10-QPeriod: Q3 FY2009

ONEOK INC /NEW/ Quarterly Report for Q3 Ended Jul 23, 2009

Filed August 6, 2009For Securities:OKE

Summary

ONEOK Inc.'s (OKE) second quarter 2009 report shows a decrease in year-over-year revenues and net income attributable to ONEOK, primarily driven by lower commodity prices impacting its ONEOK Partners segment. Despite the revenue decline, the company reported an increase in net margin for the three-month period due to improved NGL throughput from new pipeline projects and favorable hedging activities in the Energy Services segment. Capital expenditures were significantly reduced compared to the prior year, reflecting the completion of major projects. The company maintained compliance with its debt covenants and emphasized its continued access to capital markets, although acknowledging the challenging economic outlook. ONEOK Partners completed several significant capital projects, including the Overland Pass Pipeline and expansion of its fractionation capacity, which are expected to drive future NGL throughput. While lower commodity prices and narrower differentials negatively impacted profitability in the short term, the company's strategic investments position it for potential recovery and growth. The Distribution segment saw modest net margin growth driven by rate increases and regulatory approvals. Overall, ONEOK navigated a challenging economic environment by focusing on operational efficiencies, strategic project completion, and prudent financial management.

Financial Highlights

51 data points
Beta

Revenue

$2.36B

19.1% Gross Margin

Net Income

$48.04M

2.0% Net Margin

EPS (Diluted)

$0.23

Total Assets

$12.03B

Cash & Equivalents

$52.18M

Free Cash Flow

-$12.07M

Financial Statements
Beta
Revenue$2.36B
Cost of Revenue$1.91B
Gross Profit$451.85M
Operating Expenses$276.90M
Operating Income$173.78M
Interest Expense$72.69M
Net Income$48.04M
EPS (Basic)$0.23
EPS (Diluted)$0.23
Shares Outstanding (Basic)211K
Shares Outstanding (Diluted)213K

Key Highlights

  • 1Revenues declined significantly year-over-year for both the three and six-month periods ending June 30, 2009, reflecting lower commodity prices.
  • 2Net income attributable to ONEOK decreased for the six-month period, though the three-month period showed a slight increase in net margin, benefiting from improved NGL throughput and hedging gains.
  • 3ONEOK Partners completed several key capital projects, including the Overland Pass Pipeline, which is beginning to contribute to NGL throughput.
  • 4Capital expenditures were substantially lower in the first six months of 2009 compared to 2008, primarily due to project completions.
  • 5The company maintained access to credit facilities and debt markets, with ONEOK Partners issuing $500 million in senior notes and completing equity offerings.
  • 6ONEOK's Distribution segment experienced modest net margin growth due to regulatory rate adjustments and recovery of storage costs.
  • 7The company reported compliance with all debt covenants and maintained investment-grade credit ratings.

Frequently Asked Questions

The decrease in revenues is primarily attributed to significantly lower realized commodity prices for natural gas, NGLs, and crude oil, which impacted the ONEOK Partners segment, and lower average sales prices in the Energy Services segment.

These projects, particularly the Overland Pass Pipeline and related expansions, have led to increased NGL throughput, partially offsetting the negative impact of lower commodity prices and contributing to an increase in net margin for the three-month period. They are expected to drive future growth.

ONEOK expects challenging economic conditions and lower commodity prices to persist through 2009 and into 2010. The company anticipates continued volatility in financial markets but believes its operational efficiencies, strategic project completion, and access to capital will enable it to navigate these conditions.

ONEOK Partners is a significant segment, and its performance heavily influences consolidated results. While lower commodity prices negatively impacted its net margin, the completion of new NGL projects and increased throughput are positive drivers. The equity issuance and debt issuance by ONEOK Partners helped strengthen its financial position.