ONEOK Announces Higher First Quarter 2021 Earnings; Increases 2021 Financial Guidance

TULSA, Okla., April 27, 2021 /PRNewswire/ -- ONEOK, Inc. (NYSE: OKE) today announced higher first quarter 2021 results and increased 2021 financial guidance.

Higher First Quarter 2021 Results, Compared With First Quarter 2020:

• Net income of $386.2 million, resulting in 86 cents per diluted share.
• 24% increase in adjusted EBITDA to $866.4 million.
• 20% increase in Rocky Mountain region NGL raw feed throughput volumes.
• 5% increase in Rocky Mountain region natural gas volumes processed.
• $1.04 per MMBtu average fee rate in the natural gas gathering and processing segment.

Increased 2021 Guidance:

• Net income midpoint increase to $1.35 billion.
• Diluted earnings per common share midpoint increase to $3.02.
• Adjusted EBITDA midpoint increase to $3.2 billion.

FIRST QUARTER 2021 FINANCIAL HIGHLIGHTS

"Despite the extraordinary winter weather conditions in the first quarter, we continued to meet the needs of our customers," said Terry K. Spencer, ONEOK president and chief executive officer. "Volumes on our system are on an increasing trend, and our outlook for the year continues to improve. Increasing producer activity, higher commodity prices and strengthening energy markets contributed to the increase to our 2021 financial guidance.

"The hard work and preparation of our employees and the capability of our integrated assets enabled us to perform well in the first quarter," added Spencer. "ONEOK employees worked around the clock to keep our assets operational in difficult conditions while serving the critical needs of our customers."

FIRST QUARTER 2021 FINANCIAL PERFORMANCE

ONEOK's first quarter 2021 net income and adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) increased, compared with the first quarter 2020. Higher results benefited from increased natural gas sales in the natural gas pipelines segment, increased natural gas liquids (NGL) volumes in the Rocky Mountain region and lower realized commodity prices in the first quarter 2020 in the natural gas gathering and processing segment. Net income for the period also increased due to noncash impairment charges in the natural gas gathering and processing segment in the first quarter 2020.

Winter Storm Uri impacted all three operating segments, resulting in a net positive impact to financial results, as ONEOK's ability to meet increased demand for natural gas and NGLs during the first quarter 2021 more than offset unfavorable volume impacts. Results were impacted by decreased volumes and increased electricity costs across ONEOK's operations due to severe weather, and higher employee-related costs, property taxes and supplies expenses. Net income also was impacted by higher interest expense related to an increased debt balance and lower capitalized interest, and higher depreciation expense due to capital projects placed in service.

HIGHLIGHTS:

• First quarter 2021 adjusted EBITDA of $866.4 million, a 24% increase compared with first quarter 2020.
• $104.9 million increase in adjusted EBITDA from natural gas sales in the natural gas pipelines segment.
• The 200 million cubic feet per day (MMcf/d) Bear Creek natural gas processing plant expansion and related infrastructure in the Williston Basin is expected to be completed in the fourth quarter 2021.
• A $773 million reduction in capital expenditures, an 80% decrease, compared with the first quarter 2020.
• In April 2021, declaring a quarterly dividend of 93.5 cents per share, or $3.74 per share on an annualized basis.
• As of March 31, 2021:
• 3.98 times annualized run-rate net debt-to-EBITDA ratio.
• No borrowings outstanding under ONEOK's $2.5 billion credit agreement.
• $402.4 million of cash and cash equivalents.

UPDATED 2021 GUIDANCE:

BUSINESS SEGMENT RESULTS:

Natural Gas Liquids Segment

The natural gas liquids segment's first quarter 2021 adjusted EBITDA increased 6%, compared with the same period in 2020. Higher volumes in the Rocky Mountain region and lower transportation costs contributed to the increase.

