ONEOK, Inc. · NYSE:OKE
ONEOK — Wells Fargo Energy Symposium 2015
56 slides from ONEOK's conference presentation, Dec 8, 2015
Slide 1: Wells Fargo Energy Symposium
WELLS FARGO ENERGY SYMPOSIUM New York | Dec. 8, 2015
Slide 2: Terry K. Spencer, President and Chief Executive Officer
TERRY K. SPENCER President and Chief Executive Officer Page 2
Slide 3: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS • 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 imp
Slide 4: What We'll Cover
WHAT WE’LL COVER KEY POINTS ONEOK and ONEOK Partners overview – Connecting prolific supply basins to key markets Business segment overview – Enhancing fee-based earnings Volume growth continues – Continues in challenging environment – Driven by backlog of supply – Creating long-term opportunities •
Slide 5: ONEOK Overview
ONEOK OVERVIEW > ONEOK| 4 = QMO,
Slide 6: OKS Growth Benefits OKE
OKS GROWTH BENEFITS OKE VALUE OF GP INTEREST TO ONEOK • ONEOK Partners capital-growth Distributions Declared to ONEOK projects and strategic ($ in Millions) 17% CAGR $694 acquisitions expected to drive $633 continued distribution growth $546 $292 • Nearly 70% of every $476 $285 incremental ONEOK Par
Slide 7: ONEOK Partners Overview
ONEOK PARTNERS OVERVIEW wT “ yj
Slide 8: ONEOK Partners Asset Overview
ONEOK PARTNERS ASSET OVERVIEW • Owns and operates strategically located assets in midstream natural gas liquids and natural gas businesses • Provides nondiscretionary services to producers, processors and customers • Extensive 36,000-mile integrated network of natural gas liquids and natural gas pip
Slide 9: 2015 Operating Income and Equity Earnings Guidance by Segment
ONEOK PARTNERS 2015 OPERATING INCOME AND EQUITY EARNINGS GUIDANCE BY SEGMENT Natural Gas Gathering and Processing Natural Gas Liquids Natural Gas Pipelines 14% 68% 18% $180 million $864 million $225 million Page 9
Slide 10: ONEOK Partners Sources of Margin
ONEOK PARTNERS SOURCES OF MARGIN PERCENT OF MARGIN • Volume risk Sources of Margin – Exists primarily in natural gas gathering and $1.2 B $1.6 B $1.6 B $1.7 B $2.1 B $2.3 B processing and natural gas liquids segments 9% 9% 11% 12% • Ethane rejection impacts the natural gas liquids 20% segment 31% 16
Slide 11: Well-Positioned to Create Long-Term Value
ONEOK PARTNERS WELL-POSITIONED TO CREATE LONG-TERM VALUE • Increasing fee-based earnings through gathering, processing, fractionation, storage and transport services – Gathering and processing segment fee-based margin expected to increase to more than 70% in 2016 from 2015 guidance of 45% • Supply a
Slide 12: Our Key Strategies
OUR KEY STRATEGIES A PREMIER ENERGY COMPANY GROWTH • Increase distributable cash flow through investments in organic growth projects and strategic acquisitions – Continue to increase NGL and natural gas volume – Continue to grow/expand our integrated natural gas liquids and natural gas infrastructur
Slide 13: ONEOK Partners Business Segments
ONEOK PARTNERS BUSINESS SEGMENTS
Slide 14: Natural Gas Liquids Asset Overview
NATURAL GAS LIQUIDS ASSET OVERVIEW • Provides nondiscretionary, fee-based services to natural gas processors and customers – Gathering, fractionation, transportation, marketing and storage • Extensive NGL gathering system – Connected to more than 180 natural gas processing plants in the Mid-Continen
Slide 15: Natural Gas Liquids Margin Profile Mix
NATURAL GAS LIQUIDS MARGIN PROFILE MIX • Exchange & Storage Services – Gather, fractionate, transport and store NGLs Exchange & and deliver to market hubs; primarily fee based Storage Services • Transportation 68% 77% 72% Transportation 50% 55% 74% – Transporting raw NGL feed from supply basins and
Slide 16: Natural Gas Pipelines Asset Overview
