Oneok seeks more fee-based contracts

OREANDA-NEWS. January 13, 2016. Midstream gas processor Oneok is seeking to bolster its percentage of fee-based contracts in 2016 in the face of lower commodity prices, the Tulsa-based company said today.

Oneok expects fee-based margins on gas processing and gathering contracts to grow from 45pc of margin in that segment last year to 75pc in 2016, according to a presentation the company gave to the UBS MLP One-on-One Conference in Park City, Utah. It noted fee rates in the third quarter of 2015 rose nearly 20pc from the prior year and said gas processing fees will "significantly increase in 2015."

Nearly all of the partnership's margins from its gas pipeline segment are fee-based. Oneok will also seek to move toward more fee-based contracts for its NGL services, where only 72pc of its margins from gathering and storing NGLs currently come from fee-based contracts. Oneok will seek to expand fee-based margins to 78pc from that segment in 2016.

Oneok is estimating total operating income and equity earnings of approximately \\$1.5bn this year, of which roughly \\$995mn is expected to come from its NGL segment. Its gas pipeline segment and gathering and processing segments are forecast to contribute another \\$245mn and \\$260mn, respectively, which assumes Nymex crude pricing between \\$38-\\$46/bl.