Quarterly Report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2009

OR

___ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to __________.

Commission file number    001-13643

ONEOK, Inc.

(Exact name of registrant as specified in its charter)

Oklahoma	73-1520922
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
100 West Fifth Street, Tulsa, OK	74103
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code    (918) 588-7000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  Yes X   No __  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every

Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes X No __

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer X              Accelerated filer __             Non-accelerated filer __             Smaller reporting company__

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes __ No X

On July 31, 2009, the Company had 105,394,349 shares of common stock outstanding.

 

 

 

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ONEOK, Inc.

QUARTERLY REPORT ON FORM 10-Q

Part I.	Financial Information	Page No.
Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Income - Three and Six Months Ended June 30, 2009 and 2008	5
	Consolidated Balance Sheets - June 30, 2009 and December 31, 2008	6-7
	Consolidated Statements of Cash Flows - Six Months Ended June 30, 2009 and 2008	9
	Consolidated Statement of Shareholders’ Equity - Six Months Ended June 30, 2009	10-11
	Consolidated Statements of Comprehensive Income - Three and Six Months Ended June 30, 2009 and 2008	12
	Notes to Consolidated Financial Statements	13-32
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33-54
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	54-55
Item 4.	Controls and Procedures	55-56
Part II.	Other Information
Item 1.	Legal Proceedings	56
Item 1A.	Risk Factors	56
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 3.	Defaults Upon Senior Securities	57
Item 4.	Submission of Matters to a Vote of Security Holders	57
Item 5.	Other Information	57
Item 6.	Exhibits	58
Signature		59

As used in this Quarterly Report, references to “we,” “our” or “us” refer to ONEOK, Inc., an Oklahoma corporation, and its predecessors and subsidiaries, unless the context indicates otherwise.

The statements in this Quarterly Report that are not historical information, including statements concerning plans and objectives of management for future operations, economic performance or related assumptions, are forward-looking statements.  Forward-looking statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “should,” “goal,” “forecast,” “could,” “may,” “continue,” “might,” “potential,” “scheduled” and other words and terms of similar meaning.  Although we believe that our expectations regarding future events are based on reasonable assumptions, we can give no assurance that such expectations and assumptions will be achieved.  Important factors that could cause actual results to differ materially from those in the forward-looking statements are described under Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Forward-Looking Statements” and Part II, Item 1A, “Risk Factors” in this Quarterly Report and under Part I, Item 1A, “Risk Factors,” in our Annual Report.

INFORMATION AVAILABLE ON OUR WEB SITE

We make available on our Web site copies of our Annual Report, Quarterly Reports, Current Reports on Form 8-K, amendments to those reports filed or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act and reports of holdings of our securities filed by our officers and directors under Section 16 of the Exchange Act as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the SEC.  Our Web site and any contents thereof are not incorporated by reference into this report.

We also make available on our Web site the Interactive Data Files required to be submitted and posted pursuant to Rule 405 of Regulation S-T.  In accordance with Rule 402 of Regulation S-T, the Interactive Data Files shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

 

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GLOSSARY

The abbreviations, acronyms and industry terminology used in this Quarterly Report are defined as follows:

AFUDC

Allowance for funds used during construction

Annual Report

Annual Report on Form 10-K for the year ended December 31, 2008

ARB	Accounting Research Bulletin

Bbl	Barrels, 1 barrel is equivalent to 42 United States gallons

Bbl/d

Barrels per day

BBtu/d

Billion British thermal units per day

Bcf	Billion cubic feet

Bcf/d

Billion cubic feet per day

Btu(s)

British thermal units, a measure of the amount of heat required to raise the temperature of one pound of water one degree Fahrenheit

Bushton Plant

Bushton Gas Processing Plant

EBITDA

Earnings before interest, taxes, depreciation and amortization

EITF	Emerging Issues Task Force

Exchange Act

Securities Exchange Act of 1934, as amended

FASB	Financial Accounting Standards Board

FERC	Federal Energy Regulatory Commission

FSP	FASB Staff Position

GAAP	Accounting principles generally accepted in the United States of America

Guardian Pipeline

Guardian Pipeline, L.L.C.

KCC	Kansas Corporation Commission

KDHE	Kansas Department of Health and Environment

LDC	Local Distribution Company

LIBOR

London Interbank Offered Rate

MBbl	Thousand barrels

MBbl/d

Thousand barrels per day

Mcf	Thousand cubic feet

MMBbl

Million barrels

MMBtu

Million British thermal units

MMBtu/d

Million British thermal units per day

MMcf	Million cubic feet

MMcf/d

Million cubic feet per day

Moody’s

Moody’s Investors Service, Inc.

NGL products

Marketable natural gas liquid purity products, such as ethane, ethane/propane mix, propane, iso-butane, normal butane and natural gasoline

NGL(s)

Natural gas liquid(s)

Northern Border Pipeline

Northern Border Pipeline Company

NYMEX

New York Mercantile Exchange

OBPI	ONEOK Bushton Processing Inc.

OCC	Oklahoma Corporation Commission

ONEOK

ONEOK, Inc.

ONEOK Partners

ONEOK Partners, L.P.

ONEOK Partners GP

ONEOK Partners GP, L.L.C., a wholly owned subsidiary of ONEOK and the sole general partner of ONEOK Partners, L.P.

