oneok 2000 Annual Report

ONEOK 2000 SUMMARY ANNUAL REPORT

HAVE WE MET?

SURPR!SONEOK IS A DIVERSIFIED ENERGY COMPANY. We the wellhead to the marketplace. We also market w

SEmove natural gas products from holesale electricity.

WE’RE NOT YOURAVERAGE ENERGY COMPANY :)

When was the last time you took a good look at ONEOK? If morethan a year has gone by, who we are today may come as a surprise.Mostly known for our distribution business, distribution nowaccounts for less than 30 percent of ONEOK’s income. In fact, for the first time in our history, contributions from a single, nonregulated segment exceed those from distribution.

ONEOK has become a large, diversified energy corporation with anasset stronghold that lies across the prolific Mid Continent region of the United States. During the past two years, our midstreamacquisitions have vaulted us into the top 10 nationally for natural gas liquids production. Our marketing efforts reach more than 28states, and the company is a key player in the retail natural gas markets in Oklahoma and Kansas.

P R O F I T A B L E S T R A T E G Y

ONEOK’s transition has been purposeful, achieved through a seriesof events intentionally choreographed to generate earnings growth.

TO OUR SHAREHOLDERS

We set a course of action, executed that plan and now are reapingthe rewards. ONEOK’s year-end numbers epitomize an incredible2000 with momentum that continues into 2001. Diluted earningsper share were $2.96 compared with $2.09 one year ago, up 42 percent over 1999.

In last year’s annual report, we announced ONEOK’s spring 2000purchase of midstream assets from Dynegy Inc. and Kinder Morgan,Inc. Those assets, valued at nearly $878 million, enhance our MidContinent position and expand our marketing and trading presenceto California, the upper Midwest, Rocky Mountains and Gulf Coast.Although these acquisitions only contributed for nine months to our year-end earnings, their impact on our numbers is impressive.ONEOK’s overall revenues grew from $2.1 billion in 1999 to $6.6billion. Operating income generated by our gas gathering and processing operations was $110.8 million, up 410.6 percent whencompared with last year’s results.

T O T A L E N E R G Y P A C K A G E

A strong team effort by our entire business mix, blending nonregulatedwith regulated opportunities, is necessary if ONEOK is to delivershareholder value; and that’s exactly what our organization is doing.Our marketing and trading and gathering and processing activitiesare complemented by the successes of ONEOK Resources, our

45%DISTRIBUTION

26%

TRANSPORTATION& STORAGE

10%

9%8%

MARKETING& TRADING

GATHERING &PROCESSING

PRODUCTION

OTHER &ELIMINATIONS

2%

2 0 0 0 SOURCES OF

OPERATING INCOME

TRANSPORTATION& STORAGE

5%MARKETING& TRADING

PRODUCTION

OTHER &ELIMINATIONS

-1%

1 9 9 9 SOURCES OF

OPERATING INCOME

( )

29%DISTRIBUTION

19%

15%33%GATHERING &PROCESSING

production business. Focused on natural gas and oil reserve development rather than riskier exploration efforts, it posted a 96 percent success rate for completed wells during the year and hasproved reserves totaling 254.7 billion cubic feet of natural gas and4.3 million barrels of oil. At the same time, our regulated distributionbusinesses rank us ninth nationally in terms of customers served.Those operations, managed by Kansas Gas Service and OklahomaNatural Gas, serve a total of 1.4 million customers and provideONEOK stable earnings and predictable cash flow.

The company’s total energy package will become even stronger thissummer when ONEOK Power, our sixth business segment, beginsgenerating electricity. Natural gas fired generation represents onemore way that ONEOK can extract value from natural gas. Withouta doubt, ONEOK segments accomplish more working together forour shareholders than each could do standing alone.

T E R M I N A T E D M E R G E R

ONEOK continues to be engaged in litigation related to the cancelled merger with Southwest Gas Corporation. We remain committed to vigorously defending the claims against our company,yet we have not let them distract us from pursuing our businessobjectives. In December 2000, ONEOK was cleared of unfoundedracketeering charges associated with the litigation. We believe

ONEOK ultimately will be vindicated of all allegations and emerge as a stronger company because of the experience.

E M P L O Y E E S H A R E H O L D E R S

We are ever mindful that it is you, our shareholders, for whom wework. To enable all ONEOK employees to better understand yourperspective, each became a shareholder during January 2001 as theresult of a new incentive program. Last fall, we set a benchmark of$45 per share for our company and promised all 3,700 employeesone share of stock when that goal was met, plus an additional shareeach time the price reaches another $5 level beyond the $45 mark.The first celebration came December 19 when ONEOK stock closedat $45.312. The second reward was earned just nine days later whenthe stock closed at $50.5625.

S T O C K S P L I T P R O P O S E D

On January 18, 2001, ONEOK directors recommended that shareholders increase the number of authorized common stock shares from 100 million to 300 million, effecting a two-for-one split.The proposed record date for the split is May 23, 2001, with sharedistribution taking place on June 11, 2001. If approved, the actionwill increase the number of common stock shares outstanding from29.6 million shares to 59.2 million. The quarterly dividend also

would be divided in half to reflect the split. The dividend is currently paid at a rate of 31 cents per common share.

O N E O K 2 0 0 1

Intrinsic opportunities are driving ONEOK’s growth during 2001.Where possible, operations are being consolidated, allowing the company to make the best use of its assets. We continue to innovate,producing better options for our customers. We are enhancing operations, including those in the natural gas liquids markets. Asalways, we will review acquisition possibilities that could stimulatefuture earnings growth.

While ONEOK’s 2000 earnings are impressive, there are several reasons why our management team expects 2001 to be 20 percenthigher. Among those are:* A fu l l year o f contr ibut ions f rom our new mids t ream as s e t s ,* Comple t ion o f our 300-megawatt power p lant in June 2001, * Weather-normal ized rate s in Kansas e f f e c t ive December 1 , 2000,* Improved pr i ce s for product ion sa l e s .

