Exhibit 99.1
[ONEOK Logo] | News |
November 1, 2004 | Analyst Contact: Weldon Watson | |
| 918-588-7158 |
ONEOK reports strong third quarter earnings;
Increases 2004 guidance
Tulsa, Okla.—ONEOK, Inc. (NYSE:OKE) today announced net income for the third quarter of 2004 of $20.8 million, or 19 cents per diluted share of common stock, which exceeded analysts’ expectations and was significantly above last year’s third quarter earnings of $4.6 million, or 1 cent per diluted share of common stock. The First Call average of analysts’ estimates was 18 cents per share.
For the nine months ended September 30, 2004, net income was $143.8 million, or $1.38 per diluted share of common stock, compared with $49.6 million, or 57 cents per diluted share of common stock, for 2003.
ONEOK’s chairman, president and chief executive officer, David Kyle, said, “Our third quarter earnings reflect the continued success of our business strategy. The strongest results came from gathering and processing where we benefited from wider processing spreads and our contract restructuring efforts which have positioned us to benefit from higher commodity prices. Additionally, we have experienced a positive impact from our 2003 acquisition of producing properties in Texas.
“These increases and other changes during the quarter have resulted in an increase in our 2004 earnings guidance to a range of $2.25 to $2.31 per diluted share of common stock.”
Kyle added, “We are continuing to move forward with our acquisition of the 82.5 percent general partner interest in Northern Border Partners and we expect to close in the fourth quarter. We are very excited about the prospects of owning this general partnership interest in one of the nation’s premier pipeline master limited partnerships. This transaction compliments our strategy and provides a competitive financial structure for future acquisition opportunities.”
3rd quarter results included:
| • | Operating income of $59.5 million, compared with $31.8 million one year ago; |
| • | The impact of rate relief for our distribution companies in Kansas and Oklahoma; and |
| • | The impact of a favorable pricing environment for natural gas processing and production. |
-more-
ONEOK reports strong third quarter earnings;
Increases 2004 guidance
November 1, 2004
Page 2 of 14
Year to date results included:
| • | Operating income of $308.2 million, compared with $326.3 million one year ago; and |
| • | Cash flow from operations, before changes in working capital, of $368.7 million, which exceeded capital expenditures of $192.3 million and dividends of $63.4 million by $113.0 million. |
The following table shows the components of net income for the year to date. All numbers are net of tax:
| Nine Months Ended September 30, | ||||||||||||||
| 2004 | 2003 | |||||||||||||
| (Net Income in Millions of Dollars) | Net Income | EPS | Net Income | EPS | ||||||||||
Income from continuing operations | $ | 143.8 | $ | 1.38 | $ | 152.8 | $ | 1.49 | ||||||
Income from operations of a discontinued component | — | — | 2.3 | 0.02 | ||||||||||
Gain on sale of discontinued component | — | — | 38.4 | 0.34 | ||||||||||
Cumulative effect of rescission of EITF 98-10 | — | — | (141.8 | ) | (1.26 | ) | ||||||||
Cumulative effect adoption of FAS 143 | — | — | (2.1 | ) | (0.02 | ) | ||||||||
Net Income | $ | 143.8 | $ | 1.38 | $ | 49.6 | $ | 0.57 | ||||||
ONEOK business outlook
We have increased our earnings guidance for 2004 to a range of $2.25 to $2.31 per diluted share of common stock from $2.18 to $2.24 per diluted share of common stock. This increase is a result of the impact of continued strength in natural gas prices, natural gas liquids prices and keep-whole spreads on the gathering and processing segment. In addition, we reaffirm our 2005 earnings guidance in the range of $2.22 to $2.28 per diluted share of common stock, which, as previously disclosed, does not include earnings from trading opportunities which have been included in the 2004 reported results.
A summary of the revised earnings guidance is attached.
2004 business segment results
Production
Operating income from production increased to $10.9 million for the third quarter of 2004, compared with $3.5 million in 2003. The increase was primarily the result of the acquisition of the Texas producing properties in December 2003. The acquired properties produced 2.1 Bcf of natural gas and 28,600 barrels of oil during the third quarter of 2004. Operating income also benefited from a realized natural gas price of $5.17 per Mcf in 2004 compared with $4.65 per Mcf in 2003.
-more-
ONEOK reports strong third quarter earnings;
Increases 2004 guidance
November 1, 2004
Page 3 of 14
For the remainder of 2004, we have hedged approximately 95 percent of our anticipated natural gas production at an average net price at the wellhead of $5.50 per Mcf and 100 percent of our anticipated oil production at a fixed NYMEX price of $30.35 per barrel.
