ONEOK Q1 2022 Earnings Results & Report

ONEOK EPS Results

• Actual EPS: $0.87
• Consensus EPS: $0.89
• Beat/Miss: Missed by -$0.02
• One Year Ago EPS: $0.86
• EPS Beat Rate: 5 of last 8 quarters

ONEOK Revenue Results

• Actual Revenue: $5.44 billion
• Expected Revenue: $5.00 billion
• Beat/Miss: Beat by +$448.27 million
• YoY Revenue Growth: N/A

ONEOK (NYSE:OKE) is an energy infrastructure company that operates midstream assets across the United States. Its business includes the gathering, processing, storage and transportation of natural gas, as well as the gathering, fractionation, storage and transportation of natural gas liquids (NGLs). The company also provides transportation and storage services for refined petroleum products, crude oil and other related commodities.

ONEOK serves major producing and consuming regions, including the Mid-Continent, Rocky Mountain, Permian and Gulf Coast areas. Its infrastructure connects producers with processing facilities, storage sites, fractionation plants, refineries, export facilities and other end markets. The company’s operations are primarily fee-based, with services provided under a range of contractual arrangements.

ONEOK traces its history to the Oklahoma Natural Gas Company, founded in 1906, and adopted the ONEOK name in 1980. In 2023, the company completed its acquisition of Magellan Midstream Partners, expanding its refined products, crude oil and marine terminal operations. ONEOK is headquartered in Tulsa, Oklahoma, and is led by President and Chief Executive Officer Pierce H. Norton II.

ONEOK Q1 2022 Earnings Call Transcript

Key Takeaways

• Strong volume and earnings growth: Q1 2022 delivered double-digit year-over-year gains in natural gas and NGL volumes, driving a 24% rise in EPS (excluding Winter Storm Yuri) and an 11% increase in adjusted EBITDA.
• Weather resilience and guidance affirmed: Severe April blizzards cut Rocky Mountain processing and NGL volumes by about 20%, yet ONEOK reaffirmed its full-year adjusted EBITDA and EPS guidance.
• Robust shale-basin activity: Peak Bakken processing reached 1.4 Bcf/d and 385 Mbpd of NGLs pre-storm, Mid-Continent rigs ramped up, Permian NGL volumes grew 23%, and Q1 well connects exceeded 90.
• Infrastructure bolt-on projects advancing: With major expansions complete, ONEOK is executing low-capex bolt-ons including the 125 Mbpd MB5 fractionator (online Q2 2023), a 1.1 Bcf Texas storage expansion, and open seasons on its West Texas and Viking pipelines.
• Attractive ethane recovery economics: Strong domestic and export demand, coupled with higher gas prices, supports elevated ethane recovery rates and optimization gains for the balance of 2022.

Presentation

[Operator]

Please stand by. We're about to begin. Good day, and welcome to the 1st quarter 2022 ONEOK earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Andrew Ziola. Please go ahead, sir.

[Andrew Ziola, VP of Investor Relations and Corporate Affairs at ONEOK]

Thank you, Paula, and welcome to ONEOK's 1st quarter 2022 earnings call. We issued our earnings release and presentation after the markets closed yesterday, and those materials are on our website. After our prepared remarks, management will be available to take your questions. Statements made during this call that might include ONEOK's expectations or predictions should be considered forward-looking statements and are covered by the safe harbor provision of the Securities Act of 1933 and the Securities Exchange Act of 1934. Actual results could differ materially from those projected in forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer to our SEC filings. Just a reminder for Q&A, we ask that you limit yourself to one question and one follow-up in order to fit in as many of you as we can.

[Andrew Ziola, VP of Investor Relations and Corporate Affairs at ONEOK]

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

[Pierce H. Norton II, President and CEO at ONEOK]

Thanks, Andrew. Good morning, everyone, and thank you for joining us today. We appreciate your interest and investment in our company. On today's call is Walter Hulse, Chief Financial Officer and Executive Vice President, Investor Relations and Corporate Development, and Kevin Burdick, Executive Vice President and Chief Commercial Officer. Also available to answer your questions are Sheridan Swords, Senior Vice President of Natural Gas Liquids and Natural Gas Gathering and Processing, and Chuck Kelly, Senior Vice President of Natural Gas Pipelines. Yesterday, we announced 1st quarter 2022 results, which highlighted year-over-year natural gas and NGL volume growth. Earnings significantly increased year-over-year when adjusting for the favorable Winter Storm Uri impact in the 1st quarter of 2021. Customer and producer conversations continued to point to additional activity through the remainder of the year, supported by strong demand for U.S. energy and commodity prices far exceeding basin break-even economics.

