ONEOK, Inc. (OKE) Earnings Call Transcript & Summary

Everybody enjoyed lunch. Hopefully, you don't fall sleep in here after the heavy launch and didn't eat desert, that will put you down. But thanks for joining the next session. The next session is ONEOK. ONEOK is uniquely positioned midstream company with a differentiated Rockies-based integrated NGL system that's set to drive solid operating leverage across their company. And from ONEOK today, we're excited to have the full team. We've got Pierce Norton, who is the President and CEO. We've got Kevin Burdick, who is the Chief Commercial Officer. And last but definitely not least is Walt Hulse, he is the CFO. So everybody, thanks for joining us. The format today, a fireside chat. [Operator Instructions].

So to kick everything off. Why don't I just kick it off with just an overview, I think about your asset base, really what differentiates you from your midstream peers. If you could just kind of walk through that real quick, I'm not sure who wants to take it, but we'll kick it off with that.

I'll start, Chase, and these guys can add something if they'd like. ONEOK, for those who are not familiar with the story, basically, if you take from the Canadian border all the way down to the Gulf Coast and you just basically take those contiguous 18 states in between those 2 boundaries, that is where we have assets. We are in the gathering and the processing business. We create the natural gas liquids and then we take those liquids and get those to the market. So our main task is to go basically from the supply side, which is primarily from the producers and we deliver the natural gas to either natural gas utilities, industrial or commercial customers. And then also, we take our natural gas liquids to the pet chem industries in the Gulf Coast.

Okay. Awesome. Let's talk about your investment thesis. I guess the way that I think about it is really kind of 3 components. Number 1 is just your dominant market share in the Rockies. And number 2 is your fully integrated assets that provide NGL connectivity. And number 3 is really the material operating leverage that you have with the CapEx that you spent more recently. So really, next, I want to kind of step through each of these and flesh these out a little more. So let's start on kind of the market share. You got leading market share in the Rockies. So maybe can you give us a history lesson of how you were to build out such a dominant position in the Rockies?

I'd categorized it probably using 3 words in the Rockies. One is patience, the other is presence and the other is vision. What I mean by patience, so I'm fortunate enough to go back with the Rockies assets to 1998 when there were 2 drilling rigs running in the state of North Dakota. They were only drilling vertical wells at the time, and there really wasn't a whole lot of hope for growth. Around 100 million cubic feet a day was moving out of that area. Today, it's over 3 billion. A lot of that growth has occurred in the last 10 years. When I talk about patience, these assets originally were owned and then purchased by Northern Border Partners. They actually -- the collection of assets that they bought at the time back in 2001 was actually they targeted the coal-bed methane in Wyoming. These assets were almost to throw in. They didn't really put really any value on these assets. Well now, they've come to be the premier assets, probably even in the United States as it relates to gathering and processing. But even after Northern Border bought it, and they changed to ONEOK and then was put into ONEOK Partners, there really wasn't a lot of growth story until almost the mid-2000s, around 2010. So you had to be patient not to get basically, "we need to get rid of these assets, there's no growth here. " But then along came horizontal drilling and fractionation and the Bakken Shale was discovered and then the rest is kind of history. When I talk about presence, if you can think about when -- if you're operating primarily in the southern states, especially Texas, Oklahoma and those areas, New Mexico, the weather is pretty good for operating down there. So you're looking where else to go, and you say, "well, we could go to North Dakota, it's minus 60 degrees up there. " So by buying these assets and have them change hands, we had a presence up there. And it was a presence with people in North Dakota. So they were used to the weather. So kind of that weather really was a barrier to entry to other people coming up there. Well, we were up there already. And that just kind of slowly built out things, a lot of federal lands up there, so you learn how to deal with the BLM and all those kind of things. And so through history, just us being there for decades really is what kind of gave us that competitive edge. And then we just didn't want to lose it. We just kept building out and trying to stay ahead of the volumes. And the teams through the decades have just done a phenomenal job up there, so.

Yes. So it starts up there with the Rockies with the strong base business, good -- really good market share. And then you think about asset connectivity, right? So now you take those assets, connect them downstream. And so explain to the audience what fully integrated assets means to ONEOK and why connectivity is so important across the NGL midstream value chain?

