Ethane Recovery and Simplification Transaction Position Narrow-Moat Oneok to Outperform
After updating our Oneok model to incorporate the simplification transaction, associated tax benefits, and anticipated earnings uplift from an ethane recovery, our fair value estimate for Oneok (a corporation versus a master limited partnership) increases to $65 per share from $52. This marks the company as undervalued at current share prices. Our revised fair value estimate implies a 2018 EBITDA multiple of 12 times and a 2018 distribution yield of 4.6%. We expect the main driver for Oneok goin...Oneok is a midstream service provider. The company's segments include: Natural Gas Gathering and Processing, which provides midstream services to producers in North Dakota, Montana, Wyoming, Kansas and Oklahoma; natural gas liquids (NGLs), which owns and operates facilities that gather, fractionate, treat and distribute NGLs and store NGL products, primarily in Oklahoma, Kansas, Texas, New Mexico and the Rocky Mountain region; and Natural Gas Pipelines, which provides transportation and storage services to end users through its wholly owned assets and its ownership interests in Northern Border Pipeline Company and Roadrunner Gas Transmission, LLC.
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