In releasing results of its first quarter 2020 financial results this week, Tulsa-based ONEOK make it clear the spread of COVID-19 and recent energy industry developments had an adverse effect on the company.
And finances might not improve anytime soon as ONEOK reported a quarterly loss of $142 million or 34 cents a share in addition to nearly $642 million in impairment charges.
” It is possible that the continued spread of COVID-19 and efforts to contain the virus, such as quarantines, closures and reduced operations of businesses will have a continued adverse impact on global and regional economic conditions…”stated ONEOK in a filing with the Securities and Exchange Commission.
The filing indicated the pandemic might not only affect the supply and demand of natural gas liquids and natural gas but also harm ONEOK’s ability to operate efficiently and effectively.
Company leaders also aren’t confident that crude price agreements with OPEC will hold.
“Failure to abide by these agreed upon crude oil production cuts may further destabilize the global oil market, which is simultaneously experiencing a limitation on crude oil storage capacity and a dramatic decrease in demand due to COVID-19, and crude oil prices may continue to decline. In addition to these global developments, several of the states where we operate are considering imposing limits on oil production, which could further impact our volume expectations,” continued the company’s SEC filing.
“If adverse global or regional economic and market conditions remain uncertain or persist, spread or deteriorate further, we may experience a material adverse impact on our business, results of operations, financial position, cash flows and/or liquidity.”
ONEOK’s impairment charges included some of its long-lived asset groups in western Oklahoma, Kansas and Wyoming’s Powder River Basin where the company said lower pricing is expected to affect drilling and production levels and as a result, the carrying values are not recoverable and exceeded their estimated fair value.
ONEOK has a $2.5 billion line of credit in place as of March 31, 2020 and no borrowings as of then. The firm also reported it had nearly $532 million of cash and cash equivalents on hand. Its working capital surplus totaled $397 million.
As for the future, ONEOK said it expects to fund longer-term financing requirements by issuing long-term notes.
In March of this year, ONE finished an underwritten public offering of $1.75 billion senior unsecured notes. Net proceeds after expenses were $1.73 billion which will be used for general corporate purposes, repayment of other existing indebtedness and funding capital expenditures.
ONEOK anticipates the remainder of its 2020 growth-capex will range from $1.4 billion to $1.8 billion.
Click here to view SEC filing.