Exhibit 99.1
 | News | |||
| November 1, 2006 | Analyst Contact: | Dan Harrison | ||
| 918-588-7950 | ||||
| Media Contact: | Megan Washbourne | |||
| 918-588-7572 | ||||
ONEOK Announces Third-Quarter
And Nine-Month 2006 Earnings
TULSA, Okla. – Nov. 1, 2006 – ONEOK, Inc. (NYSE: OKE) announced today that its third-quarter 2006 net income was $24.4 million, or 21 cents per diluted share, compared with $176.4 million, or $1.62 per diluted share, in the same period last year. Net income for the nine months was $231.7 million, or $2.02 per diluted share, compared with $308.9 million, or $2.82 per diluted share, for the same period last year.
Third-quarter and year-to-date 2005 results included a net after-tax gain of $151.4 million, or $1.39 per diluted share in the third quarter and $1.38 in the nine-month period, from the sale of the company’s oil and gas production business, partially offset by a $32.9 million, or 30 cents per diluted share, loss from discontinued operations related to the recently completed sale of the company’s Spring Creek power plant in Oklahoma.
“Performance in our ONEOK Partners and distribution segments improved in the quarter,” said David Kyle, ONEOK chairman, president and chief executive officer. “Strong commodity prices and higher gross processing spreads contributed to ONEOK Partners’ performance, while implementation of new rates in Oklahoma last July improved results in our distribution segment.”
“Lower storage and marketing margins in the company’s energy services segment were responsible for lower third-quarter results; however, the segment’s nine-month performance has been exceptional,” Kyle added.
Operating income for the third quarter of 2006 was $119.5 million, an increase of $9.5 million, or 9 percent, compared with the same period in 2005. For the first nine months of 2006, operating income was $659.0 million, an increase of $310.4 million, or 89 percent, from the same period last year.
ONEOK adopted Financial Accounting Standards Board Emerging Issues Task Force Issue No. 04-5, requiring the company to consolidate its investment in ONEOK Partners in its financial statements, effective Jan. 1, 2006. The adoption did not have an effect on the company’s net income; however, reported revenues, costs and expenses are higher, reflecting the activities of the partnership. Third-quarter and year-to-date 2006 results reflect the
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consolidation, which resulted in increased operating income to the company. Attachment A provides a consolidating income statement for the third-quarter and year-to-date 2006 results.
THIRD-QUARTER 2006 HIGHLIGHTS INCLUDED:
| • | Operating income of $119.5 million, compared with $110.1 million in the third quarter last year, reflecting the company’s investment in ONEOK Partners on a consolidated basis; |
| • | Operating income from ONEOK Partners of $107.6 million versus $80.8 million in the same period a year ago; |
| • | Improved performance in the distribution segment, resulting in an operating loss of $9.2 million in the third quarter 2006 versus an operating loss of $12.8 million in the same period a year earlier; |
| • | Energy services’ operating income of $21.6 million, compared with $42.1 million in the third quarter last year; |
| • | Operating costs of $174.0 million versus $171.1 million in the third quarter 2005; |
| • | A settlement agreement between all parties in the Kansas rate case that will result in $52.0 million in additional annual rates, effective January 2007, pending approval by the Kansas Corporation Commission at a Nov. 6, 2006, hearing; |
| • | Energy services entering into a 20-year fixed-price purchase contract with Power Holdings of Illinois LLC for 45,000 MMBtu per day of pipeline-quality synthetic natural gas from a coal gasification facility that is expected to be completed by 2011; |
| • | Cash flow from the company’s general partner interest in ONEOK Partners of $10.0 million, compared with $2.3 million in third quarter last year; cash flow from the company’s limited partner interest in ONEOK Partners was $35.1 million, compared with $0.4 million in the same period last year; |
| • | An accelerated share repurchase plan, resulting in the purchase of 7.5 million shares of the company’s common stock; |
| • | A quarterly dividend increase to 32 cents per share; |
| • | Issuance of $1.4 billion in long-term debt by ONEOK Partners; |
| • | Completion on Oct. 31, 2006, of the sale of the Spring Creek power plant in Oklahoma to Westar Energy, Inc. for $53 million; |
| • | ONEOK, on a stand-alone basis, having no short-term debt, $191.6 million of cash invested and $815.3 million of gas in storage at the end of the third quarter; |
| • | ONEOK stand-alone long-term debt of 48 percent of capitalization; consolidated long-term debt of 65 percent of total capitalization; |
| • | ONEOK stand-alone cash flow from continuing operations, before changes in working capital, of $304.2 million, which exceeded capital expenditures and dividend distributions of $229.4 million by $74.8 million; consolidated cash flow from continuing operations, before changes in working capital, of $539.1 million, which exceeded capital expenditures, dividends and minority interest distributions of $465.0 million by $74.1 million; |
| • | Being named one of FORTUNE Magazine’s 100 fastest-growing companies for 2006; |
| • | Celebrating the company’s 100th anniversary. |
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THIRD-QUARTER AND NINE-MONTH BUSINESS UNIT RESULTS
ONEOK Partners
Operating income for the third quarter 2006 was $107.6 million, compared with $80.8 million in the same period 2005. Net margin was $210.7 million, compared with $168.7 million in the same period 2005.
