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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED AUGUST 31, 1994
COMMISSION FILE NUMBER 1-2572
ONEOK Inc.
100 West Fifth Street, Tulsa, OK 74103
(918) 588-7000
IRS EMPLOYER
INCORPORATED IN IDENTIFICATION NO.
DELAWARE 73-0383100
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
- - ------------------- -----------------------------------------
Common stock, without par value New York Stock Exchange
Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
- - -------------------
Preferred stock, $50 par value, Series A, 4 3/4% cumulative
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
---
Based on the closing price of October 1, 1994, the aggregate market value of
the voting stock held by nonaffiliates of the registrant was: Common stock,
without par value, $439.1 million; Preferred stock, $50 par value, Series A,
4 3/4% cumulative, $4.9 million.
The number of common shares outstanding of the registrant was 26,690,004 as of
October 1, 1994.
DOCUMENTS INCORPORATED BY REFERENCES:
(1) Annual Report to Shareholders
for the year ended August 31, 1994 ...................Parts I, II, and IV
(2) Proxy Statement for Shareholder meeting on
January 19, 1995 .....................................Part III
The Exhibit Index is located on pages 30-32. Page 1 of 207
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1994 Annual Report ON FORM 10-K
ONEOK Inc.
Page No.
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PART I
Item 1. Business 3 - 16
Item 2. Properties 16 - 20
Item 3. Legal Proceedings 21 - 25
Item 4. Results of Votes of Security Holders 25 - 27
PART II
Item 5. Market Price and Dividends on the Registrant's
Common Stock and Related Shareholder Matters 27
Item 6. Selected Financial Data 28
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 28
Item 8. Financial Statements and Supplementary Data 28
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 28
PART III
Item 10. Directors, Executive Officers, Promoters, and
Control Persons of the Registrant 28 - 29
Item 11. Executive Compensation 29
Item 12. Security Ownership of Certain Beneficial Owners
and Management 29
Item 13. Certain Relationships and Related Transactions 29
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K. 30 -207
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PART I.
ITEM 1. BUSINESS
ONEOK Inc. and its subsidiaries, hereinafter referred to as the Company, engage
in natural gas distribution, transmission, and storage operations. It also is
involved in oil and gas operations. The Company originally was founded on
October 12, 1906.
Oklahoma Natural Gas Company purchases, distributes, and sells natural gas and
leases pipeline capacity.
ONG Transmission Company gathers, compresses, transports, and stores natural
gas for intrastate distribution and into interstate commerce; and leases
pipeline capacity. In addition, two subsidiaries own interests in partnerships
that operate natural gas transmission systems.
Exploration and production explores for and produces natural gas and oil, gas
processing extracts and sells natural gas liquids, and buys and sells natural
gas. Effective May 1, 1994, the Company sold all of its contract drilling
operations.
ONEOK Inc.'s wholly owned subsidiaries and corporate divisions are as follows:
Year of
State of Establishment or
Distribution and Transmission Operations Incorporation Incorporation
- - ---------------------------------------- ------------- -------------
Oklahoma Natural Gas Company (Division) -- 1980
ONEOK Technology Company Delaware 1992
ONG Transmission Company (Division) -- 1985
ONG Sayre Storage Company Delaware 1964
ONG Red Oak Transmission Company Delaware 1966
ONG Western, Inc. Delaware 1973
Caney River Transmission Company Delaware 1981
TransTex Pipeline Company Delaware 1981
ONEOK Services, Inc. Delaware 1968
OkTex Pipeline Company Delaware 1990
Exploration and Production Operations
- - -------------------------------------
ONEOK Resources Company Delaware 1970
ONEOK Exploration Company Delaware 1972
Gas Processing Operations
- - -------------------------
ONEOK Products Company Delaware 1983
Other Operations
- - ----------------
ONEOK Gas Marketing Company Delaware 1992
ONEOK Leasing Company Delaware 1983
ONEOK Parking Company Delaware 1983
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(A) General Development of Business
The general developments in the business of the Company during the past five
years were as follows:
(1) DISTRIBUTION AND TRANSMISSION OPERATIONS
The Company's activities include those in its historic merchant role,
purchasing and selling natural gas, and those in its newer role,
transporting natural gas and leasing pipeline capacity. To provide
flexibility in transporting gas under Sec. 311(a) of the Natural Gas
Policy Act of 1978 (NGPA), in 1985 gathering, transmission, and
storage activities were transferred to a separate division, ONG
Transmission Company, which serves both intrastate and interstate
markets.
The Company's residential and commercial rates continue to remain
among the lowest in the industry.
A substantial portion of the gas delivered through the Company's
pipeline system goes to industrial customers, in particular, several
large fertilizer plants which use the gas as feed stock. Currently
most industrial customers purchase gas in the spot market. The
Company developed its pipeline capacity lease (PCL) program to allow
the delivery and redelivery of this gas purchased by the customers to
their facilities. The Company developed and received approval for a
Special Industrial Sales Program (SISP) which allocated lower cost
supplies to these customers.
The Company offers its PCL and payment-in-kind program (PIK) to
certain of these customers as a response to competitive pressure.
Under its PIK program, the Company accepts gas in lieu of cash for PCL
payments and for payment for exchanges of gas between intrastate
pipelines. PIK gas is priced to general system gas distribution
operations at the weighted average cost of gas (WACOG). Some of the
PCL contracts include price caps, which reduce the volume of gas
delivered to the Company as the price of gas purchased by the customer
escalates.
In order to meet competitive pressures, the Company has provided
service at discounted rates substantially below the Company's mark-up
on its industrial tariff rates.
In recent years, certain interstate and intrastate pipeline companies
have been very aggressive in attempting to capture industrial load
within the Company's service area, a phenomenon generally referred to
as "bypass" in the gas industry. The Company has moved to protect its
load through its PCL and other special sales programs.
The Company's transmission system serves much of the State of
Oklahoma, including all of the major producing areas. The system,
which intersects with ten interstate pipelines, allows natural gas to
be moved to locations throughout the nation. In 1991, the Company
purchased Lone Star Gas Company's Oklahoma properties which provide
access to the Texas market through the Lone Star intrastate system in
Texas. In 1993, the Company acquired two pipelines in western
Oklahoma. One provides access
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to a pipeline owned by Northern Natural Gas Company. The other
provides access to Red River Pipeline in Texas.
In April 1992, the Federal Energy Regulatory Commission (FERC)
approved Order 636. The Company has complied with the Order for its
FERC regulated properties. The Company's intrastate transportation
operations are not regulated by the FERC. It is difficult to assess
what long term impact, if any, the Order will have on the Company.
The Company is interested in acquiring gas distribution and
transmission facilities which will enhance its operations. In 1991,
the Company acquired Lone Star Gas Company's Oklahoma properties
located in south-central Oklahoma which added 36,000 customers, 700
miles of distribution line, and 1,000 miles of transportation
pipeline. It also provides access to the Texas gas market (see
above). During 1993, the Company negotiated for the purchase of gas
distribution properties in Kansas and northeastern Oklahoma involving
approximately 190,000 customers. Negotiations were terminated by the
owner. The Company is prepared to pursue other opportunities as they
occur.
The Company experienced claims and potential liability in recent years
arising out of long-term gas supply contracts containing "take-or-pay"
provisions which purported to require the Company to pay for volumes
of natural gas contracted for but not taken. There are no significant
remaining gas purchase contract potential claims or cases pending
against the Company at the present time. The Company currently has
approximately $107.5 million of deferred take-or-pay and other
settlement costs. The OCC has authorized an annual recovery of $6.7
million for such costs by a combination of a surcharge from customers
and revenue from transportation under Section 311 (a) of the NGPA and
other intrastate transportation revenues.
The Company's long-standing commitment to the development of natural
gas vehicles (NGV) has helped Oklahoma become the leading state in the
nation regarding the number of NGV vehicles. The Company expects NGV
vehicles to be a growing future market for natural gas in Oklahoma.
In recent years, the Company and other regulated companies have
experienced significant regulatory lag. In 1993, the Oklahoma
Legislature enacted legislation that should reduce the lag. The OCC
is required to act within 180 days of the filing of a rate application
or the applicant may put the requested rates into effect subject to
refund.
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The following summarizes gas volumes sold or transported for the past
five years and degree days (which primarily affect residential and
commercial customers).
Volumes (MMcf) 1994 1993 1992 1991 1990
- - ------------------------------------------------------------------------------------------------------------
Sales:
Residential 58,587 60,459 51,557 49,937 51,894
Commercial 27,343 27,989 24,350 25,462 25,936
Industrial
Fertilizer plants 27,078 34,350 17,487 57,380 56,140
Other 21,907 20,855 21,707 30,859 30,550
----------------------------------------------------------------------
Total industrial 48,985 55,205 39,194 88,239 86,690
Wholesale 1,797 2,253 2,830 2,836 2,885
----------------------------------------------------------------------
Total intrastate sales 136,712 145,906 117,931 166,474 167,405
----------------------------------------------------------------------
Pipeline Capacity Leases:
Fertilizer plants 66,284 55,252 75,925 34,346 34,597
Other 54,335 53,732 49,680 37,208 38,121
----------------------------------------------------------------------
Total PCL volumes 120,619 108,984 125,605 71,554 72,718
----------------------------------------------------------------------
Transportation:
Sec. 311(a) interstate 56,779 54,515 42,061 46,081 66,548
Other 3,029 3,349 3,201 - -
----------------------------------------------------------------------
Total transportation 59,808 57,864 45,262 46,081 66,548
----------------------------------------------------------------------
Total PCL and
transportation 180,427 166,848 170,867 117,635 139,266
----------------------------------------------------------------------
Total volumes 317,139 312,754 288,798 284,109 306,671
======================================================================
Degree days 3,874 3,953 3,085 3,192 3,369
======================================================================
Through subsidiaries, the Company is a 25 percent partner in two
natural gas transmission systems, Ozark Gas Transmission System
(Ozark) and Red River Pipeline (Red River). Ozark operates in
Oklahoma and Arkansas as an open access interstate transporter. Red
River operates in Texas and is regulated by the Texas Railroad
Commission. See notes (B) INVESTMENTS and (I) COMMITMENTS AND
CONTINGENCIES in the Notes to Consolidated Financial Statements for
further information.
OkTex Pipeline Company owns short transmission pipelines between
Oklahoma and Texas which connect the Company's intrastate systems to
the intrastate systems of Lone Star Gas Company and Red River
Pipeline.
(c) ONEOK Technology Company is a partner in a company which has
developed a device that allows quick meter change-out without
interruption of service to customers. The partnership contracts out
fabrication of the devices which are sold through an exclusive
representative in the United States. The same party manufactures and
markets the devices in Europe under license from the partnership.
