Oneok, Inc. · NYSE:OKE
Oneok — Jefferies Global Energy Conference 2018
57 slides from Oneok's conference presentation, November 2018
Slide 1: Jefferies Global Energy Conference November 2018
JEFFERIES GLOBAL ENERGY CONFERENCE NOVEMBER 2018
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 20 • Business Segments 21 • STACK and SCOOP 34 • Permian Basin 37 • Williston Basin 40 • Powder River Basin 46 • Environment, Social & Governance (ESG) 48 NON-GAAP RECONCILIATIONS 52 Elk Creek Pipeline – Wyoming
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) $2.5 MAJOR ENERGY INFRASTRUCTURE COMPANY • Extensive systems connect North American energy supply with worldwide demand $2.0 $1.8 • Premier assets in most prolific U.S. commodity-producing ba
Slide 7: ONEOK Value Chain
ONEOK VALUE CHAIN FROM WELLHEAD TO MARKET CENTERS LDCs Natural Gas Pipeline End-use Markets Electric generation Large industrials Residue Gas Natural Gas Gathering Raw Feed NGLs Ethane Well head Propane Natural Gas NGL Gathering Pipeline IsoButane Processing Plant Normal Butane Natural Gasoline NGL
Slide 8: ONEOK Business Segments
ONEOK BUSINESS SEGMENTS Natural Gas Liquids Natural Gas Gathering Natural Gas Pipelines and Processing ~15% ~25% 2018 EARNINGS ~60% GUIDANCE EARNINGS MIX >80 percent fee based ~85 percent fee based ~100 percent fee-based CONTRACT Fee-based, bundled service volume Fee contracts with a POP* component
Slide 9: ONEOK vs. S&P 500
ONEOK VS. S&P 500 A UNIQUE INVESTMENT OPPORTUNITY ONEOK has the fastest growing dividend and EBITDA of S&P 500 high dividend yield investment-grade companies (shown as percentages) Median S&P Median ONEOK Dividend S&P 500 Aristocrats** Approximate Current 4.9 1.8 2.2 Dividend Yield EBITDA Growth* 10
Slide 10: ONEOK's Attractive Dividend Profile
ONEOK'S ATTRACTIVE DIVIDEND PROFILE 1 OF 53 COMPANIES IN THE S&P 500 WITH A DIVIDEND YIELD GREATER THAN 4 PERCENT S&P 500 Dividend Yield* 120 113 91 81 5.21% 47 32 14 7 0% 0% - 1% 1% - 2% 2% - 3% 3% - 4% 4% - 5% 5% - 6% > 6% Source: NASDAQ market data as of Oct. 31, 2018. *Based on estimated 2018 di
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* 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 * * Last three years, annualized 50.3% 20.
Slide 12: Financial Strength – A Competitive Advantage
FINANCIAL STRENGTH – A COM PETITIVE ADVANTAGE INCREASING EXCESS CASH ◆ Prefunded a significant portion of capital-growth projects and immediately reduced Adjusted EBITDA Growth debt with a $1.2 billion equity offering in January 2018, satisfying equity financing ($ in millions) needs in 2018 $650.2
Slide 13: 2018 Financial Guidance Increased
2018 FINANCIAL GUIDANCE INCREASED Updated 2018 Guidance Range Reconciliation of Net Income to (Millions of dollars) Adjusted EBITDA and Distributable Cash Flow Net income $ 1,140 – $ 1,220 Interest expense, net of capitalized interest 480 – 470 Depreciation and amortization 425 – 435 Income taxes 35
Slide 14: Future Growth
FUTURE GROWTH Bakken NGL Pipeline — North Dakota
Slide 15: How We Got Here
ANNOUNCED HOW WE GOT HERE ORGANIC GROWTH*: WTLPG Delaware Basin extension (2018) Sterling III expansion (2018) DISCIPLINED, STRATEGIC GROWTH & ACQUISITIONS Canadian Valley plant expansion (2018) ONEOK Gas Transportation expansions (2018/2019) MLP ACQUISITION: ORGANIC GROWTH: ONEOK WesTex expansion (
Slide 16: Producer-Driven Need for More Infrastructure