The net margin increase in the third quarter 2006 included: a $49.5 million increase from the legacy ONEOK Partners operations that were consolidated beginning Jan. 1, 2006; an increase of $19.7 million from higher natural gas liquids prices, wider gross processing spreads and increased natural gas transportation revenues; and a decrease of $25.2 million, resulting from the sale of natural gas gathering and processing assets located in Texas in December 2005.
Third-quarter 2006 operating costs were $75.5 million, compared with $66.8 million in the third quarter 2005, with the increases related to the consolidation of the legacy ONEOK Partners operations, offset by the sale of the Texas natural gas gathering and processing assets in December 2005.
Third-quarter 2006 depreciation, depletion and amortization expense was $27.5 million versus $21.2 million in the same period last year. The increase of $6.3 million is primarily related to the consolidation of the legacy ONEOK Partners operations, offset by the sale of natural gas gathering and processing assets located in Texas in December 2005.
Equity earnings from investments were $22.8 million in the third quarter 2006 and result from ONEOK Partners’ 50 percent interest in Northern Border Pipeline and its gathering and processing joint venture interests in the Powder River and Wind River Basins. Other income increased in the three-month 2006 period primarily as a result of interest income from cash and other investments.
Operating income for the first nine months of 2006 was $420.1 million, compared with $189.2 million in the same period 2005. Operating income includes a $113.9 million pre-tax gain on the sale of a 20 percent interest in Northern Border Pipeline in April 2006. Net margin was $624.1 million, compared with $391.5 million in the same period 2005.
Net margin increases in the nine-month 2006 period included: a $152.6 million increase from the legacy ONEOK Partners operations that were consolidated beginning Jan. 1, 2006; an increase of $101.8 million for the natural gas liquids assets acquired in July 2005; an increase of $48.1 million from higher natural gas liquids prices, wider gross processing spreads and increased natural gas transportation revenues; and a decrease of $64.9 million, resulting from the sale of natural gas gathering and processing assets located in Texas in December 2005.
Operating costs for the first nine months of 2006 were $224.7 million, compared with $155.5 million in the third quarter 2005, with the increases related to the consolidation of the
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legacy ONEOK Partners operations and the natural gas liquids assets acquired in 2005, offset by the sale of the Texas natural gas gathering and processing assets in December 2005.
Depreciation, depletion and amortization expense for the first nine months of 2006 was $94.3 million versus $46.9 million in the same period last year. The increase is primarily related to the consolidation of the legacy ONEOK Partners operations, the acquisition of natural gas liquids assets acquired in July 2005 and the Black Mesa Pipeline impairment in the second quarter 2006, offset by the sale of natural gas gathering and processing assets located in Texas in December 2005.
Equity earnings from investments were $72.8 million for the first nine months of 2006 and resulted from ONEOK Partners’ 50 percent interest in Northern Border Pipeline and its gathering and processing joint venture interests in the Powder River and Wind River Basins. Other income increased in the nine-month 2006 period primarily as a result of interest income from cash and other investments.
Distribution
The distribution segment reported an operating loss of $9.2 million in the third quarter 2006, compared with an operating loss of $12.8 million in the third quarter 2005. Net margin for the third quarter 2006 was $106.9 million, compared with net margin of $105.1 million in the same period a year earlier.
The third-quarter net margin increase resulted from an increase of $5.6 million, primarily due to the implementation of new rates in Oklahoma, partially offset by a $2.2 million decrease from expiring riders and lower volumetric rider collections in Oklahoma, and a $1.5 million reduction in transport margins in Oklahoma.
Operating costs were $88.8 million, compared with $91.6 million in the third quarter 2005. The reduction is related to lower labor and employee benefit costs. Depreciation, depletion and amortization expense was $27.3 million, compared with $26.3 million in the third quarter last year.
Operating income for the nine-month period in 2006 was $68.5 million, compared with $60.8 million in the same period last year. Net margin increased to $422.0 million versus $412.8 million last year. The increase was primarily due to a $39.4 million increase related to implementation of new rates in Oklahoma; a decrease of $18.0 million primarily due to expiring riders and lower volumetric rider collections in Oklahoma; and a decrease of $12.9 million in customer sales due to warmer weather in the segment’s entire service territory.
The impact of warmer-than-normal weather during the nine-month period was moderated by approved weather-protection mechanisms and by the implementation of a new two-tier rate structure in Oklahoma. The new Oklahoma rate structure reduces volumetric sensitivity and provides more consistent earnings and cash flow.
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Operating costs for the nine months were $270.9 million, compared with $265.7 million in the same period last year due to an increase of $7.8 million in labor and employee benefit costs, which were partially offset by a $2.1 million decrease in bad debt expense. Depreciation, depletion and amortization expense was $82.6 million, compared with $86.3 million in the same period last year. The decrease was related primarily to a $2.9 million charge in the first quarter 2005 related to the replacement of a field customer service system in Texas.
