What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-01 compared with 2021-02-23 · 251 added, 344 removed, 1374 unchanged (30% of the section changed)

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We have audited the accompanying consolidated balance sheets of ONEOK, Inc.

and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of income, of comprehensive income, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”).

and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of income, of comprehensive income, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note A to the consolidated financial statements, the Company changed the manner in which it accounts for revenue from contracts with customers in 2018.

Basis for Opinions

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A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Level 3 Commodity Derivative Assets and Liabilities

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Many of the contracts in its derivative portfolio are executed in liquid markets where price transparency exists.

Fair value measurements classified as Level 3 are composed predominantly of exchange-cleared and over-the-counter derivatives to hedge NGL price risk and natural gas basis risk.

Fair value measurements classified as Level 3 are composed predominantly of exchange-cleared and over-the-counter derivatives to hedge NGL price risk.

These measurements are based on inputs that may include one or more unobservable inputs, including internally developed commodity price curves, that incorporate market data from broker quotes and third-party pricing services.

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Developing the independent estimate involved testing the completeness and accuracy of data provided by management and evaluating management’s assumptions related to the internally developed commodity price curves which incorporate market data from broker quotes and third-party pricing services.

Long-Lived Asset Impairment – Asset Group in the Powder River Basin

As described in Notes A and B to the consolidated financial statements, the Company’s net property, plant and equipment balance was $19.2 billion as of December 31, 2020.

Management assesses the Company’s long-lived assets for impairment whenever events or changes in circumstances indicate that an asset’s carrying amount may not be recoverable.

An impairment is indicated if the carrying amount of a long-lived asset exceeds the sum of the undiscounted future cash flows expected to result from the use and eventual disposition of the asset.

If an impairment is indicated, the Company will record an impairment loss equal to the difference between the carrying value and the fair value of the long-lived asset.

In 2020, Management evaluated the Natural Gas Gathering and Processing segment asset groups and determined that the carrying value of certain long-lived asset groups were not recoverable and exceeded their estimated fair value.

The Company recorded noncash impairment charges of $382.2 million in its Natural Gas Gathering and Processing segment, of which a portion includes a natural gas processing plant and infrastructure in the Powder River Basin and its related supply contracts.

To estimate the fair value, Management used the income approach.

Under the income approach, the discounted cash flow analysis included the following inputs that are not readily available:

a discount rate reflective of industry cost of capital, estimated contract rates, volumes, operating margins, operating and maintenance costs, and capital expenditures.

The principal considerations for our determination that performing procedures relating to long-lived asset impairments of an asset group in the Powder River Basin is a critical audit matter are (i) the significant judgment by management when developing the fair value of the long-lived asset and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to volumes and operating margins.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s long-lived asset impairment assessment, including the controls over the valuation of long-lived assets.

These procedures also included, among others (i) testing management’s process for developing the fair value estimate of an asset group in the Powder River Basin;

(ii) evaluating the appropriateness of the discounted cash flow model;

(iii) testing the completeness and accuracy of underlying data used in the model;

and (iv) evaluating the reasonableness of the significant assumptions used by management related to the volumes and operating margins.

Evaluating management’s assumptions related to the volumes and operating margins involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the asset group and (ii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

/s/ PricewaterhouseCoopers LLP

Tulsa, Oklahoma

February 23, 2021

March 1, 2022

We have served as the Company’s auditor since 2007.

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and Subsidiaries

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Depreciation and amortization 621,701 578,662 476,535

Impairment charges (Note A) 607,200 — —

Impairment charges (Notes D and E) — 607,200 —

General taxes 166,668 125,028 119,156

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Equity in net earnings from investments (Note M) 122,520 143,241 154,541

Impairment of equity investments (Note A) ( 37,730 ) — —

Impairment of equity investments (Note M) — ( 37,730 ) —

Allowance for equity funds used during construction 1,682 23,662 64,815

Other income 43,745 27,058 674

Other expense ( 19,073 ) ( 18,003 ) ( 14,928 )

Other income (expense) ( 3,333 ) 24,672 9,055

Interest expense (net of capitalized interest of $ 25,150 , $ 75,436 and $ 107,275 , respectively)

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Net income 1,499,706 612,809 1,278,577

Net income attributable to noncontrolling interests — — 3,329

Net income attributable to ONEOK 612,809 1,278,577 1,151,703

Preferred stock dividends 1,100 1,100 1,100

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See accompanying Notes to Consolidated Financial Statements.

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and Subsidiaries

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Comprehensive income $ 1,579,804 $ 435,360 $ 1,092,816

Comprehensive income attributable to noncontrolling interests — — 3,329

Comprehensive income attributable to ONEOK $ 435,360 $ 1,092,816 $ 1,190,095

See accompanying Notes to Consolidated Financial Statements.

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and Subsidiaries

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Investments in unconsolidated affiliates (Note M) 797,613 805,032

Goodwill and intangible assets (Note E) 773,723 957,833

Goodwill and net intangible assets (Note E) 763,295 773,723

Other assets 366,457 475,296

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Total assets $ 23,621,613 $ 23,078,754

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and Subsidiaries

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Current maturities of long-term debt (Note F) $ 895,814 $ 7,650

Short-term borrowings (Note F) — 220,000

Accounts payable 1,332,391 719,302

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See accompanying Notes to Consolidated Financial Statements.

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and Subsidiaries

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Accounts receivable ( 610,531 ) ( 1,297 ) ( 19,688 )

NGLs and natural gas in storage 77,116 ( 8,259 ) 38,456

NGLs and natural gas in storage, net of commodity imbalances ( 105,038 ) 172,316 ( 10,193 )

Accounts payable 622,425 ( 80,257 ) ( 62,946 )

Commodity imbalances 95,200 ( 1,934 ) ( 44,302 )

Accrued interest 54,403 29,373 26,068

Risk-management assets and liabilities ( 93,713 ) ( 187,458 ) ( 86,268 )

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Dividends paid ( 1,667,431 ) ( 1,605,366 ) ( 1,457,628 )

Distributions to noncontrolling interests — — ( 3,500 )

Borrowing (repayment) of short-term borrowings, net — ( 220,000 ) 220,000

Issuance of long-term debt, net of discounts — 3,244,777 4,185,435

Debt financing costs ( 28,247 ) ( 29,747 ) ( 13,441 )

Repayment of long-term debt ( 604,894 ) ( 1,457,222 ) ( 1,057,348 )

Issuance of common stock 32,791 969,759 29,040

Acquisition of noncontrolling interests — — ( 195,000 )

Other, net ( 28,702 ) ( 58,790 ) ( 2,481 )

Other ( 19,551 ) ( 56,949 ) ( 88,537 )

Cash provided by (used in) financing activities ( 2,259,085 ) 874,999 1,830,962

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See accompanying Notes to Consolidated Financial Statements.

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and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

ONEOK Shareholders’ Equity

Stock Issued Preferred Stock Issued Common

Stock Preferred Stock Paid-in

Stock Issued Common

Stock Issued Preferred

Stock Paid-in

( Thousands of dollars )

January 1, 2019 20,000 445,016,234 $ — $ 4,450 $ 7,615,138

Cumulative effect adjustment for adoption of ASUs (a) — — — — —

Cumulative effect adjustment for adoption of ASU 2016-02, “Leases (Topic 842)” — — — — —

Net income — — — — —

Other comprehensive income — — — — —

Other comprehensive loss — — — — —

Preferred stock dividends - $ 55.00 per share (Note G)

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— — — — ( 180,421 )

Distributions to noncontrolling interests — — — — —

Contributions from noncontrolling interests — — — — —

Acquisition of noncontrolling interests (Note G) — — — — ( 21,220 )

Other, net — — — — ( 23,155 )

December 31, 2019 20,000 445,016,234 — 4,450 7,403,895

Cumulative effect adjustment for adoption of ASU 2016-02, “Leases (Topic 842)” — — — — —

Net income — — — — —

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Preferred stock dividends - $ 55.00 per share (Note G)

— — — — ( 550 )

Common stock issued — 29,900,000 — 299 934,473

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Net income — — — — —

Other comprehensive loss (Note H) — — — — —

Other comprehensive income (Note H) — — — — —

Preferred stock dividends - $ 55.00 per share (Note G)

— — — — ( 550 )

Common stock issued — — — — 6,680

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December 31, 2021 20,000 474,916,234 $ — $ 4,749 $ 7,213,861

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and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

ONEOK Shareholders’ Equity

Comprehensive

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Earnings Treasury

Stock Noncontrolling

Subsidiaries Total

( Thousands of dollars )

January 1, 2019 $ ( 188,239 ) $ — $ ( 851,806 ) $ 6,579,543

Cumulative effect adjustment for adoption of ASUs (a) ( 38,101 ) 39,803 — 17 1,719

Cumulative effect adjustment for adoption of ASU 2016-02, “Leases (Topic 842)” — ( 67 ) — ( 67 )

Net income — 1,278,577 — 1,278,577

Other comprehensive income 38,392 — — — 38,392

Other comprehensive loss ( 185,761 ) — — ( 185,761 )

Preferred stock dividends - $ 55.00 per share (Note G)

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— ( 1,277,410 ) — ( 1,457,831 )

Distributions to noncontrolling interests — — — ( 3,500 ) ( 3,500 )

Contributions from noncontrolling interests — — — 16,449 16,449

Acquisition of noncontrolling interests (Note G) — — — ( 173,780 ) ( 195,000 )

Other, net — — — ( 23,155 )

December 31, 2019 ( 374,000 ) — ( 808,394 ) 6,225,951

Cumulative effect adjustment for adoption of ASU 2016-02, “Leases (Topic 842)” — ( 67 ) — — ( 67 )

Net income — 612,809 — 612,809

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Net income — 1,499,706 — 1,499,706

Other comprehensive loss (Note H) ( 177,449 ) — — — ( 177,449 )

Other comprehensive income (Note H) 80,098 — — 80,098

Preferred stock dividends - $ 55.00 per share (Note G)

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December 31, 2021 $ ( 471,351 ) $ — $ ( 732,096 ) $ 6,015,163

(a) - Includes cumulative effect for adoption of the following:

ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”;

ASU 2017-12, “Derivatives and Hedging (Topic 815):

Targeted Improvements to Accounting for Hedging Activities”;

and ASU 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.”

See accompanying Notes to Consolidated Financial Statements.

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AND SUBSIDIARIES

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A portion of our ONEOK North System transports refined products, including unleaded gasoline and diesel, from Kansas to Iowa.

Our Natural Gas Pipelines segment, through its wholly owned assets, provides intrastate and interstate transportation and storage services to end users.

Our Natural Gas Pipelines segment, through its wholly owned assets, provides intrastate and interstate natural gas transportation and storage services to end users.

We have 50 % ownership interests in Northern Border Pipeline and Roadrunner, which provide transportation services to various end users.

