Item 1. FINANCIAL STATEMENTS

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Item 1. FINANCIAL STATEMENTS


ONEOK, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Unaudited)	2022		2021		2022		2021
	(Thousands of dollars, except per share amounts)
Revenues
Commodity sales	$	5,563,535	$	4,204,792	$	16,319,549	$	10,115,674
Services	349,996		331,383		1,035,312		1,004,144
Total revenues (Note J)	5,913,531		4,536,175		17,354,861		11,119,818
Cost of sales and fuel (exclusive of items shown separately below)	4,772,674		3,449,127		14,016,621		7,937,616
Operations and maintenance	238,414		225,364		683,507		644,841
Depreciation and amortization	157,102		154,542		468,717		468,583
General taxes	47,770		39,753		144,058		126,132
Other operating (income) expense, net	(1,630)		(470)		(8,649)		(1,446)
Operating income	699,201		667,859		2,050,607		1,944,092
Equity in net earnings from investments (Note H)	39,180		28,573		111,150		87,613
Allowance for equity funds used during construction	734		247		1,699		1,485
Other income (expense), net	(8,296)		1,287		(31,142)		(4,228)
Interest expense (net of capitalized interest of $16,288, $6,083, $41,527 and $16,621, respectively)	(166,939)		(184,049)		(509,744)		(554,529)
Income before income taxes	563,880		513,917		1,622,570		1,474,433
Income taxes	(132,129)		(121,899)		(385,270)		(354,100)
Net income	431,751		392,018		1,237,300		1,120,333
Less: Preferred stock dividends	275		275		825		825
Net income available to common shareholders	$	431,476	$	391,743	$	1,236,475	$	1,119,508

Basic EPS (Note G)	$	0.96	$	0.88	$	2.76	$	2.51

Diluted EPS (Note G)	$	0.96	$	0.88	$	2.76	$	2.50
Average shares (thousands)
Basic	447,677		446,634		447,417		446,288
Diluted	448,217		447,635		448,268		447,117

See accompanying Notes to Consolidated Financial Statements.

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ONEOK, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Unaudited)	2022		2021		2022		2021
	(Thousands of dollars)
Net income	$	431,751	$	392,018	$	1,237,300	$	1,120,333
Other comprehensive income (loss), net of tax
Change in fair value of derivatives, net of tax of $(31,749), $39,299, $(16,951) and $81,134, respectively	106,289		(131,566)		56,747		(271,622)
Derivative amounts reclassified to net income, net of tax of $(16,116), $(19,845), $(56,876) and $(42,722), respectively	53,953		66,438		190,411		143,029
Change in retirement and other postretirement benefit plan obligations, net of tax of $(873), $(1,355), $(2,651) and $(4,009), respectively	2,922		4,538		8,874		13,423
Other comprehensive income of unconsolidated affiliates, net of tax of $(1,230), $(60), $(4,733) and $(1,429), respectively	4,118		197		15,846		4,783
Total other comprehensive income (loss), net of tax	167,282		(60,393)		271,878		(110,387)
Comprehensive income	$	599,033	$	331,625	$	1,509,178	$	1,009,946

See accompanying Notes to Consolidated Financial Statements.

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ONEOK, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS

		September 30,		December 31,
(Unaudited)		2022		2021
Assets	(Thousands of dollars)
Current assets
Cash and cash equivalents		$	22,215	$	146,391
Accounts receivable, net		1,729,192		1,441,786
Materials and supplies		155,158		153,019
NGLs and natural gas in storage		538,018		427,880
Commodity imbalances		39,526		39,609
Other current assets		281,213		165,689
Total current assets		2,765,322		2,374,374
Property, plant and equipment
Property, plant and equipment		24,727,153		23,820,539
Accumulated depreciation and amortization		4,937,352		4,500,665
Net property, plant and equipment		19,789,801		19,319,874
Investments and other assets
Investments in unconsolidated affiliates		803,807		797,613
Goodwill and net intangible assets		755,474		763,295

Other assets		324,839		366,457
Total investments and other assets		1,884,120		1,927,365
Total assets		$	24,439,243	$	23,621,613

