10-QPeriod: Q3 FY2005

ONEOK INC /NEW/ Quarterly Report for Q3 Ended Sep 30, 2005

Filed November 4, 2005For Securities:OKE

Summary

ONEOK, Inc. reported a significant increase in net income for the nine months ended September 30, 2005, reaching $317.1 million, a substantial jump from $143.8 million in the same period last year. This growth was driven by a combination of factors including strong performance in its Energy Services and Gathering and Processing segments, bolstered by favorable energy prices and increased volatility. The company also completed a major acquisition of Koch's natural gas liquids businesses in July 2005, which is expected to enhance its mid-continent operations and market access. Furthermore, ONEOK completed the sale of its Production segment, recognizing a significant gain, and is in the process of selling its Spring Creek power plant. These strategic moves reflect a focus on optimizing its asset portfolio and enhancing shareholder value through both operational performance and divestitures of non-core assets.

Key Highlights

  • 1Net income for the nine months ended September 30, 2005, was $317.1 million, up from $143.8 million in the prior year period.
  • 2Operating income increased significantly to $361.7 million for the first nine months of 2005, a 32% rise year-over-year.
  • 3Completed the acquisition of Koch's natural gas liquids businesses for approximately $1.33 billion on July 1, 2005, adding significant assets to its Natural Gas Liquids and Pipelines and Storage segments.
  • 4Sold its Production segment in September 2005 for $645 million, recognizing a pre-tax gain of approximately $243.2 million.
  • 5Exited the power generation business with plans to sell its Spring Creek power plant, recording a $52.2 million impairment charge.
  • 6Reported strong performance in the Energy Services segment due to increased natural gas prices and volatility, and in the Gathering and Processing segment due to favorable commodity pricing.
  • 7The Distribution segment received a significant rate increase from the Oklahoma Corporation Commission of $57.5 million annually, effective October 4, 2005.

Frequently Asked Questions

The primary driver was a combination of strong operational performance across key segments, particularly Energy Services and Gathering and Processing, benefiting from higher natural gas prices and volatility. Additionally, the substantial gain recognized from the sale of the Production segment contributed significantly to the net income increase.

The acquisition is expected to significantly enhance ONEOK's mid-continent operations and market access. It has formed a new 'Natural Gas Liquids' operating segment and added assets to the 'Pipelines and Storage' segment, contributing to revenue growth and operational synergies.

ONEOK is actively managing its asset portfolio by acquiring complementary businesses, such as the Koch NGL assets, and divesting non-core assets, like the Production segment and the Spring Creek power plant. This strategy aims to focus on core competencies and optimize shareholder value.

Yes, the Distribution segment benefited from a significant annual rate increase of $57.5 million granted by the Oklahoma Corporation Commission, which is expected to positively impact future earnings.