Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of ONEOK, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of ONEOK, Inc. and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of income, of comprehensive income, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Level 3 Commodity Derivative Assets and Liabilities

As described in Notes A and B to the consolidated financial statements, the Company’s level 3 commodity contracts derivative assets and liabilities total $9.3 million and $123.6 million, respectively, as of December 31, 2021. As disclosed by management, commodity price risk includes basis risk, which is the difference in price between various locations where commodities are purchased and sold. Management records all derivative instruments at fair value, with the exception of normal purchases and normal sales transactions that are expected to result in physical delivery. Many of the contracts in its derivative portfolio are executed in liquid markets where price transparency exists. Fair value measurements classified as Level 3 are composed predominantly of exchange-cleared and over-the-counter derivatives to hedge NGL price risk. These measurements are based on inputs that may include one or more unobservable inputs, including internally developed commodity price curves, that incorporate market data from broker quotes and third-party pricing services. The commodity derivatives are generally valued using forward quotes provided by third-party pricing services that are validated with other market data.

The principal considerations for our determination that performing procedures relating to the valuation of level 3 commodity derivative assets and liabilities is a critical audit matter are (i) the significant judgment by management to determine the fair value of these derivatives; (ii) a high degree of auditor judgment, subjectivity and effort in evaluating audit evidence related to the valuation due to the use of internally developed commodity price curves that incorporate market data from broker quotes and third-party pricing services; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the valuation of level 3 commodity derivative assets and liabilities, including controls over the Company’s model, significant assumptions, and data. These procedures also included, among others, the involvement of professionals with specialized skill and knowledge to assist in developing an independent estimate of the level 3 commodity derivative assets and liabilities and comparison of the independent estimate to management’s estimate to evaluate the reasonableness of management’s estimate. Developing the independent estimate involved testing the completeness and accuracy of data provided by management and evaluating management’s assumptions related to the internally developed commodity price curves which incorporate market data from broker quotes and third-party pricing services.

/s/ PricewaterhouseCoopers LLP

Tulsa, Oklahoma

March 1, 2022

We have served as the Company’s auditor since 2007.

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ONEOK, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME

	Years Ended December 31,
	2021		2020		2019
	(Thousands of dollars, except per share amounts)
Revenues
Commodity sales	$	15,180,264	$	7,255,259	$	8,916,047
Services	1,360,045		1,286,983		1,248,320
Total revenues (Note P)	16,540,309		8,542,242		10,164,367
Cost of sales and fuel (exclusive of items shown separately below)	12,256,655		5,110,146		6,788,040
Operations and maintenance	900,420		761,176		863,708
Depreciation and amortization	621,701		578,662		476,535
Impairment charges (Notes D and E)	—		607,200		—
General taxes	166,668		125,028		119,156
(Gain) loss on sale of assets	(1,394)		(1,327)		2,575
Operating income	2,596,259		1,361,357		1,914,353
Equity in net earnings from investments (Note M)	122,520		143,241		154,541
Impairment of equity investments (Note M)	—		(37,730)		—
Allowance for equity funds used during construction	1,682		23,662		64,815
Other income (expense)	(3,333)		24,672		9,055
Interest expense (net of capitalized interest of $25,150, $75,436 and $107,275, respectively)	(732,924)		(712,886)		(491,773)
Income before income taxes	1,984,204		802,316		1,650,991
Income taxes (Note L)	(484,498)		(189,507)		(372,414)
Net income	1,499,706		612,809		1,278,577
Less: Preferred stock dividends	1,100		1,100		1,100
Net income available to common shareholders	$	1,498,606	$	611,709	$	1,277,477

Basic EPS (Note I)	$	3.36	$	1.42	$	3.09

Diluted EPS (Note I)	$	3.35	$	1.42	$	3.07
Average shares (thousands)
Basic	446,403		431,105		413,560
Diluted	447,403		431,782		415,444

See accompanying Notes to Consolidated Financial Statements.

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ONEOK, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Years Ended December 31,
	2021		2020		2019
	(Thousands of dollars)
Net income	$	1,499,706	$	612,809	$	1,278,577
Other comprehensive income (loss), net of tax
Change in fair value of derivatives, net of tax of $60,896, $49,292 and $44,149, respectively	(203,868)		(165,023)		(147,803)
Derivative amounts reclassified to net income, net of tax of $(69,134), $(6,313) and $6,058, respectively	228,999		21,097		(21,057)
Change in retirement and other postretirement benefit plan obligations, net of tax of $(14,929), $7,812 and $2,910, respectively	49,976		(26,154)		(9,696)
Other comprehensive income (loss) of unconsolidated affiliates, net of tax of $(1,490), $2,201 and $2,152, respectively	4,991		(7,369)		(7,205)
Total other comprehensive income (loss), net of tax	80,098		(177,449)		(185,761)
Comprehensive income	$	1,579,804	$	435,360	$	1,092,816

See accompanying Notes to Consolidated Financial Statements.

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ONEOK, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS

	December 31,		December 31,
	2021		2020
Assets	(Thousands of dollars)
Current assets
Cash and cash equivalents	$	146,391	$	524,496
Accounts receivable, net	1,441,786		829,796
Materials and supplies	153,019		143,178
NGLs and natural gas in storage	427,880		227,810
Commodity imbalances	39,609		11,959
Other current assets	165,689		132,536
Total current assets	2,374,374		1,869,775
Property, plant and equipment
Property, plant and equipment	23,820,539		23,072,935
Accumulated depreciation and amortization	4,500,665		3,918,007
Net property, plant and equipment (Note D)	19,319,874		19,154,928
Investments and other assets
Investments in unconsolidated affiliates (Note M)	797,613		805,032
Goodwill and net intangible assets (Note E)	763,295		773,723

Other assets	366,457		475,296
Total investments and other assets	1,927,365		2,054,051
Total assets	$	23,621,613	$	23,078,754

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ONEOK, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Continued)
	December 31,		December 31,
	2021		2020
Liabilities and equity	(Thousands of dollars)
Current liabilities
Current maturities of long-term debt (Note F)	$	895,814	$	7,650
Accounts payable	1,332,391		719,302
Commodity imbalances	309,054		186,372
Accrued taxes	97,537		89,428
Accrued interest	235,602		245,153
Operating lease liability (Note O)	13,783		13,610
Other current liabilities	300,438		83,032
Total current liabilities	3,184,619		1,344,547
Long-term debt, excluding current maturities (Note F)	12,747,636		14,228,421
Deferred credits and other liabilities
Deferred income taxes (Note L)	1,166,690		669,697
Operating lease liability (Note O)	75,636		87,610
Other deferred credits	431,869		706,081
Total deferred credits and other liabilities	1,674,195		1,463,388
Commitments and contingencies (Note N)
Equity (Note G)
ONEOK shareholders’ equity:
Preferred stock, $0.01 par value: authorized and issued 20,000 shares at December 31, 2021, and at December 31, 2020	—		—
Common stock, $0.01 par value: authorized 1,200,000,000 shares; issued 474,916,234 shares and outstanding 446,138,177 shares at December 31, 2021; issued 474,916,234 shares and outstanding 444,872,383 shares at December 31, 2020	4,749		4,749
Paid-in capital	7,213,861		7,353,396
Accumulated other comprehensive loss (Note H)	(471,351)		(551,449)
Retained earnings	—		—
Treasury stock, at cost: 28,778,057 shares at December 31, 2021, and 30,043,851 shares at December 31, 2020	(732,096)		(764,298)
Total equity	6,015,163		6,042,398
Total liabilities and equity	$	23,621,613	$	23,078,754

See accompanying Notes to Consolidated Financial Statements.

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ONEOK, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
	Years Ended December 31,
	2021		2020		2019
	(Thousands of dollars)
Operating activities
Net income	$	1,499,706	$	612,809	$	1,278,577
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	621,701		578,662		476,535
Impairment charges	—		644,930		—
Equity in net earnings from investments	(122,520)		(143,241)		(154,541)
Distributions received from unconsolidated affiliates	123,010		144,352		163,476
Deferred income tax expense	472,057		186,730		372,729
Other, net	94,091		35,327		(26,101)
Changes in assets and liabilities:
Accounts receivable	(610,531)		(1,297)		(19,688)
NGLs and natural gas in storage, net of commodity imbalances	(105,038)		172,316		(10,193)
Accounts payable	622,425		(80,257)		(62,946)
Risk-management assets and liabilities	(93,713)		(187,458)		(86,268)
Other assets and liabilities, net	45,084		(63,805)		15,199
Cash provided by operating activities	2,546,272		1,899,068		1,946,779
Investing activities
Capital expenditures (less allowance for equity funds used during construction)	(696,854)		(2,195,381)		(3,848,349)
Distributions received from unconsolidated affiliates in excess of cumulative earnings	19,363		31,808		94,168
Other, net	12,199		(106,956)		(14,577)
Cash used in investing activities	(665,292)		(2,270,529)		(3,768,758)
Financing activities
Dividends paid	(1,667,431)		(1,605,366)		(1,457,628)
Borrowing (repayment) of short-term borrowings, net	—		(220,000)		220,000
Issuance of long-term debt, net of discounts	—		3,244,777		4,185,435
Repayment of long-term debt	(604,894)		(1,457,222)		(1,057,348)
Issuance of common stock	32,791		969,759		29,040
Other	(19,551)		(56,949)		(88,537)
Cash provided by (used in) financing activities	(2,259,085)		874,999		1,830,962
Change in cash and cash equivalents	(378,105)		503,538		8,983
Cash and cash equivalents at beginning of period	524,496		20,958		11,975
Cash and cash equivalents at end of period	$	146,391	$	524,496	$	20,958
Supplemental cash flow information:
Cash paid for interest, net of amounts capitalized	$	691,897	$	760,984	$	435,165
Cash paid for income taxes, net of refunds	$	8,864	$	342	$	2,690

See accompanying Notes to Consolidated Financial Statements.

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ONEOK, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

	Preferred Stock Issued	Common Stock Issued	Preferred Stock		Common Stock		Paid-in Capital
	(Shares)		(Thousands of dollars)
January 1, 2019	20,000	445,016,234	$	—	$	4,450	$	7,615,138
Cumulative effect adjustment for adoption of ASU 2016-02, “Leases (Topic 842)”	—	—	—		—		—
Net income	—	—	—		—		—
Other comprehensive loss	—	—	—		—		—

Preferred stock dividends - $55.00 per share (Note G)	—	—	—		—		—
Common stock issued	—	—	—		—		(7,667)
Common stock dividends - $3.53 per share (Note G)	—	—	—		—		(180,421)
Other, net	—	—	—		—		(23,155)
December 31, 2019	20,000	445,016,234	—		4,450		7,403,895
Net income	—	—	—		—		—
Other comprehensive loss (Note H)	—	—	—		—		—
Preferred stock dividends - $55.00 per share (Note G)	—	—	—		—		(550)
Common stock issued	—	29,900,000	—		299		934,473
Common stock dividends - $3.74 per share (Note G)	—	—	—		—		(992,741)



Other, net	—	—	—		—		8,319
December 31, 2020	20,000	474,916,234	—		4,749		7,353,396

Net income	—	—	—		—		—
Other comprehensive income (Note H)	—	—	—		—		—
Preferred stock dividends - $55.00 per share (Note G)	—	—	—		—		—
Common stock issued	—	—	—		—		6,680
Common stock dividends - $3.74 per share (Note G)	—	—	—		—		(168,145)
Other, net	—	—	—		—		21,930
December 31, 2021	20,000	474,916,234	$	—	$	4,749	$	7,213,861

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ONEOK, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Continued)
	Accumulated Other Comprehensive Loss		Retained Earnings		Treasury Stock		Total Equity
	(Thousands of dollars)
January 1, 2019	$	(188,239)	$	—	$	(851,806)	$	6,579,543
Cumulative effect adjustment for adoption of ASU 2016-02, “Leases (Topic 842)”	—		(67)		—		(67)
Net income	—		1,278,577		—		1,278,577
Other comprehensive loss	(185,761)		—		—		(185,761)

Preferred stock dividends - $55.00 per share (Note G)	—		(1,100)		—		(1,100)
Common stock issued	—		—		43,412		35,745
Common stock dividends - $3.53 per share (Note G)	—		(1,277,410)		—		(1,457,831)
Other, net	—		—		—		(23,155)
December 31, 2019	(374,000)		—		(808,394)		6,225,951
Net income	—		612,809		—		612,809
Other comprehensive loss (Note H)	(177,449)		—		—		(177,449)
Preferred stock dividends - $55.00 per share (Note G)	—		(550)		—		(1,100)
Common stock issued	—		—		44,096		978,868
Common stock dividends - $3.74 per share (Note G)	—		(612,259)		—		(1,605,000)



Other, net	—		—		—		8,319
December 31, 2020	(551,449)		—		(764,298)		6,042,398

Net income	—		1,499,706		—		1,499,706
Other comprehensive income (Note H)	80,098		—		—		80,098
Preferred stock dividends - $55.00 per share (Note G)	—		(1,100)		—		(1,100)
Common stock issued	—		—		32,202		38,882
Common stock dividends - $3.74 per share (Note G)	—		(1,498,606)		—		(1,666,751)
Other, net	—		—		—		21,930
December 31, 2021	$	(471,351)	$	—	$	(732,096)	$	6,015,163

See accompanying Notes to Consolidated Financial Statements.

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ONEOK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Nature of Operations - We are a corporation incorporated under the laws of the state of Oklahoma.

Our Natural Gas Gathering and Processing segment provides midstream services to producers in North Dakota, Montana, Wyoming, Kansas and Oklahoma. Raw natural gas is typically gathered at the wellhead, compressed and transported through pipelines to our processing facilities. Processed natural gas, usually referred to as residue natural gas, is then recompressed and delivered to natural gas pipelines, storage facilities and end users. The NGLs separated from the raw natural gas are sold and delivered through NGL pipelines to fractionation facilities for further processing.

Our Natural Gas Liquids segment owns and operates facilities that gather, fractionate, treat and distribute NGLs and store NGL products, primarily in Oklahoma, Kansas, Texas, New Mexico and the Rocky Mountain region, which includes the Williston, Powder River and DJ Basins. We provide midstream services to producers of NGLs and deliver those products to the two primary market centers, one in the Mid-Continent in Conway, Kansas, and the other in the Gulf Coast in Mont Belvieu, Texas. We own or have an ownership interest in FERC-regulated NGL gathering and distribution pipelines in Oklahoma, Kansas, Texas, New Mexico, Montana, North Dakota, Wyoming and Colorado, and terminal and storage facilities in Kansas, Missouri, Nebraska, Iowa and Illinois. We have a 50% ownership interest in Overland Pass Pipeline Company, which operates an interstate NGL pipeline originating in Wyoming and Colorado and terminating in Kansas. The majority of the pipeline-connected natural gas processing plants in the Williston Basin, Oklahoma, Kansas and the Texas Panhandle are connected to our NGL gathering systems. We lease rail cars and own and operate truck- and rail-loading and -unloading facilities connected to our NGL fractionation, storage and pipeline assets. We also own FERC-regulated NGL distribution pipelines in Kansas, Missouri, Nebraska, Iowa, Illinois and Indiana that connect our Mid-Continent assets with Midwest markets, including Chicago, Illinois. A portion of our ONEOK North System transports refined products, including unleaded gasoline and diesel, from Kansas to Iowa.

Our Natural Gas Pipelines segment, through its wholly owned assets, provides intrastate and interstate natural gas transportation and storage services to end users. We have 50% ownership interests in Northern Border Pipeline and Roadrunner, which provide transportation services to various end users. Our interstate pipelines are regulated by the FERC and are located in North Dakota, Minnesota, Wisconsin, Illinois, Indiana, Kentucky, Tennessee, Oklahoma, Texas and New Mexico. Our intrastate natural gas pipeline and storage assets are located in Oklahoma, Kansas and Texas. Our assets connect major natural gas producing basins and market hubs with end-use customers.

