TULSA, Okla., March 8 /PRNewswire-FirstCall/ -- ONEOK, Inc.
(NYSE:OKE) announced today that it is reducing its year-end 2005
financial results and increasing its 2006 guidance. The earnings
revision is related to a software error that affected the timing of
the recognition of changes in the fair value of derivatives that
are accounted for as hedges in the company's energy services
segment during 2005. These amounts are recorded as cost of sales
and fuel in the company's consolidated statement of income. The
company uses third-party software to account for its derivative
hedging instruments. The recently discovered software error reduces
2005 net income by $8.1 million, or $0.08 per diluted share of
common stock, and energy services operating income by $13.2
million. This adjustment relates to the company's third-quarter
2005 earnings and does not affect fourth-quarter 2005 results. The
decrease in net income in 2005 will be recognized as additional
earnings during the first quarter of 2006 as the hedging
instruments settle. As a result, the company is raising its 2006
guidance in its energy services segment to $183 million from $170
million, which will result in revised company guidance in the range
of $2.30 to $2.36 per diluted share of common stock. Revised 2005
net income was $546.6 million, or $5.06 per diluted share, compared
with $242.2 million, or $2.30 per diluted share of common stock in
2004. Revised 2005 income from continuing operations was $403.1
million, or $3.73 per diluted share, compared with 2004 income from
continuing operations of $224.7 million, or $2.13 per diluted
share. Revised 2006 earnings guidance exhibit is attached as
Attachment I. Revised 2005 financial statements are attached as
Attachments II - VI. ONEOK, Inc. (NYSE:OKE) is a diversified energy
company. We are among the largest natural gas distributors in the
United States, serving more than 2 million customers in Oklahoma,
Kansas and Texas. We are a leader in the gathering, processing,
storage and transportation of natural gas in the mid- continent
region of the U.S. and own one of the nation's premier natural gas
liquids (NGL) systems, connecting much of the NGL supply in the
mid-continent with two key market centers. Our energy services
operation focuses primarily on marketing natural gas and related
services throughout the U.S. ONEOK is the majority general partner
of Northern Border Partners, L.P. (NYSE:NBP), one of the largest
publicly traded limited partnerships. ONEOK is a Fortune 500
company. For information about ONEOK, Inc. visit the Web site:
http://www.oneok.com/ . Northern Border 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 pipelines and is engaged in the
gathering and processing of natural gas. More information can be
found at http://www.northernborderpartners.com/ . Some of the
statements contained and incorporated in this press release are
forward-looking statements within the meaning of the Private
Securities Litigation Reform Acts of 1995. The forward-looking
statements relate to both ONEOK and Northern Border Partners, L.P.
and apply to: anticipated financial performance, including
anticipated operating income from the businesses ONEOK acquired on
July 1, 2005, from Koch Industries, Inc. and affiliates, and the
businesses to be acquired by Northern Border Partners from ONEOK in
the transactions; 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 describing increased 2006 guidance in the preceding
paragraphs, the information concerning possible or assumed future
results of operations and distribution levels and other statements
contained or incorporated in this press release generally
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 actual
results, performance or achievements to be materially different
from any future results, performance or achievements expressed or
implied by the forward- looking statements. Those factors may
affect 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 actual results to differ materially from
those contemplated in any forward-looking statement include, among
others, the following: * actions by rating agencies concerning the
credit ratings of ONEOK and Northern Border Partners; * the effects
of weather and other natural phenomenon on our operations,
including energy sales and prices and demand for pipeline capacity;
* competition from other U.S. and Canadian energy suppliers and
transporters as well as alternative forms of energy; * the capital
intensive nature of our respective businesses; * the profitability
of assets or businesses acquired by us; * risks of marketing,
trading and hedging activities as a result of changes in energy
prices or the financial condition of our counterparties; * economic
climate and growth in the geographic areas in which we each do
business; * the uncertainty of estimates, including accruals and
cost of environmental remediation; * the timing and extent of
changes in commodity prices for natural gas, natural gas liquids,
electricity and crude oil; * 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 impact of recently issued and future
accounting pronouncements and other changes in accounting policies;
* 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 in the Middle East and elsewhere; * the
risk of increased costs for insurance premiums, security or other
items as a consequence of terrorist attacks; * 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; *
risks associated with pending or possible acquisitions and
dispositions, including our respective 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 results of administrative
proceedings and litigation, regulatory actions and receipt of
expected regulatory clearances involving the Oklahoma Corporation
Commission, Kansas Corporation Commission, Texas regulatory
authorities or any other local, state or federal regulatory body,
including the Federal Energy Regulatory Commission; * our
respective ability to access capital at competitive rates or on
terms acceptable to us; * the risk of a significant slowdown in
growth or decline in the U.S. economy or the risk of delay in
growth recovery in the U.S. economy; * risks associated with
adequate supply to the gathering and processing, fractionation and
pipeline facilities of Northern Border Partners, including
production declines which outpace new drilling; * the risk that
material weaknesses or significant deficiencies in our respective
internal controls over financial reporting could emerge or that
minor problems could become significant; * the impact of the
outcome of pending and future litigation; * the possible loss of
franchises or other adverse effects caused by the actions of
municipalities; * the impact of unsold capacity on Northern Border
Pipeline being greater or less than expected; * the ability to
market pipeline capacity on favorable terms, which is affected by:
-- future demand for and prices of natural gas; -- competitive
conditions in the overall natural gas and electricity markets; --
availability of supplies of Canadian and United States natural gas;
-- availability of additional storage capacity; -- weather
conditions; and -- competitive developments by Canadian and U.S.
