ONEOK ("one oak") is OK with its singled-minded pursuit of profits from natural gas activities. Through its 37.6%-owned ONEOK Partners (of which it is the general partner) it operates 11,300 miles of gas-gathering pipeline and 7,600 miles of transportation pipeline, as well as gas processing plants and storage facilities. The unit also owns one of the US's top natural gas liquids (NGL) systems. ONEOK's energy services unit focuses on marketing natural gas across the US. To focus on its core pipeline businesses, in 2014 ONEOK spun off its regulated utilities (Oklahoma Natural Gas, Kansas Gas Service, and Texas Gas Service, which distribute natural gas to more than 2.1 million customers) as ONE Gas.
ONEOK has 11,300 miles of natural gas gathering pipelines in the Mid-Continent and 7,600 miles in the Rocky Mountains. Its largest distribution markets are Austin and El Paso, Texas; Kansas City, Wichita, and Topeka, Kansas; and Oklahoma City and Tulsa, Oklahoma. It is the largest natural gas distributor in Kansas and Oklahoma, and the third largest in Texas. The company also has operation in Iowa, Illinois, Nebraska. New natural gas processing plants are being constructed in North Dakota, Wyoming, Oklahoma, West Texas and New Mexico.
The company operates in three reportable segments: Natural Gas Gathering and Processing; Natural Gas Liquids; and Natural Gas Pipelines.
The Natural Gas Gathering and Processing segment provides services to producers that include gathering and processing of natural gas produced from crude oil and natural gas wells. This segment gathers and processes natural gas in the Mid-Continent region and it accounted for 15% of ONEOK's revenues in 2015.
The Natural Gas Liquids segment (80% of revenues) owns and operates facilities that gather, fractionate, treat and distribute NGLs and store NGL products, primarily in Oklahoma, Kansas, Texas, New Mexico and the Rocky Mountain region where it provides nondiscretionary services to producers of NGLs. Most natural gas produced at the wellhead contains a mixture of NGL components, such as ethane, propane, iso-butane, normal butane, and natural gasoline.
The Natural Gas Pipelines segment (5%) owns and operates regulated natural gas transmission pipelines and natural gas storage facilities. It also provides interstate natural gas transportation and storage service (underground natural gas storage facilities in Oklahoma and Texas that are connected to its intrastate natural gas pipeline assets, and underground natural gas storage facilities in Kansas).
Sales and Marketing
The company uses a network storage and transportation capacity to supply natural gas to its customers (primarily local distribution companies, electric utilities and industrial end users.) The natural gas utilities serve residential, commercial, industrial and transportation customers.
The company has seen decreasing revenues over the last five years.
In 2015 net revenues dropped by 36% due to a decrease across its reportable segments.
ONEOK's revenues from Natural Gas Liquids declined due to a drop in crude prices, which cut both ONEOK Partners’ NGL and condensate sales revenues.
Revenues from Natural Gas Gathering and Processing decreased due to reductions in crude oil and natural gas drilling by producers as the result of the decline in crude oil, natural gas and NGL prices and an expectation of slower supply growth or declines.
The company has recorded a decreasing trend net income in the last five years.
In fiscal 2015 ONEOK's net income shrank by 22% due to the decrease in net revenues.
Cash from operating activities also declined by 22%.
ONEOK's strategy is to deliver consistent growth and sustainable earnings by both internal investments and strategic acquisitions.
In 2015 ONEOK Partners was iinvesting in growth projects to meet the needs of crude oil and natural gas producers. Through its Roadruner 50-50 joint venture, ONEOK Partners was also investing in natural gas pipeline infrastructure from West Texas to the Mexican border that is expected to provide markets in Mexico access to upstream supply basins.
That year ONEOK Partners also announced plans to invest $70 million to $100 million to expand its WesTex intrastate natural gas pipeline system in the Permian Basin in the Natural Gas Pipelines segment.
The company connected eight new natural gas processing plants to its NGL system in 2015 and expected an additional four third-party plant connections in 2016, which will bring the total to more than 180 processing plant connections in the Mid-Continent, Barnett Shale, Rocky Mountain region and Permian Basin. ONEOK continues to benefit from their extensive position in the Williston Basin, where its Bakken NGL Pipeline provides transportation takeaway from the region
In 2014 it had $2.1 billion to $3 billion of projects in various stages of construction, including $2.2 billion in new projects and acquisitions. ONEOK Partners expects these projects to increase volumes in its businesses and generate additional earnings and cash flows, particularly from fee-based revenues in the Natural Gas Liquids segment.
The company's primary growth vehicle, ONEOK Partners, committed $3 billion to growth projects between 2011 and 2014, primarily in the high-yielding NGL market. It is investing heavily in that unit's growth projects in the Williston Basin (Bakken Shale) in North Dakota and the Cana-Woodford Shale and Granite Wash areas in Oklahoma and Texas.
ONEOK Partners’ growth strategy in the Natural Gas Liquids segment is focused around the crude oil and NGL-rich natural gas drilling activity in shale and other unconventional resource areas from the Rocky Mountain region through the Mid-Continent region into Texas and New Mexico and also continue to grow through internal project and acquisitions,
In a major reorganization, in 2014 ONEOK spun off its natural gas distribution business, resulting in two independent, highly focused energy companies. The new public company, ONE Gas, Inc., consists of Oklahoma Natural Gas Company, Kansas Gas Service and Texas Gas Service. ONEOK will continue to hold interests in ONEOK Partners. The separation of natural gas distribution business into a stand-alone publicly traded company, ONE Gas, was completed for $1.13 billion from ONE Gas.
That year, the company also completed the wind down of it former energy services business. ONEOK Partners will continue to market natural gas, natural gas liquids, and condensate as a service to its producers and customers.
In 2013 ONEOK completed three projects that are part of its $4.7 billion to $5.3 billion growth program through 2015, including the Bakken NGL Pipeline, which transports unfractionated NGLs from the Bakken Shale and Three Forks formations in the Williston Basin to the partnership's 50%-owned Overland Pass Pipeline, a 760-mile NGL pipeline extending from southern Wyoming to Conway, Kansas.
Mergers and Acquisitions
In 2014 it acquired NGL pipelines and related assets from affiliates of Chevron for $800 million. As a result ONEOK Partners now owns 80% of the West Texas LPG Pipeline Limited Partnership (and 100% of Mesquite Pipeline), which collectively consist of 2,600 miles of NGL gathering pipelines extending from the Permian Basin in southeastern New Mexico to East Texas and Mont Belvieu, Texas. ONEOK Partners is the operator of both pipelines.