Oneok, Inc. · NYSE:OKE
Oneok — Investor Presentation (June 2018)
53 slides from Oneok's investor presentation, June 2018
Slide 1: Investor Update June 2018
ONEOK INVESTOR UPDATE JUNE 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 A PREMIER INFRASTRUCTURE COMPANY 4 FUTURE GROWTH 11 APPENDIX 19 • Business Segments 21 • STACK and SCOOP 34 • Permian Basin 37 • Williston Basin 39 • Powder River Basin 43 • Financial Guidance 45 NON-GAAP RECONCILIATIONS 47 Mont Belvieu II fractionator – Gulf Coast
Slide 4: A Premier Infrastructure Company
A PREMIER INFRASTRUCTURE C O M PA N Y Mont Belvieu II fractionator — Gulf Coast
Slide 5: Key Investment Considerations
KEY INVESTMENT CONSIDERATIONS A PREMIER ENERGY INFRASTRUCTURE COMPANY Adjusted EBITDA Growth ($ in billions) $2.3 MAJOR ENERGY INFRASTRUCTURE COMPANY $2.0 • Extensive systems connect North American energy revolution with worldwide demand $1.8 $1.6 $1.6 • Premier assets in most prolific U.S. commodit
Slide 6: 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 4.7 2.2 2.3 Dividend Yield EBITDA Growth* 11
Slide 7: ONEOK's Attractive Dividend Profile
ONEOK'S ATTRACTIVE DIVIDEND PROFILE 1 OF 39 COMPANIES IN THE S&P 500 WITH A DIVIDEND YIELD GREATER THAN 4 PERCENT S&P 500 Dividend Yield* 128 106 88 4.67% 81 58 23 8 8 0% 0% - 1% 1% - 2% 2% - 3% 3% - 4% 4% - 5% 5% - 6% > 6% Source: NASDAQ market data as of May 31, 2018 *Based on estimated 2018 divid
Slide 8: The High Yield Dividend Universe
THE HIGH YIELD DIVIDEND UNIVERSE ONEOK HAS RETURNED MORE VALUE TO SHAREHOLDERS THAN OTHER HIGH DIVIDEND PEERS Evaluating the ONEOK Peer Universe 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 24.8% 2 1 3 11.0% 5.1% 4.2% 1.5% -5.7% -8.1% ONEOK S&P 500 Alerian
Slide 9: Financial Strength
FINANCIAL STRENGTH INCREASING EXCESS CASH AND IMPROVED LEVERAGE METRICS ◆ $1.2 billion equity offering in January 2018 prefunded a significant portion of ONEOK’s capital- Adjusted EBITDA Growth growth projects, immediately reducing debt ($ in millions) ◆ $1.25 billion senior notes offering completed
Slide 10: Strategically Positioned Assets
S T R AT E G I C A L LY P O S I T I O N E D A S S E T S ASSETS IN BEST NGL PRODUCTION REGIONS IN THE U.S. U.S. NGL Production Region Million barrels/month Percent East Coast (Appalachian) 13.2 11.4 Mid-Continent (STACK/SCOOP) 18.8 16.3 Gulf (Permian/Eagle Ford) 62.4 54.1 Rocky Mountain (Bakken) 18.8
Slide 11: Future Growth
FUTURE GROWTH Bakken NGL Pipeline — North Dakota
Slide 12: Producer-Driven Need for More Infrastructure
PRODUCER -DRIVEN NEED FOR MORE INFRASTRUCTURE CAPACITY EXPANSIONS CRITICAL TO MEETING GROWING PRODUCTION Permian NGL Production Growth(Mb/d) STACK/SCOOP 2,000 NGL Production Growth (Mb/d) 1,000 1,600 800 1,200 600 800 ◆ Volume forecasts across the basins 400 where we operate show significant 400 200
Slide 13: Natural Gas Liquids Growth Projects
NATURAL GAS LIQUIDS GROWTH PROJECTS $3.6 BILLION ANNOUNCED SINCE JUNE 2017 CapEx Expected Project Scope ($ in millions) Completion • 120-mile pipeline lateral extension with capacity of 110,000 bpd in the Delaware Basin West Texas LPG Pipeline • Supported by long-term dedicated NGL production from t
Slide 14: Gathering and Processing Growth Projects
GATHERING AND PROCESSING GROWTH PROJECTS $600 MILLION ANNOUNCED SINCE JUNE 2017 CapEx Expected Project Scope ($ in millions) Completion Additional STACK • 200 MMcf/d processing capacity through long-term processing services agreement with third party $40 In Service processing capacity • 30-mile natu
Slide 15: Elk Creek Pipeline Project
ELK CREEK PIPELINE PROJECT COMPELLING STRATEGIC RATIONALE ◆ 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 Increas
Slide 16: Arbuckle II Pipeline and MB-4 Fractionator
