-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, DSGAGHAU4sLQsHHVz4fKT/21pPNyjrYIascBf6R4PT279CqVKGbln9vLPKR0MdDU j8QLeHG63myyEQ6OdWhJBw== 0000074154-95-000024.txt : 199506300000074154-95-000024.hdr.sgml : 19950630 ACCESSION NUMBER: 0000074154-95-000024 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950531 FILED AS OF DATE: 19950629 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ONEOK INC CENTRAL INDEX KEY: 0000074154 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION & DISTRIBUTION [4923] IRS NUMBER: 730383100 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-02572 FILM NUMBER: 95550839 BUSINESS ADDRESS: STREET 1: 100 W FIFTH ST CITY: TULSA STATE: OK ZIP: 74103 BUSINESS PHONE: 9185887000 FORMER COMPANY: FORMER CONFORMED NAME: OKLAHOMA NATURAL GAS CO DATE OF NAME CHANGE: 19810111 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MAY 31, 1995 COMMISSION FILE NO. 1-2572 ONEOK Inc. 100 West Fifth Street, Tulsa, OK 74103 (918) 588-7000 INCORPORATED IN IRS EMPLOYER DELAWARE IDENTIFICATION NO. 73-0383100 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of common shares outstanding of the registrant was 27,020,004 as of May 31, 1995. Page 1 of 17 TABLE OF CONTENTS Page No. PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Condensed Statements of Earnings - Three Months and Nine Months Ended May 31, 1995 and 1994 3 Consolidated Condensed Balance Sheets - May 31, 1995, and August 31, 1994 4 Consolidated Condensed Statements of Cash Flows - Nine Months Ended May 31, 1995 and 1994 5 Notes to Consolidated Condensed Financial Statements 6- 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-14 PART II. OTHER INFORMATION Item 1. Legal Proceedings 14-16 Item 6. Exhibits and Reports on Form 8-K 16 Part I. FINANCIAL INFORMATION Item 1. Financial Statements ONEOK Inc. CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) (UNAUDITED)
3 Months Ended 9 Months Ended May 31, May 31, 1995 1994 1995 1994 OPERATING REVENUES Distribution and transmission $146,698 $142,726 $518,486 $529,344 Exploration and production 5,184 5,229 16,936 18,324 Gas processing 24,377 26,525 80,413 81,329 Other 128,239 16,000 142,289 34,118 Total operating revenues 304,498 190,480 758,124 663,115 OPERATING EXPENSES Gas purchase expense 210,073 108,470 455,707 375,586 Operations 51,689 46,607 142,661 140,086 Maintenance 1,659 1,488 5,201 4,785 Depreciation, depletion, and amortization 12,655 12,494 37,813 38,546 Income taxes 4,811 2,456 27,456 23,768 Other taxes 5,168 4,815 15,644 14,220 Total operating expense 286,055 176,330 684,482 596,991 Operating income 18,443 14,150 73,642 66,124 Net interest 9,403 8,458 28,527 26,233 Net income 9,040 5,692 45,115 39,891 Preferred stock dividend requirement 107 107 321 321 Earnings available for Common stock $ 8,933 $ 5,585 $ 44,794 $ 39,570 Earnings per common share $.33 $.21 $1.67 $1.48 Dividends per common share $.28 $.28 $.84 $.83 Weighted average common shares outstanding (thousands) 27,020 26,690 26,808 26,668 See accompanying notes to consolidated condensed financial statements.
ONEOK Inc. CONSOLIDATED CONDENSED BALANCE SHEETS (THOUSANDS OF DOLLARS) (UNAUDITED)
May 31, Aug. 31, 1995 1994 ASSETS Property and equipment $1,265,427 $1,217,739 Less accumulated depreciation, depletion, and amortization 504,941 480,288 Net property and equipment 760,486 737,451 Current assets: Cash and cash equivalents 25,575 4,545 Accounts receivable 90,174 51,029 Inventories 82,750 94,454 Purchased gas cost adjustment - 11,809 Deferred taxes 827 - Other current assets 7,371 7,416 Total current assets 206,697 169,253 Deferred debits and other assets: Take-or-pay 106,617 107,491 Other 115,583 122,805 Total deferred debits and other assets 222,200 230,296 $1,189,383 $1,137,000 LIABILITIES AND SHAREHOLDERS' EQUITY Common shareholders' equity: Common stock $ 201,404 $ 195,568 Retained earnings 197,208 174,926 Total common shareholders' equity 398,612 370,494 Preferred stock 9,000 9,000 Total shareholders' equity 407,612 379,494 Long-term debt, excluding current maturities 350,969 362,897 Current liabilities: Current maturities of long-term debt 13,076 14,050 Notes payable 46,152 50,000 Accounts payable 63,708 44,238 Accrued income taxes 12,017 - Accrued general taxes 8,127 9,845 Accrued interest 14,035 8,711 Accrued liabilities 18,939 11,429 Customers' deposits 7,209 6,413 Deferred taxes - 3,822 Total current liabilities 183,263 148,508 Deferred credits: Deferred income taxes 193,879 197,156 Other 53,660 48,945 Total deferred credits 247,539 246,101 $1,189,383 $1,137,000 See accompanying notes to consolidated condensed financial statements.
