10-KPeriod: FY2018

ONEOK INC /NEW/ Annual Report, Year Ended Dec 31, 2018

Filed February 26, 2019For Securities:OKE

Summary

ONEOK Inc.'s 2018 10-K filing reveals a strong financial performance, with total revenues increasing by 3% to $12.6 billion and operating income rising significantly by 32% to $1.8 billion. This growth was driven by increased natural gas and NGL volumes across key basins like the Williston and STACK/SCOOP areas, alongside favorable NGL price differentials for much of the year. The company continues to invest heavily in growth projects, with approximately $2 billion spent out of an announced $6 billion for NGL pipelines, fractionators, and natural gas processing plants. These projects are largely supported by long-term, fee-based contracts, indicating a focus on stable, predictable earnings. ONEOK also demonstrated a commitment to returning capital to shareholders, increasing its dividend by 19% in 2018, supported by growing cash flows from operations. While commodity prices saw some decline in late 2018, ONEOK anticipates continued volume growth and expects wider NGL price differentials to persist through 2019, benefiting its Natural Gas Liquids segment until new infrastructure projects come online in early 2020. The company's strategy remains focused on prudent financial strength, fee-based earnings growth, and safe, reliable operations.

Financial Highlights

53 data points
Beta

Revenue

$12.59B

25.2% Gross Margin

Net Income

$1.16B

9.2% Net Margin

EPS (Diluted)

$2.78

Total Assets

$18.23B

Cash & Equivalents

$11.97M

Free Cash Flow

$45.24M

Financial Statements
Beta
Revenue$12.59B
Cost of Revenue$9.42B
Gross Profit$3.17B
Operating Income$1.84B
Interest Expense$469.62M
Net Income$1.16B
EPS (Basic)$2.80
EPS (Diluted)$2.78
Shares Outstanding (Basic)411.49M
Shares Outstanding (Diluted)414.19M

Key Highlights

  • 1ONEOK reported a 32% increase in operating income to $1.8 billion, driven by volume growth in key producing regions and improved NGL optimization and marketing earnings.
  • 2The company spent approximately $2 billion of its $6 billion capital growth program, primarily on NGL pipelines, fractionators, and natural gas processing plants, mostly supported by long-term, fee-based contracts.
  • 3Natural gas and NGL volumes increased across most operating segments due to improved producer economics and enhanced completion techniques.
  • 4ONEOK increased its quarterly dividend by 19% in 2018, reflecting confidence in its growing cash flows from operations.
  • 5The Natural Gas Pipelines segment saw increased transportation services revenue due to higher interruptible volumes and contracted firm capacity.
  • 6Favorable NGL price differentials in the Natural Gas Liquids segment contributed significantly to earnings for most of 2018, though these narrowed in Q4.
  • 7The company maintains strong liquidity with substantial borrowing capacity under its credit agreements and plans to use operating cash flows to fund capital expenditures and dividends.

Frequently Asked Questions

ONEOK's financial performance in 2018 was primarily driven by increased natural gas and NGL volumes across its operating regions, particularly in the Williston Basin and STACK/SCOOP areas. This growth was complemented by higher earnings from optimization and marketing activities within its Natural Gas Liquids segment, largely due to favorable NGL price differentials for most of the year. These factors led to a significant increase in operating income.

ONEOK is funding its announced $6 billion capital growth program through a combination of operating cash flows, debt issuances, and equity issuances. The company noted that it had spent approximately $2 billion of this program by the end of 2018. The infrastructure projects are largely supported by long-term, primarily fee-based contracts, providing a strong basis for future earnings.

While commodity prices decreased in the fourth quarter of 2018 and are expected to fluctuate in 2019, ONEOK does not anticipate a material impact on supply volumes. The company expects NGL price differentials to remain volatile but to be wider than historical norms throughout 2019 due to increasing demand from the Gulf Coast, continued NGL supply growth in the Mid-Continent, and existing fractionation and pipeline constraints. These wider differentials are expected to persist until new infrastructure projects, including ONEOK's Arbuckle II pipeline, are completed in early 2020.

ONEOK maintains a strong liquidity position with significant borrowing capacity available under its $2.5 Billion Credit Agreement and $1.5 Billion Term Loan Agreement. The company aims to manage its balance sheet prudently and maintain investment-grade credit ratings. It expects cash flows from operations to be sufficient to fund its operations, capital expenditures, and dividends. Debt is managed through a combination of operating cash flows, short-term borrowings, and long-term debt issuances, with a focus on refinancing existing debt and improving credit metrics.