Oneok, Inc. · NYSE:OKE
Oneok — Investor Presentation (March 2017)
53 slides from Oneok's investor presentation, March 2017
Slide 1: Investor Update March 2017
INVESTOR UPDATE March 2017 <> ONEOK QNEOK PARTNERS
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS This presentation contains certain "forward-looking statements" within the meaning of federal securities laws and covered by the safe harbor protections. Words such as "anticipates", "believes," "expects", "intends", "plans", "projects", "will", "would", "should", "may", a
Slide 3: Forward-Looking Statements (Cont'd)
FORWARD-LOOKING STATEMENTS (CONT’D) – the mechanical integrity of facilities operated; – demand for our services in the proximity of our facilities; – our ability to control operating costs; – acts of nature, sabotage, terrorism or other similar acts that cause damage to our facilities or our suppli
Slide 4: Index
INDEX ONEOK-ONEOK Partners Transaction Overview 5 ONEOK Overview 8 ONEOK Guidance 14 Financial Strength 20 Appendix – STACK and SCOOP 25 – Permian Basin 30 – Williston Basin 34 – Powder River Basin 37 – Business Segments 39 – Natural Gas Liquids 40 – Natural Gas Gathering and Processing 42 – Natural
Slide 5: ONEOK – ONEOK Partners Transaction Overview
ONEOK – ONEOK PARTNERS TRANSACTION OVERVIEW
Slide 6: Merger Transaction Summary
MERGER TRANSACTION SUMMARY CREATES $30 BILLION ENTERPRISE VALUE COMPANY; LOWERS COST OF FUNDING • On Feb. 1, 2017, ONEOK and ONEOK Partners announced a definitive agreement under which ONEOK will acquire all of the outstanding common units of ONEOK Partners it does not already own in exchange for ON
Slide 7: Compelling Long-Term Value for OKE Shareholders & OKS Unitholders
COMPELLING LONG-TERM VALUE FOR OKE SHAREHOLDERS & OKS UNITHOLDERS • Expected dividend increase of 21 percent to $0.745, or $2.98 per share on an annualized Significant upfront basis, with expected subsequent dividend growth of 9 to 11 percent annually through 2021 dividend increase • 22.4 percent pr
Slide 8: ONEOK Overview
ONEOK OVERVIEW
Slide 9: ONEOK Overview
ONEOK OVERVIEW EXTENSIVE. INTEGRATED. RELIABLE. DIVERSIFIED. • 37,000-mile network of natural gas liquids and natural gas pipelines • Provides midstream services to producers, processors and customers • Supply in attractive basins • Significant basin diversification across asset footprint • Growth e
Slide 10: ONEOK Sources of Earnings
ONEOK SOURCES OF EARNINGS CONTINUED FEE-BASED GROWTH ACROSS MULTIPLE SUPPLY BASINS AND MARKETS • Volume risk Sources of Earnings ($ in billions) – Exists primarily in natural gas gathering and processing and natural gas liquids segments $1.7 B $2.1 B $2.1 B $2.6 B ~ $2.8 B 5% 4% ~ 5% • Ethane opport
Slide 11: Natural Gas Liquids
NATURAL GAS LIQUIDS PREDOMINANTLY FEE BASED • Exchange Services - Primarily fee based – Gather, fractionate and transport raw NGL feed to Exchange Services storage and market hubs • Transportation & Storage Services - Fee based – Transport NGL products to market centers and Transportation & 69% 80%
Slide 12: Natural Gas Gathering and Processing
NATURAL GAS GATHERING AND PROCESSING PRIMARILY FEE BASED • Achieved increased fee-based contract mix by restructuring percent-of-proceeds (POP) contracts with a fee component to include a higher fee rate – Increasing fee-based earnings while providing enhanced services to customers – Average fee rat
Slide 13: Natural Gas Pipelines