NATURAL GAS PIPELINES ASSET OVERVIEW • Primarily fee-based income • 92% of transportation capacity contracted under demand-based rates in 2015 • 85% of contracted system transportation capacity serves end-use markets in 2015 – Connected directly to end-use markets • Local natural gas distribution co
Slide 17: Natural Gas Pipelines Percent of Margin
NATURAL GAS PIPELINES PERCENT OF MARGIN • Nearly 100% of margin is fee-based Sources of Margin 8% 6% 6% 4% 8% 4% • Minimal volume risk – Backed by firm demand contracts • Connect directly to end-use markets – Local natural gas distribution companies – Electric-utility generation facilities 92% 94% 9
Slide 18: Natural Gas Gathering and Processing Asset Overview
NATURAL GAS GATHERING AND PROCESSING ASSET OVERVIEW • Nondiscretionary services to producers – Gathering, compression, treating and processing Williston Basin • Diverse contract portfolio – More than 2,000 contracts Powder River – Primarily percent of proceeds (POP) and fee based Basin • Converting
Slide 19: Natural Gas Gathering and Processing Contract Portfolio
NATURAL GAS GATHERING AND PROCESSING CONTRACT PORTFOLIO • Achieving increased fee-based contract mix by restructuring existing percent-of-proceeds (POP) contracts to increase the fee-based component – Increasing fee-based margin while providing enhanced services to customers • Expect restructuring e
Slide 20: Volume Outlook
VOLUME OUTLOOK Volume Growth Continues in Challenging Environment
Slide 21: Natural Gas Liquids Ethane Upside
NATURAL GAS LIQUIDS ETHANE UPSIDE • New world-scale petrochemical facilities expected to significantly increase ethane demand in 2017 and beyond – Incremental ethane transported and fractionated volume potential greater than 150,000 bpd Third-Party Ethane Supply and Demand Forecasts 3,000 2,500 2,00
Slide 22: Natural Gas Liquids Volume Update
NATURAL GAS LIQUIDS VOLUME UPDATE • Bakken NGL Pipeline and Mid-Continent volumes gathered • 2015 fractionated volumes: increased from previous target – Expected to reach 645,000* bpd in fourth quarter – Continued volume growth in the Williston Basin, STACK and – Physical and contractual volumes exp
Slide 23: Natural Gas Pipelines Incremental Fee-Based Earnings
NATURAL GAS PIPELINES INCREMENTAL FEE-BASED EARNINGS • Converting coal-fired electric generators to Viking Gas cleaner natural gas Northern Border Transmission Pipeline – Low natural gas pricing environment providing many opportunities Guardian – EPA air emissions standards is a conversion Pipeline
Slide 24: Williston Basin Initial Production Rates and State-Wide Production
WILLISTON BASIN INITIAL PRODUCTION RATES AND STATE-WIDE PRODUCTION North Dakota Crude Oil and Natural Gas Production** 1,800,000 1,700,000 Max Monthly Production, Mcfd* 1,600,000 1,500,000 1,400,000 1,300,000 1,200,000 1,100,000 Natural gas production (Mcfd) Crude-oil production (bpd) Max Monthly Pr
Slide 25: Natural Gas Gathering and Processing Volume Update
NATURAL GAS GATHERING AND PROCESSING VOLUME UPDATE Williston Basin – significant supply backlog • Volumes significantly increased from previous target Natural Gas Gathered Volumes* (MMcf/d) – 5% increase in Q3; 4% increase in Q4 expected volumes • Approximately 1,100 wells drilled but not completed
Slide 26: Financial Strength
FINANCIAL STRENGTH
Slide 27: OKS Strong Balance Sheet
OKS STRONG BALANCE SHEET INVESTMENT GRADE ONEOK Partners Total Debt-to-Capitalization Ratio • Capital structure targets – 50/50 capitalization – Debt-to-Adjusted EBITDA ratio < 4.0x 50% 53% 52% 55% 54% 51% • Committed to investment-grade credit ratings – S&P: BBB (negative) – Moody’s: Baa2 (negative
Slide 28: Key Investment Considerations
KEY INVESTMENT CONSIDERATIONS PREMIER ENERGY COMPANIES ONEOK • Stable cash flow – Cash flow under pinned by investment-grade MLP with fee-based business model – GP and LP distributions from ONEOK Partners drive significant cash flow generation and growth – Prudent financial practices results in fina
