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

We have Walt Hulse, the CFO of ONEOK; and Sheridan Swords, the EVP and the Commercial Head of ONEOK. I'm Jean Ann Salisbury. So we're going to be talking for the next 40 minutes through Magellan, EnLink, Medallion and other stuff. So thank you guys for coming and being here today.

Thank you.

So let's just -- let's go ahead and start with Magellan. Can we rewind back a year or so? For a long time, ONEOK is a pretty straightforward story, integrated NGL system out of the Bakken and Mid-Con to Mont Belvieu, super simple. Can you talk about how long Magellan had been in your sights? And what made the deal get done last year?

Sure. Well, thank you, first of all, for having us here today. Magellan has been something that we've looked at for years. We came close to doing a transaction in 2019. But at that point in time, if you remember back, we had -- we were in the middle of a really just embarking under a $6 billion construction program as we were building the pipes out of the Bakken down to Mont Belvieu, 2 fracs, 2 processing plants, so it wasn't the right time for us. But we saw then that the overlay of their assets and our assets on the NGL side were really going to provide enormous amounts of synergies. So when we got to '21 and Pierce Norton had joined us as CEO, we sat down and we decided to figure out where we wanted to go over the next several years, and we developed a list of criteria. We had 9 criteria as to what we thought would make our company better and more attractive to shareholders. And then once we had those criteria, we developed 2 or 3 questions for each one to evaluate companies, and we screened about 15 companies against that. And Magellan popped right to the top, again, kind of back to where we were in 2019. And a couple of other criteria, I'm not going to go through them all, but a couple of those were -- we clearly were heavily weighted to the Bakken, and we love the Bakken. We wish we could find 10 more Bakkens. But it is a defined area, and there was a perception of [ our tied to ] crude prices. So we were really looking for something that was a demand pull as opposed to being supply side. Magellan fit that bill, gave us scale, was credit enhancing. So it ticked off all 9 criteria, and we went ahead and initiated that conversation ourselves and moved forward. When we got done with that, I'll jump forward a little bit to the other 2, just how they fit into that. When we got done with Magellan, we went and reevaluated those 9 criteria. We knocked off 3 and added 5 and then used those to evaluate that same group of companies again. And at that point, EnLink was right there and Medallion jumped forward because of the fit with Magellan. And we initiated those transactions back in December of '23. So in both cases, we initiated and tried to go after what we thought fit our long-term strategy as opposed to just trying to go after what was available.

Makes sense. I feel like when you talk about this funnel, all I can think about is in your IR deck, you guys always have that funnel that leads you to one of the stock, and I imagine that the M&A funnel probably looks similar. You were very farsighted with the refined product synergies that may not have been immediately obvious to everyone right at first, only humbly include myself in that bucket. Can you kind of talk through the synergy buckets from the Magellan deal, give some examples of each and talk about anything that surprised you either to the upside or the downside?

