ONEOK Partners Misses Q2 Earnings Estimates as Expenses Mount

Zacks

ONEOK Partners, L.P. (OKS) reported second-quarter 2014 earnings of 54 cents per unit, missing the Zacks Consensus Estimate of 66 cents by 18.2%. On a year-over-year basis, quarterly earnings decreased 12.9% primarily due to higher cost of sales and fuel and an increase in the unit count.

ONEOK Partners units dropped 1.4% on Aug 5 following the adverse earnings results.

Total Revenue

In the second quarter, ONEOK Partners’ total revenues were $3,065.7 million, lagging the Zacks Consensus Estimate of $3,502 million by 12.5%. However, reported revenues increased 10.7% year over year, primarily on the back of increased natural gas volumes gathered, processed and sold, and higher natural gas liquids (NGL) volumes sold due to the recently completed growth ventures.

Operational Highlights

In the quarter under review, ONEOK Partners’ cost of sales and fuel was $2,571.4 million, up 9.1% from $2,356.2 million a year ago.

Total operating expenses increased 27.4% year over year to $232.1 million, primarily due to higher operations and maintenance as well as depreciation expenses.

The partnership reported an operating income of $262.2 million, up 14% from $230 million a year ago.

ONEOK Partners’ adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in the second quarter surged 14.5% year over year to $360.9 million.

In the reported quarter, the partnership’s interest expense was $73 million compared with $57.5 million a year ago.

Segment Results

In the reported quarter, operating income at ONEOK Partners’ natural gas gathering and processing, natural gas pipelines and natural gas liquids segments increased 19.9%, 16.9% and 11.4% year over year, respectively.

Business Update

In Jul 2014, the board of directors of ONEOK Partners increased the second-quarter 2014 cash distribution by around 2% to 76 cents per unit. The revised quarterly cash distribution will be paid on Aug 14, 2014, to unitholders of record as on Aug 4.

During the second quarter, ONEOK Partners completed a public offering of around 13.9 million common units and accumulated roughly $730 million from it. The partnership also issued approximately 1.9 million common units during the quarter through its at-the-market equity program.

In addition, the partnership increased the limit under its commercial paper program to $1.7 billion from $1.2 billion.

Financial Condition

As of Jun 30, 2014, ONEOK Partners had cash and cash equivalents of $278 million versus $134.5 million as of Dec 31, 2013.

Long-term debt (excluding current maturities) as of Jun 30, 2014 was $6,041.6 million versus $6,044.9 million as of Dec 31, 2013.

In the first half of 2014, the partnership’s cash flow from operating activities was $534.1 million, higher than $383.5 million in the year-ago period.

ONEOK Partners’ capital expenditures in the first six months of 2014 were $792.4 million versus $924.8 million in the prior-year period.

In the quarter, the partnership’s distributable cash flow (DCF) was $272 million versus $251.9 million a year ago.

Guidance

For 2014, ONEOK Partners reiterated its net income, adjusted EBITDA and DCF guidance in the range of $975–$1,075 million, $1,565–$1,665 million and $1,150–$1,250 million, respectively.

The cash distribution is expected to increase 1.5 cents per unit per quarter, subject to the board’s approval.

Within a time span of 2010-2016, ONEOK Partners plans to invest $7,000–$7,500 million under its capital-growth program, up around $1,100 million from the previous estimate.

At the Peers

Access Midstream Partners, L.P. (ACMP) reported second-quarter 2014 earnings of 18 cents per unit, missing the Zacks Consensus Estimate by 33.3%.

Enterprise Products Partners L.P. (EPD) announced second-quarter 2014 earnings of 67 cents per unit, missing the Zacks Consensus Estimate by 8.2%.

Targa Resources Partners LP (NGLS) reported second-quarter 2014 earnings of 64 cents per unit, surpassing the Zacks Consensus Estimate by 48.8%.

Our View

We appreciate ONEOK Partners’ systematic investments in growth projects backed by strong cash generation capacity. The partnership’s plan for several projects, including the new natural gas processing plants and allied infrastructure in Oklahoma and North Dakota, will enable it to meet increasing service demand from customers. The scheduled completion of the projects will likely boost the partnership’s cash inflow in the future.

The partnership currently has a Zacks Rank #3 (Hold).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

To read this article on Zacks.com click here.

Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.

Be the first to comment

Leave a Reply