ONEOK Inc. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (THOUSANDS OF DOLLARS) (UNAUDITED)
9 Months Ended May 31, 1995 1994 OPERATING ACTIVITIES Net income $ 45,115 $ 39,891 Amortization of take-or-pay deferrals 3,347 - Depreciation, depletion, and amortization 37,813 38,546 Nonproductive well drilling 375 800 Net losses of equity investees 561 186 Net gain on sale of property - (1,693) Deferred income taxes (7,926) 1,284 Changes in assets and liabilities 27,128 1,837 Net cash provided by operating activities 106,413 80,851 INVESTING ACTIVITIES (Increase) decrease in investments, net 4,522 (2,846) Proceeds from sale of Caney River Transmission Company 10,901 - Capital expenditures (64,579) (55,969) Proceeds from sale of property - 7,861 Proceeds from salvage, net of removal costs 3,356 (106) Net cash used in investing activities (45,800) (51,060) FINANCING ACTIVITIES Principal payments on long-term debt (12,902) (15,000) Decrease in notes payable, net (3,848) (2,000) Dividends paid (22,833) (22,458) Net cash used in financing activities (39,583) (39,458) Change in cash and cash equivalents 21,030 (9,667) Cash and cash equivalents, beginning of period 4,545 9,667 Cash and cash equivalents, end of period $ 25,575 $ - SUPPLEMENTAL DISCLOSURES Cash paid during the period for: Interest $23,150 $30,990 Income taxes $21,849 $13,333 Noncash transactions: Gas received as payment-in-kind $77,494 $53,269 Stock Performance Plan $ - $ 1,203 Issuance of common stock $ 5,836 $ - See accompanying notes to consolidated condensed financial statements.
ONEOK Inc. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS Note 1. General. The interim consolidated condensed financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature. Note 2. Rate Regulation. On June 19, 1995, the Oklahoma Corporation Commission (Commission) approved a settlement agreed to by all active participants in the pending rate proceedings, including the Commission Staff, the Attorney General, and certain intervenors, which settled all issues in the proceedings. Under the approved settlement, the Company will receive a $14.9 million increase in base rates, of which $1.15 million applies for only two years. In recognition of the current highly competitive conditions in the industrial gas market, rates for large industrial customers were restructured and reduced, with revenue losses associated with such restructuring shifted to the general system "core" (residential and commercial) customers. The price of Payment-In-Kind (PIK) gas to be included in the weighted average cost of gas was reduced to the cost of Special Industrial Sales Program (SISP) gas and limited to an adjusted index price, the amount of PIK and SISP gas which could be taken and included in the Purchased Gas Adjustment (PGA) was increased but limited to 50 percent of the total general system supply on an annual basis, and the revenue loss resulting from the pricing change for PIK gas was shifted to the general system customers' base rates. The settlement also provided for limited (up to 10 percent) rate recovery for large industrial customer revenue losses resulting from future contract renegotiation and a temperature normalization adjustment clause. The Company anticipates that the result of such rate increases and rate restructuring and gas acquisition and pricing changes could be a net annual reduction of $6.7 million in burner tip gas costs to the general system core customers. As a part of the settlement the Company agreed not to file for a general rate increase for two years. Note 3. Other Commission Matters. The Oklahoma Corporation Commission, in an order issued April 27, 1995, established a cap of $2.68 per thousand cubic feet of gas (Mcf) on the price to be applied to gas volumes received by the Company in its approved Payment-In-Kind program. Prior to the order, the gas was priced at the weighted average cost of gas, which was approximately 60 cents per Mcf higher than the cap at the time of the order. The Commission order had the effect of reducing revenue but was superseded by the 1994 Rate Proceedings rate order described above. Note 4. Other Assets. Through TransTex Pipeline Company (TransTex), a subsidiary, the Company is a 25 percent partner in Red River Pipeline (Red River), which operates in Texas. The Company has agreed to advance cash to Red River, limited to its proportionate share, for operating expenses and for debt sinking fund payments when cash deficiencies occur. The Company has made such cash advances in each of the last three years. TransTex entered into a one-year limited agency agreement with a third party for shipping gas on Red River, which has generated additional revenue for TransTex during the 1995 fiscal year. TransTex is considering other alternatives to