ONEOK, Inc.

Good morning, everyone, and welcome to the One Oak second quarter 2025 earnings conference call. All participants will be in a 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 and then one on your touch-tone phones. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Megan Patterson, Vice President, Investor Relations. Ma'am, please go ahead.

Thank you, Jamie. Welcome to one of the second quarter 2025 earnings call. We issued our earnings release and presentation after the markets closed yesterday, and those materials are available on our website. After our prepared remarks, management will be available to take your questions. Statements made during this call that might include one of the expectations or predictions should be considered forward-looking statements and are covered under the safe harbor provision of the Securities Act 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 one follow-up to fit in as many of you as we can. With that, I'll turn the call over to Pierce Norton, President, Chief Executive Officer. Pierce.

Thanks, Megan. Good morning, and thank you for joining us. On today's call is Walt Hulse, our Chief Financial Officer, Treasurer, and Executive Vice President, Investor Relations and Corporate Development, and Sheridan Swartz, Executive Vice President and Chief Commercial Officer. Also on the call are Kevin Burdick, Executive Vice President and Chief Enterprise Service Officer, and Randy Lentz, our Executive Vice President and Chief Operating Officer. Yesterday, we announced higher second quarter results and affirmed our 2025 financial guidance ranges, which were originally provided in late February. Our second quarter adjusted EBITDA increased 12% compared with the first quarter, highlighting the continuation of incremental synergy capture increasing supply and demand strength. As we exited the winter, we saw accelerated volume momentum through the seasonal improvements across our operations, driving sequential quarter growth in AGL and natural gas processing volumes across all regions and increasing refined products demand. The sequential EVA dog growth we experienced this quarter was consistent with our expectations at the beginning of the year. and begins to demonstrate the potential earnings of bringing these assets together. As we continue to navigate an evolving macroeconomic landscape and shifting market dynamics, we believe the energy sector remains resilient with domestic and global demand for U.S. energy continuing to be well supported. Producers across our acreage continue to execute their 2025 drilling plans and drive efficiencies in their drilling and completion techniques. We're monitoring the 2026 market dynamics closely while continuing to execute on our growth strategy and support supply and demand market needs. Our focused investments on high return organic projects such as the Bakken's Elk Creek Liquids Pipeline, West Texas NGL Pipeline, and Denver Refined Products Pipeline Expansions and the Medford Fraction East Facility provide significant operating leverage and position us to capture incremental growth across our assets in the Williston Basin, the Powder River, Mid-Continent, and Permian Basins. Today, we are announcing a final investment decision on a new natural gas processing plant in the Permians-Delaware Basin, further expanding and enhancing our presence and what is a key strategic area for 1UP. Sheridan will provide more details on this project and our Permian growth strategy in his remarks. Our acquisitions are delivering tangible benefits as we continue to make meaningful progress on acquisition-related synergies and organic growth. Our contiguously integrated assets, diversified business mix, and strong balance sheet provide flexibility, enable opportunities, even during changing market dynamics. As always, we'll remain intentional and disciplined in our approach to capital allocation as we evaluate future opportunities. I'll now turn it over to Walt and Sheridan to provide their financial and commercial updates. Walt?

