ONEOK Partners, L.P. (OKS) reported that its board of directors approved a 2.5 cent increase in the quarterly cash distribution rate. The newly revised distribution rate of 63.5 cent per unit will be effective from the first quarter of 2012 and will be paid on May 15, 2012, to unitholders of record as of April 30, 2012.
The new annualized cash distribution rate of ONEOK Partners will be $2.54 per unit, with a growth of 4.1% from the prior rate of $2.44 per unit. The partnership has constantly increased its distribution rate by roughly 59% from April 2006.
During January 2012, the partnership had increased its quarterly distribution rate from 59.5 cents per unit to 61 cents per unit. This was effective from fourth quarter 2011 with an annualized cash distribution of $2.44 per unit. We believe that the regular distribution rate hikes by the partnership reflects its strong commitment toward wealth maximization of its unitholders.
The partnership plans to increase the distribution rate by 2.5 cents per quarter in 2012, subject to the sanction of its board of directors. We expect that consistent distribution rate increase will enable the partnership to achieve a 15% – 20% annual distribution growth in 2013 and 2014.
ONEOK is expected to make investments in the range of $4.7 billion – $5.7 billion in several growth projects over the next four years. We expect the returns from these initiatives to facilitate the distribution of excess cash among its unitholders.
We view ONEOK Partners as a well-positioned partnership with a strong balance sheet and growth track record. The partnership is also making significant investments at Bakken and Williston, and expanding its downstream natural gas liquids (NGL) infrastructure, all of which are expected to be accretive to long-term cash flow.
But, we are concerned about volatile oil and gas prices, changes in supply and demand fundamentals of natural gas and NGL, and higher interest rates. ONEOK Partners currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
Tulsa, Oklahoma-based ONEOK Partners is a leader in the gathering, processing, storage and transportation of natural gas in the U.S. and owns one of the nation’s premier NGL systems, connecting NGL supply in the Mid-Continent and Rocky Mountain regions with key market centers. The company competes with Kinder Morgan Energy Partners, L.P.(KMP).
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