ONEOK Partners L.P. (OKS) and Williams Partners L.P. (WPZ) recently concluded the much talked about transaction that makes Williams Partners the 50% owner of Overland Pass Pipeline Company LLC. Williams Partners paid $424 million to ONEOK Partners for the additional 49% interest in the pipeline.
Initially, ONEOK Partners (operator) had 99% ownership in the pipeline and Williams Partners owned the remaining 1%.
Williams Seeks Operatorship
Having gained 50% ownership status, Williams Partners also notified ONEOK Partners of its intention to become the operator of Overland Pass Pipeline Company. The partnership plans to work closely with ONEOK Partners to enable a smooth transition of the operations.
Going forward, the two partnerships look to work together to facilitate expansion due to increased demand for service on the Overland Pass Pipeline.
ONEOK Partners’ Stance
ONEOK Partners remains positive on the transaction as it does not expect this change in ownership to have any impact on its efforts to grow the Overland Pass Pipeline. Also, the partnership believes this will not affect customer service.
Furthermore, ONEOK Partners continues to target 2010 net income of $450-$490 million as it believes this transaction will have no impact on earnings. The partnership plans to use the proceeds from the transaction to repay short-term debt and fund capital projects. The partnership will account earnings from Overland Pass Pipeline Company prospectively as equity earnings from investments, beginning September 2010.
Background
Overland Pass Pipeline Company is a joint venture between ONEOK Partners and Williams Partners for constructing the 760-mile Overland Pass Pipeline. The pipeline transports natural gas liquids (NGLs) from Opal, Wyoming to the Mid-Continent natural gas liquids market center in Conway, Kansas, one of the nation’s primary NGL distribution and storage hubs.
On July 22, 2010, William Partners notified ONEOK Partners of its decision to exercise its option to increase its ownership of the Overland Pass Pipeline.
ONEOK PARTNERS (OKS): Free Stock Analysis Report
WILLIAMS PTNRS (WPZ): Free Stock Analysis Report
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