O N E O K T O M O R R O W

ONEOK is designed with a dynamic structure, and that means itwill always be evolving, changing to create new opportunities for

shareholders, employees and customers. What will remain constantare the values upon which we were founded: integrity in business,respect for the individual and commitment to excellence.

The success ONEOK has attained is the result of careful planningand hard work on the part of many people. We are controlling ourown destiny and expect exciting results to continue. ONEOK is not your average energy company. We hope you take time to getreacquainted with us.

D A V I D L . K Y L E

C h a i r m a n , P r e s i d e n t a n dC h i e f E x e c u t i v e O f f i c e r

Tulsa, OklahomaMarch 15, 2001

PERSONAL NOTE

Company Chairman Larry W.

Brummett lost his two-year battle

with cancer on August 24, 2000, just

one week short of his 50th birthday.

Certainly, time will prove him to be

among the most creative chairmen in

ONEOK’s history. Larry played a sig-

nificant role in designing the strategy

that makes ONEOK so successful

today. His work ethic, ambition,

knowledge and humanity were gifts

that allowed him to touch our entire

industry. Larry not only had a brilliant

mind, he also had a giving heart.

His tireless work for a myriad of

charitable causes impacted countless

lives. I am humbled to serve in the

position that Larry so admirably filled.

He challenged us all to be better.

He was my best friend.

—David

ONEOK is a diversified energy company.

* Founded in 1906 as a pipeline business.* Markets and trades energy commodities, including wholesale electricity.* Involved in all aspects of the natural gas industry.* Listed on the New York Stock Exchange under the symbol OKE.

C O N T E N T S

18 Summary Financial Information24 Corporate Officers25 Board of Directors26 Glossary27 Segment Profile29 Corporate Data

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2 0 0 0 F I N A N C I A L H I G H L I G H T S(UNAUDITED)

Percent Year Ended December 31 2000 1999 Incr. (Decr.)

Consolidated Financial Information ($000)

Operating revenues $6,642,858 $2,065,360 222%Operating income $ 333,933 $ 232,400 44%Net income $ 145,607 $ 106,873 36%Capital expenditures $ 311,403 $ 274,245 19%Number of employees at year end 3,664 3,215 14%

Common Stock DataShares outstanding at year end 29,588,275 29,554,623 —Data per common share

Earnings - diluted $ 2.96 $ 2.09 42%Dividends paid $ 1.24 $ 1.24 —Book value at year end $ 24.63 $ 19.87 24%Market price range

High $ 50.56 $ 37.19 36%Low $ 21.75 $ 24.50 (11%)

Market price at year end $ 48.13 $ 25.13 92%Return on common equity 23.0% 17.78% 29%

Business Segments ($000)

Operating income Marketing $ 51,274 $ 24,180 112%Gathering and processing 110,819 21,679 411%Transportation and storage 62,158 60,448 3%Distribution 97,931 103,289 (5%)Production 15,243 18,078 (15%)Other and eliminations (3,492) 4,726 (174%)

M+RE THANMEETS THE

N E EYE.

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++36%

(2000 VS 1999 NET INCOME)

+240%(2000 VS 1995 NET INCOME)

p. 06

ONEOK is markedly different than it was two years ago. What’s been the driver? Growth in

nonregulated earnings.

The evolution that began methodically in 1995 came into its own during 2000, positioning us

for anticipated growth in 2001 and beyond. ONEOK purchased prime Mid Continent region assets,

valued at nearly $878 million, from Dynegy Inc. and Kinder Morgan, Inc. that stretch from Texas

to Kansas and cross the natural gas-rich Hugoton, Anadarko and Panhandle Basins. These

gathering, processing and marketing jewels are already proving their worth.

ONEOK’s marketing and trading business was especially boosted by the acquisition. Gas marketing

volume, which averaged 1.1 billion cubic feet per day in 1999 increased to 2.7 billion cubic feet per

day. Storage capacity was up from 29.5 billion cubic feet to 64 billion cubic feet. Helping drive our

momentum is the fact that ONEOK now has access to five major U.S. marketing hubs. Those hubs,

plus storage capabilities and contracted pipeline capacity, enable ONEOK’s marketing and trading

segment to serve customers from coast to coast and border to border.

Gathering and processing, for years a secondary segment of ONEOK’s business mix, finally made

its way into the spotlight this year. We added 13,400 miles of gathering pipeline and natural gas

processing plants with a combined capacity of approximately 1.6 billion cubic feet per day.

The result? The company’s total daily processing capacity jumped to 2.2 billion cubic feet by

year-end. Our natural gas liquids production increased by 230 percent to 69 thousand barrels

per day, clearly placing us in the top 10 nationally.

In just a few months, ONEOK will make its debut as an electricity provider, with the completion of

the $120 million Spring Creek Power Plant. Located just outside of Oklahoma City, the 300-megawatt,

natural-gas-fired generating facility will operate as a peaking plant — supplying customers with the

additional power they need during summertime high electricity demand. To ensure reliable natural

gas supply, the plant is located near the company’s Edmond natural gas storage field.

Five years ago, at the beginning of ONEOK’s transition, our net income was almost $43 million.

Today the company’s net income exceeds $145 million, and that number continues to grow.

Without a doubt, ONEOK is one company worth watching.

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ONEOK’s operating groups are dedicated to performance and profitability as a whole. Business units

in many diversified corporations operate as stand-alone entities that rarely, if ever, interact with the

others. ONEOK shareholders, however, benefit more when our company segments come together to

form a cohesive team. The result is much more valuable than the sum of individual successes.

Few natural gas marketing and trading companies, for example, are able to quickly respond to daily

market changes. Our storage capacity, however, allows ONEOK Energy Marketing and Trading to buy

or sell large packages of gas over short time horizons — even on an hour-to-hour basis. Referred to

as serving the “optionality market,” this business requires a strong balance sheet.

