SOUTHERN CALIFORNIA GAS CO (SOCGP)·Q1 2025 Earnings Summary

Executive Summary

• SoCalGas delivered a strong Q1: operating revenues of $2.02B and net income of $443M, up 11.9% and 23.4% year over year, respectively, supported by favorable California regulatory mechanics and execution on system modernization .
• At the parent level, Sempra reported GAAP EPS of $1.39 and adjusted EPS of $1.44; management affirmed 2025 adjusted EPS guidance ($4.30–$4.70) and 2026 guidance ($4.80–$5.30), while updating 2025 GAAP EPS guidance to $4.25–$4.65 .
• Regulatory momentum: CPUC approved SoCalGas’ first RNG procurement contract under SB 1440 in March; SDG&E/SoCalGas filed cost-of-capital applications (2026–2028) seeking 11% ROE and 52% equity layer at SoCalGas, with a decision expected by year-end 2025—constructive for allowed returns from 2026 .
• KPIs remain healthy: Sempra California gas deliveries were 247 Bcf (down modestly YoY) with customer meters up to 7.122M; management emphasized affordability measures including climate credits lowering SoCalGas bills in Q1 .
• Near-term catalysts: California cost-of-capital outcome (effective 2026), RNG program ramp under SB 1440, and Sempra wide guidance discipline—factors likely to shape SRE trading rather than SOCGP securities directly .

What Went Well and What Went Wrong

• What Went Well

  • Strong SoCalGas profitability: Q1 operating revenues rose to $2.02B with net income of $443M (YoY growth reflects rate case resets and disciplined O&M) .
  • Regulatory progress: CPUC approved SoCalGas’ first RNG procurement contract (SB 1440), an early proof point for decarbonization pathways that can support capital deployment and earnings visibility .
  • Parent-level execution and guidance confidence: Sempra affirmed 2025 adjusted EPS guidance ($4.30–$4.70) and 2026 ($4.80–$5.30), signaling confidence in the utility-centric growth plan while updating 2025 GAAP EPS to $4.25–$4.65 .
  • Quote: “We are pleased to report a solid quarter… while making steady progress on our strategic initiatives” — Jeffrey W. Martin, Sempra CEO .

• What Went Wrong

  • Volume softness: Sempra California total gas deliveries declined YoY (247 Bcf vs. 264 Bcf), reflecting milder weather and ongoing demand variability .
  • Macro/tariff uncertainty persists: Management reiterated vigilance on tariffs and macro cost risks (mitigations include domestic sourcing and FTZ usage), but remains a watch item for project costs and affordability .
  • Limited subsidiary-level Street coverage: No meaningful consensus at the SoCalGas legal-entity level, making external “beat/miss” analysis challenging; investors must triangulate using consolidated Sempra metrics and segment disclosures [GetEstimates].

Financial Results

SoCalGas (SOCGP) – Income Statement Snapshot (oldest → newest)

• Note: Net income margin is computed from revenues and net income shown above.
• Asterisk indicates values retrieved from S&P Global; consensus estimates at the SOCGP entity level were not available. Values retrieved from S&P Global.

Sempra California Segment (context for SoCalGas) – Q1 YoY

Key Operating KPIs (Sempra California)

Parent-Level Results (reference)

• Sempra Q1 2025 GAAP EPS $1.39; Adjusted EPS $1.44; Adjusted earnings drivers include derivative mark-to-market and Mexico FX/inflation exclusions .

Guidance Changes

• Sempra also reiterated long-term EPS CAGR of 7–9% (2025–2029) .
• No stand-alone SoCalGas legal-entity EPS guidance is provided; regulatory asks inform future allowed returns .

Earnings Call Themes & Trends

Management Commentary

• “We are pleased to report a solid quarter… while making steady progress on our strategic initiatives.” — Jeffrey W. Martin, Chairman & CEO .
• “The current cost of capital filings are for the years 2026 through 2028… At SoCalGas, the company requested a 52% common equity layer and an 11% return on equity.” — Karen Sedgwick, EVP & CFO .
• “Also in March, the CPUC approved SoCalGas’ first renewable natural gas (RNG) procurement contract under Senate Bill 1440…” — Sempra press release .
• “SDG&E and SoCalGas customers received a one-time California climate credit lowering bills last month…” — Karen Sedgwick .

Q&A Highlights

• SIP minority sale process and timing: Management expects updates by the Q2 call, sequencing KKR/ADIA ROFOs; goal is maximizing equity value while minimizing tax leakage; transactions viewed as accretive to EPS and credit .
• Texas growth/UTM: Unified tracker bill would streamline recovery and reduce regulatory lag at Oncor; base rate proceeding and UTM are considered separately; significant queue growth and 765 kV plan underpin capital visibility (parent) .
• Tariff exposure: Utility equipment largely domestic; Port Arthur LNG uses FTZ and domestic steel; remaining exposure ~1% of Phase 1 CapEx—seen within guidance .
• Wildfire policy stability: Ongoing efforts to extend/improve CA wildfire fund framework; SDG&E highlighted 17 years without a utility-caused catastrophic wildfire .

Estimates Context

• S&P Global consensus is not available at the SoCalGas legal-entity (SOCGP) level for revenue/EPS; investors typically track consolidated Sempra (SRE) for Street comparisons [GetEstimates].
• For reference, SOCGP actuals used herein for Q3/Q4 2024 reflect S&P Global actuals without consensus (see table notes). Values retrieved from S&P Global.

Key Takeaways for Investors

• SoCalGas posted healthy Q1 profitability (net income margin ~22%), reflecting the constructive CA rate case set-up and disciplined operations .
• Regulatory momentum in CA: cost-of-capital filings (decision YE25) and the first RNG procurement approval may support returns and capital deployment from 2026 .
• Affordability actions (climate credits, Fit for 2025 cost initiatives) help mitigate bill pressure while enabling continued grid modernization .
• Macro/tariff risks appear manageable under current mitigation playbook; management reiterated confidence within revised/affirmed guidance ranges .
• Stock implication (SRE): Near-term trading likely reflects confidence in affirmed adjusted EPS and progress on portfolio transactions; CA cost-of-capital outcome becomes a key 2H25–2026 catalyst .
• For entity-level bondholders (SOCGP), stable operating performance and constructive regulatory posture underpin credit quality alongside the parent’s utility-centric capital allocation .

---

Appendix: Source Documents

• SoCalGas (SOCGP) Q1 2025 10-Q: entity-level financials (Operating revenues, Net income) .
• Sempra Q1 2025 8-K/Press Release and Exhibits: consolidated and segment results; RNG approval; guidance .
• Sempra Q1 2025 Earnings Call Transcript: regulatory filings, affordability measures, tariff mitigation, Q&A .
• Sempra Q4 2024 8-K/Press Release: prior-quarter context and capital plan .

Asterisk note: Values marked with an asterisk (*) in tables are actuals retrieved from S&P Global where Street consensus was unavailable at the SoCalGas legal-entity level. Values retrieved from S&P Global.