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ONEOK, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Continued)
		September 30,		December 31,
(Unaudited)		2022		2021
Liabilities and equity	(Thousands of dollars)
Current liabilities
Current maturities of long-term debt (Note D)		$	925,000	$	895,814
Short-term borrowings (Note D)		901,277		—
Accounts payable		1,658,904		1,332,391

Commodity imbalances		254,076		309,054

Accrued interest		120,424		235,602
Operating lease liability		12,417		13,783
Other current liabilities		266,540		397,975
Total current liabilities		4,138,638		3,184,619
Long-term debt, excluding current maturities (Note D)		11,950,660		12,747,636
Deferred credits and other liabilities
Deferred income taxes		1,592,697		1,166,690
Operating lease liability		69,676		75,636
Other deferred credits		375,303		431,869
Total deferred credits and other liabilities		2,037,676		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 September 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 446,947,691 shares at September 30, 2022; issued 474,916,234 shares and outstanding 446,138,177 shares at December 31, 2021		4,749		4,749
Paid-in capital		7,218,495		7,213,861
Accumulated other comprehensive loss (Note F)		(199,473)		(471,351)
Retained earnings		—		—
Treasury stock, at cost: 27,968,543 shares at September 30, 2022, and 28,778,057 shares at December 31, 2021		(711,502)		(732,096)
Total equity		6,312,269		6,015,163
Total liabilities and equity		$	24,439,243	$	23,621,613

See accompanying Notes to Consolidated Financial Statements.

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ONEOK, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
	Nine Months Ended
	September 30,
(Unaudited)	2022		2021
	(Thousands of dollars)
Operating activities
Net income	$	1,237,300	$	1,120,333
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	468,717		468,583

Equity in net earnings from investments	(111,150)		(87,613)
Distributions received from unconsolidated affiliates	109,655		88,389
Deferred income taxes	344,812		344,808



Other, net	45,914		57,479
Changes in assets and liabilities:
Accounts receivable	(260,213)		(687,031)
NGLs and natural gas in storage, net of commodity imbalances	(165,033)		(280,839)
Accounts payable	296,510		756,072


Risk-management assets and liabilities	47,009		(254,163)

Other assets and liabilities, net	(148,015)		(34,856)
Cash provided by operating activities	1,865,506		1,491,162
Investing activities
Capital expenditures (less allowance for equity funds used during construction)	(886,041)		(490,329)

Distributions received from unconsolidated affiliates in excess of cumulative earnings	18,014		19,188
Other, net	4,171		(4,286)

Cash used in investing activities	(863,856)		(475,427)
Financing activities
Dividends paid	(1,253,402)		(1,250,204)
Short-term borrowings, net	901,277		—
Issuance of long-term debt	120,000		—

Repayment of long-term debt	(895,814)		(68,787)


Other, net	2,113		3,097
Cash used in financing activities	(1,125,826)		(1,315,894)
Change in cash and cash equivalents	(124,176)		(300,159)
Cash and cash equivalents at beginning of period	146,391		524,496
Cash and cash equivalents at end of period	$	22,215	$	224,337

See accompanying Notes to Consolidated Financial Statements.

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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
Net income	—	—	—		—		—
Other comprehensive income (Note F)	—	—	—		—		—
Preferred stock dividends - $13.75 per share (Note E)	—	—	—		—		—
Common stock issued	—	—	—		—		3,701
Common stock dividends - $0.935 per share (Note E)	—	—	—		—		13,555
Other, net	—	—	—		—		10,782
September 30, 2022	20,000	474,916,234	$	—	$	4,749	$	7,218,495

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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
Net income	—		431,751		—		431,751
Other comprehensive income (Note F)	167,282		—		—		167,282
Preferred stock dividends - $13.75 per share (Note E)	—		(275)		—		(275)
Common stock issued	—		—		2,320		6,021
Common stock dividends - $0.935 per share (Note E)	—		(431,476)		—		(417,921)
Other, net	—		—		—		10,782
September 30, 2022	$	(199,473)	$	—	$	(711,502)	$	6,312,269

