Q4 2024 Earnings Summary
- ONEOK anticipates significant volume growth in key regions, including the Permian, Rocky Mountain, and Mid-Continent, driven by increased producer activity and efficiencies, leading to higher earnings and adjusted EBITDA in 2025 and beyond.
- The company is embarking on strategic expansion projects, such as the 400,000 barrels per day LPG export terminal joint venture with MPLX in Texas City, expected to deliver returns in the mid to high teens and enhance their integrated wellhead-to-water solutions for customers.
- Substantial synergies from recent acquisitions (EnLink and Medallion) are expected to drive additional earnings growth through operational efficiencies, expanded capacity, and cost savings, particularly in the Permian and Mid-Continent regions.
- Management is not providing specific guidance on synergies for 2026, stating that synergy benefits are "baked into our outlook" and acknowledging difficulties in identifying synergies from multiple acquisitions. This lack of clarity could raise uncertainties about achieving expected earnings growth ,.
- Elevated capital expenditures in 2025 may indicate a higher baseline spending level going forward, as noted by the CFO when he mentioned that, as a larger company, ONEOK will have a higher run rate. This could impact future free cash flow and constrain shareholder returns.
- Reaching the high end of the 2025 guidance depends on timing and realization of synergies, which may be uncertain. Management indicated that achieving higher earnings would rely on the timing of bringing in synergies and producer activity, suggesting potential risks if synergies are delayed or producers do not increase activity as expected.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +34% (from $5,235 million to approx. 7xxx million USD) | Growth in Total Revenue was driven by higher commodity sales volumes and improved fee‐based services, building on earlier improvements seen in Q4 2023. Recent operational enhancements and acquisition-related synergies helped push revenues higher compared to the previous period. |
Natural Gas Liquids | +20% (from $3,760 million to $4,522 million USD) | The increase in NGL revenue reflects higher production volumes and improved performance in exchange services, following gains seen in Q4 2023. This growth builds on previous period momentum with enhanced marketing and optimized operations boosting earnings. |
Natural Gas Pipelines | +1,788% (from $16 million to $303 million USD) | The dramatic surge in Natural Gas Pipelines revenue primarily stems from a very low base in Q4 2023 and significant improvements in firm and interruptible transportation rates, along with higher storage and transportation services. This turnaround shows the impact of operational adjustments and renewed demand compared to the prior period. |
Operating Income | +43% (from $1,099 million to $1,568 million USD) | Operating Income increased due to strong contributions from the Magellan acquisition and higher transportation services, coupled with operational efficiencies achieved in Q4 2024. These improvements built upon gains in Q4 2023, where additional revenue sources and cost synergies began to take hold. |
Net Income | +136% (from $688 million to $1,625 million USD) | Net Income saw a robust increase driven by enhanced operational performance, including acquisition-related benefits and improved margins across segments. The previous period’s earnings were subdued by one-time events, so the current period's significant recovery reflects both organic growth and a return to more normalized conditions. |
EPS (Basic/Diluted) | +41% (from $1.12 to $1.58 USD) | EPS improved as a result of higher net income and operating income, even after the dilution effect from the Magellan acquisition. The continued profitability gains, relative to the previous period’s results, underscore the impact of increased revenues and operational efficiencies. |
Cash Flow | Shift from a +$54 million increase to a –$5,731 million decrease | The substantial cash outflow in Q4 2024 contrasts with the modest inflow in Q4 2023, primarily due to heavy investing activities—especially significant capital expenditures and financing for acquisitions—that greatly impacted overall cash flows this period. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Adjusted EBITDA | FY 2025 | Total combined EBITDA for 2025: “comfortably above $8 billion” | Adjusted EBITDA projected to increase 21% to $8.225 billion | raised |
EPS | FY 2025 | no prior guidance | Expected increase of 8% to a midpoint of $5.37 | no prior guidance |
Capital Expenditures | FY 2025 | no prior guidance | Range of $2.8 billion to $3.2 billion, which includes growth and maintenance capital | no prior guidance |
Volume Growth – Rocky Mountain | FY 2025 | no prior guidance | Volume growth up 8.5% at the midpoint; average >1.7 Bcf per day in 2025 | no prior guidance |
Volume Growth – Mid-Continent | FY 2025 | no prior guidance | Expected volume growth with an average annual volume nearly 2.5 Bcf per day in 2025 | no prior guidance |
Volume Growth – Permian Basin | FY 2025 | no prior guidance | Natural gas processing volumes expected to average 1.6 Bcf per day at the midpoint | no prior guidance |
Incremental Synergies | FY 2025 | no prior guidance | Approximately $250 million of incremental commercial and cost synergies | no prior guidance |
Net Debt-to-EBITDA | 2026 | no prior guidance | Aiming for a ratio of 3.5x by 2026 | no prior guidance |
Share Repurchase Program | FY 2025 | no prior guidance | Commitment to executing on a Board-approved $2 billion share repurchase program over the next few years | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Net Income | FY 2024 | ~$3.0B | $3.035B (sum of 639+ 78+ 693+ 1,625) | Beat |
Capital Expenditures | FY 2024 | $1.75B – $1.95B | $2.021B (sum of 512+ 479+ 468+ 562) | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Permian Basin | In Q1 2024, the Permian was mentioned with weaker NGL volumes due to weather-related disruptions and an anticipated recovery through pipeline expansion efforts | In Q4 2024, the focus shifted to strong growth drivers in the Permian with new processing plant relocations, completed third‐party processing plants, and active pursuit of opportunities | Increased emphasis and more positive growth sentiment |
Rocky Mountain | Q1 2024 discussions noted a 12% YoY increase in NGL volumes, recovery from winter impacts, and reliance on pipeline expansion (Elk Creek) to further boost capacity | Q4 2024 called out a projected 8.5% growth with improved efficiencies such as longer laterals and incentives for ethane recovery, underscoring continued strength | Continued positive outlook with a focus on operational efficiency |
Mid-Continent | In Q1 2024, the Mid-Continent was affected by weather impacts and a low-margin contract expiration, with expectations to replace volumes through market-based contracts | Q4 2024 highlighted nearly 2.5 Bcf per day volumes, supported by full-year impacts of acquisitions and optimization projects, reflecting a stronger, more integrated position | Improved outlook driven by acquisitions and operational optimization |
Bakken | Q1 2024 emphasized strong volume growth in the Bakken region due to a rebound from winter weather and active rig activity | No mention in Q4 2024 | Reduced emphasis compared to the previous period |
El Paso Market | In Q1 2024, the El Paso market was noted for its completed pipeline expansion that boosted refined product volumes under full long-term contracts | No mention in Q4 2024 | Reduced emphasis compared to the previous period |
Synergy Realization | Q1 2024 focused on strong Magellan synergies that were tracking toward the upper end of a $400–800 million range, without discussing EnLink or Medallion | Q4 2024 continued emphasizing Magellan synergies—now exceeding early expectations—and introduced discussion of EnLink and Medallion synergies along with some uncertainty in 2026 guidance | Expanded focus with additional acquisitions and increased complexity in guidance |
Strategic Expansion Initiatives | No mention in Q1 2024 | Q4 2024 introduced a new LPG export terminal joint venture in Texas City with MPLX, emphasizing growth potential and strategic location benefits | New topic emerged, representing a fresh growth driver |
Capital Expenditure Trends and Free Cash Flow Implications | Q1 2024 noted a moderate CapEx guidance of $1.75–1.95 billion with expectations for a downward trend post-major projects, without highlighting free cash flow concerns | Q4 2024 revealed an elevated CapEx outlook for 2025 of $2.8–3.2 billion, with discussions of long-term cost and liquidity considerations offset by a strong cash position and anticipated future earnings growth | Shift to higher near-term CapEx with cautious liquidity sentiment but long-term optimism |
Operating Cost Management and Turnaround-Related Expense Impacts | Q1 2024 reported increased operating costs due to planned maintenance turnarounds and first full allocation of corporate costs in one segment, viewed as temporary events | No mention in Q4 2024 | Topic no longer discussed in the current period |
Weather-Related Production Disruptions | Q1 2024 mentioned that weather-related disruptions significantly impacted Permian NGL volumes, delaying recovery | No mention in Q4 2024 | Topic no longer discussed in the current period |
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Synergies Exceeding Expectations
Q: How are synergies from acquisitions tracking versus original targets?