ARBUCKLE II PIPELINE AND MB -4 FRACTIONATOR 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 se
Slide 17: Demicks Lake Plant
DEMICKS LAKE PLANT 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 same volume p
Slide 18: West Texas LPG Expansion
WEST TEXAS LPG EXPANSION EXTENDING REACH INTO PROLIFIC DELAWARE BASIN ◆ Approximately 120-mile, 16-inch pipeline extension with initial capacity of 110,000 bpd Supported by long-term dedicated NGL production from two planned third-party natural gas processing plants ◇ Up to 40,000 bpd NGL producti
Slide 19: Appendix
APPENDIX Mont Belvieu II fractionator — Gulf Coast
Slide 20: 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 21: Business Segments
BUSINESS SEGMENTS Mont Belvieu II fractionator — Gulf Coast
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 service
Slide 24: Natural Gas Liquids: Volume Update
NATURAL GAS LIQUIDS VOLUME UPDATE ◆ 2018 volume growth expected to be driven primarily by increased producer activity G a t h e r e d Vo l u m e ( M B b l / d ) in the STACK and SCOOP areas and increased ethane recovery in the Mid- Continent First quarter 2018 volumes impacted due to seasonal weat
Slide 25: Ethane Recovery by Basin
ETHANE RECOVERY BY BASIN INCREMENTAL ETHANE DEMAND ◆ ONEOK’s NGL infrastructure connects supply to the Gulf Coast market Incremental ethane transported and fractionated volume potential of 175,000 – 200,000 bpd Approximately $100 million of incremental adjusted EBITDA expected Williston Basin/ d
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 Percent of proceeds (POP) with significant fee component ◆ Natural gas supplies from three
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% ~20% 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 ) Mid-Continent 1,840 – 2,050 ◆ Increased producer activity in the STACK and SCOOP areas expected to be largest 1,524 1,561 1,680 driver of 2018 natural gas volume growth 965-1,075 ◆ Expect to connect appro
Slide 29: Gathering and Processing: Hedging
NATURAL GAS GATHERING AND PROCESSING Nine Months Ending December 31, 2018 Commodity Volumes Hedged Average Price Percent Hedged Natural Gas* (BBtu/d) 67.1 $2.79 / MMBtu 89% Condensate (MBbl/d) 2.4 $52.84 / Bbl 79% Natural Gas Liquids** (MBbl/d) 8.1 $0.66 / gallon 77% Year Ending December 31, 2019 Co
Slide 30: Commodity Price Sensitivities After Hedging
NATURAL GAS GATHERING AND PROCESSING COMMODITY PRICE SENSITIVITIES AFTER HEDGING* Earnings Impact Earnings Impact ($ in Millions) ($ in Millions) Commodity Sensitivity 2018** 2019*** Natural Gas $0.10 / MMBtu $0.2 $2.8 Natural Gas Liquids $0.01 / gallon $1.8 $2.9 Crude Oil $1.00 / barrel $0.3 $0.6 *
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 nat
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 ◆ Roadrunner Gas Transmission pipeline project and WesTex 4% 2% 4% 4% <5% 8% pipeline expansion enhance export capability to Mexico Completed in 201
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 Production
STACK AND SCOOP PRODUCTION ONEOK ASSETS: WELL POSITIONED IN HIGH ACTIVITY AREAS ◆ Higher levels of proppant injection may be a leading indicator for ◆ Producers continue to expand their areas of focus based on production activity production results Average Proppant Injection Levels 30-Day Average Oi
Slide 36: 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 200,000 – 250,000 bpd of NGLs with incremental 100,000 expected by end of year 2018 ◆ Approximately 100,
Slide 37: Permian Basin
PERMIAN BASIN Roadrunner Pipeline — Permian Basin
Slide 38: Permian Basin
PERMIAN BASIN RELIABLE SERVICE PROVIDER Natural Gas Liquids ◆ Approximately 40 third-party natural gas processing plant connections in the Permian Basin ◆ Approximately 120-mile, 16-inch West Texas LPG pipeline extension into Delaware Basin with initial capacity of 110,000 bpd Project includes exp
