ONE Gas, Inc.OGS

ONE Gas, Inc. Fair Value Disclosure

10-KFiled Feb 19, 20263 min read
DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Derivative Instruments - Our derivatives are comprised of over-the-counter natural gas fixed-price swaps and call options.

Swaps - At December 31, 2025, we held over-the-counter natural gas fixed-price swaps for the heating season ending March 2026 with a total notional amount of 5.02 Bcf. At December 31, 2024, we held over-the-counter natural gas fixed-price swaps for the heating season ending March 2025 with a total notional amount of 6.20 Bcf.

Options - At December 31, 2025, we held purchased natural gas call options for the heating season ending March 2026 with total notional amount of 0.50 Bcf, for which we paid premiums of $0.5 million. At December 31, 2024, we held purchased natural gas call options for the heating season ending March 2025 with total notional amount of 0.60 Bcf, for which we paid premiums of $0.6 million.

We have not designated any of our derivative instruments as accounting hedges. These contracts are included in, and recoverable through, our purchased-gas cost adjustment mechanisms. Additionally, premiums paid, changes in fair value and any settlements received associated with these contracts are deferred as part of our unrecovered purchased-gas costs in our consolidated balance sheets. There were no transfers between levels for the periods presented.

Other Financial Instruments - The approximate fair value of cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, and accounts payable is equal to book value, due to the short-term nature of these items. The fair value of our commercial paper was determined using quoted prices in an active market.
The following tables summarize, by level within the fair value hierarchy, our derivative and other assets and liabilities that were accounted for at fair value on a recurring basis at December 31, 2025 and 2024:

December 31, 2025
Level 1Level 2Netting (c)Total
(Thousands of dollars)
Assets:
United States treasury notes (b)$9,329 $— $— $9,329 
Corporate bonds (b)— 18,643 — 18,643 
Marketable equity securities (d)2,627 — — 2,627 
Total assets$11,956 $18,643 $— $30,599 
Liabilities:
Derivative instruments - swaps (a)$— $7,309 $— $7,309 
(a) The fair value is included in other current assets and other current liabilities in our consolidated balance sheets.
(b) The fair value is included in other current and noncurrent assets in our consolidated balance sheets.
(c) Our over-the-counter natural gas fixed-price swaps are presented on a net basis when the right of offset exists.
(d) The fair value is included in other current assets in our consolidated balance sheets.

December 31, 2024
Level 1Level 2Netting (c)Total
(Thousands of dollars)
Assets:
Derivative instruments - swaps (a)$— $25 $(25)$— 
United States treasury notes (b)8,721 — — 8,721 
Corporate bonds (b)— 13,171 — 13,171 
Total assets$8,721 $13,196 $(25)$21,892 
Liabilities:
Derivative instruments - swaps (a)$— $3,238 $(25)$3,213 
(a) The fair value is included in other current assets and other current liabilities in our consolidated balance sheets.
(b) The fair value is included in other current and noncurrent assets in our consolidated balance sheets.
(c) Our over-the-counter natural gas fixed-price swaps are presented on a net basis when the right of offset exists.

The estimated fair value of our long-term debt, including current maturities, was $2.5 billion and $2.2 billion at December 31, 2025 and December 31, 2024, respectively. The estimated fair value of our long-term debt was determined using quoted market prices and is classified as Level 2.
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Historical Timeline

Fiscal YearFiled
2025Feb 19, 2026Showing above
2024Feb 20, 2025
2023Feb 22, 2024
2022Feb 23, 2023
2021Feb 24, 2022
2020Feb 26, 2021
2019Feb 20, 2020
2018Feb 20, 2019
2017Feb 22, 2018
2016Feb 23, 2017
2015Feb 18, 2016

About Fair Value Disclosures

Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.

Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.

Other Available Disclosures

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