ONEOK, Inc.

Good day, and welcome to OneOak's fourth quarter 2024 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Andrew Zeola, Flights President and of Investor Relations. Please go ahead.

Thank you, Wyatt, and good morning. And welcome to OneOak's fourth quarter year-end 2024 earnings call. After the markets closed yesterday, we issued news releases announcing our 2024 results and our 2025 guidance and 2026 outlook. 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 One Oaks expectations or predictions should be considered forward-looking statements and are covered by the safe harbor provision of the Securities Acts of 1933 and 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 a follow-up in order to fit in as many of you as we can. With that, I'll turn the call over to Pierce Norton, President and Chief Executive Officer. Pierce?

Thanks, Andrew. Good morning, and thank you for joining us. On today's call is Walt Holtz, Chief Financial Officer, Treasurer, Executive Vice President of Investor Relations and Corporate Development at Sheridan Swords, Executive Vice President and Chief Commercial Officer. Also on the call today is Randy Lentz, Executive Vice President and Chief Operating Officer. Randy joined us from Medallion Midstream and we welcome him to the One Oak team. Yesterday, we announced higher fourth quarter and full year 2024 earnings driven by contributions from multiple strategic acquisitions, volume growth, and continued execution on the synergies identified in our refined products and crude oil businesses acquired in 2023. We also announced 2025 financial guidance and provided a 2026 growth outlook. For 2025, we expect strong earnings growth driven by our expanded operations, completed projects, and higher volumes. For our 2026 growth outlook, we expect greater than 15% earnings per share growth and adjusted EBITDA growth approaching 10%. compared with our 2025 guidance midpoints. Walton Sheridan will provide additional details on those guidance and the growth outlook shortly. Over the past two years, One Oak has executed on our intentional and disciplined growth strategy, creating unique opportunities with our more regionally diversified product and service offerings and delivering value across our expanded footprint. We've transformed our company in multiple ways, making it even stronger, more resilient, and better positioned to play a leading role in contributing to energy addition. I'll touch on a few of these key areas that we believe will drive our continued success and further enhance our strategic competitive advantage. First, we've significantly grown our integrated operations. both in terms of our product mix, demand pull versus supply push drivers, and geographic diversity. We've added refined products in crude oil transportation and crude oil gathering to our integrated value chain, and we've significantly extended and expanded our presence in the Permian Basin in Louisiana. Second, we've added significant operational scale through our now approximately 60,000-mile pipeline network, enhancing our connectivity with key producers, basins, and market centers. The scale and integrated connectivity further strengthen our resilience and position One Oak for success across various market cycles. Third, we continue to prioritize organic growth opportunities by expanding and extending our now even larger asset base. Key projects have included NGO pipeline expansions in the Bakken and Permian basins, additional NGL fractionation capacity in Mont Bellevue and the Mid-Continent, refined products pipeline expansions into the Denver market, and natural gas storage expansions in Oklahoma and Texas. Most recently, we announced an LPG export project joint venture with MPLX. With LPG exports added to our service mix, we will provide an integrated NGL wellhead-to-water solution for our customers, enhancing our product offerings. Fourth, we continue to prioritize innovation, commercial development, and customer service across our operations. Numerous additional project opportunities remain in various stages of development. These unannounced projects span across regions and products, and they include synergy projects and traditional growth opportunities. Examples include projects to interconnect and optimize recently acquired assets, pipeline and facility expansions and key basins, additional natural gas infrastructure driven by continued demand for the AI-driven data centers and LNG demand, and de-bottomlaking projects across our operations to accommodate growth, or just to name a few. Finally, we remain committed to returning meaningful value to our investors. We've proven our ability to sustain and grow our longstanding dividend, invest in high return growth projects, and maintain financial flexibility, including the ability to begin executing on our share repurchase authorization. We've provided 11 consecutive years of adjusted EBITDA growth, and our 2025 adjusted EBITDA guidance is well over double what it was just three years ago. All of these successes and extraordinary growth in the scale of OneOaks transformation doesn't happen overnight. And it doesn't happen without the dedication of our employees. Their continued focus on safety, service, and innovation has enabled this level of change to occur and will continue to drive additional meaningful growth and value across our operations. I'll now turn it over to Walt and Sheridan to provide their financial and commercial updates. Walt?

