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| 8-K - OKE Q4 2017 EARNINGS RELEASE - ONEOK INC /NEW/ | okeq42017earningsrelease.htm |
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February 26, 2018 Analyst Contact: Megan Patterson
918-561-5325
Media Contact: Brad Borror
918-588-7582
ONEOK Announces Higher Fourth-quarter and
Full-year 2017 Operating Income and Adjusted EBITDA
Natural Gas Volumes Processed and
NGL Volumes Gathered Increase
TULSA, Okla. - Feb. 26, 2018 - ONEOK, Inc. (NYSE: OKE) today announced higher
fourth-quarter and full-year 2017 operating income and adjusted earnings before interest, taxes,
depreciation and amortization (adjusted EBITDA), compared with the same periods in 2016.
Results primarily benefited from natural gas and natural gas liquids (NGL) volume growth in the
Williston and Permian basins and STACK and SCOOP areas, and higher average fee rates in the
natural gas gathering and processing segment.
SUMMARY
• Fourth-quarter 2017 operating income and adjusted EBITDA increased 21 and 16 percent,
respectively, compared with the fourth quarter 2016;
• Full-year 2017 operating income and adjusted EBITDA each increased 7 percent compared
with 2016;
• Fourth-quarter 2017 net income attributable to ONEOK totaled $63.0 million, or 16 cents per
diluted share, which includes one-time noncash charges of $141.3 million, or 36 cents per
diluted share, related to the Tax Cuts and Jobs Act;
• Fourth-quarter and full-year 2017 dividend coverage ratios were 1.28 and 1.34, respectively;
• The natural gas gathering and processing segment’s average fee rate was 86 cents per Million
British thermal units (MMBtu) for the full-year 2017, compared with 76 cents per MMBtu in
2016; and
• Fourth-quarter 2017 natural gas volumes processed increased 20 percent and NGL volumes
gathered increased 17 percent, compared with 2016.
ONEOK Announces Higher Fourth-quarter and
Full-year 2017 Operating Income and Adjusted EBITDA
Feb. 26, 2018
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FOURTH-QUARTER AND FULL-YEAR 2017 FINANCIAL HIGHLIGHTS
Three Months Ended Years Ended
December 31, December 31,
2017 2016 2017 2016
(Millions of dollars, except per share and coverage
ratio amounts)
Net income attributable to ONEOK (a) $ 63.0 $ 90.5 $ 387.8 $ 352.0
Net income per diluted share (a) $ 0.16 $ 0.43 $ 1.29 $ 1.66
Adjusted EBITDA (b) $ 547.7 $ 474.1 $ 1,986.9 $ 1,849.9
DCF (b) $ 366.0 $ 318.3 $ 1,384.7 $ 1,322.3
Dividend coverage ratio (b) 1.28 1.41 1.34 1.51
Operating income $ 397.8 $ 329.6 $ 1,380.9 $ 1,285.7
Operating costs $ 216.8 $ 204.1 $ 833.6 $ 757.1
Depreciation and amortization $ 103.8 $ 99.3 $ 406.3 $ 391.6
Equity in net earnings from investments $ 40.3 $ 39.2 $ 159.3 $ 139.7
Capital expenditures $ 182.0 $ 133.1 $ 512.4 $ 624.6
(a) Three-month and full-year periods ending Dec. 31, 2017, include one-time noncash charges of $141.3 million, or 36
cents per diluted share and 47 cents per diluted share, respectively, related to the enactment of the Tax Cuts and Jobs Act.
The full-year ending Dec. 31, 2017, also includes noncash impairment charges of approximately $20.2 million, or 4 cents
per diluted share, and approximately $50 million, or 10 cents per diluted share, in one-time and ONEOK and ONEOK
Partners merger transaction-related costs.
(b) Adjusted EBITDA; distributable cash flow (DCF); and dividend coverage ratio are non-GAAP measures. Full-year 2017
amounts include transaction-related pretax cash costs of approximately $30 million, or 0.04 times dividend coverage,
associated with the ONEOK and ONEOK Partners merger transaction. Reconciliations to relevant GAAP measures are
included in this news release.
“Producer activity and production results increased across ONEOK’s operating footprint
in 2017, driving volume growth and adjusted EBITDA increases compared with 2016,” said
Terry K. Spencer, ONEOK president and chief executive officer. “We continue to see production
growth, largely driven by improved producer drilling economics and higher rig efficiencies.
“ONEOK is investing in our systems to grow with our customers and address their needs
for additional capacity,” Spencer added. “We’ve announced approximately $4.2 billion of
organic capital-growth projects with attractive returns since June 2017 that will be highly
accretive, complement our existing assets and provide essential services in high-producing
regions.”
FOURTH-QUARTER AND FULL-YEAR 2017 FINANCIAL PERFORMANCE
ONEOK’s operating income increased 21 percent in the fourth quarter 2017 and 7
percent for the full-year 2017, compared with the same periods in 2016. Adjusted EBITDA
increased 16 percent in the fourth quarter 2017 and 7 percent for the full-year 2017, compared
with the same periods in 2016. Higher 2017 results were driven primarily by natural gas and
natural gas liquids volume growth in ONEOK’s natural gas gathering and processing and natural
ONEOK Announces Higher Fourth-quarter and
Full-year 2017 Operating Income and Adjusted EBITDA
Feb. 26, 2018
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gas liquids segments, offset partially by higher operating costs associated with the growth of
ONEOK’s operations and routine maintenance projects.
