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ONEOK (OKE) Acquires Easton's NGL Pipeline System for $280M

ONEOK, Inc. OKE announced the completion of its previously announced acquisition of a system of natural gas liquids (NGL) pipelines from Easton Energy for nearly $280 million.

The company had announced this deal in May 2024. The deal comprises around 450 miles of pipelines for liquid products, including crude oil, refined products and NGLs, that are situated in the strategic Gulf Coast market centers.

OKE has plans to connect the pipelines to its Mont Belvieu, TX, NGL infrastructure and ONEOK's Houston refined products and crude oil infrastructure.

Growth Strategy

The company is focused on expanding its operations through acquisitions. The completion of this recently calculated transaction boosts ONEOK’s NGL portfolio, yields immediate financial benefits and accelerates ONEOK's potential to realize commercial synergies from its recent acquisition of Magellan Midstream Partners, L.P.

In September 2023, ONEOK completed its acquisition of Magellan Midstream Partners for $18.8 billion. The agreement opened up Magellan's primarily fee-based refined products and crude oil transportation business to ONEOK. This merger deal created one of the largest oil and natural gas pipeline companies in the United States.

In the first four years, the combined company is expected to generate an average annual amount of $1 billion. This represents a significant improvement in free cash flow after dividends and growth capital.

Oil & Gas Sector’s Consolidation

According to a Bloomberg report, the oil and gas sector has experienced a remarkable surge in merger and acquisition activity in the recent months, with more than $155 billion in deals in the fourth quarter of 2023. The figure is more than that in the prior five quarters combined. Faced with challenging market and economic conditions, oil and gas companies — particularly upstream, midstream and oil field services companies — are poised to continue this consolidation wave in 2024 as well.

Other companies like TotalEnergies SE TTE and Chevron Corporation CVX are also expanding their operations through mergers and acquisitions.

During the first quarter of 2024, TotalEnergies acquired $1.07 billion worth of assets. The strategic acquisitions should assist the company in further expanding its multi-energy assets across the globe.

TTE’s long-term (three- to five-year) earnings growth rate is 4.38%. The Zacks Consensus Estimate for 2024 earnings per share (EPS) indicates a year-over-year decrease of 3.4%.

In October 2023, Chevron announced its intention to acquire Hess Corporation HES in a $53 billion all-stock deal. In May 2024, HES received the necessary approval from its shareholders to proceed with its proposed merger. This merger is set to enhance Chevron's portfolio by adding Hess' assets, including those in the Guyana Stabroek block.

CVX’s long-term earnings growth rate is 5%. The Zacks Consensus Estimate for 2024 EPS indicates a year-over-year increase of 2.4%.

Price Performance

Over the past three months, ONEOK’s shares have risen 0.8% against the industry’s 2.7% decline.

 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Zacks Rank

ONEOK currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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