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

Good morning, and thank you for your investment in ONEOK. A review of our 2023 results was included in the proxy statement and our annual report, which were distributed to investors in advance of today's meeting. These documents include detailed information on ONEOK's 2023 financial and operational performance. and I encourage you to review those materials if you've not already done so. I'd like to start out by reflecting on ONEOK's performance and significant achievements. 2023 marked ONEOK's tenth consecutive year of adjusted EBITDA growth that has been accomplished through various commodity cycles. ONEOK significantly expanded our portfolio of assets by completing our $18.8 billion acquisition of Magellan Midstream Partners in late September. This strategic transaction brought together 2 top-tier midstream companies with industry-leading returns on invested capital and created material diversification and scale. Adding Magellan stable, primarily fee-based refined products and crude transportation businesses to ONEOK creates a more resilient energy infrastructure company, a company designed to generate stable cash flow through various commodity cycles. Now less than a year since the close of the transaction, it is clear that our companies are greater together than either were apart. The Magellan acquisition would not have been possible without the dedication and focus of our employees who delivered strong financial performance from our legacy businesses by running those assets safely and reliably, while at the same time integrating 2 large new business platforms. We continue to prioritize safety and our sustainability and ESG-related performance, consistently ranking towards the top of our industry peer group, including receiving a AAA rating from MSCI. In January, our Board of Directors increased the quarterly dividend 3.7% to $0.99 per share, resulting in an annualized dividend of $3.96 per share. For future dividend increases, ONEOK expects to target an annual dividend growth rate ranging between 3% and 4%. Also in January, the Board of Directors authorized a $2 billion share repurchase program targets -- that targets it to be largely utilized over the next 4 years. This program is complementary to our dividend growth rate as a key pillar of shareholder return in the future. In 2023, we achieved double-digit growth in the NGL throughput and natural gas processing volumes and continue to see robust producer production across our operations with North Dakota's natural gas production reaching new all-time highs during the year. We've also had a strong start to 2024, resulting in one of already increasing financial guidance from what it was originally announced in February. We are now guiding to a 2024 net income midpoint of $2.88 billion and an adjusted EBITDA midpoint of $6.175 billion. Our increase to 2024 financial guidance was driven by two key factors: first, favorable supply and demand fundamentals across our systems that are contributing to volume growth and providing significant momentum for the remainder of 2024 and into 2025. Second, the continued confidence in our ability to realize a meaningful commercial and cost synergies from the Magellan acquisition. From the supply perspective, we continue to see volume growth across our systems from increases in production. As it relates to demand, we continue to see supportive demand and fundamentals for natural gas, natural gas liquids, refined products and crude oil across our systems. Natural gas is seeing demand for continued electric generation. Ethane remains a highly preferred feedstock for petrochemical facilities. NGL export strength continues and seasonal refined products demand for travel and agriculture continues to be steady. Crude oil demand is driven by global demand. We remain focused on expanding and extending our systems in ways that align with the needs of our customers and the marketplace. Progress continues this year on 3 material growth projects that are expected to be completed in the first quarter of 2025. They are the construction of MB-6, a new 125,000 barrel per day NGL Fractionator in Mont Belvieu. Second, the expansion of our Elk Creek NGL pipeline increasing our total capacity out of the Williston Basin to 575,000 barrels per day. And finally, the expansion of the West Texas NGL pipeline in the Permian Basin, which will more than double ONEOK's NGL capacity out of that area. We recently completed a 30,000 barrel per day expansion of our refined products pipeline in El Paso, Texas, which connects additional supply with growing markets in Texas, Arizona and Mexico. Additionally, as the need for future power generation increases, domestic natural gas demand is projected to increase, affecting the entire midstream value chain and ONEOK is positioned to play an important role. And just last week, ONEOK announced an agreement to acquire a system of strategic NGL pipelines for $280 million. That includes 450 miles of pipelines located in the Gulf Coast market centers for NGLs, refined products and crude oil. We have plans to connect these pipelines to our Mont Belvieu, Texas, NGL infrastructure and our Houston refined products and crude oil assets, providing quicker connectivity and accelerating our ability to capture batching and blending synergies. We expect to close this transaction midyear 2024, subject to the customary conditions. We've achieved a great deal in recent years, and over the course of our company's history and now ONEOK's larger scale will continue to support our efforts to help address domestic and international energy demand, contribute to energy security, and maintain our critical role in the long-term energy transformation. As it relates to capital allocation, we remain focused on delivering long-term value for our stakeholders through a balanced combination of higher return capital projects, dividend growth, debt reduction and share repurchases. We are excited about the future of ONEOK. Strength across our businesses is indicating a solid 2024 and already providing momentum into 2025. Before I conclude my remarks, I want to acknowledge our employees once again for their continued dedication and exceptional performance, all while maintaining a focus on operating our businesses and taking on our integration efforts. Thank you for your unwavering commitment to excellence and operating safely. Thanks also to our Board of Directors for their guidance and leadership in 2023 and as we took on a major transformational step toward the future growth of the company. And finally, thanks to you, our investors, for continued trust and investment in our company. Madam Chair, that concludes my remarks.

Thank you, Pierce. Mr. Cipolla, will you please report on the results of the voting?

Madam Chair, we've been provided the preliminary report of the Inspector of Election as follows: each of the 10 director nominees has been elected to the Board of Directors. Proposals 2 and 3 have been approved by the required vote of the ONEOK shareholders.

Thank you, Mr. Cipolla. Because no one has submitted any additional business for this meeting in accordance with the provisions of our bylaws, there is no other business to come before this meeting. I once again express my sincere appreciation to the shareholders who attended this meeting and to those who have submitted their proxies prior to this meeting. I declare this Annual Meeting of Shareholders concluded.