For 2005, we are approximately 63 percent hedged on our expected natural gas production. We have hedges on 19 MMcf per day of our 2005 natural gas production at a net wellhead price of $5.69 per Mcf. We have also hedged an additional 9.8 MMcf per day of our first quarter 2005 natural gas production at a net wellhead price of $6.12 per Mcf and 9.8 MMcf per day of natural gas production for the remaining three quarters of 2005 at a net wellhead price of $6.22 per Mcf. Also for 2005, we have hedged 15,000 barrels per month or 49 percent of our anticipated oil production at a fixed NYMEX price of $39.75 per barrel.
Year to date operating income for this business segment increased to $34.8 million in 2004 from $12.3 million for the same period in 2003, primarily due to the acquisition of the Texas properties.
The production segment owns, develops and produces natural gas and oil reserves in Oklahoma and Texas. This segment focuses on acquisition and development of reserves, rather than exploratory drilling.
Gathering and Processing
Operating income from our gathering and processing operations increased to $41.3 million for the third quarter of 2004, compared with $17.5 million for 2003 because of:
| • | Favorable commodity pricing for natural gas and natural gas liquids on our percentage of proceeds contracts, which represent 33 percent of our contract mix on a volumetric basis; |
| • | Our processing spreads for keep-whole contracts, which represent 24 percent of our contract mix on a volumetric basis, were $3.07 per MMBtu for the third quarter of 2004 compared with $1.43 per MMBtu for the same period in 2003; and |
| • | Improved margins resulting from the segment’s ongoing strategy of restructuring unprofitable gas purchase, gathering and processing contracts. |
Currently, we have hedged approximately 66 percent of our anticipated company-owned condensate sales at an average NYMEX price of $39.40 per barrel and pre-sold approximately 57 percent of our anticipated company-owned NGLs at a weighted average price of $0.61 per gallon for the remainder of 2004. In addition, we have hedged approximately 67 percent of our anticipated keep-whole volumes at an average gross processing spread of $3.44 per MMBtu for the remainder of 2004.
For 2005, we have hedged approximately 50 percent of our anticipated company-owned condensate sales at an average NYMEX price of $44.59 per barrel and pre-sold approximately 34 percent of our anticipated company-owned NGLs at a weighted average price of $0.74 per gallon. We have also hedged approximately 52 percent of our anticipated 2005 natural gas sales at a weighted average price of $6.66 per MMBtu.
-more-
ONEOK reports strong third quarter earnings;
Increases 2004 guidance
November 1, 2004
Page 4 of 14
Operating income for this business segment for the year to date was $89.1 million compared with $41.1 million for the same period in 2003.
The gathering and processing segment is engaged in the gathering, processing and marketing of natural gas and the fractionation, storage and marketing of natural gas liquids. The segment currently has approximately 1.8 Bcf/d of processing capacity and approximately 13,800 miles of gathering pipelines that supply our gas processing plants.
Transportation and Storage
Operating income from our transportation and storage operations was $11.8 million for the third quarter of 2004, compared with $10.8 million for the same period in 2003. The differences between the periods were:
| • | Lower volumes transported due to decreased irrigation and power plant demand; and |
| • | Decreased costs of fuel and gas, primarily related to the lower transport volumes, which reduced expense. |
Year to date operating income for this business segment was $36.4 million compared with $37.3 million for the same period in 2003.
The transportation and storage segment owns and operates intrastate pipelines and natural gas transmission pipelines, natural gas storage and gas gathering facilities in Oklahoma, Kansas and Texas. Our facilities have a combined working storage capacity of approximately 51.6 Bcf and approximately 5,500 miles of transportation pipeline with a maximum throughput of 2.9 Bcf/d.
Distribution
Operating income from our distribution operations was a loss of $17.6 million for the third quarter of 2004, compared with a loss of $6 million for the same period in 2003. The decrease was primarily due to the combination of the following:
| • | Increased labor and employee benefit costs of $9.7 million; |
| • | Elimination of the WeatherProof Bill program in Kansas which reduced operating income by $7.1 million and offset the remainder of the benefit seen in the first quarter; and |
| • | Increased margin of $7.1 million due to the rate relief in Kansas and Oklahoma, partially offset by increased amortization expense of $1.1 million related to the rate orders. |
Year to date operating income for this business segment was $65.4 million compared with $69.5 million for the same period in 2003.
-more-
ONEOK reports strong third quarter earnings;
Increases 2004 guidance
November 1, 2004
Page 5 of 14
The distribution segment includes Oklahoma Natural Gas Company, Kansas Gas Service Company and Texas Gas Service Company. The companies are the largest natural gas distributors in Kansas and Oklahoma and the third largest in Texas. Overall, the companies serve almost 2 million customers.
