ONEOK Announces 26% Year-Over-Year Increase in Third Quarter 2021 Net Income and Earnings Per Share
ONEOK, Inc. reported a 26% increase in net income to $392 million for Q3 2021, translating to 88 cents per diluted share. Adjusted EBITDA also rose by 16% to $865.2 million. The company has raised its full-year net income guidance by 10% to a midpoint of $1.49 billion and adjusted EBITDA guidance by 5% to $3.375 billion. Factors driving these increases include growth in Rocky Mountain region natural gas volumes and higher commodity prices. Additionally, ONEOK announced a greenhouse gas reduction target.
- 26% increase in Q3 net income to $392 million.
- 16% increase in adjusted EBITDA to $865.2 million.
- 10% increase in 2021 net income guidance to $1.49 billion.
- 5% increase in adjusted EBITDA guidance to $3.375 billion.
- 47% increase in NGL raw feed throughput volumes in the Rocky Mountain region.
- Higher operating costs due to increased employee-related expenses and property taxes.
TULSA, Okla., Nov. 2, 2021 /PRNewswire/ -- ONEOK, Inc. (NYSE: OKE) today announced higher third quarter 2021 results and increased 2021 financial guidance.
Higher Third Quarter 2021 Results, Compared With Third Quarter 2020:
26% increase in net income to$392.0 million , resulting in 88 cents per diluted share.16% increase in adjusted EBITDA to$865.2 million .47% increase in Rocky Mountain region NGL raw feed throughput volumes.24% increase in Rocky Mountain region natural gas volumes processed.- 4.0 times annualized run-rate net debt-to-EBITDA ratio.
Increased 2021 Guidance:
10% net income increase to a midpoint of$1.49 billion .10% earnings per diluted share increase to a midpoint of$3.33 .5% adjusted EBITDA increase to a midpoint of$3.37 5 billion.
ONEOK increased 2021 net income guidance to a range of
The increase in financial guidance reflects continued strength in Rocky Mountain region volumes and higher commodity prices in the natural gas gathering and processing segment. NGL volume growth in the Rocky Mountain region and Permian Basin, and higher natural gas sales and firm transportation revenue also contributed to increased 2021 expectations.
"ONEOK's strong third quarter results were driven by NGL and natural gas volume growth on our system, contributing higher fee-based earnings," said Pierce H. Norton II, ONEOK president and chief executive officer. "Increasing producer activity driven by improving market demand resulted in record NGL raw feed throughput volumes on our system. These factors, combined with year-to-date results, contributed to the increase in our 2021 financial guidance, giving us positive momentum going into next year.
"The third quarter also marked another milestone in ONEOK's commitment to environmental responsibility with our announcement of a greenhouse gas emission absolute reduction target," added Norton. "We continue to evaluate lower-carbon opportunities that will complement our operations and provide long-term stakeholder value."
THIRD QUARTER 2021 FINANCIAL HIGHLIGHTS
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||
(Millions of dollars, except per share amounts) | |||||||||||||||
Net income (a) | $ | 392.0 | $ | 312.3 | $ | 1,120.3 | $ | 304.8 | |||||||
Diluted earnings per common share (a) | $ | 0.88 | $ | 0.70 | $ | 2.50 | $ | 0.71 | |||||||
Adjusted EBITDA (b) (c) | $ | 865.2 | $ | 747.0 | $ | 2,533.1 | $ | 1,981.7 | |||||||
Operating income (d) | $ | 667.9 | $ | 550.4 | $ | 1,944.1 | $ | 822.7 | |||||||
Operating costs | $ | 265.2 | $ | 205.0 | $ | 770.9 | $ | 636.5 | |||||||
Depreciation and amortization | $ | 154.5 | $ | 153.2 | $ | 468.6 | $ | 426.0 | |||||||
Equity in net earnings from investments | $ | 28.6 | $ | 38.0 | $ | 87.6 | $ | 108.0 | |||||||
Maintenance capital | $ | 42.3 | $ | 31.8 | $ | 113.5 | $ | 83.2 | |||||||
Capital expenditures (includes maintenance) | $ | 166.2 | $ | 380.0 | $ | 490.3 | $ | 1,924.0 | |||||||
(a) Amounts for the three and nine months ended Sept. 30, 2020, include benefits of (b) Adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) is a non-GAAP measure. Reconciliation to the relevant GAAP measure is included in this news release. (c) Amounts for the three and nine months ended Sept. 30, 2020, include benefits of (d) Amounts for the nine months ended Sept. 30, 2020, includes noncash impairment charges of |
THIRD QUARTER 2021 FINANCIAL PERFORMANCE
ONEOK's third quarter 2021 net income and adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) increased
Results included higher operating costs from higher employee-related costs, higher materials, supplies and outside services expenses and increased property taxes.
