Oneok, Inc. · NYSE:OKE
Oneok — Investor Presentation (November 2019)
57 slides from Oneok's investor presentation, November 2019
Slide 1: Investor Update November 2019
I N V E S TO R U P D AT E NOVEMBER 2019
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEM ENTS 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 28 • Williston Basin 40 • Mid-Continent 44 • Permian Basin 47 • Powder River Basin 50 NON-GAAP RECONCILIATIONS 52 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: Financial Strength – A Competitive Advantage
FINANCIAL STRENGTH – A COM PETITIVE ADVANTAGE INCREASING LIQUIDITY Distributable Cash Flow (DCF) in Excess of Dividends Paid ◆ Significant liquidity from a $2 billion senior notes issuance completed in ($ in millions) August 2019 $183(a) $2.5 billion of borrowing capacity available on ONEOK’s cred
Slide 7: Key Investment Considerations
KEY INVESTM ENT CONSIDERATIONS A PREMIER ENERGY INFRASTRUCTURE COMPANY Adjusted EBITDA Growth ($ 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 basi
Slide 8: Investment Thesis
INVESTM ENT 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 crea
Slide 9: ONEOK Business Segments
ONEOK BUSINESS SEGM ENTS 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 c
Slide 10: Earnings Drivers
EARNINGS DRIVERS EXPECTED KEY DRIVERS FEE-BASED SOLUTIONS 2020 OUTLOOK NATURAL GAS FLARING >300 MMcf/d ~500 MMcf/d recent new capacity from ONEOK and third-party processing >550 MMcf/d currently flaring in North Dakota on ONEOK dedicated acreage and plants currently online; volume growth from contin
Slide 11: Attractive-Return Projects Expand Core Infrastructure
AT T R A C T I V E - R E T U R N P R O J E C T S E X PA N D C O R E I N F R A S T R U C T U R E PROJECTS EXPECTED TO GENERATE 4-6X ADJUSTED EBITDA MULTIPLES ~ $4.5 billion in capital-growth projects expected to be completed through Q1 2020 MB-5 fractionator (Q1 2021, $750M) Demicks Lake II plant (Ja
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 15.8% S&P 500 (a) 7.0% (shown as percentages) Median S&P 500 Median ONEOK Dividend S&P 500 Aristocrats(b) S&P 500 Dividend Aristocrats (b) 5.8% Approximate Current 5.2 2.3 2
Slide 13: Attractive Dividend Profile
ATTRACTIVE D IVIDEND PROFILE 1 OF 26 COMPANIES IN THE S&P 500 WITH A DIVIDEND YIELD GREATER THAN 5% S&P 500 Dividend Yield 126 106 81 70 62 5.24% 34 13 13 0% 0% - 1% 1% - 2% 2% - 3% 3% - 4% 4% - 5% 5% - 6% > 6% Source: NASDAQ market data as of Oct. 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 ◆ Index Inclusions: Dow Jones Sustainability North America Index - Tracks the stock performance of the world's leading companies in terms of economic, environmental and social criteria. FTSE4Good Index - Includes companies demonstrating strong ESG practi
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 VOLUM E RAM P 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 Wil
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 GGaa ss FF ll aa rree dd Current ONEOK Natural 1,000 Gas Processing Capacity Gas Captured Gas C
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 3.5 Natural Gas Production 14% CAGR(b) 200 3.0 Cumulative Oil Production (bbl) 150 2.5 Number of
Slide 21: Williston Basin: Increasing Gas-to-Oil Ratios
WILLISTON BA SIN 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 3 Bcf/d reported in production with fewer rigs August 2019, compared with 2.4 Bcf/d in August 2018 3,000 2,500 2,000
Slide 22: Williston Basin: Increased Natural Gas Capture
WILLISTON BA SIN INCREASED NATURAL GAS CAPTURE RESULTS ◆ Increased NGL and natural gas value uplift ◆ Approximately 81% of North Dakota’s natural gas production was captured in August 2019 ◆ North Dakota Industrial Commission (NDIC) policy targets: Natural gas capture: currently 88%, increasing to
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 • Contributes additional NGL and natural gas volume on ONEOK’s system $400 Complete • Supported by acreage dedication
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 • ~ 1 Bcf/d of eastbound transpor
Slide 26: Appendix
APPENDIX Mont Belvieu fractionator – Texas
Slide 27: ONEOK vs. S&P 500
ONEOK VS. S&P 500 A UNIQUE INVESTMENT OPPORTUNITY Note: Data as of Sept. 30, 2019. PAGE 27
Slide 28: Business Segments
BUSINESS SEGM ENTS Mustang Pipeline — Oklahoma
