This has become a very complicated company to understand if you are not familiar with MLPs and MLP GPs.
Why did the stock go up so much based on simply moving assets from OKE to its affiliate, NBP? All of the same assets still will be consolidated on OKE's balance sheet.
Taxes and cash flow are key. You are no longer going to be able to value this company well based on PE and income, and will need to look through the earnings to the cash flow.
Beginning this year, OKE should receive about $175 million in cash from NBP. That number hopefully will go up at a good clip going forward. Most of that money will be tax free or at reduced tax rates because of the way MLPs are structured. In addition, OKE will have very low capital expenditures tied to growing this NBP cash stream.
The bottom line is that OKE moves from a capital intensive business to a free cash flow machine.
How much cash will OKE generate going forward? The Energy Services business is a little volatile, so it is unclear. I am sure others can post the projected free cash flow from the LDCs and Energy Services. Combine those with $175 from NBP and you get 2006 cash flow. I would assign a higher multiple to the value of that cash flow given the low cap ex required to grow the NBP portion.
Another thing to point out is this. Oneok sold all of those assets to NBP, and lets assume that the cash flow multiple was 9x, so, NBP gets 333 million in cash flow. If OKE owned them still, that 333 million might come out to 250 million (assume a 25% tax rate). NBP doesn't pay taxes, so, OKE essentially lost 250 million in after tax income, gained back 175 million in income from the LP units and GP interest, gained 1.4 billion in cash(assume that they pay down debt with that they avoid at least 84 million in interest charges if the debt was at 6% interest rate), which means that they avoid , and received the 1.6 billion in LP units and set themselves up for tremendous growth and get 175 million in cash and avoid 84 million a year in interst. As MLPfollower pointed out, they now have no cap ex for those projects, yet still reap most of the benefits.