ONEOK Announces First-quarter 2012 Financial Results; Reaffirms 2012 Earnings Guidance
Posted on May 01, 2012 at 16:10 PM EDT
TULSA, Okla., May 1, 2012 /PRNewswire/ -- ONEOK, Inc. (NYSE: OKE) today announced first-quarter 2012 earnings of $1.16 per diluted share, compared with $1.19 per diluted share for the same period last year. First-quarter net income attributable to ONEOK was $122.9 million, compared with $130.1 million for the same period in 2011.
"Our ONEOK Partners segment again posted exceptionally strong results, benefiting from continued favorable NGL price differentials, increased natural gas liquids volumes gathered and fractionated and higher natural gas volumes gathered and processed in the Williston Basin," said John W. Gibson, ONEOK chairman and chief executive officer.
"Our natural gas distribution segment experienced slightly lower transportation margins due to warmer than normal weather in Kansas and Oklahoma that affected commercial customer demand, while the continued deterioration of natural gas markets negatively affected our energy services segment," Gibson said.
First-quarter results were affected by a continued decline in natural gas prices that resulted in a $29.9 million decrease from the required reclassification of losses on certain financial contracts and a $10.3 million non-recurring goodwill impairment charge, both in the company's energy services segment.
ONEOK reaffirmed its 2012 net income guidance range of $360 million to $410 million, provided on Feb. 20, 2012.
2012 earnings guidance for ONEOK includes a projected dividend increase of 5 cents per share in July 2012, subject to ONEOK board approval. ONEOK's 2012 earnings guidance also includes a projected 2.5-cent-per-unit-per-quarter increase in unitholder distributions from ONEOK Partners, subject to ONEOK Partners board approval.
ONEOK's first-quarter 2012 operating income was $325.9 million, compared with $328.3 million for the first quarter 2011.
First-quarter 2012 results benefited from strong performance in the ONEOK Partners segment including: higher natural gas liquids (NGL) optimization margins resulting from favorable NGL price differentials and increased NGL fractionation and transportation capacity available for optimization activities, and higher NGL volumes gathered and fractionated in the natural gas liquids business; and higher natural gas volumes gathered and processed in the natural gas gathering and processing business.
First-quarter 2012 results for the natural gas distribution segment were slightly lower due to higher depreciation and amortization expense from increased capital expenditures and a decrease in transportation margins as a result of warmer-than-normal weather that reduced commercial customer demand.
The energy services segment had significantly lower first-quarter results due primarily to lower storage and marketing margins from lower realized seasonal natural gas storage price differentials and the continued decline in natural gas prices that resulted in a required $29.9 million reclassification of losses on certain financial contracts and a $10.3 million non-recurring goodwill impairment charge.
Operating costs for the first quarter 2012 were $224.1 million, compared with $221.7 million in the same period last year.
In February 2012, ONEOK sold its retail natural gas marketing business, which was accounted for in the natural gas distribution segment, to Constellation Energy Group, Inc. for $32.0 million including working capital and recognized an after-tax gain of approximately $13.3 million. Financial information for this business is reflected as discontinued operations.
FIRST-QUARTER 2012 SUMMARY:
ONEOK Partners' first-quarter 2012 operating income was $256.0 million, compared with $177.6 million in the same period last year.
First-quarter results reflect:
Beginning on Feb. 28, 2012, the partnership experienced an unexpected release of brine and propane from a storage well at its NGL fractionation facility in Medford, Okla., which caused a 10-day disruption to its operations. The well was capped successfully and will be taken out of service permanently. Without this disruption, the partnership estimates net margin in this segment would have been approximately $10 million higher.
First-quarter 2012 operating costs were $115.9 million, compared with $108.7 million in the first quarter 2011. This increase was due primarily to increased expenses for materials, utilities and outside services associated with scheduled maintenance; and completed projects in the natural gas gathering and processing and natural gas liquids businesses.
Equity earnings from investments were $34.6 million in the first quarter 2012, compared with $32.1 million in the same period in 2011.
Key Statistics: More detailed information is listed in the tables.
Natural Gas Distribution
Prior reporting periods for the natural gas distribution segment exclude retail marketing operations that were sold in February 2012, and those operations are now accounted for as income from discontinued operations.
The natural gas distribution segment reported operating income of $98.8 million in the first quarter 2012, compared with $103.1 million in the first quarter 2011.
