We reiterate our recommendation on
ONEOK Partners, L.P.
) to Neutral primarily due to unpredictable commodity prices,
volatile equity and credit markets, stringent regulations and
uncertain weather conditions, which may significantly impact the
partnership's forthcoming financial performance.
We know that ONEOK Partners earns a significant portion of its
revenues from payment of gathering and processing, and
transportation and storage of natural gas, and natural gas liquids
("NGL"), and the sale of purity NGL products at its NGL business. A
decline in prices for these commodities may result in lesser
payments for ONEOK's products and services, which will
significantly impact the partnership's future cash flow.
In addition, prevailing volatility and disruption of equity capital
and credit markets might impact ONEOK's financial and operational
results. Equity capital markets face downward stress on equity
values, which gradually reduces credit-worthiness of the
ONEOK's ability to grow could be limited if it does not have
regular access to equity and credit markets. This kind of market
condition may have an adverse impact on the partnership as it will
not be able to attain necessary financing to acquire new assets
while expanding its existing facilities.
We know that ONEOK strongly follows internal growth strategy. In
2011 - 2015, the partnership plans to invest $5.7 - $6.6 billion in
several internal growth projects. ONEOK expects its future growth
to primarily come from the Bakken Shale and Three Forks in the
Mid-Continent region. The partnership expects these facilities to
provide a reliable and cost-effective means of transportation
compared to other alternatives, which subsequently curtail ONEOK's
cost of operation.
There are several other positive catalysts like capital structure
rebalancing strategy and steady increase in cash distribution,
which might fuel ONEOK's future financial performance.
ONEOK Partners, L.P. currently retains a short term Zacks #3 Rank
Tulsa, Oklahoma-based ONEOK Partners, L.P. is one of the largest
publicly traded master limited partnerships and a leader in
gathering, processing, storing and transporting of natural gas in
the U.S. The partnership competes with
Plains All American Pipeline, L.P.
ONEOK PARTNERS (OKS): Free Stock Analysis
PLAINS ALL AMER (PAA): Free Stock Analysis
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