OKS

[dan_s]

Here is what The Energy Investor had in their February newsletter.

ONEOK Partners (NYSE: OKS)
ONEOK Partners is a natural gas gatherer, processor, storer, and transporter within
the U.S. The company’s transportation pipeline system is 36,000 miles long and
crosses 17 states.
More good news from ONEOK Partners: the company was able to hold up its
dividend at $0.79 per share, same as last quarter.
“Even in this challenging commodity price environment, our integrated business
model continues to deliver strong performance,” said ONEOK’s president and CEO
Terry Spencer.
Indeed, the company has been in a good position recently. With LNG exports on the
horizon and natural gas demand for electricity production increasing, it’s a good time
to be a mid-stream natural gas company.
ONEOK also made another bold move this month: the company entered into a $1
billion loan agreement, which raised the company’s liquidity and reduced its debt by
paying off the $660 million that was going to be due throughout this year.
What’s more, the remaining money will be used to start working off debt through
2017, giving ONEOK a safer margin to work with until then.
We’re staying strong on this pick, and anyone else betting on natural gas would be
smart to do the same.
ONEOK Partners is rated a BUY up to $35.

[mkarpoff]

I am confused. They borrowed money with the left hand to pay off debt with the right hand. How does that put them in better financial position, unless the interest on the new money is much lower, and the payback date is further out? Is that the case?

[dan_s]

They used the new loan to pay off a debt that was due this year. They moved current debt to long-term debt.

When looking at any company's balance sheet to understand that all debt is not the same. For example, vendor debt or accounts payable is debt that is due right now. Long-term debt that is not due for several years is more like equity. The key is that the debt matches up well with the company's asset base.