ONEOK’s primary operational location, the Mid Continent region of the U.S., is another critical part of

our united strategy. The region is a treasure trove of prime acreage, industry technology and a skilled

workforce. ONEOK Resources, our production company, increased its development drilling in the

Mid Continent as natural gas prices recovered during 2000 and rose to unprecedented highs. It

participated in drilling more than 90 wells during the year — the most activity in its history. ONEOK

Resources is among the lowest-cost producers in the country and was ranked among the top U.S. small

independent producers in a survey of 2000 industry trends conducted by a national consulting firm.

In order to maintain a strategy of investing in assets that strengthen and complement each other,

we occasionally divest the company of holdings that no longer are solid strategic fits. That happened

twice during 2000. During the first quarter, ONEOK sold its 42.4 percent interest in the Indian Basin

Gas Processing Plant and gathering system for $55 million. Although the plant was very successful,

its New Mexico location prevented it from supporting our other operations. In June, ONEOK Resources

sold $6 million of non-core, non-strategic gas and oil producing properties. The sale involved 143

wells that were scattered in isolated fields throughout Texas and parts of Oklahoma and Kansas.

What provides ONEOK balance for its higher-risk, upstream and midstream activities? Our regulated

distribution operations, Oklahoma Natural Gas Company and Kansas Gas Service Company. These

businesses have an almost $2.0 billion asset base. ONG serves 80 percent of Oklahoma, while KGS

customers represent about two-thirds of the Kansas retail gas market. During 2000, ONG and KGS

provided ONEOK a stable 11.6 percent return on investment and were responsible for 29.3 percent

of corporate operating income.

Nonregulated with regulated. Wellhead to burner tip. It’s a smart, powerful asset mix,and no one else in the Mid Continent can match it.

p. 08

+42%(2000 VS 1999 EARNINGS PER

DILUTED COMMON SHARE)

ALL FOR ONE.ONE FOR ALL.

p. 09

WH?T YOU REWANT TO KNO

EALLYNOW.

p. 11

!+92%p. 12

(2000 VS 1999 YEAR END COMMON STOCK MARKET PRICE)

p. 13

THAT’S NOT YAVERAGE GRO

YOUROWTH...

Admittedly, the full meaning of our fast-paced 2000 is a lot to absorb in one sitting. But don’t think

for one minute that any part of ONEOK is like those flash-in-the-pan dot coms. What happened here

is the result of measured, strategic efforts to improve earnings.

To ensure ONEOK’s overall risk exposure is kept in line, we established a Corporate Risk Control

Group. The effort formalized our procedures that identify, manage, measure and monitor overall risk

exposures. It set parameters for our marketing and trading business and created a buffer between

those making trades and those who account for them. We also implemented mark-to-market

accounting, a method specific to trading contracts and trading companies.

During 2000, we selected and began installing new Enterprise Resource Planning software that

links all ONEOK accounting and human resources systems. The change will provide unprecedented

efficiency and accuracy. Each of those attributes is a critical factor in today’s marketplace.

As the natural gas industry continues to unbundle downstream operations, more and more end-use

customers are leaning toward companies with strong balance sheets and good credit ratings. That’s

one reason why significantly all of ONEOK’s long-term debt is fixed-rate: It does not jeopardize

earnings or cash flow resulting from changes in market interest rates. Additionally, the company

has a $900 million credit line.

During May, we filed a $460 million registration statement with the Securities and Exchange

Commission that allows us to issue debt or common stock securities. It provides us with access

to additional funds for working capital, refinancing debt and making acquisitions. Meanwhile to

expand and keep our assets in shape, we invested $311 million for capital expenditures during 2000.

Another $300.8 million has been budgeted for the same purposes in 2001.

p. 16

The energy business is one segment of the economy that can be impacted by, among other things,

weather, government pricing, regulation, supply and demand issues, and competition. To minimize some

of these risks, ONEOK uses derivative instruments like future contracts and hedges. This past year,

hedges protected many of our positions as gas prices soared to all-time highs. In the case of our

production company, protective hedges actually limited its earning potential. Are we sorry we hedged?

No. It was smart business. ONEOK Resources still had a great year and will benefit from higher prices

and hedges during 2001.

Our growth strategy is successful for two reasons: We seek opportunities that will maximize existing

assets and operations, and we recognize that expansion must have a positive impact on earnings

performance. ONEOK is in a very attractive position with an excellent mix of hard and soft assets.

We know who we are and where we are headed. We believe ONEOK’s bottom line will continue to

grow by double-digit percentages. We’re in the right place, with the right assets and the right people. In our book, that’s not average, that’s WOW!

p. 17

M A N A G E M E N T ’ S R E S P O N S I B I L I T Y F O R F I N A N C I A L R E P O R T I N G

The management of ONEOK, Inc., is responsible for all information included in the Summary Annual Report, whetheraudited or unaudited.

These consolidated financial statements were prepared by management in conformity with accounting principles generally accepted in the United States of America.

The company’s system of internal controls is designed to provide reasonable assurance that assets are safeguardedagainst loss or unauthorized use and that the financial records are reliable for preparing financial statements thatpresent fairly the financial position and operating results of the company. The company’s internal auditors evaluateand test the system of internal controls.

Both KPMG LLP and the company’s internal auditors have free access to the audit committee of the Board ofDirectors, without the presence of management, to discuss accounting, auditing and financial reporting matters.

