TULSA, Okla., Aug. 2 /PRNewswire-FirstCall/ -- ONEOK Partners, L.P. today reported second-quarter 2006 net income of $196.2 million, or $2.22 per unit, compared with net income of $28.1 million, or $0.55 per unit, for second quarter 2005. Year-to-date 2006, ONEOK Partners reported net income of $266.7 million, or $3.33 per unit, compared with $62.8 million, or $1.24 per unit, for the same period in 2005.
The partnership also confirmed its net income per unit guidance in the range of $4.43 to $4.69 per unit, which was announced on Feb. 15, 2006.
Cash flow, as measured by earnings before interest, taxes, depreciation and amortization (EBITDA), was $267.9 million for second quarter 2006, compared with $80.5 million in the second quarter of 2005. Distributable cash flow (DCF) for second quarter 2006 was $119.7 million, or $1.32 per unit, compared with $33.5 million, or $0.66 per unit, in second quarter 2005.
Second-quarter 2006 results reflect the April 2006 acquisition of assets comprising ONEOK, Inc.'s former gathering and processing, natural gas liquids, and pipelines and storage segments. The most recent results also reflect a $113.9 million, or $1.35 per unit, gain on the sale of a 20 percent partnership interest in Northern Border Pipeline Company in April 2006. Second-quarter results also include a non-cash, after-tax charge of approximately $10.5 million, or $0.13 per unit, to reflect asset and goodwill impairment charges for Black Mesa Pipeline, Inc.
"As expected, our results for the second quarter reflect the significant benefits from the purchase of the ONEOK assets," said David Kyle, chairman and chief executive officer of ONEOK Partners. "We also benefited from very strong gross processing spreads and a gain on the sale of a 20 percent interest in Northern Border Pipeline."
"In addition, our businesses are well positioned for future growth in distributable cash flow, as we have recently announced more than $1 billion in internally generated growth projects," Kyle added.
SECOND-QUARTER 2006 HIGHLIGHTS INCLUDE:
* The April 2006 acquisition of assets comprising ONEOK's former
gathering and processing, natural gas liquids, and pipeline and storage
assets for $3 billion, which resulted in the inclusion of these
businesses in the consolidated financial statements as of Jan. 1, 2006;
* ONEOK becoming the sole general partner and increasing its overall
ownership in the partnership to 45.7 percent;
* Increasing the second-quarter distribution to $0.95 per unit, achieving
the high end of the partnership's previously announced quarterly
distribution target range;
* The consolidation of Guardian Pipeline, L.L.C. as a result of the April
2006 acquisition of the remaining 66-2/3 percent interest in Guardian
Pipeline for $77 million;
* Forming a joint-venture company, Overland Pass Pipeline Company LLC, to
build a 750-mile natural gas liquids pipeline to link the high-growth
NGL production area in the Rocky Mountain region to the partnership's
fractionation facilities at Bushton and Conway, Kansas;
* The deconsolidation of results for Northern Border Pipeline Company
effective Jan. 1, 2006, due to the sale of a 20 percent interest in the
pipeline in April 2006, to TC PipeLines, LP for approximately $297
million, and the resulting $113.9 million gain on sale;
* The April 2006 start-up of Northern Border Pipeline's Chicago III
Expansion Project as planned, adding 130 million cubic feet per day
(mmcfd) of transportation capacity to the Chicago area;
* The May 22, 2006, name and ticker symbol change to ONEOK Partners, L.P.
from Northern Border Partners, L.P. ;
* Higher realized gross processing spreads for the partnership's
gathering and processing business;
* Higher interest expense, due to higher average debt outstanding
associated with the acquisitions, partially offset by the Northern
Border Pipeline deconsolidation;
* An after-tax, non-cash charge of approximately $10.5 million to reflect
asset and goodwill impairments for Black Mesa Pipeline, Inc. The
impairment charges had no impact on second-quarter 2006 cash flows from
operating activities or second-quarter 2006 EBITDA. The impairment is
being taken as a result of a June 2006 announcement by Southern
California Edison, co-owner of the Mohave Generating Station, that it
would no longer pursue resuming operations of the generating station,
which is the sole customer of Black Mesa Pipeline.
Gathering and Processing Segment
The natural gas gathering and processing segment reported EBITDA of $64.4 million and $127.5 million in the three- and six-month periods ended June 30, 2006, respectively, compared with $19.1 million and $36.8 million in the three- and six-month periods ended June 30, 2005, respectively. The gathering and processing assets acquired from ONEOK, located primarily in the Mid- Continent region of the U.S., accounted for most of the additional EBITDA.
Reported net margins increased $67.8 million and $134.5 million for the three and six months ended June 30, 2006, respectively, compared with the same periods last year. The margin increases were the result of the acquisition of the ONEOK gathering and processing assets, which accounted for $63.8 million and $126.2 million of net margins for the three and six months ended June 30, 2006, respectively; increased natural gas volumes gathered in the Rocky Mountain region; and increased natural gas liquids revenue due to higher prices and higher volumes in the Rocky Mountain region.
The following table contains margin information for the periods indicated. NGL shrink, plant fuel and condensate shrink refer to the Btus that are removed from natural gas through the gathering and processing operation.
