Item 1. FINANCIAL STATEMENTS

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Item 1. FINANCIAL STATEMENTS


ONEOK, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Unaudited)	2022		2021		2022		2021
	(Thousands of dollars, except per share amounts)
Revenues
Commodity sales	$	5,650,803	$	3,074,773	$	10,756,014	$	5,910,882
Services	345,918		314,191		685,316		672,761
Total revenues (Note J)	5,996,721		3,388,964		11,441,330		6,583,643
Cost of sales and fuel (exclusive of items shown separately below)	4,877,999		2,366,979		9,243,947		4,488,489
Operations and maintenance	230,687		212,319		445,093		419,477
Depreciation and amortization	157,757		156,921		311,615		314,041
General taxes	46,777		41,940		96,288		86,379
Other operating (income) expense, net	(5,449)		(707)		(7,019)		(976)
Operating income	688,950		611,512		1,351,406		1,276,233
Equity in net earnings from investments (Note H)	35,630		25,720		71,970		59,040
Allowance for equity funds used during construction	594		426		965		1,238
Other income (expense), net	(9,324)		(493)		(22,846)		(5,515)
Interest expense (net of capitalized interest of $13,519, $5,443, $25,239 and $10,538, respectively)	(170,751)		(184,957)		(342,805)		(370,480)
Income before income taxes	545,099		452,208		1,058,690		960,516
Income taxes	(130,721)		(110,069)		(253,141)		(232,201)
Net income	414,378		342,139		805,549		728,315
Less: Preferred stock dividends	275		275		550		550
Net income available to common shareholders	$	414,103	$	341,864	$	804,999	$	727,765

Basic EPS (Note G)	$	0.93	$	0.77	$	1.80	$	1.63

Diluted EPS (Note G)	$	0.92	$	0.77	$	1.80	$	1.63
Average shares (thousands)
Basic	447,451		446,337		447,288		446,116
Diluted	448,182		446,903		448,293		446,894

See accompanying Notes to Consolidated Financial Statements.


ONEOK, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Unaudited)	2022		2021		2022		2021
	(Thousands of dollars)
Net income	$	414,378	$	342,139	$	805,549	$	728,315
Other comprehensive income (loss), net of tax
Change in fair value of derivatives, net of tax of $(6,639), $51,692, $14,798 and $41,835, respectively	22,226		(173,054)		(49,542)		(140,056)
Derivative amounts reclassified to net income, net of tax of $(21,036), $(10,516), $(40,760) and $(22,877), respectively	70,426		35,204		136,458		76,591
Change in retirement and other postretirement benefit plan obligations, net of tax of $(873), $(1,567), $(1,778) and $(2,654), respectively	2,922		5,247		5,952		8,885
Other comprehensive income (loss) of unconsolidated affiliates, net of tax of $(1,596), $970, $(3,503) and $(1,369), respectively	5,343		(3,244)		11,728		4,586
Total other comprehensive income (loss), net of tax	100,917		(135,847)		104,596		(49,994)
Comprehensive income	$	515,295	$	206,292	$	910,145	$	678,321

See accompanying Notes to Consolidated Financial Statements.


ONEOK, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS

		June 30,		December 31,
(Unaudited)		2022		2021
Assets	(Thousands of dollars)
Current assets
Cash and cash equivalents		$	135,774	$	146,391
Accounts receivable, net		1,778,687		1,441,786
Materials and supplies		154,024		153,019
NGLs and natural gas in storage		619,880		427,880
Commodity imbalances		49,251		39,609
Other current assets		288,883		165,689
Total current assets		3,026,499		2,374,374
Property, plant and equipment
Property, plant and equipment		24,394,512		23,820,539
Accumulated depreciation and amortization		4,793,293		4,500,665
Net property, plant and equipment		19,601,219		19,319,874
Investments and other assets
Investments in unconsolidated affiliates		801,315		797,613
Goodwill and net intangible assets		758,081		763,295

Other assets		339,690		366,457
Total investments and other assets		1,899,086		1,927,365
Total assets		$	24,526,804	$	23,621,613


ONEOK, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Continued)
		June 30,		December 31,
(Unaudited)		2022		2021
Liabilities and equity	(Thousands of dollars)
Current liabilities
Current maturities of long-term debt (Note D)		$	895,814	$	895,814

Accounts payable		1,923,761		1,332,391

Commodity imbalances		345,806		309,054

Accrued interest		235,068		235,602
Operating lease liability		12,305		13,783
Other current liabilities		242,079		397,975
Total current liabilities		3,654,833		3,184,619
Long-term debt, excluding current maturities (Note D)		12,872,692		12,747,636
Deferred credits and other liabilities
Deferred income taxes		1,425,818		1,166,690
Operating lease liability		71,212		75,636
Other deferred credits		387,620		431,869
Total deferred credits and other liabilities		1,884,650		1,674,195
Commitments and contingencies (Note I)
Equity (Note E)
ONEOK shareholders’ equity:
Preferred stock, $0.01 par value: authorized and issued 20,000 shares at June 30, 2022, and December 31, 2021		—		—
Common stock, $0.01 par value: authorized 1,200,000,000 shares; issued 474,916,234 shares and outstanding 446,856,499 shares at June 30, 2022; issued 474,916,234 shares and outstanding 446,138,177 shares at December 31, 2021		4,749		4,749
Paid-in capital		7,190,457		7,213,861
Accumulated other comprehensive loss (Note F)		(366,755)		(471,351)
Retained earnings		—		—
Treasury stock, at cost: 28,059,735 shares at June 30, 2022, and 28,778,057 shares at December 31, 2021		(713,822)		(732,096)
Total equity		6,114,629		6,015,163
Total liabilities and equity		$	24,526,804	$	23,621,613

See accompanying Notes to Consolidated Financial Statements.

