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    OKE
    Earnings call· Jun 2025(Q2 FY25)

    ONEOK INC /NEW/ Q2 FY25 earnings call OKE

    Aug 5, 2025 Source

    Executive summary

    ONEOK Q2 FY25 — Strong Sequential Growth and Strategic Permian Expansion

    ONEOK delivered strong sequential growth in Q2 FY25, driven by seasonal volume improvements and ongoing synergy capture from recent acquisitions. The company affirmed its 2025 financial guidance while tempering its 2026 outlook due to a cautious macro environment. Strategic investments, including a new Permian processing plant and NGL/refined products connectivity, are expected to drive future growth and enhance integrated operations.

    Highlights

    5

    • Q2 Adjusted EBITDA increased 12% sequentially to $1.98 billion (or $2 billion excluding transaction costs).

    • NGL raw feed throughput volumes increased 18% sequentially, with Rocky Mountain region achieving a record 470,000 barrels per day.

    • Announced Final Investment Decision (FID) on the new 300 million cubic feet per day Big Horn natural gas processing plant in the Permian's Delaware Basin, expected to cost $365 million.

    • Expected to realize approximately $250 million of synergies in 2025, consistent with guidance.

    • Reduced senior notes by nearly $600 million in Q2, including over $400 million paid at maturity, making progress towards a 3.5x leverage target by 2026.

    Concerns

    3

    • Lower fractionation utilization due to maintenance resulted in a $13 million impact in Q2 from unfractionated NGLs and inventory.

    • Revised 2026 adjusted EBITDA outlook downward by approximately 2% or $200 million to reflect current commodity prices and spread differentials.

    • Regional supply disruptions in Mid-Continent tempered gasoline volumes during the quarter.

    Guidance & targets

    8
    CategoryTargetConfidence
    Net Income Attributable to ONEOK
    $3.1 billion to $3.6 billion
    high materiality
    High
    Adjusted EBITDA
    $8 billion to $8.45 billion
    high materiality
    High
    Synergies
    approximately $250 million
    medium materiality
    High
    Adjusted EBITDA Outlook
    mid- to upper single-digit EBITDA growth
    high materiality
    Medium
    Leverage Target
    3.5x
    high materiality
    High
    Cash Taxes
    no meaningful cash taxes
    medium materiality
    High
    Cash Tax Rate
    less than the full 15% corporate alternative minimum tax rate
    medium materiality
    High
    Refined Products Pipeline to Denver Completion
    mid-2026 completion
    medium materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Natural Gas Liquids
    Driven by increased ethane recovery, higher propane plus volume, improved seasonality, and newly contracted volumes. Experienced $13 million impact from lower fractionation utilization due to maintenance, expected to be recognized over next two quarters.
    Total raw feed throughput volumes: 18% sequential increaseRocky Mountain region volumes: 470,000 bbl/d (record)Mid-Continent NGL volumes: 20% sequential increasePermian NGL volumes: 20% sequential increase
    		——18%—
    Refined Products and Crude
    Seasonal demand picked up, with continued demand growth expected in Q3. Diesel and aviation fuel volumes remained strong. Regional supply disruptions in Mid-Continent tempered gasoline volumes, but recovered after refinery maintenance. Overall crude volumes decreased due to low-margin exchange volumes, with immaterial earnings impact.
    Refined product volumes: sequential increaseRefined products rate: mid-single digit increase (following July tariff adjustments)Wellhead gathering volumes (Medallion assets): 20% YoY increase
    		——sequential increase—
    Natural Gas Gathering and Processing
    Producers increased activity after winter. Permian growth driven by 12 active rigs on dedicated acreage, leading to FID on new Big Horn plant. Mid-Continent shows resilience with 12 rigs on dedicated acreage. Rocky Mountain saw ramp in well completions, with 15 rigs on dedicated acreage.
    Total volumes: sequential increasePermian Basin volumes: 4% sequential growthPermian Basin volumes (July): 1.6 Bcf/dMid-Continent processing volumes: 9% sequential increaseRocky Mountain region processing volumes: 1.6 Bcf/d
    		——sequential increase—

    Operational metrics

    25
    Adjusted EBITDA
    $1.98 billion12% sequential increase
    Q2 FY25

    Reported Adjusted EBITDA for the quarter.

    Adjusted EBITDA (excluding transaction costs)
    $2 billionconsistent with guidance approach
    Q2 FY25

    Adjusted EBITDA excluding transaction costs, consistent with guidance methodology.

    Net Income Attributable to ONEOK
    $841 millionmore than 30% sequential increase
    Q2 FY25

    Net income attributable to ONEOK.

