SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended Commission File No.
February 28, 1994 1-2572
ONEOK Inc.
(Exact name of registrant as specified in its charter)
Delaware 73-0383100
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
100 West Fifth Street, Tulsa, OK 74103
(Address, including zip code, of principal executive offices)
Registrant's telephone number, including area code: (918) 588-7000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Class Outstanding at February 28, 1994
Common stock, without par value 26,690,004
Page 1 of 17
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ONEOK Inc.
TABLE OF CONTENTS
FORM 10-Q FOR THE QUARTER ENDED FEBRUARY 28, 1994
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Consolidated Condensed Statements of Earnings -
Three Months and Six Months Ended
February 28, 1994, and 1993 3
Consolidated Condensed Balance Sheets -
February 28, 1994, and August 31, 1993 4
Consolidated Condensed Statements of
Cash Flows - Six Months Ended
February 28, 1994 and 1993 5
Notes to Consolidated Condensed Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14-15
Item 2. Changes in the Rights of the Company's
Security Holders 15
Item 3. Defaults by the Company on its Senior Securities 15
Item 4. Submission of Matters to a Vote of Security
Holders 15-16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
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ONEOK Inc.
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(STATED IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
3 Months Ended 6 Months Ended
February 28, February 28,
1994 1993 1994 1993
OPERATING REVENUES
Utility revenues $249,155 $266,916 $383,497 $385,416
Oil and gas production 6,254 5,783 12,899 11,936
Natural gas liquids and
residue gas sales 13,698 19,575 31,522 36,892
Other gas sales 21,466 15,778 33,260 29,272
Other operating revenues 4,871 5,832 11,457 9,818
Total operating revenues 295,444 313,884 472,635 473,334
OPERATING EXPENSES
Utility gas purchased exp. 159,865 175,452 235,796 241,461
Other gas purchased exp. 20,027 15,063 31,320 28,227
Operations and maintenance 45,763 48,980 96,776 95,167
Depreciation, depletion,
and amortization 12,993 11,491 26,052 23,994
Income taxes 16,518 17,363 21,312 19,709
Other taxes 4,896 4,874 9,405 9,169
Total operating expense 260,062 273,223 420,661 417,727
Operating income 35,382 40,661 51,974 55,607
Net interest 8,995 9,431 17,775 18,380
Net income 26,387 31,230 34,199 37,227
Preferred stock dividend 107 107 214 214
Balance for common stock $ 26,280 $ 31,123 $ 33,985 $ 37,013
Earnings per common share $.98 $1.17 $1.27 $1.39
Dividends per common share $.28 $.27 $.55 $.52
Average common shares
outstanding 26,681 26,630 26,657 26,629
See accompanying notes to consolidated condensed financial statements.
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ONEOK Inc.
CONSOLIDATED CONDENSED BALANCE SHEETS
(STATED IN THOUSANDS)
(UNAUDITED)
Feb. 28, Aug. 31,
1994 1993
ASSETS
Property, plant, and equipment, at cost $1,226,031 $1,196,433
Less accumulated depreciation, depletion,
and amortization 492,544 474,685
Net property, plant, and equipment 733,487 721,748
Current assets:
Cash and cash equivalents 13,392 9,667
Accounts receivable 138,112 51,545
Inventories 37,508 92,907
Other current assets 23,774 13,966
Total current assets 212,786 168,085
Deferred debits and other assets:
Take-or-pay 109,334 109,682
Other assets 108,466 104,953
Total deferred debits and other assets 217,800 214,635
$1,164,073 $1,104,468
CAPITALIZATION AND LIABILITIES
Common shareholders' equity:
Common stock $ 195,568 $ 194,365
Retained earnings 188,105 168,784
Total common shareholders' equity 383,673 363,149
Preferred stock 9,000 9,000
Long-term debt, excluding current maturities 375,897 375,897
768,570 748,046
Current liabilities:
Current maturities of long-term debt 16,050 16,050
Accounts and notes payable 95,308 60,782
Accrued liabilities 39,809 42,760
Customers' deposits 7,023 6,091
Total current liabilities 158,190 125,683
Deferred credits 237,313 230,739
$1,164,073 $1,104,468
See accompanying notes to consolidated condensed financial statements.