NATURAL GAS PIPELINES PREDOMINANTLY FEE BASED • Nearly 100 percent of earnings is firm, fee-based Sources of Earnings 4% 2% 4% ~ 3% • Firm demand-based contracts serving primarily 8% investment-grade utility customers • Roadrunner Gas Transmission pipeline project and WesTex pipeline expansion enhan
Slide 14: ONEOK Guidance
ee Ul ONEOK GUIDANCE 7
Slide 15: OKE Financial Guidance Summary
OKE FINANCIAL GUIDANCE SUMMARY 2017 • Net income range*: $575 million – $755 million • Adjusted EBITDA range: $1,870 million – Dividends Paid Per Share Per Year $2,130 million 19% CAGR since 2013 • Distributable Cash Flow: $1,245 million – $1,505 million – Target dividend coverage ratio of 1.20 time
Slide 16: Natural Gas Liquids 2017 Volume
NATURAL GAS LIQUIDS 2017 VOLUME • 2017 volume growth expected to be driven by the six new natural gas processing plants connected in 2016 and increased drilling in NGL-rich shale plays, particularly the STACK and SCOOP plays and the Permian Basin • 2017 expected processing plant connections – Mid-Co
Slide 17: Natural Gas Gathering and Processing 2017 Volume
NATURAL GAS GATHERING AND PROCESSING 2017 VOLUME Mid-Continent Williston Basin • Accelerated producer activity expected in the STACK and • 2017 volumes expected to increase from accelerated SCOOP plays well completions and rig activity, and a ramp up of – 10-12 rigs on ONEOK dedicated acreage compar
Slide 18: Ethane Recovery by Basin
ETHANE RECOVERY BY BASIN INCREMENTAL ETHANE DEMAND • ONEOK’s NGL infrastructure already connects supply to Gulf Coast region ‒ Incremental ethane transported and fractionated volume potential of 175,000 – 200,000 bpd ‒ Potential annual earnings uplift from full ethane recovery estimated to be approx
Slide 19: Projects Under Development
PROJECTS UNDER DEVELOPMENT $1.5 BILLION TO $2.5 BILLION – PRIMARILY FEE BASED • Project backlog: evenly distributed between ONEOK’s three business segments – Target adjusted EBITDA multiples of five to seven times • Future growth across multiple supply basins and major market areas • Backlog of unan
Slide 20: Financial Strength
FINANCIAL STRENGTH
Slide 21: OKE – Strong Balance Sheet
OKE – STRONG BALANCE SHEET COMMITTED TO INVESTMENT-GRADE CREDIT RATING • Leverage target • Expected credit ratings: – GAAP debt-to-EBITDA ratio < 4.0x – S&P: BBB • Committed to taking necessary steps to – Moody’s: Baa3 maintain investment-grade credit ratings • Expected $2.5 billion revolving credit
Slide 22: Total Shareholder Return
TOTAL SHAREHOLDER RETURN ONEOK – DELIVERING LONG-TERM VALUE • Long-term investors have experienced high returns from ONEOK – 10-year returns far exceeded the S&P 500 Index • 2016 returns outperformed the S&P 500 Index 357% 149% 98% 88% 96% 12% 1-year 5-year 10-year ONEOK S&P 500 Index Note: Total re
Slide 23: Appendix
APPENDIX 4> ONEOK
Slide 24: ONEOK Growth: 2006 – 2016
ONEOK GROWTH: 2006 – 2016 $9 BILLION INVESTED IN INFRASTRUCTURE WITH ROOM FOR GROWTH 1 1. Bakken/Williston Basin 2. Niobrara/Powder River Basin • Plants: Garden Creek I, II and III; Grasslands • Niobrara NGL Lateral Plant Expansion; Stateline I and II; Lonesome • OPPL Expansion Creek; and Bear Creek
Slide 25: STACK and SCOOP
STACK AND SCOOP
Slide 26: STACK and SCOOP Plays
STACK AND SCOOP PLAYS* RELIABLE FULL-SERVICE PROVIDER Natural Gas Liquids • Approximately 100 third-party plant connections in Mid-Continent • Incremental 100,000 bpd of expected supply by 2019 – 40,000 bpd of available gathering capacity; expandable to 100,000 bpd with less than $100 million of cap