Energy Services
Operating income from our energy services operations was $11 million for the third quarter of 2004, compared with $6.3 million for the same period in 2003. At the beginning of the third quarter of 2004, we completed a reorganization of our Energy Services segment and renewed our focus on our physical marketing and storage business. We separated management and operations of our physical marketing, retail marketing and trading activities and began accounting separately for the different types of revenue and margins earned from these activities. Concurrent with this reorganization, we evaluated the accounting treatment related to the presentation of revenues from the different types of activities and determined that revenues from non-trading activities should be reported on a gross basis. As a result, we are reporting the realized revenues and purchase costs of our non-trading activities on a gross basis beginning in the third quarter. No prior periods have been adjusted for this change. Reporting of these transactions on a gross basis did not impact operating income, but resulted in an increase to revenues and cost of sales and fuel.
The net margin from energy services for the three months ended September 30, 2004, was derived from the following three sources:
| Three Months Ended September 30, 2004 | ||||
| (Thousands of Dollars) | ||||
Marketing and storage | $ | 29,906 | ||
Trading | 18,589 | |||
Retail marketing | 3,051 | |||
Transportation and storage costs | (31,944 | ) | ||
| $ | 19,602 | |||
The increase in operating income for the third quarter of 2004 compared with the same period in 2003 is due to a combination of the following:
| · | Increase in the mark to market value of our derivative contracts subject to fair value accounting due to increased natural gas volatility; and |
| · | Reduced demand for electric generation. |
Year to date operating income was $79.3 million compared with $163.8 million for the same period in 2003.
-more-
ONEOK reports strong third quarter earnings;
Increases 2004 guidance
November 1, 2004
Page 6 of 14
Natural gas in storage at September 30, 2004 was 79.1 Bcf, or 86.8 percent of capacity, compared with 71.1 Bcf, or 88.4 percent of capacity, at September 30, 2003.
The energy services segment purchases, stores, transports and markets natural gas to both the wholesale and retail sectors in most states. Leased storage and transport capacity provide direct access to all regions of the country and flexibility in capturing volatility in the energy markets. The segment also trades natural gas and power on a smaller scale.
Other Third Quarter Events
| · | The Board of Directors voted to increase our quarterly common stock dividend to 25 cents per share of common stock. |
| · | The remaining litigation related to our Yaggy storage facility was completed with a $5 million verdict for actual damages, which is covered by insurance. There is one other case on appeal. |
| · | We signed a $1 billion, five-year credit agreement which expires on September 16, 2009. |
| · | Moody’s Investor Services changed our outlook from negative to stable. |
Earnings Conference Call
The ONEOK third quarter conference call will be held at 11 a.m. Eastern time (10 a.m. Central time) on November 2, 2004. Those who wish may join the call on the ONEOK Web site atwww.oneok.com or call 1-888-675-7686, pass code 559589. A recording of the call will be available on our website for 30 days. A recording will be available by phone for seven days. The playback call may be accessed at 1-866-219-1444, pass code 559589.
ONEOK, Inc. is a diversified energy company involved primarily in oil and gas production, natural gas processing, gathering, storage and transmission in the mid-continent areas of the United States. The company’s energy services operation provides service to customers in most states. The company is the largest natural gas distributor in Kansas and Oklahoma, and the third largest in Texas, operating as Kansas Gas Service, Oklahoma Natural Gas and Texas Gas Service, serving almost 2 million customers.
For information about ONEOK, Inc. visit the Web site: www.oneok.com.
###
Some of the statements contained in this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements relate to: anticipated financial performance, management’s plans and objectives for future operations, expectations relating to pending or possible acquisitions and dispositions, expectations as to the dividend level on our common stock, business prospects, outcome of regulatory proceedings, market conditions, and other matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements in certain circumstances. The following discussion is intended to identify important factors that could cause future outcomes to differ materially from those set forth in the forward-looking statements.
Forward-looking statements include the information concerning possible or assumed future results of our operations and other statements contained in this press release identified by words such as “anticipate,” “estimate,” “expect,” “intend,” “believe,” “projection” or “goal.”
