10-KPeriod: FY2014

ONEOK INC /NEW/ Annual Report, Year Ended Dec 31, 2014

Filed February 25, 2015For Securities:OKE

Summary

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.

Financial Highlights

54 data points
Beta

Revenue

$12.20B

17.3% Gross Margin

Net Income

$314.11M

2.6% Net Margin

EPS (Diluted)

$1.49

Total Assets

$15.26B

Cash & Equivalents

$172.81M

Free Cash Flow

-$493.54M

Financial Statements
Beta
Revenue$12.20B
Cost of Revenue$10.09B
Gross Profit$2.11B
Operating Expenses$969.57M
Operating Income$1.14B
Interest Expense$356.16M
Net Income$314.11M
EPS (Basic)$1.50
EPS (Diluted)$1.49
Shares Outstanding (Basic)209.39M
Shares Outstanding (Diluted)210.43M

Key Highlights

  • 1ONEOK 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.
  • 2The 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.
  • 3ONEOK 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.
  • 4Ethane rejection remained a challenge for the Natural Gas Liquids segment, impacting volumes gathered, fractionated, and transported, with expectations for this to persist until 2017.
  • 5Despite lower commodity prices, ONEOK Partners saw increased volumes in its Natural Gas Gathering and Processing segment, driven by producer activity in key basins.
  • 6ONEOK 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.
  • 7The 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.

Frequently Asked Questions

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.

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.

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.

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.