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, 2023 and 2022, 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, 2023, 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, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 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, 2023, 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.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Magellan Midstream Partners, L.P., (“Magellan”) from its assessment of internal control over financial reporting as of December 31, 2023, because it was acquired by the Company in a purchase business combination during 2023. We have also excluded Magellan from our audit of internal control over financial reporting. Magellan is a wholly owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent 32% and 6%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2023.

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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.

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 Matters

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.

Acquisition of Magellan Midstream Partners, LP – Valuation of the Pipelines and Intangible Assets

As described in Note B to the consolidated financial statements, the Company purchased Magellan on September 25, 2023. Pursuant to the merger agreement, each common unit of Magellan was exchanged for a fixed ratio of 0.667 shares of ONEOK common stock and $25.00 of cash, for a total consideration of $14.1 billion. In addition, the Company assumed Magellan’s debt with a fair value of $4.0 billion. The acquisition resulted in the recognition of $11.8 billion of property, plant and equipment (PP&E), a significant portion of which relates to pipelines, and $1.0 billion of intangible assets, which relate to customer relationships. The Magellan acquisition was accounted for using the acquisition method of accounting for business combinations, which requires, among other things, assets acquired and liabilities assumed to be recorded at their fair values on the acquisition date. As disclosed by management, in order to estimate the fair value of assets acquired and liabilities assumed, management utilized valuation techniques that included discounted cash flow and cost methods. The discounted cash flow method utilizes assumptions that include, but are not limited to, estimated future cash flows, discount rates applied to estimated future cash flows, estimated rates of return and estimated customer attrition rates. Cost methods estimate the fair value of assets based on the estimated construction cost of the assets, and requires the use of various inputs and assumptions.

The principal considerations for our determination that performing procedures relating to valuation of the pipelines and intangible assets related to the acquisition of Magellan is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the pipelines and intangible assets acquired; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the estimated construction cost used to value the pipelines acquired, and the estimated future cash flows, discount rates applied to estimated future cash flows, estimated rates of return and estimated customer attrition rates used to value the intangible assets acquired; 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 acquisition accounting, including controls over management’s valuation of the pipelines and intangible assets related to the acquisition. These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the pipelines and intangible assets acquired; (ii) evaluating the appropriateness of the cost method used to determine the fair value of the pipelines and the discounted cash flow model used to determine the fair value of the intangible assets (collectively the “valuation methods”); (iii) testing the completeness and accuracy of underlying data used in the valuation methods; and (iv) evaluating the reasonableness of the significant assumptions used by management related to the estimated construction cost used to value the pipelines acquired, and the estimated future cash flows, discount rates applied to estimated future cash flows, estimated rates of return and estimated customer attrition rates used to value the intangible assets acquired. Evaluating management’s assumptions related to the estimated future cash flows used to value the intangible assets involved

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evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of Magellan and (ii) consistency with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the valuation methods and (ii) the reasonableness of the estimated construction cost used to value the pipelines, and discount rates applied to estimated future cash flows, estimated rates of return and estimated customer attrition rates used to value the intangible assets.

/s/ PricewaterhouseCoopers LLP

Tulsa, Oklahoma

February 27, 2024

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,
		2023		2022		2021
	(Millions of dollars, except per share amounts)
Revenues
Commodity sales		$	15,614	$	20,976	$	15,180
Services		2,063		1,411		1,360
Total revenues (Note P)		17,677		22,387		16,540
Cost of sales and fuel (exclusive of items shown separately below)		11,929		17,910		12,257
Operations and maintenance		1,319		958		900
Depreciation and amortization		769		626		622

General taxes		216		191		167
Transaction costs (Note B)		158		—		—
Other operating income, net (Note C)		(786)		(105)		(2)
Operating income		4,072		2,807		2,596
Equity in net earnings from investments (Note N)		202		148		122


Other income (expense), net		89		(29)		(1)
Interest expense (net of capitalized interest of $43, $57 and $25, respectively)		(866)		(676)		(733)
Income before income taxes		3,497		2,250		1,984
Income taxes (Note M)		(838)		(528)		(484)
Net income		2,659		1,722		1,500
Less: Preferred stock dividends		1		1		1
Net income available to common shareholders		$	2,658	$	1,721	$	1,499

Basic EPS (Note J)		$	5.49	$	3.85	$	3.36

Diluted EPS (Note J)		$	5.48	$	3.84	$	3.35
Average shares (millions)
Basic		484.3		447.5		446.4
Diluted		485.4		448.4		447.4

See accompanying Notes to Consolidated Financial Statements.

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ONEOK, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Years Ended December 31,
	2023		2022		2021
	(Millions of dollars)
Net income	$	2,659	$	1,722	$	1,500
Other comprehensive income (loss), net of tax
Change in fair value of derivatives, net of tax of $(46), $(28) and $61, respectively	155		93		(204)
Derivative amounts reclassified to net income, net of tax of $21, $(60) and $(69), respectively	(66)		201		229
Change in retirement and other postretirement benefit plan obligations, net of tax of $2, $(16) and $(15), respectively	(9)		53		50
Other comprehensive income (loss) of unconsolidated affiliates, net of tax of $1, $(5) and $(1), respectively	(5)		16		5
Total other comprehensive income, net of tax	75		363		80
Comprehensive income	$	2,734	$	2,085	$	1,580

See accompanying Notes to Consolidated Financial Statements.

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ONEOK, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
	December 31,
	2023		2022
Assets	(Millions of dollars)
Current assets
Cash and cash equivalents	$	338	$	220
Accounts receivable, net	1,705		1,532
Materials and supplies	148		149
Inventories	639		432
Commodity imbalances	26		43
Other current assets	252		172
Total current assets	3,108		2,548
Property, plant and equipment
Property, plant and equipment	38,454		25,015
Accumulated depreciation and amortization	5,757		5,063
Net property, plant and equipment (Note F)	32,697		19,952
Other assets
Investments in unconsolidated affiliates (Note N)	1,874		802
Goodwill (Note G)	4,952		528
Intangible assets, net (Note G)	1,316		225
Other assets	319		324
Total other assets	8,461		1,879
Total assets	$	44,266	$	24,379


Liabilities and equity
Current liabilities
Current maturities of long-term debt (Note H)	$	484	$	925
Accounts payable	1,564		1,359
Commodity imbalances	244		254
Accrued taxes	215		136
Accrued interest	381		233
Operating lease liability	23		12
Other current liabilities	541		132
Total current liabilities	3,452		3,051
Long-term debt, excluding current maturities (Note H)	21,183		12,696
Deferred credits and other liabilities
Deferred income taxes (Note M)	2,594		1,739
Operating lease liability	74		68
Other deferred credits	479		331
Total deferred credits and other liabilities	3,147		2,138
Commitments and contingencies (Note O)
Equity (Note I)
Preferred stock, $0.01 par value: authorized and issued 20,000 shares at December 31, 2023, and at December 31, 2022	—		—
Common stock, $0.01 par value: authorized 1,200,000,000 shares; issued 609,713,834 shares and outstanding 583,093,100 shares at December 31, 2023; issued 474,916,234 shares and outstanding 447,157,771 shares at December 31, 2022	6		5
Paid-in capital	16,320		7,253
Accumulated other comprehensive loss	(33)		(108)
Retained earnings	868		50
Treasury stock, at cost: 26,620,734 shares at December 31, 2023, and 27,758,463 shares at December 31, 2022	(677)		(706)
Total equity	16,484		6,494
Total liabilities and equity	$	44,266	$	24,379

See accompanying Notes to Consolidated Financial Statements.

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ONEOK, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
	Years Ended December 31,
	2023		2022		2021
	(Millions of dollars)
Operating activities
Net income	$	2,659	$	1,722	$	1,500
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	769		626		622
Equity in net earnings from investments	(202)		(148)		(122)
Distributions received from unconsolidated affiliates	202		147		123
Deferred income taxes	829		464		472
Medford settlement gain	(779)		—		—
Medford settlement proceeds	502		61		—
Other, net	83		92		94
Changes in assets and liabilities:
Accounts receivable	107		(148)		(611)
Inventories, net of commodity imbalances	118		(62)		(105)
Accounts payable	(62)		(26)		622
Risk-management assets and liabilities	96		197		(94)
Other assets and liabilities, net	99		(19)		45
Cash provided by operating activities	4,421		2,906		2,546
Investing activities
Capital expenditures (less allowance for equity funds used during construction)	(1,595)		(1,202)		(697)
Cash paid for Magellan Acquisition, net of cash acquired	(5,015)		—		—
Contributions to unconsolidated affiliates	(207)		(3)		(1)
Distributions received from unconsolidated affiliates in excess of cumulative earnings	50		20		19
Medford settlement proceeds	328		39		—
Other, net	35		7		14
Cash used in investing activities	(6,404)		(1,139)		(665)
Financing activities
Dividends paid	(1,839)		(1,672)		(1,667)
Issuance of long-term debt, net of discounts	5,298		869		—
Repayment of long-term debt	(1,300)		(896)		(605)
Debt financing costs	(71)		(8)		—
Other, net	13		14		13
Cash provided by (used in) financing activities	2,101		(1,693)		(2,259)
Change in cash and cash equivalents	118		74		(378)
Cash and cash equivalents at beginning of period	220		146		524
Cash and cash equivalents at end of period	$	338	$	220	$	146
Supplemental cash flow information:
Cash paid for interest, net of amounts capitalized	$	653	$	582	$	692
Cash paid for income taxes, net of refunds	$	37	$	59	$	9

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)		(Millions of dollars)
January 1, 2021	20,000	474,916,234	$	—	$	5	$	7,353
Net income	—	—	—		—		—
Other comprehensive income	—	—	—		—		—

Preferred stock dividends - $55.00 per share (Note I )	—	—	—		—		—
Common stock issued	—	—	—		—		7
Common stock dividends - $3.74 per share (Note I )	—	—	—		—		(168)
Other, net	—	—	—		—		22
December 31, 2021	20,000	474,916,234	—		5		7,214
Net income	—	—	—		—		—
Other comprehensive income	—	—	—		—		—
Preferred stock dividends - $55.00 per share (Note I )	—	—	—		—		—
Common stock issued	—	—	—		—		13
Common stock dividends - $3.74 per share (Note I )	—	—	—		—		—



