ONEOK Partners (OKS) own and operate one of the largest natural gas liquid (NGL) networks in the U.S. Like most midstream Master Limited Partnerships (MLPs), OKS’ stock price has dropped by more than 50% since mid-2014. This despite the fact that most of ONEOK’s revenues are not directly impacted by lower crude and natural gas prices. Today we introduce the first of our new Spotlight reports (a joint venture between RBN and East Daley) available exclusively to Backstage Pass subscribers- that feature deep-dive fundamental analysis of select energy players’ operating assets. The first report features ONEOK and indicates that the company has a strong portfolio of fee based business fed by some of the most attractive producing basins in the U.S., particularly the Bakken which has the potential to amplify the company’s performance both to the upside and downside.
First a word about our new Spotlight reports feature. Spotlight is a joint venture between RBN Energy, LLC and East Daley Capital Advisors, Inc. We have joined together with the support of Oil & Gas Financial Analytics, LLC to provide comprehensive, detailed insight into the companies we select for our analysis. Using publically available data and the deep experience of our combined teams, we get to answers that can be overlooked in the more high-level assessments in the marketplace today. Instead we get into the nitty-gritty, integrating fundamentals, market information and company data into a comprehensive model that provides a clear picture of the company and its prospects. As with all energy fundamental analysis, Spotlight reports rely on estimates and approximations of volumes, throughputs and fees. No non-public data from the subject company or any other source has been used in the preparation of this report. Spotlight reports are available to RBN Backstage Pass subscribers.
Before we get to our first report on ONEOK - please note that Spotlight analysis is provided for reference only, and should not be viewed as investment advice. Neither RBN Energy nor East Daley Capital is an investment advisor. Neither company provides investment, financial, tax, or other advice, nor does either company operate as a broker-dealer. Neither company endorses the purchase or sale of any particular security or makes any other market recommendation.
Based in Tulsa, OK, ONEOK was founded as Oklahoma Natural Gas Company in 1906, one of the oldest corporations in Oklahoma. Today ONEOK, Inc. (OKE) is a major U.S. midstream company and together with its MLP OKS (see Masters of The Midstream for more on energy company partnership structures), owns and operates one of the largest natural gas liquids (NGL) networks in the U.S, including gathering and long-haul pipelines, natural gas processing plants, fractionators, storage and pipeline distribution systems. The company also operates natural gas transmission pipelines, natural gas storage facilities and provides a range of services to energy markets. ONEOK’s activities are focused on three regions - the Rocky Mountains (including a strong position in the Bakken), West Texas and the Mid-Continent.
ONEOK’s core assets are its NGL pipeline and gas processing/fractionation facilities. Figure #1 is an overview map of OKS’ NGL pipeline assets. Regular RBN readers will recall that NGLs are extracted from “wet” gas at processing plants that are usually close by to production. These processing plants output dry gas for pipeline distribution to natural gas consumers and a mixture of NGLs known as “raw-mix” or Y-grade. The raw-mix is then typically shipped by pipeline to a fractionation facility closer to market that separates the 5 purity NGL products – propane, normal butane, iso-butane, ethane and natural gasoline (see Tailgate Blues for more on NGL processing). Geographically the OKS NGL system can be divided into northern and southern halves with the Bushton, KS fractionator as the demarcation point between the two (dashed black line in Figure #1). The northern half includes the 135 Mb/d Bakken NGL pipeline (aqua line on the map) - which is linked to the 255 Mb/d Overland Pass pipeline (purple line – 50% owned by a JV with Williams) in northern Colorado. Both these systems transport raw-mix NGLs to the Bushton/Conway, KS market hub from production basins in the Rockies (Colorado and Wyoming) and the Bakken in North Dakota. The 134 Mb/d North System (orange line) transports NGLs (including purity propane) and petroleum products to Midwestern markets in Kansas, Iowa, Missouri, Indiana, and Illinois.