Jim KnealeSenior Vice President, Treasurer and Chief Financial Of ficer

FINANCIALSUMMARY

p. 18

This Summary Annual Report contains statements concerning company expectations or predictions of the future that are forward-looking statements within themeaning of the Private Securities Litigation Reform Act of 1995. These statements are intended to be covered by the safe harbor provisions of the Securities Actof 1933 and the Securities and Exchange Act of 1934. It is important to note that actual results of company earnings could differ materially from those projectedin such forward-looking statements.

p. 19

C O N S O L I D AT E D S TAT E M E N T S O F I N C O M E (Thousands of Dollars except per share amounts)

(UNAUDITED)

Year Ended December 31, 2000 1999

Operating Revenues 6,642,858 2,065,360 Cost of gas 5,845,726 1,318,362 Net revenues 797,132 746,998

Operating ExpensesOperations and maintenance 266,545 341,418 Depreciation, depletion, and amortization 143,351 131,195 General taxes 53,303 41,985 Total Operating Expenses 463,199 514,598 Operating Income 333,933 232,400 Other income, net 18,475 7,269 Interest expense 118,630 65,739 Income taxes 90,286 67,057 Income before cumulative effect of a change in accounting principle 143,492 106,873 Cumulative effect of a change in accounting principle, net of tax 2,115 — Net Income 145,607 106,873 Preferred stock dividends 37,100 37,182 Income Available for Common Stock $ 108,507 $ 69,691 Earnings Per Share of Common Stock

Basic $ 3.71 $ 2.24 Diluted $ 2.96 $ 2.09

Average Shares of Common Stock (Thousands)

Basic 29,224 31,127 Diluted 49,194 51,153

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C O N S O L I D AT E D B A L A N C E S H E E T S (Thousands of Dollars)

(UNAUDITED)

December 31, 2000 1999

AssetsCurrent Assets

Cash and cash equivalents $ 249 $ 72 Trade accounts and notes receivable 1,627,714 371,313 Materials and supplies 18,119 10,360 Gas in storage 57,800 124,511 Deferred income taxes 10,425 8,383 Purchased gas cost adjustment 1,578 8,105 Assets from price risk management activities 1,416,368 — Customer deposits 120,800 40,928 Other current assets 71,906 31,714

Total Current Assets 3,324,959 595,386 Property, Plant and Equipment 4,206,129 3,143,693

Accumulated depreciation, depletion, and amortization 1,110,616 1,021,915Net Property 3,095,513 2,121,778

Deferred Charges and Other AssetsRegulatory assets, net 238,605 247,486Goodwill 93,409 80,743 Assets from price risk management activities 405,666 — Investments and other 210,984 195,847

Total Deferred Charges and Other Assets 948,664 524,076 Total Assets $7,369,136 $3,241,240

Liabilities and Shareholders’ EquityCurrent Liabilities

Current maturities of long-term debt $ 10,767 $ 21,767Notes payable 824,106 462,242Accounts payable 1,256,310 237,653Accrued taxes 8,735 359 Accrued interest 24,161 16,628 Customers’ deposits 18,319 18,212 Liabilities from price risk management activities 1,296,041 —Other 96,913 29,852

Total Current Liabilities 3,535,352 786,713

Long-term Debt, excluding current maturities 1,336,082 775,074 Deferred Credits and Other Liabilities

Deferred income taxes 382,363 349,883 Liabilities from price risk management activities 543,278 —Lease obligation 137,131 —Other deferred credits 209,973 178,046

Total Deferred Credits and Other Liabilities 1,272,745 527,929 Total Liabilities 6,144,179 2,089,716

Shareholders’ EquityConvertible Preferred Stock, $0.01 par value: Series A authorized 20,000,000 shares;

issued and outstanding 19,946,448 shares at December 31, 2000 and 1999 199 199 Common stock, $0.01 par value: authorized 100,000,000 shares; issued

31,599,305 shares and outstanding 29,588,275 shares at December 31, 2000; issued 31,599,305 shares and outstanding 29,554,623 shares at December 31, 1999 316 316

Paid in capital 895,668 894,976 Unearned compensation (1,128) (1,846)Retained earnings 387,789 317,985 Treasury stock at cost: 2,011,030 shares at December 31, 2000; 2,044,682 shares

at December 31, 1999 (57,887) (60,106)at August 31, 1999 1,224,957 1,151,524

Total Liabilities and Shareholders’ Equity $7,369,136 $ 3,241,240

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C O N S O L I D AT E D C O N D E N S E D S TAT E M E N T S O F C A S H F L O W S (Thousands of Dollars)

(UNAUDITED)

Year Ended December 31, 2000 1999

Operating ActivitiesNet income $ 145,607 $ 106,873 Depreciation, depletion, and amortization 143,351 131,195 Gain on sale of assets (27,050) (1,646)Net income from equity investments (4,025) (5,623)Deferred income taxes 26,143 48,116 Changes in assets and liabilities (379,213) (135,008)

Cash Provided by (Used in) Operating Activities (95,187) 143,907

Investing ActivitiesChanges in other investments, net 68 (60,241)Acquisitions (494,904) (259,516)Capital expenditures (311,403) (274,245)Proceeds from sale of property 60,659 3,000

Cash Used in Investing Activities (745,580) (591,002)

Financing ActivitiesBorrowing of notes payable, net 361,864 152,242 Issuance of debt 590,000 496,254 Payment of debt (39,992) (60,599)Issuance of common stock — 1,380 Acquisition of treasury stock, net (453) (62,578)Dividends paid (70,475) (76,234)Acquisition and cancellation of preferred stock — (3,298)

Cash Provided by (Used in) Financing Activities 840,944 447,167 Change in Cash and Cash Equivalents 177 72 Cash and Cash Equivalents at Beginning of Period 72 — Cash and Cash Equivalents at End of Period $ 249 $ 72

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F I V E Y E A R S U M M A R Y 1 9 9 6 - 2 0 0 0(UNAUDITED)

Year Ended Year EndedDecember 31 August 31

2000 1999 1998 1997 1996

Financial Data (Millions of dollars, except per share amounts)

