ONEOK Inks $5.9B Deal With GIP to Expand Permian Presence

ONEOK, Inc. OKE has announced a significant move to expand its presence in the Permian and Mid-Continent basins by acquiring midstream assets worth $5.9 billion from Global Infrastructure Partners (“GIP”) in two deals.
 
This strategic acquisition will further strengthen ONEOK’s position in the U.S. production pipeline and storage industry.

ONEOK’s Strategic Investments

ONEOK’s acquisitions include GIP's 43% stake in EnLink Midstream (“ENLC”) for $14.90 per unit and full interest in EnLink's managing member, totaling about $3.3 billion in cash.
 
It will also acquire GIP's equity interests in Medallion Midstream, a crude gathering and transportation system in the Permian's Midland Basin, for $2.6 billion.

These acquisitions are expected to increase ONEOK's capacity for moving and processing oil, gas, and natural gas liquids in the Permian and Mid-continent basins.

OKE’s Growth Prospects

The oil and gas production pipeline industry is very capital-intensive, requiring large and continuous investments to build and maintain pipelines. To execute such pipeline projects, operators have to incur high costs for materials, construction, and the adoption of the latest technology to ensure safe and efficient operations.
 
The demand for natural gas is likely to continue to increase in the United States, driven by the growth of natural gas-fired power plants and the rising exports of LNG.

ONEOK's investments in regions like the Permian and Mid-Continent basins bode well. The company will also gain from increasing hydrocarbon production volumes in the region.

ONEOK’s Peer Prospects

Other production pipeline companies that are likely to enjoy the perks of the increasing demand for natural gas have been discussed below.

Kinder Morgan, Inc. KMI is expanding its natural gas pipeline network. The company recently acquired NextEra Energy Partners’ natural gas pipelines in South Texas for $1.82 billion.

KMI has a long-term (three to five years) earnings growth rate of 6%. The Zacks Consensus Estimate for KMI’s 2024 earnings indicates an improvement of 11.2% from the prior-year quarter.

The Williams Companies, Inc. WMB has consistently expanded its capacity, with a remarkable 50% increase over the past eight years. The company's deepwater portfolio includes a 3,500-mile-long natural gas and oil gathering and transmission pipeline.

WMB has a long-term earnings growth rate of 3.8%. The Zacks Consensus Estimate for WMB’s third-quarter 2024 sales indicates an improvement of 5.8% from the prior-year quarter.

MPLX LP MPLX is making strategic investments in the gas utilities sector to enhance its financial performance. It aims to invest $1.1 billion in 2024, with a significant $950 million allocated for expansion initiatives.

MPLX has a long-term earnings growth rate of 8.5%. The Zacks Consensus Estimate for MPLX’s 2024 sales indicates an improvement of 5.9% from the prior-year quarter.

OKE Stock Price Movement

Shares of OKE have gained 13.9% in the past three months, compared with the industry’s 6.2% growth.

 

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OKE’s Zacks Rank

OKE currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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Williams Companies, Inc. (The) (WMB): Free Stock Analysis Report
 
ONEOK, Inc. (OKE): Free Stock Analysis Report
 
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MPLX LP (MPLX): Free Stock Analysis Report

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