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Items that may be estimated include, but are not limited to, the economic useful life of assets, fair value of assets, liabilities and equity-method investments, obligations under employee benefit plans, provisions for uncollectible accounts receivable, expenses for services received but for which no invoice has been received, provision for income taxes, including any deferred tax valuation allowances, the results of litigation and various other

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recorded or disclosed amounts.

In addition, a portion of our revenues and cost of sales and fuel are recorded based on current month prices and estimated volumes.

The estimates are reversed in the following month when we record actual volumes and prices.

The estimates are reversed in the following month when we record actual volumes.

We evaluate our estimates on an ongoing basis using historical experience, consultation with experts and other methods we consider reasonable based on the particular circumstances.

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We validate our valuation inputs with third-party information and settlement prices from other sources, where available.

We compute the fair value of our derivative portfolio by discounting the projected future cash flows from our derivative assets and liabilities to present value using interest-rate yields to calculate present-value discount factors derived from the implied forward LIBOR yield curve.

The fair value of our forward-starting interest-rate swaps is determined using financial models that incorporate the implied forward LIBOR yield curve for the same period as the future interest-rate swap settlements.

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• Level 2 - fair value measurements are based on significant observable pricing inputs, including quoted prices for similar assets and liabilities in active markets and inputs from third-party pricing services supported with corroborative evidence.

These balances are composed of over-the-counter interest-rate derivatives.

These balances are composed of exchange cleared derivatives to hedge natural gas basis and NGL price risk at certain market locations and over-the-counter interest-rate derivatives.

• Level 3 - fair value measurements are based on inputs that may include one or more unobservable inputs, including internally developed commodity price curves that incorporate market data from broker quotes and third-party pricing services.

These balances are composed predominantly of exchange-cleared and over-the-counter derivatives to hedge NGL price risk and natural gas basis risk between various transaction locations and the NYMEX Henry Hub.

Our commodity derivatives are generally valued using forward quotes provided by third-party pricing services that are validated with other market data.

These balances are composed predominantly of exchange-cleared and over-the-counter derivatives to hedge NGL price risk at certain market locations.

These commodity derivatives are generally valued using forward quotes provided by third-party pricing services that are validated with other market data.

We believe any measurement uncertainty at December 31, 2021, is immaterial as our Level 3 fair value measurements are based on unadjusted pricing information from broker quotes and third-party pricing services.

We do not believe that our Level 3 fair value estimates have a material impact on our results of operations, as our derivatives are primarily accounted for as hedges.

Determining the appropriate classification of our fair value measurements within the fair value hierarchy requires management’s judgment regarding the degree to which market data is observable or corroborated by observable market data.

We categorize derivatives for which fair value is determined using multiple inputs within a single level, based on the lowest level input that is significant to the fair value measurement in its entirety.

We categorize derivatives based on the lowest level input that is significant to the fair value measurement in its entirety.

See Note B for our fair value measurements disclosures.

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Revenue Recognition - Revenues are recognized when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to receive in exchange for those goods or services.

Our payment terms vary by customer and contract type, including requiring payment before products or services are

delivered to certain customers.

Our payment terms vary by customer and contract type, including requiring payment before products or services are delivered to certain customers.

However, the term between customer prepayments, completion of our performance obligations, invoicing and receipt of payment due is not significant.

Upon adoption of Topic 606 in January 2018, we determined that certain Natural Gas Gathering and Processing segment fee with POP contracts and Natural Gas Liquids segment exchange services contracts that include the purchase of commodities are supplier contracts.

Contractual fees in these identified contracts are recorded as a reduction of the commodity purchase price in cost of sales and fuel.

In 2017 and prior periods, these fees were recorded as services revenue.

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Performance Obligations and Revenue Sources - Revenue sources are disaggregated in Note Q and are derived from commodity sales and services revenues, as described below:

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If the capacity reservation fees vary solely as a contract feature, contract assets or liabilities are recorded for the difference between the amount recorded in revenue and the amount billed to the customer.

Transportation fees

are recognized in revenue as those services are provided and are dependent on the volume transported by our customer, which is at our customer’s discretion.

Transportation fees are recognized in revenue as those services are provided and are dependent on the volume transported by our customer, which is at our customer’s discretion.

We use the output method based on the passage of time to measure satisfaction of the performance obligation associated with our daily stand-ready services.

Interruptible transportation contracts ( Natural Gas Pipelines segment ) - We agree to transport natural gas on our pipelines between the customer’s specified nomination and delivery points if capacity is available after satisfying firm transportation service obligations.

Interruptible transportation contracts ( Natural Gas Pipelines segment ) - We agree to transport natural gas on our pipelines between the customer’s nominated receipt and delivery points if capacity is available after satisfying firm transportation service obligations.

The transaction price is based on the transportation fees times the volumes transported.

We use the output method based on delivery of product to the customer to measure satisfaction of the performance obligation.

We use the output method

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based on delivery of product to the customer to measure satisfaction of the performance obligation.

The total consideration for delivered volumes is recorded in revenue at the time of delivery, when the customer obtains control.

Many of the contract types described above contain additional fees or charges payable by customers for nonperformance (e.g., minimum volume commitments or product specifications), which are considered to be variable consideration.

These fees and charges are not recorded until it is probable that a significant reversal of the associated revenue will not occur.

See Note P for our revenue disclosures.

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Our contract asset balances at the beginning and end of the period primarily relate to our firm service transportation contracts with tiered rates.

Our contract liabilities primarily represent deferred revenue on contributions in aid of construction received from customers for which revenue is recognized over the contract periods, which range from 5 to 10 years , and deferred revenue on NGL storage contracts for which revenue is recognized over a one-year term .

Our contract liabilities primarily represent deferred revenue on NGL storage contracts for which revenue is recognized over a one-year term, and deferred revenue on contributions in aid of construction received from customers for which revenue is recognized over the contract periods, which range from 5 to 10 years.

Cost of Sales and Fuel - Cost of sales and fuel primarily includes (i) the cost of purchased commodities, including NGLs, natural gas and condensate, (ii) fees incurred for third-party transportation, fractionation and storage of commodities, (iii) fuel and power costs incurred to operate our own facilities that gather, process, transport and store commodities, and (iv) an offset from the contractual fees deducted from the cost of purchased commodities under the contract types below:

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Accounts Receivable - Accounts receivable represent valid claims against nonaffiliated customers for products sold or services rendered.

Upon adoption of ASU 2016-13 in January 2020, we present accounts receivable net of an allowance for credit losses to reflect the net amount expected to be collected.

We present accounts receivable net of an allowance for credit losses to reflect the net amount expected to be collected.

We assess the creditworthiness of our counterparties on an ongoing basis and require security, including prepayments and other forms of collateral, when appropriate.

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At December 31, 2021, our allowance for credit losses was not material.

See “Recently Issued Accounting Standards Update” table below for more information.

Inventory - The values of current NGLs and natural gas in storage are determined using the lower of weighted-average cost or net realizable value.

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Materials and supplies are valued at average cost.

Certain large equipment inventory, which will ultimately be capitalized to property, plant and equipment when utilized, is included in other assets in our Consolidated Balance Sheets and is valued at weighted-average cost.

Certain large equipment inventory, which will ultimately be included in property, plant and equipment when utilized, is included in other assets in our Consolidated Balance Sheets and is valued at weighted-average cost.

Commodity Imbalances - Commodity imbalances represent amounts payable or receivable for NGL exchange contracts and natural gas pipeline imbalances and are valued at market prices.

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Natural gas pipeline imbalances are settled in cash or in-kind, subject to the terms of the pipelines’ tariffs or by agreement.

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Derivatives and Risk Management - We utilize derivatives to reduce our market-risk exposure to commodity price and interest-rate fluctuations and to achieve more predictable cash flows.

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Mark-to-market - Recorded at fair value - Change in fair value recognized in earnings

Cash flow hedge - The gain or loss on the

Cash flow hedge - Recorded at fair value.

The gain or loss on the

derivative instrument is reported initially as a

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Our properties are depreciated using the straight-line method over their estimated useful lives.

Generally, we apply composite depreciation rates to functional groups of property having similar economic circumstances.

Generally, we apply depreciation rates to functional groups of property having similar economic lives.

We periodically conduct depreciation studies to assess the economic lives of our assets.

For our regulated assets, these depreciation studies are completed as a part of our rate proceedings or tariff filings, and the changes in economic lives, if applicable, are implemented prospectively when the new rates are approved.

For our nonregulated assets, if it is determined that the estimated economic life

changes, the changes are made prospectively.

For our nonregulated assets, if it is determined that the estimated economic life changes, the changes are made prospectively.

Changes in the estimated economic lives of our property, plant and equipment could have a material effect on our financial position or results of operations.

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Property, plant and equipment on our Consolidated Balance Sheets includes construction work in process for capital projects that have not yet been placed in service and therefore are not being depreciated.

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Impairment of Goodwill and Long-Lived Assets, Including Intangible Assets - We assess our goodwill for impairment at least annually as of July 1, unless events or changes in circumstances indicate an impairment may have occurred before that time.

At July 1, 2020, we assessed qualitative factors subsequent to our first quarter 2020 impairment charges discussed below to determine whether it was more likely than not that the fair value of our Natural Gas Liquids and Natural Gas Pipelines reporting units were less than their carrying amount.

After assessing qualitative factors (including macroeconomic conditions, industry and market considerations, cost factors and overall financial performance), we determined that it was more likely than not that the fair value of our Natural Gas Liquids and Natural Gas Pipelines reporting units were not less than their respective carrying value, no further testing was necessary and goodwill was not considered impaired.

At July 1, 2020, there was no remaining goodwill associated with our Natural Gas Gathering and Processing reporting unit.

Late in the first quarter 2020, we experienced a significant decline in our share price and market capitalization as the energy industry experienced historic events that led to a simultaneous demand and supply disruption.

The World Health Organization declared COVID-19 a global pandemic and recommended containment and mitigation measures worldwide, which contributed to a massive economic slowdown and decreased demand for crude oil, natural gas and NGLs.

In addition, Saudi Arabia and Russia increased production of crude oil as the two countries competed for market share.

As a result, the global supply of crude oil significantly exceeded demand and led to a collapse in crude oil prices.

Due to the impact of these events, we performed a Step 1 analysis in the first quarter 2020 to test our goodwill for impairment and evaluated certain long-lived asset groups and equity investments for impairment.

Goodwill - In the Step 1 analysis, an assessment is made by comparing the fair value of a reporting unit with its carrying amount, including goodwill.

Our qualitative goodwill impairment analysis performed as of July 1, 2021, did not result in an impairment charge nor did our analysis reflect any reporting units at risk, and subsequent to that date, no event has occurred indicating that the implied fair value of each of our reporting units is less than the carrying value of its net assets.

Goodwill - As part of our goodwill impairment test, we assess qualitative factors (including macroeconomic conditions, industry and market considerations, cost factors and overall financial performance) to determine whether it was more likely than not that the fair value of each of our reporting units was less than their carrying amount.

If further testing is necessary or a quantitative test is elected, we perform a Step 1 analysis.

