ONEOK Buys Magellan Midstream in $18.8 Billion Energy Pipeline Deal

Gas pipeline operator ONEOK on Sunday announced it agreed to acquire Magellan Midstream Partners in a cash and stock deal valued at ~$18.8 billion including assumed debt, resulting in a combined company with a $60 billion total enterprise value. The deal price represents a 22% premium to Magellan’s closing price on Friday. The transaction includes $8.8 billion in new equity and the assumption of $5 billion of existing net debt and would create one of the largest U.S. oil and natural gas pipeline operators. Shares of ONEOK Inc fell over 9% on Monday on questions about potential synergies from the deal.

The consideration will consist of $25/share in cash and 0.667 common share of ONEOK (OKE) for each outstanding Magellan (MMP) common unit, representing a current implied value to each Magellan unitholder of $67.50/unit for a 22% premium based on the May 12 closing price.

Stock Market Reaction


  • $57.95 ▼ -5.77 (-9.06%) today
  • $57.95 ▼ -7.24 (-11.11%) past year
  • $57.95 ▼ -7.94 (-12.05%) past 5 years
  • 52wk High 71.57
  • 52wk Low 50.50

Magellan Midstream Partners LP NYSE: MMP

  • $62.61 ▲ +7.20 (+12.99%) today
  • $62.61 ▲ +13.14 (+26.56%) past year
  • $62.61 ▼ -5.99 (-8.73%) past 5 years
  • 52wk High 64.42 (today)
  • 52wk Low 44.79

The deal would put ONEOK among the five largest US pipeline operators according to data compiled by Bloomberg.


From Magellan they add a 9,800-mile refined products pipeline system with 54 connected terminals and two marine storage terminals (one of which is owned through a joint venture). In addition approximately 2,200 miles of crude oil pipelines, a condensate splitter and storage facilities with an aggregate storage capacity of about 39 million barrels, of which 29 million are used for contract storage.

Approximately 1,000 miles of these pipelines, the condensate splitter and 31 million barrels of this storage capacity (including 25 million barrels used for contract storage) are wholly-owned, and the remainder is owned through joint ventures. 

ONEOK and Magellan Merger

The deal came after Friday’s Bakers and Hughes rig report showed U.S. gas producers slashed the number of drilling rigs by the most in seven years, in a sign of future weakness for gas-pipeline companies.

  • US Baker Hughes Rig Count 12-May: 731 (Prev 748)
  • Rotary Gas Rigs: 141 (prev 157)
  • Rotary Oil Rigs: 586 (est 589; prev 588)

MLPs have generally fallen out of the favor among investors since the crude-market crash of 2014-2016 and a change in U.S. tax policy. Magellan appears to give an out of the master limited partnership structure at a higher premium than some peers in recent transactions.

The combined company will have:

  • 44% of its business in transporting natural gas liquids,
  • 21% in refined products,
  • 7% in crude products,
  • 10% in gas pipelines
  • 18% in gathering and processing
  • Will own 25K-plus miles of liquids-oriented pipelines, with significant assets and operational expertise at the Gulf Coast and Mid-Continent market hubs.

Via investor presentation.

ONEOK Pipelines

The competitors are gas- and oil-pipeline operators including Enterprise Products Partners, Kinder Morgan Inc, and Enbridge Inc.

Oneok expects the transaction to have a positive impact on both per-share earnings and free cash flow. Both companies are based in Tulsa, Oklahoma.

Oneok said it expects the deal to be earnings accretive beginning in 2024, with EPS accretion of 3%-7% per year during 2025-27 and free cash flow per share accretion averaging more than 20% during 2024-27; base synergies are expected to total at least $200M/year.

Oneok (OKE) expects the combined portfolio will present significant potential for enhanced customer product offerings and increased international export opportunities, which it said could result in total annual transaction synergies exceeding $400M within 2-4 years.

Analyst Response

“We see this as a bold move to redirect the long-term strategy of both companies, propelling the pro forma entity closer to the top of the class from a scale and diversification perspective,” Raymond James Financial analysts J.R. Weston and Justin Jenkins wrote in a note to clients. While the “surprising deal” comes at a high price for Oneok, it could still make sense, they added. “We are fans of consolidation in midstream.”

Pipeline operators are increasingly turning to acquisitions for growth as the transition to renewable energy pares the need for new links and threatens to make some existing assets redundant. The acquisition will give Oneok, which currently transports only natural gas and its byproducts, access to a network of crude oil and refined-products conduits and terminals sprawling from Texas to Minnesota.

The transaction is expected to close during the third quarter, subject to shareholder and regulatory approvals. Oneok has secured $5.25 billion in fully committed bridge financing for the cash portion of the deal.

About ONEOK Inc. (pronounced ONE-OAK) (NYSE: OKE)

“We are a leading midstream service provider and own one of the nation’s premier natural gas liquids systems, connecting NGL supply in the Rocky Mountain, Mid-Continent and Permian regions with key market centers and an extensive network of natural gas gathering, processing, storage and transportation assets. We apply our core capabilities of gathering, processing, fractionating, transporting, storing and marketing natural gas and NGLs through vertical integration across the midstream value chain to provide our customers with premium services while generating consistent and sustainable earnings growth.” – Company Website

About Magellan Midstream Partners (NYSE: MMP)

Magellan Midstream Partners, L.P. is a publicly traded partnership that primarily transports, stores and distributes refined petroleum products and crude oil. Magellan owns the longest refined petroleum products pipeline system in the country, with access to nearly 50% of the nation’s refining capacity and can store more than 100 million barrels of petroleum products such as gasoline, diesel fuel and crude oil. Based in Tulsa, Okla. Formerly a part of Williams Companies, Magellan began trading as Williams Energy Partners in February 2001. In September 2003, changed name to Magellan Midstream Partners and began trading under the stock ticker MMP.

Source: Oneok

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