ONEOK to build $1.4 billion Elk Creek Pipeline to aid Bakken

By Patrick C. Miller | January 09, 2018

ONEOK Inc. has announced plans to invest $1.4 billion in a new pipeline and related infrastructure that will increase the take-away capacity of natural gas liquids (NGL) from the Rocky Mountain region to the company’s Mid-Continent NGL facilities.

Based in Tulsa, Oklahoma, ONEOK said the 900-mile-long, 20-inch Elk Creek Pipeline should be completed by the end of 2019. It will have the capacity to transport up to 240,000 barrels per day (bpd) of unfractionated NGLs from near the company's Riverview terminal in eastern Montana to Bushton, Kansas.

The pipeline is estimated to cost approximately $1.2 billion. Related infrastructure is expected to cost about $200 million. The pipeline’s capacity could be expanded to 400,000 bpd with additional pump facilities.

"The existing Bakken NGL and Overland Pass Pipelines are operating at full capacity,” said Terry Spencer, ONEOK president and CEO. “Additional NGL takeaway capacity is critical to meeting the needs of producers who are increasing production and are required to meet natural gas capture targets in the Williston Basin."

The Elk Creek Pipeline is anchored by long-term contracts with terms ranging between 10 to 15 years totaling approximately 100,000 bpd, which is supported primarily by minimum volume commitments. Based on these contracts, the project is expected to generate adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) multiples of four to six times.

ONEOK expects to finance the Elk Creek Pipeline with a combination of new equity, including approximately $450 million of net proceeds received from common stock issued during 2017 under its "at-the-market" equity program, with cash from operations in excess of dividends and short- and long-term borrowings.

The project is part of ONEOK's $3 billion to $3.5 billion of potential capital-growth projects. Additional projects expected to have similar adjusted EBITDA multiples are in the late stages of development and should be announced when sufficient supply commitments are secured.

ONEOK expects to finance its additional capital-growth projects in 2018 and well into 2019 with cash generated from operations and short- and long-term borrowings.

"The Elk Creek Pipeline will strengthen ONEOK's position in the high-production areas of the Bakken, Powder River and Denver-Julesburg regions and also provide additional reliability and redundancy on our NGL system," Spencer said.

ONEOK owns about 1,500 miles of transmission pipeline with approximately 3.2 billion cubic feet per day of peak transportation capacity. The company has 10 underground natural gas storage facilities in Oklahoma, Kansas and Texas with a capacity of 53.7 billion cubic feet.