Oneok, Inc. · NYSE:OKE
Oneok — Investor Presentation (March 2019)
58 slides from Oneok's investor presentation, March 2019
Slide 1: Investor Update March 2019
I N V E S T O R U P D AT E MARCH 2019
Slide 2: Forward-Looking Statements
FORWARD -LOOKING STATEMENTS Statements contained in this presentation that include company expectations or predictions should be considered forward-looking statements that are covered by the safe harbor protections provided under federal securities legislation and other applicable laws. It is import
Slide 3: Index
INDEX OVERVIEW 4 FUTURE GROWTH 14 APPENDIX 21 • Business Segments 22 • Williston Basin 35 • Mid-Continent 41 • Permian Basin 44 • Powder River Basin 47 • Environment, Social & Governance (ESG) 49 NON-GAAP RECONCILIATIONS 53 Elk Creek Pipeline – Kansas
Slide 4: Overview
O V E RV I E W Mont Belvieu II fractionator — Gulf Coast
Slide 5: Integrated. Reliable. Diversified.
INTEGRATED. RELIABLE. DIVERSIFIED. ◆ Approximately 38,000-mile network of natural gas liquids and natural gas pipelines ◆ Provides midstream services to producers, processors and customers ◆ Significant basin diversification ◆ Growth expected to be driven by: ▪ Industry fundamentals from increased p
Slide 6: Key Investment Considerations
KEY INVESTMENT CONSIDERATIONS A PREMIER ENERGY INFRASTRUCTURE COMPANY Adjusted EBITDA Growth ($ in billions) MAJOR ENERGY INFRASTRUCTURE COMPANY $2.45 $2.60 • Extensive systems connect North American energy supply with worldwide demand $2.00 • Premier assets in most prolific U.S. commodity-producing
Slide 7: ONEOK Business Segments
ONEOK BUSINESS SEGMENTS Natural Gas Liquids Natural Gas Gathering Natural Gas Pipelines and Processing ~15% ~25% 2019 EARNINGS ~60% GUIDANCE EARNINGS MIX >80 percent fee based ~85 percent fee based >95 percent fee based CONTRACT Fee-based, bundled service volume Fee contracts with a POP component (a
Slide 8: ONEOK's Fee-for-Service Business Model
ONEOK’S FEE-FOR -SERVICE BUSINESS MODEL FEE-BASED EARNINGS COLLECTED FROM WELLHEAD TO MARKET CENTERS $ Natural Gas Gathering and Processing Fees/Sales Natural Gas Gathering and Processing 2018 Adj. EBITDA $ Natural Gas Liquids Fees/Sales $ 2014 Adj. EBITDA $ $ Natural Gas Pipelines Fees Fee Based $4
Slide 9: ONEOK vs. S&P 500
ONEOK VS. S&P 500 A UNIQUE INVESTMENT OPPORTUNITY (shown as percentages) Median S&P Median ONEOK Dividend S&P 500 Aristocrats (b) Approximate Current 5.4 2.0 2.4 Dividend Yield EBITDA Growth (a) 14.6 6.5 6.0 2019 – 2021 EPS Growth (a) 18.6 9.6 7.1 2019 – 2021 Dividend Growth (a) 9.5 5.7 5.1 2019 – 2
Slide 10: ONEOK's Attractive Dividend Profile
ONEOK'S ATTRACTIVE DIVIDEND PROFILE 1 OF 49 COMPANIES IN THE S&P 500 WITH A DIVIDEND YIELD GREATER THAN 4 PERCENT S&P 500 Dividend Yield 120 118 85 81 5.35% 52 29 11 9 0% 0% - 1% 1% - 2% 2% - 3% 3% - 4% 4% - 5% 5% - 6% > 6% Source: NASDAQ market data as of Feb. 28, 2019. PAGE 10
Slide 11: The High Dividend Yield Universe
THE HIGH DIVIDEND YIELD UNIVERSE ONEOK HAS RETURNED MORE VALUE TO SHAREHOLDERS THAN OTHER HIGH DIVIDEND PEERS Evaluating the ONEOK Peer Universe (a) ONEOK has 25+ years of dividend stability and growth To t a l S h a r e h o l d e r R e t u r n v s . P e e r s ( b ) Last three years, annualized 75.8
Slide 12: Financial Strength – A Competitive Advantage