Thank you, Pierce. Second quarter 2025 net income attributable to one oak totaled $841 million, or $1.34 per share, more than 30% increase compared with the first quarter. Second quarter adjusted EBITDA totaled $1.98 billion, or $2 billion, when excluding transaction costs of $21 million, which is consistent with the approach used in our guidance. The acquired NLINK and Medallion assets delivered nearly $450 million in adjusted EBITDA during the second quarter, contributing to a strong year-over-year earnings We ended the second quarter with $97 million in cash and no borrowings outstanding under our $3.5 billion credit facility. During the quarter, we reduced our senior notes by nearly $600 million, including more than $400 million of notes paid at maturity. Year to date, we've extinguished nearly $850 million in senior notes, underscoring our proactive approach to managing debt and clear progress towards achieving our long-term leverage target of 3.5 times which we expect to reach in 2026. With yesterday's earnings announcement, we affirmed our 2025 financial guidance ranges, including net income attributable to 1.0 of $3.1 billion to $3.6 billion, and adjusted EBITDA range of $8 billion to $8.45 billion. Our expectation to achieve results within our guidance ranges reflects current market conditions and is supported by producer performance, recently completed projects, increasing seasonal demand for refined products, and the timing of acquisition related synergies. While the market environment and commodity price outlook is different today than when we originally announced financial guidance in February, We continue to see resilience and producer activity across our operations and benefits from our integrated system. We also remain on track to realize approximately $250 million of synergies in 2025, consistent with our guidance with significant additional contributions expected in 2026. Our 2026 outlook, also provided in February, was based on commodity prices at the time. Given current market conditions, we believe our 2026 outlook for adjusted EBITDA should be adjusted downward by approximately 2% or $200 million to reflect current commodity prices and resulting spread differentials. We continue to expect year-over-year mid- to upper-single-digit EBITDA growth in 2026. We are tempering our previous outlook based on a cautious macro environment. In addition to our future earnings growth, we also reviewed our tax position following the recent tax legislation and expected a benefit of more than $1.3 billion in lower cash taxes over the next five years, due primarily to enhancements related to bonus depreciation and interest expense deductibility. With our commitment to investing in infrastructure that strengthens energy security and resilience, the enhanced tax provisions enable us to immediately expense the full cost of qualifying investments. We now don't expect to pay any meaningful cash taxes until 2028, which is a year later than our previous expectations. Additionally, we expect our cash tax rate in 28 and 29 to be less than the full 15% corporate alternative minimum tax rate. which is lower than our previous expectations. This increase in expected free cash flow will enhance our flexibility as it relates to capital allocation. I'll now turn the call over to Sheridan for a commercial update.

