Update: Oneok Partners Announces Plans To Expand Its Growth Runway

| About: ONEOK, Inc. (OKE)

Summary

Oneok Partners is expanding its presence in the Bakken/Three-Forks shale formations to help E&P players meet new gas flaring requirements.

On top of expanding in the Bakken/Three-Forks, Oneok is going to build a 100 MMcf/d gas processing plant in the Powder River Basin.

By expanding its growth runway, Oneok Partners will be able to boost its payout as new plants pad its distributable cash flow.

Oneok Partners (OKS) (NYSE:OKE) announced plans to build a 80 MMcf/d gas processing facility in Bear County, North Dakota, to service growing natural gas production from the Bakken and Three-Forks shale plays. To support its Bear County facility, Oneok Partners is also building out gathering and compression infrastructure. This will add onto Oneok Partners' 500 MMcf/d of gas processing capacity in the area, and is a part of Oneok Partners' plan to boost its Bakken/Three-Forks gas processing capacity to 1.2 Bcf/d by 2016.

In addition to Oneok's Bear County facility, Oneok Partners is also going to build a 100 MMcf/d gas processing plant in Campbell County, Wyoming, to service NGL-rich production from the Powder River Basin. The Powder River Basin is home to the emerging Turner, Frontier, Sussex, and Niobrara shale formations. These plays hold enormous amounts of potential, and early exploration efforts by Chesapeake Energy (NYSE:CHK) pointed towards Chesapeake unlocking 1.5 billion BOE from the Niobrara and 250 million BOE from the Frontier formations alone.

While I expected that Oneok Partners would announce new gas processing plants in the Bakken/Three-Forks area due to high levels of gas flaring and new state regulations, I didn't expect it to expand in the emerging Powder River Basin plays. This news reinforces the bull thesis for why Oneok Partners is a solid income play with a long growth runway (which just got longer), as new plants will pad Oneok Partners' distributable cash flow, allowing it to boost its 5.6% yield. Those interested in how Oneok is banking on the shale revolution should take a look at Cleaner Air And Payout Growth, Oneok Has Got You Covered.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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