10-QPeriod: Q2 FY2007

ONEOK INC /NEW/ Quarterly Report for Q2 Ended Jun 30, 2007

Filed August 3, 2007For Securities:OKE

Summary

ONEOK, Inc. reported a decrease in diluted earnings per share (EPS) from continuing operations for both the three-month ($0.31 vs. $0.65) and six-month ($1.67 vs. $1.80) periods ending June 30, 2007, compared to the prior year. This decline is attributed to a decrease in operating income, primarily driven by lower storage, marketing, and financial trading margins in the Energy Services segment, partially offset by rate schedule implementations in the Distribution segment. Despite these challenges, the company highlighted the upcoming acquisition of a natural gas liquids (NGL) pipeline system by its ONEOK Partners segment for approximately $300 million, expected to close in Q3 2007. ONEOK also declared an increased quarterly dividend and ONEOK Partners announced an increase in its unit distribution, signaling confidence in future performance.

Key Highlights

  • 1Diluted EPS from continuing operations declined to $0.31 for Q2 2007 and $1.67 for the first six months, down from $0.65 and $1.80 respectively in the prior year.
  • 2Operating income decreased significantly for the three-month period ($135.7M vs. $269.6M) and for the six-month period ($464.0M vs. $539.9M) primarily due to lower margins in the Energy Services segment.
  • 3ONEOK Partners announced an agreement to acquire an NGL and refined products pipeline system for approximately $300 million, expected to close in Q3 2007.
  • 4The company declared an increased quarterly dividend of $0.36 per share, an increase of approximately 13% year-over-year.
  • 5ONEOK Partners increased its quarterly unit distribution to $1.00 per unit, a 5% increase year-over-year.
  • 6Capital expenditures increased notably, especially within the ONEOK Partners segment, driven by ongoing capital projects like the Overland Pass Pipeline.
  • 7The company reported strong liquidity with no commercial paper outstanding and significant availability under its credit facilities at June 30, 2007.

Frequently Asked Questions

The decrease in EPS is primarily due to lower operating income, driven by reduced storage, marketing, and financial trading margins in the Energy Services segment. These declines were partially offset by revenue increases in the Distribution segment due to new rate schedules implemented in Kansas and Texas.

A major strategic initiative is the announced acquisition by ONEOK Partners of an interstate NGL and refined products pipeline system for approximately $300 million, anticipated to close in the third quarter of 2007. Significant capital expenditures are also being made in the ONEOK Partners segment for projects like the Overland Pass Pipeline, indicating a focus on growth and infrastructure expansion.

At June 30, 2007, ONEOK reported no commercial paper outstanding and had substantial availability under its credit facilities, indicating strong liquidity. The company's capitalization structure shifted slightly towards higher debt, with 68% debt to 32% equity for the consolidated entity, compared to 65% debt to 35% equity at the end of 2006. ONEOK Partners also expanded its credit facility commitment by $250 million.

The company expressed confidence by increasing its shareholder distributions. ONEOK declared an increased quarterly dividend of $0.36 per share, a 13% rise year-over-year. Similarly, ONEOK Partners increased its quarterly unit distribution to $1.00 per unit, a 5% increase from the prior year, reflecting positive operational expectations.