OPIS	Oil Price Information Service

Overland Pass Pipeline Company

Overland Pass Pipeline Company LLC

Quarterly Report(s)

Quarterly Report(s) on Form 10-Q

S&P	Standard & Poor’s Rating Group

SEC	Securities and Exchange Commission

Statement

Statement of Financial Accounting Standards

XBRL	eXtensible Business Reporting Language

 

 

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PART I - FINANCIAL INFOR MATION
ITEM 1. FINANCIAL STATEMENTS
ONEOK, Inc. and Subsidiaries
CONSOLIDATED  STATEMENTS OF INCOME
		Three Months Ended								Six Months Ended
		June 30,								June 30,
(Unaudited)		2009				2008				2009				2008
		(Thousands of dollars, except per share amounts)
Revenues		$	2,227,627			$	4,172,866			$	5,017,454			$	9,074,942
Cost of sales and fuel			1,795,201				3,752,038				4,033,617				8,068,202
Net margin			432,426				420,828				983,837				1,006,740
Operating expenses
Operations and maintenance			184,874				171,431				346,593				339,423
Depreciation and amortization			71,249				59,701				143,375				119,180
General taxes			25,261				16,680				50,488				42,011
Total operating expenses			281,384				247,812				540,456				500,614
Gain (loss) on sale of assets			3,762				(4	)			4,426				9
Operating income			154,804				173,012				447,807				506,135
Equity earnings from investments (Note L)			14,188				17,610				35,410				45,393
Allowance for equity funds used during construction			9,468				11,676				18,471				20,172
Other income			7,939				704				9,604				3,936
Other expense			(1,399	)			(407	)			(5,343	)			(5,015	)
Interest expense			(73,392	)			(59,059	)			(151,353	)			(121,920	)
Income before income taxes			111,608				143,536				354,596				448,701
Income taxes			(30,258	)			(30,574	)			(109,697	)			(122,942	)
Net income			81,350				112,962				244,899				325,759
Less: Net income attributable to noncontrolling interests			39,671				71,097				80,935				140,057
Net income attributable to ONEOK		$	41,679			$	41,865			$	163,964			$	185,702
Earnings per share of common stock (Note M)
Net earnings per share, basic		$	0.40			$	0.40			$	1.56			$	1.78
Net earnings per share, diluted		$	0.39			$	0.39			$	1.55			$	1.75
Average shares of common stock (thousands)
Basic			105,335				104,340				105,249				104,255
Diluted			105,950				106,072				105,848				105,947
Dividends declared per share of common stock		$	0.40			$	0.38			$	0.80			$	0.76
See accompanying Notes to Consolidated Financial Statements.

 

 

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ONEOK, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
		June 30,			December 31,
(Unaudited)		2009				2008
Assets		(Thousands of dollars)
Current assets
Cash and cash equivalents		$	47,038			$	510,058
Accounts receivable, net			771,196				1,265,300
Gas and natural gas liquids in storage			564,530				858,966
Commodity exchanges and imbalances			53,417				56,248
Energy marketing and risk management assets (Notes B and C)			168,457				362,808
Other current assets			189,277				324,222
Total current assets			1,793,915				3,377,602
Property, plant and equipment
Property, plant and equipment			9,880,620				9,476,619
Accumulated depreciation and amortization			2,289,760				2,212,850
Net property, plant and equipment (Note J)			7,590,860				7,263,769
Investments and other assets
Goodwill and intangible assets			1,034,393				1,038,226
Energy marketing and risk management assets (Notes B and C)			47,163				45,900
Investments in unconsolidated affiliates (Note L)			735,394				755,492
Other assets			631,998				645,073
Total investments and other assets			2,448,948				2,484,691
Total assets		$	11,833,723			$	13,126,062
See accompanying Notes to Consolidated Financial Statements.

 

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ONEOK, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
		June 30,			December 31,
(Unaudited)		2009				2008
Liabilities and shareholders’ equity		(Thousands of dollars)
Current liabilities
Current maturities of long-term debt (Note G)		$	268,205			$	118,195
Notes payable (Note F)			689,910				2,270,000
Accounts payable			826,414				1,122,761
Commodity exchanges and imbalances			166,847				188,030
Energy marketing and risk management liabilities (Notes B and C)			41,485				175,006
Other current liabilities			444,182				319,772
Total current liabilities			2,437,043				4,193,764
Long-term debt, excluding current maturities (Note G)			4,346,285				4,112,581
Deferred credits and other liabilities
Deferred income taxes			867,015				890,815
Energy marketing and risk management liabilities (Notes B and C)			8,301				46,311
Other deferred credits			762,213				715,052
Total deferred credits and other liabilities			1,637,529				1,652,178
Commitments and contingencies (Note I)
Shareholders’ equity
ONEOK shareholders’ equity
Common stock, $0.01 par value:
authorized 300,000,000 shares; issued 122,180,571 shares and outstanding
105,371,561 shares at June 30, 2009; issued 121,647,007 shares and
outstanding 104,845,231 shares at December 31, 2008			1,222				1,216
Paid in capital			1,308,141				1,301,153
Accumulated other comprehensive loss (Note D)			(82,960	)			(70,616	)
Retained earnings			1,632,795				1,553,033
Treasury stock, at cost: 16,809,010 shares at June 30, 2009 and
16,801,776 shares at December 31, 2008			(696,805	)			(696,616	)
Total ONEOK shareholders’ equity			2,162,393				2,088,170
Noncontrolling interests in consolidated subsidiaries			1,250,473				1,079,369
Total shareholders’ equity			3,412,866				3,167,539
Total liabilities and shareholders’ equity		$	11,833,723			$	13,126,062
See accompanying Notes to Consolidated Financial Statements.

 

