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Item 8. Financial Statements and Supplementary Data

2024-02-27 compared with 2023-02-28 · 670 added, 624 removed, 972 unchanged (57% 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, 2022 and 2021, 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, 2022, 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, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, 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, 2023, 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, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

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We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Magellan Midstream Partners, L.P., (“Magellan”) from its assessment of internal control over financial reporting as of December 31, 2023, because it was acquired by the Company in a purchase business combination during 2023.

We have also excluded Magellan from our audit of internal control over financial reporting.

Magellan is a wholly owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent 32% and 6%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2023.

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Definition and Limitations of Internal Control over Financial Reporting

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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.

Accounting for the Medford Incident

As described in Note B to the consolidated financial statements, on July 9, 2022, a fire occurred at the Company’s 210 MBbl/d Medford, Oklahoma, natural gas liquids fractionation facility.

The Company has property damage and business interruption coverage against which they developed claims related to the Medford incident and recorded accruals for the expected insurance recoveries.

Management records recoveries for incurred costs and lost earnings related to its business interruption coverage for the amount probable of recovery, not to exceed the actual losses incurred, and for lost earnings that have been realized and are no longer considered a gain contingency.

Management assessed property damage to the facility and incurred costs and lost earnings related to business interruption, as well as timing of recognition under applicable insurance recovery guidance, and recorded accruals of $150.7 million for the year ended December 31, 2022, which was comprised of property damage of $45.6 million, with a corresponding write off of assets due to property damage of the facility;

$9 million related to incurred costs in excess of the deductible that were probable of recovery, with an offset to the operating and maintenance line item;

and $96.1 million primarily related to third-party fractionation costs incurred subsequent to the 45-day business interruption waiting period, with an offset to other operating (income) expense.

The Company received a $100 million unallocated payment from the insurers in the fourth quarter of 2022, and had recorded an outstanding insurance receivable of $50.7 million as of December 31, 2022.

The principal considerations for our determination that performing procedures relating to the accounting for the Medford incident is a critical audit matter are (i) the significant judgment by management when assessing the application of accounting guidance for business interruption and the resulting recognition of incurred costs and lost earnings;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s assessment of the application of accounting guidance for business interruption and the resulting recognition of incurred costs and lost earnings.

Acquisition of Magellan Midstream Partners, LP – Valuation of the Pipelines and Intangible Assets

As described in Note B to the consolidated financial statements, the Company purchased Magellan on September 25, 2023.

Pursuant to the merger agreement, each common unit of Magellan was exchanged for a fixed ratio of 0.667 shares of ONEOK common stock and $25.00 of cash, for a total consideration of $14.1 billion.

In addition, the Company assumed Magellan’s debt with a fair value of $4.0 billion.

The acquisition resulted in the recognition of $11.8 billion of property, plant and equipment (PP&E), a significant portion of which relates to pipelines, and $1.0 billion of intangible assets, which relate to customer relationships.

The Magellan acquisition was accounted for using the acquisition method of accounting for business combinations, which requires, among other things, assets acquired and liabilities assumed to be recorded at their fair values on the acquisition date.

As disclosed by management, in order to estimate the fair value of assets acquired and liabilities assumed, management utilized valuation techniques that included discounted cash flow and cost methods.

The discounted cash flow method utilizes assumptions that include, but are not limited to, estimated future cash flows, discount rates applied to estimated future cash flows, estimated rates of return and estimated customer attrition rates.

Cost methods estimate the fair value of assets based on the estimated construction cost of the assets, and requires the use of various inputs and assumptions.

The principal considerations for our determination that performing procedures relating to valuation of the pipelines and intangible assets related to the acquisition of Magellan is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the pipelines and intangible assets acquired;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the estimated construction cost used to value the pipelines acquired, and the estimated future cash flows, discount rates applied to estimated future cash flows, estimated rates of return and estimated customer attrition rates used to value the intangible assets acquired;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

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 the application of accounting guidance for business interruption and recognition of the incurred costs and lost earnings.

These procedures also included, among others, (i) reading the related customer contracts to assess lost earnings;

(ii) evaluating management’s assessment of the incurred costs and lost earnings, including their assessment of the application of the appropriate accounting guidance for business interruption;

(iii) testing the incurred costs, lost earnings, and related recovery, which included testing the appropriate presentation within the financial statements;

and (iv) tracing the insurance payments received to the Company’s general ledger.

These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the pipelines and intangible assets related to the acquisition.

These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the pipelines and intangible assets acquired;

(ii) evaluating the appropriateness of the cost method used to determine the fair value of the pipelines and the discounted cash flow model used to determine the fair value of the intangible assets (collectively the “valuation methods”);

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

and (iv) evaluating the reasonableness of the significant assumptions used by management related to the estimated construction cost used to value the pipelines acquired, and the estimated future cash flows, discount rates applied to estimated future cash flows, estimated rates of return and estimated customer attrition rates used to value the intangible assets acquired.

Evaluating management’s assumptions related to the estimated future cash flows used to value the intangible assets involved

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evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of Magellan and (ii) consistency with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the valuation methods and (ii) the reasonableness of the estimated construction cost used to value the pipelines, and discount rates applied to estimated future cash flows, estimated rates of return and estimated customer attrition rates used to value the intangible assets.

/s/ PricewaterhouseCoopers LLP

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

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and Subsidiaries

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2023 2022 2021

( Thousands of dollars, except per share amounts )

(Millions of dollars, except per share amounts )

Commodity sales $ 15,614 $ 20,976 $ 15,180

Services 2,063 1,411 1,360

Total revenues (Note Q)

Total revenues (Note P)

17,677 22,387 16,540

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Depreciation and amortization 769 626 622

Impairment charges (Notes E and F)

General taxes 216 191 167

Other operating (income) expense, net (Note B) ( 106,229 ) ( 1,394 ) ( 1,327 )

Transaction costs (Note B)

Other operating income, net (Note C)

( 786 ) ( 105 ) ( 2 )

Operating income 4,072 2,807 2,596

Equity in net earnings from investments (Note N)

147,720 122,520 143,241

Impairment of equity investments (Note N)

— — ( 37,730 )

Allowance for equity funds used during construction 2,551 1,682 23,662

Other income (expense), net 89 ( 29 ) ( 1 )

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$ 5.48 $ 3.84 $ 3.35

Average shares (thousands)

Average shares (millions)

Basic 484.3 447.5 446.4

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See accompanying Notes to Consolidated Financial Statements.

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and Subsidiaries

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2023 2022 2021

( Thousands of dollars )

(Millions of dollars )

Net income $ 2,659 $ 1,722 $ 1,500

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Change in retirement and other postretirement benefit plan obligations, net of tax of $ 2 , $( 16 ) and $( 15 ), respectively

52,764 49,976 ( 26,154 )

Other comprehensive income (loss) of unconsolidated affiliates, net of tax of $ 1 , $( 5 ) and $( 1 ), respectively

15,947 4,991 ( 7,369 )

Total other comprehensive income (loss), net of tax 363,095 80,098 ( 177,449 )

Total other comprehensive income, net of tax 75 363 80

Comprehensive income $ 2,734 $ 2,085 $ 1,580

See accompanying Notes to Consolidated Financial Statements.

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and Subsidiaries

CONSOLIDATED BALANCE SHEETS

December 31, December 31,

Assets ( Thousands of dollars )

Assets (Millions of dollars)

Current assets

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Materials and supplies 148 149

NGLs and natural gas in storage 431,740 427,880

Inventories 639 432

Commodity imbalances 26 43

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Accumulated depreciation and amortization 5,757 5,063

Net property, plant and equipment (Note E)

Net property, plant and equipment (Note F)

32,697 19,952

Investments and other assets

Investments in unconsolidated affiliates (Note N)

801,794 797,613

Goodwill and net intangible assets (Note F)

752,867 763,295

Goodwill (Note G)

Intangible assets, net (Note G)

Other assets 319 324

Total investments and other assets 1,878,793 1,927,365

Total other assets 8,461 1,879

Total assets $ 44,266 $ 24,379

and Subsidiaries

CONSOLIDATED BALANCE SHEETS

December 31, December 31,

Liabilities and equity ( Thousands of dollars )

Liabilities and equity

Current liabilities

Current maturities of long-term debt (Note G)

$ 925,000 $ 895,814

Current maturities of long-term debt (Note H)

Accounts payable 1,564 1,359

Commodity imbalances 244 254

Accrued taxes 215 136

Accrued interest 381 233

Operating lease liability (Note P)

12,289 13,783

Operating lease liability

Other current liabilities 541 132

Total current liabilities 3,452 3,051

Long-term debt, excluding current maturities (Note G)

Long-term debt, excluding current maturities (Note H)

21,183 12,696

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Deferred income taxes (Note M)

1,738,525 1,166,690

Operating lease liability (Note P)

68,110 75,636

Operating lease liability

Other deferred credits 479 331

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Commitments and contingencies (Note O)

Equity (Note H)

ONEOK shareholders’ equity:

Equity (Note I)

Preferred stock, $ 0.01 par value:

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Paid-in capital 16,320 7,253

Accumulated other comprehensive loss (Note I)

( 108,256 ) ( 471,351 )

Accumulated other comprehensive loss ( 33 ) ( 108 )

Retained earnings 868 50

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See accompanying Notes to Consolidated Financial Statements.

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and Subsidiaries

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2023 2022 2021

( Thousands of dollars )

( Millions of dollars )

Operating activities

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Depreciation and amortization 769 626 622

Impairment charges — — 644,930

Equity in net earnings from investments ( 202 ) ( 148 ) ( 122 )

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Deferred income taxes 829 464 472

Medford settlement gain ( 779 ) — —

Medford settlement proceeds 502 61 —

Other, net 83 92 94

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Accounts receivable 107 ( 148 ) ( 611 )

NGLs and natural gas in storage, net of commodity imbalances ( 62,149 ) ( 105,038 ) 172,316

Inventories, net of commodity imbalances 118 ( 62 ) ( 105 )

Accounts payable ( 62 ) ( 26 ) 622

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Capital expenditures (less allowance for equity funds used during construction) ( 1,595 ) ( 1,202 ) ( 697 )

Cash paid for Magellan Acquisition, net of cash acquired ( 5,015 ) — —

Contributions to unconsolidated affiliates ( 207 ) ( 3 ) ( 1 )

Distributions received from unconsolidated affiliates in excess of cumulative earnings

20,267 19,363 31,808

Medford settlement proceeds 328 39 —

Other, net 35 7 14

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Dividends paid ( 1,839 ) ( 1,672 ) ( 1,667 )

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

Issuance of long-term debt, net of discounts 5,298 869 —

Repayment of long-term debt ( 1,300 ) ( 896 ) ( 605 )

Issuance of common stock 32,442 32,791 969,759

Other ( 27,322 ) ( 19,551 ) ( 56,949 )

Debt financing costs ( 71 ) ( 8 ) —

Other, net 13 14 13

Cash provided by (used in) financing activities 2,101 ( 1,693 ) ( 2,259 )

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See accompanying Notes to Consolidated Financial Statements.

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and Subsidiaries

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Stock Paid-in

( Thousands of dollars )

(Millions of dollars )

January 1, 2021 20,000 474,916,234 $ — $ 5 $ 7,353

Net income — — — — —

Other comprehensive loss — — — — —

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

— — — — ( 550 )

Other comprehensive income — — — — —

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

Common stock issued — — — — 7

Common stock dividends - $ 3.74 per share (Note H)

Common stock dividends - $ 3.74 per share (Note I )

— — — — ( 168 )

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Net income — — — — —

Other comprehensive income (Note I)

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

Other comprehensive income — — — — —

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

Common stock issued — — — — 13

Common stock dividends - $ 3.74 per share (Note H)

— — — — ( 168,145 )

Common stock dividends - $ 3.74 per share (Note I )

Other, net — — — — 26

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Net income — — — — —

Other comprehensive income (Note I)

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

Other comprehensive income — — — — —

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

Magellan Acquisition consideration — 134,797,600 — 1 9,061

Common stock issued — — — — 9

Common stock dividends - $ 3.74 per share (Note H)

Common stock dividends - $ 3.82 per share (Note I )

Other, net — — — — ( 3 )

December 31, 2023 20,000 609,713,834 $ — $ 6 $ 16,320

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and Subsidiaries

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Earnings Treasury

( Thousands of dollars )

( Millions of dollars )

January 1, 2021 $ ( 551 ) $ — $ ( 764 ) $ 6,043

Net income — 1,500 — 1,500

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

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

Other comprehensive income 80 — — 80

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

— ( 1 ) — ( 1 )

Common stock issued — — 32 39

Common stock dividends - $ 3.74 per share (Note H)

Common stock dividends - $ 3.74 per share (Note I )

— ( 1,499 ) — ( 1,667 )

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Net income — 1,722 — 1,722

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

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

Other comprehensive income 363 — — 363

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

— ( 1 ) — ( 1 )

Common stock issued — — 26 39

Common stock dividends - $ 3.74 per share (Note H)

Common stock dividends - $ 3.74 per share (Note I )

— ( 1,671 ) — ( 1,671 )

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Net income — 2,659 — 2,659

Other comprehensive income (Note I) 363,095 — — 363,095

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

Other comprehensive income 75 — — 75

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

— ( 1 ) — ( 1 )

Magellan Acquisition consideration — — — 9,062

Common stock issued — — 29 38

Common stock dividends - $ 3.74 per share (Note H)

Common stock dividends - $ 3.82 per share (Note I )

— ( 1,839 ) — ( 1,839 )

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See accompanying Notes to Consolidated Financial Statements.

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AND SUBSIDIARIES

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Raw natural gas is typically gathered at the wellhead, compressed and transported through pipelines to our processing facilities.

Processed natural gas, usually referred to as residue natural gas, is then recompressed and delivered to natural gas pipelines, storage facilities and end users.

Most raw natural gas produced at the wellhead also contains a mixture of NGL components, including ethane, propane, iso-butane, normal butane and natural gasoline.

Gathered wellhead natural gas is directed to our processing plants to remove NGLs, resulting in residue natural gas (primarily methane).

Residue natural gas is then recompressed and delivered to natural gas pipelines, storage facilities and end users.

The NGLs separated from the raw natural gas are sold and delivered through NGL pipelines to fractionation facilities for further processing.

Our Natural Gas Liquids segment owns and operates facilities that gather, fractionate, treat and distribute NGLs and store Purity NGLs, primarily in Oklahoma, Kansas, Texas, New Mexico and the Rocky Mountain region, which includes the Williston, Powder River and DJ Basins.

We provide midstream services to producers of NGLs and deliver those products to the two primary market centers, one in the Mid-Continent in Conway, Kansas, and the other in the Gulf Coast in Mont Belvieu, Texas.

We provide midstream services to producers of NGLs and deliver those products to the two primary market centers:

one in the Mid-Continent in Conway, Kansas, and the other in the Gulf Coast in Mont Belvieu, Texas.

We own or have an ownership interest in FERC-regulated NGL gathering and distribution pipelines in Oklahoma, Kansas, Texas, New Mexico, Montana, North Dakota, Wyoming and Colorado, and terminal and storage facilities in Kansas, Nebraska, Iowa and Illinois.

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We lease rail cars and own and operate truck- and rail-loading and -unloading facilities connected to our NGL fractionation, storage and pipeline assets.