Slide 29: Questions
QUESTIONS > ONEOK| 4 = QMO,
Slide 30: Index
INDEX Overview – ONEOK 5 – ONEOK Partners 7 ONEOK Partners Business Segments 13 Volume Outlook 20 Financial Strength 26 Appendix ―Natural Gas Gathering and Processing 32 ―Disciplined Growth Continues 38 ―Recent Projects 40 ―ONEOK Partners Growth Projects 43 ―Non-GAAP Reconciliations 49 Page 30
Slide 31: Appendix
V/, Uy Yi, ZZ sg + yy Uy V7 ' jai APPENDIX Page 31
Slide 32: Appendix – Natural Gas Gathering and Processing
APPENDIX – NATURAL GAS GATHERING AND PROCESSING
Slide 33: Williston Basin
WILLISTON BASIN Significant number of drilled but not completed wells are located in our asset footprint and acreage dedications Represents 5 wells waiting on completion* Existing OKS plants Compressor Lonesome Creek plant completed in November 2015 Bear Creek plant to be complete in third quarter 2
Slide 34: Williston Basin Increased Gas Capture and Volume Backlog Benefits OKS
WILLISTON BASIN INCREASED GAS CAPTURE AND VOLUME BACKLOG BENEFITS OKS • Increased natural gas capture results in increased NGL and natural gas value uplift • 79% of North Dakota’s natural gas production was captured in September 2015 • North Dakota Industrial Commission (NDIC) policy targets: – Incr
Slide 35: Williston Basin
WILLISTON BASIN Additional compressor stations expected to add 300 MMcf/d of gathering capacity Existing OKS plants Compressor stations completed in 2015 Compressor stations expected to be completed by year-end 2015 Lonesome Creek plant completed in November 2015 Bear Creek plant to be completed in
Slide 36: Natural Gas Gathering and Processing Commodity Price Risk Mitigation
NATURAL GAS GATHERING AND PROCESSING COMMODITY PRICE RISK MITIGATION 2016 natural gas equity volumes are expected to be lower due to contract restructuring efforts. As contracts become more fee-based, the partnership’s exposure to commodity prices will be reduced. Natural gas volumes hedged were rea
Slide 37: Natural Gas Gathering and Processing Commodity Price Sensitivities
NATURAL GAS GATHERING AND PROCESSING COMMODITY PRICE SENSITIVITIES 2015 Volume** Assumed Prices Annual Contribution Net Margin ($ in millions) Impact of 10% Price Movement *** ($ in millions) Natural gas (MMBtu/d) 4,100 $3.50 / MMbtu $1.3 $0.13 NGLs* (bpd) 2,600 $0.54 / gallon $5.4 $0.54 Condensate
Slide 38: Appendix – Disciplined Growth Continues in Multiple Basins
APPENDIX – DISCIPLINED GROWTH CONTINUES IN MULTIPLE BASINS
Slide 39: Future Growth: $4 Billion – $5 Billion Backlog
FUTURE GROWTH $4 BILLION – $5 BILLION BACKLOG • Project backlog: approximately 60% natural gas liquids – primarily fee based, 25% natural gas pipelines – primarily fee based and 15% natural gas gathering and processing • Future growth across multiple supply basins and major market areas • Backlog of
Slide 40: Appendix – Recent Projects
APPENDIX — RECENT PRO = ONEOK == PARTNERS
Slide 41: OKS in the Permian: West Texas LPG Pipeline System
OKS IN THE PERMIAN WEST TEXAS LPG PIPELINE SYSTEM • 2,600 miles of NGL gathering pipeline – $800 million acquisition closed in November 2014 – 285,000 bpd, gross • Expands NGL segment’s portfolio of assets – NGL gathering system mileage increased more than 60% – Gathered NGL volumes expected to incr
Slide 42: OKS in the Permian: Growing Exports to Mexico
OKS IN THE PERMIAN GROWING EXPORTS TO MEXICO Roadrunner Gas Transmission • 50-50 joint venture with Fermaca – 200 miles of 30-inch diameter pipeline – Provide up to 640 MMcf/d capacity to existing El Paso, Texas, markets and up to 570 MMcf/d to markets in northern Mexico – $450 million - $500 millio
Slide 43: Appendix – ONEOK Partners Growth Projects
