FOURTH QUARTER AND FULL-YEAR 2019 RESULTS F E B . 2 4 , 2 0 2 0 - - PowerPoint PPT Presentation

F E B . 2 4 , 2 0 2 0

FOURTH QUARTER AND FULL-YEAR 2019 RESULTS

P A G E 2

FORWARD-LOOKING STATEMENTS

Statements contained in this presentation that include company expectations or predictions should be considered forward-looking statements that are covered by the safe harbor protections provided under federal securities legislation and other applicable laws. It is important to note that actual results could differ materially from those projected in such forward-looking statements. For additional information that could cause actual results to differ materially from such forward-looking statements, refer to ONEOK’s Securities and Exchange Commission filings. This presentation contains factual business information or forward-looking information and is neither an offer to sell nor a solicitation of an offer to buy any securities of ONEOK. All references in this presentation to financial guidance or outlooks are based on the news release issued on Feb. 24, 2020, and are not being updated or affirmed by this presentation.

Arbuckle II Pipeline — Texas

INDEX

FINANCIAL STRENGTH 2020 FINANCIAL GUIDANCE 2020 EARNINGS DRIVERS EXPANDING CORE INFRASTRUCTURE NATURAL GAS LIQUIDS NATURAL GAS GATHERING AND PROCESSING NATURAL GAS PIPELINES FOURTH QUARTER 2019 VS. THIRD QUARTER 2019 SEGMENT VARIANCES NON-GAAP RECONCILIATIONS 4 5 6 7 8 9 10 11 12

P A G E 4

◆ Significant liquidity from a $2 billion senior notes issuance completed in

August 2019

▪

No borrowings outstanding under ONEOK’s $2.5 billion credit facility, $220 million of commercial paper outstanding and $21 million of cash and cash equivalents as of

• Dec. 31, 2019

◆ DCF in excess of dividends paid of $558 million for full year 2019, a 15%

increase compared with 2018

◆ Investment-grade credit ratings provide a competitive advantage

▪

S&P: BBB (stable); Moody’s: Baa3 (positive)

◆ Net debt-to-EBITDA ratio of 4.8 times on an annualized run-rate basis

FINANCIAL STRENGTH – A COMPETITIVE ADVANTAGE

INCREASING LIQUIDITY

$285 $487 $558 2017 2018 2019

D i s t r i b u t a b l e C a s h F l o w ( D C F ) i n E x c e s s o f D i v i d e n d s P a i d

( $ i n m i l l i o n s )

$1.99 $2.45 $2.58 $3.23 2017 2018 2019 2020G

A d j u s t e d E B I T D A G r o w t h

( $ i n b i l l i o n s )

2021 Outlook: ~20% increase in adjusted EBITDA

compared with 2020 guidance midpoint

P A G E 5

ONEOK 2020 FINANCIAL GUIDANCE

Note: Adjusted EBITDA and distributable cash flow are non-GAAP measures. Reconciliations to relevant GAAP measures are included in the appendix.

2020 Guidance

($ in millions)

Net income $ 1,355 – $ 1,605 Diluted earnings per common share $ 3.25 – $ 3.85 Adjusted EBITDA $ 3,100 – $ 3,350 Distributable cash flow $ 2,245 – $ 2,505 Capital-growth expenditures $ 2,250 – $ 2,730 Maintenance capital expenditures $ 200 – $ 220 Segment Adjusted EBITDA: Natural Gas Liquids $ 1,945 – $ 2,075 Natural Gas Gathering and Processing $ 790 – $ 860 Natural Gas Pipelines $ 365 – $ 405 Other $ – – $ 10

P A G E 6

EARNINGS DRIVERS

(a) Based on December 2019 production, the most recent North Dakota Pipeline Authority data available. ONEOK expects flaring in the region to be reduced in future months based on the completion of ONEOK’s Demicks Lake I and II natural gas processing plants and related infrastructure, and third-party natural gas processing plants.

