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ONEOK Partners, L.P. (OKS - Analyst Report) issued $1.3 billion senior notes in two tranches. One series consists of 5-year senior notes worth $400 million with coupon rate of 2% and the other comprises 10-year senior notes worth $900 million with coupon rate of 3.375%. The net proceeds of the total offering will be $1.29 billion. The notes offering will close on September 13, 2012.

ONEOK intends to utilize the net proceeds of the issue to repay $1.2 billion due under its commercial paper program and use the rest for general partnership purposes.

ONEOK issues senior notes and units from time to time to accumulate funds for repaying its existing debts and for its expansion projects. On January 21, 2011, the partnership issued a total of $1.3 billion of senior notes in two tranches. ONEOK utilized the net proceeds of the issue to repay the debts under its commercial paper program, redeem few senior notes and use the rest for general corporate purposes.

As of June 30, 2012, ONEOK’s long-term debts were $3,512 million, down from $3,515.6 million as of December 31, 2011. In February 2012, ONEOK completed a public offering of 8.0 million common units at $59.27 per unit. The partnership used the net proceeds to repay a part of its outstanding debts under $1.2 billion commercial paper program and $350 million 5.9% senior notes, and the rest was utilized for general partnership purposes.

In the forthcoming quarter, we believe the partnership’s interest expenses may increase from $47.1 million reported at the end of second-quarter 2012 resulting from this new senior notes issuance.

We view ONEOK as an organization with geographically diversified gas assets in five different basins. We believe this diversity enables the partnership to mitigate a decline in natural gas production in some of its operating basins and to serve a large number of customers.

In addition, the partnership continues to invest significant amounts in several projects under its organic growth program, which we believe will help it to cater the growing demand from natural gas. We also expect ONEOK’s forthcoming organic growth to primarily come from the Bakken Shale and Three Forks in the Mid-Continent region, where it owns and operates a vast majority of its gathering assets.

However, we are skeptical about uncertain weather condition, volatile credit markets and unpredictable commodity prices. These factors may significantly impact the partnership’s financial results in the future.

ONEOK Partners, L.P. currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

Tulsa, Oklahoma-based ONEOK Partners, L.P. is one of the largest publicly traded master limited partnerships and a leader in gathering, processing, storing and transporting of natural gas in the U.S. The partnership competes with Plains All American Pipeline, L.P. (PAA - Analyst Report).

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