natural gas transmission peers; * orders by the FERC which are
significantly different than our assumptions related to Northern
Border Pipeline's November 2005 rate case; * performance of
contractual obligations by the customers and shippers; * the
ability to recover operating costs, costs of property, plant and
equipment and regulatory assets in our FERC regulated rates; *
timely receipt of approval by FERC for construction and operation
of the Midwestern Gas Transmission Eastern Extension Project and
required regulatory clearances; * our ability to acquire all
necessary rights-of-way and obtain agreements for interconnects in
a timely manner; * our ability to promptly obtain all necessary
materials and supplies required for construction; * the composition
and quality of the natural gas we gather and process in our plants;
* the efficiency of our plants in processing natural gas and
extracting natural gas liquids; * renewal of the coal slurry
pipeline transportation contract under reasonable terms and our
success in completing the necessary rebuilding of the coal slurry
pipeline; * the impact of potential impairment charges; *
developments in the December 2, 2001, filing by Enron of a
voluntary petition for bankruptcy protection under Chapter 11 of
the United States Bankruptcy Code affecting our settled claims; *
the ability to control operating costs; * the risk inherent in the
use of information systems in our respective businesses,
implementation of new software and hardware, and the impact on the
timeliness of information for financial reporting; * acts of
nature, sabotage, terrorism or other similar acts causing damage to
our facilities or our suppliers' or shippers' facilities; * and the
other factors listed in the reports we each have filed and may file
with the Securities and Exchange Commission, which are incorporated
by reference. Other factors and assumptions not identified above
were also involved in the making of 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. ONEOK and Northern Border Partners have no
obligation and make no undertaking to update publicly or revise any
forward- looking information. Analyst Contact: Dan Harrison
918-588-7950 Media Contact: Lori Webster 918-588-7570 ONEOK, Inc.
and Subsidiaries Attachment I EARNINGS GUIDANCE Year Ending Dec.
31, 2006 Revised as of March 8, 2006 Previous Updated (In millions,
except per share amounts) Guidance* Guidance* Change Operating
Income Gathering and Processing $142 $142 $--- Interstate Pipelines
20 20 --- Pipelines and Storage 85 85 --- Natural Gas Liquids 93 93
--- Distribution 124 124 --- Energy Services 170 183 13 Gain on
sale of assets 108 108 --- Other 7 7 --- Operating Income 749 762
13 Other income (expense) 96 96 --- Minority interest (211) (211)
--- Interest expense (203) (203) --- Income taxes (168) (173) (5)
Net Income $263 $271 $8 Diluted Earnings Per Share of Common Stock
$2.26 $2.33 $0.07 Average Shares of Common Stock - Diluted Average
shares of common stock outstanding 115.0 115.0 --- Dilutive
components 1.2 1.2 --- Total Average Shares of Common Stock -
Diluted 116.2 116.2 --- Capital Expenditures Gathering and
Processing $97 $97 $--- Interstate Pipelines 37 37 --- Pipelines
and Storage 14 14 --- Natural Gas Liquids 20 20 --- Distribution
148 148 --- Energy Services --- --- --- Other 3 3 --- Total Capital
Expenditures $319 $319 $--- Cash Flow from Operations Cash flow
from operations before changes in working capital $791 $799 $8
Less: Dividends 125 125 --- Less: Distributions to minority
interests 163 163 --- Less: Capital expenditures 319 319 ---
Surplus $184 $192 $8 * After consolidating ONEOK and Northern
Border Partners, L.P., as required by GAAP beginning January 1,