NATURAL GAS FLARING

~500 MMcf/d currently flaring in North Dakota(a)

~300 MMcf/d

• n ONEOK dedicated acreage and

volume growth from continued strong producer activity

~850 MMcf/d

recent new processing capacity from ONEOK and third-party plants

ROCKY MOUNTAIN NGLS

>240,000 bpd of volume contracted on Elk Creek

Incremental supply from ONEOK and third-party processing plants that were being railed or flared

>240,000 bpd

Rocky Mountain region throughput expected by end of Q1 2020

ARBUCKLE II PIPELINE & MB-4

375,000 bpd of volume contracted on Arbuckle II

Addressing NGL growth across ONEOK’s operations by more than doubling current Mid-Con to Mont Belvieu NGL transportation capacity

Fully complete in Q1 2020

75,000 bpd of MB-4 capacity completed in December 2019

PERMIAN BASIN ACTIVITY

Continued strong producer activity supplying new volumes contracted at market-based rates

80,000 bpd expansion

• f West Texas LPG Pipeline and

connection with Arbuckle II expected to be completed Q1 2020

25% increase

in adjusted EBITDA

compared with 2019

KEY DRIVERS FEE-BASED SOLUTIONS 2020 GUIDANCE

P A G E 7

EXPANDING CORE INFRASTRUCTURE

Demicks Lake II plant (Completed Jan. 2020, $410M) MB-4 fractionator (Q1 2020, $575M)(a) Arbuckle II Pipeline (Q1 2020, $1.36B) WTLPG pipeline expansion and Arbuckle II connection (Q1 2020, $295M) Bakken NGL Pipeline extension (Q4 2020, $100M)

PROVIDING ADDITIONAL CONNECTIVITY FROM THE WILLISTON BASIN TO THE GULF COAST

Elk Creek Pipeline (Completed Dec. 2019, $1.4B) Demicks Lake I plant (Completed Oct. 2019, $400M) MB-5 fractionator (Q1 2021, $750M) Arbuckle II Pipeline extension (Q1 2021, $240M) Arbuckle II Pipeline expansion (Q1 2021, $60M) WTLPG pipeline expansion (Q1 2021, $145M) Mid-Continent fractionation facility expansions (Q1 2021, $150M)(b) Bear Creek plant expansion (Q1 2021, $405M) WTLPG pipeline expansion (Q2 2021, $310M) Elk Creek Pipeline expansion (Q3 2021, $305M)(c) Demicks Lake III plant (Q3 2021, $305M)

Expected to generate 4-6x adjusted EBITDA multiples or better

(a) 75,000 bpd of capacity completed December 2019; remaining 50,000 bpd expected to be completed in the first quarter 2020. (b) 15,000 bpd of capacity expected to be completed in the third quarter 2020; remaining 50,000 bpd expected to be completed in the first quarter 2021. (c) Incremental capacity available in early 2021, ramping to the full 400,000 bpd in the third quarter 2021.

2019 2020 2021

P A G E 8

NATURAL GAS LIQUIDS

(a) Rocky Mountain: Bakken NGL pipeline, Elk Creek NGL pipeline and railed volume. (b) Represents physical raw feed volumes on which ONEOK charges a fee for transportation and/or fractionation services. (c) Gulf Coast/Permian: West Texas LPG pipeline system, Arbuckle Pipeline volume originating in Texas and any volume fractionated at ONEOK’s Mont Belvieu fractionation facilities received from a third-party pipeline. (d) Includes transportation and fractionation. (e) Primarily transportation only.

VOLUME UPDATE

895 1,010 1,079 1,175-1,315 2017 2018 2019 2020G N G L R a w F e e d T h r o u g h p u t V o l u m e ( b )

( M B b l / d )

Average NGL Raw Feed Throughput Volumes(b)

Region Third Quarter 2019 Fourth Quarter 2019 Average Bundled Rate (per gallon) Rocky Mountain(a) 179,000 bpd 196,000 bpd ~ 30 cents(d) Mid-Continent 554,000 bpd 550,000 bpd ~ 9 cents(d) Gulf Coast/Permian(c) 353,000 bpd 350,000 bpd ~ 6 cents(e) Total 1,086,000 bpd 1,096,000 bpd

◆ Rocky Mountain(a) NGL raw reed throughput volume increased

approximately 9% compared with the third quarter 2019

◆ 2019 third-party or ONEOK natural gas processing plant

connections:

▪

New connections: Mid-Continent (5); Williston Basin (2); Permian Basin (1)

▪

Existing connection expansions: Mid-Continent (2); Williston Basin (2); Permian Basin (2)

◆ More than 240,000 bpd Rocky Mountain region throughput

expected by end of Q1 2020

◆ Recent project completions:

