OKE Beats, Ups Guidance

ONEOK Inc. (OKE - Snapshot Report) reported third-quarter profit of 45 cents per share, above the Zacks Consensus Estimate of 23 cents. However, this was lower than 55 cents per share earned a year ago. The better-than-expected results are attributed to strong performance across all segments.
 
Net revenues in the quarter declined 44% to $2.4 billion. Operating income declined 9.6% year over year to $173.8 million, due to lower realized commodity prices and narrower natural gas liquids (NGL) product price differentials in the ONEOK Partners segment. The decline was offset by increased NGL volumes gathered, fractionated, transported and marketed, and increased natural gas volumes processed and sold in the ONEOK Partners segment; increased transportation margins in the Energy Services segment; and the implementation of new rate mechanisms in the Distribution segment.
 
On segmental basis, ONEOK reported operating income of $144.7 million (down 27%) from ONEOK Partners segment; $21.2 million (up 505%) from the Energy Services segment; and $7.6 million (up 162%) from the Distribution segment.
 
Operating costs at the company increased to $204.6 million, compared to $203.9 million last year, primarily due to incremental operating expenses in the ONEOK Partners segment, increased costs at NGL fractionation facilities and higher employee-related costs offset by lower bad-debt expense in the Distribution segment.
 
On a stand-alone basis, ONEOK’s balance sheet remained strong with $309 million in short-term debt, $849 million available on its existing credit facilities, $21.7 million of cash and cash equivalents and $469.6 million of natural gas in storage. Stand-alone cash flow from continuing operations, before changes in working capital, were $410 million for the nine-month period, exceeding capital expenditures and dividends of $252 million for the period by $158 million.
 
ONEOK declared a quarterly dividend of 42 cents per share, payable Nov 13, 2009, to shareholders of record as of Oct 30, 2009.
 
Based on expected operating income increases in the Distribution and Energy Services segments, ONEOK raised its 2009 EPS guidance range to $2.65 to $2.85 per share from its previous range of $2.40 to $2.70. For 2009, it guides operating income (mid-point) of $209 million ($200 million previously) in the Distribution segment and $122 million ($115 million previously) in the Energy Services segment. For the full year, ONEOK expects capital expenditures to total approximately $756 million.

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