TULSA, Okla., Feb. 27, 2017 /PRNewswire/ — ONEOK Partners, L.P. (NYSE: OKS) today announced fourth-quarter and full-year 2016 financial results.
SUMMARY
FOURTH-QUARTER AND FULL-YEAR 2016 FINANCIAL HIGHLIGHTS
Three Months Ended |
Years Ended |
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December 31, |
December 31, |
||||||||||||||
ONEOK Partners |
2016 |
2015 |
2016 |
2015 |
|||||||||||
(Millions of dollars, except per unit and coverage ratio amounts) |
|||||||||||||||
Net income attributable to ONEOK Partners (a) |
$ |
277.5 |
$ |
7.2 |
$ |
1,066.8 |
$ |
589.5 |
|||||||
Net income (loss) per limited partner unit (a) |
$ |
0.60 |
$ |
(0.33) |
$ |
2.25 |
$ |
0.73 |
|||||||
Adjusted EBITDA (b) |
$ |
470.5 |
$ |
450.2 |
$ |
1,840.3 |
$ |
1,565.5 |
|||||||
DCF (b) |
$ |
339.5 |
$ |
339.8 |
$ |
1,412.9 |
$ |
1,136.7 |
|||||||
Cash distribution coverage ratio (b) |
1.03 |
1.03 |
1.09 |
0.86 |
(a) Amounts include noncash impairment charges of $264.3 million, or 91 cents per unit, in the fourth quarter 2015. |
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(b) Adjusted EBITDA; distributable cash flow (DCF); and cash distribution coverage ratio are non-GAAP measures. Reconciliations to relevant GAAP measures are attached to this news release. |
“ONEOK Partners reported strong 2016 financial performance as adjusted EBITDA increased nearly 18 percent compared with 2015, driven by higher fee-based earnings in all three business segments,” said Terry K. Spencer, president and chief executive officer of ONEOK and ONEOK Partners. “The partnership’s full-year distribution coverage of 1.09 times improved substantially compared with 2015.
“The natural gas gathering and processing segment’s 2016 adjusted EBITDA increased 40 percent compared with 2015, driven by higher average fee rates from contract restructuring efforts primarily completed in 2015 and benefiting 2016 earnings,” Spencer continued. “The natural gas liquids and natural gas pipelines segments also reported higher full-year 2016 results, largely from increased fee-based exchange and transportation services, respectively. Higher natural gas volumes processed and higher natural gas liquids (NGL) volumes fractioned also helped increase full-year 2016 earnings.
“We experienced lower than expected natural gas and NGL volumes in the fourth quarter, due primarily to increased ethane rejection and severe winter weather in the Williston Basin and Mid-Continent in December, impacting 2016 results by an estimated $15 million,” he continued. “However, despite weather impacts, natural gas volumes processed continued to increase in the fourth quarter, compared with the third quarter 2016. While heavy snowfall and severe weather in the Williston Basin impacted our operations early in the first quarter of 2017, February volumes have rebounded significantly.
“The recently announced transaction with ONEOK, which we expect to close in the second quarter of 2017, positions our businesses for continued growth,” Spencer added. “As a company with access to a more liquid equity market, ONEOK will be better able to fund its future capital needs over the long term as we continue expanding our footprint in the active basins we serve and continue growing as one of North America’s largest midstream service providers.”
FOURTH-QUARTER AND FULL-YEAR 2016 FINANCIAL PERFORMANCE
ONEOK Partners’ integrated asset footprint across multiple NGL-rich shale plays continues to drive growth across all three business segments. Producer activity continued to increase during the fourth quarter 2016, specifically in the STACK and SCOOP plays in Oklahoma and in the Williston and Permian basins, where ONEOK Partners has a strong natural gas and NGL asset position.
Fourth-quarter and full-year 2016 operating income increased 39 and 32 percent, respectively, compared with the same periods in 2015, benefiting from higher NGL and natural gas volumes from completed capital-growth projects, new natural gas processing plant connections to the partnership’s natural gas liquids system and higher average fee rates in the natural gas gathering and processing segment.
