OKE Beats Est, Lowers Guidance - Analyst Blog
February 26 2013 - 8:36AM
Zacks
ONEOK Inc. (OKE) reported fourth-quarter 2012
earnings per share of 53 cents, beating the Zacks Consensus
Estimate by 8 cents. However, quarterly earnings were 3.6% lower
than the prior-year results of 55 cents (on a split-adjusted basis)
primarily due to the weak performance of the Energy Services
segment.
The company’s earnings of $1.71 per share in 2012 surpassed the
Zacks Consensus Estimate by 5%. Full-year earnings per share were
1.8% higher than the prior-year results, mainly due to the increase
in natural gas and natural gas liquids (NGL) volumes, improved
rates in natural gas distribution segment, and lower operating
costs.
Total Revenue
ONEOK’s quarterly revenue of $3.66 billion was 13.7% above the
Zacks Consensus Estimate. However, quarterly revenue decreased
10.1% from $4.07 billion in the year-ago quarter.
Full-year 2012 revenue was $12.6 billion, $0.35 billion above the
Zacks Consensus Estimate. However, revenue was 14.7% lower than the
prior-year results.
Operating Statistics
Cost of sales and fuel in the quarter decreased 9.4% year over year
to $3.06 billion.
Quarterly total operating expenses was $310.9 million, down 6.88%
year over year due to lower operations and maintenance costs.
Segment Results
ONEOK Partners: ONEOK Partners' fourth-quarter
operating income was $230.5 million, down 27.4% year over year due
to the decrease in the natural gas liquids business, unfavorable
NGL price differentials and lower isomerization margins, and the
decrease in the natural gas liquids business related to operational
measurement losses and lower realized natural gas and NGL
prices.
Natural Gas Distribution: Segmental operating
income improved 46% year over year to $79.5 million due to higher
rates in Oklahoma, Kansas and Texas; partially offset by lower
transportation margins in Kansas.
Energy Services: In the quarter under review, the
segment reported an operating loss of $10.3 million compared with a
loss of $5.5 million in the prior-year quarter. The lackluster
performance was due to a decline in premium-services margins along
with lower storage and marketing margins.
Financial Condition
ONEOK, on a stand-alone basis, ended fourth quarter with $817.2
million of commercial paper outstanding, $1.9 million in letters of
credit and $380.9 million available under the $1.2 billion credit
facility.
Cash and cash equivalents as of Dec 31, 2012 were $583.6 million
compared with $65.9 million as of Dec 31, 2011.
As of Dec 31, 2012, long-term debt was $6.5 billion versus $4.5
billion as of Dec 31, 2011.
Cash provided by operating activities for the twelve months ended
Dec 31, 2012 was $1 billion, lower than $1.4 billion in the
year-ago comparable period.
Capital expenditure for year increased to $1.9 billion from $1.3
billion in 2011 due to the rise in expenditures at the company’s
subsidiary ONEOK Partners.
Guidance
ONEOK Inc. trimmed its net income and operating income guidance for
full year 2013, primarily due to weak performance from ONEOK
Partners segment, lower anticipated volumes and prices of NGL, and
a decline in the NGL location price differentials.
ONEOK’s full-year 2013 net income guidance will be in the range of
$350 million to $400 million, down from prior estimate of $405–$455
million.
Midpoint of ONEOK's full-year 2013 operating income guidance
decreased to $1.14 billion from previous guidance of $1.2
billion.
Capital expenditures for 2013 are expected to be approximately $3
billion, with roughly $2.64 billion to be spent at ONEOK Partners
for new growth projects and $0.31 billion on a stand-alone
basis.
The company also guides that subject to its board’s approval it
will increase the quarterly dividend rate by 2 cents for Jul 2013.
Initially, the company expected to raise the dividend rate by 3
cents.
ONEOK also modified its anticipation to increase dividends by
roughly 55%–65% within 2012 to 2015, subject to the board’s
approval, compared with its earlier guidance of 65% to 70%. The
company affirmed its long-term dividend payout target of 60% to 70%
of recurring earnings.
Other Energy Company Releases
The Laclede Group, Inc. (LG) reported
fourth-quarter 2012 earnings per share of $1.25, 16 cents above the
Zacks Consensus Estimate.
Vectren Corporation’s (VVC) fourth-quarter 2012
earnings of 52 cents were 23.8% higher than the Zacks Consensus
Estimate.
Atmos Energy Corporation (ATO) posted
fourth-quarter 2012 earnings per share of 74 cents, missing the
Zacks Consensus Estimate by 4 cents.
Our View
Despite a favorable performance in the fourth quarter of 2012, we
are skeptical about weak NGL pricing, stringent utility regulations
and volatile commodity prices. We believe these negatives may to
some extent challenge the company’s future performance.
ONEOK Inc. currently has a Zacks Rank #4 (Sell).
Tulsa, Oklahoma-based ONEOK Inc. is a diversified energy company,
operating as a natural gas distributor primarily in the United
States.
ATMOS ENERGY CP (ATO): Free Stock Analysis Report
LACLEDE GRP INC (LG): Free Stock Analysis Report
ONEOK INC (OKE): Free Stock Analysis Report
VECTREN CORP (VVC): Free Stock Analysis Report
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