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ONEOK Inc.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(STATED IN THOUSANDS)
(UNAUDITED)
6 Months Ended
February 28,
1994 1993
OPERATING ACTIVITIES
Net income $ 34,199 $ 37,227
Depreciation, depletion, and amortization 26,052 23,994
Deferred income taxes 1,282 (9,004)
Nonproductive well drilling 866 161
Net losses of equity investees 540 707
Gain on sale of property (2,053) -
Changes in assets and liabilities (2,042) 30,311
Net cash provided by operating activities 58,844 83,396
INVESTING ACTIVITIES
Increase in investments, net (1,637) (3,182)
Capital expenditures (38,276) (29,106)
Salvage, net of removal costs 1,672 (153)
Cash used in investing activities (38,241) (32,441)
FINANCING ACTIVITIES
Repayment of long-term debt - (7,137)
Decrease in notes payable, net (2,000) (5,000)
Dividends paid (14,878) (14,061)
Cash used in financing activities (16,878) (26,198)
Change in cash and cash equivalents $ 3,725 $ 24,757
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
Income taxes $ 9,122 $10,808
Interest $17,470 $19,375
Noncash transactions:
Gas received as payment-in-kind $32,533 $38,243
Stock Performance Plan $ 1,203 $ -
Decrease in take-or-pay deferrals
reflected by decrease in take-or-pay
liabilities $ - $20,000
See accompanying notes to consolidated condensed financial statements.
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ONEOK Inc.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1. The interim consolidated condensed financial statements reflect all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented. All such
adjustments are of a normal recurring nature. Due to the seasonal nature of
the business, the results of operations for the three- and six-month periods
ended February 28, 1994, are not necessarily indicative of the results that
may be expected for the year ended August 31, 1994. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year
ended August 31, 1993.
Note 2. Recovery of Settlement Costs for Take-or-Pay and Similar Claims:
On February 1, 1994, the Company began recovering the unamortized portion of
take-or-pay and other settlement costs based upon a stipulation and
settlement agreement approved by the Oklahoma Corporation Commission on
January 6, 1994. The agreement provides for recovery and return by an
annual $6.7 million revenue amount over a period not to exceed 20 years.
Revenue to recover the amortized costs will come from a volumetric gas
surcharge not exceeding $6.0 million annually, and revenue from
transportation under Section 311(a) of the NGPA and other nonjurisdictional
intrastate transportation revenue. If such transportation revenue falls
below $3.0 million in a year, the Company will be required to absorb 25
percent of the shortfall, up to a maximum of $750,000. The consolidated
condensed balance sheets reflected outstanding balances for these costs of
$109.3 million at February 28, 1994, and $109.7 million at August 31, 1993.
Note 3. Rate Proceedings: Hearings on the Company's pending application
for a rate increase commenced on October 25, 1993, and concluded on January
12, 1994. Deliberations are scheduled to begin on April 1 and continue
through the month of April. Both 3-month and 6-month periods included
utility revenue resulting from an interim annualized rate increase of $18.2
million, which is subject to refund until the OCC rules on the pending rate
case.
Note 4. Other Assets: Included in other assets are the Company's 25
percent investments in two natural gas transmission systems, Ozark Gas
Transmission System (Ozark) and Red River Pipeline (Red River) of $11.3
million and $13.6 million, respectively. Ozark continues to negotiate an
exit fee with one of its two firm shippers, Columbia Gas Transmission
Corporation (Columbia), which previously commenced a voluntary case under
the Federal Bankruptcy laws. The Company is attempting to improve the
performance of Red River, which continues to be unprofitable and continues
to require cash calls from the partners. If an acceptable exit fee cannot
be negotiated with Columbia by Ozark or Red River's operations do not become
profitable, the Company may not be able to recover all of its investments.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
ONEOK Inc. and its subsidiaries, hereinafter referred to as the Company,
engage in several aspects of the energy business. The Company purchases,
gathers, compresses, transports, and stores natural gas for distribution to
consumers. It transports gas for others, leases pipeline capacity to others
for their use in transporting gas, and is a partner in a gas marketing
business and two natural gas transmission systems that transport gas for
others. The Company explores for and produces oil and gas, extracts and
sells natural gas liquids, and performs contract drilling of oil and gas
wells. In addition, it leases and operates a headquarters office building
(leasing excess space to others) and owns and operates a related parking
facility.
