ONEOK (OKE) 2 Nov 222022 Q3 Earnings call transcript

Good day, and welcome to the ONEOK's Third Quarter 2022 Earnings Conference Call and Webcast. [Operator Instructions].

I would now like to turn the conference over to Andrew Ziola, Vice President of Investor Relations. Please go ahead.

Thank you, Betsy, and welcome to ONEOK's Third Quarter 2022 Earnings Call. release materials after are earnings yesterday, markets our those and on issued and the presentation closed We our website. remarks, prepared your our management available be After to questions. will take

expectations projected statements and differ Actual covered this might call the Statements provision safe results in materially are should XXXX Securities made forward-looking include could Acts by during of ONEOK's forward-looking considered statements. be or harbor that those of the from predictions XXXX. and

results to factors SEC of a actual to could For please that our differ, cause filings. discussion refer Instructions]. [Operator

the that, I'll over With President Norton, and Executive turn call Pierce? to Pierce Officer. Chief

morning, Thanks, appreciate Good on interest our you this everyone, Andrew. for your joining our us and thank in and We morning. investment call company.

the our President, Liquids Processing; Burdick, President Executive Kelley, Officer Gas Hulse, answer Sheridan On Chief Vice President Chief of President of your Pipelines. Financial and Gathering Senior Gas Investor and Kevin Natural and the Gas Officer. Vice call Executive Swords, Natural Development; and Vice Senior Commercial Corporate and Natural Vice and is are available questions Relations today our Also to Chuck and Walt

to adjusted and earnings, Yesterday, financial $X midpoints XXXX quarter growth provided exceed EBITDA. of outlook we our XXXX affirmed billion guidance XXXX announced third strong our

results safety to in operations. our our the employees themselves are and Our some third who productive dedicated quarter strategic shale reliability assets our the and basins, demonstrate -- sustainability of resiliency highly and integrated of U.S. the most and dedicated of have

of and backdrop. segments a producer Looking in from increased fee-based volumes business forward, and and in activity all earnings in price our increasing strength commodity continued higher services favorable demand we expect our

of for performance the to Walt our the and update. I call will expectations turn a So insurance with our financial that, and over discussion

Walt? So

income quarter. compared the X% million compared the Thank second XXXX totaled ONEOK's $X.XX quarter share, a net increase third with a increase XXXX you, or when with XX% per $XXX of third quarter Pierce. and

was million, increase and EBITDA increase second $XXX adjusted from a year-over-year an Third quarter quarter. the X%

natural from of higher gas benefited results and net realized region average higher NGL and volumes, Higher fee rates. commodity increased prices, Rocky Mountain hedging

had Additionally, lower capitalized our interest debt interest. expense balances increased to we and lower due

Third reflected related million the property interruption the and waiting XX-day approximately to of incident Medford deductible results million insurance related quarter $XX our insurance to terms our the period $X policy. XXXX losses business of under

as September our to agreed property of $XX We installment pay receipts that we million received remaining the expect first in outstanding before receive amount unallocated applied received that receivables. And year-end. insurers our this We've $XXX to of notice Medford of amount insurance cash million today, proceeds. and insurance to

charges value incurred the insurance completed associated is or the fully costs a Medford After There impairment of of business recorded the interruption interruption these subsequent based impairment of business period and are certain no assessments limited to of to receivables. to statement with impacts facility third $XX.X income as quarter costs third-party primarily sorry, $X.X fractionation XX-day we the agreements ended, million, representing to million, related period I'm incurred by waiting -- charge on offset property they waiting partial date.

capacity. with information temporary refine insurance to the to replacement path determine our sharing continue We of and of coverage insurance ongoing to business loss interruption ultimate fractionation carriers this