(2) EXPLORATION AND PRODUCTION OPERATIONS
In 1989, the Company sold slightly more than 50 percent of its
reserves for approximately $50 million. Because of the sale of the
producing properties, sales of crude oil and natural gas declined
substantially. Because of depressed prices for natural gas, the
Company curtailed up to
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25 percent of its normal production capability from March 1991 through
August 1991 and from February 1992 through July 1992.
The Company's current strategy is to acquire producing properties
while maintaining a conservative capital budget. The following
summarizes the oil and natural gas production sales and average prices
for the last five-years.
Sales 1994 1993 1992 1991 1990
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Oil (Bbls) 572,113 442,931 375,506 294,025 255,575
Oil (000s) $8,114 $8,192 $7,535 $7,081 $4,887
Average Price $14.18 $18.50 $20.07 $24.08 $19.12
(per Bbl)
Gas (MMcf) 8,043 8,401 7,349 6,952 7,338
Gas (000s) $16,036 $16,905 $10,793 $10,228 $10,943
Average Price $1.99 $2.01 $1.47 $1.47 $1.49
(per Mcf)
(3) GAS PROCESSING OPERATIONS
The following chart summarizes the Company's share of gas processing
plant capacity and natural gas liquids production. Also shown are
volumes, revenues, and average prices for residue and other gas sales.
Intercompany transactions have not been eliminated. In 1990, natural
gas liquids production was at less than full capacity because of
reduced throughput due to a depressed market for natural gas. During
1990, 1991, and 1994 ethane was rejected from the recovery process
because it was uneconomical to produce at the prevailing market
prices. Volumes and prices increased significantly in 1991 partially
due to the Middle East crisis. When prices escalate, recovery of
ethane generally increases. The Company is participating with other
plant owners in a more aggressive approach to acquiring more gas
supplies for processing in an effort to increase throughput and liquid
recoveries. Since 1989, the Company also has been buying natural gas
for resale to others.
1994 1993 1992 1991 1990
-----------------------------------------------------------
Interest in Gas Processing
Plant Capacity (MMcf per day) 327 327 327 327 327
Gas Liquids (Mgal.) 194,378 195,067 180,956 173,974 142,878
Gas Liquids (000) $48,838 $59,569 $52,080 $56,468 $34,289
Average Price (per gal.) $.25 $.31 $.29 $.32 $.24
Average Production Cost
(per gal.) $.24 $.26 $.22 $.21 $.20
Residue Gas (MMcf) 7,180 7,328 8,500 9,186 8,875
Residue Gas (000) $14,266 $14,805 $13,259 $14,663 $14,393
Average Price (per Mcf) $1.99 $2.02 $1.56 $1.60 $1.62
Other Gas Sales (MMcf) 18,551 40,436 48,311 65,288 54,907
Other Gas Sales (000) $41,853 $83,578 $77,610 $98,215 $91,275
Average Price (per Mcf) $2.26 $2.07 $1.61 $1.50 $1.66
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(4) OTHER OPERATIONS
(a) Gas Marketing
ONEOK Gas Marketing Company, a subsidiary of ONEOK Inc., was founded
in 1992 to pursue natural gas marketing opportunities with local
distribution companies and industrial customers, primarily outside of
Oklahoma. ONEOK Gas Marketing and Ward Gas Marketing, Inc., entered
into a partnership in October 1992, through which the Company
participates in gas marketing.
(b) Building Operations
In 1983, the Company acquired a partially completed office building
and parking garage in downtown Tulsa, Oklahoma. The parking garage
was completed and is now owned and operated by ONEOK Parking Company.
The partially completed office building and a long-term ground lease
were transferred to a third party who completed the office building
(ONEOK Plaza) and leased the completed building back to ONEOK Leasing
Company. The initial term of the lease was twenty-five (25) years
with six five-year renewal options. At the end of the initial lease
term or any renewal period, the Company may purchase the office
building at its fair market value. Ten and one-half floors of the
seventeen-story building, the lower lobby, and portions of the two
subbasements are used by the Company. The remainder of the space in
the building is available for lease to others. Substantially all of
the remaining office space is under lease. Lease rates have remained
flat because of excess capacity caused by overbuilding in the local
market.
(B) Financial Information about Industry Segments
Footnote H of the Notes to Consolidated Financial Statements of the
1994 Annual Report to Shareholders filed as Exhibit 13 to this filing
is incorporated herein by reference.
(C) Narrative Description of the Business
(1) Principal Products Produced and Services Rendered
(a) DISTRIBUTION AND TRANSMISSION OPERATIONS
Two operating divisions, Oklahoma Natural Gas Company and ONG
Transmission Company, along with four subsidiaries, ONG Red Oak
Transmission Company, ONG Sayre Storage Company, ONG Western, Inc.,
and ONEOK Services, Inc. (collectively, ONG), constitute a fully
integrated intrastate natural gas distribution and transmission
segment which purchases, stores, transports, and distributes natural
gas for sale to wholesale and retail customers primarily in the State
of Oklahoma, and leases pipeline capacity to customers for their use
in transporting natural gas to their facilities. In addition, ONG
Transmission Company and the four transmission subsidiaries transport
gas for others under Section 311(a) of the NGPA. Oklahoma Natural Gas
Company, ONG Transmission Company, and the four subsidiaries are
consolidated for ratemaking purposes by the Oklahoma Corporation
Commission. For
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regulatory purposes, ONG Transmission Company Division, which
transports gas in interstate commerce under Section 311(a) of the
NGPA, is being treated as a separate entity by the FERC. ONG
purchases natural gas from gas processing plants, producing gas wells,
and pipeline suppliers, and utilizes five underground storages as
necessary to deliver natural gas to approximately 715,000 customers in
292 communities in Oklahoma. The Company's largest markets are in the
Oklahoma City and Tulsa metropolitan areas. ONG Sayre Storage Company
leases the excess capacity in its underground storage facility to
Natural Gas Pipeline Company of America. ONG also sells natural gas
at wholesale to other distributors serving 44 Oklahoma communities.
ONG serves an estimated population of over 2 million. The all-time
peak gas deliveries during a single day was 2.02 billion cubic feet of
gas delivered on February 10, 1981. The peak for the most recent
fiscal year was 1.59 billion cubic feet delivered on February 9, 1994.
The Company leases space in its pipeline system under its PCL program
to third party end users to allow them to buy gas in the field and
transport it to their facilities. The Company, at times, has leased
part of its gas storage to third parties, allowing them to store gas
in the Company's gas storage facilities.
Gas reserves committed to ONG's system are not subject to priority
allocations or dedicated to certain classes of customers, except for
certain low priced gas under the SISP Program, which is allocated to
industrial customers. ONG's rate schedules contain an "Order of
Curtailment" that provides for first reducing or totally discontinuing
gas service to the very large industrial users, who are required to
have standby fuel-burning equipment, and graduating down to requesting
residential and commercial customers to reduce their gas requirements
to an amount essential for public health and safety.
Caney River Transmission Company has a 25 percent interest in Ozark
Gas Transmission System (Ozark), a general partnership. Ozark owns a
transmission pipeline and related facilities originating in Pittsburg
County, Oklahoma, and connecting with existing facilities belonging to
an interstate gas transmission company in White County, Arkansas.
Ozark does not buy or sell gas but receives revenues from the
transportation of gas for shippers pursuant to the terms of
transportation agreements approved by FERC. Ozark is an open access
interstate shipper.
TransTex Pipeline Company has a 25 percent limited partnership
interest in Red River Pipeline (Red River), a limited partnership,
which owns a transmission pipeline system and related facilities. Red
River originates in Hemphill County, Texas, and terminates in Pecos
County, Texas, where it connects with Oasis Pipeline. In 1993, the
system was modified to allow bidirectional flow. The system is
regulated by the Texas Railroad Commission.
OkTex Pipeline Company, regulated by the FERC, owns short transmission
pipelines between Oklahoma and Texas which connect ONG's intrastate
system to the intrastate system of Lone Star Gas Company, a division
of ENSERCH Corporation and Red River Pipeline. The Company has the
capacity to move up to 200 million cubic feet of gas per day into Lone
Star's System in Texas.
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ONEOK Technology Company has a fifty percent (50%) interest in Natural
Energy Products Company, which was formed in 1992 to develop and
market a meter-setting device that allows gas utilities to change
meters without shutting off the flow of gas to the customer. The
devices are sold through an exclusive representative in the United
States which also manufactures and markets the devices in Europe under
a license from Natural Energy.
(b) EXPLORATION AND PRODUCTION OPERATIONS
Two subsidiaries (collectively, the Subsidiaries), ONEOK Exploration
Company and ONEOK Resources Company, are engaged in oil and gas
exploration, development, and production. As of August 31, 1994, the
Subsidiaries had working interests in 372 gas wells and 140 oil wells.
A number of these wells are multiple completions. Such interests are
in wells located in Oklahoma, Alabama, and Texas. The Subsidiaries
participated in the drilling of 37 working interest wells during the
1994 fiscal year, compared with 35 wells the previous year. In 1994,
62 percent of such wells were completed as commercial producers
compared with 69 percent in 1993. During the 1994 fiscal year, 17
wells were completed as gas wells and 6 as oil wells. The remaining
14 wells were dry holes. In addition, the Subsidiaries farmed out an
additional 8 wells for drilling by others. Of these, 1 oil well and 5
gas wells were completed and the remaining 2 were dry holes. The
Subsidiaries' share of production during the 1994 fiscal year averaged
1,567 barrels of oil per day and 22,035 million cubic feet of natural
gas per day. On August 31, 1994, the Subsidiaries had a total of
24,960 net undeveloped leasehold acres, of which 51 percent is located
in Oklahoma, 36 percent in Texas, and 11 percent in Arkansas. The
Subsidiaries are currently concentrating exploration activities in
Oklahoma and Texas, and for the present are pursuing a relatively
conservative drilling and leasehold acquisition program due to
uncertainty about gas price trends. The Subsidiaries acquired
reserves in Alabama in 1993.
On October 4, 1994, ONEOK Exploration Company closed the purchase of
an interest in the Black Lake-Pettit Zone Unit in Natchitoches Parish,
Louisiana. The purchase was effective as of July 1, 1994. The field
covers in excess of 24,000 gross acres and is expected to add
approximately 7.5 million cubic feet of gas and 460 barrels of liquids
to daily production. The field consists of 28 active oil wells, 12
active gas wells, 4 salt disposal wells, a gas processing plant, and 5
satellite compression stations.
(c) GAS PROCESSING OPERATIONS
ONEOK Products Company (Products) owns varying interests in 16 plants
which extract liquids from natural gas. Products' share of the
liquids produced by these plants averaged 12,680 barrels per day
during 1994. Products also purchased and resold 70,496 Mcf of natural
gas per day, including intercompany transactions, during the fiscal
year. Products is participating with other plant owners in programs
to acquire more gas volumes for processing through the plants to
increase liquid recoveries.
