Attributing the decline in earnings to an accounting change, Oneok Inc. announced 2Q2003 net income of $22.5 million, or 23 cents per diluted share of common stock for the second quarter 2003, compared with $35.4 million, or 29 cents per diluted share, for the same quarter a year ago.

Despite the decrease, Tulsa-based Oneok posted increased operating income during the first six months for most of its business units, with significant gains in the gathering and processing and marketing and trading segments.

“I am pleased with the strong earnings for the quarter and the continued growth and performance of our business segments,” said David Kyle, CEO of Oneok

Oneok said lower earnings in 2003 compared with the previous year’s quarter because of an accounting change effective Jan. 1, 2003, which affects the way the company’s marketing and trading segment accounts for certain energy contracts. The required change was from mark-to-market to accrual accounting. Under the accrual method, earnings from storage and transportation contracts are recorded when the transactions settle.

Oneok’s operating income for the quarter came in at $62 million, compared with $79.3 million for the same quarter a year ago. The figure included only $13.3 million for mark-to-market earnings.

On the quarter, Oneok’s marketing and trading added 5 Bcf of leased storage capacity, bringing its total leased capacity to 75 Bcf, while its gathering and processing unit continued its efforts to mitigate processing margin volatility through contract restructuring and improved operations. As of June 30, the company said it had hedged 60% of its anticipated natural gas production for the remainder of 2003 at $4.50/Mcf at the wellhead, and 25% of its 2004 production at $5.30/Mcf.

ONEOK said it continues to look for acquisition opportunities primarily in the production, transportation and storage, and distribution segments.

Looking ahead to full year 2003 results, Oneok confirmed its previous guidance, with net income from continuing operations expected to be $2.03 to $2.08 per diluted share of common stock for 2003. Currently, the company still projects 2003 capital expenditures to be about $215 million. It is seeing an increase in wells proposed for drilling in the production segment and somewhat higher requirements in the distribution segment coming from the Texas operation that may change that number as the year progresses. Cash flow is anticipated to exceed capital expenditures and projected dividends of $71 million by $130-150 million.

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