Residential and commercial volumes decreased for the nine-month period due to warmer weather, primarily in the first quarter of 2006. Decreases in wholesale volumes were due to a reduction in volumes available for sale.
Energy Services
The energy services segment had operating income in the third quarter of $21.6 million, compared with operating income of $42.1 million in the same period in 2005. The decrease was related to lower natural gas sales from storage and lower marketing margins in the third quarter 2006, compared with the same period in 2005.
Net margin was $30.7 million, compared with $55.0 million in the three-month period 2005. In the third quarter 2006, there were $6.6 million in mark-to-market gains on unqualified hedges of transportation and storage contracts. In the same period of 2005, there were $12.6 million in losses for these same activities.
The third quarter also included: a $34.5 million decline in storage and marketing margins as a result of reduced storage and marketing optimization opportunities in 2006, compared with 2005 when hurricanes had a significant impact on natural gas volatility and affected natural gas prices; and a decrease of $10.2 million in financial trading margins primarily due to positions in the natural gas options portfolio that benefited from increased natural gas prices and higher volatility in 2005, compared with 2006.
Operating costs for the quarter were $8.6 million, compared with $12.5 million in the same period a year earlier, primarily due to lower litigation costs, employee-related expenses and bad debt expenses.
Nine-month operating income was $168.4 million, compared with $97.7 million in the same period in 2005. Net margin increased to $198.2 million, compared with $127.5 million in the nine-month period 2005.
In the nine-month period of 2006, there were $4.9 million in mark-to-market gains on unqualified hedges of transportation and storage contracts. In the nine-month period of 2005, there were $11.7 million in losses for these same activities.
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The nine-month period also included: an increase of $41.3 million in physical transportation margins, net of hedging activities, primarily due to improved natural gas basis differentials between the Mid-Continent and Gulf Coast regions; an increase of $7.2 million in financial trading margins primarily associated with favorable basis spread movements in the basis trading portfolio; and an increase of $4.8 million primarily related to storage and marketing margins due to storage optimization activities in the second quarter of 2006.
Operating costs for the nine months were $28.2 million, compared with $28.3 million due to decreased litigation expenses, offset primarily by increased employee-related costs.
Natural gas volumes marketed decreased for the three- and nine-month periods in 2006, compared with 2005, primarily due to higher storage injections in the second and third quarters of 2006, and warmer weather in the majority of the segment’s service territory in the first quarter, resulting in decreased sales from storage.
Natural gas in storage at Sept. 30, 2006, was 80.2 Bcf, compared with 60.4 Bcf at Sept. 30, 2005. Natural gas in storage on Oct. 31, 2006, was 80.4 Bcf. At Sept. 30, 2006, total natural gas storage capacity under lease was 86 Bcf, unchanged from the same period a year earlier.
The net margin for the energy services segment was derived from the following sources:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||||
| (Thousands of dollars) | ||||||||||||||||||
Marketing and storage, gross | $ | 72,303 | $ | 83,447 | $ | 303,008 | $ | 227,886 | ||||||||||
Less: Storage and transportation costs | (43,088 | ) | (40,263 | ) | (136,629 | ) | (123,639 | ) | ||||||||||
Marketing and storage, net | 29,215 | 43,184 | 166,379 | 104,247 | ||||||||||||||
Retail marketing | 3,442 | 3,535 | 13,201 | 11,792 | ||||||||||||||
Financial trading | (1,932 | ) | 8,321 | 18,626 | 11,444 | |||||||||||||
Net margin | $ | 30,725 | $ | 55,040 | $ | 198,206 | $ | 127,483 | ||||||||||
EARNINGS CONFERENCE CALL
ONEOK and ONEOK Partners management will conduct a joint conference call on Thursday, Nov. 2, 2006, at 11 a.m. Eastern Standard Time (10 a.m. Central Standard Time). The call will also be carried live on ONEOK’s and ONEOK Partners’ Web sites.
To participate in the telephone conference call, dial 866-244-4576, pass code 979388, or log on towww.oneok.com orwww.oneokpartners.com.
If you are unable to participate in the conference call or the webcast, the replay will be available on ONEOK’s Web sitewww.oneok.com and ONEOK Partners’ Web sitewww.oneokpartners.com for 30 days. A recording will be available by phone for seven days. The playback call may be accessed at 866-837-8032, pass code 979388.
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ONEOK, Inc. (NYSE: OKE) is a diversified energy company. We are the general partner and own 45.7 percent of ONEOK Partners, L.P. (NYSE: OKS), one of the largest publicly traded limited partnerships, which is a leader in the gathering, processing, storage and transportation of natural gas in the U.S. and owns one of the nation’s premier natural gas liquids (NGL) systems, connecting much of the natural gas and NGL supply in the Mid-Continent with key market centers. ONEOK is among the largest natural gas distributors in the United States, serving more than 2 million customers in Oklahoma, Kansas and Texas. Our energy services operation focuses primarily on marketing natural gas and related services throughout the U.S. ONEOK is a Fortune 500 company. OKE-FE
For information about ONEOK, Inc. visit the Web site:www.oneok.com.
