10-KPeriod: FY2017

ONEOK INC /NEW/ Annual Report, Year Ended Dec 31, 2017

Filed February 27, 2018For Securities:OKE

Summary

ONEOK Inc.'s 2017 10-K filing highlights a pivotal year for the company, marked by the successful acquisition of ONEOK Partners, L.P. This strategic move aimed to simplify its corporate structure and enhance its midstream natural gas and natural gas liquids (NGL) operations. The company reported strong operational performance driven by increased production in key basins like the Williston, Permian, and STACK/SCOOP areas, leading to higher volumes across its gathering, processing, and transportation segments. A significant portion of ONEOK's earnings are fee-based, providing a degree of insulation from commodity price volatility. The company is actively investing in substantial growth projects, totaling approximately $4.2 billion announced since June 2017, aimed at expanding its NGL transportation and processing capacity to meet growing producer demand. These investments include major pipeline projects like the Elk Creek and Arbuckle II pipelines, and new processing facilities. ONEOK also reported a 25% increase in its quarterly dividend in early 2018, reflecting confidence in its operational execution and future cash flow generation. The company benefited from the Tax Cuts and Jobs Act, expecting to pay no federal cash income taxes through at least 2021, though it recorded a one-time charge related to the revaluation of deferred tax assets.

Financial Highlights

52 data points
Beta

Revenue

$12.17B

21.7% Gross Margin

Net Income

$387.84M

3.2% Net Margin

EPS (Diluted)

$1.29

Total Assets

$16.85B

Cash & Equivalents

$37.19M

Free Cash Flow

$803.02M

Financial Statements
Beta
Revenue$12.17B
Cost of Revenue$9.54B
Gross Profit$2.64B
Operating Income$1.39B
Interest Expense$485.66M
Net Income$387.84M
EPS (Basic)$1.30
EPS (Diluted)$1.29
Shares Outstanding (Basic)297.48M
Shares Outstanding (Diluted)299.78M

Key Highlights

  • 1Completed the acquisition of all outstanding common units of ONEOK Partners, L.P. on June 30, 2017, simplifying its structure.
  • 2Reported strong volume growth across its Natural Gas Gathering and Processing and Natural Gas Liquids segments, driven by increased producer activity in key basins.
  • 3Announced approximately $4.2 billion in new growth projects since June 2017 to expand NGL infrastructure, including major pipelines.
  • 4Increased its quarterly dividend by 25% in February 2018, demonstrating confidence in its financial performance and cash flow generation.
  • 5Noted that approximately 90% of its consolidated earnings were fee-based in 2017, with expectations of similar levels in 2018, reducing commodity price exposure.
  • 6Benefited from the Tax Cuts and Jobs Act, anticipating no federal cash income taxes through at least 2021, though a $141.3 million charge was recorded for deferred tax revaluation.
  • 7Maintained investment-grade credit ratings with stable outlooks from Moody's and S&P.

Frequently Asked Questions

The acquisition of ONEOK Partners, L.P. simplified ONEOK's corporate structure and integrated its midstream assets. While accounted for as an equity transaction with no immediate gain or loss recognized, it is expected to enhance earnings growth and provide greater financial flexibility. The company's operations now benefit from a more streamlined NGL and natural gas infrastructure footprint.

ONEOK emphasizes its fee-based business model, with approximately 90% of its consolidated earnings derived from fee-based contracts in 2017. This strategy aims to reduce direct exposure to volatile commodity prices. The company also engages in contract restructuring to increase fee revenues and employs risk management strategies using derivative instruments to hedge against price fluctuations.

ONEOK's growth is driven by increasing natural gas and NGL production in prolific U.S. basins, particularly the Williston, Permian, and STACK/SCOOP areas. To capitalize on this, the company announced significant growth projects totaling approximately $4.2 billion, focusing on expanding NGL transportation, processing, and fractionation capacity. Key projects include the Elk Creek pipeline, Arbuckle II pipeline, and the MB-4 fractionator, designed to connect growing supply with key market centers.

ONEOK maintains a focus on financial strength and flexibility, aiming to preserve its investment-grade credit ratings. The company has access to a $2.5 billion revolving credit facility and has strategically raised equity, satisfying its financing needs for 2018 and into 2019. It has also repaid significant portions of its debt. The company demonstrated commitment to shareholders by increasing its quarterly dividend by 25% in early 2018, supported by expected growth in cash flows.