We also own FERC-regulated NGL distribution pipelines in Kansas, Missouri, Nebraska, Iowa, Illinois and Indiana that connect our Mid-Continent assets with Midwest markets, including Chicago, Illinois.

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

We also own FERC-regulated NGL distribution pipelines in Kansas, Nebraska, Iowa, Illinois and Indiana that connect our Mid-Continent assets with Midwest markets, including Chicago, Illinois.

A portion of our ONEOK North System transports Refined Products, including unleaded gasoline and diesel.

Our Natural Gas Pipelines segment, through its wholly owned assets primarily in Oklahoma, Texas and the upper Midwest, provides transportation and storage services to end users, such as natural gas distribution and electric-generation companies that require natural gas to operate their businesses regardless of location price differentials.

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

Our assets are connected to key supply areas and demand centers, including supply areas in Canada and the United States via our intrastate and interstate natural gas pipelines and Northern Border, and export markets in Mexico via Roadrunner which enable us to provide essential natural gas transportation and storage services.

We have 50 % ownership interests in Northern Border and Roadrunner.

Our assets are connected to key supply areas and demand centers, including export markets in Mexico via Roadrunner and supply areas in Canada and the United States via our interstate and intrastate natural gas pipelines and Northern Border, which enable us to provide essential natural gas transportation and storage services.

Our Refined Products and Crude segment is principally engaged in the transportation, storage and distribution of Refined Products and crude oil.

This new reportable business segment was added in conjunction with the Magellan Acquisition.

Our Refined Products pipeline system is one of the longest common carrier pipeline systems for Refined Products in the United States, extending approximately 9,800 miles from the Texas Gulf Coast and covering a 15 -state area across the central and western United States.

Our crude oil pipelines transport crude oil to refineries, export facilities and demand centers.

Throughout the distribution system, terminals play a key role in facilitating product movements and marketing by providing storage, distribution, blending and other ancillary services.

Products transported on our Refined Products pipeline system include gasoline, distillates, aviation fuel and certain NGLs.

Shipments originate on our Refined Products pipeline system from direct connections to refineries or through interconnections with other pipelines or terminals for transportation and ultimate distribution to retail fueling stations, convenience stores, travel centers, railroads, airports and other end users.

Our crude oil assets are strategically located to serve crude oil supply, trading and demand centers.

Consolidation - Our Consolidated Financial Statements include our accounts and the accounts of our subsidiaries over which we have control or are the primary beneficiary.

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Under this method, an investment is carried at its acquisition cost and adjusted each period for contributions made, distributions received and our share of the investee’s comprehensive income.

For the investments we account for under the equity method, the premium or excess cost over the fair value of the underlying net assets is referred to as equity-method goodwill.

The difference between the carrying value of an investment and our share of the investment’s underlying equity in net assets is referred to as a basis difference.

Basis differences related to depreciable or amortizable assets are amortized through equity in net earnings from investments.

The premium or excess cost over underlying fair value of net assets is referred to as equity-method goodwill.

The portion of the basis difference that is attributable to our equity-method goodwill has not been

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Impairment of equity investments is recorded when the impairments are other than temporary.

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Use of Estimates - The preparation of our Consolidated Financial Statements and related disclosures in accordance with GAAP requires us to make estimates and assumptions with respect to values or conditions that cannot be known with certainty that affect the reported amounts on our Consolidated Financial Statements.

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, allowance for credit losses, 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 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.

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Most of the contracts in our derivative portfolio are executed in liquid markets where price transparency exists.

Our financial commodity derivatives are generally settled through a NYMEX or ICE clearing broker account with daily margin requirements.

Our financial commodity derivatives are primarily settled through a NYMEX or ICE clearing broker account with daily margin requirements.

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

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• Level 1 - fair value measurements are based on unadjusted quoted prices for identical securities in active markets.

These balances are composed predominantly of exchange-traded derivative contracts for natural gas and crude oil.

These balances are composed predominantly of exchange-traded derivative contracts for natural gas, Refined Products and crude oil.

• 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 exchange cleared and over-the-counter derivatives to hedge natural gas basis and NGL price risk and over-the-counter interest-rate derivatives.

These balances are composed of exchange cleared and over-the-counter derivatives to hedge natural gas basis, NGLs, Refined Products and crude oil price risk and over-the-counter interest-rate derivatives.

• Level 3 - fair value measurements are based on inputs that may include one or more unobservable inputs.

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

See Note C for our fair value measurements disclosures.

See Note D for our fair value measurements disclosures.

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Cash and Cash Equivalents - Cash equivalents consist of highly liquid investments, which are readily convertible into cash and have original maturities of three months or less.

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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.

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

Commodity Sales (all segments) - We contract to deliver residue natural gas, condensate, unfractionated NGLs and/or purity NGLs to customers at a specified delivery point.

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

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

Commodity Sales (all segments) - We contract to deliver residue natural gas, unfractionated NGLs and/or Purity NGLs, Refined Products, condensate and crude oil to customers at a specified delivery point.

Our sales agreements may be daily or longer-term contracts for a specified volume.

We consider the sale and delivery of each unit of a commodity an individual performance obligation as the customer is expected to control, accept and benefit from each unit individually.

We record revenue when the commodity is delivered to the

customer as this represents the point in time when control of the product is transferred to the customer.

Revenue is recorded based on the contracted selling price, which is generally index-based and settled monthly.

We record revenue when the commodity is delivered to the customer as this represents the point in time when control of the product is transferred to the customer.

Revenue is recorded based on the contracted selling price, which is generally index-based and settled daily or monthly.

Occasionally, we sell unfractionated NGLs to customers at an index-based price less third-party fractionation costs.

These costs are included as a reduction to commodity sales revenue.

The third-party fractionation costs we incurred associated with the Medford incident (Note B) were primarily under this type of agreement.

Gathering only contracts ( Natural Gas Gathering and Processing segment ) - Under this type of contract, we charge fees for providing midstream services, which include gathering and treating our customer’s natural gas.

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We use the output method based on delivery of product to our system as the measure of progress, as our services are performed simultaneously.

Transportation and exchange contracts ( Natural Gas Liquids segment ) - Under this type of contract, we charge fees for providing midstream services, which may include a bundled combination of gathering, transporting and/or fractionation of our customer’s NGLs.

Our performance obligation begins with delivery of unfractionated NGLs or purity NGLs to our system.

Transportation ,exchange and terminal service contracts ( Natural Gas Liquids and Refined Products and Crude segment ) - Under this type of contract, we charge fees for providing midstream services, which may include a bundled combination of one or more of the following services:

gathering, transporting, terminalling, fractionation or other ancillary services.

Our performance obligation begins with delivery of product to our system.

These services represent a series of distinct services that are treated as one performance obligation that is satisfied over time.

We use the output method based on delivery of product to our system as the measure of progress, as our services are performed simultaneously.

For transportation services under a tariff on our NGL transportation pipelines, fees are recorded upon redelivery to our customer at the completion of the transportation services.

Storage contracts ( Natural Gas Liquids and Natural Gas Pipelines segments ) - We reserve a stated storage capacity and inject/withdraw/store commodities for our customer.

The capacity reservation and injection/withdrawal/storage services are considered a bundled service, as we integrate them into one stand-ready obligation provided on a daily basis over the life of the agreement and satisfied over time.

Fixed capacity reservation fees are allocated and evenly recognized in revenue.

For transportation services under a tariff on our transportation pipelines, fees are recorded when the product reaches its destination.

We have certain contracts that require counterparties to ship a minimum volume over an agreed-upon time period, which are contracted as minimum dollar or volume commitments.

Revenue pursuant to these take-or-pay contracts is initially deferred and subsequently recognized when the customers utilize their committed volumes or when the likelihood of meeting the minimum volume commitment becomes remote.

Storage contracts ( Natural Gas Liquids, Refined Products and Crude and Natural Gas Pipelines segments ) - We reserve a stated storage capacity and inject/withdraw/store commodities for our customer.

As these services represent a stand-ready obligation provided on a daily basis over the life of the agreement, the fixed capacity reservation fees are allocated and evenly recognized in revenue over the contract term.

Capacity reservation fees that vary based on a stated or implied economic index and correspond with the costs to provide our services are recognized in revenue as invoiced to our customers.

For contracts that do not include a capacity reservation, transportation, injection and withdrawal fees are recognized in revenue as those services are provided and are dependent on the volume transported, injected or withdrawn 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.

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

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Firm service transportation contracts ( Natural Gas Pipelines segment ) - We reserve a stated transportation capacity and transport commodities for our customer.

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

See Note Q for our revenue disclosures.

See Note P for our revenue disclosures.

Contract Assets and Contract Liabilities - Contract assets and contract liabilities are recorded when the amount of revenue recognized from a contract with a customer differs from the amount billed to the customer and recorded in accounts receivable.

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 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:

Our contract asset balances at the beginning and end of the period primarily relate to our firm service transportation contracts with tiered rates, which are not material.

Our contract liabilities primarily represent deferred revenue on Refined Products and crude transportation contracts and 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 1 to 15 years.

Cost of Sales and Fuel - Cost of sales and fuel primarily includes (i) the cost of purchased commodities, including natural gas, NGLs, Refined Products, condensate and crude oil, (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, (iv) product gains and losses and (v) an offset from the contractual fees deducted from the cost of purchased commodities under the contract types below:

Fee with POP contracts with no producer take-in-kind rights (Natural Gas Gathering and Processing segment ) - We purchase raw natural gas and charge contractual fees for providing midstream services, which include gathering, treating, compressing and processing the producer’s natural gas.

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At December 31, 2023, our allowance for credit losses was not material.

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

Noncurrent NGLs and natural gas are classified as property and valued at cost.

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

Materials and supplies are valued at 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.

Commodity Imbalances - In our Natural Gas Liquids and Natural Gas Pipelines segment, commodity imbalances represent amounts payable or receivable for NGL exchange contracts and natural gas pipeline imbalances and are valued at market prices.

Under the majority of our NGL exchange agreements, we physically receive volumes of unfractionated NGLs, including the risk of loss and legal title to such volumes, from the exchange counterparty.

In turn, we deliver purity NGLs back to the customer and charge them gathering, transportation and fractionation fees.

In turn, we deliver Purity NGLs back to the customer and charge gathering, transportation and fractionation fees.

To the extent that the volumes we receive under such agreements differ from those we deliver, we record a net exchange receivable or payable position with the counterparties.

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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.

In our Refined Products and Crude segment, commodity imbalances represent differences in product volumes in our pipeline systems and terminals, compared to the volumes of our customers’ inventories, as we do not take legal title to the products on our systems and terminals.

To the extent the product volumes differ from the volumes of our customers’ book inventories, we record adjustments to our product inventories.

When product shortages cause a net short inventory position in a product, a liability is recorded based on market prices.

Refined Products and crude oil imbalances are generally settled in-kind through product purchases and sales.

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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recognized in earnings

To reduce our exposure to fluctuations in natural gas, NGLs and condensate prices, we periodically enter into futures, forward purchases and sales, options or swap transactions in order to hedge anticipated purchases and sales of natural gas, NGLs and condensate.

Interest-rate swaps are used from time to time to manage interest-rate risk.

To reduce our exposure to fluctuations in natural gas, NGLs, Refined Products, condensate and crude oil prices, we periodically enter into futures, forward purchases and sales, options or swap transactions in order to hedge anticipated purchases and sales of natural gas, NGLs, Refined Products, condensate and crude oil.

Treasury locks and interest-rate swaps are used from time to time to manage interest-rate risk.

Under certain conditions, we designate our derivative instruments as a hedge of exposure to changes in fair values or cash flows.

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We specifically identify the forecasted transaction that has been designated as the hedged item in a cash flow hedge relationship.

We assess hedging relationships at the inception of the hedge and on an ongoing basis to determine whether the hedging relationship is, and is expected to remain, highly effective.

We assess hedging relationships at the inception of the hedge, and periodically thereafter, to determine whether the hedging relationship is, and is expected to remain, highly effective.

We also document our normal purchases and normal sales transactions that we expect to result in physical delivery and that we elect to exempt from derivative accounting treatment.

The realized revenues and purchase costs of our derivative instruments not considered held for trading purposes and derivatives that qualify as normal purchases or normal sales that are expected to result in physical delivery are reported on a gross basis.

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Cash flows from futures, forwards, options and swaps that are accounted for as hedges are included in the same category as the cash flows from the related hedged items in our Consolidated Statements of Cash Flows.

See Notes C and D for disclosures of our fair value measurements and risk-management and hedging activities, respectively.

See Notes D and E for disclosures of our fair value measurements and risk-management and hedging activities, respectively.

Property, Plant and Equipment - Our properties are stated at cost, including AFUDC and capitalized interest.

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

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

Generally, we estimate the useful lives of individual assets or 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.

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Assets are transferred out of construction work in process when they are substantially complete and ready for their intended use.

See Note E for our property, plant and equipment disclosures.

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.

See Note F for our property, plant and equipment disclosures.

Impairment of Goodwill and Long-Lived Assets, Including Intangible Assets and Equity Method Investments - 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.

Our qualitative goodwill impairment analysis performed as of July 1, 2023, 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 our reporting units with goodwill are less than the carrying value of their net assets.

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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.

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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.

See Notes E, F and N 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.

See Notes F, G and N for our disclosures and related impairment charges related to long-lived assets, goodwill and intangible assets and investments in unconsolidated affiliates, respectively.

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

In addition, as a result of the Magellan Acquisition, we also lease tank and pipeline capacity.

Our lease payments are generally straight-line and the exercise of lease renewal options, which vary in term, is at our sole discretion.

We include renewal periods in a lease term if we are reasonably certain to exercise available renewal options.

Our lease agreements do not include any residual value guarantees or material restrictive covenants.

We apply the short-term policy election, which allows us to exclude from recognition leases with an initial term of 12 months or less.

Our weighted-average discount rates represent the rate implicit in the lease or our incremental borrowing rate for a term equal to the remaining term of the lease.

Through ONEOK Leasing Company, L.L.C.

and ONEOK Parking Company, L.L.C., we own an office building and a parking garage and lease excess space in these facilities to affiliates and others.

In addition, as a result of the Magellan Acquisition, we also lease capacity, storage and service contracts.

We recognize fixed rental income on a straight-line basis over the life of the lease.

Variable rental payments are recognized as revenue in the period in which the circumstances on which the variable lease payments are based occur.

We have also made an accounting policy election for both our lessee and lessor arrangements to combine lease and non-lease components.

This election is applied to all of our lease arrangements as our non-lease components do not result in significant timing differences in the recognition of rental expenses or income.

Our lease activities for the periods ended December 31, 2023 and 2022, are not material.

Regulation - Depending on the specific service provided, our natural gas transmission pipelines, NGL, Refined Products and crude oil 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, RRC, Wyoming Public Service Commission and Colorado Public Utilities Commission.

Accordingly, portions of our Natural Gas Liquids and Natural Gas Pipelines segments follow the accounting and reporting guidance for regulated operations as defined pursuant to Financial Accounting Standards Board’s (FASB) Accounting Standards Codification 980, Regulated Operations.

In our Notes to Consolidated Financial Statements, we also state separately certain amounts for regulated operations where they are defined by the SEC.