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ONEOK, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
		Six Months Ended
		June 30,
(Unaudited)		2009				2008
		(Thousands of dollars)
Operating activities
Net income		$	244,899			$	325,759
Depreciation and amortization			143,375				119,180
Allowance for equity funds used during construction			(18,471	)			(20,172	)
Gain on sale of assets			(4,426	)			(9	)
Equity earnings from investments			(35,410	)			(45,393	)
Distributions received from unconsolidated affiliates			38,233				39,904
Deferred income taxes			40,865				65,374
Stock-based compensation expense			8,551				14,416
Allowance for doubtful accounts			1,663				6,965
Changes in assets and liabilities:
Accounts receivable			492,441				194,146
Gas and natural gas liquids in storage			285,271				(85,083	)
Accounts payable			(324,364	)			261,530
Commodity exchanges and imbalances, net			(18,352	)			53,881
Energy marketing and risk management assets and liabilities			35,373				77,033
Unrecovered purchased gas costs			42,766				18,185
Fair value of firm commitments			179,582				(350,626	)
Other assets and liabilities			(36,144	)			(140,285	)
Cash provided by operating activities			1,075,852				534,805
Investing activities
Changes in investments in unconsolidated affiliates			17,393				6,480
Capital expenditures (less allowance for equity funds used during construction)			(407,600	)			(640,048	)
Proceeds from sale of assets			10,029				201
Proceeds from insurance			-				9,792
Acquisitions			-				2,450
Cash used in investing activities			(380,178	)			(621,125	)
Financing activities
Borrowing (repayment) of notes payable, net			(710,090	)			598,893
Repayment of notes payable with maturities over 90 days			(870,000	)			-
Issuance of debt, net of discounts			498,325				-
Long-term debt financing costs			(4,000	)			-
Payment of debt			(107,970	)			(408,789	)
Repurchase of common stock			(250	)			(29	)
Issuance of common stock			4,342				5,786
Issuance of common units, net of discounts			220,458				146,969
Dividends paid			(84,202	)			(79,212	)
Distributions to noncontrolling interests			(105,307	)			(97,659	)
Cash provided by (used in) financing activities			(1,158,694	)			165,959
Change in cash and cash equivalents			(463,020	)			79,639
Cash and cash equivalents at beginning of period			510,058				19,105
Cash and cash equivalents at end of period		$	47,038			$	98,744
See accompanying Notes to Consolidated Financial Statements.

 

 

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ONEOK, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF SH ARE HOLDERS' EQUITY
		ONEOK Shareholders
														Accumulated
		Common												Other
		Stock				Common				Paid-in				Comprehensive
(Unaudited)		Issued				Stock				Capital				Income (Loss)
		(Shares)			(Thousands of dollars)
December 31, 2008			121,647,007			$	1,216			$	1,301,153			$	(70,616	)
Net income			-				-				-				-
Other comprehensive income (loss) (Note D)			-				-				-				(12,344	)
Repurchase of common stock			-				-				-				-
Common stock issued			533,564				6				6,988				-
Common stock dividends -
$0.80 per share			-				-				-				-
Issuance of equity units			-				-				-				-
Distributions paid			-				-				-				-
June 30, 2009			122,180,571			$	1,222			$	1,308,141			$	(82,960	)
See accompanying Notes to Consolidated Financial Statements.

 

 

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ONEOK, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Continued)
	ONEOK Shareholders									Noncontrolling Interests in Consolidated Subsidiaries
														Total
		Retained				Treasury								Shareholders’
(Unaudited)		Earnings				Stock								Equity
	(Thousands of dollars)
December 31, 2008		$	1,553,033			$	(696,616	)		$	1,079,369			$	3,167,539
Net income			163,964				-				80,935				244,899
Other comprehensive income (loss) (Note D)			-				-				(24,982	)			(37,326	)
Repurchase of common stock			-				(250	)			-				(250	)
Common stock issued			-				61				-				7,055
Common stock dividends -
$0.80 per share			(84,202	)			-				-				(84,202	)
Issuance of equity units			-				-				220,458				220,458
Distributions paid			-				-				(105,307	)			(105,307	)
June 30, 2009		$	1,632,795			$	(696,805	)		$	1,250,473			$	3,412,866

 

 

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ONEOK, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPRE HENSI VE INCOME
		Three Months Ended								Six Months Ended
		June 30,								June 30,
(Unaudited)		2009				2008				2009				2008
		(Thousands of dollars)
Net income		$	81,350			$	112,962			$	244,899			$	325,759
Other comprehensive income (loss), net of tax
Unrealized gains (losses) on energy marketing and risk management
assets/liabilities, net of tax			(22,177	)			(66,249	)			38,469				(118,570	)
Realized (gains) losses in net income, net of tax			(16,793	)			11,267				(70,713	)			4,000
Unrealized holding gains (losses) arising during the period, net of tax			318				(682	)			505				(5,446	)
Change in pension and postretirement benefit plan liability, net of tax			(3,260	)			(2,468	)			(5,795	)			(4,937	)
Other			18				-				208				-
Total other comprehensive income (loss), net of tax (Note D)			(41,894	)			(58,132	)			(37,326	)			(124,953	)
Comprehensive income			39,456				54,830				207,573				200,806
Less: Comprehensive income attributable to noncontrolling interests			24,731				51,184				55,953				121,431
Comprehensive income attributable to ONEOK		$	14,725			$	3,646			$	151,620			$	79,375
See accompanying Notes to Consolidated Financial Statements.

 

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ONEOK, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

A.           SUMMARY OF ACCOUNTING POLICIES

Our accompanying unaudited consolidated financial statements have been prepared in accordance with GAAP and reflect all adjustments that, in our opinion, are necessary for a fair presentation of the results for the interim periods presented.  All such adjustments are of a normal recurring nature.  The 2008 year-end consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP.  These unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements in our Annual Report.  Due to the seasonal nature of our business, the results of operations for the three and six months ended June 30, 2009, are not necessarily indicative of the results that may be expected for a 12-month period.

Our accounting policies are consistent with those disclosed in Note A of the Notes to Consolidated Financial Statements in our Annual Report.  The following recently issued accounting pronouncements will affect our consolidated financial statements during 2009.

Noncontrolling Interests - Statement 160, “Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51,” requires noncontrolling interest (previously referred to as minority interest) to be reported as a component of equity.  Statement 160 was effective for our year beginning January 1, 2009, and requires retroactive adoption of the presentation and disclosure requirements for existing noncontrolling interests.

Derivative Instruments and Hedging Activities - Statement 161, “Disclosures about Derivative Instruments and Hedging Activities - an amendment to FASB Statement No. 133,” requires enhanced disclosures about how derivative and hedging activities affect our financial position, financial performance and cash flows.  Statement 161 was effective for our year beginning January 1, 2009, and was applied prospectively.  See Note C for applicable disclosures.

