ONEOK Partners' Garden Creek natural gas processing facility is located near Watford City, N.D., in the Williston Basin. ONEOK Inc. owns a controlling stake in ONEOK Partners. Courtesy
With ONEOK Inc. planning to spin off its commercial natural gas distribution business into a separate company, many see its value rising as a pure general partner.
ONEOK Inc. announced in July that it plans to separate its natural gas distribution into ONE Gas, which will be its own publicly traded company composed of Oklahoma Natural Gas, Kansas Gas Service and Texas Gas Service. That separation would leave ONEOK Inc. as a holding company with control and distribution rights for ONEOK Partners LP as its key asset.
Many investors said the announcement made ONEOK Inc. more appealing because it would simplify the company's holdings.
"After their announcement they're going to spin out the gas utility, they're going to become pure-play general partner; we think we're going to see a lot of value in that," said Brett Kramer, managing partner of Pinnacle Investment Advisors.
After the spinoff is complete, CEO John Gibson will step down to be replaced by the current company president Terry Spencer. Pierce Norton, current executive vice president, commercial for ONEOK and ONEOK Partners, would become CEO and president of ONE Gas.
ONEOK Inc. broke into the top five of this year's rankings after coming in at No. 11 last year. It received two first-place rankings from area investment experts.
ONE Gas hopes to be running by the first quarter of 2014, with its headquarters in downtown Tulsa. It would be one of the largest natural gas utilities in the country and the only publicly traded, 100 percent regulated, pure-play natural gas distribution utility in the United States.
Kramer said that the natural gas distribution business held back ONEOK Inc. compared to other pure-play general partners.
"It's just a slower growth, a more stable business, but when you compare the (general partners) to the (master limited), there is a lot of room for growth," Kramer said.
Dan Safranek, founder of Safranek & Associates and a certified financial planner, agreed that as a general partner, ONEOK Inc., is in an excellent position for growth.
"They're stepping out from under the utility category and broadening their investor base," Safranek said. "They're adding clarity for investors and I think the restructuring will make it more appealing to a broader investor base.
"Investors that may not have even thought of ONEOK may take a second look at it."
ONEOK Inc. reported $113.4 million in net income through the first half of 2013, down compared to the first half of 2012. Revenues for the first half of the year were at $6.89 billion, up from $5.94 billion in the first half of 2012.
Overall, Kramer said those numbers shouldn't discourage investors in the long term.
"They've had some setbacks as far as their actual numbers coming in versus what they projected," Kramer said.
However, Safranek said he thinks that as a pure-play general partner, and with continued capital expansion at ONEOK Partners, ONEOK Inc. would be a solid investment.
"Not only are they going to be able to generate income for investors but have a strong financial position," Safranek said.
ONEOK Inc.
Address: 100 W. Fifth St., Tulsa, OK, 74103
Phone: 918-588-7000
Web: www.oneok.com
Chairman/CEO: John W. Gibson
President: Terry K. Spencer
Symbol (Exchange): OKE (NYSE)
Operation: A diversified energy company focused on natural gas and natural gas liquids processing and distribution.
Jerry Wofford 918-581-8310
jerry.wofford@tulsaworld.com
Original Print Headline: Gas spinoff set to strengthen ONEOK
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