In a Step 1 analysis, an assessment is made by comparing the fair value of a reporting unit with its carrying amount, including goodwill.

If the carrying value of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

In January 2020, we adopted ASU 2017-04 in which the requirement to calculate the implied fair value of goodwill under the two-step impairment test was eliminated.

To estimate the fair value of our reporting units, we use two generally accepted valuation approaches, an income approach and a market approach, using assumptions consistent with a market participant’s perspective.

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Under the market approach, we apply EBITDA multiples to forecasted EBITDA.

The multiples used are consistent with historical asset transactions.

The forecasted cash flows are based on average forecasted cash flows for a reporting unit over a period of years.

Based on the results of our impairment test, we concluded that the carrying value of the Natural Gas Gathering and Processing reporting unit exceeded its estimated fair value, resulting in a noncash impairment charge of $ 153.4 million, which is included within impairment charges in our Consolidated Statement of Income for the year ended December 31, 2020.

The estimated fair value of our Natural Gas Liquids and Natural Gas Pipelines reporting units substantially exceeded their respective carrying values.

The multiples used are consistent with recent market transactions.

The forecasted cash flows are based on probability weighted-average possible future cash flows for a reporting unit over a period of years.

Long-lived assets - We assess our long-lived assets for impairment whenever events or changes in circumstances indicate that an asset’s carrying amount may not be recoverable.

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If an impairment is indicated, we record an impairment loss equal to the difference between the carrying value and the fair value of the long-lived asset.

In 2020, we evaluated our Natural Gas Gathering and Processing segment asset groups and determined that the carrying value of certain long-lived asset groups in the Powder River Basin, western Oklahoma and Kansas were not recoverable and exceeded their estimated fair value.

We recorded noncash impairment charges of $ 382.2 million, which includes a natural gas processing plant and infrastructure in the Powder River Basin and its related supply contracts and natural gas processing plants and infrastructure in western Oklahoma and Kansas.

In our Natural Gas Liquids segment, we recorded noncash impairment charges of $ 71.6 million related primarily to certain inactive assets, as our expectation for future use of the assets changed.

charges are included within impairment charges in our Consolidated Statement of Income for the year ended December 31, 2020.

Investments in unconsolidated affiliates - The impairment test for equity-method investments considers whether the fair value of the equity investment as a whole, not the underlying net assets, has declined and whether that decline is other than temporary.

Therefore, we periodically evaluate the amount at which we carry our equity-method investments to determine whether current events or circumstances warrant adjustments to our carrying values.

In 2020, we evaluated our investments in unconsolidated affiliates and concluded that the carrying value of our 10.2 % investment in Venice Energy Services Company in our Natural Gas Gathering and Processing segment exceeded its estimated fair value, resulting in a noncash impairment charge of $ 30.5 million, which includes an impairment to our equity-method goodwill of $ 22.3 million.

We also concluded that the carrying value of our 50 % investment in Chisholm Pipeline Company in our Natural Gas Liquids segment exceeded its estimated fair value, resulting in a noncash impairment charge of $ 7.2 million.

These impairment charges are included within impairment of equity investments in our Consolidated Statement of Income for the year ended December 31, 2020.

See Notes D, E and M for our long-lived assets, goodwill and intangible assets and investments in unconsolidated affiliates disclosures, respectively.

See Notes D, E and M for our disclosures and related impairment charges related to long-lived assets, goodwill and intangible assets and investments in unconsolidated affiliates, respectively.

Regulation - Depending on the specific service provided, our natural gas transmission pipelines, NGL pipelines and certain natural gas storage facilities are subject to rate regulation and/or accounting requirements by one or more of the FERC, OCC, KCC and RRC.

Accordingly, portions of our Natural Gas Liquids and Natural Gas Pipelines segments follow the accounting and reporting guidance for regulated operations.

In our Consolidated Financial Statements and our Notes to Consolidated Financial Statements, regulated operations are defined pursuant to Financial Accounting Standards Board’s (FASB) ASC 980, Regulated Operations.

During the rate-making process for certain of our assets, regulatory authorities set the framework for what we can charge customers for our services and establish the manner that our costs are accounted for, including allowing us to defer recognition of certain costs and permitting recovery of the amounts through rates over time as opposed to expensing such costs as incurred.

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A write-off of regulatory assets and costs not recovered may be required if all or a portion of the regulated operations have rates that are no longer (i) established by independent, third-party regulators and (ii) set at levels that will recover our costs when considering the demand and competition for our services.

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Retirement and Other Postretirement Employee Benefits - We have defined benefit retirement plans covering certain employees and former employees.

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We reflect penalties and interest as part of income tax expense as they become applicable for tax provisions that do not meet the more-likely-than-not recognition threshold and measurement attribute.

During 2020, 2019 and 2018, we had no uncertain tax positions that required the establishment of a material reserve.

For all periods presented, we had no uncertain tax positions that required the establishment of a material reserve.

We utilize the “with-and-without” approach for intra-period tax allocation for purposes of allocating total tax expense (or benefit) for the year among the various financial statement components.

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Actual results may differ from our estimates resulting in an impact, positive or negative, on earnings.

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See Note N for additional discussion of contingencies.

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See Note J for our share-based payments disclosures.

Earnings per Common Share - Basic EPS is calculated based on the daily weighted-average number of shares of common stock outstanding during the period, vested restricted and performance units that have been deferred and share awards deferred under the compensation plan for non-employee directors.

Diluted EPS is calculated based on the daily weighted-average number of shares of common stock outstanding during the period plus potentially dilutive components.

Earnings per Common Share - Basic EPS is calculated by dividing net income available to common shareholders by the daily weighted-average number of shares of common stock outstanding during the period, vested restricted and performance units that have been deferred and share awards deferred under the compensation plan for non-employee directors.

Diluted EPS is calculated by dividing net income available to common shareholders by the daily weighted-average number of shares of common stock outstanding during the period plus potentially dilutive components.

The dilutive components are calculated based on the dilutive effect for each quarter.

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We believe this financial measure is useful to investors because it and similar measures are used by many companies in our industry as a measurement of financial performance and are commonly employed by financial analysts and others to evaluate our financial performance and to compare financial performance among companies in our industry.

Adjusted EBITDA for each segment is defined as net income adjusted for interest expense, depreciation and amortization, noncash impairment charges,

income taxes, allowance for equity funds used during construction, noncash compensation expense, and other noncash items.

Adjusted EBITDA for each segment is defined as net income adjusted for interest expense, depreciation and amortization, noncash impairment charges, income taxes, allowance for equity funds used during construction, noncash compensation expense, and other noncash items.

This calculation may not be comparable with similarly titled measures of other companies.

See Note Q for our segments disclosures.

Reclassifications - Certain reclassifications have been made in the prior-year financial statements to conform to the current-year presentation.

Recently Issued Accounting Standards Update - Changes to GAAP are established by the FASB in the form of ASUs to the FASB Accounting Standards Codification.

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Except as discussed below, there have been no new accounting pronouncements that have become effective or have been issued that are of significance or potential significance to us.

The following table provides a brief description of recently adopted accounting pronouncements and our analysis of the effects on our financial statements:

Standard Description Date of Adoption Effect on the Financial Statements or Other Significant Matters

Standards that were adopted as of December 31, 2020

ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments” The standard requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented net of the allowance for credit losses to reflect the net carrying value at the amount expected to be collected on the financial asset;

and the initial allowance for credit losses for purchased financial assets, including available-for-sale debt securities, to be added to the purchase price rather than being reported as a credit loss expense.

First quarter 2020 The impact of adopting this standard was not material.

ASU 2017-04, “Intangibles- Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment” The standard simplifies the subsequent measurement of goodwill by eliminating the requirement to calculate the implied fair value of goodwill under step 2.

Instead, an entity will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value.

The standard does not change step zero or step 1 assessments.

First quarter 2020 We adopted and implemented this standard prior to recording noncash impairment charges related to our goodwill, as described above.

ASU 2020-04, “Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting” The standard provides optional expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met.

First quarter 2020 The impact of adopting this standard was not material.

Standards that are not yet adopted as of December 31, 2020

ASU 2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes” The standard simplifies certain concepts in Topic 740, Income Taxes.

First quarter 2021 We adopted this standard in January 2021, and the impact of adopting this standard was not material.

In January 2021, we adopted ASU 2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes,” which simplifies certain concepts in Topic 740, Income Taxes.

The impact of adopting this standard was not material.

FAIR VALUE MEASUREMENTS

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We net derivative assets and liabilities when a legally enforceable master-netting arrangement exists between the counterparty to a derivative contract and us.

At December 31, 2020, we held no cash and posted $ 63.1 million of cash with various counterparties, including $ 35.1 million of cash collateral that is offsetting derivative net liability positions under master-netting arrangements in the table above.

At December 31, 2021, we held no cash and posted $ 157.0 million of cash with various counterparties, including $ 99.6 million of cash collateral that is

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offsetting derivative net liability positions under master-netting arrangements in the table above.

The remaining $ 57.4 million of cash collateral in excess of derivative net liability positions is included in other current assets in our Consolidated Balance Sheet.

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Financial contracts $ 6,697 $ — $ 103,801 $ 110,498 $ ( 110,498 ) $ —

Interest-rate contracts — 581 — 581 — 581

Total derivative assets $ 6,697 $ — $ 103,801 $ 110,498 $ ( 110,498 ) $ —

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We net derivative assets and liabilities when a legally enforceable master-netting arrangement exists between the counterparty to a derivative contract and us.

At December 31, 2019, we held no cash and posted $ 8.8 million of cash with various counterparties, which is included in other current assets in our Consolidated Balance Sheet.

The remaining $ 28.0 million of cash collateral in excess of derivative net liability positions is included in other current assets in our Consolidated Balance Sheet.

The following table sets forth a reconciliation of our Level 3 fair value measurements for the periods indicated:

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( Thousands of dollars )

Net assets at beginning of period $ 30,772 $ 40,484

Net assets (liabilities) at beginning of period $ ( 31,321 ) $ 30,772

Total changes in fair value:

Settlements included in net income (a) 31,003 ( 31,660 )

New Level 3 derivatives included in other comprehensive loss (b) ( 36,568 ) 30,627

Unrealized change included in other comprehensive loss (b) 6,135 5

Net assets (liabilities) at end of period $ ( 31,321 ) $ 30,772

Transfers out of Level 3 derivatives ( 59,911 ) —

New Level 3 derivatives included in other comprehensive income (loss) (b) ( 57,325 ) ( 36,568 )

Unrealized change included in other comprehensive income (loss) (b) 3,271 6,135

Net liabilities at end of period $ ( 114,283 ) $ ( 31,321 )

(a) - Included in commodity sales revenues/cost of sales and fuel in our Consolidated Statements of Income.

(b) - Included in change in fair value of derivatives in our Consolidated Statements of Comprehensive Income.

During the years ended December 31, 2020 and 2019, there were no transfers in or out of Level 3 of the fair value hierarchy.