EARNINGS PRESENTATION AND KEY STATISTICS:
Additional financial and operating information that will be discussed on the fourth-
quarter and year-end 2017 conference call is accessible on ONEOK’s website, www.oneok.com,
or from the links below.
> View earnings presentation
> View earnings tables
FINANCIAL HIGHLIGHTS:
• Paying in February 2018 a quarterly dividend of 77 cents per share, or $3.08 per share on an
annualized basis, an increase of 25 percent compared with the same period in 2017;
• Completing equity issuances through ONEOK’s “at-the-market” equity program in the fourth
quarter 2017 generating net proceeds of $384 million and completing a public common stock
offering in January 2018 resulting in total combined net proceeds of approximately $1.6
billion, which were used to fund recently announced capital-growth projects and repay
outstanding indebtedness. ONEOK does not expect to issue additional equity in 2018 and
well into 2019;
• Repaying in January 2018 the remaining $500 million of the $1.0 billion term loan
agreement due 2019 and short-term borrowings; and
• Having $2.5 billion of borrowing capacity available under its $2.5 billion credit agreement
following the January 2018 equity offering.
CAPITAL-GROWTH ACTIVITIES:
Since June 2017, ONEOK has announced approximately $4.2 billion of organic capital-
growth projects to support increasing production across ONEOK’s operating footprint. These
projects are expected to generate adjusted EBITDA multiples of four to six times and are backed
by a combination of long-term fee-based contracts, volume commitments or acreage dedications.
Based on recent project announcements, ONEOK’s 2018 capital-growth expenditures are
now expected to range from $1,950 million to $2,300 million, compared with the previously
announced range of $1,270 million to $1,530 million. Maintenance capital expenditures of $140
million to $180 million are expected to remain unchanged from ONEOK’s original 2018
financial guidance announced on Jan. 22, 2018.
ONEOK Announces Higher Fourth-quarter and
Full-year 2017 Operating Income and Adjusted EBITDA
Feb. 26, 2018
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Since June 2017, the natural gas liquids segment has announced more than $3.6 billion of
capital-growth projects, which include the following:
Project Scope
Approximate Cost
(Millions of dollars)
Expected
Completion
West Texas LPG
Pipeline expansion
120-mile pipeline lateral extension with 110,000 barrels
per day (bpd) of capacity in the Delaware Basin
$160 Third quarter
2018
Sterling III expansion
60,000 bpd pipeline extension from the Mid-Continent to
the Gulf Coast which increases capacity to 250,000 bpd
$130
Fourth quarter
2018
Elk Creek Pipeline
project
900-mile pipeline from the Williston Basin to the Mid-
Continent with initial capacity up to 240,000 bpd
$1,400 Year-end 2019
Arbuckle II Pipeline
530-mile pipeline from the Mid-Continent to the Gulf
Coast with initial capacity of 400,000 bpd
$1,360
First quarter
2020
MB-4 fractionator
125,000 bpd fractionator and related infrastructure in Mont
Belvieu, Texas
$575
First quarter
2020
Since June 2017, the natural gas gathering and processing segment has announced
approximately $560 million of capital-growth projects, which include the following:
Project Scope
Approximate Cost
(Millions of
dollars)
Expected
Completion
Canadian Valley
expansion
200 million cubic feet per day (MMcf/d) processing
plant expansion in the STACK which increases capacity
to 400 MMcf/d
$160
Fourth quarter
2018
Demicks Lake plant and
infrastructure
200 MMcf/d processing plant and related infrastructure
in the core of the Williston Basin
$400
Fourth quarter
2019
In December 2017, the segment completed a 30-mile natural gas gathering pipeline and
related infrastructure to connect with an existing third-party natural gas processing plant in
Oklahoma, providing ONEOK access to 200 MMcf/d of additional processing capacity.
BUSINESS-SEGMENT RESULTS:
Key financial and operating statistics are listed on page 16 in the tables.
Natural Gas Liquids Segment
The natural gas liquids segment’s fourth-quarter and full-year 2017 adjusted EBITDA
increased 22 and 7 percent, respectively, compared with the same periods in 2016. Volume
growth across ONEOK’s system from increased supply and increased ethane recovery
contributed to higher NGL volumes gathered during the fourth quarter and full year 2017,
compared with 2016. Fourth-quarter and full-year 2017 NGLs fractionated increased 18 percent
and 6 percent respectively, compared with the same periods in 2016.
ONEOK Announces Higher Fourth-quarter and
Full-year 2017 Operating Income and Adjusted EBITDA
Feb. 26, 2018
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As total NGL production increased in 2017, ethane rejection levels on ONEOK’s system
decreased to an average of more than 150,000 bpd in 2017, compared with approximately
175,000 bpd in 2016. ONEOK expects ethane rejection levels on its system to decrease to
approximately 70,000 bpd by the end of 2018 as world-scale petrochemical facilities come
online and NGL exporters increase volumes.