Well, it's about connecting the dots. So you have a -- you have a customer there that's a company that's got gas or oil to move in this case. So you have the associated natural gas that comes out of those areas. Then we also have the Mid-Continent. We also have the Permian. But as you kind of come down [ from ] there, we've literally connected the dots, just taking the gathering, we condition the gas, we get the liquids out of that, we take the gas and send it to the major pipes, either in intrastate or an interstate. And then we take the liquids literally all the way from the northern part of the United States, all the way down to the Gulf Coast. And the benefit there is just that complete full value chain. We used to, as ONEOK, would talk about the full value chain all the way from the wellhead to the burner tip. But if you really think about that, once you get to the city gate, that's a totally different business model. So really, the full value chain is the wellhead to the city gate and the wellhead to the pet chems.

Okay. And then operating leverage is the third part of the investment thesis. You spent about $5 billion recently on growth projects, should afford you some really nice operating leverage. So can you talk to what assets will drive the most operating leverage for ONEOK and where potential bottlenecks could exist as you try to unlock this earnings power for this growth CapEx [ spent ] over the past few years?

So we really don't see any bottlenecks here for the near future. And it's because the foresight of these guys long before I showed up at the company, they actually put in larger pipe. I like the way Walt talks about it, he talks about how it's an option by upsizing the pipe. We've got a lot more volume down that pipe, especially the NGL pipe coming out of the Bakken. But that's really -- if you look at the Bakken in itself, Kevin can break down the numbers for you. But we essentially have another $750 million that we can add on to our target EBITDA earnings for 2022 in the future based on the volume showing up with very, very minimal capital, and that's just in the Bakken. As you get down into the Permian, we've been slowly looping the West Texas line that basically goes out of the Permian Basin over to just around the Fort Worth area. And then again, as we were building out the Bakken, Arbuckle II was put in and upsized to move basically almost 1 million barrels a day. And so all of those combination of things and those decisions have set us up so that we can have outsized earnings with very, very minimal capital spend, which helps our ROIC.

Awesome. Maybe if I can ask, look, you seem to be kind of a heavy NGL-focused company. I mean you do have some dry gas exposure. It's relatively a small part of the company. So maybe you could just talk to us on why you chose to focus on NGLs versus other hydrocarbons?

Well, I think it's just the flexibility that you have and how NGLs are used. I mean you got different sources of use for propane, isobutane, your ethane, gasoline. So you get more diversity in your demands for those things. And so I think by getting into that, and you're not just kind of getting pigeonholed into one thing. We -- you say the natural gas side is a small piece, which it is. But amazingly, that's one of the fastest-growing pieces that we have. And it's primarily because of the weather swings that we're seeing and the need for those customers, either utilities or the industrial or commercial customers needing the extra swing capacity. So storage has become more valuable. So -- and expansions and those kind of things is really kind of taken off on that side of our business.

The other thing I would just add to that is that in the NGL business, the competitive landscape, there's a significant barrier to entry. There are several barriers to entry. One, it's very capital intensive as compared to the G&P business because if you're going to have a network of gathering, you're also going to need these long-haul pipes. We actually spend about $7 million since 2018 until now. But then the other thing that is a real key is that there's a limited amount of space on the Salt Dome in Mont Belvieu. And there are really only 4 companies that have a presence there. And having our piece of Mont Belvieu allowed us to continue to expand in other parts of the country and invest the capital that was necessary. Wherein the G&P business, it's highly competitive because the barrier to entry. Anybody can throw up a 200-million-a-day plan, $200 million and you're in the business, where it really takes billions to build out a full NGL system.

Yes. Yes. It's a good point. Any questions? So commodity price sensitivity, very topical today. I mean you've seen some volatility in NGL prices and natural gas prices. Could you talk about your commodity price exposure in each of your segments? And talk about your hedging strategy and when you think about the hedges that you have today, are they above or kind of below current spot prices?

Yes, we'll take the segments first. Obviously, our Gas Pipeline segment is basically all firm demand charge, no commodity risk, 95-plus percent subscribed. So no commodity exposure there. The NGL segment doesn't really have direct commodity exposure because the way our contracts work, we're buying and selling and then taking out our fee, but we're buying and selling at the same index price and then taking out our fee. Where we do have some exposure to pricing is, as it relates to spreads, in our optimization and marketing business. But the dynamic of that business, if you think about it is if that spread is not there, we just don't do it. So it's not something that's going to be negative. It's just upside for us as the 5 different products in the different markets of Conway and Belvieu, as those move around, we have opportunities to take advantage of those spreads and make money. So that 5% to 10% of the NGL business related to that -- those spreads. In our gathering and processing business, that's really the only area where I'd say we have direct commodity exposure, and that's from the POP or the percent of proceeds portion of our contracts, which we've worked extremely hard over the last several years to get rid of that -- as much of that as we practically can. Now that business is north of, I think, 85% fee-based -- 80%, 85% fee-based and so forth. As it relates to how we think about that commodity exposure, we do hedge. So as we are already hedged, you can look at our [ queue ] for all the details, but we're hedged in the neighborhood of 70%, 75% of the commodities, which is where we practically like to be. And we view that as we're not out trying to pick perfect prices. We're out there to take risk off the table. Those hedges are on in '23. If you look at the current strip, our crude hedges are a little above water. The NGL hedges are stronger than the strip. And our nat gas hedges are a little under the strip. So net-net, I think the key there is if you look at that and do the math, we're up significantly over what those same hedges were in 2022. So that's a built-in step up that's part of the more than 10% -- or outlook we provided in EBITDA for 2023.

Well, so now I'm [going ] to turn it over to Dan Lungo, who is our investment-grade analyst. He's going to ask you the really tough questions. And then after he asks those, he's going to hand it back to me.

Not too tough, I hope. Can I just have one follow-up to that commodity price exposure. In the NGL segment, you have 5% to 10% direct commodity exposure -- not direct, but spread commodity exposure. The other 90%, 95%, what's the breakdown between take-or-pay and volumetric base? Do you have those numbers?

We haven't provided that publicly. And as far as what that breakdown is, there is a portion of the fees. It's not 50%. But -- but there is a portion of the fees that are take-or-pay, and they -- that's -- they're some out of the Bakken. If you remember, one of the things we did talk about was in the Bakken, when we built Elk Creek, it was backstopped by about 70,000 barrels a day total of take-or-pay and now we're moving 300,000-plus. So net increase, right? So that really doesn't apply anymore. But we have a handful in the Mid-Continent, but the market is really driving away from take-or-pays as it relates to NGL due to the competitive nature, particularly in the Permian and the Mid-Continent.

That all makes sense. I want to turn to Bakken inventory debt. We hear -- a view we hear from the investor community, sometimes is that Bakken is short inventory as a mature play, especially when compared to the Permian and we'll have challenges sustaining oil growth over the coming years. As the midstream player in the region that works with all the producers, could you share your view on how the Bakken growth going forward and what it means for ONEOK?

Well, I think there's a couple of things I'd talk about when we talk about Bakken growth and inventory. First, the technology and producers continue to get better and better. So any time we talk about inventory, typically, we're talking about our forward look given the technology that exists today. And an example would be 2 years ago, we were talking about Bakken inventory depth. And today, there's actually net more wells that are profitable at below 60 or below 80, take your pick, then there were then because the technology has improved to increase the number of locations more than we've actually drilled in the Bakken during those last 2 years. So net-net, the inventory, there's about -- and this is state-provided data from the North Dakota Pipeline Authority, you've got about 7,000 more wells today than you did 2 years ago in that inventory. If you talk about inventory at $80 oil, you're talking decades. There's -- to me, there's no issues. Even at $60, you're probably talking 10 to 20 years just depending at the pace you're going. Most of our customers are talking about the Bakken, they've got plenty of inventory to grow a little bit and then hold things flat for a decade, a decade plus. And they're typically thinking about it in a $55 to $60 environment, not in an $80 environment. So we have a tremendous confidence that's using state data, we've done our own research, we've had third parties look at it. So we believe that there's a strong at a minimum hold production -- oil production flat to slightly growing over the foreseeable future. Now on top of that, you're also seeing the phenomenon of the rising gas-to-oil ratios, which a lot of times people talk about the Bakken and production is flat or production is declining, they're talking about crude. But when you look at gas production, there's clearly a trend when you look over the last 4 or 5 years of that GOR rising year-over-year. And that's where Pierce referenced, you get into even -- just for simple math, let's say there's 1 million barrels a day of production coming out of the Bakken, there's actually a little over 1.1 now. But if you take 1 million even if the gas-to-oil ratio goes up 1 turn, say, from -- when we started talking about this, it was 2.6, now it's 2.8. So it goes from 2.6 to 3.6. That's an extra Bcf a day of gas production. And then you do the math on processing plants you need and the NGLs that produces, that gets you -- that incremental Bcf a day for ONEOK means an additional $750 million of EBITDA, and that is in a flat Bakken oil production scenario. So that's the power of that rising gas-to-oil ratio that we believe will continue over the next several years.

