Oneok Shares Fall After Bakken Pipeline Canceled

Oneok Inc., the company spending as much as $4.8 billion to expand its network, fell after a subsidiary canceled plans for a $1.8 billion pipeline connecting the Bakken shale formation to crude oil terminals in Oklahoma.

Oneok, based in Tulsa, Oklahoma, declined 1.5 percent to $44.88 at the close in New York. Earlier, it fell 3 percent, the biggest intraday drop since Aug. 1.

Oneok Partners LP, which is controlled by Oneok Inc., wasn’t able to sign up enough oil producers to justify building the Bakken Crude Express pipeline, President Terry Spencer said in a statement yesterday. The 1,300-mile (2,100-kilometer) pipeline would have given Oneok a toehold in the lucrative oil transportation business in Montana and North Dakota. The company already is one of the region’s largest natural gas processors.

An “abundance of rail,” which allows producers to ship oil to higher-priced markets on the East Coast, probably made the project unviable, according to a research note from Tudor Pickering Holt & Co.

The Bakken, part of the Williston Basin that stretches from Canada into North Dakota and Montana, holds an estimated 3.6 billion barrels of crude, according to the U.S. Energy Department. Production is expected to hit 1 million barrels a day in five years. A lack of pipelines to bring the oil to refiners has caused crude in North Dakota to trade at a discount to West Texas Intermediate, the U.S. benchmark.

The Oneok pipeline would have carried as much as 200,000 barrels a day to the oil storage hub at Cushing, Oklahoma. The company is already building a pipeline to ship natural gas liquids such as propane and butane, which are produced in the Bakken.

“While we are disappointed with the results of the open season, we remain committed to serving Williston Basin producers for their natural gas, natural gas liquids and crude-oil infrastructure needs,” Spencer said in the statement.