Oneok Partners LP said it has completed the purchase of an interstate natural gas liquids (NGL) and refined petroleum products pipeline system from a subsidiary of Kinder Morgan Energy Partners LP for approximately $300 million. The system extends from Bushton and Conway in Kansas to Chicago and transports, stores and delivers a full range of NGLs and refined products.

The transaction, which was first announced in July, is accretive to Oneok Partners' earnings and distributable cash flow, beginning in the fourth quarter 2007. Financing for this transaction will come from the partnership's recently completed notes offering.

"With this strategic acquisition and the $1.5 billion of internal growth projects currently under way in the partnership, we are creating additional opportunities for future growth in distributions to our unitholders," said Oneok Partners CEO John W. Gibson.

Oneok Partners said the assets further expand its footprint by directly linking its existing Midcontinent NGL assets to markets in the Upper Midwest. The acquisition also represents the partnership's first step into the refined petroleum products market, building on its existing core capabilities of transporting, storing and marketing both natural gas and NGLs.

As a result of the closing announced last Monday, Oneok Partners will operate the federally-regulated NGL pipeline system spanning more than 1,600 miles, with a capacity to transport up to 125,000 b/d. The pipeline transports NGL purity products and various refined products, including unleaded gasoline and diesel fuel. More than 90% of the revenues associated with this system are fee based, primarily generated from transportation tariffs.

The transaction includes operation of approximately 950,000 barrels of storage capacity -- both below-ground caverns and above-ground tanks -- and eight NGL terminals. Also included in the purchase is 50% ownership of the Heartland Pipeline Co., which consists of three refined products terminals. ConocoPhillips owns the other 50% of the Heartland joint venture and is the managing partner.

Approximately 80 employees affected by this transaction have accepted positions with Oneok.

The transaction adds to Oneok Partners already extensive NGL infrastructure, including gathering pipelines, fractionators, storage and an isomerization unit in the Midcontinent -- at Conway, Bushton and Hutchinson, KS, and Medford, OK -- and on the Texas Gulf Coast at Mont Belvieu. It also owns interstate NGL distribution pipelines between the market centers in Conway and Mont Belvieu.

The company noted that it is also executing several internally generated NGL growth projects, the largest being the 760-mile Overland Pass Pipeline that will extend from southwestern Wyoming to Conway (see NGI, April 2). The $433 million project is a joint venture between a subsidiary of Oneok Partners and a subsidiary of Williams. The joint venture, Overland Pass Pipeline Company LLC, also plans to build a $120 million pipeline lateral connecting the growing Piceance Basin production in northwest Colorado to the Overland Pass Pipeline.

Additionally, Oneok Partners said it plans to build the 440-mile Arbuckle Pipeline from southern Oklahoma through the Barnett Shale natural gas play in northern Texas and continuing on to the Texas Gulf Coast (see NGI, March 26). The partnership also is investing $216 million to upgrade its existing NGL infrastructure.

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