In Notes E and R we have made certain reclassifications to prior year amounts to conform to current year presentation.

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.

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

We sponsor welfare plans that provide postretirement medical and life insurance benefits to certain employees hired prior to 2017 who retire with at least five years of service.

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

As a result of the Magellan Acquisition, we assumed the pension plan obligations of Magellan.

These obligations are composed of two defined benefit pension plans, including one for non-union employees and one for union employees.

We sponsor legacy welfare plans that provide postretirement medical and life insurance benefits to certain employees hired prior to 2017 who retire with at least five years of service of full-time consecutive service.

We also assumed the postretirement benefit obligations of Magellan which covers certain employees of Magellan.

The expense and liability related to these plans is calculated using statistical and other factors that attempt to anticipate future events.

These factors include assumptions about the discount rate, expected return on plan assets, rate of future compensation increases, mortality and employment length.

These factors include assumptions about the discount rate, expected return on plan assets, rate of future compensation increases, interest credit rating, mortality and employment length.

In determining the projected benefit obligations and costs, assumptions can change from period to period and may result in changes in the costs and liabilities we recognize.

See Note L for our retirement and other postretirement employee benefits disclosures.

Income Taxes - Deferred income taxes are provided for the difference between the financial statement and income tax basis of assets and liabilities and carryforward items based on income tax laws and rates existing at the time the temporary differences are expected to reverse.

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are expected to reverse.

Generally, the effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date of the rate change.

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Asset Retirement Obligations - Asset retirement obligations represent legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or normal use of the asset.

Certain of our natural gas gathering and processing, NGL and natural gas pipeline facilities are subject to agreements or regulations that give rise to our asset retirement obligations for removal or other disposition costs associated with retiring the assets in place upon the discontinued use of the assets.

Certain of our gathering and processing and pipeline facilities are subject to agreements or regulations that give rise to our asset retirement obligations for removal or other disposition costs associated with retiring the assets in place upon the discontinued use of the assets.

We recognize the fair value of a liability for an asset retirement obligation in the period when it is incurred if a reasonable estimate of the fair value can be made.

We are not able to estimate reasonably the fair value of the asset retirement obligations for portions of our assets, primarily certain pipeline assets, because the settlement dates are indeterminable given our expected continued use of the assets with proper maintenance.

We expect our pipeline assets, for which we are unable to estimate reasonably the fair value of the asset retirement obligation, will continue in operation as long as supply and demand for natural gas and NGLs exist.

Based on the widespread use of natural gas for heating and cooking activities for residential users and electric-power generation for commercial users, as well as use of NGLs by the petrochemical industry, we expect supply and demand to exist for the foreseeable future.

Based on the widespread use of these products in the medical, transportation, synthetics and agriculture industries, as well as for residential and industrial customers and electric generation, we expect supply and demand to exist for the foreseeable future.

For our assets that we are able to make an estimate, the fair value of the liability is added to the carrying amount of the associated asset, and this additional carrying amount is depreciated over the life of the asset.

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Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable.

Our expenditures for environmental evaluation, mitigation, remediation and compliance to date have not been significant in relation to our financial position or results of operations, and our expenditures related to environmental matters had no significant effect on earnings or cash flows during 2022, 2021 and 2020.

Our expenditures for environmental evaluation, mitigation, remediation and compliance to date have not been material in relation to our financial position or results of operations, and our expenditures related to environmental matters did not have a material effect on earnings or cash flows during 2023, 2022 and 2021.

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

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For fiscal-year periods, the dilutive components for each quarter are averaged to arrive at the fiscal year-to-date dilutive component.

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See Note J for our EPS disclosures.

Segment Reporting - Our chief operating decision-maker reviews the financial performance of each of our three segments, as well as our financial performance as a whole, on a regular basis.

Segment Reporting - Our chief operating decision maker reviews the financial performance of each of our four segments, as well as our financial performance as a whole, on a regular basis.

Adjusted EBITDA by segment is utilized in this evaluation.

We believe this financial measure is useful 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, noncash compensation expense and certain other noncash items.

Following the Magellan Acquisition, we performed a review of our calculation methodology of adjusted EBITDA, and beginning in 2023, we updated our calculation to include adjusted EBITDA related to our unconsolidated affiliates using the same recognition and measurement methods used to record equity in net earnings from investments.

In prior periods, our calculation included equity in net earnings from investments.

This change resulted in an additional $ 62 million of adjusted EBITDA in 2023, and we have not restated prior periods.

Adjusted EBITDA from our unconsolidated affiliates is calculated consistently with the definition above and excludes items such as interest, depreciation, income taxes and other noncash items.

Although the amounts related to our unconsolidated affiliates are included in the calculation of adjusted EBITDA, such inclusion should not be understood to imply that we have control over the operations and resulting revenues, expenses or cash flows of such unconsolidated affiliates.

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

See Note R for our segments disclosures.

See Note Q for our segments disclosures.

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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ASUs not discussed herein were assessed and determined to be either not applicable or clarifications of ASUs previously issued.

There have been no new accounting pronouncements that have become effective or have been issued that are of significance or potential significance to us.

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.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which requires public entities to disclose significant expense categories and amounts for each reportable segment on both an interim and annual basis, consisting of expenses regularly reported to the chief operating decision maker and included in a segment's reported measure of segment profit or loss.

The standard also requires disclosing an amount of other segment items as well as all annual disclosures in interim periods.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

We are currently evaluating the impact of this standard on us.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , which requires public entities, on an annual basis, to provide disclosure of specific disaggregated information about the reporting entity’s effective tax rate reconciliation as well as information on income taxes paid.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

We are currently evaluating the impact of this standard on us.

MAGELLAN ACQUISITION

On September 25, 2023, we completed the Magellan Acquisition.

The acquisition strategically diversifies our complementary asset base and allows for significant expected synergies.

Pursuant to the Merger Agreement, each common unit of Magellan was exchanged for a fixed ratio of 0.667 shares of ONEOK common stock and $ 25.00 of cash, for a total consideration of $ 14.1 billion.

In addition, we assumed Magellan’s debt with a fair value of $ 4.0 billion.

We issued approximately 135 million shares of common stock, with a fair value of approximately $ 9.0 billion as of the closing date of the Magellan Acquisition.

We funded the cash portion of the acquisition with an underwritten public offering of $ 5.25 billion senior unsecured notes.

In connection with the underwritten public offering, we terminated the undrawn commitment letter for the $ 5.25 billion unsecured 364-day bridge loan facility.

For additional information on our long-term debt, see Note H.

Magellan’s operations are principally composed of transportation, storage and distribution of Refined Products, certain NGLs and crude oil.

The assets acquired include 9,800 miles of Refined Products pipelines, 1,000 miles of crude oil pipelines, 54 Refined Products terminals, two marine terminals and 91 MMBbl of operating storage capacity.

We also acquired ownership interests in Magellan’s eight unconsolidated affiliates.

In conjunction with the Magellan Acquisition, Magellan’s results of operations are reported within our new Refined Products and Crude segment, consistent with how information is presented to our chief operating decision maker.

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The Magellan Acquisition was accounted for using the acquisition method of accounting for business combinations pursuant to Accounting Standards Codification 805, “Business Combinations,” which requires, among other things, assets acquired and liabilities assumed to be recorded at their fair values on the acquisition date.

Determining the fair value of acquired assets and liabilities assumed requires management’s judgment and the use of independent valuation specialists.

The purchase price allocation presented below is substantially complete.

However, management continues to refine the preliminary valuation of certain assets acquired and liabilities assumed, such as working capital liabilities and long-lived assets, and may adjust the allocation in subsequent periods.

The final valuation will be completed as we obtain the information necessary to complete the analysis, but no later than one year from the acquisition date.

The following tables set forth the acquisition consideration and preliminary purchase price allocation of assets acquired and liabilities assumed:

At September 25, 2023

(Millions of dollars and shares/units, except per share/unit data)

Magellan public common units outstanding

Cash consideration per Magellan unit

Cash consideration $ 5,052

Magellan public common units outstanding

ONEOK exchange ratio per Magellan unit

Shares of ONEOK common stock issued

ONEOK common stock closing price on September 25, 2023 $ 66.54

Fair value of common stock issued

Fair value of Magellan replacement equity awards

Equity consideration

Total consideration

At September 25, 2023

Assets acquired:

(Millions of dollars)

Cash and cash equivalents $ 37

Accounts receivables, net

Inventories 348

Other current assets 145

Property, plant and equipment 11,751

Investments in unconsolidated affiliates 922

Intangible assets 1,124

Total assets acquired 14,776

Liabilities assumed:

Accounts payable 213

Other current liabilities (a)

Long-term debt, excluding current maturities 4,013

Other deferred credits and liabilities

Total liabilities assumed 5,086

Total identifiable net assets 9,690

Goodwill 4,424

Total purchase price $ 14,114

(a) - Includes contingent liabilities, primarily related to the amounts accrued for the Corpus Christi matter described in Note O.

Amounts relating to the Corpus Christi matter are offset fully by insurance receivables, and we expect future losses in excess of amounts accrued, if any, to be recoverable through insurance.

During the period ended December 31, 2023, we further refined our valuation assumptions of assets acquired and liabilities assumed.

As a result, we recorded measurement period adjustments resulting in an increase to identifiable net assets and a decrease to goodwill of $ 729 million, due primarily to an increase in the fair value of intangible assets and property, plant and equipment of $ 479 million and $ 189 million, respectively.

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Property, plant and equipment:

Property, plant and equipment consists primarily of pipeline, pipeline-related equipment, storage tanks and processing equipment and will be depreciated on a straight-line basis over the estimated useful lives of the assets.

Intangible assets:

The preliminary value of net identifiable intangible assets relates to customer relationships that will be amortized over the period of expected benefit.

Long-term debt, excluding current maturities:

We assumed the outstanding debt of Magellan and utilized publicly traded prices to estimate the fair value.

The debt comprises senior unsecured obligations with varying maturities and interest rates as outlined in Note H.

Recognizing the debt at its acquisition date fair value resulted in a discount from the notional value.

The discount will be amortized into interest expense over the remaining life of the debt.

Goodwill primarily represents expected tax benefits from future depreciation and amortization of acquired assets and commercial synergies, and is expected to be fully deductible for tax purposes.

Results of Operations

The results of operations attributable to the Magellan Acquisition have been included in our Consolidated Financial Statements since the date of the acquisition through December 31, 2023.

Revenue and income before income taxes attributable to the net assets acquired for the period September 25, 2023, through December 31, 2023, were $ 1.1 billion and $ 361 million, respectively.

For the year ended December 31, 2023, we recognized approximately $ 179 million of expensed transaction costs associated with the Magellan Acquisition, as outlined in the table below.

These non-recurring costs are primarily related to advisory fees, severance and settlement of share-based awards for certain Magellan employees, as well as bridge facility commitment fees.

The following table sets forth the impact of acquisition related transaction costs in our Consolidated Statements of Income as of the period indicated:

(Millions of dollars)

Transaction costs

Interest expense

Pro Forma Financial Information

The following table sets forth the unaudited supplemental pro forma financial information for the years ended December 31, 2023 and 2022, as if we had completed the Magellan Acquisition on January 1, 2022:

(Millions of dollars)

Revenue $ 19,999 $ 25,349

Net income $ 3,077 $ 1,867

The summarized unaudited pro forma information reflects the following adjustments:

• Reflects depreciation and amortization based on the preliminary fair values of property, plant and equipment, and intangible assets;

• Reflects $ 179 million of non-recurring transaction costs incurred for the year ended December 31, 2023, respectively, that were reclassified and included in pro forma net income for the year ended December 31, 2022, as if they had been incurred on January 1, 2022;

• Reflects interest expense related to the underwritten public offering of $ 5.25 billion senior unsecured notes used to fund the cash consideration and other costs related to the Magellan Acquisition;

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• Reflects the amortization of the debt discount to fair value of the Magellan long-term debt assumed;

• Reflects the amortization of excess fair value of the replacement share-based awards;

• Reflects the income tax effect of the pro forma adjustments;

• Excludes the impact of historical activity between ONEOK and Magellan.

The unaudited pro forma financial information for the year ended December 31, 2023, includes a one-time operational gain of $ 779 million related to insurance proceeds on the Medford incident.

The unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of our operating results that would have occurred had the transaction been completed at the beginning of the period presented, nor is it necessarily indicative of future results.

MEDFORD INCIDENT

On July 9, 2022, a fire occurred at our 210 MBbl/d Medford, Oklahoma, natural gas liquids fractionation facility.

All personnel were safe and accounted for with temporary evacuations of local residents taken as a precautionary measure.

Subject to the terms and conditions of our insurance policies and any applicable sub-limits, we have property damage and business interruption coverage with a combined per occurrence limit of $ 2 billion and deductibles of $ 5 million per occurrence for property damage and a 45-day waiting period per occurrence for business interruption coverage.

Beginning in August 2022, we developed claims related to the Medford incident and recorded accruals for the expected insurance recoveries.

We assessed incurred costs and lost earnings related to business interruption and property damage to our facility, as well as timing of recognition under applicable insurance recovery guidance, and recorded accruals of $ 150.7 million in 2022.

We received a $ 100 million unallocated payment from our insurers in the fourth quarter 2022.

We assessed the property damage to our facility and wrote off assets totaling $ 45.6 million for the year ended December 31, 2022, which represents the value associated with certain damaged Medford facility property.

We recorded an insurance receivable that was probable of recovery and fully offsets our noncash property losses, resulting in no impact to our Consolidated Statement of Income.

We expect to continue to operate NGL pipeline assets in Medford along with existing offices for regional operations.

In addition, we are preserving certain Medford assets for future potential NGL facilities that could be constructed in Medford to enhance our NGL business as the market evolves.

Our property insurance policy also includes coverage for expenses incurred in response to the Medford incident.

For the year ended December 31, 2022, we recorded accruals of $ 9 million related to the incurred costs in excess of our $ 5 million deductible that were probable of recovery, with an offset to the operations and maintenance line item in our Consolidated Statement of Income.

Our business interruption insurance provides coverage including, but not limited to (i) incurred costs and losses that are either unavoidable or incurred to mitigate or reduce losses and (ii) lost earnings.

We record recoveries for incurred costs and losses related to our business interruption coverage for the amount probable of recovery, not to exceed the actual losses incurred and

for lost earnings that have been realized and are no longer considered a gain contingency.

For the year ended December 31, 2022, we recorded accruals of $ 96.1 million, related primarily to third-party fractionation costs incurred subsequent to the 45-day business interruption waiting period.

Accruals for business interruption insurance proceeds are recorded to other operating (income) expense, net in our Consolidated Statement of Income.

Subsequent Event - On January 9, 2023, we reached an agreement with our insurers to settle all claims for physical damage and business interruption related to the Medford incident.

In January 2023, we reached an agreement with our insurers to settle all claims for physical damage and business interruption related to the Medford incident.

Under the terms of the settlement agreement, we agreed to resolve the claims for total insurance payments of $ 930 million, $ 100 million of which was received in 2022.

The remaining $ 830 million was received in January and February 2023.

The remaining $ 830 million was received in the first quarter of 2023.

The proceeds serve as settlement for property damage, business interruption claims to the date of the settlement and as payment in lieu of future business interruption insurance claims.