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ONEOK, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
	Six Months Ended
	June 30,
(Unaudited)	2022		2021
	(Thousands of dollars)
Operating activities
Net income	$	805,549	$	728,315
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	311,615		314,041

Equity in net earnings from investments	(71,970)		(59,040)
Distributions received from unconsolidated affiliates	71,488		58,486
Deferred income taxes	227,897		226,963



Other, net	44,584		39,837
Changes in assets and liabilities:
Accounts receivable	(339,729)		(268,541)
NGLs and natural gas in storage, net of commodity imbalances	(164,890)		(171,654)
Accounts payable	568,705		363,694


Risk-management assets and liabilities	(130,873)		(158,927)
Other assets and liabilities, net	(72,792)		4,809
Cash provided by operating activities	1,249,584		1,077,983
Investing activities
Capital expenditures (less allowance for equity funds used during construction)	(559,310)		(324,122)

Distributions received from unconsolidated affiliates in excess of cumulative earnings	13,375		11,695
Other, net	3,148		(12,138)

Cash used in investing activities	(542,787)		(324,565)
Financing activities
Dividends paid	(835,309)		(833,083)

Issuance of long-term debt	120,000		—

Repayment of long-term debt	—		(68,787)


Other, net	(2,105)		(1,667)
Cash used in financing activities	(717,414)		(903,537)
Change in cash and cash equivalents	(10,617)		(150,119)
Cash and cash equivalents at beginning of period	146,391		524,496
Cash and cash equivalents at end of period	$	135,774	$	374,377

See accompanying Notes to Consolidated Financial Statements.


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

(Unaudited)	Preferred Stock Issued	Common Stock Issued	Preferred Stock		Common Stock		Paid-in Capital
	(Shares)		(Thousands of dollars)
January 1, 2022	20,000	474,916,234	$	—	$	4,749	$	7,213,861
Net income	—	—	—		—		—
Other comprehensive income (Note F)	—	—	—		—		—
Preferred stock dividends - $13.75 per share (Note E)	—	—	—		—
Common stock issued	—	—	—		—		(5,325)
Common stock dividends - $0.935 per share (Note E)	—	—	—		—		(26,264)
Other, net	—	—	—		—		(5,289)
March 31, 2022	20,000	474,916,234	$	—	$	4,749	$	7,176,983
Net income	—	—	—		—		—
Other comprehensive income (Note F)	—	—	—		—		—
Preferred stock dividends - $13.75 per share (Note E)	—	—	—		—
Common stock issued	—	—	—		—		7,039
Common stock dividends - $0.935 per share (Note E)	—	—	—		—		(3,553)
Other, net	—	—	—		—		9,988
June 30, 2022	20,000	474,916,234	$	—	$	4,749	$	7,190,457








(Unaudited)	Preferred Stock Issued	Common Stock Issued	Preferred Stock		Common Stock		Paid-in Capital
	(Shares)		(Thousands of dollars)
January 1, 2021	20,000	474,916,234	$	—	$	4,749	$	7,353,396
Net income	—	—	—		—		—
Other comprehensive income	—	—	—		—		—
Preferred stock dividends - $13.75 per share	—	—	—		—		—
Common stock issued	—	—	—		—		(10,159)
Common stock dividends - $0.935 per share	—	—	—		—		(30,234)
Other, net	—	—	—		—		(7,729)
March 31, 2021	20,000	474,916,234	$	—	$	4,749	$	7,305,274







Net income	—	—	—		—		—
Other comprehensive loss	—	—	—		—		—
Preferred stock dividends - $13.75 per share	—	—	—		—		—
Common stock issued	—	—	—		—		7,115
Common stock dividends - $0.935 per share	—	—	—		—		(74,765)
Other, net	—	—	—		—		9,710
June 30, 2021	20,000	474,916,234	$	—	$	4,749	$	7,247,334


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

(Unaudited)	Accumulated Other Comprehensive Loss		Retained Earnings		Treasury Stock		Total Equity
	(Thousands of dollars)
January 1, 2022	$	(471,351)	$	—	$	(732,096)	$	6,015,163
Net income	—		391,171		—		391,171
Other comprehensive income (Note F)	3,679		—		—		3,679
Preferred stock dividends - $13.75 per share (Note E)	—		(275)		—		(275)
Common stock issued	—		—		11,730		6,405
Common stock dividends - $0.935 per share (Note E)	—		(390,896)		—		(417,160)
Other, net	—		—		—		(5,289)
March 31, 2022	$	(467,672)	$	—	$	(720,366)	$	5,993,694
Net income	—		414,378		—		414,378
Other comprehensive income (Note F)	100,917		—		—		100,917
Preferred stock dividends - $13.75 per share (Note E)	—		(275)		—		(275)
Common stock issued	—		—		6,544		13,583
Common stock dividends - $0.935 per share (Note E)	—		(414,103)		—		(417,656)
Other, net	—		—		—		9,988
June 30, 2022	$	(366,755)	$	—	$	(713,822)	$	6,114,629








(Unaudited)	Accumulated Other Comprehensive Loss		Retained Earnings		Treasury Stock		Total Equity
	(Thousands of dollars)
January 1, 2021	$	(551,449)	$	—	$	(764,298)	$	6,042,398
Net income	—		386,176		—		386,176
Other comprehensive income	85,853		—		—		85,853
Preferred stock dividends - $13.75 per share	—		(275)		—		(275)
Common stock issued	—		—		16,836		6,677
Common stock dividends - $0.935 per share	—		(385,901)		—		(416,135)
Other, net	—		—		—		(7,729)
March 31, 2021	$	(465,596)	$	—	$	(747,462)	$	6,096,965
Net income	—		342,139		—		342,139
Other comprehensive loss	(135,847)		—		—		(135,847)
Preferred stock dividends - $13.75 per share	—		(275)		—		(275)
Common stock issued	—		—		7,208		14,323
Common stock dividends - $0.935 per share	—		(341,864)		—		(416,629)
Other, net	—		—		—		9,710
June 30, 2021	$	(601,443)	$	—	$	(740,254)	$	5,910,386

See accompanying Notes to Consolidated Financial Statements.