2006 ONEOK, Inc. and Subsidiaries Attachment II CONSOLIDATED
STATEMENTS OF INCOME Revised as of March 8, 2006 Years Ended
December 31, Quarters Ended December 31, 2005 2004 2005 2004
Revenues (Thousands of dollars, except per share amounts) Operating
revenues, excluding energy trading revenues $12,663,550 $5,671,714
$4,694,536 $2,536,595 Energy trading revenues, net 12,680 113,814
1,657 7,231 Total Revenues 12,676,230 5,785,528 4,696,193 2,543,826
Cost of sales and fuel 11,338,076 4,648,311 4,287,732 2,196,952 Net
Margin 1,338,154 1,137,217 408,461 346,874 Operating Expenses
Operations and maintenance 552,531 475,106 157,546 123,536
Depreciation, depletion and amortization 183,394 158,053 48,374
40,079 General taxes 67,464 60,406 16,403 13,909 Total Operating
Expenses 803,389 693,565 222,323 177,524 Gain on Sale of Assets
264,207 --- 264,207 --- Operating Income 798,972 443,652 450,345
169,350 Other income 14,188 17,599 (2,298) 6,445 Other expense
19,883 12,056 11,796 2,302 Interest expense 147,608 87,301 55,926
25,249 Income before Income Taxes 645,669 361,894 380,325 148,244
Income taxes 242,521 137,221 140,643 53,780 Income from Continuing
Operations 403,148 224,673 239,682 94,464 Discontinued operations,
net of taxes: Income (loss) from operations of discontinued
components, net of tax (6,180) 17,505 (262) 3,933 Gain on sale of
discontinued component, net of tax 149,577 --- (1,778) --- Net
Income $546,545 $242,178 $237,642 $98,397 Earnings Per Share of
Common Stock Basic: Earnings per share from continuing operations
$4.01 $2.21 $2.46 $0.91 Earnings (loss) per share from operations
of discontinued components, net (0.06) 0.17 --- 0.04 Earnings per
share from gain on sale of discontinued component, net 1.49 ---
(0.02) --- Net Earnings Per Share, Basic $5.44 $2.38 $2.44 $0.95
Diluted: Earnings per share from continuing operations $3.73 $2.13
$2.32 $0.86 Earnings (loss) per share from operations of
discontinued components, net (0.06) 0.17 --- 0.04 Earnings per
share from gain on sale of discontinued component, net 1.39 ---
(0.02) --- Net Earnings Per Share, Diluted $5.06 $2.30 $2.30 $0.90
Average Shares of Common Stock (Thousands) Basic 100,536 101,965
97,443 103,261 Diluted 108,006 105,461 103,361 109,523 Dividends
Declared Per Share of Common Stock $1.09 $0.88 $--- $--- ONEOK,
Inc. and Subsidiaries Attachment III CONSOLIDATED BALANCE SHEETS
Revised as of March 8, 2006 December 31, December 31, 2005 2004
Assets (Thousands of dollars) Current Assets Cash and cash
equivalents $7,915 $9,458 Trade accounts and notes receivable, net
2,202,895 1,412,861 Gas and natural gas liquids in storage 911,393
593,028 Commodity exchanges 133,159 1,758 Energy marketing and risk
management assets 765,157 386,781 Other current assets 385,274
90,566 Total Current Assets 4,405,793 2,494,452 Property, Plant and
Equipment Property, plant and equipment 5,575,365 4,832,876
Accumulated depreciation, depletion and amortization 1,581,138
1,519,719 Net Property, Plant and Equipment 3,994,227 3,313,157
Deferred Charges and Other Assets Goodwill and intangibles 683,211
225,188 Energy marketing and risk management assets 150,026 71,310
Investments and other 716,298 589,805 Total Deferred Charges and
Other Assets 1,549,535 886,303 Assets of Discontinued Component
63,911 505,240 Total Assets $10,013,466 $7,199,152 ONEOK, Inc. and
Subsidiaries CONSOLIDATED BALANCE SHEETS December 31, December 31,
2005 2004 Liabilities and Shareholders' Equity (Thousands of
dollars) Current Liabilities Current maturities of long-term debt
$6,546 $341,532 Notes payable 1,541,500 644,000 Accounts payable
1,756,307 1,161,984 Commodity exchanges 238,176 --- Energy
marketing and risk management liabilities 814,803 403,626 Other
