Managing Director Gregory A. Reid of Salient Partners has seen appreciation in ONEOK, Inc.’s (OKE) stock since the spinoff of its utility business, and he expects the company to build and sell more midstream assets, resulting in growth in the MLP and general partner.
“They went through a process of unlocking the value from their midstream business by spinning off the utility and closing down an energy service business, and it left them as a pure-play general partner,” Reid said. “They did see a lot of appreciation over the last 18 months or so while they unlocked that value.”
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ONEOK’s stock rose from $40 to around $61 as the spinoff was completed, Reid says. The company’s long-term goal is to build more midstream assets, and he predicts even more growth as a result.
“The goal of that company over the long term is to build more midstream assets at the GP level and the LP level, and ultimately drop down or sell the assets into the MLP over time. That will create growth in the MLP and create more growth in the general partner, in our opinion. We prefer to own the general partner there, believing that’s going to create a higher long-term total return for our investors,” Reid said.
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