All three business segments reported higher full-year 2016 adjusted EBITDA, compared with 2015, primarily from increased fee-based services across the partnership’s footprint.
Three Months Ended |
Years Ended |
||||||||||||||
December 31, |
December 31, |
||||||||||||||
ONEOK Partners |
2016 |
2015 |
2016 |
2015 |
|||||||||||
(Millions of dollars) |
|||||||||||||||
Operating income |
$ |
335.9 |
$ |
241.9 |
$ |
1,316.1 |
$ |
998.1 |
|||||||
Operating costs |
$ |
198.1 |
$ |
185.3 |
$ |
727.6 |
$ |
692.1 |
|||||||
Depreciation and amortization |
$ |
98.5 |
$ |
92.6 |
$ |
388.6 |
$ |
352.2 |
|||||||
Impairment of long-lived assets |
$ |
— |
$ |
(83.7) |
$ |
— |
$ |
(83.7) |
|||||||
Equity in net earnings from investments |
$ |
39.2 |
$ |
32.1 |
$ |
139.7 |
$ |
125.3 |
|||||||
Impairment of equity investments |
$ |
— |
$ |
(180.6) |
$ |
— |
$ |
(180.6) |
|||||||
Adjusted EBITDA |
$ |
470.5 |
$ |
450.2 |
$ |
1,840.3 |
$ |
1,565.5 |
|||||||
Capital expenditures |
$ |
132.3 |
$ |
257.2 |
$ |
621.7 |
$ |
1,186.1 |
Higher fourth-quarter and full-year 2016 results primarily benefited from:
Operating costs increased in the three-month and full-year 2016 periods, compared with the same periods in 2015, due primarily to higher labor costs associated with the growth of the partnership’s operations and higher employee-related costs associated with incentive and medical benefit plans.
Capital expenditures decreased in the three-month and full-year 2016 periods, compared with the same periods in 2015, due to projects placed in service and proactive spending reductions to align with customer needs.
EARNINGS PRESENTATION AND KEY STATISTICS:
Additional financial and operating information that will be discussed on the fourth-quarter and full-year 2016 conference call is accessible on ONEOK Partners’ website, www.oneokpartners.com, or by selecting the links below.
ONEOK PARTNERS HIGHLIGHTS:
BUSINESS-SEGMENT RESULTS:
Key financial and operating statistics are listed in the tables.
Natural Gas Liquids Segment
The natural gas liquids segment’s full-year 2016 adjusted EBITDA increased 11 percent compared with 2015, benefiting from new natural gas processing plant connections and increased ethane recovery. The segment connected six new natural gas processing plants to its system during the year, including the partnership’s Bear Creek plant in the Williston Basin and five third-party connections – two each in the Williston Basin and Mid-Continent and one in the Permian Basin. Growing producer activity in these basins continues to increase the need for NGL takeaway options, particularly in the Permian Basin and in the STACK play in Oklahoma where the partnership is well-positioned as the primary NGL transportation provider.
Full-year 2016 NGLs fractionated increased 6 percent, compared with 2015 due to increased volumes from new plant connections, increased ethane recovery and increased Mid-Continent volumes gathered in the STACK and SCOOP areas. Fourth-quarter 2016 NGLs fractionated remained relatively unchanged compared with the fourth quarter 2015. NGLs transported on gathering lines decreased 7 percent in the fourth quarter 2016 compared with the fourth quarter 2015 and full-year 2016 volumes gathered remained essentially unchanged compared with 2015 due to decreased volumes on the West Texas LPG pipeline system and decreased Mid-Continent volumes gathered from the Barnett Shale due to lower short-term contracted volumes and the impact of severe weather on gathered volumes.