Can I follow up on that real quick? I mean incremental Bcf a day, if that were to come across your system, bottlenecks, no bottlenecks. What kind of...

You wouldn't need a lot more -- you would expand Elk Creek up to 400,000 barrels a day, which is add on pumps. We might need another processing plant. You might need a little more fractionation capacity but Elk Creek, Arbuckle II, the big dollar items, the pipelines on the NGL side, you got capacity to handle that.

If we saw a Bcf a day come, we have a 50% market share in the G&P business. So we would expect to get half of it. So our capacity, that's what Kevin says we may need one more plant. We're looking at about 50% of that. NGL-wise, we will get 100% of the incremental NGLs.

Okay. Great. That's very helpful. Turning to exports. You've shared in the past that you're interested in building an export dock. Do you still believe this could be a value add for your customers? And then how would you look to get that exposure? Would you look to partnerships or take it on yourself?

We've been looking at a dock for several years. We've talked about it frequently. The philosophy, our strategy really hasn't changed. It is a nice fee-based business that we would like to add to our portfolio, but we're going to be disciplined and intentional about how we go about that. As we talk to customers, yes, there's some conversations from some customers that want access. They want to see their molecules go across the water. In those types of situations, there might be partnerships involved or something like that. On the other end of the value chain, we're talking to demand markets as well that are coming to the U.S. wanting supply by being one of the only large integrated NGL providers without a dock, we have a tremendous amount of supply that we could direct to a dock if we can get the right commercial terms, the right counterparty on the other side, again, all the things we would want to see to get comfortable to move forward with a dock. It's something we're continuing to work. It's not something we feel we have to have, but it is something that we think would be a nice add and a nice service to provide for our customers.

Great. So I'm going to turn to capital allocation a little bit. ONEOK has had a conservative dividend strategy that results in you having to not cut the dividend like many of your peers in 2020. Now that you're on the brink of meeting metrics, to be able to bring up -- increase the dividend again, the 3.5x leverage ratio, less than 100% payout of free cash flow. How are you looking at capital allocation going into the next year of dividends versus buybacks?

So we are starting to get to the point where we have clear visibility to hit the metrics that we've put out there. Aspirationally, we said we want to be 3.5x, 4x debt-to-EBITDA or lower. There's not any fine bright line as to when we cross that, we'll do that. It's a conversation that we regularly have with our Board. And I think the jury is still out on how we would do a mix between dividends and buybacks. We're open to both. Buybacks would be somewhat dependent on where our stock price is at a particular point in time. But I think it's clear that as we look forward, we want to maintain flexibility well below our earnings growth so that we have capital to reinvest in opportunities. We've been very successful in finding opportunities to invest as extensions to our existing assets. And when we do that, we've been able to do it at returns that have been above the industry average. So to the extent that those opportunities present themselves, that's our first capital allocation goal. Then at that point, we'll start to think about dividend increases and the potential to buy back stock. And I think at this point in time, we aren't wed to one or the other.

Bondholders will be happy to hear that you go below that leverage target. Just a follow-up on that. Historically, you guys, when you have a large capital program going forward, you're willing to go higher on your leverage but then immediately once those projects come online, you delever very rapidly through a combination of EBITDA growth and whatever debt paydown you need to hit that target. Should we expect that policy to continue moving forward? Or do you don't see yourselves going above that 4x target?