[Pierce H. Norton II, President and CEO at ONEOK]

Our built-in operating leverage and proven track record of discipline and intentional growth have positioned us well to support increasing producer activity levels. Our systems have significant capacity to grow alongside the needs of our customers. Because of our large infrastructure projects are complete, we now have opportunities for bolt-on expansion projects with quicker in-service dates, attractive returns, and minimal capital requirements. Not only are we expecting strong activity going forward, but our position in the key U.S. shale basins provides us a long runway to continue our efforts to help address increasing domestic and international energy demand. Current events continue to demonstrate the importance of natural gas and natural gas liquids in a long-term energy transformation and highlight the critical role that ONEOK plays in providing essential energy products and services.

[Pierce H. Norton II, President and CEO at ONEOK]

Before I hand the call over, I'd like to discuss the recent weather events that have impacted our Rocky Mountain region operations in April and into early May. First of all, I wanna thank our employees in the area and those who supported from other locations to ensure that we were as prepared as possible for these two unprecedented winter events within a 2 week period. The severe April storms caused blizzard conditions, record-setting snowfall, high winds, and extensive power outages across North Dakota, Montana, and South Dakota. A number of our employees staffed facilities during these conditions to maintain the safe and reliable operations of our assets. Many of these employees were also dealing with lost power and damage at their own homes. Widespread outages left many of our facilities without power for several days, and a significant number of wells across the Williston Basin were shut in.

[Pierce H. Norton II, President and CEO at ONEOK]

Our primary focus has been on the safety of our employees, assets, and the communities where we operate as we continue to work through the full impact of the storms. Due to the basin-wide power outages, our April Rocky Mountain region volumes were reduced in both our natural gas gathering and processing and natural gas liquids segments by approximately 20%. May volumes will continue to be impacted as down power lines are replaced. Currently, our processing volumes are more than 1.1 billion cubic feet per day, and our NGL volumes are more than 320,000 barrels per day and trending up as shut-in wells are brought back online. The coordination during and since these weather events with our customers, local agencies, communities, and other operators in the area has been impressive, once again highlighting the resiliency of our employees, assets, and our customers.

[Pierce H. Norton II, President and CEO at ONEOK]

Even with this late winter storm, we are affirming our financial guidance ranges and midpoints for both adjusted EBITDA and earnings per share. With that, I'll turn the call over to Walt for discussion of our financial performance.

[Walter S. Hulse III, EVP, CFO and Treasurer at ONEOK]

Thank you, Pierce. ONEOK's 1st quarter 2022 net income totaled $391 million, or $0.87 per share, a 24% increase compared with the 1st quarter 2021 when excluding the benefit of Winter Storm Uri. 1st quarter adjusted EBITDA increased 11% year-over-year when excluding Winter Storm Uri.

[Walter S. Hulse III, EVP, CFO and Treasurer at ONEOK]

We ended the 1st quarter with a higher inventory of unfractionated NGLs, primarily due to timing, and expect to recognize those earnings in the 2nd quarter as our current inventory is fractionated and sold. Our net debt to EBITDA on an annualized run rate basis remains below 4x, and we continue to view 3.5x or lower as our long-term aspirational leverage goal. In April, Moody's updated ONEOK's rating outlook to positive and affirmed our investment-grade rating. ONEOK maintains investment-grade ratings with Moody's, S&P, and Fitch. As Pierce mentioned, the recent extreme April storms have impacted our operations in the Rocky Mountain region. Even with these weather impacts, we are affirming our 2022 financial guidance.

[Walter S. Hulse III, EVP, CFO and Treasurer at ONEOK]

Strong volumes prior to weather, the weather impacts, strengthened drilling activity, DUC completions through the remainder of the year, and a positive outlook for NGL and natural gas demand this year points to a strong volume exit rate in 2022. I now turn the call over to Kevin for a commercial update.

[Kevin L. Burdick, EVP and Chief Operating Officer at ONEOK]

Thank you, Walt. During the 1st quarter, we saw a double-digit NGL volume growth across all our operating regions compared with the 1st quarter 2021. Rocky Mountain region natural gas processing volumes increased 11% year-over-year. After reporting record Rocky Mountain region natural gas and NGL volumes in the 4th quarter of 2021, we saw volumes decrease sequentially in the 1st quarter of 2022, primarily due to normal seasonality across our operating areas. Through the first 4 months of the year, we've continued to see encouraging activity from producers, and we expect these activity levels to trend higher through the remainder of the year. Let's take a closer look at our natural gas liquids segment. Total NGL raw feed throughput volumes increased 17% year-over-year, supported by increasing producer activity and increased ethane recovery.

