ONEOK(OKE) - 2024 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section presents ONEOK's unaudited consolidated financial statements and management's discussion and analysis ITEM 1. FINANCIAL STATEMENTS (Unaudited) This section presents the unaudited consolidated financial statements for ONEOK, Inc. and its subsidiaries for the three and six months ended June 30, 2024 and 2023, including statements of income, comprehensive income, balance sheets, cash flows, and changes in equity, along with detailed notes on significant accounting policies, acquisitions, fair value measurements, debt, equity, earnings per share, unconsolidated affiliates, commitments, contingencies, and segment information Consolidated Statements of Income ONEOK, Inc. reported significant revenue and operating income growth for the three and six months ended June 30, 2024, compared to the prior year, driven by increased commodity sales and services. Net income also increased for the three-month period but decreased for the six-month period due to specific non-recurring items in the prior year | Metric (Millions of dollars, except per share) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:-----------------------------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Commodity sales | $3,994 | $3,371 | $7,922 | $7,527 | | Services | $900 | $361 | $1,753 | $726 | | Total revenues | $4,894 | $3,732 | $9,675 | $8,253 | | Operating income | $1,229 | $737 | $2,293 | $2,234 | | Net income | $780 | $468 | $1,419 | $1,517 | | Basic EPS | $1.33 | $1.04 | $2.43 | $3.38 | | Diluted EPS | $1.33 | $1.04 | $2.42 | $3.38 | Consolidated Statements of Comprehensive Income Comprehensive income for the three months ended June 30, 2024, increased to $800 million from $492 million in the prior year, primarily due to higher net income and positive changes in the fair value of derivatives. For the six-month period, comprehensive income decreased to $1,344 million from $1,550 million, mainly influenced by a decrease in net income and negative changes in derivative fair values | Metric (Millions of dollars) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:-----------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Net income | $780 | $468 | $1,419 | $1,517 | | Total other comprehensive income (loss), net of tax | $20 | $24 | $(75) | $33 | | Comprehensive income | $800 | $492 | $1,344 | $1,550 | Consolidated Balance Sheets As of June 30, 2024, total assets increased slightly to $44,535 million from $44,266 million at December 31, 2023. Current assets decreased, while property, plant and equipment (net) and goodwill increased. Total liabilities also increased, primarily due to higher current maturities of long-term debt and short-term borrowings, while total equity saw a modest increase | Metric (Millions of dollars) | June 30, 2024 | December 31, 2023 | |:-----------------------------|:--------------|:------------------| | Total current assets | $2,475 | $3,108 | | Net property, plant and equipment | $33,415 | $32,697 | | Goodwill | $5,112 | $4,952 | | Total assets | $44,535 | $44,266 | | Total current liabilities | $3,979 | $3,452 | | Long-term debt, excluding current maturities | $20,339 | $21,183 | | Total liabilities and equity | $44,535 | $44,266 | | Total equity | $16,709 | $16,484 | Consolidated Statements of Cash Flows For the six months ended June 30, 2024, cash provided by operating activities remained strong at $2,026 million, a slight increase from the prior year. However, cash used in investing activities significantly increased to $1,334 million, primarily due to higher capital expenditures and acquisitions. Cash used in financing activities decreased due to lower debt repayments | Metric (Millions of dollars) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:-----------------------------|:-------------------------------|:-------------------------------| | Net income | $1,419 | $1,517 | | Depreciation and amortization | $516 | $332 | | Cash provided by operating activities | $2,026 | $1,993 | | Cash used in investing activities | $(1,334) | $(353) | | Cash used in financing activities | $(994) | $(1,754) | | Change in cash and cash equivalents | $(302) | $(114) | | Cash and cash equivalents at end of period | $36 | $106 | Consolidated Statements of Changes in Equity Total equity increased from $16,484 million at January 1, 2024, to $16,709 million at June 30, 2024, primarily driven by net income, partially offset by common stock dividends and other comprehensive losses. Common stock outstanding increased slightly | Metric (Millions of dollars, except shares) | January 1, 2024 | June 30, 2024 | |:--------------------------------------------|:----------------|:--------------| | Common Stock Issued (Shares) | 609,713,834 | 609,713,834 | | Common Stock (Millions of dollars) | $6 | $6 | | Paid-in Capital | $16,320 | $16,338 | | Accumulated other comprehensive loss | $(33) | $(108) | | Retained Earnings | $868 | $1,126 | | Treasury Stock, at cost | $(677) | $(653) | | Total Equity | $16,484 | $16,709 | | Net Income (Six Months) | N/A | $1,419 | | Common Stock Dividends (Six Months) | N/A | $(1,159) | Notes to Consolidated Financial Statements The notes provide detailed context for the financial statements, covering significant accounting policies, recent acquisitions including the Gulf Coast NGL Pipelines and adjustments to the Magellan Acquisition, the Medford incident settlement, fair value measurements of financial instruments, risk management and hedging activities, debt structure and covenants, equity details including dividends, earnings per share computations, performance of unconsolidated affiliates, and commitments and contingencies A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The unaudited Consolidated Financial Statements are prepared in accordance with GAAP and SEC rules, reflecting all necessary adjustments for fair interim period statements. No new significant accounting pronouncements became effective or were issued during the quarter - Financial statements are prepared in accordance with GAAP and SEC rules, with all adjustments being of a normal recurring nature[22] - No new significant accounting pronouncements have become effective or were issued during the quarter that are material to the company[23] B. ACQUISITIONS ONEOK completed the acquisition of Gulf Coast NGL pipelines from Easton Energy for approximately $280 million in June 2024, expanding its Natural Gas Liquids segment. Adjustments were made to the preliminary purchase price allocation for the Magellan Acquisition, increasing goodwill by $160 million - Completed acquisition of Gulf Coast NGL pipelines from Easton Energy for approximately $280 million in June 2024, adding 450 miles of liquids products pipelines[24][71] - Recorded adjustments to the preliminary purchase price allocation for the Magellan Acquisition, resulting in a $160 million increase to goodwill due to additional information received during the measurement period[26] C. MEDFORD INCIDENT In the first quarter of 2023, ONEOK settled all insurance claims related to the 2022 Medford NGL fractionation facility fire for $930 million, with $830 million received in Q1 2023, resulting in a $779 million operational gain - Settled all insurance claims for the 2022 Medford NGL fractionation facility fire for $930 million in Q1 2023[27] - Received $830 million in Q1 2023, leading to an operational gain of $779 million recorded in other operating income, net[27] D. FAIR VALUE MEASUREMENTS ONEOK uses market prices, third-party pricing services, and valuation models to determine fair value, categorizing derivatives based on the lowest level input. As of June 30, 2024, total derivative assets and liabilities were $71 million and $(95) million, respectively, largely offset by netting arrangements. The estimated fair value of consolidated long-term debt was $20.8 billion, compared to a book value of $21.7 billion | Derivative Type (Millions of dollars) | June 30, 2024 - Total Gross | June 30, 2024 - Netting (a) | June 30, 2024 - Total Net | |:--------------------------------------|:----------------------------|:----------------------------|:--------------------------| | Total derivative assets | $71 | $(71) | $0 | | Total derivative liabilities | $(95) | $95 | $0 | | Debt Metric (Millions of dollars) | June 30, 2024 | December 31, 2023 | |:----------------------------------|:--------------|:------------------| | Estimated fair value of consolidated long-term debt | $20,800 | $21,400 | | Book value of consolidated long-term debt | $21,700 | $21,700 | E. RISK-MANAGEMENT AND HEDGING ACTIVITIES USING DERIVATIVES ONEOK uses physical-forward purchases and sales, and financial derivatives to manage exposure to commodity price and interest-rate fluctuations for natural gas, NGLs, Refined Products, and crude oil. As of June 30, 2024, total derivative assets were $71 million and liabilities were $(95) million, with significant notional quantities in cash flow hedges for natural gas, NGLs, Refined Products, crude oil, and power - Uses physical-forward purchases/sales and financial derivatives to manage commodity price and interest-rate risks, not for trading[33] | Derivative Type (Millions of dollars) | June 30, 2024 - Assets | June 30, 2024 - (Liabilities) | December 31, 2023 - Assets | December 31, 2023 - (Liabilities) | |:--------------------------------------|:-----------------------|:------------------------------|:---------------------------|:----------------------------------| | Derivatives designated as hedging instruments | $63 | $(85) | $163 | $(78) | | Derivatives not designated as hedging instruments | $8 | $(10) | $14 | $(6) | | Total derivatives | $71 | $(95) | $177 | $(84) | | Contract Type (Notional Quantities) | June 30, 2024 - Net Purchased/Payor (Sold/Receiver) | December 31, 2023 | |:------------------------------------|:----------------------------------------------------|:------------------| | Natural gas (Bcf) - Fixed price | (25.3) | (16.0) | | NGLs, Refined Products and crude oil (MMBbl) - Fixed price | (11.1) | (14.5) | | Power (GWh) - Fixed price | 66.2 | 22.1 | | Natural gas (Bcf) - Basis | (24.2) | (16.0) | F. DEBT Current maturities of long-term debt totaled $1,354 million at June 30, 2024, a significant increase from December 31, 2023. The company had $180 million in commercial paper outstanding at June 30, 2024, compared to none at year-end 2023. The $2.5 Billion Credit Agreement was amended in May 2024, extending its maturity to June 2028, and the leverage ratio covenant was increased to 5.5 to 1 until March 31, 2025, due to an NGL pipeline acquisition | Current Maturities of Long-Term Debt (Millions of dollars) | June 30, 2024 | |:-----------------------------------------------------------|:--------------| | $500 at 2.75% due September 2024 | $484 | | $250 at 3.2% due March 2025 | $250 | | $500 at 4.9% due March 2025 | $500 | | Guardian $120 term loan, rate of 6.57% due June 2025 | $120 | | Total current maturities of long-term debt | $1,354 | - Commercial paper outstanding was $180 million at June 30, 2024, with a weighted-average interest rate of 5.49%[39] - The $2.5 Billion Credit Agreement maturity date was extended to June 2028, and the leverage ratio covenant was increased to 5.5 to 1 until March 31, 2025, following an NGL pipeline acquisition[40] G. EQUITY Common stock dividends of 99 cents per share were paid in February and May 2024, and another 99 cents per share was declared for August 2024. Series E Preferred Stock dividends of $0.3 million were paid in February and May 2024, with another $0.3 million declared for August 2024 - Common stock dividends of 99 cents per share were paid in February and May 2024, and declared for August 2024[42] - Series E Preferred Stock dividends of $0.3 million were paid in February and May 2024, and declared for August 2024, at a rate of 5.5% per year[42] H. EARNINGS PER SHARE Basic and diluted EPS for the three months ended June 30, 2024, were $1.33, an increase from $1.04 in the prior year. For the six months ended June 30, 2024, basic EPS was $2.43 and diluted EPS was $2.42, a decrease from $3.38 in the prior year, primarily due to the impact of the Medford incident settlement gain in 2023 | EPS Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:-----------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Basic EPS | $1.33 | $1.04 | $2.43 | $3.38 | | Diluted EPS| $1.33 | $1.04 | $2.42 | $3.38 | I. UNCONSOLIDATED AFFILIATES Equity in net earnings from investments in unconsolidated affiliates significantly increased to $88 million for the three months and $164 million for the six months ended June 30, 2024, compared to the prior year. This growth was primarily driven by contributions from Northern Border, Overland Pass, Saddlehorn, and BridgeTex. ONEOK increased its ownership in Saddlehorn to 40% in March 2024 | Affiliate (Millions of dollars) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:--------------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Northern Border | $22 | $14 | $47 | $38 | | Overland Pass | $23 | $13 | $38 | $22 | | Saddlehorn | $13 | $0 | $23 | $0 | | BridgeTex | $11 | $0 | $18 | $0 | | Total Equity in net earnings from investments | $88 | $43 | $164 | $83 | - Purchased an additional 10% interest in Saddlehorn in March 2024, increasing ownership to 40%[48] J. COMMITMENTS AND CONTINGENCIES ONEOK operates under numerous health, safety, and environmental regulations, with management believing no material noncompliance risk exists. The company settled personal injury cases related to the 2020 Corpus Christi Terminal fire in Q1 2024, with all settlement payments made in Q2 2024 and fully offset by insurance proceeds. Other legal proceedings are not expected to have a material adverse effect - Management believes there is no material risk of noncompliance with regulatory, environmental, and safety laws that would adversely affect consolidated results[50] - Settled all remaining personal injury claims related to the 2020 Corpus Christi Terminal fire in Q1 2024, with payments fully offset by insurance proceeds in Q2 2024[51] K. REVENUES Contract liabilities increased to $159 million at June 30, 2024, from $150 million at December 31, 2023, primarily related to deferred revenue on transportation and storage contracts. The total value of unsatisfied performance obligations expected to be recognized in revenue is $6,007 million, with $650 million in the remainder of 2024 and $1,120 million in 2025 | Contract Liabilities (Millions of dollars) | Amount | |:-------------------------------------------|:-------| | Balance at December 31, 2023 | $150 | | Revenue recognized included in beginning balance | $(114) | | Net additions | $123 | | Balance at June 30, 2024 | $159 | | Expected Period of Recognition in Revenue (Millions of dollars) | Amount | |:----------------------------------------------------------------|:-------| | Remainder of 2024 | $650 | | 2025 | $1,120 | | 2026 | $940 | | 2027 | $835 | | 2028 and beyond | $2,462 | | Total | $6,007 | L. SEGMENTS ONEOK operates through four reportable segments: Natural Gas Gathering and Processing, Natural Gas Liquids, Natural Gas Pipelines, and Refined Products and Crude. The Refined Products and Crude segment, added through the Magellan Acquisition, significantly contributed to revenues and Adjusted EBITDA in 2024. All segments showed growth in Adjusted EBITDA for the three months ended June 30, 2024, with Natural Gas Liquids and Refined Products and Crude being the largest contributors - ONEOK operates four reportable business segments: Natural Gas Gathering and Processing, Natural Gas Liquids, Natural Gas Pipelines, and Refined Products and Crude[56] | Segment (Millions of dollars) | Three Months Ended June 30, 2024 - Total Revenues | Three Months Ended June 30, 2024 - Segment Adjusted EBITDA | |:------------------------------|:--------------------------------------------------|:-----------------------------------------------------------| | Natural Gas Gathering and Processing | $846 | $371 | | Natural Gas Liquids | $3,530 | $635 | | Natural Gas Pipelines | $163 | $152 | | Refined Products and Crude | $1,014 | $467 | | Total Segments | $5,553 | $1,625 | | Segment (Millions of dollars) | Six Months Ended June 30, 2024 - Total Revenues | Six Months Ended June 30, 2024 - Segment Adjusted EBITDA | |:------------------------------|:------------------------------------------------|:---------------------------------------------------------| | Natural Gas Gathering and Processing | $1,856 | $677 | | Natural Gas Liquids | $6,966 | $1,223 | | Natural Gas Pipelines | $348 | $317 | | Refined Products and Crude | $1,858 | $848 | | Total Segments | $11,028 | $3,065 | ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides a detailed discussion of ONEOK's financial condition and results of operations, highlighting recent developments, market conditions, capital projects, and segment performance. It also covers liquidity, capital resources, cash flow analysis, and forward-looking statements, emphasizing the impact of the Magellan Acquisition and ongoing capital investments RECENT DEVELOPMENTS ONEOK completed the acquisition of Gulf Coast NGL pipelines for $280 million in June 2024. Earnings increased in Q2 2024 due to higher NGL and natural gas processing volumes, increased transportation services, and contributions from the new Refined Products and Crude segment. Key capital projects include the MB-6 fractionator, West Texas NGL pipeline expansion, Elk Creek pipeline expansion, and Greater Denver pipeline expansion. A $2.0 billion share repurchase program was authorized in January 2024, and quarterly common stock dividends increased by 3.7% year-over-year - Completed acquisition of Gulf Coast NGL pipelines from Easton Energy for approximately $280 million in June 2024[71] - Q2 2024 earnings increased due to higher NGL and natural gas processing volumes in the Rocky Mountain region, increased Natural Gas Pipelines transportation services, and contributions from the Refined Products and Crude segment[72] Key Capital Projects | Project | Scope | Approximate Cost | Expected Completion | |:----------------------------------|:----------------------------------------------------------------------------------|:---------------------|:--------------------| | MB-6 fractionator | 125 MBbl/d NGL fractionator in Mont Belvieu, Texas | $550 million | Year-End 2024 | | West Texas NGL pipeline expansion | Increase capacity via pipeline looping in the Permian Basin | $520 million | Year-End 2024 | | Elk Creek pipeline expansion | Increase capacity to 435 MBbl/d out of the Rocky Mountain region | $355 million | First Quarter 2025 | | Greater Denver pipeline expansion | Increase total system capacity by 35 MBbl/d and additional expansion capabilities | $480 million | Mid-2026 | - Board authorized a $2.0 billion share repurchase program in January 2024, targeting utilization over four years, with no shares repurchased as of July 29, 2024[75] - Quarterly common stock dividend of 99 cents per share paid in February and May 2024, representing a 3.7% increase year-over-year[76] FINANCIAL RESULTS AND OPERATING INFORMATION ONEOK evaluates performance using operating income, net income, diluted EPS, and Adjusted EBITDA, with segment results analyzed by Adjusted EBITDA and operating metrics. Total revenues increased significantly for both the three and six months ended June 30, 2024, primarily due to the Magellan Acquisition and higher service revenues. Operating income also saw substantial growth, while net income and diluted EPS showed mixed results due to prior-year non-recurring items and increased interest expense How We Evaluate Our Operations Management assesses performance using operating income, net income, diluted EPS, and Adjusted EBITDA, along with segment-specific volume and rate statistics. Adjusted EBITDA, a non-GAAP measure, includes contributions from unconsolidated affiliates and is used for financial performance evaluation and industry comparison - Key consolidated financial metrics include operating income, net income, diluted EPS, and adjusted EBITDA[77] - Adjusted EBITDA is a non-GAAP measure, defined as net income adjusted for interest expense, depreciation and amortization, noncash impairment charges, income taxes, noncash compensation expense, and certain other noncash items[78] - Beginning in 2023, the calculation of adjusted EBITDA was updated to include adjusted EBITDA from unconsolidated affiliates[78] Selected Financial Results Total revenues increased by $1,162 million (31.1%) for the three months and $1,422 million (17.2%) for the six months ended June 30, 2024, compared to the prior year. Operating income grew by $492 million (66.8%) for the three months and $59 million (2.6%) for the six months. Net income increased by $312 million (66.7%) for the three months but decreased by $98 million (6.5%) for the six months. Diluted EPS followed similar trends. Adjusted EBITDA saw substantial increases for both periods | Financial Results (Millions of dollars, except per share) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:----------------------------------------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Total revenues | $4,894 | $3,732 | $9,675 | $8,253 | | Operating income | $1,229 | $737 | $2,293 | $2,234 | | Net income | $780 | $468 | $1,419 | $1,517 | | Diluted EPS | $1.33 | $1.04 | $2.42 | $3.38 | | Adjusted EBITDA | $1,624 | $981 | $3,065 | $2,714 | | Capital expenditures | $479 | $305 | $991 | $594 | Consolidated Operations Operating income increased by $492 million for the three months ended June 30, 2024, primarily due to contributions from the Refined Products and Crude segment ($338 million), higher NGL and natural gas processing volumes in Natural Gas Gathering and Processing ($51 million), and increased exchange services in Natural Gas Liquids ($88 million). For the six months, operating income increased by $59 million, with the Refined Products and Crude segment contributing $600 million, offset by a $622 million decrease in Natural Gas Liquids due to a prior-year insurance settlement gain - Operating income increased $492 million for the three months ended June 30, 2024, driven by: Natural Gas Gathering and Processing (+$51 