includes tips and reminders for completing
work in a safe manner.
AMERICAN GAS ASSOCIATION TRIR QUARTILE DATA
4.28
3.62
2.98
2.45
2.20
1.53
4th Q.
3rd
2nd
1st
Zero Gap
2011
2012
2013
2014
2015
2016
Total Recordable Incident Rate (TRIR) was
1.53 incidents per 200,000 work hours.
AMERICAN GAS ASSOCIATION DART QUARTILE DATA
3.89
2.05
1.92
4th Q.
3rd
2nd
1st
Zero Gap
1.19
1.13
0.68
2011
2012
2013
2014
2015
2016
Days Away, Restricted or Transferred (DART) was
0.68 incidents per 200,000 work hours.
AMERICAN GAS ASSOCIATION PVIR QUARTILE DATA
connecting
with communities
because our people make the difference.
With a footprint that stretches from the Texas
Gulf shores of Galveston to Austin and El Paso,
throughout Oklahoma and across Kansas,
ONE Gas provides domestic and affordable energy
to more than 2 million customers, along with the
economic impact that comes with the employment
of more than 3,400 people – all of whom are
making an impact on the communities we serve.
We believe being a community partner requires a
commitment to making our areas better through
charitable giving and volunteerism. Our employees
are active partners in this effort, and their spirit of
community is contagious.
We all have a part to play in the success of our
communities. It’s not only an investment in the
community, it’s an investment in the future of
our company.
We contributed $2.7 million through the ONE Gas Foundation,
civic and corporate contributions.
$181,000
was for matching grants.
$102,000
was for 30 public school foundation grants.
4th Q.
2.35
3rd
2nd
1st
Zero Gap
2.70
2.24
2.03
1.88
1.77
$743,000
was paid to local United Way agencies to match
employee, retiree and director pledges.
$929,000
was for civic and corporate contributions
and sponsorships.
Zero harm – zero incidents – that’s the goal. We
want employees to work smart and work safe so
that we can truly say that “Zero Is Achievable.”
14
2011
2012
2013
2014
2015
2016
Preventable Vehicle Incident Rate (PVIR) was
2.70 incidents per million miles driven.
The American Gas Association (AGA) represents local energy
companies that deliver clean natural gas throughout the U.S.
$735,000
was paid in 2016 for 43 new and previously
approved multi-year grants, which benefi ted
46 agencies.
7,600 HOURS
were volunteered by our employees in 2016.
15
BOARD OF DIRECTORS
Noted from Left to Right
Douglas H. Yaeger
Retired Chairman, President and
Chief Executive Offi cer,
Laclede Gas Company
John W. Gibson
Chairman, ONE Gas, Inc.
Eduardo A. Rodriguez
President, Strategic Communications
Consulting Group
Pierce H. Norton II
President and Chief Executive Offi cer,
ONE Gas, Inc.
Robert B. Evans
Retired President and Chief Executive Offi cer,
Duke Energy Americas
Michael G. Hutchinson
Retired Partner, Deloitte & Touche
Pattye L. Moore
Chairman, Red Robin Gourmet Burgers
EXECUTIVE TEAM
As of April 5, 2017
Pierce H. Norton II, 57
President and
Chief Executive Offi cer
Joseph L. McCormick, 57
Senior Vice President, General Counsel
and Assistant Secretary
Curtis L. Dinan, 49
Senior Vice President,
Chief Financial Offi cer
and Treasurer
Caron A. Lawhorn, 56
Senior Vice President, Commercial
Robert S. McAnnally, 53
Senior Vice President, Operations
Mark A. Bender, 52
Senior Vice President,
Administration,
Chief Information Offi cer
Andrew J. Ziola, 47
Vice President,
Investor Relations and
Public Affairs
16
FORWARD-LOOKING STATEMENTS
Statements contained in this annual report that include company expectations or
predictions should be considered forward-looking statements that are covered by
the safe harbor provisions of the Securities Act of 1933 and the Securities Exchange
Act of 1934, as amended.
It is important to note that the actual results could differ materially from those
projected in such forward-looking statements.
For additional information that could cause actual results to differ materially from
such forward-looking statements, refer to ONE Gas’ Securities and Exchange
Commission fi lings.
SHAREHOLDER INFORMATION
Wells Fargo Shareowner Services
P.O. Box 64874
St. Paul, MN 55164-0856
P: 855-217-6403
P: (Outside U.S.) 651-450-4064
TDD number: 651-450-4144
www.shareowneronline.com
Direct Stock Purchase & Dividend Reinvestment Plan
ONE Gas’ Direct Stock Purchase and Dividend Reinvestment Plan provides new investors
and current shareholders a convenient way to purchase ONE Gas common stock without
paying processing fees or service charges and to reinvest cash dividends. For more
information or to enroll in a plan, call Wells Fargo at 855-217-6403. The Prospectus is also
available at www.onegas.com.
Investor Relations
ONE Gas Investor Relations
P.O. Box 21049
Tulsa, OK 74121
P: 855-496-0200
E: IR@onegas.com
Andrew Ziola, Vice President,
Investor Relations and
Public Affairs
E: andrew.ziola@onegas.com
Annual Meeting Details
First Place Tower
15 East Fifth Street
Tulsa, OK 74103
May 25, 2017 – 9 a.m. CDT
Auditors
PricewaterhouseCoopers LLP
Two Warren Place
6120 South Yale Avenue, Suite 1850
Tulsa, OK 74136
Corporate Headquarters
First Place Tower
15 East Fifth Street
Tulsa, OK 74103
Credit Ratings
Moody’s: A2 (Stable)
Standard & Poor’s: A- (Positive)
www.onegas.com
FPO
15 East Fifth Street, Tulsa, OK 74103
918-947-7000 • www.onegas.com