OKE
OKE
Hold 2026-03-30
Model
DDM
Price at Report
$93.96
Base IV
$93.07
Bear IV
$67.98
Bull IV
$128.09
Entry Zone: 71-86 · Sell Above: 109
Bore Family Office
Valuation Report — ONEOK (OKE) • March 30, 2026
3-Stage DDM (Ke) • Discount Rate: 8.60% • Current Price: $93.96
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
ONEOK is one of the largest publicly traded midstream energy companies in the United States, operating an extensive network of natural gas gathering, processing, fractionation, storage, and transportation infrastructure. Following the transformative acquisitions of Magellan Midstream Partners ($18.8B, 2023) and Crestwood Equity ($1.8B, 2023), ONEOK now operates ~50,000 miles of pipeline spanning natural gas, NGL, and refined products across 28 states.
Unlike MLPs, ONEOK is structured as a C-corporation, allowing inclusion in major equity indices and access to a broader institutional shareholder base. Approximately 85% of revenues are fee-based or have minimum volume commitments, providing significant earnings stability regardless of commodity price fluctuations. ONEOK's integrated NGL value chain from wellhead to end-user creates a competitive moat that is difficult to replicate.
| Business Segment | Revenue | % of Total | YoY Growth | Margin | Notes |
|---|---|---|---|---|---|
| Natural Gas Gathering & Processing | $12,800M | 38% | +12.0% | — | Rocky Mountain, Mid-Continent, Permian/Anadarko |
| Natural Gas Liquids (NGL) | $10,200M | 30% | +8.0% | — | Fractionation, transportation, storage of ethane/propane/butane |
| Natural Gas Pipelines | $7,500M | 22% | +6.0% | — | Regulated/fee-based transmission |
| Refined Products & Crude (Magellan) | $3,129M | 9% | +15.0% | — | Magellan liquid pipeline network; acquired mid-2023; full-year contribution from 2024 |
| Other | $0M | 1% | +0.0% | — | Corporate/intersegment |
| Blended Growth Rate | — | 100% | +9.6% | — | Weighted avg across segments |
🔍 Quality Scorecard
| Metric | Value | Assessment |
|---|---|---|
| ROIC | 8.5% | 8–12% adequate |
| FCF Margin | 7.3% | 5–10% adequate |
| Debt / EBITDA | 4.5x | 2–5x moderate |
| Revenue Trend | Growing 3yr | 3-year directional trend |
| FCF Margin Trend | Contracting | Directional margin trajectory |
| Analyst Revisions | Upward revisions | Last 90 days consensus direction |
✅ Quality profile supports the valuation
📊 Financial Snapshot
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $16,540 | $22,387 | $17,677 | $21,698 | $33,629 |
| Rev YoY Growth | — | +35.4% | -21.0% | +22.7% | +55.0% |
| Gross Margin | 25.9% | 20.0% | 32.5% | 38.7% | 30.5% |
| EBITDA ($M) | $3,218 | $3,433 | $4,841 | $6,123 | $7,255 |
| EBITDA Margin | 19.5% | 15.3% | 27.4% | 28.2% | 21.6% |
| Operating Income ($M) | $2,596 | $2,807 | $4,072 | $4,989 | $5,741 |
| Operating Margin | 15.7% | 12.5% | 23.0% | 23.0% | 17.1% |
| Net Income ($M) | $1,499 | $3,443 | $5,317 | $6,069 | $6,786 |
| Net Margin | 9.1% | 15.4% | 30.1% | 28.0% | 20.2% |
| EPS (diluted) | $3.35 | $3.84 | $5.48 | $5.17 | $5.42 |
| Free Cash Flow ($M) | $1,849 | $1,704 | $2,826 | $2,867 | $2,447 |
| Annual DPS | $3.740 | $3.760 | $3.855 | $4.000 | $4.160 |
| Total Debt ($M) | $13,733 | $13,701 | $21,667 | $32,077 | $32,816 |
📈 DDM Scenarios
$68
🔴 Bear
$93
📊 Base
$128
🚀 Bull
$93.96
Current Price
$92
Analyst Avg PT
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | Ke | Intrinsic Value | vs Price |
|---|---|---|---|---|---|---|
| 🔴 Bear | 3.0% | 1.5% | 2.0% | 8.60% | $68 | ▼27.7% |
| 📊 Base | 7.5% | 3.8% | 2.5% | 8.60% | $93 | ▼0.9% |
| 🚀 Bull | 12.0% | 6.0% | 3.0% | 8.60% | $128 | ▲36.3% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: 3.0% | Stage 2: 1.5% | Terminal: 2.0%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $4.408 | $4.059 | $4.06 |
| Year 2 | Stage 1 | $4.541 | $3.850 | $7.91 |
| Year 3 | Stage 1 | $4.677 | $3.651 | $11.56 |
| Year 4 | Stage 1 | $4.817 | $3.463 | $15.02 |
| Year 5 | Stage 1 | $4.962 | $3.285 | $18.31 |
| Year 6 | Stage 2 | $5.036 | $3.070 | $21.38 |
| Year 7 | Stage 2 | $5.112 | $2.869 | $24.25 |
| Year 8 | Stage 2 | $5.188 | $2.682 | $26.93 |
| Year 9 | Stage 2 | $5.266 | $2.506 | $29.44 |
| Year 10 | Stage 2 | $5.345 | $2.342 | $31.78 |
| Terminal | — | TV=$82.61 | PV(TV)=$36.20 (53% of IV) | $67.98 |
| Intrinsic Value | — | — | PV(Divs) $31.78 + PV(TV) $36.20 | $67.98 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (8.60%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (2.0%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $82.61. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $36.20). Intrinsic value = PV of all dividends ($31.78) + PV of terminal value ($36.20) = $67.98 per share.