Fair Value Measurements - As of January 1, 2009, we have applied the provisions of Statement 157, “Fair Value Measurements,” to assets and liabilities that are measured at fair value on a nonrecurring basis subsequent to initial recognition, and the impact was not material.  See Note B for disclosures of our fair value measurements.

Interim Disclosures about Fair Value - FSP 107-1 and Accounting Principles Board (APB) Opinion No. 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” require disclosures of fair value of financial instruments for interim reporting periods, which were effective for our quarter ended June 30, 2009.  These disclosures are included in Note B.

Postretirement Benefit Plan Assets - FSP 132R-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets,” requires enhanced disclosures about our plan assets, including our investment policies, major categories of plan assets, significant concentrations of risk within plan assets, and inputs and valuation techniques used to measure the fair value of plan assets, is effective for our fiscal year ending December 31, 2009, and will be applied prospectively. 

Subsequent Events - Statement 165, “Subsequent Events,” establishes standards of accounting for and disclosures of events that occur after the balance sheet date but before consolidated financial statements are issued.  We have evaluated subsequent events through August 6, 2009, the date our consolidated financial statements were issued, and all required disclosures have been made.

FASB Accounting Standards Codification - Statement 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles,” establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP.  Statement 168 will change the manner in which we reference authoritative accounting principles in our consolidated financial statements and will be effective for our September 30, 2009, Quarterly Report.

 

 

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B.           FAIR VALUE MEASUREMENTS

Refer to Notes A and C of the Notes to Consolidated Financial Statements in our Annual Report for a discussion of our fair value measurements and the fair value hierarchy.

Recurring Fair Value Measurements - The following tables set forth our recurring fair value measurements for the periods indicated.

 

		June 30, 2009
		Level 1				Level 2				Level 3				Netting (a)				Total
		(Thousands of dollars)
Assets
Derivatives		$	258,603			$	103,849			$	635,094			$	(781,926	)		$	215,620
Trading securities			7,341				-				-				-				7,341
Available-for-sale investment securities			2,489				-				-				-				2,489
Total assets		$	268,433			$	103,849			$	635,094			$	(781,926	)		$	225,450
Liabilities
Derivatives		$	(230,180	)		$	(38,227	)		$	(464,680	)		$	683,301			$	(49,786	)
Fair value of firm commitments			-				-				(137,403	)			-				(137,403	)
Total liabilities		$	(230,180	)		$	(38,227	)		$	(602,083	)		$	683,301			$	(187,189	)
(a) - Our derivative assets and liabilities are presented in our Consolidated Balance Sheets on a net basis. We net derivative assets and liabilities, including cash collateral, when a legally enforceable master netting arrangement exists between us and the counterparty to a derivative contract. At June 30, 2009, we held $127.1 million of cash collateral and had posted $28.5 million of cash collateral with various counterparties.

 

		December 31, 2008
		Level 1				Level 2				Level 3				Netting (a)				Total
		(Thousands of dollars)
Assets
Derivatives		$	580,029			$	215,116			$	454,377			$	(840,814	)		$	408,708
Trading securities			4,910				-				-				-				4,910
Available-for-sale investment securities			1,665				-				-				-				1,665
Fair value of firm commitments			-				-				42,179				-				42,179
Total assets		$	586,604			$	215,116			$	496,556			$	(840,814	)		$	457,462
Liabilities
Derivatives		$	(501,726	)		$	(55,705	)		$	(412,022	)		$	748,136			$	(221,317	)
Long-term debt swapped to floating			-				-				(171,455	)			-				(171,455	)
Total liabilities		$	(501,726	)		$	(55,705	)		$	(583,477	)		$	748,136			$	(392,772	)
(a) - Our derivative assets and liabilities are presented in our Consolidated Balance Sheets on a net basis. We net derivative assets and liabilities, including cash collateral, when a legally enforceable master netting arrangement exists between us and the counterparty to a derivative contract. At December 31, 2008, we held $92.7 million of cash collateral.

In accordance with Statement 157, we categorize derivatives for which fair value is determined based on multiple inputs within a single level, based on the lowest level input that is significant to the fair value measurement in its entirety.

Our Level 1 fair value measurements are based on NYMEX-settled prices, actively quoted prices for equity securities and foreign currency forward exchange rates.  These balances are predominantly comprised of exchange-traded derivative contracts, including futures and certain options for natural gas and crude oil, which are valued based on unadjusted quoted prices in active markets.  Also included in Level 1 are equity securities and foreign currency forwards.

Our Level 2 fair value inputs are based on NYMEX-settled prices that are utilized to determine the fair value of certain non-exchange traded financial instruments, including natural gas and crude oil swaps.

 

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Our Level 3 inputs are based on market volatilities derived from the NYMEX natural gas volatility curve, internally developed basis curves incorporating observable and unobservable market data, a pricing service for NGL products, historical correlations of NGL product prices to crude oil, forward NYMEX curves for crude oil, spot and forward LIBOR curves, and adjustments for the credit risk of our counterparties.  The derivatives categorized as Level 3 include over-the-counter basis and swing swaps, physical forward contracts and options for natural gas, NGL swaps and interest-rate swaps.  Also included in Level 3 are the fair values of firm commitments and long-term debt that have been hedged.  We corroborate the data on which our fair value estimates are based using quotes from an independent broker of natural gas, our market knowledge of recent transactions and analysis of historical relationships of data from the pricing service compared with actual settlements and correlations.  We do not believe that our Level 3 fair value estimates have a material impact on our results of operations, as the majority of our derivatives are accounted for as hedges for which ineffectiveness is not material.

The following tables set forth the reconciliation of our Level 3 fair value measurements for the periods indicated.