million), Natural Gas Liquids (+$88 million), Natural Gas Pipelines (+$11 million), and Refined Products and Crude (+$338 million from Magellan Acquisition)[83] - Operating income increased $59 million for the six months ended June 30, 2024, driven by: Natural Gas Gathering and Processing (+$66 million), Natural Gas Pipelines (+$14 million), and Refined Products and Crude (+$600 million from Magellan Acquisition), offset by Natural Gas Liquids (-$622 million due to 2023 Medford incident insurance settlement gain)[84] - Net income and diluted EPS increased for the three months but decreased for the six months ended June 30, 2024, primarily due to the Medford incident impact in 2023 and higher interest expense from the Magellan Acquisition[85] - Capital expenditures increased for both periods due to capital projects like the MB-6 fractionator and NGL pipeline expansion[85] Natural Gas Gathering and Processing Adjusted EBITDA for the Natural Gas Gathering and Processing segment increased by $58 million for the three months and $79 million for the six months ended June 30, 2024. This growth was primarily driven by the sale of certain Kansas assets and higher volumes in the Rocky Mountain region, partially offset by lower realized NGL and natural gas prices. Natural gas processed volumes increased, and the average fee rate rose due to inflation-based escalators | Metric (Millions of dollars) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:-----------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Adjusted EBITDA | $371 | $313 | $677 | $598 | | Capital expenditures | $101 | $84 | $217 | $182 | - Adjusted EBITDA increased by $58 million (three months) and $79 million (six months) due to the sale of Kansas assets and higher volumes in the Rocky Mountain region, partially offset by lower realized NGL and natural gas prices[88] | Operating Information | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:----------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Natural gas processed (BBtu/d) | 3,102 | 2,922 | 2,998 | 2,858 | | Average fee rate ($/MMBtu) | $1.22 | $1.20 | $1.22 | $1.17 | - Hedged approximately 70% of forecasted equity volumes for 2024 to mitigate commodity price risk[91] Natural Gas Liquids Adjusted EBITDA for the Natural Gas Liquids segment increased by $102 million for the three months ended June 30, 2024, driven by higher exchange services and lower third-party fractionation costs related to the Medford incident. However, for the six months, Adjusted EBITDA decreased by $593 million, primarily due to the $779 million insurance settlement gain in 2023 related to the Medford incident. Capital expenditures increased due to projects like the MB-6 fractionator and pipeline expansions | Metric (Millions of dollars) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:-----------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Adjusted EBITDA | $635 | $533 | $1,223 | $1,816 | | Capital expenditures | $285 | $169 | $538 | $306 | - Three-month Adjusted EBITDA increased by $102 million due to higher exchange services (Rocky Mountain region volumes, higher fee rates, lower unfractionated NGL inventory) and lower Medford incident fractionation costs[93] - Six-month Adjusted EBITDA decreased by $593 million, primarily due to the $779 million Medford incident insurance settlement gain in 2023, partially offset by increased exchange services and higher adjusted EBITDA from unconsolidated affiliates[94] | Operating Information | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:----------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Raw feed throughput (MBbl/d) | 1,365 | 1,399 | 1,303 | 1,328 | Natural Gas Pipelines Adjusted EBITDA for the Natural Gas Pipelines segment increased by $19 million for the three months and $26 million for the six months ended June 30, 2024, primarily due to higher transportation services from increased firm and interruptible rates. Capital expenditures also increased, driven by projects to reactivate idled storage in Texas. Natural gas transportation capacity contracted increased due to expansion projects | Metric (Millions of dollars) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:-----------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Adjusted EBITDA | $152 | $133 | $317 | $291 | | Capital expenditures | $52 | $39 | $131 | $85 | - Adjusted EBITDA increased by $19 million (three months) and $26 million (six months) due to higher transportation services from increased firm and interruptible rates[99] | Operating Information | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:----------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Natural gas transportation capacity contracted (MDth/d) | 7,991 | 7,656 | 8,039 | 7,675 | | Transportation capacity contracted (%) | 96% | 95% | 96% | 95% | Refined Products and Crude The Refined Products and Crude segment, acquired through Magellan, contributed $467 million in Adjusted EBITDA for the three months and $848 million for the six months ended June 30, 2024. This segment reported significant product sales and transportation revenues, with Refined Products volume shipped at 1,536 MBbl/d and Crude oil volume shipped at 731 MBbl/d for the three months ended June 30, 2024 | Metric (Millions of dollars) | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | |:-----------------------------|:---------------------------------|:-------------------------------| | Product sales | $492 | $843 | | Transportation revenues | $360 | $700 | | Storage, terminals and other revenues | $162 | $315 | | Adjusted