Oneok, Inc. · NYSE:OKE
Oneok — Oneok Inc /New/ — Merger or Acquisition (March 2017)
54 slides from Oneok's merger presentation, Mar 29, 2017
Slide 1: Rule 425 filing legend
Filed by ONEOK, Inc. (Commission File No. 001-13643) Pursuant to Rule 425 Under the Securities Act of 1933 And Deemed Filed Pursuant to Rule 14a-12 Under the Securities Exchange Act of 1934 Subject Company: ONEOK Partners, L.P. (Commission File No.: 1-12202) This filing relates to the proposed busin
Slide 2: Investor Update March 2017
INVESTOR UPDATE March 2017 INEOK | €® Qi20% ps
Slide 3: Forward-Looking Statements
Page 2 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", "
Slide 4: Forward-Looking Statements (Cont'd)
Page 3 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
Slide 5: Index
Page 4 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 –
Slide 6: ONEOK – ONEOK Partners Transaction Overview
ONEOK – ONEOK PARTNERS TRANSACTION OVERVIEW
Slide 7: Merger Transaction Summary
Page 6 MERGER TRANSACTION SUMMARY • 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 ONEOK common stock valued at $9.3 billion as of January 31, 2017
Slide 8: Compelling Long-Term Value for OKE Shareholders & OKS Unitholders
Page 7 COMPELLING LONG-TERM VALUE FOR OKE SHAREHOLDERS & OKS UNITHOLDERS Investment-grade credit ratings • S&P – ONEOK on CreditWatch positive to BBB from BB+ • Moody’s – ONEOK under review for upgrade to Baa3 from Ba1 • Annual dividend coverage target greater than 1.2 times • Ample cash flow to mai
Slide 9: ONEOK Overview
ONEOK OVERVIEW 4° Bak KN ora =n hea xy
Slide 10: ONEOK Overview
Page 9 • 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 expected to be fueled by: – Industry fundamentals from
Slide 11: ONEOK Sources of Earnings
Page 10 • Volume risk – Exists primarily in natural gas gathering and processing and natural gas liquids segments • Ethane opportunity impacts the natural gas liquids segment – Mitigated by supply and market diversity, firm-based, frac- or-pay and ship-or-pay contracts – Mitigated by significant acr
Slide 12: Natural Gas Liquids
Page 11 NATURAL GAS LIQUIDS • Exchange Services - Primarily fee based – Gather, fractionate and transport raw NGL feed to storage and market hubs • Transportation & Storage Services - Fee based – Transport NGL products to market centers and provide storage services for NGL products • Marketing - Dif
Slide 13: Natural Gas Gathering and Processing: Primarily Fee Based
Page 12 • 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 rate increased more than 50 percent between the four
Slide 14: Natural Gas Pipelines: Predominantly Fee Based
Page 13 • Nearly 100 percent of earnings is firm, fee-based • Firm demand-based contracts serving primarily investment-grade utility customers • Roadrunner Gas Transmission pipeline project and WesTex pipeline expansion enhance export capability to Mexico – Completed in 2016 – Contract terms of 25 y
Slide 15: ONEOK Guidance
i ONEOK GUIDANCE
Slide 16: OKE Financial Guidance Summary
Page 15 OKE FINANCIAL GUIDANCE SUMMARY • Net income range*: $575 million – $755 million • Adjusted EBITDA range: $1,870 million – $2,130 million • Distributable Cash Flow: $1,245 million – $1,505 million – Target dividend coverage ratio of 1.20 times or greater • Capital expenditures: $520 million -
Slide 17: Natural Gas Liquids 2017 Volume
Page 16 • 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-Continent region (3), Perm
Slide 18: Natural Gas Gathering and Processing 2017 Volume
Page 17 487 662 780 917 862 781 1,404 1,524 1,561 2014 2015 2016 2017G* Gathered Volumes (MMcf/d) NATURAL GAS GATHERING AND PROCESSING 2017 VOLUME Mid-Continent • Accelerated producer activity expected in the STACK and SCOOP plays – 10-12 rigs on ONEOK dedicated acreage compared with 3-4 at 2016 low
Slide 19: Ethane Recovery by Basin
Page 18 • 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 approximately $200 million • More than $170 milli
Slide 20: Projects Under Development
Page 19 PROJECTS UNDER DEVELOPMENT • 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 unannounced growth projects includes: – NGL pip
Slide 21: Financial Strength
FINANCIAL STRENGTH
Slide 22: OKE – Strong Balance Sheet
Page 21 OKE – STRONG BALANCE SHEET • Leverage target – GAAP debt-to-EBITDA ratio < 4.0x • Committed to taking necessary steps to maintain investment-grade credit ratings • Expected credit ratings: – S&P: BBB – Moody’s: Baa3 • Expected $2.5 billion revolving credit facility COMMITTED TO INVESTMENT-GR