▪

Elk Creek Pipeline fully completed December 2019

▪

75,000 bpd of capacity at MB-4 fractionator completed in the fourth quarter 2019

◇

Remaining 50,000 bpd expected to be completed in the first quarter 2020

P A G E 9

NATURAL GAS GATHERING AND PROCESSING

VOLUME UPDATE

Rocky Mountain

◆ 526 well connects completed in 2019 ◆ Expect to connect approximately 575-625 wells in 2020 ◆ 200 MMcf/d Demicks Lake I natural gas processing plant completed in October 2019 ◆ 200 MMcf/d Demicks Lake II natural gas processing plant completed in January 2020

Mid-Continent

◆ 117 well connects completed in 2019 ◆ Expect to connect approximately 40-60 wells in 2020

841 964 1,082 1,290-1,460 839 973 983 835-945 2017 2018 2019 2020G (a)

G a t h e r e d Vo l u m e s ( M M c f / d )

Rocky Mountain Mid-Continent 2,065 829 950 1,053 1,260-1,420 723 858 880 750-850 2017 2018 2019 2020G (b)

P r o c e s s e d Vo l u m e s ( M M c f / d )

Rocky Mountain Mid-Continent 2,010–2,270

(a) 2020 guidance gathered volumes (BBtu/d): 2,695 – 3,045 (b) 2020 guidance processed volumes (BBtu/d): 2,850 – 3,220

1,552 Region Third Quarter 2019 – Average Gathered Volumes Fourth Quarter 2019 – Average Gathered Volumes Third Quarter 2019 – Average Processed Volumes Fourth Quarter 2019 – Average Processed Volumes Mid-Continent 1,000 MMcf/d 974 MMcf/d 899 MMcf/d 879 MMcf/d Rocky Mountain 1,107 MMcf/d 1,106 MMcf/d 1,073 MMcf/d 1,080 MMcf/d Total 2,107 MMcf/d 2,080 MMcf/d 1,972 MMcf/d 1,959 MMcf/d 1,808 1,680 1,937 2,125–2,405 1,933

P A G E 1 0

◆ Natural gas transportation capacity contracted increased 9%

compared with the fourth quarter 2018

◆ Expect more than 95% fee-based earnings in 2020, and:

▪

Approximately 98% of transportation capacity contracted

▪

Approximately 65% of natural gas storage capacity contracted

NATURAL GAS PIPELINES

WELL-POSITIONED AND MARKET-CONNECTED

7,138 7,480 7,595 7,628 7,768 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019

N a t u r a l G a s Tr a n s p o r t a t i o n C a p a c i t y C o n t r a c t e d ( M D t h / d )

92% 94% 96% 98% ~98% 2016 2017 2018 2019 2020G

N a t u r a l G a s Tr a n s p o r t a t i o n C a p a c i t y C o n t r a c t e d

P A G E 1 1

◆ Natural gas gathering and processing increased

▪

$15.6 million increase due primarily to higher realized commodity prices, net of hedges.

▪

$4.0 million increase due primarily to contract settlements and lower third-party costs.

▪

$6.2 million decrease due primarily to higher operating costs from the growth of ONEOK’s operations.

◆ Natural gas liquids increased

▪

$28.6 million increase in exchange services due primarily to $26.7 million in lower unfractionated NGLs in inventory and $17.0 million in higher Rocky Mountain region volumes, offset partially by $13.7 million in higher third-party fractionation costs.

▪

$15.9 million increase in transportation and storage services due primarily to higher volumes on the North System(a).

▪

$35.3 million decrease in optimization and marketing due primarily to lower optimization volumes, narrower location price differentials and lower earnings related to the sale of NGL purity products previously held in inventory.

▪

$2.3 million decrease from higher operating costs due primarily to the growth of ONEOK’s operations.

◆ Natural gas pipelines decreased

▪

$4.1 million decrease from higher operating costs due primarily to employee-related costs.

▪

$3.3 million decrease primarily from lower interruptible transportation revenues, offset partially by higher firm transportation capacity contracted.

▪

$1.8 million increase in equity earnings due primarily to seasonal contracts on Northern Border Pipeline.

BUSINESS SEGMENT PERFORMANCE

(a) The North System is a FERC-regulated NGL pipeline that transports NGL purity products and various refined products throughout the Midwest markets, particularly near Chicago, Illinois.