EBITDA | $467 | $848 | | Capital expenditures | $33 | $75 | | Operating Information | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | |:----------------------|:---------------------------------|:-------------------------------| | Refined Products volume shipped (MBbl/d) | 1,536 | 1,473 | | Crude oil volume shipped (MBbl/d) | 731 | 739 | Non-GAAP Financial Measures Adjusted EBITDA, a non-GAAP measure, is reconciled from net income and segment adjusted EBITDA. For the three months ended June 30, 2024, Adjusted EBITDA was $1,624 million, and for the six months, it was $3,065 million, showing significant increases from the prior year, primarily driven by the Magellan Acquisition and operational improvements | Reconciliation of net income to adjusted EBITDA (Millions of dollars) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:--------------------------------------------------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Net income | $780 | $468 | $1,419 | $1,517 | | Interest expense, net of capitalized interest | $298 | $180 | $598 | $346 | | Depreciation and amortization | $262 | $170 | $516 | $332 | | Income taxes | $243 | $145 | $451 | $475 | | Adjusted EBITDA from unconsolidated affiliates | $110 | $53 | $211 | $109 | | Equity in net earnings from investments | $(88) | $(43) | $(164) | $(83) | | Noncash compensation expense and other | $19 | $8 | $34 | $18 | | Adjusted EBITDA | $1,624 | $981 | $3,065 | $2,714 | CONTINGENCIES Information regarding regulatory and legal matters is detailed in Note J of the Notes to Consolidated Financial Statements - Regulatory and legal matters are discussed in Note J of the Notes to Consolidated Financial Statements[105] LIQUIDITY AND CAPITAL RESOURCES ONEOK's liquidity is primarily supported by operating cash flows, its $2.5 Billion Credit Agreement (expiring June 2028), and access to a $1.0 billion 'at-the-market' equity program. As of June 30, 2024, the company had a working capital deficit of $1.5 billion, mainly due to current maturities of long-term debt and short-term borrowings. Capital expenditures for the six months ended June 30, 2024, were $991 million, with a full-year expectation of $1.75-$1.95 billion. The company maintains investment-grade credit ratings with a stable outlook General ONEOK's primary cash sources include operating cash flows, commercial paper, the $2.5 Billion Credit Agreement, debt issuances, and common stock issuance. These are expected to fund operations, acquisitions, capital expenditures, dividends, debt maturities, share repurchases, and affiliate contributions. The company believes it has sufficient liquidity, including access to a $1.0 billion 'at-the-market' equity program - Primary sources of cash inflows are operating cash flows, commercial paper program, $2.5 Billion Credit Agreement, debt issuances, and common stock issuance[106] - Expected to provide sufficient resources for operations, acquisitions, capital expenditures, dividends, debt maturities, share repurchases, and contributions to unconsolidated affiliates[106] - Believes it has sufficient liquidity due to the $2.5 Billion Credit Agreement (expires June 2028) and access to a $1.0 billion 'at-the-market' equity program[106] Cash Management As of June 30, 2024, ONEOK had $36 million in cash and cash equivalents. The company utilizes a centralized cash management program to consolidate cash assets of nonguarantor operating subsidiaries, providing financial flexibility and reducing borrowing and transaction costs - Cash and cash equivalents totaled $36 million at June 30, 2024[107] - Uses a centralized cash management program to concentrate cash assets of nonguarantor operating subsidiaries for financial flexibility and cost reduction[107] Guarantees ONEOK, ONEOK Partners, the Intermediate Partnership, and Magellan have cross guarantees for ONEOK's and ONEOK Partners' indebtedness, which are full, irrevocable, unconditional, and absolute joint and several guarantees. These guarantees rank equally with existing and future senior unsecured indebtedness - ONEOK, ONEOK Partners, Intermediate Partnership, and Magellan have cross guarantees for ONEOK's and ONEOK Partners' indebtedness[108] - Guarantees are full, irrevocable, unconditional, and absolute joint and several, ranking equally with existing and future senior unsecured indebtedness[108] Short-term Liquidity Principal sources of short-term liquidity include operating cash flows, distributions from unconsolidated affiliates, commercial paper, and the $2.5 Billion Credit Agreement. As of June 30, 2024, there were no borrowings under the credit agreement, and the company was in compliance with all covenants. A working capital deficit of $1.5 billion existed, primarily due to current maturities of long-term debt and short-term borrowings, which is not expected to materially impact cash flows or operations - Principal sources of short-term liquidity are operating cash flows, distributions from unconsolidated affiliates, commercial paper program, and the $2.5 Billion Credit Agreement[109] - As of June 30, 2024, no borrowings were outstanding under the $2.5 Billion Credit Agreement, and all covenants were in compliance[109] - Working capital deficit of $1.5 billion at June 30, 2024, primarily due to current maturities of long-term debt and short-term borrowings, not expected to have a material adverse impact[110] Long-term Financing Long-term financing requirements are expected to be met through issuing long-term notes, common stock, convertible debt, preferred equity, asset securitization, or sale and