The following is a discussion of selected changes in financial condition
from the end of the 1993 fiscal year to the end of the second quarter of the
1994 fiscal year and results of operations with respect to the three months
and six months ended February 28, 1994 and 1993.
LIQUIDITY AND CAPITAL RESOURCES
The estimated sources of funds (cash) for the 1994 fiscal year are as
follows:
Source of Funds (Millions of $)
Proceeds from:
Issuance of short-term debt $ 25.0
Issuance of long-term debt -
Sale of property 1.3
Cash provided by operating activities 93.3
Total $119.6
The Company had $20 million in short-term debt outstanding on February 28,
1994, and none outstanding on March 24, 1994. The Company has $77 million
in notes outstanding under its $150 million medium-term note facility. On
February 28, 1994, the Company could have issued approximately $244 million
of additional long-term debt under the most restrictive of the provisions
contained in its various lending agreements.
The Company invests available funds on a short-term basis. There were no
short-term investments on February 28, 1994, and $10.8 million on March 24,
1994.
FUNDS GENERATED FROM OPERATIONS
RATE PROCEEDINGS
Hearings on the Company's pending application for a rate increase commenced
on October 25, 1993, and concluded on January 12, 1994. Deliberations are
scheduled to begin on April 1 and continue through the month of April.
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INDUSTRIAL LOAD
One of the Company's fertilizer plant customers has filed a legal proceeding
alleging that its 15-year gas service agreement and pipeline capacity lease
agreement with the Company is discriminatory and violates state antitrust
laws. This customer accounted for approximately six percent of the
Consolidated gross revenues for the 1993 fiscal year. See "Item 1. Legal
Proceedings" on page 15 for more information.
CAPITAL EXPENDITURES
Capital expenditures budgeted for the 1994 fiscal year, compared with actual
expenditures for the 1993 and 1992 fiscal years, are as follows:
Est. Actuals
Capital Expenditures (Millions of $) 1994 1993 1992
Natural gas distribution $41.8 $45.8 $42.4
Natural gas transmission 14.7 13.0 14.9
Exploration and production 10.0 24.9 (1) 10.6
Other operations 3.6 2.5 1.8
$70.1 $86.2 $69.7
(1) Includes the April 1993 acquisition of the North Frisco City Field in
Monroe County, Alabama, at a cost of approximately $16.7 million.
RESULTS OF OPERATIONS
A summary of consolidated earnings is as follows:
3 Months Ended 6 Months Ended
(Stated in Thousands, February 28, February 28,
Except Per Share Data) 1994 1993 1994 1993
Net income $26,387 $31,230 $34,199 $37,227
Earnings per common share $.98 $1.17 $1.27 $1.39
The consolidated effective income tax rate was 38.5 percent for the second
quarter of 1994, and 38.4 percent for the fiscal year to date, compared with
35.7 percent and 34.6 percent, respectively, for the same periods last year.
The 1994 effective tax rate was higher due to the recently enacted 1 percent
federal tax rate increase and adjustments made in the first quarter of 1993
to revise prior tax estimates.
Consolidated net interest expense decreased due to lower interest rates on
long-term debt.