 

		Derivative Assets (Liabilities)					Fair Value of Firm Commitments					Long-Term Debt				Total
		(Thousands of dollars)
April 1, 2009		$	170,238				$	(111,212	)			$	-			$	59,026
Total realized/unrealized gains (losses):
Included in earnings			34,202		(a)			(26,191	)	(a)			-				8,011
Included in other comprehensive income (loss)			(52,330	)				-					-				(52,330	)
Transfers in and/or out of Level 3			18,304					-					-				18,304
June 30, 2009		$	170,414				$	(137,403	)			$	-			$	33,011
Total gains (losses) for the period included in earnings attributable      to the change in unrealized gains (losses) relating to assets      and liabilities still held as of June 30, 2009 (a)		$	57,041				$	(44,189	)				-			$	12,852
(a) - Reported in revenues and cost of sales and fuel in our Consolidated Statements of Income.

		Derivative Assets (Liabilities)					Fair Value of Firm Commitments					Long-Term Debt				Total
		(Thousands of dollars)
April 1, 2008		$	(131,942	)			$	135,538				$	(347,705	)		$	(344,109	)
Total realized/unrealized gains (losses):
Included in earnings			(283,285	)	(a)			257,772		(a)			7,497	(	b)		(18,016	)
Included in other comprehensive income (loss)			(27,272	)				-					-				(27,272	)
Transfers in and/or out of Level 3			32,138					-					-				32,138
June 30, 2008		$	(410,361	)			$	393,310				$	(340,208	)		$	(357,259	)
Total gains (losses) for the period included in earnings attributable      to the change in unrealized gains (losses) relating to assets      and liabilities still held as of June 30, 2008 (a)		$	(260,918	)			$	275,631				$	7,497			$	22,210
(a) - Reported in revenues and cost of sales and fuel in our Consolidated Statements of Income.
(b) - Reported in interest expense in our Consolidated Statements of Income.

 

 

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		Derivative Assets (Liabilities)					Fair Value of Firm Commitments					Long-Term Debt					Total
		(Thousands of dollars)
January 1, 2009		$	42,355				$	42,179				$	(171,455	)			$	(86,921	)
Total realized/unrealized gains (losses):
Included in earnings			188,038		(a)			(179,582	)	(a)			1,455		(b)			9,911
Included in other comprehensive income (loss)			(60,060	)				-					-					(60,060	)
Maturities			-					-					100,000					100,000
Terminations prior to maturity			-					-					70,000					70,000
Transfers in and/or out of Level 3			81					-					-					81
June 30, 2009		$	170,414				$	(137,403	)			$	-				$	33,011
Total gains (losses) for the period included in earnings attributable      to the change in unrealized gains (losses) relating to assets      and liabilities still held as of June 30, 2009 (a)		$	189,866				$	(162,734	)			$	-				$	27,132
(a) - Reported in revenues and cost of sales and fuel in our Consolidated Statements of Income.
(b) - Reported in interest expense in our Consolidated Statements of Income.

		Derivative Assets (Liabilities)					Fair Value of Firm Commitments					Long-Term Debt					Total
		(Thousands of dollars)
January 1, 2008		$	(54,582	)			$	42,684				$	(338,538	)			$	(350,436	)
Total realized/unrealized gains (losses):
Included in earnings			(356,375	)	(a)			350,626		(a)			(1,670	)	(b)			(7,419	)
Included in other comprehensive income (loss)			(4,007	)				-					-					(4,007	)
Transfers in and/or out of Level 3			4,603					-					-					4,603
June 30, 2008		$	(410,361	)			$	393,310				$	(340,208	)			$	(357,259	)
Total gains (losses) for the period included in earnings attributable      to the change in unrealized gains (losses) relating to assets      and liabilities still held as of June 30, 2008 (a)		$	(373,399	)			$	351,150				$	(1,670	)			$	(23,919	)
(a) - Reported in revenues and cost of sales and fuel in our Consolidated Statements of Income.
(b) - Reported in interest expense in our Consolidated Statements of Income.

 

Realized/unrealized gains (losses) include the realization of our fair value derivative contracts through maturity and changes in fair value of our hedged firm commitments and fixed-rate debt swapped to a floating rate.  Maturities represent the long-term debt associated with an interest-rate swap that matured during the period.  Terminations prior to maturity represent the long-term debt associated with an interest rate swap that was terminated during the period.  Transfers into Level 3 represent existing assets or liabilities that were previously categorized at a higher level for which the inputs to our fair value estimates became unobservable.  Transfers out of Level 3 represent existing assets and liabilities that were previously classified as Level 3 for which the inputs became observable in accordance with our hierarchy policy discussed in Note A of the Notes to Consolidated Financial Statements in our Annual Report.

Investment Securities - Net unrealized holding gains, net of tax, for our investment securities classified as available for sale and reported in accumulated other comprehensive income (loss) were $1.3 million and $0.8 million as of June 30, 2009, and December 31, 2008, respectively.  For the three and six months ended June 30, 2009, net unrealized holding gains on available-for-sale securities included in other comprehensive income were immaterial.  For the three and six months ended June 30, 2009, we recorded net gains of $1.5 million and $2.4 million, respectively, which represents the total mark-to-market effect of trading securities still held as of June 30, 2009.

 

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Other Financial Instruments -   The approximate fair value of cash and cash equivalents, accounts receivable and accounts payable is equal to book value, due to their short-term nature.  The fair value of notes payable approximates the carrying value since the interest rates, prescribed by each borrowing’s respective credit agreement, are periodically adjusted to reflect current market conditions.

The estimated fair value of long-term debt, including current maturities, was $4.52 billion at June 30, 2009.  The book value of long-term debt, including current maturities, was $4.61 billion at June 30, 2009.  The estimated fair value of long-term debt has been determined using quoted market prices of the same or similar issues with similar terms and maturities.

C.           RISK MANAGEMENT AND HEDGING ACTIVITIES USING DERIVATIVES

Energy Marketing and Risk Management Activities

Our Energy Services and ONEOK Partners segments are exposed to various risks that we manage by periodically entering into derivative instruments.  These risks include the following:

·

Commodity price risk - We are exposed to the risk of loss in cash flows and future earnings arising from adverse changes in the price of natural gas, NGLs and crude oil.  We use commodity derivative instruments such as futures, physical forward contracts, swaps and options to mitigate the commodity price risk associated with a portion of the forecasted purchases and sales of commodities and natural gas and natural gas liquids in storage.

