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On Oct 10, 2013, we have reiterated our Neutral recommendation on ONEOK Partners LP (OKS - Analyst Report). The partnership currently has a Zacks Rank #3 (Hold).

Why the Reiteration?

ONEOK Partners has a geographically diversified asset base with its gathering and processing businesses operating in different basins. It is evident from the decline in cash balance and a rise in capital expenditure figures that the partnership continues to invest substantially for new infrastructures while improving the existing set-ups.

ONEOK Partners plans to complete several important projects, including the MB-2 natural gas liquids (NGL) fractionator at Mont Belvieu and the Sterling III Pipeline by 2013. On the inorganic front, the partnership intends to acquire a natural gas processing facility, the Sage Creek plant in the Powder River Basin. We believe successful completion of internal projects and strong acquisition strategy will help the partnership to serve more customers, thereby improving revenues going forward.

On the flip side, ONEOK Partners receives a significant part of its revenues as payment for gathering and processing, and transportation and storage services. A decline in prices of natural gas, crude oil and NGL, may result in reduced payments for these services, thus significantly impacting future cash flow. In the previous quarter, the partnership’s earnings decreased year over year primarily due to a decline in NGL optimization margins and narrower NGL price differentials.

ONEOK Partners’ operations are subject to extensive federal, state and local rules and regulations governing the discharge of materials and protection of the environment. If, ONEOK Partners violates the laws or fails to meet the standard implemented by the aforesaid organizations, the partnership might face several consequences including penalties, civil fines and injunctions.

Other Stocks to Consider

Stocks from the industry that are presently performing well include Delek Logistics Partners, LP (DKL - Snapshot Report), Energy Transfer Partners, L.P. (ETP - Analyst Report) and Kinder Morgan Energy Partners, L.P. (KMP - Analyst Report), all with a Zacks Rank #2 (Buy).

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