A: Synergies are exceeding expectations, with $175 million originally planned for 2024, but surpassing that amount. For 2025, an additional $125 million is expected, and teams are finding increased opportunities to optimize NGL and refined product systems. -
2025 CapEx and Future Run Rate
Q: Is higher CapEx in 2025 a new run rate for the company?
A: 2025 CapEx is peaking as major projects like Medford and Denver wrap up. Baseline CapEx will decrease in 2026 and 2027 but remain higher than pre-acquisition levels due to EnLink and Medallion. -
Achieving High-End 2025 Guidance
Q: What could drive you to the high end of 2025 guidance?
A: Accelerated synergies from asset connections and increased producer activity could boost earnings. Innovative optimization of smaller synergies, which add up significantly, may also contribute. -
LPG Export Facility and Strategy
Q: Can you discuss the LPG export JV with MPLX and expected returns?
A: The LPG export dock offers strategic benefits due to its prime location, access to open waters, and cost efficiencies from being near Marathon's refinery. Expected returns are in the mid-teens to high-teens. It enhances our integrated strategy to touch barrels multiple times, adding value for customers. -
Mid-Con Gas Growth Outlook
Q: Do you expect material gas growth in the Mid-Con?
A: Increased drilling activity is observed in the Mid-Continent due to higher gas prices. This uptick is driving a more optimistic volume outlook. -
Leverage and Stock Buybacks
Q: How should we think about the cadence of the stock buyback program?
A: Focus is on aligning debt metrics with goals. Intend to complete the $2 billion buyback program, with the bulk being back-weighted as metrics improve. -
Synergy Opportunities from Acquisitions
Q: Any positive surprises from Medallion and EnLink acquisitions?
A: New synergy opportunities emerged as teams collaborated. Quick connects in the Mid-Continent and efficiencies in crude marketing and trucking have been beneficial. -
Permian Capacity and NGL Control
Q: What's the utilization of Permian processing capacity and NGL volume control?
A: Anticipate full utilization of 1.7 Bcf/d processing capacity in the Permian. Majority of new NGL volumes are under our marketing control, with capacity expansions accommodating growth. -
Production Expectations in Key Areas
Q: Do you still expect the same production levels in key areas?
A: Expectations are at or above prior forecasts, with efficiencies and increased volumes in the Bakken and Mid-Continent. This is reflected in our current guidance. -
Power Plant Expansions and Data Centers
Q: Update on power plant expansions and data centers?
A: Working on 30 projects at various stages, with assets' proximity to supply providing competitive advantages. Confident in capturing a significant share of demand from data centers. -
2026 Synergies and EBITDA Outlook
Q: Can you provide a synergy number for 2026?
A: Not guiding to a specific number now; synergies are blended into the outlook. Will refine the number when providing guidance for 2026. -
EnLink Opportunities Post-Acquisition
Q: How is customer demand and growth at EnLink?
A: Seeing many opportunities, especially in the Permian. Combining ONEOK and EnLink assets is facilitating growth and better service to producers. -
M&A Strategy in the Permian
Q: How does the export facility affect your M&A strategy?
A: Focus remains on integrating recent acquisitions and realizing synergies. Future M&A will be approached intentionally and disciplined. -
Capital Expenditure Trends Post-2025
Q: Will CapEx decrease after 2025?
A: Baseline CapEx is expected to come down in 2026 and 2027 as current major projects conclude. However, it will remain higher than pre-acquisition levels. -
Customer Production Plans for 2025
Q: Do producer plans affect your production expectations?
A: Based on conversations, we are at or above prior expectations. Increased efficiencies and volumes, especially in the Bakken and Mid-Continent, support this. -
Opportunities with EnLink Assets
Q: Are there additional opportunities with EnLink under your control?
A: Yes, particularly in the Permian where we see many opportunities. The team is enthusiastic about integrating assets to serve producers better.
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