-more-
ONEOK reports strong third quarter earnings;
Increases 2004 guidance
November 1, 2004
Page 7 of 14
You should not place undue reliance on forward-looking statements. Known and unknown risks, uncertainties and other factors may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Those factors may affect our operations, markets, products, services and prices. In addition to any assumptions and other factors referred to specifically in connection with the forward-looking statements, factors that could cause our actual results to differ materially from those contemplated in any forward-looking statement include, among others, the following:
| · | risks associated with any reduction in our credit ratings; |
| · | the effects of weather and other natural phenomena on sales and prices; |
| · | competition from other energy suppliers as well as alternative forms of energy; |
| · | the capital intensive nature of our business; |
| · | further deregulation of the natural gas business; |
| · | competitive changes in the natural gas gathering, transportation and storage business resulting from deregulation of the natural gas business; |
| · | the profitability of assets or businesses acquired by us; |
| · | risks of marketing, trading and hedging activities as a result of changes in energy prices or the financial condition of our counterparties; |
| · | economic climate and growth in the geographic areas in which we do business; |
| · | the uncertainty of estimates, including accruals, cost of environmental remediation and gas and oil reserves; |
| · | the timing and extent of changes in commodity prices for natural gas, natural gas liquids, electricity and crude oil; |
| · | the effects of changes in governmental policies and regulatory actions, including with respect to income taxes, environmental compliance, authorized rates or recovery of gas costs; |
| · | the impact of recently issued and future accounting pronouncements and other changes in accounting policies; |
| · | the possibility of future terrorist attacks or the possibility or occurrence of an outbreak of, or changes in, hostilities or changes in the political conditions in the Middle East or elsewhere; |
| · | the impact of unforeseen changes in interest rates, equity markets, inflation rates, economic recession and other external factors over which we have no control, including the effect on pension expense and funding resulting from changes in stock and bond market returns; |
| · | risks associated with pending or possible acquisitions and dispositions, including our ability to finance or integrate any such acquisitions and any regulatory delay or conditions imposed by regulatory bodies in connection with any such acquisitions and dispositions; |
| · | the results of administrative proceedings and litigation involving the Oklahoma Corporation Commission, Kansas Corporation Commission, Texas regulatory authorities or any other local, state or federal regulatory body, including the Federal Energy Regulatory Commission; |
| · | our ability to access capital at competitive rates or on terms acceptable to us; |
| · | the risk of a significant slowdown in growth or decline in the U.S. economy, the risk of delay in growth or recovery in the U.S. economy or the risk of increased cost for insurance premiums, security and other items as a consequence of terrorist attacks or the threat of terrorist attacks; |
| · | risks associated with the adequate supply of natural gas to our gathering and processing facilities, including from production declines, which outpace new drilling; |
| · | risks inherent in the implementation of new software, such as our customer service system, and the impact on the timeliness of information for financial reporting; |
| · | the risk that material weaknesses or significant deficiencies in internal control over financial reporting could emerge or that minor problems could become significant; |
| · | the impact of the outcome of pending and future litigation; and |
| · | the other factors listed in the reports we have filed and may file with the Securities and Exchange Commission, which are incorporated by reference. |
Other factors and assumptions not identified above were also involved in the making of the forward-looking statements. The failure of those assumptions to be realized, as well as other factors, may also cause actual results to differ materially from those projected. We have no obligation and make no undertaking to update publicly or revise any forward-looking information.
-more-
ONEOK reports strong third quarter earnings;
Increases 2004 guidance
November 1, 2004
Page 8 of 14
ONEOK, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
(Unaudited) | 2004 | 2003 | 2004 | 2003 | |||||||||
| (Thousands of dollars, except per share amounts) | |||||||||||||
Revenues | |||||||||||||
Operating revenues, excluding energy trading revenues | $ | 1,709,351 | $ | 557,093 | $ | 3,282,893 | $ | 1,966,030 | |||||