Consolidation - Our Consolidated Financial Statements include our accounts and the accounts of our subsidiaries over which we have control or are the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation.

Investments in unconsolidated affiliates are accounted for using the equity method if we have the ability to exercise significant influence over operating and financial policies of our investee. Under this method, an investment is carried at its acquisition cost and adjusted each period for contributions made, distributions received and our share of the investee’s comprehensive income. For the investments we account for under the equity method, the premium or excess cost over underlying fair value of net assets is referred to as equity-method goodwill. Impairment of equity investments is recorded when the impairments are other than temporary. These amounts are recorded as investments in unconsolidated affiliates on our accompanying Consolidated Balance Sheets. See Note M for disclosures of our unconsolidated affiliates.

Distributions paid to us from our unconsolidated affiliates are classified as operating activities on our Consolidated Statements of Cash Flows until the cumulative distributions exceed our proportionate share of income from the unconsolidated affiliate since the date of our initial investment. The amount of cumulative distributions paid to us that exceeds our cumulative proportionate share of income in each period represents a return of investment and is classified as an investing activity on our Consolidated Statements of Cash Flows.

Use of Estimates - The preparation of our Consolidated Financial Statements and related disclosures in accordance with GAAP requires us to make estimates and assumptions with respect to values or conditions that cannot be known with certainty that affect the reported amounts on our Consolidated Financial Statements. Items that may be estimated include, but are not limited to, the economic useful life of assets, fair value of assets, liabilities and equity-method investments, obligations under employee benefit plans, provisions for uncollectible accounts receivable, expenses for services received but for which no invoice has been received, provision for income taxes, including any deferred tax valuation allowances, the results of litigation and various other

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recorded or disclosed amounts. In addition, a portion of our revenues and cost of sales and fuel are recorded based on current month prices and estimated volumes. The estimates are reversed in the following month when we record actual volumes.

We evaluate our estimates on an ongoing basis using historical experience, consultation with experts and other methods we consider reasonable based on the particular circumstances. Nevertheless, actual results may differ significantly from the estimates. Any effects on our financial position or results of operations from revisions to these estimates are recorded in the period when the facts that give rise to the revision become known.

Fair Value Measurements - For our fair value measurements, we utilize market prices, third-party pricing services, present value methods and standard option valuation models to determine the price we would receive from the sale of an asset or the transfer of a liability in an orderly transaction at the measurement date. We measure the fair value of a group of financial assets and liabilities consistent with how a market participant would price the net risk exposure at the measurement date.

Many of the contracts in our derivative portfolio are executed in liquid markets where price transparency exists. Our financial commodity derivatives are generally settled through a NYMEX or ICE clearing broker account with daily margin requirements. We validate our valuation inputs with third-party information and settlement prices from other sources, where available.

We compute the fair value of our derivative portfolio by discounting the projected future cash flows from our derivative assets and liabilities to present value using interest-rate yields to calculate present-value discount factors derived from the implied forward SOFR, LIBOR or other yield curve, as appropriate. The fair value of our forward-starting interest-rate swaps is determined using financial models that incorporate the implied forward LIBOR yield curve for the same period as the future interest-rate swap settlements. We consider current market data in evaluating counterparties’, as well as our own, nonperformance risk, net of collateral, by using counterparty-specific bond yields. Although we use our best estimates to determine the fair value of the derivative contracts we have executed, the ultimate market prices realized could differ materially from our estimates.

Fair Value Hierarchy - At each balance sheet date, we utilize a fair value hierarchy to classify fair value amounts recognized or disclosed in our financial statements based on the observability of inputs used to estimate such fair value. The levels of the hierarchy are described below:

Level 1 - fair value measurements are based on unadjusted quoted prices for identical securities in active markets. These balances are composed predominantly of exchange-traded derivative contracts for natural gas and crude oil.
Level 2 - fair value measurements are based on significant observable pricing inputs, including quoted prices for similar assets and liabilities in active markets and inputs from third-party pricing services supported with corroborative evidence. These balances are composed of exchange cleared derivatives to hedge natural gas basis and NGL price risk at certain market locations and over-the-counter interest-rate derivatives.
Level 3 - fair value measurements are based on inputs that may include one or more unobservable inputs, including internally developed commodity price curves that incorporate market data from broker quotes and third-party pricing services. These balances are composed predominantly of exchange-cleared and over-the-counter derivatives to hedge NGL price risk at certain market locations. These commodity derivatives are generally valued using forward quotes provided by third-party pricing services that are validated with other market data. We believe any measurement uncertainty at December 31, 2021, is immaterial as our Level 3 fair value measurements are based on unadjusted pricing information from broker quotes and third-party pricing services.

Determining the appropriate classification of our fair value measurements within the fair value hierarchy requires management’s judgment regarding the degree to which market data is observable or corroborated by observable market data. We categorize derivatives based on the lowest level input that is significant to the fair value measurement in its entirety.

See Note B for our fair value measurements disclosures.

Cash and Cash Equivalents - Cash equivalents consist of highly liquid investments, which are readily convertible into cash and have original maturities of three months or less.

Revenue Recognition - Revenues are recognized when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to receive in exchange for those goods or services. Our payment terms vary by customer and contract type, including requiring payment before products or services are delivered to certain customers. However, the term between customer prepayments, completion of our performance obligations, invoicing and receipt of payment due is not significant.

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Performance Obligations and Revenue Sources - Revenue sources are disaggregated in Note Q and are derived from commodity sales and services revenues, as described below:

Commodity Sales (all segments) - We contract to deliver residue natural gas, condensate, unfractionated NGLs and/or NGL products to customers at a specified delivery point. Our sales agreements may be daily or longer-term contracts for a specified volume. We consider the sale and delivery of each unit of a commodity an individual performance obligation as the customer is expected to control, accept and benefit from each unit individually. We record revenue when the commodity is delivered to the customer as this represents the point in time when control of the product is transferred to the customer. Revenue is recorded based on the contracted selling price, which is generally index-based and settled monthly.

Services

Gathering only contracts (Natural Gas Gathering and Processing segment) - Under this type of contract, we charge fees for providing midstream services, which include gathering and treating our customer’s natural gas. Our performance obligation begins with delivery of raw natural gas to our system. This service is treated as one performance obligation that is satisfied over time. We use the output method based on delivery of product to our system as the measure of progress, as our services are performed simultaneously.

Fee with POP contracts with producer take-in-kind rights (Natural Gas Gathering and Processing segment) - Under this type of contract, we do not control the stream of unprocessed natural gas that we receive at the wellhead due to the producer’s take-in-kind rights. We purchase a portion of the raw natural gas stream, charge fees for providing midstream services, which include gathering, treating, compressing and processing our customer’s natural gas. After performing these services, we return primarily the residue natural gas to the producer, sell the remaining commodities and remit a portion of the commodity sales proceeds to the producer less our contractual fees. Our performance obligation begins with delivery of raw natural gas to our system. This service is treated as one performance obligation that is satisfied over time. We use the output method based on delivery of product to our system as the measure of progress, as our services are performed simultaneously.

Transportation and exchange contracts (Natural Gas Liquids segment) - Under this type of contract, we charge fees for providing midstream services, which may include a bundled combination of gathering, transporting and/or fractionation of our customer’s NGLs. Our performance obligation begins with delivery of unfractionated NGLs or NGL products to our system. These services represent a series of distinct services that are treated as one performance obligation that is satisfied over time. We use the output method based on delivery of product to our system as the measure of progress, as our services are performed simultaneously. For transportation services under a tariff on our NGL transportation pipelines, fees are recorded upon redelivery to our customer at the completion of the transportation services.

Storage contracts (Natural Gas Liquids and Natural Gas Pipelines segments) - We reserve a stated storage capacity and inject/withdraw/store commodities for our customer. The capacity reservation and injection/withdrawal/storage services are considered a bundled service, as we integrate them into one stand-ready obligation provided on a daily basis over the life of the agreement and satisfied over time. Fixed capacity reservation fees are allocated and evenly recognized in revenue. Capacity reservation fees that vary based on a stated or implied economic index and correspond with the costs to provide our services are recognized in revenue as invoiced to our customers. For contracts that do not include a capacity reservation, transportation, injection and withdrawal fees are recognized in revenue as those services are provided and are dependent on the volume transported, injected or withdrawn by our customer, which is at our customer’s discretion. We use the output method based on the passage of time to measure satisfaction of the performance obligation associated with our daily stand-ready services.

Firm service transportation contracts (Natural Gas Pipelines segment) - We reserve a stated transportation capacity and transport commodities for our customer. The capacity reservation and transportation services are considered a bundled service, as we integrate them into one stand-ready obligation provided on a daily basis over the life of the agreement and satisfied over time. Fixed capacity reservation fees are allocated and evenly recognized in revenue. Capacity reservation fees that vary based on a stated or implied economic index and correspond with the costs to provide our services are recognized in revenue based on a daily effective fee rate. If the capacity reservation fees vary solely as a contract feature, contract assets or liabilities are recorded for the difference between the amount recorded in revenue and the amount billed to the customer. Transportation fees are recognized in revenue as those services are provided and are dependent on the volume transported by our customer, which is at our customer’s discretion. We use the output method based on the passage of time to measure satisfaction of the performance obligation associated with our daily stand-ready services.

Interruptible transportation contracts (Natural Gas Pipelines segment) - We agree to transport natural gas on our pipelines between the customer’s nominated receipt and delivery points if capacity is available after satisfying firm transportation service obligations. The transaction price is based on the transportation fees times the volumes transported. We use the output method

Table of Cont ents

based on delivery of product to the customer to measure satisfaction of the performance obligation. The total consideration for delivered volumes is recorded in revenue at the time of delivery, when the customer obtains control.

Many of the contract types described above contain additional fees or charges payable by customers for nonperformance (e.g., minimum volume commitments or product specifications), which are considered to be variable consideration. These fees and charges are not recorded until it is probable that a significant reversal of the associated revenue will not occur.

See Note P for our revenue disclosures.

Contract Assets and Contract Liabilities - Contract assets and contract liabilities are recorded when the amount of revenue recognized from a contract with a customer differs from the amount billed to the customer and recorded in accounts receivable. Our contract asset balances at the beginning and end of the period primarily relate to our firm service transportation contracts with tiered rates. Our contract liabilities primarily represent deferred revenue on NGL storage contracts for which revenue is recognized over a one-year term, and deferred revenue on contributions in aid of construction received from customers for which revenue is recognized over the contract periods, which range from 5 to 10 years.

Cost of Sales and Fuel - Cost of sales and fuel primarily includes (i) the cost of purchased commodities, including NGLs, natural gas and condensate, (ii) fees incurred for third-party transportation, fractionation and storage of commodities, (iii) fuel and power costs incurred to operate our own facilities that gather, process, transport and store commodities, and (iv) an offset from the contractual fees deducted from the cost of purchased commodities under the contract types below:

Fee with POP contracts with no producer take-in-kind rights (Natural Gas Gathering and Processing segment) - We purchase raw natural gas and charge contractual fees for providing midstream services, which include gathering, treating, compressing and processing the producer’s natural gas. After performing these services, we sell the commodities and return a portion of the commodity sales proceeds to the producer less our contractual fees.

Purchase with fee (Natural Gas Liquids segment) - Under this type of contract, we purchase raw, unfractionated NGLs at an index price and charge fees for providing midstream services, which may include a bundled combination of gathering, transporting and/or fractionation of our customer’s NGLs.

Operations and Maintenance - Operations and maintenance primarily includes (i) payroll and benefit costs, (ii) third-party costs for operations, maintenance and integrity management, regulatory compliance and environmental and safety, and (iii) other business-related service costs.

Accounts Receivable - Accounts receivable represent valid claims against nonaffiliated customers for products sold or services rendered. We present accounts receivable net of an allowance for credit losses to reflect the net amount expected to be collected. We assess the creditworthiness of our counterparties on an ongoing basis and require security, including prepayments and other forms of collateral, when appropriate. Outstanding customer receivables are reviewed regularly for possible nonpayment indicators, and allowances for credit losses are recorded based upon management’s estimate of collectability, current conditions and supportable forecasts at each balance sheet date. At December 31, 2021, our allowance for credit losses was not material.

Inventory - The values of current NGLs and natural gas in storage are determined using the lower of weighted-average cost or net realizable value. Noncurrent NGLs and natural gas are classified as property and valued at cost. Materials and supplies are valued at average cost. Certain large equipment inventory, which will ultimately be included in property, plant and equipment when utilized, is included in other assets in our Consolidated Balance Sheets and is valued at weighted-average cost.

Commodity Imbalances - Commodity imbalances represent amounts payable or receivable for NGL exchange contracts and natural gas pipeline imbalances and are valued at market prices. Under the majority of our NGL exchange agreements, we physically receive volumes of unfractionated NGLs, including the risk of loss and legal title to such volumes, from the exchange counterparty. In turn, we deliver NGL products back to the customer and charge them gathering, transportation and fractionation fees. To the extent that the volumes we receive under such agreements differ from those we deliver, we record a net exchange receivable or payable position with the counterparties. These net exchange receivables and payables are generally settled with movements of NGL products rather than with cash. Natural gas pipeline imbalances are settled in cash or in-kind, subject to the terms of the pipelines’ tariffs or by agreement.

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Derivatives and Risk Management - We utilize derivatives to reduce our market-risk exposure to commodity price and interest-rate fluctuations and to achieve more predictable cash flows. We record all derivative instruments at fair value, with the exception of normal purchases and normal sales transactions that are expected to result in physical delivery. Commodity price and interest-rate volatility may have a significant impact on the fair value of derivative instruments as of a given date. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, the reason for holding it. The table below summarizes the various ways in which we account for our derivative instruments and the impact on our Consolidated Financial Statements:


		Recognition and Measurement
Accounting Treatment		Balance Sheet		Income Statement
Normal purchases and normal sales	-	Fair value not recorded	-	Change in fair value not recognized in earnings
Mark-to-market	-	Recorded at fair value	-	Change in fair value recognized in earnings

Cash flow hedge	-	Recorded at fair value. The gain or loss on the derivative instrument is reported initially as a component of accumulated other comprehensive income (loss)	-	The gain or loss on the derivative instrument is reclassified out of accumulated other comprehensive income (loss) into earnings when the forecasted transaction affects earnings
Fair value hedge	-	Recorded at fair value	-	The gain or loss on the derivative instrument is recognized in earnings
	-	Change in fair value of the hedged item is recorded as an adjustment to book value	-	Change in fair value of the hedged item is recognized in earnings

To reduce our exposure to fluctuations in natural gas, NGLs and condensate prices, we periodically enter into futures, forward purchases and sales, options or swap transactions in order to hedge anticipated purchases and sales of natural gas, NGLs and condensate. Interest-rate swaps are used from time to time to manage interest-rate risk. Under certain conditions, we designate our derivative instruments as a hedge of exposure to changes in fair values or cash flows. We formally document all relationships between hedging instruments and hedged items, as well as risk-management objectives and strategies for undertaking various hedge transactions, and methods for assessing and testing correlation and hedge effectiveness. We specifically identify the forecasted transaction that has been designated as the hedged item in a cash flow hedge relationship. We assess hedging relationships at the inception of the hedge and on an ongoing basis to determine whether the hedging relationship is, and is expected to remain, highly effective. We also document our normal purchases and normal sales transactions that we expect to result in physical delivery and that we elect to exempt from derivative accounting treatment.