Three Months Ended |
Years Ended |
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December 31, |
December 31, |
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Natural Gas Liquids Segment |
2016 |
2015 |
2016 |
2015 |
|||||||||||
(Millions of dollars) |
|||||||||||||||
Adjusted EBITDA |
$ |
253.6 |
$ |
279.3 |
$ |
1,079.6 |
$ |
972.3 |
|||||||
Capital expenditures |
$ |
20.4 |
$ |
40.7 |
$ |
105.9 |
$ |
226.1 |
The decrease in fourth-quarter 2016 adjusted EBITDA, compared with the fourth quarter 2015, primarily reflects:
The increase in adjusted EBITDA for the full-year 2016, compared with 2015, primarily reflects:
Capital expenditures decreased for the three-month and full-year 2016 periods, compared with the same periods in 2015, due primarily to projects placed in service and proactive spending reductions to align with customer needs.
Natural Gas Gathering and Processing Segment
The natural gas gathering and processing segment’s fourth-quarter and full-year 2016 adjusted EBITDA increased 30 and 40 percent, respectively, compared with the same periods in 2015. The segment’s strong financial results were driven by higher average fee rates from contract restructuring efforts and continued volume growth in the Rocky Mountain region from recently completed capital-growth projects.
The segment’s average fee rate for the fourth quarter 2016 was 84 cents, compared with 55 cents in the fourth quarter 2015. The full-year 2016 fee rate averaged 76 cents, compared with 44 cents in 2015.
Fourth-quarter and full-year 2016 natural gas volumes processed increased 2 and 12 percent, respectively, compared with the same periods in 2015, primarily due to recently completed capital-growth projects in the Rocky Mountain region. Volume growth was offset partially by natural production declines in the Mid-Continent and the impact of weather in the Williston Basin in December 2016.
Three Months Ended |
Years Ended |
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December 31, |
December 31, |
||||||||||||||
Natural Gas Gathering and Processing Segment |
2016 |
2015 |
2016 |
2015 |
|||||||||||
(Millions of dollars) |
|||||||||||||||
Adjusted EBITDA |
$ |
126.6 |
$ |
97.3 |
$ |
446.8 |
$ |
318.6 |
|||||||
Capital expenditures |
$ |
84.7 |
$ |
195.3 |
$ |
410.5 |
$ |
887.9 |
Fourth-quarter 2016 adjusted EBITDA increased, compared with the fourth quarter 2015, which primarily reflects:
The increase in adjusted EBITDA for the full-year 2016, compared with 2015, primarily reflects:
Capital expenditures decreased for the three-month and full-year 2016 periods, compared with the same periods in 2015, due to projects placed in service and proactive spending reductions to align with customer needs in 2016.
The following table contains equity-volume information for the periods indicated:
Three Months Ended |
Years Ended |
||||||||||
December 31, |
December 31, |
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Equity-Volume Information (a) |
2016 |
2015 |
2016 |
2015 |
|||||||
NGL sales – including ethane (MBbl/d) |
12.5 |
20.5 |
14.6 |
20.9 |
|||||||
Condensate sales (MBbl/d) |
2.4 |
2.4 |
2.4 |
2.8 |
|||||||
Residue natural gas sales (BBtu/d) |
76.1 |
120.3 |
80.0 |
136.2 |
|||||||
(a) – Includes volumes for consolidated entities only. |
The natural gas gathering and processing segment has restructured a portion of its percent-of-proceeds with fee contracts to include significantly higher fees, which reduced its 2016 equity volumes and the related commodity price exposure compared with 2015.
Natural Gas Pipelines Segment
The natural gas pipelines segment’s fourth-quarter and full-year 2016 adjusted EBITDA increased 22 and 14 percent, respectively, compared with the same periods in 2015. The segment continues to benefit from higher fee-based earnings driven by increased firm demand charge contracted capacity and capital-growth projects placed in service.
The segment recently announced an expansion of the ONEOK Gas Transmission Pipeline which consists of adding compressor facilities to allow for additional takeaway out of the STACK play in Oklahoma. The partnership has secured a firm commitment for 100 MMcf/d of capacity on the pipeline with the potential for additional producer commitments. The expansion is expected to be complete in the second quarter 2018.