Energy trading revenues, net | 17,411 | 11,177 | 106,583 | 183,938 | |||||||||
Total Revenues | 1,726,762 | 568,270 | 3,389,476 | 2,149,968 | |||||||||
Cost of sales and fuel | 1,480,662 | 373,888 | 2,520,565 | 1,320,198 | |||||||||
Net Margin | 246,100 | 194,382 | 868,911 | 829,770 | |||||||||
Operating Expenses | |||||||||||||
Operations and maintenance | 124,000 | 106,433 | 368,022 | 332,996 | |||||||||
Depreciation, depletion, and amortization | 47,307 | 40,105 | 140,273 | 120,241 | |||||||||
General taxes | 15,290 | 16,024 | 52,399 | 50,267 | |||||||||
Total Operating Expenses | 186,597 | 162,562 | 560,694 | 503,504 | |||||||||
Operating Income | 59,503 | 31,820 | 308,217 | 326,266 | |||||||||
Other income | 1,632 | 1,252 | 11,101 | 4,157 | |||||||||
Other expense | 1,338 | 472 | 9,811 | 1,590 | |||||||||
Interest expense | 25,248 | 24,972 | 73,885 | 78,518 | |||||||||
Income before Income Taxes | 34,549 | 7,628 | 235,622 | 250,315 | |||||||||
Income taxes | 13,710 | 3,033 | 91,841 | 97,565 | |||||||||
Income from Continuing Operations | 20,839 | 4,595 | 143,781 | 152,750 | |||||||||
Discontinued operations, net of taxes: | |||||||||||||
Income from operations of discontinued component | — | — | — | 2,342 | |||||||||
Gain on sale of discontinued component | — | — | — | 38,369 | |||||||||
Cumulative effect of changes in accounting principle, net of tax | — | — | — | (143,885 | ) | ||||||||
Net Income | 20,839 | 4,595 | 143,781 | 49,576 | |||||||||
Preferred stock dividends | — | 4,000 | — | 24,211 | |||||||||
Income Available for Common Stock | $ | 20,839 | $ | 595 | $ | 143,781 | $ | 25,365 | |||||
Earnings Per Share of Common Stock | |||||||||||||
Basic: | |||||||||||||
Earnings per share from continuing operations | $ | 0.20 | $ | 0.01 | $ | 1.42 | $ | 1.64 | |||||
Earnings per share from operations of discontinued component | — | — | — | 0.02 | |||||||||
Earnings per share from gain on sale of discontinued component | — | — | — | 0.34 | |||||||||
Earnings per share from cumulative effect of changes in accounting principle | — | — | — | (1.28 | ) | ||||||||
Net earnings per share, basic | $ | 0.20 | $ | 0.01 | $ | 1.42 | $ | 0.72 | |||||
Diluted: | |||||||||||||
Earnings per share from continuing operations | $ | 0.19 | $ | 0.01 | $ | 1.38 | $ | 1.49 | |||||
Earnings per share from operations of discontinued component | — | — | — | 0.02 | |||||||||
Earnings per share from gain on sale of discontinued component | — | — | — | 0.34 | |||||||||
Earnings per share from cumulative effect of changes in accounting principle | — | — | — | (1.28 | ) | ||||||||
Net earnings per share, diluted | $ | 0.19 | $ | 0.01 | $ | 1.38 | $ | 0.57 | |||||
Average Shares of Common Stock (Thousands) | |||||||||||||
Basic | 102,914 | 77,865 | 101,530 | 78,650 | |||||||||
Diluted | 106,942 | 78,701 | 104,080 | 97,385 | |||||||||
Dividends Declared per share of Common Stock | $ | 0.25 | $ | 0.18 | $ | 0.88 | $ | 0.52 | |||||
-more-
ONEOK reports strong third quarter earnings;
Increases 2004 guidance
November 1, 2004
Page 9 of 14
ONEOK, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited) | September 30, 2004 | December 31, 2003 | ||||
| (Thousands of dollars) | ||||||
Assets | ||||||
Current Assets | ||||||
Cash and cash equivalents | $ | 17,759 | $ | 12,172 | ||
Trade accounts and notes receivable, net | 696,907 | 970,141 | ||||
Materials and supplies | 20,585 | 18,962 | ||||
Gas in storage | 636,229 | 500,439 | ||||
Assets from price risk management activities | 469,312 | 233,013 | ||||
Deposits | 19,963 | 42,424 | ||||
Deferred income taxes | 22,408 | — | ||||
Other current assets | 59,418 | 46,184 | ||||
Total Current Assets | 1,942,581 | 1,823,335 | ||||
Property, Plant and Equipment | ||||||
Production | 442,667 | 404,254 | ||||
Gathering and Processing | 1,055,075 | 1,036,080 | ||||
Transportation and Storage | 700,781 | 699,676 | ||||
Distribution | 2,888,524 | 2,813,800 | ||||
Energy Services | 127,687 | 126,315 | ||||
Other | 133,002 | 99,549 | ||||
Total Property, Plant and Equipment | 5,347,736 | 5,179,674 | ||||
Accumulated depreciation, depletion, and amortization | 1,586,456 | 1,487,848 | ||||
Net Property, Plant and Equipment | 3,761,280 | 3,691,826 | ||||
Deferred Charges and Other Assets | ||||||
Regulatory assets, net | 201,576 | 213,915 | ||||
Goodwill | 225,363 | 225,615 | ||||
Assets from price risk management activities | 83,103 | 67,294 | ||||
Prepaid pensions | 126,974 | 120,618 | ||||
Investments and other | 83,459 | 69,283 | ||||
Total Deferred Charges and Other Assets | 720,475 | 696,725 | ||||
Total Assets | $ | 6,424,336 | $ | 6,211,886 | ||
-more-
ONEOK reports strong third quarter earnings;
Increases 2004 guidance
November 1, 2004
Page 10 of 14
ONEOK, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
| (Unaudited) | September 30, 2004 | December 31, 2003 | ||||||
