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ONEOK Q3 2024 Earning Call Summary

Management Comments and Q&A Notes

October 30, 2024

The tone of the call was positive, with ONEOK reporting solid quarterly results and strategic expansion through the EnLink and Medallion acquisitions, which position the company well for growth, particularly in the Permian Basin and Gulf Coast. Increased EBITDA guidance reflects confidence in the synergy potential from these acquisitions and the integration of assets in high-demand regions.

Key Highlights and Details

1. Drilling Rig, Frac Crew Numbers, and Completion Process

  • Williston Basin:

    • 40 rigs currently operating, with 21 on ONEOK's dedicated acreage.

    • Completion projections for 500-530 well connects in 2024 due to longer laterals and improved well performance.

  • Mid-Continent Region:

    • 42 rigs are operating, with 7 on ONEOK acreage and 4 on EnLink acreage.

    • Expected 65 well connects for ONEOK’s acreage and 90 for EnLink.

  • Bakken GORs (Gas-Oil Ratios) near all-time highs, with higher volumes from longer laterals expected to reduce the need for increased drilling activity.

2. Natural Gas Market Comments and Impact of Prices

  • Strong demand growth in the Rocky Mountain region and high pipeline transportation utilization supported revenue increases.

  • Storage capacity expansion:

    • Texas: 3 Bcf of storage reactivated recently.

    • Oklahoma: Storage expansion to be completed by Q2 2025.

  • ONEOK’s assets well-positioned to meet increasing demand from data centers and other commercial projects in collaboration with EnLink, with 23 active projects under review.

3. New Pipeline Infrastructure and Maintenance Impact

  • West Texas NGL Expansion:

    • Expected completion by year-end 2024 with 500,000 bpd capacity.

    • Pump stations to be fully operational by mid-2025.

  • Elk Creek Pipeline Expansion:

    • Scheduled completion for Q1 2025.

  • Medford Fractionator Expansion:

    • Phase 1 to be operational by Q4 2026, adding 100,000 bpd capacity.

    • Phase 2 adds another 110,000 bpd in Q1 2027, totaling 210,000 bpd.

  • Maintenance:

    • Some planned and unplanned outages impacted processing volumes in Q3, with volumes resuming in early Q4.

4. NGL and Oil Market Conditions and Impact of Prices

  • Rocky Mountain NGL volumes increased by 7% year-over-year, primarily driven by propane production.

  • Ethane recovery in Mid-Continent limited due to economic conditions, with low natural gas and ethane prices reducing recovery incentive.

  • ONEOK’s Kansas-to-Denver refined products expansion on track for completion by mid-2026.

5. New Pipeline Builds, LNG Projects, and Other Energy Infrastructure

  • EnLink and Medallion Acquisitions:

    • Integration allows increased volume directed to Houston and Corpus Christi terminals, especially for exports.

    • Expanded pipeline infrastructure in Texas enhances access to Gulf Coast LNG terminals.

  • ONEOK leveraging EnLink’s Louisiana assets to support LNG export demand with larger diameter pipelines connecting to industrial hubs.

6. New Technology Implementations

  • Small capital projects focused on cost-saving synergies through system integration, including:

    • Butane logistics optimization: Transitioning transport from road to pipeline.

    • Pipeline capacity maximization: Upsizing pipelines, especially in high-demand areas like Denver.

  • Enhanced efficiency from combined EnLink-Medallion systems, which improve overall logistics.

7. Customer Base and Regional Focus

  • Major operational focus across Rocky Mountains, Williston Basin, Permian Basin, and Gulf Coast regions.

  • Strong demand from data centers, industrial hubs, and LNG exporters; expected demand growth from Louisiana LNG terminals and Gulf Coast petrochemical facilities.

  • Expansion of customer base across the Mid-Continent and North Texas regions via EnLink’s assets, targeting Houston and Corpus export facilities.

Important Figures, Dates, and Time Periods

  • 500,000 bpd – Projected capacity of West Texas NGL pipeline by year-end 2024.

  • 1.7 Bcf/day – Rocky Mountain region natural gas processing record achieved in Q3.

  • 2025 EBITDA Guidance – Expected comfortably above $8 billion.

  • 210,000 bpd – Total capacity of Medford Fractionator by Q1 2027.

  • 2024-2027 – New $2 billion stock buyback plan completion target.