Sure. I think when you -- we've kind of came out and said that we put the synergies from Magellan into 3 buckets, and we named them batching, blending and bundling, make it very easy. And really, I think, as you talked about on the batching side, we'll start with that one is, as Walt said, their -- especially in the central part of the United States, their system fit right on top of our system. We were already at the time moving a small amount of refined products on our NGL system. So we knew it could be done and had the capability of doing that. So we knew if we would get Magellan, we would be able to expand both the NGL footprint and the refined products footprint by being able to switch products on to the 2 systems and be able to move around constraints to be able to get product on time to the locations out there. And we've really seen that happen. I mean we knew it was going to take a little bit of capital to make some of those happen. But we've been really pleased at how we see a line of sight that we can put a lot of butane on the refined product system at different locations to move it further out into the system, and this kind of what comes into the blending that now we are going to be able to put refined products pipeline connected into the blending terminals instead of bringing them in by truck. Magellan was spinning on average $0.20 a gallon to butane into the blending, to the right locations of blending, and that is a combination of both pipelines and truck. By putting it on pipelines, we're going to be able to greatly reduce that. So we're going to just -- from a logistics standpoint, we're going to see a great opportunity there, especially as we finish building out the capital, a little bit of connections that we have to do will start coming on in '25. The other thing we knew if we could get it there cheaper and get it further into the system cheaper, there'll be more opportunity to blend because I know there was some volume that was not being blended because this wasn't economical to move the trucks all the way to that location. So we've seen a lot of opportunities there as well. And I think that's probably one of the biggest surprises we had is how much more blending would be there. We knew they were doing a great job of blending butane in there where they could. But by reducing logistics costs, getting it on pipeline, having it when the opportunity blends there has really been a surprise to us on that side. On the blending side, what I'll say, we kind of think about blending is a little bit. The other thing that we knew was there, we didn't know the extent of it. But by bringing a different mentality to marketing and everything else with our ability to put butane or buy butane at certain times of the year, I told a lot of people that Magellan, because they needed normal butane to blend into the refined products, they would have to buy normal butane at different times of the year and then automatically sell RBOB against it. So really, what was driving when they captured the spread between butane and RBOB was when they could get their hands on butane. By having ONEOK, what I call us, we have butane on demand. So we are not restricted by that at all. So now when we can go in there and look at the spread and when we think it's the best time to put the spread on, we will, and we can put a little bit on, we can go through a period of time where we can put a lot on. So that has really opened up a lot, have been able to get a greater margin than being [ beholden to when you ] could buy the butane. The other thing we did from a marketing standpoint is -- and we kind of put this in the blending category, is we also -- when they blended right away, they would sell it. When they actually did the blend, they would sell it. We went and looked and there and go, "Hey, Magellan has storage. We see a better -- out on the curve, we see a better time to sell the market." So we had tens of millions of dollars come in right away, where we just didn't sell it in the month that we actually blended in. We would sell 3 or 4 months out on the curve at that time, taking no more risk. We're just taking a better opportunity on the curve to be able to get there. And that's another thing we have when we have a bigger balance sheet, we can sell further out on the curve, continue to go forward. So that was some of the blending opportunities that we had. The other big one we knew was there, we didn't know how big it was going to be on the blending side, is we knew we needed to connect our NGL infrastructure down in Mont Belvieu where a lot of our purity products into Magellan's refined products distribution system. They have a great refined products distribution system down on the Houston Ship Channel. We needed to get those 2 connected. And so we went in there and said, Okay, well, we're going to build a pipeline. That was what we were going to go look at." But after we bought the 2 companies, got our teams together, we came up with that we would go -- the Easton assets would be a great fit for us. It was something on the NGL side we had looked at for a period of time. As soon as it was going to come out when the private equity side to sell it, we were going to be in the middle of that. But we preempted that process again going, okay, this is what we need and either we're going to build a pipeline or we're going to buy this pipeline. And we were already moving a lot of volume on their pipeline. So if we built the pipeline, we were going to move a lot of volume from their pipeline. So we had a little bit of leverage in the negotiations. So we bought that pipeline. And immediately, we've been able to put 25,000 barrels a day back on that pipeline even before we [indiscernible]. But here is when we get into '25, when we connect -- finish the connections from the Easton system, small connections over into our Houston East terminal, and that will get into the whole distribution system. We will actually greatly increase the amount of NGLs that we will be able to move across the system. Today, at MVP, at our terminal MVP, at our terminal MVP in -- terminal in Galena Park, we have customers buying NGLs from our competitors to blend into their product. We will now be able to supply that ourselves and be able to capture those synergies. So when we think about it, that's been our big thing is bringing a different mentality, how much more by connecting the 2 systems, we can blend more product more efficiently and also how it led to like additional synergies with like buying Easton and being able to not only get the blend, but also increase throughput on the system.

Great. That makes sense. I think you just touched on this, but what causes some of the Magellan synergies to have occurred right away versus later in time?

Mainly capital. If we have to spend a little bit of capital, it's kind of been the big one. And we have a lot of it is coming up, going to start really hitting in '25, which we'll get a full year of that in '26. But we're pretty excited about what '25 is going to look like.

And then on bundling, the other B., that seems to be more long range in nature. But can you talk through any feedback from customers that you've heard from so far if they're interested in the bundling offer?

Well, definitely. And we have been doing this bundling for a long period of time. When we talk about the Bakken and the Mid-Continent, as we look at G&P and NGLs together, but now being able to bring in the crude side, we've had a lot of people come to us, both when we got Magellan, but definitely when we bought EnLink, come to us and really want to do more business with us because they see that integrated value chain. They also see a partner that has the balance sheet to be able to grow with them, especially in the Permian as they want to bring more gas plants on or more crude oil on this well. So we're really seeing the opportunity, especially with Medallion and EnLink to be able to bundle that, to take crude oil from the Permian and take it all the way through our long-haul pipes, either to get it into Houston or even across the dock with our Seabrook terminal. So we've had pretty good success, but we knew pretty good inquiry. We knew that was going to be a more long-term time. You got to wait for contracts to come up and everything else. But we've had some very good conversations with producers so far.