Three Months Ended Years Ended
December 31, December 31,
Natural Gas Liquids Segment 2017 2016 2017 2016
(Millions of dollars)
Adjusted EBITDA $ 309.4 $ 253.6 $ 1,154.9 $ 1,079.6
Capital expenditures $ 54.5 $ 20.4 $ 114.3 $ 105.9
The increase in fourth-quarter 2017 adjusted EBITDA, compared with the fourth quarter
2016, primarily reflects:
• A $51.7 million increase in exchange services due to increased supply in the STACK and
SCOOP areas and the Williston Basin from recently connected natural gas processing
plants, increased ethane recovery in the STACK and SCOOP areas, and the impact of
weather in December 2016, offset partially by lower volumes in the Granite Wash and
Barnett Shale; and
• An $11.7 million increase in optimization and marketing due primarily to higher
optimization volumes and wider location price differentials, offset partially by narrower
product price differentials; offset partially by
• A $12.6 million increase in operating costs due primarily to the timing of routine
maintenance projects and higher labor and employee-related costs.
The increase in adjusted EBITDA for the full year 2017, compared with 2016, primarily
reflects:
• An $81.5 million increase in exchange services due primarily to increased supply and
ethane recovery volumes in the Williston Basin, the STACK and SCOOP areas and the
Powder River Basin; offset partially by lower volumes in the Granite Wash and Barnett
Shale, and reduced volumes related to Hurricane Harvey;
• A $13.5 million increase in optimization and marketing due primarily to higher
optimization volumes and wider location price differentials; and
• A $5.4 million increase in equity in net earnings from investments due primarily to higher
volumes delivered to the Overland Pass Pipeline from the Bakken NGL Pipeline and
higher volumes and increased ethane recovery from plants connected to the Overland
Pass Pipeline; offset partially by
ONEOK Announces Higher Fourth-quarter and
Full-year 2017 Operating Income and Adjusted EBITDA
Feb. 26, 2018
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• A $32.2 million increase in operating costs due primarily to the timing of routine
maintenance projects, higher property taxes, higher labor and employee-related costs and
additional operating costs related to Hurricane Harvey.
Natural Gas Gathering and Processing Segment
The natural gas gathering and processing segment’s fourth-quarter and full-year 2017
adjusted EBITDA increased 14 and 16 percent, respectively, compared with the same periods in
2016.
Volume growth due to increased drilling activity, enhanced producer efficiencies and the
completion of growth projects contributed to increases in natural gas volumes processed of 20
percent and 9 percent in the fourth quarter and full year 2017, respectively, compared with the
same periods in 2016. Volume growth for the full year 2017 was offset partially by natural
production declines on existing wells and the impact of severe winter weather in the first quarter
2017.
This segment also continues to benefit from higher fee-based earnings, with an average
fee rate of 86 cents per MMBtu in 2017, compared with 76 cents per MMBtu in 2016, a 13
percent increase.
Three Months Ended Years Ended
December 31, December 31,
Natural Gas Gathering and Processing Segment 2017 2016 2017 2016
(Millions of dollars)
Adjusted EBITDA $ 144.3 $ 126.6 $ 518.5 $ 446.8
Capital expenditures $ 98.5 $ 84.7 $ 284.2 $ 410.5
Fourth-quarter 2017 adjusted EBITDA increased, compared with the fourth quarter 2016,
which primarily reflects:
• A $37.8 million increase due primarily to natural gas volume growth in the Williston
Basin and the STACK and SCOOP areas, offset partially by natural production declines;
offset partially by
• An $8.0 million decrease due to contract settlements in 2016;
• A $7.2 million increase in operating costs due primarily to higher materials and supplies
expenses, and increased employee-related costs; and
• A $4.4 million decrease due primarily to lower realized natural gas and condensate
prices.
ONEOK Announces Higher Fourth-quarter and
Full-year 2017 Operating Income and Adjusted EBITDA
Feb. 26, 2018
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The increase in adjusted EBITDA for the full year 2017, compared with 2016, primarily
reflects:
• A $66.0 million increase due primarily to natural gas volume growth in the Williston
Basin and the STACK and SCOOP areas, offset partially by natural production declines
and the impact of severe winter weather in the first quarter 2017; and
• A $44.0 million increase due primarily to restructured contracts resulting in higher
average fee rates, offset partially by a lower percentage of proceeds (POP) retained from
the sale of commodities purchased under POP with fee contracts; offset partially by
• A $23.9 million increase in operating costs due primarily to increased labor and
employee-related costs and the growth of ONEOK’s operations;
• An $11.9 million decrease due primarily to lower realized natural gas and condensate
prices; and
• An $8.0 million decrease due to contract settlements in 2016.
Natural Gas Pipelines Segment
The natural gas pipelines segment’s full-year 2017 adjusted EBITDA increased 9 percent,
compared with the same period in 2016. Higher fee-based earnings and increased transportation
capacity contracted, primarily from the 2016 completion of the WesTex pipeline expansion,
contributed to the segment’s results.
Three Months Ended Years Ended
December 31, December 31,
Natural Gas Pipelines Segment 2017 2016 2017 2016
(Millions of dollars)
Adjusted EBITDA $ 88.7 $ 89.9 $ 339.8 $ 313.1
Capital expenditures $ 24.9 $ 24.6 $ 95.6 $ 96.3
Fourth-quarter 2017 adjusted EBITDA was relatively unchanged, compared with the
fourth quarter 2016, which primarily reflects increased operating costs due to routine
maintenance projects and higher employee-related costs, and lower net retained fuel; offset by
higher transportation services and storage revenues.