During the year ended December 31, 2021, transfers out of Level 3 related to commodity derivatives associated with certain locations for both NGL and natural gas basis swaps were principally due to improved transparency of market prices as a result of the volume and frequency of transactions in these markets.

We consider the valuation of these commodity derivatives transacted through a clearing broker and valued with an unadjusted published price from an exchange as a Level 2 valuation.

Our Level 3 fair value measurements continue to include NGL derivatives in other markets valued using forward quotes provided by third-party pricing services that are validated with other unobservable market data.

During the year ended December 31, 2020, there were no transfers in or out of Level 3 of the fair value hierarchy.

Other Financial Instruments - The approximate fair value of cash and cash equivalents, accounts receivable, accounts payable and short-term borrowings is equal to book value due to the short-term nature of these items.

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Our short-term borrowings are classified as Level 2 since the estimated fair value of the short-term borrowings can be determined using information available in the commercial paper market.

We have investments at December 31, 2021, associated with our supplemental executive retirement plan and nonqualified deferred compensation plan that are carried at fair value and primarily composed of exchange-traded mutual funds classified as Level 1.

The estimated fair value of our consolidated long-term debt, including current maturities, was $ 15.6 billion and $ 16.3 billion at December 31, 2021 and 2020, respectively.

The book value of our consolidated long-term debt, including current maturities, was $ 13.6 billion and $ 14.2 billion at December 31, 2021 and 2020, respectively.

The estimated fair value of the aggregate senior notes outstanding was determined using quoted market prices for similar issues with similar terms and maturities.

The estimated fair value of the aggregate

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senior notes outstanding was determined using quoted market prices for similar issues with similar terms and maturities.

The estimated fair value of our consolidated long-term debt is classified as Level 2.

Nonrecurring Fair Value Measurements - In 2020, we incurred noncash impairment charges for certain long-lived assets and equity investments.

The valuation of these assets and investments required the use of significant unobservable inputs.

To estimate the fair value, we used two generally accepted valuation approaches, an income approach and a market approach.

Under the income approach, our discounted cash flow analysis included the following inputs that are not readily available:

a discount rate reflective of industry cost of capital, our estimated contract rates, volumes, operating margins, operating and maintenance costs and capital expenditures.

Under the market approach, our inputs included EBITDA multiples, which were estimated from recent peer acquisition transactions, and forecasted EBITDA, which incorporates inputs similar to those used under the income approach.

The estimated fair value of these assets is classified as Level 3.

See Note A for additional information about our impairment charges.

RISK-MANAGEMENT AND HEDGING ACTIVITIES USING DERIVATIVES

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Options may either be standardized and exchange-traded or customized and nonexchange-traded;

We may also use other instruments, including collars, to mitigate commodity price risk.

A collar is a combination of a purchased put option and a sold call option, which places a floor and a ceiling price for commodity sales being hedged.

• Collar - Combination of a purchased put option and a sold call option, which places a floor and ceiling price for commodity sales being hedged.

We may also use other instruments to mitigate commodity price risk.

In our Natural Gas Gathering and Processing segment, we are exposed to commodity price risk as a result of retaining a portion of the commodity sales proceeds associated with our fee with POP contracts.

Under certain fee with POP contracts, our fees and POP percentage may increase or decrease if production volumes, delivery pressures or commodity prices change relative to specified thresholds.

In certain commodity price environments, our contractual fees on these certain fee with POP contracts may decrease, which impacts the average fee rate in our Natural Gas Gathering and Processing segment.

In certain commodity price environments, our contractual fees on these fee with POP contracts may decrease, which would impact the average fee rate in our Natural Gas Gathering and Processing segment.

We also are exposed to basis risk between the various production and market locations where we buy and sell commodities.

As part of our hedging

strategy, we use the previously described commodity derivative financial instruments and physical-forward contracts to reduce the impact of price fluctuations related to natural gas, NGLs and condensate.

As part of our hedging strategy, we use the previously described commodity derivative financial instruments and physical-forward contracts to reduce the impact of price fluctuations related to natural gas, NGLs and condensate.

In our Natural Gas Liquids segment, we are primarily exposed to commodity price risk resulting from the relative values of the various NGL products to each other, the value of NGLs in storage and the relative value of NGLs to natural gas.

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At December 31, 2021 and 2020, there were no financial derivative instruments with respect to our natural gas pipeline operations.

Interest-rate risk - We manage interest-rate risk through the use of fixed-rate debt, floating-rate debt and interest-rate swaps.

Interest-rate swaps are agreements to exchange interest payments at some future point based on specified notional amounts.

Interest-rate risk - We may manage interest-rate risk through the use of fixed-rate debt, floating-rate debt and interest-rate swaps.

Interest-rate swaps are agreements to exchange interest payments at some future point based on specified notional

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In 2020, we settled $ 750 million of our forward-starting interest-rate swaps related to our underwritten public offerings of $ 1.75 billion senior unsecured notes resulting in a loss of $ 152.5 million, which is included in accumulated other comprehensive loss and amortized to interest expense over the term of the related debt.

We also settled the remaining $ 1.3 billion of our interest-rate swaps used to hedge our LIBOR-based interest payments resulting in a loss of $ 48.3 million, which was recognized into interest expense upon repayment of the remaining balance of our $ 1.5 Billion Term Loan Agreement.

At December 31, 2020, and December 31, 2019, we had forward-starting interest-rate swaps with notional amounts totaling $ 1.1 billion and $ 1.8 billion, respectively, to hedge the variability of interest payments on a portion of our forecasted debt issuances.

At December 31, 2019, we had interest-rate swaps with notional amounts totaling $ 1.3 billion to hedge the variability of our LIBOR-based interest payments, all of which have settled as of December 31, 2020.

We also settled the remaining $ 1.3 billion of our interest-rate swaps used to hedge our LIBOR-based interest payments in 2020 resulting in a loss of $ 48.3 million.

At December 31, 2021, and December 31, 2020, we had forward-starting interest-rate swaps with notional amounts totaling $ 1.1 billion to hedge the variability of interest payments on a portion of our forecasted debt issuances.

All of our interest-rate swaps are designated as cash flow hedges.

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Commodity contracts (a)

Financial contracts (b) Other current assets $ 107,461 $ ( 142,573 ) $ 64,858 $ ( 26,997 )

Other deferred credits — — 1,591 ( 2,599 )

Financial contracts (b) $ 204,161 $ ( 303,740 ) $ 107,461 $ ( 142,573 )

Interest-rate contracts Other current liabilities — ( 145,524 ) — —

Other assets/other deferred credits — ( 203,407 ) 581 ( 111,780 )

Other deferred credits — — — ( 203,407 )

Total derivatives designated as hedging instruments 204,161 ( 449,264 ) 107,461 ( 345,980 )

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(a) - Derivative assets and liabilities are presented in our Consolidated Balance Sheets on a net basis when a legally enforceable master-netting arrangement exists between the counterparty to a derivative contract and us.

(b) - At December 31, 2020, our derivative net liability positions under master-netting arrangements for financial contracts were fully offset by $ 35.1 million of cash collateral.

(b) - At December 31, 2021, and December 31, 2020, our derivative net liability positions under master-netting arrangements for financial contracts were fully offset by cash collateral of $ 99.6 million and $ 35.1 million, respectively.

Notional Quantities for Derivative Instruments - The following table sets forth the notional quantities for derivative instruments held for the periods indicated:

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Swaps $ 1.1 $ 1.1

(a) - Notional amounts for derivatives not designated as hedging instruments are excluded from the table above due to fully offsetting notional quantities of 0.8 Bcf for crude oil and NGLs fixed priced derivative instruments for the year ended December 31, 2020.

(a) - Notional amounts for derivatives not designated as hedging instruments are excluded from the table above due to fully offsetting notional quantities of 0.8 MMBbl for NGLs fixed priced derivative instruments at December 31, 2020.

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Cash Flow Hedges - The following table sets forth the unrealized change in fair value of cash flow hedges in other comprehensive income (loss) for the periods indicated:

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$ ( 298,133 ) $ ( 27,410 ) $ 27,115

(a) - The year ended December 31, 2020, includes a loss of $ 48.3 million on the settlement of our remaining $ 1.3 billion interest-rate swaps used to hedge our LIBOR-based interest payments.

(a) - The year ended December 31, 2020, includes a loss of $ 48.3 million on the settlement of $ 1.3 billion of interest-rate swaps used to hedge our LIBOR-based interest payments.

Credit Risk - We monitor the creditworthiness of our counterparties and compliance with policies and limits established by our Risk Oversight and Strategy Committee.

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At December 31, 2021, the credit exposure from our derivative assets is with investment-grade companies in the financial services sector.

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PROPERTY, PLANT AND EQUIPMENT

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We incurred costs for construction work in process that had not been paid at December 31, 2021, 2020 and 2019, of $ 130.5 million, $ 151.7 million and $ 544.8 million, respectively.

Such amounts are not included in capital expenditures (less AFUDC and capitalized interest) on the Consolidated Statements of Cash Flows.

Such amounts are not included in capital expenditures (less AFUDC) on the Consolidated Statements of Cash Flows.

Impairment Charges - In 2020, we evaluated our Natural Gas Gathering and Processing segment asset groups and determined that the carrying value of certain long-lived asset groups in the Powder River Basin, western Oklahoma and Kansas were not recoverable and exceeded their estimated fair value.

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These charges are included within impairment charges in our Consolidated Statement of Income for the year ended December 31, 2020.

For additional information on our impairment charges, see Note A.

GOODWILL AND INTANGIBLE ASSETS

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( Thousands of dollars )

Natural Gas Gathering and Processing $ — $ 153,404

Natural Gas Liquids $ 371,217 $ 371,217

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Total goodwill $ 527,592 $ 527,592

Impairment Charges - Based on the results of our goodwill impairment test in the first quarter 2020, we concluded that the carrying value of the Natural Gas Gathering and Processing reporting unit exceeded its estimated fair value, resulting in a noncash impairment charge of $ 153.4 million, which is included within impairment charges in our Consolidated Statement of Income for the year ended December 31, 2020.

For additional information on our impairment charges, see Note A.

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Impairment Charges - In 2020, we experienced a significant decline in our share price and market capitalization as the energy industry experienced historic events that led to a simultaneous demand and supply disruption.

Due to the impact of these events, we tested our goodwill for impairment and concluded that the carrying value of the Natural Gas Gathering and Processing reporting unit exceeded its estimated fair value, resulting in a noncash impairment charge of $ 153.4 million, which is included within impairment charges in our Consolidated Statement of Income for the year ended December 31, 2020.

At December 31, 2021 and 2020, we have no remaining goodwill in our Natural Gas Gathering and Processing segment.

Intangible Assets - Our intangible assets relate primarily to contracts acquired through acquisitions in our Natural Gas Liquids and Natural Gas Gathering and Processing segments, which are being amortized over periods of 15 to 40 years.

Amortization expense for intangible assets was $ 10.8 million in 2020 and $ 11.9 million in 2019 and 2018, and the aggregate amortization expense for each of the next five years is estimated to be $ 10.4 million.