Other, net	—	—	—		—		26
December 31, 2022	20,000	474,916,234	—		5		7,253

Net income	—	—	—		—		—
Other comprehensive income	—	—	—		—		—
Preferred stock dividends - $55.00 per share (Note I )	—	—	—		—		—
Magellan Acquisition consideration	—	134,797,600	—		1		9,061
Common stock issued	—	—	—		—		9
Common stock dividends - $3.82 per share (Note I )	—	—	—		—		—
Other, net	—	—	—		—		(3)
December 31, 2023	20,000	609,713,834	$	—	$	6	$	16,320

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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
	(Millions of dollars)
January 1, 2021	$	(551)	$	—	$	(764)	$	6,043
Net income	—		1,500		—		1,500
Other comprehensive income	80		—		—		80

Preferred stock dividends - $55.00 per share (Note I )	—		(1)		—		(1)
Common stock issued	—		—		32		39
Common stock dividends - $3.74 per share (Note I )	—		(1,499)		—		(1,667)
Other, net	—		—		—		22
December 31, 2021	(471)		—		(732)		6,016
Net income	—		1,722		—		1,722
Other comprehensive income	363		—		—		363
Preferred stock dividends - $55.00 per share (Note I )	—		(1)		—		(1)
Common stock issued	—		—		26		39
Common stock dividends - $3.74 per share (Note I )	—		(1,671)		—		(1,671)



Other, net	—		—		—		26
December 31, 2022	(108)		50		(706)		6,494

Net income	—		2,659		—		2,659
Other comprehensive income	75		—		—		75
Preferred stock dividends - $55.00 per share (Note I )	—		(1)		—		(1)
Magellan Acquisition consideration	—		—		—		9,062
Common stock issued	—		—		29		38
Common stock dividends - $3.82 per share (Note I )	—		(1,839)		—		(1,839)
Other, net	—		(1)		—		(4)
December 31, 2023	$	(33)	$	868	$	(677)	$	16,484

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. Most raw natural gas produced at the wellhead also contains a mixture of NGL components, including ethane, propane, iso-butane, normal butane and natural gasoline. Gathered wellhead natural gas is directed to our processing plants to remove NGLs, resulting in residue natural gas (primarily methane). 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 Purity NGLs, 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, Nebraska, Iowa and Illinois. We have a 50% ownership interest in Overland Pass, 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, 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.

Our Natural Gas Pipelines segment, through its wholly owned assets primarily in Oklahoma, Texas and the upper Midwest, provides transportation and storage services to end users, such as natural gas distribution and electric-generation companies that require natural gas to operate their businesses regardless of location price differentials. We have 50% ownership interests in Northern Border and Roadrunner. Our assets are connected to key supply areas and demand centers, including export markets in Mexico via Roadrunner and supply areas in Canada and the United States via our interstate and intrastate natural gas pipelines and Northern Border, which enable us to provide essential natural gas transportation and storage services.

Our Refined Products and Crude segment is principally engaged in the transportation, storage and distribution of Refined Products and crude oil. This new reportable business segment was added in conjunction with the Magellan Acquisition. Our Refined Products pipeline system is one of the longest common carrier pipeline systems for Refined Products in the United States, extending approximately 9,800 miles from the Texas Gulf Coast and covering a 15-state area across the central and western United States. Our crude oil pipelines transport crude oil to refineries, export facilities and demand centers. Throughout the distribution system, terminals play a key role in facilitating product movements and marketing by providing storage, distribution, blending and other ancillary services. Products transported on our Refined Products pipeline system include gasoline, distillates, aviation fuel and certain NGLs. Shipments originate on our Refined Products pipeline system from direct connections to refineries or through interconnections with other pipelines or terminals for transportation and ultimate distribution to retail fueling stations, convenience stores, travel centers, railroads, airports and other end users. Our crude oil assets are strategically located to serve crude oil supply, trading and demand centers.

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. The difference between the carrying value of an investment and our share of the investment’s underlying equity in net assets is referred to as a basis difference. Basis differences related to depreciable or amortizable assets are amortized through equity in net earnings from investments. The premium or excess cost over underlying fair value of net assets is referred to as equity-method goodwill. The portion of the basis difference that is attributable to our equity-method goodwill has not been

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amortized. 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 N 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, allowance for credit losses, 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 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.

Most of the contracts in our derivative portfolio are executed in liquid markets where price transparency exists. Our financial commodity derivatives are primarily 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 yield curve. The fair value of our forward-starting interest-rate swaps is determined using financial models that incorporate the implied forward SOFR 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, Refined Products 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 and over-the-counter derivatives to hedge natural gas basis, NGLs, Refined Products and crude oil price risk and over-the-counter interest-rate derivatives.
Level 3 - fair value measurements are based on inputs that may include one or more unobservable inputs.

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 D for our fair value measurements disclosures.

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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 generally not significant.

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, unfractionated NGLs and/or Purity NGLs, Refined Products, condensate and crude oil 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 daily or monthly. Occasionally, we sell unfractionated NGLs to customers at an index-based price less third-party fractionation costs. These costs are included as a reduction to commodity sales revenue.

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 ,exchange and terminal service contracts (Natural Gas Liquids and Refined Products and Crude segment) - Under this type of contract, we charge fees for providing midstream services, which may include a bundled combination of one or more of the following services: gathering, transporting, terminalling, fractionation or other ancillary services. Our performance obligation begins with delivery of product 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 transportation pipelines, fees are recorded when the product reaches its destination. We have certain contracts that require counterparties to ship a minimum volume over an agreed-upon time period, which are contracted as minimum dollar or volume commitments. Revenue pursuant to these take-or-pay contracts is initially deferred and subsequently recognized when the customers utilize their committed volumes or when the likelihood of meeting the minimum volume commitment becomes remote.

Storage contracts (Natural Gas Liquids, Refined Products and Crude and Natural Gas Pipelines segments) - We reserve a stated storage capacity and inject/withdraw/store commodities for our customer. As these services represent a stand-ready obligation provided on a daily basis over the life of the agreement, the fixed capacity reservation fees are allocated and evenly recognized in revenue over the contract term. 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. 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. Other fees are recognized in revenue as those services are provided and are dependent on the volume moved, which is at our customer’s discretion.

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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 specified 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 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, which are not material. Our contract liabilities primarily represent deferred revenue on Refined Products and crude transportation contracts and 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 1 to 15 years.

Cost of Sales and Fuel - Cost of sales and fuel primarily includes (i) the cost of purchased commodities, including natural gas, NGLs, Refined Products, condensate and crude oil, (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, (iv) product gains and losses and (v) 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.

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, 2023, our allowance for credit losses was not material.

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Inventory - The values of current NGLs, natural gas, Refined Products and crude oil in storage are determined using the lower of weighted-average cost or net realizable value. 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 - In our Natural Gas Liquids and Natural Gas Pipelines segment, 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 Purity NGLs back to the customer and charge 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 Purity NGLs 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.

In our Refined Products and Crude segment, commodity imbalances represent differences in product volumes in our pipeline systems and terminals, compared to the volumes of our customers’ inventories, as we do not take legal title to the products on our systems and terminals. To the extent the product volumes differ from the volumes of our customers’ book inventories, we record adjustments to our product inventories. When product shortages cause a net short inventory position in a product, a liability is recorded based on market prices. Refined Products and crude oil imbalances are generally settled in-kind through product purchases and sales.

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	-	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, Refined Products, condensate and crude oil 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, Refined Products, condensate and crude oil. Treasury locks and 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 periodically thereafter, 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.

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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 D and E 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 estimate the useful lives of individual assets or 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 as of the approved effective date. 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.

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 F for our property, plant and equipment disclosures.

Impairment of Goodwill and Long-Lived Assets, Including Intangible Assets and Equity Method Investments - 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, 2023, 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 our reporting units with goodwill are less than the carrying value of their 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 our reporting units with goodwill are 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. The forecasted cash flows are based on probability weighted-average possible future cash flows for a reporting unit over a period of years. Under the market approach, we apply EBITDA multiples to forecasted EBITDA. The multiples used are consistent with recent market transactions.

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.

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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 F, G and N for our disclosures and related impairment charges related to long-lived assets, goodwill and intangible assets and investments in unconsolidated affiliates, respectively.

Leases - We lease certain buildings, warehouses, office space, land and equipment, including pipeline equipment, rail cars and information technology equipment. In addition, as a result of the Magellan Acquisition, we also lease tank and pipeline capacity. 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. Our lease agreements do not include any residual value guarantees or material restrictive covenants. 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 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.

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. In addition, as a result of the Magellan Acquisition, we also lease capacity, storage and service contracts. We recognize fixed rental income on a straight-line basis over the life of the lease. Variable rental payments are recognized as revenue in the period in which the circumstances on which the variable lease payments are based occur. We have also made an accounting policy election for both our lessee and lessor arrangements to combine lease and non-lease components. This election is applied to all of our lease arrangements as our non-lease components do not result in significant timing differences in the recognition of rental expenses or income. Our lease activities for the periods ended December 31, 2023 and 2022, are not material.

Regulation - Depending on the specific service provided, our natural gas transmission pipelines, NGL, Refined Products and crude oil 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, RRC, Wyoming Public Service Commission and Colorado Public Utilities Commission. Accordingly, portions of our Natural Gas Liquids and Natural Gas Pipelines segments follow the accounting and reporting guidance for regulated operations as 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.

Retirement and Other Postretirement Employee Benefits - We have legacy defined benefit retirement plans covering certain employees and former employees. As a result of the Magellan Acquisition, we assumed the pension plan obligations of Magellan. These obligations are composed of two defined benefit pension plans, including one for non-union employees and one for union employees. We sponsor legacy 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 of full-time consecutive service. We also assumed the postretirement benefit obligations of Magellan which covers certain employees of Magellan. 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, interest credit rating, 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 L 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

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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 M 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 gathering and processing and 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, NGLs, Refined Products and crude oil exist. Based on the widespread use of these products in the medical, transportation, synthetics and agriculture industries, as well as for residential and industrial customers and electric generation, 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 material in relation to our financial position or results of operations, and our expenditures related to environmental matters did not have a material effect on earnings or cash flows during 2023, 2022 and 2021. Actual results may differ from our estimates resulting in an impact, positive or negative, on earnings.

See Note O 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 K for our share-based payments disclosures.

Earnings per Common Share - Basic EPS is calculated based on 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 based on 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.

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See Note J for our EPS disclosures.

