ONEOK, Inc. (OKE) today announced that its 2015 cash flow available for dividends is expected to be in the range of $580 million to $660 million, reflecting higher anticipated cash distributions received from its general and limited partner interests in ONEOK Partners (OKS).
The 2015 earnings guidance also includes a 14 percent increase in shareholder dividends declared compared with 2014, including a projected 2.25-cent-per-share-per-quarter increase in dividends declared. Shareholder dividends declared are subject to board approval.
ONEOK also has estimated average annual dividend declared increases of 12 to 15 percent between 2014 and 2017.
“Our 2015 guidance reflects substantial, ongoing growth at ONEOK Partners. Since 2006, the partnership has completed more than $8 billion in capital-growth projects and acquisitions, and it has another $3 billion in capital-growth projects in various stages of construction,” said Terry K. Spencer, president and chief executive officer of ONEOK. “The partnership continues to develop an unannounced backlog of additional capital-growth projects totaling approximately $4 billion to $5 billion.
“As the pure-play general partner of ONEOK Partners, this growth at the partnership benefits ONEOK and has allowed us to increase dividends paid to shareholders,” Spencer added.
“Although the commodity price environment remains volatile, we expect strong volume growth to continue in 2015 as many of our key producers plan to concentrate their drilling in more productive core areas on acreage dedicated to our systems,” Spencer said.
ONEOK’s 2015 free cash flow is expected to be in the range of $50 million to $80 million after capital expenditures and dividends.
ONEOK’s 2015 guidance reflects increased natural gas gathering and processing volumes in the natural gas gathering and processing segment; and higher natural gas liquids (NGL) volumes gathered and fractionated in the natural gas liquids segment. These increased volumes are the result of full-year operations and earnings from acquisitions and capital-growth projects completed throughout 2014, including ONEOK Partners’ recent West Texas LPG System acquisition, and reflect expected earnings and cash flows from the completion of capital-growth projects during 2015 in the natural gas gathering and processing, and natural gas liquids segments.
ONEOK’s 2015 guidance reflects a projected 1.5-cent-per-unit-per-quarter increase in unitholder distributions declared by ONEOK Partners, subject to ONEOK Partners board approval.
Additional information is available in the guidance tables on the ONEOK website.
ONEOK Partners’ 2015 operating income guidance range is $1.32 billion to $1.48 billion, an 11 percent to 25 percent increase compared with current 2014 guidance, reflecting higher anticipated natural gas gathering and processing volumes in the natural gas gathering and processing business and higher anticipated NGL volumes gathered and fractionated in the natural gas liquids business.
NATURAL GAS GATHERING AND PROCESSING SEGMENT
The natural gas gathering and processing segment’s 2015 operating income guidance range is $309 million to $409 million.
The 2015 earnings guidance reflects a 17 percent increase in natural gas volumes gathered and processed compared with 2014 guidance, as a result of new supply connections and completed projects.
Capital-growth projects completed in 2014 and those expected to be completed in 2015 that are contributing to higher 2015 operating income guidance include:
- The Canadian Valley plant, a 200-million cubic feet per day (MMcf/d) natural gas processing facility in the Cana-Woodford Shale in Oklahoma, which was completed in March 2014;
- The Garden Creek II and III plants, each 100-MMcf/d natural gas processing facilities in the Williston Basin in North Dakota, which were completed in August and October 2014, respectively;
- A 200-MMcf/d natural gas processing plant in the Williston Basin in North Dakota – the Lonesome Creek plant – expected to be completed in the fourth quarter 2015; and
- Additional natural gas compression to take advantage of additional natural gas processing capacity at the partnership’s Garden Creek and Stateline natural gas processing plants in the Williston Basin by a total of 100 MMcf/d, which is expected to be completed in the fourth quarter 2015.
Approximately 75 percent of the segment’s expected 2015 equity natural gas production is hedged at an average price of $4.03 per million British thermal units (MMBtu), and 5 percent of its expected 2015 equity natural gas liquids production is hedged at an average composite price of $1.07 per gallon. The segment’s expected 2015 equity condensate production is unhedged.
The average unhedged prices assumed in ONEOK Partners’ 2015 guidance are 89 cents per gallon for composite natural gas liquids; $4 per MMBtu for NYMEX natural gas; $4.05 per MMBtu for Ventura-NYMEX natural gas; and $1.90 per gallon for condensate. The composite NGL price for 2015 assumes ethane rejection for the entire year.
For 2015, the partnership estimates that in its natural gas gathering and processing segment, a 10 percent change in the price of natural gas would change annual net margin by approximately $5.5 million; a 10 percent change in the composite price of NGLs would change annual net margin by approximately $28.8 million; and a 10 percent change in the price of condensate would change annual net margin by approximately $13.1 million. All of these sensitivities include the effects of hedging and assume normal operating conditions.
