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ONEOK (OKE) Rides on High Fee-Based Earnings & Midstream Assets
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ONEOK Inc. (OKE - Free Report) is expected to gain from increasing pipeline volumes and fee-based commitments as production volumes rise. The company’s expansion efforts are also expected to strengthen its position in the high-production region and aid future earnings. ONEOK’s consistent dividend payment increases shareholders’ value.
However, this Zacks Rank #3 (Hold) company faces strong competition from other midstream providers.
Tailwinds
ONEOK continues to invest in organic growth projects to expand operations and provide a broad range of services to crude oil and natural gas producers, and end-use markets. Capital expenditures totaled $1,202.1 million in 2022, up from $696.9 million in 2021. The company expects total capital expenditures in the $1.27-$1.48 billion range in 2023. This indicates that systematic investments are necessary to keep up with the expected increase in producer activity.
With production volumes resuming normalcy, ONEOK is poised to benefit from long-term fee-based commitments in all three segments. More than 90% of its 2022 earnings was fee-based and a substantial portion of its 2023 earnings is also expected to be the same. As production volumes continue to improve in its service areas, the company expects to perform better in the long run.
Headwinds
The natural gas and natural gas liquids pipeline industries are highly competitive. Apart from the existing pipeline companies, the midstream section recently saw many energy companies forming master limited partnerships to begin pipeline services. The partnerships’ assets are well spread out but ONEOK’s ability to withstand competitive challenges will depend on the efficiency, quality and reliability of the services it provides.
The Zacks Consensus Estimate for Halliburton Company, Liberty Energy and Cactus’ 2023 earnings per share indicates an increase of 43.72%, 62.6% and 34.24%, respectively.
Long-term (three- to five-year) earnings growth of Halliburton Company, Liberty Energy and Cactus is pegged at 43.2%, 5.81% and 45.5%, respectively.
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ONEOK (OKE) Rides on High Fee-Based Earnings & Midstream Assets
ONEOK Inc. (OKE - Free Report) is expected to gain from increasing pipeline volumes and fee-based commitments as production volumes rise. The company’s expansion efforts are also expected to strengthen its position in the high-production region and aid future earnings. ONEOK’s consistent dividend payment increases shareholders’ value.
However, this Zacks Rank #3 (Hold) company faces strong competition from other midstream providers.
Tailwinds
ONEOK continues to invest in organic growth projects to expand operations and provide a broad range of services to crude oil and natural gas producers, and end-use markets. Capital expenditures totaled $1,202.1 million in 2022, up from $696.9 million in 2021. The company expects total capital expenditures in the $1.27-$1.48 billion range in 2023. This indicates that systematic investments are necessary to keep up with the expected increase in producer activity.
With production volumes resuming normalcy, ONEOK is poised to benefit from long-term fee-based commitments in all three segments. More than 90% of its 2022 earnings was fee-based and a substantial portion of its 2023 earnings is also expected to be the same. As production volumes continue to improve in its service areas, the company expects to perform better in the long run.
Headwinds
The natural gas and natural gas liquids pipeline industries are highly competitive. Apart from the existing pipeline companies, the midstream section recently saw many energy companies forming master limited partnerships to begin pipeline services. The partnerships’ assets are well spread out but ONEOK’s ability to withstand competitive challenges will depend on the efficiency, quality and reliability of the services it provides.
Stocks to Consider
Some better-ranked stocks for investors interested in the same sector are Halliburton Company (HAL - Free Report) , Liberty Energy (LBRT - Free Report) and Cactus, Inc. (WHD - Free Report) , both holding a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Halliburton Company, Liberty Energy and Cactus’ 2023 earnings per share indicates an increase of 43.72%, 62.6% and 34.24%, respectively.
Long-term (three- to five-year) earnings growth of Halliburton Company, Liberty Energy and Cactus is pegged at 43.2%, 5.81% and 45.5%, respectively.