Operating revenues $ 6,642.9 $ 2,065.4 $ 1,820.8 $ 1,161.6 $ 1,218.6 Operating expenses, before income taxes 6,309.0 1,833.0 1,632.0 1,033.8 1,103.6 Operating income 333.9 232.4 188.8 127.8 115.0 Other income 18.5 7.3 14.6 0.3 6.0 Interest 118.6 65.7 35.1 34.0 35.2 Income taxes 90.3 67.1 66.5 34.8 33.0 Income before cumulative effect of a change

in accounting principle 143.5 106.9 101.8 59.3 52.8 Cumulative effect of change in accounting principle, net of tax 2.1 — — — —Net Income 145.6 106.9 101.8 59.3 52.8 Dividends on preferred stock 37.1 37.2 27.0 0.3 0.4 Earnings applicable to common stock $ 108.5 $ 69.7 $ 74.8 $ 59.0 $ 52.4 Earnings per share of common stock-basic $ 3.71 $ 2.24 $ 2.44 $ 2.13 $ 1.93 Earnings per share of common stock -diluted $ 2.96 $ 2.09 $ 2.23 $ 2.13 $ 1.93 Total assets at end of year $ 7,369.1 $ 3,241.2 $ 2,422.5 $ 1,237.4 $ 1,219.9 Capital expenditures $ 311.4 $ 274.2 $ 140.8 $ 112.0 $ 95.4

Capitalization at Year End (Millions of dollars)

Long-term debt 1,346.8 796.8 329.3 347.1 351.9 Short-term debt 824.1 462.3 212.0 45.0 50.2 Total debt 2,170.9 64% 1,259.1 52% 541.3 32% 392.1 46% 402.1 49%

Shareholders’ equity 1,225.0 36% 1,151.5 48% 1,168.9 68% 462.6 54% 423.7 51%

Total capitalization $ 3,395.9 $2 ,410.6 $ 1,710.2 $ 854.7 $ 825.8

CoveragesTimes interest earned 3.0 3.6 5.8 3.7 3.4Ratio of earnings to fixed charges 2.88 3.46 5.50 3.51 3.28Ratio of earnings to fixed charges and

preferred stock dividend requirement 1.93 1.84 2.52 3.48 3.24

Common Stock DataReturn on common equity 23.30% 17.78% 19.14% 13.52% 13.15%Dividends paid per share 1.24 $1.24 $1.20 $1.20 $1.18 Percent payout 41.9% 55.4% 53.8% 56.2% 61.1%Book value per share at year end 24.63 $19.87 $22.64 $16.47 $15.21Market price

High $ 50.563 $ 37.188 $ 44.250 $ 35.313 $ 28.875Low $ 21.750 $ 24.500 $ 29.750 $ 24.875 $ 20.000Close $ 48.125 $ 25.125 $ 30.063 $ 32.375 $ 27.375

Market price to book value at year-end 2.0 1.3 1.3 2.0 1.8Market price to earnings at year end 16.3 12.0 13.5 15.2 14.5Common dividend yield at year-end 2.6% 4.9% 4.0% 3.7% 4.2%Shares outstanding at year end-basic (Thousands) 29,588 29,555 31,576 28,080 27,261Shares outstanding at year end-diluted (Thousands) 49,736 49,504 51,633 28,080 27,261Number of shareholders at year end 12,067 12,797 11,768 13,189 13,267

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O P E R AT I N G S TAT I S T I C S(UNAUDITED)

Year Ended December 31, 2000 December 31, 1999 August 31, 1998

Marketing and TradingNatural gas volumes (Billions of cubic feet) 990.0 411.0 334.4 Gross margin (Mcf) 0.06 0.08 0.05 Capital expenditures (Thousands) $ 59,512 $ 17,045 $ — Total assets (Thousands) $ 3,112,653 $ 306,705 $ 130,100

Gathering and ProcessingAverage NGL’s price ($/Gal) $ 0.500 $ 0.320 $ 0.302 Average gas price ($/Mcf) $ 3.70 $ 2.42 $ 2.30 Total gas gathered (Mcf/D) 1,186,900 229,300 219,971 Total gas processed (Mcf/D) 1,111,400 187,000 198,172 Natural gas liquids sales (Millions of gallons) 1,007,343 278,838 194,580 Gas sales (MMcf) 115,180 19,675 5,771 Natural Gas Liquids by Component (%)

Ethane 37 48 42 Propane 32 27 31 Iso butane 5 5 4 Normal butane 12 9 10 Natural gasoline 14 11 13

Contracts %Percent of Proceeds 44 64 54 Fuel and Shrink 32 36 46 Fee 24 — —

Capital expenditures (Thousands) $ 32,383 $ 31,696 $ 2,235 Total assets (Thousands) $ 1,507,546 $ 368,904 $ 86,955

Transportation and StorageVolumes transported (Billions of cubic feet) 557.1 336.7 394.8 Working gas in storage (Billions of cubic feet) 21.6 41.5 47.0Capital expenditures (Thousands) $ 37,701 $ 25,393 $ 38,271 Total assets (Thousands) $ 661,894 $ 437,561 $ 351,692

DistributionVolumes (Millions of cubic feet)

Gas sales 153,449 152,724 153,490 Pipeline capacity leases and end use customer transportation 192,881 197,269 241,262

Total 346,330 349,993 394,752

Average Number of Customers at Year EndOklahoma 784,746 757,500 739,684 Kansas 633,698 627,937 652,330

Degree daysOklahoma 3,652 2,865 3,634

Percent colder (warmer) than normal (0.2)% (20.9)% (0.4)%Kansas 4,959 4,411 3,771

Percent colder (warmer) than normal 0.3% (11.8)% (6.2)%Capital expenditures (Thousands) $ 124,983 $ 113,043 $ 77,198 Total assets (Thousands) $ 2,007,351 $1,776,273 $1,771,999Customers per employee

Oklahoma 586 563 475 Kansas 555 527 489

Gross Margin per McfOklahoma

Residential $ 2.76 $ 2.99 $ 2.99 Commercial $ 1.97 $ 2.44 $ 2.40 Industrial $ 1.09 $ 1.11 $ 1.13 Pipeline capacity leases $ 0.27 $ 0.27 $ 0.24

KansasResidential $ 2.44 $ 2.43 $ 2.24 Commercial $ 1.91 $ 1.86 $ 1.75 Industrial $ 1.85 $ 2.13 $ 1.92 Pipeline capacity leases $ 0.63 $ 0.53 $ 0.56

ProductionProved reserves at year end

Gas (Billions of cubic feet) 254.7 247.0 178.0 Oil (Thousands of barrels) 4,339 4,160 3,272

ProductionGas (Billions of cubic feet) 26.7 28.4 16.8 Oil (Thousands of barrels) 400 453 330

Average priceGas (Mcf) $ 2.28 $ 2.25 $ 2.21 Oil (Bbls) $ 21.43 $ 15.54 $ 15.70

Capital expenditures (Thousands) $ 34,035 $ 63,104 $ 16,650 Total assets (Thousands) $ 364,248 $352,912 $282,765

C O R P O R AT E O F F I C E R S

ONEOK, INC.

