Midstreamer Oneok Inc. hopes to reach a final investment decision (FID) on its proposed 2.8 Bcf/d Saguaro Connector natural gas pipeline later this year.
The 155-mile pipeline would transport natural gas from the Waha hub in West Texas to the Mexico border. It would serve the Saguaro LNG export terminal proposed by Mexico Pacific Ltd. LLC (MPL), which also has yet to reach FID.
“We continue to evaluate the Saguaro Connector Pipeline, a potential intrastate pipeline project that would provide natural gas transportation to the U.S. and Mexico border for ultimate delivery to an export facility on the West coast of Mexico,” Chief Commercial Officer Kevin Burdick said during the company’s second quarter earnings call earlier this month.
“There continues to be positive developments related to the potential LNG export project with support from multiple large well-known customers, anchoring the project. We expect to make a final investment decision on the Oneok pipeline later this year.”
He added, “there have been some positive developments… But, at the end of the day, we're focused on the U.S. side and making sure we are in line with the overall timing and needs of the projects. So, that's our focus right now.”
The MPL export project in Mexico meanwhile continues to add anchor customers to the point where trains one and two are now in “oversubscribed territory,” according to management. MPL also expects to reach FID later this year.
Upping Guidance
Oneok had another good quarter and is raising its financial projections for the year. The Tulsa, OK-based company primarily owns natural gas liquids (NGL) systems that carry supply from the Rockies, Midcontinent and Permian Basin to downstream market centers. It also has an extensive network of natural gas gathering, processing, storage and pipelines.
Its infrastructure serves the Williston, Powder River, Denver-Julesburg, Anadarko and Permian basins in the United States.
In the natural gas gathering and processing segments, second quarter processed volumes averaged around 2.2 Bcf/d, a 16% increase year-over-year.
In the natural gas pipeline segment, “the strong year-to-date results continue to benefit from demand for natural gas storage and transportation services,” Burdick said. “And we now expect the segment to exceed the high-end of its original earnings guidance range.”
Higher expectations were driven by volume growth, higher average fee rates and lower-than-expected third-party NGL fractionation costs. Strong producer activity also helped, executives said.
The company expects total capital expenditure hitting around $1.575 billion in 2023.
Merger Closing In Q3
Earlier this year, the company announced that it had agreed to purchase Magellan Midstream Partners LP for $18.8 billion, which would add crude oil and refined products to its activities.
The merger is expected to close in the third quarter.
"As we work toward the successful closing of our pending merger transaction with Magellan, we also remain focused on the fundamentals of Oneok's business that have gotten us where we are today," CEO Pierce Norton said.
"We look forward to the strategic opportunities ahead of us through the combined companies, including opportunities to grow our existing legacy operations and further diversify our company through Magellan's refined products and crude operations, providing compelling long-term value for our stakeholders."
Net income was $468 million ($1.04/share) in the second quarter, compared to $414 million (92 cents) in the same quarter last year.