lease-back of facilities. The company may also repurchase outstanding debt through various market transactions - Expects to fund longer-term financing requirements by issuing long-term notes, common stock, convertible debt securities, preferred equity securities, asset securitization, and sale and lease-back of facilities[111] - May retire or purchase outstanding debt through cash purchases, exchanges for equity or debt, open-market repurchases, or privately negotiated transactions[112] Share Repurchase Program In January 2024, the Board authorized a $2.0 billion share repurchase program for common stock, to be largely utilized over the next four years, funded by cash on hand, operating cash flows, and short-term borrowings. No shares have been repurchased under this program as of July 29, 2024 - Board authorized a $2.0 billion share repurchase program for common stock in January 2024, targeting utilization over four years[113] - Purchases expected to be funded by cash on hand, operating cash flows, and short-term borrowings[113] - No shares repurchased under the program as of July 29, 2024[113] Capital Expenditures Capital expenditures, excluding AFUDC, were $991 million for the six months ended June 30, 2024, an increase from $594 million in the prior year. Total capital expenditures for 2024 are expected to be $1.75-$1.95 billion. These are typically financed through operating cash flows and debt - Capital expenditures (excluding AFUDC) were $991 million for the six months ended June 30, 2024, up from $594 million in 2023[114] - Expected total capital expenditures for 2024 (excluding AFUDC and capitalized interest) are $1.75-$1.95 billion[114] Credit Ratings ONEOK maintains investment-grade credit ratings from Moody's (Baa2), S&P (BBB), and Fitch (BBB), all with a stable outlook as of July 29, 2024. A downgrade could increase borrowing costs and potentially affect access to the commercial paper market, but would not constitute a default under the $2.5 Billion Credit Agreement | Rating Agency | Long-Term Rating | Short-Term Rating | Outlook | |:--------------|:-----------------|:------------------|:--------| | Moody's | Baa2 | Prime-2 | Stable | | S&P | BBB | A-2 | Stable | | Fitch | BBB | F2 | Stable | - Credit ratings are investment grade and may be affected by leverage, liquidity, credit profile, or potential transactions[114] Dividends Common stock dividends of 99 cents per share were paid in February and May 2024, and declared for August 2024, representing a 3.7% increase year-over-year. Series E Preferred Stock dividends of $0.3 million were paid and declared for the same periods. Cash flows from operations exceeded dividends paid by $870 million for the six months ended June 30, 2024, and are expected to continue funding dividends - Common stock dividends of 99 cents per share ($3.96 annualized) paid in February and May 2024, a 3.7% increase YoY[116] - Series E Preferred Stock dividends of $0.3 million paid in February and May 2024, and declared for August 2024[116] - Cash flows from operations exceeded dividends paid by $870 million for the six months ended June 30, 2024, expected to sufficiently fund future dividends[117] CASH FLOW ANALYSIS For the six months ended June 30, 2024, cash provided by operating activities increased by $33 million to $2,026 million, primarily due to the Magellan Acquisition, partially offset by prior-year Medford settlement proceeds. Cash used in investing activities significantly increased by $981 million to $1,334 million due to higher capital expenditures and acquisitions. Cash used in financing activities decreased by $760 million to $994 million, mainly due to lower debt repayments | Cash Flow Activity (Millions of dollars) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Variance (2024 vs. 2023) | |:-----------------------------------------|:-------------------------------|:-------------------------------|:-------------------------| | Operating activities | $2,026 | $1,993 | +$33 | | Investing activities | $(1,334) | $(353) | -$(981) | | Financing activities | $(994) | $(1,754) | +$760 | | Change in cash and cash equivalents | $(302) | $(114) | -$(188) | | Cash and cash equivalents at end of period | $36 | $106 | -$(70) | - Operating cash flows increased by $288 million before changes in operating assets and liabilities, primarily due to the Magellan Acquisition, partially offset by 2023 Medford settlement proceeds[121] - Investing cash flows increased by $981 million due to higher capital expenditures and acquisitions in 2024, and insurance proceeds from the Medford settlement in 2023[123] - Financing cash flows decreased by $760 million due to repayment of long-term debt in 2023 and short-term borrowings in 2024, partially offset by increased dividends paid in 2024[123] REGULATORY, ENVIRONMENTAL AND SAFETY MATTERS Information regarding regulatory, environmental, and safety matters is referenced to the Annual Report and Note J of the Notes to Consolidated Financial Statements - Regulatory, environmental, and safety matters are discussed in the Annual Report and Note J of the Notes to Consolidated Financial Statements[124] IMPACT OF NEW ACCOUNTING STANDARDS Discussion of new accounting standards is provided in Note A of the Notes to Consolidated Financial Statements - New accounting standards are discussed in Note A of the Notes to Consolidated Financial Statements[125] CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements requires estimates and assumptions that affect reported amounts. Information on critical accounting estimates is available in