ONEOK Winding Down Energy Services/Marketing Segment

ONEOK announced that it will discontinue operating its Energy Services segment through an accelerated wind down process, releasing non-affiliated, third-party natural gas transportation and storage contracts to interested parties.

The Energy Services segment includes various wholesale natural gas marketing activities, including the provision of physical products and risk management services through a network of contracted natural gas supply, transportation and storage capacity.

ONEOK had previously sold its retail natural gas marketing segment to Constellation Energy.

The Energy Services segment is expected to be classified as discontinued operations, effective April 1, 2014.

As a result, ONEOK expects to record a non-cash, after-tax write down of approximately $75 million in the second quarter 2013, resulting from the release of a significant portion of Energy Services' natural gas transportation and storage contracts to third parties. The company also expects to record additional non-cash, after-tax write-downs of up to $25 million between July 1, 2013, and April 1, 2014, with most occurring in 2013, subject to the release or assignment of the remaining energy services' natural gas transportation and storage contracts.

The wind down is expected to be substantially completed by April 2014; however, cash payments are expected to continue on certain natural gas transportation, storage and other contracts with terms expiring after April 2014.

In addition to these one-time charges and as a result of the accelerated wind down process, Energy Services expects pre-tax operating losses of approximately $55 million in 2013 and approximately $15 million in 2014.

"Our decision to discontinue operating our energy services segment will reduce ONEOK's earnings risk profile over the long term, while removing any earnings uncertainty associated with this segment in the near term," said John W. Gibson, ONEOK chairman and chief executive officer.

"The energy services segment continues to face challenging industry conditions that show no signs of improving. Increased natural gas supply and infrastructure, coupled with lower natural gas price volatility, have narrowed seasonal and location natural gas price differentials, resulting in limited opportunities to generate revenues to cover our fixed costs on this contracted storage and transportation capacity," Gibson stated.

"We also believe that the energy services segment no longer fits into our long-term strategy and vision. We will continue to focus our resources on gathering, processing, transporting, storing, fractionating and distributing natural gas, natural gas liquids and other energy commodities through our ONEOK Partners and natural gas distribution segments," added Gibson.

The company's ONEOK Partners segment will continue to market natural gas, natural gas liquids and condensate as a service to its producers and customers. These marketing activities typically involve buy-sell arrangements that have no commodity-price exposure.