The increase in adjusted EBITDA for the full year 2017, compared with 2016, primarily
reflects:
• A $26.9 million increase from higher transportation services due primarily to increased
firm demand charge capacity contracted; and
ONEOK Announces Higher Fourth-quarter and
Full-year 2017 Operating Income and Adjusted EBITDA
Feb. 26, 2018
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• A $12.9 million increase in equity in net earnings from investments due primarily to
higher firm transportation revenues on Roadrunner Gas Transmission Pipeline; offset
partially by
• A $10.6 million increase in operating costs due primarily to routine maintenance projects
and higher labor and employee-related costs; and
• A $6.3 million decrease due primarily to gains on sales of excess natural gas in storage in
2016.
EARNINGS CONFERENCE CALL AND WEBCAST:
ONEOK executive management will conduct a conference call at 11 a.m. Eastern Standard
Time (10 a.m. Central Standard Time) on Feb. 27, 2018. The call also will be carried live on
ONEOK’s website.
To participate in the telephone conference call, dial 866-531-8880, pass code 1603660, or log
on to www.oneok.com.
If you are unable to participate in the conference call or the webcast, the replay will be
available on ONEOK’s website, www.oneok.com, for 30 days. A recording will be available by
phone for seven days. The playback call may be accessed at 888-203-1112, pass code 1603660.
LINKS TO EARNINGS TABLES AND PRESENTATION:
Tables:
http://ir.oneok.com/~/media/Files/O/OneOK-IR/financial-reports/2018/q4-2017-earnings-results-financial-news.pdf
Presentation:
http://ir.oneok.com/~/media/Files/O/OneOK-IR/financial-reports/2018/q4-2017-earnings-results-presentation.pdf
NON-GAAP (GENERALLY ACCEPTED ACCOUNTING PRINCIPLES) FINANCIAL
MEASURES:
ONEOK has disclosed in this news release adjusted EBITDA, distributable cash flow and
dividend coverage ratio, which are non-GAAP financial metrics, used to measure the company’s
financial performance and are defined as follows:
• Adjusted EBITDA is defined as net income from continuing operations adjusted for interest
expense, depreciation and amortization, noncash impairment charges, income taxes, noncash
compensation expense, allowance for equity funds used during construction (equity AFUDC),
and other noncash items;
• Distributable cash flow is defined as adjusted EBITDA, computed as described above, less
interest expense, maintenance capital expenditures and equity earnings from investments,
excluding noncash impairment charges, adjusted for cash distributions received from
unconsolidated affiliates and certain other items; and
ONEOK Announces Higher Fourth-quarter and
Full-year 2017 Operating Income and Adjusted EBITDA
Feb. 26, 2018
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• Dividend coverage ratio is defined as ONEOK’s distributable cash flow to ONEOK
shareholders divided by the dividends paid for the period.
These non-GAAP financial measures described above are useful to investors because they,
and similar measures, are used by many companies in the industry as a measure of financial
performance and are commonly employed by financial analysts and others to evaluate our financial
performance and to compare our financial performance with the performance of other companies
within our industry. Adjusted EBITDA, ONEOK distributable cash flow and coverage ratio should
not be considered in isolation or as a substitute for net income or any other measure of financial
performance presented in accordance with GAAP.
These non-GAAP financial measures exclude some, but not all, items that affect net income.
Additionally, these calculations may not be comparable with similarly titled measures of other
companies. Reconciliations of net income to adjusted EBITDA, distributable cash flow and coverage
ratio are included in the tables.
ONEOK, Inc. (pronounced ONE-OAK) (NYSE: OKE) is one of the largest energy midstream service providers in the U.S.,
connecting prolific supply basins with key market centers. It owns and operates one of the nation's premier natural gas
liquids (NGL) systems and is a leader in the gathering, processing, storage and transportation of natural gas. ONEOK’s
operations include a 38,000-mile integrated network of NGL and natural gas pipelines, processing plants, fractionators and
storage facilities in the Mid-Continent, Williston, Permian and Rocky Mountain regions.
ONEOK is a FORTUNE 500 company and is included in Standard & Poor's (S&P) 500 index.
For information about ONEOK, visit the website: www.oneok.com.
For the latest news about ONEOK, find us on LinkedIn, Facebook or Twitter @ONEOKNews.
This news release contains certain "forward-looking statements" within the meaning of federal securities laws. Words such
as "anticipates", "believes," "expects", "intends", "plans", "projects", "will", "would", "should", "may", and similar expressions
may be used to identify forward-looking statements. Forward-looking statements are not statements of historical fact and
reflect our current views about future events. Such forward-looking statements include, but are not limited to, statements
about the benefits of the transaction involving us, including future financial and operating results, our plans, objectives,
expectations and intentions, and other statements that are not historical facts, including future results of operations,
projected cash flow and liquidity, business strategy, expected synergies or cost savings, and other plans and objectives for
future operations. No assurances can be given that the forward-looking statements contained in this news release will
occur as projected and actual results may differ materially from those projected.