Three Months Ended |
Years Ended |
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December 31, |
December 31, |
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Natural Gas Pipelines Segment |
2016 |
2015 |
2016 |
2015 |
|||||||||||
(Millions of dollars) |
|||||||||||||||
Adjusted EBITDA |
$ |
89.9 |
$ |
73.9 |
$ |
313.1 |
$ |
275.0 |
|||||||
Capital expenditures |
$ |
24.6 |
$ |
18.3 |
$ |
96.3 |
$ |
58.2 |
Fourth-quarter 2016 adjusted EBITDA increased, compared with the fourth quarter 2015, which primarily reflects:
The increase in adjusted EBITDA for the full-year 2016, compared with 2015, primarily reflects:
Capital expenditures increased in the three-month and full-year 2016 periods, compared with the same periods in 2015, due primarily to pipeline expansion projects.
EARNINGS CONFERENCE CALL AND WEBCAST:
ONEOK Partners and ONEOK executive management will conduct a joint conference call at 11 a.m. Eastern Standard Time (10 a.m. Central Standard Time) on Feb. 28, 2017. The call also will be carried live on ONEOK Partners’ and ONEOK’s websites.
To participate in the telephone conference call, dial 888-297-0339, pass code 8270677, or log on to www.oneokpartners.com or www.oneok.com.
If you are unable to participate in the conference call or the webcast, the replay will be available on ONEOK Partners’ website, www.oneokpartners.com, and ONEOK’s website, www.oneok.com, for 30 days. A recording will be available by phone for seven days. The playback call may be accessed at 888-203-1112, pass code 8270677.
LINKS TO EARNINGS TABLES AND PRESENTATION:
Presentation:
http://ir.oneokpartners.com/~/media/Files/O/OneOK-Partners-IR/events-presentation/q4-2016-earnings-presentation.pdf
NON-GAAP (GENERALLY ACCEPTED ACCOUNTING PRINCIPLES) FINANCIAL MEASURES:
ONEOK Partners has disclosed in this news release adjusted EBITDA, DCF, distributable cash flow to limited partners per limited partner unit and cash distribution coverage ratio, which are non-GAAP financial metrics, used to measure the partnership’s financial performance and are defined as follows:
The partnership believes the non-GAAP financial measures described above are useful to investors because they are used by many companies in its industry to measure financial performance and are commonly employed by financial analysts and others to evaluate the financial performance of the partnership and to compare the financial performance of the partnership with the performance of other publicly traded partnerships within its industry.
Adjusted EBITDA, DCF, distributable cash flow to limited partners and cash distribution coverage ratio per limited partner unit should not be considered alternatives to net income, earnings per unit or any other measure of financial performance presented in accordance with GAAP.
These non-GAAP financial measures exclude some, but not all, items that affect net income. Additionally, these calculations may not be comparable with similarly titled measures of other companies. Furthermore, these non-GAAP measures should not be viewed as indicative of the actual amount of cash that is available for distributions or that is planned to be distributed in a given period, nor do they equate to available cash as defined in the partnership agreement. Reconciliations of adjusted EBITDA, distributable cash flow and cash distribution coverage ratio to net income are included in the tables.
ONEOK Partners, L.P. (pronounced ONE-OAK) (NYSE: OKS) is one of the largest publicly traded master limited partnerships in the United States and owns one of the nation’s premier natural gas liquids (NGL) systems, connecting NGL supply in the Mid-Continent, Permian and Rocky Mountain regions with key market centers and is a leader in the gathering, processing, storage and transportation of natural gas in the U.S. Its general partner is a wholly owned subsidiary of ONEOK, Inc. (NYSE: OKE), a pure-play publicly traded general partner, which owns 41.2 percent of the overall partnership interest, as of Dec. 31, 2016.
For more information, visit the website at www.oneokpartners.com.
For the latest news about ONEOK Partners, follow us on Twitter @ONEOKPartners.