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(d) OTHER OPERATIONS
(i) Gas Marketing
ONEOK Gas Marketing is a subsidiary of ONEOK Inc. ONEOK Gas Marketing
and Ward Gas Marketing, Inc., have entered into a partnership to
purchase and market natural gas.
(ii) Building Operations
ONEOK Parking Company operates a parking garage with 1,179 parking
spaces. ONEOK Leasing Company operates a 500,000 square foot office
building in which the Company's headquarters is located and leases
excess space to others.
(2) Status of New Products or Segments
Meter-setting devices are being manufactured for and marketed in the
United States by Natural Energy Products Company of which ONEOK
Technology Company is a partner. The devices are sold through an
exclusive representative in the United States that also manufactures
and markets the device in Europe under license. The device allows gas
meters to be changed out without having to shut off the flow of gas to
the customer.
(3) Source and Availability of Raw Material
ONG's gas supply comes from 38 gas processing plants, and 958 gas
purchase connections (in 126 producing fields in Oklahoma). The
Company's 1994 gas supply was as follows (million cubic feet):
Total Gas Purchases 112,406
Payment in Kind 26,824
Gas Storage Withdrawals 33,607
Less: Gas Storage Injections (32,928)
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Total Supply 139,909
=======
(4) Patents, Trademarks, and Franchises Held
Natural Energy Products Company, a partnership in which ONEOK
Technology Company has a fifty percent (50%) interest, has an
exclusive license to develop and market meter setting devices for
which a patent is pending.
ONEOK Inc. has two corporate divisions that operate under trade names
in Oklahoma. One engages in distribution operations and operates
under the trade name Oklahoma Natural Gas Company. The other engages
in transmission operations and operates under the trade name ONG
Transmission Company. In the state of Oklahoma, a utility franchise
is a nonexclusive right to use the municipal streets, alleys, and
other public ways for its facilities for a defined period of time for
a fee. Oklahoma Natural Gas Company holds franchises, all of which
are for an initial period of 25 years, in major towns in which it
operates. Although the laws of the state of Oklahoma prohibit
exclusive utility franchises, the Company nevertheless believes there
are advantages to having franchises in the larger towns in which it
operates.
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Below is a list of the municipalities having a population of over
10,000 which have granted franchises to Oklahoma Natural Gas Company.
Population
Grantor 1990 Census Expiration Date
------- ----------- ---------------
Ardmore* 23,015 July 16, 2012
Claremore 13,225 December 29, 2003
Del City 23,758 August 24, 1998
Durant 12,767 August 1, 1997
Elk City 10,419 November 21, 1998
El Reno* 15,382 December 6, 2015
Enid 45,175 January 16, 2015
Midwest City 52,037 July 14, 2019
Muskogee* 37,440 July 30, 2015
Norman* 79,579 November 15, 1998
Oklahoma City* 441,154 April 24, 2010
Ponca City* 26,328 August 16, 2007
Sand Springs 14,943 November 1, 2015
Shawnee 26,175 October 14, 1995
Stillwater 36,543 April 19, 2015
Tulsa* 364,572 August 29, 2011
Woodward* 12,287 May 26, 1995
*Grantor has an option to purchase property within the corporate
limits at such terms and conditions as are provided in the franchise
at a price to be agreed upon or determined by arbitration.
The Company has franchises in 45 other municipalities in which there
is an aggregate population of approximately 103,000. Of the remaining
towns served in which ONG has no franchises, Bethany, Broken Arrow,
Edmond, Guthrie, Moore, Mustang, Okmulgee, Owasso, Sapulpa, The
Village, and Yukon, with a combined population of approximately
263,000, are the largest. In the Company's opinion, its franchises
contain no unduly burdensome restrictions and are sufficient for the
transaction of its business in the manner in which it is now
conducted.
(5) Seasonal Variations of Business
Because residential and commercial customers use natural gas
principally for space heating, the volume of ONG's gas sales is
consistently higher during the heating season (November through May)
than in other months of the year. Industrial sales, rentals for PCLs,
and other energy-related operations tend to remain relatively constant
throughout the year, while interstate transportation volumes fluctuate
based on the customers' utilization or market demand.
(6) Special Inventory Practices, Bill Payment Terms, and Average
Payment Plans
ONG stores gas during the summer months in underground storages for
delivery to customers during the periods of higher demand. Typically,
inventories of stored gas are near maximum levels immediately prior to
the winter months and are reduced to much lower levels by the end of
the winter heating season. ONG has a bill payment extension program
which allows its customers with temporary financial hardships to
spread the
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payments of their bills over an extended period of time. In addition,
the Company has an average monthly payment plan that allows the
Company's customers to spread the payments of their average utility
bills over a 12-month period.
(7) Dependence Upon a Limited Number of Customers
A material part of the combined gas sales and revenues from PCLs is
dependent upon the amount of gas utilized by fertilizer plants.
Fertilizer plant customers include Agricultural Minerals Limited
Partnership, Wil-Gro Fertilizer, Inc., Farmland Industries, Inc., and
Terra International, Inc. Sales of 27.1 billion cubic feet of gas
were made to these customers during the 1994 fiscal year. In
addition, such customers paid $39.7 million in rentals under PCLs.
Revenues from no single customer accounted for more than 10 percent of
the Company's total operating revenues.
Currently, all the plants are operating at or near full capacity. For
the effect of reduced fertilizer plant and other industrial sales, see
Management's Discussion and Analysis of Financial Condition and
Results of Operations in the 1994 Annual Report to Shareholders filed
as Exhibit 13 to this filing.
None of the fertilizer plant customers are related to the Company.
(8) Backlog of Orders
Due to the nature of the Company's business, there was no backlog of
firm orders at the end of the Company's fiscal year.
(9) Government Contracts
None
(10) Competitive Conditions and Identity of Markets
(a) DISTRIBUTION AND TRANSMISSION OPERATIONS
In its fiscal year ended August 31, 1994, 78 percent of the Company's
consolidated revenue came from the gas distribution and transmission
operations. Revenue from sales to residential customers represented
37 percent of revenue; commercial customers, 15 percent; and wholesale
customers, 1 percent. Revenues from sales to industrial customers,
pipeline capacity leases, and other sources accounted for the
remaining 25 percent. ONG sells natural gas service to its customers
for three primary uses, energy, generally for heating, cooking,
industrial processes, and feedstock for the production of fertilizer.
ONG has experienced some competition in the sale of natural gas as an
energy source. Electric utilities, offering electricity as a rival
energy source, compete for the space heating, water heating, and
cooking markets. The principal means to compete against alternative
fuels is lower prices, and natural gas continues to maintain its price
advantage in the residential, commercial, and both small and large
industrial markets. In the last few years, the Company has
experienced competition from other pipelines for its existing
industrial load. The Company
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offers its PCL program, Special Industrial Sales Program (SISP), and
PIK program as a response to such competitive pressure. The Company
developed its PCL program to allow the delivery and redelivery of gas
purchased by the customers to their facilities. The Company developed
and received approval for its SISP program, which allocated lower cost
supplies to these customers. Under its PIK program, the Company
accepts gas in lieu of cash for PCL payments and for payment for
exchanges of gas between intrastate pipelines. PIK gas is priced to
general system gas distribution operations at the weighted average
cost of gas (WACOG). Some of the PCL contracts include price caps,
which reduce the volume of gas delivered to the Company as the price
of gas purchased by the customer escalates. PCL customers with
contracts containing price caps represent approximately 76 percent of
1994 PCL volumes and 72 percent of 1993 PCL volumes.
In recent years, certain interstate and intrastate pipeline companies
have been very aggressive in attempting to capture industrial load
within the Company's service area, a phenomenon generally referred to
as "bypass" in the gas industry. The Company has moved to protect its
load through its PCL and other special sales programs.
All of ONG's rate schedules for gas sales filed with and approved by
the Oklahoma Corporation Commission allow ONG to pass on to its
customers changes in the field cost of gas by means of a purchased gas
adjustment clause. In recent years, the field price of new gas for
short-term deliveries has fallen sharply, resulting in prices
substantially lower than the Company's current average cost of gas.
Although the field price escalated sharply in 1993, it is anticipated
that this condition may continue for several years until the supply
and demand for gas becomes more balanced. While such conditions
continue, the Company may be unable to make any off-system sales in
interstate commerce or attract new large industrial customers to its
system except through the use of the PCL, SISP, and PIK programs
described above and any other new programs that may be developed to
enable large industrial customers, whether existing or new, to compete
economically.
In the past, the Company's principal competitors for new gas supply
were interstate purchasers and large users who had transportation
contracts with interstate pipelines. However, FERC rules now allow
the contract transportation of gas for others. Many additional
purchasers, including large industrial users and distribution
companies, now have direct access to gas supply, and the Company is
faced with many more competitors for available new gas supply. Many
of such purchasers are much larger and have much greater financial
resources than the Company. Since 1982, the Company has had a surplus
of natural gas available to its utility system and had ceased
contracting for new gas reserves until 1993.
In April 1992, the Federal Energy Regulatory Commission (FERC)
approved Order 636. The Company has complied with the Order for its
interstate pipeline, OkTex Pipeline Company. The Company's intrastate
transportation operations are not regulated by the FERC. It is
difficult to assess what long term impact, if any, the Order will have
on the Company.
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(b) EXPLORATION AND PRODUCTION OPERATIONS
In the area of exploration and production operations, the Company
competes with many large integrated oil and gas companies and numerous
independent oil and gas companies of various sizes for leaseholds and
drilling prospects. Many of these companies have greater financial
resources than the Company. The Company continues to be able to sell
its crude oil production at current market prices and anticipates
continuing to be able to sell such production in the future. However,
the Company, like the rest of the industry, has from time to time
curtailed some of its natural gas production because of low prices. A
small amount of production is still sold under long-term contracts.
In certain instances, the Company has agreed to lower prices in order
to continue sales. Most production is sold to brokers at spot-market
prices.
(c) GAS PROCESSING OPERATIONS
The Company owns varying interests in 16 plants which extract liquids
from natural gas. The industry as a whole operates substantial
numbers of such plants, many owned by large integrated oil and gas
companies and independents that have greater financial resources than
the Company. In 1990, natural gas liquids production was at less than
full capacity because of reduced throughput due to a depressed market
for natural gas. During 1990, 1991, and 1994 ethane was rejected from
the recovery process because it was uneconomical to produce at the
prevailing market prices. Volumes and prices increased significantly
in 1991 partially due to the Middle East crisis. When prices
escalate, recovery of ethane generally increases. The production
costs of such liquids generally depend on the cost of the natural gas
being processed and the underlying agreements. Because of the
generally favorable location of the plants and terms of the Company's
processing and operating agreements, the Company anticipates
continuing to have favorable product costs and anticipates that its
currently competitive position in marketing will remain so for the
near future. Such liquids are used as a petrochemical feedstock, for
residential heating and cooking primarily in rural areas, and by
refiners in producing motor fuels. In 1989, the Company began buying
natural gas for resale to others.
