ONEOK Inc. (



Q4 2010 Earnings Conference Call

February 22, 2011, 11:00 am ET


Dan Harrison – IR

John Gibson – Vice Chairman, President and CEO

Curtis Dinan – CFO

Terry Spencer – COO, ONEOK Partners, L.P.

Rob Martinovich – COO


Stephen Maresca – Morgan Stanley

Yves Siegel – Credit Suisse

Ted Durbin – Goldman Sachs

Carl Kirst – BMO Capital Markets

Selman Akyol – Stifel Nicolaus



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Good day, ladies and gentlemen and welcome to the Fourth Quarter 2010 ONEOK and ONEOK Partners Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, today's conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Dan Harrison. Sir, you may begin.

Dan Harrison

Thank you. Good morning and thanks to all of you for joining us. Any statements made during this call that might include ONEOK or ONEOK Partners’ expectations or predictions should be considered forward-looking statements and are covered by the Safe Harbor provisions of the Securities Acts of 1933 and 1934. Please note that actual results could differ materially from those projected in any forward-looking statements. For discussion of factors that could cause actual results to differ, please refer to our SEC filings. And now let me turn the call over to John Gibson, ONEOK Vice Chairman, President and CEO and ONEOK Partners Chairman, President and CEO. John?

John Gibson

Thanks Dan. Good morning and many thanks to all of you for joining us today and of course, for your continued investment and interest in both ONEOK and ONEOK Partners. Joining me on today's call are Curtis Dinan, Chief Financial Officer for both ONEOK and ONEOK partners; Terry Spencer, our Chief Operating Officer of ONEOK Partners and Rob Martinovich, our Chief Operating Officer of ONEOK.

W e completed another successful quarter and year at both ONEOK and ONEOK Partners with all of our businesses performing well. At ONEOK Partners, we benefited from the first full year of operations of the assets we built during our $2 billion capital program we completed in late 2009, resulting in higher natural gas and natural gas liquids volumes moving through our assets, selecting fees and creating additional opportunities.

Those projects will continue to contribute earnings growth through this year and beyond and set the stage for the partnership's next phase of growth which now totals between 1.8 billion and 2.1 billion in new projects. Our ONEOK distribution segment continues to benefit from our new, performance-based rates in Oklahoma, which reduced volumetric sensitivity and increased revenues in the warmer months.

This shift in the segment earnings pattern is reflected in the lower fourth-quarter operating income compared with the previous year but higher year-over-year operating income. And, as expected, the energy services segments fourth quarter results were lower but were higher for the year as we have indicated it would be earlier.

In 2010, we increased the ONEOK dividend three times and, an additional increase of $0.04 per share announced last month. This dividend increase is consistent with the forecast we gave last October, to increase the dividend by 50% to 60% in 2000 – by 2013.

It is enabled by the cash coming to ONEOK from its ownership interest in ONEOK Partners, which increased its distributions to unit holders four times in 2010. This growth in earnings, distributions and dividends, is primarily the result of ONEOK Partners recently completed capital projects and, with our plans to invest another $2 billion plus at the partnership over the next few years, we are very confident in our ability to continue to grow.

While we remain active on the acquisition front, evaluating many of the assets that are publicly known to be for sale and some that are not, we have not completed any transactions for a number of reasons. The most compelling one being that we have very attractive alternatives to grow through our internal capital projects.

These projects, the ones just completed, the ones currently being built and the ones we are evaluating but not yet announced, provide us with very attractive returns. They also deliver stable cash flow growth that gives us the confidence to forecast our three-year growth targets and, the ability to consistently increase our distributions.

Bottom line, we do not have to wait on the next big acquisition, probably at pricing multiples to grow and reward our investors at ONEOK or at the partnership. Our growth continues to be embedded with our own assets.

Curtis will now review ONEOK Partners’ financial highlights and then we will ask Terry to review the partnership's operating performance. So, now let me turn this over to Curtis.

Curtis Dinan

Thanks, John and good morning everyone. John has already provided a brief summary of the partnership's fourth quarter and year-end results and Terry will provide additional detail in a moment. My remarks will focus on our financial results and outlook.

In the fourth quarter, ONEOK Partners reported net income of $142 million or $1.09 per unit compared with last year's fourth quarter net income of $116 million or $0.93 per unit. For 2010, net income was $473 million or $3.50 per unit compared with $434 million or $3.60 per unit in 2009.

2010 results included a $16 million gain related to the sale of a 49% interest in Overland Pass to Williams Partners. That gain had a $0.16 per unit impact on the partnership year-end results. Also impacting the per unit calculation is the February 2010 public equity offering of 5.5 million common units, which resulted in additional units outstanding in 2010 compared with 2009.

Distributable cash flow in the fourth quarter was $170 million, a 14% increase compared with fourth quarter 2009. For the year, distributable cash flow increased to $30 million to $588 million more than adequate to cover our 2010 distributions and maintain a 1.02 times coverage ratio for the year.

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