Master limited partner, ONEOK Partners L.P. (OKS) announced earnings of $1.09 per unit in the third quarter of 2010, beating the Zacks Consensus Estimate of 95 cents. Earnings in the quarter also outdid $1.00 reported in the third quarter of 2009.
Earnings were driven by strong results across the partnership’s business segment driven by strong volume growth from the $2 billion-plus capital-investment program completed last year.
Operating Results
Total revenues of $2.07 billion in the quarter were short of the Zacks Consensus Estimate of $2.2 billion. However, revenues improved 33% from last year’s $1.56 billion.
Earnings before interest, taxes, depreciation and amortization (EBITDA) were $236.7 million, up 12% from the year-ago period. Operating income rose 11% to $160.5 million in the quarter, driven by strong operating performances at the Natural Gas Liquids segment offset in part by weaker results at the Natural Gas Gathering and Processing and Natural Gas Pipelines segments.
By segment, ONEOK Partners’ operating income increased 31% year over year to $83.2 million in the Natural Gas Liquids segment, driven by gain on the sale of a 49% interest in Overland Pass Pipeline Company.
Operating income at the Natural Gas Gathering and Processing segment and Natural Gas Pipelines segment dipped 5% and 6%, respectively, to $38.2 million and $39.0 million, on account of lower realized commodity prices, lower natural gas gathered and processed volumes and decrease in operational natural gas inventory.
Equity earnings from investments climbed $9.3 million to $29.4 million, driven by increased throughput in the Northern Border Pipeline (50% interest ownership).
In the quarter, operating costs improved $7.3 million to $97.8 million, primarily due to lower property taxes associated with the capital projects completed in 2009 and lower costs for outside services. Depreciation and amortization expense, however, rose $1.9 million to $43.8 million, compared with $41.9 million in the third quarter of 2009.
ONEOK Partners’ units outstanding at the end of third quarter 2010 increased 5.5 million to 101.9 million compared with 96.4 million units in the year-ago period. An equity offering in February 2010 increased the partnership’s units outstanding by roughly 5.5 million units.
Distributable cash flow (DCF) totaled $156.0 million compared with $144.1 million last year.
Dividend
ONEOK Partners increased its quarterly cash distribution to $1.13 per unit from $1.12 per unit, payable on November 12, 2010, to unit-holders of record as of October 29, 2010.
Outlook
ONEOK Partners reaffirmed its 2010 guidance provided on September 30, 2010. The partnership expects earnings in the $450 – $470 million range for 2010. Distributable cash flow is targeted in the range of $570 – $590 million for 2010.
Capital expenditure budget for 2010 is $464 million, comprising $394 million in growth capital and $70 million in maintenance capital.
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