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

(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
Net income	—	—	—		—		—
Other comprehensive loss	—	—	—		—		—
Preferred stock dividends - $13.75 per share	—	—	—		—		—
Common stock issued	—	—	—		—		3,237
Common stock dividends - $0.935 per share	—	—	—		—		(25,204)
Other, net	—	—	—		—		9,888
September 30, 2021	20,000	474,916,234	$	—	$	4,749	$	7,235,255

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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, 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
Net income	—		392,018		—		392,018
Other comprehensive loss	(60,393)		—		—		(60,393)
Preferred stock dividends - $13.75 per share	—		(275)		—		(275)
Common stock issued	—		—		2,961		6,198
Common stock dividends - $0.935 per share	—		(391,743)		—		(416,947)
Other, net	—		—		—		9,888
September 30, 2021	$	(661,836)	$	—	$	(737,293)	$	5,840,875

See accompanying Notes to Consolidated Financial Statements.

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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. Certain reclassifications have been made in the prior year Consolidated Financial Statements to conform to the current year presentation. These unaudited Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements in our Annual Report.

Goodwill Impairment Review - 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. At July 1, 2022, we assessed qualitative factors to determine whether it was more likely than not that the fair value of reporting units with goodwill are less than their carrying amount. After assessing qualitative factors (including macroeconomic conditions, industry and market considerations, costs and overall financial performance), we determined that it was more likely than not that the fair value of the Natural Gas Pipelines and Natural Gas Liquids reporting units were not less than their respective carrying value, that no further testing was necessary and that goodwill was not considered impaired.

Medford Incident - On July 9, 2022, a fire occurred at our 210 MBbl/d Medford, Oklahoma, natural gas liquids fractionation facility. All personnel were safe and accounted for with evacuations of local residents taken as a precautionary measure. While the facility remains inoperable, we continue to provide midstream services through our integrated NGL pipeline system between the Mid-Continent and Gulf Coast regions, along with our fractionation and storage assets and arrangements with industry peers. 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 our insurance policies and any applicable sub-limits, we have property damage and business interruption 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. As a result of our insurance coverage, we do not expect 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.

In September 2022, we received notice that our insurers agreed to pay an unallocated first installment of insurance proceeds of $100 million. As of November 2, 2022, we have received approximately $45 million of this amount and expect to receive the remainder within the next 30 days. We have applied the cash received to the outstanding insurance receivables discussed below.

In third quarter 2022, we recorded a partial impairment charge of $6.7 million, which represents the value associated with certain Medford facility property, based on our limited assessments to date and related estimates and assumptions. We recorded a receivable of $6.7 million that was probable of recovery and fully offsets our property losses. Any insurance proceeds attributable to property damage in excess of our recognized property losses are considered a gain contingency and not recognized until realizable.

Our business interruption insurance provides coverage including, but not limited to (i) incurred costs and losses that are either unavoidable or incurred to mitigate or reduce losses and (ii) lost earnings. We record receivables for incurred costs and losses related to our business interruption coverage for the amount probable of recovery, not to exceed the actual losses incurred. Lost earnings claims under our business interruption coverage are considered a gain contingency and not recognized until realizable. In the three and nine months ended September 30, 2022, we recorded receivables of $21.7 million, related primarily to third-party fractionation costs incurred subsequent to the 45-day business interruption waiting period, that are probable of recovery, with an offset to the income statement where the actual losses incurred were recorded. The following table sets forth the impact of this business interruption insurance by income statement caption for the three and nine months ended September 30, 2022:

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	September 30, 2022
	(Thousands of dollars)
Commodity sales revenue (a)	$	17,618
Services revenue	$	1,249
Cost of sales and fuel	$	2,856

(a) - Represents third-party fractionation costs. Pursuant to ASC 606 our third-party fractionation agreements are considered commodity sales contracts as a third-party assumed control of the NGL raw feed prior to performing the fractionation services. Therefore, incurred costs associated with these third-party fractionation agreements were recorded as a reduction of the commodity sales price in commodity sales rather than as costs of sales and fuel.

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 September 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.