(11) Research and Development Costs
During the 1994, 1993, and 1992 fiscal years, ONG spent $563,000,
$195,000, and $320,000, respectively, on research and development
activities. These activities were carried out primarily through the
American Gas Association, a trade association of which the Company is
a member, and the Gas Research Institute, which is the principal
organization for cooperative research and development activities in
the investor-owned gas utility industry.
(12) Material Effects of Environmental Control Compliance.
There have been no material effects upon capital expenditures,
earnings, or the Company's competitive position during the 1994 fiscal
year related to compliance with federal, state, or local regulations
relating to the discharge of materials into the environment or the
protection of
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the environment. No material effects of this nature are anticipated
during the 1995 fiscal year.
(13) Number of Persons Employed
The Company employed 2,061 persons at August 31, 1994, and is
currently not a party to any collective bargaining agreements with
such employees.
ITEM 2. PROPERTIES
(A) Description of Property
(1) DISTRIBUTION AND TRANSMISSION OPERATIONS
(a) Gas Distribution Operations
The Company had 13,739 miles of pipeline and other distribution
facilities at August 31, 1994. Oklahoma Natural Gas Company owns a
five-story office building in Oklahoma City, Oklahoma, as well as a
number of warehouses, garages, meter and regulator houses, service
buildings, and other buildings throughout the state. The Company also
owns a fleet of vehicles and maintains an inventory of spare parts,
equipment, and supplies.
(b) Gas Transmission Operations
The Company had a combined total of 4,926 miles of transmission and
gathering pipeline on August 31, 1994. In addition, the Company owns
five underground storages located throughout the state. Four of the
storages operated by the Company are located next to its large market
areas. These four storages have a combined storage capacity of 124.5
billion cubic feet. The other storage is located in western Oklahoma
and is leased to and operated by another company. However, 25 billion
cubic feet of storage capacity has been retained for use by the
Company in this reservoir. Compression and dehydration facilities are
located at various points throughout the pipeline system.
The Company owns a 25 percent interest in two partnerships, each of
which owns a transmission pipeline system and related facilities for
the transportation of natural gas.
The Ozark Gas Transmission System consists of approximately 280 miles
of 20-inch diameter trunk pipeline, approximately 170 miles of lateral
pipeline of diameters ranging from 4 inches to 10 inches, and
compression and dehydration facilities. Ozark's pipeline system
originates in Pittsburg County, Oklahoma, crosses the Arkoma Basin in
southeastern Oklahoma and north central Arkansas, and interconnects in
White County, Arkansas, with facilities belonging to an interstate gas
transmission company. The designed capacity of the trunk line is
170,000 Mcf per day. System throughput during 1994 averaged
approximately 88,000 Mcf per day. Current throughput is approximately
98,000 Mcf per day.
Red River Pipeline is a transmission pipeline system consisting of
approximately 361 miles of 24-inch diameter pipeline and related
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facilities. The system originates in Hemphill County, Texas, and
terminates in Pecos County, Texas, where it connects with Oasis
Pipeline. In 1993, the system was modified to allow bidirectional
flow. The system has a designed capacity of 250,000 Mcf per day south
and 200,000 Mcf per day north. System throughput during 1994 averaged
approximately 119,000 Mcf per day. Current throughput is
approximately 120,000 Mcf per day.
(2) EXPLORATION AND PRODUCTION OPERATIONS
The Company owns varying economic interests in 484 gas wells and 167
oil wells, some of which are multiple completions. Such interests are
in wells located in Oklahoma, Alabama, Texas, and Louisiana. The
Company owns 42,342 net onshore developed leasehold acres and 24,960
net onshore undeveloped acres. The Company owns no offshore acreage.
Onshore acreage is located in Alabama, Arkansas, Colorado, Florida,
Louisiana, Oklahoma, Texas, and Mississippi. Lease acreage in
producing units is held by production. Leases not being held by
production are generally for a term of three years. However, such
leases require payments of rentals annually, or the leases terminate.
(3) GAS PROCESSING OPERATIONS
The Company owns interests in 16 gas processing plants in Oklahoma and
one in Texas, which extract liquid hydrocarbons from natural gas. The
residue gas remaining after such extraction is either taken by the
Company or sold to other gas pipeline companies. The Company's share
of the capacity of the plants is 327 million cubic feet per day. The
Company's share of liquids extracted during the 1994 fiscal year
averaged 12,680 barrels per day. During 1994, the Company sold 70,496
Mcf of natural gas per day, of which 69,822 Mcf per day was sold to
unaffiliated customers.
(4) OTHER OPERATIONS
(a) Building Operations
The Company owns a parking garage with 1,179 parking spaces and also
land subject to a long-term ground lease upon which has been
constructed a seventeen-story office building with approximately
500,000 square feet of net rentable space, which is being leased to
the Company. The lease term is for 25 years with six five-year
renewal options. After any renewal period, the Company can purchase
the property at its fair market value. The Company has occupied and
reserved approximately 300,000 square feet of net rentable space for
its own use and leases the remaining space to others.
(B) Other Information
This data below has been prepared in accordance with the Securities
and Exchange Commission (SEC) requirements, and readers are cautioned
that the information can be readily misunderstood. Diligent care
should be taken to read the Management's Discussion and Analysis of
Financial Conditions and Results of Operations and the Notes to
Consolidated Financial Statements in the 1994 Annual Report to
Shareholders filed as
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Exhibit 13 to this filing, in order to understand the specific data
that is covered in each disclosure.
Production figures are defined by the SEC to include natural gas
liquids from Company-owned leases. The Company produces a substantial
amount of natural gas liquids as a result of ownership in several gas
processing plants, but the Company does not own the reserves
attributable to the leases producing the gas processed by these
plants. As a result of this exclusion by the SEC, information
concerning these natural gas liquids is not included in any of the
tables in this section but is included under GAS PROCESSING OPERATIONS
on page 7.
(1) Oil and Gas Reserves
The oil and gas reserves owned by the Company are all located in the
United States.
(a) Quantities of Oil and Gas Reserves
Note K of Notes to Consolidated Financial Statements in the 1994
Annual Report to Shareholders filed as Exhibit 13 to this filing is
incorporated herein by this reference.
(b) Present Value of Estimated Future Net Revenues
Note L of Notes to Consolidated Financial Statements in the 1994
Annual Report to Shareholders filed as Exhibit 13 to this filing is
incorporated herein by this reference.
(2) Reserve Estimates Filed with Others
There were no reserve estimates filed with or included in reports to
any federal authority or agency other than the SEC during the last
twelve months.
(3) Quantities of Oil and Gas Produced
The net quantities of oil and natural gas produced and sold, including
intercompany transactions, for the last five fiscal years were as
follows:
1994 1993 1992 1991 1990
------------------------------------------------------------------------
Oil (Bbls) 572,113 442,931 375,506 294,025 255,575
Gas (MMcf) 8,043 8,401 7,349 6,952 7,338
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(4) Average Sales Price and Production (Lifting) Costs
The average sales price and average lifting costs for each of the last
three fiscal years were:
1994 1993 1992
-----------------------------------------
Average Sales Price:(a)
Oil (Bbl) $14.18 $18.50 $20.07
Gas (Mcf) $ 1.99 2.01 $ 1.47
Average Lifting Costs:
Equivalent barrel of
oil & gas (b) $ 2.57 $ 2.65 $ 2.46
(a) In determining the average sales prices of oil and gas, sales to
affiliated companies were recorded on the same basis as sales to
unaffiliated customers.
(b) For the purpose of calculating the average lifting cost per
equivalent barrel of production, natural gas was converted to a liquid
equivalent using six (6) Mcf of natural gas to one barrel of oil.
Lifting costs do not include depreciation or depletion.
(5) Wells and Developed Acreage
The total gross and net productive oil and gas wells either owned by
the Company or in which the Company had a working interest and the
total gross and net developed acres at the end of the fiscal year were
as follows:
Oil Gas
--------------------
Gross wells (a) 140 372
Net wells (a) 31 151
Gross acres (b) - -
Net acres (c) - -
(a) The gross and net wells shown above are wells in which the Company
has a working interest and does not include wells in which the Company
has royalty or overriding royalty interests. Four of the 140 oil
wells are dual completions. One of the 372 gas wells is a triple
completion and 12 are dual completions.
(b) The amount of gross developed acres is not available from the
Company's records.
(c) The total net developed acres for both oil and gas is 43,342
acres. The amount of net developed acres by well classification is
not available from the Company's records.
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(6) Undeveloped Acreage
Of the Company's 24,960 net onshore undeveloped acres, approximately
11 percent lies in the Ardmore Basin area, approximately 31 percent
lies in the Anadarko Basin area in Oklahoma, approximately 20 percent
lies in the Oklahoma portion of the Arkoma Basin, and approximately 10
percent lies in the Texas Gulf Coast area. The gross and net
undeveloped leasehold acreage held by the Company at the end of the
fiscal year was as follows:
Gross Net
-----------------------
Alabama 759 177
Arkansas 6,630 2,775
Colorado 80 1
Florida 770 196
Louisiana 149 28
Oklahoma 40,398 12,789
Texas 22,063 8,917
Mississippi 1,608 77
-----------------------
72,457 24,960
=======================
(7) Net Exploratory and Development Wells Drilled
Exploratory Development
----------- -----------
1992
Productive 1.8447 5.5757
Dry 1.5500 2.0922
------ ------
Total 3.3947 7.6679
====== ======
1993
Productive 0.4840 5.4701
Dry 1.8487 2.3540
------ ------
Total 2.3327 7.8241
====== ======
1994
Productive 0.8500 5.5760
Dry 3.5075 1.8866
------ ------
Total 4.3575 7.4626
====== ======
(8) Present Drilling Activities
On August 31, 1994, the Company was participating in the drilling of 6
wells, with the Company's average net interest in these drilling
activities amounting to 2.3105 wells.
(9) Future Obligations to Provide Oil and Gas
The Company is not obligated to provide any fixed or determinable
quantities of oil or natural gas in the future.
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ITEM 3. LEGAL PROCEEDINGS
Agricultural Minerals, Limited Partnership v. ONEOK Inc., et al., No. CJ-94-93,
District Court, Rogers County. On March 4, 1994, the Plaintiff filed a
petition alleging that it is the successor to a 15-year gas service agreement
and pipeline capacity lease agreement entered into with the Company in 1989,
which is necessary to transport gas to its fertilizer plant, that such
agreements are an exclusive dealing arrangement in furtherance and preservation
of the Company's monopoly power preventing its customers from securing
alternate sources of transportation service and causing artificially higher
rates for transportation service because of the lack of any free and open
competition; that in the exercise of its monopoly power the Company has devised
and implemented an unregulated scheme to unlawfully discriminate against the
Plaintiff, and that as a result the Company charges competitors of the
Plaintiff substantially less than it charges the Plaintiff for comparable
transportation services. The Plaintiff alleges that such conduct is in
violation of the Oklahoma antitrust laws and asks for actual damages in excess
of $10,000, trebling of the actual damages, costs, and reasonable attorney
fees. On August 11, 1994, the Court denied the Company's motion to dismiss
and/or stay the action on the grounds that the Court lacked jurisdiction. On
August 31, 1994, the Company filed its answer denying the Plaintiff's
allegations, and alleging that both the contracts with the Plaintiff and those
with the Company's other pipeline capacity lease customers were entered into as
a result of arm's length bargaining in a free and effective competitive market
for industrial gas supplies. The case is now in the discovery stage. A
related proceeding filed by the Company in the Oklahoma Corporation Commission,
Application for a Determination that the Rate Charges Pursuant to a Pipeline
Capacity Lease Agreement between ONG and AMLP is Just and Reasonable, Cause No.