438,009 337,653 Total Current Liabilities 4,795,341 2,888,795
Long-term Debt, excluding current maturities 2,024,070 1,543,202
Deferred Credits and Other Liabilities Deferred income taxes
603,835 601,281 Energy marketing and risk management liabilities
442,842 102,865 Other deferred credits 350,157 371,130 Total
Deferred Credits and Other Liabilities 1,396,834 1,075,276
Liabilities of Discontinued Component 2,464 86,175 Total
Liabilities 8,218,709 5,593,448 Commitments and Contingencies
Shareholders' Equity Common stock, $0.01 par value: authorized
300,000,000 shares; issued 107,973,436 shares and outstanding
97,654,697 shares at December 31, 2005; issued 107,143,722 shares
and outstanding 104,106,285 shares at December 31, 2004 1,080 1,071
Paid in capital 1,044,283 1,017,603 Unearned compensation (105)
(1,413) Accumulated other comprehensive loss (56,991) (9,591)
Retained earnings 1,085,845 649,240 Treasury stock, at cost:
10,318,739 shares at December 31, 2005 and 3,037,437 shares at
December 31, 2004 (279,355) (51,206) Total Shareholders' Equity
1,794,757 1,605,704 Total Liabilities and Shareholders' Equity
$10,013,466 $7,199,152 ONEOK, Inc. and Subsidiaries Attachment IV
CONSOLIDATED STATEMENTS OF CASH FLOWS Revised as of March 8, 2006
Years Ended December 31, 2005 2004 Operating Activities (Thousands
of dollars) Net income $546,545 $242,178 Depreciation, depletion
and amortization 183,394 158,053 Impairment expense on discontinued
operations 52,226 --- Gain on sale of discontinued component, net
(149,577) --- Gain on sale of assets (269,040) (10,586) Income from
equity investments, net 9,705 (1,506) Deferred income taxes 16,372
91,238 Stock based compensation expense 11,842 14,330 Allowance for
doubtful accounts 16,329 13,309 Changes in assets and liabilities
(net of acquisition and disposition effects): Accounts and notes
receivable (733,367) (476,017) Inventories (320,632) (96,510)
Unrecovered purchased gas costs (8,943) 12,944 Commodity exchanges
106,775 --- Deposits (118,214) 10,030 Regulatory assets (6,357)
(15,395) Accounts payable and accrued liabilities 518,406 322,387
Energy marketing and risk management assets and liabilities 223,965
(22,033) Other assets and liabilities (259,088) (36,718) Cash
Provided by (Used in) Operating Activities (179,659) 205,704
Investing Activities Changes in other investments, net (23,864)
1,891 Acquisitions (1,327,907) (176,709) Capital expenditures
(250,493) (264,110) Proceeds from sale of discontinued component
519,279 --- Proceeds from sale of assets 556,434 21,241 Other
investing activities (6,862) (5,603) Cash Used in Investing
Activities (533,413) (423,290) Financing Activities Borrowing of
notes payable, net 897,500 44,000 Issuance of debt, net of issuance
costs 798,792 --- Termination of interest rate swaps (22,565)
82,915 Payment of debt (636,288) (1,364) Purchase of common stock
(228,149) --- Issuance of common stock 16,372 189,777 Purchase of
treasury stock, net --- (823) Dividends paid (110,157) (89,229)
Other financing activities (3,976) (10,404) Cash Provided by
Financing Activities 711,529 214,872 Change in Cash and Cash
Equivalents (1,543) (2,714) Cash and Cash Equivalents at Beginning
of Period 9,458 12,172 Cash and Cash Equivalents at End of Period
$7,915 $9,458 ONEOK, Inc. Attachment V INFORMATION AT A GLANCE
Revised as of March 8, 2006 Years Ended Quarters Ended December 31,
December 31, 2005 2004 2005 2004 (Millions of dollars) Gathering
and Processing Net margin $287.3 $267.0 $60.1 $78.1 Depreciation,
depletion and amortization $32.6 $32.7 $7.7 $8.4 Operating income
$395.4 $116.2 $285.5 $38.5 Total gas gathered (MMMBtu/d) 1,077