Some of the statements contained and incorporated in this news 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; business prospects; outcome of regulatory and legal 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 items identified in the preceding paragraph, the information concerning possible or assumed future results of our operations and other statements contained or incorporated in this news release identified by words such as “anticipate,” “plan,” “estimate,” “expect,” “forecast,” “intend,” “believe,” “projection,” “goal” or similar phrases.
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 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:
| • | actions by rating agencies concerning the credit ratings of ONEOK and ONEOK Partners; |
| • | the effects of weather and other natural phenomena on our operations, including energy sales and prices and demand for pipeline capacity; |
| • | competition from other U.S. and Canadian energy suppliers and transporters as well as alternative forms of energy; |
| • | the capital intensive nature of our businesses; |
| • | the profitability of assets or businesses acquired by us; |
| • | risks of marketing, trading and hedging activities, including the risks 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 risk of a significant slowdown in growth or decline in the U.S. economy or the risk of delay in growth recovery in the U.S. economy; |
| • | the uncertainty of estimates, including accruals and costs of environmental remediation; |
| • | the timing and extent of changes in commodity prices for natural gas, NGLs, electricity and crude oil; |
| • | the effects of changes in governmental policies and regulatory actions, including changes with respect to income taxes, environmental compliance, and authorized rates or recovery of gas and gas transportation 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 and elsewhere; |
| • | the risk of increased costs for insurance premiums, security or other items as a consequence of terrorist attacks; |
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| • | 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, regulatory actions and receipt of expected regulatory clearances involving the OCC, KCC, Texas regulatory authorities or any other local, state or federal regulatory body, including the FERC; |
| • | our ability to access capital at competitive rates or on terms acceptable to us; |
| • | risks associated with adequate supply to our gas gathering and processing, fractionation and pipeline facilities, including production declines which outpace new drilling; |
| • | the risk that material weaknesses or significant deficiencies in our internal controls over financial reporting could emerge or that minor problems could become significant; |
| • | the impact of the outcome of pending and future litigation; |
| • | the possible loss of gas distribution franchises or other adverse effects caused by the actions of municipalities; |
| • | the impact of unsold pipeline capacity being greater or less than expected; |
| • | the ability to market pipeline capacity on favorable terms, including the affects of: |
| – | future demand for and prices of natural gas; |
| – | competitive conditions in the overall natural gas and electricity markets; |
| – | availability of supplies of Canadian and United States natural gas; |
| – | availability of additional storage capacity; |
| – | weather conditions; and |
| – | competitive developments by Canadian and U.S. natural gas transmission peers; |
| • | orders by the FERC that are significantly different than the settlement related to Northern Border Pipeline’s November 2005 rate case; |
| • | our ability to successfully transfer ONEOK Partners’ operations from Omaha and Denver to Tulsa; |
| • | performance of contractual obligations by our customers and shippers; |
| • | the ability to recover operating costs and amounts equivalent to income taxes, costs of property, plant and equipment and regulatory assets in our state and FERC-regulated rates; |
| • | timely receipt of approval by applicable governmental entities for construction and operation of our pipeline projects and required regulatory clearances; |
| • | our ability to acquire all necessary rights-of-way permits and consents in a timely manner, and our ability to promptly obtain all necessary materials and supplies required for construction, and our ability to construct pipelines without labor or contractor problems; |
| • | our ability to promptly obtain all necessary materials and supplies required for construction of gathering, processing and transportation facilities; |
| • | the composition and quality of the natural gas we gather and process in our plants and transport on our pipelines; |
| • | the efficiency of our plants in processing natural gas and extracting natural gas liquids; |
| • | the mechanical integrity of facilities operated; |
| • | demand for our services in the proximity of our facilities; |
| • | the impact of potential impairment charges; |
| • | our ability to control operating costs; |
| • | the risk inherent in the use of information systems in our respective businesses, implementation of new software and hardware, and the impact on the timeliness of information for financial reporting; |
| • | acts of nature, sabotage, terrorism or other similar acts causing damage to our facilities or our suppliers’ or shippers’ facilities; and |
| • | the risk factors listed in the reports we have filed and may file with the SEC, which are incorporated by reference. |
These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other factors could also have material adverse effects on our future results. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these factors. Other than as required under securities laws, we undertake no obligation to
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update publicly any forward-looking statement whether as a result of new information, subsequent events or change in circumstances, expectations or otherwise.