ONEOK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Our accompanying unaudited Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the SEC. These statements have been prepared in accordance with GAAP and reflect all adjustments that, in our opinion, are necessary for a fair statement of the results for the interim periods presented. All such adjustments are of a normal recurring nature. The 2021 year-end Consolidated Balance Sheet data was derived from our audited Consolidated Financial Statements but does not include all disclosures required by GAAP. These unaudited Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements in our Annual Report.

Subsequent Event - On July 9, 2022, a fire occurred at our 210 MBbl/d Medford, Oklahoma, natural gas liquids fractionation facility. All personnel are safe and accounted for with evacuations of local residents taken as a precautionary measure. While the facility is not currently operational, we are using our integrated NGL pipeline system between the Mid-Continent and Gulf Coast, along with our fractionation and storage assets and fractionation and storage arrangements with industry peers, to provide midstream services. We are working to reduce future impacts to our suppliers and customers. We are cooperating with government agencies, as applicable, and we continue our efforts to determine the cause of the event and expect the Medford facility to remain out of service for an extended period. Subject to the terms and conditions of the policies and any applicable sub-limits, we have property damage and business interruption insurance coverage with a combined per occurrence limit of $2 billion and deductibles of $5 million per occurrence for property damage and a 45-day waiting period per occurrence for business interruption coverage.

We are in the early stages of determining the full extent of property damage and developing information to support a claim for property damage and business interruption losses. We expect our insurance coverage to mitigate our financial loss, which cannot be reasonably estimated at this time. As a result of our insurance coverage, we do not currently anticipate that the Medford incident will have a material effect on our financial condition, results of operations or cash flows. However, the timing of insurance proceeds may impact our results in a given quarter or year.

Recently Issued Accounting Standards Update - Changes to GAAP are established by the Financial Accounting Standards Board (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 or in our Annual Report were assessed and determined to be either not applicable or clarifications of ASUs previously issued. There have been no new accounting pronouncements that have become effective or have been issued that are of significance or potential significance to us.

B. FAIR VALUE MEASUREMENTS

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

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

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

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

Level 1 - fair value measurements are based on unadjusted quoted prices for identical securities in active markets. These balances are composed predominantly of exchange-traded derivative contracts for natural gas and crude oil.
Level 2 - fair value measurements are based on significant observable pricing inputs, including quoted prices for similar assets and liabilities in active markets and inputs from third-party pricing services supported with corroborative evidence. These balances are composed of exchange-cleared derivatives to hedge natural gas basis and NGL price risk at certain market locations and over-the-counter interest-rate derivatives.
Level 3 - fair value measurements are based on inputs that may include one or more unobservable inputs, including internally developed commodity price curves that incorporate market data from broker quotes and third-party pricing services. These balances are composed predominantly of exchange-cleared and over-the-counter derivatives to hedge NGL price risk at certain market locations. These commodity derivatives are generally valued using forward quotes provided by third-party pricing services that are validated with other market data. We believe any measurement uncertainty at June 30, 2022, is immaterial as our Level 3 fair value measurements are based on unadjusted pricing information from broker quotes and third-party pricing services.

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

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


	June 30, 2022
	Level 1		Level 2		Level 3		Total - Gross		Netting (a)		Total - Net
	(Thousands of dollars)
Derivative assets
Commodity contracts
Financial contracts	$	14,226	$	130,446	$	19,529	$	164,201	$	(164,201)	$	—
Interest-rate contracts	—		24,223		—		24,223		—		24,223
Total derivative assets	$	14,226	$	154,669	$	19,529	$	188,424	$	(164,201)	$	24,223
Derivative liabilities
Commodity contracts
Financial contracts	$	(104,080)	$	(80,143)	$	(129,925)	$	(314,148)	$	314,148	$	—

Interest-rate contracts	—		(25,455)		—		(25,455)		—		(25,455)
Total derivative liabilities	$	(104,080)	$	(105,598)	$	(129,925)	$	(339,603)	$	314,148	$	(25,455)

(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 June 30, 2022, we held no cash and posted $287.8 million of cash with various counterparties, including $149.9 million of cash collateral that is offsetting derivative net liability positions under master-netting arrangements in the table above. The remaining $137.9 million of cash collateral in excess of derivative net liability positions is included in other current assets in our Consolidated Balance Sheet.


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


Total derivative assets	$	22,019	$	172,833	$	9,309	$	204,161	$	(204,161)	$	—
Derivative liabilities
Commodity contracts
Financial contracts	$	(67,226)	$	(112,922)	$	(123,592)	$	(303,740)	$	303,740	$	—

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

(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, 2021, we held no cash and posted $157.0 million of cash with various counterparties, including $99.6 million of cash collateral that is offsetting derivative net liability positions under master-netting arrangements in the table above. The remaining $57.4 million of cash collateral in excess of derivative net liability positions is included in other current assets in our Consolidated Balance Sheet.