FINANCIAL STRENGTH – A COM PETITIVE ADVANTAGE INCREASING EXCESS CASH ◆ Total liquidity of $3.5 billion at Dec. 31, 2018, with borrowing capacity of $2.5 billion Adjusted EBITDA Growth ($ in billions) available on ONEOK’s credit facility and $950 million available on its three-year unsecured term loa
Slide 13: ONEOK 2019 Financial Guidance
ONEOK 2019 FINANCIAL GUIDANCE 2019 Guidance Range ($ in millions) Midpoint Net income $ 1,140 $ 1,270 $ 1,400 Adjusted EBITDA 2,500 2,600 2,700 Distributable cash flow 1,820 1,940 2,060 Capital-growth expenditures 2,500 3,100 3,700 Maintenance capital expenditures 160 180 200 Segment Adjusted EBITDA
Slide 14: Future Growth
FUTURE GROWTH Elk Creek Pipeline — Kansas
Slide 15: Elk Creek Pipeline Volume Ramp
ELK CREEK PIPELINE VOLUME RAMP EXPECT TO ACHIEVE FOUR TO SIX TIMES EBITDA MULTIPLE IN FIRST QUARTER 2020 Up to 240,000 Current contracted capacity: 170,000 bpd Additional contracted volume: Demicks Lake II and third-party plant connections and expansions (includes Williston Basin flared volume); pro
Slide 16: North Dakota Natural Gas Flaring
NORTH DAKOTA NATURAL GAS FLARING CONNECTED MORE THAN 600 WELLS IN 2018 ONEOK Dedicated Gross Production 1,700 1,500 Capacity with Demicks Lake II 1,300 Capacity with Demicks Lake I MMcf/d 1,100 Gas Flared Current ONEOK Natural Gas Flared Gas Processing Capacity 900 Gas Captured Gas Captured 700 500
Slide 17: Williston Basin Production
WILLISTON BASIN PRODUCTION INCREASING PRODUCTION AT LOWER CRUDE OIL PRICES AND WITH FEWER RIGS Rig Count vs. Natural Gas Production (a) North Dakota Crude Oil Performance (c) 250 3.0 Natural Gas Production 13% CAGR (b) 200 2.6 Cumulative Oil Production (bbl) 150 2.2 Number of Rigs (Bcf/d) Gas Flared
Slide 18: Natural Gas Liquids Growth Projects
NATURAL GAS LIQUIDS GROWTH PROJECTS ~$5.0 BILLION ANNOUNCED SINCE JUNE 2017 CapEx Expected Project Scope ($ in millions) Completion West Texas LPG (WTLPG) • 120-mile pipeline lateral extension with capacity of 110,000 bpd in the Delaware Basin $200 (a) Complete pipeline extension • Supported by long
Slide 19: Gathering and Processing Growth Projects
GATHERING AND PROCESSING GROWTH PROJECTS ~$1.0 BILLION ANNOUNCED SINCE JUNE 2017 CapEx Expected Project Scope ($ in millions) Completion • 200 MMcf/d processing capacity through a long-term processing services agreement with a third Additional STACK party $40 Complete processing capacity • 30-mile n
Slide 20: Natural Gas Pipelines Growth Projects
NATURAL GAS PIPELINES GROWTH PROJECTS ANNOUNCED SINCE JUNE 2018 Expected Project Scope Completion ONEOK Gas Transportation • 100 MMcf/d westbound expansion from the STACK area to multiple western Oklahoma pipeline delivery points Complete (OGT) westbound expansion Roadrunner Gas Transmission • Appro
Slide 21: Appendix
APPENDIX Mont Belvieu fractionator — Texas
Slide 22: Business Segments
BUSINESS SEGMENTS Mustang Pipeline — Oklahoma
Slide 23: Natural Gas Liquids
NATURAL GAS LIQUIDS ONE OF THE LARGEST INTEGRATED NGL SERVICE PROVIDERS ◆ Integrated NGL pipeline system from the Williston Basin to the Gulf Coast, linking key NGL market centers at Conway, Kansas and Mont Belvieu, Texas ◆ Provides fee-based services to natural gas processors and customers ▪ Gather
Slide 24: Natural Gas Liquids: Predominantly Fee Based
NATURAL GAS LIQUIDS PREDOMINANTLY FEE BASED Sources of Earnings ◆ Exchange Services – Primarily fee based ▪ Gather, fractionate and transport raw NGL feed to storage and market hubs ◆ Transportation & Storage Services – Fee based ▪ Transport NGL products to market centers and provide storage service