Slide 29: 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 30: 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 31: Natural Gas Liquids: Volume Update
NATURAL GAS LIQUIDS VOLUME UPDATE ◆ Rocky Mountain(a) NGL raw reed throughput volume increased approximately Average NGL Raw Feed Throughput Volumes(b) 7% compared with the second quarter 2019 Region Second Quarter 2019 Third Quarter 2019 Average Bundled Rate (per gallon) Expect region to exit 201
Slide 32: 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 33: 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 34: 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 Expect to connect approximately 525-550 wells in 2019 1,680 ◆ 1,561 412 well connects through the first nine months of 2019 973 925-1,025 839 781 ◆ Third quarter 2019
Slide 35: Gathering and Processing: Hedging
NATURAL GAS GATHERING AND PROCESSING Three Months Ending Dec. 31, 2019 Commodity Volumes Hedged Average Price Percent Hedged Natural Gas (BBtu/d)(a) 82.0 $2.30 / MMBtu 71% Condensate (MBbl/d) 2.6 $58.55 / Bbl 74% Natural Gas Liquids (MBbl/d)(b) 7.6 $0.71 / gallon 66% Year Ending Dec. 31, 2020 Commod
Slide 36: Commodity Price Sensitivities
NATURAL GAS GATHERING AND PROCESSING COMMODITY PRICE SENSITIVITIES(a) Earnings Impact Earnings Impact ($ in Millions) ($ in Millions) Commodity Sensitivity 2019(b) 2020(c) Natural Gas $0.10 / MMBtu $1.1 $4.0 Natural Gas Liquids $0.01 / gallon $0.4 $1.9 Crude Oil $1.00 / barrel $0.3 $1.4 (a) As of Se
Slide 37: Natural Gas Pipelines: Connectivity to Key Markets
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 38: 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 completed approximately 1.5 billion cubic feet per day 2% 4% 4% 3% <5% 8% of system expansions Capital-efficient projects backed by multi
Slide 39: 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) ◆ Natural gas transportation capacity contracted increased 12% compared with the third quarter 2018 ◆ Recently completed capital-growth projects in the Permian Basin
Slide 40: Williston Basin
WILLISTON BASIN Bear Creek plant — North Dakota
Slide 41: Williston Basin: Providing Valuable Takeaway Capacity
WILLISTON BA SIN PROVIDING VALUABLE TAKEAWAY CAPACITY Natural Gas Gathering and Processing ◆ More than 1.2 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 c
Slide 42: 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 43: 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 44: Mid-Continent Region
M ID-CONTINENT REGION Canadian Valley plant — Oklahoma
Slide 45: Mid-Continent Region
M ID-CONTINENT REGION RELIABLE FULL-SERVICE PROVIDER SERVING GROWTH IN THE STACK AND SCOOP PLAYS Natural Gas Liquids ◆ More than 115 existing natural gas processing plant connections ◆ Raw feed throughput greater than 550,000 bpd ◆ Incremental ethane opportunity of more than 100,000 bpd Natural Gas
Slide 46: 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 47: Permian Basin
PERM IAN BASIN Roadrunner Pipeline — Permian Basin
Slide 48: ONEOK's Permian Basin Strategy
ONEOK’S PERM IAN 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 Liquid
Slide 49: Permian Basin: Reliable Service Provider
PERM IAN 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 faciliti
Slide 50: Powder River Basin
POWDER RIVER BASIN Lonesome Creek plant — North Dakota
Slide 51: 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 Elk Creek Pipeline Elk Creek Pipeline will provide addit
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-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 54: Updated 2019 Financial Guidance
UPDATED 2019 FINANCIAL GUIDANCE NON-GAAP RECONCILIATION Updated 2019 Guidance Range (Millions of dollars) Reconciliation of Net Income to Adjusted EBITDA and Distributable Cash Flow Net Income $ 1,220 - $ 1,330 Interest expense, net of capitalized interest 505 - 485 Depreciation and amortization 485
Slide 55: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION 2017 2018 2019 ($ in Millions) Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Reconciliation of Net Income to Adjusted EBITDA Net income $186 $176 $167 $65 $594 $266 $282 $314 $293 $1,155 $337 $312 $309 Interest expense, net of capitalized interest 116 118 127 125 486 116 113 122 119
Slide 56: 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 57: Bear Creek plant — Williston Basin
Bear Creek plant — Williston Basin