[Kevin L. Burdick, EVP and Chief Operating Officer at ONEOK]

Rocky Mountain region NGL volumes increased 24% compared with the 1st quarter of 2021. In April, we reached peak volumes of more than 385,000 barrels per day from the region prior to the severe late-season storms Pierce discussed earlier. Mid-Continent NGL volumes increased 10% year-over-year. As producers continue to increase activity in the Mid-Continent, a large majority of those related NGLs are transported on our system. So far this year, NGL volumes from the region are trending slightly higher than we had originally planned. In the Permian Basin, NGL volumes increased 23% year-over-year due to strong producer activity levels, which feed our West Texas NGL Pipeline.

[Kevin L. Burdick, EVP and Chief Operating Officer at ONEOK]

In the Gulf Coast, construction continues on our 125,000 barrel per day MB-5 fractionator in Mont Belvieu, which we now expect to be complete in the 2nd quarter of 2023. MB-5 will increase our total system-wide fractionation capacity to more than 1 million barrels per day. International LPG demand remains strong, and we continue to expect both domestic and international ethane demand to continue to increase throughout 2022. As natural gas prices have increased this year, ethane prices have kept pace, providing attractive ethane recovery economics in certain areas of our system. While 1st quarter ethane recovery is typically lighter due to natural gas heating demand and typical winter weather impacts, we see strong ethane recovery opportunities for the remainder of the year. Moving on to the natural gas gathering and processing segment.

[Kevin L. Burdick, EVP and Chief Operating Officer at ONEOK]

In the Rocky Mountain region, 1st quarter processed volumes averaged 1.3 billion cubic feet per day, an 11% increase year-over-year. In April, volumes reached a peak of more than 1.4 billion cubic feet per day prior to the storms. We connected more than 90 wells in the region in the 1st quarter, compared with 38 connections in the 1st quarter of 2021, and are on pace to meet our guidance midpoint of 400 well connections in the region. There are currently 38 rigs and 12 completion crews operating in the basin, with 17 rigs and approximately half of the completion crews on our dedicated acreage. This continues to be more than enough activity to grow gas production in the basin and on our acreage.

[Kevin L. Burdick, EVP and Chief Operating Officer at ONEOK]

Additionally, the basin-wide DUC inventory remains at approximately 500, with half of those on our dedicated acreage. Recent reports from the North Dakota Pipeline Authority highlight the long runway of core drilling inventory remaining in the Williston Basin. Enhanced drilling and completion technologies are significantly increasing the basin's core acreage and further extending the decades of profitable drilling locations remaining in the region. The core acreage in the basin has expanded by an additional 3,000 sq mi, with more than 7,000 drilling locations added to inventory that are profitable at crude oil prices of $60 per barrel. In the Mid-Continent region, we continue to see increased activity with 3 rigs now operating on our acreage and 45 rigs basin-wide.

[Kevin L. Burdick, EVP and Chief Operating Officer at ONEOK]

We continue to expect increased natural gas processing volumes from the region compared with 2021, and expect the majority of rigs basin-wide to drive additional NGLs to our system. In the natural gas pipeline segment, strong 1st quarter results benefited from increased natural gas sales and higher seasonal volumes compared with the 4th quarter of 2021. We continue to see strong demand for natural gas storage services and are working to expand our facilities to meet this increasing demand. We recently completed a 1.1 billion cubic feet expansion of our Texas storage facilities and announced an open season to increase our storage capabilities in Oklahoma, enabling an additional 4 billion cubic feet of storage capacity to be contracted. This project is expected to be complete in early 2023. We also recently announced 2 open seasons for additional pipeline capacity to address increased demand.

[Kevin L. Burdick, EVP and Chief Operating Officer at ONEOK]

One on our WesTex pipeline system in the Permian Basin, and one on our Viking pipeline in the upper Midwest. We continue to work with customers across our natural gas pipeline network to address their evolving transportation and storage needs as these key assets continue to provide value year round. Pierce, that concludes my remarks.

[Pierce H. Norton II, President and CEO at ONEOK]

Thank you, Kevin and Walt. The overall dynamics in the midstream space, and for ONEOK specifically, remain positive. We increased activity, strengthened demand and available system operating leverage. The U.S. energy industry is well-positioned to be a significant source for domestic and global natural gas and NGL supply for the long term, with midstream playing a vital role in the safe and responsible transportation of these vital energy resources. As we continue to help supply our country and the world with low-cost energy, we are also looking to play an important role in the transformation to a lower carbon future. Through best management practices and collaboration with customers and service providers, we are addressing the growing need for energy products and services today, while also preparing for a long-term energy future. It's the innovation, resiliency, and dedication of our employees that makes ONEOK a leader in our industry.

[Pierce H. Norton II, President and CEO at ONEOK]

With the positive momentum we're seeing in our business and the increasingly positive outlook for the remainder of the year, we're well positioned for yet another year of volume and earnings growth. With that, operator, we're now ready for questions.

[Operator]

Thank you. To signal for a question, please press star 1 on your telephone keypad. Also, if you are using a speakerphone, please make sure that your mute button is turned off to allow your signal to reach our equipment. We ask that you please limit yourself to one question and one follow-up. Once again, it is star 1 at this time for questions. First, we'll go to Jeremy Tonet with JPMorgan.

[Analyst at JPMorgan Chase & Co.]

Hi, this is Steve on for Jeremy. I guess I just wanted to start, obviously with the most topical one about weather. In the release we talked about reaching 1.4 million cubic feet per day in the Bakken. I just wanted to see if that's, is that an average or was that what you got to, and just kinda how that's trending now with how things are there?

[Kevin L. Burdick, EVP and Chief Operating Officer at ONEOK]

This is Kevin. You know, that record volume that we said, that's not an average for April. That was just, we wanted to provide, you know, a number out there that showed where the gas that was available. We were at 1.4 BCF a day on a few days there before the storms hit, which shows kind of where we were trending. In my remarks, I mentioned that we were at, or I think Pierce mentioned we are at 1.1 BCF a day currently, and that's trending up as the wells are brought back online.

[Analyst at JPMorgan Chase & Co.]

Got it. Thank you. Next one, I guess we'll go to the GORs. I just kinda wanna get some feedback there on how you're seeing those trending as new wells get drilled. Are they maintaining kind of that GOR level, or are they becoming, you know, I think, more oil-based at the early stages and just how you're kind of seeing that go.

[Kevin L. Burdick, EVP and Chief Operating Officer at ONEOK]

Yeah, the GORs, when you look at trends over time, obviously they've been going up. I think the number's like 80% since 2016. Yes, you'll see some fluctuations, some minor fluctuations as new wells are brought on, that the GORs do increase over time for individual wells. The GORs also are a little different across different parts of the basin, from a regional perspective. Yes, you'll see some dynamics of that will bounce around month to month, as new wells are brought online, and as drilling occurs in different parts of the play. The general trend is it's going to continue to go up.

[Analyst at JPMorgan Chase & Co.]

Got it. Appreciate it. Thanks, guys.

[Kevin L. Burdick, EVP and Chief Operating Officer at ONEOK]

Sure.

[Operator]

Moving on, we'll go to Brian Reynolds with UBS.

[Brian Reynolds, Analyst at UBS]

Hi, good morning, everyone. Maybe just to start off on operations. Was wondering if you could talk a little bit more about the completion guidance for this year. You know, we saw, you know, roughly 90 wells completed, which, you know, kind of indicates that roughly 25% of the well completions were done in 1Q per the guide. Typically knowing that, you know, most of the well completions for ONEOK are back half-weighted, just due to natural seasonality. Was curious if you could see some upsides to that well completion number, particularly as producers, specifically the private, look to take advantage of the current pricing and rigs start to materially come back into the basin over the balance of 2022.

[Sheridan C. Swords, EVP and Chief Commercial Officer at ONEOK]

Brian, this is Sheridan. What I would say is we said in our remarks that we're staying at our previous guidance on well connects. As you said, coming out of the 1st quarter with 90 well connects is a really good start to this year.

[Brian Reynolds, Analyst at UBS]

Fair enough. Maybe to pivot to just future the natural gas segment, you know, really outperformed this quarter. Was curious if you could just talk about those future recontracting opportunities, you know, specifically around the Permian and around the WesTex system, just given Permian net gas tightness and whether there are opportunities to expand WesTex similar to what we saw ONEOK do in 2018.

[Sheridan C. Swords, EVP and Chief Commercial Officer at ONEOK]

Chuck, you wanna take that one?

[Charles M. Kelley, SVP of Natural Gas Pipelines at ONEOK]

Sure. Absolutely. Brian, this is Chuck. As you said, in 2018, we had an expansion. We also recontracted. We're seeing right now similar opportunities for this year. We're currently working on an additional expansion opportunity beyond the open season that's listed on our website. And that'll be moving Permian gas north as well, like we did in 2018. That's an incremental expansion. On recontracting, we see some really good recontracting opportunities this year, somewhere in the neighborhood of up to 200 million a day on recontracting.

[Brian Reynolds, Analyst at UBS]

Great. Appreciate all the color. Have a great day, everyone.

[Sheridan C. Swords, EVP and Chief Commercial Officer at ONEOK]

Thank you.

[Charles M. Kelley, SVP of Natural Gas Pipelines at ONEOK]

Thank you.

[Operator]

Next, we'll go to Praneeth Satish with Wells Fargo.