Liabilities and Shareholders’ Equity | (Thousands of dollars) | |||||||
Current Liabilities | ||||||||
Current maturities of long-term debt | $ | 341,334 | $ | 6,334 | ||||
Notes payable | 298,000 | 600,000 | ||||||
Accounts payable | 775,078 | 813,895 | ||||||
Dividends payable | 25,840 | — | ||||||
Accrued taxes | 24,155 | 102,637 | ||||||
Accrued interest | 28,671 | 32,999 | ||||||
Customers' deposits | 36,970 | 34,692 | ||||||
Unrecovered purchased gas costs | 68,535 | 51,378 | ||||||
Liabilities from price risk management activities | 610,122 | 246,474 | ||||||
Deferred income taxes | — | 6,194 | ||||||
Other | 112,341 | 130,174 | ||||||
Total Current Liabilities | 2,321,046 | 2,024,777 | ||||||
Long-term Debt, excluding current maturities | 1,549,232 | 1,878,264 | ||||||
Deferred Credits and Other Liabilities | ||||||||
Deferred income taxes | 614,292 | 559,356 | ||||||
Liabilities from price risk management activities | 121,179 | 66,956 | ||||||
Lease obligation | 90,186 | 100,292 | ||||||
Other deferred credits | 329,013 | 340,849 | ||||||
Total Deferred Credits and Other Liabilities | 1,154,670 | 1,067,453 | ||||||
Total Liabilities | 5,024,948 | 4,970,494 | ||||||
Commitments and Contingencies | ||||||||
Shareholders’ Equity | ||||||||
Common stock, $0.01 par value: authorized 300,000,000 shares; issued 106,396,240 shares and outstanding 103,359,074 shares at September 30, 2004; | 1,064 | 982 | ||||||
Paid in capital | 996,855 | 815,870 | ||||||
Unearned compensation | (2,007 | ) | (3,422 | ) | ||||
Accumulated other comprehensive loss | (96,183 | ) | (17,626 | ) | ||||
Retained earnings | 550,858 | 495,971 | ||||||
Treasury stock at cost: 3,037,166 shares at September 30, | (51,199 | ) | (50,383 | ) | ||||
Total Shareholders’ Equity | 1,399,388 | 1,241,392 | ||||||
Total Liabilities and Shareholders’ Equity | $ | 6,424,336 | $ | 6,211,886 | ||||
-more-
ONEOK reports strong third quarter earnings;
Increases 2004 guidance
November 1, 2004
Page 11 of 14
ONEOK, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Nine Months Ended September 30, | ||||||||
| (Unaudited) | 2004 | 2003 | ||||||
Operating Activities | (Thousands of dollars) | |||||||
Income from continuing operations | $ | 143,781 | $ | 152,750 | ||||
Depreciation, depletion, and amortization | 140,273 | 120,241 | ||||||
Gain on sale of assets | (9,345 | ) | (289 | ) | ||||
Income from equity investments | (802 | ) | (1,141 | ) | ||||
Deferred income taxes | 77,906 | 93,451 | ||||||
Stock based compensation expense | 6,695 | 3,588 | ||||||
Allowance for doubtful accounts | 10,238 | 10,313 | ||||||
Changes in assets and liabilities (net of acquisition effects): | ||||||||
Accounts and notes receivable | 262,659 | 215,271 | ||||||
Inventories | (137,771 | ) | (441,143 | ) | ||||
Unrecovered purchased gas costs | 17,157 | 15,765 | ||||||
Deposits | 22,461 | (7,965 | ) | |||||
Regulatory assets | (6,921 | ) | (2,848 | ) | ||||
Accounts payable and accrued liabilities | (123,583 | ) | (51,445 | ) | ||||
Price risk management assets and liabilities | (33,780 | ) | 5,468 | |||||
Other assets and liabilities | (82,730 | ) | 14,674 | |||||
Cash Provided by Continuing Operations | 286,238 | 126,690 | ||||||
Cash Provided by Discontinued Operations | — | 8,285 | ||||||
Cash Provided by Operating Activities | 286,238 | 134,975 | ||||||
Investing Activities | ||||||||
Changes in other investments, net | 1,372 | 1,167 | ||||||
Acquisitions | — | (436,630 | ) | |||||
Capital expenditures | (192,335 | ) | (150,685 | ) | ||||
Proceeds from sale of property | 17,249 | — | ||||||
Other investing activities | (2,990 | ) | (2,733 | ) | ||||
Cash Used in Continuing Operations | (176,704 | ) | (588,881 | ) | ||||
Cash Provided by Discontinued Operations | — | 280,669 | ||||||
Cash Used in Investing Activities | (176,704 | ) | (308,212 | ) | ||||
Financing Activities | ||||||||
Payments of notes payable, net | (302,000 | ) | (98,500 | ) | ||||
Change in bank overdraft | 4,262 | 253 | ||||||
Issuance of debt | — | 404,964 | ||||||
Termination of interest rate swaps | 82,915 | — | ||||||
Payment of debt issuance costs | — | (2,564 | ) | |||||
Payment of debt | (1,041 | ) | (15,792 | ) | ||||
Purchase of Series A Convertible Preferred Stock | — | (300,000 | ) | |||||
Purchase of common stock | — | (50,000 | ) | |||||
Issuance of common stock | 176,107 | 218,521 | ||||||
Issuance (receipt) of treasury stock, net | (816 | ) | 7,358 | |||||
Dividends paid | (63,374 | ) | (52,410 | ) | ||||
Cash Provided by (Used in) Financing Activities | (103,947 | ) | 111,830 | |||||
Change in Cash and Cash Equivalents | 5,587 | (61,407 | ) | |||||
Cash and Cash Equivalents at Beginning of Period | 12,172 | 73,522 | ||||||
Cash and Cash Equivalents at End of Period | $ | 17,759 | $ | 12,115 | ||||
-more-
ONEOK reports strong third quarter earnings;
Increases 2004 guidance
November 1, 2004
Page 12 of 14
ONEOK, Inc.