David L. Kyle, 48Chairman of the Board, President andChief Executive Officer

John A. Gaberino Jr., 59Senior Vice President and GeneralCounsel

James C. Kneale, 49Senior Vice President, Treasurer and ChiefFinancial Officer

Deborah B. Barnes, 46Vice President, Secretary and AssociateGeneral Counsel

James M. Fallon, 44Vice President - Corporate Services

William S. Maxwell, 40Vice President - Financial Trading

D. Lamar Miller, 41Vice President and Risk Control Officer

Charles O. Moore, 38Vice President - Information Technology

David E. Roth, 45Vice President - Human Resources

Weldon L. Watson, 53Vice President - Investor Relations andCommunications

O P E R AT I O N S O F F I C E R S

DISTRIBUT ION

Eugene N. Dubay*, 52PresidentKansas Gas Service Company

Edmund J. Farrell*, 57PresidentOklahoma Natural Gas Company

David D. Arnold, 42Vice President - Customer ServiceOklahoma Natural Gas and Kansas Gas Service

William G. Eliason, 48Vice President - Gas StrategyOklahoma Natural Gas and Kansas Gas Service

Daniel C. Walker, 47Vice President - OperationsOklahoma Natural Gas and Kansas Gas Service

KANSAS GAS SERVICE COMPANY

Joseph B. Diskin, 58Vice President - Northern Operations

Larry L. Fischer, 57Vice President - Western Operations

Phyllis S. Worley, 50Vice President - Southern Operations

OKLAHOMA NATURAL GAS COMPANY

Samuel Combs III, 43Vice President - Western Region

Carl J. Holliday, 57Vice President - Eastern Region

GATHERING AND PROCESSINGTRANSPORTAT ION AND STORAGE POWER

John W. Gibson*, 48President - Energy

J. Brian Boulter, 48Vice President, Engineering andOperations - Kansas Region

William R. DeWare, 45Vice President - Marketing and Business DevelopmentONEOK Power Marketing Company

Stephan R. Guy, 46Vice President, Engineering andOperations - Oklahoma Region

Donald T. Jacobsen, 52Vice President - GatheringONEOK Producer Services, L.L.C.

Sam H. McVay Jr., 56Vice President - Business Development

Greg A. Phillips, 38Vice President, Engineering andOperations - Texas Region

John L. Sommer, 45Vice President, Gathering and Processing - Supply

Sherman W. “Pete” Walker, 49Vice President, Commercial ONEOK Gas Transportation, L.L.C.

MARKETING AND TRADING

ONEOK ENERGY MARKETING AND TRADING COMPANY

Christopher R. Skoog, 37President

Patrick J. McDonie, 40Vice President - Trading

PRODUCTION

ONEOK RESOURCES COMPANY

J. D. Holbird, 51President

George W. Drake, 51Vice President - Marketing

Kenneth D. Lovell, 46Vice President - Acquisitions andExploration

W. Clark Southmayd Jr., 42Vice President - Engineering andOperations

*Also a ONEOK Corporate Officer

O f f i c e r R e t i r e m e n t sJames T. Clark, 60, Kansas Gas Service Company Vice President - Administration,retires effective April 1, 2001, following 22 years of service.

Roy L. Clymer, 62, Oklahoma Natural Gas Company Vice President - CustomerService, retired September 1, 2000, following 38 years of service.

Barry D. Epperson, 56, ONEOK Vice President, Controller and Chief AccountingOfficer, retires effective April 1, 2001, following 30 years of service.

p. 24

D I R E C T O R S

Edwyna G. AndersonRetired General CounselDuquesne Light CompanyPittsburgh, Pennsylvania

William M. BellPresident and DirectorBank One Oklahoma, N.A.Oklahoma City, Oklahoma

Douglas R. CummingsChairmanCummings Oil CompanyOklahoma City, Oklahoma

John B. DicusPresident and Chief Operating OfficerCapitol Federal Savings BankTopeka, Kansas

William L. FordPresidentShawnee Milling CompanyShawnee, Oklahoma

David L. KyleChairman, President and Chief Executive OfficerONEOK, Inc.Tulsa, Oklahoma

Douglas T. LakeExecutive Vice President andChief Strategic OfficerWestern Resources, Inc.Topeka, Kansas

Bert H. MackiePresident and DirectorSecurity National BankEnid, Oklahoma

Douglas Ann Newsom, Ph.D.Professor, Department of JournalismTexas Christian UniversityFort Worth, Texas

Gary D. ParkerPresidentMoffitt, Parker & Company, Inc.Muskogee, Oklahoma

J. D. ScottRetired Chairman of the BoardONEOK, Inc.Tulsa, Oklahoma

B o a r d T r a n s i t i o n sStanton L. Young retired from ONEOK’s Board of Directors on April 20, 2000. Young,president of The Young Companies in Oklahoma City, tirelessly contributed his expertiseto our Board for more than 28 years. We especially appreciate his service to ONEOKduring our period of major transformation.

Howard R. Fricke, chairman of the board and chief executive officer of The SecurityBenefit Group of Companies, resigned from the ONEOK Board of Directors on February 14, 2001. Fricke served as a director for four years. He will be missed, and we wish him the best.