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


	September 30, 2022
	Level 1		Level 2		Level 3		Total - Gross		Netting (a)		Total - Net
	(Thousands of dollars)
Derivative assets
Commodity contracts
Financial contracts	$	10,959	$	134,356	$	91,384	$	236,699	$	(236,699)	$	—
Interest-rate contracts	—		67,377		—		67,377		—		67,377
Total derivative assets	$	10,959	$	201,733	$	91,384	$	304,076	$	(236,699)	$	67,377
Derivative liabilities
Commodity contracts
Financial contracts	$	(112,578)	$	(104,047)	$	(40,132)	$	(256,757)	$	256,757	$	—


Total derivative liabilities	$	(112,578)	$	(104,047)	$	(40,132)	$	(256,757)	$	256,757	$	—

(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 September 30, 2022, we held no cash and posted $110.0 million of cash with various counterparties, including $20.1 million of cash collateral that is offsetting derivative net liability positions under master-netting arrangements in the table above. The remaining $89.9 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				Nine Months Ended
	September 30,				September 30,
Derivative Assets (Liabilities)	2022		2021		2022		2021
	(Thousands of dollars)
Net liabilities at beginning of period	$	(110,396)	$	(121,750)	$	(114,283)	$	(31,321)
Total changes in fair value:

Settlements included in net income (a)	39,446		46,797		78,932		28,028

New Level 3 derivatives included in other comprehensive income (loss) (b)	(360)		(23,151)		73,168		(129,805)
Unrealized change included in other comprehensive income (loss) (b)	122,562		(69,104)		13,435		(34,110)
Net assets (liabilities) at end of period	$	51,252	$	(167,208)	$	51,252	$	(167,208)

(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.

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During the three and nine months ended September 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 $11.5 billion and $15.6 billion at September 30, 2022, and December 31, 2021, respectively. The book value of our consolidated long-term debt, including current maturities, was $12.9 billion and $13.6 billion at September 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

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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 September 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 September 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:


		September 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)		$	236,699	$	(256,757)	$	204,161	$	(303,740)


Interest-rate contracts	Other current assets/liabilities	67,377		—		—		(145,524)

Total derivatives designated as hedging instruments		$	304,076	$	(256,757)	$	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 September 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 $20.1 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:


		September 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	(46.4)		(32.3)

- Crude oil and NGLs (MMBbl)	Futures	(12.4)		(10.0)

Basis
- Natural gas (Bcf)	Futures	(46.3)		(30.5)
Interest-rate contracts (Billions of dollars)	Swaps	$	1.1	$	1.1

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


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
2022			2021			2022			2021
	(Thousands of dollars)
Commodity contracts	$	69,430		$	(171,665)		$	(139,203)		$	(410,572)
Interest-rate contracts	68,608			800			212,901			57,816
Total unrealized change in fair value of cash flow hedges in other comprehensive income (loss)	$	138,038		$	(170,865)		$	73,698		$	(352,756)

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				Nine Months Ended
September 30,				September 30,
2022		2021		2022		2021
		(Thousands of dollars)
Commodity contracts	Commodity sales revenues	$	(77,938)	$	(223,741)	$	(546,506)	$	(439,421)
	Cost of sales and fuel	17,479		147,360		327,782		283,153
Interest-rate contracts	Interest expense	(9,610)		(9,902)		(28,563)		(29,483)
Total change in fair value of cash flow hedges reclassified from accumulated other comprehensive loss into net income on derivatives		$	(70,069)	$	(86,283)	$	(247,287)	$	(185,751)

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

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D. DEBT

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


	September 30, 2022		December 31, 2021
	(Thousands of dollars)
Commercial paper outstanding, bearing a weighted average interest rate of 3.8% as of September 30, 2022	$	901,277	$	—
Senior unsecured obligations:

$900,000 at 3.375% due October 2022	—		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	13,882,172		13,756,709
Unamortized portion of terminated swaps	10,308		11,596
Unamortized debt issuance costs and discounts	(115,543)		(124,855)
Current maturities of long-term debt	(925,000)		(895,814)
Short-term borrowings (a)	(901,277)		—
Long-term debt	$	11,950,660	$	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 September 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

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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 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.