INFORMATION AT A GLANCE
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
| 2004 | 2003 | 2004 | 2003 | |||||||||||
| (Millions of dollars) | ||||||||||||||
Production | ||||||||||||||
Net Margin | $ | 24.8 | $ | 9.8 | $ | 75.3 | $ | 32.2 | ||||||
Depreciation, depletion, and amortization | $ | 6.6 | $ | 2.8 | $ | 19.2 | $ | 8.8 | ||||||
Operating Income | $ | 10.9 | $ | 3.5 | $ | 34.8 | $ | 12.3 | ||||||
Proved reserves (a) | ||||||||||||||
Gas(MMcf) | (b | ) | (b | ) | 204,793 | 62,759 | ||||||||
Oil(MBbls) | (b | ) | (b | ) | 3,620 | 2,140 | ||||||||
Production | ||||||||||||||
Gas(MMcf) | 4,036 | 1,709 | 12,339 | 5,282 | ||||||||||
Oil(MBbls) | 89 | 67 | 258 | 202 | ||||||||||
Average realized price (c) | ||||||||||||||
Gas($/Mcf) | $ | 5.17 | $ | 4.65 | $ | 5.19 | $ | 4.88 | ||||||
Oil($/Bbls) | $ | 29.80 | $ | 26.84 | $ | 29.16 | $ | 27.68 | ||||||
Capital expenditures | $ | 17.2 | $ | 6.1 | $ | 37.6 | $ | 12.9 | ||||||
Gathering and Processing | ||||||||||||||
Net Margin | $ | 84.4 | $ | 53.5 | $ | 207.4 | $ | 152.1 | ||||||
Depreciation, depletion, and amortization | $ | 8.3 | $ | 7.4 | $ | 24.5 | $ | 21.9 | ||||||
Operating Income | $ | 41.3 | $ | 17.5 | $ | 89.1 | $ | 41.1 | ||||||
Total gas gathered(MMMBtu/d) | 1,099 | 1,162 | 1,106 | 1,178 | ||||||||||
Total gas processed(MMMBtu/d) | 1,175 | 1,201 | 1,162 | 1,215 | ||||||||||
Natural gas liquids sales(MBbls/d) | 108 | 112 | 107 | 113 | ||||||||||
Natural gas liquids produced(MBbls/d) | 64 | 62 | 61 | 58 | ||||||||||
Gas sales(MMMBtu/d) | 330 | 340 | 325 | 339 | ||||||||||
Capital expenditures | $ | 8.5 | $ | 4.2 | $ | 18.5 | $ | 12.2 | ||||||
Conway OPIS composite NGL Price ($/gal) | $ | 0.76 | $ | 0.57 | $ | 0.68 | $ | 0.58 | ||||||
Average NYMEX crude oil price ($/Bbl) | $ | 42.28 | $ | 30.65 | $ | 38.41 | $ | 31.30 | ||||||
Average natural gas price ($/MMBtu) (mid-continent region) | $ | 5.43 | $ | 4.80 | $ | 5.38 | $ | 5.30 | ||||||
Transportation and Storage | ||||||||||||||
Net Margin | $ | 28.4 | $ | 26.8 | $ | 85.4 | $ | 84.0 | ||||||
Depreciation, depletion, and amortization | $ | 4.4 | $ | 4.2 | $ | 12.9 | $ | 12.5 | ||||||
Operating Income | $ | 11.8 | $ | 10.8 | $ | 36.4 | $ | 37.3 | ||||||
Volumes transported(MMcf) | 92,409 | 101,025 | 314,156 | 341,143 | ||||||||||
Capital expenditures | $ | 3.7 | $ | 5.6 | $ | 7.7 | $ | 10.4 | ||||||
Average natural gas price($/MMBtu) | $ | 5.43 | $ | 4.80 | $ | 5.38 | $ | 5.30 | ||||||
-more-
ONEOK reports strong third quarter earnings;
Increases 2004 guidance
November 1, 2004
Page 13 of 14
Distribution | ||||||||||||||
Net Margin | $ | 88.6 | $ | 89.5 | $ | 395.6 | $ | 367.8 | ||||||
Depreciation, depletion, and amortization | $ | 26.5 | $ | 24.0 | $ | 78.7 | $ | 71.6 | ||||||
Operating Income | $ | (17.6 | ) | $ | (6.0 | ) | $ | 65.4 | $ | 69.5 | ||||
Average number of customers | 1,991,117 | 1,970,074 | 2,006,276 | 1,989,907 | ||||||||||