Forward-looking statements are based on current expectations, estimates and assumptions that involve a number of risks
and uncertainties, many of which are beyond our control, and are not guarantees of future results. Accordingly, there are
or will be important factors that could cause actual results to differ materially from those indicated in such statements and,
therefore, you should not place undue reliance on any such statements and caution must be exercised in relying on
forward-looking statements. These risks and uncertainties include, without limitation, the following:
• the risk that cost savings, tax benefits and any other synergies from the ONEOK and ONEOK Partners
merger transaction may not be fully realized or may take longer to realize than expected
• the effects of weather and other natural phenomena, including climate change, on our operations,
demand for our services and energy prices;
• competition from other United States and foreign energy suppliers and transporters, as well as
alternative forms of energy, including, but not limited to, solar power, wind power, geothermal energy and
biofuels such as ethanol and biodiesel;
ONEOK Announces Higher Fourth-quarter and
Full-year 2017 Operating Income and Adjusted EBITDA
Feb. 26, 2018
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• the capital intensive nature of our businesses;
• the profitability of assets or businesses acquired or constructed by us;
• our ability to make cost-saving changes in operations;
• risks of marketing, trading and hedging activities, including the risks of changes in energy prices or the
financial condition of our counterparties;
• the uncertainty of estimates, including accruals and costs of environmental remediation;
• the timing and extent of changes in energy commodity prices;
• the effects of changes in governmental policies and regulatory actions, including changes with respect to
income and other taxes, pipeline safety, environmental compliance, climate change initiatives and
authorized rates of recovery of natural gas and natural gas transportation costs;
• the impact on drilling and production by factors beyond our control, including the demand for natural gas
and crude oil; producers' desire and ability to obtain necessary permits; reserve performance; and
capacity constraints on the pipelines that transport crude oil, natural gas and NGLs from producing areas
and our facilities;
• difficulties or delays experienced by trucks, railroads or pipelines in delivering products to or from our
terminals or pipelines;
• changes in demand for the use of natural gas, NGLs and crude oil because of market conditions caused
by concerns about climate change;
• the impact of unforeseen changes in interest rates, debt and equity markets, inflation rates, economic
recession and other external factors over which we have no control, including the effect on pension and
postretirement expense and funding resulting from changes in equity and bond market returns;
• our indebtedness and guarantee obligations could make us vulnerable to general adverse economic and
industry conditions, limit our ability to borrow additional funds and/or place us at competitive
disadvantages compared with our competitors that have less debt, or have other adverse consequences;
• actions by rating agencies concerning our credit;
• the results of administrative proceedings and litigation, regulatory actions, rule changes and receipt of
expected clearances involving any local, state or federal regulatory body, including the Federal Energy
Regulatory Commission (FERC), the National Transportation Safety Board, the Pipeline and Hazardous
Materials Safety Administration (PHMSA), the U.S. Environmental Protection Agency (EPA) and the U.S.
Commodity Futures Trading Commission (CFTC);
• our ability to access capital at competitive rates or on terms acceptable to us;
• risks associated with adequate supply to our gathering, processing, fractionation and pipeline facilities,
including production declines that outpace new drilling or extended periods of ethane rejection;
• the risk that material weaknesses or significant deficiencies in our internal controls over financial
reporting could emerge or that minor problems could become significant;
• the impact and outcome of pending and future litigation, including litigation, if any, relating to the ONEOK
and ONEOK Partners merger transaction;
• the ability to market pipeline capacity on favorable terms, including the effects of:
– future demand for and prices of natural gas, NGLs and crude oil;
– competitive conditions in the overall energy market;
– availability of supplies of Canadian and United States natural gas and crude oil; and
– availability of additional storage capacity;
• performance of contractual obligations by our customers, service providers, contractors and shippers;
• the timely receipt of approval by applicable governmental entities for construction and operation of our
pipeline and other projects and required regulatory clearances;
• our ability to acquire all necessary permits, consents or other approvals in a timely manner, to promptly
obtain all necessary materials and supplies required for construction, and to construct gathering,
processing, storage, fractionation and transportation facilities without labor or contractor problems;
• the mechanical integrity of facilities operated;
• demand for our services in the proximity of our facilities;
• our ability to control operating costs;
• acts of nature, sabotage, terrorism or other similar acts that cause damage to our facilities or our
suppliers' or shippers' facilities;
• economic climate and growth in the geographic areas in which we do business;
ONEOK Announces Higher Fourth-quarter and
Full-year 2017 Operating Income and Adjusted EBITDA
Feb. 26, 2018
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• the risk of a prolonged slowdown in growth or decline in the United States or international economies,
including liquidity risks in United States or foreign credit markets;
• the impact of recently issued and future accounting updates and other changes in accounting policies;
• the possibility of future terrorist attacks or the possibility or occurrence of an outbreak of, or changes in,
hostilities or changes in the political conditions throughout the world;
• the risk of increased costs for insurance premiums, security or other items as a consequence of terrorist
attacks;
• risks associated with pending or possible acquisitions and dispositions, including our ability to finance or
integrate any such acquisitions and any regulatory delay or conditions imposed by regulatory bodies in
connection with any such acquisitions and dispositions;
• the impact of uncontracted capacity in our assets being greater or less than expected;
• the ability to recover operating costs and amounts equivalent to income taxes, costs of property, plant
and equipment and regulatory assets in our state and FERC-regulated rates;
• the composition and quality of the natural gas and NGLs we gather and process in our plants and
transport on our pipelines;
• the efficiency of our plants in processing natural gas and extracting and fractionating NGLs;
• the impact of potential impairment charges;
• the risk inherent in the use of information systems in our respective businesses, implementation of new
software and hardware, and the impact on the timeliness of information for financial reporting;
• our ability to control construction costs and completion schedules of our pipelines and other projects; and
• the risk factors listed in the reports ONEOK has filed and may file with the Securities and Exchange
Commission (the "SEC"), which are incorporated by reference.