Following is a summary of financial results and operating information for
the various operating segments of the Company:
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UTILITY OPERATIONS
3 Months Ended 6 Months Ended
February 28, February 28,
1994 1993 1994 1993
FINANCIAL RESULTS
(Thousands of dollars, except per share amounts)
Utility revenues:
From unaffiliated cust. $249,155 $266,916 $383,497 $385,416
Intersegment sales 984 982 1,064 1,097
Total 250,139 267,898 384,561 386,513
Other nonutility revenues 1,489 2,232 3,121 3,613
Total revenues 251,628 270,130 387,682 390,126
Gas purchased expense 159,865 175,452 235,796 241,461
Operating expenses 41,187 41,513 83,295 80,216
Operating income
before income taxes 50,576 53,165 68,591 68,449
Income taxes 16,392 15,847 20,233 18,290
Net interest 8,000 8,589 15,869 16,754
Net income $ 26,184 $ 28,729 $ 32,489 $ 33,405
Earnings per share $.98 $1.08 $1.21 $1.25
OPERATING STATISTICS
Revenues (thousands of dollars):
Utility gas sales:
Residential and
commercial $190,229 $201,183 $276,173 $273,473
Industrial 33,574 38,364 59,075 63,516
Wholesale 2,572 3,634 3,622 5,156
Total utility sales 226,375 243,181 338,870 342,145
PCL\SISP margins 5,577 7,944 10,506 12,460
Pipeline cap. leases 13,461 12,592 26,640 24,340
Transportation 2,185 2,237 4,020 3,708
Other utility revenues 2,541 1,944 4,525 3,860
Total utility rev. 250,139 267,898 384,561 386,513
Less utility gas purchases 159,865 175,452 235,796 241,461
Net utility revenues $ 90,274 $ 92,446 $148,765 $145,052
Volumes (MMcf):
Utility gas sales:
Residential and
commercial 43,339 44,782 61,712 60,107
Industrial 14,040 18,287 25,843 30,096
Wholesale 926 1,278 1,353 1,857
Total utility sales 58,305 64,347 88,908 92,060
Pipeline cap. leases 31,043 25,394 61,069 52,364
Transportation 13,035 14,211 27,200 25,445
Total volumes 102,383 103,952 177,177 169,869
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UTILITY OPERATIONS
3 Months Ended 6 Months Ended
February 28, February 28,
1994 1993 1994 1993
Average cost of gas
purchased (per Mcf):
General system $2.92 $2.90 $2.92 $2.90
SISP $2.05 $1.97 $2.01 $1.86
Degree days:
Actual 2,314 2,406 3,212 3,113
Normal 2,335 2,287 2,966 2,906
Number of customers
at end of period 729,642 720,585
In spite of more than 9,000 additional customers, revenue for residential
and commercial gas sales decreased during the current fiscal quarter because
of weather which was warmer than last year's second quarter. For the fiscal
year to date, weather was 4 percent colder than the previous year, and
revenues increased slightly for those customers.
Volumes sold to industrial customers or delivered under pipeline capacity
leases (PCLs) are as follows:
3 Months Ended 6 Months Ended
February 28, February 28,
INDUSTRIAL DELIVERIES 1994 1993 1994 1993
Volumes (MMcf):
Sales 14,040 18,287 25,843 30,096
PCLs 34,160 24,262 62,047 49,405
Total 48,200 42,549 87,890 79,501
Amount (000's of $):
Sales $33,574 $38,364 $59,075 $63,516
PCL's 14,742 11,859 26,884 22,850
Total $48,316 $50,223 $85,959 $86,366
Revenues from industrial customers decreased for both periods because of
decreased PCL margins. Margins began declining in October 1992 and continue
to decrease. Under the Company's payment-in-kind (PIK) program, a portion
of gas transported for pipeline capacity lease customers is retained in lieu
of cash payment for transportation charges. Certain contracts using the PIK
program include price equivalent caps, which reduce the volumes of gas
retained by the Company as the price of PIK gas purchased escalates. PIK
gas is priced to utility customers at the weighted average cost of gas
purchased from all sources. Revenues received under the PIK program decline
as spot market prices increase, reducing both the spread and the volumes of
gas retained.
Utility gas purchased expense decreased due to lower sales volumes because
of increased customers' utilization of the PCL program.
Operating expenses increased during the current fiscal year to date
primarily because of increased labor costs and regulatory expenses, but
decreased slightly during the quarter because of lower legal costs and the
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prior year's accruals for an employee incentive plan. Depreciation expense
increased due to additional utility property in service.