Segment Reporting - Our chief operating decision maker reviews the financial performance of each of our four 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 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, noncash compensation expense and certain other noncash items. Following the Magellan Acquisition, we performed a review of our calculation methodology of adjusted EBITDA, and beginning in 2023, we updated our calculation to include adjusted EBITDA related to our unconsolidated affiliates using the same recognition and measurement methods used to record equity in net earnings from investments. In prior periods, our calculation included equity in net earnings from investments. This change resulted in an additional $62 million of adjusted EBITDA in 2023, and we have not restated prior periods. Adjusted EBITDA from our unconsolidated affiliates is calculated consistently with the definition above and excludes items such as interest, depreciation, income taxes and other noncash items. Although the amounts related to our unconsolidated affiliates are included in the calculation of adjusted EBITDA, such inclusion should not be understood to imply that we have control over the operations and resulting revenues, expenses or cash flows of such unconsolidated affiliates. 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 discussed herein were assessed and determined to be either not applicable or clarifications of ASUs previously issued. 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 November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose significant expense categories and amounts for each reportable segment on both an interim and annual basis, consisting of expenses regularly reported to the chief operating decision maker and included in a segment's reported measure of segment profit or loss. The standard also requires disclosing an amount of other segment items as well as all annual disclosures in interim periods. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of this standard on us.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific disaggregated information about the reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of this standard on us.

B. MAGELLAN ACQUISITION

On September 25, 2023, we completed the Magellan Acquisition. The acquisition strategically diversifies our complementary asset base and allows for significant expected synergies. Pursuant to the Merger Agreement, each common unit of Magellan was exchanged for a fixed ratio of 0.667 shares of ONEOK common stock and $25.00 of cash, for a total consideration of $14.1 billion. In addition, we assumed Magellan’s debt with a fair value of $4.0 billion. We issued approximately 135 million shares of common stock, with a fair value of approximately $9.0 billion as of the closing date of the Magellan Acquisition. We funded the cash portion of the acquisition with an underwritten public offering of $5.25 billion senior unsecured notes. In connection with the underwritten public offering, we terminated the undrawn commitment letter for the $5.25 billion unsecured 364-day bridge loan facility. For additional information on our long-term debt, see Note H.

Magellan’s operations are principally composed of transportation, storage and distribution of Refined Products, certain NGLs and crude oil. The assets acquired include 9,800 miles of Refined Products pipelines, 1,000 miles of crude oil pipelines, 54 Refined Products terminals, two marine terminals and 91MMBbl of operating storage capacity. We also acquired ownership interests in Magellan’s eight unconsolidated affiliates. In conjunction with the Magellan Acquisition, Magellan’s results of operations are reported within our new Refined Products and Crude segment, consistent with how information is presented to our chief operating decision maker.

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The Magellan Acquisition was accounted for using the acquisition method of accounting for business combinations pursuant to Accounting Standards Codification 805, “Business Combinations,” which requires, among other things, assets acquired and liabilities assumed to be recorded at their fair values on the acquisition date. Determining the fair value of acquired assets and liabilities assumed requires management’s judgment and the use of independent valuation specialists. The purchase price allocation presented below is substantially complete. However, management continues to refine the preliminary valuation of certain assets acquired and liabilities assumed, such as working capital liabilities and long-lived assets, and may adjust the allocation in subsequent periods. The final valuation will be completed as we obtain the information necessary to complete the analysis, but no later than one year from the acquisition date.

The following tables set forth the acquisition consideration and preliminary purchase price allocation of assets acquired and liabilities assumed:


	At September 25, 2023
	(Millions of dollars and shares/units, except per share/unit data)
Magellan public common units outstanding	202.1
Cash consideration per Magellan unit	$25.00
Cash consideration	$	5,052
Magellan public common units outstanding	202.1
ONEOK exchange ratio per Magellan unit	0.667
Shares of ONEOK common stock issued	134.8
ONEOK common stock closing price on September 25, 2023	$66.54
Fair value of common stock issued	$	8,969
Fair value of Magellan replacement equity awards	93

Equity consideration	$	9,062
Total consideration	$	14,114


	At September 25, 2023
Assets acquired:	(Millions of dollars)
Cash and cash equivalents	$	37
Accounts receivables, net	333
Inventories	348
Other current assets	145
Property, plant and equipment	11,751
Investments in unconsolidated affiliates	922
Intangible assets	1,124
Other assets	116
Total assets acquired	14,776
Liabilities assumed:
Accounts payable	213
Other current liabilities (a)	673
Long-term debt, excluding current maturities	4,013
Other deferred credits and liabilities	187
Total liabilities assumed	5,086
Total identifiable net assets	9,690
Goodwill	4,424
Total purchase price	$	14,114

(a) - Includes contingent liabilities, primarily related to the amounts accrued for the Corpus Christi matter described in Note O. Amounts relating to the Corpus Christi matter are offset fully by insurance receivables, and we expect future losses in excess of amounts accrued, if any, to be recoverable through insurance.

During the period ended December 31, 2023, we further refined our valuation assumptions of assets acquired and liabilities assumed. As a result, we recorded measurement period adjustments resulting in an increase to identifiable net assets and a decrease to goodwill of $729 million, due primarily to an increase in the fair value of intangible assets and property, plant and equipment of $479 million and $189 million, respectively.

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Property, plant and equipment:

Property, plant and equipment consists primarily of pipeline, pipeline-related equipment, storage tanks and processing equipment and will be depreciated on a straight-line basis over the estimated useful lives of the assets.

Intangible assets:

The preliminary value of net identifiable intangible assets relates to customer relationships that will be amortized over the period of expected benefit.

Long-term debt, excluding current maturities:

We assumed the outstanding debt of Magellan and utilized publicly traded prices to estimate the fair value. The debt comprises senior unsecured obligations with varying maturities and interest rates as outlined in Note H. Recognizing the debt at its acquisition date fair value resulted in a discount from the notional value. The discount will be amortized into interest expense over the remaining life of the debt.

Goodwill:

Goodwill primarily represents expected tax benefits from future depreciation and amortization of acquired assets and commercial synergies, and is expected to be fully deductible for tax purposes.

Results of Operations

The results of operations attributable to the Magellan Acquisition have been included in our Consolidated Financial Statements since the date of the acquisition through December 31, 2023. Revenue and income before income taxes attributable to the net assets acquired for the period September 25, 2023, through December 31, 2023, were $1.1 billion and $361 million, respectively.

For the year ended December 31, 2023, we recognized approximately $179 million of expensed transaction costs associated with the Magellan Acquisition, as outlined in the table below. These non-recurring costs are primarily related to advisory fees, severance and settlement of share-based awards for certain Magellan employees, as well as bridge facility commitment fees.

The following table sets forth the impact of acquisition related transaction costs in our Consolidated Statements of Income as of the period indicated:


	Year Ended
	December 31,
		2023
	(Millions of dollars)
Transaction costs		$	158
Interest expense		21
Total		$	179

Pro Forma Financial Information

The following table sets forth the unaudited supplemental pro forma financial information for the years ended December 31, 2023 and 2022, as if we had completed the Magellan Acquisition on January 1, 2022:


		Years Ended
		December 31,
			2023		2022
	(Millions of dollars)
Revenue			$	19,999	$	25,349
Net income			$	3,077	$	1,867

The summarized unaudited pro forma information reflects the following adjustments:

Reflects depreciation and amortization based on the preliminary fair values of property, plant and equipment, and intangible assets;
Reflects $179 million of non-recurring transaction costs incurred for the year ended December 31, 2023, respectively, that were reclassified and included in pro forma net income for the year ended December 31, 2022, as if they had been incurred on January 1, 2022;
Reflects interest expense related to the underwritten public offering of $5.25 billion senior unsecured notes used to fund the cash consideration and other costs related to the Magellan Acquisition;

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Reflects the amortization of the debt discount to fair value of the Magellan long-term debt assumed;
Reflects the amortization of excess fair value of the replacement share-based awards;
Reflects the income tax effect of the pro forma adjustments; and
Excludes the impact of historical activity between ONEOK and Magellan.

The unaudited pro forma financial information for the year ended December 31, 2023, includes a one-time operational gain of $779 million related to insurance proceeds on the Medford incident. The unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of our operating results that would have occurred had the transaction been completed at the beginning of the period presented, nor is it necessarily indicative of future results.

C. MEDFORD INCIDENT

On July 9, 2022, a fire occurred at our 210 MBbl/d Medford, Oklahoma, natural gas liquids fractionation facility. Beginning in August 2022, we developed claims related to the Medford incident and recorded accruals for the expected insurance recoveries. We assessed incurred costs and lost earnings related to business interruption and property damage to our facility, as well as timing of recognition under applicable insurance recovery guidance, and recorded accruals of $151 million in 2022 for insurance recoveries that offset our incurred costs and losses.

In January 2023, we reached an agreement with our insurers to settle all claims for physical damage and business interruption related to the Medford incident. Under the terms of the settlement agreement, we agreed to resolve the claims for total insurance payments of $930 million, $100 million of which was received in 2022. The remaining $830 million was received in the first quarter of 2023. The proceeds serve as settlement for property damage, business interruption claims to the date of the settlement and as payment in lieu of future business interruption insurance claims.

In the first quarter of 2023, we applied the $830 million received to our outstanding insurance receivable at December 31, 2022, of $51 million, and recorded an operational gain for the remaining $779 million in other income, net, within the Consolidated Statement of Income. We classified proceeds received within the Consolidated Statement of Cash Flows based on our assessment of the nature of the loss (property and business interruption) included in the settlement.

D. FAIR VALUE MEASUREMENTS

Recurring Fair Value Measurements - The following tables set forth our recurring fair value measurements as of the dates indicated:


	December 31, 2023
	Level 1		Level 2		Level 3		Total - Gross		Netting (a)		Total - Net
	(Millions of dollars)
Derivative assets
Commodity contracts	$	109	$	68	$	—	$	177	$	(125)	$	52



Total derivative assets	$	109	$	68	$	—	$	177	$	(125)	$	52

Derivative liabilities
Commodity contracts	$	(40)	$	(44)	$	—	$	(84)	$	84	$	—



Total derivative liabilities	$	(40)	$	(44)	$	—	$	(84)	$	84	$	—

(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, 2023, we posted no cash and held cash of $41 million with various counterparties, which offsets our derivative net asset position under master netting arrangements as shown in the table above.