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


	Three Months Ended				Six Months Ended
	June 30,				June 30,
Derivative Assets (Liabilities)	2022		2021		2022		2021
	(Thousands of dollars)
Net liabilities at beginning of period	$	(189,831)	$	(41,794)	$	(114,283)	$	(31,321)
Total changes in fair value:

Settlements included in net income (a)	56,782		17,731		59,699		26,852

New Level 3 derivatives included in other comprehensive income (loss) (b)	9,430		(20,262)		9,442		(68,237)
Unrealized change included in other comprehensive income (loss) (b)	13,223		(77,425)		(65,254)		(49,044)
Net liabilities at end of period	$	(110,396)	$	(121,750)	$	(110,396)	$	(121,750)

(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 three and six months ended June 30, 2022 and 2021, there were no transfers in or out of Level 3 of the fair value hierarchy.

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

The estimated fair value of our consolidated long-term debt, including current maturities, was $13.1 billion and $15.6 billion at June 30, 2022, and December 31, 2021, respectively. The book value of our consolidated long-term debt, including current maturities, was $13.8 billion and $13.6 billion at June 30, 2022, and December 31, 2021, 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.

C. RISK-MANAGEMENT AND HEDGING ACTIVITIES USING DERIVATIVES

Risk-management Activities - We are sensitive to changes in natural gas, crude oil and NGL prices, principally as a result of contractual terms under which these commodities are processed, purchased and sold. We are also subject to the risk of interest-rate fluctuation in the normal course of business. We use physical-forward purchases and sales and financial derivatives to secure a certain price for a portion of our natural gas, condensate and NGL products; to reduce our exposure to commodity price and interest-rate fluctuations; and to achieve more predictable cash flows. We follow established policies and procedures

to assess risk and approve, monitor and report our risk-management activities. We have not used these instruments for trading purposes.

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

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

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

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

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

In our Natural Gas Pipelines segment, we are primarily exposed to commodity price risk on our intrastate pipelines because they consume natural gas in operations and retain natural gas from our customers for operations or as part of our fee for services provided. When the amount consumed in operations differs from the amount provided by our customers, our pipelines must buy or sell natural gas, or store or use natural gas inventory, which can expose this segment to commodity price risk depending on the regulatory treatment for this activity. To the extent that commodity price risk in our Natural Gas Pipelines segment is not mitigated by fuel cost-recovery mechanisms, we may use physical-forward sales or purchases to reduce the impact of natural gas price fluctuations. At June 30, 2022, and December 31, 2021, there were no financial derivative instruments with respect to our natural gas pipeline operations.

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

At June 30, 2022, and December 31, 2021, we had forward-starting interest-rate swaps with notional amounts totaling $1.1 billion to hedge the variability of interest payments on a portion of our forecasted debt issuances. All of our interest-rate swaps are designated as cash flow hedges.

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


		June 30, 2022				December 31, 2021
	Location in our Consolidated Balance Sheets	Assets		(Liabilities)		Assets		(Liabilities)
Derivatives designated as hedging instruments		(Thousands of dollars)
Commodity contracts (a)
Financial contracts (b)		$	164,201	$	(314,148)	$	204,161	$	(303,740)


Interest-rate contracts	Other current assets/liabilities	24,223		(25,455)		—		(145,524)

Total derivatives designated as hedging instruments		$	188,424	$	(339,603)	$	204,161	$	(449,264)

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

(b) - At June 30, 2022, and December 31, 2021, our derivative net liability positions under master-netting arrangements for financial contracts were fully offset by cash collateral of $149.9 million and $99.6 million, respectively.

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


		June 30, 2022		December 31 2021
	Contract Type	Net Purchased/Payor (Sold/Receiver)
Derivatives designated as hedging instruments:
Cash flow hedges
Fixed price
- Natural gas (Bcf)	Futures	(57.1)		(32.3)

- Crude oil and NGLs (MMBbl)	Futures	(10.9)		(10.0)

Basis
- Natural gas (Bcf)	Futures	(57.0)		(30.5)
Interest-rate contracts (Billions of dollars)	Swaps	$	1.1	$	1.1

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


	Three Months Ended						Six Months Ended
	June 30,						June 30,
2022			2021			2022			2021
	(Thousands of dollars)
Commodity contracts	$	(34,273)		$	(175,477)		$	(208,633)		$	(238,907)
Interest-rate contracts	63,138			(49,269)			144,293			57,016
Total unrealized change in fair value of cash flow hedges in other comprehensive income (loss)	$	28,865		$	(224,746)		$	(64,340)		$	(181,891)

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	Three Months Ended				Six Months Ended
June 30,				June 30,
2022		2021		2022		2021
		(Thousands of dollars)
Commodity contracts	Commodity sales revenues	$	(257,774)	$	(85,162)	$	(468,568)	$	(215,680)
	Cost of sales and fuel	175,935		49,357		310,303		135,793
Interest-rate contracts	Interest expense	(9,623)		(9,915)		(18,953)		(19,581)
Total change in fair value of cash flow hedges reclassified from accumulated other comprehensive loss into net income on derivatives		$	(91,462)	$	(45,720)	$	(177,218)	$	(99,468)

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

Our financial commodity derivatives are generally settled through a NYMEX or ICE clearing broker account with daily margin requirements. However, we may enter into financial derivative instruments that contain provisions that require us to maintain an investment-grade credit rating from S&P, Fitch and/or Moody’s. If our credit ratings on our senior unsecured long-term debt were to decline below investment grade, the counterparties to the derivative instruments could request collateralization on derivative instruments in net liability positions. There were no financial derivative instruments with contingent features related to credit risk at June 30, 2022.

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

At June 30, 2022, the credit exposure from our derivative assets is with investment-grade companies in the financial services sector.