Amortization expense for intangible assets was $ 10.4 million in 2021, $ 10.8 million in 2020, and $ 11.9 million in 2019, and the aggregate amortization expense for each of the next five years is estimated to be $ 10.4 million.

The following table reflects the gross carrying amount and accumulated amortization of intangible assets for the periods presented:

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Net intangible assets $ 235,703 $ 246,131

Impairment Charges - In our Natural Gas Gathering and Processing segment, we recorded noncash impairment charges to intangible assets of $ 19.9 million related to supply contracts associated with our natural gas processing plant in the Powder River Basin, which was also impaired.

Impairment Charges - In 2020 in our Natural Gas Gathering and Processing segment, we recorded noncash impairment charges to intangible assets of $ 19.9 million related to supply contracts associated with our natural gas processing plant in the Powder River Basin, which was also impaired.

These charges are included within impairment charges in our Consolidated Statement of Income for the year ended December 31, 2020.

For additional information on our impairment charges, see Note A.

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The following table sets forth our consolidated debt for the periods indicated:

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(Thousands of dollars)

Commercial paper outstanding, bearing a weighted-average interest rate of 2.16 % as of December 31, 2019

$ — $ 220,000

Commercial paper outstanding $ — $ —

Senior unsecured obligations:

$ 1,500,000 term loan at 2.70 % as of December 31, 2019, due November 2021

$ 700,000 at 4.25 % due February 2022

541,877 547,397

$ 900,000 at 3.375 % due October 2022

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$ 400,000 at 2.2 % due September 2025

387,000 387,000

$ 600,000 at 5.85 % due January 2026

600,000 600,000

$ 500,000 at 4.0 % due July 2027

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$ 850,000 at 3.1 % due March 2030

780,093 780,093

$ 600,000 at 6.35 % due January 2031

600,000 600,000

$ 400,000 at 6.0 % due June 2035

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$ 500,000 at 4.5 % due March 2050

443,015 451,270

$ 300,000 at 7.15 % due January 2051

300,000 300,000

Guardian Pipeline

Weighted average 7.85 % due December 2022

13,657 21,307

Total debt 13,756,709 14,361,644

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(a) - Individual issuances of commercial paper under our commercial paper program generally mature in 90 days or less.

$2.5 Billion Credit Agreement - In May 2019, we extended the term of our $ 2.5 Billion Credit Agreement by one year to June 2024.

Our $2.5 Billion Credit Agreement is a revolving credit facility and contains certain financial, operational and legal covenants.

Among other things, these covenants include maintaining a ratio of indebtedness to adjusted EBITDA (EBITDA, as defined in our $2.5 Billion Credit Agreement, adjusted for all noncash charges and increased for projected EBITDA from certain lender-approved capital expansion projects).

In June 2020, we amended our $2.5 Billion Credit Agreement by, among other things, modifying the leverage ratio so that we may net up to $ 700 million of cash on hand against our consolidated indebtedness for purposes of calculating the ratio’s numerator for the fiscal quarters ending June 30, 2020, September 30, 2020, and December 31, 2020.

In October 2020, we acquired additional interest in one of our equity investments and a related asset for $ 27 million, which allowed us to elect an acquisition adjustment period under our $2.5 Billion Credit Agreement and, as a result, increased our leverage ratio covenant to 5.5 to 1 for the fourth quarter 2020 and the two following quarters.

Thereafter, the covenant will decrease to 5.0 to 1.

$2.5 Billion Credit Agreement - Our $ 2.5 Billion Credit Agreement, which expires in June 2024, is a revolving credit facility and contains certain financial, operational and legal covenants.

Our $2.5 Billion Credit Agreement includes a $ 100 million sublimit for the issuance of standby letters of credit and a $ 200 million sublimit for swingline loans.

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Based on our current credit ratings, borrowings, if any, will accrue at LIBOR, or alternate benchmark rate, plus 110 basis points, and the annual facility fee is 15 basis points.

At December 31, 2020, our ratio of indebtedness to adjusted EBITDA was 4.6 to 1, and we were in compliance with all covenants under our $2.5 Billion Credit Agreement.

At December 31, 2020 and 2019, we had letters of credit issued totaling $ 7.7 million and $ 4.7 million, respectively, and no borrowings outstanding under our $2.5 Billion Credit Agreement.

At December 31,

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2021, our ratio of indebtedness to adjusted EBITDA was 4.0 to 1, and we were in compliance with all covenants under our $2.5 Billion Credit Agreement.

At December 31, 2021 and 2020, we had letters of credit issued totaling $ 7.7 million, and no borrowings outstanding under our $2.5 Billion Credit Agreement.

Senior Unsecured Obligations - All notes are senior unsecured obligations, ranking equally in right of payment with all of our existing and future unsecured senior indebtedness, and are structurally subordinate to any of the existing and future debt and other liabilities of any non-guarantor subsidiaries.

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The proceeds were used for general corporate purposes, including repayment of existing indebtedness and funding capital expenditures.

In November 2018, we entered into our $ 1.5 Billion Term Loan Agreement with a syndicate of banks, which was fully drawn as of June 30, 2019.

The proceeds were used for general corporate purposes, including repayment of existing indebtedness and funding capital expenditures.

In July 2018, we completed an underwritten public offering of $ 1.25 billion senior unsecured notes consisting of $ 800 million, 4.55 % senior notes due 2028 and $ 450 million, 5.2 % senior notes due 2048.

The net proceeds, after deducting underwriting discounts, commissions and offering expenses, were $ 1.23 billion.

The proceeds were used for general corporate purposes, which included repayment of existing indebtedness and funding capital expenditures.

Repayments - In May 2020, we repaid the remaining $ 1.25 billion of our $ 1.5 Billion Term Loan Agreement with cash on hand from our May 2020 public offering of $ 1.5 billion senior unsecured notes.

Repayments - In November 2021, we redeemed the remaining $ 536.1 million of our $ 700 million, 4.25 % senior notes due February 2022 at 100 % of the principal amount, plus accrued and unpaid interest, with cash on hand and short-term borrowings.

In June 2021, we repaid the remaining $ 11.7 million of Guardian Pipeline’s senior notes due December 2022 with cash on hand.

In 2021, we repurchased in the open market outstanding principal of certain of our senior notes in the amount of $ 55.2 million for an aggregate repurchase price of $ 54.6 million with cash on hand.

In May 2020, we repaid the remaining $ 1.25 billion of our $ 1.5 Billion Term Loan Agreement with cash on hand from our May 2020 public offering of $ 1.5 billion senior unsecured notes.

In 2020, we repurchased in the open market outstanding principal of certain of our senior notes in the amount of $ 224.4 million for an aggregate repurchase price of $ 199.6 million with cash on hand.

In connection with these open market repurchases, we recognized $ 22.3 million of net gains on extinguishment of debt, which is included in other income in our Consolidated Statement of Income for the year ended December 31, 2020.

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In August 2019, we repaid $ 250 million of our $1.5 Billion Term Loan agreement with cash on hand.

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In March 2019, we repaid our $ 500 million, 8.625 % senior notes at maturity with a combination of cash on hand and short-term borrowings.

In 2018, we repaid our $ 425 million, 3.2 % senior notes due September 2018 with cash on hand and the remaining $ 500 million of the ONEOK Partners Term Loan Agreement due 2019 with a combination of cash on hand and short-term borrowings.

The aggregate maturities of long-term debt outstanding as of December 31, 2020, for the years 2021 through 2025 are shown below:

Obligations Guardian

Pipeline Total

The aggregate maturities of long-term debt outstanding and interest obligations on debt as of December 31, 2021, for the years 2022 through 2026 are shown below:

Obligations Interest

on Debt Total

(Millions of dollars)

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Our senior notes are senior unsecured obligations, ranking equally in right of payment with all of our existing and future unsecured senior indebtedness.

Guardian Pipeline Senior Notes - These senior notes were issued under a master shelf agreement dated November 8, 2001, with certain financial institutions.

Principal payments are due quarterly through 2022.

Guardian Pipeline’s senior notes contain financial covenants that require the maintenance of certain financial ratios as defined in the master shelf agreement based on Guardian Pipeline’s financial position and results of operations.

Upon any breach of these covenants, all amounts outstanding under the master shelf agreement may become due and payable immediately .

At December 31, 2020, Guardian Pipeline was in compliance with its financial covenants .

Other - We amortize premiums, discounts and expenses incurred in connection with the issuance of long-term debt consistent with the terms of the respective debt instrument.

Debt Guarantees - ONEOK, ONEOK Partners and the Intermediate Partnership have cross guarantees in place for our and ONEOK Partners’ indebtedness.

Noncontrolling Interests - In July 2018, we acquired the remaining 20 % interest in West Texas LPG Pipeline Limited Partnership for $ 195 million with cash on hand.

We are now the sole owner of ONEOK West Texas NGL, formerly known as West Texas LPG.

Series A and B Convertible Preferred Stock - There are no shares of Series A or Series B Preferred Stock currently issued or outstanding.

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In June 2020, we completed an underwritten public offering of 29.9 million shares of our common stock at a public offering price of $ 32.00 per share, generating net proceeds, after deducting underwriting discounts, commissions and offering expenses, of $ 937.0 million.

A portion of the proceeds was, and we anticipate the remainder will be, used for general corporate purposes, including repayment of existing indebtedness and funding capital expenditures.

In January 2018, we completed an underwritten public offering of 21.9 million shares of our common stock at a public offering price of $ 54.50 per share, generating net proceeds of $ 1.2 billion.

We used the net proceeds from this offering to fund capital expenditures and for general corporate purposes, which included repaying a portion of our outstanding indebtedness.

The proceeds were used for general corporate purposes, including repayment of existing indebtedness and funding capital expenditures.

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Dividends - Holders of our common stock share equally in any dividend declared by our Board of Directors, subject to the rights of the holders of outstanding Series E Preferred Stock.

Dividends paid totaled $ 1.7 billion, $ 1.6 billion and $ 1.5 billion for 2021, 2020 and 2019, respectively.

In addition to the increase in dividends paid per share outlined in the table below, dividends paid increased due to the increase in number of shares outstanding as a result of our equity issuances.

Although dividends per share did not increase in 2021 as compared with 2020, dividends paid increased due to the increase in number of shares outstanding as a result of our equity issuances.

The following table sets forth the quarterly dividends per share paid on our common stock in the periods indicated:

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Total $ 3.74 $ 3.74 $ 3.53

Additionally, in February 2021, we maintained and paid a quarterly dividend of $ 0.935 per share ($ 3.74 per share on an annualized basis), which was paid to shareholders of record as of February 1, 2021 .

Additionally, in February 2022, we maintained and paid a quarterly common stock dividend of $ 0.935 per share ($ 3.74 per share on an annualized basis), which was paid to shareholders of record as of January 31, 2022 .

The Series E Preferred Stock pays quarterly dividends on each share of Series E Preferred Stock, when, as and if declared by our Board of Directors, at a rate of 5.5 % per year.