This news release contains certain “forward-looking statements” within the meaning of federal securities laws. Words such as “anticipates”, “believes,” “expects”, “intends”, “plans”, “projects”, “will”, “would”, “should”, “may”, and similar expressions may be used to identify forward-looking statements. Forward-looking statements are not statements of historical fact and reflect ONEOK’s and ONEOK Partners’ current views about future events. Such forward-looking statements include, but are not limited to, statements about the benefits of the proposed transaction involving ONEOK and ONEOK Partners, including future financial and operating results, ONEOK’s and ONEOK Partners’ plans, objectives, expectations and intentions, the expected timing of completion of the transaction, and other statements that are not historical facts, including future results of operations, projected cash flow and liquidity, business strategy, expected synergies or cost savings, and other plans and objectives for future operations. No assurances can be given that the forward-looking statements contained in this news release will occur as projected and actual results may differ materially from those projected. Forward-looking statements are based on current expectations, estimates and assumptions that involve a number of risks and uncertainties, many of which are beyond our control, and are not guarantees of future results. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in such statements and, therefore, you should not place undue reliance on any such statements and caution must be exercised in relying on forward-looking statements. These risks and uncertainties include, without limitation, the following:
These reports are also available from the sources described above. Forward-looking statements are based on the estimates and opinions of management at the time the statements are made. Neither ONEOK nor ONEOK Partners undertakes any obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.
The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included herein and elsewhere, including the Risk Factors included in the most recent reports on Form 10-K and Form 10-Q and other documents of ONEOK and ONEOK Partners on file with the SEC. ONEOK’s and ONEOK Partners’ SEC filings are available publicly on the SEC’s website at www.sec.gov.
Additional Information And Where To Find It
This communication is not a solicitation of any vote, approval, or proxy from any ONEOK stockholder or ONEOK Partners unitholder. In connection with the proposed transaction, ONEOK will file with the Securities and Exchange Commission (“SEC”) a registration statement on Form S-4, which will include a prospectus of ONEOK and a joint proxy statement of ONEOK and ONEOK Partners. Each of ONEOK and ONEOK Partners may also file other documents with the SEC regarding the proposed transaction. ONEOK and ONEOK Partners will each mail the joint proxy statement/prospectus to their respective stockholders and unitholders. This document is not a substitute for any prospectus, proxy statement or any other document which ONEOK or ONEOK Partners may file with the SEC in connection with the proposed transaction. ONEOK and ONEOK Partners urge investors and their respective stockholders and unitholders to read the joint proxy statement/prospectus and other relevant materials to be filed with the SEC regarding the proposed transaction when they become available, as well as other documents filed with the SEC, because they will contain important information. You may obtain copies of all documents filed with the SEC regarding this transaction (when they become available), free of charge, at the SEC’s website (www.sec.gov). You may also obtain these documents, free of charge, from ONEOK’s website (www.oneok.com) under the tab “Investors” and then under the heading “SEC Filings.” You may also obtain these documents, free of charge, from ONEOK Partners’ website (www.oneokpartners.com) under the tab “Investors” and then under the heading “SEC Filings.”
Participants In The Solicitation
ONEOK, ONEOK Partners and their respective directors, executive officers and certain other members of management and employees may be soliciting proxies from ONEOK stockholders and ONEOK Partners unitholders in favor of the proposed transaction and related matters. Information regarding the persons who may, under the rules of the SEC, be deemed participants in the solicitation of ONEOK stockholders and ONEOK Partners unitholders in connection with the proposed transaction will be set forth in the joint proxy statement/prospectus when it is filed with the SEC. You can find information about ONEOK’s executive officers and directors in its definitive proxy statement filed with the SEC on April 5, 2016. You can find information about ONEOK Partners’ executive officers and directors in its annual report on Form 10-K filed with the SEC on February 23, 2016. Additional information about ONEOK’s executive officers and directors and ONEOK Partners’ executive officers and directors can be found in the above-referenced Registration Statement on Form S-4 and other relevant materials to be filed with the SEC when they become available. You can obtain free copies of these documents from ONEOK and ONEOK Partners using the contact information above.
Analyst Contact: |
Megan Patterson 918-561-5325 |
Media Contact: |
Brad Borror 918-588-7582 |
SOURCE ONEOK Partners, L.P.