ONEOK Partners Completes 3 Projects

Zacks Equity Research

ONEOK Partners L.P. (OKS) continues with its steady effort towards expansion of its operations by adding new infrastructure. The partnership has completed three important projects: the Sterling III pipeline, Canadian Valley natural gas processing facility and an ethane/propane (E/P) splitter. All the three projects are part of ONEOK Partners’ $6-$6.4 billion capital-growth program through 2016.

ONEOK Partners has constructed a 540-plus-mile, 16-inch diameter natural gas liquids (NGL) pipeline, called Sterling III pipeline, stretching from the Mid-Continent region to the Texas Gulf Coast. The pipeline will carry 193,000 barrels per day (bpd) of either unfractionated NGLs or NGL purity products from the partnership's NGL operations at Medford, OK to its storage and fractionation facilities at Mont Belvieu, TX.

Located in Cana-Woodford Shale, OK, the Canadian Valley natural gas processing facility has a capacity to process 200-million cubic feet per day (MMcf/d) of natural gas. ONEOK Partners has invested $340-$360 million for this project. It is the partnership’s largest natural gas processing facility in OK. The new infrastructure will enable the partnership to increase its processing capability to around 700 MMcf/d.

The third project, a 40,000-bpd E/P splitter at ONEOK Partners’ NGL storage facility in Mont Belvieu, TX, cost the partnership $46 million. The infrastructure will enable ONEOK Partners to split E/P mix into purity ethane and propane. The facility has a capacity to produce purity ethane and propane of 32,000 bpd and 8,000 bpd, respectively.

Cana-Woodford Shale is situated in Western Oklahoma. As per a U.S. Energy Information Administration report published in 2011, the shale is expected to be the world’s deepest commercial horizontal shale play. The depth ranges from 11,500 to 14,500 feet. The estimated ultimate recovery (:EUR) of the shale is 4-12 billion cubic feet (Bcf) with an average EUR of 5.2 Bcf per well. The shale contains gas, NGL and oil of about 65%, 30% and 5%, respectively.

To reap the benefits of the vast resources of Cana-Woodford Shale, energy companies like Devon Energy Corp. (DVN) and Marathon Oil Corp. (MRO) have a significant presence in the region and engages in steady exploration and production activities.

The construction of the Sterling III pipeline and Canadian Valley natural gas processing facility are in sync with the existing infrastructural development initiatives undertaken by ONEOK Partners in Cana-Woodford Shale.

ONEOK Partners has decided to further invest in Cana-Woodford Shale. The partnership intends to reconfigure its existing Sterling I and II pipelines. The estimated cost for the development of the Stateline III pipeline and the reconfiguration projects will be in the range of $760-$790 million. We believe that the scheduled completion of these projects will enable the partnership to meet the growing customer demand.

ONEOK Partners currently has a Zacks Rank #3 (Hold). However, another stock from the industry that is presently performing better is Energy Transfer Equity, L.P. (ETE) with a Zacks Rank #1 (Strong Buy).

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