·

Basis risk - We are exposed to the risk of loss in cash flows and future earnings arising from adverse changes in the price differentials between pipeline receipt and delivery locations.  Our firm transportation capacity allows us to purchase gas at a pipeline receipt point and sell gas at a pipeline delivery point.  Our Energy Services segment periodically enters into basis swaps between the transportation receipt and delivery points in order to protect the fair value of these location price differentials related to our firm commitments.

·

Currency exchange rate risk - As a result of our Energy Services segment’s activities in Canada, we are exposed to the risk of loss in cash flows and future earnings from adverse changes in currency exchange rates on our commodity purchases and sales primarily related to our firm transportation and storage contracts that are transacted in a currency other than our functional currency, the U.S. dollar.  To reduce our exposure to exchange-rate fluctuations, we use physical forward transactions, which result in an actual two-way flow of currency on the settlement date in which we exchange U.S. dollars for Canadian dollars with another party.

The following derivative instruments are used to manage our exposure to these risks.

·	Futures contracts  - Standardized exchange-traded contracts to purchase or sell natural gas and crude oil at a specified price, requiring delivery on or settlement through the sale or purchase of an offsetting contract by a specified future date under the provisions of exchange regulations.

·	Forward contracts  - Commitments to purchase or sell natural gas, crude oil or NGLs for delivery at some specified time in the future.  Forward contracts are different from futures in that forwards are customized and non-exchange traded.

·

Swaps  - Financial trades involving the exchange of payments based on two different pricing structures for a commodity.  In a typical commodity swap, parties exchange payments based on changes in the price of a commodity or a market index, while fixing the price they effectively pay or receive for the physical commodity.  As a result, one party assumes the risks and benefits of movements in market prices, while the other party assumes the risks and benefits of a fixed price for the commodity.

·	Options - Contractual agreements that give the holder the right, but not the obligation, to buy or sell a fixed quantity of a commodity, at a fixed price, within a specified period of time.  Options may either be standardized, exchange traded or customized and non-exchange traded.

Our objectives for entering into such contracts include, but are not limited to:

·	reducing the variability of cash flows by locking in the price for all or a portion of anticipated index-based physical purchases and sales, transportation fuel requirements, asset management transactions and customer-related business activities;

·	locking in price differential to protect the fair value between transportation receipt and delivery points and to protect the fair value of natural gas or NGLs that are purchased in one month and sold in a later month; and

·	reducing our exposure to fluctuations in foreign currency exchange rates.

Our Energy Services segment also enters into derivative contracts for financial trading purposes primarily to capitalize on opportunities created by market volatility, weather-related events, supply-demand imbalances and market liquidity

 

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inefficiency, which allows us to capture additional margin.  Financial trading activities are generally executed using financially settled derivatives and are normally short term in nature.

With respect to the net open positions that exist within our marketing and financial trading operations, fluctuating commodity prices can impact our financial position and results of operations.  The net open positions are actively managed, and the impact of the changing prices on our financial condition at a point in time is not necessarily indicative of the impact of price movements throughout the year.

Our Distribution segment also uses derivative instruments to hedge the cost of anticipated natural gas purchases during the winter heating months to protect our customers from upward volatility in the market price of natural gas.  The use of these derivative instruments and the associated recovery of these costs have been approved by the OCC, KCC and regulatory authorities in certain of our Texas jurisdictions.

We are also subject to fluctuation in interest rates.  We manage interest-rate risk through the use of fixed-rate debt, floating-rate debt and interest-rate swaps.  Floating-rate swaps may be used to convert the fixed rates of long-term borrowings into short-term variable rates.  Interest-rate swaps are agreements to exchange an interest payment at some future point based on the differential between two interest rates.

Accounting Treatment

We account for derivative instruments and hedging activities in accordance with Statement 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended.  Under Statement 133, entities are required to record derivative instruments at fair value, with the exception of normal purchases and normal sales that are expected to result in physical delivery.  The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, the reason for holding it.

If certain conditions are met, we may elect to designate a derivative instrument as a hedge of exposure to changes in fair values, cash flows or foreign currency.  Certain non-trading derivative transactions, which are economic hedges of our accrual transactions, such as our storage and transportation contracts, do not qualify for hedge accounting treatment.

The table below summarizes the various ways in which we account for our derivative instruments and the impact on our consolidated financial statements.

 

Accounting Treatment		Recognition and Measurement
		Balance Sheet		Income Statement
Normal purchases and normal sales	-	Fair value not recorded	-	Change in fair value not recognized in earnings
Mark-to-market	-	Recorded at fair value	-	Change in fair value recognized in earnings
Cash flow hedge	-	Recorded at fair value	-	Ineffective portion of the gain or loss on the derivative instrument is recognized in earnings
	-	Effective portion of the gain or loss on the derivative instrument is reported initially as a component of accumulated other comprehensive income (loss)	-	Effective portion of the gain or loss on the derivative instrument is reclassified out of accumulated other comprehensive income (loss) into earnings when the forecasted transaction affects earnings
Fair value hedge	-	Recorded at fair value	-	The gain or loss on the derivative instrument is recognized in earnings
	-	Change in fair value of the hedged item is recorded as an adjustment to book value	-	Change in fair value of the hedged item is recognized in earnings

Gains or losses associated with the fair value of derivative instruments entered into by our Distribution segment are included in, and recoverable through, the monthly purchased-gas cost mechanism.