First-quarter results reflect higher depreciation and amortization expense from increased capital expenditures, including investments in automated meter-reading devices in Oklahoma; and a decrease in transportation margins in Kansas and Oklahoma due to warmer-than-normal weather reducing commercial customer demand that is not subject to weather normalization, offset partially by higher rates and rider recoveries in Texas.
First-quarter 2012 operating costs were $105.0 million, compared with $104.7 million in the first quarter 2011. The first-quarter 2012 increase was due primarily to higher outside services and legal expenses offset by lower share-based compensation costs.Key Statistics: More detailed information is listed in the tables.
The energy services segment reported a first-quarter 2012 operating loss of $30.7 million, compared with operating income of $47.8 million in the same period in 2011.
The decrease in first-quarter 2012 operating income, compared with the same period in 2011, reflects:
Additionally, this segment recorded a $10.3 million non-recurring goodwill impairment charge as a result of the continued decline in natural gas prices and its effect on location and seasonal natural gas storage price differentials.
First-quarter 2012 operating costs were $4.8 million, compared with $8.0 million in the first quarter 2011. This decrease was due primarily to lower employee-related costs.
Key Statistics: More detailed information is listed in the tables.
EARNINGS CONFERENCE CALL AND WEBCAST:
ONEOK and ONEOK Partners management will conduct a joint conference call on Wednesday, May 2, 2012, at 11 a.m. Eastern Daylight Time (10 a.m. Central Daylight Time). The call will also be carried live on ONEOK's and ONEOK Partners' websites.
If you are unable to participate in the conference call or the webcast, the replay will be available on ONEOK's website, www.oneok.com, and ONEOK Partners' website, www.oneokpartners.com, for 30 days. A recording will be available by phone for seven days. The playback call may be accessed at 888-203-1112, pass code 2482979.
LINK TO EARNINGS TABLES:
NON-GAAP (GENERALLY ACCEPTED ACCOUNTING PRINCIPLES) FINANCIAL MEASURE
ONEOK has disclosed in this news release stand-alone cash flow, before changes in working capital, which is a non-GAAP financial measure. Stand-alone cash flow, before changes in working capital, is used as a measure of the company's financial performance. Stand-alone cash flow, before changes in working capital, is defined as net income less the portion attributable to non-controlling interests, adjusted for equity in earnings and distributions received from ONEOK Partners, and ONEOK's stand-alone depreciation, amortization and impairments, deferred income taxes, and certain other items.
The non-GAAP financial measure described above is useful to investors because the measurement is used as a measurement of financial performance of the company's fundamental business activities. ONEOK stand-alone cash flow, before changes in working capital, 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.
This non-GAAP financial measure excludes some, but not all, items that affect net income. Additionally, this calculation may not be comparable with similarly titled measures of other companies. A reconciliation of stand-alone cash flow, before changes in working capital, to net income is included in the financial tables.
ONEOK, Inc. (NYSE: OKE) is a diversified energy company. We are the general partner and own 43.4 percent of ONEOK Partners, L.P. (NYSE: 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 among the largest natural gas distributors in the United States, serving more than two million customers in Oklahoma, Kansas and Texas. Our energy services operation focuses primarily on marketing natural gas and related services throughout the U.S. ONEOK is a FORTUNE 500 company and is included in Standard & Poor's (S&P) 500 Stock Index.
For information about ONEOK, Inc., visit the website: www.oneok.com.
For the latest news about ONEOK, follow us on Twitter @ONEOKNews.
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 and Section 21E of the Exchange Act. 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.
Forward-looking statements include the items identified in the preceding paragraph, the information concerning possible or assumed future results of our operations and other statements contained or incorporated in this news release identified by words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "should," "goal," "forecast," "guidance," "could," "may," "continue," "might," "potential," "scheduled," and other words and terms of similar meaning.
One should not place undue reliance on forward-looking statements, which are applicable only as of the date of this news release. Known and unknown risks, uncertainties and other factors may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by forward-looking statements. Those factors may affect our operations, markets, products, services and prices. In addition to any assumptions and other factors referred to specifically in connection with the forward-looking statements, factors that could cause our actual results to differ materially from those contemplated in any forward-looking statement include, among others, the following:
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 Item 1A, Risk Factors, in the Annual Report. 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.
SOURCE ONEOK, Inc.
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