Expected Higher EBITDA
ONEOK (OKE) is scheduled to report its 4Q16 earnings on February 27, 2017. Analysts expect its EBITDA (earnings before interest, tax, depreciation, and amortization) for the quarter to be $483 million, a 13% increase compared to $427.9 million reported in 3Q16. OKE’s 4Q16 estimated EBITDA is 15% higher compared to its 4Q15 EBITDA of $419.1 million. ONEOK’s EBITDA for 3Q16 reflected a 15% increase as compared to its 3Q15 EBITDA.
The above graph shows OKE’s actual EBITDA over the last nine quarters.
Expected EBITDA drivers in 4Q16
“Through October, we’ve seen the completion of large multi-well pads in the Mid-Continent, specifically in the STACK play, supporting our expectation for a year-end volume ramp up and setting the stage for additional volume growth in 2017,” said Terry Spencer, president and chief executive officer of ONEOK, in the company’s 3Q16 earnings release.
“The partnership recently completed several capital-growth projects including the Bear Creek natural gas processing plant in the Williston Basin and related NGL gathering infrastructure, and the second phase of the Roadrunner Gas Transmission pipeline and complementary ONEOK WesTex expansion project in the natural gas pipelines segment,” Spencer added.
“All of these projects are expected to contribute primarily fee-based earnings and stable growth to the partnership as we exit 2016,” continued Spencer.
Acquisition of ONEOK Partners
On February 1, 2017, ONEOK and ONEOK Partners (OKS) announced an agreement under which ONEOK will acquire all of the outstanding common units of its MLP ONEOK Partners for $9.3 billion in OKE common stock. The transaction is expected to close in 2Q17.
The merger is expected to lower ONEOK’s cost of funding with enhanced access to capital markets and provide higher dividend growth rates with stronger cash flow generation.