Thank you, Pierce. I'll start with a brief overview of our fourth quarter and full year financial performance and then move on to our 25 guidance and 2026 outlook. 2024 results were in line with our guidance expectations that we increase in both the first and third quarters of 2024. Net income attributable to One Oak totaled $923 million or $1.57 per share in the fourth quarter 2024 and totaled $3 billion or $5.17 per share for the full year. Adjusted EBITDA totaled nearly $2.2 billion in the fourth quarter 2024 and more than $6.7 billion for the full year. These results include $375 million of adjusted EBITDA and $73 million of transaction costs related to the NLINK and Medallion acquisitions that we began consolidating in October. As of December 31, we had more than $730 million in cash on hand. No commercial paper outstanding and no borrowings outstanding under our credit agreement. Our fourth quarter 2024 annualized run rate net debt to EBITDA ratio was 3.6 times. We continue to demonstrate our ability to utilize various capital allocation levers in 2024 by returning nearly $2.5 billion of value to shareholders through dividends and share repurchases. We repurchased $172 million of stock in the fourth quarter And in January 2025, we increased our quarterly dividend by 4%. Now moving on to our guidance. As Pierce mentioned, in addition to yesterday's earnings announcement, we provided detailed 2025 financial and volume guidance and a 2026 growth outlook. For 2025, we expect an 8% increase in earnings per share to a midpoint of $5.37, compared with 2024 when excluding one-time items in 2024, such as transactional related costs and divestitures. This EPS guidance does not include an assumption for share repurchases, but we remain committed to executing on our Board-approved $2 billion share repurchase program over the course of these next few years. From an adjusted EBITDA perspective, we expect a 21% increase in adjusted EBITDA in 2025 to $8.225 billion, excluding approximately $50 million of transaction costs compared with 2024. Key drivers of our 2025 guidance include higher earnings driven by a full year of earnings from recent acquisitions, volume growth from increases in production and completed growth projects, and fee-based earnings. Our 2025 financial guidance also includes approximately $250 million of incremental commercial and cost synergies related to our acquisitions of Magellan, Medallion, and Enlink. This is additive to what we've already realized through the end of 2024. As it relates to capital expenditures, our guidance assumes a range of $2.8 billion to $3.2 billion, which includes growth and maintenance capital. This range reflects the investments necessary to accommodate expected increases in production and invest in attractive return growth projects, such as our recently announced LPG export dock. Our 2026 outlook of greater than 15% earnings per share growth and adjusted EBITDA growth approaching 10% compared with the 2025 guidance midpoints is driven by expected volumes from in-keep crease production and recently completed synergy and growth projects. Key contributors include a full year of earnings from the Elk Creek and West Texas NGL pipeline expansions, and synergy projects completed in 2025, along with a partial year benefit from the completion of the Denver area refined products expansion and the connection of our Mount Bellevue assets to the Houston Ship Channel distribution assets. We also expect to realize additional synergies in 2026. I'll now turn the call over to Sheridan for a commercial update. Thank you, Walt.

