ONEOK Partners LP (NYSE: OKS) will invest approximately $440 million in the natural gas liquids-rich area in the Powder River Basin in Wyoming.
With the investment the Tulsa, OK-based partnership will purchase a 50-million cubic feet per day (MMcf/d) natural gas processing facility – the Sage Creek plant and related natural gas gathering and natural gas liquids (NGL) infrastructure – in western Converse and Campbell Counties, Wyo., for $305 million from an undisclosed seller; and invest $135 million to upgrade and construct natural gas gathering and processing related infrastructure, NGL gathering pipelines and well connections.
"The Sage Creek plant gives ONEOK Partners additional natural gas gathering and processing capacity in a region where producers are actively drilling that has significant long-term growth potential," said Terry K. Spencer, president, ONEOK Partners.
"This acquisition will add assets located in and around our operating footprint that can be integrated into our system and used as a platform for future growth opportunities. The acquisition further positions the partnership as a full-service midstream provider for area producers," Spencer concluded.
The partnership expects to close the transaction during the third quarter 2013 and complete the related infrastructure projects in the second half 2014. Financing for this transaction will come from available cash and short-term borrowings.
As part of the acquisition, ONEOK Partners will receive long-term acreage dedications and fee-based and percent-of-proceeds agreements with producers. As natural gas volumes increase to the Sage Creek natural gas processing plant and NGL volumes are transported to the adjacent ONEOK Partners-owned and operated Bakken NGL pipeline over the next several years, total partnership annual EBITDA (earnings before interest, taxes, depreciation and amortization) from this acquisition and the related investments is expected to increase by $40 million to $60 million between 2015 and 2018.
In addition to the Bakken NGL pipeline, ONEOK Partners currently operates approximately 1,000 miles of natural gas gathering pipelines in the Powder River and Wind River Basins in Wyoming. Approximately 10 employees currently operate the Sage Creek system.
The partnership has announced total investments of approximately $5.2 billion to $5.6 billion through 2015 for acquisitions and infrastructure growth projects related to natural gas gathering and processing, and natural gas liquids, which includes the acquisitions and projects described above.
These investments consist of approximately $2.4 billion to $2.6 billion for natural gas gathering and processing projects, and approximately $2.8 billion to $3.0 billion for natural gas liquids projects. Approximately $2.5 billion to $2.6 billion are for growth projects related to resource development in the Williston Basin. In aggregate, these projects are expected to generate EBITDA multiples of five to seven times. The incremental earnings from these projects are expected to increase distributable cash flow and value to unitholders in the form of higher distributions.
The partnership has a $2 billion to $3 billion backlog of unannounced growth projects that it continues to evaluate.