Oneok, Inc. · NYSE:OKE
Oneok — Investor Presentation (August 2019)
58 slides from Oneok's investor presentation, August 2019
Slide 1: Investor Update August 2019
ONEOK INVESTOR UPDATE us AUGUST 2019 I
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 17 APPENDIX 26 • Business Segments 29 • Williston Basin 41 • Mid-Continent 45 • Permian Basin 48 • Powder River Basin 51 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 • Premier assets in most prolific U.S. commodity-producing basin
Slide 7: Financial Strength – A Competitive Advantage
FINANCIAL STRENGTH – A COM PETITIVE ADVANTAGE INCREASING EXCESS CASH Distributable Cash Flow (DCF) in Excess of Dividends Paid ◆ DCF in excess of dividends paid of $183 million, a 20% increase ($ in millions) compared with the first quarter 2019 $183(a) $153 ◆ $2.5 billion of borrowing capacity avai
Slide 8: Investment Thesis
INVESTMENT THESIS ONEOK’s Competitive Position Key Priorities Connectivity Makes system duplication uneconomic Operate safely and environmentally • Full NGL value chain essential for operations – NGL pipelines, fractionators, storage and market 1 responsibly connectivity • Multiple pipe system creat
Slide 9: 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% fee based ~85% fee based >95% fee based CONTRACT Fee-based, bundled service volume Fee contracts with a POP component(a) Fee-based, demand ch
Slide 10: 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 11: Earnings Drivers
EARNINGS DRIVERS EXPECTED KEY DRIVERS FEE-BASED SOLUTIONS 2020 OUTLOOK ~850 MMcf/d new capacity NATURAL GAS FLARING >300 MMcf/d on ONEOK dedicated acreage and from ONEOK and third-party processing plants expected to be >500 MMcf/d currently flaring in North Dakota continued strong producer activity
Slide 12: Long-Term Growth Outlook
LONG -TERM GROWTH OUTLOOK LEADING EARNINGS PER SHARE (EPS) GROWTH 3-year EPS Growth (Median CAGR) 12/31/2018 - 12/31/2021 ONEOK 14.7% (a) S&P 500 7.8% (shown as percentages) Median S&P 500 Median ONEOK Dividend S&P 500 Aristocrats(b) Approximate Current Energy Midstream Peers (a) 6.4% Dividend Yield
Slide 13: Attractive Dividend Profile
ATTRACTIVE DIVIDEND PROFILE 1 OF 25 COMPANIES IN THE S&P 500 WITH A DIVIDEND YIELD GREATER THAN 5% S&P 500 Dividend Yield 127 99 83 5.08% 78 60 33 13 12 0% 0% - 1% 1% - 2% 2% - 3% 3% - 4% 4% - 5% 5% - 6% > 6% Source: NASDAQ market data as of July 31, 2019. PAGE 13
Slide 14: ESG Initiatives and Practices
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 and nonexecutive chairman, l
Slide 15: 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 16: 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 17: Future Growth
FUTURE GROWTH Elk Creek Pipeline — Kansas
Slide 18: 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(a) Plants contracted: volumes up to 225,000 bpd Additional contracted volume: Demicks Lake II, Bear Creek expansion and third- party plant connections and expansions (includes Willi
Slide 19: North Dakota Natural Gas Flaring
NORTH DAKOTA NATURAL GAS FLARING CONNECTED MORE THAN 600 WELLS IN 2018 O N E O K D e d i c a t e d G r o s s P r o d u c t i o n (a) 1,500 Capacity with Demicks Lake II Capacity with MMcf/d Demicks Lake I GGaass FFllaarreedd Current ONEOK Natural 1,000 Gas Processing Capacity Gas Captured Gas Captur
Slide 20: Williston Basin Production
WILLISTON BASIN PRODUCTION INCREASING PRODUCTION AT LOWER CRUDE OIL PRICES AND WITH FEWER RIGS Rig Count vs. Natural Gas Production(a) N o r t h D a k o t a C r u d e O i l P e r f o r m a n c e (c) 250 3.0 Natural Gas Production 12% CAGR(b) 200 2.6 Cumulative Oil Production (bbl) 150 2.2 Number of
Slide 21: Williston Basin
WILLISTON BASIN INCREASING GAS-TO-OIL RATIOS (GOR) DRIVING VOLUME GROWTH ◆ Producer efficiencies across the basin leading to increasing ◆ Natural gas production of 2.8 Bcf/d reported in May 2019, production with fewer rigs compared with 2.3 Bcf/d in May 2018 3,000 2,500 2,000 2.03 GOR 1,500 1,000 1.