GAS PROCESSING
3 Months Ended 6 Months Ended
(Stated in Thousands February 28, February 28,
Except Per Share Data) 1994 1993 1994 1993
Natural gas liquids and gas sales:
To unaffiliated cust. $25,209 $35,353 $52,637 $66,164
Intersegment sales 647 13,618 647 18,972
Total sales 25,856 48,971 53,284 85,136
Other revenues 52 - 2,167 -
Total revenues 25,908 48,971 55,451 85,136
Operating expenses 24,666 45,405 50,652 79,013
Operating income before
income taxes 1,242 3,566 4,799 6,123
Income taxes 403 1,250 1,694 1,885
Net interest 200 253 420 493
Net income $ 639 $ 2,063 $ 2,685 $ 3,745
Earnings per share $.03 $.08 $.10 $.14
OPERATING STATISTICS
Natural gas liquids sales:
Volumes (Mgals.) 41,294 54,008 95,022 96,402
Average price (per gal.) $.25 $.31 $.26 $.31
Margin (per gal.) $ - $.06 $.02 $.06
Residue gas sales:
Volumes (MMcf) 1,843 1,797 3,624 3,679
Average price (per Mcf) $2.13 $2.23 $2.08 $2.12
Other gas sales:
Volumes (MMcf) 4,537 13,173 8,919 22,606
Average price (per Mcf) $2.54 $2.14 $2.37 $2.07
Margin (per Mcf) $.32 $.05 $.22 $.05
Volumes of natural gas liquids sold were down due to reduced recovery of
ethane because of decreased margins. Product prices were down, resulting in
revenues of $10.4 million for the three-month period, down 38 percent, and
$24.6 million for the fiscal year to date, down 19 percent. Increased
operating expense, primarily shrinkage and fuel costs, also reduced margins
on natural gas liquids sales. Other gas sales margins increased because of
lower-cost supplies of gas obtained at an earlier date and held for sale.
Included in the current fiscal year to date is a gain of $2.1 million on the
sale of a gas gathering system, which was included in other revenues during
the first quarter.
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EXPLORATION AND PRODUCTION
3 Months Ended 6 Months Ended
(Stated in Thousands, February 28, February 28,
Except Per Share Data) 1994 1993 1994 1993
Oil and gas production sales:
To unaffiliated cust. $6,254 $5,783 $12,899 $11,936
Intersegment sales 362 368 738 369
Total sales 6,616 6,151 13,637 12,305
Other revenues 168 - 196 -
Total revenues 6,784 6,151 13,833 12,305
Operating expenses 6,311 4,686 12,645 10,652
Operating income (loss)
before income taxes 473 1,465 1,188 1,653
Income taxes 15 430 112 490
Net interest 435 327 899 662
Net income (loss) $ 23 $ 708 $ 177 $ 501
Earnings (loss) per share $(.01) $.02 $ - $.02
OPERATING STATISTICS
Oil production:
Volumes (bbls.) 149,033 97,388 304,133 191,260
Average price (per bbl.) $13.09 $18.77 $14.28 $19.71
Gas production:
Volumes (MMcf) 2,249 2,094 4,549 4,162
Average price (per Mcf) $2.07 $2.08 $2.04 $2.07
Revenue from oil production increased 7 percent for the quarter and 15
percent for the fiscal year to date because of increased sales volumes,
primarily production from the North Frisco City Field acquired in April
1993.
Dry hole costs, which increased for both periods, and increased depreciation
and depletion expenses were primarily responsible for increased operating
expenses.
GAS MARKETING
3 Months Ended 6 Months Ended
(Stated in Thousands, February 28, February 28,
Except Per Share Data) 1994 1993 1994 1993
Gas sales:
To the partnership $ 9,943 $ - $12,145 $ -
Intersegment sales 15,711 - 39,010 -
Total sales 25,654 - 51,155 -
Other revenues 113 - 113 -
Equity in net income
of partnership 165 544 145 467
Total revenues 25,932 544 51,413 467
Operating expenses 25,834 73 51,403 108
Operating income
before income taxes 98 471 10 359
Income taxes 16 177 (26) 135
Net interest 56 2 76 2
Net income (loss) $ 26 $292 $ (40) $222
Earnings per share $ - $.01 $ - $.01
<PAGE>
ONEOK Gas Marketing supplies natural gas at cost to the gas marketing
partnership and to other affiliates.