Slide 27: STACK and SCOOP Plays: Full-Service Capability
STACK AND SCOOP PLAYS FULL-SERVICE CAPABILITY Natural Gas Liquids • Currently gathering approximately 150,000 – 200,000 bpd of NGLs • Three new processing plant connections in the STACK and SCOOP expected by the end of 2017 • Expect an incremental 100,000 bpd of NGLs gathered by the end of 2019 • Mo
Slide 28: STACK and SCOOP Plays
STACK AND SCOOP PLAYS WELL-POSITIONED GATHERING AND PROCESSING ASSETS Natural Gas Gathering and Processing • Approximately 200,000 acres dedicated to ONEOK in the STACK • Well completions expected to increase • Producers are seeing some wells average 8 to 10 MMcf/d initial production rates • Integra
Slide 29: STACK and SCOOP Plays: Providing Connectivity
STACK AND SCOOP PLAYS PROVIDING CONNECTIVITY Natural Gas Pipelines • Connected to 34 natural gas processing plants in Oklahoma with a total capacity of 1.8 Bcf/d • Access to on-system utility and industrial markets with peak demand of approximately 2.4 Bcf/d • Westbound expansion of ONEOK Gas Transm
Slide 30: Permian Basin
> PERMIAN BASIN
Slide 31: Permian Basin
PERMIAN BASIN RELIABLE SERVICE PROVIDER Natural Gas Liquids • Nearly 40 third-party natural gas processing plant connections in the Permian Basin • Two new natural gas processing plant connections in the Permian Basin expected in 2017 • West Texas LPG pipeline system expandable through additional pu
Slide 32: Permian Basin: Full-Service Capability
PERMIAN BASIN FULL-SERVICE CAPABILITY Natural Gas Liquids • Well-positioned near NGL-rich Delaware and Midland Basins • Extensive network of natural gas liquids pipelines connecting supply to Gulf Coast and Conway, Kansas, market centers • Potential to offer transportation and fractionation services
Slide 33: Permian Basin: Providing Connectivity
PERMIAN BASIN PROVIDING CONNECTIVITY Natural Gas Pipelines • Connected to 22 natural gas processing plants in the Permian Basin with a total capacity of 1.9 Bcf/d • Well-positioned in the Delaware Basin with a significant position in the Midland Basin • 2,500-mile network of natural gas pipelines an
Slide 34: Williston Basin
WILLISTON BASIN
Slide 35: Williston Basin
WILLISTON BASIN PROVIDING VALUABLE TAKEAWAY CAPACITY Natural Gas Liquids • Four third-party natural gas processing plant connections in the Williston Basin • Bakken NGL Pipeline expandable to 160,000 bpd with additional pump stations, expected in the third quarter 2018 • Highest margin NGL barrel wi
Slide 36: Williston Basin
WILLISTON BASIN COMPETITIVELY ADVANTAGED ASSET FOOTPRINT Natural Gas Gathering and Processing • More than 3 million acres dedicated to ONEOK – Approximately 1 million acres in the core • Nearly 1 Bcf/d natural gas processing capacity – More than 200 MMcf/d available • Seeing increased drilling activ
Slide 37: Powder River Basin
POWDER RIVER BASIN
Slide 38: Powder River Basin
POWDER RIVER BASIN PROVIDING VALUABLE TAKEAWAY CAPACITY Natural Gas Liquids • Assets located in NGL-rich Niobrara, Sussex and Turner formations • NGL takeaway through the Bakken NGL Pipeline and Overland Pass Pipeline • 2 third-party natural gas processing plant connections Natural Gas Gathering and
Slide 39: Business Segments
i BUSINESS SEGMENTS | o.
Slide 40: Natural Gas Liquids
NATURAL GAS LIQUIDS
Slide 41: Natural Gas Liquids: One of the Largest in the U.S.
