Nov. 3, 2009 (PR Newswire) -- TULSA, Okla., Nov. 3 /PRNewswire-FirstCall/ -- ONEOK Partners, L.P. (NYSE: OKS) today announced third-quarter 2009 earnings of $1.00 per unit, compared with $1.97 per unit for the third quarter 2008. Net income attributable to ONEOK Partners was $121.5 million in the third quarter 2009, compared with $203.9 million in the same period in 2008.
For the nine-month period ended Sept. 30, 2009, net income attributable to ONEOK Partners was $318.6 million, or $2.67 per unit, compared with $503.4 million, or $4.93 per unit, in the same period in 2008.
The partnership also updated its 2009 limited partners' net income per unit guidance to the range of $3.40 to $3.60 per unit from its previous range of $3.25 to $3.65 per unit. The partnership's distributable cash flow is expected to be in the range of $530 million to $550 million.
"The partnership posted solid results in the third quarter," said John W. Gibson, chairman and chief executive officer of ONEOK Partners. "We achieved continued volume growth in both our natural gas and natural gas liquids businesses, which helped offset significantly lower commodity prices and narrower NGL product price differentials compared with a year ago."
"We successfully completed our more than $2 billion capital investment program," Gibson said. "These investments, coupled with the additional opportunities we've identified over the next five years, establish a strong foundation for growth in both our fee-based earnings and distributions to unitholders."
Cash flow, as measured by earnings before interest, taxes, depreciation and amortization (EBITDA), was $211.4 million in the third quarter 2009, compared with $252.6 million in the third quarter 2008. Distributable cash flow (DCF) in the third quarter 2009 was $144.1 million, or $1.24 per unit, compared with $191.0 million, or $1.85 per unit, in the third quarter 2008.
Year-to-date 2009 EBITDA was $577.7 million, compared with $672.8 million in the same period last year. Nine-month 2009 DCF was $409.6 million, or $3.63 per unit, compared with $526.7 million, or $5.23 per unit, in the same period last year.
Operating income for the third quarter 2009 was $144.7 million, compared with $197.5 million for the third quarter 2008. For the nine months 2009, operating income was $394.4 million, compared with $511.8 million in the same period last year.
The operating income decreases in both the three- and nine-month 2009 periods were due primarily to lower realized commodity prices in the natural gas gathering and processing segment; narrower NGL product price differentials and prior-year operational measurement gains in the natural gas liquids segment; and the impact of lower natural gas prices on retained fuel in the natural gas pipelines segment.
These decreases were partially offset by increased NGL throughput in the natural gas liquids segment, primarily associated with the completion of the Overland Pass Pipeline and related expansion projects, and the Arbuckle Pipeline, as well as new supply connections; higher natural gas volumes processed and sold in the natural gas gathering and processing segment; and higher natural gas transportation margins, as a result of the Guardian Pipeline expansion and extension and an increase in contracted volumes on Midwestern Gas Transmission as a result of a new interconnect with the Rockies Express Pipeline in the natural gas pipelines segment.
Operating costs were $105.1 million in the third quarter 2009, compared with $97.5 million in the same period last year. Nine-month 2009 operating costs were $295.0 million, compared with $272.7 million in the same period last year. The operating cost increases for both the three- and nine-month periods were due primarily to incremental costs associated with the operation of the Overland Pass Pipeline and the Arbuckle Pipeline, and higher operating expenses at fractionation facilities, including the expanded Bushton fractionator.
Equity earnings from investments were $20.1 million in the third quarter 2009, compared with $29.4 million in the same period last year. For the nine months 2009, equity earnings from investments were $55.5 million, compared with $74.8 million in the same period last year. The equity earnings from investments decreased for both the three- and nine-month 2009 periods, primarily as the result of lower subscription volumes and rates on Northern Border Pipeline and lower volumes gathered at various natural gas gathering and processing investments in the Powder River Basin of Wyoming. Third-quarter and nine-month 2008 results included an $8.3 million gain on the sale of Bison Pipeline LLC by Northern Border Pipeline.
