EP EL Paso Corp. (Holding Co.)

ONEOK Partners L.P. (OKS) provided financial forecasts for fiscal 2012. The net income of the partnership for 2012 is expected to be in the range of $740 million to $800 million, an estimated growth of 20% from the current 2011 earnings guidance of $630 million to $660 million.

The strong performance in 2012 is expected to come in from the $2.7 billion to $3.3 billion, four-year growth program, which the partnership is going to place into service later in 2011 and in 2012.

Earnings in 2012 would get a tailwind from higher anticipated natural gas gathering and processing volumes and increased natural gas liquids gathering output. The future growth in earnings will also be boosted by higher contribution from ONEOK Partners’ completed projects in the Bakken Shale, Cana-Woodford Shale and Granite Wash plays.

The positives are partially to be curbed by lower natural gas liquids (“NGL”) optimization margins resulting from lower optimization volumes and narrower NGL price differentials at this business.

The partnership estimates distributable cash flow in the range of $845 million to $915 million, an estimated growth of 17% from the current 2011 earnings guidance of $735 million to $765 million. It further has plans to increase the cash distribution among unit holders subject to the board’s approval.

Our Take

ONEOK Partners has been performing well in the first two quarters of 2011, with its earnings per unit in both the quarters surpassing the comparable prior-year results. The growth in the first half of the year was driven by favorable NGL price differentials, higher NGL volumes gathered and fractionated, favorable contract renegotiations and higher isomerization margins in the NGL segment.

We believe this strong trend will continue into the later half of 2011 and into 2012, yielding improved performance. We also appreciate the partnership’s intention to boost long-term unitholder value by hiking the cash distribution rate by 2 cents per quarter, albeit subject to approval.

The Zacks Consensus Estimates for third-quarter fiscal 2011, fiscal year 2011 and fiscal year 2012 are currently pegged at 65 cents, $2.51 and $2.42, respectively.

ONEOK Partners currently retains a Zacks #1 Rank, which translates into a short-term Strong Buy rating. The partnership competes with El Paso Corp. (EP) and Kinder Morgan Energy Partners L.P. (KMP).

Tulsa, Oklahoma-based ONEOK Partners is a leader in the gathering, processing, storage and transportation of natural gas in the U.S. and owns one of the nation' s premier NGL systems, connecting NGL supply in the Mid-Continent and Rocky Mountain regions with key market centers.

 
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