NATURAL GAS LIQUIDS ONE OF THE LARGEST IN THE U.S. • Provides fee-based services to natural gas processors and customers – Gathering, fractionation, transportation, marketing and storage • Extensive NGL gathering system – Connected to nearly 200 natural gas processing plants in the Mid-Continent, Ba
Slide 42: Natural Gas Gathering and Processing
NATURAL GAS GATHERING AND PROCESSING
Slide 43: Natural Gas Gathering and Processing: Serving Producers in Key Basins
NATURAL GAS GATHERING AND PROCESSING SERVING PRODUCERS IN KEY BASINS • Provides gathering, compression, treating and processing services to producers • Diverse contract portfolio – More than 2,000 contracts – Percent of proceeds (POP) with fees • Restructured significant POP with fee contracts to in
Slide 44: Williston Basin: Increased Gas Capture and Volume Backlog
WILLISTON BASIN INCREASED GAS CAPTURE AND VOLUME BACKLOG BENEFITS ONEOK • Increased natural gas capture results in increased NGL and natural gas value uplift • Approximately 88% of North Dakota’s natural gas production was captured in January 2017 • North Dakota Industrial Commission (NDIC) policy t
Slide 45: Commodity Price Risk Mitigation
NATURAL GAS GATHERING AND PROCESSING COMMODITY PRICE RISK MITIGATION Year Ending December 31, 2017 Commodity Volumes Hedged Average Price Percent Hedged Natural Gas* (MMBtu/d) 73,100 $2.63 / MMBtu 97% Condensate (bpd) 1,800 $44.88 / Bbl 72% Natural Gas Liquids** (bpd) 8,000 $0.51 / gallon 91% Year E
Slide 46: Commodity Price Sensitivities After Hedging
NATURAL GAS GATHERING AND PROCESSING COMMODITY PRICE SENSITIVITIES AFTER HEDGING* Earnings Impact* ($ in Millions) Commodity Sensitivity 2017** Natural Gas $0.10 / MMBtu $0.1 Natural Gas Liquids $0.01 / gallon $0.4 Crude Oil $1.00 / barrel $0.4 *As of Dec. 31, 2016 **Three-month forward-looking sens
Slide 47: Natural Gas Pipelines
NATURAL GAS PIPELINES
Slide 48: Natural Gas Pipelines: Connectivity to Key Markets
NATURAL GAS PIPELINES CONNECTIVITY TO KEY MARKETS • Predominantly fee-based income • 92% of transportation capacity contracted under firm demand-based rates in 2016 • 82% of contracted system transportation capacity serves end-use markets in 2016 ‒ Connected directly to end-use markets • Local natur
Slide 49: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS , *
Slide 50: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS ONEOK, Inc. ONEOK has disclosed in this presentation expected 2017 adjusted EBITDA and distributable cash flow (DCF), which are non-GAAP financial metrics, used to measure ONEOK’s financial performance, and are defined as follows: Adjusted EBITDA is defined as net income adj
Slide 51: OKE Non-GAAP Reconciliation: Net Income to Adjusted EBITDA
OKE NON-GAAP RECONCILIATION NET INCOME TO ADJUSTED EBITDA ($ in Millions) 2013 2014 2015 2016 Reconciliation of Net Income to Adjusted EBITDA Net income from continuing operations $589 $669 $385 $746 Interest expense, net of capitalized interest 271 356 417 470 Depreciation and amortization 239 295
Slide 52: OKE Non-GAAP Reconciliation: Net Income to Adjusted EBITDA and DCF
OKE NON-GAAP RECONCILIATION NET INCOME TO ADJUSTED EBITDA AND DCF 2017 Guidance Range (Millions of dollars) Reconciliation of Net Income to Adjusted EBITDA and Distributable Cash Flow Excludes one-time transaction fees associated with the acquisition of ONEOK Partners Net income (a) $ 575 - $ 755 In
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