ONEOK Partners is in Expansion Mode

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ONEOK Partners L.P. (OKS) continues to expand its operations through organic as well as inorganic route, while improving existing infrastructure. Recently, the partnership has announced its plan to invest roughly $440 million in the Powder River Basin.

ONEOK Partners has divided its investment into two parts. The partnership will invest $305 million for the acquisition of a natural gas processing facility and the development of allied infrastructure and the rest will be used for the installation and improvement of natural gas and natural gas liquids (NGL) infrastructure. The partnership intends to utilize available cash and short-term borrowings for these projects.

ONEOK Partners will buy a natural gas processing facility, the Sage Creek plant. The set up has a capacity to process the natural gas of 50-million cubic feet per day (MMcf/d). The partnership will also acquire associated natural gas gathering and NGL infrastructure, located in western Converse and Campbell Counties in Wyoming. ONEOK Partners intends to complete the acquisition in third-quarter 2013 and the related infrastructure projects in the second half of 2014.

In addition, ONEOK Partners will spend $135 million to develop and improve natural gas gathering and processing infrastructure, NGL gathering pipelines and well connections.

The Powder River Basin is known for its natural gas liquids-rich nature. It is located in northeastern Wyoming and southeastern Montana.

In this region, the petroleum companies are doing active drilling to reap the benefits from the vast resources. To cater to the increasing demand for services from the natural gas and NGL companies, ONEOK Partners has decided to invest more in the Powder River Basin. Another pipeline operator TC PipeLines, LP (TCP) also owns assets in the region.

ONEOK Partners is investing substantial amount for its natural gas and NGL infrastructure projects. Previously, the partnership completed its three important projects - Bakken NGL pipeline, Stateline II plant and an ethane header pipeline.

We view the acquisition and the allied investment as a positive move for ONEOK Partners. The acquisition will help the partnership to boost its natural gas processing capacity and transport NGL volumes to the adjacent ONEOK Partners-owned and operated Bakken NGL pipeline, which will in turn, improve the annual earnings before interest, taxes, depreciation and amortization (:EBITDA) by $40 million to $60 million with in a time span of 2015 and 2018.

Tulsa, Okla.-based ONEOK Partners is one of the largest publicly traded master limited partnerships and a leader in gathering, processing, storing and transporting natural gas in the United States.

ONEOK Partners currently has a Zacks Rank #3 (Hold). However, other stocks from the industry that are presently performing well include Magellan Midstream Partners LP (MMP) with a Zacks Rank #1 (Strong Buy), and Delek Logistics Partners LP (DKL) with a Zacks Rank #2 (Buy).

Read the Full Research Report on MMP

Read the Full Research Report on OKS

Read the Full Research Report on TCP

Read the Full Research Report on DKL

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