[Praneeth Satish, Stock Analyst at Wells Fargo]

Thanks. Good morning. I think you mentioned that NGL volumes in the Bakken reached 385,000 barrels per day prior to the winter weather. I mean, that's an 88% utilization rate on your NGL pipe. I guess my question is, why aren't you moving forward with an Elk Creek expansion at this point? Are you waiting for utilization to get closer to 100% or waiting to see what happens with the gas pipe expansions? Just trying to get a better understanding of your thought process behind an expansion.

[Sheridan C. Swords, EVP and Chief Commercial Officer at ONEOK]

Praneeth, this is Sheridan. When we look at the expansion, we look forward and see when we'll need it and when we need to start commissioning that expansion. You've got to think about that we have about 440,000 barrels a day today, and at 385, that has quite a bit of incentivized ethane in it. We can kind of swing on that as well. We continue to look through our gathering and processing, what's going on in the basin, when we need to expand that and when we need to expand the capacity. Right now we're saying today, we think in the short term, we have enough capacity on the system to handle what we need going forward.

[Sheridan C. Swords, EVP and Chief Commercial Officer at ONEOK]

We continue to evaluate that, the opportunity to expand and make sure that we put ourselves in a position that when it is time to expand, we can expand it quickly.

[Praneeth Satish, Stock Analyst at Wells Fargo]

Got it. Thanks. I wanted to ask about the rate case on the Guardian Pipeline. If you could just, you know, ballpark the magnitude of the rate case and how you intend to proceed. Would you expect to settle with shippers? I mean, I know you're probably limited in what you can say, but just any clarity would be helpful. Thanks.

[Sheridan C. Swords, EVP and Chief Commercial Officer at ONEOK]

Chuck, you wanna take that one?

[Charles M. Kelley, SVP of Natural Gas Pipelines at ONEOK]

As we look at the rate case, yes, it's not going to be a big deal at all. When I say a big deal, it's not gonna be material in terms of where we're at from a rate and where we might go. Yes, those typically will evolve. We'll do our best to work with the shippers on the pipe and come up with a rate that we feel is appropriate and move forward. It's not gonna be meaningful to our overall EBITDA.

[Praneeth Satish, Stock Analyst at Wells Fargo]

Got it. Thanks.

[Operator]

Next, we'll go to Colton Bean with Tudor, Pickering, Holt & Co.

[Colton Bean, Managing Director at Tudor, Pickering, Holt & Co.]

Morning. Just to follow up on Pierce and Kevin's comments. You know, it sounded like 1.1 B is a processing currently versus the 320. I think on the processing side, you know, still down about 15% versus Q1, but actually up for NGL. One, just wanted to clarify that that's what you mentioned in terms of incentivized ethane. Then 2, you know, interested in your thoughts on whether we're seeing a more structural shift or primarily due to pricing volatility over the last month or 2.

[Kevin L. Burdick, EVP and Chief Operating Officer at ONEOK]

Colton, when you say structural shift, I'm not sure I'm following that question on the pricing.

[Colton Bean, Managing Director at Tudor, Pickering, Holt & Co.]

Yeah. Kevin, I think you mentioned that, you know, you see ethane opportunities over the balance of the year. I guess, I mean, it seems like that would imply that you are, you know, seeing a pull on ethane. Just wanted to get your thoughts on the market broadly.

[Sheridan C. Swords, EVP and Chief Commercial Officer at ONEOK]

Okay, go ahead, Sheridan. Colton, this is Sheridan. I think when we look at the ethane market, no doubt it's gonna be ethane recovery rejection's gonna be volatile through this year in certain areas. With the increase in domestic demand that's coming online and with the increase in international demand or export demand, we still see some growth in ethane demand or a pull coming in. Right now, ethane is the only advantaged crack in the petrochemicals right now. We are in the short term seeing a little bit of softness due to we have some maintenance going on in the petrochemical industry, and they are working through some of the logistical issues they have on the supply side getting out.

[Sheridan C. Swords, EVP and Chief Commercial Officer at ONEOK]

That seems to be, as we talk to our customers, is getting better. As we see that's what gives us confidence that we'll see good opportunities to bring more incentivized ethane out of the Bakken for the rest of the year.

[Colton Bean, Managing Director at Tudor, Pickering, Holt & Co.]

Yeah, maybe a related question there. Oh, sorry, go ahead.

[Sheridan C. Swords, EVP and Chief Commercial Officer at ONEOK]

No, we didn't say anything. Go ahead.

[Colton Bean, Managing Director at Tudor, Pickering, Holt & Co.]

Yeah, just on the optimization of marketing, it looks like that ticked higher here in Q1. I think historically, you all have highlighted the Conway to Mont Belvieu ethane spread as, you know, a key indicator of optimization opportunities. I guess, one, is that still a good marker? Then two, you know, can you frame the opportunity that you're seeing if so?

