Analyzing ONEOK Partners’ 2Q15 Earnings and Recent Unit Sale
ONEOK Partners’ returns exceed MLP average
ONEOK Partners (OKS) has generated a total return of -10.3% since the start of this year. Over the same period, its peers Enbridge Energy Partners (EEP), Kinder Morgan (KMI), and Targa Resources (NGLS) have generated returns of -26%, -15.8%, and -29.3%, respectively.
The Alerian MLP ETF’s (AMLP) total returns year-to-date are -11%. The broader-market SPDR S&P 500 ETF Trust (SPY) has returned 3.4% since the beginning of 2015. Over the same period, the Energy Select Sector SPDR ETF (XLE) has generated a total return of -11%. Low energy prices have dragged down the energy sector’s returns in 2015.
The above graph shows the total returns from OKS, EEP, KMI, NGLS, and AMLP since the start of 2015. ONEOK Partners is an energy MLP that gathers, processes, and transports natural gas and NGLs (natural gas liquids). It also stores and distributes NGLs. To learn more about OKS, read our series An Energy Investor’s Guide to ONEOK Partners.
ONEOK Partners Sells Common Units to ONEOK Inc.
On August 12, 2015, ONEOK Partners announced an agreement to sell 21.5 million of its common units to ONEOK Inc. (OKE) in a private placement. ONEOK Inc. is the parent company of ONEOK Partners’ GP (general partner). The sale will increase OKE’s ownership in OKS by 4.4% to 41.2%. OKS shares closed 3% higher on the day of the announcement, compared to the previous close.
OKS also announced plans to sell 3.3 million of its common units to funds managed by Kayne Anderson Capital Advisors for ~$100 million. After deducting expenses, the net proceeds from the two transactions are expected to be ~$749 million. OKS intends to use the proceeds to repay some of its debt. It might also invest a part of the proceeds in its ongoing growth projects.
Next, we’ll analyze ONEOK Partners’ leverage, which contributed to the decision to sell its units.
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