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December 31, 2020 ( 377,446 ) ( 157,635 ) ( 16,368 ) ( 551,449 )

Other comprehensive loss before reclassifications ( 165,023 ) ( 40,341 ) ( 8,635 ) ( 213,999 )

Other comprehensive income (loss) before reclassifications ( 203,868 ) 31,897 3,088 ( 168,883 )

Amounts reclassified to net income (c) 228,999 18,079 1,903 248,981

Other comprehensive loss ( 143,926 ) ( 26,154 ) ( 7,369 ) ( 177,449 )

Other comprehensive income 25,131 49,976 4,991 80,098

December 31, 2021 $ ( 352,315 ) $ ( 107,659 ) $ ( 11,377 ) $ ( 471,351 )

2 unchanged sentences

(c) - See Note C for details of amounts reclassified to net income for risk-management assets/liabilities and Note K for retirement and other postretirement benefit plan obligations.

The following table sets forth information about the balance of accumulated other comprehensive loss at December 31, 2020, representing unrealized gains (losses) related to risk-management assets and liabilities:

Table of Cont ents

The following table sets forth information about the balance of accumulated other comprehensive loss at December 31, 2021, representing unrealized losses related to risk-management assets and liabilities:

Assets/Liabilities (a)

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(a) - All amounts are presented net of tax.

(b) - Based on December 31, 2020, commodity prices, we expect $ 27.0 million in net losses, net of tax, over the next 12 months and $ 0.3 million in net losses, net of tax, thereafter.

(b) - Based on commodity prices on December 31, 2021, we expect net losses of $ 76.8 million, net of tax, will be reclassified into earnings during the next 12 months.

19 unchanged sentences

( Thousands, except per share amounts )

Net income attributable to ONEOK available for common stock

$ 1,150,603 411,485 $ 2.80

Net income available for common stock $ 1,277,477 413,560 $ 3.09

Effect of dilutive securities — 1,884

Net income attributable to ONEOK available for common stock and common stock equivalents

$ 1,150,603 414,195 $ 2.78

Net income available for common stock and common stock equivalents $ 1,277,477 415,444 $ 3.07

SHARE-BASED PAYMENTS

Our Equity Compensation Plan (ECP) and Long-Term Incentive Plan (LTIP) historically provided for the granting of stock-based compensation, including incentive stock options, nonstatutory stock options, stock bonus awards, restricted stock unit awards and performance unit awards to eligible employees and the granting of stock awards to non-employee directors.

The ECP was terminated immediately following the issuance of new awards in February 2018.

The awards issued prior to the termination remain subject to the terms of the ECP and the applicable award agreement.

Similarly, the LTIP was terminated in May 2018, and the awards issued under the LTIP prior to the termination date remain subject to the terms of the LTIP and the applicable award agreement.

In May 2018, our shareholders approved the ONEOK, Inc.

Equity Incentive Plan (EIP), which has been used for all new equity awards since such date.

We have reserved 8.5 million shares of common stock for issuance under the EIP and at December 31, 2020, we had 6.9 million shares available for issuance under the plan.

Our Equity Incentive Plan (EIP) provides for the granting of stock-based compensation, including restricted stock unit awards and performance unit awards, to eligible employees and the granting of stock awards to non-employee directors.

Table of Cont ents

reserved 8.5 million shares of common stock for issuance under the EIP and at December 31, 2021, we had 5.5 million shares available for issuance under the plan.

This calculation of available shares reflects shares issued and estimated shares expected to be issued upon vesting of outstanding awards granted under the EIP, excluding estimated forfeitures expected to be returned to the plan.

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Grant date fair value of units vested (thousands of dollars) $ 12,519 $ 11,204 $ 10,691

Table of Cont ents

Performance Unit Activity

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Subject to certain exclusions, all employees are eligible to participate in the ESPP.

Employees can choose to have up

to 10 % of their base pay withheld from each paycheck during the offering period to purchase our common stock, subject to terms and limitations of the plan.

Employees can choose to have up to 10 % of their base pay withheld from each paycheck during the offering period to purchase our common stock, subject to terms and limitations of the plan.

The purchase price of the stock is 85 % of the lower of its grant date or exercise date market price.

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Shares issued to employees under this program during 2020 and 2019 totaled 2,871 and 14,022 , respectively.

Compensation expense related to the Employee Stock Award Program was $ 0.2 million, $ 1.0 million and $ 0.2 million for 2020, 2019 and 2018, respectively.

Compensation expense related to the Employee Stock Award Program was $ 0.2 million and $ 1.0 million for 2020 and 2019, respectively.

No shares were issued to employees under this program in 2021.

As of the date of this report, the next award will be issued when our common stock closes at or above $ 78 .

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Shares are distributed to non-employee directors at the fair market value of our common stock at the date of distribution.

Table of Cont ents

EMPLOYEE BENEFIT PLANS

Retirement and Other Postretirement Benefit Plans

Retirement Plans - We have a defined benefit pension plan covering certain employees and former employees hired prior to January 1, 2005.

Retirement Plans - We have a defined benefit pension plan covering certain employees and former employees, which closed to new participants in 2005.

In addition, we have a supplemental executive retirement plan for the benefit of certain officers who participate in our defined benefit pension plan.

Our defined benefit pension plan and our supplemental executive retirement plan are both closed to new participants.

We fund our defined benefit pension plan at a level needed to maintain or exceed the minimum funding levels required by the Employee Retirement Income Security Act of 1974, as amended, and the Pension Protection Act of 2006.

Our supplemental executive retirement plan is closed to new participants.

We fund our defined benefit pension plan at a level needed to maintain or exceed the minimum funding levels required by the Employee Retirement Income Security Act of 1974, as amended.

All employees are eligible to make salary deferrals and receive company matching contributions under our 401(k) Plan, and employees that do not participate in our defined benefit pension plan are also eligible to receive quarterly and annual profit-sharing contributions under our 401(k) Plan.

Other Postretirement Benefit Plans - We sponsor health and welfare plans that provide postretirement medical and life insurance benefits to employees hired prior to 2017 who retire with at least five years of full-time service.

The postretirement medical plan for pre-Medicare participants is contributory, with retiree contributions adjusted periodically, and contains other cost-sharing features such as deductibles and coinsurance.

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Plan participants’ contributions — — 1,092 1,032

Actuarial loss 37,951 55,954 2,860 5,101

Actuarial loss (gain) ( 22,792 ) 37,951 ( 2,496 ) 2,860

Benefits paid ( 18,483 ) ( 16,200 ) ( 3,959 ) ( 3,917 )

Benefit obligation, end of period 583,072 534,849 54,515 52,309

Benefit obligation, end of period (b) 567,011 583,072 51,027 54,515

Change in plan assets

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Benefits paid ( 18,483 ) ( 16,200 ) ( 3,488 ) ( 3,519 )

Fair value of plan assets, end of period 379,092 346,792 20,874 39,060

Fair value of plan assets, end of period (c) 413,183 379,092 24,397 20,874

Balance at December 31 $ ( 153,828 ) $ ( 203,980 ) $ ( 26,630 ) $ ( 33,641 )

3 unchanged sentences

(a) - Other Postretirement Benefits for the year ended December 31, 2020, includes a $ 13.2 million tax loss incurred from the exit of an investment in an insurance contract.

The table above includes the supplemental executive retirement plan obligation.

ONEOK has investments included in other assets on the Consolidated Balance Sheets, which totaled $ 116.2 million and $ 98.9 million at December 31, 2020 and 2019, respectively, for the purpose of offsetting the obligation.

These assets are excluded from the table above as the assets are maintained in a rabbi trust and are not treated as assets of the supplemental executive retirement plan.

(b) - The benefit obligation for Retirement Benefits at December 31, 2021 and 2020, include the supplemental executive retirement plan obligation.

(c) - Fair value of plan assets for Retirement Benefits exclude the assets of our supplemental executive retirement plan, which totaled $ 111.2 million and $ 116.2 million at December 31, 2021 and 2020, respectively, and are included in other assets on the Consolidated Balance Sheets.

These assets are maintained in a rabbi trust and are not treated as assets of the supplemental executive retirement plan.

The accumulated benefit obligation for our retirement plans was $ 541.8 million and $ 548.2 million at December 31, 2021 and 2020, respectively.

The actuarial losses impacting our benefit obligations for our retirement and other postretirement benefit plans are due primarily to changes in the discount rate assumptions discussed in the “Actuarial Assumptions” section below.

Table of Cont ents

The actuarial gains and losses impacting our benefit obligations for our retirement and other postretirement benefit plans are due primarily to changes in the discount rate assumptions discussed in the “Actuarial Assumptions” section below.

Components of Net Periodic Benefit Cost - The following table sets forth the components of net periodic benefit cost for our retirement and other postretirement benefit plans for the periods indicated:

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Amortization of net loss (b) 19,673 18,306 12,649 3,692 5 297

Deferred income taxes (c) 2,897 3,068 ( 18,928 ) 4,933 ( 177 ) ( 2,831 )

Deferred income taxes ( 12,493 ) 2,897 3,068 ( 2,471 ) 4,933 ( 177 )

Total recognized in other comprehensive income (loss) $ 41,823 $ ( 9,699 ) $ ( 10,273 ) $ 8,273 $ ( 16,515 ) $ 593

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(b) - These components are recognized in accumulated other comprehensive loss and are reclassified to other expense in our Consolidated Statements of Income, with related income tax benefits of $ 5.4 million, $ 4.2 million and $ 2.9 million reclassified to income tax expense for the years ended December 31, 2021, 2020 and 2019, respectively.

(c) - Year ended December 31, 2018, includes the impact of adopting ASU 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.”

The table below sets forth the amounts in accumulated other comprehensive loss that had not yet been recognized as components of net periodic benefit expense for the periods indicated:

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(a) - Other Postretirement Benefits for the year ended December 31, 2020, includes a $ 13.2 million tax loss incurred from the exit of an investment in an insurance contract.

Table of Cont ents

Actuarial Assumptions - The following table sets forth the weighted-average assumptions used to determine benefit obligations for retirement and other postretirement benefits for the periods indicated:

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As part of our risk management for the plans, minimums and maximums have been set for each of the asset classes listed above.

Table of Cont ents

The following tables set forth the plan assets by fair value category as of the measurement date for our defined benefit pension and other postretirement benefit plans:

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( Thousands of dollars )

Equity securities $ 42 $ — $ — $ 42 $ — $ 42

Common/collective trusts

Equity securities (a) — — — — 166,132 166,132

2 unchanged sentences

Corporate obligations (b) — — — — 120,877 120,877

Common/collective trusts — 4,890 — 4,890 — 4,890

Short-term investments — — — — 4,243 4,243

Other investments (c) — — — — 41,954 41,954

3 unchanged sentences

(c) - This category repre sen ts alternative investments in limited partnerships, which can be redeemed with a 30-day notice with no further restrictions.

There are no u nfunded capital commitments.

There are no unfunded capital commitments.

