ONEOK - $OKE - Earnings Analysis: Significant revenue and net income growth driven by acquisitions and volume increases.

Business Model

ONEOK, Inc. generates revenue primarily through fee-based services in gathering, processing, storing, transporting, and marketing of natural gas, natural gas liquids (NGLs), refined products, and crude oil. The company operates through four main segments: Natural Gas Liquids, Refined Products and Crude, Natural Gas Gathering and Processing, and Natural Gas Pipelines.

Revenue Sources

• Natural Gas Liquids segment: Gathering, fractionation, transportation, storage, and marketing services for NGLs.
• Refined Products and Crude segment: Transportation, storage, and distribution services for refined products and crude oil.
• Natural Gas Gathering and Processing segment: Gathering, compression, treating, and processing services for natural gas.
• Natural Gas Pipelines segment: Transportation and storage services for natural gas.

Revenue Distribution by Channel

• Adjusted EBITDA distribution by segment for 2024: Natural Gas Liquids (37%), Refined Products and Crude (28%), Natural Gas Gathering and Processing (27%), Natural Gas Pipelines (8%).

Income Statement Analysis

• Total revenues increased by 33.72% due to contributions from strategic acquisitions and volume growth.
• Operating income grew by 42.67%, reflecting improved operational efficiency and higher fee-based earnings.
• Net income increased by 45.35%, indicating strong profitability.
• Basic earnings per share increased by 33.90%, benefiting from higher net income.

Balance Sheet Analysis

• Total assets increased by 44.73%, primarily due to the acquisitions of EnLink and Medallion.
• Total stockholders' equity increased by 34.27%, reflecting retained earnings and equity issued for acquisitions.
• Total liabilities increased by 50.97% due to additional debt financing for acquisitions.

Cash Flow Analysis

• Net cash provided by operating activities increased by 10.56%, driven by higher net income.
• Net cash used in investing activities increased due to cash paid for acquisitions of EnLink and Medallion.
• Net cash provided by financing activities remained relatively stable.
• Cash and cash equivalents at end of period increased by 116.86%, enhancing liquidity.

Capital Allocation

The company increased its quarterly dividend by 4% and initiated share repurchases totaling $172 million in 2024. Capital expenditures ranged between $2.8 billion to $3.2 billion, focusing on growth projects such as the Medford fractionator rebuild, Denver-area refined products expansion, and the Texas City export terminal joint ventures.

Management Commentary

ONEOK's strong performance in 2024 was driven by contributions from multiple strategic acquisitions, volume growth and fee-based earnings.

We have transformed our company in multiple ways making it even stronger, more resilient and better positioned.

We expect continued volume growth across our systems from completed projects and continued execution on synergies from recent acquisitions.

Increased operating costs due primarily to higher employee-related costs and higher outside services from the growth of ONEOK's operations.

The decrease in adjusted EBITDA for the full year 2024, compared with 2023, primarily reflects a $695 million decrease related to the Medford incident.

Overall Sentiment: Management is optimistic about future growth driven by strategic acquisitions and completed projects but acknowledges increased operating costs and prior negative impacts from incidents.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.