Six Months Ended
June 30,
2006 2005 (A)
Keep-whole
NGL shrink (MMBtu/d) 36,974 ---
Plant fuel (MMBtu/d) 4,861 ---
Condensate shrink (MMBtu/d) 3,234 ---
Condensate sales (Bbl/d) 664 ---
Percentage of total net margin 14% 0%
Percent-of-proceeds
Wellhead purchases (MMBtu/d) 125,907 ---
NGL sales (Bbl/d) 7,131 2,199
Residue sales (MMBtu/d) 28,905 11,906
Condensate sales (Bbl/d) 1,115 ---
Percentage of total net margin 61% 58%
Fee-based
Wellhead volumes (MMBtu/d) 1,149,272 289,214
Average rate ($/MMBtu) $0.22 $0.41
Percentage of total net margin 25% 42%
(A) Excludes results related to the acquisition of the ONEOK gathering
and processing assets.
The partnership estimates that a $0.10 per MMBtu increase in the price of natural gas would decrease annual net income by approximately $0.5 million. Also, a $0.01 per gallon decrease in the price of natural gas liquids would decrease annual net income by approximately $2.5 million. A $1.00 per barrel decrease in the price of crude oil would decrease annual net income by approximately $0.5 million. All these sensitivities exclude the effects of hedging.
As shown in the table below, for the remainder of 2006, the gathering and processing segment is approximately 40 percent hedged on its percent-of- proceeds natural gas projected volumes; approximately 35 percent hedged on its percent-of-proceeds projected natural gas liquids volumes; and approximately 31 percent hedged on its projected keep-whole gross processing spread.
Year Ending
December 31, 2006
Volumes Average
Product Hedged Price Per Unit
Percent-of-proceeds
Condensate (A) (Bbl/d) 815 $52.00-60.00
Natural gas liquids (B) (Bbl/d) 2,813 $44.13
Natural gas (A) (MMBtu/d) 5,217 $6.15-11.00
Natural gas (B) (MMBtu/d) 7,000 $7.92
Keep-whole
Gross processing spread (MMBtu/d) 10,550 $6.01
(A) Hedged with NYMEX-based collars.
(B) Hedged with fixed-price swaps.
Operating costs for the segment increased $25.8 million and $48.9 million for the three and six months ended June 30, 2006, respectively, as did depreciation and amortization expense, which increased $6.5 million and $13.1 million, respectively for the same periods. The increases in operating costs and depreciation and amortization were primarily due to the acquisition of the assets from ONEOK and gathering system expansions.
Equity earnings from investments increased $1.0 million and $2.4 million for the three and six months ended June 30, 2006, respectively, compared with the same periods last year due to increased volumes gathered at Bighorn Gas Gathering and Fort Union Gas Gathering, partially offset by lower volumes gathered at the Wind River Basin joint venture, Lost Creek.
The following information for the gathering and processing assets acquired from ONEOK compares 2006 results with periods prior to the acquisition. As a result, it is not reported in the financial tables of this press release, but is provided here solely for purposes of comparing performance for the three- and six-month periods ended June 30, 2006, with the comparable periods in 2005.
* Net margins for the assets acquired from ONEOK increased $8.7 million
and $18.8 million for the second quarter and six months ended June 30,
2006, respectively, primarily due to favorable commodity pricing for
natural gas liquids and natural gas on percent-of-proceeds contracts
and higher gross processing spreads on keep-whole contracts. Margins
were partially offset by lower gathering and processing volumes related
to natural reserve declines for production connected to the
partnership's systems, and contract terminations;
* The realized gross processing spread for the second quarter of 2006 was
$6.11 per million British Thermal Units (MMBtu), significantly higher
than the previous five-year average of $1.86 per MMBtu. Based on
current market conditions, the gross processing spread for the
remainder of 2006 is expected to continue to be significantly higher
than the previous five-year average;
* Operating costs for the acquired assets increased $1.2 million and $2.3
million for the three and six months ended June 30, 2006, respectively,
compared with the same periods last year, primarily due to higher
employee costs and utility costs.
Natural Gas Liquids Segment
The natural gas liquids segment reported EBITDA of $35.1 million and $57.5 million in the three- and six-month periods ended June 30, 2006, respectively. Net margins were $50.5 million in the second quarter 2006 and $84.3 million in the first half of 2006. The EBITDA and net margin increases for the second quarter and six months 2006 are entirely incremental to the partnership due to the acquisition of ONEOK's former natural gas liquids segment in April 2006.
Operating costs were $15.9 million and $27.2 million in the second-quarter and six-month periods, respectively. Depreciation and amortization was $5.4 million and $10.8 million in the second-quarter and six-month periods, respectively.
The following information for the natural gas liquids segment acquired by the partnership from ONEOK compares 2006 results with periods prior to the partnership's acquisition. As a result, it is not reported in the financial tables of this press release, but is provided here solely for purposes of comparing performance for the three- and six-month periods ended June 30, 2006, with the comparable periods in 2005. Because ONEOK acquired the majority of these assets from Koch Industries in July 2005, the following comparisons are with ONEOK's legacy natural gas liquids assets only:
* Net margins increased $43.4 million and $70.0 million for the three and
six months ended June 30, 2006, respectively, compared with the three-
and six-month periods ended June 30, 2005;
* Operating costs increased $12.9 million and $21.8 million for the three
and six months ended June 30, 2006;
* Depreciation and amortization increased $5.3 million and $10.7 million
for the three and six months ended June 30, 2006, respectively, over
comparable periods in 2005.
Pipelines and Storage Segment
The pipelines and storage segment reported EBITDA of $32.5 million and $69.3 million for the three and six months ended June 30, 2006, respectively. Net margins were $50.6 million in the second quarter 2006 and $102.8 million in the first half of 2006, which are entirely incremental to the partnership due to the partnership's acquisition of ONEOK's pipeline and storage assets in April 2006.
The following information for the pipeline and storage segment acquired from ONEOK compares 2006 results with periods prior to the partnership's acquisition. As a result, it is not reported in the financial tables of this press release, but is provided solely for purposes of comparing performance for the three-and six-month periods ended June 30, 2006, with the comparable periods in 2005.
* Net margins increased $19.4 million and $41.4 million for the three and
six months ended June 30, 2006, respectively, compared with the same
periods last year when ONEOK owned the assets. The net margin increases
were primarily due to additional revenue generated from the natural gas
liquids gathering and distribution pipelines ONEOK acquired from Koch
in July 2005, increased natural gas transportation revenue from higher
realized rates and higher volumes in the segment's commodity-based
short-term business and an improved fuel position. These increases
were partially offset by lower natural gas storage revenue during the
second quarter 2006 as a result of lower injection volumes;
* Operating costs for the acquired pipelines and storage segment assets
increased $6.0 million and $11.3 million for the three and six months
ended June 30, 2006, respectively, compared with the same periods last
year, primarily due to increased operating expense associated with
ONEOK's acquisition of natural gas liquids gathering and distribution
pipelines from Koch and higher employee-related expenses.
Interstate Natural Gas Pipeline Segment
The interstate natural gas pipeline segment contributed EBITDA of $141.4 million and $184.4 for the three and six months ended June 30, 2006, respectively, compared with $61.2 million and $134.1 million for the same periods in 2005. EBITDA for second quarter 2006 includes a $113.9 million gain on the sale of the 20 percent ownership interest in Northern Border Pipeline; equity earnings from Northern Border Pipeline of $12.7 million; and $6.2 million as a result of the April 2006 acquisition of the remaining 66-2/3 percent interest in Guardian Pipeline, which was consolidated beginning Jan. 1, 2006. EBITDA for the second quarter 2005 included $53.8 million from Northern Border Pipeline prior to its deconsolidation.
Net margins decreased $59.3 million and $130.4 million for the three and six months ended June 30, 2006, respectively, compared with the same periods last year, as a result of the deconsolidation of Northern Border Pipeline. Operating costs decreased $13.6 million and $29.3 million, respectively, for the three and six months ended June 30, 2006, as did depreciation and amortization, which decreased $13.0 million and $25.8 million, respectively, for the same periods. These decreases were also primarily a result of the deconsolidation of Northern Border Pipeline.
Equity earnings from investments for the three and six months ended June 30, 2006, were $12.7 million and $38.9 million, respectively, representing the partnership's 50 percent interest in Northern Border Pipeline that is no longer consolidated as of January 1, 2006, due to the sale of a 20 percent interest in the pipeline. Equity earnings from investments for the three and six months ended June 30, 2005, were $0.2 million and $0.6 million, respectively, representing the partnership's 33-1/3 percent interest in Guardian Pipeline that is now consolidated with the partnership's interstate natural gas pipelines segment, as a result of the April 2006 acquisition of the remaining interests in the pipeline.
Minority interest for the three and six months ended June 30, 2006, primarily represents the 66-2/3 percent interest in Guardian Pipeline that the partnership did not own until it acquired the remaining interests in April 2006. Minority interest for the three and six months ended June 30, 2005, represents the 30 percent interest in Northern Border Pipeline owned by TC PipeLines when Northern Border Pipeline's results were consolidated with the interstate natural gas pipelines segment.
GROWTH ACTIVITIES
Recently, the partnership announced that it will invest more than $1 billion in internally generated growth projects over the next three years. The projects include $433 million to build Overland Pass Pipeline and another $173 million to make related infrastructure upgrades in the partnership's existing natural gas liquids operations. Approximately $450 million of additional investment will be made in other projects, which include the previously announced Guardian II and Midwestern Gas Transmission projects.
Northern Border Pipeline's Chicago III expansion project was placed in service at the end of April 2006. The Chicago III expansion project increases Northern Border Pipeline's transportation capacity by 130 mmcfd, to 974 mmcfd, from Harper, Iowa, to the Chicago market area. Increased revenues from the expansion have already been incorporated into the partnership's financial guidance for 2006.