As required by Statement 133, we formally document all relationships between hedging instruments and hedged items, as well as risk management objectives, strategies for undertaking various hedge transactions and methods for assessing and testing correlation and hedge ineffectiveness.  We specifically identify the asset, liability, firm commitment or forecasted transaction that has been designated as the hedged item.  We assess the effectiveness of hedging relationships quarterly by performing a regression analysis on our cash flow and fair value hedging relationships to determine whether the hedge

 

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relationships are highly effective on a retrospective and prospective basis.  We also document our normal purchases and normal sales transactions that we expect to result in physical delivery and which we elect to exempt from derivative accounting treatment.

We evaluate the presentation of revenues from our different types of activities to determine which amounts should be reported on a gross or net basis in accordance with the following literature:

·	EITF 03-11, “Reporting Realized Gains and Losses on Derivative Instruments That Are Subject to FASB Statement No. 133 and Not ‘Held for Trading Purposes’ as Defined in EITF Issue No. 02-3;”

·	EITF 02-3, “Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities;” and

·	EITF 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent.”

In accordance with this guidance, all financially settled derivative instruments, as well as derivative instruments considered held for trading purposes that result in physical delivery, are reported on a net basis in revenues in our Consolidated Statements of Income.  The realized revenues and purchase costs of derivative instruments that are not considered held for trading purposes and non-derivative contracts are reported on a gross basis.  Derivatives that qualify for the normal purchase or sale exception as defined in Statement 133 are also reported on a gross basis.

Revenues in our Consolidated Statements of Income include financial trading margins, as well as certain physical natural gas transactions with our trading counterparties.  Revenues and cost of sales and fuel from such physical transactions are reported on a net basis.

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

Fair Values of Derivative Instruments

Statement 157 defines fair value as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date.  See Note B for a discussion of the inputs associated with our fair value measurements and our fair value hierarchy disclosures.

The following table sets forth the fair values of our derivative instruments for the period indicated.

 

		June 30, 2009
		Fair Values of Derivatives (a)
		Assets				(Liabilities)
		(Thousands of dollars)
Derivative commodity contracts designated as hedging instruments		$	731,942			$	(467,630	)
Derivatives not designated as hedging instruments
Commodity contracts			265,604				(264,693	)
Foreign exchange contracts			-				(764	)
Total derivatives not designated as hedging instruments		$	265,604			$	(265,457	)
Total derivatives		$	997,546			$	(733,087	)
(a) - Included on a net basis in energy marketing and risk management assets and liabilities on our Consolidated Balance Sheet.

 

 

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The following table sets forth the notional quantities for derivative instruments held for the period indicated.

 

			June 30, 2009
			Contract Type		Purchased/ Payor			Sold/ Receiver
Derivatives designated as hedging instruments:
Cash flow hedges
Fixed price
- Natural gas (Bcf)			Exchange futures			6.9			(29.4	)
			Swaps			23.5			(82.8	)
- Crude oil and NGLs (MMBbl)			Swaps			-			(2.0	)
Basis
- Natural gas (Bcf)			Swaps			29.5			(111.1	)
Fair value hedges
Basis
- Natural gas (Bcf)			Forwards and swaps			411.4			(411.3	)
Derivatives not designated as hedging instruments:
Fixed price
- Natural gas (Bcf)			Exchange futures			31.7			(13.0	)
			Forwards and swaps			90.1			(109.4	)
			Options			118.6			(95.0	)
- Foreign currency (Millions of dollars)			Swaps		$	7.1		$	-
Basis
- Natural gas (Bcf)			Forwards and swaps			891.0			(914.8	)
Index
- Natural gas (Bcf)			Forwards and swaps			74.4			(34.8	)

These notional amounts are used to summarize the volume of financial instruments.  However, they do not reflect the extent to which the positions offset one another and, consequently, do not reflect our actual exposure to market or credit risk.

Cash Flow Hedges -   Our Energy Services and ONEOK Partners segments use derivative instruments to hedge the cash flows associated with anticipated purchases and sales of natural gas, NGLs and condensate and cost of fuel used in the transportation of natural gas.  Accumulated other comprehensive income (loss) at June 30, 2009, includes gains of approximately $23.3 million, net of tax, related to these hedges that will be realized within the next 21 months as the forecasted transactions affect earnings.  If prices remain at current levels, we will recognize $25.4 million in net gains over the next 12 months, and we will recognize net losses of $2.1 million thereafter.

For the six months ended June 30, 2009, cost of sales and fuel in our Consolidated Statements of Income includes $11.3 million reflecting an adjustment to inventory at the lower of cost or market.  We reclassified $11.3 million of deferred gains, before income taxes, on associated cash flow hedges from accumulated other comprehensive income (loss) into earnings.

The following table sets forth the effect of cash flow hedges recognized in other comprehensive income (loss) for the periods indicated.

 

	Three Months Ended					Six Months Ended
Derivatives in Cash Flow Hedging Relationships		June 30, 2009				June 30, 2009
		(Thousands of dollars)
Commodity contracts		$	(32,363	)		$	66,245
Interest rate contracts			443				564
Total gain (loss) recognized in other comprehensive income (loss) on derivatives (effective portion)		$	(31,920	)		$	66,809

 

 

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The following tables set forth the effect of cash flow hedges on our Consolidated Statements of Income for the periods indicated.

 

Derivatives in Cash Flow Hedging Relationships	Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Net Income (Effective Portion)		Three Months Ended June 30, 2009				Six Months Ended June 30, 2009
			(Thousands of dollars)
Commodity contracts	Revenues		$	31,157			$	113,872
Commodity contracts	Cost of sales and fuel			(9,624	)			(11,178	)
Interest rate contracts	Interest expense			436				872
Total gain (loss) reclassified from accumulated other comprehensive income (loss) into net income on derivatives (effective portion)			$	21,969			$	103,566

Derivatives in Cash Flow Hedging Relationships	Location of Gain (Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)		Three Months Ended June 30, 2009				Six Months Ended June 30, 2009
			(Thousands of dollars)
Commodity contracts	Revenues		$	(228	)		$	2,820
Commodity contracts	Cost of sales and fuel			(217	)			(747	)
Total gain (loss) recognized in income on derivatives (ineffective portion and amount excluded from effectiveness testing)			$	(445	)		$	2,073

 

For the three and six months ended June 30, 2008, ineffectiveness related to our cash flow hedges resulted in losses of approximately $0.6 million and $1.8 million, respectively.  In the event that it becomes probable that a forecasted transaction will not occur, we will discontinue cash flow hedge treatment, which will affect earnings.  There were no gains or losses due to the discontinuance of cash flow hedge treatment during the three and six months ended June 30, 2009 and 2008.

