ONEOK, Inc. (OKE) Earnings

Management highlights

### Overall Business Positioning & Long-Term Strategy - Management targets mid- to high-single-digit adjusted EBITDA growth over the next 5 to 7 years, underpinned by multiple growth drivers across all business segments, including continued production growth in key U.S. basins (Permian, Mid-Continent, Powder River, Bakken), rising U.S. LPG exports, growing global demand for reliable U.S. crude and natural gas supplies, and increasing domestic demand from LNG exports, power generation, and industrial development. - The company's integrated multi-commodity platform connecting key U.S. supply basins to domestic and international demand is a key competitive differentiator, allowing it to capture growth opportunities across commodities and regions while maintaining financial flexibility. - Long-term strategy remains grounded in operational excellence, financial discipline, and a value-driven approach to capital allocation. ### Operational & Project Updates - As of August 1, 2026, the Denver area refined products expansion has been placed in service, adding 35,000 barrels per day of capacity to the fast-growing Denver market and a new direct jet fuel connection to Denver International Airport. - A 150 million cubic feet per day processing plant in the Permian Midland Basin has recently been completed, and a 110 million cubic feet per day Delaware Basin processing expansion remains on track for Q3 2026 completion. - The Bighorn Permian processing plant has been upsized from 300 million cubic feet per day to 400 million cubic feet per day (on schedule for mid-2027 completion) due to stronger-than-expected producer demand, bringing total Permian processing capacity to nearly 2.4 billion cubic feet per day upon completion of all planned projects. - Construction has begun on a second 120 million cubic feet per day cutter plant in the Powder River Basin, expected online in Q1 2028, following the initial 60 million cubic feet per day facility previously announced. - Phase 1 of the Medford Fractionation project in the Mid-Continent remains on track for Q4 2026 completion, adding 100,000 barrels per day of fractionation capacity, with Phase 2 expected in Q1 2027. - The company has secured a 1 gigawatt natural gas supply agreement for a new power plant, expanding its exposure to growing power generation demand, and is in late-stage commercial discussions for multiple natural gas connections to large-scale AI data center projects. ### Financial Performance Update - Q2 2026 reported net income of $965 million ($1.53 per diluted share), a 13% increase year-over-year. Adjusted EBITDA totaled $2.12 billion, up 7% year-over-year, driven by volume growth across segments. - Updated analysis of U.S. tax legislation (Inflation Reduction Act) indicates the company will receive approximately $2.6 billion in cumulative cash tax benefits, up from the previous estimate of $1.5 billion. This will defer meaningful cash tax payments until 2031, extending the cash tax runway by two years and improving future free cash flow generation, which supports progress toward the long-term leverage target of 3.5x debt to EBITDA.

Guidance

- Management raised full-year 2026 guidance for the second time in 2026, now targeting a net income midpoint of $3.6 billion, adjusted EBITDA midpoint of $8.35 billion, and diluted EPS midpoint of $5.68. This represents a $150 million increase in projected net income and $250 million increase in projected adjusted EBITDA compared to original February 2026 guidance. - Full-year 2026 capital expenditure guidance is maintained at $2.7 billion to $3.2 billion, with capital spending expected to accelerate in the second half of 2026, pushing full-year spending toward the upper end of the range. - Longer-term, management expects capital expenditure to moderate to a $2 billion to $2.5 billion annual run rate after current major projects are completed in 2026 and 2027, as the project pipeline will be dominated by midsize opportunities (no major $1 billion+ projects are currently planned), supporting strong free cash flow generation. - Earnings are expected to follow the normal seasonal cadence of the business, with tailwinds supporting stronger second-half 2026 results. Management noted that if current volume momentum holds, further guidance updates may be provided in Q3 2026. - EPS growth is expected to exceed adjusted EBITDA growth over the long term, as capped capital spending and strong free cash flow will enable share repurchases.