maximize the value of its assets. If the system does not improve cash flow as a result of these or other changes, the Company may not be able to fully recover its investment. The amount of such effect is not presently determinable. The sale of Ozark Gas Transmission System (Ozark System) was closed on April 28, 1995. The total purchase price was $44.8 million, the approximate book value of the Ozark System. Caney River Transmission Company (Caney River), a wholly owned subsidiary of ONEOK Inc., was a partner in the Ozark System with a twenty-five percent partnership interest therein. At the closing, ownership of Caney River was transferred by ONEOK Inc. to Ozark Pipeline, Inc., a subsidiary of NGC Energy Resources Limited Partnership as part of the transaction. ONEOK Inc. fully recovered its investment, which, for the current fiscal year, will result in a positive cash flow but no material impact on earnings. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ONEOK Inc. and its subsidiaries (the Company) engage in natural gas distribution, transmission, gathering, and storage operations; oil and gas energy operations; and certain other operations, as described below. Distribution and Transmission. Oklahoma Natural Gas Company purchases, distributes, and sells natural gas and leases pipeline capacity. ONG Transmission Company and five subsidiaries gather, compress, transport, and store natural gas for intrastate distribution, transport gas in interstate commerce, and lease pipeline capacity. In addition, one subsidiary, TransTex Pipeline Company, owns an interest in a partnership that operates a natural gas transmission system. A new subsidiary, ONG Gas Gathering Company, has been formed and substantially all gas gathering facilities and operations were transferred to the new subsidiary effective April 1, 1995. Present plans call for reorganizing and consolidating substantially all gas transmission facilities and operations into one subsidiary to be named ONG Transmission Company. All gas distribution facilities and operations will remain in the parent corporation and continue to be operated under the trade name, Oklahoma Natural Gas Company. Exploration and Production. ONEOK Exploration Company and ONEOK Resources Company primarily explore for and produce natural gas and oil. Gas Processing. ONEOK Products Company extracts and sells natural gas liquids. It also buys and sells natural gas. Other Operations. ONEOK Gas Marketing Company markets natural gas. Other subsidiaries operate the headquarters office building and a parking garage. RESULTS OF OPERATIONS The Company reported consolidated net income of $9.0 million, or 33 cents per share of common stock for the Company's fiscal 1995 third quarter ended May 31, 1995, compared with $5.7 million, or 21 cents per share for the prior year's third quarter. Earnings for Oklahoma Natural Gas Company, the Company's gas distribution and transmission operation, were $6.1 million, or 22 cents per share, compared with $6.3 million, or 23 cents per share, last year. The impact of cooler weather and increased margins was offset by a nonrecurring charge related to Tri-Fuels Company, a small alternative-fuel subsidiary. ONEOK's natural gas liquids processing business contributed $2.9 million, or 11 cents per share, compared with earnings of $199,000, or one cent per share, a year ago. The earnings increase was due to additional sales volumes and improved margins. Consolidated net interest expense increased during the current year's third quarter and fiscal year to date due to increased amounts of short-term debt outstanding and higher interest rates during the periods. The average cost of debt for the current three-month and nine-month periods was 8.661 percent and 8.238 percent, respectively, compared with 8.568 percent and 8.157 percent for the same periods last year. Following is a summary of consolidated earnings:
3 Months Ended 9 Months Ended May 31, May 31, NET INCOME (LOSS) 1995 1994 1995 1994 (Thousands of $) Distribution and transmission $6,085 $6,330 $40,696 $38,819 Exploration and production 419 3 413 180 Gas processing 2,908 199 5,276 2,884 Contract drilling - (430) - (981) Other operations (372) (410) (1,270) (1,011) Consolidated $9,040 $5,692 $45,115 $39,891
3 Months Ended 9 Months Ended May 31, May 31, EARNINGS (LOSS) PER COMMON SHARE 1995 1994 1995 1994 Distribution and transmission $ .22 $ .23 $1.50 $1.44 Exploration and production .02 .01 .02 .01 Gas processing .11 .01 .20 .11 Contract drilling - (.02) - (.04) Other operations (.02) (.02) (.05) (.04) Consolidated $ .33 $ .21 $1.67 $1.48
Following are summaries of financial results and operating information for the various segments of the Company for the three-month and nine-month periods ended May 31, 1995 and 1994.