These limited partnerships invest through multi-strategy programs in broadly diversified portfolios of private investment funds, hedge funds and/or separate accounts to seek equity-like returns with low market correlation, reduced volatility and limited risk.

(d) - Plan asset investments measured at fair value using the net asset value per share.

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( Thousands of dollars )

Equity securities $ 43 $ — $ — $ 43 $ — $ 43

Common/collective trusts

Equity securities (a) — — — — 164,099 164,099

2 unchanged sentences

Corporate obligations (b) — — — — 101,626 101,626

Common/collective trusts — 3,263 — 3,263 — 3,263

Cash 63 — — 63 — 63

Short-term investments (e) — — — — 4,890 4,890

Other investments (c) — — — — 39,063 39,063

4 unchanged sentences

There are no unfunded capital commitments.

(d) - Plan asset investments measured at fair value using the net asset value per share.

(e) - The fair value of short term investments in the Bank of New York Mellon EB Temporary Investment Fund was previously reported in Level 2.

We elected to consistently apply the practical expedient to all investments within common/collective trusts, and therefore, the fair value of this fund is now measured at net asset value per share and no longer classified in the fair value hierarchy.

Table of Cont ents

Other Postretirement Benefits

2 unchanged sentences

( Thousands of dollars )

Equity securities (a) $ 2,043 $ — $ — $ 2,043

Equity securities (a)(b) $ 15,116 $ — $ — $ 15,116

Money market funds — 808 — 808

Insurance and group annuity contracts — 34,589 — 34,589

Municipal obligations (b) 4,950 — — 4,950

Fair value of plan assets $ 20,066 $ 808 $ — $ 20,874

(a) - This category represents securities of the respective market sector from diverse industries.

(b) - Net proceeds of $ 16.2 million from the exit of an investment in an insurance contract were reinvested in various equity securities and municipal obligations.

Contributions - During 2021, we made $ 11.2 million in contributions to our defined benefit pension plan and no contributions to our other postretirement plans.

We contributed $ 11.2 million to our defined benefit pension plan in January 2021 and do not expect to make any contributions to our other postretirement plans in the remainder of 2021.

Our defined benefit pension plan elected to adopt funding relief provided by the American Rescue Plan Act of 2021 legislation.

As a result of the election, our defined benefit pension plan has no minimum required contribution in 2022.

Pension and Other Postretirement Benefit Payments - Benefit payments for our defined benefit pension and other postretirement benefit plans for the period ending December 31, 2021, were $ 18.5 million and $ 4.0 million, respectively.

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401(k) Plan - We have a 401(k) Plan covering all employees, and employee contributions are discretionary.

We match 100 % of employee 401(k) Plan contributions up to 6 % of each participant’s eligible compensation, subject to certain limits.

We match 100 % of employee 401(k) Plan contributions up to 6 % of each participant’s eligible compensation each payroll period, subject to certain limits.

We also make profit-sharing contributions under our 401(k) Plan for employees who do not participate in our defined benefit pension plan.

1 unchanged sentence

Our contributions made to the plan, including profit-sharing contributions, were $ 32.7 million, $ 27.1 million and $ 30.4 million in 2021, 2020 and 2019, respectively.

Table of Cont ents

Nonqualified Deferred Compensation Plan - The 2020 Nonqualified Deferred Compensation Plan and its predecessor nonqualified deferred compensation plans (collectively, the NQDC Plan) provide a select group of management and highly compensated employees, as approved by our Chief Executive Officer, with the option to defer portions of their compensation and receive notional employer contributions that generally are not available due to limitations on employer and employee contributions to qualified defined contribution plans under federal tax laws.

We have investments included in other assets on the Consolidated Balance Sheets related to the NQDC Plan, which totaled $ 36.1 million and $ 32.4 million at December 31, 2021 and 2020, respectively.

These investments are maintained in a rabbi trust.

Our contributions to the plan were not material in 2021, 2020 and 2019.

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Income before income taxes $ 1,984,204 $ 802,316 $ 1,650,991

Net income attributable to noncontrolling interests — — 3,329

Net income attributable to ONEOK before income taxes 802,316 1,650,991 1,514,606

Federal statutory income tax rate 21.0 % 21.0 % 21.0 %

3 unchanged sentences

Excess tax benefits from share-based compensation ( 1,968 ) ( 7,380 ) ( 20,983 )

Other, net ( 6,058 ) 804 5,260

Other, net (a) 23,341 ( 6,058 ) 804

Income tax provision $ 484,498 $ 189,507 $ 372,414

(a) The year ended December 31, 2021, includes $ 19.4 million impact from previously recognized gains on certain benefit plan investments.

Table of Cont ents

The following table sets forth the tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and liabilities for the periods indicated:

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(a) Due primarily to excess of tax over book depreciation.

The majority of our tax benefits relate to federal and state net operating losses and carry forward indefinitely.

Due to the Tax Cuts and Jobs Act and the impact of increased expensing for capital investment, we believe that it is more likely than not that the tax benefits of certain carryforwards will not be utilized prior to their expirations;

therefore, we recorded a valuation allowance of $ 20.9 milli on, $ 11.3 million and $ 5.6 million through net income related to these tax benefits in 2020, 2019 and 2018, respectively.

As of December 31, 2021, we have federal net operating loss carryforwards of $ 6.4 billion, the majority of which have an indefinite carry forward period.

We expect to generate taxable income and utilize these net operating loss carryforwards in future periods.

We also have loss and credit carryovers in multiple states, $ 2.8 billion of which have an indefinite carry forward period and $ 1.9 billion of which will expire between 2022 and 2038.

We have deferred tax assets related to federal and state net operating loss and credit carryforwards of $ 1.6 billion and $ 1.7 billion in 2021 and 2020, respectively.

We believe that it is more likely than not that the tax benefits of certain state carryforwards will not be utilized;

therefore, we recorded a valuation allowance of $ 6.4 million , $ 20.9 million and $ 11.3 million through net income related to these tax benefits in 2021, 2020 and 2019 , respectively.

UNCONSOLIDATED AFFILIATES

8 unchanged sentences

Investments in unconsolidated affiliates (b) $ 797,613 $ 805,032

(a) - Year ended December 31, 2020, includes the impact of noncash impairment charges of $ 37.7 million related to the equity investments discussed below, offset partially by an acquisition of additional equity interest for $ 20.0 million.

(b) - Equity-method goodwill (Note A) was $ 16.5 million and $ 38.8 million at December 31, 2020 and 2019, respectively.

(b) - Equity-method goodwill (Note A) was $ 16.5 million at December 31, 2021 and 2020.

Table of Cont ents

Equity in Net Earnings from Investments and Impairments - The following table sets forth our equity in net earnings (loss) from investments for the periods indicated:

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These impairment charges are included within impairment of equity investments in our Consolidated Statement of Income for the year ended December 31, 2020.

For additional information on our impairment charges, see Note A.

We incurred expenses in transactions with unconsolidated affiliates of $ 62.8 million, $ 135.4 million and $ 164.7 million for 2021, 2020 and 2019, respectively, primarily related to Overland Pass Pipeline and Northern Border Pipeline.

Accounts payable to our equity-method investees at December 31, 2020 and 2019, were $ 8.4 million and $ 13.5 million, respectively.

Northern Border Pipeline - The Northern Border Pipeline partnership agreement provides that distributions to Northern Border Pipeline’s partners are to be made on a pro rata basis according to each partner’s percentage interest.

Revenue earned and accounts receivable from, and accounts payable to, our equity-method investees were not material.

The Northern Border Pipeline Management Committee determines the amount and timing of such distributions.

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Loans or other advances from Northern Border Pipeline to its partners or affiliates are prohibited under its credit agreement.

In 2020, 2019 and 2018, we made no contributions to Northern Border Pipeline.

Northern Border Pipeline entered into a settlement with shippers that was approved by the FERC in February 2018.

The settlement provides for tiered rate reductions beginning January 1, 2018, that reduced tariff rates 12.5 % by January 2020, compared with previous tariff rates, and requires new rates to be established by January 2024.

The impact of lower tariff rates on Northern Border Pipeline’s earnings and cash distributions was not material to us.

Overland Pass Pipeline - The Overland Pass Pipeline agreement provides that distributions to Overland Pass Pipeline’s members are to be made on a pro rata basis according to each member’s percentage interest.

In all periods presented, we made no contributions to Northern Border Pipeline.

The Overland Pass Pipeline Company Management Committee determines the amount and timing of such distributions.

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Cash distributions are equal to 100 % of available cash as defined in the limited liability company agreement.

In 2020, 2019 and 2018, our contributions to Overland Pass Pipeline were not material.

In all periods presented, our contributions to Overland Pass Pipeline were not material.

Roadrunner - The Roadrunner agreement provides that distributions to members are made on a pro rata basis according to each member’s ownership interest.

1 unchanged sentence

Cash distributions are equal to 100 % of available cash, as defined in the limited liability company agreement.

In 2020, 2019 and 2018, our contributions to Roadrunner were not material.

In all periods presented, our contributions to Roadrunner were not material.

We have an operating agreement with Roadrunner that provides for reimbursement or payment to us for management services and certain operating costs.

Reimbursements and payments from Roadrunner included in operating income in our Consolidated Statements of Income for the years ended December 31, 2020, 2019 and 2018, were not material.

Reimbursements and payments from Roadrunner included in operating income in our Consolidated Statements of Income for all periods presented were not material.

Table of Cont ents

COMMITMENTS AND CONTINGENCIES

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Management does not believe that, based on currently known information, a material risk of noncompliance with these laws and regulations exists that will affect adversely our consolidated results of operations, financial condition or cash flows.

Legal Proceedings - We are a party to various litigation matters and claims that have arisen in the normal course of our operations.

While the results of these litigation matters and claims cannot be predicted with certainty, we believe the reasonably possible losses from such matters, individually and in the aggregate, are not material.

Additionally, we believe the probable final outcome of such matters will not have a material adverse effect on our consolidated results of operations, financial position or cash flows.

We adopted Topic 842 using the modified retrospective method and the optional transition method to record the adoption impact through a cumulative-effect adjustment to retained earnings as of January 1, 2019.

Results for reporting periods

beginning after January 1, 2019, are presented under Topic 842, while prior periods are not adjusted and continue to be reported under the accounting standards in effect for those periods.

Legal Proceedings - We are a party to various legal proceedings that have arisen in the normal course of our operations.

While the results of these proceedings cannot be predicted with certainty, we believe the reasonably possible losses from such proceedings, individually and in the aggregate, are not material.

Additionally, we believe the probable final outcome of such proceedings will not have a material adverse effect on our consolidated results of operations, financial position or cash flows.

We lease certain buildings, warehouses, office space, pipeline capacity, land and equipment, including pipeline equipment, rail cars and information technology equipment.

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Our consolidated lease income is not material.

In December 2019, we entered into an operating lease for pipeline capacity with a lease term of 10 years that commenced January 1, 2020.

