ONEOK Announces Full Ownership of Delaware Basin JV for $940M

ONEOK (OKE) announced it will acquire the remaining 49.9% interest in Delaware G&P LLC for $940 million, consisting of $530 million in cash and $410 million in ONEOK common stock, giving ONEOK full ownership of the Delaware Basin JV by May 28, 2025. This acquisition, along with past acquisitions like Magellan Midstream Partners and Medallion Midstream, aims to expand ONEOK's operations, increase geographic diversification, and enhance fee-based earnings, although ONEOK's shares have declined 9.4% over the past three months, compared to the industry's 5.7% decline.

Analysis

ONEOK, Inc. (OKE) is actively pursuing a growth-through-acquisition strategy, exemplified by its latest move to acquire the remaining 49.9% interest in Delaware G&P LLC for $940 million, comprising $530 million in cash and $410 million in ONEOK common stock, with completion anticipated by May 28, 2025. This transaction will grant ONEOK full ownership of the Delaware Basin joint venture, which boasts a natural gas processing capacity exceeding 700 million cubic feet per day. This acquisition follows a series of significant purchases, including Magellan Midstream Partners, L.P., a system of NGL pipelines from Easton Energy in 2024, Medallion Midstream in October 2024, and EnLink Midstream, LLC in January 2025. These strategic moves are aimed at expanding ONEOK's operational footprint, which already includes approximately 60,000 miles of pipelines, enhancing geographic diversification, improving infrastructure integration, and boosting fee-based earnings, with an expectation of significant cost savings and synergies. Despite these strategic initiatives, ONEOK's stock has underperformed, declining 9.4% over the past three months, compared to a 5.7% decrease for the broader industry. This M&A activity is part of a wider trend in the oil and gas sector, with companies like Energy Transfer (ET), TotalEnergies SE (TTE), and Devon Energy (DVN) also engaging in acquisitions to expand operations and enhance value. For instance, ET's acquisition of WTG Midstream supports its projected 21.4% long-term earnings growth, while DVN's acquisition of Grayson Mill Energy's Williston Basin assets is expected to triple its production in the region. TTE also actively acquired $836 million in assets in Q1 2025, though its 2025 consensus EPS indicates a 12.4% year-over-year decrease. ONEOK currently holds a Zacks Rank #3 (Hold).

Key Decisions for Investors

• Investors should closely monitor ONEOK's ability to integrate its recent string of acquisitions, including the Delaware Basin JV, and realize the touted cost savings and synergies, particularly given the significant capital outlay and use of common stock.
• The recent 9.4% share price decline, underperforming the industry, may present a valuation opportunity if ONEOK's M&A strategy successfully translates into enhanced profitability and fee-based earnings, but also highlights market concerns that need to be tracked.
• Consider the broader M&A trend in the midstream sector; while consolidation can lead to stronger, more diversified entities, it also brings integration risks and potential overpayment, warranting scrutiny of ONEOK's execution relative to peers like ET and DVN.