Summary
ONEOK Inc.'s (OKE) second quarter 2016 results demonstrate a solid operational performance with total revenues largely flat year-over-year but driven by a significant increase in services revenue, which offset a decline in commodity sales. This shift highlights the company's increasing reliance on fee-based services, a trend that contributes to more stable and predictable earnings. The company's net income attributable to ONEOK increased to $85.9 million from $76.5 million in the prior year period, a growth of approximately 12.3%. This growth was fueled by improved operating income across its segments, particularly in Natural Gas Gathering and Processing and Natural Gas Liquids, driven by higher volumes and the positive impact of restructured contracts. ONEOK Partners' capital projects, including those in the Williston Basin and the Roadrunner joint venture, are contributing to this expansion and are expected to drive future fee-based revenue growth. Despite a challenging commodity price environment, ONEOK's strategy of increasing its fee-based revenue streams and managing operational costs has positioned it well. The company maintained compliance with its debt covenants and managed its liquidity effectively. Investors should note the ongoing importance of ONEOK Partners' infrastructure development and its ability to secure long-term, fee-based contracts as key drivers for future performance.
Financial Highlights
48 data points| Revenue | $2.13B |
| Cost of Revenue | $1.53B |
| Gross Profit | $606.78M |
| Operating Income | $315.29M |
| Interest Expense | $118.98M |
| Net Income | $85.94M |
| EPS (Basic) | $0.41 |
| EPS (Diluted) | $0.40 |
| Shares Outstanding (Basic) | 211.07M |
| Shares Outstanding (Diluted) | 212.62M |
Key Highlights
- 1Total revenues remained relatively stable at $2,134.1 million, a slight increase from $2,128.1 million in the prior year, driven by a substantial 23% increase in services revenue ($500.8 million vs. $405.8 million), which offset a 5% decrease in commodity sales.
- 2Net income attributable to ONEOK Inc. rose by 12.3% to $85.9 million ($0.40 per diluted share) from $76.5 million ($0.36 per diluted share) in the same period last year, indicating improved profitability.
- 3Operating income saw a significant increase of 16% to $315.3 million, primarily driven by higher volumes and fee revenues in the Natural Gas Gathering and Processing and Natural Gas Liquids segments.
- 4Adjusted EBITDA increased by 17% to $452.7 million from $385.7 million, reflecting strong operational performance and effective cost management.
- 5Capital expenditures decreased by 52% to $136.8 million from $285.6 million, as projects were completed and the company aligned spending with customer needs in the prevailing commodity price environment.
- 6ONEOK Partners maintained compliance with its debt covenants, with a ratio of indebtedness to adjusted EBITDA of 4.2 to 1 at June 30, 2016, well within the 5.0 to 1 limit.
- 7The company continues to emphasize its fee-based business model, with Natural Gas Liquids and Natural Gas Pipelines segments expected to be approximately 90% and 96% fee-based, respectively, in 2016, providing revenue stability.