Oneok Earnings: Strong Volumes Continue to Propel Growth Yet Again

Oneok’s OKE ongoing volume strength continues to drive first-quarter earnings. With the firm reaffirming 2023 EBITDA guidance at a midpoint of $4.6 billion, matching our forecast, we expect to maintain our $61 per share fair value estimate and narrow moat rating.

Oneok’s volume growth continues to be impressive compared with last year, with a 27% increase in Mid-continent natural gas volumes processed, a 17% increase in Gulf Coast/Permian region natural gas liquids volumes, and an 11% increase in overall gas volumes processed. Increasing gas-to-oil ratios in the Williston Basin have certainly helped as well as an ongoing focus on reducing flaring. Well connection activity from producers in the Rockies and Mid-continent have also been in line or in the Rockies’ case, ahead of expectations.

First-quarter results were impacted by a one-time gain of $733 million in EBITDA reflecting the insurance settlement related to the Medford incident of $779 million offset by $46 million in third-party fractionation costs. The costs are trending a bit better than expected. Last quarter, Oneok suggested that the third-party fractionation costs would be about $240 million for 2023, versus the current $184 million run rate. With the new fractionation plant, MB-5, ramping up throughout the year, there’s potential for the third-party costs to decline further, especially as competitors bring their own new fractionation plants online.