Great. So now on to EnLink and Medallion. We've already started overlapping into that, but how long were those deals in the works? And what made these assets so attractive to you?

Well, I would come back to we were very disciplined and intentional about how we went about it. Our criteria that we had developed, we knew that, especially after we bought Magellan, really, Magellan previously didn't have the producers as customers. We clearly did in our G&P business and our NGL business. But now with 2 long-haul pipes and really no way to source crude, clearly, Medallion fit right into that. And then EnLink, we had our eyes on EnLink. We also had the opportunity to buy EnLink back in that '18, '19 whenever it traded out of Devon's hands. And at that point in time, it didn't quite fit the mix. They hadn't really made the push into the Permian yet. So it was more of a double down in the Mid-Continent at that point. We decided not to do it. But as they did a good job of building out the Permian business, that kind of fit into the fold. So when we did our screen, we realized that we needed both of those. We needed the G&P push into the -- at the same time, we needed the crude gathering. It just so happened that GIP controlled one and owned the other. So we approached them in December of '23 and started a conversation around that and really worked through the bulk of until August of '24 when we were able to bring those 2 together. We wanted to make sure that we had the opportunity to do both. So we did try to keep the linkage between those. They clearly had those in one fund. So our ability to show up with a little over $5 billion in cash was definitely helpful to the process. But again, it was us initiating a transaction that fit those holes that we felt we had. We've got the strategy that we've had for the last 10 years of having a fantastic asset position and then trying to extend and expand, so that whenever we're doing a capital project, it has an element of being a brownfield type of project. And we felt that these kind of fit in to allow us to then again, expand and extend but do it in a much quicker fashion by bringing in the whole company. So that was how we came into the fold.

That's great color. Do you plan to be more aggressive in allocating CapEx to the Permian for G&P versus the previous ownership structure?

Yes. I think we'll be much more aggressive on that. I mean the previous ownership structure had kind of a just in time on processing capacity in the Permian Basin. They didn't want to spend their capital too much too early. I think our approach is going to be much more let's get some capacity out there. Let's be there to be able to take the gas when producers are producing it. Time to market, I think, is very important in that area. So I think you'll see us put a lot more capital out there and put some spare capacity out there to be able to continue to compete for more volume.

Great. And so as you kind of just described, the Medallion synergies are very linked to the Magellan crude. How are you thinking about growth opportunities related to your crude oil assets?

I mean we still have. So we have a great position in the Midland, and we think there's opportunities to continue to grow that out, continue to bundle with the gas processing from EnLink to be able to just organically grow or grow in-basin. But we're also continuing to look at the Delaware. We think there's some opportunities to grow into the Delaware, either by organic growth or by M&A. There's some small opportunities out there. As the time comes, we'll take a look at those as well to be able to bring them in. I think also with -- we integrate -- put this integrated model in place where we can take a barrel from the Permian and take it all the way to Houston or even across the dock. I think that is going to give us the competitive advantage to be able to get bigger. The other thing we're seeing with Medallion is they didn't have the balance sheet to buy a lot of crude. So a lot of times, there were certain producers out there who did not want to market their crude. We were seeing marketers come in and take that role now, which really a lot of the producers would rather sell to Medallion. They just didn't want to take Medallion's credit risk. Obviously, now with ONEOK coming in, we will be able to offer those services to those people. And that's one way we'll be able to take that volume and direct it towards our long-haul pipes going forward. So I think you put all that together between the bundling and more an integrated service, still opportunities in the Delaware. I think we have a pretty good runway on the crude ahead of us.

Great. And then moving over to the EnLink synergies. Can you talk through those? The most obvious is moving NGL barrels to your T&F assets over time? Any framework of how to think about that timing?

