ONEOK CEO Discusses Q3 2010 Results – Earnings Call Transcript
ONEOK, Inc. (
)
Q3 2010 Earnings Call Transcript
November 3, 2010 11:00 am ET
Executives
Dan Harrison – VP, IR & Public Affairs
John Gibson – President and CEO
Curtis Dinan – SVP, CFO and Treasurer
Terry Spencer – COO, ONEOK Partners
Rob Martinovich – COO
Analysts
Steve Maresca – Morgan Stanley
John Tysseland – Citi
Andrew Gundlach – ASB
Mike Cerasoli – Goldman Sachs
Presentation
Operator
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ONEOK, Inc. Q3 2009 Earnings Call Transcript
Good day, ladies and gentlemen, and welcome to the third quarter 2010 ONEOK and ONEOK Partners earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator instructions) As a reminder, today’s call is being recorded.
At this time, I would now like to turn the conference over to your host, Mr. Dan Harrison. Sir, you may begin.
Dan Harrison
Thank you. Good morning and thank you everyone for joining us. Any statements made during this call that might include ONEOK or ONEOK Partners expectations or predictions should be considered forward-looking statements and are covered by the Safe Harbor provision of the Securities Acts of 1933 and 1934.
Please note that actual results could differ materially from those projected in any forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer to our SEC filings.
Now, let me turn the call over to John Gibson, ONEOK’s President and CEO, and ONEOK Partners, Chairman, President and CEO. John?
John Gibson
Thanks, Dan. Good morning and many thanks for joining us today and for your continued investment and interest in ONEOK and ONEOK Partners.
Joining me on the call today are Curtis Dinan, our Chief Financial Officer for both ONEOK and ONEOK Partners; Terry Spencer, our Chief Operating Officer of ONEOK Partners; and Rob Martinovich, Chief Operating Officer of ONEOK.
We completed another successful quarter at both ONEOK and ONEOK Partners. At the Partnership segment both third quarter and nine-month results reflect higher NGL volumes and higher contracted natural gas transportation.
In a few minutes, Terry will provide you with more detail on the Partnership’s activities. Our ONEOK Distribution segment continues to benefit from our new performance-based rates in Oklahoma, which reduced volumetric sensitivity and increased revenues in the warmer months.
As expected, the Energy Services segments third quarter results were lower but remained on-track to earn $126 million this year, and we continue to make progress on reducing our contracted storage and transportation capacity to mitigate annual earnings volatility.
In late September, we updated our 2010 earnings guidance for both ONEOK and ONEOK Partners and remained confident we will achieve those results.
Also during the quarter, we announced additional growth projects at ONEOK Partners. Another gas processing plant in the Bakken Shale and a new natural gas liquids pipeline that will transport NGLs out of the Bakken to the Mid-Continent bringing our total to more than $1.5 billion of new projects announced this year.
These new projects along with the $2 billion of projects we completed late last year will benefit not only the Partnership but also ONEOK in the form of increased earnings and cash flow in the future.
Our visibility into future potential earnings and cash flow growth give us the confidence to project 14% to 18% EBITDA growth over the next three years at the Partnership, which will result in continued distribution growth during that period. We just recently increased the distribution by another penny, which results in a 40% increase since we became sole general partner 4.5 years ago.
Over the next three years, we believe this growth at the Partnership along with the continued contributions from our other segments will result in an 8% to 10% annual net income growth at ONEOK, and 50% to 60% dividend growth while generating $150 million to $200 million in free cash flow per year.
Our investments along with the efficient and prudent use of cash have been a significant part of our effort to create value for shareholders. As ONEOK has benefited from the Partnership’s many capital investments, we have continued to grow the dividend.
Just two weeks ago, the board approved a $0.02 per share dividend increase, which is in addition to the $0.02 per share increases we declared in January and July. At the same meeting, the board also authorized a three year $750 million stock repurchase program.
Curtis will provide additional financial insight into ONEOK later in our call, but first he’ll review ONEOK Partners financials and then Terry will review the Partnership’s operating performance. So, at this time, let me turn the call over to Curtis.
Curtis Dinan
Thanks, John and good morning, everyone. John has already provided a brief summary of the Partnership’s third quarter results and Terry will provide additional detail in a moment. My remarks will focus on our financial results and outlook.
In the third quarter, ONEOK Partners reported net income of $142 million or $1.09 per unit compared with last year’s third quarter net income of $122 million or $1 per unit. Third quarter results included a $16 million gain related to the sale of a 49% interest in Overland Pass to Williams Partners. That gain had a $0.16 per unit impact on the Partnership’s third quarter results.
On a perspective basis, Overland Pass has been deconsolidated in our financial statements and is now reflected as equity earnings from investments. In the third quarter we had $101.9 million units outstanding compared with $96.4 million units in the same period last year. Our equity offering in February 2010 added approximately $5.5 million additional units.
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