John B. Dicus joined ONEOK’s board of directors effective February 15, 2001. Dicus,39, is president and chief operating officer and director of Capitol Federal Savings Bankin Topeka, Kansas. He brings financial expertise and experience to our board, alongwith knowledge of Kansas where ONEOK distributes natural gas to more than two-thirdsof the state.

p. 25

C h a i r m a n E m e r i t u sC. C. IngramChairman EmeritusONEOK, Inc.Tulsa, Oklahoma

G L O S S A R Y

Dekatherm (Dt or Dth): A measure of heating value roughly equivalent to onethousand cubic feet of natural gas.

Exploitation: The optimal development of an oil and gas reservoir to extractits hydrocarbons.

Hedging: The process of reducing financial risk to adverse natural gas, oil orother commodity price movements by entering into offsetting transactions.

Fuel and Shrink Contract: Also referred to as “keep whole.” Contract in whichthe processor replaces NGLs extracted with natural gas to maintain the BTUcontent at the tailgate of the plant. It allows the owner of the gas to be “keptwhole” in terms of BTUs and allows the processor to sell the recovered NGLs.

Mark-to-Market: The daily adjustment of a transaction to reflect its fair value.Often required to calculate variations of margins and to indicate market pricesfor positions.

Natural Gas Liquids (NGL): Liquid hydrocarbons that are extracted and separated from the natural gas stream. NGL products include ethane, propane,iso butane, butane and natural gasoline.

Percent-of-Proceeds Contract: Contract in which the processor is paid a percentage of the market value of the natural gas and NGLs that are processed.

Units of Measure: Mcf Thousand cubic feetMMcf Million cubic feetBcf Billion cubic feetBbl Barrels (42 U.S. gallons)MBbl Thousand barrelsMGal Thousand gallons

When -e follows any of the above, the oil and natural gas liquids components have been converted to their equivalents in cubic feet at a rate of 6 Mcf per barrel.

p. 26

SEGMENTPROFILE p. 27

M A R K E T I N G A N D T R A D I N G

Results(For The Year Ended Dec. 31) 2000 1999

Natural gas sales ($000) $ 4,658,787 $ 960,764Natural gas volumes (MMcf) 990,033 411,002Daily Natural gas volumes (Bcf) 2.7 1.1Capital expenditures ($000) (b) $ 59,512 $ 17,045Operating income ($000) $ 51,274 $ 24,180

Highlights* Signed three major supply agreements of more than 100 million

cubic feet per day for terms of 2 to 5 years.

* Signed a new 100 million cubic feet a day two-year agreement on supply side of business with a major producer that has multiple pipeline deliveries.

* Signed several new peaking contracts with local distribution customers around the country that are within the confines of our storage deliverability.

* Exceeded $1 billion in gross revenues for the first time.

* Implemented new online portal system that provides inter face with customers and streamlines operations.

Top 2001 Strategy* Exploit trading opportunities between supply basins and

market centers.

(a) On January 1 2001, the company created a new segment, “Power,” which will include the operating results of ONEOK Power Marketing Company.

(b) The majority of capital expenditures relate to the construction of the Spring CreekPower Plant

G AT H E R I N G A N D P R O C E S S I N G


Natural gas liquids (NGL)

and condensate sales ($000) $ 536,470 $ 87,097NGL sales (MGal) 1,007,343 278,838NGL average price realized ($/gal) $ 0.50 $ 0.32Gas sales ($000) $ 426,364 $ 47,699Gas sales (MMMbtu) 115,180 19,675Gathering revenues ($000) $ 51,734 $ 13,192Capital expenditures ($000) $ 32,383 $ 31,696Operating income ($000) $ 110,819 $ 21,679

Highlights* Acquired 13,400 miles of gathering pipeline and natural gas

processing plants with a combined capacity of 1.6 billion cubic feet per day, expanding our system to West Texas.

* Produced one million barrels of brine at Bushton NGL storage facility in order to sell more natural gas liquids from storage during the winter 2000-2001 heating season.

* Sold the Indian Basin Processing Plant and gathering system for $55 million.

* Increased processing capacity in Oklahoma by about 25 million cubicfeet a day by connecting several plants together with piping and using previously unprocessed gas to fill that capacity.

* Shut down five gas plants through consolidation to better utilize capacity and reduce operating costs.

Top 2001 Strategy* Seek “back-yard” acquisitions that will facilitate consolidation and

optimization of assets while increasing percent-of-proceeds and fee-based contracts, thereby reducing exposure to keep whole contracts.

COMPANIES LOCATIONS ACTIV IT IES

ONEOK EnergyMarketing &Trading Company

Major marketing hubs in the U.S.including the Waha,Mid Continent, Katy, Rockport and Chicago.

Markets natural gas towholesale and retail customers in the UnitedStates, leases gas storage from others withdirect access to theWest Coast and theTexas intrastate market,trades wholesale elec-tricity on a limited scale.

ONEOK PowerMarketingCompany (a)

Oklahoma Conducts wholesaletrading of electricity.Building ONEOK’s SpringCreek Power Plant,scheduled to be opera-tional June 1, 2000.


ONEOK FieldServicesCompany

Oklahoma, Kansas,Texas

Conducts gas gatheringand processing. Also fractionates, stores and markets natural gas liquids (NGL) products.

ONEOK GasProcessing, L.L.C.

MARKETING PRESENCE

ONEOK FIELD SERVICES

PROCESSING PLANTS

p. 28

MAJOR MARKETING HUBS

T R A N S P O R TAT I O N A N D S T O R A G E


Volumes transported (MMcf) 557,052 336,658Capital expenditures ($000) $ 37,701 $ 25,393Operating income ($000) $ 62,158 $ 60,448

Highlights* Added 5,000 miles of transmission pipeline and 10 billion cubic feet

of additional storage capacity to assets through acquisition, and also expanded system into West Texas.

* Entered into a long-term agreement with a major power producer to provide firm natural gas transportation service of up to 85,000 dekatherms per day to its new 500 megawatt generating plant in Oklahoma.

Top 2001 Strategy* Grow throughput while operating as the lowest cost provider in all

operational locations.

