ONEOK to Construct NGL Fractionation & Processing Capacity
ONEOK Inc. OKE is planning to construct additional natural gas liquids (“NGL”) and natural gas infrastructure. The projects include a new NGL fractionator — MB-5 — with capacity of 125,000-barrel per day (bpd) in Mont Belvieu, TX and an extension of ONEOK's Arbuckle II NGL pipeline project. The company will invest nearly $1.05 billion for the NGL projects, which are expected to be completed in the first quarter of 2021.
Natural gas infrastructure construction includes a new 200-million cubic feet per day (MMcf/d) natural gas processing facility, which is related to the Demicks Lake II plant and related infrastructure project. It is expected to be completed by the first quarter of 2020.
ONEOK’s Expansion Plans
With the increasing production of natural gas, the demand for additional NGL fractionation and natural gas processing capacity in rising. To benefit from increasing production and demand for NGLs, ONEOK announced $3.7-billion NGL pipeline growth projects in June 2017.
Recently, the company announced plans to increase operations in the Permian Basin through the expansion of the West Texas LPG Limited Partnership pipeline system, which has 80,000 barrels per day (bpd) capacity. To increase pipeline system’s capacity by 190,000 bpd in the Delaware Basin and the Permian Basin ONEOK will invest nearly $495 million. The company expects 2018 total growth capital expenditures in the range of $2.0-$2.3 billion.
Future of Natural Gas
Per U.S. Energy Information Administration report, dry natural gas production in the United States was 82.2 billion cubic feet per day (Bcf/d) in August, up 0.7 Bcf/d from July. Dry natural gas production projected to average 81.0 Bcf/d in 2018, up 7.4 Bcf/d from 2017 level and establishing a new record high. EIA expects natural gas production will continue to rise in 2019 to an average of 84.7 Bcf/d.
Increasing production of natural gas will increase the demand for infrastructure and processing capacity. More pipeline systems are expected to boost upcoming results. ONEOK‘s new projects are expected to generate adjusted EBITDA by multiples of four to six times.
Price Movement
In a year’s time, ONEOK’s shares have rallied 23.1% compared with the industry’s rise of 5.2%.
Zacks Rank & Key Picks
ONEOK currently has a Zacks Rank #3 (Hold). A few better-ranked stocks in the same industry are NewJersey Resources Corporation NJR, Southwest Gas Corporation SWX and UGI Corporation UGI. All three stocks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
NewJersey Resources’ earnings per share (EPS) estimate for 2018 inched up 1.1% in the past 60 days to $2.65. In the past six months, shares of this company have gained 16.0%.
Southwest Gas’ EPS estimate rose 3.6% for the current year to $3.71 in the past 60 days. The stock has gained 16.1% in the past six months.
UGI Corporation’ EPS estimate has been revised 1.5% upward for the current year to $2.77 in the past 60 days. The stock has gained 24.6% in the past six months.
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