1,099 973 1,080 Total gas processed (MMMBtu/d) 1,117 1,172 1,049
1,201 Natural gas liquids sales (MBbls/d) 49 51 42 50 Natural gas
liquids produced (MBbls/d) 59 62 50 62 Gas sales (MMMBtu/d) 329 328
284 338 Capital expenditures $28.3 $23.1 $6.8 $9.0 Average Conway
OPIS composite NGL Price ($/gal) (based on our NGL product mix)
$0.89 $0.72 $1.04 $0.83 Average NYMEX crude oil price ($/Bbl)
$55.76 $41.34 $62.81 $50.15 Average realized condensate sales price
($/Bbl) $52.69 $38.17 $56.59 $45.10 Average natural gas price
($/MMBtu) (mid-continent region) $7.30 $5.54 $9.87 $6.03 Gross
processing spread ($/MMBtu) $2.77 $2.47 $1.94 $3.35 Natural Gas
Liquids Net margin $87.9 $24.4 $35.7 $6.0 Depreciation, depletion
and amortization $11.1 $0.1 $5.4 --- Operating income $43.4 $14.8
$17.0 $3.4 Natural gas liquids gathered (MBbls/d) (A) 191 --- (A)
188 --- Natural gas liquids sales (MBbls/d) 207 109 212 116 Natural
gas liquids fractionated (MBbls/d) (A) 292 --- (A) 276 --- Capital
expenditures $12.2 $9.3 $4.1 $5.0 Pipelines and Storage Net margin
$171.6 $126.5 $59.4 $41.1 Depreciation, depletion and amortization
$23.7 $17.3 $7.5 $4.4 Operating income $84.6 $59.8 $31.7 $23.4
Natural gas transported (MMcf) 486,635 432,844 127,929 118,688
Natural gas liquids transported (MBbls/d) (A) 187 --- (A) 175 ---
Natural gas liquids gathered (MBbls/d) (A) 53 --- (A) 54 ---
Capital expenditures $15.7 $12.3 $5.9 $4.6 Average natural gas
price ($/MMBtu) (mid-continent region) $7.30 $5.54 $9.87 $6.03
Energy Services Net margin $206.4 $174.0 $78.9 $68.1 Depreciation,
depletion and amortization $2.1 $1.6 $0.6 $0.4 Operating income
$165.7 $139.2 $68.0 $59.0 Natural gas marketed (Bcf) 1,191 1,073
312 297 Natural gas gross margin ($/Mcf) $0.14 $0.14 $0.21 $0.20
Physically settled volumes (Bcf) 2,387 2,157 628 598 Capital
expenditures $0.2 $1.8 $--- $0.4 Distribution Net margin $587.7
$557.3 $174.9 $161.7 Depreciation, depletion and amortization
$113.4 $105.4 $27.1 $26.8 Operating income $113.9 $110.2 $53.1
$44.8 Customers per employee 689 664 698 668 Capital expenditures
$143.8 $142.5 $40.7 $36.2 Natural gas volumes (MMcf) Gas Sales
199,816 202,898 59,450 60,042 Transportation 252,180 239,914 67,482
62,848 Natural gas margins Gas Sales $465.6 $449.5 $131.6 $129.5
Transportation $94.2 $82.0 $35.9 $26.6 (A) -- Data presented for
2005 represents the per day results of operations from July 1,
2005. ONEOK, Inc. and Subsidiaries Attachment VI REGULATION G GAAP
RECONCILIATION Revised as of March 8, 2006 Year Ended December 31,
2005 (Millions of Dollars) Cash used in operating activities
$(179.7) Accounts and notes receivable 733.4 Inventories 320.6
Unrecovered purchased gas costs 8.9 Commodity Exchanges (106.8)
Deposits 118.2 Regulatory assets 6.4 Accounts payable and accrued
liabilities (518.4) Income taxes on gain on sale recorded in
operating income 102.4 Energy marketing and risk management assets
and liabilities (224.0) Other assets and liabilities 259.1 Cash
flow, before changes in working capital (A) $520.1 (A) Cash flow
from operations, before changes in working capital, is a non-GAAP
financial measure used by industry analysts, investors, lenders,
and rating agencies to assess the financial performance and the
operating results of a company's fundamental business activities.
Cash flow from operations, before changes in working capital,
should not be considered in isolation or as a substitute for net
income, income from operations, or other measures of cash flow.
DATASOURCE: ONEOK, Inc. CONTACT: analysts, Dan Harrison,
+1-918-588-7950, or media, Lori Webster, +1-918-588-7570, both of
ONEOK, Inc. Web site: http://www.oneok.com/
http://www.northernborderpartners.com/
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