# # #
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ONEOK, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| (Unaudited) | 2006 | 2005 | 2006 | 2005 | ||||||||||||
| (Thousands of dollars, except per share amounts) | ||||||||||||||||
Revenues | ||||||||||||||||
Operating revenues, excluding energy trading revenues | $ | 2,649,312 | $ | 3,181,592 | $ | 8,825,377 | $ | 7,969,014 | ||||||||
Energy trading revenues, net | (8,435 | ) | 10,615 | 3,047 | 11,023 | |||||||||||
Total Revenues | 2,640,877 | 3,192,207 | 8,828,424 | 7,980,037 | ||||||||||||
Cost of sales and fuel | 2,291,891 | 2,862,888 | 7,579,939 | 7,050,344 | ||||||||||||
Net Margin | 348,986 | 329,319 | 1,248,485 | 929,693 | ||||||||||||
Operating Expenses | ||||||||||||||||
Operations and maintenance | 154,501 | 153,008 | 468,743 | 394,985 | ||||||||||||
Depreciation, depletion and amortization | 55,468 | 48,131 | 178,889 | 135,020 | ||||||||||||
General taxes | 19,482 | 18,114 | 57,765 | 51,061 | ||||||||||||
Total Operating Expenses | 229,451 | 219,253 | 705,397 | 581,066 | ||||||||||||
Gain on Sale of Assets | - | - | 115,892 | - | ||||||||||||
Operating Income | 119,535 | 110,066 | 658,980 | 348,627 | ||||||||||||
Equity earnings from investments | 22,788 | 2,822 | 72,750 | 8,472 | ||||||||||||
Other income | 8,418 | 4,428 | 21,735 | 8,014 | ||||||||||||
Other expense | 861 | 3,365 | 12,595 | 8,087 | ||||||||||||
Interest expense | 61,460 | 41,601 | 176,648 | 91,682 | ||||||||||||
Income before Minority Interest and Income Taxes | 88,420 | 72,350 | 564,222 | 265,344 | ||||||||||||
Minority interest in income of consolidated subsidiaries | 48,281 | - | 184,620 | - | ||||||||||||
Income taxes | 15,726 | 27,736 | 147,505 | 101,878 | ||||||||||||
Income from Continuing Operations | 24,413 | 44,614 | 232,097 | 163,466 | ||||||||||||
Discontinued operations, net of taxes | ||||||||||||||||
Income (loss) from operations of discontinued components, net of tax | (13 | ) | (19,582 | ) | (410 | ) | (5,918 | ) | ||||||||
Gain on sale of discontinued component, net of tax | - | 151,355 | - | 151,355 | ||||||||||||
Net Income | $ | 24,400 | $ | 176,387 | $ | 231,687 | $ | 308,903 | ||||||||
Earnings Per Share of Common Stock | ||||||||||||||||
Basic: | ||||||||||||||||
Earnings per share from continuing operations | $ | 0.22 | $ | 0.45 | $ | 2.06 | $ | 1.61 | ||||||||
Earnings per share from operations of discontinued components, net of tax | - | (0.20 | ) | - | (0.06 | ) | ||||||||||
Earnings per share from gain on sale of discontinued component, net | - | 1.52 | - | 1.49 | ||||||||||||
Net earnings per share, basic | $ | 0.22 | $ | 1.77 | $ | 2.06 | $ | 3.04 | ||||||||
Diluted: | ||||||||||||||||
Earnings per share from continuing operations | $ | 0.21 | $ | 0.41 | $ | 2.02 | $ | 1.49 | ||||||||
Earnings per share from operations of discontinued components, net of tax | - | (0.18 | ) | - | (0.05 | ) | ||||||||||
Earnings per share from gain on sale of discontinued component, net | - | 1.39 | - | 1.38 | ||||||||||||
Net earnings per share, diluted | $ | 0.21 | $ | 1.62 | $ | 2.02 | $ | 2.82 | ||||||||
Average Shares of Common Stock(Thousands) | ||||||||||||||||
Basic | 113,200 | 99,894 | 112,589 | 101,568 | ||||||||||||
Diluted | 114,920 | 108,602 | 114,901 | 109,555 | ||||||||||||
Dividends Declared Per Share of Common Stock | $ | 0.32 | $ | 0.28 | $ | 0.90 | $ | 1.09 | ||||||||
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ONEOK, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
| (Unaudited) | September 30, 2006 | December 31, 2005 | |||||
Assets | (Thousands of dollars) | ||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 247,475 | $ | 7,915 | |||
Trade accounts and notes receivable, net | 944,732 | 2,202,895 | |||||
Gas and natural gas liquids in storage | 1,028,007 | 911,393 | |||||
Commodity exchanges | 191,184 | 133,159 | |||||
Energy marketing and risk management assets | 408,093 | 399,439 | |||||
Deposits | 161,572 | 150,608 | |||||
Other current assets | 95,835 | 234,666 | |||||
Total Current Assets | 3,076,898 | 4,040,075 | |||||
Property, Plant and Equipment | |||||||
Property, plant and equipment | 6,634,992 | 5,575,365 | |||||
Accumulated depreciation, depletion and amortization | 1,867,565 | 1,581,138 | |||||
Net Property, Plant and Equipment | 4,767,427 | 3,994,227 | |||||
Deferred Charges and Other Assets | |||||||
Goodwill and intangibles | 1,025,420 | 683,211 | |||||