HIGHLIGHTS:
- Third quarter 2021 net income of
$392.0 million , a26% increase compared with the third quarter 2020. - Third quarter 2021 adjusted EBITDA of
$865.2 million , a16% increase compared with the third quarter 2020. - Completing the 200 million cubic feet per day (MMcf/d) Bear Creek natural gas processing plant expansion and related infrastructure in the Williston Basin.
- In September 2021, announcing a
30% absolute greenhouse gas emissions reduction target, or 2.2 million metric tons, of combined Scope 1 and Scope 2 emissions by 2030, compared with 2019 base-year levels. - In October 2021, declaring a quarterly dividend of 93.5 cents per share, or
$3.74 per share on an annualized basis. - Redeeming in November 2021 the remaining
$536.1 million of4.25% senior notes due February 2022. - As of Sept. 30, 2021:
- 4.0 times annualized run-rate net debt-to-EBITDA ratio.
- No borrowings outstanding under ONEOK's
$2.5 billion credit agreement. $224.3 million of cash and cash equivalents.
BUSINESS SEGMENT RESULTS:
Natural Gas Liquids Segment
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
Natural Gas Liquids Segment | 2021 | 2020 | 2021 | 2020 | |||||||||||
(Millions of dollars) | |||||||||||||||
Adjusted EBITDA | $ | 532.2 | $ | 451.2 | $ | 1,448.1 | $ | 1,199.8 | |||||||
Capital expenditures | $ | 53.8 | $ | 298.9 | $ | 225.8 | $ | 1,504.9 | |||||||
The increase in third quarter 2021 adjusted EBITDA, compared with the third quarter 2020, primarily reflects:
- A
$97.8 million increase in exchange services due primarily to$59.6 million in higher volumes primarily in the Rocky Mountain region and Permian Basin, offset partially by lower volumes in the Barnett Shale, and$29.5 million related to wider commodity price differentials; and - A
$10.3 million increase in optimization and marketing due primarily to wider location and commodity price differentials; offset by - A
$25.4 million increase in operating costs due primarily to higher employee-related costs, increased property taxes associated with ONEOK's completed capital-growth projects and higher outside services expenses.
The increase in adjusted EBITDA for the nine-month 2021 period, compared with the same period last year, primarily reflects:
- A
$299.0 million increase in exchange services (excluding the impact of Winter Storm Uri discussed below) due primarily to: $249.6 million related to higher volumes in the Rocky Mountain region and lower transportation costs, offset by$11.3 million in lower volumes primarily in the Barnett Shale,$65.9 million related to wider commodity price differentials, and$12.9 million related to the recognition of proceeds previously considered a gain contingency, offset by$15.6 million related to lower earnings on unfractionated NGLs held in inventory due primarily to decreasing inventory levels throughout 2020; and- An
$85.1 million increase in optimization and marketing due primarily to wider location and commodity price differentials, increased activities during Winter Storm Uri and higher earnings on purity NGL sales; offset by - A
$46.2 million decrease in exchange services related to Winter Storm Uri due primarily to decreased volumes across ONEOK's operations and higher electricity costs; - A
$68.9 million increase in operating costs due primarily to higher employee-related costs, increased property taxes associated with ONEOK's completed capital-growth projects and higher outside services expenses; and - A
$17.0 million decrease in equity in net earnings from investments due primarily to lower volumes on the Overland Pass Pipeline.
In the third quarter 2021, the segment connected two third-party natural gas processing plants to its system, including one in the Permian Basin and one in the Rocky Mountain region.
Natural Gas Gathering and Processing Segment
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
Natural Gas Gathering and Processing Segment | 2021 | 2020 | 2021 | 2020 | |||||||||||
(Millions of dollars) | |||||||||||||||
Adjusted EBITDA | $ | 229.7 | $ | 183.1 | $ | 663.6 | $ | 431.5 | |||||||
Capital expenditures | $ | 80.8 | $ | 63.0 | $ | 177.4 | $ | 362.8 | |||||||
Third quarter 2021 adjusted EBITDA increased, compared with the third quarter 2020, which primarily reflects:
- A
$36.4 million increase from higher volumes due primarily to increased production in the Rocky Mountain region in 2021 and production curtailments in 2020, offset partially by natural production declines in the Mid-Continent region; - A
$26.3 million increase due primarily to lower realized commodity prices in 2020 impacting fee-based contracts with a percent of proceeds (POP) component; and - A
$7.3 million increase from a gain on the partial sale of an equity investment; offset by - A
$23.9 million increase in operating costs due primarily to higher materials and supplies expenses, employee-related costs and outside services expenses due primarily to the growth of ONEOK's operations.