Well, so what's going to be is when contracts come off. I mean we're moving a lot of the EnLink volume today on our system. ONEOK was just transporting it. It was already moving into EnLink's own fracs through ONEOK system. But they also have contracts that will be coming up that they had contracted with other NGL providers that when those contracts come up, obviously, they will be right away to come. So the timing is going to be when those contracts up. But there's not a long tenure left on those contracts. So we will be here in the next couple of years, we'll start seeing them come off as well going forward. The other thing when we think about synergies with EnLink, we talked a little about very easy to see it in the Permian, where we've already talked about we think we have the low-cost pipeline out of there to be able to compete. We think now with Medford, we think we're going to have the low-cost frac and Medford is not full. We built it to have extra capacity into it. So we even had -- before this, we knew we could compete pretty effectively, and we have competed very effectively in the Permian. But adding EnLink on top of that is going to make us even more effective competing on that to even grow our volumes faster. So we're really looking forward to that piece. If you go up into the Mid-Continent, our G&P assets are very complementary up there. And I think we're going to be -- we're seeing a lot of synergies where we can redirect volume into the most efficient frac, produce more NGLs to get on down our system. A lot of those are fixed recovery type contracts. And so if we can get it to a more efficient frac, that's more money to us without any harm to the producer as we go forward. Also, our -- and I'd say they're complementary are gathering systems. We touch some areas that EnLink doesn't touch and they have some dedication in some of those areas that they're a little too far away, that we will be able to pick up as well. So we'll see a lot more volume coming to our system, coming out of the Mid-Continent as well. And then we don't talk about it much, but EnLink also had a crude gathering system in the Midland, and it is also going to be very complementary to the Medallion gathering system. They work very well together. So [ there's even going to be ] some synergies not even between the 2 acquisitions that we made, that they will be able to put those together and [ make them ]. So we're -- as we continue to peel the onion, we haven't had it very long. We've had EnLink control for a month and Medallion, 2 weeks. We are very excited about what we're seeing.

Great. You previously mentioned the potential to repurpose the legacy West Texas NGL to refined products. Is that still on the table? Or with the EnLink deal, would you likely keep it as NGLs because you'll need it?

Well, what I would say is, yes, we're going to get up to 740,000 barrels a day of capacity come on our NGL system coming out of the Permian. And we could take 140,000 of that and put it into a different product. And so what we're going to continue -- it's an option we have, and we like when we embed options into our business. So we'll be able to decide that later as we come down. If it gets to a point that we think that's going to be more economical, we can make more money putting it into crude service, then we'll put it into crude service. But if we think it's better in NGL service, we'll leave it in NGL service. And we even have the option. If we think part of it or all of it would be better to put into refined products, we could be able to do that as well, switch back and forth. So we have that option and we don't have to exercise that for a period of time as we continue to grow. So we'll see how it kind of plays out, but it does give us a lot of flexibility for sure.

Great. Let's talk about the Louisiana footprint acquired in the EnLink acquisition and the potential that you see in those assets. Do you see clear synergies here or just attractive gas assets feeding, I guess, LNG over there?

So what I would say, we probably don't see clear synergies in this area. If you just look at the footprint, we really don't have any natural gas assets over in Louisiana. And that's the big thing in there. But as we've continued to get in there and look at it, we do see opportunities. We're very pleasantly surprised with the opportunities that we are seeing in there. And you need to think about EnLink's gas pipes as kind of the last mile in there. They're big pipes. The system was designed to take Gulf of Mexico gas offshore to bring it in and process and distribute, so very large diameter pipes. But what they are doing is they are connected into the industrial corridor along the Mississippi River. And we're seeing a growing demand in that area from like there's quite a few ammonia plants getting to come in there and ammonia consumes a lot of natural gas as well. We do see -- with some of the LNGs, we do see there could be some opportunities to get -- be the last mile into the LNGs or help to continue to work up as the LNG. But we definitely see, as you see more demand from the LNGs and more coming from other areas, that our system could help get that to market as well, not only the industrial core but LNG. So we are -- we like what we see in Louisiana and how that could grow. I said there's no synergies. So if you go to the NGLs, there are some synergies over there on the NGL side that they have fractionation in markets in Louisiana. A lot of times, they're getting premium prices on there. So I think we'll be able to direct Y-grade in between Mont Belvieu, Conway and Louisiana to be able to capture premium markets for our liquids. So on the NGL side, there are some synergies in Louisiana.

Great. You recently raised your guidance for 2024. Can you talk about some of the tailwinds driving that?