The realized revenues and purchase costs of our derivative instruments not considered held for trading purposes and derivatives that qualify as normal purchases or normal sales that are expected to result in physical delivery are reported on a gross basis.

Cash flows from futures, forwards, options and swaps that are accounted for as hedges are included in the same category as the cash flows from the related hedged items in our Consolidated Statements of Cash Flows.

See Notes B and C for disclosures of our fair value measurements and risk-management and hedging activities, respectively.

Property, Plant and Equipment - Our properties are stated at cost, including AFUDC and capitalized interest. In some cases, the cost of regulated property retired or sold, plus removal costs, less salvage, is charged to accumulated depreciation. Gains and losses from sales or transfers of nonregulated properties or an entire operating unit or system of our regulated properties are recognized in income. Maintenance and repairs are charged directly to expense.

The interest portion of AFUDC and capitalized interest represent the cost of borrowed funds used to finance construction activities for regulated and nonregulated projects, respectively. We capitalize interest costs during the construction or upgrade of qualifying assets. These costs are recorded as a reduction to interest expense. The equity portion of AFUDC represents the capitalization of the estimated average cost of equity used during the construction of major projects and is recorded in the cost of our regulated properties and as a credit to the allowance for equity funds used during construction.

Our properties are depreciated using the straight-line method over their estimated useful lives. Generally, we apply depreciation rates to functional groups of property having similar economic lives. We periodically conduct depreciation studies to assess the economic lives of our assets. For our regulated assets, these depreciation studies are completed as a part of our rate proceedings or tariff filings, and the changes in economic lives, if applicable, are implemented prospectively when the new rates are approved. For our nonregulated assets, if it is determined that the estimated economic life changes, the changes are made prospectively. Changes in the estimated economic lives of our property, plant and equipment could have a material effect on our financial position or results of operations.

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Property, plant and equipment on our Consolidated Balance Sheets includes construction work in process for capital projects that have not yet been placed in service and therefore are not being depreciated. Assets are transferred out of construction work in process when they are substantially complete and ready for their intended use.

See Note D for our property, plant and equipment disclosures.

Impairment of Goodwill and Long-Lived Assets, Including Intangible Assets - We assess our goodwill for impairment at least annually as of July 1, unless events or changes in circumstances indicate an impairment may have occurred before that time. Our qualitative goodwill impairment analysis performed as of July 1, 2021, did not result in an impairment charge nor did our analysis reflect any reporting units at risk, and subsequent to that date, no event has occurred indicating that the implied fair value of each of our reporting units is less than the carrying value of its net assets.

Goodwill - As part of our goodwill impairment test, we assess qualitative factors (including macroeconomic conditions, industry and market considerations, cost factors and overall financial performance) to determine whether it was more likely than not that the fair value of each of our reporting units was less than their carrying amount. If further testing is necessary or a quantitative test is elected, we perform a Step 1 analysis. In a Step 1 analysis, an assessment is made by comparing the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying value of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

To estimate the fair value of our reporting units, we use two generally accepted valuation approaches, an income approach and a market approach, using assumptions consistent with a market participant’s perspective. Under the income approach, we use anticipated cash flows over a period of years plus a terminal value and discount these amounts to their present value using appropriate discount rates. Under the market approach, we apply EBITDA multiples to forecasted EBITDA. The multiples used are consistent with recent market transactions. The forecasted cash flows are based on probability weighted-average possible future cash flows for a reporting unit over a period of years.

Long-lived assets - We assess our long-lived assets for impairment whenever events or changes in circumstances indicate that an asset’s carrying amount may not be recoverable. An impairment is indicated if the carrying amount of a long-lived asset exceeds the sum of the undiscounted future cash flows expected to result from the use and eventual disposition of the asset. If an impairment is indicated, we record an impairment loss equal to the difference between the carrying value and the fair value of the long-lived asset.

Investments in unconsolidated affiliates - The impairment test for equity-method investments considers whether the fair value of the equity investment as a whole, not the underlying net assets, has declined and whether that decline is other than temporary. Therefore, we periodically evaluate the amount at which we carry our equity-method investments to determine whether current events or circumstances warrant adjustments to our carrying values.

See Notes D, E and M for our disclosures and related impairment charges related to long-lived assets, goodwill and intangible assets and investments in unconsolidated affiliates, respectively.

Regulation - Depending on the specific service provided, our natural gas transmission pipelines, NGL pipelines and certain natural gas storage facilities are subject to rate regulation and/or accounting requirements by one or more of the FERC, OCC, KCC and RRC. Accordingly, portions of our Natural Gas Liquids and Natural Gas Pipelines segments follow the accounting and reporting guidance for regulated operations. In our Consolidated Financial Statements and our Notes to Consolidated Financial Statements, regulated operations are defined pursuant to Financial Accounting Standards Board’s (FASB) Accounting Standards Codification 980, Regulated Operations. During the rate-making process for certain of our assets, regulatory authorities set the framework for what we can charge customers for our services and establish the manner that our costs are accounted for, including allowing us to defer recognition of certain costs and permitting recovery of the amounts through rates over time as opposed to expensing such costs as incurred. Certain examples of types of regulatory guidance include costs for fuel and losses, acquisition costs, contributions in aid of construction, charges for depreciation, and gains or losses on disposition of assets. This allows us to stabilize rates over time rather than passing such costs on to the customer for immediate recovery. Actions by regulatory authorities could have an effect on the amounts we may charge our customers. Any difference in the amount recoverable and the amount deferred is recorded as income or expense at the time of the regulatory action. A write-off of regulatory assets and costs not recovered may be required if all or a portion of the regulated operations have rates that are no longer (i) established by independent, third-party regulators and (ii) set at levels that will recover our costs when considering the demand and competition for our services.

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Retirement and Other Postretirement Employee Benefits - We have defined benefit retirement plans covering certain employees and former employees. We sponsor welfare plans that provide postretirement medical and life insurance benefits to certain employees hired prior to 2017 who retire with at least five years of service. The expense and liability related to these plans is calculated using statistical and other factors that attempt to anticipate future events. These factors include assumptions about the discount rate, expected return on plan assets, rate of future compensation increases, mortality and employment length. In determining the projected benefit obligations and costs, assumptions can change from period to period and may result in changes in the costs and liabilities we recognize.

See Note K for our retirement and other postretirement employee benefits disclosures.

Income Taxes - Deferred income taxes are provided for the difference between the financial statement and income tax basis of assets and liabilities and carryforward items based on income tax laws and rates existing at the time the temporary differences are expected to reverse. Generally, the effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date of the rate change.

We utilize a more-likely-than-not recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position that is taken or expected to be taken in a tax return. We reflect penalties and interest as part of income tax expense as they become applicable for tax provisions that do not meet the more-likely-than-not recognition threshold and measurement attribute. For all periods presented, we had no uncertain tax positions that required the establishment of a material reserve.

We utilize the “with-and-without” approach for intra-period tax allocation for purposes of allocating total tax expense (or benefit) for the year among the various financial statement components.

We file numerous consolidated and separate income tax returns with federal tax authorities of the United States along with the tax authorities of several states. We are not under any United States federal audits or statute waivers at this time.

See Note L for our income taxes disclosures.

Asset Retirement Obligations - Asset retirement obligations represent legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or normal use of the asset. Certain of our natural gas gathering and processing, NGL and natural gas pipeline facilities are subject to agreements or regulations that give rise to our asset retirement obligations for removal or other disposition costs associated with retiring the assets in place upon the discontinued use of the assets. We recognize the fair value of a liability for an asset retirement obligation in the period when it is incurred if a reasonable estimate of the fair value can be made. We are not able to estimate reasonably the fair value of the asset retirement obligations for portions of our assets, primarily certain pipeline assets, because the settlement dates are indeterminable given our expected continued use of the assets with proper maintenance. We expect our pipeline assets, for which we are unable to estimate reasonably the fair value of the asset retirement obligation, will continue in operation as long as supply and demand for natural gas and NGLs exist. Based on the widespread use of natural gas for heating and cooking activities for residential users and electric-power generation for commercial users, as well as use of NGLs by the petrochemical industry, we expect supply and demand to exist for the foreseeable future.

For our assets that we are able to make an estimate, the fair value of the liability is added to the carrying amount of the associated asset, and this additional carrying amount is depreciated over the life of the asset. The liability is accreted at the end of each period through charges to operating expense. If the obligation is settled for an amount other than the carrying amount of the liability, we will recognize a gain or loss on settlement. The depreciation and accretion expense are immaterial to our Consolidated Financial Statements.

Contingencies - Our accounting for contingencies covers a variety of business activities, including contingencies for legal and environmental exposures. We accrue these contingencies when our assessments indicate that it is probable that a liability has been incurred or an asset will not be recovered and an amount can be estimated reasonably. We expense legal fees as incurred and base our legal liability estimates on currently available facts and our estimates of the ultimate outcome or resolution. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of a remediation feasibility study. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable. Our expenditures for environmental evaluation, mitigation, remediation and compliance to date have not been significant in relation to our financial position or results of operations, and our expenditures related to environmental matters had no significant effect on earnings or cash flows during 2021, 2020 and 2019. Actual results may differ from our estimates resulting in an impact, positive or negative, on earnings.

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See Note N for additional discussion of contingencies.

Share-Based Payments - We expense the fair value of share-based payments net of estimated forfeitures. We estimate forfeiture rates based on historical forfeitures under our share-based payment plans.

See Note J for our share-based payments disclosures.

Earnings per Common Share - Basic EPS is calculated by dividing net income available to common shareholders by the daily weighted-average number of shares of common stock outstanding during the period, vested restricted and performance units that have been deferred and share awards deferred under the compensation plan for non-employee directors. Diluted EPS is calculated by dividing net income available to common shareholders by the daily weighted-average number of shares of common stock outstanding during the period plus potentially dilutive components. The dilutive components are calculated based on the dilutive effect for each quarter. For fiscal-year periods, the dilutive components for each quarter are averaged to arrive at the fiscal year-to-date dilutive component.

See Note I for our EPS disclosures.

Segment Reporting - Our chief operating decision-maker reviews the financial performance of each of our three segments, as well as our financial performance as a whole, on a regular basis. Adjusted EBITDA by segment is utilized in this evaluation. We believe this financial measure is useful to investors because it and similar measures are used by many companies in our industry as a measurement of financial performance and are commonly employed by financial analysts and others to evaluate our financial performance and to compare financial performance among companies in our industry. Adjusted EBITDA for each segment is defined as net income adjusted for interest expense, depreciation and amortization, noncash impairment charges, income taxes, allowance for equity funds used during construction, noncash compensation expense, and other noncash items. This calculation may not be comparable with similarly titled measures of other companies.

See Note Q for our segments disclosures.

Recently Issued Accounting Standards Update - Changes to GAAP are established by the FASB in the form of ASUs to the FASB Accounting Standards Codification. We consider the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable or clarifications of ASUs previously issued or listed below. Except as discussed below, there have been no new accounting pronouncements that have become effective or have been issued that are of significance or potential significance to us.

In January 2021, we adopted ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which simplifies certain concepts in Topic 740, Income Taxes. The impact of adopting this standard was not material.

B. FAIR VALUE MEASUREMENTS

Recurring Fair Value Measurements - The following tables set forth our recurring fair value measurements for the periods indicated:


	December 31, 2021
	Level 1		Level 2		Level 3		Total - Gross		Netting (a)		Total - Net
	(Thousands of dollars)
Derivative assets
Commodity contracts
Financial contracts	$	22,019	$	172,833	$	9,309	$	204,161	$	(204,161)	$	—


Total derivative assets	$	22,019	$	172,833	$	9,309	$	204,161	$	(204,161)	$	—

Derivative liabilities
Commodity contracts
Financial contracts	$	(67,226)	$	(112,922)	$	(123,592)	$	(303,740)	$	303,740	$	—

Interest-rate contracts	—		(145,524)		—		(145,524)		—		(145,524)
Total derivative liabilities	$	(67,226)	$	(258,446)	$	(123,592)	$	(449,264)	$	303,740	$	(145,524)

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offsetting derivative net liability positions under master-netting arrangements in the table above. The remaining $57.4 million of cash collateral in excess of derivative net liability positions is included in other current assets in our Consolidated Balance Sheet.


	December 31, 2020
	Level 1		Level 2		Level 3		Total - Gross		Netting (a)		Total - Net
	(Thousands of dollars)
Derivative assets
Commodity contracts
Financial contracts	$	6,697	$	—	$	103,801	$	110,498	$	(110,498)	$	—


Total derivative assets	$	6,697	$	—	$	103,801	$	110,498	$	(110,498)	$	—

Derivative liabilities
Commodity contracts
Financial contracts	$	(10,489)	$	—	$	(135,122)	$	(145,611)	$	145,611	$	—

Interest-rate contracts	—		(203,407)		—		(203,407)		—		(203,407)
Total derivative liabilities	$	(10,489)	$	(203,407)	$	(135,122)	$	(349,018)	$	145,611	$	(203,407)

(a) - Derivative assets and liabilities are presented in our Consolidated Balance Sheet on a net basis. We net derivative assets and liabilities when a legally enforceable master-netting arrangement exists between the counterparty to a derivative contract and us. At December 31, 2020, we held no cash and posted $63.1 million of cash with various counterparties, including $35.1 million of cash collateral that is offsetting derivative net liability positions under master-netting arrangements in the table above. The remaining $28.0 million of cash collateral in excess of derivative net liability positions is included in other current assets in our Consolidated Balance Sheet.

The following table sets forth a reconciliation of our Level 3 fair value measurements for the periods indicated:


	Years Ended
	December 31,
Derivative Assets (Liabilities)	2021		2020
	(Thousands of dollars)
Net assets (liabilities) at beginning of period	$	(31,321)	$	30,772
Total changes in fair value:

Settlements included in net income (a)	31,003		(31,660)
Transfers out of Level 3 derivatives	(59,911)		—
New Level 3 derivatives included in other comprehensive income (loss) (b)	(57,325)		(36,568)
Unrealized change included in other comprehensive income (loss) (b)	3,271		6,135

Net liabilities at end of period	$	(114,283)	$	(31,321)

(a) - Included in commodity sales revenues/cost of sales and fuel in our Consolidated Statements of Income.

(b) - Included in change in fair value of derivatives in our Consolidated Statements of Comprehensive Income.

During the year ended December 31, 2021, transfers out of Level 3 related to commodity derivatives associated with certain locations for both NGL and natural gas basis swaps were principally due to improved transparency of market prices as a result of the volume and frequency of transactions in these markets. We consider the valuation of these commodity derivatives transacted through a clearing broker and valued with an unadjusted published price from an exchange as a Level 2 valuation. Our Level 3 fair value measurements continue to include NGL derivatives in other markets valued using forward quotes provided by third-party pricing services that are validated with other unobservable market data. During the year ended December 31, 2020, there were no transfers in or out of Level 3 of the fair value hierarchy.

Other Financial Instruments - The approximate fair value of cash and cash equivalents, accounts receivable, accounts payable and short-term borrowings is equal to book value due to the short-term nature of these items. Our cash and cash equivalents are composed of bank and money market accounts and are classified as Level 1. Our short-term borrowings are classified as Level 2 since the estimated fair value of the short-term borrowings can be determined using information available in the commercial paper market. We have investments at December 31, 2021, associated with our supplemental executive retirement plan and nonqualified deferred compensation plan that are carried at fair value and primarily composed of exchange-traded mutual funds classified as Level 1.

The estimated fair value of our consolidated long-term debt, including current maturities, was $15.6 billion and $16.3 billion at December 31, 2021 and 2020, respectively. The book value of our consolidated long-term debt, including current maturities, was $13.6 billion and $14.2 billion at December 31, 2021 and 2020, respectively. The estimated fair value of the aggregate

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senior notes outstanding was determined using quoted market prices for similar issues with similar terms and maturities. The estimated fair value of our consolidated long-term debt is classified as Level 2.

