- Net Income: $780 million or $1.33 per share, a 28% increase year-over-year and 22% increase quarter-over-quarter.
- Adjusted EBITDA: $1.6 billion for the second quarter.
- Pre-tax Net Benefit from Asset Sale: Approximately $50 million during the quarter.
- Full-Year Net Benefit from Asset Sale: Expected to be approximately $40 million.
- 2024 Financial Guidance: Adjusted EBITDA midpoint of $6.175 billion, high end at $6.325 billion.
- Cost and Commercial Synergies: Expected to meet or exceed $175 million in 2024 and $125 million in 2025.
- Credit Agreement: No borrowings outstanding under $2.5 billion credit agreement as of June 30.
- Net Debt-to-EBITDA Ratio: 3.36 times at the end of the second quarter.
- Upcoming Debt Maturity: $480 million due in September, expected to be paid with cash.
- Rocky Mountain Region Volume Growth: 17% increase in natural gas liquids segment compared to Q1 2024.
- Mid-Continent Region Volume Growth: 16% increase in natural gas liquids segment compared to Q1 2024.
- West Texas NGL Pipeline Expansion: Expected in service by year-end 2024, full capacity of 740,000 barrels per day.
- Elk Creek Pipeline Expansion: On track for Q1 2025 completion.
- Medford Fractionator Rebuild: Expected cost of $385 million, completion in two phases by Q1 2027.
- Refined Products Pipeline Expansion to Denver: Expected cost of $480 million, completion by mid-2026.
- Rocky Mountain Region Processing Volumes: Increased 10% year-over-year, averaging over 1.6 Bcf per day.
- Natural Gas Pipelines Segment: Higher firm and interruptible transportation rates in Q2.
Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ONEOK Inc (OKE, Financial) reported a strong second quarter with net income totaling $780 million, representing a 28% increase in earnings per share compared to the same period last year.
- The company affirmed its full-year 2024 financial guidance, driven by record volumes in the Rocky Mountain region and solid demand for its products and services.
- ONEOK Inc (OKE) completed the acquisition of NGL pipelines from Easton Energy, enhancing value creation and return potential.
- The company announced the expansion of its refined products pipeline to the Greater Denver area, addressing increasing demand and supporting future growth.
- ONEOK Inc (OKE) has no borrowings outstanding under its $2.5 billion credit agreement and extended the maturity of its revolving credit facility to June 2028, strengthening its balance sheet.
Negative Points
- The company faces potential risks from new NGL pipeline alternatives in the Bakken region, although it does not expect a material impact on its business.
- Ethane recovery remains volatile and dependent on natural gas prices, which could affect earnings.
- ONEOK Inc (OKE) has significant capital expenditures planned, including the $385 million Medford fractionator rebuild, which could impact cash flow.
- The company has not yet provided specific 2025 CapEx guidance, creating some uncertainty about future capital allocation.
- Despite strong performance, the company has not yet initiated its $2 billion share repurchase program, which may disappoint some investors.
Q & A Highlights
Q: Can you clarify your guidance for the year and what needs to go right to beat the midpoint?
A: Pierce Norton, President, Chief Executive Officer, Director: We raised guidance in the first quarter and are confident in our current trajectory. We'll reassess and provide more information in the third quarter.
Q: How are you assessing the risk to your Bakken position with a peer converting a pipeline to NGL?
A: Sheridan Swords, Executive Vice President, Commercial Liquids and Natural Gas Gathering and Processing: We don't expect a material impact. We have long-term contracts with an average life of over nine years and provide superior service with dual pipeline offerings and reliability.
Q: Can you provide more color on the synergies unlocked by the Easton acquisition, especially post-Magellan acquisition?
A: Sheridan Swords, Executive Vice President, Commercial Liquids and Natural Gas Gathering and Processing: The Easton acquisition allows us to connect our NGL and refined products systems more efficiently and faster, capturing synergies at a lower capital cost.
Q: How is producer activity trending, particularly in the Bakken, and how does it affect your volume guidance?
A: Sheridan Swords, Executive Vice President, Commercial Liquids and Natural Gas Gathering and Processing: We reaffirm our volume guidance. Longer laterals and higher well performance mean we don't need as many well connects to meet our targets.
Q: What are the drivers behind the strength in the refined products and crude segment, and how do you see it evolving in the second half of the year?
A: Sheridan Swords, Executive Vice President, Commercial Liquids and Natural Gas Gathering and Processing: It's a combination of synergy capture, seasonality, and increased blending activity. We feel confident about our synergies and the segment's performance for the rest of the year.
Q: Can you discuss the economics and potential for further expansion of your Denver project?
A: Sheridan Swords, Executive Vice President, Commercial Liquids and Natural Gas Gathering and Processing: The project has a five-times multiple on 35,000 barrels a day. We have low-cost expansion opportunities available as demand grows.
Q: How is ethane recovery trending across your basins, and what do you expect for the second half of the year?
A: Sheridan Swords, Executive Vice President, Commercial Liquids and Natural Gas Gathering and Processing: Ethane recovery is volatile and depends on natural gas prices. We have modest ethane recovery assumptions and expect some recovery in the ethane markets for the remainder of the year.
Q: How do you plan to allocate capital in 2025 given the expected lower CapEx and higher free cash flow?
A: Walter Hulse, Chief Financial Officer, Executive Vice President of Investor Relations and Corporate Development, Treasurer: We plan to allocate capital to high-growth projects, maintain our balance sheet, grow dividends, and execute our $2 billion stock repurchase program.
Q: What are the benefits of rebuilding the Medford fractionator, and how does it fit into your overall system?
A: Sheridan Swords, Executive Vice President, Commercial Liquids and Natural Gas Gathering and Processing: Rebuilding Medford is a low-cost option that increases our fractionation capacity and system efficiency, allowing us to better balance our system and meet customer demands.
Q: How do you see the impact of recent producer mergers in the Bakken on your business?
A: Sheridan Swords, Executive Vice President, Commercial Liquids and Natural Gas Gathering and Processing: We have good relationships with the producers involved and expect them to continue their drilling cadence, potentially even increasing activity in core areas.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