D I S T R I B U T I O N


Total throughput (MMcf) 346,330 349,993Capital expenditures ($000) $ 124,983 $ 113,043Number of customers (Average) 1,418,444 1,435,647Customers per employee (Average)

Oklahoma 586 563Kansas 555 527

Operating income ($000) $ 97,931 $ 103,289

Highlights* Adjusted operations following deregulation of gas storage and

gathering in Oklahoma.

* Implemented weather-normalization rate adjustment in Kansas on December 1, 2000.

* Implemented field scheduling management system in Kansas.

* Test pilot global positioning in Oklahoma.

* Installed low-cost remote meter reading equipment for larger Oklahoma commercial customers.

* Coordinating efforts through best practices.

Top 2001 Strategy* Use best practices to continue reducing overhead and

maintenance expense.

KANSAS GAS SERVICE TERRITORY

OKLAHOMA NATURAL GAS SERVICE TERRITORY


ONEOK GasTransportation L.L.C., Mid Continent MarketCenter, Mid ContinentTransportationCompany, ONEOK WesTexTransmissionCompany


Provides affiliated andnonaffiliated compa-nies access to keynatural gas producingareas through 9,600miles of integratedpipeline systems.

ONEOK GasStorage, L.L.C..

Oklahoma,Kansas, Texas

Owns 10 undergroundstorage facilities andleases capacity to thirdparties.

ONEOK ProducerServices, L.L.C.

Oklahoma Helps producersthrough the stepsinvolved in getting natural gas from thefield to transportationsystems and storagefacilities.


OklahomaNaturalCompany

Oklahoma Provides natural gasdistribution services to 80 percent ofOklahoma, includingresidential, commercialand industrial cus-tomers. Operations are regulated by theOklahoma CorporationCommission.

Kansas GasService Company

Kansas Provides natural gasdistribution services to approximately two-thirds of Kansas, including residential,commercial and industrial customers.Operations are regulated by the KansasCorporation Commission.

ONEOK GAS TRANSPORTATION,L.L.C.

ONEOK GAS TRANSPORTATION — GATHERING

MID CONTINENT MARKET CENTER

MID CONTINENT TRANSPORTATION CO.

ONEOK WESTEX TRANSMISSION CO.

STORAGE

P R O D U C T I O N


Natural gas sales ($000) $ 60,966 $ 63,808Natural gas production (MMcf) 26,746 28,379Oil sales ($000) $ 8,571 $ 7,040Oil production (MBbls) 400 453Capital expenditures ($000) $ 34,035 $ 63,104Operating income ($000) $ 15,243 $ 18,078Other income, net ($000) (a) $ 10,600 $ 5,300Proved reserves at year end

Gas (Bcf) 250.5 247.0Oil (MBbl) 4,311 4,160

Highlights* Increased development drilling by 140 percent.

* Divested 143 non-strategic, under per forming wells for $6 million.

* Reduced company’s lifting costs by 4 cents per Mcf.

* Participated in the acquisition of $2.2 million in wells and associated leaseholds near existing production in Grady County, Oklahoma.

Top 2001 Strategy* Maximize earnings by continuing to participate in acquisition activities,

developing acreage and prospects from our existing inventory, and increasing production through the drill bit.

(a) Increased dividends from the Magnum Hunter investment led to the increase in “other income, net.”


ONEOKResourcesCompany


Produces naturalgas and oil.Participates as operator of someprojects and as anonoperator, interestpartner in others.

PRODUCTION AREAS

ONEOK, Inc. Senior Management Team (left to right)

(1) Christopher R. Skoog, President, ONEOK Energy Marketing and Trading Company

(2) David L. Kyle, Chairman of the Board, President and Chief Executive Officer, ONEOK, Inc.

(3) Edmund J. Farrell, President, Oklahoma Natural Gas Company

(4) John A. Gaberino Jr., Senior Vice President and General Counsel, ONEOK, Inc.

(5) John W. Gibson, President — Energy, ONEOK, Inc.

(6) J.D. Holbird, President, ONEOK Resources Company

(7) James C. Kneale, Senior Vice President, Treasurer and Chief Financial Officer, ONEOK, Inc.

(8) Eugene N. Dubay, President, Kansas Gas Service Company

C O R P O R AT E I N F O R M AT I O N

Annual MeetingThe annual meeting of shareholders will be heldThursday, May 17, 2001, at 10:00 a.m. at ONEOK Plaza,100 West Fifth Street, Tulsa, Oklahoma.

AuditorsKPMG LLP100 West Fifth Street, Suite 310Tulsa, OK 74103-9919

Direct Stock Purchase and Dividend Reinvestment PlanThe company’s Direct Stock and Dividend ReinvestmentPlan provides investors the opportunity to purchaseshares of common stock without payment of any brokerage fees or service charges.

Transfer Agent, Registrar and Dividend Disbursing AgentFirst Chicago Trust Company of New York, a division of EquiServeP.O. Box 2500Jersey City, New Jersey 07303Phone: (888) 764-5595Website: www.equiserve.comHearing Impaired: TDD: 201-222-4955

Credit RatingStandard & Poor’s AMoody’s Investors Service A2

Stock TradingThe common stock is listed on the New York StockExchange. The ticker symbol for ONEOK common stock isOKE. The corporate name ONEOK is used in newspaperstock listings.

ONEOK Shareholder InformationA shareholder communication service is available by phone at (800) 653-8083.

The following information may be accessed:* Faxed news releases* Transfer agent requests* Requests for mailed copies of:

(1) Annual report(2) News releases(3) 10-K(4) 10-Q(5) Proxy statement(6) Direct Stock Purchase and Dividend Reinvestment Plan (7) Prospectus

Investor Relations ContactWeldon Watson, vice president - investor relations andcommunications, by phone at (918) 588-7158 or by e-mail at [email protected]

Corporate Web SiteONEOK business and financial information is available at: www.oneok.com

W W W . O N E O K . C O M

O N E O K , I N C .

100 WEST FIFTH STREETPOST OFFICE BOX 871

TULSA, OK 74102-0871

oneok 2000 Annual Report

Economy & Finance

Transcript of oneok 2000 Annual Report