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    OKE
    Earnings call· Mar 2025(Q1 FY25)

    ONEOK INC /NEW/ Q1 FY25 earnings call OKE

    Apr 30, 2025 Source

    Executive summary

    ONEOK Q1 FY25 — Strong Start, Affirmed Guidance, and Synergy Momentum

    ONEOK delivered Q1 FY25 results in line with expectations, affirming its full-year guidance and 2026 outlook, driven by the integration of recent acquisitions and strategic growth projects. The company is gaining momentum into the second half of the year with volumes ramping up and high-return synergy projects coming online. Management emphasized the company's diversified footprint and strong balance sheet to navigate macroeconomic volatility, with a focus on capital discipline and return on investment.

    Highlights

    5

    • Affirmed 2025 financial guidance and 2026 outlook, reflecting confidence in future growth.

    • Adjusted EBITDA reached $1.78 billion, or $1.81 billion excluding transaction costs, driven by acquisitions and volume increases.

    • Acquired EnLink and Medallion assets contributed nearly $450 million in Q1 FY25.

    • NGL volumes increased 4% year-over-year, with Rocky Mountain region up 15% and Gulf Coast Permian up 8%.

    • Midland crude gathered volumes increased over 20% year-over-year, including EnLink and Medallion systems.

    Concerns

    3

    • Q1 FY25 results were partially offset by the absence of earnings from interstate pipeline assets divested on December 31, 2024.

    • Raw feed throughput in the Gulf Coast Permian region was impacted by winter weather, particularly an extreme cold snap in February, and lower ethane recovery levels.

    • Rocky Mountain region processing volumes were slightly lower quarter-over-quarter due to normal winter weather effects.

    Guidance & targets

    5
    CategoryTargetConfidence
    Full-year 2025 Financial Guidance
    Affirmed
    high materiality
    High
    Full-year 2026 Outlook
    Affirmed
    high materiality
    High
    Incremental Synergies
    $250 million
    medium materiality
    High
    Leverage Target
    3.5x
    high materiality
    High
    NGL volume growth (Bakken)
    low single-digit growth
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Natural Gas Liquids
    NGL volumes increased year-over-year, driven by strong performance in the Rocky Mountain and Gulf Coast Permian regions. Winter weather and lower ethane recovery impacted raw feed throughput in the Gulf Coast Permian, but volumes are ramping up significantly in April across all regions. Strategic commercial synergies are being pursued, linking NGL infrastructure to refined product assets.
    Rocky Mountain NGL volume increase: 15% YoYGulf Coast Permian NGL volume increase: 8% YoYRocky Mountain NGL volumes (April): ~480,000 bpdMid-Continent NGL volumes (April): >540,000 bpdGulf Coast Permian NGL volumes (April): >500,000 bpdGulf Coast Permian NGL volume attributable to new systems: ~100,000 bpd
    		—4%——
    Refined Product and Crude
    Refined product volumes were consistent year-over-year, with expectations for increased demand in Q2 and Q3 due to seasonal factors. Crude oil volumes increased significantly, particularly Midland gathered volumes, benefiting from added gathering infrastructure and the EnLink/Medallion systems.
    Midland crude gathered volumes increase: >20% YoY
    		—nearly unchanged——
    Natural Gas Gathering and Processing
    The segment expanded into the Permian Basin and significantly increased Mid-Continent processing capacity through acquisitions. High rig activity in the Permian and Williston Basin is expected to fill existing capacity. Mid-Continent and Rocky Mountain volumes are ramping up post-winter, with efficiency gains from longer laterals in the Williston Basin.
    Permian processing capacity added: 1.7 Bcf/dMid-Continent processing capacity: doubledPermian active rigs on dedicated acreage: 16Mid-Continent processing volumes (April): >2.4 Bcf/dRocky Mountain processing volumes (Q1 FY25): ~1.6 Bcf/dRocky Mountain processing volumes (April): ~1.7 Bcf/dWilliston Basin active rigs on dedicated acreage: 153-mile laterals in 2025: >35% of wells connected
    		————
    Natural Gas Pipelines
    The natural gas pipeline segment is performing well, benefiting from heating demand in Q1 and strong demand drivers from data centers and industrial users. Storage expansion projects are underway, with the Oklahoma project nearing full service and the Jefferson Island project fully subscribed.
    Oklahoma storage expansion: 4 Bcf working capacityOklahoma storage commitment: 80% subscribedJefferson Island storage hub expansion: 8.5 Bcf capacity
    		————

    Operational metrics

    21
    Adjusted EBITDA
    $1.78 billion
    Q1 FY25

    Comparable to financial guidance.