C. RISK-MANAGEMENT AND HEDGING ACTIVITIES USING DERIVATIVES

Risk-management Activities - We are sensitive to changes in natural gas, crude oil and NGL prices, principally as a result of contractual terms under which these commodities are processed, purchased and sold. We are also subject to the risk of interest-rate fluctuation in the normal course of business. We use physical-forward purchases and sales and financial derivatives to secure a certain price for a portion of our natural gas, condensate and NGL products; to reduce our exposure to commodity price and interest-rate fluctuations; and to achieve more predictable cash flows. We follow established policies and procedures to assess risk and approve, monitor and report our risk-management activities. We have not used these instruments for trading purposes.

Commodity price risk - Commodity price risk refers to the risk of loss in cash flows and future earnings arising from adverse changes in the price of natural gas, NGLs and condensate. We may use the following commodity derivative instruments to reduce the near-term commodity price risk associated with a portion of the forecasted sales of these commodities:

Futures contracts - Standardized contracts to purchase or sell natural gas and crude oil for future delivery or settlement under the provisions of exchange regulations;
Forward contracts - Nonstandardized commitments between two parties to purchase or sell natural gas, crude oil or NGLs for future physical delivery. These contracts are typically nontransferable and can only be canceled with the consent of both parties;
Swaps - Exchange of one or more payments based on the value of one or more commodities. These instruments transfer the financial risk associated with a future change in value between the counterparties of the transaction, without also conveying ownership interest in the asset or liability;
Options - Contractual agreements that give the holder the right, but not the obligation, to buy or sell a fixed quantity of a commodity at a fixed price within a specified period of time. Options may either be standardized and exchange-traded or customized and nonexchange-traded; and
Collar - Combination of a purchased put option and a sold call option, which places a floor and ceiling price for commodity sales being hedged.

We may also use other instruments to mitigate commodity price risk.

In our Natural Gas Gathering and Processing segment, we are exposed to commodity price risk as a result of retaining a portion of the commodity sales proceeds associated with our fee with POP contracts. Under certain fee with POP contracts, our fees and POP percentage may increase or decrease if production volumes, delivery pressures or commodity prices change relative to specified thresholds. In certain commodity price environments, our contractual fees on these fee with POP contracts may decrease, which would impact the average fee rate in our Natural Gas Gathering and Processing segment. We also are exposed to basis risk between the various production and market locations where we buy and sell commodities. As part of our hedging strategy, we use the previously described commodity derivative financial instruments and physical-forward contracts to reduce the impact of price fluctuations related to natural gas, NGLs and condensate.

In our Natural Gas Liquids segment, we are primarily exposed to commodity price risk resulting from the relative values of the various NGL products to each other, the value of NGLs in storage and the relative value of NGLs to natural gas. We are also exposed to location price differential risk as a result of the relative value of NGL purchases at one location and sales at another location, primarily related to our optimization and marketing business. As part of our hedging strategy, we utilize physical-forward contracts and commodity derivative financial instruments to reduce the impact of price fluctuations related to NGLs.

In our Natural Gas Pipelines segment, we are primarily exposed to commodity price risk on our intrastate pipelines because they consume natural gas in operations and retain natural gas from our customers for operations or as part of our fee for services provided. When the amount consumed in operations differs from the amount provided by our customers, our pipelines must buy or sell natural gas, or store or use natural gas inventory, which can expose this segment to commodity price risk depending on the regulatory treatment for this activity. To the extent that commodity price risk in our Natural Gas Pipelines segment is not mitigated by fuel cost-recovery mechanisms, we may use physical-forward sales or purchases to reduce the impact of natural gas price fluctuations. At December 31, 2021 and 2020, there were no financial derivative instruments with respect to our natural gas pipeline operations.

Interest-rate risk - We may manage interest-rate risk through the use of fixed-rate debt, floating-rate debt and interest-rate swaps. Interest-rate swaps are agreements to exchange interest payments at some future point based on specified notional

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amounts. In 2020, we settled $750 million of our forward-starting interest-rate swaps related to our underwritten public offerings of $1.75 billion senior unsecured notes resulting in a loss of $152.5 million, which is included in accumulated other comprehensive loss and amortized to interest expense over the term of the related debt. We also settled the remaining $1.3 billion of our interest-rate swaps used to hedge our LIBOR-based interest payments in 2020 resulting in a loss of $48.3 million.

At December 31, 2021, and December 31, 2020, we had forward-starting interest-rate swaps with notional amounts totaling $1.1 billion to hedge the variability of interest payments on a portion of our forecasted debt issuances. All of our interest-rate swaps are designated as cash flow hedges.

Fair Values of Derivative Instruments - See Note A for a discussion of the inputs associated with our fair value measurements. The following table sets forth the fair values of our derivative instruments presented on a gross basis for the periods indicated:


		December 31, 2021				December 31, 2020
	Location in our Consolidated Balance Sheets	Assets		(Liabilities)		Assets		(Liabilities)
		(Thousands of dollars)
Derivatives designated as hedging instruments
Commodity contracts (a)
Financial contracts (b)		$	204,161	$	(303,740)	$	107,461	$	(142,573)



Interest-rate contracts	Other current liabilities	—		(145,524)		—		—
	Other deferred credits	—		—		—		(203,407)
Total derivatives designated as hedging instruments		204,161		(449,264)		107,461		(345,980)
Derivatives not designated as hedging instruments
Commodity contracts (a)
Financial contracts (b)		—		—		3,037		(3,038)
Total derivatives not designated as hedging instruments		—		—		3,037		(3,038)
Total derivatives		$	204,161	$	(449,264)	$	110,498	$	(349,018)

(a) - Derivative assets and liabilities are presented in our Consolidated Balance Sheets on a net basis when a legally enforceable master-netting arrangement exists between the counterparty to a derivative contract and us.

(b) - At December 31, 2021, and December 31, 2020, our derivative net liability positions under master-netting arrangements for financial contracts were fully offset by cash collateral of $99.6 million and $35.1 million, respectively.

Notional Quantities for Derivative Instruments - The following table sets forth the notional quantities for derivative instruments held for the periods indicated:


		December 31, 2021	December 31, 2020
	Contract Type		Net Purchased/Payor (Sold/Receiver)
Derivatives designated as hedging instruments: (a)
Cash flow hedges
Fixed price
-Natural gas (Bcf)	Futures		(32.3)		(43.3)
-Crude oil and NGLs (MMBbl)	Futures		(10.0)		(4.6)
Basis
-Natural gas (Bcf)	Futures		(30.5)		(43.3)
Interest-rate contracts (Billions of dollars)	Swaps		$	1.1	$	1.1

(a) - Notional amounts for derivatives not designated as hedging instruments are excluded from the table above due to fully offsetting notional quantities of 0.8 MMBbl for NGLs fixed priced derivative instruments at December 31, 2020.

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Cash Flow Hedges - The following table sets forth the unrealized change in fair value of cash flow hedges in other comprehensive income (loss) for the periods indicated:


		Years Ended December 31,
	2021			2020			2019
		(Thousands of dollars)
Commodity contracts		$	(322,648)		$	(5,699)		$	38,819
Interest-rate contracts		57,884			(208,616)			(230,771)
Total unrealized change in fair value of cash flow hedges in other comprehensive income (loss)		$	(264,764)		$	(214,315)		$	(191,952)

The following table sets forth the effect of cash flow hedges on net income for the periods indicated:


Derivatives in Cash Flow Hedging Relationships	Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Net Income
	Years Ended December 31,
	2021	2020		2019
		(Thousands of dollars)
Commodity contracts	Commodity sales revenues	$	(731,793)	$	85,436	$	94,547
	Cost of sales and fuel	473,612		(19,170)		(44,202)
Interest-rate contracts (a)	Interest expense	(39,952)		(93,676)		(23,230)
Total change in fair value of cash flow hedges reclassified from accumulated other comprehensive loss into net income on derivatives		$	(298,133)	$	(27,410)	$	27,115

(a) - The year ended December 31, 2020, includes a loss of $48.3 million on the settlement of $1.3 billion of interest-rate swaps used to hedge our LIBOR-based interest payments.

Credit Risk - We monitor the creditworthiness of our counterparties and compliance with policies and limits established by our Risk Oversight and Strategy Committee. We maintain credit policies with regard to our counterparties that we believe minimize overall credit risk. These policies include an evaluation of potential counterparties’ financial condition (including credit ratings, bond yields and credit default swap rates), collateral requirements under certain circumstances and the use of standardized master-netting agreements that allow us to net the positive and negative exposures associated with a single counterparty. We use internally developed credit ratings for counterparties that do not have a credit rating.

Our financial commodity derivatives are generally settled through a NYMEX or ICE clearing broker account with daily margin requirements. However, we may enter into financial derivative instruments that contain provisions that require us to maintain an investment-grade credit rating from S&P, Fitch and/or Moody’s. If our credit ratings on our senior unsecured long-term debt were to decline below investment grade, the counterparties to the derivative instruments could request collateralization on derivative instruments in net liability positions. There were no financial derivative instruments with contingent features related to credit risk at December 31, 2021.

The counterparties to our derivative contracts typically consist of major energy companies, financial institutions and commercial and industrial end users. This concentration of counterparties may affect our overall exposure to credit risk, either positively or negatively, in that the counterparties may be affected similarly by changes in economic, regulatory or other conditions. Based on our policies, exposures, credit and other reserves, we do not anticipate a material adverse effect on our financial position or results of operations as a result of counterparty nonperformance.

At December 31, 2021, the credit exposure from our derivative assets is with investment-grade companies in the financial services sector.

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D. PROPERTY, PLANT AND EQUIPMENT

The following table sets forth our property, plant and equipment by property type, for the periods indicated:


	Estimated Useful Lives (Years)	December 31, 2021		December 31, 2020
		(Thousands of dollars)
Nonregulated
Gathering pipelines and related equipment	5 to 40	$	4,371,936	$	4,143,752
Processing and fractionation and related equipment	3 to 40	5,356,508		5,084,802
Storage and related equipment	3 to 54	874,522		798,785
Transmission pipelines and related equipment	5 to 54	886,343		810,434
General plant and other	2 to 60	695,117		647,675
Construction work in process	—	1,132,961		1,265,736
Regulated
Storage and related equipment	5 to 25	9,197		9,180
Natural gas transmission pipelines and related equipment	5 to 77	1,660,034		1,569,268
NGL transmission pipelines and related equipment	5 to 88	8,595,968		8,423,544
General plant and other	2 to 50	73,449		72,535
Construction work in process	—	164,504		247,224
Property, plant and equipment		23,820,539		23,072,935
Accumulated depreciation and amortization - nonregulated		(2,885,020)		(2,514,328)
Accumulated depreciation and amortization - regulated		(1,615,645)		(1,403,679)
Net property, plant and equipment		$	19,319,874	$	19,154,928

The average depreciation rates for our regulated property are set forth, by segment, in the following table for the periods indicated:


	Years Ended December 31,
	2021	2020	2019
Natural Gas Liquids	2.2%	2.2%	2.0%
Natural Gas Pipelines	2.1%	2.1%	2.1%

We incurred costs for construction work in process that had not been paid at December 31, 2021, 2020 and 2019, of $130.5 million, $151.7 million and $544.8 million, respectively. Such amounts are not included in capital expenditures (less AFUDC) on the Consolidated Statements of Cash Flows.

Impairment Charges - In 2020, we evaluated our Natural Gas Gathering and Processing segment asset groups and determined that the carrying value of certain long-lived asset groups in the Powder River Basin, western Oklahoma and Kansas were not recoverable and exceeded their estimated fair value. As a result, we recorded noncash impairment charges of $362.3 million, which includes a natural gas processing plant and infrastructure in the Powder River Basin and its related supply contracts and natural gas processing plants and infrastructure in western Oklahoma and Kansas. In our Natural Gas Liquids segment, we recorded noncash impairment charges of $71.6 million related primarily to certain inactive assets, as our expectation for future use of the assets changed. These charges are included within impairment charges in our Consolidated Statement of Income for the year ended December 31, 2020.

E. GOODWILL AND INTANGIBLE ASSETS

Goodwill - The following table sets forth our goodwill, by segment, for the periods indicated:


	December 31, 2021		December 31, 2020
	(Thousands of dollars)

Natural Gas Liquids	$	371,217	$	371,217
Natural Gas Pipelines	156,375		156,375
Total goodwill	$	527,592	$	527,592

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Impairment Charges - In 2020, we experienced a significant decline in our share price and market capitalization as the energy industry experienced historic events that led to a simultaneous demand and supply disruption. Due to the impact of these events, we tested our goodwill for impairment and concluded that the carrying value of the Natural Gas Gathering and Processing reporting unit exceeded its estimated fair value, resulting in a noncash impairment charge of $153.4 million, which is included within impairment charges in our Consolidated Statement of Income for the year ended December 31, 2020. At December 31, 2021 and 2020, we have no remaining goodwill in our Natural Gas Gathering and Processing segment.

Intangible Assets - Our intangible assets relate primarily to contracts acquired through acquisitions in our Natural Gas Liquids and Natural Gas Gathering and Processing segments, which are being amortized over periods of 15 to 40 years. Amortization expense for intangible assets was $10.4 million in 2021, $10.8 million in 2020, and $11.9 million in 2019, and the aggregate amortization expense for each of the next five years is estimated to be $10.4 million. The following table reflects the gross carrying amount and accumulated amortization of intangible assets for the periods presented:


	December 31, 2021		December 31, 2020
	(Thousands of dollars)
Gross intangible assets	$	381,435	$	381,435
Accumulated amortization	(145,732)		(135,304)
Net intangible assets	$	235,703	$	246,131

Impairment Charges - In 2020 in our Natural Gas Gathering and Processing segment, we recorded noncash impairment charges to intangible assets of $19.9 million related to supply contracts associated with our natural gas processing plant in the Powder River Basin, which was also impaired. These charges are included within impairment charges in our Consolidated Statement of Income for the year ended December 31, 2020.

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F. DEBT

The following table sets forth our consolidated debt for the periods indicated:


	December 31, 2021		December 31, 2020
	(Thousands of dollars)
Commercial paper outstanding	$	—	$	—
Senior unsecured obligations:

$700,000 at 4.25% due February 2022	—		541,877
$900,000 at 3.375% due October 2022	895,814		895,814
$425,000 at 5.0% due September 2023	425,000		425,000
$500,000 at 7.5% due September 2023	500,000		500,000
$500,000 at 2.75% due September 2024	500,000		500,000
$500,000 at 4.9% due March 2025	500,000		500,000
$400,000 at 2.2% due September 2025	387,000		387,000
$600,000 at 5.85% due January 2026	600,000		600,000
$500,000 at 4.0% due July 2027	500,000		500,000
$800,000 at 4.55% due July 2028	800,000		800,000
$100,000 at 6.875% due September 2028	100,000		100,000
$700,000 at 4.35% due March 2029	700,000		700,000
$750,000 at 3.4% due September 2029	714,251		714,251
$850,000 at 3.1% due March 2030	780,093		780,093
$600,000 at 6.35% due January 2031	600,000		600,000
$400,000 at 6.0% due June 2035	400,000		400,000
$600,000 at 6.65% due October 2036	600,000		600,000
$600,000 at 6.85% due October 2037	600,000		600,000
$650,000 at 6.125% due February 2041	650,000		650,000
$400,000 at 6.2% due September 2043	400,000		400,000
$700,000 at 4.95% due July 2047	689,006		689,006
$1,000,000 at 5.2% due July 2048	1,000,000		1,000,000
$750,000 at 4.45% due September 2049	672,530		713,676
$500,000 at 4.5% due March 2050	443,015		451,270
$300,000 at 7.15% due January 2051	300,000		300,000
Guardian Pipeline
Weighted average 7.85% due December 2022	—		13,657
Total debt	13,756,709		14,361,644
Unamortized portion of terminated swaps	11,596		13,314
Unamortized debt issuance costs and discounts	(124,855)		(138,887)
Current maturities of long-term debt	(895,814)		(7,650)
Short-term borrowings (a)	—		—
Long-term debt	$	12,747,636	$	14,228,421

(a) - Individual issuances of commercial paper under our commercial paper program generally mature in 90 days or less.