In the first quarter 2023, we applied the $ 830 million received to our outstanding insurance receivable at December 31, 2022 of $ 50.7 million, and recorded an operational gain for the remaining $ 779.3 million.

In the first quarter of 2023, we applied the $ 830 million received to our outstanding insurance receivable at December 31, 2022, of $ 51 million, and recorded an operational gain for the remaining $ 779 million in other income, net, within the Consolidated Statement of Income.

We classified proceeds received within the Consolidated Statement of Cash Flows based on our assessment of the nature of the loss (property and business interruption) included in the settlement.

FAIR VALUE MEASUREMENTS

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Level 1 Level 2 Level 3 Total - Gross Netting (a) Total - Net

( Thousands of dollars )

(Millions of dollars )

Derivative assets

Commodity contracts $ 109 $ 68 $ — $ 177 $ ( 125 ) $ 52

Financial contracts $ 14,897 $ 152,338 $ — $ 167,235 $ ( 124,566 ) $ 42,669

Interest-rate contracts — 10,918 — 10,918 — 10,918

Total derivative assets $ 109 $ 68 $ — $ 177 $ ( 125 ) $ 52

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Commodity contracts $ ( 40 ) $ ( 44 ) $ — $ ( 84 ) $ 84 $ —

Financial contracts $ ( 38,187 ) $ ( 86,379 ) $ — $ ( 124,566 ) $ 124,566 $ —

Total derivative liabilities $ ( 40 ) $ ( 44 ) $ — $ ( 84 ) $ 84 $ —

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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, 2022, we held no cash and posted $ 8.9 million of cash with various counterparties, which is included in other current assets in our Consolidated Balance Sheets.

At December 31, 2023, we posted no cash and held cash of $ 41 million with various counterparties, which offsets our derivative net asset position under master netting arrangements as shown in the table above.

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December 31, 2022

Level 1 Level 2 Level 3 Total - Gross Netting (a) Total - Net

( Thousands of dollars )

( Millions of dollars )

Derivative assets

Commodity contracts $ 15 $ 152 $ — $ 167 $ ( 125 ) $ 42

Financial contracts $ 22,019 $ 172,833 $ 9,309 $ 204,161 $ ( 204,161 ) $ —

Interest-rate contracts — 11 — 11 — 11

Total derivative assets $ 15 $ 163 $ — $ 178 $ ( 125 ) $ 53

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Commodity contracts $ ( 38 ) $ ( 87 ) $ — $ ( 125 ) $ 125 $ —

Financial contracts $ ( 67,226 ) $ ( 112,922 ) $ ( 123,592 ) $ ( 303,740 ) $ 303,740 $ —

Interest-rate contracts — ( 145,524 ) — ( 145,524 ) — ( 145,524 )

Total derivative liabilities $ ( 38 ) $ ( 87 ) $ — $ ( 125 ) $ 125 $ —

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

At December 31, 2022, we held no cash and posted $ 9 million of cash with various counterparties, which 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:

Derivative Assets (Liabilities) 2023 2022

( Thousands of dollars )

( Millions of dollars )

Net liabilities at beginning of period $ — $ ( 114 )

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Transfers out of Level 3 derivatives — ( 49 )

New Level 3 derivatives included in other comprehensive income (loss) (b) 56,387 ( 57,325 )

Unrealized change included in other comprehensive income (loss) (b) 7,072 3,271

New Level 3 derivatives included in other comprehensive income (b) — 56

Unrealized change included in other comprehensive income (b) — 7

Net liabilities at end of period $ — $ —

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

During the years ended December 31, 2022 and 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.

During the year ended December 31, 2022, we transferred out of Level 3 commodity derivatives associated with certain locations for NGL swaps, 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, which are transacted through a clearing broker and valued with an unadjusted published price from an exchange, as a Level 2 valuation.

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

We have investments associated with our supplemental executive retirement plan and nonqualified deferred compensation plan that are carried at fair value and primarily are composed of mutual funds, municipal bonds and other fixed income securities classified as Level 1 and Level 2.

The estimated fair value of our consolidated long-term debt, including current maturities, was $ 21.4 billion and $ 12.7 billion at December 31, 2023 and 2022, respectively.

The book value of our consolidated long-term debt, including current maturities, was $ 13.6 billion at December 31, 2022 and 2021.

The book value of our consolidated long-term debt, including current maturities, was $ 21.7 billion and $ 13.6 billion at December 31, 2023 and 2022, 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.

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RISK-MANAGEMENT AND HEDGING ACTIVITIES USING DERIVATIVES

Risk-management Activities - We are sensitive to changes in natural gas, crude oil and NGL prices, principally as a result of contractual terms under which these commodities are processed, purchased and sold.

Risk-management Activities - We are sensitive to changes in natural gas, NGLs and crude oil prices, principally as a result of contractual terms under which these commodities are processed, purchased and sold.

As a result of the Magellan Acquisition, we are also sensitive to changes in Refined Products prices.

We are also subject to the risk of interest-rate fluctuation in the normal course of business.

We use physical-forward purchases and sales and financial derivatives to secure a certain price for a portion of our natural gas, condensate and purity NGLs;

We use physical-forward purchases and sales and financial derivatives to secure a certain price for a

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portion of our natural gas, NGLs, Refined Products, condensate and crude oil purchases and sales;

to reduce our exposure to commodity price and interest-rate fluctuations;

and to achieve more predictable cash flows.

Additionally, we may use physical-forward purchases and financial derivatives to reduce commodity price risk associated with power and natural gas used to operate our facilities.

We follow established policies and procedures to assess risk and approve, monitor and report our risk-management activities.

We have not used these instruments for trading purposes.

Commodity price risk - Commodity price risk refers to the risk of loss in cash flows and future earnings arising from adverse changes in the price of natural gas, NGLs and condensate.

We may use the following commodity derivative instruments to reduce the near-term commodity price risk associated with a portion of the forecasted sales of these commodities:

Commodity price risk - Commodity price risk refers to the risk of loss in cash flows and future earnings arising from adverse changes in the price of natural gas, NGLs, Refined Products, condensate and crude oil.

We may use the following commodity derivative instruments to reduce the near-term commodity price risk associated with a portion of our forecasted purchases and sales of these commodities:

• Futures contracts - Standardized contracts to purchase or sell natural gas and crude oil for future delivery or settlement under the provisions of exchange regulations;

• Forward contracts - Nonstandardized commitments between two parties to purchase or sell natural gas, crude oil or NGLs for future physical delivery.

• Forward contracts - Nonstandardized commitments between two parties to purchase or sell natural gas, NGLs, Refined Products, condensate and crude oil for future physical delivery.

These contracts are typically nontransferable and can only be canceled with the consent of both parties;

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At December 31, 2023 and 2022, there were no financial derivative instruments with respect to our natural gas pipeline operations.

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

In our Refined Products and Crude segment, we are primarily exposed to commodity price risk from our liquids blending and marketing activities, as well as product retained during the operations of our pipelines and terminals.

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 NGLs, Refined Products and crude oil.

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

Treasury locks are agreements to pay the difference between the benchmark Treasury rate and the rate that is designated in the terms of the agreement.

In the second quarter of 2023, we entered into $ 1.1 billion of Treasury locks to hedge the variability of interest payments on a portion of our forecasted debt issuances.

In the third quarter of 2023, we settled all of our $ 1.1 billion Treasury locks related to our underwritten public offering of $ 5.25 billion senior unsecured notes

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associated with the Magellan Acquisition resulting in a gain of $ 43 million, which is included in accumulated other comprehensive loss and amortized into interest expense over the term of the related debt.

All of our Treasury locks were designated as cash flow hedges.

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

In 2022, we settled $ 750 million of our forward-starting interest-rate swaps related to our underwritten public offering of $ 750 million senior unsecured notes resulting in a gain of $ 28.1 million, which is included in accumulated other comprehensive loss and amortized into interest expense over the term of the related debt.

In December 2022, we terminated the remaining $ 375 million of our forward-starting interest swaps that had mandatory termination dates of December 31, 2022.

We simultaneously entered into forward-starting interest rate swaps with the same notional amounts at current market rates to hedge the variability of interest payments on a portion of our forecasted debt issuances that may result from changes in the benchmark interest rate before the debt is issued.

At December 31, 2022, and December 31, 2021, we had forward-starting interest-rate swaps with notional amounts totaling $ 0.4 billion and $ 1.1 billion, respectively, 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.

In 2023, we settled all of our $ 0.4 billion forward-starting interest-rate swaps related to our underwritten public offerings of $ 5.25 billion senior unsecured notes associated with the Magellan Acquisition resulting in a gain of $ 44 million, which is included in accumulated other comprehensive loss and amortized into interest expense over the term of the related debt.

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

Fair Values of Derivative Instruments - See Note A for a discussion of the inputs associated with our fair value measurements.

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Location in our Consolidated Balance Sheets Assets (Liabilities) Assets (Liabilities)

( Thousands of dollars )

(Millions of dollars )

Derivatives designated as hedging instruments

Commodity contracts (a)

Financial contracts (b) Other current assets $ 160,390 $ ( 123,121 ) $ 204,161 $ ( 303,740 )

Commodity contracts (a) Other current assets $ 163 $ ( 78 ) $ 160 $ ( 123 )

Other assets — — 6 ( 1 )

Interest-rate contracts Other current assets/liabilities 10,918 — — ( 145,524 )

Interest-rate contracts Other current assets — — 11 —

Total derivatives designated as hedging instruments 163 ( 78 ) 177 ( 124 )

Derivatives not designated as hedging instruments

Commodity contracts (a)

Financial contracts Other current assets 558 ( 240 ) — —

Commodity contracts (a) Other current assets 14 ( 6 ) 1 ( 1 )

Total derivatives not designated as hedging instruments 14 ( 6 ) 1 ( 1 )

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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, 2021, our derivative net liability positions under master-netting arrangements for financial contracts were fully offset by cash collateral of $ 99.6 million.

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

December 31, 2022 December 31, 2021

Type Net Purchased/Payor

(Sold/Receiver)

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

2023 December 31,

Type Net Purchased/Payor (Sold/Receiver)

Derivatives designated as hedging instruments:

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Futures ( 16.0 ) ( 39.3 )

-Crude oil and NGLs ( MMBbl )

Futures ( 8.4 ) ( 10.0 )

-NGLs, Refined Products and crude oil (MMBbl)

Futures and swaps ( 14.5 ) ( 8.4 )

-Natural gas ( Bcf )

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Futures ( 0.7 ) ( 0.1 )

-Crude oil and NGLs ( MMBbl )

Futures 0.1 —

-NGLs, Refined Products and crude oil (MMBbl)

Futures and swaps 0.1 0.1

-Natural gas ( Bcf )

Futures ( 0.7 ) ( 0.1 )

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:

-NGLs, Refined Products, and crude oil (MMBbl)

Futures and swaps ( 0.1 ) —

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Cash Flow Hedges - At December 31, 2023 and 2022, the accumulated other comprehensive income (loss) relating to risk-management assets and liabilities, net of taxes, was $ 31 million and $( 58 ) million, respectively.

The following table sets forth information about the balance of accumulated other comprehensive loss at December 31, 2023, representing unrealized gains (losses) related to risk-management assets and liabilities, net of tax:

Assets/Liabilities

( Millions of dollars )

Commodity derivative instruments expected to be realized within the next 36 months (a) $ 63

Settled interest-rate swaps and Treasury locks to be recognized over the life of the long-term, fixed-rate debt (b) ( 32 )

Accumulated other comprehensive income at December 31, 2023

(a) - Based on commodity prices on December 31, 2023, we expect net gains of $ 63 million, net of tax, will be reclassified into earnings during the next 12 months.

The remaining forecasted gains and losses have offsetting positions and are immaterial.

(b) - We expect net losses of $ 15 million, net of tax, will be reclassified into earnings during the next 12 months.

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

Years Ended December 31,

2023 2022 2021

( Thousands of dollars )

( Millions of dollars )

Commodity contracts $ 147 $ ( 85 ) $ ( 323 )

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2023 2022 2021

( Thousands of dollars )

( Millions of dollars )

Commodity contracts Commodity sales revenues $ 201 $ ( 484 ) $ ( 732 )

Cost of sales and fuel ( 93 ) 257 474

Interest-rate contracts (a) Interest expense ( 34,215 ) ( 39,952 ) ( 93,676 )

Interest-rate contracts Interest expense ( 21 ) ( 34 ) ( 40 )

Total change in fair value of cash flow hedges reclassified from accumulated other comprehensive loss into net income on derivatives

$ 87 $ ( 261 ) $ ( 298 )

(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.

We maintain credit policies with regard to our counterparties that we believe minimize overall credit risk.

We maintain credit policies with regard to our counterparties that we believe minimize credit risk.

These policies include an evaluation of potential counterparties’ financial condition (including credit ratings, bond yields and credit default swap rates), collateral requirements under certain circumstances and the use of standardized master-netting agreements that allow us to net the positive and negative exposures associated with a single counterparty.

We use internally developed credit ratings for counterparties that do not have a credit rating.

Our financial commodity derivatives are generally settled through a NYMEX or ICE clearing broker account with daily margin requirements.

Our financial commodity derivatives are primarily settled through a NYMEX or ICE clearing broker account with daily margin requirements.

However, we may enter into financial derivative instruments that contain provisions that require us to maintain an investment-grade credit rating from S&P, Fitch and/or Moody’s.

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Based on our policies, exposures, credit and other reserves, we do not anticipate a material adverse effect on our financial position or results of operations as a result of counterparty nonperformance.

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At December 31, 2023, the credit exposure from our derivative assets is with investment-grade companies in the financial services sector.

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2023 December 31,

( Thousands of dollars )

(Millions of dollars )

Gathering pipelines and related equipment 5 to 40

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Processing and fractionation and related equipment 3 to 40

5,396,165 5,356,508

Storage and related equipment 3 to 54

926,300 874,522

Transmission pipelines and related equipment 5 to 87

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General plant and other 2 to 60

716,310 678,410

Construction work in process — 1,618,561 1,122,615

Storage and related equipment 5 to 25

Natural gas transmission pipelines and related equipment 5 to 77

2,028,995 1,970,631

NGL transmission pipelines and related equipment 5 to 87

8,575,980 8,445,523

General plant and other 2 to 50

94,641 90,157

Land — 375 160

Construction work in process — 1,528 1,839

Property, plant and equipment 38,454 25,015

Accumulated depreciation and amortization - nonregulated ( 3,151,214 ) ( 2,814,045 )

Accumulated depreciation and amortization - regulated ( 1,911,395 ) ( 1,686,620 )

Accumulated depreciation and amortization ( 5,757 ) ( 5,063 )

Net property, plant and equipment $ 32,697 $ 19,952

The average depreciation rates for our regulated property are set forth, by segment, in the following table for the periods indicated:

Years Ended December 31,

2022 2021 2020

Natural Gas Liquids 2.2 % 2.2 % 2.2 %

Natural Gas Pipelines 2.3 % 2.2 % 2.2 %

The depreciation expense for the years ended December 31, 2023 and 2022, are $ 736 million and $ 615 million, respectively.

We incurred costs for construction work in process that had not been paid at December 31, 2023, 2022 and 2021, of $ 242 million, $ 171 million and $ 131 million, respectively.