APPENDIX – ONEOK PARTNERS GROWTH PROJECTS
Slide 44: Williston Basin-Related Growth Projects Completed
WILLISTON BASIN-RELATED GROWTH PROJECTS COMPLETED ~$1.5 BILLION IN PROJECTS CapEx Contract Major Project Scope Completed ($ Millions) Type Bakken NGL Pipeline • Bakken NGL Pipeline: 600-mile, 12-inch NGL pipeline with initial $90 Fee based September 2014 expansion – Phase I capacity of 60,000 bpd •
Slide 45: Williston Basin-Related Growth Projects Announced
WILLISTON BASIN-RELATED GROWTH PROJECTS ~$1.5 BILLION ANNOUNCED CapEx Contract Major Project Scope Timing ($ Millions) Type Natural gas compression • 100 MMcf/d* total additional processing capacity at existing Garden $80 - $90 POP with fee Fourth quarter Creek and Stateline plants (20 MMcf/d each)
Slide 46: Mid-Continent and Gulf Coast-Related Growth Projects
MID-CONTINENT AND GULF COAST-RELATED GROWTH PROJECTS ~$1.8 BILLION IN PROJECTS COMPLETED Major Project Scope CapEx Contract Completed ($ Millions) Type Sterling III pipeline and • 550-mile, 16-inch NGL pipeline $808 Fee based March 2014 reconfiguration of Sterling I and II • Initial capacity of 193,
Slide 47: Permian Growth Projects
PERMIAN GROWTH PROJECTS ~$560 MILLION Approximate Contract Major Project Scope Costs Type Timing ($ Millions) WesTex Transmission Pipeline Expansion • Constructing two new and upgrading three $70-$100 Fee based First quarter 2017 existing compressor stations • Increasing capacity by 260 MMcf/d Roadr
Slide 48: Acquisitions ~$1.2 Billion
ACQUISITIONS ~$1.2 BILLION Major Project Scope CapEx Contract Timing ($ Millions) Type Sage Creek natural gas • 50 MMcf/d* natural gas processing capacity $305 POP with fee September 2013 processing plant • Powder River Basin components Remaining 30 percent interest • 40 MMcf/d in additional natural
Slide 49: Non-GAAP Reconciliations – ONEOK
NON-GAAP RECONCILIATIONS – ONEOK
Slide 50: Non-GAAP Reconciliations: ONEOK, Inc.
NON-GAAP RECONCILIATIONS ONEOK, INC. ONEOK has disclosed in this presentation anticipated cash flow available for dividends, free cash flow and dividend coverage ratio, all amounts that are non-GAAP financial measures. Management believes these measures provide useful information to investors as a m
Slide 51: OKE Financial Measures: Cash Flow Available for Dividends
OKE FINANCIAL MEASURES CASH FLOW AVAILABLE FOR DIVIDENDS ($ in Millions) 2014 2015G* Recurring cash flows: Distributions received from ONEOK Partners – declared $ 633 $ 694 Interest expense, excluding non cash items (69) (63) Cash income taxes - - Released contracts from the former energy services s
Slide 52: OKE Non-GAAP Reconciliation
OKE NON-GAAP RECONCILIATION CASH FLOW AVAILABLE FOR DIVIDENDS AND FREE CASH FLOW ($ in Millions) 2014 2015G* Net income attributable to ONEOK $ 314 $ 317 Depreciation and amortization 15 3 Deferred income taxes 141 173 Equity in earnings of ONEOK Partners (563) (580) Distributions received from ONEO
Slide 53: Non-GAAP Reconciliations – ONEOK Partners
NON-GAAP RECONCILIATIONS – ONEOK PARTNERS
Slide 54: Non-GAAP Reconciliations: ONEOK Partners
NON-GAAP RECONCILIATIONS ONEOK PARTNERS ONEOK Partners has disclosed in this presentation its historical and anticipated adjusted EBITDA, distributable cash flow (DCF) and cash distribution coverage ratio, which are non-GAAP financial metrics, used to measure the partnership’s financial performance
Slide 55: OKS Non-GAAP Reconciliations: Adjusted EBITDA and Distributable Cash Flow
OKS NON-GAAP RECONCILIATIONS ADJUSTED EBITDA AND DISTRIBUTABLE CASH FLOW ($ in Millions) 2010 2011 2012 2013 2014 2015G* Reconciliation of Net Income to Adjusted EBITDA and Distributable Cash Flow Net Income $ 473 $ 831 $ 888 $ 804 $ 911 $935 Interest expense 204 223 206 237 282 321 Depreciation and
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