The increase in first quarter 2021 adjusted EBITDA, compared with the first quarter 2020, primarily reflects:

• A $63.8 million increase in exchange services (excluding the impact of Winter Storm Uri discussed below) due primarily to:
• $51.8 million in higher volumes in the Rocky Mountain region,
• $32.9 million in lower transportation costs,
• $15.8 million related to wider commodity price differentials, offset by
• $19.0 million in lower average fee rates,
• $13.2 million in lower Permian Basin volumes due to short-term contracts and increased ethane rejection, and
• $9.5 million related to lower unfractionated NGLs held in inventory; and
• A $38.8 million increase in optimization and marketing due primarily to increased activities during Winter Storm Uri and unfavorable changes in the value of NGLs held in inventory in 2020; offset by
• A $46.2 million decrease in exchange services related to Winter Storm Uri due primarily to decreased volumes across ONEOK's operations and increased electricity costs;
• A $21.6 million increase in operating costs due primarily to higher employee-related costs and increased property taxes associated with ONEOK's completed capital-growth projects; and
• An $11.7 million decrease in equity in net earnings from investments due primarily to lower volumes on the Overland Pass Pipeline.

Natural Gas Gathering and Processing Segment

The natural gas gathering and processing segment's first quarter 2021 adjusted EBITDA increased 28%, compared with the same period in 2020.

First quarter 2021 adjusted EBITDA increased, compared with the first quarter 2020, which primarily reflects:

• A $45.6 million increase due primarily to lower realized commodity prices in the prior year impacting fee-based contracts with a percent of proceeds (POP) component; and
• A $7.1 million decrease in operating costs due primarily to lower materials, supplies and outside services expenses; offset by
• A $9.0 million decrease due primarily to lower volumes in the Mid-Continent region related to Winter Storm Uri and natural production declines, offset partially by higher volumes in the Rocky Mountain region.

Natural Gas Pipelines Segment

The natural gas pipelines segment's well-positioned storage and pipeline assets helped meet critical needs in the first quarter 2021. ONEOK's ability to continue providing reliable service throughout the weather event helped meet increased natural gas demand and contributed to higher adjusted EBITDA in the segment compared with the same period in 2020.

First quarter 2021 adjusted EBITDA increased, compared with the first quarter 2020, which primarily reflects:

• A $104.9 million increase due primarily to higher average natural gas prices on 5.2 billion cubic feet (Bcf) of natural gas sales in the first quarter 2021 of volumes previously held in inventory, compared with 1.2 Bcf in the first quarter 2020; and
• A $15.4 million increase in transportation services due primarily to higher park-and-loan activity, and higher interruptible transportation revenue; offset by
• A $5.4 million increase in operating costs due primarily to higher employee-related costs and supplies expenses.

EARNINGS CONFERENCE CALL AND WEBCAST:

ONEOK executive management will conduct a conference call at 11 a.m. Eastern Daylight Time (10 a.m. Central Daylight Time) on April 28, 2021. The call also will be carried live on ONEOK's website.

To participate in the telephone conference call, dial 800-367-2403, pass code 6389387, 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 6389387.

LINK TO EARNINGS TABLES AND PRESENTATION:

https://ir.oneok.com/financial-information/financial-reports/2021

NON-GAAP (GENERALLY ACCEPTED ACCOUNTING PRINCIPLES) FINANCIAL MEASURES:

ONEOK has disclosed in this news release adjusted earnings before interest, taxes, depreciation and amortization (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 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
• Dividend coverage ratio is defined as ONEOK's distributable cash flow to ONEOK shareholders divided by the dividends paid in 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 dividend 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 (loss) to adjusted EBITDA, distributable cash flow and coverage ratio are included in the tables.

ONEOK, Inc. (pronounced ONE-OAK) (NYSE: OKE) is a leading midstream service provider and owner of one of the nation's premier natural gas liquids (NGL) systems, connecting NGL supply in the Rocky Mountain, Mid-Continent and Permian regions with key market centers and an extensive network of natural gas gathering, processing, storage and transportation assets.

ONEOK is a FORTUNE 500 company and is included in S&P 500.

For information about ONEOK, visit the website: www.oneok.com.

For the latest news about ONEOK, find us on LinkedIn, Instagram, Facebook and Twitter.

