Tulsa, OK-based Oneok Inc. said Friday that its earnings guidance for 2004 remains at $2.12-2.18 per diluted share of common stock. The company also provided quarterly earnings-per-share guidance and updated segment operating income estimates due to changes in the market.
“The update of Oneok’s earnings outlook primarily reflects an increase in operating income for the gathering and processing segment and a decrease in our marketing and trading segment,” Oneok CEO David Kyle said. “We have not previously provided quarterly earnings guidance for 2004, but in as much as we are almost halfway through the year, we believe it is necessary to provide investors and analysts with the additional guidance. I would like to emphasize that based upon these expectations the company continues to perform well with a stable earnings base.”
The company reported that expected operating income for its gathering and processing unit has been increased by $26 million to $84 million for 2004 based on the continued effect of higher gas liquids-to-natural gas spreads on keep-whole contracts and higher prices generally for natural gas liquids and natural gas sold under percentage-of-proceeds contracts.
Oneok also reported that projected operating income for its marketing and trading unit has been reduced by $27 million to $155 million. In the breakdown, the company raised the operating income projections for its marketing, storage and retail divisions of the segment, but lowered its trading projections significantly.
The company noted that it raised its marketing and storage revenues primarily due to the reclassification of $15 million of transportation basis out of trading revenue and into marketing and storage.
Trading revenues, which include natural gas options, power and crude oil, decreased $31 million to $32 million after removing the $15 million of transportation basis. “Because lower volatility in natural gas prices impacts natural gas option margins, we have reduced estimated revenues for our natural gas option strategy,” the company said. “We have also reduced anticipated power trading margins. We are evaluating our overall trading strategy in light of these reductions.”
On its quarterly earnings per share guidance from continuing operations, Oneok said it accomplished $1.04 per share in 1Q2004, and expects to make 15 cents, 16 cents and 80 cents in the remaining three quarters. This compares to $1.20 in 1Q2003, and 23 cents, 1 cent and 65 cents in the three remaining quarters of 2003.
“The second quarter 2004 earnings are lower than those in 2003 primarily because of projected continued lower volatility in natural gas prices leading to lower options margins,” the company said. “The fourth quarter reflects anticipated greater withdrawals from storage at higher margins than last year.”
Oneok is a diversified energy company focused on oil and natural gas production, natural gas processing, gathering, storage and transmission in the Midcontinent areas of the United States.
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