Slide 39: Williston Basin
WILLISTON BASIN Garden Creek plant — North Dakota
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 2.2 Bcf/d reported production with fewer rigs in April 2018, compared with 1.8 Bcf/d in April 2017 2,500 2,000 1,500 1
Slide 41: 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 1.2 Bcf/d by 2020 ◆ More than 3 million acres dedicated to ONEOK, with approximately 1 million acres in the core ◆ Approximately 5
Slide 42: Williston Basin: Increased Natural Gas Capture Results
WILLISTON BASIN INCREASED NATURAL GAS CAPTURE RESULTS ◆ Increased NGL and natural gas value uplift ◆ Approximately 85% of North Dakota’s natural gas production was captured in April 2018 ◆ North Dakota Industrial Commission (NDIC) policy targets: Natural gas capture: currently 85%, increasing to 8
Slide 43: Powder River Basin
POWDER RIVER BASIN Lonesome Creek plant — North Dakota
Slide 44: Powder River Basin
POWDER RIVER BASIN PROVIDING VALUABLE TAKEAWAY CAPACITY Natural Gas Liquids ◆ Assets located in NGL-rich Niobrara, Sussex and Turner formations ◆ NGL takeaway through Bakken NGL Pipeline and Overland Pass Pipeline Elk Creek Pipeline will provide additional capacity once complete ◆ Two third-party
Slide 45: Guidance
GUIDANCE Canadian Valley plant - Oklahoma
Slide 46: 2018 Financial Guidance Summary
2018 FINANCIAL GUIDANCE SUMMARY D ivid en d s Paid Per Sh are Per Year ◆ Adjusted EBITDA: $2,215 million – $2,415 million $3.25 - $3.31 ◆ Distributable cash flow: $1,615 million – $1,815 million $2.43 $2.46 $2.72 $2.13 Target dividend coverage ratio of ≥1.2 times ◆ Net income: $955 million – $1,15
Slide 47: Non-GAAP Reconciliations
NON-GAAP R E C O N C I L I AT I O N S Mont Belvieu II fractionator — Gulf Coast
Slide 48: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS ONEOK has disclosed in this presentation adjusted EBITDA, distributable cash flow (DCF) and dividend coverage ratio, which are non-GAAP financial metrics, used to measure ONEOK’s financial performance, and are defined as follows: Adjusted EBITDA is defined as net income from
Slide 49: Income from Continuing Operations to Adjusted EBITDA
NON-GAAP RECONCILIATION INCOME FROM CONTINUING OPERATIONS TO ADJUSTED EBITDA ($ in Millions) 2013 2014 2015 2016 2017 Reconciliation of Income from Continuing Operations to Adjusted EBITDA Income from continuing operations $589 $669 $385 $746 $594 Interest expense, net of capitalized interest 271 35
Slide 50: Net Income to Adjusted EBITDA and DCF
NON-GAAP RECONCILIATION 2017 2018 ($ in Millions) Q1 Q2 Q3 Q4 FY Q1 Reconciliation of Net Income to Adjusted EBITDA Net income $186 $176 $167 $65 $594 $266 Interest expense, net of capitalized interest 116 118 127 125 486 116 Depreciation and amortization 99 101 102 104 406 104 Impairment charges -
Slide 51: Net Income to Adjusted EBITDA and DCF (2018 Guidance)
NON-GAAP RECONCILIATION NET INCOME TO ADJUSTED EBITDA AND DCF 2018 Guidance Range (Millions of dollars) Reconciliation of Net Income to Adjusted EBITDA and Distributable Cash Flow Net Income $ 955 - $ 1,155 Interest expense, net of capitalized interest 495 - 455 Depreciation and amortization 425 - 4
Slide 52: Segment Adjusted EBITDA to Adjusted EBITDA
NON-GAAP RECONCILIATION SEGMENT ADJUSTED EBITDA TO ADJUSTED EBITDA 2018 Guidance Range (Millions of dollars) Reconciliation of segment adjusted EBITDA to adjusted EBITDA Segment adjusted EBITDA: Natural Gas Liquids $ 1,300 - $ 1,430 Natural Gas Gathering and Processing 575 - 625 Natural Gas Pipeline
Slide 53: Bear Creek plant — Williston Basin
Bear Creek plant — Williston Basin