ONEOK Partners’ Leverage: Key for Investors
ONEOK Partners' Stock Has Risen by 30% in 2016: What's Next?
ONEOK Partners’ net debt-to-equity ratio
ONEOK Partners’ (OKS) net debt-to-equity ratio currently stands at 1.2x. In comparison, midstream companies Spectra Energy (SE), Enterprise Products Partners (EPD), Enable Midstream Partners (ENBL), and Enbridge Energy Partners (EEP) have debt-to-equity ratios of 1.4x, 1.1x, 0.4x, and 0.9x, respectively.
ONEOK Partners had total outstanding debt of $7.6 billion at the end of 1Q16.
Net debt-to-EBITDA ratio
The above graph shows ONEOK Partners’ quarterly net debt-to-equity and net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) ratios over the last three years.
ONEOK Partners’ net debt-to-EBITDA ratio is 5.1x. The nebt-to-EBITDA ratio is often used to assess a company’s ability to repay debt. It’s commonly used by credit rating agencies to determine a company’s credit rating. MLPs usually target a ratio of below 4.5x.
Debt and equity issuances
In January 2016, OKS entered into a $1.0 billion delayed-draw term loan agreement with a group of banks. The agreement matures in January 2019. During 1Q16, OKS drew the full $1.0 billion available under the agreement and used the proceeds to repay outstanding notes and amounts outstanding under its commercial paper program.
In March 2016, OKS completed an underwritten public offering of $800 million worth of senior notes. The net proceeds were used to repay amounts outstanding under its commercial paper program.
In August 2015, ONEOK (OKE) agreed to buy 21.5 million common units of ONEOK Partners’ stock. ONEOK is OKS’s general partner. The transaction increased OKE’s ownership in OKS by 4.4% to 41.2%. OKE issued $500 million worth of senior notes to fund the transaction.
OKS also sold 3.3 million of its common units to funds managed by Kayne Anderson Capital Advisors for ~$100 million. The combined offerings generated net cash proceeds of ~$749 million to OKS.
During the three months ended March 31, 2016, no common units were sold through OKS’s at-the-market equity program.
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