ONEOK , Inc., a leader in natural gas transmission and distribution, announced the completion of a significant debt offering on Monday. The Oklahoma-based company successfully issued a series of notes totaling $6.9 billion, with varying maturities ranging from 2027 to 2064, at interest rates between 4.250% and 5.850%. The offering was conducted under the company's existing shelf registration statement.
The notes are guaranteed by ONEOK Partners, L.P., ONEOK Partners Intermediate Limited Partnership, and Magellan Midstream (NYSE:MMP) Partners, L.P., which are collectively referred to as the Guarantors. The proceeds from the offering, after deducting underwriting discounts and estimated expenses, are primarily intended to finance ONEOK's acquisition of interests in EnLink Midstream (NYSE:ENLC), LLC and Medallion Midstream, LLC from Global Infrastructure Partners. The deal is expected to bolster ONEOK's position in the midstream energy sector.
The newly issued notes are subject to a special mandatory redemption clause. If the EnLink acquisition is not completed by a specified date in 2025 or if the purchase agreement is terminated, ONEOK is required to redeem certain series of the notes at 101% of their principal amount, plus accrued interest.
This financial maneuver follows the termination of a $6.0 billion commitment from JPMorgan Chase (NYSE:JPM) Bank, N.A., and Goldman Sachs Bank USA, which was initially intended to support the acquisitions. The termination indicates that ONEOK no longer requires this facility due to the successful notes offering.
This transaction is seen as a strategic move by ONEOK to optimize its financial structure and support its growth initiatives. The company's use of the remaining proceeds for general corporate purposes may include repaying existing debt, which could improve its financial flexibility.
The offering's underwriters and their affiliates are full-service financial institutions that have had, and may continue to have, various financial relationships with ONEOK, including providing banking services and participating in ONEOK's credit facilities.
In other recent news, ONEOK Inc (NYSE:OKE). has been the subject of several analyst adjustments following strategic acquisitions and robust financial performance. Morgan Stanley upgraded ONEOK from an Equalweight to an Overweight rating, reflecting the potential upside from the company's acquisition of a controlling interest in Enable Midstream (NYSE:ENBL) Partners (ENLC). This strategic move is expected to enhance ONEOK's financial growth and operational expansion.
Simultaneously, CFRA downgraded ONEOK shares from a Buy to a Hold rating due to valuation concerns after a significant year-to-date surge, but raised its price target. Stifel and Citi maintained a Buy rating on ONEOK, raising their price targets in response to the company's recent strategic acquisitions of Medallion Midstream and a stake in EnLink Midstream.
These acquisitions are projected to contribute over $2 billion to ONEOK's long-term EBITDA and increase its free cash flow by approximately 20% by 2028. Notably, ONEOK's second-quarter results for 2024 showed a significant 28% year-over-year increase in net income, reaching $780 million, surpassing analyst expectations. These are among the recent developments in ONEOK's business operations.
InvestingPro Insights
As ONEOK, Inc. makes strategic moves to strengthen its financial structure, current and potential investors may find the following metrics from InvestingPro insightful. With a market capitalization of $55.69 billion, ONEOK is a significant player in the natural gas transmission and distribution industry. The company's P/E ratio stands at 20.57, reflecting market sentiment on its earnings potential. Notably, the P/E ratio adjusted for the last twelve months as of Q2 2024 is slightly higher at 20.75. Additionally, ONEOK's revenue for the same period is $19.1 billion, indicating the scale of its operations.
InvestingPro Tips suggest looking at the dividend yield, which is currently 4.16%, coupled with a dividend growth of 3.66%. This could be of particular interest to income-focused investors. Moreover, the company's stock performance has been robust, with a year-to-date price total return of 40.98%, showcasing investor confidence. It's worth noting that the stock is trading at 99.22% of its 52-week high, suggesting a strong market position. For those seeking more in-depth analysis, InvestingPro offers numerous additional tips, providing a comprehensive understanding of ONEOK's financial health and investment potential.
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