Energy marketing and risk management assets | 111,122 | 55,713 | |||||
Investments | 755,772 | 245,009 | |||||
Other assets | 388,982 | 471,289 | |||||
Total Deferred Charges and Other Assets | 2,281,296 | 1,455,222 | |||||
Assets of Discontinued Component | 62,897 | 63,911 | |||||
Total Assets | $ | 10,188,518 | $ | 9,553,435 | |||
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ONEOK, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
| (Unaudited) | September 30, 2006 | December 31, 2005 | ||||||
Liabilities and Shareholders’ Equity | (Thousands of dollars) | |||||||
Current Liabilities | ||||||||
Current maturities of long-term debt | $ | 18,183 | $ | 6,546 | ||||
Notes payable | 4,500 | 1,541,500 | ||||||
Accounts payable | 1,021,732 | 1,756,307 | ||||||
Commodity exchanges | 291,095 | 238,176 | ||||||
Energy marketing and risk management liabilities | 375,620 | 449,085 | ||||||
Other | 412,214 | 438,009 | ||||||
Total Current Liabilities | 2,123,344 | 4,429,623 | ||||||
Long-term Debt, excluding current maturities | 4,036,127 | 2,024,070 | ||||||
Deferred Credits and Other Liabilities | ||||||||
Deferred income taxes | 577,591 | 603,835 | ||||||
Energy marketing and risk management liabilities | 154,019 | 348,529 | ||||||
Other deferred credits | 330,068 | 350,157 | ||||||
Total Deferred Credits and Other Liabilities | 1,061,678 | 1,302,521 | ||||||
Liabilities of Discontinued Component | 1,683 | 2,464 | ||||||
Commitments and Contingencies | ||||||||
Minority Interests in Consolidated Subsidiaries | 810,089 | - | ||||||
Shareholders’ Equity | ||||||||
Common stock, $0.01 par value: | ||||||||
authorized 300,000,000 shares; issued 119,825,128 shares and outstanding 110,169,874 shares at September 30, 2006; issued 107,973,436 shares and outstanding 97,654,697 shares at December 31, 2005 | 1,198 | 1,080 | ||||||
Paid in capital | 1,243,981 | 1,044,283 | ||||||
Unearned compensation | - | (105 | ) | |||||
Accumulated other comprehensive loss | 33,251 | (56,991 | ) | |||||
Retained earnings | 1,217,404 | 1,085,845 | ||||||
Treasury stock, at cost: 9,655,254 shares at September 30, 2006 and 10,318,739 shares at December 31, 2005 | (340,237 | ) | (279,355 | ) | ||||
Total Shareholders’ Equity | 2,155,597 | 1,794,757 | ||||||
Total Liabilities and Shareholders’ Equity | $ | 10,188,518 | $ | 9,553,435 | ||||
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ONEOK Announces Third-Quarter
And Nine-Month 2006 Earnings
Page 13
ONEOK, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Nine Months Ended September 30, | ||||||
| (Unaudited) | 2006 | 2005 | ||||
Operating Activities | (Thousands of dollars) | |||||
Net income | $ 231,687 | $ 308,903 | ||||
Depreciation, depletion, and amortization | 178,889 | 135,020 | ||||
Impairment expense for discontinued component | - | 52,226 | ||||
Gain on sale of discontinued component | - | (151,355 | ) | |||
Gain on sale of assets | (115,892 | ) | - | |||
Minority interest in income of consolidated subsidiaries | 184,620 | - | ||||
Distributions received from unconsolidated affiliates | 93,209 | 8,135 | ||||
Income from equity investments | (72,750 | ) | (8,472 | ) | ||
Deferred income taxes | 18,056 | 40,128 | ||||
Stock-based compensation expense | 13,052 | 9,903 | ||||
Allowance for doubtful accounts | 8,220 | 9,723 | ||||
Changes in assets and liabilities (net of acquisition and disposition effects): | ||||||
Accounts and notes receivable | 1,295,726 | 5,339 | ||||
Inventories | (121,031 | ) | (284,653 | ) | ||
Unrecovered purchased gas costs | (75,227 | ) | 45,547 | |||
Commodity exchanges | (5,106 | ) | 130,260 | |||
Deposits | (10,964 | ) | (55,227 | ) | ||
Regulatory assets | 12,922 | (5,490 | ) | |||
Accounts payable and accrued liabilities | (779,425 | ) | 216,008 | |||
Energy marketing and risk management assets and liabilities | (194,761 | ) | 121,718 | |||
Other assets and liabilities | 183,989 | (334,840 | ) | |||
Cash Provided by Operating Activities | 845,214 | 242,873 | ||||
Investing Activities | ||||||
Changes in other investments, net | (6,458 | ) | (20,800 | ) | ||
Acquisitions | (128,485 | ) | (1,328,572 | ) | ||
Capital expenditures | (243,968 | ) | (189,930 | ) | ||
Proceeds from sale of discontinued component | - | 630,214 | ||||
Proceeds from sale of assets | 298,838 | 27,520 | ||||
Increase in cash and cash equivalents for previously unconsolidated subsidiaries | 1,334 | - | ||||