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, May 2022 and August 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 November 1, 2022, payable November 14, 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, May 2022, and August 2022. Dividends totaling $0.3 million were declared for the Series E Preferred Stock and are payable November 14, 2022.

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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 before reclassifications	56,747		170		14,958		71,875
Amounts reclassified to net income (b)	190,411		8,704		888		200,003
Other comprehensive income	247,158		8,874		15,846		271,878
September 30, 2022	$	(105,157)	$	(98,785)	$	4,469	$	(199,473)

(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 September 30, 2022, representing unrealized gains (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 27 months (a)	$	(15,711)
Settled interest-rate swaps to be recognized over the life of the long-term, fixed-rate debt (b)	(141,326)
Interest-rate swaps with future settlement dates expected to be amortized over the life of long-term debt	51,880
Accumulated other comprehensive loss at September 30, 2022	$	(105,157)

(a) - Based on commodity prices on September 30, 2022, we expect net losses of $14.7 million, net of tax, will be reclassified into earnings during the next 12 months.

(b) - We expect net losses of $19.0 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 September 30, 2022
	Income		Shares	Per Share Amount
	(Thousands, except per share amounts)
Basic EPS
Net income available for common stock	$	431,476	447,677	$	0.96
Diluted EPS
Effect of dilutive securities	—		540
Net income available for common stock and common stock equivalents	$	431,476	448,217	$	0.96

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	Three Months Ended September 30, 2021
	Income		Shares	Per Share Amount
	(Thousands, except per share amounts)
Basic EPS
Net income available for common stock	$	391,743	446,634	$	0.88
Diluted EPS
Effect of dilutive securities	—		1,001
Net income available for common stock and common stock equivalents	$	391,743	447,635	$	0.88


	Nine Months Ended September 30, 2022
	Income		Shares	Per Share Amount
	(Thousands, except per share amounts)
Basic EPS
Net income available for common stock	$	1,236,475	447,417	$	2.76
Diluted EPS
Effect of dilutive securities	—		851
Net income available for common stock and common stock equivalents	$	1,236,475	448,268	$	2.76


	Nine Months Ended September 30, 2021
	Income		Shares	Per Share Amount
	(Thousands, except per share amounts)
Basic EPS
Net income available for common stock	$	1,119,508	446,288	$	2.51
Diluted EPS
Effect of dilutive securities	—		829
Net income available for common stock and common stock equivalents	$	1,119,508	447,117	$	2.50

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				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
	(Thousands of dollars)
Northern Border Pipeline	$	16,744	$	14,634	$	53,216	$	47,459
Roadrunner	9,600		8,056		28,041		23,407
Overland Pass Pipeline	10,486		5,241		23,379		12,952
Other	2,350		642		6,514		3,795
Equity in net earnings from investments	$	39,180	$	28,573	$	111,150	$	87,613

We incurred expenses in transactions with unconsolidated affiliates of $25.4 million and $16.2 million for the three months ended September 30, 2022 and 2021, respectively, and $55.5 million and $44.2 million for the nine months ended September 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.

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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	(34.7)
Net additions	46.6
Balance at September 30, 2022 (b)	$	63.4

(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 $34.6 million and $28.8 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 September 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 September 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	$	105.4
2023	409.3
2024	346.1
2025	253.5
2026 and beyond	1,052.4
Total estimated transaction price allocated to unsatisfied performance obligations	$	2,166.7

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

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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 September 30, 2022	Natural Gas Gathering and Processing		Natural Gas Liquids (a)		Natural Gas Pipelines (b)		Total Segments
	(Thousands of dollars)
NGL and condensate sales	$	990,020	$	4,749,230	$	—	$	5,739,250
Residue natural gas sales	824,558		—		2,889		827,447
Gathering, processing and exchange services revenue	36,571		139,302		—		175,873
Transportation and storage revenue	—		39,884		133,789		173,673
Other	7,453		2,533		250		10,236
Total revenues (c)	1,858,602		4,930,949		136,928		6,926,479

