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ONEOK's Project Pipeline to Drive Growth, Pricing Still a Woe

On May 12, 2016, we have issued an updated research report on ONEOK Inc. OKE, an energy company engaged in natural gas and natural gas liquids businesses. ONEOK Partners, L.P. OKS continues to provide the company a distinct competitive edge over its peers. Through the partnership, ONEOK focuses on maintaining a stable inflow of cash, predominantly as distribution. However, persistent softness in commodity prices, stringent regulations and intensifying competition in the midstream energy services space are major concerns for the company.

ONEOK continues to work on its projects in the Williston Basin, Permian Basin and other mineral-rich areas through ONEOK Partners. This provides a solid platform to the company to boost its long-term fee-based earnings. Higher NGL fee-based exchange-services volumes, primarily from its recently connected natural gas processing plants in the Williston Basin and Mid-Continent regions will continue to benefit ONEOK in the long term.

Moreover, the company continues to take prudent steps to control operating costs. Going forward, such measures are expected to lower costs, thereby strengthening the company’s financial health and boosting its margins.

On the flip side, a sharp decline in commodity prices has slowed down the drilling plans of ONEOK’s producer customers. As a result, demand for midstream services is not going to improve as much as expected. This may hurt the company’s cash inflow.

Zacks Rank & Key Picks

Currently, ONEOK carries a Zacks Rank #3 (Hold).

A couple of better-ranked stocks in the same space include MDU Resources Group Inc. MDU and ONE Gas, Inc. OGS, both carrying a Zacks Rank #2 (Buy).

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ONEOK INC (OKE): Free Stock Analysis Report
 
MDU RESOURCES (MDU): Free Stock Analysis Report
 
ONEOK PARTNERS (OKS): Free Stock Analysis Report
 
ONE GAS INC (OGS): Free Stock Analysis Report
 
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