EX-99.1 12 oneokproformaexhibit991.htm ONEOK PRO FORMA EXHIBIT 99.1 ONEOK Pro Forma Exhibit 99.1

Exhibit 99.1



Introduction to the Unaudited Pro Forma Condensed Consolidated Financial Statements


On March 31, 2014, we completed the abandonment (or "wind down") of our energy services business. In connection with the wind down, we executed agreements to assign a significant portion of our nonaffiliated natural gas transportation and storage contracts, or otherwise released capacity to unaffiliated third parties resulting in noncash charges of $138.6 million in 2013. We assigned or released in total 20 natural gas storage and transportation contracts to the following parties or their affiliates; Tenaska, Inc.; Devon Energy Corporation; AGL Resources, Inc.; Sequent Energy Management, L.P.; MIECO, Inc.; BG Group; DCP Midstream Partners, LP. and Midwest Energy, Inc. with a total financial impact of $138.6 million. All of the remaining natural gas transportation and storage contracts not previously released or assigned expired on their own terms on or before March 31, 2014. Our energy services business continued to serve its contracted premium-services customers until these remaining contracts expired on or before March 31, 2014. Our energy services business was classified as discontinued operations, effective at the close of business March 31, 2014, when substantially all operations ceased.

The amounts in the columns titled "Historical ONEOK as Previously Presented" in the accompanying unaudited pro forma condensed consolidated financial statements have been derived from our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2013, as filed on February 25, 2014. These unaudited pro forma condensed consolidated financial statements of ONEOK do not include the effect of the separation of our former natural gas distribution business, which was competed on January 31, 2014, and has subsequently been included in discontinued operations. The unaudited pro forma condensed consolidated financial statements are being presented to give effect to the wind down of our energy services business and have been prepared as of March 31, 2014 based upon the historical financial statements filed as of that date. Effective with the filing of our Quarterly Report on Form 10-Q for the three months ended March 31, 2014, our energy services business was reported as discontinued operations and has been reflected as discontinued operations in our historical financial statements and the related notes as filed in our Current Report on Form 8-K dated September 18, 2014.

The following unaudited pro forma condensed consolidated balance sheet gives effect to the wind down of energy services business as if it had occurred on December 31, 2013. The unaudited pro forma statements of income give effect to the wind down described above as if it had occurred on January 1, 2011. The unaudited pro forma condensed consolidated financial statements are for illustrative purposes only and do not reflect what our financial position and results of operations would have been had the wind down occurred on the dates indicated and are not necessarily indicative of our future financial position and future results of operations.

The pro forma adjustments are based upon currently available information and certain estimates and assumptions which management believes are factually supportable, and for income statement purposes, recurring in nature. The adjustments to reflect the wind down of our energy services business include:
•
Reclassification of natural gas sales and transportation and storage services provided by ONEOK Partners, L.P. and its affiliates to energy services, previously eliminated in consolidation, as third-party transactions since such services will continue after the wind down.

•
Adjustment of tax balances to reflect the wind down.

The actual adjustments that would have been made had the wind down occurred on the dates described above may have differed from the pro forma adjustments. However, management believes the adjustments provide a reasonable basis for presenting the significant effects of the wind down, give appropriate effect to the assumptions and are properly applied in the unaudited pro forma condensed consolidated financial statements.

All significant pro forma adjustments and their underlying assumptions are described more fully in the notes to the unaudited pro forma financial statements which should be read in conjunction with such unaudited pro forma financial information.



