10-QPeriod: Q1 FY2014

ONEOK INC /NEW/ Quarterly Report for Q1 Ended Mar 31, 2014

Filed May 7, 2014For Securities:OKE

Summary

ONEOK Inc. reported its first quarter 2014 results, marked by significant strategic changes including the separation of its natural gas distribution business (ONE Gas) and the wind-down of its energy services business. These divestitures have reshaped the company's operational focus to its core midstream infrastructure assets within ONEOK Partners. Financially, the company saw an increase in total revenues to $3.16 billion from $2.52 billion in the prior year's comparable period, driven by higher commodity sales and services revenue. Net income attributable to ONEOK, however, decreased to $93.5 million from $112.5 million, largely due to the impact of discontinued operations and debt retirement costs. Despite the decrease in net income attributable to the parent, the underlying operational performance of the continuing segments within ONEOK Partners showed strength, with operating income up significantly to $294.1 million. The company also maintained a strong liquidity position with substantial credit facilities available.

Financial Highlights

50 data points
Beta

Revenue

$3.16B

16.1% Gross Margin

Net Income

$93.52M

3.0% Net Margin

EPS (Diluted)

$0.45

Total Assets

$13.65B

Cash & Equivalents

$210.23M

Free Cash Flow

$60.86M

Financial Statements
Beta
Revenue$3.16B
Cost of Revenue$2.65B
Gross Profit$510.63M
Operating Expenses$216.53M
Operating Income$294.12M
Interest Expense$94.90M
Net Income$93.52M
EPS (Basic)$0.45
EPS (Diluted)$0.45
Shares Outstanding (Basic)209.13M
Shares Outstanding (Diluted)210.17M

Key Highlights

  • 1Total revenues increased by 26% to $3.16 billion compared to the prior year's first quarter, indicating top-line growth.
  • 2Significant strategic restructuring occurred with the separation of ONE Gas and wind-down of the energy services business, refocusing the company on its core midstream operations.
  • 3Operating income from continuing operations surged by 68% to $294.1 million, highlighting improved profitability in the core business segments.
  • 4Net income attributable to ONEOK decreased by 17% to $93.5 million, primarily due to costs associated with debt retirement and the impact of discontinued operations.
  • 5The company completed the separation of its natural gas distribution business (ONE Gas) and is actively managing the wind-down of its energy services business, classifying both as discontinued operations.
  • 6Capital expenditures decreased by 14% to $429.5 million, reflecting a shift in investment focus post-divestitures.
  • 7ONEOK maintains a strong liquidity position with significant credit facilities available, demonstrating financial flexibility.

Frequently Asked Questions

The most significant strategic events were the separation of ONEOK's natural gas distribution business into a new publicly traded company called ONE Gas, completed on January 31, 2014, and the accelerated wind-down of its energy services business, completed on March 31, 2014. These actions have reshaped ONEOK's operational focus and financial reporting, with both now classified as discontinued operations.

While total revenues increased to $3.16 billion from $2.52 billion year-over-year, net income attributable to ONEOK decreased to $93.5 million from $112.5 million. This decrease was largely due to costs associated with early debt retirements ($24.8 million loss on extinguishment) and the impact of discontinued operations. However, operating income from continuing operations within ONEOK Partners significantly improved, rising 68% to $294.1 million, indicating strong underlying performance in the core midstream businesses.

ONEOK now primarily focuses on its midstream infrastructure assets within ONEOK Partners. The company maintains a strong liquidity position with a $300 million revolving credit facility and approximately $94.8 million in cash as of March 31, 2014. Although debt levels increased following the ONE Gas separation, the company's credit ratings remain investment grade (Baa3/BB+ for ONEOK, Baa2/BBB for ONEOK Partners), and it expects distributions from ONEOK Partners to sufficiently fund its operations and dividends.

Following the divestitures, ONEOK's reportable segments are now aligned with the three business segments of ONEOK Partners: Natural Gas Gathering and Processing, Natural Gas Liquids, and Natural Gas Pipelines. These segments are focused on gathering, processing, treating, and transporting natural gas and natural gas liquids.