Q4 2019 VS. Q3 2019 ADJUSTED EBITDA VARIANCES

P A G E 1 2

2020 FINANCIAL GUIDANCE

NON-GAAP RECONCILIATION

2020 Guidance Range

(Millions of dollars)

Reconciliation of net income to adjusted EBITDA and distributable cash flow

Net Income

$ 1,355

• $ 1,605

Interest expense, net of capitalized interest

670

• 640

Depreciation and amortization

600

• 580

Income taxes

420

• 520

Noncash compensation expense

50

• 30

Equity AFUDC and other noncash items

5

• (25)

Adjusted EBITDA

3,100

• 3,350

Interest expense, net of capitalized interest

(670)

• (640)

Maintenance capital

(220)

• (200)

Equity in net earnings from investments

(130)

• (180)

Distributions received from unconsolidated affiliates

170

• 190

Other

(5)

• (15)

Distributable cash flow

$ 2,245

• $ 2,505

P A G E 1 3

NON-GAAP RECONCILIATION

2017 2018 2019 ($ in Millions) FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Reconciliation of Net Income to Adjusted EBITDA Net income $594 $266 $282 $314 $293 $1,155 $337 $312 $309 $321 $1,279 Interest expense, net of capitalized interest 486 116 113 122 119 470 115 117 130 130 492 Depreciation and amortization 406 104 107 107 111 429 114 115 121 127 477 Impairment charges 20

• Income taxes

447 76 88 102 97 363 78 99 97 98 372 Noncash compensation expense 13 9 12 6 11 38 6 5 10 6 27 Equity AFUDC and other noncash items 21 (1)

• (1)

(5) (7) (13) (16) (17) (21) (67) Adjusted EBITDA $1,987 $570 $602 $650 $626 $2,448 $637 $632 $650 $661 $2,580 Interest expense, net of capitalized interest (486) (116) (113) (122) (119) (470) (115) (117) (130) (130) (492) Maintenance capital (147) (30) (44) (63) (51) (188) (41) (44) (48) (63) (196) Equity in net earnings from investments (159) (40) (37) (39) (42) (158) (43) (34) (38) (40) (155) Distributions received from unconsolidated affiliates 196 50 48 47 52 197 59 100 44 55 258 Other (7) (2) (3)

• (2)

(7) 10 4 3 4 21 Distributable Cash Flow $1,384 $432 $453 $473 $464 $1,822 $507 $541 $481 $487 $2,016 Dividends paid to preferred shareholders (1)

• (1)
• (1)
• (1)
• (1)

Distributions to public limited partners (270)

• Distributable cash flow to shareholders

$1,113 $432 $453 $472 $464 $1,821 $507 $540 $481 $487 $2,015 Dividends paid (828) (316) (327) (339) (352) (1,334) (354) (357) (368) (378) (1,457) Distributable cash flow in excess of dividends paid $285 $116 $126 $133 $112 $487 $153 $183 $113 $109 $558 Dividends paid per share $2.720 $0.770 $0.795 $0.825 $0.855 $3.245 $0.860 $0.865 $0.890 $0.915 $3.530 Dividend coverage ratio 1.34 1.37 1.39 1.39 1.32 1.37 1.43 1.51 1.31 1.29 1.38 Number of shares used in computations (millions) 304 411 411 411 411 411 412 413 413 413 413

P A G E 1 4

ONEOK has disclosed in this presentation adjusted EBITDA, distributable cash flow (DCF) and dividend coverage ratio, which are non-GAAP financial metrics, used to measure ONEOK’s financial performance, and are defined as follows: Adjusted EBITDA is defined as net income from continuing operations adjusted for interest expense, depreciation and amortization, noncash impairment charges, income taxes, noncash compensation expense, allowance for equity funds used during construction (equity AFUDC), and other noncash items; and Distributable cash flow is defined as adjusted EBITDA, computed as described above, less interest expense, maintenance capital expenditures and equity earnings from investments, excluding noncash impairment charges, adjusted for cash distributions received from unconsolidated affiliates and certain other items; and Dividend coverage ratio is defined as ONEOK’s distributable cash flow to ONEOK shareholders divided by the dividends paid for the period. These non-GAAP financial measures described above are useful to investors because they are used by many companies in the industry as a measurement of financial performance and are commonly employed by financial analysts and others to evaluate our financial performance and to compare our financial performance with the performance of other companies within our industry. Adjusted EBITDA, DCF and dividend coverage ratio should not be considered in isolation or as a substitute for net income or any other measure of financial performance presented in accordance with GAAP. These non-GAAP financial measures exclude some, but not all, items that affect net income. Additionally, these calculations may not be comparable with similarly titled measures of other companies. Furthermore, these non- GAAP measures should not be viewed as indicative of the actual amount of cash that is available or that is planned to be distributed in a given period.

NON-GAAP RECONCILIATIONS

Demicks Lake plant — North Dakota