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	December 31, 2022
	Level 1		Level 2		Level 3		Total - Gross		Netting (a)		Total - Net
	(Millions of dollars)
Derivative assets

Commodity contracts	$	15	$	152	$	—	$	167	$	(125)	$	42

Interest-rate contracts	—		11		—		11		—		11
Total derivative assets	$	15	$	163	$	—	$	178	$	(125)	$	53

Derivative liabilities
Commodity contracts	$	(38)	$	(87)	$	—	$	(125)	$	125	$	—


Total derivative liabilities	$	(38)	$	(87)	$	—	$	(125)	$	125	$	—

(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, 2022, we held no cash and posted $9 million of cash with various counterparties, which 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)	2023		2022
	(Millions of dollars)
Net liabilities at beginning of period	$	—	$	(114)
Total changes in fair value:
Settlements included in net income (a)	—		100
Transfers out of Level 3 derivatives	—		(49)
New Level 3 derivatives included in other comprehensive income (b)	—		56
Unrealized change included in other comprehensive income (b)	—		7
Net liabilities at end of period	$	—	$	—

(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, 2022, we transferred out of Level 3 commodity derivatives associated with certain locations for NGL swaps, 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, which are transacted through a clearing broker and valued with an unadjusted published price from an exchange, as a Level 2 valuation.

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 associated with our supplemental executive retirement plan and nonqualified deferred compensation plan that are carried at fair value and primarily are composed of mutual funds, municipal bonds and other fixed income securities classified as Level 1 and Level 2.

The estimated fair value of our consolidated long-term debt, including current maturities, was $21.4 billion and $12.7 billion at December 31, 2023 and 2022, respectively. The book value of our consolidated long-term debt, including current maturities, was $21.7 billion and $13.6 billion at December 31, 2023 and 2022, respectively. The estimated fair value of the aggregate 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.

E. RISK-MANAGEMENT AND HEDGING ACTIVITIES USING DERIVATIVES

Risk-management Activities - We are sensitive to changes in natural gas, NGLs and crude oil prices, principally as a result of contractual terms under which these commodities are processed, purchased and sold. As a result of the Magellan Acquisition, we are also sensitive to changes in Refined Products prices. 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

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portion of our natural gas, NGLs, Refined Products, condensate and crude oil purchases and sales; to reduce our exposure to commodity price and interest-rate fluctuations; and to achieve more predictable cash flows. Additionally, we may use physical-forward purchases and financial derivatives to reduce commodity price risk associated with power and natural gas used to operate our facilities. 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, Refined Products, condensate and crude oil. We may use the following commodity derivative instruments to reduce the near-term commodity price risk associated with a portion of our forecasted purchases and 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, NGLs, Refined Products, condensate and crude oil 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. 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 Purity NGLs 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 compression 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, 2023 and 2022, there were no financial derivative instruments with respect to our natural gas pipeline operations.

In our Refined Products and Crude segment, we are primarily exposed to commodity price risk from our liquids blending and marketing activities, as well as product retained during the operations of our pipelines and terminals. 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 NGLs, Refined Products and crude oil.

Interest-rate risk - We may manage interest-rate risk through the use of fixed-rate debt, floating-rate debt, Treasury locks and interest-rate swaps. Treasury locks are agreements to pay the difference between the benchmark Treasury rate and the rate that is designated in the terms of the agreement. In the second quarter of 2023, we entered into $1.1 billion of Treasury locks to hedge the variability of interest payments on a portion of our forecasted debt issuances. In the third quarter of 2023, we settled all of our $1.1 billion Treasury locks related to our underwritten public offering of $5.25 billion senior unsecured notes

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associated with the Magellan Acquisition resulting in a gain of $43 million, which is included in accumulated other comprehensive loss and amortized into interest expense over the term of the related debt. All of our Treasury locks were designated as cash flow hedges.

Interest-rate swaps are agreements to exchange interest payments at some future point based on specified notional amounts. In 2023, we settled all of our $0.4 billion forward-starting interest-rate swaps related to our underwritten public offerings of $5.25 billion senior unsecured notes associated with the Magellan Acquisition resulting in a gain of $44 million, which is included in accumulated other comprehensive loss and amortized into interest expense over the term of the related debt. All of our interest-rate swaps were 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 as of the dates indicated:


		December 31, 2023				December 31, 2022
	Location in our Consolidated Balance Sheets	Assets		(Liabilities)		Assets		(Liabilities)
		(Millions of dollars)
Derivatives designated as hedging instruments
Commodity contracts (a)	Other current assets	$	163	$	(78)	$	160	$	(123)
	Other assets	—		—		6		(1)
Interest-rate contracts	Other current assets	—		—		11		—

Total derivatives designated as hedging instruments		163		(78)		177		(124)
Derivatives not designated as hedging instruments
Commodity contracts (a)	Other current assets	14		(6)		1		(1)
Total derivatives not designated as hedging instruments		14		(6)		1		(1)
Total derivatives		$	177	$	(84)	$	178	$	(125)

(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.

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


		December 31, 2023		December 31, 2022
	Contract Type	Net Purchased/Payor (Sold/Receiver)
Derivatives designated as hedging instruments:
Cash flow hedges
Fixed price
-Natural gas (Bcf)	Futures	(16.0)		(39.3)
-NGLs, Refined Products and crude oil (MMBbl)	Futures and swaps	(14.5)		(8.4)
-Power (GWh)	Futures	22.1		—
Basis
-Natural gas (Bcf)	Futures	(16.0)		(39.3)

Interest-rate contracts (Billions of dollars)	Swaps	$	—	$	0.4

Derivatives not designated as hedging instruments:
Fixed price
-Natural gas (Bcf)	Futures	(0.7)		(0.1)
-NGLs, Refined Products and crude oil (MMBbl)	Futures and swaps	0.1		0.1
Basis
-Natural gas (Bcf)	Futures	(0.7)		(0.1)
-NGLs, Refined Products, and crude oil (MMBbl)	Futures and swaps	(0.1)		—

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Cash Flow Hedges - At December 31, 2023 and 2022, the accumulated other comprehensive income (loss) relating to risk-management assets and liabilities, net of taxes, was $31 million and $(58) million, respectively. The following table sets forth information about the balance of accumulated other comprehensive loss at December 31, 2023, representing unrealized gains (losses) related to risk-management assets and liabilities, net of tax:


	Risk- Management Assets/Liabilities
	(Millions of dollars)
Commodity derivative instruments expected to be realized within the next 36 months (a)	$	63
Settled interest-rate swaps and Treasury locks to be recognized over the life of the long-term, fixed-rate debt (b)	(32)

Accumulated other comprehensive income at December 31, 2023	$	31

(a) - Based on commodity prices on December 31, 2023, we expect net gains of $63 million, net of tax, will be reclassified into earnings during the next 12 months. The remaining forecasted gains and losses have offsetting positions and are immaterial.

(b) - We expect net losses of $15 million, net of tax, will be reclassified into earnings during the next 12 months.

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,
	2023			2022			2021
		(Millions of dollars)
Commodity contracts		$	147		$	(85)		$	(323)
Interest-rate contracts		54			206			58
Total unrealized change in fair value of cash flow hedges in other comprehensive income (loss)		$	201		$	121		$	(265)

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,
	2023	2022		2021
		(Millions of dollars)
Commodity contracts	Commodity sales revenues	$	201	$	(484)	$	(732)
	Cost of sales and fuel	(93)		257		474
Interest-rate contracts	Interest expense	(21)		(34)		(40)
Total change in fair value of cash flow hedges reclassified from accumulated other comprehensive loss into net income on derivatives		$	87	$	(261)	$	(298)

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 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 primarily 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, 2023.

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.

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At December 31, 2023, the credit exposure from our derivative assets is with investment-grade companies in the financial services sector.

F. PROPERTY, PLANT AND EQUIPMENT

The following table sets forth our property, plant and equipment by property type, as of the dates indicated:


	Estimated Useful Lives (Years)	December 31, 2023		December 31, 2022
		(Millions of dollars)
Gathering pipelines and related equipment	5 to 40	$	5,077	$	4,667
Processing and fractionation and related equipment	3 to 40	8,591		5,310
Storage and related equipment	3 to 54	3,330		906
Transmission pipelines and related equipment	5 to 87	18,551		11,327


General plant and other	2 to 60	1,002		806
Land	—	375		160
Construction work in process	—	1,528		1,839
Property, plant and equipment		38,454		25,015
Accumulated depreciation and amortization		(5,757)		(5,063)
Net property, plant and equipment		$	32,697	$	19,952

The depreciation expense for the years ended December 31, 2023 and 2022, are $736 million and $615 million, respectively.

We incurred costs for construction work in process that had not been paid at December 31, 2023, 2022 and 2021, of $242 million, $171 million and $131 million, respectively. Such amounts are not included in capital expenditures (less AFUDC) on the Consolidated Statements of Cash Flows.

Magellan Acquisition - In September 2023, we completed the Magellan Acquisition and acquired property, plant and equipment, which primarily include pipeline, pipeline-related equipment, storage tanks and processing equipment, valued at $11.8 billion.

Medford Assets - In connection with the Medford incident in 2022, we assessed the property damage to our facility and wrote off assets totaling $46 million, which represents the carrying value associated with certain damaged Medford facility property. These noncash property losses were fully offset by insurance recoveries.

G. GOODWILL AND INTANGIBLE ASSETS

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


	Natural Gas Gathering and Processing		Natural Gas Liquids		Natural Gas Pipelines		Refined Products and Crude		Total
	(Millions of dollars)
Gross goodwill	$	153	$	371	$	157	$	—	$	681
Accumulated impairment losses	(153)		—		—		—		(153)
December 31, 2022	—		371		157		—		528
Magellan Acquisition (a)	—		—		—		4,424		4,424
December 31, 2023	$	—	$	371	$	157	$	4,424	$	4,952

(a) - Goodwill primarily represents expected tax benefits from future depreciation and amortization of acquired assets and commercial synergies and is expected to be fully deductible for tax purposes. The allocation of goodwill is preliminary and may be updated as we continue to evaluate the benefits of expected commercial synergies to our segments.

