ONEOK Partners’ natural gas gathering and processing segment
Must-know: An investor's guide to ONEOK Partners (Part 2 of 15)
Natural gas gathering and processing segment
ONEOK Partners’ (OKS) natural gas gathering and processing segment provides natural gas gathering, compression, treatment, and processing services to natural gas producers.
The segment primarily receives natural gas from producers operating in the Williston Basin, Powder River Basin, Wind River Basin, and Mid-Continent regions—which include Cana-Woodford Shale, Mississippi Lime, SCOOP (or South Central Oklahoma Oil Province), and Anadarko Basin.
The segment has 18,499 miles of gathering pipelines and 17 processing plants with a capacity of 1,250 MMcf/d (or million cubic feet per day).
Why Williston Basin is key
According to the company’s 10-K annual report, OKS is the largest independent operator of natural gas gathering and processing facilities in the Williston Basin, which includes the Bakken Shale and Three Forks formation.
The company reported that its natural gas gathering system in this region alone includes more than 6,500 miles. This is approximately 35% of its total gathering pipelines.
Also, the company added that ONEOK Partners’ systems serve approximately three million acres, or 60%, of the five million available acres of natural gas production. Plus, approximately half of producers’ rigs currently operating in the Williston Basin are drilling on acreage dedicated to ONEOK. This would make OKS’s assets crucial to producers in the region.
Major producers operating in this region include Continental Resources (CLR), EOG Resources (EOG), and Kodiak Oil & Gas (KOG). All of these companies are components of the Energy Select Sector SPDR Fund (XLE).
Segment revenues
Revenue from the natural gas gathering and processing business is derived primarily from commodity and fee-based contracts. According to a company presentation, the company has more than 2,000 contracts.
OKS gathers and processes natural gas under the following contract types:
Primarily percent of proceeds (or POP) with fee—these contracts allow OKS to retain a percentage of the proceeds from the sale of residue gas, condensate, and NGLs (or natural gas liquids). OKS is also allowed to charge fees for providing gathering and processing services to producers.
Fee—under these type of contracts, OKS is paid a fee for the services it provides.
Read more about different natural gas processing contracts here.
The following part talks about the natural gas liquids segment.
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