Base Scenario
Stage 1: 7.5% | Stage 2: 3.8% | Terminal: 2.5%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $4.601 | $4.237 | $4.24 |
| Year 2 | Stage 1 | $4.946 | $4.194 | $8.43 |
| Year 3 | Stage 1 | $5.317 | $4.151 | $12.58 |
| Year 4 | Stage 1 | $5.716 | $4.109 | $16.69 |
| Year 5 | Stage 1 | $6.144 | $4.068 | $20.76 |
| Year 6 | Stage 2 | $6.378 | $3.888 | $24.65 |
| Year 7 | Stage 2 | $6.620 | $3.716 | $28.36 |
| Year 8 | Stage 2 | $6.872 | $3.552 | $31.91 |
| Year 9 | Stage 2 | $7.133 | $3.395 | $35.31 |
| Year 10 | Stage 2 | $7.404 | $3.245 | $38.55 |
| Terminal | — | TV=$124.41 | PV(TV)=$54.52 (59% of IV) | $93.07 |
| Intrinsic Value | — | — | PV(Divs) $38.55 + PV(TV) $54.52 | $93.07 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (8.60%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (2.5%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $124.41. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $54.52). Intrinsic value = PV of all dividends ($38.55) + PV of terminal value ($54.52) = $93.07 per share.
Bull Scenario
Stage 1: 12.0% | Stage 2: 6.0% | Terminal: 3.0%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $4.794 | $4.414 | $4.41 |
| Year 2 | Stage 1 | $5.369 | $4.552 | $8.97 |
| Year 3 | Stage 1 | $6.013 | $4.695 | $13.66 |
| Year 4 | Stage 1 | $6.735 | $4.842 | $18.50 |
| Year 5 | Stage 1 | $7.543 | $4.993 | $23.50 |
| Year 6 | Stage 2 | $7.995 | $4.874 | $28.37 |
| Year 7 | Stage 2 | $8.475 | $4.757 | $33.13 |
| Year 8 | Stage 2 | $8.984 | $4.643 | $37.77 |
| Year 9 | Stage 2 | $9.523 | $4.532 | $42.30 |
| Year 10 | Stage 2 | $10.094 | $4.423 | $46.73 |
| Terminal | — | TV=$185.66 | PV(TV)=$81.36 (64% of IV) | $128.09 |
| Intrinsic Value | — | — | PV(Divs) $46.73 + PV(TV) $81.36 | $128.09 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (8.60%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (3.0%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $185.66. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $81.36). Intrinsic value = PV of all dividends ($46.73) + PV of terminal value ($81.36) = $128.09 per share.
🔲 Sensitivity Table
| Ke \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 6.6% | $120 | $129 | $140 | $154 | $173 |
| 7.1% | $109 | $116 | $125 | $135 | $149 |
| 7.6% | $100 | $105 | $112 | $120 | $130 |
| 8.1% | $92 | $96 | $102 | $108 | $116 |
| 8.6% | $85 | $89 | $93 | $98 | $104 |
| 9.1% | $79 | $82 | $86 | $90 | $95 |
| 9.6% | $74 | $76 | $79 | $83 | $87 |
| 10.1% | $69 | $72 | $74 | $77 | $80 |
| 10.6% | $65 | $67 | $69 | $72 | $74 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|---|
| Annual DPS | $4.280 |
| Current Yield | 4.56% |
| Consecutive Growth Years | 3 |
| 1-yr DPS CAGR | +4.0% |
| 3-yr DPS CAGR | +3.8% |
| 5-yr DPS CAGR | +2.5% |
| 10-yr DPS CAGR | — |
| Payout Ratio (DPS/EPS) | 78.8% ⚠️ |
| FCF Payout Ratio | 106.3% ⚠️ |
| Sustainability Verdict | Watch |
Dividend is Watch. FCF payout exceeded 100% in FY2025 due to elevated post-Magellan integration capex. However, EBITDA coverage is strong (2.7×) and management expects FCF to improve as capex normalizes toward $2.0B. The dividend is likely safe at current levels but growth is constrained until deleveraging is complete.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $3.35 | — | — | — | Actual |
| 2022 | $3.84 | — | — | — | Actual |
| 2023 | $5.48 | — | — | — | Actual |
| 2024 | $5.17 | — | — | — | Actual |
| 2025 | $5.42 | — | — | — | Actual |
| 2026 | $5.23 | $5.77 | $6.58 | 21 | Estimate |
| 2027 | $5.68 | $6.18 | $7.20 | 19 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $16.5B | — | — | — | Actual |
| 2022 | $22.4B | — | — | — | Actual |
| 2023 | $17.7B | — | — | — | Actual |
| 2024 | $21.7B | — | — | — | Actual |
| 2025 | $33.6B | — | — | — | Actual |
| 2026 | $27.1B | $32.5B | $41.2B | 21 | Estimate |
| 2027 | $28.8B | $34.0B | $42.2B | 19 | Estimate |
(c) Individual Analyst Price Targets
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| Michael Blum | Wells Fargo | Buy | $100 | +6.4% |
| Julien Dumoulin-Smith | Jefferies | Strong Buy | $98 | +4.3% |
| Gabe Daoud | Truist Securities | Hold | $91 | -3.2% |
| Elvira Scotto | RBC Capital | Hold | $84 | -10.6% |
💡 Investment Thesis
- Scale transformation via Magellan acquisition: The $18.8B Magellan deal (Sep 2023) added ~9,700 miles of liquid pipelines and terminalling assets, transforming OKE from a pure-play NGL company to the most diversified midstream platform in the US. FY2024-2025 results are the first full years showing the combined entity's earnings power.
