10-QPeriod: Q2 FY2009

ONEOK INC /NEW/ Quarterly Report for Q2 Ended Apr 30, 2009

Filed April 30, 2009For Securities:OKE

Summary

ONEOK Inc.'s first quarter 2009 report shows a decrease in net income and earnings per share compared to the same period in 2008, reflecting challenging economic conditions and lower commodity prices. While consolidated revenues declined significantly, net margin saw a more modest decrease, indicating some resilience in the business model. The company's significant capital projects, particularly in the ONEOK Partners segment, are nearing completion, which is expected to drive future throughput and growth. ONEOK also successfully issued $500 million in senior notes through ONEOK Partners, strengthening its financial position. Despite the economic headwinds, ONEOK maintained its dividend and saw increases in capital expenditures for certain projects. The company's focus remains on managing operational costs, leveraging its infrastructure, and navigating volatile financial markets. Investors should monitor the impact of ongoing infrastructure projects and the evolving economic landscape on future performance.

Financial Highlights

51 data points
Beta

Revenue

$2.23B

19.4% Gross Margin

Net Income

$41.68M

1.9% Net Margin

EPS (Diluted)

$0.20

Total Assets

$11.83B

Cash & Equivalents

$47.04M

Free Cash Flow

$120.42M

Financial Statements
Beta
Revenue$2.23B
Cost of Revenue$1.80B
Gross Profit$432.43M
Operating Expenses$281.38M
Operating Income$154.80M
Interest Expense$73.39M
Net Income$41.68M
EPS (Basic)$0.20
EPS (Diluted)$0.20
Shares Outstanding (Basic)210.67M
Shares Outstanding (Diluted)211.90M

Key Highlights

  • 1Net income attributable to ONEOK decreased to $122.3 million for the three months ended March 31, 2009, down from $143.8 million in the prior year's comparable period.
  • 2Diluted earnings per share decreased to $1.16 from $1.36 year-over-year.
  • 3Consolidated revenues dropped significantly by 43% to $2.8 billion due to lower commodity prices and reduced marketing margins.
  • 4ONEOK Partners successfully completed a $500 million offering of 8.625% Senior Notes due 2019, using the proceeds to repay outstanding debt.
  • 5Capital expenditures decreased by 28% to $243 million, largely due to the completion of major projects like the Overland Pass Pipeline.
  • 6The company declared a quarterly dividend of $0.40 per share, an increase from $0.38 in the prior year.
  • 7Despite lower net income, the company's net margin declined by a more moderate 6%, suggesting some stability in operational performance.

Frequently Asked Questions

The primary reasons for the decrease in net income and EPS were lower realized commodity prices and narrower NGL product location price differentials, particularly impacting the ONEOK Partners segment. Additionally, the Energy Services segment experienced decreases in storage, marketing, and transportation margins, net of hedging activities.

ONEOK has relied on operating cash flow, credit facilities, and capital markets for liquidity. In March 2009, ONEOK Partners issued $500 million in senior notes to repay debt, strengthening its financial position. The company also maintained access to its credit agreements and expects sufficient cash flow and financing to meet its operational and capital expenditure needs.

ONEOK Partners has been focused on major natural gas liquids (NGL) infrastructure projects. The Overland Pass Pipeline, Piceance Lateral Pipeline, and D-J Basin Lateral Pipeline are significant projects. Several of these, including the Overland Pass Pipeline and D-J Basin Lateral Pipeline, were nearing completion or had recently been placed into service during the quarter, contributing to increased throughput. The Arbuckle Pipeline project was ongoing, facing some challenges with right-of-way acquisition.

ONEOK utilizes various derivative instruments, including futures contracts, forwards, swaps, and options, to manage commodity price risk. These hedging activities aim to reduce the variability of cash flows and protect against adverse price movements for natural gas, NGLs, and crude oil. The company formally documents its hedging relationships and assesses their effectiveness regularly.