This news release contains certain "forward-looking statements" within the meaning of federal securities laws. Words such as "anticipates," "believes," "continues," "could," "estimates," "expects," "forecasts," "goal," "guidance," "intends," "may," "might," "outlook," "plans," "potential," "projects," "scheduled," "should," "will," "would," 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 length, severity and reemergence of a pandemic or other health crisis, such as the outbreak of COVID-19 and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it, which may (as with COVID-19) precipitate or exacerbate one or more of the factors herein, reduce the demand for natural gas, NGLs and crude oil and significantly disrupt or prevent us and our customers and counterparties from operating in the ordinary course for an extended period and increase the cost of operating our business;
• operational challenges relating to the COVID-19 pandemic and efforts to mitigate the spread of the virus, including logistical challenges, protecting the health and well-being of our employees, remote work arrangements, performance of contracts and supply chain disruption;
• 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 drill and obtain necessary permits; regulatory compliance; reserve performance; and capacity constraints and/or shutdowns on the pipelines that transport crude oil, natural gas and NGLs from producing areas and our facilities;
• risks associated with adequate supply to our gathering, processing, fractionation and pipeline facilities, including production declines that outpace new drilling, the shutting-in of production by producers, actions taken by federal, state or local governments to require producers to prorate or to cut their production levels as a way to address any excess market supply situations or extended periods of ethane rejection;
• demand for our services and products in the proximity of our facilities;
• economic climate and growth in the geographic areas in which we operate;
• the risk of a slowdown in growth or decline in the United States or international economies, including liquidity risks in United States or foreign credit markets;
• performance of contractual obligations by our customers, service providers, contractors and shippers;
• 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, production limits and authorized rates of recovery of natural gas and natural gas transportation costs;
• changes in demand for the use of natural gas, NGLs and crude oil because of the development of new technologies or other market conditions caused by concerns about climate change;
• the effects of weather and other natural phenomena, including climate change, on our operations, demand for our services and energy prices;
• acts of nature, sabotage, terrorism or other similar acts that cause damage to our facilities or our suppliers', customers' or shippers' facilities;
• 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;
• the timing and extent of changes in energy commodity prices, including changes due to production decisions by other countries, such as the failure of countries to abide by agreements to reduce production volumes;
• 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 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 United States natural gas and crude oil; and
• availability of additional storage capacity;
• the efficiency of our plants in processing natural gas and extracting and fractionating NGLs;
• the composition and quality of the natural gas and NGLs we gather and process in our plants and transport on our pipelines;
• risks of marketing, trading and hedging activities, including the risks of changes in energy prices or the financial condition of our counterparties;
• our ability to control operating costs and make cost-saving changes;
• the risk inherent in the use of information systems in our respective businesses and those of our counterparties and service providers, including cyber-attacks, which, according to experts, have increased in volume and sophistication since the beginning of the COVID-19 pandemic; implementation of new software and hardware, and the impact on the timeliness of information for financial reporting;
• the timely receipt of approval by applicable governmental entities for construction and operation of our pipeline and other projects and required regulatory clearances;
• 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 Federal Energy Regulatory Commission (FERC)-regulated rates;
• the results of administrative proceedings and litigation, regulatory actions, executive orders, rule changes and receipt of expected clearances involving any local, state or federal regulatory body, including the 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);
• the mechanical integrity of facilities and pipelines operated;
• the capital intensive nature of our businesses;
• 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;
• actions by rating agencies concerning our credit;
• 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;
• our ability to access capital at competitive rates or on terms acceptable to us;
• 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;
• our ability to control construction costs and completion schedules of our pipelines and other projects;
• difficulties or delays experienced by trucks, railroads or pipelines in delivering products to or from our terminals or pipelines;
• the uncertainty of estimates, including accruals and costs of environmental remediation;
• the impact of uncontracted capacity in our assets being greater or less than expected;
• the impact of potential impairment charges;
• the profitability of assets or businesses acquired or constructed by us;
• 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 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 impact of recently issued and future accounting updates and other changes in accounting policies; 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.

SOURCE ONEOK, Inc.

Related Links

www.oneok.com

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