New York, October 10, 2016 -- Moody's Investors Service (Moody's) affirmed ONEOK Partners, L.P.'s (OKS) Baa2 senior unsecured rating and its P-2 short term rating, and changed its outlook to stable from negative.
"Rebounding from 2015's lows, OKS's EBITDA, debt leverage and distribution coverage have progressively improved to the extent that credit metrics have once again realigned themselves to levels supporting OKS's Baa2 rating with a stable outlook," commented Andrew Brooks, Moody's Vice President. "Management has acted decisively to considerably reduce OKS's sensitivity to commodity price risk, while remaining focused on contracted growth opportunities existing within OKS's expansive midstream operating footprint to generate incremental EBITDA."
OKS annual yield is currently 7.6%, but I expect them to raise their quarterly cash distributions by about 10% per year.
OKS for high yield
OKS for high yield
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: OKS for high yield
What is your take on the OKS buyout by OKE?
Re: OKS for high yield
I am traveling this week. I will take a look at OKS next week.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: OKS for high yield
Tom Abrams – Morgan Stanley
February 1, 2017 3:26 PM GMT
ONEOK's simplification transaction pulls forward value with the initial step up dividend (+21% upon closing) and offers attractive 9-11% growth through 2021 with coverage >1.2x. Outlook for 2017 is constructive vs. our ests.
Extracting value from OKE/OKS trading dynamics. OKS units have trailed OKE despite strong operational updates throughout 2016, with OKE trading at a 4.5% yield and OKS trading at a 7.3% yield pre-announcement. Consolidating the entities allows for OKE to see meaningful accretion to its distributable cash flow, while providing an enhanced currency to pursue growth across and/or beyond its current footprint.
OKE shareholders will enjoy an immediate 21% increase in the dividend, accretion in the next several years, and now have better guidance to distribution increases through 2021.
OKS unitholders get a premium today and an improved cost of capital to support growth as offsets to a modest effective distribution reduction and potential individual taxable events.
ONEOK is currently enjoys a strong balance sheet and dividend coverage so the timing of the oft discussed eventual possibility of a consolidation was not expected now; many of the GP/LP combinations we have seen have been undertaken at more distressed firms. However, the transaction allays concerns surrounding 2017 dividend guidance and the potential impact of OKE's growth profile due to cash taxes, as the consolidation transaction will delay cash income taxes through at least 2021. With some assets depreciable for longer periods than others, we assume cash tax rates, ceteris paribus, will gradually rise beyond 2021 rather than jump higher to whatever corporate rates are at that time. Pro forma for the transaction, ONEOK expects to retain its investment grade credit rating and is targeting a 4.0x debt/EBITDA. With a greater than 1.2x coverage targeted for the next several years. OKE expects to be in a delevering mode. 2017 guidance constructive relative to our expectations.
February 1, 2017 3:26 PM GMT
ONEOK's simplification transaction pulls forward value with the initial step up dividend (+21% upon closing) and offers attractive 9-11% growth through 2021 with coverage >1.2x. Outlook for 2017 is constructive vs. our ests.
Extracting value from OKE/OKS trading dynamics. OKS units have trailed OKE despite strong operational updates throughout 2016, with OKE trading at a 4.5% yield and OKS trading at a 7.3% yield pre-announcement. Consolidating the entities allows for OKE to see meaningful accretion to its distributable cash flow, while providing an enhanced currency to pursue growth across and/or beyond its current footprint.
OKE shareholders will enjoy an immediate 21% increase in the dividend, accretion in the next several years, and now have better guidance to distribution increases through 2021.
OKS unitholders get a premium today and an improved cost of capital to support growth as offsets to a modest effective distribution reduction and potential individual taxable events.
ONEOK is currently enjoys a strong balance sheet and dividend coverage so the timing of the oft discussed eventual possibility of a consolidation was not expected now; many of the GP/LP combinations we have seen have been undertaken at more distressed firms. However, the transaction allays concerns surrounding 2017 dividend guidance and the potential impact of OKE's growth profile due to cash taxes, as the consolidation transaction will delay cash income taxes through at least 2021. With some assets depreciable for longer periods than others, we assume cash tax rates, ceteris paribus, will gradually rise beyond 2021 rather than jump higher to whatever corporate rates are at that time. Pro forma for the transaction, ONEOK expects to retain its investment grade credit rating and is targeting a 4.0x debt/EBITDA. With a greater than 1.2x coverage targeted for the next several years. OKE expects to be in a delevering mode. 2017 guidance constructive relative to our expectations.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: OKS for high yield
Oneok Rolls Up Its Partners by Robert Rapier (an EPG Member and fellow energy sector analyst)
In other news, units of the Oneok Partners (NYSE: OKS) master limited partnership surged more than 20% on an announcement that its general partner ONEOK (NYSE: OKE) would acquire all units that it does not currently own for $9.3 billion in ONEOK stock. Each outstanding common unit of ONEOK Partners that ONEOK does not already own will be converted into .985 shares of ONEOK common stock, representing a 22.4% premium based on the Jan. 27 closing prices of the two securities.
The stated reasons for the merger were a lower cost of funding with elimination of incentive distribution rights, improved capital markets access and enhanced dividend growth. The deal is expected to lift ONEOK's distributable cash flow by more than 10% from 2018 through 2021.
In other news, units of the Oneok Partners (NYSE: OKS) master limited partnership surged more than 20% on an announcement that its general partner ONEOK (NYSE: OKE) would acquire all units that it does not currently own for $9.3 billion in ONEOK stock. Each outstanding common unit of ONEOK Partners that ONEOK does not already own will be converted into .985 shares of ONEOK common stock, representing a 22.4% premium based on the Jan. 27 closing prices of the two securities.
The stated reasons for the merger were a lower cost of funding with elimination of incentive distribution rights, improved capital markets access and enhanced dividend growth. The deal is expected to lift ONEOK's distributable cash flow by more than 10% from 2018 through 2021.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group