ONEOK (OKE) — Growth, Leverage and Dividend Durability Under the Permian Buildout

Fiscal snapshot that forces a choice: growth vs. leverage#

ONEOK [OKE] closed FY2024 with $21.64B of revenue and $3.04B of net income, representing a year-over-year jump in top line of +22.41% and in net income of +14.29% versus FY2023 (revenue $17.68B; net income $2.66B) (source: FY2024 filings, filed 2025-02-25). Those growth numbers underscore successful volume capture and the contribution of recent asset additions, yet the balance sheet tells a more complicated story: net debt increased to $31.34B at year-end 2024 and, when measured against FY2024 EBITDA of $6.59B, implies a net-debt/EBITDA ratio of roughly ~4.75x on a full-year snapshot. That leverage dynamic is the defining tension for investors — funding an aggressive Permian expansion while pushing to restore headline credit metrics.

The numbers create a trade-off: management is engineering capacity and fee-bearing cash flows that should lift normalized EBITDA into the back half of the decade, but it has done so by materially increasing invested capital and project-related cash outflows (acquisitions and JV equity). The firm’s guidance and commentary explicitly prioritize deleveraging to regain optionality for buybacks and dividend acceleration, but the pace and credibility of that repair depend on execution and realized synergies as new assets ramp to contracted volumes.

Throughout this piece I rely on ONEOK’s FY2024 consolidated financials (filed 2025-02-25) and the company’s publicly disclosed project parameters for Permian initiatives and the Eiger Express JV. Where the dataset provides both TTM and year-end snapshots with divergent metrics, I note the differences and explain which measure I use and why.

Financial performance: revenue, margins and cash conversion#

ONEOK’s FY2024 revenue growth of +22.41% was driven by higher volumes across gas transportation, processing and NGL services and by contributions from acquisitions and integrated flow optimizations (source: FY2024 filings). Operating income of $5.02B and EBITDA of $6.59B produced an EBITDA margin near 30.48% for 2024 on the company’s published margins—an improvement in absolute dollars over 2023’s $5.11B of EBITDA and 2022’s $3.52B as the company scaled throughput and realized synergies.

Net income rose to $3.04B in 2024 from $2.66B in 2023, a +14.29% increase; the difference in magnitude versus revenue growth reflects higher depreciation and interest associated with new asset deployment plus a heavier capital base. Importantly, cash generation remained robust in 2024: net cash provided by operating activities was $4.89B, and free cash flow (FCF) was $2.87B after capital expenditures of $2.02B—a sign that the business continues to convert earnings into distributable cash even while investing heavily (source: FY2024 cash flow statement).

A concise recalculation table below summarizes the income-statement trajectory that underpins the narrative.

Source: FY2024 consolidated income statements (filed 2025-02-25). YoY figures calculated from line-item changes.

Cash flow, dividends and payout dynamics#

ONEOK’s 2024 free cash flow of $2.87B funded $2.31B of dividends and roughly $159M of share repurchases, while the company contributed $5.83B in acquisitions and had $6.61B of investing cash outflows largely tied to JV and project investments (source: FY2024 cash flow statement). Dividends therefore consumed a large share of distributable cash: using year-end figures, dividends paid represent about 80.48% of 2024 free cash flow (2.31 / 2.87 = 0.8048). On an earnings basis, dividends equal ~75.99% of reported net income (2.31 / 3.04 = 0.7599).

Those computed ratios differ from the dataset’s headline payout ratio of ~79% and the draft’s cited FCF payout of ~88%; the gap arises because various published ratios use TTM denominators, adjusted earnings measures or different FCF definitions. To be transparent, I favor point-in-time, GAAP-derived FY2024 numbers for a clear view of the company’s recent cash conversion and actual capital flows, while noting that TTM and adjusted metrics provide complementary perspectives on run-rate sustainability.

The upshot: the dividend is sizable and currently funded by both earnings and FCF, but the margin for error is modest. The company has signaled that deleveraging remains the priority and buybacks are conditional on achieving leverage targets, which is the prudent path to avoid compressing the dividend if project cash flows underperform expectations.

Balance sheet and leverage: where the story tightens#

ONEOK’s balance sheet expanded materially in 2024. Total assets rose to $64.07B while total liabilities were $41.94B, producing total shareholders’ equity of $17.04B (source: FY2024 balance sheet). Total debt stood at $32.08B and net debt at $31.34B. Using those year-end figures, a simple debt-to-equity calculation equals 1.88x (32.08 / 17.04 = 1.88) or 188.20% on a percentage basis.

Comparisons to some TTM metrics in the dataset (for example a reported debt-to-equity of 148.73% and net-debt/EBITDA of 4.46x) reveal inconsistencies driven by differing denominators and timing (TTM EBITDA vs FY EBITDA; debt snapshots taken at different points). To avoid misleading conclusions, I present both the FY-end snapshot calculations and the dataset’s TTM ratios and explicitly flag the differences. For conservative credit analysis, the FY-end net-debt/EBITDA using FY2024 EBITDA gives ~4.75x (31.34 / 6.59 = 4.75), a level that explains management’s public priority of deleveraging to a target near the mid-3x area.

Current liquidity is workable but not abundant. Cash and equivalents were $733M at year-end 2024, and the balance sheet current ratio per year-end figures is 0.90x (4.24 current assets / 4.72 current liabilities). That contrasts with a TTM current ratio reported at 0.59x in the dataset; again, timing and definitional differences account for the gap. The practical implication is that ONEOK must continue to manage maturities and project contributions to avoid liquidity stress, especially if commodity or capital markets tighten.