$2.5 Billion Credit Agreement - Our $2.5 Billion Credit Agreement, which expires in June 2024, is a revolving credit facility and contains certain financial, operational and legal covenants. Among other things, these covenants include maintaining a ratio of indebtedness to adjusted EBITDA (EBITDA, as defined in our $2.5 Billion Credit Agreement, adjusted for all noncash charges and increased for projected EBITDA from certain lender-approved capital expansion projects) of no more than 5.0 to 1 at December 31, 2021.

Our $2.5 Billion Credit Agreement includes a $100 million sublimit for the issuance of standby letters of credit and a $200 million sublimit for swingline loans. Under the terms of our $2.5 Billion Credit Agreement, we may request an increase in the size of the facility to an aggregate of $3.5 billion by either commitments from new lenders or increased commitments from existing lenders. Our $2.5 Billion Credit Agreement contains provisions for an applicable margin rate and an annual facility fee, both of which adjust with changes in our credit ratings. Based on our current credit ratings, borrowings, if any, will accrue at LIBOR, or alternate benchmark rate, plus 110 basis points, and the annual facility fee is 15 basis points. At December 31,

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2021, our ratio of indebtedness to adjusted EBITDA was 4.0 to 1, and we were in compliance with all covenants under our $2.5 Billion Credit Agreement.

At December 31, 2021 and 2020, we had letters of credit issued totaling $7.7 million, and no borrowings outstanding under our $2.5 Billion Credit Agreement.

Senior Unsecured Obligations - All notes are senior unsecured obligations, ranking equally in right of payment with all of our existing and future unsecured senior indebtedness, and are structurally subordinate to any of the existing and future debt and other liabilities of any non-guarantor subsidiaries.

Issuances - In May 2020, we completed an underwritten public offering of $1.5 billion senior unsecured notes consisting of $600 million, 5.85% senior notes due 2026; $600 million, 6.35% senior notes due 2031; and $300 million, 7.15% senior notes due 2051. The net proceeds, after deducting underwriting discounts, commissions and offering expenses, were $1.48 billion. A portion of the proceeds was used to repay the outstanding borrowings under our $1.5 Billion Term Loan Agreement. The remainder was used for general corporate purposes.

In March 2020, we completed an underwritten public offering of $1.75 billion senior unsecured notes consisting of $400 million, 2.2% senior notes due 2025; $850 million, 3.1% senior notes due 2030; and $500 million, 4.5% senior notes due 2050. The net proceeds, after deducting underwriting discounts, commissions and offering expenses, were $1.73 billion. A portion of the proceeds was used to pay all outstanding amounts under our commercial paper program. The remainder was used for general corporate purposes, which included repayment of other existing indebtedness and funding capital expenditures.

In August 2019, we completed an underwritten public offering of $2.0 billion senior unsecured notes consisting of $500 million, 2.75% senior notes due 2024; $750 million, 3.4% senior notes due 2029; and $750 million, 4.45% senior notes due 2049. The net proceeds, after deducting underwriting discounts, commissions and offering expenses, were $1.97 billion. The proceeds were used for general corporate purposes, including repayment of existing indebtedness and funding capital expenditures.

In March 2019, we completed an underwritten public offering of $1.25 billion senior unsecured notes consisting of $700 million, 4.35% senior notes due 2029 and an additional issuance of $550 million of our existing 5.2% senior notes due 2048. The net proceeds, after deducting underwriting discounts, commissions and offering expenses, and exclusive of accrued interest, were $1.23 billion. The proceeds were used for general corporate purposes, including repayment of existing indebtedness and funding capital expenditures.

Repayments - In November 2021, we redeemed the remaining $536.1 million of our $700 million, 4.25% senior notes due February 2022 at 100% of the principal amount, plus accrued and unpaid interest, with cash on hand and short-term borrowings.

In June 2021, we repaid the remaining $11.7 million of Guardian Pipeline’s senior notes due December 2022 with cash on hand.

In 2021, we repurchased in the open market outstanding principal of certain of our senior notes in the amount of $55.2 million for an aggregate repurchase price of $54.6 million with cash on hand.

In May 2020, we repaid the remaining $1.25 billion of our $1.5 Billion Term Loan Agreement with cash on hand from our May 2020 public offering of $1.5 billion senior unsecured notes.

In 2020, we repurchased in the open market outstanding principal of certain of our senior notes in the amount of $224.4 million for an aggregate repurchase price of $199.6 million with cash on hand. In connection with these open market repurchases, we recognized $22.3 million of net gains on extinguishment of debt, which is included in other income in our Consolidated Statement of Income for the year ended December 31, 2020.

In September 2019, we redeemed our $300 million, 3.8% senior notes due March 2020 at a redemption price of $308.0 million, including the outstanding principal, plus accrued and unpaid interest, with cash on hand from our public offering of $2.0 billion senior unsecured notes in August 2019. In connection with this early redemption, we incurred a $2.7 million loss on extinguishment of debt, which is included in other expense in our Consolidated Statements of Income for the year ended December 31, 2019.

In August 2019, we repaid $250 million of our $1.5 Billion Term Loan agreement with cash on hand.

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In March 2019, we repaid our $500 million, 8.625% senior notes at maturity with a combination of cash on hand and short-term borrowings.

The aggregate maturities of long-term debt outstanding and interest obligations on debt as of December 31, 2021, for the years 2022 through 2026 are shown below:


	Senior Unsecured Obligations		Interest Obligations on Debt		Total
	(Millions of dollars)
2022	$	895.8	$	670.5	$	1,566.3
2023	$	925.0	$	629.3	$	1,554.3
2024	$	500.0	$	584.6	$	1,084.6
2025	$	887.0	$	553.6	$	1,440.6
2026	$	600.0	$	508.8	$	1,108.8

Covenants - Our senior notes are governed by indentures containing covenants, including among other provisions, limitations on our ability to place liens on our property or assets and to sell and leaseback our property. The indentures governing our 6.875% senior notes due 2028 include an event of default upon acceleration of other indebtedness of $15 million or more, and the indentures governing the remainder of our senior notes include an event of default upon the acceleration of other indebtedness of $100 million or more. Such events of default would entitle the trustee or the holders of 25% in aggregate principal amount of the outstanding senior notes to declare those senior notes immediately due and payable in full. The indenture for the 7.5% notes due 2023 also contains a provision that allows the holders of the notes to require ONEOK to offer to repurchase all or any part of their notes if a change of control and a credit rating downgrade occur at a purchase price of 101% of the principal amount, plus accrued and unpaid interest, if any.

We may redeem our senior notes, in whole or in part, at any time prior to their maturity at a redemption price equal to the principal amount, plus accrued and unpaid interest and a make-whole premium. We may redeem the balance of our senior notes due 2022, 2023, 2024, 2025, 2026, 2027, 2028 (4.55%), 2029, 2030, 2031, 2041, 2043, 2047, 2048, 2049, 2050 and 2051 at a redemption price equal to the principal amount, plus accrued and unpaid interest, starting one to six months before the maturity date as stipulated in the respective contract terms. Our senior notes are senior unsecured obligations, ranking equally in right of payment with all of our existing and future unsecured senior indebtedness.

Other - We amortize premiums, discounts and expenses incurred in connection with the issuance of long-term debt consistent with the terms of the respective debt instrument.

Debt Guarantees - ONEOK, ONEOK Partners and the Intermediate Partnership have cross guarantees in place for our and ONEOK Partners’ indebtedness.

G. EQUITY

Series A and B Convertible Preferred Stock - There are no shares of Series A or Series B Preferred Stock currently issued or outstanding.

Equity Issuances - In July 2020, we established an “at-the-market” equity program for the offer and sale from time to time of our common stock up to an aggregate offering price of $1.0 billion. The program allows us to offer and sell common stock at prices we deem appropriate through a sales agent, in forward sales transactions through a forward seller or directly to one or more of the program’s managers acting as principals. Sales of our common stock may be made by means of ordinary brokers’ transactions on the NYSE, in block transactions or as otherwise agreed to between us and the sales agent. We are under no obligation to offer and sell common stock under the program. No shares have been sold through our “at-the-market” program as of the date of this report.

In June 2020, we completed an underwritten public offering of 29.9 million shares of our common stock at a public offering price of $32.00 per share, generating net proceeds, after deducting underwriting discounts, commissions and offering expenses, of $937.0 million. The proceeds were used for general corporate purposes, including repayment of existing indebtedness and funding capital expenditures.

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Dividends - Holders of our common stock share equally in any dividend declared by our Board of Directors, subject to the rights of the holders of outstanding Series E Preferred Stock. Dividends paid totaled $1.7 billion, $1.6 billion and $1.5 billion for 2021, 2020 and 2019, respectively. Although dividends per share did not increase in 2021 as compared with 2020, dividends paid increased due to the increase in number of shares outstanding as a result of our equity issuances. The following table sets forth the quarterly dividends per share paid on our common stock in the periods indicated:


	Years Ended December 31,
	2021		2020		2019
First Quarter	$	0.935	$	0.935	$	0.860
Second Quarter	0.935		0.935		0.865
Third Quarter	0.935		0.935		0.890
Fourth Quarter	0.935		0.935		0.915
Total	$	3.74	$	3.74	$	3.53

Additionally, in February 2022, we maintained and paid a quarterly common stock dividend of $0.935 per share ($3.74 per share on an annualized basis), which was paid to shareholders of record as of January 31, 2022.

The Series E Preferred Stock pays quarterly dividends on each share of Series E Preferred Stock, when, as and if declared by our Board of Directors, at a rate of 5.5% per year. We paid dividends for the Series E Preferred Stock of $1.1 million in 2021, 2020 and 2019. We paid quarterly dividends totaling $0.3 million for the Series E Preferred Stock in February 2022.

H. ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table sets forth the balance in accumulated other comprehensive loss for the periods indicated:


	Risk- Management Assets/Liabilities (a)		Retirement and Other Postretirement Benefit Plan Obligations (a) (b)		Risk- Management Assets/Liabilities of Unconsolidated Affiliates (a)		Accumulated Other Comprehensive Loss (a)
	(Thousands of dollars)
January 1, 2020	$	(233,520)	$	(131,481)	$	(8,999)	$	(374,000)
Other comprehensive loss before reclassifications	(165,023)		(40,341)		(8,635)		(213,999)
Amounts reclassified to net income (c)	21,097		14,187		1,266		36,550
Other comprehensive loss	(143,926)		(26,154)		(7,369)		(177,449)
December 31, 2020	(377,446)		(157,635)		(16,368)		(551,449)
Other comprehensive income (loss) before reclassifications	(203,868)		31,897		3,088		(168,883)
Amounts reclassified to net income (c)	228,999		18,079		1,903		248,981
Other comprehensive income	25,131		49,976		4,991		80,098
December 31, 2021	$	(352,315)	$	(107,659)	$	(11,377)	$	(471,351)

(a) - All amounts are presented net of tax.

(b) - Includes amounts related to supplemental executive retirement plan.

(c) - See Note C for details of amounts reclassified to net income for risk-management assets/liabilities and Note K for retirement and other postretirement benefit plan obligations.

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The following table sets forth information about the balance of accumulated other comprehensive loss at December 31, 2021, representing unrealized losses related to risk-management assets and liabilities:


	Risk- Management Assets/Liabilities (a)
	(Thousands of dollars)
Commodity derivative instruments expected to be realized within the next 36 months (b)	$	(76,942)
Settled interest-rate swaps to be recognized over the life of the long-term, fixed-rate debt (c)	(163,320)
Interest-rate swaps with future settlement dates expected to be amortized over the life of long-term debt	(112,053)
Accumulated other comprehensive loss at December 31, 2021	$	(352,315)

(a) - All amounts are presented net of tax.

(b) - Based on commodity prices on December 31, 2021, we expect net losses of $76.8 million, net of tax, will be reclassified into earnings during the next 12 months.

The remaining amounts in accumulated other comprehensive loss relate primarily to our retirement and other postretirement benefit plan obligations, which are expected to be amortized over the average remaining service period of employees participating in these plans.

I. EARNINGS PER SHARE

The following tables set forth the computation of basic and diluted EPS for the periods indicated:


	Year Ended December 31, 2021
	Income		Shares	Per Share Amount
	(Thousands, except per share amounts)
Basic EPS
Net income available for common stock	$	1,498,606	446,403	$	3.36
Diluted EPS
Effect of dilutive securities	—		1,000
Net income available for common stock and common stock equivalents	$	1,498,606	447,403	$	3.35


	Year Ended December 31, 2020
	Income		Shares	Per Share Amount
	(Thousands, except per share amounts)
Basic EPS
Net income available for common stock	$	611,709	431,105	$	1.42
Diluted EPS
Effect of dilutive securities	—		677
Net income available for common stock and common stock equivalents	$	611,709	431,782	$	1.42


	Year Ended December 31, 2019
	Income		Shares	Per Share Amount
	(Thousands, except per share amounts)
Basic EPS
Net income available for common stock	$	1,277,477	413,560	$	3.09
Diluted EPS
Effect of dilutive securities	—		1,884
Net income available for common stock and common stock equivalents	$	1,277,477	415,444	$	3.07

J. SHARE-BASED PAYMENTS

Our Equity Incentive Plan (EIP) provides for the granting of stock-based compensation, including restricted stock unit awards and performance unit awards, to eligible employees and the granting of stock awards to non-employee directors. We have

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reserved 8.5 million shares of common stock for issuance under the EIP and at December 31, 2021, we had 5.5 million shares available for issuance under the plan. This calculation of available shares reflects shares issued and estimated shares expected to be issued upon vesting of outstanding awards granted under the EIP, excluding estimated forfeitures expected to be returned to the plan.

Restricted Stock Units - We have granted restricted stock units to key employees that vest at the end of a three-year period and entitle the grantee to receive shares of our common stock. Restricted stock unit awards are measured at fair value as if they were vested and issued on the grant date and adjusted for estimated forfeitures. Restricted stock unit awards accrue dividend equivalents in the form of additional restricted stock units prior to vesting. Compensation expense is recognized on a straight-line basis over the vesting period of the award.

Performance Unit Awards - We have granted performance unit awards to key employees that vest at the end of a three-year period. Upon vesting, a holder of outstanding performance units is entitled to receive a number of shares of our common stock equal to a percentage (0% to 200%) of the performance units granted, based on our total shareholder return over the vesting period, compared with the total shareholder return of a peer group of other energy companies over the same period. Performance unit awards are measured at fair value on the grant date based on a Monte Carlo model and adjusted for estimated forfeitures. Performance unit awards accrue dividend equivalents in the form of additional performance units prior to vesting. Compensation expense is recognized on a straight-line basis over the vesting period of the award.

Stock Compensation for Non-Employee Directors

The EIP provides for the granting of nonstatutory stock options and stock bonus awards to non-employee directors, including performance unit awards and restricted stock unit awards. Under the EIP, awards may be granted by the Executive Compensation Committee at any time, until grants have been made for all shares authorized under the EIP. The maximum number of shares of common stock and cash-based awards that can be issued to a participant under the EIP during any year is limited to $0.8 million in value as of the grant date. No performance unit awards or restricted stock unit awards have been made to non-employee directors, and there are no options outstanding.