We will provide additional is forward material updates process available. as information we in this move when

inventory of those levels and been from benefit XXXX. $XX and million sold third first that the we realize have ended in the since will forward, for with lastly, quarter, quarter And fourth we NGL higher sales quarter earnings

our current no floating goal. as we XXXX maturities currently material no and through our net to long-term We our an long-term XX, of annualized or have September long-term X.Xx, was basis run of outstanding to debt-to-EBITDA debt. view X.Xx exposure on rate and until continue have aspirational debt As we September interest rates lower

of Yesterday, guidance driven now expect billion for previously 'XX capital of X we for adjusted income expansion growth were scale by expenditures $X.XX billion $X.XX contribute our and fractionator in smaller XXXX. for that the and total to EBITDA. We that affirmed billion, our of on not projects business $X.X spending across planned MB-X XXXX will midpoints our net acceleration segments

volumes year. providing Key Medford, gas insurance drivers and $X prices include XXXX us natural from outlook additional growth for outlook our our expected in XX% gas fee-based our next and to earnings strength our confidence producer adjusted XXXX liquids of to a related with These rates, for our EBITDA financial than to into more compared growing realized provide midpoints higher continued exceed in in commodity and strong XXXX our in higher activity double-digit tailwinds natural increase stable to and recoveries system business, base due higher position hedges. earnings billion

to I'll now call turn for the over commercial update. Kevin a

Walt. you, Thank

the Natural system. segment. Liquids volumes XX% following have with recovery higher our strong volume in driven with per region XXX,XXX including Let's Volumes severe on and more day. ethane our increased second than weather start the region XXXX, and barrels the averaging quarter overall Gas growth, September Rocky compared remained Mountain April incentivized year-over-year volume by XX% NGL with

Third and quarter recovery second quarter. year-over-year were the system. volumes the compared NGL our and year-over-year Permian with Mid-Continent unchanged prior with NGL quarter, ethane primarily compared on due to Basin, decreased volumes the In lower

plant of October, to third-party region volumes expect and connection XXXX. we year this recent this the from the With through into increase in remainder

from will out see we NGL of to Permian, future We on the also seeking low-cost continue so additional system. to takeaway evaluate expansions our continue customers interest

guidance midpoint we to in the the been ethane seeing XXXX the April be rejection storms. a the of perspective, impact Mid-Continent to of and the we From have NGL volume mostly expect our range, due guidance near

pet September, in across the most by some with to we NGL in leading started lower lower outages. and Europe, especially demand demand Regarding rejection ethane. in driven chem to from The ethane has Beginning chems for more been decrease utilization China regions. along globally, ethane see pet

XXXX. been factored somewhat has ethane in We to into quarter into remain early and XXXX this our and expectations. expect demand muted XXXX And fourth the

As lead in seeing to will ethane and which we demand we we sit today, believe to inventories starting increasing get off, are ethylene worked XXXX.

for ONEOK, we winter to natural we that due ethane as but natural continue of out be the opportunistic. prices much gas the higher it demand, to season typical and will As don't Bakken gas is during incentivize

updated recovery. our As Mont guidance. XXX,XXX to reflected capital it relates is which on fractionator continuing quarter of MB-X to barrel to the in second full expect XXXX Permian our XXXX still the and opportunities expect day Belvieu, our to recovery, in continues early outlook, the we be to recovery Mid-Continent XXXX be completed per and in in to the we partial Rockies ethane incentivize in Construction provide be

Rocky to Mountain with Processing Gathering averaging Natural the on third in billion strong for and Moving X.X remained us. processed cubic activity volumes quarter per Producer region Gas feet day, record segment. quarter a the

fee higher go-forward the Rockies. $X.XX contract from this contracts escalators, of reflecting basis, we larger average our on a total and average also increased, rate fee On volumes impact higher Our $X.XX. and volumes to component between a expect the rate percentage of range

of also wells Activity complete now XXX of at now our connected and due expectations into completions we connections near few of us expect availability factors a materials. expect to large low next guidance range. on will coming timing near pad approximately the These wells push remains below adjusting XXXX or to timing and still that same our high, year. well the be slightly we've some XXX guidance the crews for in end of some impact led region. to or elements the We storms, just completion April volume the Year-to-date,

operating crews currently more with more XX than the the are on There than dedicated rigs completion our rigs approximately in completion acreage. and and XX XX crews half basin,

