ONEOK, Inc. (OKE) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Record Rocky Mountain Region Volumes: The company reported record volumes in the Rocky Mountain region, driving strong performance in the second quarter.
• Acquisition-Related Synergies: Continued progress on acquisition-related synergies contributed to the quarter's success.
• Expansion and Growth Opportunities: Announced expansions in refined products pipeline to the Greater Denver area and received the first shipment of sustainable aviation fuel, highlighting growth in sustainable fuels.
• Strong Financial Performance: Net income totaled $780 million, with a 28% increase in earnings per share compared to the second quarter of 2023.
• Debt Management: No borrowings under the $2.5 billion credit agreement and a plan to pay a $480 million maturity with cash, strengthening the balance sheet.

Pessimistic Highlights

• Ethane Recovery Volatility: Ethane recovery remains volatile and dependent on natural gas prices, with the Permian in full recovery but the Mid-Continent in rejection.
• Bakken Well Connects: Despite reaffirming volume guidance, the company noted fewer well connects in the Bakken, relying on longer laterals and higher well performance for volume maintenance.

Company Outlook

• Confidence in Future Growth: The company remains confident in its long-term growth and returns, citing long-term volume commitments, strong operating performance, and a proven track record.
• Guidance Affirmation: Affirmed full-year 2024 financial guidance, expecting to meet or exceed the adjusted EBITDA midpoint of $6.175 billion.
• Synergy and Expansion Projects: Anticipates meeting or exceeding $175 million in cost and commercial synergies in 2024, with additional annual synergies expected in 2025.

Q & A Highlights

• Q: Can you discuss the guidance and what needs to go right to beat the midpoint? (Spiro Dounis, Citi)

  A: The company raised guidance in the first quarter and likes where it's trending, giving confidence in the back half of the year. Plans to reevaluate guidance in the third quarter. (Pierce Norton)

• Q: How do you assess the risk to your Bakken position with a peer's NGL pipeline conversion? (Spiro Dounis, Citi)

  A: The company does not expect a material impact from the conversion, citing long-term contracts and superior service in the Bakken. (Sheridan Swords)

• Q: Could you provide more color on the Easton acquisition synergies? (Jeremy Tonet, JPMorgan)

  A: The acquisition accelerates commercial synergy opportunities, especially in blending, by providing a more capital-efficient and faster way to connect NGL and refined products systems. (Sheridan Swords)

• Q: What's driving strength in the refined products and crude segment? (Theresa Chen, Barclays)

  A: Synergy capture, seasonality, and optimization of assets through forward sales are contributing to the segment's strength. (Sheridan Swords)

• Q: Can you talk about ethane recovery across the basins? (Tristan Richardson, Scotiabank)

  A: Ethane recovery will depend on natural gas values and demand at petrochemical facilities, with the Permian in full recovery and the Mid-Continent in rejection. (Sheridan Swords)

• Q: What are your thoughts on '25 CapEx and free cash flow? (Tristan Richardson, Scotiabank)

  A: The company expects a downtrend in '25 CapEx versus '24, positioning well for strategic and balanced capital allocation, including high-return projects and share repurchases. (Walter Hulse)

• Q: Any updates on potential AI data center-related projects? (Michael Blum, Wells Fargo)

  A: The number of potential power plant projects has increased, with five specifically stating AI demand, totaling approximately a Bcf per day across the footprint. (Charles Kelley)

• Q: Can you discuss the Medford rebuild and its economics? (Neil Mehta, Bank of America)

  A: The Medford rebuild is seen as the lowest cost per barrel expansion option, enhancing fractionation capabilities and allowing for more efficient system operation. (Sheridan Swords)