Oneok, Inc. · NYSE:OKE
Oneok — Investor Presentation (December 2019)
57 slides from Oneok's investor presentation, December 2019
Slide 1: Investor Update December 2019
INVESTOR UPDATE DECEMBER 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
OVERVIEW Mont Belvieu fractionators – 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 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 7: 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 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: Rocky Mountain Region NGL Volume Growth
ROCKY M OUNTAIN REGION NGL VOLUM E GROWTH EXPECTED TO REACH GREATER THAN 240,000 BARRELS PER DAY BY THE END OF Q1 2020 300,000 250,000 ~25,000 > 240,000 bpd expected in 200,000 ~5,000 ~30,000 Q1 2020 Barrels Per Day (bpd) 185,000 150,000 100,000 50,000 0 Q3 2019 Rocky Mountain Raw Powder River Volum
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) North Dakota Crude Oil Performance(c) 250 3.5 Natural Gas Production 14% CAGR(b) 200 3.0 Cumulative Oil Production (bbl) 150 2.5 Number of Rigs (Bcf/d) 100 2.0 50 1.
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 ◆ Natural gas production of 2.9 Bcf/d reported in September 2019, production with fewer rigs compared with 2.5 Bcf/d in September 2018. 3,000 2,500 2,000 2.04 GOR
Slide 22: Williston Basin: Increased Natural Gas Capture
WILLISTON BA SIN INCREASED NATURAL GAS CAPTURE RESULTS ◆ Increased NGL and natural gas value uplift ◆ Approximately 82% of North Dakota’s natural gas production was captured in September 2019 ◆ North Dakota Industrial Commission (NDIC) policy targets: Natural gas capture: currently 88%, increasing
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 Oct. 31, 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
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: Depew Storage Facility — Oklahoma
Depew Storage Facility — Oklahoma