ONEOK, Inc. and Subsidiaries
 
 
 
 
 
 
 
Unaudited Pro Forma Condensed Consolidated Income Statement
 
 
Year Ended December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
ONEOK
Historical
as Previously
Presented
 
Energy
Services
Abandonment
(a)
 
Pro Forma
Adjustments
 
ONEOK
Pro Forma
for
Abandonment
of Energy
Services
 
(Thousands of dollars, except per share amounts)
Revenues
$
14,602,717

 
$
(1,381,636
)
 
$
276,290

(b)
$
13,497,371

Cost of sales and fuel
12,313,034

 
(1,554,621
)
 
276,290

(b)
11,034,703

Net margin
2,289,683

 
172,985

 
—

 
2,462,668

Operating expenses
 
 
 
 
 
 
 
Operations and maintenance
872,125

 
(11,509
)
 
 
 
860,616

Depreciation and amortization
384,377

 
(276
)
 
 
 
384,101

General taxes
118,328

 
(1,077
)
 
 
 
117,251

Total operating expenses
1,374,830

 
(12,862
)
 
—

 
1,361,968

Gain (loss) on sale of assets
11,881

 
 
 
 
 
11,881

Operating income
926,734

 
185,847

 
—

 
1,112,581

Equity earnings from investments
110,517

 
 
 
 
 
110,517

Allowance for equity funds used during construction
30,522

 
 
 
 
 
30,522

Other income
24,483

 
(135
)
 
 
 
24,348

Other expense
(17,707
)
 
 
 
 
 
(17,707
)
Interest expense
(334,206
)
 
 
 
 
 
(334,206
)
Income before income taxes
740,343

 
185,712

 
—

 
926,055

Income taxes
(163,382
)
 
(73,542
)
(c)
 
 
(236,924
)
Net income from continuing operations
576,961

 
112,170

 
—

 
689,131

Less: Net income attributable to noncontrolling interests
310,428

 
 
 
 
 
310,428

Net income from continuing operations attributable to ONEOK
$
266,533

 
$
112,170

 
$
—

 
$
378,703

Net income from continuing operations attributable to ONEOK per share:
 
 
 
 


Basic
$
1.29

 
 
 
 
 
$
1.84

Diluted
$
1.27

 
 
 
 
 
$
1.81

Average shares (thousands)
 

 
 
 
 
 


Basic
206,044

 
 
 
 
 
206,044

Diluted
209,695

 
 
 
 
 
209,695

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.


2

ONEOK, Inc. and Subsidiaries
 
 
 
 
 
 
 
Unaudited Pro Forma Condensed Consolidated Income Statement
 
 
Year Ended December 31, 2012
 
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
ONEOK
Historical
as Previously
Presented
 
Energy
Services
Abandonment
(a)
 
Pro Forma
Adjustments
 
ONEOK
Pro Forma
for
Abandonment
of Energy
Services
 
(Thousands of dollars, except per share amounts)
Revenues
$
12,632,559

 
$
(1,421,171
)
 
$
299,945

(b)
$
11,511,333

Cost of sales and fuel
10,281,718

 
(1,470,514
)
 
299,945

(b)
9,111,149

Net margin
2,350,841

 
49,343

 
—

 
2,400,184

Operating expenses
 
 
 
 
 
 


Operations and maintenance
806,087

 
(16,004
)
 
 
 
790,083

Depreciation and amortization
335,844

 
(360
)
 
 
 
335,484

Goodwill impairment
10,255

 
(10,255
)
 
 
 
—

General taxes
102,891

 
(1,410
)
 
 
 
101,481

Total operating expenses
1,255,077

 
(28,029
)
 
—

 
1,227,048

Gain (loss) on sale of assets
6,736

 
 
 
 
 
6,736

Operating income
1,102,500

 
77,372

 
—

 
1,179,872

Equity earnings from investments
123,024

 
 
 
 
 
123,024

Allowance for equity funds used during construction
13,648

 
 
 
 
 
13,648

Other income
12,504

 
(147
)
 
 
 
12,357

Other expense
(4,925
)
 
 
 
 
 
(4,925
)
Interest expense
(302,305
)
 
 
 
 
 
(302,305
)
Income before income taxes
944,446

 
77,225

 
—

 
1,021,671

Income taxes
(215,195
)
 
(30,581
)
(c)
 
 
(245,776
)
Net income from continuing operations
729,251

 
46,644

 
—

 
775,895

Less: Net income attributable to noncontrolling interests
382,911

 
 
 
 
 
382,911

Net income from continuing operations attributable to ONEOK
$
346,340

 
$
46,644

 
$
—

 
$
392,984

Net income from continuing operations attributable to ONEOK per share:
 
 
 
 


Basic
$
1.68

 
 
 
 
 
$
1.91

Diluted
$
1.64

 
 
 
 
 
$
1.87

Average shares (thousands)
 

 
 
 
 
 


Basic
206,140

 
 
 
 
 
206,140

Diluted
210,710

 
 
 
 
 
210,710

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.



