ONEOK reports 44 percent revenue increase over 2015

By Patrick C. Miller | March 01, 2017

In its year-end and fourth quarter 2016 report, Oklahoma-based ONEOK reported a 44 percent net income increase over the previous year.

According to Terry Spencer, president and CEO of ONEOK and ONEOK Partners, the companies reported a strong 2016 financial performance. ONEOK Partners adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased nearly 18 percent over 2015.

Spencer said increased fee-based earning drove a double-digit adjustment of EBITDA in all three business segments—natural gas gathering and processing, pipelines and gas liquids.

“This strong year-over-year adjusted EBITDA growth was achieved despite increased ethane rejection and severe weather in December that impacted volumes in our natural gas liquids and natural gas gathering and processing segments in both the Williston Basin and the Mid-Continent,” he said

Severe weather continued to impact volumes early in the first quarter of 2017, but Spencer said they have rebounded significantly in February to November 2016 levels—some of ONEOK’s highest monthly volumes.

“We expect year-over-year adjusted EBITDA growth of 2017 to be weighted toward the back half of the year,” he said. “This growth is driven by mostly routine high-return capital expenditures to fill available capacity, and our natural gas gathering and processing and natural gas liquid segments. It sets the stage for significant adjusted EBITDA growth into 2018 and beyond.”

ONEOK’s natural gas liquids segment's 2016 adjusted EBITDA increased 11 percent compared with 2015, benefiting from new natural gas processing plant connections and increased ethane recovery. Six new natural gas processing plants were connected to the company’s 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 ONEOK is well-positioned as the primary NGL transportation provider.

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 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.

Spencer discussed an agreement announced Feb. 1 in which ONEOK will acquire the outstanding common units of ONEOK Partners for $9.3 billion in ONEOK common stock. ONEOK received $428.8 million in distributions from the company's general partner interest and $361.2 million in distributions from the company's limited partner interests in ONEOK Partners during 2016.

ONEOK Partners reported full-year 2016 net income and adjusted EBITDA increases of 81 and 18 percent, respectively, compared with 2015. It also announced an expansion project on the ONEOK Gas Transmission Pipeline in Oklahoma's STACK play with a firm commitment secured for 100 million cubic feet per day of additional capacity.