Sure. Well, we clearly have had all the base businesses operating and performing extremely well. We've had -- we went out earlier in the year with guidance that we would expect about $175 million of synergies. Through the course of the year, we said that we thought we might exceed that. I think that we can say now we'll be comfortably above $175 million for 2024 and able to achieve a nice run rate into 2025. Part of that is doing things like the Easton acquisition, which accelerated our timing pretty significantly. If we had to build that pipe, probably wouldn't have come on until the '26 time frame. By bringing on Easton and just having to do small connections in certain areas and able to go out and grab this extra 25,000 barrels and other things, we've been able to bring some of those synergies forward. And then in the longer term have continued to find more and more opportunities. Clearly, on the Magellan side, the opportunity set has grown the more we've gotten involved with the business. We've seen some great opportunities in growth out in the El Paso market. We've already filled up that expansion. And we've recently announced our expansion out into Colorado as well, which will help provide growth here in the '26 and beyond time frame as well.

Great. How do you see your capital return framework evolving once you get through Phase 2 of the EnLink acquisition, by which I mean buying the remaining publicly held units?

Sure. Well, we came out in January before we knew we would actually be successful with completing these, and put forth our capital allocation formula, if you will. And what we had said at that point in time is that we would target 75% to 85% of free cash flow after CapEx for dividends and share repurchase. And we specifically retained 15% to 25% of unallocated cash because our Board wanted to make sure that we didn't box ourselves into a situation where we wouldn't have capital for high-return projects. So dial forward, we go out and we do the EnLink and Medallion transaction. You're talking 20-plus percent accretive to cash flow. So we clearly are in a position where, over time, we'll have more free cash flow available. We still are right now sticking with our $2 billion stock repurchase over the next 4 years or so. We'll see how everything plays out. Sheridan has found quite a few opportunities over time to spend capital, so we won't commit to buying back more stock. But if we don't find opportunities, there's clearly the potential after we get our debt down to the levels that we like, that we may have the opportunity to buy some more stock going forward. I would argue that we just did a $3 billion -- $3.25 billion stock buyback when we bought in the GIP position in EnLink. That clearly could have been done with stock, but we wanted to be as shareholder friendly as we could there and use that cash because we knew we could get our balance sheet quickly back into order that way.

Makes sense. Going back to your M&A funnel framework. There's not a ton of midsized midstream targets left. How are you thinking about M&A here? I know you mentioned that there's some small opportunities but...

Sure. Well, kind of sticking with our MO, we've redone our criteria again and dropped a few, added a few. And so we're clearly trying to make sure that we find the pieces that would continue to allow us to expand and extend and stick with our strategy. That said, we've got a lot on our plate right now and integration. I think in a perfect world, we probably would let a little more time go after the Magellan opportunity to complete the integration, which is going really, really well. But we had the opportunity here, and so we jumped in and took care of it with EnLink and Medallion. But we've got a lot on our plate to integrate and we'll continue to do that. There may be some tuck-ins like in Easton that will help us accelerate synergies or give us access to a new market that we'll continue to look at. But you are right, the opportunity of public companies out there is really narrowed at this point, and the choices are pretty few and far between.

Makes sense. Moving over to CapEx. You reiterated your 2024 CapEx budget. Can you talk about how you see CapEx spending in 2025 and beyond compared with your recent run rate?

Sure. Well, in 2025, we did bring in Medallion and EnLink. There were already some capital commitments that were there. So those are reasonably additive. We may be able to optimize a little bit on those. If you look at the base ONEOK business, we were completing the West Texas expansion. We're completing MB-6 here in the fourth quarter, and we're completing the Elk Creek expansion in the first quarter of 2025. We've added Medford and we've added the Denver refined products pipe. But net-net, that's a reduction year-over-year. So we were kind of setting up to see a little more modest in the base business. We continue to see growth opportunities. So I think you're going to see us kind of stay at a reasonably similar level here as we go out into '25. But we still see that trending down as you get out in the further years because what was driving that trend for us before is we have significant operating leverage in our business. When we get Elk Creek, the Elk Creek expansion done, we'll have 125,000, 135,000 barrels of available capacity. We'll have capacity on West Texas LPG. The Medford when that's completed, that's not going to be a full frac contracted enough to get us a great return. But we will have -- it's a 210,000 barrel a day frac, so we'll have some available capacity there. So we'll have operating leverage. As Sheridan said, maybe we'll go put a plant or 2 out in the Permian. We might need another processing plant at some point up here in the Bakken. But those are reasonably small dollars in the context of the company. So I don't see that really driving any major increase in CapEx going forward. So I think we're going to be generating a lot of free cash flow. If you just look at the trend and most of the research analysts have this out there and kind of where we're at if we don't buy back stock or find more capital projects, our debt to EBITDA is going to come down over the next 5 years pretty significantly. So I will bet on Sheridan to find growth opportunities.

