Good day, everyone. And welcome to the ONE Gas third quarter earnings conference call. Today's conference is being recorded. For opening remarks, I will now turn the call over to Mr. Curtis Dinan. Curtis, please go ahead.

Good morning. And thank you for joining us on our third quarter 2017 earnings conference call. This call is being webcast live and a replay will be made available. After our prepared remarks, we would be happy to take your questions. A reminder that statements made during this call that might include ONE Gas expectations or predictions should be considered forward-looking statements and are covered by the Safe Harbor provision of the Securities Acts of 1933 and '34. Actual results could differ materially from those projected in any forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer to our SEC filings. Yesterday, the ONE Gas Board of Directors declared a dividend of $0.42 per share, unchanged from the previous quarter. This dividend is consistent with the company's guidance for 2017. As we have previously indicated, we expect the average annual dividend increase to be 8% to 10% between 2016 and 2021, with a targeted dividend payout ratio of 55% to 65%. We also affirmed our 2017 guidance, which we narrowed back in August. We expect net income to be within the range of $155 million to $161 million or $2.94 to $3.04 per diluted share. We anticipate releasing our 2018 guidance and our updated five-year forecast in January. Now, on to third quarter results. Net income for the third quarter of 2017 was $18.8 million or $0.36 per diluted share compared with $12.7 million or $0.24 per diluted share for the same period last year. New rates from investing in our systems, which includes the effect of the Kansas rate case and our recent rate cases in the Gulf Coast, West Texas and Central Texas jurisdictions, positively impacted results. Pierce will discuss more of the details of our rate cases in a few…

Thanks, Curtis. And good morning, everyone. I'd like to give you a brief regulatory update, beginning with Texas. In June, Texas Gas Service filed a rate case for customers in its Rio Grande Valley service area. TGS and the cities of the Rio Grande Valley service area agreed to an increase of $3.6 million, and new rates became effective this month. Now on to Oklahoma. In August, a joint stipulation and settlement agreement was approved by the Oklahoma Corporation Commission for our first annual Performance-Based Rate Change or PBR after the general rate case that was approved in January 2016. The following demonstrated that we were earning within the allowed range of 9% to 10% ROE. Therefore, we did not request a change in base rates. Our next PBR filing is expected to be made in March of 2018. And in Kansas, we filed a request for interim rate relief under the Gas System Reliability Surcharge rider in August for $2.9 million. And if approved, new rates will be effective January 2018. Earlier this month, Kansas Gas Service, Kansas Corporation Commission staff and the Citizens' Utility Ratepayer Board filed a unanimous settlement agreement with the KCC regarding the KGS application filed in April, seeking approval of an accounting authority order associated with the cost incurred at and nearby its 12 former manufactured gas plant sites. If approved, the agreement will allow Kansas Gas Service to defer MGP costs for the investigation and remediation at the 12 former MGP sites incurred after January 1, 2017, up to a cap of $15 million, net of any related insurance recoveries and amortized approved cost in a future rate proceeding over a 15-year period. The unamortized amounts will not be included in the rate base or accumulate carrying charges. At the time, future investigation…

Thank you, sir. [Operator Instructions] Our first question today from Spencer Joyce with Hilliard Lyons.

Pierce, Curtis, good morning. Nice quarter.

Good morning, Spencer.

A quick one, just to follow up on some of the comments on Hurricane Harvey. So, appreciate the color. It sounds like you all are pulling through okay. Are you seeing construction crews or availability there impair or impact your ability to perhaps carry out your capital budget through the end of the year? I'm assuming no, but I'm just wondering if there any kind of second-level issues there.

The answer is no, Spencer. We've actually already completed 100% of our assessments. We've already replaced everything that needs to be replaced. And everybody that was used to bring in from other places in the company to assist in our Port Arthur efforts, they've now gone back to their respective workplaces. And it's business as usual.

Okay, that's very helpful. And if you could, you mentioned a $700,000 figure towards the end of the prepared remarks. Can you go over that one more time? What was that specifically?

Spencer, this is Curtis. Most of that was recognized in the third quarter. And it primarily represents labor or supplies, items like that, travel costs, et cetera, as we responded to the storm.

Okay. So, the $700,000 figure would be mostly in the third quarter and it would represent labor, supplies and then, I guess, some of the fixtures that would've been replaced. But that's sort of your total hurricane direct impact. Is that…?

Yeah. The $700,000 is the expense piece. And then, in addition, there's $250,000 of capital cost for regulators and meters and things like that that had to be replaced. So, two separate amounts.

Okay. That's what I was looking for. Perfect. One final item here for me. Have seen lower legal cost across much of this year. Curtis, can you remind us of the cadence there for Q4? Will we see a little bit more of that come out to close out the year? And then, what was that? Have you all just perhaps internalized some of that? Or was there a specific item last year?

So, as it relates to the legal costs, Spencer?

Yeah, yeah. Just specifically that little piece.

So, a couple of things that occurred last year. One was a larger workers' comp issue that we recognized in the quarter. And then, there was another settlement that got recorded in the third quarter last year.