Cost of sales and fuel (exclusive of depreciation and operating costs)	(1,460,727)		(4,316,327)		(4,460)		(5,781,514)
Operating costs	(98,197)		(144,586)		(43,823)		(286,606)
Equity in net earnings from investments	1,676		11,159		26,345		39,180
Noncash compensation expense and other	2,512		3,648		2,096		8,256
Segment adjusted EBITDA	$	303,866	$	484,843	$	117,086	$	905,795

Depreciation and amortization	$	(65,107)	$	(75,558)	$	(15,344)	$	(156,009)


Capital expenditures	$	104,754	$	169,175	$	39,644	$	313,573

(a) - Our Natural Gas Liquids segment has regulated and nonregulated operations. Our Natural Gas Liquids segment’s regulated operations had revenues of $671.8 million, of which $620.9 million related to revenues within the segment, and cost of sales and fuel of $205.0 million.

(b) - Our Natural Gas Pipelines segment has regulated and nonregulated operations. Our Natural Gas Pipelines segment’s regulated operations had revenues of $73.2 million and cost of sales and fuel of $10.3 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 $1.0 billion. Intersegment revenues for the Natural Gas Liquids and Natural Gas Pipelines segments were not material.

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Three Months Ended September 30, 2022	Total Segments		Other and Eliminations		Total
	(Thousands of dollars)
Reconciliations of total segments to consolidated
NGL and condensate sales	$	5,739,250	$	(1,005,882)	$	4,733,368
Residue natural gas sales	827,447		—		827,447
Gathering, processing and exchange services revenue	175,873		—		175,873
Transportation and storage revenue	173,673		(2,214)		171,459
Other	10,236		(4,852)		5,384
Total revenues (a)	$	6,926,479	$	(1,012,948)	$	5,913,531

Cost of sales and fuel (exclusive of depreciation and operating costs)	$	(5,781,514)	$	1,008,840	$	(4,772,674)
Operating costs	$	(286,606)	$	422	$	(286,184)
Depreciation and amortization	$	(156,009)	$	(1,093)	$	(157,102)
Equity in net earnings from investments	$	39,180	$	—	$	39,180


Capital expenditures	$	313,573	$	13,158	$	326,731

(a) - Noncustomer revenue for the three months ended September 30, 2022, totaled $(56.5) million related primarily to losses from derivatives on commodity contracts.


Three Months Ended September 30, 2021	Natural Gas Gathering and Processing		Natural Gas Liquids (a)		Natural Gas Pipelines (b)		Total Segments
	(Thousands of dollars)
NGL and condensate sales	$	815,993	$	3,853,078	$	—	$	4,669,071
Residue natural gas sales	370,801		—		19		370,820
Gathering, processing and exchange services revenue	35,395		133,574		—		168,969
Transportation and storage revenue	—		40,465		120,294		160,759
Other	6,294		2,499		167		8,960
Total revenues (c)	1,228,483		4,029,616		120,480		5,378,579

Cost of sales and fuel (exclusive of depreciation and operating costs)	(913,931)		(3,377,903)		(344)		(4,292,178)
Operating costs	(95,210)		(128,809)		(41,020)		(265,039)
Equity in net earnings from investments	499		5,384		22,690		28,573
Noncash compensation expense and other	9,816		3,871		920		14,607
Segment adjusted EBITDA	$	229,657	$	532,159	$	102,726	$	864,542

Depreciation and amortization	$	(63,750)	$	(74,986)	$	(14,821)	$	(153,557)

Capital expenditures	$	80,839	$	53,778	$	24,587	$	159,204

(a) - Our Natural Gas Liquids segment has regulated and nonregulated operations. Our Natural Gas Liquids segment’s regulated operations had revenues of $618.8 million, of which $567.7 million related to revenues within the segment, and cost of sales and fuel of $160.0 million.

(b) - Our Natural Gas Pipelines segment has regulated and nonregulated operations. Our Natural Gas Pipelines segment’s regulated operations had revenues of $72.4 million and cost of sales and fuel of $3.9 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 $837.7 million. Intersegment revenues for the Natural Gas Liquids and Natural Gas Pipelines segments were not material.