Touching on some of those projects that you just mentioned. Can you talk through the volume ramp expectations on your soon-to-be completed growth projects, MB-6, West Texas NGL expansion and the Elk Creek expansion?

Sure. Yes, absolutely. MB-6 will come up full, completely full. We -- that's kind of a continuation of the Medford -- issue with Medford going down. As we grow into that, we've had more success out in the Permian and the Mid-Continent, growing our volumes out there. So it will be full. We may actually even need some excess capacity in '25, third-party capacity. So we're really happy where our volumes are continuing to grow. Elk Creek, when it comes online, we do need some C3+ volume on there because we're seeing growth out there. But the volume on Elk Creek will probably in the short term will be more driven by how much ethane we decided to pull out of the Bakken. If we see an opportunity to pull a lot more out of the Bakken, it will be on the more full side. If we don't, it would be on the lesser side. So it gives us a lot of optionality going forward on that piece of it. And we also -- we built it because we want to make sure that there's plenty of NGL capacity coming out of the Bakken, that nobody needs to get worried about that to continue to go forward. Well, West Texas pipeline, as we said all along that we went out West Texas pipeline, very cheap expansion. We went out and secured enough volume that we got a good return on that, but it gave us a tremendous amount of upside. And so as we -- we're going to be quicker filling that than we were -- than we thought because of bringing on the EnLink G&P and how we think we can compete out there and continue to grow. So you'll see that ramping over a period of time. But we got a lot. We're going from 300 to 740. I mean there's a lot of capacity we're bringing on this. So it will take us a little bit to continue to go forward. But definitely, EnLink is going to make that go a lot faster as we continue to go forward, both the expansion of that and Medford when it comes up, the growing of, filling Medford when it comes up.

Yes. You mentioned ethane, ethane storage is at high levels. What are your thoughts on the opportunities over the next 6 to 12 months for ethane recovery in the Bakken and Mid-Con, which you kind of referenced? Could that become a headwind?

Well, we've always said we really don't put a whole lot of incentivized ethane, what we call it. We don't think that's really the right term, but that's the term we're using right now, incentivized ethane. We don't put that much in our forward projections. If we've locked in the spread a little bit, we will. We see that all as opportunistic. If the opportunity happens, we can go put it in there. We've all along said on the ethane supply stack that the Mid-Continent is going to be sporadic. Sometimes it's going to be in, sometimes it's going to be not, driven a little bit by gas prices in the Mid-Continent, driven a little by utilization of the petrochemical facilities when they tend to buy that. And then the Bakken is going to be purely as we watch the gas spread, the price of gas at the plant versus Mont Belvieu, when that gets to a range that we like, then we can turn ethane on going forward. So we think in the next year, that's what it's going to look like. We do have coming up on the demand side, we do have some export facilities that are coming up here in a year or so. That will bring more demand to ethane. A lot really with that data is how well the petrochemical run. If they run at high utilization rates and they can keep them running without unplanned downtimes, we can see some drawdown in ethane and see some more opportunities. If they have more turnarounds, then it may be a little bit less. But that, we see that all as opportunistic going forward.

Makes sense. Gas-to-oil ratio in the Bakken has been on a pretty good run in the last 6 months. It's hitting new highs. Can you talk about the moving pieces there and how you think it could grow in the next several years?