3 Months Ended 9 Months Ended May 31, May 31, DISTRIBUTION AND TRANSMISSION 1995 1994 1995 1994 (Thousands of $, except per share amounts) Revenues: From unaffiliated customers $146,698 $142,803 $518,486 $529,421 Intersegment sales 777 500 1,351 1,564 Total revenues 147,475 143,303 519,837 530,985 Less gas purchase expense 80,158 84,411 293,684 320,207 Net revenues/gross margins 67,317 58,892 226,153 210,778 Operating expenses 50,054 41,916 135,448 125,211 Operating income before income taxes 17,263 16,976 90,705 85,567 Income taxes 3,085 2,980 24,808 23,213 Net interest expense 8,093 7,666 25,201 23,535 Net income $ 6,085 $ 6,330 $ 40,696 $ 38,819 Earnings per share $.22 $.23 $1.50 $1.44 Gas sales: Residential and commercial $102,749 $ 92,933 $371,905 $367,365 Industrial 5,388 6,826 20,498 21,388 Wholesale 402 168 1,603 2,494 PCL/SISP gas sales 12,815 22,067 40,760 69,617 Total gas sales 121,354 121,994 434,766 460,864 Less gas purchase expense 80,158 84,411 293,684 320,207 Gas sales margins 41,196 37,583 141,082 140,657 PCL/SISP margins 5,922 5,026 17,624 15,532 Pipeline capacity lease margins 15,230 12,767 53,238 39,407 Other revenues 4,969 3,516 14,209 15,182 Net revenues $ 67,317 $ 58,892 $226,153 $210,778 Volumes (MMcf): Gas sales: Residential and commercial 18,573 17,393 69,818 78,279 Industrial 1,875 1,955 6,613 6,639 Wholesale 114 55 494 788 Total gas sales 20,562 19,403 76,925 85,706 PCL/SISP 8,600 10,730 26,859 33,550 Pipeline capacity leases 32,193 29,719 98,543 90,788 Total volumes 61,355 59,852 202,327 210,044 Average cost of gas purchased (per Mcf): General system $3.27 $2.92 $3.28 $2.92 SISP $1.54 $2.08 $1.57 $2.04 PCL margins (per MMcf) $.52 $.44 $.57 $.44 Degree days: Actual 761 645 3,357 3,857 Normal 650 650 3,629 3,616 Number of customers at end of periods 732,924 722,665
Distribution and transmission operations reported decreased net income for the current fiscal year's third quarter. Revenues for the current quarter increased due to improved margins and slightly colder weather, offset by a nonrecurring charge related to Tri-Fuels Company, a small alternative-fuel subsidiary of the Company. For the fiscal year to date, net income increased compared with the same period last year. Major contributing factors were additional customers, increased margins, and the nonrecurring effect of a rate order issued during the 1995 first quarter, partially offset by warmer weather and the nonrecurring charge related to Tri-Fuels Company discussed above. The market to serve industrial customers remains extremely competitive, so the Company offers its pipeline capacity lease program (PCL) and payment- in-kind program (PIK) to certain of these customers as a response to the competitive pressures. Under its PIK program, the Company accepts gas in lieu of cash for PCL payments and for transportation charges. Prior to an April 27, 1995, order of the Oklahoma Corporation Commission (Commission), PIK gas had been priced to general system gas distribution operations at the weighted average cost of gas (WACOG). Some of the PCL contracts included price caps, which reduced the volume of gas delivered to the Company as the price of gas purchased by the customers escalated. Average spot market prices increased significantly in 1993 and continued to increase for part of 1994, triggering price caps and reducing the volume of PIK gas delivered to the Company. In May 1994, spot market prices began declining to levels under those which triggered the price caps, improving PCL margins. Spot prices continued to decline during the current fiscal year causing PCL margins to increase. The Oklahoma Corporation Commission, in an order dated April 27, 1995, established a cap of $2.68 on the price to be applied to gas volumes received by the Company in its approved Payment-In-Kind program. Prior to the order, the gas was priced at the weighted average cost of gas, which was approximately 60 cents per Mcf higher than the cap at the time of the order. The Commission order had the effect of reducing revenue but was superseded by a new rate order entered June 19, 1995. (For additional discussion, see "Rate Regulation" on page 13.)
