Company Reports

Oneok brings together high-quality assets, some of the strongest near- to medium-term growth prospects in our coverage as Rockies volumes continue their ongoing rebound, a C-Corporation structure, and a well-respected management team in a compelling package. About 90% of the firm's earnings are fee-based, 80%-90% of its customers are investment-grade, and the firm hedges its limited commodity price exposure. The addition of Magellan's wide-moat refined product assets strengthens the business and opens up new investment opportunities by bundling different products across Oneok assets as well as batching, blending, and other storage opportunities. Early returns have been excellent, as Oneok is already exceeding its synergy targets.

Oneok’s first-quarter results were solid, in our view. We expect to increase our fair value estimate to $73 from $70 per share, as we incorporate slightly higher volumes into our model. Our narrow moat rating remains unchanged. Oneok boosted 2024 EBITDA guidance $75 million to a midpoint of $6.2 billion, slightly above our $6.1 billion forecast.

Oneok brings together high-quality assets, some of the strongest near- to medium-term growth prospects in our coverage as Rockies volumes continue their ongoing rebound, a C-Corporation structure, and a well-respected management team in a compelling package. About 90% of the firm's earnings are fee-based, 80%-90% of its customers are investment-grade, and the firm hedges its limited commodity price exposure. The addition of Magellan's wide-moat refined product assets strengthens the business and opens up new investment opportunities by bundling different products across Oneok assets as well as batching, blending, and other storage opportunities. Early returns have been excellent, as Oneok is already exceeding its synergy targets.

Oneok’s fourth-quarter and full-year results generally met our expectations. 2024 guidance was solidly above our expectations at a midpoint of $6.1 billion, and we expect to increase our fair value estimate by about 10%-15% from $62 per share. Our narrow moat rating remains unchanged. The upside strength is driven primarily by higher volume growth than our forecasts, as well connects in the Rockies and Mid-continent are trending well above expectations, and also better-than-expected synergies.

Oneok brings together high-quality assets, some of the strongest near- to medium-term growth prospects in our coverage as Rockies volumes continue their ongoing rebound, a C-Corporation structure, and a well-respected management team in a compelling package. About 90% of the firm's earnings are fee-based, 80%-90% of its customers are investment-grade, and the firm hedges its limited commodity price exposure. The addition of Magellan's wide-moat refined product assets strengthens the business and opens up new investment opportunities by bundling different products across Oneok assets as well as batching, blending, and other storage opportunities.

Oneok’s third-quarter results were good, and the firm upped its 2023 EBITDA estimate by $125 million, reflecting very strong volume growth in the Permian/Gulf Coast (18%) and Rockies (6%) regions. Higher fee rates and lower fractionation costs also contributed. Well connections in the Rockies are expected to be a midpoint of 550 wells, up from earlier expectations of 500 wells, while midcontinent wells are expected to be at the high end of the 45-55 range. Rockies volumes are about three times as valuable as midcontinent connections for Oneok.

Oneok brings together high-quality assets, some of the strongest near- to medium-term growth prospects in our coverage as Rockies volumes continue their ongoing rebound, a C-Corporation structure, and a well-respected management team in a compelling package. About 90% of the firm's earnings are fee-based, 80%-90% of its customers are investment-grade, and the firm hedges its limited commodity price exposure. The addition of Magellan's wide-moat refined product assets strengthens the business and opens up new investment opportunities by bundling different products across Oneok assets as well as batching, blending, and other storage opportunities.

Oneok brings together high-quality assets, some of the strongest near- to medium-term growth prospects in our coverage as Rockies volumes continue their ongoing rebound, a C-Corporation structure, and a well-respected management team in a compelling package. About 90% of the firm's earnings are fee-based, 80%-90% of its customers are investment-grade, and the firm hedges its limited commodity price exposure. The addition of Magellan's wide-moat refined product assets strengthens the business and opens up new investment opportunities by bundling different products across Oneok assets as well as batching, blending, and other storage opportunities.

Oneok’s second-quarter earnings were strong, as the firm boosted its guidance by $100 million at the midpoint to $4.675 billion. The main drivers of the change were higher volumes and fees in the natural gas liquids segment, lower-than-expected third-party fractionation costs, and better storage and transportation fees from its natural gas pipelines business. 2023 EBITDA guidance includes a one-time $539 million positive impact due to an insurance settlement due to the Medford incident and does not include anything from Magellan.