Well, first, we'll talk about gas-to-oil ratio. What we know is when you drill a well, the gas-to-oil ratio always increases. We know that and it will increase that for a long period of time. What can drive the overall gas-to-oil ratio in the short term is where are they drilling? Are they drilling in an area that it starts that 1 gas-to-oil ratio or 2.5 gas-to-oil ratio? Where does it start? Well, we know it's always going to grow. What we also have seen and we've talked to producers on that, that everybody underestimates is that the wells that have been drilled the last 15 years, what's their gas-to-oil ratio? And will it ever stop? And we continue to see that growing. And you talk to people, they said, "We've always underestimated what those long-term wells, what their gas-to-oil ratio continues to go forward." So I would say right now, we feel it's still going to be positive, still going to grow. There may be some -- on a long-term basis, it's still going to grow. There may be some inter-month noise as they drill in different areas that have start with a lower gas-to-oil ratio than other areas. That's what some of the internal noise is. But overall, for everything we're showing, that it will continue to grow for quite some time.

Great. Are you seeing more refined products opportunities like the pipeline expansion to the Denver Airport?

Well, I mean, obviously, the pipeline expansion in Denver Airport is a pretty big project for that business segment, and we're pretty excited about that. I don't necessarily say right away, we see those kind of opportunities to lay that big of a line and long of a line right now. What we are seeing opportunities is to be able to expand our system in different areas to give our producers, our refiners and customers a better places to go, better netbacks. An example is as we talked about, Walt mentioned the expansion into the El Paso area has -- it's full. We actually went out last year for a very small expansion that was fully subscribed. That will come on next year a little bit. It's not as big as the first one, but it is a little bit of an expansion. We see opportunities to do that, and we see areas that customers want a lot of volume or growing areas that we can use our system to get more volume into that area. So we see a lot of high-return, low capital kind of expansions throughout the system as we continue to take a look at where we can move product for certain people.

Okay. Obviously, there's some uncertainty about OPEC. How do you think about Bakken rigs and production could hold up in a $60 or even $55 crude environment? What are you hearing from your producers?

You know what I'd say, we get this a lot. And this question got throughout many years, and we talk to the producers and they'll give you an idea, hey, it's probably in a certain range or whatever, but I know there's a lot of factors to it. But what I would say is the last time crude went below $50, and we saw some rigs come out of the Bakken. When it crossed back over $50 is when we started seeing rigs come back to the Bakken. And now we know that the rigs are more efficient now. We know that their completion techniques are better now and everything else. But if you just look at history, history would say it's $50 or less is where you would see kind of breakover point for that. So we think we have a long ways to go before we get that into the Bakken. We know there's been some consolidation of E&P companies in the Bakken and talking to them, we do know that some of them have talked a little bit about not having as many rigs out there. But what they're going to do is they bought those other companies so they can drill the 3-mile laterals, so they have the contracts out there or the acreage to be able to drill the longer laterals. They're bringing better completion techniques to the game than the people they're buying out so that we will get more efficiency out of the wells that are drilled. So when we talk to them, they're basically saying, "Hey, we're going to -- some of them are going to slow down some rig growth, but our volumes are going to be the same or grow." So it's kind of a more of an efficiency play. But what that means for us is that it -- not that it's going to be overall meaningful, but our capital will be more efficient as well. We won't be -- have to hook up as many wells to get the volume when we come in there. Wells will be better. We think overall, the consolidation in the Bakken has been very good because you're getting it into the right hands of the people that have better techniques, longer laterals and at a position that they can -- will continue to grow. They're not going to be too fickle with the price of crude oil, they're going to continue to grow, drill as they can.

And last question, you know it's coming. Can you talk about ONEOK's opportunity for data centers or AI? And in what geographical areas do you see potential projects?

You know what I'll say about that. And I said on the call, we have 23 different projects of people coming to us needing natural gas. And I think I said 10 of them specifically said AI. Now this isn't always that we may not be delivering right to the power generation, it may be going through utility, but they need our volume to get in there. And that's really just on legacy ONEOK systems as we continue to grow. Now we know all 23 are going to happen. There's a lot of noise out there. But we know some of them are going to happen, and they're really kind of all over our system. But the EnLink also has quite a few as well. One of the areas that we're hearing a lot about from the EnLink system is the North Texas. There's a fiber optics highway up there that a lot of people are talking about be a great place for a data center, and there are some conversations in that area as well. And also in Louisiana, we're getting some conversations on power generation, that people are needing some power generation. So it's really we're kind of seeing it all over our system. But as I said, there's a lot of buzz out there. There's a lot of projects that we know not all of them are going to go. But we're going to get our fair share of the AI demand for power as it continues to go forward.

Great. We'll leave it there. Thank you so much for being here today.

All right.

Thank you, Jean Ann. Appreciate it.