These reports are also available from the sources described below. Forward-looking statements are based on the
estimates and opinions of management at the time the statements are made. ONEOK undertakes no obligation to publicly
update any forward-looking statement, whether as a result of new information, future events or changes in circumstances,
expectations or otherwise.
The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the
other cautionary statements that are included herein and elsewhere, including the Risk Factors included in the most recent
reports on Form 10-K and Form 10-Q and other documents of ONEOK on file with the SEC. ONEOK's SEC filings are
available publicly on the SEC's website at www.sec.gov.
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ONEOK Announces Higher Fourth-quarter and
Full-year 2017 Operating Income and Adjusted EBITDA
Feb. 26, 2018
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ONEOK, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Years Ended
December 31, December 31,
(Unaudited) 2017 2016 2017 2016
(Thousands of dollars, except per share amounts)
Revenues
Commodity sales $ 3,162,392 $ 2,101,150 $ 9,862,652 $ 6,858,456
Services 629,766 553,311 2,311,255 2,062,478
Total revenues 3,792,158 2,654,461 12,173,907 8,920,934
Cost of sales and fuel (exclusive of items shown separately below) 3,073,764 2,021,470 9,538,045 6,496,124
Operations and maintenance 194,511 179,859 735,190 668,335
Depreciation and amortization 103,769 99,310 406,335 391,585
Impairment of long-lived assets — — 15,970 —
General taxes 22,298 24,320 98,396 88,849
Gain on sale of assets (20 ) (98 ) (924 ) (9,635 )
Operating income 397,836 329,600 1,380,895 1,285,676
Equity in net earnings from investments 40,293 39,249 159,278 139,690
Impairment of equity investments — — (4,270 ) —
Allowance for equity funds used during construction 32 1 107 209
Other income 3,715 183 15,385 6,091
Other expense (1,505 ) (5,214 ) (24,936 ) (4,059 )
Interest expense (net of capitalized interest of $1,256, $1,326, $5,510
and $10,591, respectively) (124,190 ) (114,188 ) (485,658 ) (469,651 )
Income before income taxes 316,181 249,631 1,040,801 957,956
Income taxes (251,369 ) (54,870 ) (447,282 ) (212,406 )
Income from continuing operations 64,812 194,761 593,519 745,550
Income (loss) from discontinued operations, net of tax — (296 ) — (2,051 )
Net income 64,812 194,465 593,519 743,499
Less: Net income attributable to noncontrolling interests 1,767 103,960 205,678 391,460
Net income attributable to ONEOK 63,045 90,505 387,841 352,039
Less: Preferred stock dividends 274 — 767 —
Net income available to common shareholders $ 62,771 $ 90,505 $ 387,074 $ 352,039
Amounts available to common shareholders:
Income from continuing operations $ 62,771 $ 90,801 $ 387,074 $ 354,090
Income (loss) from discontinued operations — (296 ) — (2,051 )
Net income $ 62,771 $ 90,505 $ 387,074 $ 352,039
Basic earnings per common share:
Income from continuing operations $ 0.16 $ 0.43 $ 1.30 $ 1.68
Income (loss) from discontinued operations — — — (0.01 )
Net income $ 0.16 $ 0.43 $ 1.30 $ 1.67
Diluted earnings per common share:
Income from continuing operations $ 0.16 $ 0.43 $ 1.29 $ 1.67
Income (loss) from discontinued operations — — — (0.01 )
Net income $ 0.16 $ 0.43 $ 1.29 $ 1.66
Average shares (thousands)
Basic 385,586 211,398 297,477 211,128
Diluted 388,071 213,157 299,780 212,383
Dividends declared per share of common stock $ 0.745 $ 0.615 $ 2.72 $ 2.46
ONEOK Announces Higher Fourth-quarter and
Full-year 2017 Operating Income and Adjusted EBITDA
Feb. 26, 2018
Page 13
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ONEOK, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
(Unaudited) 2017 2016
Assets (Thousands of dollars)
Current assets
Cash and cash equivalents $ 37,193 $ 248,875
Accounts receivable, net 1,202,951 872,430
Materials and supplies 90,301 60,912
Natural gas and natural gas liquids in storage 342,293 140,034
Commodity imbalances 38,712 60,896
Other current assets 53,008 45,986
Assets of discontinued operations — 551
Total current assets 1,764,458 1,429,684
Property, plant and equipment
Property, plant and equipment 15,559,667 15,078,497
Accumulated depreciation and amortization 2,861,541 2,507,094
Net property, plant and equipment 12,698,126 12,571,403
Investments and other assets
Investments in unconsolidated affiliates 1,003,156 958,807
Goodwill and intangible assets 993,460 1,005,359
Deferred income taxes 205,907 —
Other assets 180,830 162,998
Assets of discontinued operations — 10,500
Total investments and other assets 2,383,353 2,137,664
Total assets $ 16,845,937 $ 16,138,751
ONEOK Announces Higher Fourth-quarter and
Full-year 2017 Operating Income and Adjusted EBITDA
Feb. 26, 2018
Page 14
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ONEOK, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Continued)
December 31, December 31,
(Unaudited) 2017 2016
Liabilities and equity (Thousands of dollars)
Current liabilities
Current maturities of long-term debt $ 432,650 $ 410,650