Slide 23: Total Shareholder Return
Page 22 TOTAL SHAREHOLDER RETURN • 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 ONEOK – DELIVERING LONG-TERM VALUE Note: Total return as of Dec. 31, 2016 357% 88% 149% 96% 98% 12% 10-year5-
Slide 24: Appendix
APPENDIX ONEOK
Slide 25: ONEOK Growth: 2006–2016
Page 24 2 4 1 5 3 ONEOK GROWTH: 2006 – 2016 $9 BILLION INVESTED IN INFRASTRUCTURE WITH ROOM FOR GROWTH 1. Bakken/Williston Basin • Plants: Garden Creek I, II and III; Grasslands Plant Expansion; Stateline I and II; Lonesome Creek; and Bear Creek • Bakken NGL Pipeline and Expansion Phase I • Statelin
Slide 26: STACK and SCOOP
STACK AND SCOOP 4° Bak KN ora =n hea xy
Slide 27: STACK and SCOOP Plays: Reliable Full-Service Provider
Page 26 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 millio
Slide 28: STACK and SCOOP Plays: Full-Service Capability
Page 27 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 2
Slide 29: STACK and SCOOP: Gathering and Processing Assets
Page 28 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 •
Slide 30: STACK and SCOOP: Providing Connectivity
Page 29 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 Ga
Slide 31: Permian Basin
i PERMIAN BASIN -,
Slide 32: Permian Basin: Reliable Service Provider
Page 31 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 addit
Slide 33: Permian Basin: Full-Service Capability
Page 32 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
Slide 34: Permian Basin: Providing Connectivity
Page 33 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 pipe
Slide 35: Williston Basin
WILLISTON BASIN ONEOK
Slide 36: Williston Basin: Providing Valuable Takeaway Capacity
Page 35 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 b
Slide 37: Williston Basin: Competitively Advantaged Asset Footprint
Page 36 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 drilli
Slide 38: Powder River Basin
POWDER RIVER BASIN
Slide 39: Powder River Basin: Providing Valuable Takeaway Capacity
Page 38 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 Gathe
Slide 40: Business Segments
i BUSINESS SEGMENTS .
Slide 41: Natural Gas Liquids
NATURAL GAS LIQUIDS
Slide 42: Natural Gas Liquids segment overview
Page 41 • 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, Barnett Shale, Rocky Mountain regions and Per
Slide 43: Natural Gas Gathering and Processing
NATURAL GAS GATHERING AND PROCESSING
Slide 44: Natural Gas Gathering and Processing: Serving Producers in Key Basins
Page 43 • 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 include a larger fee component • Natural gas supplies from thre
Slide 45: Williston Basin: Increased Gas Capture and Volume Backlog
Page 44 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 0% 5% 10% 15% 20% 25% 30% 35% 40% 2010 2011 2012 2013 2014 2015 2016 2017 Gas Produced Percent of Gas Flared WILLISTON BASIN INCREASED GAS CAPTURE AND VOLUME BACKLOG BENEFITS ONEOK P erce nt Flare d M M cf /d P ro duced North Dakota Natur
Slide 46: Commodity Price Risk Mitigation
Page 45 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 $0.51 / gallon 91
Slide 47: Commodity Price Sensitivities After Hedging
Page 46 NATURAL GAS GATHERING AND PROCESSING COMMODITY PRICE SENSITIVITIES AFTER HEDGING* *As of Dec. 31, 2016 **Three-month forward-looking sensitivities net of hedges in place ***Full-year forward-looking sensitivities net of hedges in place Earnings Impact* ($ in Millions) Commodity Sensitivity 2
Slide 48: Natural Gas Pipelines
NATURAL GAS PIPELINES
Slide 49: Natural Gas Pipelines: Connectivity to Key Markets
Page 48 • 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 natural gas distribution companies • Electric-g
Slide 50: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS —“apaf*=W oo y
Slide 51: Non-GAAP Reconciliations: ONEOK, Inc.
Page 50 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 in
Slide 52: OKE Non-GAAP Reconciliation: Net Income to Adjusted EBITDA
Page 51 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
Slide 53: OKE Non-GAAP Reconciliation: 2017 Guidance Adjusted EBITDA and DCF
Page 52 OKE NON-GAAP RECONCILIATION NET INCOME TO ADJUSTED EBITDA AND DCF 2017 Guidance Range Reconciliation of Net Income to Adjusted EBITDA and Distributable Cash Flow Excludes one-time transaction fees associated with the acquisition of ONEOK Partners (Millions of dollars) Net income (a) $ 575 -
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