We reiterated our Neutral recommendation on
ONEOK Partners, L.P.
) primarily due to fluctuating commodity prices, volatile equity
and credit markets, stringent regulations, and unpredictable
weather condition. We believe these negatives may impact the
partnership's forthcoming financial performance.
In the third quarter of 2012, ONEOK's earnings per unit and
revenue surpassed the Zacks Consensus Estimates. This was mainly
driven by rise in natural gas liquids ("NGL") volumes gathered
and fractionated, and strong performance from natural gas
gathering and processing segments; partially offset by narrower
NGL price differentials.
ONEOK earns a significant portion of its revenues from the
payment of fees related to gathering, processing, transportation
and storage of natural gas and NGL, and the sale of NGL products.
A decline in prices of these commodities may result in lesser
payments for the partnership's products and services, which will,
in turn, negatively impact its future cash flow.
We know that ONEOK strongly pursues internal growth strategy and
plans to invest $5.7 - $6.6 billion in several internal growth
projects within a time span of 2011 to 2015. The partnership
expects its future growth to primarily driven by the Bakken Shale
and Three Forks in the Mid-Continent region. It expects these
facilities to provide a reliable and cost-effective ways of
transportation compared with other alternatives.
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 has a market capitalization of $11.83
billion. Both, ONEOK and its competitor
Plains All American Pipeline, L.P.
) currently has a short term Zacks #3 Rank (Hold Rating).
ONEOK PARTNERS (OKS): Free Stock Analysis
PLAINS ALL AMER (PAA): Free Stock Analysis
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