Earnings Preview: ONEOK Partners - Analyst Blog

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ONEOK Partners, L.P. ( OKS ), one of the largest publicly traded master limited partnerships ("MLP"), is scheduled to report its third-quarter 2012 financial results after the market closes on October 30, 2012.

Second-Quarter Highlights

ONEOK Partners reported its second-quarter 2012 earnings per unit of 69 cents compared with 67 cents in the year-ago quarter. The year-over-year growth in earnings was primarily driven by positive natural gas liquids ("NGL") price differentials and higher NGL volumes gathered and fractionated related to the recent expansion of Mid-Continent NGL gathering system. However, quarterly earnings missed the Zacks Consensus Estimate by a penny.

Net revenues during the quarter under review decreased 23.7% to $2.1 billion from $2.8 billion reported in the year-ago quarter. The partnership's quarterly top line fell short of the Zacks Consensus Estimate of $2.8 billion.

Full-year 2012 and 2013 Guidance

ONEOK Partners increased its full-year 2012 net income guidance to $860.0 million - $910.0 million from its previous guidance range of $810.0 million - $870.0 million. The partnership's mid-point 2012 operating income guidance increased to $948.0 million compared with its previous guidance of $910.0 million. ONEOK Partners revised its 2012 mid-point earnings before interest, tax, depreciation and amortization ("EBITDA") projection to $1,289.0 million compared with its earlier guidance of $1,249.0 million.

ONEOK Partners increased its distributable cash flow ("DCF") guidance to the band of $975.0 million - $1,025.0 million from the previous guidance range of $925.0 million - $985.0 million.

For full-year 2012, the partnership's mid-point capital expenditures will be approximately $2.0 billion, including approximately $1.9 billion in growth capital and $108.0 million in maintenance capital.

As far as full-year 2013 financial guidance is concerned, ONEOK Partners expects its full-year 2013 mid-point operating income to increase to $1.03 billion from $0.95 billion. The partnership's full-year 2012 EBITDA is expected to be in the range of $1.36 billion - $1.48 billion versus current 2012 guidance midpoint of nearly $1.3 billion.

Zacks Consensus  

As per the Zacks Consensus Estimate, ONEOK Partners' third-quarter 2012 earnings per unit came in at 71 cents, lower than 84 cents reported in the prior-year quarter. Currently, the Zacks Consensus Estimate for the partnership's earnings ranges between 61 cents and 77 cents per unit.

For full-year 2012, the Zacks Consensus Estimate stands at $2.98 per unit, lower than the prior-year earnings of $3.35 per unit. The current Zacks Consensus Estimate for full-year 2012 ranges from $2.82 to $3.10 per unit.  

Estimate Revisions Trend

Agreement

For third-quarter 2012, we have observed that none of the estimates have moved neither in the upward direction nor downward direction in the last 7 days. Over the last 30 days, 1 estimate moved upwards whereas 3 estimates moved in the downward direction.

For full-year 2012, none of the estimates have moved upwards or downwards in the last 7 days. In the last 30 days, one estimate has moved upwards whereas 4 estimates followed the downward trend.

Magnitude

In the last 7 days, the Zacks Consensus Estimate for third-quarter 2012 earnings remained unchanged. On the other hand, the Zacks Consensus Estimate for third-quarter 2012 earnings per unit declined by a penny to 71 cents from 72 cents in the last 30 days.

The Zacks Consensus Estimate for full-year 2012 earnings remained unchanged at $2.98 per unit in the last 7 days. In the last 30 days, the Zacks Consensus Estimate for full-year 2012 earnings per unit declined by a penny to $2.98 from $2.99.

Surprise History

With respect to earnings surprises, ONEOK Partners has topped the Zacks Consensus Estimate in three quarters out of the last four quarters. Over the last four quarters, the surprise ranges from -1.43% to 31.25% with an average of 16.84%.

Our Recommendation

We know that ONEOK Partners strongly follows internal growth strategy. As per its full-year 2013 capital investment guidance, the partnership plans to invest $5.7 - $6.6 billion, including $2.5 billion in several internal growth projects. ONEOK Partners expects its future growth to primarily come from the Bakken Shale and Three Forks in the Mid-Continent region. The partnership expects these facilities to provide a reliable and cost-effective means of transportation compared to other alternatives, which subsequently reduce ONEOK Partners' future cost of operations.

However, we are cautious about possibilities of an increase in interest expenses due to new debt issuance, chances of volatile equity and credit markets, uncertain weather condition, and unpredictable commodity prices, which may significantly impact ONEOK Partners' forthcoming financial results.

ONEOK Partners, L.P. currently has short-term Zacks #3 Rank (Hold rating).

Tulsa, Oklahoma-based ONEOK Partners, L.P. is one of the largest publicly traded master limited partnerships and a leader in gathering, processing, storing and transporting of natural gas in the U.S. Currently, the partnership has a market capitalization of $13.28 billion. ONEOK Partners competes with Plains All American Pipeline, L.P. ( PAA ).



ONEOK PARTNERS (OKS): Free Stock Analysis Report

PLAINS ALL AMER (PAA): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: OKS , PAA

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