ONEOK Inc. (OKE) reported earnings of 51 cents per share, up from 39 cents per share in the year-ago quarter. However, the quarterly results lagged the Zacks Consensus Estimate of 55 cents per share.
The year-over-year growth was propelled by a solid performance from the ONEOK Partner segment, which benefited from a robust natural gas liquids (NGL) business that almost doubled over the prior year.
Total Revenue
Net revenues in the quarter shot up 25.2% to $3.51 billion from $2.81 billion reported in the year-ago quarter, but still lagged substantially the Zacks Consensus Estimate of $4.19 billion.
Operating Statistics
In second quarter 2011, cost of sales and fuel increased 27.4% year over year. Total operating expenses rose 9.1% year over year, mainly due to an 11.9% escalation in the operation and maintenance cost of the company.
Despite an increase in operating expenses from the year-ago quarter, operating income of the company gained 21.4% year over year as the results benefited from higher NGL optimization and increased NGL fractionation and transportation capacity available for optimization activities.
Interest expenses of the company remained at par with the prior-year level.
Segmental Results
ONEOK Partners: ONEOK Partners' operating income was $202 million compared with $146 million in the year-ago quarter. Operating costs were $113.6 million compared with $97.9 million in the second quarter of 2010. The increase in operating cost was attributable to higher employee-related costs associated with incentive and benefit plans administered by ONEOK coupled with higher property taxes.
Distribution: The Distribution segment reported operating income of $20.9 million in the second quarter compared with $32.3 million a year ago. The year-over-year decline in income was due to higher operating costs, stemming from higher share-based compensation costs, increase in pension costs and higher employee-benefit costs.
Energy Services: The Energy Services segment reported an operating loss of $5.8 million versus an income of $0.9 million in the prior-year period. The results during the quarter were primarily affected by lower natural gas transportation margins.
Financial Condition
On a stand-alone basis, as of June 30, 2011, the company did not have any short-term debt and had $45.4 million of cash and cash equivalents.
During the quarter the company repaid $400 million of senior notes with its available cash and short-term borrowings. In May, ONEOK entered into a $300 million accelerated share repurchase agreement with Barclays Capital, the investment banking division of Barclays Plc. (BCS). ONEOK received 3.7 million shares in May and expects to receive the remaining shares upon settlement of the repurchase agreement by November 2011.
Cash flow from operation during the quarter was $227.8 million versus $32.4 million reported in the year-ago quarter due to postiive change in working capital and higher net income.
Long-term debt of the company as of June 30, 2011 was $4.62 billion, higher than $3.68 billion as of December 31, 2010.
Guidance
ONEOK's operating income guidance for 2011, at the midpoint, has been increased to $1,012 million from the prior expectation of $977 million. ONEOK Partner is expected to contribute $752 million to operating income, while the Distribution and Energy Services segments are expected to chip in with $218 million and $42 million, respectively.
ONEOK Inc. narrowed its net income expectation for 2011 to a range of $325 million to $345 million from the earlier range of $325 million to $360 million.
Capital expenditures for 2011 are expected to be approximately $1.55 billion, with roughly $1.3 billion to be spent at ONEOK Partners and $258 million on a stand-alone basis.
We maintain our long-term Neutral recommendation on ONEOK shares, supported by the company’s short term Zacks #3 Rank (Hold). The company’s primary competitors include Dynegy Inc. (DYN) and OGE Energy Corp. (OGE).
Based in Tulsa, Oklahoma, ONEOK Inc. is a diversified energy company, operating as a natural gas distributor primarily in the United States.
BARCLAY PLC-ADR (BCS): Free Stock Analysis Report
DYNEGY INC (DYN): Free Stock Analysis Report
OGE ENERGY CORP (OGE): Free Stock Analysis Report
ONEOK INC (OKE): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment