Tulsa Time - Does ONEOK's Magellan Deal Give It Enough Scale and Permian Presence?

RBN Energy Blogcast

The feeling is almost palpable among midstreamers: In a fast-changing energy industry, the companies that gather, transport, store and export hydrocarbons need to consolidate and augment — and be smart about how they get bigger. Scale, that’s the key. That — plus complementary assets that provide synergies, lower costs and increase free cash flow, a sizable portion of which can be returned to shareholders as dividends and buybacks — is what investors are looking for. Oh, and don’t forget this important M&A goal: gaining a larger footprint and a more prominent role in the Permian, the dominant U.S. production area. ONEOK, a midstream company heretofore primarily focused on moving NGLs and natural gas, earlier this week announced an $18.8 billion agreement to acquire Magellan Midstream Partners, which is best known for pipelines that transport refined products and crude oil. In today’s RBN blog, we and our friends at East Daley Analytics kick the tires, look under the hood, and give our thoughts on the deal’s pros and potential cons.