ONEOK Partners completed the purchase of the remaining 66-2/3 percent ownership interest in Guardian Pipeline in April 2006. The $77 million purchase gave the partnership 100 percent ownership of the pipeline that transports Chicago-area gas to Wisconsin markets. As a result, the previously announced Guardian expansion and extension project, estimated to cost $220 million to $240 million, will increase pipeline throughput and operating income. Construction of that project is targeted to begin in 2008 and be completed in November 2008.
The partnership is currently constructing the eastern extension project of Midwestern Gas Transmission. The project will add 31 miles of natural gas pipeline into Tennessee, with 120 mmcfd of transportation capacity. It is estimated that the project will cost approximately $28 million. The proposed in-service date of November 2006 will likely be delayed for several months due to the delay in obtaining the Federal Energy Regulatory Commission certificate.
On June 1, 2006, the partnership announced that it had completed a series of transactions with a subsidiary of The Williams Companies, Inc. to form a joint venture called Overland Pass Pipeline Company LLC. The joint-venture company will build a 750-mile natural gas liquids pipeline from Opal, Wyo., to the Mid-Continent natural gas liquids market center in Conway, Kan. The pipeline will be designed to transport 110,000 barrels per day of natural gas liquids. The installation of additional pump facilities would increase the capacity to 150,000 barrels per day. Construction of the pipeline is expected to begin in the summer of 2007, with start-up scheduled for early 2008.
On June 8, 2006, ONEOK Partners, Boardwalk Pipeline Partners, LP and Energy Transfer Partners, LP signed a letter of intent regarding the formation of a joint venture that would construct a new interstate natural gas pipeline originating in North Texas, crossing the states of Oklahoma, Arkansas and terminating in Dyer County, Tenn., at a new interconnect with Texas Gas Transmission, LLC. The proposed interstate pipeline would have initial capacity of up to 1.0 billion cubic feet per day.
DISTRIBUTION DECLARATION
On July 19, 2006, the partnership's board of directors declared an 8 percent increase in the partnership's quarterly cash distribution to $0.95 per unit for the second quarter of 2006. The indicated annual rate is $3.80 per unit. The distribution is payable August 14, 2006, to unit holders of record on July 31, 2006. This achieves the high end of the previously announced target annual distribution rate.
2006 GUIDANCE
As reflected in Attachment A, the partnership is confirming its net income per unit guidance for 2006. Net income per unit for 2006 is expected to be in the range of $4.43 to $4.69.
However, net income guidance has changed to reflect pre-acquisition income tax and interest expense for the businesses acquired from ONEOK, favorable commodity prices for the gathering and processing segment, the purchase of additional interests in Guardian, and the Black Mesa Pipeline impairment. EBITDA is changing due to favorable commodity prices for the gathering and processing segment and the purchase of additional interests in Guardian.
Prior to the partnership's April 2006 acquisition of the ONEOK assets, those businesses were included in the consolidated state and federal income tax returns of ONEOK. The partnership's 2006 net income reflects income tax expense of $22.2 million in the first quarter of 2006; however, the income tax liability was retained by ONEOK. These items were not included in the partnership's Feb. 15, 2006, guidance but have been reflected in the current net income guidance.
Income of the acquired businesses for the first quarter of 2006 also reflected interest expense of $21.3 million, which represented interest charged on long-term debt owed to ONEOK. This debt was retained by ONEOK as part of the partnership acquisition.
Updated guidance for net income reflects the first-quarter income tax and interest expense for the assets acquired. In calculating net income, the updated guidance reduces the income allocated to ONEOK related to partial-year ownership for these expenses.
The partnership is also updating its 2006 capital expenditure guidance, which is summarized in the following table:
2006 Projected Capital Expenditures Growth Maintenance Total
(Millions of dollars)
Gathering and Processing $66 $17 $83
Natural Gas Liquids 20 17 37
Pipelines and Storage 111 14 125
Interstate Natural Gas Pipelines 35 13 48
Total projected capital expenditures $232 $61 $293
As reflected on Attachment A, distributable cash flow is expected to be in the range of $326 million to $346 million, or $3.96 to $4.23 per unit.
CONFERENCE CALL
ONEOK Partners and ONEOK will host a joint conference call on Thursday, August 3, 2006 at 11:00 a.m. Eastern Time to review second-quarter 2006 results and to discuss the 2006 outlook. This call may be accessed via the partnership's Web site at http://www.oneokpartners.com/ . The webcast will be available on the partnership's Web site for 30 days. The call-in number for the live conference call is 866-836-4700, pass code 890065. An audio replay of the call will be available through August 10, 2006, by dialing 866-837-8032 and entering pass code 890065.
NON-GAAP FINANCIAL MEASURES
The partnership has disclosed in this news release EBITDA and DCF amounts that are non-GAAP financial measures. Management believes EBITDA and DCF provide useful information to investors as a measure of comparison with peer companies. However, these calculations may vary from company to company, so the partnership's computations may not be comparable with those of other companies. DCF is not necessarily the same as available cash as defined in the Partnership Agreements. Management further uses EBITDA to compare the financial performance of its segments and to internally manage those business segments. Reconciliations of EBITDA to operating income, and computations of DCF for the six months ended June 30, 2006, and 2005, are included in the financial tables attached to this release. Reconciliations of projected 2006 EBITDA to projected net income and computations of projected DCF are also included in Attachment A of this release.