No, I don't think so. I think that -- I think we were in a very one-time-in-a-lifetime spot when that happened for us in that we had the opportunity to build Elk Creek and Arbuckle II simultaneously, along with 2 fracs and 2 processing plants. I mean we don't get presented with $7 billion of opportunity at one time on a regular basis. It was too good to be true to not go for it, so we did it. And you got to think about it, at the point in time we were coming off a $2.6 billion EBITDA base. So a turn on $2.6 billion is very different than a turn on $4 billion of EBITDA. So now when we're $3.5 billion of EBITDA, that means that we've got plenty of room and our expectation is to hope to, regardless of cycle, try to use 4x as kind of an upward ceiling as it looks [ in ] CapEx. Not to say that if the right project comes along, we won't get there. But I don't foresee a situation where we would go back up and approach anywhere close to [ 5x ]. Just given the size and magnitude of the company today, that would be -- we don't see capital opportunities of that size to do that. So where we are today, I think we've got a lot of room and flexibility and dry powder to stay comfortably in the leverage range that we want to.

Perfect. I'll pass it back to Chase.

Yes. So digging into the NGL segment, the last 14 minutes we have, we'll go through -- try to go through all the segments, but let's start with NGLs. the Medford fire, obviously, an outage there. And I guess we don't know yet if it can be repaired or not. And so -- but if it can't be repaired, how are you thinking about building at Conway versus Mont Belvieu? I mean obviously, you have optimization opportunities for Conway. But if you build at Mont Belvieu, I'm assuming you probably lose some of it, but you still have capacity up there. So you probably still do have some optimization opportunities. But just walk us through kind of how you're thinking about where you would build if you couldn't repair? Now if you can repair then obviously, you'll repair it. But just kind of walk us through that.

Yes, we -- at this point in time, we haven't come to a conclusion. I think that the 2 options that are probably out there are repair at Medford or build at Mont Belvieu. If we repair at Medford, that gives us the flexibility. We have 3 fracs in the Mid-Continent with Bushton, Conway and Medford. So we have plenty of connectivity to do our optimization along those. There are pros and cons in doing one or the other. And frankly, we're somewhat indifferent between the 2. And it's really going to come down to a comparison of the returns, the insurance proceeds that are going to be necessary. If the repair comes in at a price that wouldn't allow us to do a Mont Belvieu build, we won't do it. We'll do it at Medford. We're very happy. That's how we've been operating for a long time. To the extent that an opportunity comes to build at Mont Belvieu, and that's a better solution for us and a better solution for the insurers, then we'll head that path. We hope to make that decision in the near future. But we're very comfortable in either space, basically because of the connectivity we have today. I mean we've been able to take 210,000 barrels of capacity out of our system and not shut in one plant, and we had one for a few hours when it just happened because it was connected directly into the [ plant ]. But other than that everybody else, we were able to flow those barrels around and get them either to Conway or down to Mont Belvieu. So our system provides us a lot of flexibility. The insurance companies are working very closely with us. And so we'll come to that conclusion and let everybody know in the next...

So let me ask you this, how much -- if you were to build a frac at Mont Belvieu, what would that cost roughly?

Well we've built 2, so -- here in the last couple of years, the MB-4 was around $400 million. MB-5 was around $750 million because MB-5 -- we had built 2, 3 and 4. And so we had an infrastructure that was around that. When we built MB-5, we built the infrastructure to prepare it for 6 and 7. So an MB-5 would be more in line with what MB-4 cost than it would what MB-5 cost because MB-5 includes that infrastructure that's necessary to take the next couple of [indiscernible].

So [ now ] was at 4?

It was $400 million. Now things have escalated and the world is a different place then...

Assuming it's $450 million, if you want to just make a number up, that's not quoting you. And so if you looked at that, and it was $450 million to build a new one and then all of a sudden, you figured out that the repair Medford was $450 million, what's your decision?

I'll tell you -- when we make the decision we'll tell you. It's a little more complicated than that because there are time factors and what it takes to do each. Just think about it this way that Medford was originally a 20,000 barrel a day frac. And over a period of 50 years, it became a 210,000 barrel a day frac. So you aren't going to recreate that animal just the way it was built all the way. They're going to go back in a much more efficient manner. And so it's a matter of how much of that facility, and there's a lot of it is, is really going to fit in with repair and putting together a state-of-the-art facility. So either way, we're going to end up with a high-quality, newly efficient facility in either of those locations. And we'll tell everybody when we make the decision.

