01—Abstract
Summary
Summary of the 10-K filed February 26, 2019. Cited figures are marked; the original filing is the authoritative source.
ONEOK Inc.'s 2018 10-K filing reveals a strong financial performance, with total revenues increasing by 3% to $12.6 billiona 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 billionb 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%c 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.
02—Key points
Key Highlights
- ONEOK 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.
- The 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.
- Natural gas and NGL volumes increased across most operating segments due to improved producer economics and enhanced completion techniques.
- ONEOK increased its quarterly dividend by 19% in 2018, reflecting confidence in its growing cash flows from operations.
- The Natural Gas Pipelines segment saw increased transportation services revenue due to higher interruptible volumes and contracted firm capacity.
- Favorable NGL price differentials in the Natural Gas Liquids segment contributed significantly to earnings for most of 2018, though these narrowed in Q4.
- The 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.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, ONEOK Inc kept $0.09.
- Revenue$12.59B100.0%
- Cost of revenue−$9.42B74.8%
- Gross profit$3.17B25.2%
- Operating costs−$1.34B10.6%
- Operating income$1.84B14.6%
- Interest, other & tax−$680.4M5.4%
- Net income$1.16B9.2%
Where FY2018 revenue went
$12.59B- Cost of revenue: $9.42B, 75% of revenue
- Net income: $1.16B, 9.2% of revenue
- Operating costs: $1.34B, 11% of revenue
- Interest, other & tax: $680.4M, 5.4% of revenue
Kept 9.2% as net incomeNet income $1.16B · 9.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 26, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $12.59B$12.17B | +3.4% |
| Cost of Revenue | $9.42B$9.54B | −1.2% |
| Gross Profit | $3.17B$2.64B | +20.3% |
| Operating Income | $1.84B$1.39B | +31.9% |
| Interest Expense | $469.62M$485.66M | −3.3% |
| Net Income | $1.16B$387.84M | +197.8% |
| EPS (Basic) | $2.80$1.30 | +115.4% |
| EPS (Diluted) | $2.78$1.29 | +115.5% |
| Shares Outstanding (Basic) | 411.49M297.48M | +38.3% |
| Shares Outstanding (Diluted) | 414.19M299.78M | +38.2% |
05—Questions
Frequently Asked Questions
What were the main drivers of ONEOK's financial performance in 2018?
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.
How is ONEOK funding its significant capital growth projects?
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.
What is ONEOK's outlook on commodity prices and NGL price differentials for 2019?
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.
How is ONEOK managing its debt and liquidity?
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.
06—Continue