Slide 25: Natural Gas Liquids: Volume Update
NATURAL GAS LIQUIDS VOLUME UPDATE ◆ NGL volumes gathered increased 12 percent compared with 2017 G a t h e r e d Vo l u m e ( M B b l / d ) ◆ Ethane volumes across ONEOK’s system increased approximately 65,000 bpd compared with 2017 2018 third-party natural gas processing plant connections: 912 ◆ 77
Slide 26: Natural Gas Liquids: Volume Update
NATURAL GAS LIQUIDS VOLUME UPDATE New Disclosure NGL Gathered and Fractionated N G L R a w F e e d T h r o u g h p u t Vo l u m e Vo l u m e s ( M B b l / d ) (d)(MBbl/d) 912 770 812 715 586 621 1,080-1,165 895 1,010 836 2016 2017 2018 2016 2017 2018 2019G Gathered Volume Fractionated Volume Full Ye
Slide 27: Natural Gas Gathering and Processing
NATURAL GAS GATHERING AND PROCESSING SERVING PRODUCERS IN KEY BASINS ◆ Provides gathering, compression, treating and processing services to producers ◆ Diverse contract portfolio ▪ More than 2,000 contracts ▪ Fee-based contracts with a percent of proceeds (POP) component ◆ Natural gas supplies from
Slide 28: Gathering and Processing: Predominantly Fee Based
NATURAL GAS GATHERING AND PROCESSING PREDOMINANTLY FEE BASED ◆ Increased fee-based contract mix by restructuring percent-of- Contract Mix by Earnings proceeds (POP) contracts with a fee component to include a higher fee rate ▪ Increasing fee-based earnings while providing enhanced 20% 15% 16% ~15% s
Slide 29: Gathering and Processing: Volume Update
NATURAL GAS GATHERING AND PROCESSING VOLUME UPDATE G a t h e r e d Vo l u m e s ( M M c f / d ) Rocky Mountain 1,915-2,115 1,937 143 well connects completed in the fourth quarter 2018; 610 for the full year 2018 1,680 ◆ 1,561 973 925-1,025 ◆ Expect to connect approximately 620 wells in 2019 839 781
Slide 30: Gathering and Processing: Commodity Hedges
NATURAL GAS GATHERING AND PROCESSING Year Ending December 31, 2019 Commodity Volumes Hedged Average Price Percent Hedged Natural Gas (BBtu/d) (a) 82.0 $2.30 / MMBtu 81% Condensate (MBbl/d) 2.7 $58.55 / Bbl 92% Natural Gas Liquids (MBbl/d) (b) 7.6 $0.71 / gallon 75% Year Ending December 31, 2020 Comm
Slide 31: Commodity Price Sensitivities
NATURAL GAS GATHERING AND PROCESSING COMMODITY PRICE SENSITIVITIES (a) Earnings Impact Earnings Impact ($ in Millions) ($ in Millions) Commodity Sensitivity 2019 (b) 2020 (c) Natural Gas $0.10 / MMBtu $3.9 $3.6 Natural Gas Liquids $0.01 / gallon $1.6 $1.7 Crude Oil $1.00 / barrel $1.5 $1.6 (a) As of
Slide 32: Natural Gas Pipelines
NATURAL GAS PIPELINES CONNECTIVITY TO KEY MARKETS ◆ Predominantly fee-based earnings ◆ 96% of transportation capacity contracted under firm demand-based rates in 2018 ◆ 85% of contracted system transportation capacity served end-use markets in 2018 ▪ Connected directly to end-use markets ◇ Local nat
Slide 33: Natural Gas Pipelines: Predominantly Fee Based
NATURAL GAS PIPELINES PREDOMINANTLY FEE BASED ◆ Firm demand-based contracts serving primarily investment- Sources of Earnings grade utility customers ◆ Recently announced approximately 1.6 billion cubic feet per 2% 4% 4% 3% <5% 8% day of system expansions ▪ Capital-efficient projects backed by multi
Slide 34: Natural Gas Pipelines: Well-Positioned and Market-Connected