[Sheridan C. Swords, EVP and Chief Commercial Officer at ONEOK]

A lot of things that happened in the optimization of marketing between 4Q and 1Q. As you remember, in 4Q, we were down due to timing of inventory sales, and we said we'd get that back in 2022. Well, we got it back in the 1st quarter of 2021. The reason we use ethane as the marker for the Conway to Mont Belvieu spread for optimization is the fact that ethane is the product we have the most of, so that's volume in it. Volatility in that spread gives us a lot of opportunity, whether or not it's going to Mont Belvieu or in favor of Conway with all products. We were able to use that volatility to make our positions on contracts to make money either way.

[Sheridan C. Swords, EVP and Chief Commercial Officer at ONEOK]

If it's in favor of Conway or in favor of Mont Belvieu, what we need is just some volatility between the two markets, not necessarily just wide markets to Mont Belvieu.

[Colton Bean, Managing Director at Tudor, Pickering, Holt & Co.]

Okay. I guess, you know, in terms of the spread that we've seen just over the course of Q2, I mean, does that maybe offer a little bit of upside relative to that 5% guidance contribution?

[Sheridan C. Swords, EVP and Chief Commercial Officer at ONEOK]

Yeah, we're seeing a little bit wider spread right now on the ethane side in Q2, and that's mainly right now due to the fact that we have some Mid-Continent petrochemical crackers that are on turnaround. We think they'll be short-lived through May, but it is giving us some upside in the 2nd quarter.

[Colton Bean, Managing Director at Tudor, Pickering, Holt & Co.]

Great. Appreciate the time.

[Operator]

Next, we'll go to John Mackay with Goldman Sachs.

[John Mackay, VP of Equity Research at Goldman Sachs]

Hey, Al, thanks for the time. I just wanted to kind of collect some of the comments you guys have had so far. Just thinking about the flat or unchanged guidance versus some of the weather impacts. I guess you've talked about 1st quarter Well Connects being a little bit better. Talked about MidCon maybe being a little bit better. But just, you know, can you kind of line up the moving pieces that get you to kind of maintain the guidance versus, you know, after the weather impact? Specifically, is your kind of ethane recovery assumption actually better now than it was a few months ago? Thanks.

[Kevin L. Burdick, EVP and Chief Operating Officer at ONEOK]

Well, this is Kevin. John, I think you hit on a bunch of the key attributes we're looking through. One, yes, we've seen weather impact our Bakken volumes, but it hasn't changed the rest of the year outlook for our growth opportunities in the Bakken, both on the G&P side and the NGL side. We see that as very positive, and we continue to see activity at or above levels than we were anticipating when we put out guidance. We think there's gonna be some offset there. Clearly, we've had ethane recovery opportunities both so far to date and as well as we look through the remainder of the year that we believe you know are gonna be strong. You mentioned we're seeing growth.

[Kevin L. Burdick, EVP and Chief Operating Officer at ONEOK]

There's been some very positive and favorable calls where other processors and producers in the Mid-Continent about volumes growing there. We think there's some upside there. The Permian, again, we haven't talked about it a lot on this call, but we've continued to get our fair share of the volume growth coming out of the Permian and like our position with both our West Texas LPG Pipeline as well as our West Texas pipe system we've talked about. There's a lot of tailwinds for us in a lot of those other areas, including the optimization and marketing side we have on the NGL business. We think those are absolutely gonna offset any hurt we may have had with the severe weather impact in April.

[John Mackay, VP of Equity Research at Goldman Sachs]

All right. That's great. Thanks for pulling this together. Maybe, just as a follow-up, you guys talked about kind of strong international demand for NGLs. Can you just remind us where you sit on the export idea and kind of, you know, what the latest might be?

[Kevin L. Burdick, EVP and Chief Operating Officer at ONEOK]

Well, we continue to work it. As we've said for a while, it's a piece of the business. We would love to extend the value chain that we see as a natural extension. It's a nice fee-based business. At the same time, we're working with a lot of different markets. You know, we're trying to get a deal done that would happen, but we're not gonna step out and do something that's going to earn a return that we're not used to. We're gonna be disciplined. We're gonna be intentional about a Dakota project, but we continue to work it.

[John Mackay, VP of Equity Research at Goldman Sachs]

Thanks for that. Appreciate it.

[Operator]

Next, we'll go to Chase Mulvehill with Bank of America.

[Chase Mulvehill, Director and Oilfield Service Analyst at Bank of America]

Hey, good morning. I guess a couple questions and one kind of follow-up question, I guess, maybe on ethane and, you know, on one of your competitors conference calls earlier this week, there was mention that the Permian's still rejecting about 200,000 barrels a day of ethane. You know, obviously, if we hit some bottleneck constraints with natural gas egress in the Permian, then you would look to recover that. I guess maybe my question is, if this actually does happen and you start going to full ethane recovery mode in the Permian.