THIRD-QUARTER 2009 SUMMARY AND ADDITIONAL UPDATES:
-- Operating income of $144.7 million, compared with $197.5 million in the
third quarter 2008;
-- Natural gas gathering and processing segment operating income of $40.2
million, compared with $63.5 million in the third quarter 2008;
-- Natural gas pipelines segment operating income of $41.7 million,
compared with $33.3 million in the third quarter 2008;
-- Completing the consolidation of the natural gas liquids gathering and
fractionation and natural gas liquids pipelines segments into one
reporting segment and recasting prior reporting periods;
-- Natural gas liquids segment operating income of $63.3 million, compared
with $101.2 million in the third quarter 2008;
-- Equity earnings from investments of $20.1 million, compared with $29.4
million in the third quarter 2008;
-- Capital expenditures of $169.4 million, compared with $335.6 million in
the third quarter 2008;
-- Completing construction in July of the 440-mile Arbuckle Pipeline
project, which transports unfractionated NGLs from southern Oklahoma and
the Barnett Shale in north Texas to the Texas Gulf Coast;
-- Placing into service in October the 150-mile Piceance Lateral Pipeline,
connecting NGL production from the Piceance Basin to the Overland Pass
Pipeline;
-- Completing in October the $14.7 million expansion of the Fargo Lateral
segment of the Viking natural gas pipeline;
-- Electing Julie H. Edwards, Jim W. Mogg, Shelby E. Odell and Craig F.
Strehl to the board of directors, which increases the number of those
serving on the board of directors to 10 from six, and the number of
independent directors to seven from three; and
-- Increasing the quarterly cash distribution to $1.09 per unit, payable
Nov. 13, 2009, to unitholders of record as of Oct. 30, 2009.
THIRD-QUARTER AND YEAR-TO-DATE 2009 BUSINESS-UNIT RESULTS
Natural Gas Gathering and Processing Segment
The natural gas gathering and processing segment's operating income for the third quarter 2009 was $40.2 million, compared with $63.5 million for the third quarter 2008.
Third-quarter 2009 results decreased $33.7 million due to lower realized commodity prices, partially offset by an $11.4 million increase as the result of higher volumes processed and sold. Operating costs for the third quarter 2009 were $33.6 million, compared with $35.7 million in the same period last year.
Operating income for the nine-month 2009 period was $120.9 million, compared with $198.8 million in the same period in 2008.
Nine-month 2009 results decreased $95.1 million, due primarily to lower realized commodity prices, partially offset by a $20.1 million increase from higher volumes processed and sold. Operating costs for the segment decreased to $99.4 million, compared with $101.5 million in the same period in 2008.
Depreciation and amortization expense increased for both the three- and nine-month periods ended Sept. 30, 2009, compared with 2008, primarily as the result of completed capital projects.
Equity earnings from investments decreased for both the three- and nine-month periods ended Sept. 30, 2009, compared with the prior year, primarily as a result of lower volumes in various natural gas gathering system investments in the Powder River Basin of Wyoming.
NGL shrink, plant fuel and condensate shrink discussed in the table below refer to the Btus that are removed from natural gas through the gathering and processing operation. The following table contains margin information for the periods indicated:
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
-------------------------------------------------------------------------
Percent of proceeds
Wellhead purchases (MMBtu/d) 49,472 65,804 55,545 68,564
NGL sales (Bbl/d) 5,408 3,998 5,215 4,637
Residue gas sales (MMBtu/d) 46,406 42,119 41,698 38,570
Condensate sales (Bbl/d) 1,488 1,469 1,786 1,711
Percentage of total net
margin 50% 64% 49% 62%
Fee-based
Wellhead volumes (MMBtu/d) 1,100,202 1,145,656 1,131,018 1,173,894
Average rate ($/MMBtu) $0.31 $0.27 $0.30 $0.26
Percentage of total net
margin 35% 22% 36% 23%
Keep-whole
NGL shrink (MMBtu/d) 16,843 20,016 17,875 21,978
Plant fuel (MMBtu/d) 1,954 2,106 2,100 2,301
Condensate shrink (MMBtu/d) 1,407 1,574 1,893 1,941
Condensate sales (Bbl/d) 285 318 383 393
Percentage of total net
margin 15% 14% 15% 15%
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The natural gas gathering and processing segment is exposed to commodity price risk, primarily NGLs, as a result of receiving commodities in exchange for services. The following table provides updated hedging information in the natural gas gathering and processing segment for the remainder of 2009 and for 2010:
Three Months Ending
December 31, 2009
--------------------------------------
Volumes Percentage
Hedged Average Price Hedged
--------------------------------------------------------------
NGLs (Bbl/d) (a) 7,857 $1.04 / gallon 87%
Condensate
(Bbl/d) (a) 2,064 $2.08 / gallon 91%
--------------------------------------------------------------
Total (Bbl/d) 9,921 $1.26 / gallon 88%
==============================================================
Natural gas
(MMBtu/d) 17,009 $4.25 / MMBtu 88%
--------------------------------------------------------------
(a) - Hedged with fixed-price swaps.