PUD 940000419, is described hereinafter.
Cayman Resources Corporation v. ONEOK Resources Company, No. C-91-400-E,
District Court, Stephens County. On November 22, 1991, the Plaintiff filed a
petition alleging a breach of contract relating to an area of mutual interest,
requesting a declaratory judgment of the rights of the parties under the
contract, and asking for damages in excess of $10,000, plus attorney fees and
costs. The Company estimates the value of the property involved to be
approximately $200,000. The Company filed its answer generally denying the
alleged breach of contract and alleging, as an affirmative defense, failure on
the part of Plaintiff to state any claims upon which relief can be granted by
the court. The case is currently in the discovery stage.
Fent, et ux v. Oklahoma Natural Gas Company, a division of ONEOK Inc., et al.,
No. CJ-88-10148, District Court, Oklahoma County. On October 6, 1988, the
Plaintiffs filed a petition for reimbursement for the cost of replacement of a
yard line and for repairing the gap in piping caused by the relocation of the
meter to the property line and as a class action for similarly situated
customers. The Company moved to dismiss the action on the grounds the District
Court did not have subject matter jurisdiction and a failure to state a cause
of action for which relief could be granted. The District Court granted the
motion to dismiss and the Plaintiffs appealed the decision. On August 14,
1991, the Court of Appeals reversed the trial court's decision and remanded the
case for further proceedings. The Appellate court held that the trial court
had erred in ruling both that it was without jurisdiction and that the
Plaintiffs had failed to state a cause of action, instead finding that under
Commission Rule 6(a) the Company could be responsible for maintenance of
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the pipeline up to the outflow side of the meter. As a result, the Company
could have a duty to repair the gap caused by removal of the meter and to
maintain and repair the yard line. The case was remanded to the District
Court; the Company filed a related proceeding with the Oklahoma Corporation
Commission (see below); and, although the Plaintiffs filed a motion in district
court to certify the class, further proceedings in the case were stayed pending
resolution of the appeal of the decision in the Corporation Commission
proceeding described below.
Fent, et ux v. Oklahoma Natural Gas Company, a division of ONEOK Inc., No.
79,243, Oklahoma Supreme Court. On June 26, 1991, the Company filed an
application with the Oklahoma Corporation Commission requesting an
interpretation of applicable rules and an order that the Company's customers
are responsible for installation and maintenance of all piping between the
property or curb line and the customer's point of consumption, regardless of
meter location on the premises. The Fents objected, asserting that the dispute
was resolved by the District Court case described above and the Commission
lacked power to decide the issue. The Commission ruled that it had
jurisdiction, and under the Commission's Rules, the customer is financially
responsible for the yard line. The Order of the Commission was appealed. On
April 27, 1993, the Court of Appeals affirmed the order and the Fents sought
review by the Oklahoma Supreme Court. The Supreme Court granted certiorari,
and, by an opinion issued on October 4, 1994, held that the Commission's
determination of an issue decided by the Court of Appeals in the District Court
case constituted an impermissible collateral attack on that decision, which had
become "the law of the case," vacated the opinion of the Court of Appeals, and
reversed the Commission's order. The Company is filing a motion for rehearing
with the Supreme Court.
Hadson Energy Resources Corporation v. ONG Western, Inc., No. 93-3953-62,
District Court, Oklahoma County. On May 5, 1993, the Plaintiff filed a
petition seeking damages in an amount in excess of $500,000.00 for the alleged
breach of the take-or-pay provisions of a gas purchase contract for the
1989-1992 contract years. The contract covers one well in Canadian County,
Oklahoma. The Plaintiff also seeks to recover interest, costs, and reasonable
attorney fees. The Company has filed an answer denying any amounts are owed
under the Contract and alleging certain affirmative defenses and counterclaims.
The case is in the discovery stage. The Company has entered into settlement
discussions on this case with Apache Corporation, the successor to Hadson
Energy Resources Corporation.
McWilliams, et ux. v. ONEOK Inc., No. CJ-94-244, District Court, Kay County.
On September 2, 1994, the Plaintiffs filed a petition alleging personal injury
sustained by one of the Plaintiffs from a fire that ignited while he attempted
to remove a fire extinguisher from equipment that had struck and ruptured a gas
pipeline, asking for actual damages of $30,000,000 and punitive damages of
$25,000,000, together with costs and attorney fees. The Company intends to
answer denying the allegations.
Mustang Fuel Corp. of Oklahoma, et al. v. ONEOK Exploration Company and ONEOK
Resources Company, No. CJ-94-4293-63, District Court, Oklahoma County. In this
action filed on June 21, 1994, the Plaintiffs seek a declaratory judgment
interpreting the provisions of an Asset Purchase Agreement dated November 4,
1988 (the "Agreement"), between ONEOK Exploration Company and ONEOK Resources
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Company (collectively "ONEOK") and Mustang Fuel Corp. of Oklahoma and Mustang
Energy Corp. (collectively "Mustang"), concerning the sale of oil and gas
properties by ONEOK to Mustang in 1988. Specifically, Mustang seeks an
interpretation of the Agreement with respect to who bears the responsibility
for making cash-balancing payments on certain gas wells that had been
overproduced by ONEOK but which were not scheduled under the Agreement. In
addition, Mustang seeks a judgment against ONEOK in the amount of $549,655.50,
which it alleged represents the amount that ONEOK should have paid to Mustang
for the overproduction on the gas wells, which were not scheduled under the
Agreement. Mustang also seeks to recover interest, costs, and attorneys' fees.
The Company has answered denying the allegations. The case is now in the
discovery stage. This matter is related to the Payne case described below.
Settlement discussions are in progress.
Payne, et al. v. Mustang Fuel Corporation and ONEOK Resources Company, No.
CJ-94-53, District Court, Grady County. In this action filed on February 10,
1991, the Plaintiff trustees allege that they are a working interest owner in a
well, and they are entitled to be compensated for 30,379 Mcf of gas
overproduction of the well for the account of the Company and another working
interest owner, and asks for damages in excess of $10,000, interest, and
attorney fees. The Company was a working interest owner when the well was
overproduced in 1986 and 1987, which interest was subsequently sold to Mustang
Fuel Corporation. The Company has filed an answer denying any liability. The
case is now in the discovery stage. This matter is related to the Mustang Fuel
case described above.
Producers Selling Gas Processed at the Laverne and/or Mooreland Plants
(including ONEOK Exploration Company), Docket No. IN 92-1-000, and Amoco
Production Company and ORYX Energy Company, Docket No. IN 92-2-000, before the
Federal Energy Regulatory Commission. On November 18, 1991, the Federal Energy
Regulatory Commission ("FERC") initiated these proceedings against the owners
of gas production behind the Laverne and Mooreland Gas Processing Plants to
determine if the owners had violated the maximum lawful pricing provisions of
the Natural Gas Policy Act of 1978 ("NGPA"). The owners collected the maximum
lawful price for the gross volumes of gas sold at the wellhead to ANR Pipeline
Company ("ANR"), but they failed to reimburse ANR for the full value of the gas
that was lost, used or extracted in the gas plant operations. The FERC staff
contends that the transactions are, in economic reality, one transaction, and
therefore violate the maximum lawful pricing provisions of the NGPA. Even if
it is found that there are separate gas purchase and processing transactions
between the parties, the FERC contends that there was a scheme devised by the
parties to circumvent the requirements of the NGPA. According to calculations
made by ANR, the current potential financial exposure for ONEOK Exploration
Company and its affiliates is approximately $7.5 million plus civil penalties
and interest from January 1, 1992. On December 11, 1992, the presiding
administrative law judge issued the Commission's Initial Decision in the Docket
involving Amoco Production Company and ORYX Energy Company, and in which ONEOK
Exploration Company was an intervenor. The administrative law judge determined
that there was not a sufficient evidentiary basis for finding any specific
violations of the maximum lawful pricing provisions of the NGPA. The FERC
Staff, as well as Amoco, ORYX, and other parties, filed exceptions to the
Commission's Initial Decision on January 11, 1993.
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In the Matter of the Ad Valorem Tax Protest of Oklahoma Natural Gas Company,
ONG Sayre Storage, ONG Transmission Company, ONEOK Services, Inc., ONG Western,
Inc., ONG Red Oak Transmission Company, and OkTex Pipeline Company, Case Nos.
E-94-32, E-94-33, E-94-34, E-94-35, E-94-36, E-94-37, E-94-38, Court of Tax
Review, Oklahoma Board of Equalization. On August 8, 1994, the companies filed
protests of the 1994 Oklahoma ad valorem tax assessments in the Oklahoma Court
of Tax Review. The protests asserted that the ad valorem tax ratio set for the
companies by the Oklahoma State Board of Equalization is excessive and
unlawful. The cases are pending possible consolidation with 68 other protests
filed by public service corporations and pipelines on similar grounds. (In a
separate action filed in the Oklahoma Supreme Court, another corporation has
asked the court to assume original jurisdiction and decide the legality of the
Board's action.)
Application of Oklahoma Natural Gas Company for Limited Deviation From the
General Priority Schedule Established by OCC-OGR 1-305, General Cause No.
28738, Oklahoma Corporation Commission. This is a request by the Company for
an exception from the Commission's Market Demand Rules so that the Company will
not be required to purchase ratably from wells producing gas priced in excess
of NGPA Sec. 102 price, filed December 16, 1983. The Oklahoma Fertilizer
Manufacturers' Association and Damson Oil Corporation have intervened in the
case. No date for a hearing has ever been set by the Commission.
In the Matter of the Application of Oklahoma Natural Gas Company, a Division of
ONEOK Inc. for Examination of Standby Service, Cause CD No. 598, Oklahoma
Corporation Commission. This is a request filed on September 6, 1988, by the
Company to determine if standby and/or partial service shall be offered by the
Company, and if offered, what rates should apply, what the priority for such
service should be, what class of customers should be able to utilize such
service, and remaining terms and conditions applicable to such service. The
Company's brief argued that the Commission had no jurisdiction to require
standby service, or alternatively, if jurisdiction does exist, no standby
service should be required. On December 11, 1990, an Administrative Law Judge
recommended that the Commission assert jurisdiction to determine the issue of
standby service. The Company appealed the recommendation to the full
Commission, and the Commission voted to accept the recommendation. The matter
was appealed to the Oklahoma Supreme Court. On October 20, 1992, the Supreme
Court decided the Commission is empowered to determine whether standby is in
the public interest and what rates to apply, and the matter has been returned
to the Commission for further proceedings. No hearing date has been set.