PRODUCER -DRIVEN NEED FOR MORE INFRASTRUCTURE CAPACITY EXPANSIONS CRITICAL TO MEETING GROWING PRODUCTION STACK/SCOOP Permian NGL Production Growth(Mb/d) NGL Production Growth (Mb/d) 2,400 800 2,000 ◆ Volume forecasts across the basins 1,600 where we operate show significant 600 growth in crude oil,
Slide 17: 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* Complete pipeline extension • Supported by long-te
Slide 18: 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 19: 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 Q4 2018 (OGT) westbound expansion • 150 MMcf/d eastbound expansion fro
Slide 20: Appendix
APPENDIX Mont Belvieu II fractionator — Gulf Coast
Slide 21: Business Segments
BUSINESS SEGMENTS Mustang Pipeline — Oklahoma
Slide 22: Natural Gas Liquids
NATURAL GAS LIQUIDS ONE OF THE LARGEST INTEGRATED NGL SERVICE PROVIDERS ◆ Provides fee-based services to natural gas processors and customers ▪ Gathering, fractionation, transportation, marketing and storage ◆ Extensive NGL gathering system ▪ Connected to nearly 200 natural gas processing plants in
Slide 23: 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 ~75% se
Slide 24: Natural Gas Liquids: Volume Update
NATURAL GAS LIQUIDS VOLUME UPDATE ◆ Third quarter 2018 volumes gathered increased approximately 6 percent, compared G a t h e r e d Vo l u m e ( M B b l / d ) with the second quarter 2018 ◆ 2018 volume growth expected to be driven primarily by increased producer activity in 910–940 the STACK and SCO
Slide 25: Ethane Recovery by Basin
ETHANE RECOVERY BY BASIN INCREMENTAL ETHANE DEMAND ◆ ONEOK’s NGL infrastructure connects supply to the Gulf Coast market ▪ 100,000 bpd of additional ethane volumes gathered on 1 ONEOK’s system compared with third quarter 2017 3 2 ▪ Conway-priced ethane expected to remain in rejection until Arbuckle
Slide 26: 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 27: 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% ~15% servi
Slide 28: 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 1,900 – 1,980 ◆ Third quarter 2018 natural gas volumes processed increased approximately 8 1,680 1,524 1,561 percent, compared with the second quarter 2018 950-990 ◆ Expect to connect appro
Slide 29: Gathering and Processing: Hedged Volumes
NATURAL GAS GATHERING AND PROCESSING Three Months Ending December 31, 2018 Commodity Volumes Hedged Average Price Percent Hedged Natural Gas* (BBtu/d) 67.1 $2.79 / MMBtu 74% Condensate (MBbl/d) 2.3 $53.20 / Bbl 74% Natural Gas Liquids** (MBbl/d) 8.0 $0.66 / gallon 82% Year Ending December 31, 2019 C
Slide 30: Commodity Price Sensitivities After Hedging
NATURAL GAS GATHERING AND PROCESSING COMMODITY PRICE SENSITIVITIES AFTER HEDGING* Earnings Impact Earnings Impact ($ in Millions) ($ in Millions) Commodity Sensitivity 2018** 2019*** Natural Gas $0.10 / MMBtu $0.5 $0.4 Natural Gas Liquids $0.01 / gallon $0.1 $0.2 Crude Oil $1.00 / barrel $0.2 $0.4 *
Slide 31: Natural Gas Pipelines: Connectivity to Key Markets
NATURAL GAS PIPELINES CONNECTIVITY TO KEY MARKETS ◆ Predominantly fee-based income ◆ 94% of transportation capacity contracted under firm demand-based rates in 2017 ◆ 83% of contracted system transportation capacity served end-use markets in 2017 ▪ Connected directly to end-use markets ◇ Local natur
Slide 32: 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 up to 1.7 billion cubic feet per day of 4% 2% 4% 4% <5% 8% system expansions ▪ Capital-efficient projects backed by multiple firm
Slide 33: 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 2018, and: ▪ Approximately 95 percent of transportation capacity contracted ▪ Approximately 65 percent of natural