ONEOK Partners, L.P. is a publicly traded partnership whose purpose is to own, operate and acquire a diversified portfolio of energy assets. The Partnership owns and manages natural gas gathering, processing, storage, interstate and intrastate natural gas pipeline assets and one of the nation's premier natural gas liquids (NGL) systems, connecting much of the natural gas and NGL supply in the Mid-Continent with key market centers.
For more information about ONEOK Partners, L.P., visit: http://www.oneokpartners.com/ .
Some of the statements contained and incorporated in the news release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements relate to: anticipated financial performance; management's plans and objectives for future operations; business prospects; outcome of regulatory and legal proceedings; market conditions and other matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements in certain circumstances. The following discussion is intended to identify important factors that could cause future outcomes to differ materially from those set forth in the forward-looking statements.
Forward-looking statements include the items identified in the preceding paragraph, the information concerning possible or assumed future results of our operations and other statements contained or incorporated in this news release identified by words such as "anticipate," "estimate," "expect," "forecast," "intend," "believe," "projection" or "goal."
You should not place undue reliance on forward-looking statements. Known and unknown risks, uncertainties and other factors may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by forward- looking statements. Those factors may affect our operations, markets, products, services and prices. In addition to any assumptions and other factors referred to specifically in connection with the forward-looking statements, factors that could cause our actual results to differ materially from those contemplated in any forward-looking statement include, among others, the following:
* the effects of weather and other natural phenomena on our operations,
demand for our services and energy prices;
* competition from other U.S. and Canadian energy suppliers and
transporters as well as alternative forms of energy;
* the timing and extent of changes in commodity prices for natural gas,
natural gas liquids, electricity and crude oil;
* impact on drilling and production by factors beyond our control,
including the demand for natural gas and refinery-grade crude oil;
producers' desire and ability to obtain necessary permits; reserve
performance; and capacity constraints on the pipelines that transport
natural gas, crude oil and natural gas liquids from producing areas and
our facilities;
* risks of trading and hedging activities as a result of changes in
energy prices or the financial condition of our counterparties;
* the timely receipt of approval by applicable governmental entities for
construction and operation of our pipeline projects and required
regulatory clearances; our ability to acquire all necessary rights-of-
way in a timely manner, and our ability to promptly obtain all
necessary materials and supplies required for construction;
* the ability to market pipeline capacity on favorable terms;
* risks associated with adequate supply to our gathering, processing,
fractionation and pipeline facilities, including production declines
which outpace new drilling;
* the mechanical integrity of facilities operated;
* the effects of changes in governmental policies and regulatory actions,
including changes with respect to income taxes, environmental
compliance, authorized rates or recovery of gas costs;
* the results of administrative proceedings and litigation, regulatory
actions and receipt of expected clearances involving regulatory
authorities or any other local, state or federal regulatory body,
including the FERC;
* actions by rating agencies concerning our credit ratings;
* 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 expense and
funding resulting from changes in stock and bond market returns;
* our ability to access capital at competitive rates or on terms
acceptable to us;
* demand for our services in the proximity of our facilities;
* the profitability of assets or businesses acquired by us;
* the risk that material weaknesses or significant deficiencies in our
internal control over financial reporting could emerge or that minor
problems could become significant;
* the impact and outcome of pending and future litigation;
* our ability to successfully integrate the operations of the assets
acquired from ONEOK with our current operations;
* performance of contractual obligations by our customers;
* the uncertainty of estimates, including accruals;
* ability to control operating costs; and
* acts of nature, sabotage, terrorism or other similar acts that cause
damage to our facilities or our suppliers' or shippers' facilities.
Other factors and assumptions not identified above were also involved in the making of the forward-looking statements. The failure of those assumptions to be realized, as well as other factors, may also cause actual results to differ materially from those projected. We have no obligation and make no undertaking to update publicly or revise any forward-looking information.
ONEOK Partners, L.P. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
June 30, June 30,
(Unaudited) 2006 2005 2006 2005
(Thousands of dollars,
except per unit amounts)
Operating revenue $1,159,350 $149,417 $2,329,179 $309,796
Cost of sales and fuel 944,150 35,466 1,909,038 67,931
Net margin 215,200 113,951 420,141 241,865
Operating expenses:
Operations and maintenance 69,063 30,042 140,889 63,214
Depreciation and amortization 39,282 21,456 66,752 42,848
Taxes other than income 8,136 8,989 14,913 18,801
Total operating expenses 116,481 60,487 222,554 124,863
Gain on sale of assets 113,877 --- 114,865 ---
Operating income 212,596 53,464 312,452 117,002
Interest expense, net 30,787 21,372 67,221 42,538
Other income (expense):
Equity earnings from
investments 18,004 4,418 49,817 8,895
Other income 3,614 1,082 5,421 1,823
Other expense (5,425) (234) (6,150) (457)
Total other income, net 16,193 5,266 49,088 10,261
Minority interest in net
income 519 8,629 2,138 20,818
Income from continuing
operations before income
taxes 197,483 28,729 292,181 63,907
Income taxes 1,284 997 25,478 1,896
Income from continuing
operations 196,199 27,732 266,703 62,011
Discontinued operations, net
of tax --- 358 --- 748
Net income to partners $196,199 $28,090 $266,703 $62,759
Limited partners' interest in
net income:
Net income to partners $196,199 $28,090 $266,703 $62,759
General partners' interest in
net income 12,105 2,552 51,745 5,235
Limited partners' interest
in net income $184,094 $25,538 $214,958 $57,524
Limited partners' per unit net
income:
Income from continuing
operations $2.22 $0.54 $3.33 $1.22
Discontinued operations, net
of tax --- 0.01 --- 0.02
Net income per unit $2.22 $0.55 $3.33 $1.24
Number of units used in
computation 82,891 46,397 64,644 46,397
Supplemental Information:
EBITDA (A) $267,901 $80,485 $427,994 $171,157
Distributable cash flow (B) $119,749 $33,520 $171,645 $77,635
Distributable cash flow per
unit $1.32 $0.66 $2.44 $1.55
(A) EBITDA is computed from net income plus minority interest, interest
expense (net), income taxes, and depreciation and amortization; less
equity AFUDC.
