●  ONEOK INC /NEW/ · FY 2024 

Market Risk

Significant market volatility poses a persistent challenge to ONEOK INC, stemming from both its large $3.5 billion credit agreement and core commodity marketing activities across natural gas and NGLs. The company employs formal risk management strategies, including interest-rate swaps and derivative contracts, to offset potential losses from hypothetical price movements. Despite this active hedging, the underlying exposure remains substantial given ongoing borrowing and market fluctuations.

OKE L1 Synthesis
●  SYMBOLOGY.ONLINE l1 SYNTHESIS 

Oneok Inc /new Market Risk Synthesis

Market Risk Exposure Assessment Report (ONEOK INC)

This report synthesizes ONEOK INC's market risk disclosures from the 10-K filing, focusing on quantitative exposure, mitigation strategies, and identified risks.

Interest Rate Sensitivity

Magnitude of Exposure

The company is exposed to interest-rate volatility primarily through its $3.5 Billion Credit Agreement, commercial paper program, and long-term debt issuances. The risk lies in future increases in commercial paper or bond rates leading to increased interest costs on borrowings.

Mitigation Strategies and Changes

  • Strategies: ONEOK utilizes fixed-rate debt, floating-rate debt, Treasury locks, and interest-rate swaps to manage this exposure.
  • Activity/Changes: In Q3 2024, the company actively hedged forecasted debt issuances by entering into $1.5 billion in Treasury locks. These were subsequently settled in the same quarter. Similarly, existing $400 million interest rate swaps related to EnLink facilities were terminated in December 2024.
  • Current Status: As of both Dec 31, 2024, and Dec 31, 2023, there were no outstanding Treasury lock or interest-rate swap agreements disclosed.

Assessment (Strengths & Weaknesses)

  • Strength: The company demonstrates proactive risk management by actively entering into and subsequently closing out hedging instruments (Treasury locks and swaps) to manage specific debt issuance risks in Q3 2024.
  • Weakness: While current outstanding hedges are zero, the underlying exposure remains significant due to the $3.5 Billion Credit Agreement and ongoing borrowing activities.

Commodity Price Risk

Magnitude of Exposure

The company is exposed to volatility across its core marketing activities: natural gas, NGLs, Refined Products, condensate, and crude oil. The risk is quantified using a sensitivity analysis model based on hypothetical 10% movements in underlying commodity prices or interest rates.

Mitigation Strategies and Changes

  • Strategies: ONEOK employs derivative financial instruments and physical-forward contracts to reduce the impact of near-term price fluctuations. These instruments are used for mitigating business risks, not trading purposes. The company notes that changes in the market value of its derivative portfolio would typically be offset by a corresponding gain or loss on the hedged item.
  • Quantitative Data: As of Dec 31, 2024, the total estimated fair value of commodity contracts was $70 million (down from $72 million at Dec 31, 2023). A hypothetical 10% change in underlying prices resulted in an estimated total change in fair value of $70 million.

Assessment (Strengths & Weaknesses)

  • Strength: The company utilizes a formal sensitivity analysis model and maintains a clear hedging policy designed to offset market risk with corresponding gains/losses on hedged items.
  • Weakness: The disclosed quantitative data ($70M change for 10% movement) represents an estimate of "reasonably possible" gains and losses, which may differ from actual results due to fluctuations or changes in the portfolio during the year.

Foreign Currency Exposure

Assessment

No information regarding foreign currency exposure, involved currencies, translation risk, or transaction risk was provided in the document excerpt.

Equity Price Risk

Assessment

The filing does not disclose any specific investment portfolio exposure subject to equity price risk or mark-to-market impacts from stock holdings. The disclosed financial instruments relate primarily to debt and commodity hedging.

Quantitative Measures Disclosed

Value-at-Risk (VaR) and Stress Testing

No explicit mention of Value-at-Risk (VaR) calculations or formal stress test results was provided in the market risk disclosures.

Sensitivity Analysis

The primary quantitative measure disclosed is a sensitivity analysis model, which assesses the potential change in fair value of derivative instruments based on hypothetical 10% movements in underlying commodity prices or interest rates. This provides an estimate of reasonably possible gains and losses related to the derivative portfolio.