[Chase Mulvehill, Director and Oilfield Service Analyst at Bank of America]

What do you think that means for, you know, ethane recovery in other basins? Do you think that you have to have an offset there? If so, kind of what basins do you think you'll see, some of the offsets?

[Sheridan C. Swords, EVP and Chief Commercial Officer at ONEOK]

Yeah, I think all that 200, as I read that call too, may not be recoverable out there in the Permian. I can only speak to our system. Our system, we're fairly full on recovering ethane on our system. But if you would see natural gas prices get depressed, and if there's more ethane to be recovered out of the Permian, that will have a downward pressure on ethane as it relates to other basins. Probably the first basin we would see come out of is probably our Mid-Continent basin.

[Sheridan C. Swords, EVP and Chief Commercial Officer at ONEOK]

We still have the opportunity to move that Mid-Continent basin in front of the Permian Basin by flexing our rates as we've done out of the Bakken, because we've always said the Bakken will, at full rates, will be in rejection for this year and for the future. I think it may have some impact on it, but I don't think it's gonna have a major impact on what we're forward-looking for ethane out of the Mid-Continent.

[Chase Mulvehill, Director and Oilfield Service Analyst at Bank of America]

Okay. Great. That's helpful. The other question is really just when we think about Bakken egress and kind of, you know, look at the situation over the next 2 or 3 years, do you see any, you know, egress bottlenecks, whether it's, you know, for oil, NGLs or natural gas? And if so, you know, which one do you think you get first?

[Kevin L. Burdick, EVP and Chief Operating Officer at ONEOK]

Well, I think the basin's in really good shape. You know, oil's fine with Energy Transfer and Dakota Access Pipeline expansion. They're in great shape. NGL, we've talked about that. We've got capacity currently, and we have a quick low-cost expansion. We could add another 100,000 barrels a day of NGL capacity. We go to residue. There's still volume on Northern Border that can be priced out or pushed out. Bakken Gas can displace gas coming from Canada. There's an open season out right now for 400 or 500 million a day, that Northern Border has out there on a Bison reversal. There's some other smaller expansions from a residue perspective that are out there being discussed, that could, you know, that will help out the basin from a residue takeaway.

[Kevin L. Burdick, EVP and Chief Operating Officer at ONEOK]

All in all, we feel like the capacities that are out there and some of the expansions that are available put the basin in really good shape from a takeaway perspective.

[Chase Mulvehill, Director and Oilfield Service Analyst at Bank of America]

Okay. Helpful answers. Appreciate it. I'll turn it back over.

[Sheridan C. Swords, EVP and Chief Commercial Officer at ONEOK]

Thanks.

[Operator]

Moving on, we'll go to Sunil Sibal with Seaport Global Securities.

[Sunil Sibal, Managing Director at Seaport Global Securities]

Yeah. Hi, good morning, folks, and thanks for all the clarity. Just wanted to start off with a couple of clarifications. If I heard correctly, I think you said April volumes reduced by 20% because of the weather events. I just wanted to clarify, is that 20%, based on the peak rates that you mentioned hitting in April, or is it more related to Q1 averages?

[Kevin L. Burdick, EVP and Chief Operating Officer at ONEOK]

Yeah, that would be roughly off the 1.4 BCF a day.

[Sunil Sibal, Managing Director at Seaport Global Securities]

Got it.

[Kevin L. Burdick, EVP and Chief Operating Officer at ONEOK]

Got it.

[Sunil Sibal, Managing Director at Seaport Global Securities]

I think you mentioned also that you have, you know, runway to exceed the 400 well connects in that you'd guided to for Bakken. I was curious, is that the exit rate we are talking about? Or you think that for the full year average or for the full year total, you would probably exceed 400 well connects?

[Kevin L. Burdick, EVP and Chief Operating Officer at ONEOK]

Well, I think what Sheridan said was, we're still maintaining our guidance range, which the midpoint would be 400, but connecting more than 90 wells in the 1st quarter is an outstanding start to the year. There's definitely we think there could be some upside there.

[Sunil Sibal, Managing Director at Seaport Global Securities]

Got it. Then one on CapEx trend. Seems like, you know, you expedited the start-up date on the MB-5 a little bit, and then you're also adding gas capacity. What does that mean for the, you know, total CapEx for full year? I saw that, you know, Q1 was a little bit higher, or was it pick up from Q4?