- Natural gas renaissance as energy transition fuel: Natural gas is increasingly viewed as the bridge fuel and AI data center power source of the next decade. US LNG export capacity expansions (Sabine Pass, Golden Pass, Lake Charles) will require incremental gathering and transport infrastructure — OKE is uniquely positioned.
- Fee-based model with 85%+ contracted revenues: Unlike E&P companies, OKE's earnings are largely insulated from commodity price swings. EBITDA of $7.3B provides 2.7× coverage of the $2.6B annual DPS obligation.
- Dividend growth optionality post-deleveraging: OKE took on substantial debt for Magellan. As leverage comes down from ~4.5× to the 3.5× target range, excess cash flow will accelerate dividend growth from the current 3-4% guidance toward 7-8%.
- C-corp structure re-rating potential: As an S&P 500 component, OKE is accessible to all institutional investors (vs. K-1 issuing MLPs). The midstream sector has been re-rated upward as investors recognize fee-based utility-like characteristics.
⚖️ DDM Verdict: Hold — ONEOK (OKE)
Current price: $93.96 | Analyst Avg PT: $92.06
$68
🔴 Bear
$93
📊 Base
$128
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$86 | Begin position |
| Tier 2 — Add | ≤$81 | Add on weakness |
| Tier 3 — Full | ≤$71 | Full allocation |
| Sell Alert | ≥$109 | Above fair value — consider trimming |
How tiers are set: Tier 1 = Base IV × 0.92 (8% discount to base case). Tier 2 = midpoint of Bear & Base IV (building on meaningful weakness). Tier 3 = Bear IV × 1.05 (just above worst-case — maximum margin of safety). Sell alert = Bull IV × 0.85 (15% discount to bull case — above fair value range).
Initiate at Hold with a Base intrinsic value of approximately $93. OKE is fully valued at current levels — the stock trades essentially at our Base IV with upside limited to ~8% before accounting for the 4.56% dividend yield. The Magellan integration is proceeding well, but near-term EPS growth is muted. We'd become more constructive on weakness below $85, where the yield approaches 5% and upside to Base improves to 10%+. Current holders: Hold and collect the dividend.
🔧 Model Notes & Calibration
| Assumption | Rationale / Notes |
|---|---|
| Model Selection | DDM chosen: OKE is structured as a C-corp midstream company with a stable, growing dividend backed by 85%+ fee-based revenues. DPS is the primary equity cash flow to investors. DCF would be distorted by large D&A from the Magellan acquisition ($1.5B+ annually). |
| Cost of Equity | Ke = 4.4% + 0.80 × 5.5% = 8.8%; used 8.6% — integrated midstream C-corp with minimum volume commitments has lower systematic risk than pure commodity names. Beta estimated at 0.80. |
| DPS Growth Calibration | Historical DPS growth has been 3-4%/yr. Post-Magellan, OKE's scale and cash generation support higher growth once leverage normalizes. Stage 1 g=7.5% reflects deleveraging trajectory (2025-2029). Management will likely guide to higher growth once Debt/EBITDA < 3.5×. |
| FCF Coverage Note | FY2025 FCF $2.4B vs DPS obligation ~$2.6B = coverage <1.0×. This is due to elevated post-Magellan integration capex. Maintenance capex ~$800M; growth capex $1.3B in 2025. As growth capex moderates, FCF/DPS coverage should recover to 1.1–1.2× by 2026-2027. |
| Sanity Check | Base IV $92.92 vs. analyst consensus PT $92.06 — +0.9%, within ±1% — excellent calibration. |
Bore Family Office • Analysis generated by Lurch • Not investment advice.