The increase in adjusted EBITDA for the nine-month 2021 period, compared with the same period last year, primarily reflects:
- A
$150.5 million increase due primarily to lower realized commodity prices in 2020 impacting fee-based contracts with a POP component; and - A
$94.2 million increase from higher volumes due primarily to increased production in the Rocky Mountain region in 2021 and production curtailments in 2020, offset partially by natural production declines in the Mid-Continent region; offset by - A
$24.2 million increase in operating costs due primarily to higher materials and supplies expenses, employee-related costs and outside services expenses due primarily to the growth of ONEOK's operations.
Natural Gas Pipelines Segment
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
Natural Gas Pipelines Segment | 2021 | 2020 | 2021 | 2020 | |||||||||||
(Millions of dollars) | |||||||||||||||
Adjusted EBITDA | $ | 102.7 | $ | 109.8 | $ | 423.6 | $ | 332.2 | |||||||
Capital expenditures | $ | 24.6 | $ | 13.0 | $ | 73.5 | $ | 40.5 | |||||||
The decrease in third quarter 2021 adjusted EBITDA, compared with the third quarter 2020, primarily reflects:
- A
$7.4 million decrease from lower equity in net earnings from investments due primarily to decreased firm transportation revenues on Northern Border Pipeline; and - A
$5.8 million increase in operating costs due primarily to higher employee-related costs and higher supplies expenses; offset by - A
$4.9 million increase in transportation and storage services due primarily to higher storage and firm transportation rates.
The increase in adjusted EBITDA for the nine-month 2021 period, compared with the same period last year, primarily reflects:
- A
$106.8 million increase due primarily to higher average natural gas prices on 5.2 billion cubic feet (Bcf) of natural gas sales in the first quarter 2021 of volumes previously held in inventory, compared with 1.2 Bcf in the first quarter 2020; and - A
$7.0 million increase in transportation services due primarily to higher park-and-loan activity and higher interruptible transportation revenue in the first quarter 2021, offset partially by a favorable$13.5 million contract settlement in the second quarter 2020; offset by - A
$16.4 million increase in operating costs due primarily to higher employee-related costs and higher supplies expenses; and - A
$7.4 million decrease from lower equity in net earnings from investments due primarily to decreased firm transportation revenues on Northern Border Pipeline.
EARNINGS CONFERENCE CALL AND WEBCAST:
ONEOK executive management will conduct a conference call at 11 a.m. Eastern Daylight Time (10 a.m. Central Daylight Time) on Nov. 3, 2021. The call also will be carried live on ONEOK's website.
To participate in the telephone conference call, dial 800-367-2403, pass code 2571760, or log on to www.oneok.com.
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, for 90 days. A recording will be available by phone for seven days. The playback call may be accessed at 888-203-1112, pass code 2571760.
LINK TO EARNINGS TABLES AND PRESENTATION:
https://ir.oneok.com/financial-information/financial-reports/2021
NON-GAAP (GENERALLY ACCEPTED ACCOUNTING PRINCIPLES) FINANCIAL MEASURES:
ONEOK has disclosed in this news release adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA), which is a non-GAAP financial metric, used to measure the company's financial performance. Adjusted EBITDA is defined as net income adjusted for interest expense, depreciation and amortization, noncash impairment charges, income taxes, noncash compensation expense, allowance for equity funds used during construction (equity AFUDC), and other noncash items.
Adjusted EBITDA is useful to investors because it, and similar measures, is used by many companies in the industry as a measure of financial performance and is commonly employed by financial analysts and others to evaluate ONEOK's financial performance and to compare the company's financial performance with the performance of other companies within the industry. Adjusted EBITDA 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 net income to adjusted EBITDA is included in the tables.
ONEOK, Inc. (pronounced ONE-OAK) (NYSE: OKE) is a leading midstream service provider and owner of one of the nation's premier natural gas liquids (NGL) systems, connecting NGL supply in the Rocky Mountain, Mid-Continent and Permian regions with key market centers and an extensive network of natural gas gathering, processing, storage and transportation assets.