Source: FY2024 balance sheet (filed 2025-02-25); ratio calculated from FY2024 EBITDA.

Strategy in motion: Permian expansion and the Eiger Express JV#

ONEOK’s strategic posture is no longer purely regional; management is explicitly building a “wellhead-to-water” franchise that ties Permian gas production into Gulf Coast demand and LNG export economics. Central to that plan is ONEOK’s participation in the Eiger Express pipeline joint venture, which the company discloses as carrying an aggregate economic exposure of ~25.5% and a design capacity up to 2.5 Bcf/d with an anticipated in-service window around mid-2028 (source: company project disclosures and investor presentations).

Project economics are structured around fee-bearing, long-duration contracts rather than merchant commodity exposure, which is the strategic rationale investors find compelling: the asset is designed to convert Permian volume growth into stable transportation fees that should raise the normalized baseline of EBITDA without materially increasing commodity sensitivity. The JV financing model—partner equity plus shipper support and limited recourse project debt—reduces ONEOK’s direct funding burden, but it does not eliminate the balance-sheet and cash-flow impacts of equity contributions, construction-period costs and contingent obligations.

Execution will be the watchpoint. The company has historically realized synergies from asset integration and will need both successful construction and commercial ramp of Eiger Express and other Permian projects to justify the elevated invested capital. The timeline also means meaningful, incremental cash flow from Eiger Express is a multi-year story rather than an immediate boost to 2025–2026 results.

Capital allocation: deliberate but constrained#

ONEOK’s stated capital allocation priorities are orderly: fund high-return organic projects, preserve and modestly grow the dividend, deleverage to restore optionality for buybacks, and pursue disciplined M&A where value is clear. FY2024 capex of $2.02B (investments in PP&E) and acquisitions of $5.83B reflect aggressive deployment into Permian-linked capacity and strategic JVs.

The financing of those commitments has come via a combination of operating cash flow, project-level partner equity and capital markets access; the company completed a $3.0B note issuance in August 2025 (management disclosure) to extend maturities and improve liquidity posture. The capital plan is coherent, but it requires successful delivery of synergies and contracted volumes to avoid protracted high leverage that would limit discretionary returns.

Risks that matter#

Execution risk is primary: large-scale pipeline builds face permitting, construction and timing risks, and underperformance in volumes or contract ramping would delay the expected fee revenue that underpins the thesis. Counterparty risk is another practical consideration; while management emphasizes long-dated shipper commitments, the ultimate credit quality and take-or-pay mechanics of those contracts determine downside protection.

Market and macro risks remain relevant. A sustained slowdown in Permian drilling economics or a sharp contraction in LNG demand would lower the marginal value of takeaway capacity and could compress contracted pricing or delay projects. Finally, the dividend’s high payout relative to free cash flow leaves less margin for error during a downturn until leverage returns to target ranges.

What this means for investors#

Investors should read ONEOK’s FY2024 picture as a company in a capital-intensive growth phase: management is buying scale and future fee-bearing cash flows at the cost of near-term leverage expansion. The strength is that operations are generating healthy EBITDA and cash from operations today, and the strategic focus on fee-based transportation to Gulf Coast markets via projects like Eiger Express reduces commodity exposure in the long run. The immediate weakness is the leverage profile — net-debt/EBITDA in the mid-to-high 4x area on FY snapshots — which constrains discretionary capital return until deleveraging progresses.

Patience and execution evaluation will be the differentiators. Stakeholders should monitor three metrics on an ongoing basis: (1) quarterly free cash flow conversion and dividend coverage on an adjusted basis, (2) the pace of leveraged reduction (net-debt/EBITDA movement toward the stated mid-3x range), and (3) commercial progress on Eiger Express and Permian offtake agreements, particularly shipper credit quality and ramp schedules. Those variables will determine whether the firm converts growth capex into durable, distributable cash rather than a prolonged lift in leverage.

Key takeaways#

ONEOK delivered meaningful revenue and net income growth in FY2024 while expanding invested capital to participate in high-capacity Permian-to-Gulf projects. The company generated $2.87B of free cash flow and paid $2.31B of dividends in 2024, implying a near-term FCF payout above 80% on the FY snapshot and a dividend payout that consumes a significant share of distributable cash.

Balance-sheet leverage increased substantially with year-end net debt of $31.34B, producing a FY-snapshot net-debt/EBITDA of ~4.75x based on FY2024 EBITDA. Management’s deleveraging target and conditional buyback stance are therefore credible and necessary guardrails as the company transitions to a larger, coast-to-coast pipeline footprint.

Strategically, Eiger Express and Permian buildouts are the centerpiece of future fee-based growth. These projects are structured to capture Gulf Coast and LNG demand via long-term fees, but their contribution to normalized cash flow will be multi-year and dependent on commercial ramp and successful execution.

Conclusion#

ONEOK sits at a strategic inflection: the company has moved from regional midstream to a larger integrator with end-market access that can convert Permian supply growth into higher-value Gulf Coast receipts. Its FY2024 financials validate revenue and EBITDA growth, but the balance-sheet expansion that funded that growth elevates leverage to levels that make deleveraging and commercial execution the most important near-term performance indicators.

For investors the crux is not whether the strategy can work — the economics and contract design are plausible — but whether ONEOK can deliver projects on time, realize synergies, and reduce net debt to restore optionality for buybacks and more aggressive dividend increases. Until that combination is visible in sequential reporting, the company will remain a growth story tied tightly to balance-sheet repair.

Data sources: ONEOK FY2024 consolidated financial statements (filed 2025-02-25), company project disclosures and investor presentations; internal calculations based on disclosed line items.