Short-term borrowings 614,673 1,110,277
Accounts payable 1,140,571 874,731
Commodity imbalances 164,161 142,646
Accrued interest 135,309 112,514
Other current liabilities 179,971 166,042
Liabilities of discontinued operations — 19,841
Total current liabilities 2,667,335 2,836,701
Long-term debt, excluding current maturities 8,091,629
7,919,996
Deferred credits and other liabilities
Deferred income taxes 52,697 1,623,822
Other deferred credits 348,924 321,846
Liabilities of discontinued operations — 7,471
Total deferred credits and other liabilities 401,621 1,953,139
Commitments and contingencies
Equity
ONEOK shareholders’ equity:
Preferred stock, $0.01 par value:
issued 20,000 shares at December 31, 2017, and no shares at December 31, 2016 —
—
Common stock, $0.01 par value:
authorized 1,200,000,000 shares, issued 423,166,234 shares and outstanding
388,703,543 shares at December 31, 2017; authorized 600,000,000 shares, issued
245,811,180 shares and outstanding 210,681,661 shares at December 31, 2016 4,232
2,458
Paid-in capital 6,588,878 1,234,314
Accumulated other comprehensive loss (188,530 ) (154,350 )
Retained earnings — —
Treasury stock, at cost: 34,462,691 shares at December 31, 2017, and
35,129,519 shares at December 31, 2016 (876,713 ) (893,677 )
Total ONEOK shareholders’ equity 5,527,867 188,745
Noncontrolling interests in consolidated subsidiaries 157,485 3,240,170
Total equity 5,685,352 3,428,915
Total liabilities and equity $ 16,845,937 $ 16,138,751
ONEOK Announces Higher Fourth-quarter and
Full-year 2017 Operating Income and Adjusted EBITDA
Feb. 26, 2018
Page 15
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ONEOK, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended
December 31,
(Unaudited) 2017 2016
(Thousands of dollars)
Operating activities
Net income $ 593,519 $ 743,499
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 406,335 391,585
Impairment charges 20,240 —
Noncash contribution of preferred stock, net of tax 12,600 —
Equity in net earnings from investments (159,278 ) (139,690 )
Distributions received from unconsolidated affiliates 167,372 144,673
Deferred income taxes 437,917 211,638
Share-based compensation expense 26,262 40,563
Pension and postretirement benefit expense, net of contributions 4,079 11,643
Allowance for equity funds used during construction (107 ) (209 )
Gain on sale of assets (924 ) (9,635 )
Changes in assets and liabilities:
Accounts receivable (330,521 ) (285,806 )
Natural gas and natural gas liquids in storage (202,259 ) (11,950 )
Accounts payable 261,305 287,632
Commodity imbalances, net 43,699 45,971
Settlement of exit activities liabilities (9,707 ) (19,906 )
Accrued interest 22,795 (16,529 )
Risk-management assets and liabilities 37,617 (78,136 )
Other assets and liabilities, net (15,532 ) 37,998
Cash provided by operating activities 1,315,412 1,353,341
Investing activities
Capital expenditures (less allowance for equity funds used during construction) (512,393 ) (624,634 )
Contributions to unconsolidated affiliates (87,861 ) (68,275 )
Distributions received from unconsolidated affiliates in excess of cumulative earnings 28,742 52,044
Proceeds from sale of assets 3,879 25,420
Cash used in investing activities (567,633 ) (615,445 )
Financing activities
Dividends paid (829,414 ) (517,601 )
Distributions to noncontrolling interests (276,260 ) (549,419 )
Borrowing (repayment) of short-term borrowings, net (495,604 ) 563,937
Issuance of long-term debt, net of discounts 1,190,496 1,000,000
Debt financing costs (11,425 ) (2,770 )
Repayment of long-term debt (994,776 ) (1,108,040 )
Issuance of common stock 471,358 21,971
Other (13,836 ) 5,403
Cash used in financing activities (959,461 ) (586,519 )
Change in cash and cash equivalents (211,682 ) 151,377
Change in cash and cash equivalents included in discontinued operations — (121 )
Change in cash and cash equivalents from continuing operations (211,682 ) 151,256
Cash and cash equivalents at beginning of period 248,875 97,619
Cash and cash equivalents at end of period $ 37,193 $ 248,875
ONEOK Announces Higher Fourth-quarter and
Full-year 2017 Operating Income and Adjusted EBITDA
Feb. 26, 2018
Page 16
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ONEOK, Inc. and Subsidiaries
INFORMATION AT A GLANCE
Three Months Ended Years Ended
December 31, December 31,
(Unaudited) 2017 2016 2017 2016
(Millions of dollars, except as noted)
Natural Gas Liquids
Operating costs $ 103.5 $ 90.9 $ 359.8 $ 327.6
Depreciation and amortization $ 42.8 $ 41.1 $ 167.3 $ 163.3
Equity in net earnings from investments $ 15.8
$ 13.3 $ 59.9 $ 54.5
Adjusted EBITDA $ 309.4 $ 253.6 $ 1,154.9 $ 1,079.6
NGLs transported-gathering lines (MBbl/d) (a) 867 744 812 770
NGLs fractionated (MBbl/d) (b) 682 579 621 586
NGLs transported-distribution lines (MBbl/d) (a) 592 520 567 508
Average Conway-to-Mont Belvieu OPIS price differential -
ethane in ethane/propane mix ($/gallon) $ 0.07
$ 0.02
$ 0.05
$ 0.03
Capital expenditures $ 54.5 $ 20.4 $ 114.3 $ 105.9
(a) - Includes volumes for consolidated entities only.
