ONEOK's Q1 Results: Revenue Rises Amid Earnings Headwinds

ONEOK (NYSE: OKE) delivered a mixed set of results for the first quarter of 2025, showcasing robust revenue growth driven by strategic acquisitions and rising operational volumes, while net income attributable to shareholders dipped marginally compared to the prior-year period. The company’s earnings report highlights both the rewards of its aggressive growth strategy and the challenges of integrating new assets and managing rising costs.

Revenue Growth Fuels Momentum

ONEOK’s total revenue surged to $8.043 billion in Q1 2025, a significant increase from previous periods, though it narrowly missed analyst expectations of $8.227 billion. The revenue boost stemmed primarily from two key drivers:
1. Strategic Acquisitions: The completion of the EnLink Midstream acquisition on January 31, 2025, added substantial operational scale. Full-quarter contributions from EnLink and Medallion operations contributed approximately $250 million to adjusted EBITDA.
2. Volume Increases: Rocky Mountain region volumes rose sharply, with NGL raw feed throughput up 15% and natural gas processed volumes up 7% year-over-year. This growth was fueled by higher production in key basins and winter weather-related demand in 2024.

Segment performance further underscored this momentum:
- Natural Gas Liquids (NGL) Segment: Adjusted EBITDA jumped to $635 million from $588 million in 2024, driven by EnLink’s contributions and higher unconsolidated affiliate volumes.
- Refined Products and Crude Segment: Adjusted EBITDA rose to $471 million from $381 million, aided by increased crude oil shipments (1,846,000 barrels per day) and synergies from Medallion operations.

Net Income Decline: Costs and Integration Pressures

Despite the revenue gains, net income attributable to ONEOK dipped slightly to $636 million from $639 million in Q1 2024, while diluted EPS fell to $1.04 from $1.09. The decline reflects three primary challenges:
1. Rising Operating Costs: Operating expenses surged to $752 million from $569 million in 2024, driven by 32% higher employee-related costs, methane fee accruals, and transaction expenses tied to the EnLink acquisition.
2. Depreciation and Amortization: These costs increased to $380 million from $254 million, reflecting the expanded asset base from acquisitions.
3. Divestiture Impact: Losses from assets sold in 2024 reduced Q1 2025 results by approximately $6 million in the Natural Gas Gathering segment.

Adjusted EBITDA: A Bright Spot

While net income faltered, adjusted EBITDA soared 23.7% to $1.78 billion, surpassing the prior-year figure of $1.44 billion. This metric excludes noncash items and transaction costs, highlighting operational resilience:
- EnLink Synergies: The acquisition added $80 million to the Natural Gas Pipelines segment and $213 million to the Natural Gas Gathering segment.
- Volume-Driven Gains: Higher NGL and natural gas processing volumes offset margin compression in some areas, such as lower NGL prices and reduced fee rates.

Balance Sheet and Capital Allocation

ONEOK maintained financial discipline, with $141 million in cash and no borrowings under its $3.5 billion credit facility. The company:
- Repaid $250 million of maturing senior notes using cash on hand.
- Returned $17.4 million to shareholders via share repurchases in March 2025, bringing total buybacks under its $2 billion program to $189 million since January 2024.
- Maintained its $4.12 annualized dividend, demonstrating commitment to shareholder returns.

Outlook and Risks

ONEOK reaffirmed its full-year 2025 guidance, projecting $8.225 billion in adjusted EBITDA. Growth catalysts include:
- The Texas City LPG export terminal (400,000 barrels/day capacity), expected to begin operations in early 2028.
- The Medford Fractionator, slated for completion by late 2026/early 2027.
- Continued integration benefits from the EnLink acquisition.

However, risks remain:
- Cost Pressures: Rising employee expenses and methane fees could persist.
- Commodity Volatility: Lower NGL prices or gas demand could impact margins.
- Regulatory Challenges: New environmental regulations may increase compliance costs.

Conclusion: A Compelling Growth Story, with Caution

ONEOK’s Q1 results underscore its ability to execute on strategic acquisitions and capitalize on volume growth, as evidenced by the 23.7% adjusted EBITDA surge. While net income dipped slightly, the company’s focus on high-return projects and shareholder returns (via dividends and buybacks) remains intact. The Rocky Mountain region’s 15% NGL throughput increase and the EnLink integration’s $250 million EBITDA contribution highlight operational strength.

Investors should weigh these positives against rising costs and execution risks. ONEOK’s $1.78 billion adjusted EBITDA and robust balance sheet position it to weather near-term headwinds, but sustained margin expansion will depend on cost control and successful project execution. For now, the company’s growth trajectory and dividend stability make it a compelling play on U.S. energy infrastructure, provided shareholders remain patient through the integration phase.

Final Note: ONEOK’s long-term outlook hinges on its ability to balance acquisition synergies with cost discipline. Investors should monitor Q2 results for further signs of margin stabilization and track the progress of its $4 billion LPG export terminal—a project that could add $300–400 million annually to EBITDA once operational.