ONEOK Partners Announces Higher 2012 Financial Guidance
Press Release Source: ONEOK Partners, L.P. on Monday September 26, 2011, 4:05 pm EDT
TULSA, Okla., Sept. 26, 2011 /PRNewswire/ — ONEOK Partners, L.P. (NYSE:OKS – News) today announced that its 2012 net income is expected to increase 20 percent compared with the partnership’s current 2011 earnings guidance that was updated Aug. 2, 2011.
ONEOK Partners’ 2012 net income is expected to be in the range of $740 million to $800 million compared with its current 2011 guidance range of $630 million to $660 million.
“Our 2012 earnings guidance reflects higher anticipated natural gas gathering and processing volumes and increased natural gas liquids gathering volumes as several projects from our $2.7 billion to $3.3 billion, four-year growth program are placed into service later this year and in 2012,” said John W. Gibson, chairman, president and chief executive officer of ONEOK Partners.
“Incremental earnings from the completion of several announced projects in the Bakken Shale, Cana-Woodford Shale and Granite Wash plays provide a strong foundation for future earnings growth and strengthen the partnership’s position as an attractive investment,” Gibson added.
The midpoint for ONEOK Partners’ current 2012 operating income guidance is $833 million. 2012 earnings guidance reflects higher anticipated earnings from 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 increases are expected to be offset partially by lower NGL optimization margins, resulting from lower optimization volumes and narrower NGL price differentials in the natural gas liquids segment.
Earnings before interest, taxes, depreciation and amortization (EBITDA) are expected to be in the range of $1.125 billion to $1.215 billion.
Preliminary estimates for the partnership’s 2012 distributable cash flow (DCF) are expected to be in the range of $845 million to $915 million compared with its 2011 range of $735 million to $765 million, a 17 percent increase.
2012 earnings guidance includes a projected 2-cent-per-quarter increase in unitholder distributions, while maintaining a minimum coverage ratio of 1.05 times distributable cash flow. Actual unitholder distribution declarations are subject to ONEOK Partners board approval.
Additional information is available in Exhibits a and B in the guidance tables on the ONEOK Partners website.
NATURAL GAS GATHERING AND PROCESSING SEGMENT
The midpoint of the natural gas gathering and processing segment’s 2012 operating income guidance is $297 million, an increase of 65 percent compared with 2011.
The 2012 earnings guidance reflects higher anticipated natural gas volumes gathered and processed as a result of new supply connections in the Bakken Shale in the Williston Basin in North Dakota, including volumes related to the new 100 million cubic feet per day (MMcf/d) Garden Creek natural gas processing plant expected to be in service in the fourth quarter of 2011. These increases are expected to be offset partially by lower natural gas gathering volumes in Kansas and the Powder River Basin in Wyoming due to decreased drilling activity and natural production declines. Natural gas volumes processed are expected to increase approximately 28 percent from 2011 guidance, while natural gas volumes gathered are expected to increase approximately 15 percent compared with current 2011 guidance.
For 2012, financial hedges are in place on approximately 42 percent of the segment’s expected equity natural gas production at an average price of $5.09 per million British thermal units (MMBtu); 43 percent of its expected equity natural gas liquids production at an average price of $1.61 per gallon; and 73 percent of its expected equity condensate production at an average price of $2.43 per gallon.
The average unhedged prices used in ONEOK Partners’ 2012 earnings guidance are $99.30 per barrel for new York Mercantile Exchange (NYMEX) crude oil, $4.71 per MMBtu for NYMEX natural gas and $1.42 per gallon for composite natural gas liquids.
For 2012, the partnership estimates that in its natural gas gathering and processing segment, a 1 cent per gallon change in the composite price of NGLs would change annual net margin by approximately $1.7 million. A $1.00 per barrel change in the price of crude oil would change annual net margin by approximately $1.3 million. also, a 10 cent per MMBtu change in the price of natural gas would change annual net margin by approximately $2.2 million. All of these sensitivities exclude the effects of hedging and assume normal operating conditions.
NATURAL GAS PIPELINES SEGMENT
The midpoint of the natural gas pipelines segment’s 2012 operating income guidance is $141 million, unchanged compared with 2011. 2012 guidance assumes that approximately 80 percent of transportation capacity and 100 percent of natural gas storage capacity will be contracted for 2012.
