Yesterday, ONEOK Inc. (OKE) and its limited partnership ONEOK Partners L.P. (OKS) updated their 2009 outlook and provided 2010 earnings guidance.
 
ONEOK raised its 2009 earnings guidance in the range of $2.85 -$2.89 per share, on the high end of its previous guidance of $2.65 -$2.85. ONEOK Partners expects its 2009 earnings to be at the high end of its previous guidance of $3.40 -$3.60 per share. The partnership also revised its 2009 distributable cash flow (DCF) guidance to $556 -$560 million, above the high end of its previous guidance of $530 -$550 million.
 
ONEOK Inc.’s 2010 Guidance
 
For 2010, ONEOK Inc. expects its net income to be in the $300-$335 million range, driven by expectations of increased earnings at ONEOK Partners and the Distribution segment, offset partially by lower earnings at the Energy Services segment. The company did not provide earnings guidance on a per share basis.
 
The company also provided 2010 operating income guidance of $958 million (midpoint), consisting of operating income of $625 million from the ONEOK Partners segment, $223 million from the Distribution segment and $107 from the Energy Services segment.
 
The earnings guidance reflects moving the retail natural gas marketing business, which is forecasted to earn $8 million in operating income, to the distribution segment from the energy services segment.
 
The company indicated that it has 62% of energy services’ transportation position and 75% of its storage position hedged for 2010. It expects 2010 leased storage capacity to be 71.3 billion cubic feet (Bcf), compared with 82.5 Bcf in 2009 and a target of 65 Bcf in 2011.  Long-term leased transportation capacity for 2010 is expected to be 1.3 Bcf per day compared with 1.5 Bcf per day in 2009 and a target of 1.0 Bcf per day in 2012.
 
For 2010, ONEOK’s standalone capital expenditure (capex) guidance was $241 million, including Distribution segment’s $31 million investment for the installation of automated meters in selected residential communities in Oklahoma, in addition to increased investments related to pipeline integrity and non-discretionary compliance projects.
 
The company also expects 2010 standalone cash flow before working capital to total $584 million (midpoint). It expects excess of cash flow before working capital over capex and dividend to be in the $135 -$170 million range. Furthermore, the company expects a dividend increase of 2 cents per share semi-annually in 2010.
 
At December 31, 2009, ONEOK had $358.9 million outstanding and $804.1 million available under its revolving credit facility.
 
ONEOK Partners’ 2010 Guidance
 
ONEOK Partners, a limited partnership in which ONEOK Inc. owns a 45% stake, provided 2010 net income guidance in the $450 -$490 million range, driven by expectations of increased earnings at the Natural Gas Liquids segment, following the completion of the $2 million capex program. For 2010, the partnership expects DCF to be in the range of $580 -$620 million.
 
The partnership expects equity earnings from investments to be $80 million in 2010, primarily reflecting higher anticipated earnings from the Northern Border Pipeline, in which ONEOK Partners owns 50% interest.
 
Moreover, 2010 earnings guidance for ONEOK and ONEOK Partners includes a 1 cent per quarter increase in unitholder distributions, while maintaining a minimum coverage ratio of 1.05 times DCF.
 
ONEOK Partners’ 2010 operating income guidance is $625 million (midpoint), consisting of operating income of $172 million from the Natural Gas Gathering and Processing segment, $156 million from the Natural Gas Pipelines segment and $297 million from the Natural Gas Liquids segment. Natural gas processed volumes in 2010 are expected to increase 6% from 2009 levels, while natural gas gathered volumes are expected to remain relatively flat compared with 2009.
 
For 2010, ONEOK Partners’ natural gas gathering and processing segment has hedged 75% of its expected natural gas liquids, condensate and natural gas production at $1.03 per gallon, $1.80 per gallon, and $5.55 per MMBtu, respectively.  Additionally, for 2011, it has hedged 13% of its natural gas liquids production at $1.34 per gallon, 25% of its condensate production at $2.12 per gallon, and 43% of its natural gas production at $6.29 per MMBtu.
 
ONEOK Partners’ 2010 capex is projected at $362 million, comprising $278 million in growth capital and $84 million in maintenance capital.  Growth capex includes $32 million for new well connections in the natural gas gathering and processing segment. Maintenance capital primarily relates to increased investments in pipeline integrity and non-discretionary compliance projects. ONEOK Partners’ recently completed internal growth projects that are primarily fee based and will add incremental earnings to both ONEOK Partners and ONEOK in 2010.
 
At December 31, 2009, ONEOK Partners had $523 million outstanding and $389.7 million available under its revolving credit facility.
 
ONEOK Inc. and ONEOK Partners are scheduled to release their full year 2009 financial results on Feb 22, 2010.
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