In connection with this lease, we recognized an operating lease right-of-use asset and a lease liability with remaining balances of $ 69.0 million and $ 69.9 million, respectively, as of December 31, 2020.

Table of Cont ents

The following table sets forth information about our lease assets and liabilities included in our Consolidated Balance Sheet for the periods indicated:

Leases Location in our Consolidated Balance Sheet December 31, 2020 December 31, 2019

Leases Location in our Consolidated

Balance Sheet December 31, 2021 December 31, 2020

( Thousands of dollars )

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Total leased assets $ 115,930 $ 125,989

$ 125,989 $ 42,113

Operating leases Operating lease liability $ 13,783 $ 13,610

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Operating cash flows for operating leases $ 15,690 $ 13,245

$ 13,245 $ 6,213

Financing cash flows for finance lease $ 2,307 $ 1,949

Right-of-use assets obtained in exchange for operating lease liabilities (noncash) $ 99,547 $ 4,097

Right-of-use assets obtained in exchange for operating lease liabilities (noncash) (a) $ 1,150 $ 99,547

(a) - In December 2019, we entered into an operating lease for pipeline capacity with a lease term of 10 years that commenced January 1, 2020.

The following table sets forth information about our lease costs for the periods indicated:

Years Ended December 31,

Location in our

Consolidated Statement of Income 2020 2019

Location in our Consolidated

Statement of Income 2021 2020

( Thousands of dollars )

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Total lease cost $ 21,224 $ 20,830

Table of Cont ents

The following table sets forth information about our leases for the periods indicated:

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Present value of lease liabilities $ 23.7 $ 89.4

Accounting Policies - See Note A for revenue recognition accounting policies.

Contract Assets and Contract Liabilities - Our contract asset balances at the beginning and end of the years ended December 31, 2020 and 2019, are not material.

The following table sets forth the changes in our contract liability balances for the periods indicated:

Contract Assets and Contract Liabilities - Our contract asset balances at the beginning and end of the years ended December 31, 2021 and 2020, primarily relate to our firm service transportation contracts with tiered rates, which are not material.

The following table sets forth the balances in contract liabilities for the periods indicated:

Contract Liabilities ( Millions of dollars )

Balance at January 1, 2020 $ 57.1

Revenue recognized included in beginning balance ( 15.6 )

Revenue recognized included in beginning balance (c) ( 36.1 )

Net additions 20.4

Balance at December 31, 2020 (a) 41.4

Revenue recognized included in beginning balance (c) ( 36.1 )

Revenue recognized included in beginning balance ( 23.7 )

Net additions 33.8

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Revenues sources are disaggregated in Note Q.

Practical Expedients - We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) variable consideration on contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

Transaction Price Allocated to Unsatisfied Performance Obligations - The following table presents aggregate value allocated to unsatisfied performance obligations as of December 31, 2020, and the amounts we expect to recognize in revenue in future periods, related primarily to firm transportation and storage contracts with remaining contract terms ranging from one month to 23 years :

Transaction Price Allocated to Unsatisfied Performance Obligations - We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) variable consideration on contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

Table of Cont ents

The following table presents aggregate value allocated to unsatisfied performance obligations as of December 31, 2021, and the amounts we expect to recognize in revenue in future periods, related primarily to firm transportation and storage contracts with remaining contract terms ranging from one month to 22 years :

Expected Period of Recognition in Revenue ( Millions of dollars )

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Other and eliminations consist of corporate costs, the operating and leasing activities of our headquarters building and related parking facility and eliminations necessary to reconcile our reportable segments to our Consolidated Financial Statements.

Accounting Policies - The accounting policies of the segments are described in Note A.

For each of the years ended December 31, 2020, 2019 and 2018, we had no single customer from which we received 10 % or more of our consolidated revenues.

For the year ended December 31, 2021, revenues from one customer in our Natural Gas Liquids segment represents approximately 11.6 % of our consolidated revenues.

For the years ended December 31, 2020 and 2019, we had no single customer from which we received 10 % or more of our consolidated revenues.

Table of Cont ents

Operating Segment Information - The following tables set forth certain selected financial information for our operating segments for the periods indicated:

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Cost of sales and fuel (exclusive of depreciation and operating costs) ( 3,226,078 ) ( 11,939,661 ) ( 11,236 ) ( 15,176,975 )

( 843,976 ) ( 5,108,558 ) ( 6,809 ) ( 5,959,343 )

Operating costs ( 367,390 ) ( 528,084 ) ( 170,257 ) ( 1,065,731 )

Equity in net earnings (loss) from investments ( 1,123 ) 39,938 104,426 143,241

Equity in net earnings from investments 3,757 21,000 97,763 122,520

Noncash compensation expense and other 17,299 18,511 4,637 40,447

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Depreciation and amortization $ ( 260,011 ) $ ( 298,937 ) $ ( 58,702 ) $ ( 617,650 )

Impairment charges $ ( 566,145 ) $ ( 78,785 ) $ — $ ( 644,930 )

Investments in unconsolidated affiliates $ 27,018 $ 416,648 $ 353,947 $ 797,613

2 unchanged sentences

(a) - Our Natural Gas Liquids segment has regulated and nonregulated operations.

Our Natural Gas Liquids segment’s regulated operations had revenues of $ 2.0 billion, of which $ 1.8 billion related to sales within the segment, and cost of sales and fuel of $ 520.6 million.

Our Natural Gas Liquids segment’s regulated operations had revenues of $ 2.4 billion, of which $ 2.2 billion related to revenues within the segment, and cost of sales and fuel of $ 607.5 million.

(b) - Our Natural Gas Pipelines segment has regulated and nonregulated operations.

Our Natural Gas Pipelines segment’s regulated operations had revenues of $ 394.2 million and cost of sales and fuel of $ 24.3 million.

(c) - Intersegment revenues are primarily commodity sales which are based on the contracted selling price, which is generally index-based and settled monthly, and for the Natural Gas Gathering and Processing segment totaled $ 865.6 million.

Intersegment revenues for the Natural Gas Liquids and Natural Gas Pipelines segments were not material.

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Depreciation and amortization $ ( 617,650 ) $ ( 4,051 ) $ ( 621,701 )

Impairment charges $ ( 644,930 ) $ — $ ( 644,930 )

Equity in net earnings from investments $ 122,520 $ — $ 122,520

2 unchanged sentences

Capital expenditures $ 674,731 $ 22,123 $ 696,854

(a) - Noncustomer revenue for the year ended December 31, 2020, totaled $ 65.8 million related primarily to gains from derivatives on commodity contracts.

(a) - Noncustomer revenue for the year ended December 31, 2021, totaled $( 565.0 ) million related primarily to losses from derivatives on commodity contracts.

Table of Cont ents

Year Ended December 31, 2020 Natural Gas

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Depreciation and amortization $ ( 247,010 ) $ ( 271,900 ) $ ( 55,739 ) $ ( 574,649 )

Impairment charges $ ( 566,145 ) $ ( 78,785 ) $ — $ ( 644,930 )

Investments in unconsolidated affiliates $ 22,757 $ 423,494 $ 358,781 $ 805,032

5 unchanged sentences

Our Natural Gas Pipelines segment’s regulated operations had revenues of $ 298.5 million and cost of sales and fuel of $ 30.4 million.

Intersegment revenues for the Natural Gas Liquids and Natural Gas Pipelines segments were not material.

13 unchanged sentences

Depreciation and amortization $ ( 574,649 ) $ ( 4,013 ) $ ( 578,662 )

Impairment charges $ ( 644,930 ) $ — $ ( 644,930 )

Equity in net earnings from investments $ 143,241 $ — $ 143,241

3 unchanged sentences

(a) - Noncustomer revenue for the year ended December 31, 2020, totaled $ 65.8 million related primarily to gains from derivatives on commodity contracts.

Table of Cont ents

Year Ended December 31, 2019 Natural Gas

13 unchanged sentences

Operating costs ( 368,352 ) ( 456,892 ) ( 157,230 ) ( 982,474 )

Equity in net earnings from investments 410 67,126 90,847 158,383

Equity in net earnings (loss) from investments ( 6,292 ) 65,123 95,710 154,541

Noncash compensation expense and other 10,965 15,936 2,977 29,878

28 unchanged sentences

Capital expenditures $ 3,822,314 $ 26,035 $ 3,848,349

(a) - Noncustomer revenue for the year ended December 31, 2018, totaled $( 16.2 ) million related primarily to losses from derivatives on commodity contract s.

(a) - Noncustomer revenue for the year ended December 31, 2019, totaled $ 139.6 million related primarily to gains from derivatives on commodity contract s.

Table of Cont ents

Years Ended December 31,

11 unchanged sentences

(a) - The year ended December 31, 2020, includes corporate net gains of $ 22.3 million on extinguishment of debt related to open market repurchases.

The year ended December 31, 2019, includes higher equity AFUDC related to our capital-growth projects compared with 2020 and 2018.

QUARTERLY FINANCIAL DATA (UNAUDITED)

Year Ended December 31, 2020 First

Quarter (a) Second

Quarter (b) Third

Quarter (c) Fourth

( Thousands of dollars, except per share amounts )

Total revenues $ 2,136,672 $ 1,660,729 $ 2,174,264 $ 2,570,577

Operating income (loss) $ ( 83,469 ) $ 355,730 $ 550,433 $ 538,663

Net income (loss) $ ( 141,857 ) $ 134,321 $ 312,316 $ 308,029

Net income (loss) available to common shareholders $ ( 142,132 ) $ 134,046 $ 312,041 $ 307,754

Earnings (loss) per share total

Basic $ ( 0.34 ) $ 0.32 $ 0.70 $ 0.69

Diluted $ ( 0.34 ) $ 0.32 $ 0.70 $ 0.69

(a) - Due to historic events as a result of COVID-19 impacting supply, demand and commodity prices, we evaluated our goodwill, certain long-lived asset groups and equity investments for impairment and recorded $ 641.8 million in impairment charges.

(b) - In the second quarter 2020, due to the commodity price environment and continued global and regional economic disruptions due primarily to COVID-19, many of our crude oil and natural gas producers curtailed production, which significantly reduced volumes on our system.

(c) - In the third quarter 2020, many of our producers reversed curtailments, bringing volumes back to pre-COVID-19 levels as prices and demand improved from second quarter 2020 lows and remained stable.

Year Ended December 31, 2019 First

Quarter Second

Quarter Third

Quarter Fourth

( Thousands of dollars except per share amounts )

Total revenues $ 2,779,958 $ 2,457,575 $ 2,263,228 $ 2,663,606

Operating income $ 468,742 $ 476,146 $ 482,151 $ 487,314

Net income $ 337,208 $ 311,963 $ 309,155 $ 320,251

Net income available to common shareholders $ 336,933 $ 311,688 $ 308,880 $ 319,976

Basic $ 0.82 $ 0.75 $ 0.75 $ 0.77

Diluted $ 0.81 $ 0.75 $ 0.74 $ 0.77

The year ended December 31, 2019, includes higher equity AFUDC related to our capital-growth projects compared with 2020.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data