in gas at than approximately to XX acreage, current levels. maintain XX see our compared XXXX XXXX. higher with on we natural well said expect we've currently production more But on As and before, connections to our acreage rigs with volumes

per Demicks stable the million remains XXX the needed to DUC first of in and III will those remained dedicated to region. on plant schedule The rig Lake increasing bring inventory activity feet quarter capacity acreage. at and completed processing half around considering under XXX, the construction The count our basin-wide be on with day cubic

now continue acreage rigs X our Mid-Continent region, activity on the In increased rigs more basin-wide. XX we to than with and see operating

volumes We of remainder our to steady year with year to system. the next activity into through the additional majority and NGLs the expect increasing basin-wide driving and rigs of

end Natural Gas gas from natural with results the $XXX benefiting storage and guidance year-to-date million high now to million. of its expect In segment, range we of demand Pipeline increasing to strong the the exceed for services, this segment $XXX transportation continued

our which fully our subscribed Oklahoma We service rates including Texas now for our higher storage for facilities, terms, are XXXX. and at subscribed through Texas and is in recent of expansion longer storage highly

contracted. XXXX capabilities be expansion feet in storage storage billion evaluating our assets. XX% expected project This of additional to and is our nearly and to is Additionally, capacity of XXXX, enabling we expanding an April in Texas X additional also are we through are be subscribed Oklahoma, storage cubic an complete

Viking the lastly, third improve back began reductions a reliability emissions pipeline compression project and be call the completed expected we operational system. to electrification million turn is Pierce, our our greenhouse The Transmission included on and future is And cost I gas XXXX Gas before outlook. of quarter the in and project on interstate to to $XX provide in

remarks. my that concludes Pierce,

Walt you, Thank and Kevin.

key a I'm of XXXX of safely, environmentally and last contributions forward As continue employees and proud to the success sustainably them and and midstream couple responsible we operator. year, our who thank are hard on the as for months look enter focus want next to of our and work their operating to to

growing future. on is as for remain our other important looks operate communities is we as important, engage employees, the to how drive focused we helping the ONEOK it equally even Also demand forward to for meeting is and energy needs stakeholders the for How but transformation today also important. energy with

an ONEOK X sector Oklahoma shaped a traded century. also that firm capital effort companies based that a for hub publicly has joined energy a than start-ups a the announced We into and fund other transform and in recently more of redefine venture to Oklahoma large economy technology to region's with

includes aligns may and long-term and long-term in participate low right role partnership and building business strategy, growth ONEOK which this been and now the future. has the contribute in that it better to innovative low-carbon teams those potential investments that resources believe a business play practices -- to the technologies to We that sees our diversification.

for I MSCI an our I rating ESG leader our ONEOK's Before over call industry by earnings wanted maintained updated AA, status. and reviewed MSCI recently we AAA we mentioned item from turn was important in highlight and to Q&A, release. the ESG to

our progress areas. important these and of committed continuing to I in As a source make are pride are ESG previously we for ONEOK, said, efforts to

questions. operator, that, ready we're now With for

Instructions]. [Operator

The first question with today comes from Reynolds UBS. Brian

growth, 'XX. earnings guys the pretty few next hedges Rockies 'XX revisit recovery of should recovery XX% I seems Btu years little bit some but Permian on into it on in your dive have your to prepared around been was assumption, volumes demand Maybe XXXX it could to assumptions of just Historically, ethane ethane rolling impacted tailwinds we curious earnings as assumptions should the you into how if for further and tightness some assumptions conservative like concerns that the you higher. we relates some plateauing remarks a gas see growth? about how for and nat think this as and curious

and of Kevin. about volumes tailwinds, are seeing over Gathering in. outlook, up, be start the as expect going rigs add to carry Think overall today into is our Sheridan NGL we're all XXXX with and we Processing the both 'XX. those existing with I'll basins this can and our then growth in Brian, the

growth driver. to So the is be primary volume going

have fee you're -- escalations. going to got also contract a of full the You've year

year that. we'll So full of a see

You've a our got in step-up hedging.

