ONEOK Inc. OKE reported second-quarter 2015 adjusted earnings of 36 cents per share, lagging the Zacks Consensus Estimate of 37 cents by 2.7% and the year-ago earnings by 24.1%.
The company's GAAP earnings in the second quarter were in line with the adjusted earnings.
Total Revenue
ONEOK’s total revenue of $2,128.1 million fell short of the Zacks Consensus Estimate of $2,603 million by 18.2%. Revenues dropped 30.6% year over year mainly due to a decline in commodity sales.
Quarterly Highlights
In the second quarter, ONEOK Inc. spent nearly $1,603.1 million as cost of sales and fuel, down 37.7% from the prior-year level.
The company’s total operating expenses in the quarter were $252.3 million compared with $244.1 million a year ago. The 3.4% year-over-year rise was attributable to higher depreciation and amortization, and general taxes.
Operating income came in at $272.7 million in the second quarter, up 8.5% year over year mainly due to higher Natural Gas Liquids (NGL) exchange services volumes from the recently connected natural gas processing plants, higher NGL transportation margins primarily from the acquisition of the West Texas LPG pipeline system, and higher margins due to changes in contract mix and higher natural gas and NGL volumes sold, all of which were partially offset by lower net realized NGL, natural gas and condensate prices.
In the quarter, the company incurred $102.4 million as interest expenses, up 15.4% year over year.
Financial Condition
As of Jun 30, 2015, ONEOK had cash and cash equivalents of $226.2 million compared with $172.8 million as of Dec 31, 2014. The company’s long-term debt (excluding current maturities) was $7,291.4 million as of Jun 30, 2015 compared with $7,150.1 million as of Dec 31, 2014.
In the first half of 2015, the company’s cash flow from operating activities was $333.9 million, down 37.7% from $536.3 million in the year-ago period. Capital expenditures were $629.4 million, down 23.4% from $822.2 million in the prior-year period.
Guidance
The company reaffirmed its cash flow available for dividends guidance of $570–$650 million and free cash flow guidance of $90 million to $120 million for 2015.
ONEOK expects to achieve its target on the back of ONEOK Partners OKS anticipating higher natural gas and NGL volumes in the second half of the year and firm fee-based earnings in the natural gas pipelines segment.
Zacks Rank
ONEOK Inc. currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include Atmos Energy Corporation ATO and The Laclede Group, Inc. LG, both carrying a Zacks Rank #2 (Buy).
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