3

ONEOK, Inc. and Subsidiaries
 
 
 
 
 
 
 
Unaudited Pro Forma Condensed Consolidated Income Statement
 
 
Year Ended December 31, 2011
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
ONEOK
Historical
as Previously
Presented
 
Energy
Services
Abandonment
(a)
 
Pro Forma
Adjustments
 
ONEOK
Pro Forma
for
Abandonment
of Energy
Services
 
(Thousands of dollars, except per share amounts)
Revenues
$
14,805,794

 
$
(2,274,799
)
 
$
361,953

(b)
$
12,892,948

Cost of sales and fuel
12,425,435

 
(2,226,059
)
 
361,953

(b)
10,561,329

Net margin
2,380,359

 
(48,740
)
 
—

 
2,331,619

Operating expenses
 
 
 
 
 
 


Operations and maintenance
813,666

 
(24,477
)
 
 
 
789,189

Depreciation and amortization
312,160

 
(445
)
 
 
 
311,715

General taxes
94,657

 
1,015

 
 
 
95,672

Total operating expenses
1,220,483

 
(23,907
)
 
—

 
1,196,576

Gain (loss) on sale of assets
(963
)
 
 
 
 
 
(963
)
Operating income
1,158,913

 
(24,833
)
 
—

 
1,134,080

Equity earnings from investments
127,246

 
 
 
 
 
127,246

Allowance for equity funds used during construction
2,335

 
 
 
 
 
2,335

Other income
1,410

 
(100
)
 
 
 
1,310

Other expense
(9,336
)
 
 
 
 
 
(9,336
)
Interest expense
(297,006
)
 
 
 
 
 
(297,006
)
Income before income taxes
983,562

 
(24,933
)
 
—

 
958,629

Income taxes
(226,048
)
 
9,873

(c)
 
 
(216,175
)
Net income from continuing operations
757,514

 
(15,060
)
 
—

 
742,454

Less: Net income attributable to noncontrolling interests
399,150

 
 
 
 
 
399,150

Net income from continuing operations attributable to ONEOK
$
358,364

 
$
(15,060
)
 
$
—

 
$
343,304

Net income from continuing operations attributable to ONEOK per share:
 
 
 
 


Basic
$
1.71

 
 
 
 
 
$
1.64

Diluted
$
1.67

 
 
 
 
 
$
1.60

Average shares (thousands)
 

 
 
 
 
 


Basic
209,344

 
 
 
 
 
209,344

Diluted
214,498

 
 
 
 
 
214,498

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.


4

ONEOK, Inc. and Subsidiaries
 
 
 
 
Unaudited Pro Forma Condensed Consolidated Balance Sheet
 
 
 
December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
ONEOK
Historical
as Previously
Presented
 
Energy
Services
Abandonment
(a)
 
ONEOK
Pro Forma
for
Abandonment
of Energy
Services
Assets
(Thousands of dollars)
Current assets
 
 
 
 
 
Cash and cash equivalents
$
149,313

 
$
(213
)
 
$
149,100

Accounts receivable, net
1,549,563

 
(87,315
)
 
1,462,248

Gas and natural gas liquids in storage
417,077

 
(62,663
)
 
354,414

Commodity imbalances
82,144

 
—

 
82,144

Energy marketing and risk-management
assets
1,687

 
(3,971
)
 
(2,284
)
Other current assets
171,018

 
(25,505
)
 
145,513

Assets of discontinued operations
—

 
179,667

 
179,667

Total current assets
2,370,802

 
—

 
2,370,802

Property, plant and equipment
 
 
 
 
 
Property, plant and equipment
15,536,156

 
(2,421
)
 
15,533,735

Accumulated depreciation and
amortization
3,238,652

 
(2,142
)
 
3,236,510

Net property, plant and equipment
12,297,504

 
(279
)
 
12,297,225

Investments and other assets
 
 
 
 
 
Investments in unconsolidated affiliates
1,229,838

 
—

 
1,229,838

Goodwill and intangible assets
1,182,515

 
—

 
1,182,515

Other assets
626,899

 
(385
)
 
626,514

Assets of discontinued operations
—

 
664

 
664

Total investments and other assets
3,039,252

 
279

 
3,039,531

Total assets
$
17,707,558

 
$
—

 
$
17,707,558

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.


5

ONEOK, Inc. and Subsidiaries
 
 
 
 
Unaudited Pro Forma Condensed Consolidated Balance Sheet
 
 
 
December 31, 2013
 
 
 
 
 
(Continued)
 
 
 
 
 
 
 
 
 
 
(Unaudited)
ONEOK
Historical
as Previously
Presented
 
Energy
Services
Abandonment
(a)
 
ONEOK
Pro Forma
for
Abandonment
of Energy
Services
Liabilities and equity
(Thousands of dollars)
Current liabilities
 
 
 
 
 
Current maturities of long-term debt
$
10,656

 
$
—

 
$
10,656

Notes payable
564,462

 
—

 
564,462

Accounts payable
1,503,699

 
(77,287
)
 
1,426,412

Commodity imbalances
212,136

 
—

 
212,136

Energy marketing and risk-management
liabilities
4,032

 
(1,515
)
 
2,517

Other current liabilities
401,422

 
(39,131
)
 
362,291

Liabilities of discontinued operations
—

 
117,933

 
117,933

Total current liabilities
2,696,407

 
—

 
2,696,407

Long-term debt, excluding current
maturities
7,754,975

 
—

 
7,754,975

Deferred credits and other liabilities
 
 
 
 
 
Deferred income taxes
1,938,262

 
35,221

 
1,973,483

Other deferred credits
472,734

 
(70,998
)
 
401,736

Liabilities of discontinued operations
—

 
35,777

 
35,777

Total deferred credits and other liabilities
2,410,996

 
—

 
2,410,996

Commitments and contingencies
 
 
 
 
 
Equity
 
 
 
 
 
ONEOK shareholders’ equity:
 
 
 
 
 
Common stock, $0.01 par value: authorized 600,000,000 shares; issued 245,811,180 shares and outstanding 206,618,877 shares at
December 31, 2013
2,458

 
—

 
2,458

Paid-in capital
1,433,600

 
—

 
1,433,600

Accumulated other comprehensive loss
(121,987
)
 
—

 
(121,987
)
Retained earnings
2,020,815

 
—

 
2,020,815

Treasury stock, at cost: 39,192,303 shares at December 31, 2013
(997,035
)
 
—

 
(997,035
)
Total ONEOK shareholders’ equity
2,337,851

 
—

 
2,337,851

Noncontrolling interests in consolidated
subsidiaries
2,507,329

 
—

 
2,507,329

Total equity
4,845,180

 
—

 
4,845,180

Total liabilities and equity
$
17,707,558

 
$
—

 
$
17,707,558

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.


6


ONEOK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




Pro Forma Adjustments

(a)
On March 31, 2014, we completed the wind down of our energy services business. Amounts presented are the adjustments to remove the historical balances and results of operations for our energy services business from our previous historical consolidated financial statements.

(b)
Represents the reclassification of revenues from natural gas sales and storage and transportation services provided by ONEOK Partners, L.P. and its affiliates and the related cost of sales and fuel previously eliminated in consolidation since such services will continue after the wind down as third-party transactions.

(c)
Represents the tax effect of the pro forma adjustments to income using a blended statutory rate of 39.6 percent for all periods.



7