01—Abstract
Summary
Summary of the 10-K filed February 25, 2015. Cited figures are marked; the original filing is the authoritative source.
ONEOK, Inc.'s 2014 10-K report details a year of significant corporate restructuring and adaptation to a challenging commodity price environment.
The company successfully separated its natural gas distribution business into a standalone entity, ONE Gas, and wound down its energy services business. These strategic moves allowed ONEOK to focus more intently on its core midstream operations through its significant investment in ONEOK Partners. The company's financial performance in 2014 was impacted by a sharp decline in crude oil and natural gas prices, particularly in the latter half of the year.
Despite this, ONEOK Partners saw increased volumes across its systems due to producer activity in key basins like the Williston and Cana-Woodford. However, ethane rejection continued to negatively affect the Natural Gas Liquids segment's results. The company highlighted substantial growth projects completed and underway within ONEOK Partners, aimed at expanding its gathering, processing, fractionation, and transportation infrastructure.
02—Key points
Key Highlights
- ONEOK completed the separation of its natural gas distribution business (ONE Gas) and winded down its energy services business in 2014, refocusing the company on its midstream operations via ONEOK Partners.
- The company experienced a significant decline in commodity prices (crude oil and natural gas) in late 2014, impacting segment margins and leading to a reassessment and suspension of certain growth projects.
- ONEOK Partners continued to invest heavily in growth projects, completing approximately $5.9 billion in projects and acquisitions from 2010-2014 across its natural gas gathering and processing, and natural gas liquids segments.
- Ethane rejection remained a challenge for the Natural Gas Liquids segment, impacting volumes gathered, fractionated, and transported, with expectations for this to persist until 2017.
- Despite lower commodity prices, ONEOK Partners saw increased volumes in its Natural Gas Gathering and Processing segment, driven by producer activity in key basins.
- ONEOK demonstrated a commitment to returning capital to shareholders, increasing its quarterly dividend per share by approximately 44% in 2014 and a further 51% on an annualized basis in early 2015.
- The company is facing ongoing litigation regarding Gas Index Pricing, with the Supreme Court having granted a writ of certiorari in July 2014, with a decision anticipated mid-2015.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, ONEOK Inc kept $0.03.
- Revenue$12.20B100.0%
- Cost of revenue−$10.09B82.7%
- Gross profit$2.11B17.3%
- Operating costs−$963.0M7.9%
- Operating income$1.14B9.4%
- Interest, other & tax−$829.5M6.8%
- Net income$314.1M2.6%
Where FY2014 revenue went
$12.20B- Cost of revenue: $10.09B, 83% of revenue
- Net income: $314.1M, 2.6% of revenue
- Operating costs: $963.0M, 7.9% of revenue
- Interest, other & tax: $829.5M, 6.8% of revenue
Kept 2.6% as net incomeNet income $314.1M · 2.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 25, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $12.20B$11.87B | +2.7% |
| Cost of Revenue | $10.09B$10.22B | −1.3% |
| Gross Profit | $2.11B$1.65B | +27.7% |
| Operating Expenses | $969.57M$780.93M | +24.2% |
| Operating Income | $1.14B$880.62M | +29.9% |
| Interest Expense | $356.16M$270.65M | +31.6% |
| Net Income | $314.11M$266.53M | +17.8% |
| EPS (Basic) | $1.50$1.29 | +16.3% |
| EPS (Diluted) | $1.49$1.27 | +17.3% |
| Shares Outstanding (Basic) | 209.39M206.04M | +1.6% |
| Shares Outstanding (Diluted) | 210.43M209.69M | +0.3% |
05—Questions
Frequently Asked Questions
What were the major strategic changes for ONEOK in 2014?
In 2014, ONEOK underwent significant strategic restructuring, including the tax-free separation of its natural gas distribution business into a new, publicly traded company called ONE Gas, and the completion of the wind-down of its energy services business. These actions allowed ONEOK to concentrate on its core midstream operations, primarily through its investment in ONEOK Partners.
How did the decline in commodity prices in late 2014 affect ONEOK's business?
The sharp decline in crude oil and natural gas prices in late 2014 impacted ONEOK Partners' financial results, particularly in the Natural Gas Gathering and Processing segment, which has a greater reliance on commodity-based contracts. This price environment also led ONEOK Partners to suspend or reduce capital expenditures on certain growth projects, aligning them with anticipated lower producer activity.
What is the impact of ethane rejection on ONEOK's operations?
Ethane rejection, where ethane is left in the natural gas stream rather than being extracted due to unfavorable price differentials, continued to negatively affect the Natural Gas Liquids segment's volumes and financial results. ONEOK expects this trend to persist until new ethylene production capacity comes online, anticipated in 2017, which would increase ethane demand.
How is ONEOK managing its debt and liquidity?
Following the separation of ONE Gas, ONEOK utilized the proceeds to repay commercial paper and reduce long-term debt. The company's primary source of liquidity is distributions from ONEOK Partners, and it has access to a $300 million credit facility. ONEOK Partners also maintains access to its credit facilities and commercial paper programs to fund its operations and growth projects.
06—Continue