Summary
ONEOK Inc.'s (OKE) third-quarter 2014 report highlights a significant strategic shift with the successful separation of its natural gas distribution business (ONE Gas) and the wind-down of its energy services segment, both classified as discontinued operations. This restructuring has refocused the company's primary operations on its investment in ONEOK Partners (OKE), which now represents its main source of income and cash flow. Despite a slight decrease in total revenues for the quarter, net income attributable to ONEOK saw a modest increase, driven by improved performance in its midstream infrastructure segments, particularly Natural Gas Liquids and Natural Gas Gathering and Processing. Looking ahead, ONEOK Partners is actively pursuing growth through significant capital projects and strategic acquisitions, most notably the pending acquisition of West Texas LPG and Mesquite Pipeline. While commodity price volatility remains a factor, the company's strategy emphasizes fee-based earnings and contractual commitments to mitigate risks. Investors should monitor the company's ongoing integration of new assets and its ability to navigate market conditions and regulatory landscapes, particularly with the significant Bighorn Gas Gathering impairment charge impacting equity earnings.
Financial Highlights
50 data points| Revenue | $3.12B |
| Cost of Revenue | $2.58B |
| Gross Profit | $536.94M |
| Operating Expenses | $247.08M |
| Operating Income | $291.39M |
| Interest Expense | $86.05M |
| Net Income | $64.46M |
| EPS (Basic) | $0.31 |
| EPS (Diluted) | $0.31 |
| Shares Outstanding (Basic) | 209.49M |
| Shares Outstanding (Diluted) | 210.76M |
Key Highlights
- 1Successful separation of the natural gas distribution business (ONE Gas) and wind-down of the energy services business, refocusing operations on ONEOK Partners.
- 2Net income attributable to ONEOK increased by 3% to $64.5 million for the three months ended September 30, 2014, compared to $62.4 million in the prior year period.
- 3Strong growth in net margin for the Natural Gas Liquids segment (+25%) and Natural Gas Gathering and Processing segment (+36%) driven by increased volumes and fee-based services.
- 4Announcement of a significant acquisition of West Texas LPG and Mesquite Pipeline for approximately $800 million, expected to close in Q4 2014.
- 5Recognition of a substantial noncash impairment charge of $76.4 million related to the Bighorn Gas Gathering equity investment, impacting equity earnings from investments.
- 6Continued investment in growth projects across the Natural Gas Gathering and Processing and Natural Gas Liquids segments, with significant capital expenditures planned through 2016.
- 7ONEOK's credit rating was downgraded to Baa3 (Moody's) and BB+ (S&P) in February 2014, reflecting the strategic separation of its natural gas distribution business.