ONEOK Inc. (NYSE:OKE)

The analysis of the reported debt data over the five-year period reveals several noteworthy trends and fluctuations in different categories of debt and liabilities.

Current maturities of long-term debt

This category exhibits significant variability. Starting at a high value in 2018 of approximately 508 million, it sharply decreased to about 7.65 million in 2019 and 2020, before surging dramatically again in 2021 and 2022 to approximately 896 million and 925 million respectively. This pattern indicates substantial refinancing or repayment activity, with large portions of long-term debt becoming due in the later years.

Short-term borrowings

Short-term borrowings were absent in most years, appearing only in 2019 with a recorded value of 220 million. This suggests that the company utilized short-term borrowings selectively or intermittently during the observed period.

Current finance lease liability

The current finance lease liability shows a consistent upward trend, gradually increasing from 1.8 million in 2018 to nearly 3 million by the end of 2022. This steady increase may reflect the company’s growing dependence on leased assets in the short term.

Long-term debt, excluding current maturities

Long-term debt follows an overall increasing trend until 2020, starting at approximately 8.87 billion in 2018 and peaking at around 14.23 billion in 2020. Afterward, it decreases to approximately 12.75 billion in 2021 and slightly declines again to about 12.70 billion in 2022. This trend illustrates a buildup of long-term obligations up to 2020, followed by a modest reduction or restructuring in the subsequent years.

Noncurrent finance lease liability

This liability demonstrates a gradual decline over the period, moving from 26.2 million in 2018 down to about 19.3 million in 2022. Such a decrease points to diminishing reliance on long-term leased assets or successful repayments or reclassifications within lease agreements.

Total debt and finance lease liability (carrying amount)

The aggregate debt and lease liability amount rose significantly from approximately 9.41 billion in 2018 to a peak of about 14.26 billion in 2020. Subsequently, the total slightly declined to around 13.67 billion in 2021 and remained relatively stable at 13.64 billion in 2022. This overall pattern indicates a phase of debt accumulation followed by stabilization or minor deleveraging in the later years.

In summary, the data reflect a dynamic and evolving debt structure, with substantial long-term debt increases until 2020 and a shift towards maintaining or slightly reducing total debt thereafter. The considerable fluctuations in current maturities of long-term debt imply active debt management, likely involving refinancing or repayment scheduling. The steady rise in current finance lease liability alongside a reduction in noncurrent finance lease liability suggests a possible shift in leasing strategy toward shorter-term commitments.

The data on annual interest costs incurred reveals several key trends and fluctuations over the five-year period from 2018 to 2022.

Interest Expense

Interest expense showed a steady increase from 2018 to 2021, rising from 469,620 thousand US dollars in 2018 to a peak of 732,924 thousand US dollars in 2021. In 2022, there was a slight decrease to 675,946 thousand US dollars. This upward trend followed by a minor decline suggests that the company experienced increasing borrowing costs or higher interest-bearing debt levels for most of the period before a modest reduction in the latest year.

Capitalized Interest

Capitalized interest displayed more volatility compared to the interest expense. It initially increased significantly from 28,062 thousand US dollars in 2018 to 107,275 thousand in 2019, then declined sharply to 75,436 thousand in 2020. This was followed by a further drop to 25,150 thousand in 2021, before rising again to 57,426 thousand in 2022. The fluctuations in capitalized interest suggest variations in the amount of interest costs that were added to the cost of qualifying assets, which could be related to changes in ongoing capital projects or asset development activities.

Interest Costs Incurred

Interest costs incurred, representing the total interest-related charges combining both interest expense and capitalized interest, increased consistently from 497,682 thousand US dollars in 2018 to a high of 788,322 thousand in 2020. This was followed by a slight decrease to 758,074 thousand in 2021 and further declined to 733,372 thousand in 2022. Despite the reductions in the last two years, the overall level of interest costs incurred remains significantly higher compared to the initial years, reflecting elevated financing expenses.

In summary, the data indicates a general upward trend in financing costs over the period, with interest expense steadily increasing until 2021 before experiencing a decline. Capitalized interest fluctuated more markedly, influencing the total interest costs incurred, which peaked around 2020 and then showed a gradual decrease. These trends may reflect shifts in borrowing strategies, project investment timing, or changes in interest rates affecting the company’s cost of capital.

Interest Coverage Ratio (without capitalized interest)

The interest coverage ratio displayed moderate fluctuations over the analyzed period. It began at 4.23 in 2018, increased slightly to 4.36 in 2019, then experienced a significant decline to 2.13 in 2020, indicating a reduced ability to cover interest expenses that year. However, there was a recovery in 2021, with the ratio rising to 3.71, and further improvement in 2022 to 4.33, nearly reaching the levels observed in 2018 and 2019.

Adjusted Interest Coverage Ratio (with capitalized interest)

The adjusted interest coverage ratio mirrored a similar trend but maintained slightly lower values compared to the non-adjusted ratio. It started at 3.99 in 2018 and decreased to 3.58 in 2019. In 2020, the ratio dropped notably to 1.92, indicating a comparatively weaker capacity to cover interest when including capitalized interest costs. The ratio improved to 3.58 in 2021 and further to 3.99 in 2022, aligning closely with the 2018 level.

Overall Insights

Both ratios suggest that 2020 was a challenging year in terms of interest coverage, as evidenced by the considerable decline. The recovery in subsequent years points to improving earnings or reductions in interest expense or debt levels. The consistently lower adjusted ratios compared to the non-adjusted ones imply that capitalized interest represents a noteworthy portion of interest costs, which temporarily affected coverage capacity more than indicated by the unadjusted ratio.