ONEOK Inc at Wells Fargo Midstream, Utilities & Renewables Symposium Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Michael Blum - Wells Fargo Securities, LLC - Analyst : So maybe elections are kind of top of mind here for a lot of us. I'd be curious to get your thoughts on how you see the change that's coming here with the administration impacting ONEOK broadly, and then maybe specifically, you can comment on the potential new treasury secretaries plan to increase US production by 3 million-barrel, BOE -- is that -- does that -- I assume a lot of that's going to be Permian? Just curious for your thoughts if you see that actually playing out and just generally how you see this change in administration benefiting ONEOK?

Question: Michael Blum - Wells Fargo Securities, LLC - Analyst : 3 million barrels. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 10, 2024 / 4:00PM, OKE.N - ONEOK Inc at Wells Fargo Midstream, Utilities & Renewables Symposium

Question: Michael Blum - Wells Fargo Securities, LLC - Analyst : Great. So obviously, you've been very active in the M&A front the last couple of years, Magellan, EnLink, Medallion. And I guess from our perspective, it seems like a strategic pivot to some degree. And so maybe we've been following the company a long time. Historically, I would say ONEOK has been really focused on organic growth and these are my words not yours, but I would say that's because you had a huge opportunity set. The returns were better than M&A, and that was always kind of the answer we asked about M&A historically. And again, our view, I think rightfully so, a large portion of compensation was driven by ROIC metrics, which we always thought was a great thing. So I guess the question is what changed in the last couple of years and how do you think about -- yeah, maybe just speak to that? And what is the criteria for M&A here? Walter Hulse - ONEOK Inc - Chief Financial Officer, Executive Vice President of Investor Relations and Corporate Development, Treasurer Yeah, absolutely. Well, I think the criteria is really the most important aspect of it. So what we did in 2021 is when Pierce joined the company, we sat down and looked at our company, how we were positioned. The feedback we are getting from investors, what the stock was reacting to, and I think at that point in time, it was pretty clear that we were -- our stock price was very correlated to crude. Our earnings were not correlated to crude. We had EBITDA growth every year because we did enjoy fantastic growth opportunities. I mean, I think, if you think about it, the sheer growth, given the shale era in that 10-year period was dramatic for crude production and the needed infrastructure around that. So we were looking for ways that we might be able to reduce that perception of correlation to crude. As we sat at that point in time, we were 60% of our EBITDA was coming out of the Bakken. We love the Bakken. We wish there were 10 more Bakkens, but there isn't. But if we let things run their course, Bakken EBITDA would have moved to 75% of our overall EBITDA. And so we thought it was going to be pretty difficult to break that perception about this tie to crude prices. So we looked at what can we do to position the company to where that perception might be reduced? First thing we looked for was a demand pull as opposed to supply push, the vast majority of our business was really reliant on the drill bit. So we were looking for something to be pulling volume through and the EBITDA associated with that. Clearly, Magellan was that. We are looking for a significant amount of EBITDA that was not tied to the Bakken. So there was a geographical aspect to it. And I'm not going to go through all nine criteria. But clearly, one of them was to start to reposition ourselves into the Permian. So when we went then and scoped across all of the companies, we ran about 24 companies across that screen and Magellan jumped out as the clear winner. Because with Magellan, we had the opportunity for enormous synergies given the way our assets laid over each other. So we have the beauty of -- we're clicking off a bunch of these criteria. At the same time, we had a very synergistic acquisition. When we were done with Magellan, we went back and evaluated the criteria. We had nine, we dropped off three. We added five actually. And when I say we dropped them off, we didn't completely eliminate them, but they were no longer a significant factor. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 10, 2024 / 4:00PM, OKE.N - ONEOK Inc at Wells Fargo Midstream, Utilities & Renewables Symposium We felt like we have the critical mass. We don't need scale at this point for scale's sake. So that wasn't a real driver. But as we looked at the Permian, we needed GMP, we needed crude to round out, so we would have the fully integrated offering out there for producers. So now in the Permian, we've got NGL takeaway, natural gas, GMP, crude gathering, and crude takeaway. So we've got the full set of products so we can compete there. So everything that we've gone out and bought we've initiated, and we did it because in a plan, it was what we thought we needed. We've since gone back and reevaluated the criteria. We actually expanded that criteria to also include large-scale CapEx. So that when we're looking at large-scale CapEx versus a bolt-on acquisition or something that those are going to be compared and that really comes back to that return on invested capital. It's still incredibly important to our Board. We still are compensated on return on invested capital. But as we look forward, we wanted to be positioned for the next 10 to 15 years going forward. And as much as we love the Bakken, clearly, the Permian is going to be where the new growth is, and we wanted to be positioned to get our fair share of that. EnLink clearly had other things that we liked and that it gave us a very nice synergistic fit in the Mid-Continent with our G&P business that we had there, and EnLink had, and we picked up Louisiana added to our frac position. If you looked at EnLink, they were four disparate businesses that were not connected, or they were run regionally. They didn't have any integration amongst them. We connected all those assets. We provided the connection between those assets and now we can optimize that fit. So that's how we approached it. And as we look forward, we'll kind of use that same criteria-based process.