General

For all awards outstanding, we used a 3% forfeiture rate based on historical forfeitures under our share-based payment plans. We currently use treasury stock to satisfy our share-based payment obligations.

Compensation expense for our share-based payment plans was $54.1 million, $29.4 million and $46.5 million during 2021, 2020 and 2019, respectively, before related tax benefits of $14.4 million, $14.1 million and $31.7 million, respectively.

Restricted Stock Unit Activity

As of December 31, 2021, we had $19.3 million of total unrecognized compensation cost related to our nonvested restricted stock unit awards, which is expected to be recognized over a weighted-average period of 1.8 years. The following tables set forth activity and various statistics for our restricted stock unit awards:


	Number of Units	Weighted Average Price
Nonvested December 31, 2020	646,287	$	63.85
Granted	417,212	$	46.84
Released to participants	(242,765)	$	51.57
Forfeited	(40,797)	$	55.27
Nonvested December 31, 2021	779,937	$	59.02


	2021		2020		2019
Weighted-average grant date fair value (per share)	$	46.84	$	76.49	$	58.07
Fair value of units granted (thousands of dollars)	$	19,542	$	16,552	$	15,238
Grant date fair value of units vested (thousands of dollars)	$	12,519	$	11,204	$	10,691

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Performance Unit Activity

As of December 31, 2021, we had $31.7 million of total unrecognized compensation cost related to the nonvested performance unit awards, which is expected to be recognized over a weighted-average period of 1.8 years. The following tables set forth activity and various statistics related to the performance unit awards and the assumptions used in the valuations at the respective grant dates:


	Number of Units	Weighted Average Price
Nonvested December 31, 2020	834,246	$	75.96
Granted	542,183	$	62.03
Released to participants	(311,907)	$	64.00
Forfeited	(87,937)	$	68.37
Nonvested December 31, 2021	976,585	$	72.73


	2021	2020	2019
Volatility (a)	60.30%	21.70%	27.10%
Dividend yield	8.13%	4.87%	5.05%
Risk-free interest rate	0.21%	1.39%	2.47%

(a) - Volatility was based on historical volatility over three years using daily stock price observations.


	2021		2020		2019
Weighted-average grant date fair value (per share)	$	62.03	$	88.43	$	68.02
Fair value of units granted (thousands of dollars)	$	33,632	$	25,028	$	23,020
Grant date fair value of units vested (thousands of dollars)	$	19,962	$	17,722	$	15,018

Employee Stock Purchase Plan

We have reserved a total of 11.6 million shares of common stock for issuance under our Employee Stock Purchase Plan (the ESPP). Subject to certain exclusions, all employees are eligible to participate in the ESPP. Employees can choose to have up to 10% of their base pay withheld from each paycheck during the offering period to purchase our common stock, subject to terms and limitations of the plan. The purchase price of the stock is 85% of the lower of its grant date or exercise date market price. Approximately 69%, 68% and 62% of employees participated in the plan in 2021, 2020 and 2019, respectively. Under the plan, we sold 277,012 shares at a weighted average of $38.98 per share in 2021, 359,977 shares at a weighted average of $27.78 per share in 2020 and 171,590 shares at a weighted average of $51.24 per share in 2019.

Employee Stock Award Program

Under our Employee Stock Award Program, we issue, for no monetary consideration, to all eligible employees one share of our common stock when the per-share closing price of our common stock on the NYSE is at or above each one-dollar increment above its previous high closing price. The total number of shares of our common stock available for issuance under this program is 900,000. Shares issued to employees under this program during 2020 and 2019 totaled 2,871 and 14,022, respectively. Compensation expense related to the Employee Stock Award Program was $0.2 million and $1.0 million for 2020 and 2019, respectively. No shares were issued to employees under this program in 2021. As of the date of this report, the next award will be issued when our common stock closes at or above $78.

Deferred Compensation Plan for Non-Employee Directors

Our Deferred Compensation Plan for Non-Employee Directors provides our non-employee directors the option to defer all or a portion of their compensation for their service on our Board of Directors. Under the plan, directors may elect either a cash deferral option or a phantom stock option. Under the cash deferral option, directors may elect to defer the receipt of all or a portion of their annual retainer fees, which will be credited with interest during the deferral period. Under the phantom stock option, directors may defer all or a portion of their annual retainer fees and receive such fees on a deferred basis in the form of shares of common stock under our EIP, which earn the equivalent of dividends declared on our common stock. Shares are distributed to non-employee directors at the fair market value of our common stock at the date of distribution.

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K. EMPLOYEE BENEFIT PLANS

Retirement and Other Postretirement Benefit Plans

Retirement Plans - We have a defined benefit pension plan covering certain employees and former employees, which closed to new participants in 2005. In addition, we have a supplemental executive retirement plan for the benefit of certain officers who participate in our defined benefit pension plan. Our supplemental executive retirement plan is closed to new participants. We fund our defined benefit pension plan at a level needed to maintain or exceed the minimum funding levels required by the Employee Retirement Income Security Act of 1974, as amended.

All employees are eligible to make salary deferrals and receive company matching contributions under our 401(k) Plan, and employees that do not participate in our defined benefit pension plan are also eligible to receive quarterly and annual profit-sharing contributions under our 401(k) Plan.

Other Postretirement Benefit Plans - We sponsor health and welfare plans that provide postretirement medical and life insurance benefits to employees hired prior to 2017 who retire with at least five years of full-time consecutive service. The postretirement medical plan for pre-Medicare participants is contributory, with retiree contributions adjusted periodically, and contains other cost-sharing features such as deductibles and coinsurance. The postretirement medical plan for Medicare-eligible participants is an account-based plan under which participants may elect to purchase private insurance policies under a private exchange and/or seek reimbursement of other eligible medical expenses.

Obligations and Funded Status - The following table sets forth our retirement and other postretirement benefit plans benefit obligations and fair value of plan assets for the periods indicated:


	Retirement Benefits				Other Postretirement Benefits
	December 31,				December 31,
	2021		2020		2021		2020
Change in benefit obligation	(Thousands of dollars)
Benefit obligation, beginning of period	$	583,072	$	534,849	$	54,515	$	52,309
Service cost	8,314		8,154		421		460
Interest cost	16,900		18,318		1,454		1,771
Plan participants’ contributions	—		—		1,092		1,032
Actuarial loss (gain)	(22,792)		37,951		(2,496)		2,860
Benefits paid	(18,483)		(16,200)		(3,959)		(3,917)
Benefit obligation, end of period (b)	567,011		583,072		51,027		54,515

Change in plan assets
Fair value of plan assets, beginning of period	379,092		346,792		20,874		39,060
Actual return on plan assets (a)	41,374		36,400		5,919		(15,699)
Employer contributions	11,200		12,100		—		—
Plan participants’ contributions	—		—		1,092		1,032
Benefits paid	(18,483)		(16,200)		(3,488)		(3,519)
Fair value of plan assets, end of period (c)	413,183		379,092		24,397		20,874
Balance at December 31	$	(153,828)	$	(203,980)	$	(26,630)	$	(33,641)

Current liabilities	$	(5,219)	$	(4,679)	$	—	$	—
Noncurrent liabilities	(148,609)		(199,301)		(26,630)		(33,641)
Balance at December 31	$	(153,828)	$	(203,980)	$	(26,630)	$	(33,641)

(a) - Other Postretirement Benefits for the year ended December 31, 2020, includes a $13.2 million tax loss incurred from the exit of an investment in an insurance contract.

(b) - The benefit obligation for Retirement Benefits at December 31, 2021 and 2020, include the supplemental executive retirement plan obligation.

(c) - Fair value of plan assets for Retirement Benefits exclude the assets of our supplemental executive retirement plan, which totaled $111.2 million and $116.2 million at December 31, 2021 and 2020, respectively, and are included in other assets on the Consolidated Balance Sheets. These assets are maintained in a rabbi trust and are not treated as assets of the supplemental executive retirement plan.

The accumulated benefit obligation for our retirement plans was $541.8 million and $548.2 million at December 31, 2021 and 2020, respectively.

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The actuarial gains and losses impacting our benefit obligations for our retirement and other postretirement benefit plans are due primarily to changes in the discount rate assumptions discussed in the “Actuarial Assumptions” section below.

Components of Net Periodic Benefit Cost - The following table sets forth the components of net periodic benefit cost for our retirement and other postretirement benefit plans for the periods indicated:


	Retirement Benefits						Other Postretirement Benefits
	Years Ended December 31,						Years Ended December 31,
	2021		2020		2019		2021		2020		2019
	(Thousands of dollars)
Components of net periodic benefit cost
Service cost	$	8,314	$	8,154	$	7,825	$	421	$	460	$	468
Interest cost	16,900		18,318		20,528		1,454		1,771		2,038
Expected return on plan assets	(25,109)		(24,964)		(23,600)		(1,364)		(2,894)		(2,285)
Amortization of prior service cost (credit)	114		114		—		—		—		(227)
Amortization of net loss	19,673		18,306		12,649		3,692		5		297
Net periodic benefit cost (income)	$	19,892	$	19,928	$	17,402	$	4,203	$	(658)	$	291

Other Comprehensive Income (Loss) - The following table sets forth the amounts recognized in other comprehensive income (loss) related to our retirement and other postretirement benefits for the periods indicated:


	Retirement Benefits						Other Postretirement Benefits
	Years Ended December 31,						Years Ended December 31,
	2021		2020		2019		2021		2020		2019
	(Thousands of dollars)
Net gain (loss) (a)	$	34,529	$	(31,016)	$	(25,389)	$	7,052	$	(21,453)	$	700
Prior service cost	—		—		(601)		—		—		—
Amortization of prior service cost (credit) (b)	114		114		—		—		—		(227)
Amortization of net loss (b)	19,673		18,306		12,649		3,692		5		297
Deferred income taxes	(12,493)		2,897		3,068		(2,471)		4,933		(177)
Total recognized in other comprehensive income (loss)	$	41,823	$	(9,699)	$	(10,273)	$	8,273	$	(16,515)	$	593

(a) - Other Postretirement Benefits for the year ended December 31, 2020, includes a $13.2 million tax loss incurred from the exit of an investment in an insurance contract.

(b) - These components are recognized in accumulated other comprehensive loss and are reclassified to other expense in our Consolidated Statements of Income, with related income tax benefits of $5.4 million, $4.2 million and $2.9 million reclassified to income tax expense for the years ended December 31, 2021, 2020 and 2019, respectively.

The table below sets forth the amounts in accumulated other comprehensive loss that had not yet been recognized as components of net periodic benefit expense for the periods indicated:


	Retirement Benefits				Other Postretirement Benefits
	December 31,				December 31,
	2021		2020		2021		2020
	(Thousands of dollars)
Prior service cost	$	(374)	$	(487)	$	—	$	—
Accumulated loss (a)	(131,460)		(185,662)		(14,815)		(25,558)
Accumulated other comprehensive loss	(131,834)		(186,149)		(14,815)		(25,558)


Deferred income taxes	36,759		49,251		3,852		6,322
Accumulated other comprehensive loss, net of tax	$	(95,075)	$	(136,898)	$	(10,963)	$	(19,236)

(a) - Other Postretirement Benefits for the year ended December 31, 2020, includes a $13.2 million tax loss incurred from the exit of an investment in an insurance contract.

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Actuarial Assumptions - The following table sets forth the weighted-average assumptions used to determine benefit obligations for retirement and other postretirement benefits for the periods indicated:


	Retirement Benefits		Other Postretirement Benefits
	December 31,		December 31,
	2021	2020	2021	2020
Discount rate	3.25%	3.00%	3.00%	2.75%
Compensation increase rate	3.60%	3.60%	NA	NA

The following table sets forth the weighted-average assumptions used to determine net periodic benefit costs for the periods indicated:


	Years Ended December 31,
	2021	2020	2019
Discount rate - retirement plans	3.00%	3.50%	4.50%
Discount rate - other postretirement plans	2.75%	3.50%	4.50%
Expected long-term return on plan assets	7.00%	7.50%	7.50%
Compensation increase rate	3.60%	3.70%	3.65%

We determine our overall expected long-term rate of return on plan assets based on our review of historical returns and economic growth models.

We determine our discount rates annually utilizing portfolios of high-quality bonds matched to the estimated benefit cash flows of our retirement and other postretirement benefit plans. Bonds selected to be included in the portfolios are only those rated by S&P or Moody’s as an AA or Aa2 rating or better and exclude callable bonds, bonds with less than a minimum issue size, yield outliers and other filtering criteria to remove unsuitable bonds.

Health Care Cost Trend Rates - The following table sets forth the assumed health care cost-trend rates for the periods indicated:


	2021	2020
Health care cost-trend rate assumed for next year	6.50%	6.50%
Rate to which the cost-trend rate is assumed to decline (the ultimate trend rate)	5.00%	5.00%
Year that the rate reaches the ultimate trend rate	2025	2024

Plan Assets - Our investment strategy is to invest plan assets in accordance with sound investment practices that emphasize long-term fundamentals. The goal of this strategy is to maximize investment returns while managing risk in order to meet the plan’s current and projected financial obligations. The investment allocation for our other postretirement benefit plans is to target a diversified mix of approximately 30% fixed income and 70% equity securities. The investment allocation for our defined benefit pension plan follows a glide path approach of liability-driven investing that shifts a higher portfolio weighting to fixed income as the plan’s funded status increases. The purpose of liability-driven investing is to structure the asset portfolio to more closely resemble the pension liability and thereby more effectively hedge against changes in the liability. The plan’s current investments include a diverse blend of various domestic and international equities, investments in various classes of debt securities, real estate and hedge funds. The target allocation for the assets of our retirement plan as of December 31, 2021, is as follows:


Domestic and international equities	42	%
Long duration fixed income	30	%
Return-seeking credit	11	%
Hedge funds	10	%
Real estate funds	7	%
Total	100	%

As part of our risk management for the plans, minimums and maximums have been set for each of the asset classes listed above.

Table of Cont ents

The following tables set forth the plan assets by fair value category as of the measurement date for our defined benefit pension and other postretirement benefit plans:


	Pension Benefits
	December 31, 2021
Asset Category	Level 1		Level 2		Level 3		Subtotal		Measured at NAV (d)		Total
	(Thousands of dollars)
Investments:
Equity securities	$	42	$	—	$	—	$	42	$	—	$	42
Common/collective trusts
Equity securities (a)	—		—		—		—		166,132		166,132
Real estate funds	—		—		—		—		30,491		30,491
Government obligations	—		—		—		—		49,444		49,444
Corporate obligations (b)	—		—		—		—		120,877		120,877
Short-term investments	—		—		—		—		4,243		4,243

Other investments (c)	—		—		—		—		41,954		41,954
Fair value of plan assets	$	42	$	—	$	—	$	42	$	413,141	$	413,183

(a) - This category represents securities of the respective market sector from diverse industries.

(b) - This category represents bonds from diverse industries.

(c) - This category represents alternative investments in limited partnerships, which can be redeemed with a 30-day notice with no further restrictions. There are no unfunded capital commitments. These limited partnerships invest through multi-strategy programs in broadly diversified portfolios of private investment funds, hedge funds and/or separate accounts to seek equity-like returns with low market correlation, reduced volatility and limited risk.

(d) - Plan asset investments measured at fair value using the net asset value per share.