3 Months Ended 9 Months Ended May 31, May 31, EXPLORATION AND PRODUCTION 1995 1994 1995 1994 (Thousands of $ except per share amounts) Revenues: From unaffiliated customers $5,184 $5,228 $16,936 $18,323 Intersegment sales 1,034 391 1,516 1,129 Total revenues 6,218 5,619 18,452 19,452 Operating expenses 5,054 5,297 16,281 17,942 Operating income before income taxes 1,164 322 2,171 1,510 Income taxes 248 (66) 244 46 Net interest expense 497 385 1,514 1,284 Net income $ 419 $ 3 $ 413 $ 180 Earnings per share $.02 $.01 $.02 $.01
3 Months Ended 9 Months Ended May 31, May 31, EXPLORATION AND PRODUCTION(Cont.) 1995 1994 1995 1994 Oil production sales: Revenue (thousands of $) $1,928 $1,583 $5,323 $5,700 Volumes (Bbls.) 114,588 125,679 330,096 407,620 Average price (per bbl.) $16.83 $12.60 $16.12 $13.98 Gas production sales: Revenue (thousands of $) $2,860 $3,755 $10,205 $13,050 Volumes (MMcf) 2,077 1,781 6,729 6,330 Average price (per Mcf) $1.38 $2.11 $1.52 $2.06 Natural gas liquids sales: Revenue (thousands of $) $635 $154 $1,752 $379 Volumes (Mgals.) 2,505 893 6,607 1,825 Average price (per gal.) $.25 $.17 $.27 $.21
Increased earnings for exploration and production for the current quarter and fiscal year to date were primarily attributable to increased natural gas liquids and gas sales from properties acquired during the first quarter, increased oil prices, and decreased depreciation and depletion expenses. Also contributing to the increased fiscal-year-to-date earnings were a gain on sale of property and lower nonproductive well drilling costs.
3 Months Ended 9 Months Ended May 31, May 31, GAS PROCESSING 1995 1994 1995 1994 (Thousands of $ except per share amounts) Revenues: From unaffiliated customers $24,377 $26,523 $80,413 $81,328 Intersegment sales 4,564 21 4,564 668 Total revenues 28,941 26,544 84,977 81,996 Operating expenses 24,042 26,255 75,718 76,908 Operating income before income taxes 4,899 289 9,259 5,088 Income taxes 1,712 (102) 3,206 1,592 Net interest expense 279 192 777 612 Net income $ 2,908 $ 199 $ 5,276 $ 2,884 Earnings per share $.11 $.01 $.20 $.11 Natural gas liquids sales: Revenue (thousands of $) $12,947 $11,734 $40,735 $36,376 Volumes (Mgals.) 51,671 49,409 154,923 144,431 Average price (per gal.) $.25 $.24 $.26 $.25 Margin (per gal.) $.05 $ - $.03 $.01 Other gas sales: Revenue (thousands of $) $13,392 $11,132 $35,786 $32,247 Volumes (MMcf) 6,730 4,876 17,916 13,795 Average price (per Mcf) $1.99 $2.28 $2.00 $2.34 Margin (per Mcf) $.38 $.12 $.28 $.18
In July 1994, the Company began trading NYMEX natural gas futures contracts to hedge shrinkage and fuel requirements in its gas processing operations. These contracts were entered into in order to effectively manage the risks involved in natural gas price fluctuations. Gains or losses were recognized as the futures contracts expired. In the first quarter, a loss of $1.2 million was recognized for futures contracts that had expired, $.9 million of which was applicable to shrinkage and fuel (gas purchase) costs recorded in December 1994 and January 1995. During the second quarter, a $1.8 million loss was recognized, $1.3 million of which was applicable to shrinkage and fuel costs recorded in March and April 1995. Lower prices paid for natural gas purchased for shrinkage and fuel requirements offset the amounts of the hedging losses. There were no hedging activities during the third quarter, and the Company has no open positions on gas futures contracts. Net income for the gas processing business increased during the current three-month and nine-month periods primarily because of increased product sales and decreased shrinkage and fuel costs. Earnings for the nine-month period ended May 31, 1994, included a gain of $2.1 million for the sale of a plant.
