ONEOK Increases Capex, Makes Headway with Midstream Growth Projects

Researched by Industrial Info Resources (Sugar Land, Texas)--Midstream operator ONEOK Incorporated (NYSE:OKE) (Tulsa, Oklahoma) is growing its presence in the pipeline, natural gas liquids (NGL) fractionation and natural gas processing segments, and has the increasing capital expenditure (capex) to show for it. For the year through September 30, ONEOK had capex of $2.74 billion, compared with $1.3 billion in the corresponding period of 2018. The company expects growth capex in full-year 2019 to be between $3.5 billion and $3.7 billion.

While ONEOK has project activity in various parts of the U.S., one of its main areas of focus is the Williston Basin in North Dakota and Montana. In ONEOK's recent earnings conference call, Chief Financial Officer Walt Hulse said, "The Williston Basin continues to be a primary contributor to ONEOK's growth, underscored by the fact that volume growth in the region is at higher margins relative to our other regions."

In the conference call, ONEOK Chief Executive Officer Terry Spencer gave an update on some of the company's growth projects. He said, "Between now and the first quarter of 2020, we expect to fully complete five growth projects that will add more than 700,000 barrels per day (BBL/d) of NGL transportation capacity, 125,000 BBL/d of fractionation capacity and an additional 400 million cubic feet of natural gas processing capacity, including the Demicks Lake plants."

ONEOK's Demicks Lake natural gas processing plants near Watford City, North Dakota, are taking advantage of the production of natural gas from the region's oil-focused production. Much of this gas is being flared, although this has been reduced in recent years. The Demicks Lake I plant was completed earlier this month and has a processing capacity of 200 million cubic feet per day. Spencer said a second plant, Demicks Lake II, is expected to be completed in January 2020. Construction on Demicks Lake II began in mid-2019, with Optimized Process Designs LLC (Katy, Texas) providing engineering, procurement and construction (EPC) services. The projects have a combined total investment value (TIV) of $540 million. For more information, see Industrial Info's project reports on Demicks Lake I and Demicks Lake II.

Also in North Dakota, ONEOK recently began construction on the Bear Creek 2 natural gas processing train near Killdeer. The cryogenic facility will have a processing capacity of 200 million cubic feet per day and is expected to be completed in the first quarter of next year. Optimized Process Designs also is providing EPC on this project. For more information, see Industrial Info's project report.

ONEOK is at work on increasing NGL fractionation capacity in Mont Belvieu, Texas. Construction on a fourth fractionator, MB-4, began last year and is expected to wrap up in the first half of 2020. The unit will have a processing capacity of 125,000 BBL/d. Construction of a fifth fractionator, MB-5, began early this year and is expected to be completed in first-quarter 2021. The 125,000-BBL/d MB-5 unit will bring total site capacity to 400,000 BBL/d. Burns & McDonnell Incorporated (Kansas City, Missouri) is providing EPC on the projects, which have a combined TIV of more than $1.2 billion. For more information, see Industrial Info's project reports on MB-4 and MB-5.

ONEOK is at work on pipeline projects. Spencer said, "The northern section of our Elk Creek NGL pipeline is expected to begin line-fill activities in November and will provide meaningful volume and earnings growth as we exit the year." The 900-mile Elk Creek Pipeline will transport up to 240,000 BBL/d of unfractionated NGLs from eastern Montana to Bushton, Kansas. Construction began early this year, using various general contractors. The pipeline sections and pump sections have a combined TIV of more than $1 billion. For more information, see Industrial Info's project reports on the Montana, Wyoming, Colorado and Kansas sections of the pipeline.

Further south, ONEOK is at work on the 530-mile Arbuckle II NGL pipeline, which will run from Oklahoma to Mont Belvieu. Construction began earlier this year and is expected to wrap up in the first half of next year. The pipeline will carry up to 400,000 BBL/d of unfractionated NGLs. For more information, see Industrial Info's project reports on the Oklahoma and Texas portions.

ONEOK's third-quarter 2019 net income was essentially flat from the previous year at $309.2 million, compared with $313.9 million in third-quarter 2018.

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