NATURAL GAS LIQUIDS SEGMENT
The natural gas liquids segment’s 2015 operating income guidance range is $867 million to $917 million.
The 2015 earnings guidance reflects higher anticipated fee-based earnings from increased NGL volumes gathered and fractionated as a result of completed capital-growth projects, nine new connections to natural gas processing plants, anticipated increased NGL volumes from new capital-growth projects and the recent West Texas LPG System acquisition, including:
- The expansion of the Bakken NGL Pipeline, increasing the pipeline’s capacity to 135,000 barrels per day (bpd) from 60,000 bpd, which was completed in September 2014;
- The Niobrara NGL Lateral Pipeline that connects the partnership’s Sage Creek plant in the NGL-rich Niobrara Shale formation in the Powder River Basin to the partnership’s Bakken NGL Pipeline, which was completed in September 2014;
- The acquisition of approximately 2,600 miles of NGL pipelines and related assets in the Permian Basin in southeastern New Mexico and West Texas, including an 80 percent interest in the West Texas LPG Pipeline and 100 percent interest in the Mesquite Pipeline, which closed in November 2014;
- A 75,000-bpd NGL fractionator, MB-3, at Mont Belvieu, Texas, expected to be completed in December 2014; and
- A 95-mile NGL pipeline between existing NGL fractionation infrastructure at Hutchinson, Kansas, and Medford, Oklahoma, and the modification of the partnership’s NGL fractionation infrastructure at Hutchinson, Kansas, to accommodate unfractionated NGLs produced in the Williston Basin, expected to be completed in the first quarter 2015.
NGL volumes gathered in 2015 are expected to increase approximately 58 percent compared with current 2014 guidance, due primarily to the recent West Texas LPG System acquisition, which is expected to increase NGLs gathered by nearly 44 percent to approximately 820,000 bpd systemwide. NGL volumes fractionated in 2015 are expected to increase approximately 8 percent compared with current 2014 guidance.
ONEOK Partners’ 2015 guidance assumes the Conway-to-Mont Belvieu ethane in ethane/propane mix price differential to average 2 cents per gallon.
NATURAL GAS PIPELINES SEGMENT
The natural gas pipelines segment’s 2015 operating income guidance range is $150 million to $160 million and assumes that 92 percent of transportation capacity and 76 percent of natural gas storage capacity is expected to be contracted for 2015.
For 2015, ONEOK Partners’ capital expenditures are expected to be in the range of $2.6 billion to $3.0 billion, composed of approximately $2.6 billion in growth capital and $175 million in maintenance capital.
ANNUAL INVESTOR CONFERENCE
ONEOK and ONEOK Partners will hold their annual investor conference on Wednesday, Dec. 3, 2014, in New York City, from 9 a.m. Eastern Standard Time (8 a.m. Central Standard Time) to noon Eastern Standard Time (11 a.m. Central Standard Time). The meeting also will be carried live on ONEOK’s and ONEOK Partners’ websites.
LINK TO NEWS RELEASE WITH GUIDANCE TABLES
NON-GAAP (GENERALLY ACCEPTED ACCOUNTING PRINCIPLES) FINANCIAL MEASURE:
ONEOK has disclosed in this news release anticipated cash flow available for dividends, free cash flow and dividend coverage ratio, which are non-GAAP financial metrics, used to measure the company’s financial performance and are defined as follows:
- Cash flow available for dividends is defined as net income less the portion attributable to non-controlling interests, adjusted for equity in earnings and distributions declared from ONEOK Partners, and ONEOK’s stand-alone depreciation and amortization, deferred income taxes, stand-alone capital expenditures and certain other items;
- Free cash flow is defined as cash flow available for dividends, computed as described above, less ONEOK’s dividends declared; and
- Dividend coverage ratio is defined as cash flow available for dividends divided by the dividends declared for the period.
These non-GAAP financial measures described above are useful to investors because they are used by many companies in the industry as a measurement of financial performance and are commonly employed by financial analysts and others to evaluate our financial performance and to compare our financial performance with the performance of other companies within our industry. ONEOK cash flow available for dividends, free cash flow and dividend coverage ratio should not be considered in isolation or as a substitute for net income or any other measure of financial performance presented in accordance with GAAP.
These non-GAAP financial measures exclude some, but not all, items that affect net income. Additionally, these calculations may not be comparable with similarly titled measures of other companies. A reconciliation of cash flow available for dividends and free cash flow to net income is included in the tables.
ONEOK, Inc. (pronounced ONE-OAK) (NYSE: OKE) is the general partner and as of Sept. 30, 2014, owns 38.3 percent of ONEOK Partners, L.P. (OKS), one of the largest publicly traded master limited partnerships, which 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 natural gas liquids (NGL) systems, connecting NGL supply in the Mid-Continent and Rocky Mountain regions with key market centers. ONEOK is a FORTUNE 500 company and is included in Standard & Poor’s (S&P) 500 Stock Index.