Earnings Preview: ONEOK Partners

Midstream companies are having an excellent 2013 so far, but ONEOK Partners (NYSE: OKS  ) has more or less missed out, as shares are down about 1% year to date. The partnership and its general partner ONEOK (NYSE: OKE  ) report earnings on Tuesday, and the results will hopefully shed some light on whether or not things will pick up this year. Here are three things to watch for when ONEOK Partners reports.

1. NGL prices
ONEOK Partners got completely clobbered by low natural gas liquids prices last quarter. Operating income for its NGL segment was essentially cut in half, falling to $125.8 million. The partnership hopes to increase its percentage of fee-based gross margin from 58% to 68% this year, and first quarter results will let us know how far along ONEOK really is, especially given that the prices of ethane and propane are still depressed.

2. Distributable cash flow
The partnership has already announced it will be increasing its distribution for the first quarter, from $0.71 to $0.715. It would like to increase its payout by the same amount every quarter this year, with the aim of growing distributions by 8% to 12% annually until 2015.

The increase comes after the partnership reduced the low end of its full-year distributable income target from $1.05 billion to $910 million. In 2012, full-year distributable cash flow came in at $1.0 billion, after first-quarter distributable cash flow of $279 million. Anything shy of that number would be a bit disconcerting.

3. Progress in the Bakken
ONEOK Partners is one of the few outfits focused on expanding natural gas and NGL infrastructure in the Bakken Shale play. It recently completed its Bakken NGL pipeline, and while this asset won't contribute much, if anything at all, to the bottom line in the first quarter, it is currently up and running. We should get some feedback on performance of this line and the other assets ONEOK brought on line in recent weeks. The partnership plans to spend up to $1.7 billion building out Bakken infrastructure by 2015.

Foolish takeaway
Analysts are expecting earnings of about $0.58 per unit, while revenue estimates range from a high of $3.14 billion to a low of $389 million. Last quarter, analysts anticipated earnings per unit of $0.62, but actual earnings came in higher at $0.66. ONEOK Partners reports before the market opens on Tuesday, with its conference call scheduled for 11:00 a.m. EST that morning. Interested investors can listen here, or click here to add ONEOK Partners to My Watchlist.

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