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Intangible Assets - Our intangible assets relate primarily to acquired customer relationships in our Refined Products and Crude segment and are being amortized on a straight-line basis over a weighted average life of 26 years. Amortization expense for intangible assets was $33 million in 2023, and $10 million in both 2022 and 2021, and the amortization expense for each of the next five years is estimated to be $60 million. The following table reflects the gross carrying amount and accumulated amortization of intangible assets as of the dates presented:


	December 31, 2023		December 31, 2022
	(Millions of dollars)
Gross intangible assets (a)	$	1,505	$	381
Accumulated amortization	(189)		(156)
Intangible assets, net	$	1,316	$	225

(a) - Increases to gross intangible assets primarily represent customer relationships associated with the Magellan Acquisition.

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H. DEBT

The following table sets forth our consolidated debt as of the dates indicated:


	December 31, 2023		December 31, 2022
	(Millions of dollars)
Commercial paper outstanding (a)	$	—	$	—
Senior unsecured obligations:
$425 at 5.0% due September 2023	—		425
$500 at 7.5% due September 2023	—		500
$500 at 2.75% due September 2024	484		500
$250 at 3.2% due March 2025 (b)	250		—
$500 at 4.9% due March 2025	500		500
$400 at 2.2% due September 2025	387		387
$600 at 5.85% due January 2026	600		600
$650 at 5.0% due March 2026 (b)	650		—
$750 at 5.55% due November 2026	750		—
$500 at 4.0% due July 2027	500		500
$800 at 4.55% due July 2028	800		800
$100 at 6.875% due September 2028	100		100
$750 at 5.65% due November 2028	750		—
$700 at 4.35% due March 2029	700		700
$750 at 3.4% due September 2029	714		714
$850 at 3.1% due March 2030	780		780
$500 at 3.25% due June 2030 (b)	500		—
$500 at 5.8% due November 2030	500		—
$600 at 6.35% due January 2031	600		600
$750 at 6.1% due November 2032	750		750
$1,500 at 6.05% due September 2033	1,500		—
$400 at 6.0% due June 2035	400		400
$600 at 6.65% due October 2036	600		600
$250 at 6.4% due May 2037 (b)	250		—
$600 at 6.85% due October 2037	600		600
$650 at 6.125% due February 2041	650		650
$250 at 4.2% due December 2042 (b)	250		—
$400 at 6.2% due September 2043	400		400
$550 at 5.15% due October 2043 (b)	550		—
$250 at 4.2% due March 2045 (b)	250		—
$500 at 4.25% due September 2046 (b)	500		—
$700 at 4.95% due July 2047	564		689
$500 at 4.2% due October 2047 (b)	500		—
$1,000 at 5.2% due July 2048	919		1,000
$500 at 4.85% due February 2049 (b)	500		—
$750 at 4.45% due September 2049	576		673
$500 at 4.5% due March 2050	443		443
$800 at 3.95% due March 2050 (b)	797		—
$300 at 7.15% due January 2051	300		300
$1,750 at 6.625% due September 2053	1,750		—
Guardian $120 term loan, rate of 6.58% as of December 31, 2023, due June 2025	120		120
Viking $60 term loan, rate of 6.71% as of December 31, 2023, due March 2026	60		—
Total debt	22,794		13,731
Unamortized debt discounts	(1,015)		(35)
Unamortized debt issuance costs and terminated swaps	(112)		(75)
Current maturities of long-term debt	(484)		(925)

Long-term debt	$	21,183	$	12,696

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

(b) - Debt assumed in the Magellan Acquisition. Amounts are presented at face value with discount to fair value included in unamortized debt discounts.

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$2.5 Billion Credit Agreement - Our $2.5 Billion Credit Agreement, which expires in 2027, is a revolving credit facility and contains certain customary conditions for borrowing, as well as customary financial, affirmative and negative covenants. Among other things, these covenants include maintaining a ratio of consolidated net 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). In addition, adjusted EBITDA as defined in our $2.5 Billion Credit Agreement allows inclusion of the trailing 12 months of consolidated adjusted EBITDA of the acquired business. In the third quarter of 2023, we completed the Magellan Acquisition, which allowed us to elect an acquisition adjustment period under our $2.5 Billion Credit Agreement and, as a result, increased our leverage ratio covenant to 5.5 to 1 for the fourth quarter of 2023 and the following quarter. Thereafter, the covenant will decrease to 5.0 to 1.

The $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 the $2.5 Billion Credit Agreement, we may request up to an aggregate $1.0 billion increase in the size of the facility, upon satisfaction of customary conditions, including receipt of commitments from new lenders or increased commitments from existing lenders. The $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. Borrowings, if any, will accrue at Term SOFR plus an applicable margin based on our credit ratings at the time of determination plus an adjustment of 10 basis points. Under our current credit ratings, the applicable margin on any borrowings would be 110 basis points. We are required to pay an annual facility fee equal to the daily amount of aggregate commitments under the $2.5 Billion Credit Agreement times an applicable rate based on our credit rating at the time of determination. Under our current credit ratings, the applicable rate is 15 basis points. We have the option to request two one-year maturity extensions, subject to lender approvals. The $2.5 Billion Credit Agreement also contains various customary events of default, the occurrence of which could result in a termination of the lenders’ commitments and the acceleration of all of our obligations thereunder. As of December 31, 2023, we had no outstanding borrowings, our ratio of consolidated indebtedness to adjusted EBITDA was 3.6 to 1, and we were in compliance with all covenants under our $2.5 Billion Credit Agreement.

Viking Term Loan Agreement - In March 2023, Viking entered into a $60 million senior unsecured term loan agreement, which is fully drawn. The proceeds were used to repay intercompany debt with ONEOK and for general corporate purposes. The Viking Term Loan Agreement matures in March 2026 and bears interest at Term SOFR plus an applicable margin based on Viking’s credit rating at the time of determination plus an adjustment of 10 basis points. Under Viking’s current credit ratings, the applicable margin is 125 basis points. The Viking Term Loan Agreement allows prepayment of all or any portion outstanding without penalty or premium. As of December 31, 2023, Viking was in compliance with all covenants under the Viking Term Loan Agreement.

Guardian Term Loan Agreement - In 2022, Guardian entered into a $120 million unsecured term loan agreement, which is fully drawn. The proceeds were used to repay intercompany debt with ONEOK. The Guardian Term Loan Agreement matures in June 2025, and bears interest at Term SOFR plus an applicable margin based on Guardian’s credit rating at the time of determination plus an adjustment of 10 basis points. Under Guardian’s current credit ratings, the applicable margin is 112.5 basis points. The Guardian Term Loan Agreement allows prepayment of all or any portion outstanding without penalty or premium. As of December 31, 2023, Guardian was in compliance with all covenants under the Guardian Term Loan 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.

Debt Issuances - In August 2023, we completed an underwritten public offering of $5.25 billion senior unsecured notes consisting of $750 million, 5.55% senior notes due 2026; $750 million, 5.65% senior notes due 2028; $500 million, 5.80% senior notes due 2030; $1.5 billion, 6.05% senior notes due 2033; and $1.75 billion, 6.625% senior notes due 2053. The net proceeds, after deducting underwriting discounts, commissions and offering expenses, were $5.2 billion. The net proceeds were used to fund the cash consideration and other costs related to the Magellan Acquisition.

In 2022, we completed an underwritten public offering of $750 million, 6.1% senior unsecured notes due 2032. The net proceeds, after deducting underwriting discounts, commissions and offering expenses, were $742 million. The proceeds were used primarily to repay all outstanding amounts under our commercial paper program. The remainder was used for general corporate purposes.

Debt Repayments - In 2023, we repurchased in the open market outstanding principal of certain of our senior notes in the amount of $322 million for an aggregate repurchase price of $280 million, including accrued and unpaid interest, with cash on hand. In connection with these open market repurchases, we recognized $41 million of net gains on extinguishment of debt,

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which is included in other income (expense), net in our Consolidated Statement of Income for the year ended December 31, 2023.

In June 2023, we redeemed our $500 million, 7.5% senior notes due September 2023 at 100% of the principal amount, plus accrued and unpaid interest, with cash on hand.

In February 2023, we redeemed our $425 million, 5.0% senior notes due September 2023 at 100% of the principal amount, plus accrued and unpaid interest, with cash on hand.

In 2022, we redeemed the remaining $896 million of our 3.375% senior notes due October 2022 at 100% of the principal amount, plus accrued and unpaid interest, with cash on hand and short-term borrowings.

In 2021, we redeemed the remaining $536 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 2021, we repaid the remaining $12 million of Guardian’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 million for an aggregate repurchase price of $55 million with cash on hand.

The aggregate maturities of long-term debt outstanding and interest payments on debt as of December 31, 2023, for the years 2024 through 2028 are shown below:


	Senior Unsecured Obligations		Guardian		Viking		Interest Obligations on Debt		Total
	(Millions of dollars)
2024	$	484	$	—	$	—	$	1,167	$	1,651
2025	$	1,137	$	120	$	—	$	1,124	$	2,381
2026	$	2,000	$	—	$	60	$	1,038	$	3,098
2027	$	500	$	—	$	—	$	987	$	1,487
2028	$	1,650	$	—	$	—	$	951	$	2,601

Compliance with Debt Covenants - As of December 31, 2023, we were in compliance with the covenants contained in our various debt agreements.

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 - In December 2023, ONEOK assumed the debt obligations of Magellan under its previous debt indentures and Magellan provided a guarantee of the outstanding notes. As of December 31, 2023, Magellan no longer has debt obligations outstanding. ONEOK, ONEOK Partners, the Intermediate Partnership and Magellan have cross guarantees in place for ONEOK’s and ONEOK Partners’ indebtedness. The Guardian Term Loan Agreement and Viking Term Loan Agreement are not guaranteed by ONEOK, ONEOK Partners, the Intermediate Partnership or Magellan.

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I. 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 September 2023, we completed the Magellan Acquisition. Pursuant to the Merger Agreement, each common unit of Magellan was exchanged for a fixed ratio of 0.667 shares of ONEOK common stock and $25.00 of cash. We issued approximately 135 million shares of common stock, with a fair value of approximately $9.0 billion as of the closing date of the Magellan Acquisition.

We have 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. As of December 31, 2023, no shares have been sold through our “at-the-market” program.

Share Repurchase Program - In January 2024, our Board of Directors authorized a share repurchase program to buy up to $2.0 billion of our outstanding common stock and targets the program to be largely utilized over the next four years. We expect shares to be acquired from time to time in open-market transactions or through privately negotiated transactions at our discretion, subject to market conditions and other factors. We expect any purchases to be funded by cash on hand, cash flow from operations and short-term borrowings. The program will terminate upon completion of the repurchase of $2.0 billion of common stock or on January 1, 2029, whichever occurs first.

