(Date of report) | December 21, 2015 |
(Date of earliest event reported) | December 21, 2015 |
Oklahoma | 001-13643 | 73-1520922 | ||
(State or other jurisdiction | (Commission | (IRS Employer | ||
of incorporation) | File Number) | Identification No.) |
Item 7.01 | Regulation FD Disclosure | |
On December 21, 2015, we and ONEOK Partners, L.P. (ONEOK Partners) announced our 2016 financial guidance. A copy of the news release is attached as Exhibit 99.1 and is incorporated herein by reference. The information disclosed in this Item 7.01, including Exhibit 99.1 hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act except as expressly set forth by specific reference in such filing. | ||
Item 9.01 | Financial Statements and Exhibits | |
(d) | Exhibits | |
Exhibit Number | Description | |
99.1 | News release issued by ONEOK, Inc. and ONEOK Partners, L.P. dated December 21, 2015. |
ONEOK, Inc. | |||
Date: | December 21, 2015 | By: | /s/ Derek S. Reiners |
Derek S. Reiners Senior Vice President, Chief Financial Officer and Treasurer |
Exhibit Number | Description | |
99.1 | News release issued by ONEOK, Inc. and ONEOK Partners, L.P. dated December 21, 2015. |
December 21, 2015 | Analyst Contact: | T.D. Eureste 918-588-7167 | |
Media Contact: | Stephanie Higgins 918-591-5026 |
• | Dividend to remain flat |
• | No cash income taxes in 2016 |
• | No long-term debt maturities until 2022 |
• | Free cash flow after dividends and cash on hand totaling approximately $250 million available to support ONEOK Partners |
• | No public equity offerings in 2016 and well into 2017 |
• | ONEOK Partners’ fee-based margin to increase to approximately 85 percent in 2016 from approximately 75 percent in 2015 |
• | Distribution coverage at 1.0 times or better in 2016 under current NYMEX future strip pricing, and distributions to remain flat compared with 2015 |
• | Capital-growth expenditures of $460 million, which is adequate to support continued infrastructure needs |
• | GAAP debt-to-EBITDA ratio of 4.2 times or less by late 2016 |
2016 Guidance | ||
(millions of dollars, except coverage ratio amounts) | ||
ONEOK, Inc. | ||
Cash flow available for dividends (a) | ~ $675 | |
Dividend coverage ratio (a) | ~ 1.3 | |
ONEOK Partners | ||
Adjusted EBITDA (a) | ~ $1,880 | |
Distributable cash flow (a) | ~ $1,390 | |
Cash distribution coverage ratio (a) | >1.0 | |
Capital-growth expenditures | ~ $460 | |
Maintenance capital expenditures | ~ $140 | |
(a) Cash flow available for dividends, dividend coverage ratio, adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA), distributable cash flow (DCF) and cash distribution coverage ratio are non-GAAP measures. Reconciliations to relevant GAAP measures are attached to this news release. |
• | Cash flow available for dividends is defined as net income less the portion attributable to non-controlling interests, adjusted for equity in earnings and distributions declared from ONEOK Partners, and ONEOK’s stand-alone depreciation and amortization, deferred income taxes, stand-alone capital expenditures and certain other items; |
• | Free cash flow is defined as cash flow available for dividends, computed as described above, less ONEOK’s dividends declared; |
• | Dividend coverage ratio is defined as cash flow available for dividends divided by the dividends declared for the period; |
• | Adjusted EBITDA is defined as net income adjusted for interest expense, depreciation and amortization, income taxes and allowance for equity funds used during construction and certain other items; |
• | Distributable cash flow is defined as adjusted EBITDA, computed as described above, less interest expense, maintenance capital expenditures and equity earnings from investments, adjusted for cash distributions received and certain other items; and |
• | Cash distribution coverage ratio is defined as distributable cash flow to limited partners per limited partner unit divided by the distribution declared per limited partner unit for the period. |
• | 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; |
• | 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, 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 stock and bond market returns; |
• | our indebtedness 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 the credit ratings of ONEOK and ONEOK Partners; |
• | 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 FERC, the National Transportation Safety Board, the PHMSA, the EPA and 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; |
• | 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; |
• | 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 in the Middle East and elsewhere; |
• | 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 we have filed and may file with the SEC, which are incorporated by reference. |
2016 | ||
(Unaudited) | Guidance Range | |
(Millions of dollars) | ||
Cash Flow Available for Dividends | ||
Recurring cash flows: | ||
Distributions from ONEOK Partners – declared | ~ $790 | |
Interest expense, excluding noncash items | ~ (105) | |
Cash income taxes | - | |
Released contracts from the former energy services business | ~ (20) | |
Corporate expenses | ~ (10) | |
Equity compensation reimbursed by ONEOK Partners | ~ 25 | |
Total cash flows | ~ 680 | |
Capital expenditures | ~ (5) | |
Cash flow available for dividends | ~ 675 | |
Dividends declared | ~ (515) | |
Free cash flow | ~ $160 | |
Dividend coverage ratio | ~1.3 |
2016 | ||
(Unaudited) | Guidance Range | |
(Millions of dollars) | ||
Reconciliation of Cash Flow Available for Dividends and Free Cash Flow to Net Income | ||
Net income attributable to ONEOK | ~ $360 | |
Depreciation and amortization | ~ 5 | |
Deferred income taxes | ~ 200 | |
Equity in earnings of ONEOK Partners | ~ (700) | |
Distributions from ONEOK Partners – declared | ~ 790 | |
Equity compensation reimbursed by ONEOK Partners | ~ 25 | |
Energy Services realized working capital | ~ (20) | |
Other | ~ 20 | |
Total cash flow | ~ 680 | |
Capital expenditures | ~ (5) | |
Cash flow available for dividends | ~ 675 | |
Dividends | ~ (515) | |
Free cash flow | ~ $160 |
ONEOK Partners, L.P. and Subsidiaries | ||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | ||
2016 | ||
(Unaudited) | Guidance Range | |
(Millions of dollars) | ||
Reconciliation of Net Income to Adjusted EBITDA and Distributable Cash Flow | ||
Net income | ~ $1,120 | |
Interest expense | ~ 370 | |
Depreciation and amortization | ~ 380 | |
Income tax expense | ~ 11 | |
Allowance for equity funds used during construction and other non-cash items | ~ (1) | |
Adjusted EBITDA | ~ $1,880 | |
Interest expense | ~ (370) | |
Maintenance capital | ~ (140) | |
Equity in net earnings from investments | ~ (135) | |
Distributions received from unconsolidated affiliates | ~ 160 | |
Other | ~ (5) | |
Distributable cash flow | ~ $1,390 |
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