ONEOK Q3 2026: EPS up 43% to $2.13, but about 7% without a one-time $336M tax benefit

ONEOK, the Tulsa-based pipeline and processing company, reported third-quarter 2026 (three months to September 30) net income attributable to ONEOK of $1.35 billion, up 43.8%, and diluted earnings per share (EPS) of $2.13 versus $1.49 a year earlier. The size of that jump is mostly an accounting event: a one-time, noncash income tax benefit of $336 million ($0.53 per share) that came from reorganizing the company around the $9 billion minority equity investment it took in during the quarter. Without it, EPS would have been about $1.60, up 7.4%. Adjusted EBITDA, the company's preferred measure of cash earnings from its pipelines and plants (earnings before interest, taxes, depreciation and amortization, excluding noncash items), rose 5.6% to $2.24 billion, and management raised its full-year guidance for the third time this year.

Key figures

MBbl/d = thousand barrels per day; MMcf/d = million cubic feet per day. The EPS excluding the tax benefit is our calculation from the $0.53 per share the release attributes to the benefit; ONEOK does not report an adjusted EPS.

As in the first half, the revenue line says little. Of the $3.82 billion revenue increase, $3.77 billion was "commodity sales," products ONEOK buys and resells in its marketing business, and cost of sales and fuel rose by $3.65 billion alongside it. That pass-through is why operating margin (the share of revenue left after running the business) fell from 18.0% to 12.6% while operating income was flat. For a pipeline company, EBITDA and volumes are the yardsticks that matter.

Segment results: trading gains up, the NGL business down

Refined Products and Crude (+$103M): blending and contract terms. The biggest driver was $87 million more from optimization and marketing, "due primarily to $67 million of higher liquids blending earnings and $20 million of higher crude marketing earnings." Liquids blending means mixing cheaper butane into gasoline and selling the result, so its profit depends on the price gap between the two. Transportation and storage added $36 million, of which $35 million came from "favorable margin sharing components within certain crude contracts" and $23 million from higher refined products volumes, less $17 million from the timing of operational gains and losses. Crude volumes shipped fell 6.6%, so the crude gain came from contract economics, not from more barrels.

Natural Gas Pipelines (+$31M): the West Texas price gap, smaller than in Q2. $22 million came from optimization and marketing on "favorable price differentials between the Waha Hub and Katy, Texas, markets": gas in the Permian Basin still traded below Gulf Coast prices, and ONEOK owns the capacity to move it between the two. That compares with $77 million from the same source in Q2. Firm transportation revenue (fees customers pay for reserved capacity whether or not they use it) added $18 million; contracted capacity rose 7.4% to 7,780 MDth/d, 92% of what is available.

Natural Gas Liquids (-$30M): record volumes, lower earnings. This is ONEOK's largest segment, handling ethane, propane, butane and other liquids separated from raw gas. Raw feed throughput rose 5.5% to 1,661 MBbl/d, with the Gulf Coast/Permian region up 16%, and those volumes were worth $28 million more in exchange-services fees. But exchange services fell $27 million overall, because of a "$45 million decrease from higher inventory of unfractionated NGLs" (liquids received but not yet separated into products, so not yet earning the full fee) and $5 million from narrower price differentials. Operating costs rose another $27 million. A $29 million gain in optimization and marketing ($14 million from selling purity NGLs held in inventory, $11 million from wider commodity price differentials) cushioned the drop.

Gathering and Processing (-$3M): volumes up, costs up more. Higher production "in all regions" added $11 million and realized prices net of hedging $6 million; operating costs rose $19 million. Permian gas processed rose 4%, but company-wide processed volume was up only 0.2%.