Slide 22: Williston Basin
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 May 2019 ◆ North Dakota Industrial Commission (NDIC) policy targets: ▪ Natural gas capture: currently 88%, increasing to 91%
Slide 23: Natural Gas Liquids Growth Projects
NATURAL GAS LIQUIDS GROWTH PROJECTS CapEx Expected Project Scope ($ in millions) Completion • 900-mile NGL pipeline from the Williston Basin to the Mid-Continent with capacity of up to 240,000 bpd, and related infrastructure Elk Creek Pipeline project • Supported by long-term contracts, which includ
Slide 24: Gathering and Processing Growth Projects
GATHERING AND PROCESSING GROWTH PROJECTS CapEx Expected Project Scope ($ in millions) Completion • 200 MMcf/d processing plant in the core of the Williston Basin Demicks Lake I plant and • Expected to open full by capturing natural gas currently being flared $400 Q4 2019 infrastructure • Contributes
Slide 25: Natural Gas Pipelines Growth Projects
NATURAL GAS PIPELINES GROWTH PROJECTS Expected Project Scope Completion ONEOK Gas Transportation • 100 MMcf/d westbound expansion from the STACK area to multiple western Oklahoma pipeline delivery points Complete (OGT) westbound expansion Roadrunner Gas Transmission • 750 MMcf/d of eastbound transpo
Slide 26: Appendix
APPENDIX Mont Belvieu fractionator – Texas
Slide 27: ONEOK vs. S&P 500
ONEOK VS. S&P 500 A UNIQUE INVESTMENT OPPORTUNITY (a) 2019-2021 growth rates based on consensus estimates as of July 31, 2019. (b) Includes the companies within the S&P 1,500 that have followed a managed-dividends policy of consistently maintaining or increasing dividends every year for at least 20
Slide 28: ONEOK 2019 Financial Guidance
ONEOK 2019 FINANCIAL GUIDANCE 2019 Guidance Range ($ 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 29: Business Segments
BUSINESS SEGMENTS Mustang Pipeline — Oklahoma
Slide 30: 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 31: Natural Gas Liquids
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 32: Natural Gas Liquids
NATURAL GAS LIQUIDS VOLUME UPDATE Average NGL Raw Feed Throughput Volumes(a) ◆ NGL raw feed throughput volumes increased 8%, Average Bundled compared with the first quarter 2019 Region/Asset First Quarter 2019 Second Quarter 2019 Rate (per gallon) ▪ Gulf Coast/Permian volume increased approximately
Slide 33: 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 34: Natural Gas Gathering and Processing
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 35: Natural Gas Gathering and Processing
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 Expect to connect approximately 620 wells in 2019 1,680 ◆ 1,561 ▪ 259 well connects completed in the first half of 2019 973 925-1,025 781 839 ◆ Second-quarter 2019 natur
Slide 36: Natural Gas Gathering and Processing
NATURAL GAS GATHERING AND PROCESSING Six Months Ending Dec. 31, 2019 Commodity Volumes Hedged Average Price Percent Hedged Natural Gas (BBtu/d)(a) 82.0 $2.30 / MMBtu 73% Condensate (MBbl/d) 2.6 $58.55 / Bbl 76% Natural Gas Liquids (MBbl/d)(b) 7.6 $0.71 / gallon 66% Year Ending Dec. 31, 2020 Commodit
Slide 37: Commodity Price Sensitivities
NATURAL GAS GATHERING AND PROCESSING COMMODITY PRICE SENSITIVITIES(a) Earnings Impact Earnings Impact ($ in Millions) ($ in Millions) Commodity Sensitivity 2019(b) 2020(c) Natural Gas $0.10 / MMBtu $2.1 $4.0 Natural Gas Liquids $0.01 / gallon $0.9 $1.8 Crude Oil $1.00 / barrel $0.6 $1.4 (a) As of Ju
Slide 38: 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 39: Natural Gas Pipelines
NATURAL GAS PIPELINES PREDOMINANTLY FEE BASED ◆ Firm demand-based contracts serving primarily investment- Sources of Earnings grade utility customers ◆ Recently completed approximately 1.3 billion cubic feet per day 2% 4% 4% 3% <5% 8% of system expansions ▪ Capital-efficient projects backed by multi
Slide 40: Natural Gas Pipelines
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) ◆ Natural gas transportation capacity contracted increased 14% compared with the second quarter 2018 ◆ Recently completed capital-growth projects in the Permian Basi
Slide 41: Williston Basin
WILLISTON BASIN Bear Creek plant — North Dakota
Slide 42: Williston Basin
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 1.6 Bcf/d in the first quarter 2021 ◆ More than 3 million acres dedicated to ONEOK, with approximately 1 million acres in the core
Slide 43: 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 44: Williston Basin Processing Plant Projects
WILLISTON BASIN PROCESSING PLANT PROJECTS 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 de
Slide 45: Mid-Continent Region
MID -CONTINENT REGION Canadian Valley plant — Oklahoma
Slide 46: 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 575,000 bpd of NGLs with an incremental 90,000 bpd, excluding ethane, expected by
Slide 47: 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 48: Permian Basin
PERMIAN BASIN Roadrunner Pipeline — Permian Basin
Slide 49: 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 50: Permian Basin
PERMIAN BASIN RELIABLE SERVICE PROVIDER Natural Gas Liquids ◆ Approximately 40 third-party natural gas processing plant connections in the Permian Basin ◆ Current West Texas LPG pipeline expansion projects to increase mainline capacity including: ▪ 80,000 bpd expansion with additional pump facilitie
Slide 51: Powder River Basin
POWDER RIVER BASIN Lonesome Creek plant — North Dakota
Slide 52: Powder River Basin
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 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
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 2017 2018 2019 ($ in Millions) Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Reconciliation of Net Income to Adjusted EBITDA Net income $186 $176 $167 $65 $594 $266 $282 $314 $293 $1,155 $337 $312 Interest expense, net of capitalized interest 116 118 127 125 486 116 113 122 119 470
Slide 57: Non-GAAP Reconciliation: 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: Bear Creek plant — Williston Basin
Bear Creek plant — Williston Basin