Capital expenditures | $ | 43.7 | $ | 47.9 | $ | 106.3 | $ | 107.0 | ||||||
Natural gas volumes(MMcf) | ||||||||||||||
Gas Sales | 24,333 | 22,123 | 142,856 | 145,137 | ||||||||||
Transportation | 55,492 | 54,125 | 177,066 | 166,772 | ||||||||||
Energy Services | ||||||||||||||
Net Margin | $ | 19.6 | $ | 14.5 | $ | 109.2 | $ | 191.4 | ||||||
Depreciation, depletion, and amortization | $ | 1.4 | $ | 1.4 | $ | 4.2 | $ | 4.3 | ||||||
Operating Income | $ | 11.0 | $ | 6.3 | $ | 79.3 | $ | 163.8 | ||||||
Natural gas marketed(MMcf) | 240,462 | 220,622 | 775,618 | 754,769 | ||||||||||
Electricity marketed(MMwh) | 1,661 | 561 | 3,412 | 1,304 | ||||||||||
Physically settled volumes(MMcf) | 507,965 | 469,958 | 1,558,578 | 1,519,694 | ||||||||||
Capital expenditures | $ | 0.6 | $ | 0.1 | $ | 1.4 | $ | 0.5 | ||||||
Discontinued Component | ||||||||||||||
Net Margin | $ | — | $ | — | $ | — | $ | 7.7 | ||||||
Depreciation, depletion, and amortization | $ | — | $ | — | $ | — | $ | 1.9 | ||||||
Operating Income | $ | — | $ | — | $ | — | $ | 3.8 | ||||||
Production | ||||||||||||||
Gas(MMcf) | — | — | — | 1,472 | ||||||||||
Oil(MBbls) | — | — | — | 53 | ||||||||||
Average realized price | ||||||||||||||
Gas($/Mcf) | $ | — | $ | — | $ | — | $ | 4.10 | ||||||
Oil($/Bbls) | $ | — | $ | — | $ | — | $ | 32.28 | ||||||
| (a) | Proved reserves include provided undeveloped reserves which are attributed to locations directly offsetting (adjacent to) existing production. |
| (b) | Reserves are disclosed at a point in time, therefore reserves are only shown once as of September 30, 2004 and 2003. |
| (c) | Average realized price reflects the impact of hedging activities. |
-more-
ONEOK reports strong third quarter earnings;
Increases 2004 guidance
November 1, 2004
Page 14 of 14
ONEOK, Inc. and Subsidiaries
EARNINGS GUIDANCE
(In Millions, except per share data) | Previous 2004 Guidance | Revised 2004 Guidance | |||||
Operating Income | |||||||
Production | $ | 49 | $ | 48 | |||
Gathering and Processing | 99 | 130 | |||||
Transportation and Storage | 50 | 50 | |||||
Distribution | 118 | 117 | |||||
Energy Services | 155 | 148 | |||||
Other | 1 | 4 | |||||
Operating income | 472 | 497 | |||||
Other income/expense | 2 | (1 | ) | ||||
Interest | 99 | 103 | |||||
Income taxes | 145 | 153 | |||||
Net Income | $ | 230 | $ | 240 | |||
Earnings Per Share of Common Stock—Diluted | $ | 2.21 | $ | 2.28 | |||
Average Shares of Common Stock—Diluted | |||||||
Average shares of common stock outstanding | 102.2 | 102.2 | |||||
Mandatory convertible equity units and other dilutive components | 1.9 | 2.9 | |||||
Total Average Shares of Common Stock—Diluted | 104.1 | 105.1 | |||||
Cash Flow from Operations | |||||||
Cash flow from operations before changes in working capital | $ | 522 | $ | 541 | |||
Less Dividends | 87 | 89 | |||||
Less Capital Expenditures | 275 | 275 | |||||
Surplus | $ | 160 | $ | 177 | |||