	Pension Benefits
	December 31, 2020
Asset Category	Level 1		Level 2		Level 3		Subtotal		Measured at NAV (d)		Total
	(Thousands of dollars)
Investments:
Equity securities	$	43	$	—	$	—	$	43	$	—	$	43
Common/collective trusts
Equity securities (a)	—		—		—		—		164,099		164,099
Real estate funds	—		—		—		—		24,134		24,134
Government obligations	—		—		—		—		45,237		45,237
Corporate obligations (b)	—		—		—		—		101,626		101,626
Short-term investments (e)	—		—		—		—		4,890		4,890
Other investments (c)	—		—		—		—		39,063		39,063
Fair value of plan assets	$	43	$	—	$	—	$	43	$	379,049	$	379,092

(a) - This category represents securities of the respective market sector from diverse industries.

(b) - This category represents bonds from diverse industries.

(d) - Plan asset investments measured at fair value using the net asset value per share.

(e) - The fair value of short term investments in the Bank of New York Mellon EB Temporary Investment Fund was previously reported in Level 2. We elected to consistently apply the practical expedient to all investments within common/collective trusts, and therefore, the fair value of this fund is now measured at net asset value per share and no longer classified in the fair value hierarchy.

Table of Cont ents


	Other Postretirement Benefits
	December 31, 2021
Asset Category	Level 1		Level 2		Level 3		Total
	(Thousands of dollars)
Investments:
Equity securities (a)	$	17,953	$	—	$	—	$	17,953
Money market funds	—		480		—		480
Municipal obligations	5,964		—		—		5,964
Fair value of plan assets	$	23,917	$	480	$	—	$	24,397

(a) - This category represents securities of the respective market sector from diverse industries.


	Other Postretirement Benefits
	December 31, 2020
Asset Category	Level 1		Level 2		Level 3		Total
	(Thousands of dollars)
Investments:
Equity securities (a)(b)	$	15,116	$	—	$	—	$	15,116
Money market funds	—		808		—		808
Municipal obligations (b)	4,950		—		—		4,950
Fair value of plan assets	$	20,066	$	808	$	—	$	20,874

(a) - This category represents securities of the respective market sector from diverse industries.

(b) - Net proceeds of $16.2 million from the exit of an investment in an insurance contract were reinvested in various equity securities and municipal obligations.

Contributions - During 2021, we made $11.2 million in contributions to our defined benefit pension plan and no contributions to our other postretirement plans. Our defined benefit pension plan elected to adopt funding relief provided by the American Rescue Plan Act of 2021 legislation. As a result of the election, our defined benefit pension plan has no minimum required contribution in 2022.

Pension and Other Postretirement Benefit Payments - Benefit payments for our defined benefit pension and other postretirement benefit plans for the period ending December 31, 2021, were $18.5 million and $4.0 million, respectively. The following table sets forth the defined benefit pension and other postretirement benefits payments expected to be paid in 2022 through 2031:


	Pension Benefits		Other Postretirement Benefits
Benefits to be paid in:	(Thousands of dollars)
2022	$	25,962	$	3,387
2023	$	26,756	$	3,363
2024	$	27,769	$	3,302
2025	$	28,759	$	3,293
2026	$	29,651	$	3,220
2027 through 2031	$	156,041	$	15,339

The expected benefits to be paid are based on the same assumptions used to measure our benefit obligation at December 31, 2021, and include estimated future employee service.

Other Employee Benefit Plans

401(k) Plan - We have a 401(k) Plan covering all employees, and employee contributions are discretionary. We match 100% of employee 401(k) Plan contributions up to 6% of each participant’s eligible compensation each payroll period, subject to certain limits. We also make profit-sharing contributions under our 401(k) Plan for employees who do not participate in our defined benefit pension plan. We generally make a quarterly profit sharing contribution equal to 1% of each profit-sharing participant’s eligible compensation during the quarter and an annual discretionary profit-sharing contribution equal to a percentage of each profit-sharing participant’s eligible compensation. Our contributions made to the plan, including profit-sharing contributions, were $32.7 million, $27.1 million and $30.4 million in 2021, 2020 and 2019, respectively.

Table of Cont ents

Nonqualified Deferred Compensation Plan - The 2020 Nonqualified Deferred Compensation Plan and its predecessor nonqualified deferred compensation plans (collectively, the NQDC Plan) provide a select group of management and highly compensated employees, as approved by our Chief Executive Officer, with the option to defer portions of their compensation and receive notional employer contributions that generally are not available due to limitations on employer and employee contributions to qualified defined contribution plans under federal tax laws. We have investments included in other assets on the Consolidated Balance Sheets related to the NQDC Plan, which totaled $36.1 million and $32.4 million at December 31, 2021 and 2020, respectively. These investments are maintained in a rabbi trust. Our contributions to the plan were not material in 2021, 2020 and 2019.

L. INCOME TAXES

The following table sets forth our provision for income taxes for the periods indicated:


	Years Ended December 31,
	2021		2020		2019
	(Thousands of dollars)
Current tax expense (benefit)
Federal	$	2,897	$	980	$	(1,278)
State	9,544		1,797		963
Total current tax expense (benefit)	12,441		2,777		(315)
Deferred tax expense
Federal	433,469		154,068		327,806
State	38,588		32,662		44,923
Total deferred tax expense	472,057		186,730		372,729
Total provision for income taxes	$	484,498	$	189,507	$	372,414

The following table is a reconciliation of our income tax provision for the periods indicated:


	Years Ended December 31,
	2021			2020			2019
	(Thousands of dollars)
Income before income taxes	$	1,984,204		$	802,316		$	1,650,991
Federal statutory income tax rate	21.0		%	21.0		%	21.0		%
Provision for federal income taxes	416,683			168,486			346,708
State income taxes, net of federal benefit	40,092			13,580			34,545
Deferred tax rate change, inclusive of valuation allowance	6,350			20,879			11,340
Excess tax benefits from share-based compensation	(1,968)			(7,380)			(20,983)
Other, net (a)	23,341			(6,058)			804
Income tax provision	$	484,498		$	189,507		$	372,414

(a) The year ended December 31, 2021, includes $19.4 million impact from previously recognized gains on certain benefit plan investments.

Table of Cont ents

The following table sets forth the tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and liabilities for the periods indicated:


	December 31, 2021		December 31, 2020
Deferred tax assets	(Thousands of dollars)
Employee benefits and other accrued liabilities	$	95,952	$	96,741
Federal net operating loss	1,337,050		1,473,093
State net operating loss and benefits	216,181		258,929
Derivative instruments	118,063		134,499
Other	4,863		12,894
Total deferred tax assets	1,772,109		1,976,156
Valuation allowance for state net operating loss and tax credits
Carryforward expected to expire prior to utilization	(84,755)		(121,212)
Net deferred tax assets	1,687,354		1,854,944
Deferred tax liabilities
Excess of tax over book depreciation	84,692		87,021
Investment in partnerships (a)	2,769,352		2,437,620
Total deferred tax liabilities	2,854,044		2,524,641
Net deferred tax assets (liabilities)	$	(1,166,690)	$	(669,697)

(a) Due primarily to excess of tax over book depreciation.

As of December 31, 2021, we have federal net operating loss carryforwards of $6.4 billion, the majority of which have an indefinite carry forward period. We expect to generate taxable income and utilize these net operating loss carryforwards in future periods. We also have loss and credit carryovers in multiple states, $2.8 billion of which have an indefinite carry forward period and $1.9 billion of which will expire between 2022 and 2038. We have deferred tax assets related to federal and state net operating loss and credit carryforwards of $1.6 billion and $1.7 billion in 2021 and 2020, respectively. We believe that it is more likely than not that the tax benefits of certain state carryforwards will not be utilized; therefore, we recorded a valuation allowance of $6.4 million, $20.9 million and $11.3 million through net income related to these tax benefits in 2021, 2020 and 2019, respectively.

M. UNCONSOLIDATED AFFILIATES

Investments in Unconsolidated Affiliates - The following table sets forth our investments in unconsolidated affiliates for the periods indicated:


	Net Ownership Interest	December 31, 2021		December 31, 2020
		(Thousands of dollars)
Northern Border Pipeline	50%	$	283,170	$	291,987
Overland Pass Pipeline	50%	403,011		409,573
Roadrunner	50%	70,777		66,794


Other (a)	Various	40,655		36,678
Investments in unconsolidated affiliates (b)		$	797,613	$	805,032

(a) - Year ended December 31, 2020, includes the impact of noncash impairment charges of $37.7 million related to the equity investments discussed below, offset partially by an acquisition of an additional equity interest for $20.0 million.

(b) - Equity-method goodwill (Note A) was $16.5 million at December 31, 2021 and 2020.

Table of Cont ents

Equity in Net Earnings from Investments and Impairments - The following table sets forth our equity in net earnings (loss) from investments for the periods indicated:


	Years Ended December 31,
	2021		2020		2019
	(Thousands of dollars)
Northern Border Pipeline	$	64,470	$	75,409	$	68,871
Overland Pass Pipeline	19,434		38,618		63,698
Roadrunner	33,293		29,017		26,839


Other	5,323		197		(4,867)
Equity in net earnings from investments	$	122,520	$	143,241	$	154,541

Impairment of equity investments	$	—	$	(37,730)	$	—

Impairment Charges - In 2020, we incurred a noncash impairment charge of $30.5 million related to our 10.2% investment in Venice Energy Services Company in our Natural Gas Gathering and Processing segment, which includes $22.3 million related to equity-method goodwill, and a $7.2 million noncash impairment charge related to our 50% investment in Chisholm Pipeline Company in our Natural Gas Liquids segment. These impairment charges are included within impairment of equity investments in our Consolidated Statement of Income for the year ended December 31, 2020.

We incurred expenses in transactions with unconsolidated affiliates of $62.8 million, $135.4 million and $164.7 million for 2021, 2020 and 2019, respectively, primarily related to Overland Pass Pipeline and Northern Border Pipeline. Revenue earned and accounts receivable from, and accounts payable to, our equity-method investees were not material.

Northern Border Pipeline - The Northern Border Pipeline partnership agreement provides that distributions to Northern Border Pipeline’s partners are to be made on a pro rata basis according to each partner’s ownership percentage interest. The Northern Border Pipeline Management Committee determines the amount and timing of such distributions. Any changes to, or suspension of, the cash distribution policy of Northern Border Pipeline requires the unanimous approval of the Northern Border Pipeline Management Committee. Cash distributions are equal to 100% of distributable cash flow as determined from Northern Border Pipeline’s financial statements based upon EBITDA less interest expense and maintenance capital expenditures. As determined by the Northern Border Pipeline Management Committee, we received an additional distribution of $50.0 million from Northern Border Pipeline during the year ended December 31, 2019. Loans or other advances from Northern Border Pipeline to its partners or affiliates are prohibited under its credit agreement. In all periods presented, we made no contributions to Northern Border Pipeline.

Overland Pass Pipeline - The Overland Pass Pipeline agreement provides that distributions to Overland Pass Pipeline’s members are to be made on a pro rata basis according to each member’s ownership percentage interest. The Overland Pass Pipeline Company Management Committee determines the amount and timing of such distributions. Any changes to, or suspension of, the cash distributions from Overland Pass Pipeline requires the unanimous approval of the Overland Pass Pipeline Company Management Committee. Cash distributions are equal to 100% of available cash as defined in the limited liability company agreement. In all periods presented, our contributions to Overland Pass Pipeline were not material.

Roadrunner - The Roadrunner agreement provides that distributions to members are made on a pro rata basis according to each member’s ownership interest. As the operator, we have been delegated the authority to determine such distributions in accordance with, and on the frequency set forth in, the Roadrunner agreement. Cash distributions are equal to 100% of available cash, as defined in the limited liability company agreement. In all periods presented, our contributions to Roadrunner were not material.

We have an operating agreement with Roadrunner that provides for reimbursement or payment to us for management services and certain operating costs. Reimbursements and payments from Roadrunner included in operating income in our Consolidated Statements of Income for all periods presented were not material.

Table of Cont ents

N. COMMITMENTS AND CONTINGENCIES

Commitments - Firm transportation and storage contracts are fixed-price contracts that provide us with firm transportation and storage capacity. The following table sets forth our firm transportation and storage contract payments for the periods indicated:


	Firm Transportation and Storage Contracts
	(Millions of dollars)
2022	$	72.3
2023	63.1
2024	59.3
2025	53.9
2026	40.8
Thereafter	211.6
Total	$	501.0

Environmental Matters and Pipeline Safety - The operation of pipelines, plants and other facilities for the gathering, processing, fractionation, transportation and storage of natural gas, NGLs, condensate and other products is subject to numerous and complex laws and regulations pertaining to health, safety and the environment. As an owner and/or operator of these facilities, we must comply with laws and regulations that relate to air and water quality, hazardous and solid waste management and disposal, cultural resource protection and other environmental and safety matters. The cost of planning, designing, constructing and operating pipelines, plants and other facilities must incorporate compliance with these laws, regulations and safety standards. Failure to comply with these laws and regulations may trigger a variety of administrative, civil and potentially criminal enforcement measures, including citizen suits, which can include the assessment of monetary penalties, the imposition of remedial requirements and the issuance of injunctions or restrictions on operation or construction. Management does not believe that, based on currently known information, a material risk of noncompliance with these laws and regulations exists that will affect adversely our consolidated results of operations, financial condition or cash flows.

Legal Proceedings - We are a party to various legal proceedings that have arisen in the normal course of our operations. While the results of these proceedings cannot be predicted with certainty, we believe the reasonably possible losses from such proceedings, individually and in the aggregate, are not material. Additionally, we believe the probable final outcome of such proceedings will not have a material adverse effect on our consolidated results of operations, financial position or cash flows.

O. LEASES

We lease certain buildings, warehouses, office space, pipeline capacity, land and equipment, including pipeline equipment, rail cars and information technology equipment. Our lease payments are generally straight-line and the exercise of lease renewal options, which vary in term, is at our sole discretion. We include renewal periods in a lease term if we are reasonably certain to exercise available renewal options. We apply the short-term policy election, which allows us to exclude from recognition leases with an initial term of 12 months or less. Our lease agreements do not include any residual value guarantees or material restrictive covenants.

Through ONEOK Leasing Company, L.L.C. and ONEOK Parking Company, L.L.C., we own an office building and a parking garage and lease excess space in these facilities to affiliates and others. Our consolidated lease income is not material.

Table of Cont ents

The following table sets forth information about our lease assets and liabilities included in our Consolidated Balance Sheet for the periods indicated:


Leases	Location in our Consolidated Balance Sheet	December 31, 2021		December 31, 2020
		(Thousands of dollars)
Assets
Operating leases	Other assets	$	89,558	$	100,154
Finance lease	Property, plant and equipment	29,962		28,286
Finance lease	Accumulated depreciation	(3,590)		(2,451)
Total leased assets		$	115,930	$	125,989

Liabilities
Current
Operating leases	Operating lease liability	$	13,783	$	13,610
Finance lease	Other current liabilities	2,584		2,153
Noncurrent
Operating leases	Operating lease liability	75,636		87,610
Finance lease	Other deferred credits	21,082		22,143
Total lease liabilities		$	113,085	$	125,516

The following table sets forth supplemental cash flow information related to our leases:


	Years Ended December 31,
	2021		2020
	(Thousands of dollars)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases	$	15,690	$	13,245
Financing cash flows for finance lease	$	2,307	$	1,949
Right-of-use assets obtained in exchange for operating lease liabilities (noncash) (a)	$	1,150	$	99,547

(a) - In December 2019, we entered into an operating lease for pipeline capacity with a lease term of 10 years that commenced January 1, 2020. In connection with this lease, we recognized an operating lease right-of-use asset and a lease liability with remaining balances of $69.0 million and $69.9 million, respectively, as of December 31, 2020.