D. DEBT

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


	June 30, 2022		December 31, 2021
	(Thousands of dollars)
Commercial paper outstanding	$	—	$	—
Senior unsecured obligations:

$900,000 at 3.375% due October 2022	895,814		895,814
$425,000 at 5.0% due September 2023	425,000		425,000
$500,000 at 7.5% due September 2023	500,000		500,000
$500,000 at 2.75% due September 2024	500,000		500,000
$500,000 at 4.9% due March 2025	500,000		500,000
$400,000 at 2.2% due September 2025	387,000		387,000
$600,000 at 5.85% due January 2026	600,000		600,000
$500,000 at 4.0% due July 2027	500,000		500,000
$800,000 at 4.55% due July 2028	800,000		800,000
$100,000 at 6.875% due September 2028	100,000		100,000
$700,000 at 4.35% due March 2029	700,000		700,000
$750,000 at 3.4% due September 2029	714,251		714,251
$850,000 at 3.1% due March 2030	780,093		780,093
$600,000 at 6.35% due January 2031	600,000		600,000
$400,000 at 6.0% due June 2035	400,000		400,000
$600,000 at 6.65% due October 2036	600,000		600,000
$600,000 at 6.85% due October 2037	600,000		600,000
$650,000 at 6.125% due February 2041	650,000		650,000
$400,000 at 6.2% due September 2043	400,000		400,000
$700,000 at 4.95% due July 2047	689,006		689,006
$1,000,000 at 5.2% due July 2048	1,000,000		1,000,000
$750,000 at 4.45% due September 2049	672,530		672,530
$500,000 at 4.5% due March 2050	443,015		443,015
$300,000 at 7.15% due January 2051	300,000		300,000
Guardian Pipeline
$120,000 term loan, variable rate, due June 2025	120,000		—
Total debt	13,876,709		13,756,709
Unamortized portion of terminated swaps	10,737		11,596
Unamortized debt issuance costs and discounts	(118,940)		(124,855)
Current maturities of long-term debt	(895,814)		(895,814)

Long-term debt	$	12,872,692	$	12,747,636

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

$2.5 Billion Credit Agreement - In June 2022, we amended and restated our $2.5 Billion Credit Agreement, extending its maturity to June 2027. Our $2.5 Billion Credit Agreement is a revolving credit facility and contains certain customary conditions for borrowing, as well as customary financial, affirmative and negative covenants. Among other things, beginning in June 2022, 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 the first quarter 2022, we acquired assets for $30 million, 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 first quarter 2022 and the two following quarters. Thereafter, the covenant will decrease to 5.0 to 1. As of June 30, 2022, we had no outstanding borrowings, our ratio of consolidated net indebtedness to adjusted EBITDA was 3.9 to 1, and we were in compliance with all covenants under our $2.5 Billion Credit Agreement.

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.

Guardian Term Loan Agreement - In June 2022, Guardian Pipeline entered into a $120 million senior unsecured Term Loan Agreement. The Guardian Term Loan Agreement matures in June 2025, and bears interest at Term SOFR plus an applicable margin based on Guardian Pipeline’s credit rating at the time of determination plus an adjustment of 10 basis points. Under Guardian Pipeline’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. During the second quarter 2022, Guardian Pipeline drew the full $120 million available under the agreement and used the proceeds to repay intercompany debt with ONEOK. The Guardian Term Loan Agreement contains certain affirmative and negative covenants, as well as customary events of default, the occurrence of which could result in a termination of lenders’ commitments and the accelerations of all of Guardian Pipeline’s obligations thereunder. Guardian Pipeline is in compliance with all covenants under the Guardian Term Loan Agreement.

Debt Repayments - In July 2022, we redeemed the remaining $895.8 million of our $900 million, 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. As of July 31, 2022, we had $860 million of short-term borrowings outstanding.

Debt Guarantees - ONEOK, ONEOK Partners and the Intermediate Partnership have cross guarantees in place for ONEOK’s and ONEOK Partners’ indebtedness. The Guardian Term Loan Agreement is not guaranteed by ONEOK, ONEOK Partners or the Intermediate Partnership.

E. EQUITY

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 on our common stock in February 2022 and May 2022 were $0.935 per share. A common stock dividend of $0.935 per share was declared for shareholders of record at the close of business on August 1, 2022, payable August 15, 2022.

Our Series E Preferred Stock pays quarterly dividends on each share of Series E Preferred Stock, when, as and if declared by our Board of Directors, at a rate of 5.5% per year. We paid dividends for the Series E Preferred Stock of $0.3 million in February 2022 and May 2022. Dividends totaling $0.3 million were declared for the Series E Preferred Stock and are payable August 15, 2022.

F. ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table sets forth the balance in accumulated other comprehensive loss for the period indicated, net of tax:


	Risk- Management Assets/Liabilities		Retirement and Other Postretirement Benefit Plan Obligations (a)		Risk- Management Assets/Liabilities of Unconsolidated Affiliates		Accumulated Other Comprehensive Loss
	(Thousands of dollars)
January 1, 2022	$	(352,315)	$	(107,659)	$	(11,377)	$	(471,351)
Other comprehensive income (loss) before reclassifications	(49,542)		149		10,956		(38,437)
Amounts reclassified to net income (b)	136,458		5,803		772		143,033
Other comprehensive income	86,916		5,952		11,728		104,596
June 30, 2022	$	(265,399)	$	(101,707)	$	351	$	(366,755)

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

(b) - See Note C for details of amounts reclassified to net income for risk-management assets/liabilities.