In the Matter of the Application of Oklahoma Natural Gas Company, a Division of
ONEOK Inc., for a Review and Determination Concerning its Rates and Earnings in
Compliance with the Requirements of 17 O.S. Supp. 1990, Section 263, and for
Other Appropriate Relief, Cause PUD No. 910001190, Oklahoma Corporation
Commission. The Company filed an application on December 6, 1991, requesting
in increase of $63.3 million in rates. Subsequently consolidated were
proceedings relating to the Take-or-Pay Settlements Account (Cause PUD No.
91000115), the SISP Program Modifications (Cause PUD No. 920001394 and Cause CD
No. 92000165303), and the Lone Star Acquisition (Cause PUD No. 910001144). On
March 5, 1992, the Commission granted an interim rate increase of $18.2 on an
annualized basis, subject to refund with interest. On January 6, 1994, the
Commission approved a joint stipulation by an order which has become final,
which provides for recovery of the settlement costs in take-or-pay and similar
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claims. Rates implementing the approved recovery procedures were approved by
the Director of the Public Utility Division on February 1, 1994. Decisions
reached by the Commissioners during posthearing public deliberations on the
rate order during the first half of 1994 and concluded on June 29, 1994,
indicate a rate increase of approximately $5.5 million in addition to the
interim annual rate increase. This amount is subject to review and approval of
a final order which is pending. With reference to the consolidated proceeding
relating to the acquisition of the Oklahoma properties of Lone Star Gas
Company, in which the Company asked that the full purchase price be included in
the rate base for ratemaking purposes, and in its public deliberations, the
Commission has voted to allow the Company to amortize the amount over a 5-year
period but earn no return on the outstanding balance.
With reference to the consolidated Application in Cause PUD No. 01394 to modify
the SISP Program to permit the Company to purchase sufficient volumes of gas to
supply its SISP market demand at whatever price is necessary to ensure that the
Company can meet the needs of its SISP customers, and an Application in Cause
CD No. 165303 requesting modification of the limited deviation under which SISP
operates, emergency relief was granted on October 28, 1992, effective September
30, 1992, pending further review in the rate proceedings. The Commissioners in
their rate case deliberations voted to make the granted emergency relief
permanent, subject to review and approval of a final order in the proceedings.
Application for a Determination that the Rate Charges Pursuant to a Pipeline
Capacity Lease Agreement between ONG and AMLP is Just and Reasonable, Cause No.
PUD 940000419. On August 19, 1994, the Company filed an Application with the
Commission requesting that the Commission determine that the rate the Company
charges Agricultural Minerals Limited Partnership ("AMLP") pursuant to a 1989
pipeline capacity lease agreement is just and reasonable. On September 9,
1994, the Commission Staff filed a Motion to Establish Procedural Schedule,
which was set for hearing on September 15, 1994. At the hearing, the
administrative law judge established a schedule on the issue of jurisdiction.
Initial briefs were filed October 3, 1994, and reply briefs on October 10,
1994. Oral arguments, if requested by the judge, will be on October 31, 1994.
The Company has also filed a motion to limit the scope of the hearing to the
matters raised in the Company's application. This proceeding is related to the
Agricultural Minerals, Limited Partnership v. ONEOK Inc. lawsuit filed in
Rogers County District Court described earlier.
ITEM 4. RESULTS OF VOTES OF SECURITY HOLDERS
(A) Matters Submitted to a Vote of Security Holders
No matters were submitted to a vote of the security holders during the fourth
quarter of the 1994 fiscal year.
(B) Executive Officers of the Registrant
Larry W. Brummett is Chairman of the Board of Directors, President, and Chief
Executive Officer - ONEOK Inc. He was born in Tulsa, Oklahoma, and received
B.S. and M.S. degrees in civil engineering from the University of Oklahoma in
1974 and 1984, respectively. He joined Oklahoma Natural Gas in 1974 as an
engineer trainee and subsequently served in positions of increasing
responsibility. He was promoted to Vice President - Tulsa District on
25
26
September 1, 1986, to Executive Vice President of Oklahoma Natural Gas on May
17, 1990, to Executive Vice President - ONEOK Inc. on January 21, 1993, and to
President and Chief Executive Officer of ONEOK Inc. on February 17, 1994. Mr.
Brummett was elected to the position of Chairman of the Board of Directors
effective June 1, 1994. Mr. Brummett is 44.
D. L. Kyle is President and Chief Operating Officer of Oklahoma Natural Gas
Company and ONG Transmission Company. He was born in Wichita, Kansas, and
reared in Oklahoma City, Oklahoma. He received a B.S. degree in industrial
engineering and management from Oklahoma State University in 1974 and an MBA
degree in 1987 from the University of Tulsa. He joined Oklahoma Natural Gas in
1974 as an engineer trainee and subsequently served in positions of increasing
responsibility. He was elected to Vice President of Gas Supply in 1986 and
Executive Vice President in 1990. Mr. Kyle was elected to the position of
President and Chief Operating Officer on September 1, 1994. Mr. Kyle is 42.
B. M. Van Meter is President - Energy Companies of ONEOK. He was born in
Bartlesville, Oklahoma, and received a petroleum engineering degree from the
University of Oklahoma in 1955. After approximately 30 years of experience in
various managerial and technical positions in the oil and gas industry, he
joined ONEOK in 1985 as President of ONEOK Exploration Company and ONEOK
Resources Company. He was named to his present position in 1986. Mr. Van
Meter is 61.
J. D. Neal is Vice President, Chief Financial Officer, and Treasurer. He was
born in Shawnee, Oklahoma, and has a bachelor of arts degree from Oklahoma
Baptist University with majors in both economics and management. He joined the
Company in 1961 and has held various positions in operations and accounting.
He was promoted to Assistant Treasurer in June 1988 and to Treasurer in January
of 1989. He was elected to the position of Vice President - Finance in May
1990. On January 1, 1992, he assumed his current position. Mr. Neal is 55.
Lavon W. Neal is Vice President, Secretary, and Assistant Treasurer. She was
born in Ponca City, Oklahoma, and received a B.S. degree in business
administration in 1954 from the University of Oklahoma. Joining ONG in 1957,
she became Secretary to the Chairman of the Board in 1972 and Executive
Assistant to the Chairman and Assistant Secretary and Assistant Treasurer in
1974. She became Vice President Corporate Responsibilities and Services in
1976. Effective December 1, 1991, she assumed her present position. Ms. Neal
is 62.
F. W. Schemm is Vice President of Business Development - ONEOK Inc. He was
born in South Dakota and reared in Hutchinson, Kansas. He received a B. S.
degree in engineering from Kansas State University in 1960 and went to work at
Oklahoma Natural Gas Company as an engineer trainee. He has served in various
management positions, including Manager of Pipeline Systems Design and district
operating management positions. He was promoted to Vice President of Enid
district in 1990 and to his current position in April 1994. Mr. Schemm is 60.
There is no relationship by blood, marriage, or adoption between any of the
above executive officers. All executive officers are elected at the annual
26
27
meeting of directors held in January. All officers serve for a period of one
year or until their successors are duly elected.
PART II
ITEM 5. MARKET PRICE AND DIVIDENDS ON THE REGISTRANT'S COMMON STOCK AND
RELATED SHAREHOLDER MATTERS
(A) Market Information
The Company's common stock is listed on the New York Stock Exchange and the
Midwest Stock Exchange. The high and low market prices of the Company's common
stock as traded on the New York Stock Exchange for each fiscal quarter during
the last two fiscal years were as follows:
High Low
-------------------------------
1993
- - ----
First quarter $18 3/8 $16 1/4
Second quarter $20 5/8 $16 7/8
Third quarter $24 7/8 $20
Fourth quarter $26 1/4 $20 3/8
1994
- - ----
First quarter $22 5/8 $19 5/8
Second quarter $20 1/2 $17 5/8
Third quarter $18 1/2 $15 3/4
Fourth quarter $19 3/4 $15 3/4
(B) Holders
There were 12,208 holders of the Company's common stock at August 31, 1994.
(C) Dividends
Quarterly dividends declared on the Company's common stock during the last two
fiscal years were as follows:
1994 1993
------------------------
First quarter $.27 $.25
Second quarter .28 .27
Third quarter .28 .27
Fourth quarter .28 .27
---- ----
Total $1.11 $1.06
==== ====
Dividend restrictions are as follows: the debt agreements pursuant to which the
Company's outstanding long-term and short-term debt has been issued limit
dividends and other distributions on the Company's common stock. Under the
most restrictive of these provisions, $27,412,000 of retained earnings is so
restricted. On August 31, 1994, $147,514,000 was available for dividends on
the Company's common stock.
27
28
ITEM 6. SELECTED FINANCIAL DATA
The following are selected financial data for the Company for each of the last
five fiscal years. Dollar amounts are in millions of dollars, except per share
amounts.
1994 1993 1992 1991 1990
----------------------------------------------------------------------
Operating revenues $ 792.4 $ 789.1 $ 677.1 $ 689.5 $668.0
Operating income $ 70.9 $ 75.7 $ 65.0 $ 62.4 $ 57.5
Net income $ 36.2 $ 38.4 $ 32.6 $ 35.9 $ 33.0
Total assets $1,137.0 $1,104.5 $1,069.9 $1,051.9 $939.7
Long-term debt $ 376.9 $ 391.9 $ 397.9 $ 291.2 $244.5
Earnings per common
share $1.34 $1.43 $1.21 $1.33 $1.21
Dividends per common
share $1.11 $1.06 $ .96 $ .82 $ .75
Percent of payout 82.8% 74.1% 79.3% 61.7% 62.0%
Common equity per
share $13.88 $13.63 $13.28 $13.03 $12.51
Return on common equity 9.65% 10.46% 9.09% 10.24% 9.76%
Ratio of earnings
to fixed charges 2.39 2.33 2.21 2.54 2.48
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Management's Discussion and Analysis of Financial Condition and Results of
Operations in the 1994 Annual Report to Shareholders filed as Exhibit 13 to
this filing is incorporated herein by this reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements, including Consolidated Statements of
Earnings, Consolidated Statements of Cash Flows, Consolidated Balance Sheets,
Consolidated Statements of Shareholders' Equity, and the Notes to Consolidated
Financial Statements, together with the report of KPMG Peat Marwick LLP,
independent certified public accountants, as contained in the 1994 Annual
Report to Shareholders filed as Exhibit 13 to this filing, are incorporated
herein by this reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS OF THE
REGISTRANT
(A) Directors of the Registrant
Information concerning the directors of the Company is shown in the 1994
definitive Proxy Statement, which is incorporated herein by this reference.