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Three Months Ended September 30, 2021	Total Segments		Other and Eliminations		Total
	(Thousands of dollars)
Reconciliations of total segments to consolidated
NGL and condensate sales	$	4,669,071	$	(838,279)	$	3,830,792
Residue natural gas sales	370,820		—		370,820
Gathering, processing and exchange services revenue	168,969		—		168,969
Transportation and storage revenue	160,759		(3,500)		157,259
Other	8,960		(625)		8,335
Total revenues (a)	$	5,378,579	$	(842,404)	$	4,536,175

Cost of sales and fuel (exclusive of depreciation and operating costs)	$	(4,292,178)	$	843,051	$	(3,449,127)
Operating costs	$	(265,039)	$	(78)	$	(265,117)
Depreciation and amortization	$	(153,557)	$	(985)	$	(154,542)

Equity in net earnings from investments	$	28,573	$	—	$	28,573
Capital expenditures	$	159,204	$	7,003	$	166,207

(a) - Noncustomer revenue for the three months ended September 30, 2021, totaled $(178.7) million related primarily to losses from derivatives on commodity contracts.


Nine Months Ended September 30, 2022	Natural Gas Gathering and Processing		Natural Gas Liquids (a)		Natural Gas Pipelines (b)		Total Segments
	(Thousands of dollars)
NGL and condensate sales	$	3,033,568	$	14,308,502	$	—	$	17,342,070
Residue natural gas sales	2,035,330		—		30,254		2,065,584
Gathering, processing and exchange services revenue	104,072		415,073		—		519,145
Transportation and storage revenue	—		126,988		387,211		514,199
Other	17,558		7,920		689		26,167
Total revenues (c)	5,190,528		14,858,483		418,154		20,467,165

Cost of sales and fuel (exclusive of depreciation and operating costs)	(4,147,901)		(12,948,769)		(22,196)		(17,118,866)
Operating costs	(289,376)		(416,491)		(126,231)		(832,098)
Equity in net earnings from investments	4,906		24,986		81,258		111,150
Noncash compensation expense and other	12,607		11,624		5,610		29,841
Segment adjusted EBITDA	$	770,764	$	1,529,833	$	356,595	$	2,657,192

Depreciation and amortization	$	(192,960)	$	(225,865)	$	(46,633)	$	(465,458)
Investments in unconsolidated affiliates	$	28,262	$	413,877	$	361,668	$	803,807
Total assets	$	7,079,315	$	14,987,107	$	2,204,942	$	24,271,364
Capital expenditures	$	321,469	$	444,875	$	82,135	$	848,479

(a) - Our Natural Gas Liquids segment has regulated and nonregulated operations. Our Natural Gas Liquids segment’s regulated operations had revenues of $1.9 billion, of which $1.7 billion related to revenues within the segment, and cost of sales and fuel of $503.3 million.

(b) - Our Natural Gas Pipelines segment has regulated and nonregulated operations. Our Natural Gas Pipelines segment’s regulated operations had revenues of $240.5 million and cost of sales and fuel of $32.6 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 $3.1 billion. Intersegment revenues for the Natural Gas Liquids and Natural Gas Pipelines segments were not material.

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Nine Months Ended September 30, 2022	Total Segments		Other and Eliminations		Total
	(Thousands of dollars)
Reconciliations of total segments to consolidated
NGL and condensate sales	$	17,342,070	$	(3,095,907)	$	14,246,163
Residue natural gas sales	2,065,584		(332)		2,065,252
Gathering, processing and exchange services revenue	519,145		—		519,145
Transportation and storage revenue	514,199		(6,356)		507,843
Other	26,167		(9,709)		16,458
Total revenues (a)	$	20,467,165	$	(3,112,304)	$	17,354,861

Cost of sales and fuel (exclusive of depreciation and operating costs)	$	(17,118,866)	$	3,102,245	$	(14,016,621)
Operating costs	$	(832,098)	$	4,533	$	(827,565)
Depreciation and amortization	$	(465,458)	$	(3,259)	$	(468,717)
Equity in net earnings from investments	$	111,150	$	—	$	111,150
Investments in unconsolidated affiliates	$	803,807	$	—	$	803,807
Total assets	$	24,271,364	$	167,879	$	24,439,243
Capital expenditures	$	848,479	$	37,562	$	886,041

(a) - Noncustomer revenue for the nine months ended September 30, 2022, totaled $(363.9) million related primarily to losses from derivatives on commodity contracts.


