10-Q/APeriod: Q1 FY2002

ONEOK INC /NEW/ Quarterly Report (Amendment) for Q1 Ended Mar 31, 2002

Filed November 14, 2002For Securities:OKE

Summary

ONEOK Inc. (OKE) reported financial results for the first quarter ended March 31, 2002, showing a significant decrease in operating revenues and cost of gas compared to the prior year, primarily driven by lower commodity prices and warmer weather. Despite these top-line declines, net revenues saw an increase, bolstered by a $14.0 million recovery related to Enron sales contracts and effective execution of the company's storage arbitrage strategy. The company also restructured its reporting segments, combining the Power segment into Marketing and Trading. Overall operating income remained relatively stable year-over-year, indicating effective cost management and operational efficiencies. The company highlighted its ongoing strategy of vertical integration and asset acquisition to maximize shareholder value. Liquidity appears adequate, supported by operating cash flow and established credit facilities, though the company remains subject to commodity price volatility and potential impacts from Enron's bankruptcy proceedings and regulatory matters. Investors should note the company's strategic shift towards higher-margin businesses and the ongoing efforts to manage risks associated with energy price fluctuations and regulatory environments.

Key Highlights

  • 1Net revenues increased by $16.7 million to $307.6 million in Q1 2002 compared to $290.9 million in Q1 2001, driven by a $14.0 million Enron claim recovery and successful storage arbitrage strategy, despite lower overall revenues.
  • 2Operating income remained stable at approximately $143 million for both Q1 2002 and Q1 2001, demonstrating cost control amidst declining revenue.
  • 3The company reported a $14.0 million recovery in Q1 2002 from its Enron sales contracts, partially offsetting a $37.4 million charge taken in Q4 2001.
  • 4The Marketing and Trading segment saw a significant increase in operating income, rising to $62.6 million from $24.8 million year-over-year, attributed to capturing higher margins in a lower price environment and the Enron recovery.
  • 5The Gathering and Processing segment experienced a notable decline in operating income to $1.3 million from $13.2 million, primarily due to lower commodity prices (NGL and natural gas) and an ice storm impacting plant operations.
  • 6The company's liquidity is supported by operating cash flow, a $500 million shelf registration, and an $850 million revolving credit facility, though it remains subject to commodity price volatility and potential impacts from Enron's bankruptcy.
  • 7The Distribution segment's gross margin per Mcf showed mixed results across customer types and regions, with increases in some categories driven by normalized revenues across lower sales volumes due to warmer weather.

Frequently Asked Questions

The decrease in operating revenues and cost of gas for the three months ended March 31, 2002, compared to the same period in 2001, was primarily due to decreased market prices for natural gas and warmer weather conditions. This impacted sales volumes and the overall value of transactions across multiple segments.

ONEOK reported a recovery of approximately $14.0 million in the first quarter of 2002 related to the sale of its claim against Enron. This recovery helped offset a previously recorded $37.4 million charge in the fourth quarter of 2001 related to the Enron bankruptcy. The recovery also triggered approximately $5.5 million in increased employee costs.

During the quarter ended March 31, 2002, the Power segment was combined into the Marketing and Trading segment. All previously reported segment data has been restated to reflect this change, aligning with the company's strategy of trading around its electric generating plant capacity.

ONEOK relies on operating cash flow and borrowings from commercial paper, lines of credit, and capital markets for liquidity. The company has a $500 million shelf registration and an $850 million revolving credit facility available. While managing commodity price volatility and potential impacts from Enron's bankruptcy, the company believes its current debt capacity is adequate for its liquidity needs.