Oneok brings together high-quality assets, some of the strongest near- to medium-term growth prospects in our coverage as Rockies volumes continue their ongoing rebound, a C-Corporation structure, and a well-respected management team in a compelling package. About 90% of the firm's earnings are fee-based, 80%-90% of its customers are investment-grade, and the firm hedges its limited commodity price exposure. The addition of Magellan's wide-moat refined product assets strengthens the business and opens up new investment opportunities by bundling different products across Oneok assets as well as batching, blending, and other storage opportunities.

After adding Magellan to our Oneok model, we are increasing our Oneok fair value estimate to $62 per share from $61. Our Magellan fair value remains unchanged at $66 per unit, as the cash component of the deal dilutes the impact of the modest fair value estimate increase. Our Oneok narrow moat and Magellan wide moat also remain intact.

Oneok brings together high-quality assets, some of the strongest near- to medium-term growth prospects in our coverage as Rockies volumes continue their ongoing rebound, a C-Corporation structure, and a well-respected management team in a compelling package. About 90% of the firm's earnings are fee-based, 80%-90% of its customers are investment-grade, and the firm hedges its limited commodity price exposure. The addition of Magellan's wide-moat refined product assets strengthens the business and opens up new investment opportunities by bundling different products across Oneok assets.

Oneok has agreed to acquire Magellan Midstream Partners in a cash and stock deal that values Magellan at $67.50 per unit. Based on our current Oneok fair value estimate of $61, we are increasing our Magellan fair value to $66 per unit. We will maintain our narrow moat and wide moat ratings for Oneok and Magellan while we continue to analyze the implications of the deal and incorporate Magellan into our Oneok model.

Oneok’s 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 brings together high-quality assets, some of the strongest near- to medium-term growth prospects in our coverage as Rockies volumes continue their ongoing rebound, a C-Corporation structure, and a well-respected management team in a compelling package. About 90% of the firm's earnings are fee-based, 80%-90% of its customers are investment-grade, and the firm hedges its limited commodity price exposure.

After looking deeper at Oneok's fourth-quarter results, we are increasing our fair value estimate to $61 per share from $58. The Medford settlement accounted for a bit more than $1 per share of that increase, while modestly higher volumes at Oneok's gathering and processing operations accounted for the remainder.

Oneok’s fourth-quarter results generally met our expectations. Full-year EBITDA was $3.62 billion compared with our $3.64 billion forecast. 2023 adjusted EBITDA guidance is set at a midpoint of $4.575 billion, including a net $539 million cash gain relating to insurance recoveries from the Medford incident. Removing the gain, adjusted EBITDA falls to $4 billion, close to our $4.1 billion forecast. 2023 growth is mainly being driven by a combination of higher gas and natural gas liquids volumes out of the Rockies, higher fee rates goosed by inflation-linked escalators, and higher earnings from gas storage contracts and expansions. Growth capital spending plans are set at around $1.1 billion, compared with our $1 billion forecast. At first glance, we maintain our $58 per share fair value estimate and narrow moat rating.

Oneok’s third-quarter results were healthy, as its EBITDA increased 4% year over year. Its early 2023 outlook calls for a 10%-plus increase in adjusted EBITDA over 2022 levels of a bit more than $3.6 billion, or above $4 billion. We see the upside as both volume and fee driven, as Rockies volumes continue to be healthy while gathering fees are tracking to a 10% increase in 2023. The completion of the MB-5 fractionator plant in mid-2023 should also contribute. The fee increase is expected to be primarily due to inflationary trends. After updating our model, we are increasing our Oneok fair value estimate to $58 per share from $56 while maintaining our narrow moat rating.

Oneok brings together high-quality assets, some of the strongest near- to medium-term growth prospects in our coverage as Rockies volumes continue their ongoing rebound, a C-Corporation structure, and a well-respected management team in a compelling package. About 90% of the firm's earnings are fee-based, 80%-90% of its customers are investment-grade, and the firm hedges its limited commodity price exposure. With the reduced capital program, Oneok is forecast to have material levels of excess cash flow in 2023, perhaps 24 months behind other U.S. midstream peers to buy back more stock. We estimate there could be up to $675 million in buybacks in 2023, though knowing Oneok's penchant for finding accretive growth projects, this is also equally likely to be plowed back into attractive growth assets.

Oneok’s second-quarter results were solid, in our view. After updating our model, we will hold our fair value estimate and narrow moat rating intact. Oneok has historically been a strong operator, and this quarter was no exception. Rocky Mountain volumes, which have been growing rapidly in the past few quarters, were impacted by severe weather in April 2022, but volumes normalized by the end of May. Still, EBITDA increased 11% to $886 million from last year’s levels, mainly due to higher fee rates. 2022 EBTIDA guidance remains unchanged at a midpoint of $3.62 billion, but we expect some upside as volumes continue to improve.