Okay, that's very helpful. That’s all I had. Nice quarter.

Thank you.

Thank you, Spencer.

We'll go next to Christopher Sighinolfi with Jeffries.

Hey, good morning, guys. Happy Halloween.

Good morning, Chris.

Just a couple of questions from my end. I guess, following up real quickly just on the costing cadence. I know when you guys had amended the guidance last quarter, there was a modest uptick in what you were anticipating for the full year O&M. And then, obviously, a pretty significant year-on-year reduction in the cost from 3Q 2016 to 3Q 2017. So, I'm just wondering, what is operating different than you expected and might we see a continuation of that in the fourth quarter? Or was there anything that was more timing shifted away from 4Q – sorry, away from 3Q and perhaps into 4Q.

The biggest item is what I was describing in my remarks about the O&M projects that we were doing more of those in the first half of 2017. And the focus of our crews in the field shifted to be more heavily capital focused as we were anticipating that happening in the third quarter and continuing into the fourth quarter. So, crews doing less O&M and more capital projects. So, their labor then goes into those capital projects and into rate base instead of going into O&M expense. So, the quarter really came out as we were expecting it to in that regard. There's always a little bit of timing in things that shift a little bit between quarters, but that's really not the big piece or the big driver in those numbers. Now, just on a – we don't give quarterly guidance, but if you look at our historical O&M pattern, as you would expect, in the winter heating months, so the fourth quarter and then in the first quarter, our O&M expenses are higher in those periods and they're typically lower in the second and third quarters.

Right, okay. I guess what I was trying to figure out, Curtis, is that presumably at the time of the guidance – nothing has changed in terms of the operations versus what you guys had envisioned at the time of the guidance. The first half of this year, O&M was up versus the first half of 2016, presumably because you were focused on more O&M projects and then we saw this big stepdown in the third quarter. So, I was just curious how I might decipher that versus the guidance. But hear you on the annual cadence into the activities of servicing the winter. I guess, away from that, if I could just ask about the manufactured gas plants, we've seen this around other states. New York has been dealing with this for some time. But, curious, if this is an initiative, this final cleanup remediation is an initiative brought on by the EPA in Kansas or the Kansas Department of Health and Environment, if it's something you guys are driving, if it's the KCC. I was just curious if you could give us some historical context as to how we are where we are. And then, in terms of the totality of the work that you guys see that remains and a time profile for completing it, any help there –

Really, nothing has changed, Chris, other than the fact that we continue to investigate and remediate in accordance with the Kansas Department of Health and Environment consent order that we had. So, as you go through, the only thing that changes as you continue to do investigation or whatever then that leads to different levels of remediation, so this is really nothing different than we've done in the past. So, it's just continuing to follow that order. That's from the KDHE. And then, basically, as you start to accrue those expenses, then we have a little more clarity, and that's when we wanted to put this framework in that we explained in my comments that's been agreed to by the Kansas Corporation Commission staff and the Citizens' Utility Ratepayer Board and the company. But it's not final yet until the order is actually approved by the Kansas Corporation Commission. So, nothing has really changed other than just continuing to enact the order that was put in place by the KDHE.

Okay. And, I guess, Curtis, with regard – it's 12 sites, I think, is what you cited in last night's release. Are there more than that or is that just – meaning, are those ones that still require remediation work or is that the totality of what was legacy to Kansas Gas Service?

That is the totality of the legacy of Kansas Gas Service.

Got it. Okay. Thanks for that clarification. Appreciate the time on today's call.

You're welcome, Chris.

We'll go next to Patrick Downey with Canon Asset Management.

Hey, guys. How is it going?

Good, Patrick.

Hey, I wanted to ask about the Kansas asset replacement program order that they issued back in September, and which I believe affected all gas companies in Kansas. Does this new order replace your current GSRS rider within Kansas?

The short answer, Patrick, is no. It does not replace it. So, for years, we've been replacing these obsolete materials that has been covered under the Gas System Reliability Surcharge. That's the GSRS that you just mentioned. We expect to continue that to actually initiate the ARP, which stands for the Accelerated Replacement Program. We actually would have to file a rate case, and it is in addition to the GSRS. So, the GSRS has a $0.40 per customer per month cap on it as to the level of spending. So, would be ARP, but that's in addition to. And what we're going to do is we're going to – at the time that we file our next rate case, that's then we'll make a decision of whether or not we do or do not participate in the ARP program.

Okay. But the $0.40 per month is just an annual increase cap or is that just a hard revenue cap?

No, that's an annual increase cap that's associated with those capital expenditures.

Okay. All right.

[Operator Instructions] And with no other questions at this time, I'll turn the call back to Curtis Dinan for closing remarks.

Thank you for joining us this morning. Our quiet period for the fourth quarter starts when we close our books in early January and extends until we release earnings in February. We'll provide details on the conference call at a later date. Have a great rest of your day.

Ladies and gentlemen, thank you for your participation. This does conclude today's conference. You may now disconnect.