Betting on Gas Infrastructure
There are several ways to play the American energy revolution, and ONEOK Partners is betting on NGL and natural gas.
While a lot of production in the Bakken is oil, there still is plenty of NGL being produced. ONEOK Partners, an MLP with a distribution of 5.3%, recently completed a ~$600 million NGL pipeline in the Bakken with the capacity to carry 60,000 bpd.
In order to increase that further ONEOK Partners is going to invest $35-40 million to expand its existing pump stations, which it completed in the second quarter.
The expansion will enable ONEOK Partners to expand its NGL pipeline capacity to 135,000 bpd by the third quarter of 2014. ONEOK Partners also is going to complete its Divide County Gathering System by the second half of 2013. This will allows ONEOK Partners to add an additional 200 million cubic feet of natural gas processing capacity over the next two years.
ONEOK is the general partner and owns a 41.3% (August 2013) stake in ONEOK Partners. ONEOK will benefit from ONEOK Partners' investment in the Bakken and other plays as it will allow ONEOK Partners keep paying out its 5.3% distribution with the potential to even raise it, which means more money for ONEOK.
ONEOK Partners is also investing in the Sage Creek field in Wyoming through a $305 million acquisition. The Sage Creek field is an NGL-rich play, and ONEOK Partners now has a gas processing plant with 50 MMcf/d of capacity and other infrastructure in the area. Going forward ONEOK Partners is investing $135 million in the area to build an NGL gathering pipeline, which will be completed in the second half of 2014.
ONEOK Partners plans on spending between $5.2-$5.6 billion from 2010-2015 on growth projects and acquisitions to push up cash flow. That additional cash flow can be used to keep paying/increase its distribution and invest in more growth projects.
Another company with NGL investments is Atlas Pipeline Partners.
Atlas has 455 million cubic feet a day of gas processing capacity in West Texas, which is going to increase by 200 mmcf/d in the second half of 2014.
In South Texas Atlas plans on increasing production capacity by 400 mmcf/d, which will come online in the first quarter of 2014. In the Arkoma area Atlas is going to increase its processing capacity by 120 mmcf/d in the first quarter of 2014, with the possibility to increase that by an additional 80 mmcf/d.
Combined this is an additional 720-800 mmcf/d of natural gas processing capacity about to come online in the next few quarters. This will enable Atlas to keep paying out its 6.5% distribution with the possibility of payout increases. In the past 12 quarters Atlas has raised its distribution 11 times, which points toward management wanting to reward long-term investors.
Atlas also owns 20% of a pipeline operated by Chevron (80% owner) that transports 230,000 bpd of NGL in West Texas. While the primary reason for the pipeline is for stable cash flow, there still is the possibility for an increase in capacity due to the explosive growth in the area.
Up north in the Utica play, Access Midstream Partners has several facilities to process NGL and natural gas.
Currently Access operates (with 66% ownership) five gas gathering systems with 144 miles of pipeline to gather 72 mmcf/d of wet natural gas and crude oil in the Utica. For dry gas Access has five miles of pipeline gathering 2 mmcf/d in the area.
Going forward Access plans on building (with 49% ownership) four new processing facilities to bring on an additional 800 mmcf/d of gas processing capacity with 870,000 barrels of NGL storage capacity in the eastern Ohio region of the Utica.
Access also plans on building out its pipeline and gathering capacity with an additional 41 miles of pipeline that has 28 well connections. Looking even further ahead Access has plans for an additional 370 miles of pipeline and currently is in route development.
These investments in the Utica will increase Access' cash flow and enable Access to complete its processing plants and additional pipeline infrastructure in the area.
As America pumps out more energy, NGL and natural gas production will increase. These are several companies seeking to build out the necessary infrastructure to process, store, and move NGL/gas across America.
The infrastructure build-out will increase each company's cash flow and allow for further NGL/gas investments with the possibility of payout increases to reward long-term income investors.
More on America's energy revolution
Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, the Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the energy industry. To find out which three companies are spreading their wings, check out the special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free.
The article Betting on Gas Infrastructure originally appeared on Fool.com.Callum Turcan has no position in any stocks mentioned. The Motley Fool recommends ONEOK and ONEOK Partners, L.P.. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.