ONEOK Gas Marketing Company began partnership operations in October 1992 and
began marketing gas in March 1993.
CONTRACT DRILLING
3 Months Ended 6 Months Ended
(Stated in Thousands, February 28, February 28,
Except Per Share Data) 1994 1993 1994 1993
Revenues $2,042 $2,176 $4,094 $4,029
Operating expenses 2,374 2,632 4,880 4,906
Operating loss
before income taxes (332) (456) (786) (877)
Income taxes (151) (197) (347) (318)
Net interest 57 65 112 128
Net loss $ (238) $ (324) $ (551) $ (687)
Loss per share $(.01) $(.01) $(.02) $(.03)
OPERATING STATISTICS
Rig utilization rate 39% 47% 41% 43%
The contract drilling industry remains depressed, which is reflected in this
segment's results for the quarter and fiscal year to date. Currently six
of the Company's twelve rigs are operating.
BUILDINGS
3 Months Ended 6 Months Ended
(Stated in Thousands, February 28, February 28,
Except Per Share Data) 1994 1993 1994 1993
Revenues:
From unaffiliated cust. $ 671 $ 769 $1,377 $1,523
Intersegment sales 1,622 1,616 3,243 3,232
Total revenues 2,293 2,385 4,620 4,755
Operating expenses 2,618 2,682 5,377 5,330
Operating income (loss)
before income taxes (325) (297) (757) (575)
Income taxes (155) (145) (353) (773)
Net interest 77 86 157 157
Net income (loss) $ (247) $ (238) $ (561) $ 41
Earnings (loss) per share $(.01) $(.01) $(.02) $ -
Buildings operations remained flat, with a slight decrease in net income for
the current year's second quarter. Lower income tax benefits accounted for
most of the reduction in net income for the fiscal year to date.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
AGRICULTURAL MINERALS, LIMITED PARTNERSHIP V. ONEOK INC., ET AL.,
No. CJ-94-93, District Court, Rogers County. Plaintiff alleges that it is
the successor to a 15-year gas service agreement and pipeline capacity
lease agreement necessary to transport gas to its fertilizer plant, that
such agreements are an exclusive dealing arrangement in furtherance and
preservation of the Company's monopoly power preventing its customers from
securing alternate sources of transportation service and causing
artificially higher rates for transportation service because of the lack of
any free and open competition; that in the exercise of its monopoly power
the Company has devised and implemented an unregulated scheme to unlawfully
discriminate against the Plaintiff, and that as a result the Company
charges competitors substantially less than it charges the Plaintiff for
comparable transportation services. The Plaintiff alleges that such
conduct is in violation of the Oklahoma antitrust laws and asks for actual
damages in excess of $10,000, trebling of the actual damages, costs, and
reasonable attorney fees. A response was filed March 24.
CARMEN FIELD LIMITED PARTNERSHIP V. ONEOK INC., ET AL., No. C-89-77,
District Court, Woods County. The case was initially filed July 7, 1989,
but has been amended twice, most recently on September 7, 1993, after Magic
Circle Energy Company, predecessor to Carmen Field Limited Partnership,
regained control of the lawsuit as a result of agreements reached with its
creditors in its bankruptcy proceedings. Magic Circle has alleged claims
against ONG for (1) failure to take a specified volume of gas under two gas
purchase contracts, (2) failure to pay the correct price for gas taken
under the contracts, (3) anticipatory repudiation of the contracts, and (4)
tortious interference with contractual relations. After a hearing on ONG's
Motion to Dismiss plaintiff's claim for tortious interference, plaintiff
dismissed that claim without prejudice. Plaintiff previously asked for
$20,100,129.14 in actual damages. Counsel for plaintiff is re-examining
the price claim, and it is anticipated that plaintiff will now contend that
higher prices apply to the contracts. As a result, plaintiff's claim is
expected to be substantially more than the amount originally claimed. With
respect to plaintiff's "take-or-pay" claim, the Company's position is that
because these are "take" contracts, rather than take-or-pay, no deficiency
payments are owed, because the Company was prohibited from taking any more
gas than it did by the Priority Rule enacted by the Oklahoma Corporation
Commission and there is no alternate performance obligation to pay for gas
not taken under the contracts. Most of the gas not taken was in fact sold
to alternate purchasers, albeit at a lower price than plaintiff claims is
provided for in the contracts. The Court's current scheduling order
provides for discovery cutoff on June 7, 1994, and trial is set to begin on
June 27, 1994.