3 Months Ended 9 Months Ended May 31, May 31, OTHER 1995 1994 1995 1994 (Thousands of $ except per share amounts) Revenues: From unaffiliated customers $128,239 $14,806 $142,289 $ 28,828 Intersegment sales 12,246 29,888 52,474 72,141 Total revenues 140,485 44,694 194,763 100,969 Gas purchase expense 135,648 41,770 185,205 92,922 Operating expenses 4,911 2,878 10,596 8,506 Operating income (loss) before income taxes (74) 46 (1,038) (459) Income taxes (236) 273 (803) (106) Net interest expense 534 183 1,035 658 Net income (loss) $ (372) $ (410) $ (1,270) $ (1,011) Earnings (loss) per share $(.02) $(.02) $(.05) $(.04) Buildings operations (thousands of $): Revenue $2,232 $2,306 $6,580 $6,926 Earnings per share $(.01) $(.02) $(.03) $(.04) Corporate operations (thousands of $): Revenue $287 $ 56 $515 $298 Earnings per share $ - $ - $ - $ - Gas marketing operations (thousands of $): Revenue $137,966 $42,332 $187,668 $93,745 Less gas purchase expense 135,648 41,770 185,205 92,922 Net revenue $ 2,318 $ 562 $ 2,463 $ 823 Earnings per share $(.01) $ - $(.02) $ -
During the second quarter of 1995, ONEOK Inc. issued 330,000 shares of previously unissued shares of its common stock as part of a merger to acquire the remaining interest in a gas marketing partnership in which ONEOK Gas Marketing Company was a 50 percent owner. Increased revenues during the third quarter and fiscal year to date were primarily a result of gas marketing operations. Losses for other operations, including the results of gas marketing activities, remained relatively flat for both periods compared with last year. LIQUIDITY AND CAPITAL RESOURCES The estimated sources of funds (cash) for the 1995 fiscal year are as follows: (Est.) Sources of Funds (Millions of $) 1995 Proceeds from: Issuance of short-term debt $ 5.0 Sale of investment 10.9 Cash provided by operating activities 100.4 Total $116.3 Short-Term Debt. The aggregate amount of short-term debt outstanding at June 27, 1995, and May 31, 1995, was $36.2 million and $46.2 million, respectively. Long-Term Debt. As of June 27, 1995, the Company could have issued approximately $269.9 million of additional long-term debt under the most restrictive of the provisions contained in the Company's various lending agreements. Stock and Dividends. As of June 27, 1995, the Company could have issued approximately 33 million shares of common stock, 160,000 shares of preferred stock, and three million shares of preference stock. Common stock dividends were increased from 27 cents per share during the first quarter of 1994 and have remained at 28 cents per share since that time. Preferred dividends are 59.375 cents per share. At May 31, 1995, approximately $169.8 million of retained earnings is available for dividends. Rate Regulation. On June 19, 1995, the Commission approved a settlement agreed to by all active participants in the pending rate proceedings, including the Commission Staff, the Attorney General, and certain intervenors, which settled all issues in the proceedings. Under the approved settlement, the Company will receive a $14.9 million increase in base rates, of which $1.15 million applies for only two years. In recognition of the current highly competitive conditions in the industrial gas market, rates for large industrial customers were restructured and reduced, with revenue losses associated with such restructuring shifted to the general system "core" (residential and commercial) customers. The price of PIK gas to be included in the weighted average cost of gas was reduced to the cost of SISP gas and limited to an adjusted index price, the amount of PIK and SISP gas which could be taken and included in the Purchased Gas Adjustment (PGA) was increased but limited to 50 percent of the total general system supply on an annual basis, and the revenue loss resulting from the pricing change for PIK gas was shifted to the general system customers' base rates. The settlement also provided for limited (up to 10 percent) rate recovery for large industrial customer revenue losses resulting from future contract renegotiation and a temperature normalization adjustment clause. The Company anticipates that the result of such rate increases and rate restructuring and gas acquisition and pricing changes could be a net annual reduction of $6.7 million in burner tip gas costs to the general system core customers. As a part of the settlement the Company agreed not to file for a general rate increase for two years. Industrial Load. A contingent settlement agreement relating to litigation with Terra Nitrogen, Limited Partnership, formerly Agricultural Minerals, Limited Partnership (AMLP), was entered into as a result of, but was not a part of, the settlement approved by the Commission on June 19, 1995. Capital Expenditures. Capital expenditures budgeted