Pipeline Company Predicts Weaker 2009 (OKE, OKS)

February 6, 2009 by Douglas A. McIntyre

Oil_well_imageONEOK, Inc. (NYSE:OKE) and its pipeline partnership ONEOK Partners, L.P. (NYSE:OKS) have issued guidance for 2008 and 2009. ONEOK has affirmed 2008 EPS "at the low end" of the $2.95-$3.05 range it had previously announced. ONEOK Partners expects to end up in the "lower half" of earlier 2008 guidance of $5.95-$6.15 per common unit, and distributable cash flow of $625-$655 million.

For 2009, ONEOK expects EPS of $2.25-$2.75, while ONEOKPartners is looking at net income of $3.15-$3.75 per common unit anddistributable cash flow of $490 million to $550 million. In the first nine monthsof 2008, ONEOK Partners contributed $512 million to ONEOK’s operatingincome. The 2009 guidance is nowhere near that figure.

It’s not often that master limited partnerships like ONEOK Partnersproject lower income and less distributable cash. But ONEOK Partners isexposed to substantial commodity price risk and the company expects "asignificantly lower commodity price environment" in 2009. Thepartnership expects to offset some of this weakness with new fee-basedrevenue, but as the guidance shows, the difference is just too great.

ONEOK shares are off more than 2% in early trading this morning. ONEOK Partners’ common units are down about 2.5%.

Paul Ausick
February 6, 2009