HILL RESOURCES, ET AL. V. ONEOK INC., ET AL., No. C-89-143, District Court,
Alfalfa County. A settlement conference was held on February 16, 1994, and
negotiations on a settlement are continuing. Further pretrial scheduling
is awaiting the outcome of settlement negotiations.
PAYNE, ET AL. V. MUSTANG FUEL CORPORATION AND ONEOK RESOURCES COMPANY,
No. CJ-94-53, District Court, Grady County. Plaintiff trustees allege that
they are a working interest owner in a well, and they are entitled to be
compensated for 30,379 Mcf of gas overproduction of the well for the
account of ONEOK Resources, and another working interest owner, and asks
<PAGE>
for damages in excess of $10,000, interest, and attorney fees. ONEOK
Resources Company was a working interest owner when the well was
overproduced in 1986 and 1987, which interest was subsequently sold to
Mustang Fuel Corporation. A motion to dismiss was filed on or before March
22, 1994.
POWERSMITH COGENERATION PROJECT, LTD. MATTERS. Oral Arguments were held on
February 4, 1994, and the court has taken the matter under advisement.
IN THE MATTER OF THE APPLICATION OF OKLAHOMA NATURAL GAS COMPANY, A
DIVISION OF ONEOK INC., FOR A REVIEW AND DETERMINATION CONCERNING ITS RATES
AND EARNINGS IN COMPLIANCE WITH THE REQUIREMENTS OF 17 O.S. SUPP. 1990,
SECTION 263, AND FOR OTHER APPROPRIATE RELIEF, Cause PUD No. 910001190,
Oklahoma Corporation Commission. Hearings on rate design were held on
January 11 and 12, 1994. Deliberations by the Corporation Commission are
scheduled for March 31 and April 5, 1994.
Item 2. Changes in the Rights of the Company's Security Holders
(a) None
(b) None
Item 3. Defaults by the Company on its Senior Securities
(a) None
(b) None
Item 4. Submission of Matters to a Vote of Security Holders
(a) Results of Votes of Security Holders
The Annual Meeting of Shareholders of ONEOK Inc. was held on January 20,
1994, in Tulsa, Oklahoma. At this meeting, shareholders voted to elect
directors and approve the appointment of independent auditors. Proxies for
the meeting were solicited pursuant to Section 14(a) of the Securities
Exchange Act of 1934 and there was no solicitation in opposition to
management's solicitation.
The results of the voting are as follows:
(1) Election of Class A Directors
Common Stock Votes Preferred Stock Votes
For Withheld For Withheld
W. M. Bell 23,033,344 324,271 309,971 4,399
W. L. Ford 23,065,549 292,066 310,410 3,960
B. H. Mackie 23,032,290 325,325 310,410 3,960
G. D. Parker 23,059,665 297,950 310,410 3,960
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Class B Directors continuing after the meeting are as follows:
S. J. Jatras
Douglas Ann Newsom, Ph.D.
J. E. Tyree
Class C Directors continuing after the meeting are as follows:
D. R. Cummings
J. M. Graves
J. D. Scott
G. R. Williams
S. L. Young
(2) Appointment of KPMG Peat Marwick as independent auditors for the
Company.
For Against Abstain
Preferred 261,092 48,260 5,018
Common 23,068,728 130,395 158,492
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
One Current Report on Form 8-K was filed during the second quarter of the
1994 fiscal year. It was dated February 17, 1994, and reported the
retirement of J. D. Scott as Chairman of the Board, President, and Chief
Executive Officer of ONEOK and the election of Larry W. Brummett to the
same positions.
There were no financial statements filed with the Form 8-K.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on this 25th day of March, 1994.
ONEOK Inc.
(Registrant)
By: (J. D. NEAL)
J. D. Neal
Vice President,
Chief Financial Officer,
and Treasurer