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 $1.8 billion, $1.7 billion and $1.7 billion for 2023, 2022 and 2021, respectively. The following table sets forth the quarterly dividends per share paid on our common stock in the periods indicated:


	Years Ended December 31,
	2023		2022		2021
First Quarter	$	0.955	$	0.935	$	0.935
Second Quarter	0.955		0.935		0.935
Third Quarter	0.955		0.935		0.935
Fourth Quarter	0.955		0.935		0.935
Total	$	3.82	$	3.74	$	3.74

Additionally, in February 2024, we paid a quarterly common stock dividend of $0.99 per share ($3.96 per share on an annualized basis), which was paid to shareholders of record as of January 30, 2024.

Our Series E Preferred Stock pays quarterly dividends on each share of Series E Preferred Stock, when, 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 2023, 2022 and 2021. We paid quarterly dividends totaling $0.3 million for the Series E Preferred Stock in February 2024.

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J. EARNINGS PER SHARE

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


	Year Ended December 31, 2023
	Income		Shares	Per Share Amount
	(Millions, except per share amounts)
Basic EPS
Net income available for common stock	$	2,658	484.3	$	5.49
Diluted EPS
Effect of dilutive securities	—		1.1
Net income available for common stock and common stock equivalents	$	2,658	485.4	$	5.48


	Year Ended December 31, 2022
	Income		Shares	Per Share Amount
	(Millions, except per share amounts)
Basic EPS
Net income available for common stock	$	1,721	447.5	$	3.85
Diluted EPS
Effect of dilutive securities	—		0.9
Net income available for common stock and common stock equivalents	$	1,721	448.4	$	3.84


	Year Ended December 31, 2021
	Income		Shares	Per Share Amount
	(Millions, except per share amounts)
Basic EPS
Net income available for common stock	$	1,499	446.4	$	3.36
Diluted EPS
Effect of dilutive securities	—		1.0
Net income available for common stock and common stock equivalents	$	1,499	447.4	$	3.35

K. 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 reserved 8.5 million shares of common stock for issuance under the EIP and at December 31, 2023, we had 4.0 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. In conjunction with the Magellan Acquisition, we assumed the former Magellan Midstream Partners, L.P. Long-Term Incentive Plan, which was used for the conversion of stock-based compensation upon closing. We reserved 1.0 million shares of common stock for issuance under the assumed plan, and as of December 31, 2023, all of the shares have been granted. The remaining restricted stock unit awards converted in conjunction with the Magellan Acquisition were granted from the shares reserved under the registration statements.

Restricted Stock Units - We have granted restricted stock units to key employees that vest at the end of a designated period, typically three years, 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.

Magellan Acquisition - As discussed in Note B, we completed the Magellan Acquisition on September 25, 2023. Prior to the acquisition, Magellan had previously issued unit-based awards consisting of time-vested phantom units and performance phantom units, that vested at the end of a designated period, typically three years. Pursuant to the terms of the Merger Agreement, each outstanding unit-based award was converted into a restricted stock unit and measured at their acquisition date

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fair value as if they were vested and issued on the acquisition date. The fair value attributable to pre-combination service was allocated to consideration transferred and was included as part of the purchase price. The portion attributable to post-combination service is being recognized as compensation expense on a straight-line basis over the remaining vesting period of the awards. Converted restricted stock unit awards accrue dividend equivalents that are paid out in cash at vesting. Approximately $70 million of the converted awards were settled in cash immediately following the closing of the Magellan Acquisition and are not included in restricted stock unit activity disclosures herein.

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, exclusive of those recognized within transaction costs, for our share-based payment plans was $63 million, $53 million and $54 million during 2023, 2022 and 2021, respectively, before related tax benefits of $14 million, $13 million and $14 million, respectively.

Restricted Stock Unit Activity - As of December 31, 2023, we had $42 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 1.7 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, 2022	832,734	$	58.30
Granted (a)	1,667,473	$	66.50
Released to participants (b)	(698,906)	$	68.47
Forfeited	(76,736)	$	58.92
Nonvested December 31, 2023	1,724,565	$	62.08

(a) - Includes 1,346,845 restricted stock unit awards granted in conjunction with the Magellan Acquisition.

(b) - Includes 488,929 restricted stock unit awards released to participants in conjunction with the Magellan Acquisition.


	2023		2022		2021
Weighted-average grant date fair value (per share)	$	66.50	$	60.96	$	46.84
Fair value of units granted (millions of dollars)	$	111	$	20	$	20
Grant date fair value of units vested (millions of dollars)	$	48	$	14	$	13

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Performance Unit Activity - As of December 31, 2023, we had $34 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 1.7 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, 2022	1,045,706	$	74.15
Granted	369,222	$	87.46
Released to participants	(235,874)	$	88.96
Forfeited	(84,114)	$	77.22
Nonvested December 31, 2023	1,094,940	$	75.22


	2023	2022	2021
Volatility (a)	63.30%	61.10%	60.30%
Dividend yield	5.75%	6.15%	8.13%
Risk-free interest rate	4.43%	1.78%	0.21%

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


	2023		2022		2021
Weighted-average grant date fair value (per share)	$	87.46	$	79.05	$	62.03
Fair value of units granted (millions of dollars)	$	32	$	32	$	34
Grant date fair value of units vested (millions of dollars)	$	21	$	20	$	20

Employee Stock Purchase Plan - We have reserved a total of 12 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 69% of employees participated in the plan in 2023, 2022 and 2021, respectively. Under the plan, we sold 236,108 shares at a weighted average of $52.70 per share in 2023, 235,583 shares at a weighted average of $47.21 per share in 2022 and 277,012 shares at a weighted average of $38.98 per share in 2021.

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. We have reserved a total of 900,000 shares of common stock for issuance under this program. No shares were issued to employees under this program in 2023, 2022 or 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.

L. EMPLOYEE BENEFIT PLANS

Retirement and Other Postretirement Benefit Plans

Retirement Plans - We have a legacy 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.

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Other Postretirement Benefit Plans - We sponsor legacy 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.

Magellan Acquisition - As a result of the Magellan Acquisition, we assumed the pension plan assets and obligations of Magellan. These obligations are composed of two defined benefit pension plans, including one for non-union employees and one for union employees. The pension plan for non-union employees closed to new participants upon the closing of the acquisition. The pension plan for union employees closed to new participants in January 2024. We fund these defined benefit pension plans at a level needed to maintain or exceed the minimum funding levels required by the Employee Retirement Income Security Act of 1974, as amended. We also assumed the postretirement benefit obligations of Magellan which covers certain employees of Magellan.

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 plans are also eligible to receive quarterly and annual profit-sharing contributions under our 401(k) Plan.

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,
	2023		2022		2023		2022
Change in benefit obligation	(Millions of dollars)
Benefit obligation, beginning of period	$	423	$	567	$	38	$	51
Service cost	7		7		—		—
Interest cost	27		18		2		1
Plan participants’ contributions	—		—		1		1
Actuarial (gain) loss	38		(149)		3		(11)
Benefits paid	(33)		(20)		(4)		(4)
Magellan Acquisition	240		—		11		—
Benefit obligation, end of period (a)	702		423		51		38

Change in plan assets
Fair value of plan assets, beginning of period	322		413		17		24
Actual return on plan assets	60		(71)		2		(4)

Plan participants’ contributions	—		—		1		1
Benefits paid	(33)		(20)		(4)		(4)
Magellan Acquisition	205		—		—		—
Fair value of plan assets, end of period (b)	554		322		16		17
Balance at December 31	$	(148)	$	(101)	$	(35)	$	(21)

Current liabilities	$	(5)	$	(5)	$	—	$	—
Noncurrent liabilities	(143)		(96)		(35)		(21)
Balance at December 31	$	(148)	$	(101)	$	(35)	$	(21)

(a) - The benefit obligation for Retirement Benefits at December 31, 2023 and 2022, include the supplemental executive retirement plan obligation.

(b) - Fair value of plan assets for Retirement Benefits exclude the assets of our supplemental executive retirement plan, which totaled $89 million and $92 million at December 31, 2023 and 2022, 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 $637 million and $409 million at December 31, 2023 and 2022, respectively.

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

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The components of net periodic benefit cost and related assumptions, and amounts recognized in other comprehensive income related to our retirement and other postretirement benefit plans are not material. The balance in accumulated other comprehensive loss at December 31, 2023 and 2022, was $64 million and $48 million, respectively. This balance is expected to be amortized over the average remaining service period of employees participating in these plans.

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,
	2023	2022	2023	2022
Discount rate	5.40%	5.75%	5.50%	5.75%
Compensation increase rate	3.65%	3.60%	NA	NA
Interest credit rating (a)	4.03%	NA	NA	NA

(a) - This actuarial assumption is only applicable to the pension plans assumed with the Magellan Acquisition.

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.

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 legacy ONEOK 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. A majority of the legacy Magellan pension assets are allocated to fixed income securities and invested to match the duration of the plans’ short, intermediate and long-term liabilities, with the remaining amount allocated to equity securities. Our pension plans utilize a diversified mix of investments that may include domestic and international equities, short, intermediate and long term corporate and government obligations, real estate and hedge funds. The combined target allocation for the assets of our pension plans as of December 31, 2023, is as follows:


Domestic and international equities	32	%
Long duration fixed income	56	%
Return-seeking credit	4	%
Hedge funds	5	%
Real estate funds	3	%
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.

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The fair value of the plan assets for our other postretirement benefit plans as of December 31, 2023 are not material. The following tables set forth the plan assets by fair value category as of the measurement date for our defined benefit pension plans:


	Pension Benefits
	December 31, 2023
Asset Category	Level 1		Level 2		Level 3		Subtotal		Measured at NAV (d)		Total
	(Millions of dollars)
Investments:
Equity securities	$	65	$	—	$	—	$	65	$	—	$	65
Cash and money market funds	9		—		—		9		—		9
Government obligations	45		—		—		45		—		45
Corporate obligations	100		—		—		100		—		100
Common/collective trusts
Equity securities (a)	—		—		—		—		109		109
Real estate funds	—		—		—		—		17		17
Government obligations	—		—		—		—		60		60
Corporate obligations (b)	—		—		—		—		114		114
Short-term investments	—		—		—		—		6		6

Other investments (c)	—		—		—		—		29		29
Fair value of plan assets	$	219	$	—	$	—	$	219	$	335	$	554

(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, 2022
Asset Category	Level 1		Level 2		Level 3		Subtotal		Measured at NAV (d)		Total
	(Millions of dollars)
Investments:

Common/collective trusts
Equity securities (a)	$	—	$	—	$	—	$	—	$	100	$	100
Real estate funds	—		—		—		—		26		26
Government obligations	—		—		—		—		57		57
Corporate obligations (b)	—		—		—		—		102		102
Short-term investments	—		—		—		—		6		6

Other investments (c)	—		—		—		—		31		31
Fair value of plan assets	$	—	$	—	$	—	$	—	$	322	$	322

(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.