for the 1995 fiscal year are as follows: (Est.) CAPITAL EXPENDITURES (Millions of $) 1995 Distribution $41.4 Transmission 13.0 Exploration and production 22.2 Gas processing 2.5 Other operations .7 Total $79.8 The 1995 estimate for the exploration and production segment includes an October 1994 acquisition of Louisiana properties at a cost of approximately $17.6 million. Other. Through TransTex Pipeline Company (TransTex), a subsidiary, the Company is a 25 percent partner in Red River Pipeline (Red River), which operates in Texas. The Company has agreed to advance cash to Red River, limited to its proportionate share, for operating expenses and for debt sinking fund payments when cash deficiencies occur. The Company has made such cash advances in each of the last three years. TransTex entered into a one-year limited agency agreement with a third party for shipping gas on Red River, which has generated additional revenue for TransTex during the 1995 fiscal year. TransTex is considering other alternatives to maximize the value of its assets. If the system does not improve cash flow as a result of these or other changes, the Company may not be able to fully recover its investment. The amount of such effect is not presently determinable. PART II. OTHER INFORMATION Item 1. Legal Proceedings Agricultural Minerals Limited Partnership v. ONEOK Inc., et al., No. CJ-94- 93, District Court, Rogers County. As a result of the settlement of the Company's 1994 Rate Proceedings (see Cause No. 940000477 below), a contingent settlement agreement has been reached relating to this case. In the Matter of the Ad Valorem Tax Protest of Oklahoma Natural Gas Company, ONG Sayre Storage, ONG Transmission Company, ONEOK Services, Inc., ONG Western, Inc., ONG Red Oak Transmission Company, and OkTex Pipeline Company, Nos. E-94-32, E-94-33, E-94-34, E-94-35, E-94-36, E-94-37, E-94- 38, Court of Tax Review, Oklahoma Board of Equalization. This matter has been settled. Under the settlement agreement, the current assessment ratio shall remain fixed for three years. A legislative study group is being established to study the matter and recommend a long-term solution. McWilliams, et ux v. ONEOK Inc., No. CJ-94-244, District Court, Kay County. The trial of the case commenced June 6, 1995, and the jury returned a verdict against the Company for $430,000 actual damages and $1 million punitive damages. The Company plans to file a motion for a new trial. Producers Selling Gas Processed at the LaVerne and/or Mooreland Plants (including ONEOK Exploration Company), Docket No,. IN 92-1-000, and Amoco Production and Oryx Energy Company, Docket No. IN 92-2-000, before the Federal Energy Regulatory Commission. The Commission withdrew its Notice of Proposed Civil Penalty by Order issued May 2, 1995. As such, the Company is no longer subject to any potential liability under the NGA or NGPA arising out of matters covered by the Notice. Application of Ernest G. Johnson Director of the Public Utility Division, Oklahoma Corporation Commission, seeking Commission Authorization to Modify Oklahoma Natural Gas Company's Purchased Gas Adjustment Clause, Cause No. PUD 590000059, Oklahoma Corporation Commission; and Application of Ernest G. Johnson Director of the Public Utility Division, Oklahoma Corporation Commission, seeking Commission Authorization to Modify Oklahoma Natural Gas Company's Payment-In-Kind Tariff, Cause No. PUD 590000060, Oklahoma Corporation Commission. Orders were issued in these proceedings but will be superseded by the Order in the 1994 Rate Proceedings. (See Cause No. 940000477 below.) In the Matter of the Application of Oklahoma Natural Gas Company, a Division of ONEOK Inc., for Examination of Standby Service. Cause No. PUD 880000598, Oklahoma Corporation Commission. Pursuant to a scheduling order entered by an administrative law judge (and agreed to by both parties) on December 9, 1994, a hearing on the merits is scheduled for September 13, 1995. The Company filed its testimony and proposed tariffs on April 14, 1995. In the Matter of the Application of Oklahoma Natural Gas Company, a Division of ONEOK Inc., for a Review and Determination Concerning its Rates and Earnings in Compliance with the Requirements of 17 O. S. Supp. 1990, Sec. 263, and for Other Appropriate Relief, Cause PUD No. 910001190, Oklahoma Corporation Commission. As a result of the settlement of the Company's 1994 Rate Proceedings (see Cause No. 940000477 below), a contingent settlement agreement has been reached relating to Terra Nitrogen, Limited Partnership's appeal of the Commission's November 22, 1994 Order. Application for a Determination that the Rate Charges Pursuant to a Pipeline Capacity Lease Agreement between ONG and AMLP is Just and Reasonable, Cause No. PUD 940000419, Oklahoma Corporation Commission. As