NATURAL GAS PIPELINES WELL-POSITIONED AND MARKET-CONNECTED N a t u r a l G a s Tr a n s p o r t a t i o n Capacity Contracted (MDth/d) ◆ Expect more than 95 percent fee-based earnings in 2019, and: ▪ Approximately 95 percent of transportation capacity subscribed ▪ Approximately 65 percent of natural
Slide 35: Williston Basin
WILLISTON BASIN Garden Creek plant — North Dakota
Slide 36: Williston Basin: Providing Valuable Takeaway Capacity
WILLISTON BASIN PROVIDING VALUABLE TAKEAWAY CAPACITY Natural Gas Gathering and Processing ◆ More than 1 Bcf/d of natural gas processing capacity, increasing to more than 1.4 Bcf/d in the first quarter 2020 ◆ More than 3 million acres dedicated to ONEOK, with approximately 1 million acres in the core
Slide 37: Elk Creek Pipeline Project
ELK CREEK PIPELINE PROJECT ATTRACTIVE PROJECT RETURN ◆ Existing Bakken NGL Pipeline and Overland Pass Pipeline operating at full capacity ◆ Expected to reach 100,000 bpd in the first quarter 2020 ◆ Growing production in the region drives need for increased NGL takeaway ▪ Producer drilling and comple
Slide 38: Demicks Lake I and II Plants
DEMICKS LAKE I AND II PLANTS PROCESSING CAPACITY TO SUPPORT PRODUCER GROWTH AND HELP MEET GAS CAPTURE TARGETS ◆ Williston Basin growth continues with enhanced well-completion techniques driving increased production and lower breakeven economics ▪ One-third of the rigs needed today to develop the sam
Slide 39: Williston Basin: Increased Natural Gas Capture Results
WILLISTON BASIN INCREASED NATURAL GAS CAPTURE RESULTS ◆ Increased NGL and natural gas value uplift ◆ Approximately 81% of North Dakota’s natural gas production was captured in December 2018 ◆ North Dakota Industrial Commission (NDIC) policy targets: ▪ Natural gas capture: currently 88% , increasing
Slide 40: Williston Basin: Increasing Gas-to-Oil Ratios
WILLISTON BASIN INCREASING GAS-TO-OIL RATIOS (GOR) DRIVING VOLUME GROWTH ◆ Producer efficiencies across the basin leading to increasing ◆ New all-time high natural gas production of 2.65 Bcf/d production with fewer rigs reported in December 2018, compared with 2.09 Bcf/d in December 2017 3,000 2,500
Slide 41: Mid-Continent Region
MID -CONTINENT REGION Canadian Valley plant — Oklahoma
Slide 42: Mid-Continent Region
MID -CONTINENT REGION RELIABLE FULL-SERVICE PROVIDER SERVING GROWTH IN THE STACK AND SCOOP PLAYS Natural Gas Liquids ◆ More than 110 existing natural gas processing plant connections ◆ Currently gathering approximately 576,000 bpd of NGLs with an incremental 90,000 bpd, excluding ethane, expected by
Slide 43: Arbuckle II Pipeline
ARBUCKLE II PIPELINE CRITICAL INFRASTRUCTURE TO SERVE GROWING PRODUCTION ◆ Volume growth expected across ONEOK footprint, particularly in the STACK and SCOOP areas and Williston and Permian basins, creating a need for additional capacity ◆ Pipeline and fractionator projects serving producer needs at
Slide 44: Permian Basin
PERMIAN BASIN Roadrunner Pipeline — Permian Basin
Slide 45: Permian Basin: Reliable Service Provider
PERMIAN BASIN RELIABLE SERVICE PROVIDER Natural Gas Liquids ◆ Approximately 40 third-party natural gas processing plant connections in the Permian Basin ◆ Completed West Texas LPG pipeline extension into Delaware Basin with initial capacity of 110,000 bpd ▪ Includes expansion of existing 285,000 bpd
Slide 46: ONEOK's Permian Basin Strategy