Nine Months Ended September 30, 2021	Natural Gas Gathering and Processing		Natural Gas Liquids (a)		Natural Gas Pipelines (b)		Total Segments
	(Thousands of dollars)
NGL and condensate sales	$	1,874,183	$	9,097,512	$	—	$	10,971,695
Residue natural gas sales	940,850		—		115,478		1,056,328
Gathering, processing and exchange services revenue	101,221		376,429		—		477,650
Transportation and storage revenue	—		127,057		365,578		492,635
Other	15,422		38,161		682		54,265
Total revenues (c)	2,931,676		9,639,159		481,738		13,052,573

Cost of sales and fuel (exclusive of depreciation and operating costs)	(2,019,723)		(7,838,141)		(10,901)		(9,868,765)
Operating costs	(266,237)		(382,012)		(121,843)		(770,092)
Equity in net earnings from investments	2,669		14,078		70,866		87,613
Noncash compensation expense and other	15,254		14,994		3,737		33,985
Segment adjusted EBITDA	$	663,639	$	1,448,078	$	423,597	$	2,535,314

Depreciation and amortization	$	(198,050)	$	(223,679)	$	(43,786)	$	(465,515)
Investments in unconsolidated affiliates	$	25,734	$	417,573	$	353,926	$	797,233
Total assets	$	6,725,753	$	14,898,568	$	2,129,406	$	23,753,727
Capital expenditures	$	177,362	$	225,766	$	73,540	$	476,668

(a) - Our Natural Gas Liquids segment has regulated and nonregulated operations. Our Natural Gas Liquids segment’s regulated operations had revenues of $1.8 billion, of which $1.6 billion related to revenues within the segment, and cost of sales and fuel of $449.1 million.

(b) - Our Natural Gas Pipelines segment has regulated and nonregulated operations. Our Natural Gas Pipelines segment’s regulated operations had revenues of $323.2 million and cost of sales and fuel of $20.5 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 $1.9 billion. Intersegment revenues for the Natural Gas Liquids and Natural Gas Pipelines segments were not material.

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Nine Months Ended September 30, 2021	Total Segments		Other and Eliminations		Total
	(Thousands of dollars)
Reconciliations of total segments to consolidated
NGL and condensate sales	$	10,971,695	$	(1,920,483)	$	9,051,212
Residue natural gas sales	1,056,328		—		1,056,328
Gathering, processing and exchange services revenue	477,650		—		477,650
Transportation and storage revenue	492,635		(10,541)		482,094
Other	54,265		(1,731)		52,534
Total revenues (a)	$	13,052,573	$	(1,932,755)	$	11,119,818

Cost of sales and fuel (exclusive of depreciation and operating costs)	$	(9,868,765)	$	1,931,149	$	(7,937,616)
Operating costs	$	(770,092)	$	(881)	$	(770,973)
Depreciation and amortization	$	(465,515)	$	(3,068)	$	(468,583)
Equity in net earnings from investments	$	87,613	$	—	$	87,613
Investments in unconsolidated affiliates	$	797,233	$	—	$	797,233
Total assets	$	23,753,727	$	118,604	$	23,872,331
Capital expenditures	$	476,668	$	13,661	$	490,329

(a) - Noncustomer revenue for the nine months ended September 30, 2021, totaled $(386.9) million related primarily to losses from derivatives on commodity contracts.


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
	(Thousands of dollars)
Reconciliation of net income to total segment adjusted EBITDA
Net income	$	431,751	$	392,018	$	1,237,300	$	1,120,333
Add:
Interest expense, net of capitalized interest	166,939		184,049		509,744		554,529
Depreciation and amortization	157,102		154,542		468,717		468,583
Income taxes	132,129		121,899		385,270		354,100

Noncash compensation expense	15,229		12,978		52,976		37,086
Other corporate costs and equity AFUDC	2,645		(944)		3,185		683
Total segment adjusted EBITDA	$	905,795	$	864,542	$	2,657,192	$	2,535,314

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