Taking advantage of significant storage and transportation capacity and natural gas price volatility, Oneok’s marketing and trading unit more than doubled operating income in 2002 over 2001, contributing to the company’s 2002 earnings of $166.6 million, or $1.39 per diluted share of common stock compared with $101.6 million, or 85 cents per diluted share for the previous year.

Operating income for energy marketing and trading increased to $181.5 million in 2002 from $74.8 million in 2001 as the unit continues to enhance its strategy of focusing on high margin business, which includes providing reliable service during peak demand periods. It uses storage and transport capacity to capture margins from intra-month and regional price volatility from the Rockies, Mid-continent, and Gulf coast to the Chicago citygate.

The segment grew its natural gas storage capacity during the year by 10%, from 73 Bcf of storage to 80 Bcf. It also has about a Bcf of leased pipeline capacity on interstate pipelines that connect major natural gas supply areas with market centers.

In addition Oneok was able to increase customer numbers, picking up on opportunities created by the exit of a number of major natural gas marketing and trading companies from the business. Most of the customers are large natural gas distribution companies in the United States.

The marketing and trade unit’s mark-to-market earnings for 2002 were $43 million compared with $35 million in 2001. Although they were higher last year, they declined as a percentage of gross margin from 32% to 20% in 2002, which Oneok said was indicative of the company’s strategy of focusing on its physical leased transportation and storage assets.

This January marked some important milestones for Oneok. The addition of the Texas assets of Southern Union Company for $420 million effective Jan. 1, 2003 made Oneok the fifth largest gas distributor in the United States with almost two million customers in Oklahoma, Kansas and Texas.

On Jan. 31, 2003, Oneok closed the sale of approximately 70% of its natural gas and oil producing assets and will report a gain or $74.4 million on the sale in the first quarter. Income in 2002 from the assets sold was $10.6 million, after taxes, or 9 cents per diluted share, compared to $24.9 million, after taxes, or 21 cents per diluted share, in 2001.

Oneok’s income from continuing operations was $156 million, or $1.30 per diluted share of common stock, compared with income from continuing operations in 2001 of $78.8 million or 66 cents per diluted share of common stock.

Operating income including the discontinued operations was $389 million in 2002 compared to $295.2 million in 2001. Excluding the discontinued operations, operating income increased to $371.5 million compared with $255.6 million in 2001. Also included in 2001 was a loss of $2.2 million, net of taxes, or 2 cents per diluted share, from the cumulative effect of a change in an accounting principle.

Operating income for transportation and storage was relatively flat, $53.3 million for 2002 compared to $53.1 million for 2001, while operating income from distribution activities was up to $95.2 million for 2002 compared with $61.3 million in 2001.

On Thursday Oneok revised upward the 2003 earnings guidance of $2.20 to $2.30 per share to $2.40 to $2.45, excluding the effect of an EITF 02-3 accounting change, saying the original estimate was too conservative.

©Copyright 2003 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.