Okay. Sorry. I tried. All right.

There's a question.

Oh sorry, questions, yeah.

[indiscernible] repair.

At some point in time, if we need the capacity ultimately over time, it would be. But I think you got to remember that we have MB-5 coming up in the early second quarter of 2023. We built that for the next wave of growth with Medford in place. So I don't think we're at a point where we needed more capacity yet. But growth continues to be robust, and we'll make that decision. But we have the flexibility. We are definitely prepared for expansion down in Mont Belvieu in the future.

If we can go back and talk about Rockies NGLs, you talked about not really -- you didn't see any kind of near-term bottlenecks. I mean maybe you have to build some process capacity or something. But we think about takeaway capacity. I think that to see what's the -- I've got 440,000 barrels a day of takeaway, I hope that's right. If not, I'll blame Neil. I'm just kidding Neil. But if we split that, I think 300,000 is Elk Creek and 140,000 is on Bakken NGL pipeline. Help us think about your decisions about putting it on Elk Creek versus Bakken NGL. Is it more economic for you to put it on Elk Creek? If so, when you run out of capacity there, do you -- how do you think about adding, I think you said 100,000 barrels a day of capacity there versus putting more capacity on -- or more volumes down for the Bakken NGL Pipeline?

Well, the way we think about that is the Bakken NGL line ultimately connects into Overland Pass, which is a 50-50 JV that flows on into Bushton and the Conway markets. So as we think about the economics, as we put a barrel on the NGL pipeline, the original Bakken NGL pipeline in Overland Pass, there's some leakage there to our partner in -- on the Overland Pass side. So expansion, moving that over, that's the economics we'll use as far as when you would need -- you might build capacity to then move all that over to Elk Creek. We're not going to get caught short capacity, right? Those barrels, that's one of the things we've said from day one. We've got a lot of visibility. We talk to every customer in the basin at this point, and we talk to them frequently. So we have a really good feel for when those volumes are going to show up. And we will make sure we stay ahead of that and ensure that we've got the right capacity at the right time, even in an ethane recovery scenario. That's part of our factoring in as well, especially as we've had some great opportunities to incentivize some ethane recovery out of the Bakken over the last few quarters. So that's part of our thinking as well as what do we need that capacity to be. The other thing about expanding Elk Creek, it's not a 2-year project, right? In many cases, we may go ahead and order pumps and have them in inventory. So it's just you're talking months, not years to be able to get a project like that done.

Okay. Awesome. If we can talk about the West Texas NGL pipeline system. This is your Permian NGL pipeline, you know this, but just [ fair ] -- the Permian NGL pipeline and it's about 230,000 barrels a day, if I have that number right. And so kind of a few questions. Number one, how should we think about utilization on that pipe today? Number two, talk about potential to expand if utilization is tight. And then number three, talk about connectivity within the Midland and Delaware Basin to third-party NGL shippers?

Pierce referenced this in his original -- in his opening remarks and some of the early questions about the strategy around West Texas LPG is we'll continue -- we have been. I think we've done our third expansion now, expanding the Permian to where it connects to Arbuckle II. And we can continue to do that in small chunks as volumes needed. So as we start ramping up and get close to capacity, volume show up or we get a new contract, we can start a project and in a few months, have some capacity added. We will continue to do that until ultimately we have a brand new 24-inch pipe from the Permian all the way to Arbuckle II. When you finish that last loop, you literally almost pick up another couple of hundred thousand barrels a day of capacity. Because a 24-inch pipeline running full is roughly 600,000 barrels a day. So that's what I'm saying you do incremental, incremental. And then when you finish the last one, now you've reduced all the bottlenecks and you pick up the extra capacity. So at that point, it allows us to go compete, we can compete well right now because we can expand quickly and at a low cost. But at that point, we'll have the opportunity to really go add a lot of volume.

If I can move on to G&P, and this is kind of really a follow-up to the last question. Obviously, you've got a very strong integrated foothold in the Rockies and the Mid-Con. When you look at the Permian, you don't have the G&P, it's noticeably absent. What are your thoughts on expanding on -- the further upstream into the G&P in the Permian and you're doing that either organically or M&A?