Slide 34: STACK and SCOOP
STACK AND SCOOP Mustang Pipeline — Oklahoma
Slide 35: STACK and SCOOP Plays
STACK AND SCOOP PLAYS RELIABLE FULL-SERVICE PROVIDER Natural Gas Liquids ◆ More than 110 existing natural gas processing plant connections in the Mid-Continent ◆ Currently gathering approximately 285,000 bpd of NGLs with incremental 15,000 expected by end of year 2018 Natural Gas Gathering and Proce
Slide 36: 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 37: Permian Basin
PERMIAN BASIN Roadrunner Pipeline — Permian Basin
Slide 38: 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 39: Permian Basin
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 40: Williston Basin
WILLISTON BASIN Garden Creek plant — North Dakota
Slide 41: 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 2.44 Bcf/d production with fewer rigs reported in August 2018, compared with 1.95 Bcf/d in August 2017 2,500 2,000 1,5
Slide 42: 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 43: Elk Creek Pipeline Project
ELK CREEK PIPELINE PROJECT ATTRACTIVE PROJECT RETURN ◆ Existing Bakken NGL Pipeline and Overland Pass Pipeline operating at full capacity ◆ Growing production in the region drives need for increased NGL takeaway ▪ Producer drilling and completion improvements driving break-evens lower ▪ Increased ac
Slide 44: 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 45: Williston Basin: Increased Natural Gas Capture Results
WILLISTON BASIN INCREASED NATURAL GAS CAPTURE RESULTS ◆ Increased NGL and natural gas value uplift ◆ Approximately 82% of North Dakota’s natural gas production was captured in August 2018 ◆ North Dakota Industrial Commission (NDIC) policy targets: ▪ Natural gas capture: currently 88% , increasing to
Slide 46: Powder River Basin
POWDER RIVER BASIN Lonesome Creek plant — North Dakota
Slide 47: 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 48: Environment, Social & Governance
ENVIRONMENT, SOCIAL & GOVERNANCE Mont Belvieu II fractionator — Gulf Coast
Slide 49: 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 50: 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 ▪ C
Slide 51: 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 52: 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 53: Non-GAAP Reconciliations
NON-G A A P 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 a
Slide 54: Non-GAAP Reconciliation
NON-G A A P RECONCILIATION 2016 2017 2018 ($ in Millions) FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 YTD Reconciliation of Net Income to Adjusted EBITDA Net income $744 $186 $176 $167 $65 $594 $266 $282 $314 $862 Interest expense, net of capitalized interest 470 116 118 127 125 486 116 113 122 351 Depreciation and
Slide 55: Income from Continuing Operations to Adjusted EBITDA
NON-G A A P RECONCILIATION INCOME FROM CONTINUING OPERATIONS TO ADJUSTED EBITDA ($ in Millions) 2013 2014 2015 2016 2017 Reconciliation of Net Income to Adjusted EBITDA Net Income $577 $663 $379 $744 $594 Interest expense, net of capitalized interest 271 356 417 470 486 Depreciation and amortization
Slide 56: 2018 Financial Guidance Increased: Segment Adjusted EBITDA
2018 FINANCIAL GUIDANCE INCREASED SEGMENT ADJUSTED EBITDA Updated 2018 Guidance Range Reconciliation of segment adjusted EBITDA to adjusted EBITDA (millions of dollars) Segment adjusted EBITDA: Natural Gas Liquids $ 1,485 – $ 1,535 Natural Gas Gathering and Processing 600 – 620 Natural Gas Pipelines
Slide 57: Elk Creek Pipeline — Kansas
Elk Creek Pipeline — Kansas