01—Abstract
Summary
Summary of the 10-K filed February 23, 2021. Cited figures are marked; the original filing is the authoritative source.
ONEOK, Inc.'s 2020 10-K filing reflects a year significantly impacted by the COVID-19 pandemic, leading to a substantial decline in commodity prices and production volumes in early 2020.
While the company experienced a notable decrease in revenues and recorded significant non-cash impairment charges totaling $644.9 milliona (primarily related to goodwill and long-lived assets), its predominantly fee-based business model provided resilience. The company's Natural Gas Pipelines segment demonstrated stability with high utilization rates, supported by long-term firm contracts. The NGL segment saw a rebound in volumes in the latter half of the year, driven by improved ethane economics and demand from petrochemical manufacturers.
ONEOK proactively managed its financial position by reducing capital expenditures and operating expenses, and by securing liquidity through an equity issuance. Despite the challenging environment, the company maintained its investment-grade credit ratings and continued to pay and increase its common stock dividend, reflecting its commitment to shareholder returns.
02—Key points
Key Highlights
- COVID-19 pandemic significantly impacted 2020 operations, causing a decline in commodity prices and production volumes, particularly in Q2.
- ONEOK incurred $644.9 million in non-cash impairment charges, primarily affecting goodwill and long-lived assets in the Natural Gas Gathering and Processing segment.
- The company's business model remained resilient, with over 90% of consolidated earnings being fee-based, providing a degree of insulation from commodity price volatility.
- Capital expenditures were reduced significantly in 2020 due to project pauses and suspensions in response to market conditions.
- Liquidity was strengthened through a June 2020 equity issuance of $937 million, and the company ended the year with no borrowings under its $2.5 Billion Credit Agreement and $524.5 million in cash.
- The company maintained its investment-grade credit ratings and continued its history of returning capital to shareholders, paying $3.74 per share in dividends in 2020, a 6% increase from 2019.
- Despite the challenging year, the Natural Gas Pipelines segment saw stable fee-based earnings with over 95% contracted capacity, and the NGL segment's volumes recovered in the second half of 2020.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, ONEOK Inc kept $0.07.
- Revenue$8.54B100.0%
- Cost of revenue−$5.11B59.8%
- Gross profit$3.43B40.2%
- Operating costs−$2.07B24.2%
- Operating income$1.36B15.9%
- Interest, other & tax−$748.5M8.8%
- Net income$612.8M7.2%
Where FY2020 revenue went
$8.54B- Cost of revenue: $5.11B, 60% of revenue
- Operating costs: $2.07B, 24% of revenue
- Net income: $612.8M, 7.2% of revenue
- Interest, other & tax: $748.5M, 8.8% of revenue
Kept 7.2% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 23, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $8.54B$10.16B | −16.0% |
| Cost of Revenue | $5.11B$6.79B | −24.7% |
| Gross Profit | $3.43B$3.38B | +1.7% |
| Operating Income | $1.36B$1.91B | −28.9% |
| Interest Expense | $712.89M$491.77M | +45.0% |
| Net Income | $612.81M$1.28B | −52.1% |
| EPS (Basic) | $1.42$3.09 | −54.0% |
| EPS (Diluted) | $1.42$3.07 | −53.7% |
| Shares Outstanding (Basic) | 431.11M413.56M | +4.2% |
| Shares Outstanding (Diluted) | 431.78M415.44M | +3.9% |
05—Questions
Frequently Asked Questions
How did the COVID-19 pandemic affect ONEOK's financial performance in 2020?
The COVID-19 pandemic led to a significant decline in commodity prices and economic activity, impacting demand for ONEOK's services and products, particularly in the second quarter of 2020. This resulted in reduced production volumes and necessitated substantial non-cash impairment charges totaling $644.9 million. However, the company's predominantly fee-based revenue model and proactive cost management measures helped to mitigate the full impact.
What is ONEOK's liquidity position at the end of 2020?
ONEOK maintained a strong liquidity position at the end of 2020. The company had $524.5 million in cash and cash equivalents and no outstanding borrowings under its $2.5 Billion Credit Agreement. This financial stability was supported by cash flows from operations and proceeds from a June 2020 equity issuance.
Did ONEOK suspend any of its growth projects due to market conditions?
Yes, in response to the decline in commodity prices and economic disruption caused by COVID-19, ONEOK suspended announced plans for certain capital-growth projects, including the Demicks Lake III natural gas processing plant and the fourth expansion of the ONEOK West Texas NGL pipeline system. These projects can be restarted when producer activity warrants additional infrastructure.
How did ONEOK manage its debt in 2020?
In 2020, ONEOK actively managed its debt by issuing $1.5 billion in senior unsecured notes and $1.75 billion in senior unsecured notes to refinance existing debt and for general corporate purposes. The company also repurchased $224.4 million of its senior notes in the open market, recognizing a gain on extinguishment of debt.
06—Continue