ONEOK Inc. (OKE) Valuation Update - May 19

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ONEOK Inc. (OKE) Valuation Update - May 19

Post by dan_s »

I have updated my forecast/valuation model for ONEOK based on the assumption that their $18.8 billion "Mega Merger" with Magellan Midstream Partners closes in early Q3 2023. They are both highly respected midstream companies based in Tulsa.

My forecast is a high level "guess", but I think it errs on being too conservative. My current valuation of OKE adjusts to $67.00 per share.

TipRanks' current price target is $72.07, but the five analysts that have updated their models since the merger was announced on May 14 have price targets that range from $57 to $70 and average $65.60 per share. Wall Street Gang analysts are always very conservative when the put out initial price targets on a deal of this size.

OKE's pre-merger dividend is $0.955/quarter and my guess is that they will keep it there through year-end. Based on my 2024 forecast, they should be able to raise the dividend to at least $1.00/quarter.

Today OKE closed at $58.52, so the current annualized yield ($3.82/$58.52) is 6.53%.

IMO this merger creates a Power House midstream company with first class management and a lot of very good employees. It will generate over $1billion of operating cash flow per quarter after the merger. Distributable Cash Flow should be close to $2.9 billion (over $5.00 per share) in 2024.
Dan Steffens
Energy Prospectus Group
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