Diversified energy company
) has completed the separation of its natural gas distribution
business following the approval granted by its board of directors
last month. The new company,
ONE Gas, Inc.
) has begun to trade on the New York Stock Exchange (NYSE) from
Feb 3, 2014.
ENERGY TRAN EQT (ETE): Free Stock Analysis
ONEOK INC (OKE): Free Stock Analysis Report
ONEOK PARTNERS (OKS): Free Stock Analysis
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Post Spin-Off Structure
Following the spin-off ONEOK will continue to hold general
partner and limited partner interests in
ONEOK Partners, L.P.
), which together comprise 41.2% of outstanding partnership
interests. ONE Gas will consist of Kansas Gas Service, Oklahoma
Natural Gas Company and Texas Gas Service.
Why the Spin-Off?
The rapidly rising demand for natural gas in the U.S. has kindled
demand for efficient midstream services. ONE Gas currently serves
more than 2 million customers in three states. Post separation,
the spun-off entity can solely concentrate on the expansion of
its distribution business and hence capitalize on the favorable
We believe the spin-off will also allow ONEOK to reduce its
outstanding debt. Post separation, ONEOK will receive a one-time
cash payment of $1.13 billion from ONE Gas. This cash payment
will allow ONEOK to reduce its long-term debt level to $1.1
ONEOK shareholders of record at the close of business on Jan 21,
2014 received one tax-free share of ONE Gas Inc. for every four
shares of ONEOK. No fractional shares were issued, but those
eligible for fractional shares received cash compensation.
Primarily, this separation will allow ONEOK to substantially
lower its existing debt and strengthen its financial position,
which should help the company gain better credit rating.
The spin-off will not only unlock hidden value of its nat-gas
business but also help ONEOK to focus more on its strategic goals
and core operations.
ONEOK Inc. currently has a Zacks Rank #3 (Hold). A better-ranked
stock in the same industry is
Energy Transfer Equity, L.P.
) with a Zacks Ranked #2 (Buy).