10-QPeriod: Q1 FY2020

ONEOK INC /NEW/ Quarterly Report for Q1 Ended Mar 31, 2020

Filed April 29, 2020For Securities:OKE

Summary

ONEOK Inc. reported a significant net loss of $141.9 million for the first quarter of 2020, a stark contrast to the $337.2 million net income in the prior year. This downturn was primarily driven by substantial non-cash impairment charges totaling $641.8 million, a consequence of the severe market disruption caused by the COVID-19 pandemic and the resulting collapse in energy commodity prices. Total revenues also declined to $2.14 billion from $2.78 billion year-over-year. Despite the challenging quarter, ONEOK's liquidity remains strong, supported by its $2.5 billion credit facility, with no borrowings outstanding as of March 31, 2020. The company also successfully issued $1.75 billion in senior unsecured notes to enhance its financial flexibility. Management has taken steps to mitigate the impact of the downturn, including a significant reduction in planned 2020 capital growth expenditures. The majority of ONEOK's earnings are expected to remain fee-based, providing some resilience against commodity price volatility.

Financial Highlights

48 data points
Beta

Revenue

$2.14B

40.2% Gross Margin

Net Income

-$141.86M

-6.6% Net Margin

EPS (Diluted)

$-0.34

Total Assets

$21.97B

Cash & Equivalents

$531.63M

Free Cash Flow

-$526.96M

Financial Statements
Beta
Revenue$2.14B
Cost of Revenue$1.28B
Gross Profit$859.74M
Operating Income-$83.47M
Interest Expense$140.62M
Net Income-$141.86M
EPS (Basic)$-0.34
EPS (Diluted)$-0.34
Shares Outstanding (Basic)414.28M
Shares Outstanding (Diluted)414.28M

Key Highlights

  • 1Significant Net Loss: Reported a net loss of $141.9 million for Q1 2020, compared to a net income of $337.2 million in Q1 2019.
  • 2Substantial Impairment Charges: Recorded $641.8 million in non-cash impairment charges due to market conditions, impacting profitability.
  • 3Decreased Revenues: Total revenues fell to $2.14 billion in Q1 2020 from $2.78 billion in Q1 2019.
  • 4Strong Liquidity Position: Maintained a solid liquidity position with no borrowings outstanding on its $2.5 billion credit facility as of March 31, 2020.
  • 5Debt Issuance for Flexibility: Successfully raised $1.75 billion in senior unsecured notes in early March 2020.
  • 6Reduced Capital Expenditures: Significantly reduced planned 2020 capital growth expenditures by approximately $900 million.
  • 7Fee-Based Earnings Resilience: Expects approximately 90% of its earnings to be fee-based in 2020, providing a buffer against commodity price volatility.

Frequently Asked Questions

The primary driver for the net loss of $141.9 million in Q1 2020 was substantial non-cash impairment charges of $641.8 million. These charges were a direct result of the unprecedented market conditions in the energy sector, including the collapse in crude oil prices and decreased demand for energy commodities due to the COVID-19 pandemic.

ONEOK is maintaining a strong liquidity position with $531.6 million in cash and cash equivalents and no borrowings outstanding under its $2.5 billion credit facility as of March 31, 2020. The company also raised $1.75 billion in senior unsecured notes in March 2020 to enhance financial flexibility and has significantly reduced its planned 2020 capital growth expenditures by approximately $900 million. Management expects its primarily fee-based earnings to provide some resilience.

The company anticipates adverse impacts on volume expectations and cash flows across its segments due to decreased drilling and completion activity by producers. However, its Natural Gas Gathering and Processing segment's earnings are largely fee-based, and it benefits from dedicated acreage. The Natural Gas Liquids segment has seen increased volumes from new projects. The Natural Gas Pipelines segment is largely unaffected due to its contracted capacity. The company is monitoring producer activity and regulatory developments closely.

Key risks include the continued adverse impact of the COVID-19 pandemic on economic conditions and energy demand, volatility in commodity prices, potential impacts on counterparties' ability to meet obligations, and the possibility of states imposing production limits. The company also notes that its credit ratings could be affected by a material change in financial ratios or industry events.