Contributions - During 2023, we made no contributions to our defined benefit pension and other postretirement benefit plans. We contributed $5 million to our legacy defined benefit pension in January 2024, and we do not expect to make any contributions to our other postretirement benefit plans in 2024.

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Pension and Other Postretirement Benefit Payments - Benefit payments for our defined benefit pensions and other postretirement benefit plans for the period ending December 31, 2023, were $33 million and $4 million, respectively. The following table sets forth the defined benefit pension and other postretirement benefits payments expected to be paid in 2024 through 2033:


	Pension Benefits		Other Postretirement Benefits
Benefits to be paid in:	(Millions of dollars)
2024	$	39	$	5
2025	$	43	$	5
2026	$	45	$	5
2027	$	47	$	4
2028	$	47	$	4
2029 through 2033	$	267	$	18

The expected benefits to be paid are based on the same assumptions used to measure our benefit obligation at December 31, 2023, 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 plans. 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 $44 million, $35 million and $33 million in 2023, 2022 and 2021, respectively.

The legacy Magellan 401(k) Plan was terminated as a result of the Magellan Acquisition, and legacy Magellan employees were given the option to roll their 401(k) balances into the existing ONEOK 401(k) Plan or to their individual retirement accounts.

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. Our investments which are included in other assets on the Consolidated Balance Sheets related to the NQDC Plan are not material. These investments are maintained in a rabbi trust. Our contributions to the plan were not material.

M. INCOME TAXES

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


	Years Ended December 31,
	2023		2022		2021
	(Millions of dollars)
Current tax expense (benefit)
Federal	$	(3)	$	52	$	3
State	12		12		9
Total current tax expense	9		64		12
Deferred tax expense
Federal	739		423		433
State	90		41		39
Total deferred tax expense	829		464		472
Total provision for income taxes	$	838	$	528	$	484

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


	Years Ended December 31,
	2023			2022			2021
	(Millions of dollars)
Income before income taxes	$	3,497		$	2,250		$	1,984
Federal statutory income tax rate	21.0		%	21.0		%	21.0		%
Provision for federal income taxes	734			472			417
State income taxes, net of federal benefit	100			54			40
Deferred tax rate change, inclusive of valuation allowance	2			(1)			6
Excess tax benefits from share-based compensation	1			(1)			(2)
Other, net (a)	1			4			23
Income tax provision	$	838		$	528		$	484

(a) The year ended December 31, 2021, includes $19 million impact from previously recognized gains on certain benefit plan investments.

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


	December 31, 2023		December 31, 2022
Deferred tax assets	(Millions of dollars)
Employee benefits and other accrued liabilities	$	88	$	82
Federal net operating loss	2,534		1,105
State net operating loss and benefits	492		196
Derivative instruments	—		19
Interest expense limitation	210		25
Other	20		5
Total deferred tax assets	3,344		1,432
Valuation allowance for state net operating loss and tax credits
Carryforward expected to expire prior to utilization	(240)		(75)
Net deferred tax assets	3,104		1,357
Deferred tax liabilities
Excess of tax over book depreciation	104		95
Derivative instruments	7		—
Investment in partnerships (a)	5,587		3,001
Total deferred tax liabilities	5,698		3,096
Net deferred tax liabilities	$	2,594	$	1,739

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

In August 2022, the U.S. government enacted the IRA into law. The IRA includes a new corporate alternative minimum tax (CAMT) of 15% on the adjusted financial statement income (AFSI) of corporations with average AFSI exceeding $1.0 billion over a three-year period. The CAMT became effective for the 2023 tax year. We do not expect the CAMT to have an impact on our cash taxes in the 2024 tax year. However, when our CAMT liability is greater than our regular U.S. federal income tax liability for any particular year, the CAMT liability would effectively accelerate our future U.S. federal income tax obligations but provide an offsetting credit against our regular U.S. federal income tax liability for future years. As a result, we expect that any future impact will be limited to timing differences in future tax years.

As of December 31, 2023, we have federal net operating loss carryforwards of $12.1 billion, which have an indefinite carryforward 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, $10.9 billion of which have an indefinite carryforward period and $1.2 billion of which will expire between 2024 and 2038. We have deferred tax assets related to federal and state net operating loss and credit carryforwards of $3.0 billion and $1.3 billion in 2023 and 2022, 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, which was increased by $165 million and $6 million in 2023 and 2021, respectively, and reduced by $1 million in 2022 through net income.

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N. UNCONSOLIDATED AFFILIATES

Magellan Acquisition - As a result of the Magellan Acquisition, we acquired ownership interests in Magellan’s eight unconsolidated affiliates. These investments include a 30% ownership interest in BridgeTex, which owns an approximately 400-mile crude oil pipeline that connects Permian Basin crude oil to our East Houston terminal; a 30% ownership interest in Saddlehorn, which owns an undivided joint interest in an approximately 600-mile pipeline that transports crude oil from the DJ Basin and Rocky Mountain region to storage facilities in Cushing, including our Cushing terminal; and a 25% ownership in MVP, which owns a Refined Products marine storage terminal along the Houston Ship Channel in Pasadena, Texas. The other unconsolidated affiliates acquired are not material.

Investments in Unconsolidated Affiliates - The following table sets forth our investments in unconsolidated affiliates as of the dates indicated:


	Net Ownership Interest	December 31, 2023		December 31, 2022
		(Millions of dollars)
Overland Pass	50%	$	402	$	401
Northern Border	50%	338		265
Saddlehorn	30%	288		—
MVP	25%	241		—
Roadrunner	50%	188		94
BridgeTex	30%	193		—
Other	Various	224		42
Investments in unconsolidated affiliates (a)		$	1,874	$	802

(a) - Includes basis differences of $148 million and $17 million at December 31, 2023 and 2022, respectively, related primarily to equity-method goodwill (Note A).

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


	Years Ended December 31,
	2023		2022		2021
	(Millions of dollars)
Northern Border	$	75	$	71	$	64
Overland Pass	56		33		19
Roadrunner	43		37		33
Saddlehorn (a)	10		—		—


MVP (a)	4		—		—
BridgeTex (a)	(1)		—		—
Other (a)	15		7		6
Equity in net earnings from investments	$	202	$	148	$	122

(a) - Includes equity in net earnings from the period September 25, 2023 through December 31, 2023.

We incurred expenses in transactions with unconsolidated affiliates of $132 million, $83 million and $63 million for 2023, 2022 and 2021, respectively, primarily related to Overland Pass and Northern Border. Revenue earned and accounts receivable from, and accounts payable to, our equity-method investees were not material.

We have agreements with our unconsolidated affiliates that provide that distributions to members are made, primarily, on a pro rata basis according to each member’s ownership interest.

We are the operator of Roadrunner, and as a result of the Magellan Acquisition, we are also the operator of BridgeTex, MVP and Saddlehorn. In each case, we have operating agreements that provide for reimbursement or payment to us for management services and certain operating costs. Reimbursements and payments included in operating income in our Consolidated Statements of Income for all periods presented were not material.

In 2023, we made an equity contribution of $105 million to Roadrunner, which in combination with an equal contribution from our joint venture partner, was used to repay Roadrunner’s outstanding debt. In 2022 and 2021, our contributions to Roadrunner

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were not material. In November 2023, we made an equity contribution of $91 million to Northern Border, which in combination with an equal contribution from our joint venture partner, was used to partially repay the outstanding balance of its revolving credit facility and fund capital projects.

O. COMMITMENTS AND CONTINGENCIES

Commitments - The following table sets forth our transportation, volume and storage commitments for the periods indicated:



Commitments	(Millions of dollars)
2024	$	145
2025	117
2026	83
2027	68
2028	64
Thereafter	277
Total	$	754

Environmental Matters and Pipeline Safety - The operation of pipelines, terminals, plants and other facilities for the gathering, processing, fractionation, transportation and storage of 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, terminals, 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 - Corpus Christi Terminal Personal Injury Proceeding - Ismael Garcia, Andrew Ramirez, and Jesus Juarez Quintero, et al. brought personal injury cases against Magellan and co-defendants Triton Industrial Services, LLC, Tidal Tank, Inc. and Cleveland Integrity Services, Inc. in Nueces County Court in Texas. The claims were originally brought in three different actions but were consolidated into a single case on March 2, 2021. Claims were asserted by or on behalf of seven individuals, and certain beneficiaries, who were employed by a contractor of Magellan and were injured, one fatally, as a result of a fire that occurred on December 5, 2020 while they were cleaning a tank at our Corpus Christi terminal. We reached settlement with certain claimants, including resolution of claims relating to the individual who was fatally injured. Other claims remain outstanding. We recorded accruals that represent our best estimate for these claims. We also recorded offsetting insurance receivables for the amounts accrued. We expect future losses in excess of amounts accrued, if any, to be recoverable through insurance. While the outcome cannot be predicted, we do not expect the final resolution of this matter to have a material adverse effect on our business.

We are a party to various other 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.

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P. REVENUES

Contract Liabilities - The following table sets forth the balances in contract liabilities for the periods indicated:


Contract Liabilities	(Millions of dollars)
Balance at January 1, 2022	$	51
Revenue recognized included in beginning balance	(36)
Net additions	37
Balance at December 31, 2022 (a)	52
Revenue recognized included in beginning balance	(23)
Net additions (b)	121
Balance at December 31, 2023 (c)	$	150

(a) - Contract liabilities of $23 million and $29 million are included in other current liabilities and other deferred credits, respectively, in our Consolidated Balance Sheet.

(b) - Net additions include increases due to the Magellan Acquisition, which are primarily related to customer prepayments for services.