Other Derivative Instruments - The following table sets forth the effect of our derivative instruments that are not part of a hedging relationship on our Consolidated Statements of Income for the periods indicated.

 

Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss)		Three Months Ended June 30, 2009				Six Months Ended June 30, 2009
			(Thousands of dollars)
Commodity contracts - trading	Revenues		$	104			$	3,409
Commodity contracts - non-trading (a)	Cost of gas and fuel			2,476				1,937
Foreign exchange contracts	Revenues			585				323
Total gain (loss) recognized in income on derivatives			$	3,165			$	5,669
(a) - For the six months ended June 30, 2009, we recognized $2.1 million of losses associated with the fair value of derivative instruments entered into by our Distribution segment that were deferred as they are included in, and recoverable through, the monthly purchased-gas cost mechanism.

Fair Value Hedges - In prior years, we terminated various interest-rate swap agreements.  The net savings from the termination of these swaps is being recognized in interest expense over the terms of the debt instruments originally hedged.  Interest expense savings for the six months ended June 30, 2009, from amortization of terminated swaps was $5.2 million, and the remaining amortization of terminated swaps will be recognized over the following periods.

 

						ONEOK
		ONEOK				Partners				Total
		(Millions of dollars)
Remainder of 2009		$	3.2			$	1.8			$	5.0
2010		$	6.4			$	3.7			$	10.1
2011		$	3.4			$	0.9			$	4.3
2012		$	1.7			$	-			$	1.7
2013		$	1.7			$	-			$	1.7
2014		$	1.7			$	-			$	1.7
Thereafter		$	23.6			$	-			$	23.6

 

 

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ONEOK and ONEOK Partners had no interest-rate swap agreements at June 30, 2009.

Our Energy Services segment uses basis swaps to hedge the fair value of location price differentials related to certain firm transportation commitments.  Net gains or losses from the fair value hedges and ineffectiveness are recorded to cost of sales and fuel.  The ineffectiveness related to these hedges was immaterial for the six months ended June 30, 2009 and 2008.

For the three and six months ended June 30, 2009, cost of sales and fuel in our Consolidated Statements of Income include gains of $46.6 million and $178.3 million, respectively, related to the change in fair value of derivatives declared as fair value hedges.  Revenues include losses of $46.6 million and $179.1 million for the three and six months ended June 30, 2009, respectively, to recognize the change in fair value of the hedged firm commitments.

Credit Risk - We monitor the creditworthiness of our counterparties and compliance with management’s risk tolerance as determined by our Risk Oversight and Strategy Committee.  We maintain credit policies with regard to our counterparties that we believe minimize overall 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 which allow us to net the positive and negative exposures associated with a single counterparty.  We have counterparties that are not publicly rated and for those customers, we use internally-developed credit ratings.

Some of our derivative instruments contain provisions that require us to maintain an investment grade credit rating from S&P and/or Moody’s.  If our credit ratings on senior unsecured long-term debt were to decline below investment grade, we would be in violation of these provisions, and the counterparties to the derivative instruments could request collateralization on derivative instruments in net liability positions.  The aggregate fair value of all derivative instruments with contingent features related to credit risk that were in a net liability position as of June 30, 2009, was $30.8 million for which we have posted collateral of $28.5 million in the normal course of business.  If the contingent features underlying these agreements were triggered on June 30, 2009, we would be required to post an additional $2.3 million of collateral to our counterparties.

The counterparties to our derivative contracts consist primarily of major energy companies, LDCs, electric utilities, financial institutions and commercial and industrial end-users.  This concentration of counterparties may impact our overall exposure to credit risk, either positively or negatively, in that the counterparties may be similarly affected by changes in economic, regulatory or other conditions.  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.

The following table sets forth the net credit exposure from our derivative assets for the period indicated.

		June 30, 2009
		Investment				Non-investment				Not
		Grade				Grade				Rated
Counterparty sector		(Thousands of dollars)
Gas and electric utilities		$	87,060			$	7,913			$	7,336
Oil and gas			76,972				467				10,110
Industrial			9,263				-				264
Financial			15,533				-				11
Other			14				29				648
Total		$	188,842			$	8,409			$	18,369

 

 

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D.           OTHER COMPREHENSIVE INCOME (LOSS)

The following table sets forth the gross amount of other comprehensive income (loss) and related tax (expense) benefit for the periods indicated.

 

		Three Months Ended												Three Months Ended
		June 30, 2009												June 30, 2008
		Gross				Tax (Expense) or Benefit				Net				Gross				Tax (Expense) or Benefit				Net
		(Thousands of dollars)
Unrealized losses on energy marketing    and risk management assets/liabilities		$	(31,920	)		$	9,743			$	(22,177	)		$	(92,320	)		$	26,071			$	(66,249	)
Less: Gains (losses) on energy marketing    and risk management assets/liabilities    recognized in net income			21,969				(5,176	)			16,793				(15,217	)			3,950				(11,267	)
Unrealized holding gains (losses) on    investment securities arising    during the period			518				(200	)			318				(1,112	)			430				(682	)
Change in pension and postretirement    benefit plan liability			(5,317	)			2,057				(3,260	)			(4,025	)			1,557				(2,468	)
Other			29				(11	)			18				-				-				-
Other comprehensive income (loss)		$	(58,659	)		$	16,765			$	(41,894	)		$	(82,240	)		$	24,108			$	(58,132	)
Less: Other comprehensive income (loss)    attributable to noncontrolling interests			(14,940	)			-				(14,940	)			(19,913	)			-