ONEOK Drills for Liquidity Gold as an Early Adopter of APIs
The Oklahoma-based energy company takes home the 2020 Gold Alexander Hamilton Award in Technology Excellence.
ONEOK, Inc. is a midstream energy company headquartered in Tulsa, Oklahoma. ONEOK owns of one of the nation’s premier natural gas liquids (NGL) systems, connecting NGL supply in the Rocky Mountain, Mid-Continent, and Permian regions with key market centers. The company also has an extensive network of natural gas gathering, processing, storage, and transportation assets. ONEOK periodically funds business activities through daily borrowing. However, accessing East Coast markets for short-term debt and commercial paper creates some inherent efficiency challenges.
“Being in Oklahoma, we’re in the Central Time Zone,” explains Anita West, supervisor of treasury operations. “A few years ago, our first view of our cash position each day was when we got BAI files from our banks. After the BAI files came in, we could start pulling out any wires we were planning to send that day, and we could factor in the incoming ACH payments and wires that we expected to arrive before our bank closed at the end of the day.”
This process gave West’s team an idea of the company’s overall net position, which they would use to determine how much to borrow for that day. “So if, for instance, it looked like we were going to need $25 million to fund our activities, we would go to the market with the goal of issuing $25 million worth of short-term debt or commercial paper, and our dealers would start looking for investors,” she explains.
The problem with operating in Central Time was that the treasury team had a narrow window during which to borrow funds they needed each day. ONEOK’s Oklahoma-based banks were scheduled to send over the BAI files at 9 a.m. local time, and they were often late. “By 9 o’clock here, it’s already 10 o’clock on the East Coast, and a lot of investors have been in the market since 7 or 8 o’clock,” West says. “We would be at a disadvantage because by 10 a.m. Eastern, some investors have already spent their allotted cash for the day. This put us way behind, time zone–wise, and then on a lot of days the BAI files came in at 9:15 or 9:30, making things even worse.”
Moreover, many incoming payments arrived after the commercial paper markets closed at noon Eastern Time. West’s treasury group would refresh bank information repeatedly throughout the day to keep an eye on the company’s cash position. In the afternoons, they would go into bank portals and download PDFs of the latest transactions. They would compare the new information with the morning statements, determining whether any expected inflows had cleared and updating the company’s cash position. When this analysis revealed a mismatch between balances and borrowing, the team had little recourse.
“Suppose we purchased $25 million in commercial paper for today, and then at 11:01 a.m. CT, an incoming wire for $10 million came through. We would be stuck with that excess cash, paying interest on short-term debt we didn’t actually need,” West says. Because they couldn’t reduce borrowing at that point, the team would look for opportunities between 11 a.m. and 2:30 p.m. CT to invest newfound excess cash, to partially offset commercial paper costs with a little interest income.
The process was frustrating and consumed several hours a day of treasury analysts’ time—hours that they would have preferred to spend on projects that added more long-term value to the company. The legacy approach was also expensive, because ONEOK paid separately for each file transmission. Compounding these challenges, the difficulty gaining real-time visibility into the company’s cash position had the potential to get in the way of sales.
“A lot of our business is based on pre-pays,” West says. “The sales team will contact us and say, ‘We’re waiting to release product until we receive a pre-pay from Customer X. Can you see whether we’ve received the funds yet?’ That’s a question treasury would be asked multiple times throughout the day—and it was a major pain point. We would have to go back to the bank portal and start pulling PDFs showing the latest transactions in each account. We had 120 different bank accounts, and each account might have hundreds of transactions for us to sort through. Worse, if the transaction we were looking for didn’t show up in any of the accounts when we searched for it at, say, 2:15, then we would have to search again at 2:30 because sales was waiting to hear that we’d gotten the payment.”
Treasury needed to accelerate and automate cash positioning, and needed to be able to search for transactions across all the company’s accounts. At a conference, West learned about the potential of application programming interfaces (APIs). “This conference presentation I attended explained that APIs offer direct connections to the banks,” she says. “There are no more BAI files, and there’s no more waiting. Information can come in automatically and instantaneously. I immediately wanted to figure out how we could leverage this technology.”
West reached out to ONEOK’s treasury management system vendor, GTreasury, and its primary partner bank, JPMorgan Chase. “They said it was possible to use APIs for transactional and balance information,” she says. “Both already had API capabilities in development, but neither was using them to push transactional data at that time. So we started brainstorming about how we could work together to make API connections work for ONEOK.”
The first area they explored was account balances. GTreasury and JPMorgan Chase established API connectivity through which ONEOK’s treasury workstation would automatically receive updates to account balances. The functionality worked well in testing, but it didn’t meet all of the company’s cash management needs. “It was accurately showing us how much was in each account, but we couldn’t tell which transactions were included in that amount,” West says. “We needed the API data flows to include details on individual transactions as well.”
The vendors continued to work on improvements, and within the next year, they had built a new API through which the GTreasury workstation automatically and directly receives current transaction data across ONEOK’s 100-plus accounts with JPMorgan Chase. The treasury management system receives data either according to an agreed-upon schedule or on demand, and immediately posts the transactions.
“We can schedule cash positioning for a particular account for every 30 minutes, every 15 minutes, or even every minute,” West says. “And if a question comes up between refresh cycles, we can pull data on a one-off basis anytime we need it. We no longer have any need to log into the banking portal or wade through PDF statements. We just hit ‘refresh,’ and all the latest transaction data pulls right in.”
The improvement to cash visibility was night and day. “We don’t have to wait until 3 o’clock to see our afternoon cash,” West says. “It’s right there whenever we want to look at it. We can more accurately forecast our commercial paper needs, and if a wire comes in at 2:53, we can reduce the amount we’re borrowing for that day.” Answering one-off questions is another key benefit.
“Anytime management asks, ‘What’s cash looking like today?’” West says, “we can click a button and let them know whether anything unexpected has come in. Our answer is no longer, ‘We’ll get back to you in 30 minutes, after we’ve manually sorted through dozens of PDFs.’ In addition, we’ve leveraged filtering technology in GTreasury to answer questions about whether a specific ACH or wire payment has come in. We click on the filtering feature, and that information is readily available.”
ONEOK is so pleased with these capabilities that it is encouraging its other banking partners to follow suit. Likewise, GTreasury and JPMorgan Chase are both offering the functionality they developed in concert with ONEOK to their other customers.
For West, the biggest benefit of the project is that it freed treasury staff from the quagmire of manual liquidity management. “Now they have more time to focus on analytical tasks,” she says. “They can give more attention to things like opening new investment accounts and re-evaluating our investment strategy, which are important considerations right now because of the market volatility. Or they can dive into new projects to improve our company’s operations. Whatever they end up focusing on, it is going to bring more value to ONEOK than spending their days mired in back-and-forth manual processes.”
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