(B) Executive Officers of the Registrant
28
29
Information concerning the executive officers of the Company is included in
Part I of this Annual Report on Form 10-K.
(C) Compliance with Section 16(a) of the Exchange Act
Information on compliance with Section 16(a) of the Exchange Act is included in
the 1994 definitive Proxy Statement, which is incorporated herein by this
reference.
ITEM 11. EXECUTIVE COMPENSATION
Information on executive compensation is shown in the 1994 definitive Proxy
Statement, which is incorporated herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(A) Security Ownership of Certain Beneficial Owners
Information on security ownership of certain beneficial owners is shown in the
1994 definitive Proxy Statement, which is incorporated herein by this
reference.
(B) Security Ownership of Management
Information on security ownership of directors and officers is shown in the
1994 definitive Proxy Statement, which is incorporated herein by this
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
29
30
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) Documents Filed as a Part of This Report
Page Number or
Incorporation
by Reference to
---------------
(1) Exhibits
(3)(a) Third Restated Certificate of 42- 81
Incorporation of ONEOK Inc.
(3)(b) By-Laws of ONEOK Inc. as 82- 99
Amended
(4)(a) Indenture dated November 28, Exhibit (4) to
1989, between ONEOK Inc. and Registration
Security Pacific National Bank Statement on
Form S-3, File
No. 33-31979
(4)(b) Indenture dated December 1, Exhibit (4)(b) to
1990, between ONEOK Inc. and Annual Report on
Security Pacific National Bank Form 10-K dated
August 31, 1991
(4)(c) First Supplemental Indenture Exhibit (4)(c) to
dated December 1, 1990, between Annual Report on
ONEOK Inc. and Security Pacific Form 10-K dated
National Bank August 31, 1991
(4)(d) Second Supplemental Indenture Exhibit (4)(d) to
dated October 1, 1991, between Annual Report on
ONEOK Inc. and Security Pacific Form 10-K dated
National Bank August 31, 1991
NOTE: Certain instruments defining
the rights of holders of long-term
debt are not being filed as exhibits
hereto pursuant to Item 601(b)(4)(iii)
of Regulation S-K. The Company
agrees to furnish copies of such
agreements to the Commission upon
request.
(10)(a) ONEOK Inc. Stock Performance Exhibit A of 1991
Plan Definitive Proxy
Statement
30
31
Page Number or
Incorporation
by Reference to
---------------
(10)(b) Unfunded Excess Benefit Plan Exhibit (10)(e) to
of ONEOK Inc. Annual Report on
Form 10-K dated
August 31, 1984
(10)(c) Termination Agreement Exhibit (10)(d) to
between ONEOK Inc. and Annual Report on
ONEOK Inc. Executives Form 10-K dated
dated January 20, 1984 August 31,1984
(10)(d) Indemnification Agreement Exhibit (28)(c) to
between ONEOK Inc. and Annual Report on
ONEOK Inc. Officers and Form 10-K dated
Directors August 31, 1987
(10)(e) Ground Lease Between ONEOK Exhibit (10)(a) to
Leasing Company and South- Annual Report on
western Associates dated Form 10-K dated
May 15, 1983 August 31, 1983
(10)(f) First Amendment to Ground Exhibit (19)(b) to
Lease between ONEOK Leasing Annual Report on
Company and Southwestern Form 10-K dated
Associates dated October 1, August 31, 1984
1984
(10)(g) Sublease Between RMZ Corp. Exhibit (10)(c) to
and ONEOK Leasing Company Annual Report on
dated May 15, 1983 Form 10-K dated
August 31, 1983
(10)(h) First Amendment to Sublease Exhibit (19)(c) to
between RMZ Corp. and ONEOK Annual Report on
Leasing Company dated Form 10-K dated
October 1, 1984 August 31, 1984
(10)(i) ONEOK Leasing Company Lease Exhibit (19)(a) to
Agreement with Oklahoma Annual Report on
Natural Gas Company Form 10-K dated
dated August 31, 1984 August 31, 1985
(10)(j) Rights Agreement between Exhibit 1 to
ONEOK Inc. and Chase Form 8-A
Manhattan Bank, N. A. Registration
dated March 31, 1988 Statement dated
March 1988
31
32
Page Number or
Incorporation
by Reference to
---------------
(10)(k) Credit Agreement between 100-177
ONEOK Inc. and Bank of
America National Trust and
Savings Association,
dated August 20, 1993
(10)(l) First Amendment to Credit 178-184
Agreement between ONEOK Inc.
and Bank of America National
Trust and Savings Association,
dated August 18, 1994
(10)(m) Private Placement Agreement Exhibit (10)(l) to
between ONEOK Inc. and Annual Report on
Paine Webber Incorporated, Form 10-K dated
dated April 6, 1993 August 31, 1993
(Medium-term Notes, Series A,
up to U.S. $150,000,000)
(10)(n) Issuing and Paying Agency Exhibit (10)(1) to
Agreement between Bank America Annual Report on
Trust Company of New York, Form 10-K dated
as Issuing and Paying Agent, August 31, 1993
and ONEOK Inc.
(Medium-term Notes, Series A,
up to U.S. $150,000,000)
(13) Pages 28 through 49 of the 185-206
1994 Annual Report to
Shareholders for ONEOK Inc.
(22) Required information concerning
the registrant's subsidiaries is
included in Item 1. of this
document.
(24) Independent Auditors' Consent 207
(28) History of Gas Pricing Exhibit (99) to
Annual Report on
Form 10-K dated
August 31, 1993
32
33
(2) Financial Statements
The following financial statements are contained in the Company's 1994
Annual Report to Shareholders filed as Exhibit 13 to this filing.
(a) Independent Auditors' Report
(b) Consolidated Statements of Earnings for the years ended
August 31, 1994, 1993, and 1992
(c) Consolidated Balance Sheets as of August 31, 1994 and 1993
(d) Consolidated Statements of Shareholders' Equity for the years
ended August 31, 1994, 1993, and 1992
(e) Consolidated Statements of Cash Flows for the years ended
August 31, 1994, 1993, and 1992
(f) Notes to Consolidated Financial Statements
Page Number or
Incorporation
by Reference to
---------------
(3) Financial Statement Schedules
Included in Part IV of this report for the
years ended August 31, 1994, 1993, and 1992,
are the following:
(a) Independent Auditors' Report 34
(b) Schedule V - Property and Equipment 35-36
(c) Schedule VI - Accumulated Depreciation,
Depletion, and Amortization 37
(d) Schedule IX - Short-Term Borrowings 38
(e) Schedule X - Supplementary Income
Statement Information 38
All other schedules have been omitted since the required information
is inapplicable or is included in the Consolidated Financial
Statements or footnotes thereto.
(B) Reports on Form 8-K
One report on Form 8-K was filed by the Company during the last quarter of
the period covered by this Form 10-K. The Form 8-K reported the settlement of
the Carmen Field Limited Partnership case on August 4, 1994.
33
34
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
ONEOK Inc.:
Under date of October 14, 1994, we reported on the consolidated balance sheets
of ONEOK Inc. and subsidiaries as of August 31, 1994 and 1993, and the related
consolidated statements of earnings, shareholders' equity, and cash flows for
each of the years in the three-year period ended August 31, 1994, as contained
in the 1994 Annual Report to Shareholders. Our report refers to a change in
the method of accounting for certain postemployment and postretirement benefit
obligations. These consolidated financial statements and our report thereon
are incorporated by reference in the Annual Report on Form 10-K for the year
1994. In connection with our audits of the aforementioned consolidated
financial statements, we also have audited the related financial statement
schedules as listed in the accompanying index. These financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statement schedules
based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present
fairly, in all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Tulsa, Oklahoma
October 14, 1994
34
35
Property and Equipment (Thousands of Dollars) Schedule V
Balance Retire- Transfers Balance
August 31, Additions ments & Other August 31,
System 1993 at Cost or Sales Changes 1994
- - -------------------------------------------------------------------------------
Gas property:
Distribution 515,923 39,249 5,551 34 549,655
Transmission 316,423 18,931 3,231 (14) 332,109
Gas storage 43,010 2,949 13 (2) 45,944
Other 107,137 1,000 5,479 0 102,658
- - ------------------------------------------------------------------------------
Total gas property 982,493 62,129 14,274 18 1,030,366
Exploration and
production 96,773 8,327 3,103 0 101,997
Drilling 33,249 724 33,973 0 0
Gas processing 68,507 2,729 1,282 0 69,954
Other 15,411 19 8 0 15,422
- - ------------------------------------------------------------------------------
Total 1,196,433 73,928 52,640 18 1,217,739
==============================================================================
Balance Retire- Transfers Balance
August 31, Additions ments & Other August 31,
System 1992 at Cost or Sales Changes 1993
- - -------------------------------------------------------------------------------
Gas property:
Distribution 484,221 32,475 4,868 4,095 515,923
Transmission 314,539 7,135 2,991 (2,260) 316,423
Gas storage 38,851 4,209 50 0 43,010
Other 93,386 14,972 1,239 18 107,137
- - ------------------------------------------------------------------------------
Total gas property 930,997 58,791 9,148 1,853 982,493
Exploration and
production 76,635 24,872 4,716 (18) 96,773
Drilling 34,655 722 2,128 0 33,249
Gas processing 66,764 1,743 0 0 68,507
Other 15,316 95 0 0 15,411
- - ------------------------------------------------------------------------------
Total 1,124,367 86,223 15,992 1,835 1,196,433
==============================================================================
Balance Retire- Transfers Balance
August 31, Additions ments & Other August 31,
System 1991 at Cost or Sales Changes 1992
- - -------------------------------------------------------------------------------
Gas property:
Distribution 449,063 39,978 5,964 1,144 484,221
Transmission 308,359 9,803 2,502 (1,121) 314,539
Gas storage 38,260 2,874 2,260 (23) 38,851
Other 85,706 4,628 (3,052) 0 93,386
- - ------------------------------------------------------------------------------
Total gas property 881,388 57,283 7,674 0 930,997
Oil and gas 69,577 10,562 3,504 0 76,635
Drilling 36,157 679 2,181 0 34,655
Gas processing 65,022 1,742 0 0 66,764
Other 15,924 (608) 0 0 15,316
- - ------------------------------------------------------------------------------
Total 1,068,068 69,658 13,359 0 1,124,367
==============================================================================
35
36
Depreciation Rates and Methods Schedule V (Continued)
Exploration and production properties are depreciated and depleted using the
unit-of-production method based upon periodic estimates of oil and gas
reserves. Undeveloped properties are amortized based upon remaining lease
terms and exploratory and developmental drilling experience. Gas processing
plants are depreciated using various rates based on estimated lives of
available gas reserves. All other property and equipment is depreciated using
the straight-line method over its estimated useful life.