    EPS
    $1.34more than 30% sequential increase
    Q2 FY25

    Earnings per share.

    Cash Balance
    $97 million
    Q2 FY25 end

    Cash and equivalents at quarter end.

    Senior Notes Reduced
    nearly $600 million
    Q2 FY25

    Debt reduction during the quarter.

    Senior Notes Reduced
    nearly $850 million
    YTD FY25

    Year-to-date debt reduction, underscoring proactive debt management.

    Acquired Assets Adjusted EBITDA Contribution
    nearly $450 million
    Q2 FY25

    Contribution from acquired EnLink and Medallion assets to Q2 adjusted EBITDA.

    2026 Adjusted EBITDA Outlook Adjustment
    downward by approximately 2% or $200 million
    FY26

    Adjustment to 2026 outlook to reflect current commodity prices and spread differentials.

    Lower Cash Taxes
    more than $1.3 billion
    next 5 years

    Expected lower cash taxes due to enhancements related to bonus depreciation and interest expense deductibility.

    Fractionation Utilization Impact
    $13 million
    Q2 FY25

    Impact from lower fractionation utilization due to maintenance, from unfractionated NGLs and inventory. Expected to be recognized over next 2 quarters.

    Rocky Mountain NGL Raw Feed Throughput
    470,000
    Q2 FY25

    Record volume for the region.

    Mid-Continent NGL Raw Feed Throughput Growth
    20%sequential increase
    Q2 FY25

    Sequential growth in NGL volumes.

    Permian NGL Raw Feed Throughput Growth
    20%sequential increase
    Q2 FY25

    Sequential growth in NGL volumes.

    Refined Products Rate Increase
    mid-single digits
    July FY25

    Increase following July tariff rate adjustments.

    Medallion Assets Wellhead Gathering Volume Growth
    20%YoY increase
    YoY

    Year-over-year increase in wellhead gathering volumes.

    Permian Natural Gas Processing Volume Growth
    4%sequential increase
    Q2 FY25

    Sequential growth in natural gas processing volumes.

    Permian Natural Gas Processing Volume
    1.6
    July FY25

    Volume reached in July.

    Permian Active Rigs
    12
    current

    Active rigs on dedicated acreage.

    Mid-Continent Natural Gas Processing Volume Growth
    9%sequential increase
    Q2 FY25

    Sequential growth in natural gas processing volumes.

    Mid-Continent Active Rigs
    12
    current

    Active rigs on dedicated acreage in Oklahoma.

    Rocky Mountain Natural Gas Processing Volume
    1.64% sequential increase
    Q2 FY25

    Natural gas processing volume.

    Rocky Mountain Active Rigs
    15
    current

    Active rigs on dedicated acreage.

    Natural Gas Pipeline Outperformance (EnLink assets)
    75%
    Q2 FY25

    Portion of natural gas pipeline outperformance tied to legacy EnLink assets optimization.

    Spread Variability (context)
    maybe $100 million or $200 million
    annual

    Context for spread variability on $8-plus billion EBITDA, representing 2% variability.

    Industry KPIs

    4
    MetricValueDetails
    D c efficiency rig activity12rigs
    Pipeline throughput storage435,000bbl/d
    Sanctioned expansion backlog$365 millionUSD
    Basin level production volume1.6Bcf/d

    Deals & partnerships

    1
    JV partner (private equity)Increased ownership in a Delaware Basin joint venture from 30% to 60%.$940 million (for 49.9% stake)

    Opportunistic acquisition at attractive multiples, providing flexibility to grow the business and allocate capital. Not consolidating due to governance structure.

    Capital programs

    8
    Big Horn Natural Gas Processing Plantsanctioned$365 million
    Start: Q2 FY25

    Benefit: 300 million cubic feet per day processing capacity, ability to treat high CO2 gas

    Further expands and enhances presence in Permian's Delaware Basin. Supported by acreage dedication.

    Refined Products Pipeline to Denverunderway

    On track for mid-2026 completion. Currently seeing record jet fuel volumes into Denver International Airport.

    Texas City LPG Export Joint Ventureprogressing as planned

    Benefit: wellhead-to-water solution for LPG export

    Strong interest from customers due to strategically positioned location outside Houston Ship Channel.

    Elk Creek Liquids Pipeline Expansioncompleted

    Benefit: 435,000 bbl/d capacity (combined with Bakken pipeline, 575,000 bbl/d total)

    Project is fully completed.

    West Texas NGL Pipeline Expansionunderway

    Will see ramp in 2026. New processing plants and expansions will add volume.

    Medford Fractionation Facilityunderway

    Benefit: low-cost NGL fractionation capacity expansion

    Will help maintain and grow market share on NGL side.