(c) - Contract liabilities of $104 million and $46 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, 2023 and 2022, relate to customer receivables. Revenue sources are disaggregated in Note Q.

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.

The following table presents aggregate value allocated to unsatisfied performance obligations as of December 31, 2023, 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 20 years:


Expected Period of Recognition in Revenue	(Millions of dollars)
2024	$	1,174
2025	920
2026	764
2027	671
2028 and beyond	1,912
Total estimated transaction price allocated to unsatisfied performance obligations	$	5,441

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 four 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 Purity NGLs;
our Natural Gas Pipelines segment transports and stores natural gas; and
our Refined Products and Crude segment transports, stores and distributes Refined Products and crude oil, as well as conducts certain commodity-related activities including liquids blending and marketing activities. This new reportable business segment was added in conjunction with the Magellan Acquisition that closed on September 25, 2023. Results of operations for this business segment are included below for the period September 25, 2023 through December 31, 2023.

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

For the year ended December 31, 2023, revenues from one customer impacting all our segments represented approximately 11% of our consolidated revenues. For the year ended December 31, 2022, we had no single customer from which we received 10% or more of our consolidated revenues. For the year ended December 31, 2021, revenues from one customer in our Natural Gas Liquids segment represented approximately 12% of our consolidated revenues.

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


Year Ended December 31, 2023	Natural Gas Gathering and Processing		Natural Gas Liquids		Natural Gas Pipelines		Refined Products and Crude		Total Segments
	(Millions of dollars)
Liquids commodity sales	$	2,479	$	13,666	$	—	$	502	$	16,647
Residue natural gas sales	1,398		—		39		—		1,437
Gathering, processing and exchange services revenue	147		549		—		—		696
Transportation and storage revenue	—		204		582		535		1,321
Other	32		10		2		34		78
Total revenues (a)	4,056		14,429		623		1,071		20,179
Cost of sales and fuel (exclusive of depreciation and operating costs)	(2,364)		(11,592)		(28)		(450)		(14,434)
Operating costs	(467)		(666)		(202)		(198)		(1,533)
Adjusted EBITDA from unconsolidated affiliates	1		67		160		36		264
Noncash compensation expense	19		29		8		6		62
Other	(1)		778		(2)		—		775
Segment adjusted EBITDA	$	1,244	$	3,045	$	559	$	465	$	5,313

Depreciation and amortization	$	(272)	$	(334)	$	(67)	$	(92)	$	(765)
Equity in net earnings from investments	$	(2)	$	58	$	118	$	28	$	202
Investments in unconsolidated affiliates	$	24	$	419	$	526	$	903	$	1,872
Total assets	$	7,078	$	14,974	$	2,624	$	19,531	$	44,207
Capital expenditures	$	448	$	818	$	228	$	52	$	1,546

(a) - Intersegment revenues are primarily commodity sales, which are based on the contracted selling price that is generally index-based and settled monthly, and for the Natural Gas Gathering and Processing segment totaled $2.4 billion. Intersegment revenues for the Natural Gas Liquids, Refined Products and Crude and Natural Gas Pipelines segments were not material.

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Year Ended December 31, 2023	Total Segments		Other and Eliminations		Total
	(Millions of dollars)
Reconciliations of total segments to consolidated
Liquids commodity sales	$	16,647	$	(2,480)	$	14,167
Residue natural gas sales	1,437		—		1,437
Gathering, processing and exchange services revenue	696		—		696
Transportation and storage revenue	1,321		(15)		1,306
Other	78		(7)		71
Total revenues (a)	$	20,179	$	(2,502)	$	17,677

Cost of sales and fuel (exclusive of depreciation and operating costs)	$	(14,434)	$	2,505	$	(11,929)
Operating costs	$	(1,533)	$	(2)	$	(1,535)
Depreciation and amortization	$	(765)	$	(4)	$	(769)
Equity in net earnings from investments	$	202	$	—	$	202
Investments in unconsolidated affiliates	$	1,872	$	2	$	1,874
Total assets	$	44,207	$	59	$	44,266
Capital expenditures	$	1,546	$	49	$	1,595

(a) - Noncustomer revenue for the year ended December 31, 2023, totaled $296 million related primarily to gains from derivatives on commodity sales contracts.


Year Ended December 31, 2022	Natural Gas Gathering and Processing		Natural Gas Liquids		Natural Gas Pipelines		Total Segments
	(Millions of dollars)
NGL and condensate sales	$	3,690	$	18,329	$	—	$	22,019
Residue natural gas sales	2,674		—		39		2,713
Gathering, processing and exchange services revenue	144		547		—		691
Transportation and storage revenue	—		180		539		719
Other	25		11		1		37
Total revenues (a)	6,533		19,067		579		26,179
Cost of sales and fuel (exclusive of depreciation and operating costs)	(5,117)		(16,546)		(25)		(21,688)
Operating costs	(403)		(576)		(181)		(1,160)
Equity in net earnings from investments	5		35		108		148
Noncash compensation expense	17		27		7		51
Other	2		88		—		90
Segment adjusted EBITDA	$	1,037	$	2,095	$	488	$	3,620

Depreciation and amortization	$	(257)	$	(302)	$	(62)	$	(621)
Investments in unconsolidated affiliates	$	28	$	415	$	359	$	802
Total assets	$	6,980	$	14,643	$	2,254	$	23,877
Capital expenditures	$	445	$	581	$	123	$	1,149

(a) - Intersegment revenues are primarily commodity sales, which are based on the contracted selling price that is generally index-based and settled monthly, and for the Natural Gas Gathering and Processing segment totaled $3.7 billion. Intersegment revenues for the Natural Gas Liquids and Natural Gas Pipelines segments were not material.

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Year Ended December 31, 2022	Total Segments		Other and Eliminations		Total
	(Millions of dollars)
Reconciliations of total segments to consolidated
NGL and condensate sales	$	22,019	$	(3,759)	$	18,260
Residue natural gas sales	2,713		(8)		2,705
Gathering, processing and exchange services revenue	691		—		691
Transportation and storage revenue	719		(9)		710
Other	37		(16)		21
Total revenues (a)	$	26,179	$	(3,792)	$	22,387

Cost of sales and fuel (exclusive of depreciation and operating costs)	$	(21,688)	$	3,778	$	(17,910)
Operating costs	$	(1,160)	$	11	$	(1,149)
Depreciation and amortization	$	(621)	$	(5)	$	(626)
Equity in net earnings from investments	$	148	$	—	$	148
Investments in unconsolidated affiliates	$	802	$	—	$	802
Total assets	$	23,877	$	502	$	24,379
Capital expenditures	$	1,149	$	53	$	1,202

(a) - Noncustomer revenue for the year ended December 31, 2022, totaled $(286) million related primarily to losses from derivatives on commodity contracts.


Year Ended December 31, 2021	Natural Gas Gathering and Processing		Natural Gas Liquids		Natural Gas Pipelines		Total Segments
	(Millions of dollars)
NGL and condensate sales	$	2,821	$	13,653	$	—	$	16,474
Residue natural gas sales	1,484		—		115		1,599
Gathering, processing and exchange services revenue	135		518		—		653
Transportation and storage revenue	—		180		491		671
Other	21		41		1		63
Total revenues (a)	4,461		14,392		607		19,460
Cost of sales and fuel (exclusive of depreciation and operating costs)	(3,226)		(11,940)		(11)		(15,177)
Operating costs	(367)		(528)		(170)		(1,065)
Equity in net earnings from investments	4		21		97		122
Noncash compensation expense and other	17		19		5		41
Segment adjusted EBITDA	$	889	$	1,964	$	528	$	3,381

Depreciation and amortization	$	(260)	$	(299)	$	(59)	$	(618)
Investments in unconsolidated affiliates	$	27	$	417	$	354	$	798
Total assets	$	6,769	$	14,502	$	2,143	$	23,414
Capital expenditures	$	275	$	307	$	93	$	675

(a) - Intersegment revenues are primarily commodity sales, which are based on the contracted selling price that 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.

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Year Ended December 31, 2021	Total Segments		Other and Eliminations		Total
	(Millions of dollars)
Reconciliations of total segments to consolidated
NGL and condensate sales	$	16,474	$	(2,904)	$	13,570
Residue natural gas sales	1,599		—		1,599
Gathering, processing and exchange services revenue	653		—		653
Transportation and storage revenue	671		(14)		657
Other	63		(2)		61
Total revenues (a)	$	19,460	$	(2,920)	$	16,540

Cost of sales and fuel (exclusive of depreciation and operating costs)	$	(15,177)	$	2,920	$	(12,257)
Operating costs	$	(1,065)	$	(2)	$	(1,067)
Depreciation and amortization	$	(618)	$	(4)	$	(622)
Equity in net earnings from investments	$	122	$	—	$	122
Investments in unconsolidated affiliates	$	798	$	—	$	798
Total assets	$	23,414	$	208	$	23,622
Capital expenditures	$	675	$	22	$	697

(a) - Noncustomer revenue for the year ended December 31, 2021, totaled $(565) million related primarily to losses from derivatives on commodity contracts.


	Years Ended December 31,
	2023		2022		2021
Reconciliation of net income to total segment adjusted EBITDA	(Millions of dollars)
Net income	$	2,659	$	1,722	$	1,500
Interest expense, net of capitalized interest	866		676		733
Depreciation and amortization	769		626		622
Income taxes	838		528		484


Adjusted EBITDA from unconsolidated affiliates (c)	264		—		—
Equity in net earnings from investments (c)	(202)		—		—
Noncash compensation expense and other	49		68		41
Other corporate costs (b)	70		—		1
Total segment adjusted EBITDA (a) (c)	$	5,313	$	3,620	$	3,381

(a) - The year ended December 31, 2023 includes $633 million related to the Medford incident, including a settlement gain of $779 million, offset partially by $146 million of third-party fractionation costs.

(b) - The year ended December 31, 2023 primarily includes corporate costs related to the Magellan Acquisition of $158 million, offset partially by interest income of $49 million and corporate net gains of $41 million on extinguishment of debt related to open market repurchases.

(c) - Beginning in 2023, we updated our calculation methodology of adjusted EBITDA to include adjusted EBITDA from our unconsolidated affiliates using the same recognition and measurement methods used to record equity in net earnings from investments. In prior periods, our calculation included equity in net earnings from investments. This change resulted in an additional $62 million of adjusted EBITDA in 2023, and we have not restated prior periods.

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