Decrease in cash and cash equivalents for previously consolidated subsidiaries | (22,039 | ) | - | |||
Other investing activities | (3,685 | ) | (3,866 | ) | ||
Cash Used in Investing Activities | (104,463 | ) | (885,434 | ) | ||
Financing Activities | ||||||
Borrowing (repayment) of notes payable, net | (641,500 | ) | (341,500 | ) | ||
Short term financing payments | (2,632,000 | ) | (100,000 | ) | ||
Short term financing borrowings | 1,530,000 | 1,000,000 | ||||
Issuance of debt, net of issuance costs | 1,397,328 | 798,792 | ||||
Long-term debt financing costs | (12,027 | ) | - | |||
Termination of interest rate swaps | - | (22,565 | ) | |||
Payment of debt | (41,214 | ) | (335,808 | ) | ||
Equity unit conversion | 402,448 | - | ||||
Repurchase of common stock | (281,420 | ) | (188,770 | ) | ||
Issuance of common stock | 3,986 | 3,291 | ||||
Dividends paid | (100,181 | ) | (82,834 | ) | ||
Distributions to minority interests | (120,803 | ) | - | |||
Other financing activities | (48,898 | ) | (11,343 | ) | ||
Cash Provided by (Used in) Financing Activities | (544,281 | ) | 719,263 | |||
Change in Cash and Cash Equivalents | 196,470 | 76,702 | ||||
Cash and Cash Equivalents at Beginning of Period | 7,915 | 9,458 | ||||
Effect of Accounting Change on Cash and Cash Equivalents | 43,090 | - | ||||
Cash and Cash Equivalents at End of Period | $ 247,475 | $ 86,160 | ||||
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ONEOK Announces Third-Quarter
And Nine-Month 2006 Earnings
Page 14
ONEOK, Inc. and Subsidiaries
INFORMATION AT A GLANCE
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| (Unaudited) | 2006 | 2005 | 2006 | 2005 | |||||||||||
| (Millions of dollars) | |||||||||||||||
Distribution | |||||||||||||||
Net margin | $ | 106.9 | $ | 105.1 | $ | 422.0 | $ | 412.8 | |||||||
Depreciation, depletion and amortization | $ | 27.3 | $ | 26.3 | $ | 82.6 | $ | 86.3 | |||||||
Operating income (loss) | $ | (9.2 | ) | $ | (12.8 | ) | $ | 68.5 | $ | 60.8 | |||||
Customers per employee | 706 | 683 | 709 | 686 | |||||||||||
Capital expenditures | $ | 37.2 | $ | 39.1 | $ | 114.8 | $ | 103.1 | |||||||
Natural gas volumes (MMcf) | |||||||||||||||
Gas Sales | 19,459 | 25,058 | 122,421 | 140,366 | |||||||||||
Transportation | 46,506 | 57,107 | 150,018 | 184,698 | |||||||||||
Natural gas margins | |||||||||||||||
Gas Sales | $ | 83.0 | $ | 82.1 | $ | 341.9 | $ | 334.0 | |||||||
Transportation | $ | 17.1 | $ | 16.9 | $ | 55.5 | $ | 58.2 | |||||||
Energy Services | |||||||||||||||
Net margin | $ | 30.7 | $ | 55.0 | $ | 198.2 | $ | 127.5 | |||||||
Depreciation, depletion and amortization | $ | 0.5 | $ | 0.5 | $ | 1.6 | $ | 1.5 | |||||||
Operating income | $ | 21.6 | $ | 42.1 | $ | 168.4 | $ | 97.7 | |||||||
Natural gas marketed (Bcf) | 275 | 279 | 839 | 879 | |||||||||||
Natural gas gross margin ($/Mcf) | $ | 0.11 | $ | 0.21 | $ | 0.21 | $ | 0.13 | |||||||
Physically settled volumes (Bcf) | 564 | 560 | 1,702 | 1,759 | |||||||||||
Capital expenditures | $ | - | $ | - | $ | - | $ | - | |||||||
ONEOK Partners (b) | |||||||||||||||
Net margin | $ | 210.7 | $ | 168.7 | $ | 624.1 | $ | 391.5 | |||||||
Depreciation, depletion and amortization | $ | 27.5 | $ | 21.2 | $ | 94.3 | $ | 46.9 | |||||||
Operating income | $ | 107.6 | $ | 80.8 | $ | 420.1 | $ | 189.2 | |||||||
Total gas gathered (BBtu/d) | 1,202 | 1,093 | 1,165 | 1,111 | |||||||||||
Total gas processed (BBtu/d) | 1,017 | 1,141 | 980 | 1,139 | |||||||||||
Natural gas liquids gathered (MBbl/d) | 208 | 193 | 205 | (a) | |||||||||||
Natural gas liquids sales (MBbl/d) | 210 | 201 | 211 | 129 | |||||||||||
Natural gas liquids fractionated (MBbl/d) | 326 | 309 | 315 | (a) | |||||||||||
Natural gas liquids transported (MBbl/d) | 199 | (a) | 200 | (a) | |||||||||||
Natural gas transported (MMcf/d) | 2,094 | 1,288 | 2,241 | 1,314 | |||||||||||
Natural gas sales (BBtu/d) | 353 | 341 | 318 | 345 | |||||||||||
Capital expenditures | $ | 61.2 | $ | 8.9 | $ | 114.8 | $ | 39.4 | |||||||
Realized composite NGL sales prices ($/gallon) | $ | 1.02 | $ | 0.90 | $ | 0.95 | $ | 0.78 | |||||||
Realized condensate sales price ($/Bbl) | $ | 51.79 | $ | 46.18 | $ | 56.75 | $ | 44.72 | |||||||
Realized natural gas sales price ($/MMBtu) | $ | 5.68 | $ | 7.35 | $ | 6.48 | $ | 6.54 | |||||||
Realized gross processing spread ($/MMBtu) | $ | 6.34 | $ | 3.65 | $ | 5.27 | $ | 2.97 | |||||||
(a) - The acquisition of these assets was completed July 1, 2005.