    Net income attributable to ONEOK
    $636 million
    Q1 FY25

    Reported net income for the quarter.

    EPS
    $1.04
    Q1 FY25

    Diluted EPS for the quarter.

    Acquisition contribution to Adjusted EBITDA
    $450 million
    Q1 FY25

    Contribution from EnLink and Medallion assets.

    Cash balance
    $140 million
    Q1 FY25

    Cash on hand at quarter end.

    Revolving credit facility outstanding
    $0
    Q1 FY25

    No borrowings outstanding under the facility.

    Senior notes repaid
    $250 million
    March 2025

    Repaid at maturity with cash on hand.

    NGL volumes (Rocky Mountain)
    480,000
    April

    Average NGL volumes in April.

    NGL volumes (Mid-Continent)
    540,000
    April

    Average NGL volumes in April, includes more ethane recovery and growth in Oklahoma.

    NGL volumes (Gulf Coast Permian)
    436,000
    Q1 FY25

    Total NGL volumes in the region during the quarter.

    NGL volumes (Gulf Coast Permian)
    500,000
    April

    Average NGL volumes in April with improved weather.

    Processing capacity (Permian)
    1.7
    current

    Processing capacity added through recent acquisitions.

    Processing capacity (Mid-Continent)
    doubled
    current

    Processing capacity in the Mid-Continent region.

    Processing volumes (Mid-Continent)
    2.4
    April

    Average processing volumes in April.

    Processing volumes (Rocky Mountain)
    1.6slightly lower than Q4
    Q1 FY25

    Average processing volumes in Q1 FY25 due to winter effects.

    Processing volumes (Rocky Mountain)
    1.7
    April

    Average processing volumes in April, ramping up.

    Rig count (Permian)
    16
    current

    Active rigs on dedicated acreage.

    Rig count (Mid-Continent)
    14
    current

    Active rigs on dedicated acreage in Oklahoma.

    Rig count (Williston Basin)
    15
    current

    Active rigs on dedicated acreage.

    Longer laterals (Williston Basin)
    35%
    2025

    Expected percentage of wells connected with 3-mile laterals.

    Property insurance savings
    nearly 100%
    starting April 1

    Savings achieved by adding EnLink and Medallion to ONEOK's program.

    Industry KPIs

    6
    MetricValueDetails
    D c efficiency rig activity16rigs
    Pipeline throughput storage4Bcf
    Sanctioned expansion backlog8.5Bcf
    Basin level production volume480,000bpd
    Take or pay contract structure80%%
    Weather event volume earnings impact—

    Deals & partnerships

    3
    EnLinkAcquisition of EnLink Midstream assets

    Full quarter of adjusted EBITDA from EnLink assets.

    MedallionAcquisition of Medallion Pipeline assets

    Full quarter of adjusted EBITDA from Medallion assets.

    Texas City LPG export joint ventureLPG export facility

    Wellhead-to-water strategy, fully integrated solution for products. Enough propane on system to fill capacity.

    Capital programs

    7
    West Texas NGL pipeline expansionnearing completion

    Expansion out of the Permian Basin.

    Elk Creek pipeline expansionnearing completion

    Expansion out of the Rocky Mountain region.

    Easton Energy NGL assets connectionunderway

    Benefit: increased contributions

    Connection with Gulf Coast infrastructure, part of synergy projects.

    Midland Basin plant relocationunderway

    Benefit: 150 MMcf/d processing capacity

    Relocating a plant from North Texas to the Midland Basin.

    Delaware Basin processing facility expansionunderway

    Expansion projects at existing processing facilities.

    Oklahoma natural gas storage expansionnearing completion

    Benefit: 4 Bcf working storage capacity

    Will be fully in service next month, 80% committed with third-party contracts.

    Jefferson Island storage hub expansionunderway

    Benefit: 8.5 Bcf storage capacity

    Fully subscribed by third-party commitments, to be completed in 2 phases.

    Risks & headwinds

    3
    Macroeconomic market variables and volatilityNear-term

    Not quantified, but includes commodity prices, producer activity, inflationary trends, regulatory developments.

    Mitigation: Closely monitor indicators, structured to perform through various cycles, geographic diversity, integrated footprint, strong balance sheet, investment-grade credit ratings, capital discipline.

