ONEOK Announces 4Q12 and Full Year (2012) Financial Results

Updates

February 26, 2013: I am bringing the first comment below up here, so it is easier to access the links. In addition, the comment reminds newbies and folks like me the issue of "ethane rejection," something that RBN Energy has talked about on several occasions.  Note, the comment includes a data point about a new pipeline from Williston, North Dakota, to Conway, Kansas.

The ethane issue is a major problem for OKS right now. With ethane prices so low, it is not economical to separate it from the methane by deep refrigeration methods, so the ethane gets "rejected" into the natural gas lines (and increases the BTU value plus the carbon content). As a results, their NGLs volumes are down (less ethane), so their fees are less.

As of now, almost all of the ethane now produced in the Bakken is rejected into nat gas pipelines, but when the NGL line from Williston to Conway, Kansas comes on line later this quarter, OKS will have the ability to include the ethane as part of the NGL line. When this ethane hits the market, it will further depress ethane prices. The new ethylene cracker units have to come on line - increasing demands for ethane - before this pricing situation gets corrected to ensure the ethane is profitable enough to separate from nat gas. The chemical companies in the US who produce ethylene and polyethylene have to be making a killing and will for some time.

For mid-stream MLP, ethane rejection is a big issue throughout the shale basins. The Bakken, Marcellus, Utica, and Eagle Ford are producing large amounts of ethane that are not yet seeing the chemical side end markets (but rather the shale basin ethane is being burned with the nat gas).

http://www.eia.gov/dnav/pet/PET_PNP_GP_A_EPLLE_FPF_MBBL_A.htm


But the incredibly cheap price of ethane may allow the US Chemical Industry to undercut every other market in the world. Asian markets, especially China where they are building huge amounts of capacity, will simply not be competitive. Even Saudi production will have competitive issues.

http://www.pwc.com/en_US/us/industrial-products/publications/assets/pwc-shale-gas-chemicals-industry-potential.pdf 

Original Post

Press release:

ONEOK, Inc. today announced 2012 net income attributable to ONEOK was $360.6 million, or $1.71 per diluted share, compared with $360.6 million, or $1.68 per diluted share on a split-adjusted basis, in 2011. 

Fourth-quarter 2012 net income attributable to ONEOK was $111.5 million, or 53 cents per diluted share, compared with $115.0 million, or 55 cents per diluted share on a split-adjusted basis, for the same period in 2011.

Half of the reduction in 2013 operating income and equity earnings guidance is due to lower expected natural gas liquids (NGL) volumes as a result of widespread and prolonged ethane rejection.  Narrower expected NGL location price differentials and lower expected NGL prices, particularly ethane and propane, also are expected to affect the partnership's 2013 earnings.

"We do not expect prolonged ethane rejection to continue into 2014, although there may be intermittent periods when ethane will be left in the natural gas stream," said Gibson.

• 2012 operating income of $1.10 billion, compared with $1.16 billion in 2011;
• ONEOK Partners segment operating income of $962.9 million, compared with $939.5 million in 2011;
• Natural gas distribution segment operating income of $215.7 million, compared with $197.6 million in 2011;
• Energy services segment operating loss of $77.9 million, compared with an operating income of $23.8 million in 2011;
• In December 2012, the Kansas Corporation Commission approved an increase in Kansas Gas Service's rates by a net amount of $10.0 million annually, which became effective in January 2013;
• ONEOK Partners announcing in November 2012 that it will not proceed with the Bakken Crude Express Pipeline due to insufficient long-term transportation commitments during its open season, which concluded Nov. 20, 2012