the Annual Report - Financial statements require estimates and assumptions; information on critical accounting estimates is in the Annual Report[126] FORWARD-LOOKING STATEMENTS This section contains forward-looking statements regarding anticipated financial performance, liquidity, future operations, and market conditions, subject to substantial risks and uncertainties. Key factors that could cause actual results to differ materially include commodity price volatility, dependence on third-party infrastructure, ESG issues, operational hazards, regulatory changes, interest rate fluctuations, and integration risks from acquisitions like Magellan - Forward-looking statements involve substantial risk and uncertainties, relating to financial performance, liquidity, future operations, business prospects, regulatory/legal outcomes, and market conditions[127] - Important factors that could cause actual results to differ include: demand for natural gas, NGLs, Refined Products and crude oil; unfavorable economic conditions and inflationary pressures; volatility of commodity prices; dependence on third-party infrastructure; ESG issues; operational hazards; inability of insurance to cover losses; increased regulation; and risks related to the Magellan Acquisition[130][131] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes in market risk exposures since December 31, 2023. Further information on hedging activities is available in Note E of the Notes to Consolidated Financial Statements - No material changes in market risk exposures since December 31, 2023[134] - Information on hedging activities is provided in Note E of the Notes to Consolidated Financial Statements[134] ITEM 4. CONTROLS AND PROCEDURES The Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of June 30, 2024. No material changes in internal control over financial reporting occurred during the quarter - Disclosure controls and procedures were effective as of June 30, 2024[135] - No material changes in internal control over financial reporting during the quarter ended June 30, 2024[135] PART II - OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and other disclosures relevant to the company's operations ITEM 1. LEGAL PROCEEDINGS Legal proceedings information, including environmental proceedings with a $1 million disclosure threshold, is detailed in Note J of the Notes to Consolidated Financial Statements in this Quarterly Report and Note O in the Annual Report - Legal proceedings information is included in Note J of the Notes to Consolidated Financial Statements in this Quarterly Report and Note O in the Annual Report[136] - A $1 million threshold is used for disclosing environmental proceedings[136] ITEM 1A. RISK FACTORS Investors should consider the risks outlined in Part I, Item 1A of the Annual Report and the 'Forward-Looking Statements' section of this Quarterly Report. New risks may emerge, and other factors could adversely affect future results - Investors should consider risks set forth in Part I, Item 1A, Risk Factors, of the Annual Report and 'Forward-Looking Statements' in this Quarterly Report[137] - New risks may emerge, and other factors could adversely affect future results[137] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS No shares were purchased under the $2.0 billion share repurchase program during the three months ended June 30, 2024. The program, authorized in January 2024, will terminate upon completion or by January 1, 2029 | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of the Publicly Announced Program (a) | Maximum Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program (Millions of dollars) | |:----------------------|:---------------------------------|:-----------------------------|:-------------------------------------------------------------------------------|:-------------------------------------------------------------------------------------------------------------| | April 1 - April 30, 2024 | — | $— | — | $2,000 | | May 1 - May 31, 2024 | — | $— | — | $2,000 | | June 1 - June 30, 2024 | — | $— | — | $2,000 | | Total | — | | — | | - A $2.0 billion share repurchase program was authorized in January 2024, with no shares purchased as of June 30, 2024[139] ITEM 3. DEFAULTS UPON SENIOR SECURITIES This item is not applicable to the current report - Not applicable[140] ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to the current report - Not applicable[140] ITEM 5. OTHER INFORMATION This item is not applicable to the current report - Not applicable[140] ITEM 6. EXHIBITS This section lists all exhibits filed as part of the Quarterly Report, including corporate governance documents, credit agreements, and certifications. It also specifies the Inline XBRL-related documents attached, such as financial statements and taxonomy documents - Exhibits include Amended and Restated Certificate of Incorporation, Amended and Restated By-laws, and an Extension Agreement for the $2.5 Billion Credit Agreement[142] - Certifications by the CEO and CFO pursuant to the Sarbanes-Oxley Act of 2002 are included[144] - Inline XBRL-related documents, including financial statements and taxonomy documents, are attached as Exhibit 101[144] Signature The report is duly signed on behalf of ONEOK, Inc. by Walter S. Hulse III, Chief Financial Officer, Treasurer, and Executive Vice President, Investor Relations and Corporate Development, on August 6, 2024 - Report signed by Walter S. Hulse III, Chief Financial Officer, Treasurer and Executive Vice President, Investor Relations and Corporate Development, on August 6, 2024[146]