01—Abstract
Summary
Summary of the 10-K filed February 27, 2018. Cited figures are marked; the original filing is the authoritative source.
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 billiona 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%b 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.
02—Key points
Key Highlights
- Completed the acquisition of all outstanding common units of ONEOK Partners, L.P. on June 30, 2017, simplifying its structure.
- Reported strong volume growth across its Natural Gas Gathering and Processing and Natural Gas Liquids segments, driven by increased producer activity in key basins.
- Announced approximately $4.2 billion in new growth projects since June 2017 to expand NGL infrastructure, including major pipelines.
- Increased its quarterly dividend by 25% in February 2018, demonstrating confidence in its financial performance and cash flow generation.
- Noted that approximately 90% of its consolidated earnings were fee-based in 2017, with expectations of similar levels in 2018, reducing commodity price exposure.
- Benefited 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.
- Maintained investment-grade credit ratings with stable outlooks from Moody's and S&P.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, ONEOK Inc kept $0.03.
- Revenue$12.17B100.0%
- Cost of revenue−$9.54B78.3%
- Gross profit$2.64B21.7%
- Operating costs−$1.24B10.2%
- Operating income$1.39B11.4%
- Interest, other & tax−$1.00B8.2%
- Net income$387.8M3.2%
Where FY2017 revenue went
$12.17B- Cost of revenue: $9.54B, 78% of revenue
- Net income: $387.8M, 3.2% of revenue
- Operating costs: $1.24B, 10% of revenue
- Interest, other & tax: $1.00B, 8.2% of revenue
Kept 3.2% as net incomeNet income $387.8M · 3.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 27, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $12.17B$8.92B | +36.5% |
| Cost of Revenue | $9.54B$6.50B | +46.8% |
| Gross Profit | $2.64B$2.42B | +8.7% |
| Operating Income | $1.39B$1.30B | +7.4% |
| Interest Expense | $485.66M$469.65M | +3.4% |
| Net Income | $387.84M$352.04M | +10.2% |
| EPS (Basic) | $1.30$1.67 | −22.2% |
| EPS (Diluted) | $1.29$1.66 | −22.3% |
| Shares Outstanding (Basic) | 297.48M211.13M | +40.9% |
| Shares Outstanding (Diluted) | 299.78M212.38M | +41.2% |
05—Questions
Frequently Asked Questions
What was the impact of the ONEOK Partners acquisition on the company's financial structure and operations?
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.
How is ONEOK diversifying its revenue streams and mitigating commodity price risk?
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.
What are ONEOK's primary growth drivers and capital investment plans?
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.
How is ONEOK managing its financial health, particularly its debt and dividend policy?
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.
06—Continue