Question: Michael Blum - Wells Fargo Securities, LLC - Analyst : So maybe if we take these acquisitions and maybe in chronological order to some degree, so you've now had Magellan for, I believe, more than a year. Can you talk about synergies, where that stands today, what you've realized so far? And maybe just relative to when you first announced the deal and you laid out those synergy targets, where do you stand on that?

Question: Michael Blum - Wells Fargo Securities, LLC - Analyst : Great. So if I move to EnLink and Medallion, I would say like that when you announced those deals, the market, I think -- and we saw also very clearly that part of the strategy there was to secure volumes to feed your Permian pipes, I think that was pretty evident and obvious to everyone. But I wonder if you can just talk about other benefits or other key assets that you picked up in those transactions, for example, the Louisiana footprint. And then a question I got yesterday, the EnLink pipelines that they were going to convert to CO2. Is that still the plan? Or would you keep those in gas service? Like how are you thinking about that?

Question: Michael Blum - Wells Fargo Securities, LLC - Analyst : Maybe just staying on that, EnLink had in Louisiana, an NGL system as well, Cajun-Sabon and fractionators and even an export dock. Is there anything you can do there to kind of integrate that more closely into your system or any kind of synergies that could come about from that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 10, 2024 / 4:00PM, OKE.N - ONEOK Inc at Wells Fargo Midstream, Utilities & Renewables Symposium

Question: Michael Blum - Wells Fargo Securities, LLC - Analyst : Thanks. Can you talk about how you coordinate the commercial development among the different entities that you have now?

Question: Michael Blum - Wells Fargo Securities, LLC - Analyst : Since you mentioned EnLink, you recently made an offer for the remainder of the public stub of EnLink. I'm wondering if you could just -- maybe just talk to us about the timeline and the progress to what are the steps here to get that done? Walter Hulse - ONEOK Inc - Chief Financial Officer, Executive Vice President of Investor Relations and Corporate Development, Treasurer Sure. Well, we actually filed the S-4 yesterday with the preliminary proxy unit from EnLink. That timing is really up to the SEC at this point. If they choose not to review that, we could be in a position where we could start the process moving forward next week. If they choose to take a full 30 days or even more, we'll have to go at their time frame. Once they're done, we will set the record date. We've got to give the New York Stock Exchange 10 days' notice before we set the record date. So that's just a defined process. And then we will set the vote out from that kind of depending on where we are in the period, I don't think that we expect a whole lot to happen over the holidays. So we might go a little bit further. But if the SEC works with us late January, early February, we would hope to have the whole thing wrapped up.

Question: Michael Blum - Wells Fargo Securities, LLC - Analyst : Could you discuss an extension of bonus depreciation, what that impact could be for you folks? Walter Hulse - ONEOK Inc - Chief Financial Officer, Executive Vice President of Investor Relations and Corporate Development, Treasurer I think at this point, it's actually kind of a moot point. Given our size and where we stand, it would have to be a very, very large capital project that would come on between now and 2027 to be in a position in the way the rules set to avoid the AMT. Probably more significantly is if they were to take the alternative minimum tax out of the equation, then our NOL would extend, and we wouldn't become a full taxpayer. Right now, we're targeting to get there in 2027. If the AMT was to relieve that would give us an extension of the utilization of the NOL, but we're going to be in a position when you look at the three-year backward-looking test at the end of '26 that we will go into the AMT and be in that 15%-ish range for the foreseeable future going forward. So bonus, unfortunately, isn't going to, be at this point, given our size, enough of a factor, it will be a benefit and a very good positive, but it won't be enough of a factor to -- given the current rules to change the timing of the tax. I have not heard any adjustments to the AMT come to the fold yet. I think the trade organizations have it on the agenda to bring it up.

Question: Michael Blum - Wells Fargo Securities, LLC - Analyst : Okay. In our last two minutes, maybe we could just quickly get your thoughts on the Bakken right now, just volume trends, what you're seeing in terms of GOR. Yeah, what the outlook looks like in '25?

Question: Michael Blum - Wells Fargo Securities, LLC - Analyst : All right. We are out of time. So thank you both very much for your time. Thank you.