ONEOK, Inc. OKE announced that it has executed a definitive agreement with DT Midstream, Inc. DTM. Under this agreement, ONEOK will sell its three wholly owned interstate natural gas pipeline systems for a total cash consideration of $1.2 billion, subject to customary adjustments.

The transaction, unanimously approved by the boards of directors of both ONEOK and DT Midstream, is expected to be closed in the fourth quarter of 2024, subject to customary closing conditions, including Hart-Scott-Rodino Act clearance.

Key Details of OKE’s Deal

The three interstate natural gas pipeline systems consist of Guardian Pipeline, L.L.C. links to local natural gas distribution and power generation firms in Wisconsin, as well as a number of pipes at the Chicago Hub near Joliet, IL. The second is Midwestern Gas Transmission — a bidirectional system that includes several interstate pipelines with access to the Marcellus and Utica shale, a major pipeline interconnect near Portland, TN, and multiple interstate pipelines at the Chicago Hub near Joliet, IL.

The third is Viking Gas Transmission — a two-way system that connects to a significant pipeline network at the U.S. border close to Marshfield, WI, and Emerson, Canada.

According to Federal Energy Regulatory Commission filings, as of June 30, 2024, the purchase price was 10.8 times the previous year's EBITDA.

The net proceeds from the sale are anticipated to improve ONEOK's financial flexibility and its deleveraging trend as it moves closer to its previously stated goal of 3.5 times in 2026.

Other Oil & Gas Company’s Divestiture

Here are some oil and gas companies that take strategic actions to grow their businesses.

EQT Corporation EQT, a leading U.S.-based natural gas producer, is reportedly in talks with Blackstone, a major private equity firm, to sell minority stakes in its interstate natural gas pipelines, per Reuters. The transaction is valued at approximately $3.5 billion. This might ease a considerable amount of EQT's debt burden. Per Reuters, EQT will continue to operate the pipeline after the deal is finalized.

The Zacks Consensus Estimate for 2024 sales indicates a year-over-year increase of 7.8%. The company delivered an average earnings surprise of 56% in the trailing four quarters.

TC Energy Corporation TRP has an agreement to sell its Prince Rupert Gas Transmission project (“PRGT”) to Nisga’a Nation and Western LNG. PRGT is a natural gas pipeline project in British Columbia, the westernmost province of Canada, that would support the development of liquefied natural gas exports. The divestiture aligns with TC Energy's strategic priorities for 2024, which focus on disciplined capital allocation within its established investment framework, maximizing asset value and enhancing its overall financial strength.

TRP’s long-term (three to five-year) earnings growth rate is 4%. It delivered an average earnings surprise of 12.7% in the trailing four quarters.

OKE’s Price Performance

Over the past three months, ONEOK’s shares have risen 30.6% compared with the industry’s 13.9% growth.

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OKE’s Zacks Rank

ONEOK currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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