Whenever we evaluate opportunities, whether they’re capital projects or new business ventures, we answer three questions. First, how does the opportunity fit with our vision? Second, what is our competitive advantage? And finally, are we creating value for others besides ourselves? In this case, the opportunity fits our vision very well. We believe our unique knowledge of the Bakken, the presence of our existing assets, our relationships with producers and our strong commercial, construction and operating capabilities represent a competitive advantage that will create value, not only for investors, but also for producers and refiners.
For producers, this new pipeline provides a reliable mode of transportation at a lower cost versus other alternatives. It allows them to increase their net backs and receive the benefits of their high-quality crude oil. Demand for light, sweet crude has never been greater. Despite improved technology to refine heavier, sour crudes, light sweet crude is still refiners’ preferred feedstock.
This new platform also is a – excuse me, this new pipeline also is a platform for future growth, creating additional opportunities to provide services to producers and refiners. As Terry will discuss later, we are well on our way to securing the supply commitments to make this pipeline economically viable. Consistent with our past practice, we only announce projects in which we have a high degree of confidence that we can secure producer commitment.
Rob will now review ONEOK’s financial highlights, and then Pierce will review ONEOK’s operating performance. Rob?Robert Martinovich Thanks, John, and good morning, everyone. ONEOK’s first quarter net income was $122.9 million compared with $130.9 million for the same period last year, due mostly to losses in the Energy Services segment as a result of the continued decline in natural gas prices. This quarter included a non-recurring, non-cash $10.3 million or $8.5 million after-tax goodwill impairment charge that reduced Energy Services’ goodwill balance to zero, and a required $29.9 million non-cash reclassification of deferred losses to earnings on certain financial contracts related to our Storage business. This loss is similar to an LCM, or lower of cost or market charge on inventory that you may be familiar with. However, this charge relates to losses on purchase hedge contracts rather than on physical inventory. We still have gains that will be recognized in earnings during the 2012, 2013 heating season. Read the rest of this transcript for free on seekingalpha.com