    Absence of earnings from divested interstate pipeline assetsFY25 onwards

    Impacted Q1 FY25 results

    Mitigation: Proceeds from sales used to accelerate deleveraging of the balance sheet.

    Winter weather impacts on raw feed throughputQ1 FY25

    Impacted Gulf Coast Permian NGL volumes, particularly extreme cold snap in February, and lower ethane recovery.

    Mitigation: Volumes ramping up significantly in April with improved weather; expected seasonal recovery.

    What to watch in Q2 FY25

    5

    NGL volume ramp-up (Rocky Mountain)

    Next quarter
    Current~480,000 bpd in April
    TargetContinued growth

    Why it matters

    Indicates the effectiveness of post-winter recovery and contributes to overall NGL segment performance.

    As we've exited winter, volumes across our system have wrapped up significantly, providing momentum for additional growth through the remainder of the year.

    Q&A highlights

    6

    Can you elaborate on the synergies and the confidence in the 2026 outlook, especially given market uncertainty?

    Management expressed confidence in the 2026 outlook, citing global demand for LNG/LPGs, increasing AI data center demand, and the nature of their synergies. Many synergies are not volume-dependent, focusing on efficiency, blending, and optimizing existing infrastructure, which provides resilience across different pricing environments. Procurement opportunities also contribute to cost reduction.

    “a lot of our center projects are not dependent on volume. We have a lot of projects where we are becoming more efficient at blending normal butane and refined products as we connect our NGL infrastructure into our byproduct infrastructure”

    asked by Jeremy Tonet · answered by Sheridan Swords

    2 min read5 chapters

    Detailed Narrative

    01

    Strategic Acquisitions and Integration Progress

    ONEOK's Q1 FY25 results were significantly bolstered by the full quarter contribution from the EnLink and Medallion acquisitions, adding nearly $450 million to adjusted EBITDA. The company is actively integrating these businesses, with $250 million in incremental synergies expected for FY25. Key synergy projects, such as connecting Easton Energy NGL assets with Gulf Coast infrastructure and linking Mont Belvieu/Conway fractionation to refined product assets, are nearing completion and are expected to provide earnings tailwinds in H2 2025 and into 2026.

    02

    Volume Recovery and Seasonal Demand

    Following winter, volumes across ONEOK's systems have ramped up significantly, providing momentum for growth. NGL volumes increased 4% year-over-year, with the Rocky Mountain region up 15% and Gulf Coast Permian up 8%. The company anticipates increased refined product volumes in Q2 and Q3 due to higher demand from agriculture activity and the summer travel season. April NGL volumes are averaging nearly 480,000 bpd in the Rocky Mountains and over 540,000 bpd in the Mid-Continent, with Gulf Coast Permian NGL volumes averaging over 500,000 bpd.

    03

    Permian Basin Growth and Infrastructure Development

    ONEOK has extended its gathering and processing assets into the Permian Basin through recent acquisitions, adding 1.7 Bcf per day of processing capacity. The company currently has 16 active rigs on its dedicated acreage in the Permian, with activity levels expected to fill existing processing capacity. Expansion projects include relocating a 150 MMcf per day plant from North Texas to the Midland Basin and expanding existing facilities in the Delaware Basin, providing a clear path for future growth.

    04

    Natural Gas Pipeline Expansion and Demand Drivers

    The Natural Gas Pipelines segment is well-positioned to benefit from increasing natural gas demand, particularly from data centers in Oklahoma and Texas, as well as LNG, ammonia, and industrial demand along the Mississippi River Industrial corridor. The Oklahoma natural gas storage expansion project, adding 4 Bcf of working storage capacity (80% committed), will be fully in service next month. The Jefferson Island storage hub expansion in Louisiana will add 8.5 Bcf capacity in two phases (2028 and 2029), fully subscribed by third-party commitments.

    05

    Financial Discipline and Balance Sheet Strength

    ONEOK maintains a strong commitment to balance sheet strength, ending Q1 FY25 with no outstanding borrowings on its $3.5 billion facility and over $140 million in cash. The company repaid $250 million of senior notes at maturity with cash on hand in March and continues to target a leverage ratio of 3.5x in 2026. Management emphasized its ability to flex capital plans if economic conditions materially shift, citing past actions in 2016 and 2020 to protect financial flexibility.

    AI-generated summary of the company’s earnings call. Not investment advice.