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

Medford Assets - In connection with the Medford incident, we assessed the property damage to our facility and wrote off assets totaling $ 45.6 million, which represents the carrying value associated with certain damaged Medford facility property.

These noncash property losses are fully offset by insurance recoveries.

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.

As a result, we recorded noncash impairment charges of $ 362.3 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.

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

Magellan Acquisition - In September 2023, we completed the Magellan Acquisition and acquired property, plant and equipment, which primarily include pipeline, pipeline-related equipment, storage tanks and processing equipment, valued at $ 11.8 billion.

Medford Assets - In connection with the Medford incident in 2022, we assessed the property damage to our facility and wrote off assets totaling $ 46 million, which represents the carrying value associated with certain damaged Medford facility property.

These noncash property losses were fully offset by insurance recoveries.

GOODWILL AND INTANGIBLE ASSETS

Goodwill - The following table sets forth our goodwill, by segment, as of the dates indicated:

Goodwill - The following table sets forth our goodwill, by segment, for the periods indicated:

Gathering and

Processing Natural Gas

Liquids Natural Gas

Pipelines Refined Products and Crude

( Millions of dollars )

Gross goodwill $ 153 $ 371 $ 157 $ — $ 681

Accumulated impairment losses ( 153 ) — — — ( 153 )

December 31, 2022 — 371 157 — 528

( Thousands of dollars )

Natural Gas Liquids $ 371,217 $ 371,217

Natural Gas Pipelines 156,375 156,375

Total goodwill $ 527,592 $ 527,592

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.

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 segment, which are being amortized over periods of 15 to 40 years.

Amortization expense for intangible assets was $ 10.4 million in 2022, $ 10.4 million in 2021, and $ 10.8 million in 2020, and the amortization expense for each of the next five years is estimated to be $ 10.4 million.

Magellan Acquisition (a) — — — 4,424 4,424

December 31, 2023 $ — $ 371 $ 157 $ 4,424 $ 4,952

(a) - Goodwill primarily represents expected tax benefits from future depreciation and amortization of acquired assets and commercial synergies and is expected to be fully deductible for tax purposes.

The allocation of goodwill is preliminary and may be updated as we continue to evaluate the benefits of expected commercial synergies to our segments.

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Intangible Assets - Our intangible assets relate primarily to acquired customer relationships in our Refined Products and Crude segment and are being amortized on a straight-line basis over a weighted average life of 26 years.

Amortization expense for intangible assets was $ 33 million in 2023, and $ 10 million in both 2022 and 2021, and the amortization expense for each of the next five years is estimated to be $ 60 million.

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

2023 December 31,

( Thousands of dollars )

Gross intangible assets $ 381,435 $ 381,435

(Millions of dollars )

Gross intangible assets (a) $ 1,505 $ 381

Accumulated amortization ( 189 ) ( 156 )

Net intangible assets $ 225,275 $ 235,703

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.

The following table sets forth our consolidated debt for as of the dates indicated:

2022 December 31,

(Thousands of dollars)

Intangible assets, net

$ 1,316 $ 225

(a) - Increases to gross intangible assets primarily represent customer relationships associated with the Magellan Acquisition.

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The following table sets forth our consolidated debt as of the dates indicated:

December 31, 2023 December 31, 2022

(Millions of dollars)

Commercial paper outstanding (a) $ — $ —

Senior unsecured obligations:

$ 900,000 at 3.375 % due October 2022

$ 425 at 5.0 % due September 2023

425,000 425,000

$ 500 at 7.5 % due September 2023

500,000 500,000

$ 500 at 2.75 % due September 2024

500,000 500,000

$ 250 at 3.2 % due March 2025 (b)

$ 500 at 4.9 % due March 2025

500,000 500,000

$ 400 at 2.2 % due September 2025

387,000 387,000

$ 600 at 5.85 % due January 2026

600,000 600,000

$ 650 at 5.0 % due March 2026 (b)

$ 750 at 5.55 % due November 2026

$ 500 at 4.0 % due July 2027

500,000 500,000

$ 800 at 4.55 % due July 2028

800,000 800,000

$ 100 at 6.875 % due September 2028

100,000 100,000

$ 750 at 5.65 % due November 2028

$ 700 at 4.35 % due March 2029

700,000 700,000

$ 750 at 3.4 % due September 2029

714,251 714,251

$ 850 at 3.1 % due March 2030

780,093 780,093

$ 500 at 3.25 % due June 2030 (b)

$ 500 at 5.8 % due November 2030

$ 600 at 6.35 % due January 2031

600,000 600,000

$ 750 at 6.1 % due November 2032

$ 1,500 at 6.05 % due September 2033

$ 400 at 6.0 % due June 2035

400,000 400,000

$ 600 at 6.65 % due October 2036

600,000 600,000

$ 250 at 6.4 % due May 2037 (b)

$ 600 at 6.85 % due October 2037

600,000 600,000

$ 650 at 6.125 % due February 2041

650,000 650,000

$ 250 at 4.2 % due December 2042 (b)

$ 400 at 6.2 % due September 2043

400,000 400,000

$ 550 at 5.15 % due October 2043 (b)

$ 250 at 4.2 % due March 2045 (b)

$ 500 at 4.25 % due September 2046 (b)

$ 700 at 4.95 % due July 2047

689,006 689,006

$ 500 at 4.2 % due October 2047 (b)

$ 1,000 at 5.2 % due July 2048

1,000,000 1,000,000

$ 500 at 4.85 % due February 2049 (b)

$ 750 at 4.45 % due September 2049

672,530 672,530

$ 500 at 4.5 % due March 2050

443,015 443,015

$ 800 at 3.95 % due March 2050 (b)

$ 300 at 7.15 % due January 2051

300,000 300,000

$ 120,000 term loan, rate of 4.06 % as of December 31, 2022, due June 2025

$ 1,750 at 6.625 % due September 2053

Guardian $ 120 term loan, rate of 6.58 % as of December 31, 2023, due June 2025

Viking $ 60 term loan, rate of 6.71 % as of December 31, 2023, due March 2026

Total debt 22,794 13,731

Unamortized portion of terminated swaps 9,878 11,596

Unamortized debt issuance costs and discounts ( 119,939 ) ( 124,855 )

Unamortized debt discounts ( 1,015 ) ( 35 )

Unamortized debt issuance costs and terminated swaps ( 112 ) ( 75 )

Current maturities of long-term debt ( 484 ) ( 925 )

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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 June 2022, we amended and restated our $ 2.5 Billion Credit Agreement, extending its maturity to June 2027.

Our $2.5 Billion Credit Agreement is a revolving credit facility and contains certain customary conditions for borrowing, as well as customary financial, affirmative and negative covenants.

Among other things, beginning in June 2022, these covenants include maintaining a ratio of consolidated net 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) of no more than 5.0 to 1 at December 31, 2022.

(b) - Debt assumed in the Magellan Acquisition.

Amounts are presented at face value with discount to fair value included in unamortized debt discounts.

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$ 2.5 Billion Credit Agreement - Our $ 2.5 Billion Credit Agreement, which expires in 2027, is a revolving credit facility and contains certain customary conditions for borrowing, as well as customary financial, affirmative and negative covenants.

Among other things, these covenants include maintaining a ratio of consolidated net 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 addition, adjusted EBITDA as defined in our $ 2.5 Billion Credit Agreement allows inclusion of the trailing 12 months of consolidated adjusted EBITDA of the acquired business.

In the third quarter of 2023, we completed the Magellan Acquisition, 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 of 2023 and the following quarter.

Thereafter, the covenant will decrease to 5.0 to 1.

The $ 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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Borrowings, if any, will accrue at Term SOFR plus an applicable margin based on our credit ratings at the time of determination plus an adjustment of 10 basis points.

Under our current credit ratings, the applicable margin on any borrowings

would be 110 basis points.

Under our current credit ratings, the applicable margin on any borrowings would be 110 basis points.

We are required to pay an annual facility fee equal to the daily amount of aggregate commitments under the $ 2.5 Billion Credit Agreement times an applicable rate based on our credit rating at the time of determination.

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The $ 2.5 Billion Credit Agreement also contains various customary events of default, the occurrence of which could result in a termination of the lenders’ commitments and the acceleration of all of our obligations thereunder.

As of December 31, 2022, our ratio of consolidated net indebtedness to adjusted EBITDA was 3.7 to 1, and we were in compliance with all covenants under our $2.5 Billion Credit Agreement.

At December 31, 2022 and 2021, we had letters of credit issued totaling $ 7.9 million and $ 7.7 million, respectively, a nd no borrowings outstanding under our $2.5 Billion Credit Agreement.

Guardian Term Loan Agreement - In June 2022, Guardian entered into a $ 120 million unsecured term loan agreement.

As of December 31, 2023, we had no outstanding borrowings, our ratio of consolidated indebtedness to adjusted EBITDA was 3.6 to 1, and we were in compliance with all covenants under our $ 2.5 Billion Credit Agreement.

Viking Term Loan Agreement - In March 2023, Viking entered into a $ 60 million senior unsecured term loan agreement, which is fully drawn.

The proceeds were used to repay intercompany debt with ONEOK and for general corporate purposes.

The Viking Term Loan Agreement matures in March 2026 and bears interest at Term SOFR plus an applicable margin based on Viking’s credit rating at the time of determination plus an adjustment of 10 basis points.

Under Viking’s current credit ratings, the applicable margin is 125 basis points.

The Viking Term Loan Agreement allows prepayment of all or any portion outstanding without penalty or premium.

As of December 31, 2023, Viking was in compliance with all covenants under the Viking Term Loan Agreement.

Guardian Term Loan Agreement - In 2022, Guardian entered into a $ 120 million unsecured term loan agreement, which is fully drawn.

The proceeds were used to repay intercompany debt with ONEOK.

The Guardian Term Loan Agreement matures in June 2025, and bears interest at Term SOFR plus an applicable margin based on Guardian’s credit rating at the time of determination plus an adjustment of 10 basis points.

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The Guardian Term Loan Agreement allows prepayment of all or any portion outstanding without penalty or premium.

During the second quarter 2022, Guardian drew the full $120 million available under the agreement and used the proceeds to repay intercompany debt with ONEOK.

As of December 31, 2023, Guardian was in compliance with all covenants under the Guardian Term Loan 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.

Issuances - In November 2022, we completed an underwritten public offering of $ 750 million, 6.1 % senior unsecured notes due 2032.

The net proceeds, after deducting underwriting discounts, commissions and offering expenses, were $ 742 million.

The proceeds were used primarily to repay all outstanding amounts under our commercial paper program.

The remainder was used for general corporate purposes.

In May 2020, we completed an underwritten public offering of $ 1.5 billion senior unsecured notes consisting of $ 600 million, 5.85 % senior notes due 2026;

Debt Issuances - In August 2023, we completed an underwritten public offering of $ 5.25 billion senior unsecured notes consisting of $ 750 million, 5.55 % senior notes due 2026;

$ 750 million, 5.65 % senior notes due 2028;

and $ 300 million, 7.15 % senior notes due 2051.

The net proceeds, after deducting underwriting discounts, commissions and offering expenses, were $ 1.48 billion.

A portion of the proceeds was used to repay the outstanding borrowings under our $ 1.5 Billion Term Loan Agreement.

The remainder was used for general corporate purposes.

In March 2020, we completed an underwritten public offering of $ 1.75 billion senior unsecured notes consisting of $ 400 million, 2.2 % senior notes due 2025;

$ 500 million, 5.80 % senior notes due 2030;

and $ 500 million, 4.5 % senior notes due 2050.

$ 1.5 billion, 6.05 % senior notes due 2033;

and $ 1.75 billion, 6.625 % senior notes due 2053.

The net proceeds, after deducting underwriting discounts, commissions and offering expenses, were $ 5.2 billion.

A portion of the proceeds was used to pay all outstanding amounts under our commercial paper program.

The remainder was used for general corporate purposes, which included repayment of other existing indebtedness and funding capital expenditures.

Repayments - In July 2022, we redeemed the remaining $ 895.8 million of our 3.375 % senior notes due October 2022 at 100 % of the principal amount, plus accrued and unpaid interest, with cash on hand and short-term borrowings.

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’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.

The net proceeds were used to fund the cash consideration and other costs related to the Magellan Acquisition.

In 2022, we completed an underwritten public offering of $ 750 million, 6.1 % senior unsecured notes due 2032.

The net proceeds, after deducting underwriting discounts, commissions and offering expenses, were $ 742 million.

The proceeds were used primarily to repay all outstanding amounts under our commercial paper program.

The remainder was used for general corporate purposes.

Debt Repayments - In 2023, we repurchased in the open market outstanding principal of certain of our senior notes in the amount of $ 322 million for an aggregate repurchase price of $ 280 million, including accrued and unpaid interest, with cash on hand.

In connection with these open market repurchases, we recognized $ 41 million of net gains on extinguishment of debt,

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which is included in other income (expense), net in our Consolidated Statement of Income for the year ended December 31, 2023.

In June 2023, we redeemed our $ 500 million, 7.5 % senior notes due September 2023 at 100 % of the principal amount, plus accrued and unpaid interest, with cash on hand.

In February 2023, we redeemed our $ 425 million, 5.0 % senior notes due September 2023 at 100 % of the principal amount, plus accrued and unpaid interest, with cash on hand.

In 2022, we redeemed the remaining $ 896 million of our 3.375 % senior notes due October 2022 at 100 % of the principal amount, plus accrued and unpaid interest, with cash on hand and short-term borrowings.

In 2021, we redeemed the remaining $ 536 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 2021, we repaid the remaining $ 12 million of Guardian’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 million for an aggregate repurchase price of $ 55 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 (expense), net in our Consolidated Statement of Income for the year ended December 31, 2020.

Subsequent event - We elected to redeem our $ 425 million, 5.0 % senior notes due September 2023, with a redemption effective date in late February 2023.

We expect the redemption price to equal 100 % of the principal amount of the notes, plus accrued and unpaid interest, which we will pay with cash on hand.

The aggregate maturities of long-term debt outstanding and interest payments on debt as of December 31, 2023, for the years 2024 through 2028 are shown below:

Obligations Guardian Interest

Obligations Guardian Viking Interest

on Debt Total

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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.

The Guardian Term Loan Agreement is not guaranteed by ONEOK, ONEOK Partners or the Intermediate Partnership.

Debt Guarantees - In December 2023, ONEOK assumed the debt obligations of Magellan under its previous debt indentures and Magellan provided a guarantee of the outstanding notes.

As of December 31, 2023, Magellan no longer has debt obligations outstanding.

ONEOK, ONEOK Partners, the Intermediate Partnership and Magellan have cross guarantees in place for ONEOK’s and ONEOK Partners’ indebtedness.

The Guardian Term Loan Agreement and Viking Term Loan Agreement are not guaranteed by ONEOK, ONEOK Partners, the Intermediate Partnership or Magellan.

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

Equity Issuances - In July 2020, we established an “at-the-market” equity program for the offer and sale from time to time of our common stock up to an aggregate offering price of $ 1.0 billion.

Equity Issuances - In September 2023, we completed the Magellan Acquisition.

Pursuant to the Merger Agreement, each common unit of Magellan was exchanged for a fixed ratio of 0.667 shares of ONEOK common stock and $ 25.00 of cash.

We issued approximately 135 million shares of common stock, with a fair value of approximately $ 9.0 billion as of the closing date of the Magellan Acquisition.