a result of the settlement of the Company's 1994 Rate Proceedings (see Cause No. 940000477 below), a contingent settlement agreement has been reached relating to this case. In the Matter of the Application for a Change or Modification in the Rates, Charges, and Tariffs of Oklahoma Natural Gas Company, a Division of ONEOK Inc., Cause No. 940000477, Oklahoma Corporation Commission. A joint stipulation to settle the pending rate proceeding was entered into between the Company, the Staff of the Public Utility Division of the Corporation Commission, the Attorney General, and certain large industrial customers who intervened in the proceedings, and approval recommended by the administrative law judge. The joint stipulation was approved by order of the Commission on June 19, 1995. The approved settlement provides, among other things, for (a) a $14.9 million increase in basic rates, $1.15 million of which would apply for only the next two years, (b) PIK gas (previously priced to the general system gas distribution operation at the weighted average cost of gas (WACOG)) to be priced at the cost of SISP gas (actual or cash equivalent price cap of each contract) with the resulting revenue loss of $26.5 million shifted to general system customers' basic rates, (c) reduction in PIK volumes to be replaced by direct purchase of SISP gas with combined volumes limited to 50 percent of general system volumes on an annual basis, (d) maximum rates for customers in the Competitive Market PCL Class of 16 cents per MMBtu for fertilizer customers and other customers with annual volumes exceeding 5 million MMBtu's and 34 cents per MMBtu for other customers in the Class (all PCL contracts for customers in the Competitive Market PCL rate class are automatically modified to conform to the new maximum rates), with revenue loss of $8.9 million associated with such reduction to be shifted to general system customers, (e) SISP and PIK gas included in WACOG at actual purchase price but limited to an index price plus 5 cents per MMBtu, (f) establishment of base revenue of $25,023,470 for the 35 customers in the Competitive Market PCL Class with any reduction in such revenue up to a maximum of 10 percent to be added to base rates, any reductions beyond such 10 percent to be lost to the Company, and any revenue above the base amount to be realized by the Company, (g) a temperature adjustment clause, (h) recovery of certain postretirement benefits and deferred pension expenses, and (i) agreement by the Company not to file an application for a general rate increase for two years. In addition, the settlement provides for certain future studies, exchanges of information, and informal reviews. The changes were effective with the filing of new tariffs on June 19, 1995. Application of Oklahoma Natural Gas Company to Amend its Limited Deviation from the General Priority Schedule Established by OAC 165:10-17-12 in Order to Modify its Special Industrial Sales Program, Cause No. 9500000391; and Application of Oklahoma Natural Gas Company for Modification of its Special Industrial Sales Program, Cause PUD No. 950000017. These matters were settled as part of the 1994 Rate Proceedings (see Cause No. 940000477 above). Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None (b) Reports on Form 8-K Three reports on Form 8-K were filed during the third quarter of the 1995 fiscal year or preceding the filing of this report. The first report was dated May 3, 1995, and reported the closing on the sale of Ozark Gas Transmission System and the transfer of ownership of Caney River Transmission Company to Ozark Pipeline, Inc. The second report was dated May 5, 1995, and reported that the Oklahoma Corporation Commission issued an order establishing a cap of $2.68 per thousand cubic feet of gas on the price to be applied to gas volumes received by the Company in its approved Payment-In-Kind program. The third report was dated June 19, 1995, and reported the Oklahoma Corporation Commission approval of a rate settlement for Oklahoma Natural Gas Company. There were no financial statements filed with any of these Forms 8-K. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 28th day of June 1995. ONEOK Inc. (Registrant) By: (J. D. NEAL) J. D. Neal Vice President, Chief Financial Officer, and Treasurer EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENT OF EARNINGS FOR THE 1995 FISCAL YEAR'S THIRD QUARTER ENDED MAY 31, 1995, AND THE CONSOLIDATED BALANCE SHEET AT MAY 31, 1995, FOR ONEOK INC. AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS AUG-31-1995 MAR-01-1995 MAY-31-1995 25,575 0 90,174 0 82,750 206,697 1,265,427 504,941 1,189,383 183,263 0 201,404 0 9,000 197,208 1,189,383 0 304,498 0 281,244 0 0 9,403 0 4,811 9,040 0 0 0 9,040 .33 .33
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