ONEOK, Inc. Q3 FY2025 earnings call

• Recently completed or nearing completion of projects to add NGL pipeline capacity, fractionation capacity, natural gas processing capacity, and expandable refined products capacity to the Denver market.
• Remain on track to realize approximately $250 million of incremental synergies in 2025, having realized nearly $500 million of synergies since closing the Magellan acquisition in September 2023.
• Strong financial flexibility with a strong balance sheet, disciplined capital allocation, and cash flow generation.
• Employees' focus on safety, operational excellence and innovation is key to success.

Third quarter adjusted EBITDA increased 7% compared to the second quarter, and has increased approximately 20% compared with the first quarter of 2025. For the natural gas liquids segment, total NGL raw feed throughput volumes increased. Rocky Mountain region volumes averaged more than 490,000 barrels per day, a 5% increase compared with the second quarter. Gulf Coast/Permian NGL volumes averaged nearly 570,000 barrels per day during the third quarter, an 8% increase compared with the second quarter. In the Mid-Continent, less ethane recovery led to slightly lower volumes. Regarding the fractionation operations, the Mont Belvieu fractionation complex, including the MB-4 fractionator is back to capacity. For the refined products and crude segment, third quarter refined product volumes increased sequentially. Crude oil gathering and long-haul pipelines continue to perform well. In the natural gas gathering and processing segment, volumes increased across all regions. The Permian Basin volumes increased 5% compared with the second quarter, Mid-Continent natural gas processing volumes increased 6% compared with the second quarter, and Rocky Mountain region process volumes averaged 1.7 Bcf per day in the third quarter of 2025, a 4% increase compared with the second quarter.

• Affirmed 2025 net income guidance range of $3.17 billion to $3.65 billion, adjusted EBITDA guidance range of $8 billion to $8.45 billion (excluding onetime transaction costs).
• Expect total capital expenditures, including growth and maintenance capital, to be in the range of $2.8 billion to $3.2 billion in 2025.
• Expect to recognize approximately $250 million of synergy-related adjusted EBITDA in 2025.
• Expect to pay more than $1.5 billion less in cash taxes over the next 5 years due to the One Big Beautiful Bill.
• Will finalize 2026 guidance in early part of first quarter of 2026.

• Commodity price environment could drive moderation and increased optimization of drilling and completion activities across basins where operated.

Q: Curious if you guys could frame up tailwinds versus headwinds as you think about earnings growth into next year. Should we -- specifically, should we think about that mid- to high single-digit growth still appropriate?

A: This is Sheridan. Where we see our tailwinds, which push us into next year is obviously first is the synergies. We've put a lot of synergies in place this year, and we've got a partial yield into that. Easton being one of the big ones. We'll see a full year next year of that one also with the Conway NGL to Mid-Continent refined products, among others. We also have our growth projects coming online with the Denver expansion coming on midway through the year. As we mentioned in our remarks, we have that [ 500 million ] over 500 million a day of processing capacity coming on throughout '26 into early '27. So the stuff coming on '26 is going to be a tailwind as we continue to go forward. And then also, we think there's just a growth in market share that we'll see in the Permian and some of our other areas will continue to fuel our growth moving forward.

Q: Could you walk through, I guess, how you think about executing on the buyback versus debt pay down or other capital allocation priorities at this point?

A: Sure. Well, as we've said in the past, as we get closer to a clear path to our debt-to-EBITDA target of 3.5x, it's going to free up our flexibility to add some stock buybacks to the equation. We continue to be on track with where we think we need to get to from a debt-to-EBITDA standpoint. And with that visibility, we're starting to feel a little bit more flexible in our asset allocation, saw the opportunity to buy back some stock there in the third quarter and did a modest amount. We also saw a pretty nice opportunity on the bond side and executed on that as well.