are that's you significant look what have a hedge to The we going compared prices 'XX, up be pretty to there. we recovery into the ethane assumptions 'XX. step going had at to If similar 'XX in

mentioned, continue appropriate. and we in expect we recovery the Mid-Continent, where As of full to of the Permian, Bakken, partial incentivize we'll out out ethane

ethane when see as thing coming at out really -- an in we that I Bakken we opportunity of 'XX have as the limited that we We in. is would incentivized factored add opportunistic 'XX, going The forward. one on look looked

were ONEOK 'XX was given Great. alleviated payout is appreciate minute. I But think color. some capital concerns its a had that never proceeds. just towards insurance the XXXX, to earnings we time. and that Maybe pivot there the leverage target but are capital the around I towards targets. into framework of trending should of that Obviously, ratio partially with cut return the you've allocation said, how for at since dividend looking about curious that same same

I there, color appreciate any it. So

execute So that debt-to-EBITDA available one we ratio XXXX. create XXXX, are for value indicating positive the going us flexibility through our to Brian, or earnings this is have to Pierce. metrics With going our shareholders more growth of are are progress to payout that our that capital levers indications to and as more our to allocation for be we on

So that's way there. the I'd your answer question

comes question Michael Fargo. with from next The Wells Blum

I Border? does the terms ask on gas Is a latest there? wanted related Bakken? room versus Northern of there potential to Where the Canada it project expansion from in stand updates any to that, any Border. on North on coming And then more

Kevin. it's Michael, Yes,

For coming Bakken still of from continue displaced Bakken That to Canada. XXX there's probably million from as estimate your day gas question, first get million we grows. XXX will to a

Basin. demand discussions some in parties and projects, with you've some there. various got takeaway And So actually active we're in projects residue on demand multiple opportunities also,

We out that doesn't Northern Border. a solution to have million day XXX that's south about of takeaway secured go going on

So to that's help. going

think So we move that one that, forward. able Basin the find we believe there's -- and will that's as to we be provides don't necessary capacity solution we'll to of single out provide but there do going be

Medford question, second or just decision a else at -- rebuild made ask you I know or something guess I Belvieu Mont you're going about yet to really haven't build whether maybe Okay. otherwise. wanted to

you to to Belvieu if in you dynamics, relates market the could between just talk of Sterling? it rebuild to that Mont So Medford, change do and you the does choose curious dynamics not terms anything for Conway as if

was be Sterling will an anyway down we you of if put there Mont build down on bit today, was I our But up, most to in impact little liquids Belvieu mean, Mont there. the transported if Medford a that No. when in down Belvieu or of market.

overall, that we dynamics think much, not we or are whether at to Belvieu. market be it going at Medford So the Mont build impacted

from question Salisbury with next comes Jean Bernstein. The

from and I quarter, third the from say was expected. ethane quarter flipped blowouts the less Mid-Con usual? Rockies marginal ethane Mid-Con the fair to it maybe that recovered the was recover more the In was there than in the a it price due would little the you before have and from specifically AECO to from that of most Is Rockies that it would time

we're Yes. at look which really of to incentivize. the what basis We gas on going as basin kind drives us

ethane what what's Rockies versus where a -- in to the see So there. basis of Mid-Continent ethane. in drive coming We will on could for out going and of quarter secure out yes, the for AECO benefit due lot did pricing on going gas and what's coming we prices we incentivize so third the of the

and see of So at basins gas as X incentivize we that base a we between great that that X. the that times kind opportunistic can play

system. So we big to think a our that's advantage

they Btu all kind of going is go helpful. rejection of said, Bakken has Border does Northern That's happen potential the in kind the that to assuming think Northern Okay. anything just of process And exceed really Border whole think is is next that back the then? Does to couple Or the higher in? probably spec to FERC point cap I quarters, receipt I that which want. X,XXX, a max that at