(b) - Includes volumes at company-owned and third-party facilities.
Natural Gas Gathering and Processing
Operating costs $ 84.4 $ 77.2 $ 309.5 $ 285.6
Depreciation and amortization $ 47.1 $ 45.2 $ 184.9 $ 178.5
Equity in net earnings from investments, excluding impairment $ 2.3 $ 2.7 $ 12.1 $ 10.7
Adjusted EBITDA $ 144.3 $ 126.6 $ 518.5 $ 446.8
Natural gas gathered (BBtu/d) (a) 2,402 1,995 2,211 2,034
Natural gas processed (BBtu/d) (a) (b) 2,235 1,869 2,056 1,882
NGL sales (MBbl/d) (a) 196 156 187 156
Residue natural gas sales (BBtu/d) (a) 975 829 896 865
Realized composite NGL net sales price ($/gallon) (a) (c) (d) $ 0.20 $ 0.25 $ 0.22 $ 0.23
Realized condensate net sales price ($/Bbl) (a) (c) (e) $ 38.93 $ 42.60 $ 35.22 $ 38.31
Realized residue natural gas net sales price ($/MMBtu) (a) (c) (e) $ 2.35 $ 2.95 $ 2.48 $ 2.80
Average fee rate ($/MMBtu) (a) $ 0.86 $ 0.84 $ 0.86 $ 0.76
Capital expenditures $ 98.5 $ 84.7 $ 284.2 $ 410.5
(a) - Includes volumes for consolidated entities only.
(b) - Includes volumes at company-owned and third-party facilities.
(c) - Includes the impact of hedging activities on ONEOK’s equity volumes.
(d) - Net of transportation and fractionation costs.
(e) - Net of transportation costs.
Natural Gas Pipelines
Operating costs $ 33.7 $ 30.5 $ 126.2 $ 115.6
Depreciation and amortization $ 13.1 $ 12.1 $ 51.0 $ 46.7
Equity in net earnings from investments $ 22.2 $ 23.2 $ 87.3 $ 74.4
Adjusted EBITDA $ 88.7 $ 89.9 $ 339.8 $ 313.1
Natural gas transportation capacity contracted (MDth/d) (a) 6,642 6,659 6,611 6,345
Transportation capacity contracted (a) 95 % 97 % 94 % 92 %
Capital expenditures $ 24.9 $ 24.6 $ 95.6 $ 96.3
(a) - Includes volumes for consolidated entities only.
ONEOK Announces Higher Fourth-quarter and
Full-year 2017 Operating Income and Adjusted EBITDA
Feb. 26, 2018
Page 17
ONEOK, Inc.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Three Months Ended Years Ended
December 31, December 31,
(Unaudited) 2017 2016 2017 2016
(Thousands of dollars, except per share amounts)
Reconciliation of Income from Continuing Operations to Adjusted EBITDA and Distributable Cash Flow
Income from continuing operations $ 64,812 $ 194,761 $ 593,519 $ 745,550
Interest expense, net of capitalized interest 124,190 114,188 485,658 469,651
Depreciation and amortization 103,769 99,310 406,335 391,585
Income taxes 251,369 54,870 447,282 212,406
Impairment charges — — 20,240 —
Noncash compensation expense 3,631 11,811 13,421 31,981
Other noncash items and equity AFUDC (a) (52 ) (880 ) 20,398 (1,255 )
Adjusted EBITDA (b) 547,719 474,060 1,986,853 1,849,918
Interest expense (124,190 ) (114,188 ) (485,658 ) (469,651 )
Maintenance capital (67,184 ) (46,039 ) (147,157 ) (112,364 )
Equity in net earnings from investments; excluding noncash
impairment charges (40,293 ) (39,249 ) (159,278 ) (139,690 )
Distributions received from unconsolidated affiliates 50,020 47,318 196,114 196,717
Other (58 ) (3,652 ) (6,213 ) (2,644 )
Distributable cash flow (b) $ 366,014 $ 318,250 $ 1,384,661 $ 1,322,286
Dividends paid to preferred shareholders (275 ) — (627 ) —
Distributions paid to public limited partners — (135,480 ) (270,959 ) (541,919 )
Distributable cash flow to shareholders $ 365,739 $ 182,770 $ 1,113,075 $ 780,367
Dividends paid per share $ 0.745
$ 0.615
$ 2.720
$ 2.460
Dividend coverage ratio (b) 1.28 1.41 1.34 1.51
Number of shares used in computation (thousands) 383,439
210,523
304,435
210,216
(a) Full-year 2017 totals include ONEOK’s April 2017 contribution to the ONEOK Foundation of 20,000 shares of Series E
Preferred Stock, with an aggregate value of $20 million.
(b) Full-year 2017 amounts include transaction-related pretax cash costs of approximately $30 million, or 0.04 times dividend
coverage, associated with the ONEOK and ONEOK Partners merger transaction.