[Kevin L. Burdick, EVP and Chief Operating Officer at ONEOK]

Yeah, we still feel good about our capital guidance range as well. You know, as we think about, as we looked at the 1st quarter, we always have some seasonal kind of timing things of just routine growth type stuff. Again, we did not increase the cost at all for MB-5 in accelerating that schedule. That was just our ability. We had some things go our way from a schedule perspective early in the project that allowed us to pull it forward. The guidance range for capital is still in place.

[Sunil Sibal, Managing Director at Seaport Global Securities]

Got it. Thanks for the clarification.

[Kevin L. Burdick, EVP and Chief Operating Officer at ONEOK]

You bet.

[Sunil Sibal, Managing Director at Seaport Global Securities]

Sorry, go ahead.

[Operator]

Our final question will come from Theresa Chen with Barclays.

[Theresa Chen, Senior Analyst at Barclays]

Hi. Thanks for taking my questions. First, I just had a question for clarification around the different moving components of the average bundled rate for the Rocky Mountain NGL raw feed throughput. If you did, you know, on an average basis, $0.26 for the $3.14 for its average of 1st quarter, and hit $3.85 in April, what would be the analogous average bundled rate if there was a lot of incentive ethane attributed to that $3.85?

[Sheridan C. Swords, EVP and Chief Commercial Officer at ONEOK]

Theresa, this is Sheridan. To be honest with you, I have no idea what it will be. It'll be around $0.26. The reason I say that is the accountants will work through it, and we have a lot of moving parts on that. It's gonna be $0.26-$0.27. In that range is where I would say that it's gonna come out to be.

[Theresa Chen, Senior Analyst at Barclays]

Got it. To the earlier comment about your customers seeing some alleviation downstream on the petchem front, I'm just curious to hear, you know, how do you see the pace and path of supply chain bottlenecks, you know, relieving out of the Gulf Coast to the extent that it can reduce some of the economic run cuts on ethane cracking and increased demand?

[Sheridan C. Swords, EVP and Chief Commercial Officer at ONEOK]

Well, all I can say is we've talked to our customers and seen what they're seeing in there, and they said they have had some issues getting rid of the polyethylene pellets to get them exported out of there or actually get them from the petrochemical facilities to the dock. You know, they keep saying they're working through that and continuing to improve that to be better. They're optimistic that it's gonna improve over time, is kind of what we're hearing. Obviously, if there's a bottleneck there, you could see them slow down their production to make sure they can get rid of the products. They seem to be more upbeat now than they have in the past.

[Theresa Chen, Senior Analyst at Barclays]

That's helpful. Thank you. Lastly, if I can just squeeze one more in. On the cost side, you've seen some good cost control, you know, in 1st quarter. Just wondering your outlook for costs, for the year as far as potential inflationary pressures go?

[Kevin L. Burdick, EVP and Chief Operating Officer at ONEOK]

We've seen a little bit of the inflationary pressures. I would just remind everybody that we also have the escalators on our contracts that we think are more than offset the cost increases we have seen. You know, the 1st quarter, if we look at OpEx, the 1st quarter is usually just a little bit light as you think about the rest of the year, but we still feel good. Again, all that's factored in as we talk about reaffirming our guidance. Inflationary pressures are included in that analysis.

[Theresa Chen, Senior Analyst at Barclays]

Thank you.

[Kevin L. Burdick, EVP and Chief Operating Officer at ONEOK]

You're welcome.

[Operator]

Now I'd like to turn it back to Mr. Ziola for any additional or closing comments.

[Andrew Ziola, VP of Investor Relations and Corporate Affairs at ONEOK]

Our quiet period for the 2nd quarter starts when we close our books in July and extends until we release earnings in early August. We'll provide details for that conference call at a later date. Thank you all for joining us, and have a good day.

[Operator]

Thank you. That does conclude today's conference. We'd like to thank everyone for their participation. You may now disconnect.

Participants

Executives

• Andrew Ziola, VP of Investor Relations and Corporate Affairs
• Charles M. Kelley, SVP of Natural Gas Pipelines
• Kevin L. Burdick, EVP and Chief Operating Officer
• Pierce H. Norton II, President and CEO
• Sheridan C. Swords, EVP and Chief Commercial Officer
• Walter S. Hulse III, EVP, CFO and Treasurer

Analysts

• Brian Reynolds, Analyst at UBS
• Chase Mulvehill, Director and Oilfield Service Analyst at Bank of America
• Colton Bean, Managing Director at Tudor, Pickering, Holt & Co.
• John Mackay, VP of Equity Research at Goldman Sachs
• Praneeth Satish, Stock Analyst at Wells Fargo
• Sunil Sibal, Managing Director at Seaport Global Securities
• Theresa Chen, Senior Analyst at Barclays
• Analyst at JPMorgan Chase & Co.