    Midland Processing Plant Relocation (Shadow plant)underway

    Benefit: 150 million cubic feet per day capacity

    Relocated from Barnett to Midland, will add volume to NGL pipeline.

    Delaware Facilities Low-Cost Expansionunderway

    Benefit: approximately 75 million cubic feet per day capacity

    Low-cost expansion at existing Delaware facilities, will add NGLs to pipeline.

    Risks & headwinds

    3
    Lower fractionation utilization due to maintenanceQ2 FY25, expected to be recognized over next 2 quarters

    $13 million impact in Q2 FY25 from unfractionated NGLs and inventory

    Mitigation: Expect to fractionate these NGLs and recognize earnings over the next two quarters.

    Commodity price and spread volatility2026 outlook

    2026 adjusted EBITDA outlook adjusted downward by approximately 2% or $200 million

    Mitigation: Focused investments on high-return organic projects, diversified business mix, strong balance sheet, and ongoing synergy capture.

    Regional supply disruptions in Mid-ContinentQ2 FY25

    Tempered gasoline volumes

    Mitigation: Volumes recovered following completion of refinery maintenance in late spring.

    What to watch in Q3 FY25

    4

    Fractionation Utilization Earnings Recognition

    Next 2 quarters (Q3 FY25, Q4 FY25)
    Current$13 million impact from unfractionated NGLs in Q2 FY25
    TargetRecognition of earnings from these NGLs

    Why it matters

    Verifies management's expectation to recover earnings from Q2 maintenance impact.

    During the quarter, we experienced lower fractionation utilization due to maintenance, which resulted in a $13 million impact in the second quarter from unfractionated NGLs and inventory. We expect to fractionate these NGLs and recognize their earnings over the next 2 quarters.

    Q&A highlights

    5

    How lean is the revised 2026 outlook, and how much of the growth is hardwired by contractual volumes, synergies, or cost savings versus volume growth?

    The revised 2026 outlook is based on current market conditions. Growth is primarily driven by projects coming online in 2026 (refined products expansion, West Texas NGL ramp, Houston connections) and ongoing synergies, which are expected to contribute more than producer activity.

    “The strength here in our 2026 outlook really comes from the fact that we have a number of projects that come on in 2026, including the refined products expansion. We'll start to see the ramp on West Texas LPG. But more importantly, the connections of East and some of the other connections between our refined products and NGL business. Those connections are expected to provide more of the incremental increase over 2025 than producer activity.”

    asked by Spiro Dounis · answered by Walter Hulse

    2 min read5 chapters

    Detailed Narrative

    01

    Q2 Performance and Synergies

    ONEOK reported higher Q2 FY25 results, with adjusted EBITDA increasing 12% sequentially, driven by seasonal improvements and incremental synergy capture from recent acquisitions. The acquired EnLink and Medallion assets contributed nearly $450 million in adjusted EBITDA during the quarter. The company remains on track to realize approximately $250 million in synergies in 2025, with significant additional contributions expected in 2026.

    02

    Strategic Growth in Permian Basin

    The company announced a Final Investment Decision (FID) on the new Big Horn natural gas processing plant in the Permian's Delaware Basin, with a capacity of 300 million cubic feet per day and the ability to treat high CO2 gas. This plant, costing approximately $365 million, is supported by acreage dedication and is expected to be completed in mid-2027, increasing ONEOK's Delaware Basin processing capacity to 1.1 billion cubic feet per day.

    03

    NGL and Refined Products Integration

    Significant progress is being made on the build-out of connectivity between Mont Belvieu and Conway NGL platforms and strategic Houston and Mid-Continent refined products assets. Three critical Houston connections (Galena Park, East Houston, Pasadena MVP JV) are expected online in Q3 FY25, driving earning contributions in Q4 FY25. The company expects record blending volumes in 2025 and 2026 due to these synergies.

    04

    Balance Sheet and Capital Allocation

    ONEOK reduced its senior notes by nearly $600 million in Q2, including over $400 million paid at maturity, and ended the quarter with $97 million in cash and no outstanding borrowings on its $3.5 billion credit facility. The company expects to reach its long-term leverage target of 3.5x in 2026. Enhanced tax provisions are expected to provide over $1.3 billion in lower cash taxes over the next five years, delaying meaningful cash tax payments until 2028.

    05

    Producer Activity and Market Dynamics

    Producers across ONEOK's acreage continue to execute 2025 drilling plans, demonstrating resilience despite an evolving macroeconomic landscape. The company is monitoring 2026 market dynamics closely, noting that while the 2026 adjusted EBITDA outlook was tempered due to commodity prices, the underlying growth drivers from projects and synergies remain strong.

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