ONEOK Inc. (OKE) Q2 Results - July 30

[dan_s]

On July 28 ONEOK, Inc. (NYSE: OKE) announced second quarter 2020 financial results and updated its 2020 outlook.

Second Quarter 2020 Results:

Net income of $134.3 million, resulting in 32 cents per diluted share. < Compares to my forecast of $151 million net income.
Adjusted EBITDA of $533.9 million.
Operating income of $355.7 million.
More than $945 million of cash and cash equivalents as of June 30, 2020.

Updated 2020 Outlook:

Given continued market and industry uncertainty, including recent developments related to crude oil pipeline takeaway in the Williston Basin, ONEOK expects 2020 net income and adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) results to be at the low end of the ranges provided on April 28, 2020. < My 2H 2020 forecast was already at the low end of the Company's net income guidance range of $500 to $900 million.

Total capital expenditures for the second half of 2020 are expected to range from approximately $300 million to $400 million. < WAY BELOW expected cash flow from operations.

"I am proud of the way our employees continue to operate safely and responsibly and remain focused on providing excellent customer service in a challenging environment," said Terry K. Spencer, ONEOK president and chief executive officer. "Second quarter results were interrupted by the pandemic's effect on worldwide crude oil demand, the resulting extensive oil and associated natural gas production curtailments by producers across our operations and low commodity prices. As we return to volumes achieved during early March 2020, we expect our earnings run rate to be in line with our previous expectations.

"The trends we are seeing in all of our operating areas are improving," added Spencer. "Volumes on our systems are sharply increasing as our customers bring production back online with improvements in commodity prices, which is positive for our business in the second half of the year."

I am updating my forecast/valuation model for OKE, which will be posted to the EPG website this afternoon.

TULSA, Okla., July 22, 2020 /PRNewswire/ -- The board of directors of ONEOK, Inc. (NYSE: OKE) today declared a quarterly dividend of 93.5 cents per share, unchanged from the previous quarter, resulting in an annualized dividend of $3.74 per share.

The dividend is payable Aug. 14, 2020, to shareholders of record at the close of business Aug. 3, 2020.

[dan_s]

OKE is trading at approximately $29/share at the time of this post. < At that price the annual dividend yield is over 12.8%.

Three Wall Street firms have published new reports since the Company released 2Q results on July 28
New Price Targets
$ 35 by BofA
$ 33 by RBC Capital
$ 30 by Stifel

Based on my forecast/valuation model, which is closed to the three above, ONEOK's cash flow from operations should exceed $900 million in 2H 2020. This compares to the Company's updated capital expenditure budged for 2H 2020 of $300 to $400 million. DCF coverage should be enough to hold their dividends at $0.935/quarter.

Before the pandemic, ONEOK's stated goal was to increase dividends by 8% year-over-year. When we move out of "Crazy Coronavirus World" they should get back to that plan.