ONEOK INC /NEW/ Q4 FY2024 earnings call

• Significantly grown integrated operations in terms of product mix, demand pull versus supply push drivers and geographic diversity, adding refined products in crude oil transportation and gathering and expanding presence in Permian Basin and Louisiana.
• Added operational scale through approximately 60,000 mile pipeline network, enhancing connectivity with key producers, basins and market centers.
• Prioritized organic growth opportunities by expanding and extending asset base, with key projects including NGL pipeline expansions, NGL fractionation capacity additions, refined products pipeline expansions and natural gas storage expansions.
• Prioritized innovation, commercial development and customer service across operations, with numerous unannounced projects spanning regions and products, including synergy projects and traditional growth opportunities.
• Committed to returning meaningful value to investors, having proven ability to sustain and grow dividend, invest in high-return growth projects and maintain financial flexibility.

The refined products and crude segment contributed its first full year of earnings in 2024, benefiting from higher average refined product tariff rates, blending and marketing opportunities, as well as higher earnings on long-haul crude oil pipelines. The Natural Gas Pipeline segment exceeded the high end of its 2024 financial guidance even excluding divestitures and acquisitions, driven by strong demand for intrastate pipeline and storage services. For the natural gas liquids segment in 2025, higher year-over-year adjusted EBITDA and raw feed throughput volumes are expected, primarily driven by growth out of the Permian and Rocky Mountain regions. The refined products and crude segment in 2025 is expected to see continued growth in refined products margins and a significant increase in crude oil volumes driven by added crude oil gathering infrastructure.

• For 2025, expect 8% increase in earnings per share to midpoint of $5.37, 21% increase in adjusted EBITDA to $8.225 billion (excluding ~$50 million transaction costs), capital expenditures range of $2.8 billion to $3.2 billion.
• 2026 outlook: greater than 15% earnings per share growth and adjusted EBITDA growth approaching 10% compared with 2025 guidance midpoints, driven by expected volumes from increased production and completed synergy and growth projects, including full year of earnings from Elk Creek and West Texas NGL pipeline expansions and synergy projects, and partial year benefit from Denver area refined products expansion and connection of Mont Belvieu assets to Houston Ship Channel distribution assets, and additional synergies in 2026.

Q: Would you be able to provide some additional details behind bridging the 2025 to 2026 guidance?

A: The benefit of synergy capital spending, primarily connecting Easton assets, with these assets getting completed in 2025 and full benefit in 2026, and other projects wrapping up in later 2025 or early 2026 contributing benefit.

Q: On the LPG side, can you speak more to the strategic benefits behind your export JV with MPLX and how exactly will ONEOK and MPLX be competitive versus the incumbent from export economics? And then secondly, within your refined product portfolio, what other capacity additions are there like the Denver pipeline expansion?

A: Strategic benefits of LPG dock include location with access to open waters, being next to Marathon's refinery (brownfield construction site reducing cost), and location to NGL system and storage. For Denver pipeline expansion, 16-inch line can be expanded beyond initial 35,000 barrels per day up to 250,000 barrels per day depending on demand.

Q: I guess just a follow-up on Theresa's question about the LPG export dock. It seems like LPG ports are getting overbuilt and spot rates could fall significantly. Can you just speak about your assumptions for uncontracted rates, whether you share that view and whether in your numbers, the uncontracted capacity as a meaningful contributor to the economics that you're projecting?

A: Don't share the view that docks are going to be overbuilt when the dock is up in 2028, and have assumed a typical market rate on any spot volume included in economics.

Q: For the '25 CapEx guide, could you help us bridge spend on the three larger projects in your backlog versus those smaller capital opportunities such as well connects, well connections and synergy-related opportunities?

A: Three larger projects are Medford frac, Denver pipeline, and addition of plant down in North Texas, with other capital spending on synergies being very small, extremely high return projects to enhance efficiency.

Q: Now that you're operating with Medallion and EnLink, are there any opportunities operationally that you are seeing, which you did not see earlier when you actually did the deal. So those are like kind of positive surprises. Can you talk a little bit about any positive surprises of these two deals?

A: As people from different assets start working together, synergy opportunities boil out, such as quick connects between systems in Mid-Continent for gas to more efficient gas plants, ability to market crude oil in Permian area quickly, and positive synergies between EnLink crude oil system and Medallion crude oil system.