The following table sets forth information about the balance of accumulated other comprehensive loss at June 30, 2022, representing unrealized losses related to risk-management assets and liabilities, net of tax:


	Risk- Management Assets/Liabilities
	(Thousands of dollars)
Commodity derivative instruments expected to be realized within the next 30 months (a)	$	(115,725)
Settled interest-rate swaps to be recognized over the life of the long-term, fixed-rate debt (b)	(148,726)
Interest-rate swaps with future settlement dates expected to be amortized over the life of long-term debt	(948)
Accumulated other comprehensive loss at June 30, 2022	$	(265,399)

(a) - Based on commodity prices on June 30, 2022, we expect net losses of $104.1 million, net of tax, will be reclassified into earnings during the next 12 months.

(b) - We expect net losses of $21.7 million, net of tax, will be reclassified into earnings during the next 12 months.

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

G. EARNINGS PER SHARE

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


	Three Months Ended June 30, 2022
	Income		Shares	Per Share Amount
	(Thousands, except per share amounts)
Basic EPS
Net income available for common stock	$	414,103	447,451	$	0.93
Diluted EPS
Effect of dilutive securities	—		731
Net income available for common stock and common stock equivalents	$	414,103	448,182	$	0.92


	Three Months Ended June 30, 2021
	Income		Shares	Per Share Amount
	(Thousands, except per share amounts)
Basic EPS
Net income available for common stock	$	341,864	446,337	$	0.77
Diluted EPS
Effect of dilutive securities	—		566
Net income available for common stock and common stock equivalents	$	341,864	446,903	$	0.77


	Six Months Ended June 30, 2022
	Income		Shares	Per Share Amount
	(Thousands, except per share amounts)
Basic EPS
Net income available for common stock	$	804,999	447,288	$	1.80
Diluted EPS
Effect of dilutive securities	—		1,005
Net income available for common stock and common stock equivalents	$	804,999	448,293	$	1.80


	Six Months Ended June 30, 2021
	Income		Shares	Per Share Amount
	(Thousands, except per share amounts)
Basic EPS
Net income available for common stock	$	727,765	446,116	$	1.63
Diluted EPS
Effect of dilutive securities	—		778
Net income available for common stock and common stock equivalents	$	727,765	446,894	$	1.63

H. UNCONSOLIDATED AFFILIATES

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


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
	(Thousands of dollars)
Northern Border Pipeline	$	16,347	$	12,586	$	36,472	$	32,825
Roadrunner	9,300		7,602		18,441		15,351
Overland Pass Pipeline	7,885		4,739		12,893		7,711
Other	2,098		793		4,164		3,153
Equity in net earnings from investments	$	35,630	$	25,720	$	71,970	$	59,040

We incurred expenses in transactions with unconsolidated affiliates of $15.6 million and $12.5 million for the three months ended June 30, 2022 and 2021, respectively, and $30.1 million and $28.0 million for the six months ended June 30, 2022 and 2021, respectively, primarily related to Northern Border Pipeline and Overland Pass Pipeline. Revenue earned and accounts receivable from, and accounts payable to, our equity-method investees were not material.

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

I. COMMITMENTS AND CONTINGENCIES

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

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

J. REVENUES

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


Contract Liabilities	(Millions of dollars)
Balance at December 31, 2021 (a)	$	51.5
Revenue recognized included in beginning balance	(33.1)
Net additions	43.3
Balance at June 30, 2022 (b)	$	61.7

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

(b) - Contract liabilities of $33.2 million and $28.5 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 June 30, 2022, and December 31, 2021, relate to customer receivables. Revenues sources are disaggregated in Note K.

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

The following table presents aggregate value allocated to unsatisfied performance obligations as of June 30, 2022, 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 two months to 22 years:


Expected Period of Recognition in Revenue	(Millions of dollars)
Remainder of 2022	$	207.6
2023	390.8
2024	328.1
2025	240.2
2026 and beyond	882.9
Total estimated transaction price allocated to unsatisfied performance obligations	$	2,049.6

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. 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.

K. SEGMENTS

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

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

Other and eliminations consist of corporate costs, the operating and leasing activities of our headquarters building and related parking facility, the activity of our wholly owned captive insurance company, which began in April 2022, and eliminations necessary to reconcile our reportable segments to our Consolidated Financial Statements.

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


Three Months Ended June 30, 2022	Natural Gas Gathering and Processing		Natural Gas Liquids (a)		Natural Gas Pipelines (b)		Total Segments
	(Thousands of dollars)
NGL and condensate sales	$	1,039,199	$	5,010,571	$	—	$	6,049,770
Residue natural gas sales	659,735		—		945		660,680
Gathering, processing and exchange services revenue	36,056		139,928		—		175,984
Transportation and storage revenue	—		40,282		130,711		170,993
Other	5,266		2,518		233		8,017
Total revenues (c)	1,740,256		5,193,299		131,889		7,065,444

Cost of sales and fuel (exclusive of depreciation and operating costs)	(1,398,624)		(4,543,318)		(744)		(5,942,686)
Operating costs	(97,468)		(143,043)		(41,200)		(281,711)
Equity in net earnings from investments	1,596		8,387		25,647		35,630
Noncash compensation expense and other	6,442		2,051		396		8,889
Segment adjusted EBITDA	$	252,202	$	517,376	$	115,988	$	885,566

Depreciation and amortization	$	(65,127)	$	(75,277)	$	(16,244)	$	(156,648)


Capital expenditures	$	123,417	$	150,165	$	19,136	$	292,718

(a) - Our Natural Gas Liquids segment has regulated and nonregulated operations. Our Natural Gas Liquids segment’s regulated operations had revenues of $617.1 million, of which $567.7 million related to revenues within the segment, and cost of sales and fuel of $152.3 million.