ONEOK’S PERMIAN BASIN STRATEGY CONNECTING PERMIAN BASIN TO ARBUCKLE II UTILIZING INCREMENTAL, CAPITAL-EFFICIENT EXPANSIONS STRATEGY POTENTIAL FUTURE Legacy WTLPG system – potential conversion to crude service New Permian to Arbuckle II connector Arbuckle II Pipeline (in progress) Natural Gas Liquids
Slide 47: Powder River Basin
POWDER RIVER BASIN Lonesome Creek plant — North Dakota
Slide 48: Powder River Basin: Providing Valuable Takeaway Capacity
POWDER RIVER BASIN PROVIDING VALUABLE TAKEAWAY CAPACITY Natural Gas Liquids ◆ Assets located in NGL-rich Niobrara, Sussex and Turner formations ◆ Approximately 1 million acres dedicated to ONEOK ◆ NGL takeaway through Bakken NGL Pipeline and Overland Pass Pipeline ▪ Elk Creek Pipeline will provide a
Slide 49: Environment, Social & Governance
ENVIRONMENT, SOCIAL & GOVERNANCE Mont Belvieu II fractionator — Gulf Coast
Slide 50: ONEOK's ESG Initiatives and Practices
ONEOK’S ESG INITIATIVES AND PRACTICES PROMOTING LONG-TERM BUSINESS SUSTAINABILITY ◆ Effective Governance and Oversight ◆ Committed to Safety ▪ Diverse board of directors – members elected annually, including a ▪ Training – robust protocols and training focused on employee, asset nonexecutive chairma
Slide 51: Delivering Long-Term Value
DELIVERING LONG -TERM VALUE ALIGNED WITH SHAREHOLDERS Value Creation and Equity Returns Drive Incentives Total Shareholder Returns ◆ ONEOK’s executive compensation program is focused on ◆ ONEOK’s total shareholder returns have consistently creating long-term shareholder value outperformed peers (a)
Slide 52: ESG-Related Recognition
ESG-RELATED RECOGNITION RECENT HIGHLIGHTS ◆ FTSE4Good Index ▪ Includes companies demonstrating strong ESG practices. The FTSE4Good indices are used by a variety of market participants to create and assess responsible investment funds and other products. ◆ MSCI USA Quality Index ▪ Includes companies
Slide 53: Non-GAAP Reconciliations
NON-GAAP R E C O N C I L I AT I O N S Mont Belvieu II fractionator — Gulf Coast
Slide 54: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS ONEOK has disclosed in this presentation adjusted EBITDA, distributable cash flow (DCF) and dividend coverage ratio, which are non-GAAP financial metrics, used to measure ONEOK’s financial performance, and are defined as follows: Adjusted EBITDA is defined as net income adju
Slide 55: 2019 Financial Guidance Non-GAAP Reconciliation
2019 FINANCIAL GUIDANCE NON-GAAP RECONCILIATION 2019 Guidance Range (Millions of dollars) Reconciliation of Net Income to Adjusted EBITDA and Distributable Cash Flow Net Income $ 1,140 - $ 1,400 Interest expense, net of capitalized interest 525 - 475 Depreciation and amortization 490 - 470 Income ta
Slide 56: Non-GAAP Reconciliation
NON-G A A P RECONCILIATION 2016 2017 2018 ($ in Millions) FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Reconciliation of Net Income to Adjusted EBITDA Net income $744 $186 $176 $167 $65 $594 $266 $282 $314 $293 $1,155 Interest expense, net of capitalized interest 470 116 118 127 125 486 116 113 122 119 470 Depr
Slide 57: Net Income to Adjusted EBITDA
NON-GAAP RECONCILIATION NET INCOME TO ADJUSTED EBITDA (millions of dollars) 2014 2015 2016 2017 2018 Reconciliation of net income to adjusted EBITDA Net income $ 663 $ 379 $ 744 $ 594 $ 1,155 Interest expense, net of capitalized interest 356 417 470 486 470 Depreciation and amortization 295 355 392
Slide 58: Elk Creek Pipeline — Kansas
Elk Creek Pipeline — Kansas