The following table sets forth information about our lease costs for the periods indicated:


		Years Ended December 31,
	Location in our Consolidated Statement of Income	2021		2020
		(Thousands of dollars)
Operating leases	Operations and maintenance	$	17,747	$	17,162
Finance lease
Amortization of lease assets	Depreciation and amortization	1,139		1,131
Interest on lease liabilities	Interest expense	2,338		2,537
Total lease cost		$	21,224	$	20,830

Table of Cont ents

The following table sets forth information about our leases for the periods indicated:


	December 31, 2021	December 31, 2020
Weighted average remaining lease term (years)
Operating leases	7.8	8.3
Finance lease	6.6	7.8
Weighted average discount rate (a)
Operating leases	3.40%	3.20%
Finance lease	9.60%	10.00%

(a) - Our weighted-average discount rates represent the rate implicit in the lease or our incremental borrowing rate for a term equal to the remaining term of the lease.

The following table sets forth the maturity of our lease liabilities as of December 31, 2021:


	Finance Lease		Operating Leases
	(Millions of dollars)

2022	$	4.7	$	16.4
2023	4.7		13.9
2024	4.7		12.6
2025	5.4		11.2
2026	4.5		11.4
2027 and beyond	8.3		36.9
Total lease payments	32.3		102.4
Less: Interest	8.6		13.0
Present value of lease liabilities	$	23.7	$	89.4

P. REVENUES

Contract Assets and Contract Liabilities - Our contract asset balances at the beginning and end of the years ended December 31, 2021 and 2020, primarily relate to our firm service transportation contracts with tiered rates, which are not material. The following table sets forth the balances in contract liabilities for the periods indicated:


Contract Liabilities	(Millions of dollars)
Balance at January 1, 2020	$	57.1
Revenue recognized included in beginning balance (c)	(36.1)
Net additions	20.4
Balance at December 31, 2020 (a)	41.4
Revenue recognized included in beginning balance	(23.7)
Net additions	33.8
Balance at December 31, 2021 (b)	$	51.5

(a) - Contract liabilities of $23.7 million and $17.7 million are included in other current liabilities and other deferred credits, respectively, in our Consolidated Balance Sheet.

(b) - Contract liabilities of $35.3 million and $16.2 million are included in other current liabilities and other deferred credits, respectively, in our Consolidated Balance Sheet.

Receivables from Customers and Revenue Disaggregation - Substantially all of the balances in accounts receivable on our Consolidated Balance Sheets at December 31, 2021 and 2020, relate to customer receivables. Revenues sources are disaggregated in Note Q.

Transaction Price Allocated to Unsatisfied Performance Obligations - We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) variable consideration on contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

Table of Cont ents

The following table presents aggregate value allocated to unsatisfied performance obligations as of December 31, 2021, and the amounts we expect to recognize in revenue in future periods, related primarily to firm transportation and storage contracts with remaining contract terms ranging from one month to 22 years:


Expected Period of Recognition in Revenue	(Millions of dollars)
2022	$	339.1
2023	288.2
2024	238.1
2025	162.7
2026 and beyond	781.3
Total estimated transaction price allocated to unsatisfied performance obligations	$	1,809.4

The table above excludes variable consideration allocated entirely to wholly unsatisfied performance obligations, wholly unsatisfied promises to transfer distinct goods or services that are part of a single performance obligation and consideration we determine to be fully constrained. Information on the nature of the variable consideration excluded and the nature of the performance obligations to which the variable consideration relates can be found in the description of the major contract types discussed in Note A. The amounts we determined to be fully constrained relate to future sales obligations under long-term sales contracts where the transaction price is not known and minimum volume agreements, which we consider to be fully constrained until invoiced.

Q. SEGMENTS

Segment Descriptions - Our operations are divided into three reportable business segments, as follows:

our Natural Gas Gathering and Processing segment gathers, treats and processes natural gas;
our Natural Gas Liquids segment gathers, treats, fractionates and transports NGLs and stores, markets and distributes NGL products; and
our Natural Gas Pipelines segment transports and stores natural gas via regulated intrastate and interstate natural gas transmission pipelines and natural gas storage facilities.

Other and eliminations consist of corporate costs, the operating and leasing activities of our headquarters building and related parking facility and eliminations necessary to reconcile our reportable segments to our Consolidated Financial Statements.

For the year ended December 31, 2021, revenues from one customer in our Natural Gas Liquids segment represents approximately 11.6% of our consolidated revenues. For the years ended December 31, 2020 and 2019, we had no single customer from which we received 10% or more of our consolidated revenues.

Table of Cont ents

Operating Segment Information - The following tables set forth certain selected financial information for our operating segments for the periods indicated:


Year Ended December 31, 2021	Natural Gas Gathering and Processing		Natural Gas Liquids (a)		Natural Gas Pipelines (b)		Total Segments
	(Thousands of dollars)
NGL and condensate sales	$	2,821,175	$	13,653,120	$	—	$	16,474,295
Residue natural gas sales	1,483,898		—		115,495		1,599,393
Gathering, processing and exchange services revenue	135,501		517,758		—		653,259
Transportation and storage revenue	—		179,619		490,498		670,117
Other	20,965		41,376		910		63,251
Total revenues (c)	4,461,539		14,391,873		606,903		19,460,315
Cost of sales and fuel (exclusive of depreciation and operating costs)	(3,226,078)		(11,939,661)		(11,236)		(15,176,975)
Operating costs	(367,390)		(528,084)		(170,257)		(1,065,731)
Equity in net earnings from investments	3,757		21,000		97,763		122,520
Noncash compensation expense and other	17,299		18,511		4,637		40,447
Segment adjusted EBITDA	$	889,127	$	1,963,639	$	527,810	$	3,380,576

Depreciation and amortization	$	(260,011)	$	(298,937)	$	(58,702)	$	(617,650)
Investments in unconsolidated affiliates	$	27,018	$	416,648	$	353,947	$	797,613
Total assets	$	6,768,955	$	14,502,372	$	2,143,307	$	23,414,634
Capital expenditures	$	275,165	$	306,949	$	92,617	$	674,731

(a) - Our Natural Gas Liquids segment has regulated and nonregulated operations. Our Natural Gas Liquids segment’s regulated operations had revenues of $2.4 billion, of which $2.2 billion related to revenues within the segment, and cost of sales and fuel of $607.5 million.

(b) - Our Natural Gas Pipelines segment has regulated and nonregulated operations. Our Natural Gas Pipelines segment’s regulated operations had revenues of $394.2 million and cost of sales and fuel of $24.3 million.

(c) - Intersegment revenues are primarily commodity sales which are based on the contracted selling price, which is generally index-based and settled monthly, and for the Natural Gas Gathering and Processing segment totaled $2.9 billion. Intersegment revenues for the Natural Gas Liquids and Natural Gas Pipelines segments were not material.


Year Ended December 31, 2021	Total Segments		Other and Eliminations		Total
	(Thousands of dollars)
Reconciliations of total segments to consolidated
NGL and condensate sales	$	16,474,295	$	(2,904,598)	$	13,569,697
Residue natural gas sales	1,599,393		—		1,599,393
Gathering, processing and exchange services revenue	653,259		—		653,259
Transportation and storage revenue	670,117		(13,121)		656,996
Other	63,251		(2,287)		60,964
Total revenues (a)	$	19,460,315	$	(2,920,006)	$	16,540,309

Cost of sales and fuel (exclusive of depreciation and operating costs)	$	(15,176,975)	$	2,920,320	$	(12,256,655)
Operating costs	$	(1,065,731)	$	(1,357)	$	(1,067,088)
Depreciation and amortization	$	(617,650)	$	(4,051)	$	(621,701)
Equity in net earnings from investments	$	122,520	$	—	$	122,520
Investments in unconsolidated affiliates	$	797,613	$	—	$	797,613
Total assets	$	23,414,634	$	206,979	$	23,621,613
Capital expenditures	$	674,731	$	22,123	$	696,854

(a) - Noncustomer revenue for the year ended December 31, 2021, totaled $(565.0) million related primarily to losses from derivatives on commodity contracts.

Table of Cont ents


Year Ended December 31, 2020	Natural Gas Gathering and Processing		Natural Gas Liquids (a)		Natural Gas Pipelines (b)		Total Segments
	(Thousands of dollars)
NGL and condensate sales	$	889,388	$	6,409,332	$	—	$	7,298,720
Residue natural gas sales	771,486		—		8,693		780,179
Gathering, processing and exchange services revenue	141,943		488,574		—		630,517
Transportation and storage revenue	—		182,915		470,097		653,012
Other	17,304		9,192		1,192		27,688
Total revenues (c)	1,820,121		7,090,013		479,982		9,390,116
Cost of sales and fuel (exclusive of depreciation and operating costs)	(843,976)		(5,108,558)		(6,809)		(5,959,343)
Operating costs	(326,938)		(412,900)		(141,713)		(881,551)
Equity in net earnings (loss) from investments	(1,123)		39,938		104,426		143,241
Noncash compensation expense and other	1,952		8,748		1,540		12,240
Segment adjusted EBITDA	$	650,036	$	1,617,241	$	437,426	$	2,704,703

Depreciation and amortization	$	(247,010)	$	(271,900)	$	(55,739)	$	(574,649)
Impairment charges	$	(566,145)	$	(78,785)	$	—	$	(644,930)
Investments in unconsolidated affiliates	$	22,757	$	423,494	$	358,781	$	805,032
Total assets	$	6,499,908	$	13,636,109	$	2,100,213	$	22,236,230
Capital expenditures	$	446,142	$	1,655,759	$	71,918	$	2,173,819

(a) - Our Natural Gas Liquids segment has regulated and nonregulated operations. Our Natural Gas Liquids segment’s regulated operations had revenues of $2.0 billion, of which $1.8 billion related to revenues within the segment, and cost of sales and fuel of $520.6 million.

(b) - Our Natural Gas Pipelines segment has regulated and nonregulated operations. Our Natural Gas Pipelines segment’s regulated operations had revenues of $298.5 million and cost of sales and fuel of $30.4 million.

(c) - Intersegment revenues are primarily commodity sales which are based on the contracted selling price, which is generally index-based and settled monthly, and for the Natural Gas Gathering and Processing segment totaled $865.6 million. Intersegment revenues for the Natural Gas Liquids and Natural Gas Pipelines segments were not material.


Year Ended December 31, 2020	Total Segments		Other and Eliminations		Total
	(Thousands of dollars)
Reconciliations of total segments to consolidated
NGL and condensate sales	$	7,298,720	$	(820,851)	$	6,477,869
Residue natural gas sales	780,179		(10,860)		769,319
Gathering, processing and exchange services revenue	630,517		—		630,517
Transportation and storage revenue	653,012		(14,599)		638,413
Other	27,688		(1,564)		26,124
Total revenues (a)	$	9,390,116	$	(847,874)	$	8,542,242

Cost of sales and fuel (exclusive of depreciation and operating costs)	$	(5,959,343)	$	849,197	$	(5,110,146)
Operating costs	$	(881,551)	$	(4,653)	$	(886,204)
Depreciation and amortization	$	(574,649)	$	(4,013)	$	(578,662)
Impairment charges	$	(644,930)	$	—	$	(644,930)
Equity in net earnings from investments	$	143,241	$	—	$	143,241
Investments in unconsolidated affiliates	$	805,032	$	—	$	805,032
Total assets	$	22,236,230	$	842,524	$	23,078,754
Capital expenditures	$	2,173,819	$	21,562	$	2,195,381

(a) - Noncustomer revenue for the year ended December 31, 2020, totaled $65.8 million related primarily to gains from derivatives on commodity contracts.

Table of Cont ents


Year Ended December 31, 2019	Natural Gas Gathering and Processing		Natural Gas Liquids (a)		Natural Gas Pipelines (b)		Total Segments
	(Thousands of dollars)
NGL and condensate sales	$	1,224,378	$	7,910,833	$	—	$	9,135,211
Residue natural gas sales	966,149		—		1,244		967,393
Gathering, processing and exchange services revenue	164,299		414,238		—		578,537
Transportation and storage revenue	—		197,483		466,266		663,749
Other	13,813		9,962		4,477		28,252
Total revenues (c)	2,368,639		8,532,516		471,987		11,373,142
Cost of sales and fuel (exclusive of depreciation and operating costs)	(1,302,310)		(6,690,918)		(4,628)		(7,997,856)
Operating costs	(368,352)		(456,892)		(157,230)		(982,474)
Equity in net earnings (loss) from investments	(6,292)		65,123		95,710		154,541
Noncash compensation expense and other	10,965		15,936		2,977		29,878
Segment adjusted EBITDA	$	702,650	$	1,465,765	$	408,816	$	2,577,231

Depreciation and amortization	$	(219,519)	$	(196,132)	$	(57,250)	$	(472,901)
Investments in unconsolidated affiliates	$	34,426	$	439,393	$	388,025	$	861,844
Total assets	$	6,795,744	$	12,551,476	$	2,094,072	$	21,441,292
Capital expenditures	$	926,489	$	2,796,604	$	99,221	$	3,822,314

(a) - Our Natural Gas Liquids segment has regulated and nonregulated operations. Our Natural Gas Liquids segment’s regulated operations had revenues of $1.4 billion, of which $1.2 billion related to revenues within the segment, and cost of sales and fuel of $496.8 million.

(b) - Our Natural Gas Pipelines segment has regulated and nonregulated operations. Our Natural Gas Pipelines segment’s regulated operations had revenues of $285.3 million and cost of sales and fuel of $20.0 million.

(c) - Intersegment revenues are primarily commodity sales which are based on the contracted selling price, which is generally index-based and settled monthly, and for the Natural Gas Gathering and Processing segment totaled $1.2 billion. Intersegment revenues for the Natural Gas Liquids and Natural Gas Pipelines segments were not material.


Year Ended December 31, 2019	Total Segments		Other and Eliminations		Total
	(Thousands of dollars)
Reconciliations of total segments to consolidated
NGL and condensate sales	$	9,135,211	$	(1,190,424)	$	7,944,787
Residue natural gas sales	967,393		(1,418)		965,975
Gathering, processing and exchange services revenue	578,537		—		578,537
Transportation and storage revenue	663,749		(15,646)		648,103
Other	28,252		(1,287)		26,965
Total revenues (a)	$	11,373,142	$	(1,208,775)	$	10,164,367

Cost of sales and fuel (exclusive of depreciation and operating costs)	$	(7,997,856)	$	1,209,816	$	(6,788,040)
Operating costs	$	(982,474)	$	(390)	$	(982,864)
Depreciation and amortization	$	(472,901)	$	(3,634)	$	(476,535)
Equity in net earnings from investments	$	154,541	$	—	$	154,541
Investments in unconsolidated affiliates	$	861,844	$	—	$	861,844
Total assets	$	21,441,292	$	370,829	$	21,812,121
Capital expenditures	$	3,822,314	$	26,035	$	3,848,349

(a) - Noncustomer revenue for the year ended December 31, 2019, totaled $139.6 million related primarily to gains from derivatives on commodity contracts.

Table of Cont ents


	Years Ended December 31,
	2021		2020		2019
Reconciliation of net income to total segment adjusted EBITDA	(Thousands of dollars)
Net income	$	1,499,706	$	612,809	$	1,278,577
Add:
Interest expense, net of capitalized interest	732,924		712,886		491,773
Depreciation and amortization	621,701		578,662		476,535
Income tax expense	484,498		189,507		372,414
Impairment charges	—		644,930		—
Noncash compensation expense	42,592		8,540		26,699
Other corporate costs and equity AFUDC (a)	(845)		(42,631)		(68,767)
Total segment adjusted EBITDA	$	3,380,576	$	2,704,703	$	2,577,231

(a) - The year ended December 31, 2020, includes corporate net gains of $22.3 million on extinguishment of debt related to open market repurchases. The year ended December 31, 2019, includes higher equity AFUDC related to our capital-growth projects compared with 2020.

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