What the headline numbers hide

• A one-time tax benefit did most of the EPS growth. Pretax income rose 9.8% to $1.36 billion, yet ONEOK reported a $26 million tax benefit against $297 million of tax expense a year ago. The release attributes $336 million to "a one-time noncash income tax benefit... resulting from the ONEOK, Inc. reorganization related to the minority equity transaction." Without it, the tax line would have been about $310 million (a 22.8% rate), net income attributable to ONEOK about $1.01 billion (+8.0%) and EPS about $1.60 (+7.4%).
• A debt gain sits inside adjusted EBITDA. Q3 adjusted EBITDA includes a "$53 million net benefit from the minority equity and Brazos Midland transactions, related primarily to corporate net gains on extinguishment of debt" (ONEOK bought back bonds below face value when it retired nearly $5.5 billion of debt in September). Q3 2025 had a $22 million gain of the same kind. Stripping both out, adjusted EBITDA grew about 4.2% ($2,185 million vs $2,097 million). This is also why "Other income, net" rose from $37 million to $102 million.
• Fee earnings did not grow. Optimization and marketing rose $87 million in Refined Products and Crude, $29 million in NGLs and $22 million in Natural Gas Pipelines: $138 million in total, more than the $119 million company-wide increase. Total operating costs rose 16.7% to $861 million, much faster than volumes, with every segment citing higher outside services and employee costs. Marketing profits depend on price gaps that can close; pipeline fees are the steadier part of the business, and here they did not carry the quarter.
• Outside investors now take a slice. Net income attributable to noncontrolling interests (the share of profit belonging to outside owners of ONEOK subsidiaries) rose from $1 million to $34 million, of which $33 million relates to the new $9 billion minority equity investment. Under that deal, as our Q2 report described, the investor receives 15% of ONEOK's consolidated operating cash flow in quarters it gets a distribution. The guidance implies this grows: full-year net income of $4.18 billion versus $3.985 billion attributable to ONEOK at the midpoints leaves about $195 million for outside owners, or roughly $158 million in Q4 alone after $37 million year to date.
• Interest is falling, partly because of accounting. Interest expense fell 7.8% to $415 million. Part of the drop is that more interest was capitalized into construction projects ($42 million vs $19 million), which moves the cost onto the balance sheet rather than eliminating it. Total debt (long-term, current maturities and short-term borrowings) fell from $32.8 billion at December 31 to $28.5 billion, which will cut interest in Q4: full-year guidance of $1,645–1,675 million implies $357–387 million for Q4.
• Cash conversion is solid. Nine-month operating cash flow was $4.37 billion against net income of $3.13 billion. Receivables rose $1.17 billion since December, but payables rose $1.38 billion, consistent with higher pass-through commodity sales rather than slow-paying customers. Inventories rose $390 million to $1.34 billion, in line with the NGL segment's comment about unfractionated inventory.
• Share count and dividends. Diluted shares rose 0.2% to 632.6 million, so buybacks played no role in EPS; the cash flow statement shows no share repurchase line for 2026. Dividends paid were $674 million in Q3 (our calculation: $2,022 million for nine months less $1,348 million for the first half in the Q2 10-Q), up 4.0% from $648 million.

On balance the quarter is flattered: EPS rose 43%, but about 7% without the one-time $336 million tax benefit, and adjusted EBITDA growth shrinks from 5.6% to about 4% once the debt-repurchase gains in both years are set aside.

Did last time's read hold up?

Our Q2 report named two things to watch in the second half: whether NGL fee rates would stabilize as the rebuilt Medford fractionator came back, and how much of the Waha-to-Katy marketing gain would repeat. The NGL segment is still lagging: EBITDA fell 4% on 5.5% more volume, this time because barrels waited in inventory unfractionated (the first Medford phase is due in Q4). The Waha-Katy gain shrank as expected, from $77 million in Q2 to $22 million in Q3, but liquids blending and crude contracts in Refined Products and Crude more than replaced it. We also said the Brazos and Apollo deals would make comparisons harder; they did, through the $336 million tax benefit, the $53 million debt gain and the new noncontrolling-interest line. Q2's guidance implied about $4.23 billion of second-half adjusted EBITDA; Q3 alone delivered $2.24 billion, and the new midpoint implies about $4.43 billion for the half.

Takeaway: Strip out the one-time $336 million tax benefit and ONEOK grew EPS about 7%, with marketing gains from price gaps (blending, crude contracts, West Texas gas) providing more than all of the EBITDA increase while costs rose 16.7%. The volumes are growing; what is not yet showing is fee income growing with them.

Guidance and outlook

ONEOK raised its 2026 guidance on October 27:

Most of the net income and EPS raise is the tax benefit: $0.53 of the $0.62 increase in the EPS midpoint. Of the $200 million increase in the EBITDA midpoint, the company attributes about $50 million (net of transaction costs) to the Brazos Permian Midland acquisition, and $53 million is the Q3 debt gain, leaving roughly $100 million from the existing business. Capex rises to about $3.5 billion with Brazos-related spending.

The midpoints imply about $2.19 billion of adjusted EBITDA, $895 million of net income attributable to ONEOK and $1.41 of EPS in Q4. That EPS is below Q3's roughly $1.60 excluding the tax benefit. Total net income is implied at about $1.05 billion, close to Q3's level without the tax benefit, so the gap is the outside investor's larger share (about $158 million) rather than weaker operations.

CEO Pierce Norton said he expects "meaningful earnings growth" in 2027 from Brazos, completed projects and "commercial optimization." Our read: what will show whether 2027 growth is real is (1) whether NGL segment EBITDA turns up once Medford's 100 MBbl/d first phase is running and the unfractionated inventory clears, (2) how much of the blending and crude-contract gains repeat, since they were the largest single driver this quarter, and (3) EPS after the outside investor's share, which will now run at well over $100 million a quarter. The quarterly dividend is $1.07 ($4.28 annualized).

Source: ONEOK third-quarter 2026 earnings release (Form 8-K, Exhibit 99.1, October 27, 2026). The full Form 10-Q, with management's discussion and more segment detail, had not been filed at the time of writing. First-half dividends paid are from the Q2 2026 Form 10-Q. Adjusted EBITDA is a non-GAAP measure; ONEOK reconciles it to net income in the release.