(B) Distributable cash flow is computed from EBITDA less interest expense
(net), maintenance capital expenditures, equity earnings, gain on
sale of assets, distributions to minority interests and current
income taxes; plus distributions received from equity investments.
ONEOK Partners, L.P. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
June 30, Dec. 31,
(Unaudited) 2006 2005
Assets (Thousands of dollars)
Current assets:
Cash and cash equivalents $24,869 $43,090
Accounts receivable, net 416,076 82,848
Gas and natural gas liquids in
storage and imbalances 247,920 ---
Commodity exchanges 203,187 ---
Materials and supplies 16,284 7,273
Derivative financial instruments 3,998 ---
Prepaid expenses and other 8,391 5,211
Total current assets 920,725 138,422
Property, plant and equipment:
Property, plant and equipment 3,299,795 3,000,720
Accumulated depreciation and
amortization 621,568 1,082,210
Property, plant and equipment, net 2,678,227 1,918,510
Investments and other assets:
Investment in unconsolidated
affiliates 756,053 290,756
Goodwill and intangibles 665,648 152,782
Other 19,838 27,296
Total investments and other assets 1,441,539 470,834
Total assets $5,040,491 $2,527,766
Liabilities and Partners' Equity
Current liabilities:
Current maturities of long-term debt $11,931 $2,194
Notes payable 1,364,000 231,000
Derivative financial instruments 9,937 4,571
Accounts payable 390,713 46,673
Commodity exchanges 337,532 ---
Accrued taxes other than income 14,779 33,081
Accrued interest 10,237 17,446
Other 37,358 7,033
Total current liabilities 2,176,487 341,998
Long-term debt, net of current
maturities 626,359 1,121,777
Minority interests in partners'
equity 5,548 274,510
Deferred credits and other
liabilities:
Deferred income taxes 14,085 10,311
Derivative financial instruments 6,874 2,362
Other liabilities 28,252 11,219
Total deferred credits and other
liabilities 49,211 23,892
Commitments and contingencies
Partners' equity:
General partners 51,904 17,341
Common units: 46,397,214 units issued
and outstanding at June 30, 2006,
and December 31, 2005 802,559 750,201
Class B units: 36,494,126 units
issued and outstanding at June 30,
2006 1,331,659 ---
Accumulated other comprehensive
income (loss) (3,236) (1,953)
Total partners' equity 2,182,886 765,589
Total liabilities and partners'
equity $5,040,491 $2,527,766
ONEOK Partners, L.P. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended
June 30,
(Unaudited) 2006 2005
(Thousands of Dollars)
Operating Activities
Net income to partners $266,703 $62,759
Depreciation and amortization 66,752 43,023
Minority interests in net income 2,138 20,818
Equity earnings from investments (49,817) (8,895)
Distributions received from
investments 69,819 2,653
Gain on sale of assets (115,349) ---
Non-cash gains on derivative
financial instruments (3,842) (58)
Changes in components of working
capital (net of acquisition
effects):
Accounts receivable 75,224 8,149
Commodity exchange receivable (70,028) ---
Inventories, prepaid expenses and
other (16,250) (214)
Accounts payable and other current
liabilities 12,363 (9,182)
Commodity exchange payable 103,043 ---
Accrued taxes other than income (6,872) (4,850)
Accrued interest 4,315 236
Other 4,365 (3,132)
Cash provided by operating activities 342,564 111,307
Investing Activities
Investments in unconsolidated
affiliates (8,212) (1,454)
Acquisitions (1,438,485) ---
Proceeds from sale of assets 297,236 ---
Capital expenditures for property,
plant and equipment (53,575) (23,161)
Increase in cash and cash equivalents
for previously unconsolidated
subsidiaries 7,496 ---
Decrease in cash and cash equivalents
for previously consolidated subsidiaries (22,039) ---
Cash used in investing activities (1,217,579) (24,615)
Financing Activities
Cash distributions:
General and limited partners (84,761) (79,812)