we saw a strong year-over-year performance in 2024. The refined products and crude segment contributed its first full year of earnings, benefiting from higher average refined product tariff rates, blending and marketing opportunities, as well as higher earnings on our long-haul crude oil pipelines. Continued strength in Rocky Mountain volumes during the year continue to support earnings with NGL raw feed throughput volumes up 8%, and natural gas volumes processed up 6% in the region. The natural gas pipeline segment exceeded the high end of its 2024 financial guidance, even excluding divestitures and acquisitions. The segment's outperformance continues to be driven by strong demand for our intra-state pipeline and storage services. Turning to 2025 and starting with the natural gas liquid segment, We expect higher year-over-year adjusted EBITDA and raw feed throughput volumes to be driven primarily by growth out of the Permian and Rocky Mountain regions. We've assumed high levels of ethane recovery continue in the Permian Basin and partial recovery in the Mid-Continent. We also expect to see continued opportunities to incentivize ethane recovery in the Rocky Mountain regions. In the Permian Basin, we expect recently completed and connected third-party processing plants, new contracts, and increasing volume from legacy in-link plants to contribute to higher volumes feeding our West Texas NGL pipeline. As legacy in-link contracts roll off in future years, significant incremental volume is expected to move to our Permian NGL systems. Recently completed NGL growth projects will contribute to higher volumes and earnings in 2025, including MB6 and expansions of our Elk Creek and West Texas NGL pipelines in the Williston and Permian Basins. We also expect increasing contributions from the acquired Easton energy assets as we complete connections to our Houston-based system in 2025, helping us to realize additional synergies. As Pierce mentioned earlier this month, we announced strategic joint venture projects to construct a 400,000 barrels per day LPG export terminal in Texas City, Texas, and a pipeline connecting One Oaks Mont Bellevue Storage Facility to the new terminal. Our collaboration with MPLX on this project enables us to provide a new wellhead to water solution to customers across our entire system. The world-scale dock has multiple strategic benefits over other currently operating facilities, including a premier open water location, brownfield economics, timing and cost benefits driven by the proximity to the existing Marathon refinery and infrastructure, and strategic access to our NGL storage in Mont Belvieu. The project is expected to be completed in early 2028. In the refined products and crude segment, we expect continued growth in refined products margins and a significant increase in crude oil volumes driven by our added crude oil gathering infrastructure from both the medallion and in-link acquisitions. We expect to fill existing gathering capacity over time, which will feed and fill our long-haul crude oil pipelines connecting key suppliers with critical refining and marketing centers. We also expect continued benefits from the ability to execute certain blending related commercial and cost synergies between the natural gas liquids and refined product businesses. We expect these types of synergies to ramp up as projects come on mind this year. Moving to the natural gas gathering and processing segment. We expect volume growth in all of our regions across our footprint in 2025. We guided to Rocky Mountain region volume growth of 8.5% at the midpoint, compared with 2024, and an average of more than 1.7 BCF per day in 2025. Williston Basin volumes continue to benefit from increasing efficiencies that have been well documented by our producer customers, strong gas-to-oil ratios, and overall producer activity. Part of those efficiencies that we continue to benefit from is the drilling of longer laterals and higher well performance on traditional laterals, without the need for as many well connects. In 2025, we expect 35% of our well connections to be with 3-mile laterals, as opposed to traditional shorter laterals. Through recent acquisitions, we've extended our gathering and processing assets into the strategic and growing Permian Basin and added assets in the Mid-Continent. In the mid-continent, we expect volume growth in addition to the full-year impact of the acquisition with average annual volume of nearly 2.5 BCF per day in 2025. Projects are already underway to connect and optimize assets. As Pierce mentioned, these synergies are captured in the 2026 outlet Walt provided. In the Permian Basin, we expect natural gas processing volumes to average approximately 1.6 BCF per day at the midpoint. We are in the process of relocating 150 million cubic feet per day legacy in-link natural gas processing plant to the region from North Texas, which we expect to be completed in the first quarter of 2026. And we continue looking at expected infrastructure needs going forward. as existing customers and potential opportunities to provide line of sight for strong growth in the coming years. In the natural gas pipeline segment, our assets are well positioned to benefit from industrial demand growth driven by data centers, LNG exports, and ammonia facilities. Our newly acquired assets in Louisiana provide direct connectivity to major LNG exporters and industrial customers. There are also approximately 30 potential power plant expansion projects across our footprint that could provide more than four BCF per day of incremental demand if they move forward. Natural gas storage expansions continue to be an opportunity for us as well, with key projects ongoing in Oklahoma and in Louisiana. Pierce, that concludes my remarks.

Thank you, Sheridan, and thank you, Walt. We're proud of our strong performance over the past year. Through strategic acquisitions and organic initiatives, we've extended our reach and built a platform for future growth that leaves us poised for continued success. The potential before us is significant, and we remain committed to delivering the value to our employees, shareholders, customers, and communities. Before we close, I want to recognize our employees' efforts related to the recent severe cold across our footprint. As always, our teams demonstrated incredible commitment and dedication to maintaining safety and delivering reliable service, regardless of the challenging conditions. This unwavering focus on safety and customer service is a testament to the character and resilience of our people. I want to thank all of our employees for their hard work and dedication throughout another year of significant change and growth. It is their commitment and passion that drive our success and make us stronger as an organization. Thank you to our shareholders for your continued trust and support. We're excited about the journey ahead and look forward to sharing our progress with you in the future. Operator, we're now ready for questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. And the first question will come from Theresa Chen with Barclays. Please go ahead.

Good morning. Thank you for taking my questions. Would you be able to provide some additional details behind bridging the 2025 to 2026 guidance? Sounds like much of it is driven by project contribution, but are there other details in color around synergies or assumptions on volume and pricing you can share at this point?

Well, Teresa, what we're really seeing is the benefit of The synergy capital that we've been spending primarily connecting the Eastern assets so that all of our assets down in Bellevue and the Houston channel, those should get completed here in 2025 and we'll get that full benefit into 2026. We'll start to see some of these other projects wrap up in later 2025 or early 2026 in contributing benefit. So this last phase of capital investment is coming at a great time.

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