ONEOK INC /NEW/ Q1 FY2025 earnings call

Key Points

• First quarter results were in line with expectations, and 2025 financial guidance and 2026 outlook were affirmed.
• Exited winter with volumes across systems ramping up, entering refined products demand旺季.
• Executing on acquisition-related synergies, with several organic growth projects nearing completion.
• Monitored macroeconomic indicators including commodity prices, producer activity, etc.
• Company structured to perform through cycles, with unique earnings catalysts from acquisition synergies not tied to production volume growth.
• Strategically positioned assets in productive U.S. shale basins, connected with large producers.
• Maintained strong balance sheet, ending quarter with no borrowings under $3.5 billion facility and over $140 million in cash.

Natural Gas Liquids Segment

First quarter NGL volumes increased 4% year-over-year, driven by a 15% increase in the Rocky Mountain region and an 8% increase in the Gulf Coast Permian volume. Rocky Mountain region volumes are currently averaging nearly 480,000 barrels per day in April, and Gulf Coast Permian region volumes increased year-over-year with raw feed throughput impacted by winter weather but expected to ramp up in coming quarters.

Refined Product and Crude Segment

First quarter refined product volumes were nearly unchanged year-over-year. Midland crude gathered volumes in the first quarter of 2025 were up more than 20% year-over-year, with expected additional volumes directed to long-haul pipeline throughout the year.

Natural Gas Gathering and Processing Segment

Through acquisitions, extended gathering and processing assets into the Permian Basin and Mid-Con. Added 1.7 Bcf per day of processing capacity in the Permian and more than doubled processing capacity in the Mid-Continent. Mid-Continent region processing volumes are averaging more than 2.4 Bcf per day in April, Rocky Mountain region processing volumes averaged nearly 1.6 Bcf per day in Q1 2025 and began ramping in April, and Williston Basin has 15 rigs on dedicated acreage.

Natural Gas Pipelines Segment

Assets well positioned to benefit from increasing natural gas demand. Oklahoma natural gas storage expansion project completed and will be fully in service next month, adding 4 Bcf of working storage capacity (80% committed), and Jefferson Island storage hub expansion project underway with two phases, fully subscribed by third-party commitments

Guidance

• Affirmed 2025 financial guidance and 2026 outlook provided in late February.
• First quarter in line with internal forecast, expected future quarters to see growth from seasonal refined product demand, completed capital projects, and additional synergies.
• Anticipated leverage to trend towards 3.5x target in 2026.

Risks

• Operating in an environment with evolving macroeconomic market variables, including commodity prices, producer activity, inflationary trends, and regulatory developments.

Q: Jeremy Tonet from JPMorgan asked about synergies and forward outlook, producer conversations.

A: Pierce, Sheridan, and Walt responded on synergies being independent of volume, producer conversations being constructive with win-win potential.

Q: Doug Irwin from Citi asked about LPG export project and tariffs, macro environment on storage.

A: Sheridan said tariffs not impacting project, contango market would provide storage tailwinds.

Q: Theresa Chen from Barclays asked about CapEx flex and synergy execution.

A: Walter and Sheridan responded on CapEx flex and synergies underway.

Q: Michael Blum from Wells Fargo asked about Bakken volumes and ethane recovery.

A: Sheridan responded on Bakken trending well and ethane recovery sensitive to pricing.

Q: Jean Ann Salisbury from Bank of America asked about NGL volumes and ethane rejection.

A: Sheridan said volumes in line with forecast and ethane recovery as expected.

Q: Manav Gupta from UBS asked about Slide 5 and weather impact.

A: Walter responded on Slide 5 and weather impact on EBITDA.

Q: AJ O'Donnell from TPH asked about Permian volume and refined products blending.

A: Sheridan responded on Permian volume from new well connects and blending strategy.

Q: Sunil Sibal from Seaport Global Securities asked about LPG export docks and gas pipeline business.

A: Sheridan responded on LPG volumes and gas pipeline segment performing well