OKE - Oneok raised to Buy with Street-high EBITDA forecast at Citi

2023-04-04 11:42:57 ET

Oneok ( NYSE: OKE ) drifts lower Tuesday even after Citi upgrades the stock to Buy from Neutral with a $72 price target, saying the company is well positioned to achieve the high end of its FY 2023 guidance range.

Citi's Spiro Dounis cited "increasing rig counts, improved ethane recovery economics, and the potential for reduced third-party frac fees once MB-5 enters service all present upside relative to what we believe is imputed into the current guidance range" in raising his FY 2023 EBITDA estimate for Oneok ( OKE ) to a Street-high $4.7B.

Dounis also said he does not believe the current consensus properly reflects Oneok's ( OKE ) "torque to volume growth, particularly following the recently announced OPEC+ output cut, which we expect to result in increased associated gas and NGL production."

The analyst also said an acceleration in drilling activity could speed the need for additional Elk Creek capacity by 2027, an expansion that could drive as much as $400M of incremental EBITDA at full rates.

Oneok's ( OKE ) balance sheet "is in good shape with leverage near 3.5x, and the dividend is growing," Geoffrey Seiler writes in an analysis published recently on Seeking Alpha .

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