Depreciation is computed by major groups of properties based on the following
annual depreciation rates:
Exploration and production and drilling *
Transmission .22% to 7.60%
Gas storage 1.55% to 4.74%
Gas processing *
Distribution 1.41% to 5.91%
General 1.80% to 33.33%
*As described above.
36
37
Accumulated Depreciation, Depletion, and Amortization Schedule VI
(Thousands of Dollars)
Additions
------------------
Balance Charged Transfer Balance
August 31, to Other Retire- &/or August 31,
System 1993 Income Accounts ments Reclass 1994
- - ------------------------------------------------------------------------------
Gas property:
Distribution 163,801 19,957 0 5,648 0 178,110
Transmission 144,690 7,698 18 4,235 0 148,171
Gas storage 11,997 848 0 23 0 12,822
Other 23,561 7,377 0 4,199 0 26,739
- - ------------------------------------------------------------------------------
Total 344,049 35,880 18 14,105 0 365,842
Expl. and prod. 51,035 12,048 0 2,012 0 61,071
Drilling 26,516 580 0 27,096 0 0
Gas processing 49,328 1,894 0 1,239 0 49,983
Other 3,757 456 0 821 0 3,392
- - ------------------------------------------------------------------------------
Total 474,685 50,858 18 45,273 0 480,288
==============================================================================
Additions
------------------
Balance Charged Transfer Balance
August 31, to Other Retire- &/or August 31,
System 1992 Income Accounts ments Reclass 1993
- - ------------------------------------------------------------------------------
Gas property:
Distribution 150,866 18,698 0 5,589 (174) 163,801
Transmission 138,056 7,690 1,835 3,065 174 144,690
Gas storage 11,325 739 0 67 0 11,997
Other 18,584 5,974 0 997 0 23,561
- - ------------------------------------------------------------------------------
Total 318,831 33,101 1,835 9,718 0 344,049
Expl. and prod. 43,651 10,716 0 3,332 0 51,035
Drilling 27,735 884 0 2,103 0 26,516
Gas processing 46,479 2,849 0 0 0 49,328
Other 3,324 476 0 43 0 3,757
- - ------------------------------------------------------------------------------
Total 440,020 48,026 1,835 15,196 0 474,685
==============================================================================
Additions
------------------
Balance Charged Transfer Balance
August 31, to Other Retire- &/or August 31,
System 1991 Income Accounts ments Reclass 1992
- - ------------------------------------------------------------------------------
Gas property:
Distribution 138,683 17,943 0 5,499 (261) 150,866
Transmission 131,485 7,515 0 1,205 261 138,056
Gas storage 10,738 722 0 135 0 11,325
Other 15,472 4,375 0 1,263 0 18,584
- - -----------------------------------------------------------------------------
Total 296,378 30,555 0 8,102 0 318,831
Oil and gas 33,326 12,054 0 1,729 0 43,651
Drilling 28,994 887 0 2,146 0 27,735
Gas processing 43,633 2,846 0 0 0 46,479
Other 2,934 475 0 85 0 3,324
- - -----------------------------------------------------------------------------
Total 405,265 46,817 0 12,062 0 440,020
=============================================================================
37
38
Short-Term Borrowings Schedule IX
(Thousands of Dollars)
(2)
Weighted Weighted
Balance Average (1) Average
at End Interest Maximum Average Interest
Short-Term Notes Payable of Period Rate Outstanding Outstanding Rate
- - ------------------------------------------------------------------------------
1994 Fiscal Year $50,000 5.2% $65,000 $32,000 4.0%
====== === ====== ====== ===
1993 Fiscal Year $22,000 3.5% $50,000 $14,000 4.0%
====== === ====== ====== ===
1992 Fiscal Year $5,000 6.0% $104,000 $41,000 6.1%
===== === ======= ====== ===
(1) The average amount outstanding during the period was computed by dividing
the total of month-end outstanding principal balances by 12.
(2) The weighted average interest rate during the period was computed by
dividing the total annualized interest cost per issue by the total short-term
debt outstanding during the year.
Supplementary Income Statement Information Schedule X
(Thousands of Dollars)
Charged to
Ad Valorem Taxes Costs and Expenses
- - ------------------------------------------------------------------------------
1994 Fiscal Year $11,948
======
1993 Fiscal Year $11,768
======
1992 Fiscal Year $11,247
======
38
39
OTHER MATTERS
For the purpose of complying with the amendments to the rules
governing Form S-8 (effective July 13, 1990) under the Securities Act
of 1933, the undersigned registrant hereby undertakes as follows,
which undertaking shall be incorporated by reference in registrant's
Registration Statements on Form S-8 Registration Nos. 33-38059 (filed
December 3, 1990), 33-52733 (filed March 18, 1994), and 33-69062
(filed September 21, 1993):
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers,
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a director, officer, or controlling person of the
registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its Counsel the matter
has been settled by a controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed by the Act and will be
governed by the final adjudication of such issue.
39
40
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on this 20th day of
October, 1994.
ONEOK Inc.
Registrant
By: J. D. NEAL
---------------------------
J. D. Neal
Vice President, Chief
Financial Officer, and
Treasurer (Principal
Financial and Accounting
Officer)
40
41
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated, on the 20th day of October, 1994.
LARRY W. BRUMMETT J. D. NEAL
- - -------------------------- --------------------------
Larry W. Brummett J. D. Neal
Chairman of the Board, Vice President, Chief
President, Chief Executive Financial Officer, and
Officer, and Director Treasurer (Principal
Financial and Accounting
Officer)
W. M. BELL D. A. NEWSOM
- - -------------------------- ---------------------------
W. M. Bell D. A. Newsom
Director Director
D. R. CUMMINGS G. D. PARKER
- - -------------------------- ---------------------------
D. R. Cummings G. D. Parker
Director Director
W. L. FORD J. D. SCOTT
- - -------------------------- ---------------------------
W. L. Ford J. D. Scott
Director Director
J. M. GRAVES J. E. TYREE
- - -------------------------- ---------------------------
J. M. Graves J. E. Tyree
Director Director
S. J. JATRAS G. R. WILLIAMS
- - -------------------------- ---------------------------
S. J. Jatras G. R. Williams
Director Director
B. H. MACKIE S. L. YOUNG
- - -------------------------- ---------------------------
B. H. Mackie S. L. Young
Director Director
41
42
Index to Exhibits
Filed herewith or
Incorporation
by Reference to
---------------
(3)(a)* Third Restated Certificate of
Incorporation of ONEOK Inc.
(3)(b)* By-Laws of ONEOK Inc. as
Amended
(4)(a) Indenture dated November 28, Exhibit (4) to
1989, between ONEOK Inc. and Registration
Security Pacific National Bank Statement on
Form S-3, File
No. 33-31979
(4)(b) Indenture dated December 1, Exhibit (4)(b) to
1990, between ONEOK Inc. and Annual Report on
Security Pacific National Bank Form 10-K dated
August 31, 1991
(4)(c) First Supplemental Indenture Exhibit (4)(c) to
dated December 1, 1990, between Annual Report on
ONEOK Inc. and Security Pacific Form 10-K dated
National Bank August 31, 1991
(4)(d) Second Supplemental Indenture Exhibit (4)(d) to
dated October 1, 1991, between Annual Report on
ONEOK Inc. and Security Pacific Form 10-K dated
National Bank August 31, 1991
NOTE: Certain instruments defining
the rights of holders of long-term
debt are not being filed as exhibits
hereto pursuant to Item 601(b)(4)(iii)
of Regulation S-K. The Company
agrees to furnish copies of such
agreements to the Commission upon
request.
(10)(a) ONEOK Inc. Stock Performance Exhibit A of 1991
Plan Definitive Proxy
Statement
43
Filed herewith or
Incorporation
by Reference to
---------------
(10)(b) Unfunded Excess Benefit Plan Exhibit (10)(e) to
of ONEOK Inc. Annual Report on
Form 10-K dated
August 31, 1984
(10)(c) Termination Agreement Exhibit (10)(d) to
between ONEOK Inc. and Annual Report on
ONEOK Inc. Executives Form 10-K dated
dated January 20, 1984 August 31,1984
(10)(d) Indemnification Agreement Exhibit (28)(c) to
between ONEOK Inc. and Annual Report on
ONEOK Inc. Officers and Form 10-K dated
Directors August 31, 1987
(10)(e) Ground Lease Between ONEOK Exhibit (10)(a) to
Leasing Company and South- Annual Report on
western Associates dated Form 10-K dated
May 15, 1983 August 31, 1983
(10)(f) First Amendment to Ground Exhibit (19)(b) to
Lease between ONEOK Leasing Annual Report on
Company and Southwestern Form 10-K dated
Associates dated October 1, August 31, 1984
1984
(10)(g) Sublease Between RMZ Corp. Exhibit (10)(c) to
and ONEOK Leasing Company Annual Report on
dated May 15, 1983 Form 10-K dated
August 31, 1983
(10)(h) First Amendment to Sublease Exhibit (19)(c) to
between RMZ Corp. and ONEOK Annual Report on
Leasing Company dated Form 10-K dated
October 1, 1984 August 31, 1984
(10)(i) ONEOK Leasing Company Lease Exhibit (19)(a) to
Agreement with Oklahoma Annual Report on
Natural Gas Company Form 10-K dated
dated August 31, 1984 August 31, 1985
(10)(j) Rights Agreement between Exhibit 1 to
ONEOK Inc. and Chase Form 8-A
Manhattan Bank, N. A. Registration
dated March 31, 1988 Statement dated
March 1988
44
Filed herewith or
Incorporation
by Reference to
---------------
(10)(k)* Credit Agreement between
ONEOK Inc. and Bank of
America National Trust and
Savings Association,
dated August 20, 1993
(10)(l)* First Amendment to Credit
Agreement between ONEOK Inc.
and Bank of America National
Trust and Savings Association,
dated August 18, 1994
(10)(m) Private Placement Agreement Exhibit (10)(l) to
between ONEOK Inc. and Annual Report on
Paine Webber Incorporated, Form 10-K dated
dated April 6, 1993 August 31, 1993
(Medium-term Notes, Series A,
up to U.S. $150,000,000)
(10)(n) Issuing and Paying Agency Exhibit (10)(1) to
Agreement between Bank America Annual Report on
Trust Company of New York, Form 10-K dated
as Issuing and Paying Agent, August 31, 1993
and ONEOK Inc.
(Medium-term Notes, Series A,
up to U.S. $150,000,000)
(13)* Pages 28 through 49 of the
1994 Annual Report to
Shareholders for ONEOK Inc.
(22) Required information concerning
the registrant's subsidiaries is
included in Item 1. of this
document.
(24)* Independent Auditors' Consent
(27)* Financial Data Schedules
(28) History of Gas Pricing Exhibit (99) to
Annual Report on
Form 10-K dated
August 31, 1993
____________________
* Filed herewith