Thank you, Walt. During the second quarter, we saw a significant rebound in volumes on normal and expected first quarter seasonality. We experienced strong sequential quarter growth coming out of the first quarter with higher natural gas processing volumes and double-digit NGL growth across all regions. Taking a closer look at the natural gas liquid segment, total NGL raw feed throughput volumes increased 18% compared with the first quarter. Rocky Mountain region volumes averaged nearly 470,000 barrels per day, a record for the region, driven by increased ethane recovery and higher propane plus volume compared with the first quarter of 2025. Mid-continent and Permian NGL volumes both increased 20% compared with the first quarter, supported by higher ethane recovery levels, improved seasonality, and newly contracted volumes beginning to ramp up in the Permian Basin. During the quarter, we experienced lower fractionation utilization due to maintenance, which resulted in a $13 million impact in the second quarter from unfractionated NGLs and inventory. We expect to fractionate these NGLs and recognize their earnings over the next two quarters. We saw minimal impacts from ethane export disruptions during the quarter. The importance of ethane to the global market was evident during this period, and it's clear there's a strong demand for U.S. ethane in the global market. We continue to see opportunities for economic ethane recovery across our system for the balance of the year. The build-out of connectivity between our Montbellevue and Conway NGL platforms and our Strategic Houston and Mid-Continent Refined Products assets remains on pace. All three critical Houston connections of Helena Park, East Houston, and our Pasadena MVP joint venture are expected to come online in the third quarter of this year. We have a strong line of sight to these pipelines operating at high utilization and delivering earning contributions in the fourth quarter of this year. With executed synergies rated to our liquid blending business, we expect record blending volumes in 2005 and 2006. Our Texas City LPG export joint venture is also progressing as planned, and we continue to have a lot of interest from customers on this strategically positioned wellhead to water solution. Moving on to the refined products and crude segments. Second quarter refined product volumes increased sequentially as seasonal demand picked up. We expect continued demand growth in the third quarter as we've entered peak summer travel season. Diesel and aviation fuel volumes have remained strong during the first half of the year, and we expect that to continue for the remainder of the year. Regional supply disruptions in mid-competence tempered gasoline volumes during the quarter, However, volumes have recovered following the completion of refinery maintenance in late spring. Following the July tariff rate adjustments, we increased our refined products rate by mid-single digits, as expected. Our refined products pipeline to the Denver area is on track for a mid-2026 completion, and we're currently seeing record jet fuel volumes into the Denver International Airport. Turning now to our approvals. our gathering and long haul assets to continue to perform with wellhead gathering volumes on our medallion assets up approximately 20% year over year. The overall decrease in crude volumes compared with the first quarter of 2025 was due primarily to low margin exchange volumes. These volumes have significantly lower rates than wellhead gathering or long haul shipments, so their earning impact was not material. Moving on to the natural gas gathering and processing segment. Volumes increased all regions compared with the first quarter of 2025, with producers increasing activity coming out of winter. Looking first at the Permian Basin. Following 4% growth in volumes in the second quarter, we reached 1.6 billion cubic feet per day in July. Currently, we have 12 active rigs on our dedicated acreage, providing a line of sight to filling our existing processing capacity in the region, and driving the need for additional capacity. In addition to our already announced 150 million cubic feet per day relocation to the Midlands and approximately 75 million cubic feet per day of low-cost expansion at existing Delaware facilities, we've also reached FAAD on the construction of a new plant in the Delaware Basin. The new Bighorn plant will have a capacity of 300 million cubic feet per day with the ability to treat high CO2 gas. The plant and treater are expected to cost approximately $365 million. Bighorn is supported by acreage dedication and is expected to be completed in mid-2027. These growth opportunities will increase one-oaks processing capacity in the Delaware Basin to 1.1 billion cubic feet per day, with a little over 700 million cubic feet per day currently and we'll position 1-0 for additional growth opportunities in the basin across our value chain. The Permian Basin continues to be a key area of strategic growth for us, and we will continue to be actively engaged in intentional and assessing opportunities to expand and enhance our integrated operations within the basin. In the Mid-Continent, there are 12 rigs running on our dedicated acreage in Oklahoma, and a number of projects underway to connect and optimize assets in the region. Second quarter natural gas processing volumes increased 9% compared with first quarter in line with our expectations and continue to show resilience. Rocky Mountain region processing volumes averaged more than 1.6 BCF per day in the second quarter of 2025, a 4% increase compared with the first quarter. We saw a ramp in well completions in the second quarter compared with the first quarter, and expect the same level in the third quarter, reflecting the normal seasonality we see in this region. There are currently 15 rigs on our dedicated anchorage. As Pierce and Walt noted, producers are cost, our operations remain resilient, and the effectiveness they have gained in recent years are being highlighted in this environment. I'll close with our natural gas pipeline segment, which continues to outperform compared with our guidance expectations. Approximately 75% of the outperformance is tied to legacy in-link assets and our ability to optimize that system. As demand for natural gas continues to rise, particularly related to power generation and industrial demand, our footprint is uniquely positioned to meet that growth, and we're in active conversation with customers to support project developments through direct connections. We are also well positioned to benefit from increased demand tied to LNG exports in Louisiana. Pierce, that concludes my remarks.

Thank you, Sheridan and Walt. I want to begin by thanking all of our employees. Their efforts and commitment to bringing together our assets, teams, and ideas is evident in the strength of our day-to-day operations and the solid results we continue to deliver. 1UP remains well positioned in today's market environment to continue delivering long-term value to our stakeholders. The strength of our balance sheet, a stable and long-standing customer base, diversified earnings across our integrated value chain, and the dedication of our experienced and innovation employees. We're focused on running our business efficiently and providing essential products and services that make a difference. Just as important as what we do is how we do it with a steadfast commitment to safety, integrity, and responsibility. In that spirit, I'm pleased to share that our 17th Annual Corporate Sustainability Report will be published on our website this week. I encourage you to take a look and see the measurable progress we've made on our sustainability journey. All our workforce and operations have grown significantly in recent years. Our commitment to our four values has never wavered. Together, we're delivering the energy that makes a difference in how we live, how we move, communicate, and learn across the U.S. and around the world. A shared purpose that creates value for all of our stakeholders. Operator, we're now ready for questions.