ONEOK Inc. (OKE) said Tuesday that its third quarter profit declined from last year, hurt mainly by lower revenues as a result of lower realized commodity prices and narrower natural gas liquids product price differentials in the ONEOK Partners segment. Earnings, however, came in well above Street estimates. Looking further, the company raised its fiscal 2009 earnings guidance.
The Tulsa, Oklahoma-based company reported third quarter net income attributable to the company of $48.0 million or $0.45 per share, compared to $58.0 million or $0.55 per share in the year-ago quarter.
On average, eight analysts polled by Thomson Reuters expected the company to earn $0.23 per share for the quarter. Analysts estimates typically exclude special items.
Operating income for the third quarter declined to $173.8 million from $192.2 million for the third quarter 2008, due primarily to lower realized commodity prices and narrower natural gas liquids product price differentials in the ONEOK Partners segment.
Revenues for the quarter plummeted to $2.36 billion from $4.24 billion in the prior-year quarter. Three analysts had a revenue consensus of $3.74 billion for the third quarter.
In the immediately preceding quarter, the company's profit edged down to $41.68 million or $0.39 per share from the same quarter a year ago, as earnings were negatively impacted by an increase in expenses as well as a decline in quarterly revenues of $2.23 billion that came in below analysts estimate.
Among ONEOK's rivals, OGE Energy Corp. (OGE), the parent company of Oklahoma Gas and Electric Co., or OG&E, and Enogex LLC, reported a marginal decline in third-quarter profit to $136.8 million or $1.40 per share, attributable mainly to lower revenues of $845.3 million that fell sharply from last year. Full impact of revenue decline on bottom-line was partially offset by improved margins in the electric utility business due to rate increases.
Another runner, the Pittsburgh, Pennsylvania-based integrated energy company EQT Corp. (EQT) reported a slump in profit for the third quarter of $2.91 million or $0.02 per share over last year as higher revenues of $218.36 million from increased production was offset by long-term incentive compensation expense and lower commodity prices.
Segment wise, ONEOK Partners segment operating income of $144.7 million, compared with $197.5 million in the third quarter 2008, as the result of lower realized commodity prices in the natural gas gathering and processing business, narrower NGL product price differentials and prior-year operational measurement gains in the natural gas liquids business.
Distribution segment operating income of $7.6 million, compared with a loss of $2.9 million in the third quarter 2008, as the third quarter of 2009 earnings benefited from new rate mechanisms, which contributed $2.0 million in Oklahoma, $1.2 million in Kansas and $1.2 million in Texas.
Energy services segment operating income of $21.2 million, compared with a loss of $3.5 million in the third quarter 2008, reflecting a $17.8 million increase in transportation margins, net of hedging activities, due primarily to higher realized Rockies-to-Mid-Continent margins, a $4.5 million increase in storage and marketing margins, a $1.7 million increase in premium service margins resulting from additions to our customer base and a $1.4 million increase in retail marketing margins.
Third-quarter 2009 operating costs were $204.6 million, compared with $203.9 million in the third quarter 2008. The higher operating costs were due to incremental operating expenses in the ONEOK Partners segment, associated with the Overland Pass Pipeline and the Arbuckle Pipeline and increased costs at natural gas liquids fractionation facilities, including the expanded Bushton fractionator, and higher employee-related costs.
Commenting on the results, ONEOK chief executive officer, John Gibson said, "ONEOK continues to benefit from its investment in ONEOK Partners, which successfully completed more than $2 billion in capital investments at the end of the third quarter, providing the company with solid earnings and cash flow growth. These projects, together with additional opportunities the partnership has identified over the next five years, are expected to drive additional growth at the partnership and at ONEOK."
For the nine-month period, net income attributable to ONEOK was $212.0 million or $2.00 per share, compared to $243.7 million or $2.30 per share, in the same period last year.
The company's year-to-date revenues slumped to $7.38 billion from $13.31 billion in the year-ago period.
Looking ahead for fiscal 2009, ONEOK increased its earnings per share guidance to the range of $2.65 to $2.85 per share from its previous range of $2.40 to $2.70 per share.
Analysts currently expect earnings of $2.63 per share for fiscal 2009.
The company said that the updated earnings guidance reflects an anticipated operating income increase in the distribution and energy services segments.
OKE closed Tuesday's trading at $36.93, up $0.76 or 2.10%, on a volume of 0.66 million shares on the NYSE. Further, the stock gained $0.27 or $0.73, and traded at $37.20 in after hours. For the past 52 weeks, the stock traded in a broad range of $18.10 - $37.00, with a three-month average volume of 0.69 million shares.
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