We have an “at-the-market” equity program for the offer and sale from time to time of our common stock up to an aggregate offering price of $ 1.0 billion.

The program allows us to offer and sell common stock at prices we deem appropriate through a sales agent, in forward sales transactions through a forward seller or directly to one or more of the program’s managers acting as principals.

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We are under no obligation to offer and sell common stock under the program.

No shares have been sold through our “at-the-market” program as of the date of this report.

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.

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

As of December 31, 2023, no shares have been sold through our “at-the-market” program.

Share Repurchase Program - In January 2024, our Board of Directors authorized a share repurchase program to buy up to $ 2.0 billion of our outstanding common stock and targets the program to be largely utilized over the next four years .

We expect shares to be acquired from time to time in open-market transactions or through privately negotiated transactions at our discretion, subject to market conditions and other factors.

We expect any purchases to be funded by cash on hand, cash flow from operations and short-term borrowings.

The program will terminate upon completion of the repurchase of $ 2.0 billion of common stock or on January 1, 2029, whichever occurs first.

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.

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Additionally, in February 2024, we paid a quarterly common stock dividend of $ 0.99 per share ($ 3.96 per share on an annualized basis), which was paid to shareholders of record as of January 30, 2024.

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.

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

We paid dividends for the Series E Preferred Stock of $ 1.1 million in 2023, 2022 and 2021.

We paid quarterly dividends totaling $ 0.3 million for the Series E Preferred Stock in February 2024.

ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table sets forth the balance in accumulated other comprehensive loss for the periods indicated:

Assets/Liabilities (a) Retirement and Other

Postretirement

Obligations (a) (b) Risk-

Assets/Liabilities of

Unconsolidated

Affiliates (a) Accumulated

Comprehensive

( Thousands of dollars )

January 1, 2021 $ ( 377,446 ) $ ( 157,635 ) $ ( 16,368 ) $ ( 551,449 )

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

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

Other comprehensive income before reclassifications 93,451 41,140 15,183 149,774

Amounts reclassified to net income (c) 200,933 11,624 764 213,321

Other comprehensive income 294,384 52,764 15,947 363,095

December 31, 2022 $ ( 57,931 ) $ ( 54,895 ) $ 4,570 $ ( 108,256 )

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

(b) - Includes amounts related to supplemental executive retirement plan.

The following table sets forth information about the balance of accumulated other comprehensive loss at December 31, 2022, representing unrealized gains (losses) related to risk-management assets and liabilities, net of tax:

Assets/Liabilities (a)

( Thousands of dollars )

Commodity derivative instruments expected to be realized within the next 24 months (b) $ 32,611

Settled interest-rate swaps to be recognized over the life of the long-term, fixed-rate debt (c)

Interest-rate swaps with future settlement dates expected to be amortized over the life of long-term debt (d) 25,074

Accumulated other comprehensive loss at December 31, 2022 $ ( 57,931 )

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

(b) - Based on commodity prices on December 31, 2022, we expect net gains of $ 28.7 million, net of tax, will be reclassified into earnings during the next 12 months.

(d) - Includes the interest rate swaps terminated in December 2022.

See Note D for more details.

The remaining amounts in accumulated other comprehensive loss relate primarily to our retirement and other postretirement benefit plan obligations, which are expected to be amortized over the average remaining service period of employees participating in these plans.

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EARNINGS PER SHARE

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Income Shares Per Share

( Thousands, except per share amounts )

( Millions, except per share amounts )

Net income available for common stock $ 2,658 484.3 $ 5.49

$ 1,721,121 447,507 $ 3.85

Effect of dilutive securities — 1.1

Net income available for common stock and common stock equivalents $ 2,658 485.4 $ 5.48

$ 1,721,121 448,447 $ 3.84

Year Ended December 31, 2022

Income Shares Per Share

( Thousands, except per share amounts )

(Millions, except per share amounts )

Net income available for common stock

$ 1,721 447.5 $ 3.85

Effect of dilutive securities — 0.9

Net income available for common stock and common stock equivalents

$ 1,721 448.4 $ 3.84

Year Ended December 31, 2021

Income Shares Per Share

( Thousands, except per share amounts )

(Millions, except per share amounts )

Net income available for common stock $ 1,499 446.4 $ 3.36

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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.

In conjunction with the Magellan Acquisition, we assumed the former Magellan Midstream Partners, L.P.

Long-Term Incentive Plan, which was used for the conversion of stock-based compensation upon closing.

We reserved 1.0 million shares of common stock for issuance under the assumed plan, and as of December 31, 2023, all of the shares have been granted.

The remaining restricted stock unit awards converted in conjunction with the Magellan Acquisition were granted from the shares reserved under the registration statements.

Restricted Stock Units - We have granted restricted stock units to key employees that vest at the end of a designated period, typically three years, and entitle the grantee to receive shares of our common stock.

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Compensation expense is recognized on a straight-line basis over the vesting period of the award.

Magellan Acquisition - As discussed in Note B, we completed the Magellan Acquisition on September 25, 2023.

Prior to the acquisition, Magellan had previously issued unit-based awards consisting of time-vested phantom units and performance phantom units, that vested at the end of a designated period, typically three years.

Pursuant to the terms of the Merger Agreement, each outstanding unit-based award was converted into a restricted stock unit and measured at their acquisition date

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fair value as if they were vested and issued on the acquisition date.

The fair value attributable to pre-combination service was allocated to consideration transferred and was included as part of the purchase price.

The portion attributable to post-combination service is being recognized as compensation expense on a straight-line basis over the remaining vesting period of the awards.

Converted restricted stock unit awards accrue dividend equivalents that are paid out in cash at vesting.

Approximately $ 70 million of the converted awards were settled in cash immediately following the closing of the Magellan Acquisition and are not included in restricted stock unit activity disclosures herein.

Performance Unit Awards - We have granted performance unit awards to key employees that vest at the end of a three -year period.

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Compensation expense is recognized on a straight-line basis over the vesting period of the award.

Stock Compensation for Non-Employee Directors

The EIP provides for the granting of nonstatutory stock options and stock bonus awards to non-employee directors, including performance unit awards and restricted stock unit awards.

Stock Compensation for Non-Employee Directors - The EIP provides for the granting of nonstatutory stock options and stock bonus awards to non-employee directors, including performance unit awards and restricted stock unit awards.

Under the EIP, awards may be granted by the Executive Compensation Committee at any time, until grants have been made for all shares authorized under the EIP.

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No performance unit awards or restricted stock unit awards have been made to non-employee directors, and there are no options outstanding.

For all awards outstanding, we used a 3 % forfeiture rate based on historical forfeitures under our share-based payment plans.

General - For all awards outstanding, we used a 3 % forfeiture rate based on historical forfeitures under our share-based payment plans.

We currently use treasury stock to satisfy our share-based payment obligations.

Compensation expense for our share-based payment plans was $ 52.8 million, $ 54.1 million and $ 29.4 million during 2022, 2021 and 2020, respectively, before related tax benefits of $ 13.5 million, $ 14.4 million and $ 14.1 million, respectively.

Restricted Stock Unit Activity

As of December 31, 2022, we had $ 20.7 million of total unrecognized compensation cost related to our nonvested restricted stock unit awards, which is expected to be recognized over a weighted-average period of 1.7 years .

Compensation expense, exclusive of those recognized within transaction costs, for our share-based payment plans was $ 63 million, $ 53 million and $ 54 million during 2023, 2022 and 2021, respectively, before related tax benefits of $ 14 million, $ 13 million and $ 14 million, respectively.

Restricted Stock Unit Activity - As of December 31, 2023, we had $ 42 million of total unrecognized compensation cost related to our nonvested restricted stock unit awards, which is expected to be recognized over a weighted-average period of 1.7 years.

The following tables set forth activity and various statistics for our restricted stock unit awards:

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Nonvested December 31, 2022 832,734 $ 58.30

Granted 323,048 $ 60.96

Released to participants ( 222,254 ) $ 64.98

1,667,473 $ 66.50

Released to participants (b)

( 698,906 ) $ 68.47

Forfeited ( 76,736 ) $ 58.92

Nonvested December 31, 2023 1,724,565 $ 62.08

(a) - Includes 1,346,845 restricted stock unit awards granted in conjunction with the Magellan Acquisition.

(b) - Includes 488,929 restricted stock unit awards released to participants in conjunction with the Magellan Acquisition.

2023 2022 2021

Weighted-average grant date fair value (per share) $ 66.50 $ 60.96 $ 46.84

Fair value of units granted (thousands of dollars) $ 19,693 $ 19,542 $ 16,552

Grant date fair value of units vested (thousands of dollars) $ 14,442 $ 12,519 $ 11,204

Performance Unit Activity

As of December 31, 2022, we had $ 33.7 million of tot al unrecognized compensation cost related to the nonvested performance unit awards, which is expected to be recognized over a weighted-average period of 1.7 years .

Fair value of units granted (millions of dollars) $ 111 $ 20 $ 20

Grant date fair value of units vested (millions of dollars) $ 48 $ 14 $ 13

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Performance Unit Activity - As of December 31, 2023, we had $ 34 million of tot al unrecognized compensation cost related to the nonvested performance unit awards, which is expected to be recognized over a weighted-average period of 1.7 years.

The following tables set forth activity and various statistics related to the performance unit awards and the assumptions used in the valuations at the respective grant dates:

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Weighted-average grant date fair value (per share) $ 87.46 $ 79.05 $ 62.03

Fair value of units granted (thousands of dollars) $ 31,566 $ 33,632 $ 25,028

Grant date fair value of units vested (thousands of dollars) $ 20,464 $ 19,962 $ 17,722

Employee Stock Purchase Plan

We have reserved a total of 11.6 million shares of common stock for issuance under our Employee Stock Purchase Plan (the ESPP).

Fair value of units granted (millions of dollars) $ 32 $ 32 $ 34

Grant date fair value of units vested (millions of dollars) $ 21 $ 20 $ 20

Employee Stock Purchase Plan - We have reserved a total of 12 million shares of common stock for issuance under our Employee Stock Purchase Plan (the ESPP).

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

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Under the plan, we sold 236,108 shares at a weighted average of $ 52.70 per share in 2023, 235,583 shares at a weighted average of $ 47.21 per share in 2022 and 277,012 shares at a weighted average of $ 38.98 per share in 2021.

Employee Stock Award Program

Under our Employee Stock Award Program, we issue, for no monetary consideration, to all eligible employees one share of our common stock when the per-share closing price of our common stock on the NYSE is at or above each one-dollar increment above its previous high closing price.

The total number of shares of our common stock available for issuance under this program is 900,000 .

Shares issued to employees under this program during 2020 totaled 2,871 .

Compensation expense related to the Employee Stock Award Program was $ 0.2 million for 2020.

Employee Stock Award Program - Under our Employee Stock Award Program, we issue, for no monetary consideration, to all eligible employees one share of our common stock when the per-share closing price of our common stock on the NYSE is at or above each one-dollar increment above its previous high closing price.

We have reserved a total of 900,000 shares of common stock for issuance under this program.

No shares were issued to employees under this program in 2023, 2022 or 2021.

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

Deferred Compensation Plan for Non-Employee Directors

Our Deferred Compensation Plan for Non-Employee Directors provides our non-employee directors the option to defer all or a portion of their compensation for their service on our Board of Directors.

Deferred Compensation Plan for Non-Employee Directors - Our Deferred Compensation Plan for Non-Employee Directors provides our non-employee directors the option to defer all or a portion of their compensation for their service on our Board of Directors.

Under the plan, directors may elect either a cash deferral option or a phantom stock option.

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Retirement and Other Postretirement Benefit Plans

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

Retirement Plans - We have a legacy 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.

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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 consecutive service.

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Other Postretirement Benefit Plans - We sponsor legacy 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 consecutive 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.

The postretirement medical plan for Medicare-eligible participants is an account-based plan under which participants may elect to purchase private insurance policies under a private exchange and/or seek reimbursement of other eligible medical expenses.

Magellan Acquisition - As a result of the Magellan Acquisition, we assumed the pension plan assets and obligations of Magellan.

These obligations are composed of two defined benefit pension plans, including one for non-union employees and one for union employees.

The pension plan for non-union employees closed to new participants upon the closing of the acquisition.

The pension plan for union employees closed to new participants in January 2024.

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

We also assumed the postretirement benefit obligations of Magellan which covers certain employees of Magellan.

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 plans are also eligible to receive quarterly and annual profit-sharing contributions under our 401(k) Plan.

Obligations and Funded Status - The following table sets forth our retirement and other postretirement benefit plans benefit obligations and fair value of plan assets for the periods indicated:

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2023 2022 2023 2022

Change in benefit obligation ( Thousands of dollars )

Change in benefit obligation (Millions of dollars )

Benefit obligation, beginning of period $ 423 $ 567 $ 38 $ 51

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Plan participants’ contributions — — 1 1

Actuarial gain ( 148,988 ) ( 22,792 ) ( 11,554 ) ( 2,496 )

Actuarial (gain) loss

38 ( 149 ) 3 ( 11 )

Benefits paid ( 33 ) ( 20 ) ( 4 ) ( 4 )

Magellan Acquisition

Benefit obligation, end of period (a) 702 423 51 38

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Actual return on plan assets 60 ( 71 ) 2 ( 4 )

Employer contributions — 11,200 — —

Plan participants’ contributions — — 1 1

Benefits paid ( 33 ) ( 20 ) ( 4 ) ( 4 )

Magellan Acquisition

Fair value of plan assets, end of period (b) 554 322 16 17

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The accumulated benefit obligation for our retirement plans was $ 637 million and $ 409 million at December 31, 2023 and 2022, respectively.

The actuarial gains 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:

Retirement Benefits Other Postretirement Benefits

Years Ended December 31, Years Ended December 31,

2022 2021 2020 2022 2021 2020

( Thousands of dollars )

Components of net periodic benefit cost

Service cost $ 6,808 $ 8,314 $ 8,154 $ 307 $ 421 $ 460

Interest cost 17,788 16,900 18,318 1,480 1,454 1,771

Expected return on plan assets ( 24,469 ) ( 25,109 ) ( 24,964 ) ( 1,493 ) ( 1,364 ) ( 2,894 )

Amortization of prior service cost 114 114 114 — — —

Amortization of net loss 13,050 19,673 18,306 1,932 3,692 5

Net periodic benefit cost (income) $ 13,291 $ 19,892 $ 19,928 $ 2,226 $ 4,203 $ ( 658 )

Other Comprehensive Income (Loss) - The following table sets forth the amounts recognized in other comprehensive income (loss) related to our retirement and other postretirement benefits for the periods indicated:

Retirement Benefits Other Postretirement Benefits

Years Ended December 31, Years Ended December 31,

2022 2021 2020 2022 2021 2020

( Thousands of dollars )

Net gain (loss) (a) $ 47,577 $ 34,529 $ ( 31,016 ) $ 5,629 $ 7,052 $ ( 21,453 )

Prior service cost — — — — — —

Amortization of prior service cost 114 114 114 — — —

Amortization of net loss 13,050 19,673 18,306 1,932 3,692 5

Deferred income taxes ( 13,970 ) ( 12,493 ) 2,897 ( 1,739 ) ( 2,471 ) 4,933

Total recognized in other comprehensive income (loss) $ 46,771 $ 41,823 $ ( 9,699 ) $ 5,822 $ 8,273 $ ( 16,515 )

(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 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:

Retirement Benefits Other Postretirement Benefits

December 31, December 31,

2022 2021 2022 2021

( Thousands of dollars )

Prior service cost $ ( 260 ) $ ( 374 ) $ — $ —

Accumulated loss ( 70,833 ) ( 131,460 ) ( 7,255 ) ( 14,815 )

Accumulated other comprehensive loss ( 71,093 ) ( 131,834 ) ( 7,255 ) ( 14,815 )

Deferred income taxes 22,788 36,759 2,113 3,852

Accumulated other comprehensive loss, net of tax $ ( 48,305 ) $ ( 95,075 ) $ ( 5,142 ) $ ( 10,963 )

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

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The components of net periodic benefit cost and related assumptions, and amounts recognized in other comprehensive income related to our retirement and other postretirement benefit plans are not material.

