This excerpt taken from the OKS 10-Q filed May 2, 2007.
Pipelines and Storage
Overview - Our Pipelines and Storage segment operates intrastate natural gas transmission pipelines, natural gas storage facilities, regulated natural gas liquids gathering and distribution pipelines, and non-processable natural gas gathering facilities. We also provide interstate natural gas transportation and storage service in accordance with Section 311(a) of the Natural Gas Policy Act.
In Oklahoma, we have access to the major natural gas producing areas and transport natural gas and NGLs throughout the state. We also have access to the major natural gas producing area in south central Kansas. In Texas, we are connected to the major natural gas producing areas in the Texas panhandle and the Permian Basin, and transport natural gas to the Waha Hub,
where other pipelines may be accessed for transportation east to the Houston Ship Channel market, north into the Mid-Continent market and west to the California market. Our natural gas liquids gathering connections deliver raw NGLs gathered in Oklahoma, Kansas and the Texas panhandle to our fractionation facilities and to our natural gas liquids distribution pipelines, which provide access to two of the main NGL market centers in Conway, Kansas and Mont Belvieu, Texas.
Selected Financial and Operating Information - The following tables set forth certain selected financial and operating results for our Pipelines and Storage segment for the periods indicated.
Operating Results - Our Pipelines and Storage segment reported operating income of $28.1 million for the three months ended March 31, 2007, compared with $28.7 million for the same period last year. Net margin increased $2.6 million for the three months ended March 31, 2007, compared with the same period last year. Our natural gas liquids gathering and distribution pipelines contributed $2.9 million of the net margin increase as a result of increased throughput from new connections and increased volume transported between Conway, Kansas, and Mont Belvieu, Texas, net with related costs.
Operating costs increased primarily related to increased employee-related costs and general taxes.
The increase in capital expenditures for 2007, compared with 2006 is driven primarily by our capital projects, which are discussed beginning on page 20.
This excerpt taken from the OKS 10-K filed Mar 1, 2007.
Pipelines and Storage
Selected Financial and Operating Information - The following tables set forth certain selected financial and operating results for our Pipelines and Storage segment for the period indicated.
Operating Results - We did not have a Pipelines and Storage segment prior to 2006. Our Pipelines and Storage segment reported operating income of $107.9 million for 2006 as a result of the acquisition of ONEOKs pipelines and storage assets.
Comparative Analysis of Acquired Pipelines and Storage Assets - We are providing the following information for additional analysis of the pipelines and storage assets we acquired from ONEOK. The transactions with ONEOK were accounted for at historical cost and therefore, the information is comparable between the periods. ONEOK acquired certain of these pipelines and storage assets from Koch in July 2005.
Net margin for the acquired assets increased $38.5 million for 2006, compared with 2005, primarily due to the following:
Operating costs for the acquired assets increased $9.6 million for 2006, compared with 2005, due to increased operating expense associated with the additional six months of ownership of the natural gas liquids gathering and distribution pipelines ONEOK acquired from Koch.
This excerpt taken from the OKS 8-K filed Jun 22, 2006.
PIPELINES AND STORAGE
Overview The pipeline and storage assets we acquired gather and transport natural gas and natural gas liquids and store natural gas in Oklahoma, Kansas and Texas.
Operating revenue for these assets is derived primarily from fee-based services provided to affiliates. In 2005, approximately 69 percent of the pipelines and storage revenue was generated from ONEOK affiliates. The regulated natural gas and natural gas liquids pipelines derive revenue from transportation contracts at rates that are stated in their tariffs or at discounted rates. Tariff transportation rates are established in a FERC or appropriate state jurisdictional agency proceeding known as a rate case. Tariffs specify the maximum rates customers can be charged and the general terms and conditions for pipeline transportation service. Once rates are set in a rate case, pipelines are not permitted to increase rates if costs increase or contract demand decreases without application for a new rate case, nor are they required to reduce rates based on cost savings until a new rate application is filed and completed. Pipeline tariffs also allow for services to be provided under negotiated and non-discriminatory discounted rates. As a result, earnings and cash flow depend on costs incurred, contracted capacity, the volume of gas transported and the ability to recontract capacity at acceptable rates. In Texas and Kansas, natural gas storage service is a fee-based business that may be regulated by the state in which the facility operates as well as the FERC for certain types of services. The natural gas gathering and natural gas storage assets in Oklahoma that we acquired are not subject to rate regulation and have market-based rate authority.
The pipeline assets transportation contracts include specifications regarding the receipt and delivery of natural gas at points along the pipeline systems. The type of transportation contract, either firm or interruptible service, determines the mechanism by which each customer is charged. Customers with firm service transportation agreements generally pay a fee known as a demand charge to reserve pipeline capacity, regardless of use, for the term of their contracts. Firm service transportation customers also pay a fee known as a commodity charge that is based on the volume of natural gas they transport. Customers with interruptible service transportation agreements may utilize available capacity on our pipelines after firm service transportation requests are satisfied. Interruptible service customers are assessed commodity charges only.