Segment performance

1. Natural Gas Pipelines: Delivered another strong quarter in Q2 2026, supported by continued transportation demand, favorable market conditions, and strong Waha to Katy location price differentials. Earnings are expected to decline in the second half of 2026 as new Permian takeaway capacity enters service and differentials narrow, consistent with full-year guidance assumptions. Long-term demand growth is supported by power generation, LNG exports, and industrial development. 2. Natural Gas Liquids (NGL): Raw feed throughput volumes increased 7% year-over-year, with growth across all regions, led by a 15% year-over-year increase in the Gold Coast Permian region driven by increased production and ramp-up of recently connected third-party plants. Utilization increased across the system, driven by improved seasonal demand and producer activity. July and August 2026 have seen a strong, higher-than-anticipated uptick in NGL volumes after Waha to Katy price spreads narrowed, and overall NGL throughput is tracking well above original projections. The segment reached the 80% contracted threshold for its 200,000 barrels per day LPG export capacity currently under construction. 3. Refined Products and Crude: Refined products volumes increased 8% year-over-year, supported by strong gasoline and diesel demand, high refinery utilization, and refinery maintenance dynamics. Midland crude gathering volumes increased 10% quarter-over-quarter, with more than 30 active rigs operating on the company's acreage, reflecting continued strength in this higher-margin business. Seabrook Crude Export Joint Venture throughput increased ~20% quarter-over-quarter, including record crude loadings in May 2026, and the facility remains 100% contracted under take-or-pay agreements for the foreseeable future. The newly completed 35,000 barrels per day Denver area refined products expansion is almost entirely under long-term take-or-pay contracts, with minimal exposure to near-term regional price spreads. The segment continues to see strong volume growth in refined product exports out of the Gulf Coast. 4. Gathering and Processing: Volumes increased across all regions year-over-year and quarter-over-quarter. Producer activity remains healthy, with 11 active rigs in the Mid-Continent and 13 active rigs in the Rocky Mountain region (up 2 rigs quarter-over-quarter in the Rockies). Recent and upcoming processing capacity expansions in the Permian Basin position the company to support continued producer growth through 2027 and beyond. The company recently upsized the Bighorn Permian plant from 300 million cubic feet per day to 400 million cubic feet per day due to stronger-than-expected producer demand.

Risks & headwinds

- Forward-looking statements are subject to inherent risks, and actual results may differ materially from projections due to factors discussed in the company's SEC filings, including changes in commodity supply and demand dynamics, commodity price volatility, and changes in regulatory and tax policy. - NGL segment margins softened slightly in Q2 2026 due to a higher share of lower-margin ethane volumes relative to higher-margin C3+ volumes across multiple basins, driven by tiered contract pricing structures. Management noted that strong volume growth has offset this modest margin pressure, and volumes have continued to strengthen into the second half of the year. - Natural gas pipeline segment earnings are expected to decline in the second half of 2026 as new Permian takeaway capacity enters service and Waha to Katy price differentials narrow, in line with existing guidance assumptions. - Large-scale new energy demand projects (such as data center connections) have experienced longer commercialization timelines than initially anticipated, pushing potential revenue and project start dates further into the future. - Some expiring Mid-Continent contracts that were initially signed at higher market rates may roll over at lower current market rates, though any contractual impacts have already been fully incorporated into current guidance.

Analyst Q&A

• Q: The company targets mid-to-high single-digit long-term EBITDA growth. How much of this growth will come from optimizing existing capacity versus building new infrastructure, and which segments will drive the most growth?

  A: Growth comes from multiple reinforcing sources across all segments, not just one area. Key drivers include continued production growth in premier U.S. basins (Permian, Mid-Continent, Powder River, Bakken), rising U.S. LPG and crude exports, and growing natural gas demand from LNG exports, power generation, and industrial development. The majority of growth is organic, with significant operating leverage available from existing capacity (filling "white space") with minimal capital investment.

• Q: What is the long-term run-rate capital expenditure needed to support the mid-to-high single-digit EBITDA growth target?

  A: After current major projects are completed in 2026 and 2027, capital spending is expected to moderate to a $2 billion to $2.5 billion annual run rate. All upcoming projects are midsize (generally $100 million to $500 million, no $1 billion+ projects currently planned), which will support strong free cash flow generation after capital investments are made. Management will remain disciplined and only pursue additional high-return opportunities as they arise.

• Q: NGL segment volumes were strong in Q2, but overall margins were softer. What drove this dynamic, and how will margins trend in the second half of 2026?

  A: The modest margin softening came from a larger than expected increase in lower-margin ethane volumes relative to higher-margin C3+ volumes across the Bakken and Mid-Continent, due to the tiered pricing structure the company has on long-term contracts where ethane has lower contracted rates than C3+. Strong volume growth has offset this margin impact, and July and August 2026 have seen a much stronger than expected uptick in NGL volumes after Waha to Katy price spreads narrowed, supporting stronger second-half results.

• Q: If additional natural gas egress capacity is built in the Bakken, how will that impact One Oak's ethane recovery and basin growth outlook?

  A: Improved gas egress will improve producer netbacks, giving them more incentive to increase overall Bakken production, which is a net positive for One Oak. Discretionary ethane recovery in the Bakken will remain supported by favorable market dynamics, and One Oak has plenty of available NGL egress capacity to accommodate any production growth, so incremental production growth will more than offset any potential modest impact on ethane recovery margins.