The balance in accumulated other comprehensive loss at December 31, 2023 and 2022, was $ 64 million and $ 48 million, respectively.

This balance is expected to be amortized over the average remaining service period of employees participating in these plans.

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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Compensation increase rate 3.65 % 3.60 % NA NA

The following table sets forth the weighted-average assumptions used to determine net periodic benefit costs for the periods indicated:

Years Ended December 31,

2022 2021 2020

Discount rate - retirement plans 3.25 % 3.00 % 3.50 %

Discount rate - other postretirement plans 3.00 % 2.75 % 3.50 %

Expected long-term return on plan assets 6.50 % 7.00 % 7.50 %

Compensation increase rate 3.60 % 3.60 % 3.70 %

We determine our overall expected long-term rate of return on plan assets based on our review of historical returns and economic growth models.

Interest credit rating (a)

4.03 % NA NA NA

(a) - This actuarial assumption is only applicable to the pension plans assumed with the Magellan Acquisition.

We determine our discount rates annually utilizing portfolios of high-quality bonds matched to the estimated benefit cash flows of our retirement and other postretirement benefit plans.

Bonds selected to be included in the portfolios are only those rated by S&P or Moody’s as an AA or Aa2 rating or better and exclude callable bonds, bonds with less than a minimum issue size, yield outliers and other filtering criteria to remove unsuitable bonds.

Health Care Cost Trend Rates - The following table sets forth the assumed health care cost-trend rates for the periods indicated:

Health care cost-trend rate assumed for next year 7.00 % 6.50 %

Rate to which the cost-trend rate is assumed to decline

(the ultimate trend rate)

5.00 % 5.00 %

Year that the rate reaches the ultimate trend rate 2026 2025

Plan Assets - Our investment strategy is to invest plan assets in accordance with sound investment practices that emphasize long-term fundamentals.

The goal of this strategy is to maximize investment returns while managing risk in order to meet the plan’s current and projected financial obligations.

The investment allocation for our other postretirement benefit plans is to target a diversified mix of approximately 30% fixed income and 70% equity securities.

The investment allocation for our defined benefit pension plan follows a glide path approach of liability-driven investing that shifts a higher portfolio weighting to fixed income as the plan’s funded status increases.

The purpose of liability-driven investing is to structure the asset portfolio to more closely resemble the pension liability and thereby more effectively hedge against changes in the liability.

The plan’s current investments include a diverse blend of various domestic and international equities, investments in various classes of debt securities, real estate and hedge funds.

The target allocation for the assets of our retirement plan as of December 31, 2022, is as follows:

The investment allocation for our legacy ONEOK defined benefit pension plan follows a glide path approach of liability-driven investing that shifts a higher portfolio weighting to fixed income as the plan’s funded status increases.

A majority of the legacy Magellan pension assets are allocated to fixed income securities and invested to match the duration of the plans’ short, intermediate and long-term liabilities, with the remaining amount allocated to equity securities.

Our pension plans utilize a diversified mix of investments that may include domestic and international equities, short, intermediate and long term corporate and government obligations, real estate and hedge funds.

The combined target allocation for the assets of our pension plans as of December 31, 2023, is as follows:

Domestic and international equities 32 %

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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.

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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The fair value of the plan assets for our other postretirement benefit plans as of December 31, 2023 are not material.

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

Pension Benefits

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Asset Category Level 1 Level 2 Level 3 Subtotal Measured at NAV (d)

( Thousands of dollars )

( Millions of dollars )

Equity securities $ 65 $ — $ — $ 65 $ — $ 65

Cash and money market funds 9 — — 9 — 9

Government obligations

45 — — 45 — 45

Corporate obligations

100 — — 100 — 100

Common/collective trusts

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Asset Category Level 1 Level 2 Level 3 Subtotal Measured at NAV (d)

( Thousands of dollars )

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

( Millions of dollars )

Common/collective trusts

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

Other Postretirement Benefits

December 31, 2021

Asset Category Level 1 Level 2 Level 3 Total

( Thousands of dollars )

Equity securities (a) $ 17,953 $ — $ — $ 17,953

Money market funds — 480 — 480

Municipal obligations 5,964 — — 5,964

Fair value of plan assets $ 23,917 $ 480 $ — $ 24,397

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

Contributions - During 2023, we made no contributions to our defined benefit pension and other postretirement benefit plans.

Our defined benefit pension plan has a minimum required contribution of approximately $ 7 million in 2023.

We expect that any contributions to our defined benefit pension plan in 2023 will be satisfied entirely through a non-cash offset against our prefunding account balance.

We do not expect to make any contributions to our other postretirement benefit plans in 2023.

Pension and Other Postretirement Benefit Payments - Benefit payments for our defined benefit pension and other postretirement benefit plans for the period ending December 31, 2022, were $ 19.8 million and $ 4.5 million, respectively.

We contributed $ 5 million to our legacy defined benefit pension in January 2024, and we do not expect to make any contributions to our other postretirement benefit plans in 2024.

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Pension and Other Postretirement Benefit Payments - Benefit payments for our defined benefit pensions and other postretirement benefit plans for the period ending December 31, 2023, were $ 33 million and $ 4 million, respectively.

The following table sets forth the defined benefit pension and other postretirement benefits payments expected to be paid in 2024 through 2033:

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Benefits to be paid in:

( Thousands of dollars )

( Millions of dollars )

2024 $ 39 $ 5

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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.

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

We generally make a quarterly profit-sharing contribution equal to 1 % of each profit-sharing participant’s eligible compensation during the quarter and an annual discretionary profit-sharing contribution equal to a percentage of each profit-sharing participant’s eligible compensation.

Our contributions made to the plan, including profit-sharing contributions, were $ 44 million, $ 35 million and $ 33 million in 2023, 2022 and 2021, respectively.

The legacy Magellan 401(k) Plan was terminated as a result of the Magellan Acquisition, and legacy Magellan employees were given the option to roll their 401(k) balances into the existing ONEOK 401(k) Plan or to their individual retirement accounts.

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 $ 22.9 million and $ 36.1 million at December 31, 2022 and 2021, respectively.

Our investments which are included in other assets on the Consolidated Balance Sheets related to the NQDC Plan are not material.

These investments are maintained in a rabbi trust.

Our contributions to the plan were not material in 2022, 2021 or 2020.

Our contributions to the plan were not material.

The following table sets forth our provision for income taxes for the periods indicated:

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2023 2022 2021

( Thousands of dollars )

Current tax expense

( Millions of dollars )

Current tax expense (benefit)

Federal $ ( 3 ) $ 52 $ 3

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Total provision for income taxes $ 838 $ 528 $ 484

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The following table is a reconciliation of our income tax provision for the periods indicated:

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2023 2022 2021

( Thousands of dollars )

( Millions of dollars )

Income before income taxes $ 3,497 $ 2,250 $ 1,984

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(a) The year ended December 31, 2021, includes $ 19 million impact from previously recognized gains on certain benefit plan investments.

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:

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

2023 December 31,

Deferred tax assets ( Thousands of dollars )

Deferred tax assets ( Millions of dollars )

Employee benefits and other accrued liabilities $ 88 $ 82

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Derivative instruments — 19

Other (a) 30,048 4,863

Interest expense limitation 210 25

Total deferred tax assets 3,344 1,432

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Excess of tax over book depreciation 104 95

Investment in partnerships (b) 3,000,700 2,769,352

Derivative instruments 7 —

Investment in partnerships (a) 5,587 3,001

Total deferred tax liabilities 5,698 3,096

Net deferred tax liabilities $ 2,594 $ 1,739

(a) The year ended December 31, 2022, includes an indefinite-lived interest limitation carryforward of $ 24.7 million.

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

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

In August 2022, the U.S.

government enacted the Inflation Reduction Act into law.

The Inflation Reduction Act includes a new corporate alternative minimum tax (CAMT) of 15% on the adjusted financial statement income (AFSI) of corporations with average AFSI exceeding $1.0 billion over a three-year period.

The CAMT is effective for tax years beginning after December 31, 2022.

We expect the CAMT to have an impact on our cash taxes beginning with the 2024 tax year.

When we become subject to the CAMT and our CAMT liability is greater than our regular U.S.

government enacted the IRA into law.

The IRA includes a new corporate alternative minimum tax (CAMT) of 15% on the adjusted financial statement income (AFSI) of corporations with average AFSI exceeding $1.0 billion over a three-year period.

The CAMT became effective for the 2023 tax year.

We do not expect the CAMT to have an impact on our cash taxes in the 2024 tax year.

However, when our CAMT liability is greater than our regular U.S.

federal income tax liability for any particular year, the CAMT liability would effectively accelerate our future U.S.

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federal income tax liability for future years.

As a result, we expect that any impact is limited to timing differences in future tax years.

As of December 31, 2022, we have federal net operating loss carryforwards of $ 5.3 billion, the majority of which have an indefinite carryforward period.

As a result, we expect that any future impact will be limited to timing differences in future tax years.

As of December 31, 2023, we have federal net operating loss carryforwards of $ 12.1 billion, which have an indefinite carryforward period.

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

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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, which was reduced by $ 1.4 million in 2022, and increased by $ 6.4 million and $ 20.9 million in 2021 and 2020, respectively, through net income .

therefore, we recorded a valuation allowance, which was increased by $ 165 million and $ 6 million in 2023 and 2021, respectively, a nd reduced by $ 1 million in 2022 through net income.

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UNCONSOLIDATED AFFILIATES

Magellan Acquisition - As a result of the Magellan Acquisition, we acquired ownership interests in Magellan’s eight unconsolidated affiliates.

These investments include a 30 % ownership interest in BridgeTex, which owns an approximately 400-mile crude oil pipeline that connects Permian Basin crude oil to our East Houston terminal;

a 30 % ownership interest in Saddlehorn, which owns an undivided joint interest in an approximately 600-mile pipeline that transports crude oil from the DJ Basin and Rocky Mountain region to storage facilities in Cushing, including our Cushing terminal;

and a 25 % ownership in MVP, which owns a Refined Products marine storage terminal along the Houston Ship Channel in Pasadena, Texas.

The other unconsolidated affiliates acquired are not material.

Investments in Unconsolidated Affiliates - The following table sets forth our investments in unconsolidated affiliates as of the dates indicated:

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2023 December 31,

( Thousands of dollars )

( Millions of dollars )

Overland Pass 50 % $ 402 $ 401

Northern Border 50 % 338 265

Saddlehorn 30 % 288 —

MVP 25 % 241 —

Roadrunner 50 % 188 94

BridgeTex 30 % 193 —

Other Various 224 42

Investments in unconsolidated affiliates (a)

(a) - Equity-method goodwill (Note A) was $ 16.5 million at December 31, 2022 and 2021.

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

$ 1,874 $ 802

(a) - Includes basis differences of $ 148 million and $ 17 million at December 31, 2023 and 2022, respectively, related primarily to equity-method goodwill (Note A).

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

Years Ended December 31,

2023 2022 2021

( Thousands of dollars )

( Millions of dollars )

Northern Border $ 75 $ 71 $ 64

Roadrunner 37,114 33,293 29,017

Overland Pass 56 33 19

Other 6,981 5,323 197

Roadrunner 43 37 33

Saddlehorn (a) 10 — —

MVP (a) 4 — —

BridgeTex (a) ( 1 ) — —

Equity in net earnings from investments $ 202 $ 148 $ 122

Impairment of equity investments $ — $ — $ ( 37,730 )

Impairment Charges - In 2020, we incurred a noncash impairment charge of $ 30.5 million related to our 10.2 % investment in Venice Energy Services Company in our Natural Gas Gathering and Processing segment, which includes $ 22.3 million related to equity-method goodwill, and a $ 7.2 million noncash impairment charge related to our 50 % investment in Chisholm Pipeline Company in our Natural Gas Liquids segment.

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

(a) - Includes equity in net earnings from the period September 25, 2023 through December 31, 2023.

We incurred expenses in transactions with unconsolidated affiliates of $ 132 million, $ 83 million and $ 63 million for 2023, 2022 and 2021, respectively, primarily related to Overland Pass and Northern Border.

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

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

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

Any changes to, or suspension of, the cash distribution policy of Northern Border requires the unanimous approval of the Northern Border Management Committee.

Cash distributions are equal to 100 % of distributable cash flow as determined from Northern Border’s financial statements based upon EBITDA less interest expense and maintenance capital expenditures.

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

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

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

As the operator, we have been delegated the authority to determine such distributions in accordance with, and on the frequency set forth in, the Roadrunner agreement.

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

In 2022, 2021 and 2020, 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 all periods presented were not material.

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

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

Any changes to, or suspension of, the cash distributions from Overland Pass requires the unanimous approval of the Overland Pass Management Committee.

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

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

We have agreements with our unconsolidated affiliates that provide that distributions to members are made, primarily, on a pro rata basis according to each member’s ownership interest.

We are the operator of Roadrunner, and as a result of the Magellan Acquisition, we are also the operator of BridgeTex, MVP and Saddlehorn.

In each case, we have operating agreements that provide for reimbursement or payment to us for management services and certain operating costs.

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

In 2023, we made an equity contribution of $ 105 million to Roadrunner, which in combination with an equal contribution from our joint venture partner, was used to repay Roadrunner’s outstanding debt.

In 2022 and 2021, our contributions to Roadrunner

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were not material.

In November 2023, we made an equity contribution of $ 91 million to Northern Border, which in combination with an equal contribution from our joint venture partner, was used to partially repay the outstanding balance of its revolving credit facility and fund capital projects.

COMMITMENTS AND CONTINGENCIES

Commitments - Firm transportation and storage contracts are fixed-price contracts that provide us with firm transportation and storage capacity.

The following table sets forth our firm transportation and storage contract payments for the periods indicated:

Transportation

Commitments - The following table sets forth our transportation, volume and storage commitments for the periods indicated:

( Millions of dollars )

Thereafter 277

Total $ 455.6

Environmental Matters and Pipeline Safety - The operation of pipelines, plants and other facilities for the gathering, processing, fractionation, transportation and storage of natural gas, NGLs, condensate and other products is subject to numerous and complex laws and regulations pertaining to health, safety and the environment.

Environmental Matters and Pipeline Safety - The operation of pipelines, terminals, plants and other facilities for the gathering, processing, fractionation, transportation and storage of products is subject to numerous and complex laws and regulations pertaining to health, safety and the environment.

