ONEOK Partners Beats on Earnings, Misses Revs - Analyst Blog

ONEOK Partners L.P. OKS reported first-quarter 2014 earnings of 81 cents per unit, surpassing the Zacks Consensus Estimate of 66 cents by 22.7%. Quarterly earnings increased 92.9% year over year, mainly on the back of higher revenues.

Total Revenue

In first-quarter 2014, ONEOK Partners' total revenue of $3,162.3 million missed the Zacks Consensus Estimate of $3,370 million by 6.2%. However, reported total revenue increased 25.6% from the prior-year figure of $2,517.4 million, primarily due to wider natural gas liquids NGL location and product price differentials, and increased natural gas volumes gathered, processed and sold, and natural gas transportation revenues.

Operating Results

In the quarter under review, ONEOK Partners' cost of sales and fuel was $2,652.7 million, up 23.6% from $2,146.8 million a year ago.

Quarterly total operating expenses increased 12.4% year over year to $216.9 million, primarily due to higher operations and maintenance expenses as well as depreciation expenses.

The partnership's quarterly operating margin was 9.3%, up from 7.1% in the prior-year quarter.

In first-quarter 2014, ONEOK Partners' adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) jumped around 51% year over year to $393.7 million.

Quarterly interest expenses increased 22.2% to $68.3 million from $55.9 million in the prior-year quarter.

Segment Results

In first-quarter 2014, ONEOK Partners' Natural Gas Gathering and Processing segment reported an operating income of $59.9 million, up 77.7% year over year. Natural Gas Pipelines' operating income climbed 53.5% year over year to $55.1 million. Natural Gas Liquids segment's operating income escalated 65.1% year over year to $176.8 million.

Financial Condition

ONEOK Partners had cash and cash equivalents of $115.4 million as of Mar 31, 2014 versus $134.5 million as of Dec 31, 2013.

Long-term debt (excluding current maturities) as of Mar 31, 2014 was $6,043.2 million versus $6,044.9 million as of Dec 31, 2013.

In the first three months of 2014, cash provided by operating activities was $459.2 million, higher than $181.4 million in the year-ago comparable period.

ONEOK Partners' capital expenditures in first-quarter 2014 dropped 9.1% year over year to $403 million.

The partnership's distributable cash flow (DCF) was $298.2 million versus $193.2 million a year ago.

Guidance

ONEOK Partners maintained its 2014 net income and EBITDA guidance in the range of $975 million to $1,075 million and $1,565 million to $1,665 million, respectively.

The partnership reiterated its DCF guidance for 2014 in the band of $1,150 million to $1,250 million.

ONEOK Partners continues to pay incremental cash distribution to its unitholders. The projected cash distribution is expected to increase 1.5 cents per unit per quarter, subject to the board's approval.

At the Peer

Boardwalk Pipeline Partners, LP BWP reported first-quarter 2014 earnings of 44 cents per unit, surpassing the Zacks Consensus Estimate of 32 cents by 37.5%.

Enterprise Products Partners L.P. EPD announced first-quarter 2014 earnings of 75 cents per unit, beating the Zacks Consensus Estimate by a penny.

Energy Transfer Equity, L.P. ETE reported first-quarter 2014 earnings of 68 cents per unit, surpassing the Zacks Consensus Estimate by 151.8%.

Our View

ONEOK Partners' systematic investment in growth projects backed by strong cash generation capacity will enable it to strengthen its presence in the U.S. The partnership continues to construct infrastructure next to its current operations to solidify its footprint. These initiatives will enable ONEOK Partners to serve more upstream players.

The partnership currently has a Zacks Rank #3 (Hold).