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Higher Natural Gas Liquids Volumes Drive ONEOK’s 4Q15 Growth

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ONEOK’s EBITDA grew 6.6%

ONEOK (OKE) reported its 4Q15 results on February 22, 2016, after the Market closed. The company’s 4Q15 adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) rose 6.6% to $412.8 million, from $387.3 million in 4Q14. Analysts expected EBITDA of $422.8 million for the quarter. ONEOK missed EBITDA estimates by 2.4%. ONEOK forms ~2% of the PowerShares High Yield Equity Dividend Achievers ETF (PEY).

The above graph compares ONEOK’s EBITDA estimates with its adjusted EBITDA. Spectra Energy (SE) missed consensus 4Q15 EBITDA estimates by 8%, while Enterprise Products Partners (EPD) missed consensus 4Q15 EBITDA estimates by 3%.

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Cash flow available for dividends

ONEOK’s cash flow available for dividends increased from $142.2 million in 4Q14 to $166.6 million in 4Q15. For fiscal 2015, the cash flow available for dividends stood at $641.3 million compared to $620.6 million in 2014. ONEOK’s 2015 cash flow available for dividends met its guidance range of $570–$650 million for the year.

Higher volumes drive EBITDA growth

ONEOK operates as a pure-play general partner of ONEOK Partners (OKS). In order to analyze OKE’s earnings levers, we first need to look at OKS’s earnings. The company’s EBITDA growth in 4Q15 was driven by the following:

  • increased NGL (natural gas liquids) gathering and fractionating volumes from recently connected natural gas processing plants in the Williston Basin, Powder River Basin, and Mid-Continent region
  • increased NGL transportation volumes primarily from the West Texas LPG (liquified petroleum gas) pipeline system in the Permian Basin

Increased distributions from OKS

ONEOK received increased distributions from ONEOK Partners in 2015 due to its increased interest in the MLP. “ONEOK ended 2015 in a strong financial position, benefiting from increased distributions related to our limited and general partner interests in ONEOK Partners,” said Terry K. Spencer, president and chief executive officer of ONEOK. “Distributions declared from the partnership increased more than 16 percent in 2015 compared with 2014, driven by ONEOK’s purchase of an additional 21.5 million ONEOK Partners units in August 2015.”

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