(b) - 2005 includes only our legacy operations.
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ONEOK Announces Third-Quarter
And Nine-Month 2006 Earnings
Page 15
ONEOK, Inc. and Subsidiaries
REGULATION G GAAP RECONCILIATION
| (Unaudited) | Nine Months Ended September 30, 2006 | |||
| (Millions of Dollars) | ||||
Cash provided by operating activities | $ | 845.2 | ||
Accounts and notes receivable | (1,295.7 | ) | ||
Inventories | 121.0 | |||
Unrecovered purchased gas costs | 75.2 | |||
Commodity exchanges | 5.1 | |||
Deposits | 11.0 | |||
Regulatory assets | (12.9 | ) | ||
Accounts payable and accrued liabilities | 779.4 | |||
Energy marketing and risk management assets and liabilities | 194.8 | |||
Other assets and liabilities | (184.0 | ) | ||
Cash flow, before changes in working capital (a) | $ | 539.1 | ||
(a) Cash flow, before changes in working capital, is a non-GAAP financial measure used by industry analysts, investors, lenders, and rating agencies to assess the financial performance and the operating results of a company’s fundamental business activities. Cash flow, before changes in working capital, should not be considered in isolation or as a substitute for net income, income from operations, or other measures of cash flow.
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ONEOK Announces Third-Quarter
And Nine-Month 2006 Earnings
Page 16
ONEOK, Inc. and Subsidiaries Consolidating Income Statement | Attachment A |
| Three Months Ended September 30, 2006 | ||||||||||||||||
| (Unaudited) | ONEOK | ONEOK Partners | Consolidating Entries | Consolidated | ||||||||||||
| (Millions of dollars) | ||||||||||||||||
Operating Income | ||||||||||||||||
Distribution | $ | (9 | ) | $ | - | $ | - | $ | (9 | ) | ||||||
Energy Services | 22 | - | - | 22 | ||||||||||||
ONEOK Partners | - | 108 | - | 108 | ||||||||||||
Other | (1 | ) | - | - | (1 | ) | ||||||||||
Operating Income | 12 | 108 | - | 120 | ||||||||||||
Equity in earnings of ONEOK Partners | 50 | - | (50 | ) | - | |||||||||||
Other income (expense) | 7 | 23 | - | 30 | ||||||||||||
Minority interest | - | - | (48 | ) | (48 | ) | ||||||||||
Interest expense | (29 | ) | (33 | ) | - | (62 | ) | |||||||||
Income Taxes | (16 | ) | - | - | (16 | ) | ||||||||||
Net Income | $ | 24 | $ | 98 | $ | (98 | ) | $ | 24 | |||||||
| Nine Months Ended September 30, 2006 | ||||||||||||||||
| (Unaudited) | ONEOK | ONEOK Partners | Consolidating Entries | Consolidated | ||||||||||||
| (Millions of dollars) | ||||||||||||||||
Operating Income | ||||||||||||||||
Distribution | $ | 69 | $ | - | $ | - | $ | 69 | ||||||||
Energy Services | 168 | - | - | 168 | ||||||||||||
ONEOK Partners | - | 305 | - | 305 | ||||||||||||
Gain on sale of assets | - | 115 | - | 115 | ||||||||||||
Other | 2 | - | - | 2 | ||||||||||||
Operating Income | 239 | 420 | - | 659 | ||||||||||||
Equity in earnings of ONEOK Partners | 182 | - | (182 | ) | - | |||||||||||
Other income (expense) | 9 | 73 | - | 82 | ||||||||||||
Minority interest | - | (2 | ) | (183 | ) | (185 | ) | |||||||||
Interest expense | (77 | ) | (100 | ) | - | (177 | ) | |||||||||
Income Taxes | (121 | ) | (26 | ) | - | (147 | ) | |||||||||
Net Income | $ | 232 | $ | 365 | $ | (365 | ) | $ | 232 | |||||||