Assessing ONEOK Partners' 1st quarter earnings for 2014 (Part 4 of 7)
ONEOK Partners plans to increase NGL production
ONEOK Partners (OKS) plans to invest more than $3.0 billion in its natural gas liquids (or NGL) segment from 2010 through 2016. The company projects to increase NGL production gathered volume by 15% and NGL volumes fractionated to increase by 10% in 2014, as compared to 2013.
The demand for ethane and propane, known as the purity NGL products, has been strong due to their extensive usage in the petrochemical industry. The pet-chem companies continue to use these lower-cost feedstocks instead of the more expensive, crude-oil-based alternatives. Several new petrochemical expansion projects and facilities have come up in the Gulf Coast region. In late 2013 and early 2014, the U.S. witnessed one of the coldest winters in recent times. This led to an increased propane demand and lower Midwest inventories, which resulted in higher propane prices. During 1Q14, propane demand in Midwest increased due to the colder-than-normal temperatures. Also, prices were higher at the Mid-Continent market center in Conway, Kansas than the prices in the Gulf Coast market center in Mont Belvieu, Texas.
The growth in NGL volume is expected to be materialized through addition of more than ten natural gas processing plants. OKS has announced ~$1.0 billion of new capital-growth projects, which are at various stages of completion. Expected to be complete by 3Q14, OKS is building additional pumping stations on the Bakken NGL Pipeline for approximately $100 million. This would double the pipeline’s capacity to 135,000 barrels per day. Plus, a second expansion of the Bakken NGL pipeline has also been announced in November 2013, which would further increase the capacity to 160,000 barrels per day by the end of 2Q16.
OKS is also planning a capital expenditure of approximately $525 million to $575 million to construct a 75,000-bpd NGL fractionator at Mont Belvieu, Texas. The facility is expected to be complete in 4Q14.
The company is also setting up a $85 million pipeline to connect the Sage Creek natural gas gathering and processing plant with the Bakken NGL pipeline, expected to be complete by 4Q14. Plus, to connect the company’s NGL fractionation infrastructure at Hutchinson, Kansas, and Medford, Oklahoma OKS is constructing a 95-mile pipeline for $140 million. The company also plans to modify its infrastructure at the plant to fractionate additional NGL production from Williston basin.
ONEOK Partners, L.P. (OKS) is a master limited partnership operating in the midstream energy space. OKS is also part of Alerian MLP ETF (AMLP), MLP ETF (MLPA), and Global X MLP & Energy Infrastructure ETF (MLPX). OKS is also a component of Alerian MLP Index ETN (AMJ).
Browse this series on Market Realist:
- Part 1 - ONEOK Partners: A must-know introduction for investors
- Part 2 - ONEOK Partners’ 1Q14 earnings analysis: A $6.5 billion capex spend
- Part 3 - Why the Natural Gas Gathering and Processing segment is growing