Oneok Partners Grows With The Bakken

Oneok Partners (NYSE:OKS) is making major investments in the Williston Basin to accommodate the large increase in production expected from development of the Bakken and other formations over the next decade. The company detailed these projects and outlined the company's strategy at an analyst meeting held in early October 2010.

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The company owns pipelines and facilities used to process natural gas in the United States, and is 42% owned by Oneok (NYSE:OKE), which also acts as the general partner of Oneok Partners.

Expansion Plans
Over the next three years, Oneok Partners will spend up to $355 million to build pipelines and natural gas processing facilities in North Dakota. Most of the funds will be used to build the Stateline I natural gas processing facility, which will have capacity to process 100 million cubic feet per day of natural gas. The company has also allocated funds to expand existing gathering and compression infrastructure in the area.

This was the third expansion notice by Oneok Partners in 2010. In April and July 2010, the company announced its intention to spend $1.1 billion for various projects in the Bakken.

Natural Gas
Oneok Partners owns substantial assets in the natural gas gathering and processing area and is active in six basins in the mid-continent. The company owns 15,000 miles of gathering pipelines and facilities that can process 770 million cubic feet per day of natural gas. Oneok Partners is making investments into high growth shale areas and estimates that by 2013, 36% of its volume will come from the Williston Basin.

The company also owns 7100 miles of pipelines used to transport natural gas across the United States, with capacity of 6.5 billion cubic feet per day, along with 52 Bcf of storage for natural gas. Oneok Partners has a 50% equity interest in the Northern Border Pipeline Company, which operates a natural gas pipelines running from Canada to the Midwestern United States.

TC PipeLines, LP (Nasdaq:TCLP) owns the other 50% of the Northern Border Pipeline Company. A wholly owned subsidiary of TransCanada Corporation (NYSE:TRP) is the general partner of TC PipeLines, LP.

Natural Gas Liquids
Oneok Partners also has infrastructure to process and transport natural gas liquids. The company has 549,000 barrels per day of fractionation capacity, as well as storage and distribution assets. Oneok Partners typically will transport unprocessed natural gas liquids from various areas in the mid-continent and then fractionate the liquids into its components in preparation for distribution.

Financials
These expansion projects and its other assets are expected to lead to EBITDA growth of 14% to 18% annually over the next three years. The company hopes to use this to increase its distribution by 5- 10% in 2011 and 2012 as well. The stock has a current yield of just under 6%.

Oneok Partners is an infrastructure play on the hyper growth in development of the Bakken and other plays in North America. Some investors may prefer this company to the more volatile exploration and production companies. (For related reading, take a look at our Oil And Gas Industry Primer.)

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