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ONEOK (OKE) Rides on High Fee-Based Earnings & Expansion Efforts
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ONEOK Inc. (OKE - Free Report) is well poised to gain from increasing volumes in its pipelines and fee-based commitments as production volumes rise. The company’s expansion efforts and pipeline additions are expected to strengthen its position in high-production regions and aid future earnings.
However, this Zacks Rank #3 (Hold) company has to face risks related to strong competition in the pipeline business.
Tailwinds
ONEOK is poised to benefit from long-term fee-based commitments in all three of its segments. More than 90% of its 2022 earnings was fee-based. A substantial portion of its 2023 earnings is expected to be fee-based too.
The company continues to invest in organic growth projects to expand its business in the existing operating regions. It plans to provide a broad range of services to crude oil as well as natural gas producers and end-use markets. Capital expenditures (including maintenance) totaled $289 million in the first quarter compared with $257 million in the year-ago period.
OKE expects total capital expenditures in the $1,270-$1,480 million range in 2023. This indicates that systematic investments are necessary to expand infrastructure to keep up with the expected increase in producer activity.
ONEOK is expanding its storage capabilities in Oklahoma, adding 4 billion cubic feet of storage capacity. The project is expected to be completed in early 2023 and is nearly 90% subscribed through 2029. The company is planning to further increase its storage assets in Texas to cater to the rising demand in the region.
Headwinds
The natural gas and natural gas liquids pipeline industries are expected to remain highly competitive. Apart from the existing pipeline companies, this midstream section has recently seen many energy companies forming master limited partnerships to begin pipeline services.
Although OKE’s assets are well spread out, its ability to withstand competitive challenges will depend on the efficiency, quality and reliability of its services.
Constellation Energy has a long-term (three to five year) earnings growth rate of 30.6%. The Zacks Consensus Estimate for CEG’s 2023 earnings per share (EPS) indicates an increase of 938.8% year over year.
Evergy’s long-term earnings growth rate is 5.2%. It delivered an average earnings surprise of 16% in the last four quarters.
The Zacks Consensus Estimate for PFIE’s 2023 EPS indicates an improvement of 125% year over year. The company delivered an average earnings surprise of 11.1% in the last four quarters.
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ONEOK (OKE) Rides on High Fee-Based Earnings & Expansion Efforts
ONEOK Inc. (OKE - Free Report) is well poised to gain from increasing volumes in its pipelines and fee-based commitments as production volumes rise. The company’s expansion efforts and pipeline additions are expected to strengthen its position in high-production regions and aid future earnings.
However, this Zacks Rank #3 (Hold) company has to face risks related to strong competition in the pipeline business.
Tailwinds
ONEOK is poised to benefit from long-term fee-based commitments in all three of its segments. More than 90% of its 2022 earnings was fee-based. A substantial portion of its 2023 earnings is expected to be fee-based too.
The company continues to invest in organic growth projects to expand its business in the existing operating regions. It plans to provide a broad range of services to crude oil as well as natural gas producers and end-use markets. Capital expenditures (including maintenance) totaled $289 million in the first quarter compared with $257 million in the year-ago period.
OKE expects total capital expenditures in the $1,270-$1,480 million range in 2023. This indicates that systematic investments are necessary to expand infrastructure to keep up with the expected increase in producer activity.
ONEOK is expanding its storage capabilities in Oklahoma, adding 4 billion cubic feet of storage capacity. The project is expected to be completed in early 2023 and is nearly 90% subscribed through 2029. The company is planning to further increase its storage assets in Texas to cater to the rising demand in the region.
Headwinds
The natural gas and natural gas liquids pipeline industries are expected to remain highly competitive. Apart from the existing pipeline companies, this midstream section has recently seen many energy companies forming master limited partnerships to begin pipeline services.
Although OKE’s assets are well spread out, its ability to withstand competitive challenges will depend on the efficiency, quality and reliability of its services.
Stocks to Consider
Some better-ranked stocks for investors interested in the same sector are Constellation Energy Corporation (CEG - Free Report) , Evergy, Inc. (EVRG - Free Report) and Profire Energy (PFIE - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Constellation Energy has a long-term (three to five year) earnings growth rate of 30.6%. The Zacks Consensus Estimate for CEG’s 2023 earnings per share (EPS) indicates an increase of 938.8% year over year.
Evergy’s long-term earnings growth rate is 5.2%. It delivered an average earnings surprise of 16% in the last four quarters.
The Zacks Consensus Estimate for PFIE’s 2023 EPS indicates an improvement of 125% year over year. The company delivered an average earnings surprise of 11.1% in the last four quarters.