(b) - Our Natural Gas Pipelines segment has regulated and nonregulated operations. Our Natural Gas Pipelines segment’s regulated operations had revenues of $74.7 million and cost of sales and fuel of $6.2 million.

(c) - 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 $1.1 billion. Intersegment revenues for the Natural Gas Liquids and Natural Gas Pipelines segments were not material.


Three Months Ended June 30, 2022	Total Segments		Other and Eliminations		Total
	(Thousands of dollars)
Reconciliations of total segments to consolidated
NGL and condensate sales	$	6,049,770	$	(1,062,412)	$	4,987,358
Residue natural gas sales	660,680		—		660,680
Gathering, processing and exchange services revenue	175,984		—		175,984
Transportation and storage revenue	170,993		(2,117)		168,876
Other	8,017		(4,194)		3,823
Total revenues (a)	$	7,065,444	$	(1,068,723)	$	5,996,721

Cost of sales and fuel (exclusive of depreciation and operating costs)	$	(5,942,686)	$	1,064,687	$	(4,877,999)
Operating costs	$	(281,711)	$	4,247	$	(277,464)
Depreciation and amortization	$	(156,648)	$	(1,109)	$	(157,757)
Equity in net earnings from investments	$	35,630	$	—	$	35,630


Capital expenditures	$	292,718	$	9,614	$	302,332

(a) - Noncustomer revenue for the three months ended June 30, 2022, totaled $(132.7) million related primarily to losses from derivatives on commodity contracts.


Three Months Ended June 30, 2021	Natural Gas Gathering and Processing		Natural Gas Liquids (a)		Natural Gas Pipelines (b)		Total Segments
	(Thousands of dollars)
NGL and condensate sales	$	566,383	$	2,829,604	$	—	$	3,395,987
Residue natural gas sales	257,802		—		4		257,806
Gathering, processing and exchange services revenue	34,139		129,624		—		163,763
Transportation and storage revenue	—		37,864		112,337		150,201
Other	5,128		2,386		103		7,617
Total revenues (c)	863,452		2,999,478		112,444		3,975,374

Cost of sales and fuel (exclusive of depreciation and operating costs)	(550,486)		(2,399,919)		(544)		(2,950,949)
Operating costs	(86,429)		(128,834)		(38,506)		(253,769)
Equity in net earnings from investments	442		5,090		20,188		25,720
Noncash compensation expense and other	2,287		4,476		1,114		7,877
Segment adjusted EBITDA	$	229,266	$	480,291	$	94,696	$	804,253

Depreciation and amortization	$	(67,268)	$	(74,151)	$	(14,489)	$	(155,908)

Capital expenditures	$	56,872	$	59,967	$	27,796	$	144,635

(a) - Our Natural Gas Liquids segment has regulated and nonregulated operations. Our Natural Gas Liquids segment’s regulated operations had revenues of $603.1 million, of which $557.2 million related to revenues within the segment, and cost of sales and fuel of $153.3 million.

(b) - Our Natural Gas Pipelines segment has regulated and nonregulated operations. Our Natural Gas Pipelines segment’s regulated operations had revenues of $69.4 million and cost of sales and fuel of $3.8 million.

(c) - 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 $555.6 million. Intersegment revenues for the Natural Gas Liquids and Natural Gas Pipelines segments were not material.


Three Months Ended June 30, 2021	Total Segments		Other and Eliminations		Total
	(Thousands of dollars)
Reconciliations of total segments to consolidated
NGL and condensate sales	$	3,395,987	$	(582,140)	$	2,813,847
Residue natural gas sales	257,806		—		257,806
Gathering, processing and exchange services revenue	163,763		—		163,763
Transportation and storage revenue	150,201		(3,506)		146,695
Other	7,617		(764)		6,853
Total revenues (a)	$	3,975,374	$	(586,410)	$	3,388,964

Cost of sales and fuel (exclusive of depreciation and operating costs)	$	(2,950,949)	$	583,970	$	(2,366,979)
Operating costs	$	(253,769)	$	(490)	$	(254,259)
Depreciation and amortization	$	(155,908)	$	(1,013)	$	(156,921)

Equity in net earnings from investments	$	25,720	$	—	$	25,720
Capital expenditures	$	144,635	$	2,753	$	147,388

(a) - Noncustomer revenue for the three months ended June 30, 2021, totaled $(76.0) million related primarily to losses from derivatives on commodity contracts.


Six Months Ended June 30, 2022	Natural Gas Gathering and Processing		Natural Gas Liquids (a)		Natural Gas Pipelines (b)		Total Segments
	(Thousands of dollars)
NGL and condensate sales	$	2,043,548	$	9,559,272	$	—	$	11,602,820
Residue natural gas sales	1,210,772		—		27,365		1,238,137
Gathering, processing and exchange services revenue	67,501		275,771		—		343,272
Transportation and storage revenue	—		87,104		253,422		340,526
Other	10,105		5,387		439		15,931
Total revenues (c)	3,331,926		9,927,534		281,226		13,540,686

Cost of sales and fuel (exclusive of depreciation and operating costs)	(2,687,174)		(8,632,442)		(17,736)		(11,337,352)
Operating costs	(191,179)		(271,905)		(82,408)		(545,492)
Equity in net earnings from investments	3,230		13,827		54,913		71,970
Noncash compensation expense and other	10,095		7,976		3,514		21,585
Segment adjusted EBITDA	$	466,898	$	1,044,990	$	239,509	$	1,751,397

Depreciation and amortization	$	(127,853)	$	(150,307)	$	(31,289)	$	(309,449)
Investments in unconsolidated affiliates	$	27,794	$	414,967	$	358,554	$	801,315
Total assets	$	7,084,849	$	15,183,170	$	2,176,256	$	24,444,275
Capital expenditures	$	216,715	$	275,700	$	42,491	$	534,906

(a) - Our Natural Gas Liquids segment has regulated and nonregulated operations. Our Natural Gas Liquids segment’s regulated operations had revenues of $1.2 billion, of which $1.1 billion related to revenues within the segment, and cost of sales and fuel of $298.3 million.