Minority interests (147) (31,943)
Cash flow retained by ONEOK (176,978) ---
Debt reacquisition costs (3,628) ---
Long-term debt financing costs (179) (1,327)
Retirement of long-term debt (35,013) (2,653)
Short-term note payable, net 1,157,500 7,000
Payments upon termination of
derivatives --- (2,654)
Cash provided by (used in) financing
activities 856,794 (111,389)
Change in cash and cash equivalents (18,221) (24,697)
Cash and cash equivalents at
beginning of period 43,090 33,980
Cash and cash equivalents at end of
period $24,869 $9,283
Supplemental cash flow information:
Cash paid for interest, net of amount
capitalized $37,785 $44,341
ONEOK Partners, L.P. and Subsidiaries
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Three Months Ended Six Months Ended
June 30, June 30,
(Unaudited) 2006 2005 2006 2005
Reconciliation of Operating Income
to EBITDA
Operating income $212,596 $53,464 $312,452 $117,002
Depreciation and amortization 39,282 21,541 66,752 43,023
Equity earnings from investments 18,004 4,418 49,817 8,895
Other income (expense) excluding
AFUDC (1,981) 730 (1,027) 1,230
Discontinued operations --- 332 --- 1,007
EBITDA $267,901 $80,485 $427,994 $171,157
Reconciliation of Net Income to
EBITDA
Net income $196,199 $28,090 $266,703 $62,759
Minority interest 519 8,629 2,138 20,818
Interest expense, net 30,787 21,372 67,221 42,538
Depreciation and amortization 39,282 21,541 66,752 43,023
Income taxes 1,284 971 25,478 2,155
AFUDC (170) (118) (298) (136)
EBITDA $267,901 $80,485 $427,994 $171,157
Reconciliation of EBITDA to
Distributable Cash Flow
EBITDA $267,901 $80,485 $427,994 $171,157
Gain on sale of assets (113,877) --- (114,865) ---
Interest expense, net (30,787) (21,372) (67,221) (42,538)
Maintenance capital (14,955) (6,967) (21,904) (13,002)
Distributions to minority interest --- (15,713) (147) (31,943)
Equity earnings from investments (18,004) (4,418) (49,817) (8,895)
Distributions received from
investments 29,111 1,466 69,819 2,653
Distributable cash flow to ONEOK
for partial year ownership --- --- (85,817) ---
Current income tax expense and
other 360 39 13,603 203
Distributable Cash Flow $119,749 $33,520 $171,645 $77,635
ONEOK Partners, L.P. and Subsidiaries
Summary Segment Information (Unaudited)
Gathering and Processing Segment
Three Months Ended Six Months Ended
June 30, June 30,
Financial Results 2006 2005 (A) 2006 2005 (A)
(Thousands of dollars)
Natural gas liquids and condensate
sales $162,741 $26,581 $312,152 $51,045
Gas sales 152,238 23,806 370,899 46,098
Gathering, compression, dehydration
and processing fees and other
revenue 32,895 10,652 65,563 21,469
Cost of sales and fuel 254,526 35,466 563,405 67,931
Net margin 93,348 25,573 185,209 50,681
Operating costs 36,568 10,754 71,316 22,402
Depreciation and amortization 10,501 3,978 21,068 7,936
Operating income $46,279 $10,841 $92,825 $20,343
Reconciliation of Operating Income
to EBITDA
Operating income $46,279 $10,841 $92,825 $20,343
Depreciation and amortization 10,501 3,978 21,068 7,936
Equity earnings from investments 5,276 4,251 10,698 8,255
Other income (expense) 2,351 63 2,932 305
EBITDA $64,407 $19,133 $127,523 $36,839
Operating Information
Total gas gathered (BBtu/d) 1,142 277 1,149 289
Total gas processed (BBtu/d) 993 91 958 89
Natural gas liquids sales (MBbl/d) 41 8 41 8
Natural gas liquids produced
(MBbl/d) 53 8 52 8
Gas sales (BBtu/d) 288 45 298 43
Capital expenditures (Thousands of
dollars) $14,581 $4,180 $22,398 $8,127
Realized composite NGL sales price
($/gallon) $0.96 $0.86 $0.91 $0.85
Realized condensate sales price
($/Bbl) $59.83 $--- $58.65 $---
Realized natural gas sales price
($/MMBtu) $5.81 $5.87 $6.88 $5.90
Realized gross processing spread
($/MMBtu) $6.11 $--- $4.70 $---
(A) Excludes results related to the acquisition of the ONEOK gathering
and processing assets.
