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ONEOK to Sell $7B Notes to Fund Acquisition, Expand Permian Presence
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ONEOK Inc. (OKE - Free Report) announced to sell $7 billion of senior notes in six tranches with coupon rates varying between 4.25% and 5.85%. The maturity dates of the different series of senior notes vary from 3 years to 40 years.
The net proceeds of senior notes after deducting underwriting discounts, commissions and offering expenses, are expected to be $6.92 billion. ONEOK expects the offering to close on or about Sept. 24, 2024, subject to the satisfaction of customary closing conditions.
How ONEOK Will Utilize Proceeds of Senior Notes
ONEOK intends to utilize the net proceeds from the offering to fund the purchase price for its previously announced transactions to acquire Global Infrastructure Partners' (GIP) interest in EnLink Midstream, LLC and Medallion Midstream, LLC. Also, the company will pay fees and expenses related to the respective transactions by using the proceeds.
ONEOK plans to use any remaining net proceeds from the offering for general corporate purposes, which may include the repayment of outstanding indebtedness, including the repurchase or redemption of existing notes.
The times interest earned ratio of ONEOK is 4, which indicates that the company has the financial flexibility to meet its interest obligation. New senior notes will no doubt increase the debt burden of the company, but OKE, through its stable performance, will generate enough funds to meet its financial obligations.
ONEOK Continues to Expand Operation Via Acquisition
In May 2024, ONEOK decided to acquire a system of NGL pipelines from Easton Energy for $280 million. This acquisition, completed on June 17, provided improved connectivity to and within the critical supply and demand centers in the Gulf Coast.
In September 2023, OKE completed the acquisition of Magellan Midstream Partners, L.P. This $18.8-billion merger deal created one of the largest oil and natural gas pipeline companies in the United States.
Acquisitions of GIP’s interest in EnLink Midstream are expected to increase OKE's capacity for moving and processing oil, gas and natural gas liquids in the Permian and Mid-continent basins.
Merger & Acquisitions Galore in Pipeline Space
The oil and natural gas pipeline industry is very competitive and the pipeline operators continue to expand operations through acquisition.
Energy Transfer (ET - Free Report) , in July 2024, completed the previously announced acquisition of WTG Midstream Holdings LLC. The firm paid $2.28 billion in cash and nearly 50.8 million newly issued ET common units to complete the agreement. This acquisition expanded Energy Transfer’s presence in the Midland Basin by adding 6,000 miles of complementary gas-gathering pipelines in the region. The deal also added eight gas processing plants with a total capacity of 1.3 billion cubic feet per day and two additional processing plants, which are under construction.
On Aug. 6, 2024, Trace Midstream Partners II, LLC (Trace), a portfolio company of Quantum Capital Group, announced that it has entered into agreements with LM Energy Delaware, LLC, a portfolio company of Old Ironsides Energy, LLC, to acquire the company’s natural gas gathering and transportation assets in the Northern Delaware Basin. This acquisition marks a significant milestone for Trace as it enters the Northern Delaware Basin.
ONEOK's Shares Outperform Its Industry
ONEOK’s shares returned 47.4% in the last year compared with its industry rally of 30.2%.
Delek Logistics reported an average earnings surprise of 2.49% in the trailing four quarters. The Zacks Consensus Estimate for 2024 and 2025 earnings per unit moved up 4.3% and 12.1%, respectively, in the last 60 days.
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ONEOK to Sell $7B Notes to Fund Acquisition, Expand Permian Presence
ONEOK Inc. (OKE - Free Report) announced to sell $7 billion of senior notes in six tranches with coupon rates varying between 4.25% and 5.85%. The maturity dates of the different series of senior notes vary from 3 years to 40 years.
The net proceeds of senior notes after deducting underwriting discounts, commissions and offering expenses, are expected to be $6.92 billion. ONEOK expects the offering to close on or about Sept. 24, 2024, subject to the satisfaction of customary closing conditions.
How ONEOK Will Utilize Proceeds of Senior Notes
ONEOK intends to utilize the net proceeds from the offering to fund the purchase price for its previously announced transactions to acquire Global Infrastructure Partners' (GIP) interest in EnLink Midstream, LLC and Medallion Midstream, LLC. Also, the company will pay fees and expenses related to the respective transactions by using the proceeds.
ONEOK plans to use any remaining net proceeds from the offering for general corporate purposes, which may include the repayment of outstanding indebtedness, including the repurchase or redemption of existing notes.
The times interest earned ratio of ONEOK is 4, which indicates that the company has the financial flexibility to meet its interest obligation. New senior notes will no doubt increase the debt burden of the company, but OKE, through its stable performance, will generate enough funds to meet its financial obligations.
ONEOK Continues to Expand Operation Via Acquisition
In May 2024, ONEOK decided to acquire a system of NGL pipelines from Easton Energy for $280 million. This acquisition, completed on June 17, provided improved connectivity to and within the critical supply and demand centers in the Gulf Coast.
In September 2023, OKE completed the acquisition of Magellan Midstream Partners, L.P. This $18.8-billion merger deal created one of the largest oil and natural gas pipeline companies in the United States.
Acquisitions of GIP’s interest in EnLink Midstream are expected to increase OKE's capacity for moving and processing oil, gas and natural gas liquids in the Permian and Mid-continent basins.
Merger & Acquisitions Galore in Pipeline Space
The oil and natural gas pipeline industry is very competitive and the pipeline operators continue to expand operations through acquisition.
Energy Transfer (ET - Free Report) , in July 2024, completed the previously announced acquisition of WTG Midstream Holdings LLC. The firm paid $2.28 billion in cash and nearly 50.8 million newly issued ET common units to complete the agreement. This acquisition expanded Energy Transfer’s presence in the Midland Basin by adding 6,000 miles of complementary gas-gathering pipelines in the region. The deal also added eight gas processing plants with a total capacity of 1.3 billion cubic feet per day and two additional processing plants, which are under construction.
On Aug. 6, 2024, Trace Midstream Partners II, LLC (Trace), a portfolio company of Quantum Capital Group, announced that it has entered into agreements with LM Energy Delaware, LLC, a portfolio company of Old Ironsides Energy, LLC, to acquire the company’s natural gas gathering and transportation assets in the Northern Delaware Basin. This acquisition marks a significant milestone for Trace as it enters the Northern Delaware Basin.
ONEOK's Shares Outperform Its Industry
ONEOK’s shares returned 47.4% in the last year compared with its industry rally of 30.2%.
Image Source: Zacks Investment Research
Zacks Rank & Another Stock to Consider
ONEOK currently has a Zacks Rank#3 (Hold). A better-ranked stock in the same industry is Delek Logistics Partners (DKL - Free Report) , which currently has a Zacks Rank#2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Delek Logistics reported an average earnings surprise of 2.49% in the trailing four quarters. The Zacks Consensus Estimate for 2024 and 2025 earnings per unit moved up 4.3% and 12.1%, respectively, in the last 60 days.