What were the key drivers of ONEOK's revenue growth in the first half of 2005?

ONEOK's revenue growth in the first half of 2005 was primarily driven by favorable energy prices, particularly for natural gas and natural gas liquids (NGLs). This positively impacted the Gathering and Processing segment due to higher processing spreads and increased volumes. The Production segment also benefited from higher production volumes and prices.

Can you explain the significant Koch Industries acquisition and its financing?

ONEOK completed a substantial acquisition of natural gas liquids businesses from Koch Industries on July 1, 2005, for approximately $1.35 billion. The transaction included mid-continent NGL businesses, pipelines, and fractionation assets. The acquisition was initially financed through a $1.0 billion short-term credit agreement and commercial paper, with plans for permanent financing through long-term debt issuance, proceeds from mandatory convertible equity units settlement, asset sales, and available cash.

What is the company's strategy regarding its Production segment?

ONEOK's Board of Directors approved the potential sale of its Production segment. If this sale proceeds, the segment's results will be reflected as discontinued operations. This move aligns with the company's strategy to divest assets that are deemed less strategic or as other business conditions warrant.

How does ONEOK manage its financial risk related to commodity price volatility and interest rates?

ONEOK utilizes derivative instruments, such as futures and swaps, to hedge against price volatility for natural gas, NGLs, and crude oil. They also employ interest rate swaps to manage interest rate risk on their debt. The company's fair value hedges and cash flow hedges are accounted for under Statement 133, with gains and losses recognized in earnings or other comprehensive income as appropriate. They also actively manage their credit facilities and debt issuance to maintain liquidity.

OKE 10-Q Quarterly Report Q2 FY2005 — Revenue, Net Income, EPS

Summary

ONEOK Inc. reported its financial results for the quarter and six months ended June 30, 2005. The company saw a significant increase in revenues, largely driven by favorable energy prices, particularly benefiting its Gathering and Processing segment. Net income for the six months rose to $132.5 million, up from $122.9 million in the prior year period. Diluted earnings per share for the six months remained stable at $1.20, impacted by the dilutive effect of mandatory convertible equity units. The company also announced a major acquisition of natural gas liquids businesses from Koch Industries for approximately $1.35 billion, financed initially through a credit agreement and commercial paper. Looking ahead, ONEOK is considering the sale of its Production segment to further align with its business strategy of divesting less strategic assets. The company has revised its 2005 earnings guidance and is actively managing its financial condition through debt issuance and credit agreements, including an amendment to its debt-to-equity ratio covenant to accommodate recent financing activities. The company remains compliant with its debt covenants at the reporting date.

Key Highlights

1Total Revenues for the six months ended June 30, 2005, reached $4.87 billion, a substantial increase from $1.66 billion in the same period of 2004, driven by strong performance across segments.
2Net Income for the six months ended June 30, 2005, was $132.5 million, an increase from $122.9 million in the prior year.
3Diluted Earnings Per Share (EPS) for the six months ended June 30, 2005, was $1.20, consistent with the prior year, impacted by dilutive convertible units.
4ONEOK completed a significant acquisition of natural gas liquids businesses from Koch Industries for approximately $1.35 billion on July 1, 2005.
5The company is exploring the potential sale of its Production segment, intending to reflect its results as discontinued operations if the sale proceeds.
6Operating income increased to $68.6 million for the quarter ended June 30, 2005, up 28% year-over-year, and to $268.2 million for the six-month period, up 8% year-over-year.
7The company amended its five-year credit agreement to increase the debt-to-equity ratio limit to 70% from July 25, 2005, to February 28, 2006, to manage recent financing activities.

ONEOK INC /NEW/ Quarterly Report for Q2 Ended Jun 30, 2005

Summary

Key Highlights

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