ONEOK Partners, L.P. and Subsidiaries
Summary Segment Information (Unaudited)
Natural Gas Liquids Segment
Three Months Six Months
Ended Ended
Financial Results June 30, 2006 June 30, 2006
(Thousands of dollars)
Natural gas liquids and condensate
sales $827,368 $1,607,196
Storage and fractionation revenue 54,157 93,752
Cost of sales and fuel 830,980 1,616,660
Net margin 50,545 84,288
Operating costs 15,945 27,170
Depreciation and amortization 5,368 10,767
Operating income $29,232 $46,351
Reconciliation of Operating Income to
EBITDA
Operating income $29,232 $46,351
Depreciation and amortization 5,368 10,767
Equity earnings from investments --- ---
Other income (expense) 485 354
EBITDA $35,085 $57,472
Operating Information
Natural gas liquids gathered (MBbl/d) 213 203
Natural gas liquids sales (MBbl/d) 199 203
Natural gas liquids fractionated
(MBbl/d) 333 309
Capital expenditures (Thousands of
dollars) $5,023 $7,977
ONEOK Partners, L.P. and Subsidiaries
Summary Segment Information (Unaudited)
Pipelines and Storage Segment
Three Months Six Months
Ended Ended
Financial Results June 30, 2006 June 30, 2006
(Thousands of dollars)
Transportation and gathering revenue $44,317 $90,145
Storage revenue 13,014 25,158
Gas sales and other revenue 1,940 6,880
Cost of sales and fuel 8,630 19,421
Net margin 50,641 102,762
Operating costs 18,083 34,873
Depreciation and amortization 7,558 15,141
Gain on sale of assets --- 988
Operating income $25,000 $53,736
Reconciliation of Operating Income to
EBITDA
Operating income $25,000 $53,736
Depreciation and amortization 7,558 15,141
Equity earnings from investments 25 269
Other income (expense) (131) 195
EBITDA $32,452 $69,341
Operating Information
Natural gas transported (MMcf) 112,998 245,533
Natural gas liquids transported
(MBbl/d) 208 201
Natural gas liquids gathered (MBbl/d) 58 57
Capital expenditures (Thousands of
dollars) $11,914 $15,490
Average natural gas price
Midcontinent region ($/MMBtu) $5.57 $6.40
ONEOK Partners, L.P. and Subsidiaries
Summary Segment Information (Unaudited)
Interstate Natural Gas Pipelines Segment
Three Months Six Months
Ended Ended
June 30, June 30,
Financial Results 2006 2005 2006 2005
(Thousands of dollars)
Transportation revenue $23,230 $82,541 $48,783 $179,186
Cost of sales and fuel --- --- --- ---
Net margin 23,230 82,541 48,783 179,186
Operating costs 8,384 22,028 17,122 46,466
Depreciation and amortization 3,613 16,598 7,362 33,167
Gain on sale of asset 113,877 --- 113,877 ---
Operating income $125,110 $43,915 $138,176 $99,553
Reconciliation of Operating
Income to EBITDA
Operating income $125,110 $43,915 $138,176 $99,553
Depreciation and amortization 3,613 16,598 7,362 33,167
Equity earnings from investments 12,703 167 38,850 640
Other income (expense) 13 554 61 697
EBITDA $141,439 $61,234 $184,449 $134,057
Operating Information (A)
Natural gas delivered (MMcf) 257,482 257,171 562,761 563,864
Natural gas average throughput
(MMcf/d) 2,878 2,889 3,172 3,193
Capital expenditures (Thousands of
dollars) $3,783 $7,656 $6,905 $13,066
(A) Includes 100 percent of the volumes for joint venture investments.
ONEOK Partners, L.P. and Subsidiaries Attachment A
EARNINGS GUIDANCE *
Year Ending December 31, 2006
Previous Updated
Guidance Guidance Change
(In millions, except per unit amounts)
Operating Income
Gathering and Processing $142 $160 $18
Interstate Pipelines 20 44 24
Pipelines and Storage 85 95 10
Natural Gas Liquids 93 89 (4)
Coal Slurry and Other (10) (25) (15)
Gain on sale of assets 108 114 6
Operating Income 438 477 39
Equity earnings from investments 96 94 (2)
Other income (expense) --- (3) (3)
Interest expense (95) (134) (39)
Income taxes (3) (26) (23)
Net Income $436 $408 $(28)
Net Income $436 $408 $(28)
Income allocated to ONEOK related to
partial year ownership (66) (36) 30
Income allocated to general partner (34) (35) (1)
Limited Partners' Interest in Net
Income $336 $337 $1
Net Income Per Unit $4.56 $4.56 $---
Average Units Outstanding 73.7 73.8 0.1
Reconciliation of Net Income to
EBITDA
Net income $436 $408 $(28)
Minority interest --- 2 2
Interest expense, net 95 134 39
Depreciation and amortization 106 123 17
Income taxes 3 26 23
AFUDC --- --- ---
EBITDA $640 $693 $53
Reconciliation of EBITDA to
Distributable Cash Flow
EBITDA $640 $693 $53
Gain on sale of assets (108) (114) (6)
Interest expense, net (95) (134) (39)
Maintenance capital (52) (61) (9)
Distributions to minority interest --- --- ---
Equity earnings from investments (96) (94) 2
Distributions received from equity
investments 119 118 (1)
Distributable cash flow to ONEOK for
partial year ownership (77) (86) (9)
Current income tax expense and other 3 14 11
Distributable Cash Flow $334 $336 $2
Distributable Cash Flow per Unit $4.09 $4.09 $---
* Amounts shown are midpoints of ranges provided
Analyst Contact: Ellen Konsdorf
877-208-7318
Media Contact: Beth Jensen
402-492-3400
OKS-FE