ONEOK is a FORTUNE 500 company and is included in S&P 500.
For information about ONEOK, visit the website: www.oneok.com.
For the latest news about ONEOK, find us on LinkedIn, Instagram, Facebook and Twitter.
This news release contains certain "forward-looking statements" within the meaning of federal securities laws. Words such as "anticipates," "believes," "continues," "could," "estimates," "expects," "forecasts," "goal," "target," "guidance," "intends," "may," "might," "outlook," "plans," "potential," "projects," "scheduled," "should," "will," "would," and similar expressions may be used to identify forward-looking statements. Forward-looking statements are not statements of historical fact and reflect our current views about future events. Such forward-looking statements include, but are not limited to, statements about the benefits of the transaction involving us, including future financial and operating results, our plans, objectives, expectations and intentions, and other statements that are not historical facts, including future results of operations, projected cash flow and liquidity, business strategy, expected synergies or cost savings, and other plans and objectives for future operations. No assurances can be given that the forward-looking statements contained in this news release will occur as projected and actual results may differ materially from those projected.
Forward-looking statements are based on current expectations, estimates and assumptions that involve a number of risks and uncertainties, many of which are beyond our control, and are not guarantees of future results. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in such statements and, therefore, you should not place undue reliance on any such statements and caution must be exercised in relying on forward-looking statements. These risks and uncertainties include, without limitation, the following:
- the length, severity and reemergence of a pandemic or other health crisis, such as the COVID-19 pandemic and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it, which may (as with COVID-19) precipitate or exacerbate one or more of the factors herein, reduce the demand for natural gas, NGLs and crude oil and significantly disrupt or prevent us and our customers and counterparties from operating in the ordinary course for an extended period and increase the cost of operating our business;
- operational challenges relating to the COVID-19 pandemic and efforts to mitigate the spread of the virus, including logistical challenges, protecting the health and well-being of our employees, remote work arrangements, performance of contracts and supply chain disruption;
- the impact on drilling and production by factors beyond our control, including the demand for natural gas and crude oil; producers' desire and ability to drill and obtain necessary permits; regulatory compliance; reserve performance; and capacity constraints and/or shutdowns on the pipelines that transport crude oil, natural gas and NGLs from producing areas and our facilities;
- risks associated with adequate supply to our gathering, processing, fractionation and pipeline facilities, including production declines that outpace new drilling, the shutting-in of production by producers, actions taken by federal, state or local governments to require producers to prorate or to cut their production levels as a way to address any excess market supply situations or extended periods of ethane rejection;
- demand for our services and products in the proximity of our facilities;
- economic climate and growth in the geographic areas in which we operate;
- the risk of a slowdown in growth or decline in the United States or international economies, including liquidity risks in United States or foreign credit markets;
- performance of contractual obligations by our customers, service providers, contractors and shippers;
- the effects of changes in governmental policies and regulatory actions, including changes with respect to income and other taxes, pipeline safety, environmental compliance, cybersecurity, climate change initiatives, emissions credits, carbon offsets, carbon pricing, production limits and authorized rates of recovery of natural gas and natural gas transportation costs;
- changes in demand for the use of natural gas, NGLs and crude oil because of the development of new technologies or other market conditions caused by concerns about climate change;
- the transition to a lower-carbon economy, including the timing and extent of the transition, as well as the expected role of different energy sources in such a transition;
- the pace of technological advancements and industry innovation, including those focused on reducing greenhouse gas emissions and advancing other climate-related initiatives, and our ability to take advantage of those innovations and developments;
- the effectiveness of our risk management strategies, including mitigating climate-related risks;
- our ability to identify and execute opportunities, and the economic viability of those opportunities, including those relating to renewable natural gas, carbon capture, use and storage, other renewable energy sources such as solar and wind and alternative low carbon fuel sources such as hydrogen;
- the ability of our existing assets and our ability to apply and continue to develop our expertise to support the growth of, and transition to, various renewable and alternative energy opportunities, including through the positioning and optimization of our assets;
- our ability to efficiently reduce the carbon intensity of our operations (both Scope 1 and 2 emissions), including through the use of lower carbon power alternatives, management practices and system optimizations;
- the necessity to direct our focus on maintaining and enhancing our existing assets instead of efforts to reduce our greenhouse gas emissions;
- the effects of weather and other natural phenomena, including climate change, on our operations, demand for our services and energy prices;