As an owner and/or operator of these facilities, we must comply with laws and regulations that relate to air and water quality, hazardous and solid waste management and disposal, cultural resource protection and other environmental and safety matters.

The cost of planning, designing, constructing and operating pipelines, plants and other facilities must incorporate compliance with these laws, regulations and safety standards.

The cost of planning, designing, constructing and operating pipelines, terminals, plants and other facilities must incorporate compliance with these laws, regulations and safety standards.

Failure to comply with these laws and regulations may trigger a variety of administrative, civil and potentially criminal enforcement measures, including citizen suits, which can include the assessment of monetary penalties, the imposition of remedial requirements and the issuance of injunctions or restrictions on operation or construction.

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 legal proceedings that have arisen in the normal course of our operations.

Legal Proceedings - Corpus Christi Terminal Personal Injury Proceeding - Ismael Garcia, Andrew Ramirez, and Jesus Juarez Quintero, et al.

brought personal injury cases against Magellan and co-defendants Triton Industrial Services, LLC, Tidal Tank, Inc.

and Cleveland Integrity Services, Inc.

in Nueces County Court in Texas.

The claims were originally brought in three different actions but were consolidated into a single case on March 2, 2021.

Claims were asserted by or on behalf of seven individuals, and certain beneficiaries, who were employed by a contractor of Magellan and were injured, one fatally, as a result of a fire that occurred on December 5, 2020 while they were cleaning a tank at our Corpus Christi terminal.

We reached settlement with certain claimants, including resolution of claims relating to the individual who was fatally injured.

Other claims remain outstanding.

We recorded accruals that represent our best estimate for these claims.

We also recorded offsetting insurance receivables for the amounts accrued.

We expect future losses in excess of amounts accrued, if any, to be recoverable through insurance.

While the outcome cannot be predicted, we do not expect the final resolution of this matter to have a material adverse effect on our business .

We are a party to various other 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.

Our lease payments are generally straight-line and the exercise of lease renewal options, which vary in term, is at our sole discretion.

We include renewal periods in a lease term if we are reasonably certain to exercise available renewal options.

We apply the short-term policy election, which allows us to exclude from recognition leases with an initial term of 12 months or less.

Our lease agreements do not include any residual value guarantees or material restrictive covenants.

Through ONEOK Leasing Company, L.L.C.

and ONEOK Parking Company, L.L.C., we own an office building and a parking garage and lease excess space in these facilities to affiliates and others.

Our consolidated lease income is not material.

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

Leases Location in our Consolidated Balance Sheet December 31, 2022 December 31, 2021

( Thousands of dollars )

Operating leases Other assets $ 82,838 $ 89,558

Finance lease Property, plant and equipment 31,264 29,962

Finance lease Accumulated depreciation ( 4,769 ) ( 3,590 )

Total leased assets $ 109,333 $ 115,930

Operating leases Operating lease liability $ 12,289 $ 13,783

Finance lease Other current liabilities 2,954 2,584

Operating leases Operating lease liability 68,110 75,636

Finance lease Other deferred credits 19,299 21,082

Total lease liabilities $ 102,652 $ 113,085

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

December 31, 2022 December 31, 2021

Weighted average remaining lease term (years)

Operating leases 7.5 7.8

Finance lease 5.5 6.6

Weighted average discount rate (a)

Operating leases 3.54 % 3.40 %

Finance lease 9.43 % 9.60 %

(a) - Our weighted-average discount rates represent the rate implicit in the lease or our incremental borrowing rate for a term equal to the remaining term of the lease.

The following table sets forth the maturity of our lease liabilities as of December 31, 2022:

Lease Operating

( Millions of dollars )

2023 $ 4.9 $ 14.6

2024 4.9 13.2

2025 5.6 11.8

2026 5.3 12.0

2027 4.5 11.5

2028 and beyond 3.7 29.4

Total lease payments 28.9 92.5

Interest 6.6 12.1

Present value of lease liabilities $ 22.3 $ 80.4

Our lease costs and supplemental cash flow information related to our leases for the periods ended December 31, 2022 and 2021 are not material.

Contract Assets and Contract Liabilities - Our contract asset balances at the beginning and end of the years ended December 31, 2022 and 2021, 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:

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

Contract Liabilities ( Millions of dollars )

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Revenue recognized included in beginning balance ( 23 )

Net additions 36.9

Balance at December 31, 2022 (b) $ 52.4

Net additions (b) 121

Balance at December 31, 2023 (c) $ 150

(a) - Contract liabilities of $ 23 million and $ 29 million are included in other current liabilities and other deferred credits, respectively, in our Consolidated Balance Sheet.

(b) - Contract liabilities of $ 23.3 million and $ 29.1 million are included in other current liabilities and other deferred credits, respectively, in our Consolidated Balance Sheet.

(b) - Net additions include increases due to the Magellan Acquisition, which are primarily related to customer prepayments for services.

(c) - Contract liabilities of $ 104 million and $ 46 million are included in other current liabilities and other deferred credits, respectively, in our Consolidated Balance Sheet.

Receivables from Customers and Revenue Disaggregation - Substantially all of the balances in accounts receivable on our Consolidated Balance Sheets at December 31, 2023 and 2022, relate to customer receivables.

Revenues sources are disaggregated in Note R.

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.

Revenue sources are disaggregated in Note Q.

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.

The following table presents aggregate value allocated to unsatisfied performance obligations as of December 31, 2023, 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 20 years:

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The amounts we determined to be fully constrained relate to future sales obligations under long-term sales contracts where the transaction price is not known and minimum volume agreements, which we consider to be fully constrained until invoiced.

Segment Descriptions - Our operations are divided into three reportable business segments, as follows:

Segment Descriptions - Our operations are divided into four reportable business segments, as follows:

• our Natural Gas Gathering and Processing segment gathers, treats and processes natural gas;

• our Natural Gas Liquids segment gathers, treats, fractionates and transports NGLs and stores, markets and distributes Purity NGLs;

• our Natural Gas Pipelines segment transports and stores natural gas via regulated intrastate and interstate natural gas transmission pipelines and natural gas storage facilities.

Other and eliminations consist of corporate costs, the operating and leasing activities of our headquarters building and related parking facility, the activity of our wholly-owned captive insurance company, which began in 2022, and eliminations necessary to reconcile our reportable segments to our Consolidated Financial Statements.

• our Natural Gas Pipelines segment transports and stores natural gas;

• our Refined Products and Crude segment transports, stores and distributes Refined Products and crude oil, as well as conducts certain commodity-related activities including liquids blending and marketing activities.

This new reportable business segment was added in conjunction with the Magellan Acquisition that closed on September 25, 2023.

Results of operations for this business segment are included below for the period September 25, 2023 through December 31, 2023.

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

For the year ended December 31, 2023, revenues from one customer impacting all our segments represented approximately 11 % of our consolidated revenues.

For the year ended December 31, 2022, 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 represented approximately 12 % of our consolidated revenues.

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

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

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Processing Natural Gas

Liquids (a) Natural Gas

Pipelines (b) Total

( Thousands of dollars )

NGL and condensate sales $ 3,690,217 $ 18,329,318 $ — $ 22,019,535

Liquids Natural Gas

Pipelines Refined Products and Crude Total

( Millions of dollars )

Liquids commodity sales $ 2,479 $ 13,666 $ — $ 502 $ 16,647

Residue natural gas sales 1,398 — 39 — 1,437

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Other 32 10 2 34 78

Total revenues (c) 6,533,492 19,066,822 578,542 26,178,856

Total revenues (a) 4,056 14,429 623 1,071 20,179

Cost of sales and fuel (exclusive of depreciation and operating costs) ( 2,364 ) ( 11,592 ) ( 28 ) ( 450 ) ( 14,434 )

Operating costs ( 467 ) ( 666 ) ( 202 ) ( 198 ) ( 1,533 )

Equity in net earnings from investments 4,857 34,643 108,220 147,720

Adjusted EBITDA from unconsolidated affiliates

1 67 160 36 264

Noncash compensation expense 19 29 8 6 62

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Depreciation and amortization $ ( 272 ) $ ( 334 ) $ ( 67 ) $ ( 92 ) $ ( 765 )

Equity in net earnings from investments $ ( 2 ) $ 58 $ 118 $ 28 $ 202

Investments in unconsolidated affiliates $ 24 $ 419 $ 526 $ 903 $ 1,872

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Capital expenditures $ 448 $ 818 $ 228 $ 52 $ 1,546

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

Our Natural Gas Liquids segment’s regulated operations had revenues of $ 2.5 billion, of which $ 2.3 billion related to revenues within the segment, cost of sales and fuel of $ 686.9 million and operating costs of $ 333.7 million.

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

Our Natural Gas Pipelines segment’s regulated operations had revenues of $ 438.2 million, cost of sales and fuel of $ 48.9 million and operating costs of $ 154.4 million.

(c) Intersegment revenues are primarily commodity sales, which are based on the contracted selling price that is generally index-based and settled monthly, and for the Natural Gas Gathering and Processing segment totaled $ 3.7 billion.

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

(a) - Intersegment revenues are primarily commodity sales, which are based on the contracted selling price that is generally index-based and settled monthly, and for the Natural Gas Gathering and Processing segment totaled $ 2.4 billion.

Intersegment revenues for the Natural Gas Liquids, Refined Products and Crude and Natural Gas Pipelines segments were not material.

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Year Ended December 31, 2023 Total

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Eliminations Total

( Thousands of dollars )

( Millions of dollars )

Reconciliations of total segments to consolidated

NGL and condensate sales $ 22,019,535 $ ( 3,759,453 ) $ 18,260,082

Liquids commodity sales $ 16,647 $ ( 2,480 ) $ 14,167

Residue natural gas sales 1,437 — 1,437

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Capital expenditures $ 1,546 $ 49 $ 1,595

(a) - Noncustomer revenue for the year ended December 31, 2022, totaled $( 285.9 ) million related primarily to losses from derivatives on commodity contracts.

(a) - Noncustomer revenue for the year ended December 31, 2023, totaled $ 296 million related primarily to gains from derivatives on commodity sales contracts.

Year Ended December 31, 2022 Natural Gas

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Processing Natural Gas

Liquids (a) Natural Gas

Pipelines (b) Total

( Thousands of dollars )

Liquids Natural Gas

Pipelines Total

( Millions of dollars )

NGL and condensate sales $ 3,690 $ 18,329 $ — $ 22,019

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Other 25 11 1 37

Total revenues (c) 4,461,539 14,391,873 606,903 19,460,315

Total revenues (a) 6,533 19,067 579 26,179

Cost of sales and fuel (exclusive of depreciation and operating costs) ( 5,117 ) ( 16,546 ) ( 25 ) ( 21,688 )

( 3,226,078 ) ( 11,939,661 ) ( 11,236 ) ( 15,176,975 )

Operating costs ( 403 ) ( 576 ) ( 181 ) ( 1,160 )

Equity in net earnings from investments 5 35 108 148

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

Noncash compensation expense 17 27 7 51

Other 2 88 — 90

Segment adjusted EBITDA

$ 1,037 $ 2,095 $ 488 $ 3,620

Depreciation and amortization $ ( 257 ) $ ( 302 ) $ ( 62 ) $ ( 621 )

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Capital expenditures $ 445 $ 581 $ 123 $ 1,149

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

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, cost of sales and fuel of $ 607.5 million and operating costs of $ 308.5 million.

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

Our Natural Gas Pipelines segment’s regulated operations had revenues of $ 521.3 million, cost of sales and fuel of $ 28.5 million and operating costs of $ 147.5 million.

(c) -Intersegment revenues are primarily commodity sales, which are based on the contracted selling price that is generally index-based and settled monthly, and for the Natural Gas Gathering and Processing segment totaled $ 2.9 billion.

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

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Year Ended December 31, 2022 Total

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Eliminations Total

( Thousands of dollars )

( Millions of dollars )

Reconciliations of total segments to consolidated

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Processing Natural Gas

Liquids (a) Natural Gas

Pipelines (b) Total

( Thousands of dollars )

Liquids Natural Gas

Pipelines Total

( Millions of dollars )

NGL and condensate sales $ 2,821 $ 13,653 $ — $ 16,474

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Other 21 41 1 63

Total revenues (c) 1,820,121 7,090,013 479,982 9,390,116

Total revenues (a) 4,461 14,392 607 19,460

Cost of sales and fuel (exclusive of depreciation and operating costs)

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Operating costs ( 367 ) ( 528 ) ( 170 ) ( 1,065 )

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

Equity in net earnings from investments 4 21 97 122

Noncash compensation expense and other 17 19 5 41

Segment adjusted EBITDA

$ 889 $ 1,964 $ 528 $ 3,381

Depreciation and amortization $ ( 260 ) $ ( 299 ) $ ( 59 ) $ ( 618 )

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

Investments in unconsolidated affiliates $ 27 $ 417 $ 354 $ 798

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Capital expenditures $ 275 $ 307 $ 93 $ 675

(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 revenues within the segment, cost of sales and fuel of $ 520.6 million and operating costs of $ 225.8 million.

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

Our Natural Gas Pipelines segment’s regulated operations had revenues of $ 410.8 million, cost of sales and fuel of $ 35.4 million and operating costs of $ 121.9 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.

T able of Contents

Year Ended December 31, 2021 Total

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Eliminations Total

(Thousands of dollars)

( Millions of dollars )

Reconciliations of total segments to consolidated

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Depreciation and amortization $ ( 618 ) $ ( 4 ) $ ( 622 )

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

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

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Capital expenditures $ 675 $ 22 $ 697

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

(a) - Noncustomer revenue for the year ended December 31, 2021, totaled $( 565 ) million related primarily to losses from derivatives on commodity contracts.

Years Ended December 31,

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Reconciliation of net income to total segment adjusted EBITDA

( Thousands of dollars )

( Millions of dollars )

Net income $ 2,659 $ 1,722 $ 1,500

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Income taxes 838 528 484

Impairment charges — — 644,930

Noncash compensation expense 70,502 42,592 8,540

Other corporate costs and equity AFUDC (a) ( 1,948 ) ( 845 ) ( 42,631 )

Total segment adjusted EBITDA $ 3,620,277 $ 3,380,576 $ 2,704,703

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

Adjusted EBITDA from unconsolidated affiliates (c) 264 — —

Equity in net earnings from investments (c)

Noncash compensation expense and other 49 68 41

Other corporate costs (b) 70 — 1

Total segment adjusted EBITDA (a) (c) $ 5,313 $ 3,620 $ 3,381

(a) - The year ended December 31, 2023 includes $ 633 million related to the Medford incident, including a settlement gain of $ 779 million, offset partially by $ 146 million of third-party fractionation costs.

(b) - The year ended December 31, 2023 primarily includes corporate costs related to the Magellan Acquisition of $ 158 million, offset partially by interest income of $ 49 million and corporate net gains of $ 41 million on extinguishment of debt related to open market repurchases.

(c) - Beginning in 2023, we updated our calculation methodology of adjusted EBITDA to include adjusted EBITDA from our unconsolidated affiliates using the same recognition and measurement methods used to record equity in net earnings from investments.

In prior periods, our calculation included equity in net earnings from investments.

This change resulted in an additional $ 62 million of adjusted EBITDA in 2023, and we have not restated prior periods.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND

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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