Consistent with the way we've talked about it. I mentioned earlier, we worked really hard to get rid of commodity exposure. Several of the opportunities that -- we look at all the opportunities, but many of them we've looked at, we would be adding back quite a bit of commodity exposure. The Permian also, in many cases, we look at who has access or who has the rights to direct where the NGLs go. And in many cases, the processor in the Permian does not have those rights. The producer has what's called take-in-kind rights. So it's ultimately the producer's decision on where the NGLs get directed. And there's been a couple of opportunities that may look real attractive. But behind -- under the covers, the producers are really making those decisions and those NGLs have already been directed to other -- to other NGL providers. So that's another reason that we don't particularly like some of the assets in the Permian. Lastly, one of the things about the Bakken, the Mid-Continent is processors are typically connected all the way to the wellhead. So as it comes up for recontracting, you've got a stickiness factor, for lack of a better term, with the customer. In the Permian many of the plays have evolved where the producer is laying their gathering system and delivering at central delivery points. And so the processor then is really just processing, and that's it. And when that contract comes up for bid, then it's just a free-for-all from a recontracting perspective. So those are just 3 of the things we look at and as we've evaluated these opportunities, we've chosen not to participate. Interestingly, one of the areas that we do have strength in our NGL business is we -- customers that don't -- that aren't integrated sometimes like to come to us because we don't have G&P in the basin competing against them. So that's an interesting dynamic that's played out on several occasions as reasons people would like to come to us. So we believe we're going to continue to get our fair share of the Permian growth. And with that, we'll come at further expansions to West Texas LPG.

Okay. Awesome. We've got about a minute left. If we don't have any questions, I'm going to wrap it up with a question on your natural gas pipeline business. We talked about this earlier, smaller, but it seems like it's often overlooked as a part of your business. But could you step back and talk about some of your storage investments and your West Texas gas expansion that gives you some incremental takeaway out of the Permian and just overall kind of residue gas pipeline strategy? I mean, obviously, LNG is going to be a very big growth driver for some of this business over time. So just kind of what's your strategy on the residue gas pipeline?

Let me take the first part of that question. Kevin, I'll let you finish it up with kind of the more details on the storage. But what makes intrastate and interstate pipes valuable is the amount of connectivity that you have to supply and the amount of connectivity you have to demand. And diversified demand, diversified supply because the business model there is basically you can determine what your rates are going to be but the market actually determines what you actually get. So if you had $1.5 on your rates, but the market is saying that, "hey, it's not worth but $0.10," you're going to get $0.10. So the more connectivity you have to supply and the diversity of each you have on the demand -- on the demand side makes that pipe much, much more valuable. So that's the kind of assets that we have. We have multiple connectivity to supply basins and multiple connectivity to the demand sources. And then what's recently happened, I'll let Kevin talk about the storage, but it's just the nature of the weather that we see now has caused a lot more demand for swing-type services.

Yes. And that's what got us continuing to look at even more ways to expand our storage capabilities, both in Texas and in Oklahoma and other areas if opportunities present. But we have had a lot more -- a lot of interest particularly since Winter Storm Uri for those storage assets. We've had many customers come to us looking for redundant supply from a resiliency and reliability perspective. All those things are effectively demand drivers for our business. And we love this business because, again, these contracts are going to be all 100% take-or-pay firm demand charge, you're getting paid and regardless of what happens. And I would also reference an example of this, we built our Roadrunner pipeline, which is a 50-50 JV with Fermaca, several years ago with the intent of -- and it's fully subscribed for going east to west, out to the connection into Mexico. But then as Waha, the gas takeaway tightened up, they were looking for ways to get gas back. So we -- okay, we'll backhaul that pipe. So we're able to make money there as well. So having a system out there that's effectively a giant header system, connecting supply points and demand points like Pierce mentioned, is a fantastic asset for us to continue to build on, given what's going on in the Permian.

Awesome. Now we're a few minutes over, so we're going to have to call it quits. But really appreciate the time. Thanks for bringing the whole team from ONEOK. Really enjoyed the conversation, and thanks everybody for joining. With that, we'll close it out.