With Its Business Derisked, Is It Okay To Invest In ONEOK?

ONEOK, Inc. OKE, a master limited partnership that operates in the natural gas industry in the United States, has succeeded in de-risking its business over the past few years which prompted analysts at BMO Capital Markets to upgrade the stock.

BMO's Danilo Juvane upgraded Oneok's stock from Market Perform to Outperform with a price target boosted from $53 to $59. In fact, the stock now offers investors one of the best exposures to G&P in the midstream space.

New Business Profile

Oneok's business profile today is different from what it was a few years ago, as 90 percent of 2017's expected EBITDA will come from fee-based and take-or-pay assets. This marks an improvement from 65 percent in 2014 and 2015.

In addition, recent concerns over declined crude oil prices and by extension declining volumes from the Bakken region amount to "overblown" headlines, Juvane continued. On the contrary, declining output from Bakken is unlikely to meaningfully impact the company's 9 to 11 percent compounded annual dividend growth rate through 2021 and the company will see a relatively stable production volume level of 1.7Bcf/d through 2020.

"We think concerns around potential impacts to OKE's Bakken volumes are overblown, and while we are cognizant that perceptions take time to change, we think the proof will be had in earnings results over the next few quarters," Juvane emphasized.

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Benzinga's Top Upgrades, Downgrades For July 5, 2017

Improving Fundamentals, Bottom Line Stability Among The Reasons For ONEOK Upgrade