Yes, Jean you Border. ethane, content this is will Ann, reject raise the that on Kevin. as Northern more Btu

pipe. the we spec is X,XXX, If you about number there was not a where were now, on were back of that right pre-COVID north to and

to understand pull So markets Northern have high the it. some They've if downstream Border, too concerns. start watch and got they'll it's our gets to levers it

FERC but go exact continue an back for that. with timing don't and we on a shippers all potentially stakeholders They work relevant to spec, the to to have

high require back. it that lower incentivized to full not we the that gets If point -- point, rates, gets gets would issues, ethane -- at then it's And if at the it raising start we'll it level recover I at required where always downstream rate. markets to too to we Btu then if option do watch it. have would and mean, the that, So be that an

The Jeremy with next question JPMorgan. comes from Tonet

Jeremy. Steve McGee for on is This

Just as business the starting interruption as line, far insurance insurance along goes.

as marketing an business in include XXXX, And that. get include well? idea covered does that that then insurance Does there under to trying optimization, as well? Just the what's of for

we call, we return we have receive event. to last on that is as so said would to but we the get that Well, this the are we that coverage for entitled have coverage what made,

system-wide. it's So

So does like if that the impact BI parts factored business gets other that into marketing, of our optimization and calculation.

run at forward. September, The I wouldn't companies rate a to received predominantly money we're we going that in at look parts BI there's with booked are look were how frac costs. because that still Those insurance the third-party some as [indiscernible] that working September, we moving refine we the necessarily costs in

And to much pretty refine at expect a receive we're from work benefit we point, XXXX, optimization forward. in BI continue. forward. going regular that to you as coverage how do we BI catch with And we don't any variation them be really expect see up that In that going so market, and hoping the from real insurance the some that month-to-month on

Understood. And connects year. bit little lower you the CapEx, forward, then, over still I of well to towards pulled the guess, a some kind end this guide, flipping up but of

walk MB-X. as less just XXXX the Should CapEx So of year now guess, guessing that? guess, the and year well. because that little in then raise what most bit looks like into year of we expect, us this I'm uptick this a through, if is I you that I could And next

mover moving capital Kevin. a it's of Yes, some that Steve, significant Yes, 'XX. in was MB-X into forward

projects project compression in in we north station our a Bakken them, the strong the power We strong and in moved to add of as a in had in the contribute forward And will typically that 'XX remarks. multiple that growth then that with had earnings have Viking just smaller up our from handful that also will extremely We referenced growth-type we routine compressor 'XX. opening well. -- --

are into in So 'XX. what just a increase the factors combination of those led

'XX that once thinking we Demicks continue Lake III, If little in that lead projects would to -- MB-X other capital step down that to correctly. about and a you work prove. You're probably we complete on could barring

this yes, unknown reach expect we'll projects that's maybe constantly working So them. down on those, that and is absent the announce as CapEx to little then at come bit -- in would they we're 'XX. point you new But a FID,

with Chen Theresa from comes question next Barclays. The

on to if some exit-to-exit First, I color in or rig of growth provide your touch and delve any would love particular, here. then counts, completions, the can gas? well could deck terms some you XXXX on into you assumptions Mainly, and assumptions of the color for oil in share on guidance in Bakken price activity, assumption

third And development recovery granted ethane volatile, in can just for remains color you in that the be XXXX? XXXX the assumption can on the and reported give sort then you that any quarter recovery the of dynamic but level versus

we're early levels, Theresa, decks we'll is the this again, I you, Kevin. price next there's year. we into not to -- probably going detailed And we're about But rig. release guidance and sometime think get not activity would probably next -- as that tell specifics more

more we in If we're you at, looking today, about there's look have than basins that outlook. just talking we're in the at that activity that

exceedings $X to levels billion. activity So strong help we're plenty are us the of achieve seeing today that

composition the previous it. quite shared from on Processing understand of in I run a and Gathering fee the Got average segment, escalators the color you and And the it. $X.XX step-up the fee that and rate rate,

we in beyond, to think the step-ups? similar assume speaking, Or how in the escalators growth about trajectory of driving And think trying anything this? here. line? think we about this Was of should Just we there about and magnitudes generally XXXX should as particular