- acts of nature, sabotage, terrorism or other similar acts that cause damage to our facilities or our suppliers', customers' or shippers' facilities;
- the possibility of future terrorist attacks or the possibility or occurrence of an outbreak of, or changes in, hostilities or changes in the political conditions throughout the world;
- the risk of increased costs for insurance premiums, security or other items as a consequence of terrorist attacks;
- the timing and extent of changes in energy commodity prices, including changes due to production decisions by other countries, such as the failure of countries to abide by agreements to reduce production volumes;
- competition from other United States and foreign energy suppliers and transporters, as well as alternative forms of energy, including, but not limited to, solar power, wind power, geothermal energy and biofuels such as ethanol and biodiesel;
- the ability to market pipeline capacity on favorable terms, including the effects of:
- future demand for and prices of natural gas, NGLs and crude oil;
- competitive conditions in the overall energy market;
- availability of supplies of United States natural gas and crude oil; and
- availability of additional storage capacity;
- the efficiency of our plants in processing natural gas and extracting and fractionating NGLs;
- the composition and quality of the natural gas and NGLs we gather and process in our plants and transport on our pipelines;
- risks of marketing, trading and hedging activities, including the risks of changes in energy prices or the financial condition of our counterparties;
- our ability to control operating costs and make cost-saving changes;
- the risk inherent in the use of information systems in our respective businesses and those of our counterparties and service providers, including cyber-attacks, which, according to experts, have increased in volume and sophistication since the beginning of the COVID-19 pandemic; implementation of new software and hardware; and the impact on the timeliness of information for financial reporting;
- the timely receipt of approval by applicable governmental entities for construction and operation of our pipeline and other projects and required regulatory clearances;
- the ability to recover operating costs and amounts equivalent to income taxes, costs of property, plant and equipment and regulatory assets in our state and Federal Energy Regulatory Commission (FERC)-regulated rates;
- the results of governmental actions, administrative proceedings and litigation, regulatory actions, executive orders, rule changes and receipt of expected clearances involving any local, state or federal regulatory body, including the FERC, the National Transportation Safety Board, the Department of Homeland Security, the Pipeline and Hazardous Materials Safety Administration (PHMSA), the U.S. Environmental Protection Agency (EPA) and the U.S. Commodity Futures Trading Commission (CFTC);
- the mechanical integrity of facilities and pipelines operated;
- the capital-intensive nature of our businesses;
- the impact of unforeseen changes in interest rates, debt and equity markets, inflation rates, economic recession and other external factors over which we have no control, including the effect on pension and postretirement expense and funding resulting from changes in equity and bond market returns;
- actions by rating agencies concerning our credit;
- our indebtedness and guarantee obligations could make us vulnerable to general adverse economic and industry conditions, limit our ability to borrow additional funds and/or place us at competitive disadvantages compared with our competitors that have less debt or have other adverse consequences;
- our ability to access capital at competitive rates or on terms acceptable to us;
- our ability to acquire all necessary permits, consents or other approvals in a timely manner, to promptly obtain all necessary materials and supplies required for construction, and to construct gathering, processing, storage, fractionation and transportation facilities without labor or contractor problems;
- our ability to control construction costs and completion schedules of our pipelines and other projects;
- difficulties or delays experienced by trucks, railroads or pipelines in delivering products to or from our terminals or pipelines;
- the uncertainty of estimates, including accruals and costs of environmental remediation;
- the impact of uncontracted capacity in our assets being greater or less than expected;
- the impact of potential impairment charges;
- the profitability of assets or businesses acquired or constructed by us;
- risks associated with pending or possible acquisitions and dispositions, including our ability to finance or integrate any such acquisitions and any regulatory delay or conditions imposed by regulatory bodies in connection with any such acquisitions and dispositions;
- the risk that material weaknesses or significant deficiencies in our internal controls over financial reporting could emerge or that minor problems could become significant;
- the impact and outcome of pending and future litigation;
- the impact of recently issued and future accounting updates and other changes in accounting policies; and
- the risk factors listed in the reports ONEOK has filed and may file with the Securities and Exchange Commission (the "SEC"), which are incorporated by reference.
These reports are also available from the sources described below. Forward-looking statements are based on the estimates and opinions of management at the time the statements are made. ONEOK undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or changes in circumstances, expectations or otherwise.
The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included herein and elsewhere, including the Risk Factors included in the most recent reports on Form 10-K and Form 10-Q and other documents of ONEOK on file with the SEC. ONEOK's SEC filings are available publicly on the SEC's website at www.sec.gov.
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SOURCE ONEOK, Inc.
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