ONEOK (OKE) Sees Stronger Growth in 2012 - 14; Looks for 40% Increase in Dividend
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Financial Fact:
Cost of sales and fuel: 1.75B
Today's EPS Names:
MSGM, SMID, VISL, More
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ONEOK, Inc. (NYSE: OKE) Chairman and Chief Executive Officer John W. Gibson today told shareholders at the company's annual meeting that the company expects to increase its net income by approximately 18 percent annually between 2012 and 2014, compared with 2012 earnings guidance, driven primarily by incremental earnings to ONEOK from the growth at ONEOK Partners (NYSE: OKS).
He also told shareholders the company expects to increase its dividend by approximately 40 percent between 2012 and 2014, which includes a projected dividend increase of 5 cents per share on a pre-split basis in July 2012, subject to ONEOK board approval. Compared with its 2011 annual dividend of $2.16 per share, this increase represents a 64-percent increase.
"Most importantly, projected dividend and net income growth at ONEOK is expected to be driven primarily by natural gas and natural gas liquids volume growth at ONEOK Partners, not by higher projected commodity prices or wider price differentials," said Gibson. "And ONEOK shareholders should continue to benefit from the incremental earnings generated by ONEOK Partners' completion of its more than $5 billion internal-growth program, expected to be completed by 2015."
He also said that the company's investment in ONEOK Partners – through its 2-percent general partner interest and limited partner interests that together represent a 43.4-percent total ownership interest – continues to benefit ONEOK and fulfill the partnership's role as ONEOK's growth engine. In 2011, ONEOK received $333 million in total distributions from ONEOK Partners, compared with $145 million in 2006, the first year ONEOK was the sole general partner.
"As ONEOK Partners grows, ONEOK grows," said Gibson. "The partnership's current plans to invest an additional $4.7 billion to $5.6 billion for natural gas, natural gas liquids and crude-oil infrastructure in and around our existing operational footprint should result in increased earnings and cash distributions paid to ONEOK."
Gibson said ONEOK Partners expects earnings before interest, taxes, depreciation and amortization (EBITDA) to increase approximately 20 percent annually between 2012 and 2014, compared with 2012 earnings guidance. The partnership has estimated a 2.5-cent-per-unit-per-quarter increase in unitholder distributions in 2012 and an average annual distribution increase of 15 to 20 percent in 2013 and 2014. Actual unitholder distribution declarations are subject to ONEOK Partners board approval.
Gibson said that if 2013 and 2014 commodity prices – crude oil, natural gas and natural gas liquids – remained at the levels assumed in 2012 guidance, 2012 to 2014 earnings growth projections at ONEOK and ONEOK Partners would be reduced by only one percentage point annually.
He also highlighted the company's entry into the crude-oil transportation business through the partnership's previously announced plans to build a 1,300-mile crude-oil pipeline that will transport light-sweet crude oil from the Bakken Shale in the Williston Basin in North Dakota to the Cushing, Oklahoma, crude-oil market hub.
Gibson said ONEOK had an exceptionally strong performance in 2011, led by its ONEOK Partners segment, which increased its volumes and benefited from its integrated midstream natural gas and natural gas liquids assets.
He said the company's natural gas distribution segment should continue to benefit from successful rate and risk-mitigation strategies, combined with targeted capital investments that provide value to investors and its 2 million customers. He noted that the company's energy services segment continues to operate in the most challenging natural gas marketing environment in a decade, but that the segment has become an increasingly smaller percentage of ONEOK's total operating income, approximately 2 percent in 2011.
Total shareholder return for ONEOK shareholders during the last one-, three-, five- and 10-year timeframes has significantly exceeded the S&P 500 index and the S&P 500 utilities index, according to Gibson. In 2011, ONEOK earned a total shareholder return of 61 percent compared with returns of 20 percent for the S&P 500 utilities index and 2 percent for the S&P 500 index, he said.
Gibson also praised the company's environmental, safety and health (ESH) initiatives. "We continue to make progress to strengthen and improve our environmental, safety and health performance, which is a top priority in everything that we do," he said.
He also told shareholders the company expects to increase its dividend by approximately 40 percent between 2012 and 2014, which includes a projected dividend increase of 5 cents per share on a pre-split basis in July 2012, subject to ONEOK board approval. Compared with its 2011 annual dividend of $2.16 per share, this increase represents a 64-percent increase.
"Most importantly, projected dividend and net income growth at ONEOK is expected to be driven primarily by natural gas and natural gas liquids volume growth at ONEOK Partners, not by higher projected commodity prices or wider price differentials," said Gibson. "And ONEOK shareholders should continue to benefit from the incremental earnings generated by ONEOK Partners' completion of its more than $5 billion internal-growth program, expected to be completed by 2015."
He also said that the company's investment in ONEOK Partners – through its 2-percent general partner interest and limited partner interests that together represent a 43.4-percent total ownership interest – continues to benefit ONEOK and fulfill the partnership's role as ONEOK's growth engine. In 2011, ONEOK received $333 million in total distributions from ONEOK Partners, compared with $145 million in 2006, the first year ONEOK was the sole general partner.
"As ONEOK Partners grows, ONEOK grows," said Gibson. "The partnership's current plans to invest an additional $4.7 billion to $5.6 billion for natural gas, natural gas liquids and crude-oil infrastructure in and around our existing operational footprint should result in increased earnings and cash distributions paid to ONEOK."
Gibson said ONEOK Partners expects earnings before interest, taxes, depreciation and amortization (EBITDA) to increase approximately 20 percent annually between 2012 and 2014, compared with 2012 earnings guidance. The partnership has estimated a 2.5-cent-per-unit-per-quarter increase in unitholder distributions in 2012 and an average annual distribution increase of 15 to 20 percent in 2013 and 2014. Actual unitholder distribution declarations are subject to ONEOK Partners board approval.
Gibson said that if 2013 and 2014 commodity prices – crude oil, natural gas and natural gas liquids – remained at the levels assumed in 2012 guidance, 2012 to 2014 earnings growth projections at ONEOK and ONEOK Partners would be reduced by only one percentage point annually.
He also highlighted the company's entry into the crude-oil transportation business through the partnership's previously announced plans to build a 1,300-mile crude-oil pipeline that will transport light-sweet crude oil from the Bakken Shale in the Williston Basin in North Dakota to the Cushing, Oklahoma, crude-oil market hub.
Gibson said ONEOK had an exceptionally strong performance in 2011, led by its ONEOK Partners segment, which increased its volumes and benefited from its integrated midstream natural gas and natural gas liquids assets.
He said the company's natural gas distribution segment should continue to benefit from successful rate and risk-mitigation strategies, combined with targeted capital investments that provide value to investors and its 2 million customers. He noted that the company's energy services segment continues to operate in the most challenging natural gas marketing environment in a decade, but that the segment has become an increasingly smaller percentage of ONEOK's total operating income, approximately 2 percent in 2011.
Total shareholder return for ONEOK shareholders during the last one-, three-, five- and 10-year timeframes has significantly exceeded the S&P 500 index and the S&P 500 utilities index, according to Gibson. In 2011, ONEOK earned a total shareholder return of 61 percent compared with returns of 20 percent for the S&P 500 utilities index and 2 percent for the S&P 500 index, he said.
Gibson also praised the company's environmental, safety and health (ESH) initiatives. "We continue to make progress to strengthen and improve our environmental, safety and health performance, which is a top priority in everything that we do," he said.
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