driving think was up, Theresa, of it about a step this from. escalation it is lot came you Sheridan. margin is increased on where which that is that When

more on. or Some on volume being mix the forward. We on margin and others contract contracts got on higher we contracts go as

the comes out to a and going escalators is we'll into that's be, thing see big are going inflationary as [indiscernible] trajectory in land that inflation reacts we the go have big that, The how going most we and versus on get going how on that CPI and 'XX, time to what to CPI how drive forward. we and the 'XX on 'XX where against is -- driver to of be

be biggest to would on it's piece. really inflation, the So be going based

Next question Energy Michael with Pickering comes Partners. from Cusimano

million Gas was I price think wanted a Medford at any you a decrease first focus and it that optimization result Was I all of number, sequentially. the you Natural all Or timing -- and I all? of to some the on Liquids on think marketing NGLs? just noted differentials other mentioned XX

during this have that Yes, Medford, mentioned, forward that And money we we XX-day and waiting forward Medford the have first forward take back. And period, of little had we an we forward, is that we quarter numbers, and the as $XX first there. quarter time. those sales sales did quarter factored here, spreads there. in sorry, to receive and will Michael, hits in things second that were on fourth we that's get We go some will did that you other impact or $XX due optimization some marketing in Sheridan. that money bit a million is of I'm that and push -- million quarter as narrowed

those optimization are you the that So in drop -- in and main factors see marketing. X as that

-- any the happen? insurance be expect the optimization to would to to in would reductions, to of what you be expect of event you just recoup -- would And marketing future, expect proceeds clarify, Okay. in you or

we of that. cover on we we We -- that and we losses get us. period, But XX-day been going is that's would expect part do. marketing we insurance in to do that optimization expect have if the expect received get which We up, Medford forward, wouldn't insurance to to of had because a any as $XX in but that million lot that proceeds, waiting get

current given month for previously, NGL have Okay. is then run like of And helpful. the out rate That takeaway. you Bakken all a

going Any forward? you indication think number. October can September looks gave have a I you like for what

if That run gave We really think weather of bringing that's we're through. move a about for to September. a not going Michael, We number fourth you start was as in rate get we the numbers and good QX. play. the quarter into kind it -- you you provide into

we that's off that. So why backed

one, I last cost? other are for then I for proceeds one Or from interruption, can. the property up all if the business replacement frac back where from it? like shapes to getting about recover it trying is are of that capacity MB-X some insurance viewing of And Understood. how way If loss property to the the break Just the insurance you out loss, think Okay. allocation as the that? company you thinking like and

We or that would the the to would have of to the back coverage where specific point cover it that currently replacement get XXX,XXX the capacity facility achieve of repair the we we have. barrels

we us to that those that, have we back build wherever dollars to considering point. would we to same -- do have that but and to were flexibility property it this we're before. coverage that what want with So position it we in that's cost at still the the then And do put do

much the expect rhythm. money as unallocated of on a we of it get not kind would out monthly the as once allocated get monthly -- property we likely spend get replacement should -- we not This will forward, was BI is basis for into facility. to or money. repair be what the it the a the be And Going for

beyond something if you be property to? was loss it already sort any MB-X, to? you Okay. of allocate since undergoing MB-X be wanted it Would could That's and Or in construction, helpful. that would

discrete, it because it help obviously, are it. its bit that needed -- us of those No. the will we going Medford replacement facility phase. in we part and or that But we we costs. it our for is received that And -- stand-alone cover own be will our is as capital MB-X a natural on the project ramp-up the comes we of to be repair will proceeds built and little and

the This Andrew like closing any question-and-answer I to over session. turn to our conference for back Ziola would remarks. concludes

all. Thank right. you, All

details that you for quiet in close period starts We'll late for date. later earnings in fourth extends release February. the conference joining when books until and call us. Our at good thank provide January Have and we we a our quarter day, for a

The conference Thank today's now concluded. presentation. for you attending has

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