Year Ending
December 31, 2010
--------------------------------------
Volumes Percentage
Hedged Average Price Hedged
--------------------------------------------------------------
NGLs (Bbl/d) (a) 3,881 $1.19 / gallon 55%
Condensate
(Bbl/d) (a) 1,696 $1.79 / gallon 75%
--------------------------------------------------------------
Total (Bbl/d) 5,577 $1.38 / gallon 60%
==============================================================
Natural gas
(MMBtu/d) 25,225 $5.55 / MMBtu 75%
--------------------------------------------------------------
(a) - Hedged with fixed-price swaps.
The partnership currently estimates that a 1 cent per gallon decrease in the composite price of NGLs would decrease annual net margin by approximately $1.1 million. A $1.00 per barrel decrease in the price of crude oil would decrease annual net margin by approximately $1.0 million. Also, a 10 cent per MMBtu decrease in the price of natural gas would decrease annual net margin by approximately $1.1 million. All of these sensitivities exclude the effects of hedging and assume normal operating conditions.
Natural Gas Pipelines Segment
The natural gas pipelines segment reported third-quarter 2009 operating income of $41.7 million, compared with $33.3 million for the third quarter 2008.
Third-quarter 2009 results include a $10.1 million increase in transportation margins, primarily as the result of incremental margin from the Guardian Pipeline expansion and extension that was completed in February 2009 and an increase in contracted volumes on Midwestern Gas Transmission as a result of a new interconnect with the Rockies Express Pipeline that was placed in service in June 2009. These increases were partially offset by a $4.8 million decrease from the effect of lower natural gas prices on retained fuel.
Operating income for the nine months was $106.1 million, compared with $102.7 million in the same period in 2008.
Nine-month 2009 results reflect a $23.3 million increase in transportation margins, primarily as the result of the completion of the Guardian Pipeline expansion and extension project, partially offset by an $18.3 million decrease from the effect of lower natural gas prices on retained fuel.
Third-quarter 2009 equity earnings from investments were $11.0 million, compared with $20.2 million in the third quarter 2008. Nine-month 2009 equity earnings from investments were $32.8 million, compared with $49.4 million in 2008. The decreases were primarily due to lower subscription volumes and rates on Northern Border Pipeline, in which the partnership has a 50 percent interest. Third-quarter and nine-month 2008 results included an $8.3 million gain on the sale of Bison Pipeline LLC by Northern Border Pipeline.
Natural Gas Liquids Segment
As previously announced, beginning in the third quarter 2009, the natural gas liquids gathering and fractionation segment and the natural gas liquids pipelines segment were consolidated into one reporting segment - natural gas liquids. Prior reporting periods have been recast to reflect the consolidation.
The natural gas liquids segment reported third-quarter 2009 operating income of $63.3 million, compared with $101.2 million for the third quarter 2008.
Third-quarter 2009 results decreased $28.0 million due to narrower NGL product price differentials and decreased $11.6 million as the result of prior-year operational measurement gains. These decreases were offset by an $18.2 million increase as the result of higher NGL volumes gathered, fractionated and transported, primarily associated with the completion of the Overland Pass Pipeline and related expansion projects, and the Arbuckle Pipeline, as well as new supply connections.