NATURAL GAS LIQUIDS SEGMENT
The midpoint of the natural gas liquids segment’s 2012 operating income guidance is $395 million, reflecting lower expected optimization margins from lower optimization volumes and narrower NGL price differentials. these 2012 decreases are expected to be offset partially by higher anticipated fee-based earnings from increased NGL volumes gathered and fractionated.
2012 guidance assumes the average Conway-to-Mont Belvieu ethane price differential to be 12 cents per gallon, compared with 16 cents per gallon assumed for 2011.
OTHER
Equity earnings from investments are estimated to be approximately $127 million in 2012. Northern Border Pipeline’s transportation capacity is substantially subscribed through October 2012.
2012 other income is estimated to be higher than 2011 due to higher allowance for equity funds used during construction (equity AFUDC) as a result of the previously announced growth projects of approximately $2.7 billion to $3.3 billion between 2011 and 2014.
The midpoint for interest expense is expected to be approximately $203 million, reflecting higher capitalized interest as a result of approximately $2.7 billion to $3.3 billion of growth projects between 2011 and 2014.
CAPITAL EXPENDITURES
For 2012, ONEOK Partners’ capital expenditures are expected to be approximately $1.9 billion, comprised of approximately $1.8 billion in growth capital, related to the approximately $2.7 billion to $3.3 billion of growth projects between 2011 and 2014; and $109 million in maintenance capital.
ANNUAL INVESTOR CONFERENCE
ONEOK Partners will hold its annual investor conference on Tuesday, Sept. 27, 2011, in new York City, from 9 a.m. Eastern Daylight Time (8 a.m. Central Daylight Time) to noon Eastern Daylight Time (11 a.m. Central Daylight Time.) The meeting also will be carried live on ONEOK Partners’ website.
At the meeting, ONEOK Partners will discuss 2012 earnings guidance and will update its three-year EBITDA and distribution growth forecasts.
The webcast can be accessed on ONEOK Partners’ website at http://www.oneokpartners.com/. A replay of the webcast will be available for 30 days after the conference.
LINK TO NEWS RELEASE WITH GUIDANCE TABLES
NON-GAAP (GENERALLY ACCEPTED ACCOUNTING PRINCIPLES) FINANCIAL MEASURES
ONEOK Partners has disclosed in this news release anticipated EBITDA and DCF levels that are non-GAAP financial measures. EBITDA and DCF are used as measures of the partnership’s financial performance. EBITDA is defined as net income adjusted for interest expense, depreciation and amortization, income taxes and equity AFUDC. DCF is defined as EBITDA, computed as described above, less interest expense, maintenance capital expenditures and equity earnings from investments, adjusted for distributions received and certain other items.
The partnership believes the non-GAAP financial measures described above are useful to investors because these measurements are used by many companies in its industry as a measurement of financial performance and are commonly employed by financial analysts and others to evaluate the financial performance of the partnership and to compare the financial performance of the partnership with the performance of other publicly traded partnerships within its industry.
EBITDA and DCF should not be considered an alternative to net income, earnings per unit 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. Furthermore, these non-GAAP measures should not be viewed as indicative of the actual amount of cash that is available for distributions or that is planned to be distributed for a given period nor do they equate to available cash as defined in the partnership agreement.
ONEOK Partners, L.P. (NYSE:OKS – News) is one of the largest publicly traded master limited partnerships, and 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. its general partner is a wholly owned subsidiary of ONEOK, Inc. (NYSE:OKE – News), a diversified energy company, which owns 42.8 percent of the overall partnership interest. ONEOK is one of the largest natural gas distributors in the United States, and its energy services operation focuses primarily on marketing natural gas and related services throughout the U.S.
For more information, visit the website at www.oneokpartners.com.
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Some of the statements contained and incorporated in this news release are forward-looking statements within the meaning of Section 27A of the Securities Act, as amended, and Section 21E of the Exchange Act, as amended. The forward-looking statements relate to our anticipated financial performance, liquidity, management’s plans and objectives for our future operations, our business prospects, the outcome of regulatory and legal proceedings, market conditions and other matters. we make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. The following discussion is intended to identify important factors that could cause future outcomes to differ materially from those set forth in the forward-looking statements.
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These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. other factors could also have material adverse effects on our future results. these and other risks are described in greater detail in Part I, Item 1A, Risk Factors, in the Annual Report on Form 10-K for the year ended December 31, 2010. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these factors. other than as required under securities laws, we undertake no obligation to update publicly any forward-looking statement whether as a result of new information, subsequent events or change in circumstances, expectations or otherwise.
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