(b) - Our Natural Gas Pipelines segment has regulated and nonregulated operations. Our Natural Gas Pipelines segment’s regulated operations had revenues of $167.3 million and cost of sales and fuel of $22.3 million.

(c) - 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 $2.1 billion. Intersegment revenues for the Natural Gas Liquids and Natural Gas Pipelines segments were not material.


Six Months Ended June 30, 2022	Total Segments		Other and Eliminations		Total
	(Thousands of dollars)
Reconciliations of total segments to consolidated
NGL and condensate sales	$	11,602,820	$	(2,090,025)	$	9,512,795
Residue natural gas sales	1,238,137		(332)		1,237,805
Gathering, processing and exchange services revenue	343,272		—		343,272
Transportation and storage revenue	340,526		(4,142)		336,384
Other	15,931		(4,857)		11,074
Total revenues (a)	$	13,540,686	$	(2,099,356)	$	11,441,330

Cost of sales and fuel (exclusive of depreciation and operating costs)	$	(11,337,352)	$	2,093,405	$	(9,243,947)
Operating costs	$	(545,492)	$	4,111	$	(541,381)
Depreciation and amortization	$	(309,449)	$	(2,166)	$	(311,615)
Equity in net earnings from investments	$	71,970	$	—	$	71,970
Investments in unconsolidated affiliates	$	801,315	$	—	$	801,315
Total assets	$	24,444,275	$	82,529	$	24,526,804
Capital expenditures	$	534,906	$	24,404	$	559,310

(a) - Noncustomer revenue for the six months ended June 30, 2022, totaled $(307.4) million related primarily to losses from derivatives on commodity contracts.


Six Months Ended June 30, 2021	Natural Gas Gathering and Processing		Natural Gas Liquids (a)		Natural Gas Pipelines (b)		Total Segments
	(Thousands of dollars)
NGL and condensate sales	$	1,058,190	$	5,244,434	$	—	$	6,302,624
Residue natural gas sales	570,049		—		115,459		685,508
Gathering, processing and exchange services revenue	65,826		242,855		—		308,681
Transportation and storage revenue	—		86,592		245,284		331,876
Other	9,128		35,662		515		45,305
Total revenues (c)	1,703,193		5,609,543		361,258		7,673,994

Cost of sales and fuel (exclusive of depreciation and operating costs)	(1,105,792)		(4,460,238)		(10,557)		(5,576,587)
Operating costs	(171,027)		(253,203)		(80,823)		(505,053)
Equity in net earnings from investments	2,170		8,694		48,176		59,040
Noncash compensation expense and other	5,438		11,123		2,817		19,378
Segment adjusted EBITDA	$	433,982	$	915,919	$	320,871	$	1,670,772

Depreciation and amortization	$	(134,300)	$	(148,693)	$	(28,965)	$	(311,958)
Investments in unconsolidated affiliates	$	23,529	$	420,949	$	355,873	$	800,351
Total assets	$	6,564,118	$	14,309,709	$	2,110,459	$	22,984,286
Capital expenditures	$	96,523	$	171,988	$	48,953	$	317,464

(b) - Our Natural Gas Pipelines segment has regulated and nonregulated operations. Our Natural Gas Pipelines segment’s regulated operations had revenues of $250.8 million and cost of sales and fuel of $16.6 million.

(c) - 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 $1.0 billion. Intersegment revenues for the Natural Gas Liquids and Natural Gas Pipelines segments were not material.


Six Months Ended June 30, 2021	Total Segments		Other and Eliminations		Total
	(Thousands of dollars)
Reconciliations of total segments to consolidated
NGL and condensate sales	$	6,302,624	$	(1,082,204)	$	5,220,420
Residue natural gas sales	685,508		—		685,508
Gathering, processing and exchange services revenue	308,681		—		308,681
Transportation and storage revenue	331,876		(7,041)		324,835
Other	45,305		(1,106)		44,199
Total revenues (a)	$	7,673,994	$	(1,090,351)	$	6,583,643

Cost of sales and fuel (exclusive of depreciation and operating costs)	$	(5,576,587)	$	1,088,098	$	(4,488,489)
Operating costs	$	(505,053)	$	(803)	$	(505,856)
Depreciation and amortization	$	(311,958)	$	(2,083)	$	(314,041)
Equity in net earnings from investments	$	59,040	$	—	$	59,040
Investments in unconsolidated affiliates	$	800,351	$	—	$	800,351
Total assets	$	22,984,286	$	452,962	$	23,437,248
Capital expenditures	$	317,464	$	6,658	$	324,122

(a) - Noncustomer revenue for the six months ended June 30, 2021, totaled $(208.2) million related primarily to losses from derivatives on commodity contracts.


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
	(Thousands of dollars)
Reconciliation of net income to total segment adjusted EBITDA
Net income	$	414,378	$	342,139	$	805,549	$	728,315
Add:
Interest expense, net of capitalized interest	170,751		184,957		342,805		370,480
Depreciation and amortization	157,757		156,921		311,615		314,041
Income taxes	130,721		110,069		253,141		232,201

Noncash compensation expense	13,014		7,825		37,747		24,108
Other corporate costs and equity AFUDC	(1,055)		2,342		540		1,627
Total segment adjusted EBITDA	$	885,566	$	804,253	$	1,751,397	$	1,670,772

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