Operating income for the nine-month 2009 period was $168.0 million, compared with $211.9 million in the same period last year.
Nine-month 2009 operating income decreased $38.4 million due to narrower NGL product price differentials and decreased $12.5 million as the result of prior-year operational measurement gains. These decreases were offset by a $46.2 million increase as the result of higher NGL volumes gathered, fractionated and transported, primarily associated with the completion of the Overland Pass Pipeline and related expansion projects, and the Arbuckle Pipeline, as well as new supply connections.
Third-quarter 2009 operating costs were $49.6 million, compared with $37.9 million in the third quarter 2008. Nine-month 2009 operating costs were $129.8 million, compared with $103.7 million in the same period last year. The increases resulted primarily from the operation of the Overland Pass Pipeline, the Arbuckle Pipeline and the recently expanded Bushton fractionator, as well as increased outside service expenses at other fractionators, incremental ad valorem taxes and higher employee-related costs.
The Conway-to-Mont Belvieu average ethane price differential in the third quarter 2009, based on Oil Price Information Service (OPIS) pricing, was 15 cents per gallon, compared with 24 cents per gallon in the same period last year. For the nine-month 2009 period, the average ethane price differential was 12 cents per gallon, compared with 15 cents per gallon in the same period 2008.
GROWTH ACTIVITIES
The partnership recently completed more than $2 billion of internally generated growth projects. Following is a review of these projects and updated throughput expectations (all cost estimates exclude allowance for funds used during construction, or AFUDC).
In October 2009, the partnership placed into service the Piceance Lateral Pipeline, a 150-mile pipeline connecting the Piceance Basin with the Overland Pass Pipeline. The pipeline has the capacity to transport as much as 100,000 barrels per day (bpd) of unfractionated NGLs. The project is expected to cost approximately $135 million to $140 million. Throughput is expected to reach approximately 30,000 bpd during the fourth quarter 2009.
In July 2009, construction of the Arbuckle Pipeline was completed. The 440-mile NGL pipeline extends from southern Oklahoma through the Barnett Shale of north Texas and on to the partnership's fractionation and storage facilities at Mont Belvieu on the Texas Gulf Coast. The pipeline has the capacity to transport 160,000 bpd of unfractionated NGLs, expandable to 240,000 bpd with additional pump facilities. The estimated cost for the current pipeline capacity is approximately $490 million. During the month of October 2009, volumes reached 80,000 bpd, and supply commitments from producers are expected to be sufficient to transport up to 210,000 bpd over the next three to five years.
In March 2009, the $70 million D-J Basin Lateral Pipeline, a 125-mile pipeline connecting the Denver-Julesburg Basin with the Overland Pass Pipeline, was placed into service. The pipeline has the capacity to transport as much as 55,000 bpd of unfractionated NGLs. Throughput reached 30,000 bpd during the third quarter 2009, with an additional 10,000 bpd anticipated in the next two years.
In November 2008, the Overland Pass Pipeline - the $575 million, 760-mile NGL pipeline extending from Opal, Wyo., to Conway, Kan. - was placed into service with the capacity to transport approximately 110,000 bpd of unfractionated NGLs. The Overland Pass Pipeline Company is a joint venture with a subsidiary of The Williams Companies, Inc., which owns 1 percent. Approximately 99,000 bpd is currently flowing on Overland Pass, and the pipeline's capacity can be increased to approximately 255,000 bpd with the addition of pump facilities. By the end of the fourth quarter 2009, expected throughput on Overland Pass Pipeline will be approximately 130,000 to 140,000 bpd.
The partnership has identified additional growth projects, depending on market needs, in the range of approximately $300 million to $500 million per year between 2010 and 2015, with more than half of the planned investments in the natural gas liquids segment.
2009 EARNINGS GUIDANCE
The partnership updated its 2009 limited partners' net income per unit guidance to the range of $3.40 to $3.60 per unit from its previous range of $3.25 to $3.65 per unit.
