Leverage ratio greater than four
Debt-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) ratios are often used to assess a company’s ability to repay debt. It’s commonly used by credit rating agencies to determine a company’s credit rating. A lower ratio is considered better.
ONEOK Partners’ (OKS) long-term debt-to-EBITDA ratio in 2014 was 4.7. ONEOK’s long-term leverage ratio target is below 4x, which is what MLP companies generally target. So its current ratio is higher than its target.
Moody’s gives ONEOK Partners’ a current long-term debt credit rating of Baa2, and S&P gives it a BBB.
Targa Resources Partners’ (NGLS) leverage ratio was 2.8 in 2014. It increased to 3.5 in the first quarter of 2015 as a result of its merger with Atlas. For more on this topic, read Targa’s Leverage and Liquidity Position.
ONEOK Partners’ capital structure target is to have 50% debt and 50% equity. The above chart shows its capital structure over the last five years. At the end of first-quarter 2015, the company had ~$1.6 billion available from its $2.4 billion revolving credit facility.
OKS generated ~$1.1 billion in 2014 through a public offering and ATM (at-the-market) equity program. This included the company’s general partner contribution to maintain its 2% interest in the partnership.
The company used the proceeds to repay commercial papers, fund capital expenses, and other purposes. In the first quarter of 2015, OKS issued ~1.7 million common units through its ATM program. As of 1Q 2015, OKS had ~$443 million common units available to issue through its $650 million ATM program.
The company had 181 million common units outstanding at the end of 2014, 159 million outstanding in 2013, 147 million in 2012, and 131 million common units outstanding in 2011.
OKS forms ~4.5% of the Alerian MLP ETF (AMLP).