Citi Power and Gas Conference Boston, Mass. June 2, 2011
Overview Key Points Strategy and Vision A premier energy company Well-positioned assets: Connecting prolific supply basins to key markets Track record of disciplined growth that continues through: Investing in new and existing…
Strategy and Vision Page 4
Our Key Strategies A Premier Energy Company Operate in a safe, reliable and environmentally responsible manner Generate consistent growth and sustainable earnings Increase distributable cash flow at ONEOK Partners (OKS) through a…
Value for Customers A Premier Energy Company Creating exceptional value for customers Rebundling services across the value chain, primarily through vertical integration, to provide customers with premium services at lower costs…
Well-Positioned Assets Page 7
ONEOK Overview Participation in natural gas and natural gas liquids energy value chains Distribution Energy Services ONEOK Partners General partner 42.8 percent owner Generating 235-275 million in free cash flow in 2011*…
Business Segments Provide Stability and Opportunity Natural Gas Distribution Provides low-risk, stable cash flow Rate strategies have improved sustainable earnings and returns Energy Services Provides premium services to…
Natural Gas Distribution Kansas City Asset Overview Wichita Tulsa Eighth largest U.S. natural gas distributor Oklahoma City Largest in Oklahoma and Kansas; third largest in Texas El Paso More than 2 million customers served…
Energy Services Asset Overview Delivers natural gas, together with bundled, reliable, premium products and services Peaking services Primarily to LDCs Access to prolific supply and high-demand areas Deep industry knowledge and…
ONEOK Partners Asset Overview Owns and operates assets in midstream natural gas and natural gas liquids business Provides non-discretionary services to producers, processors and customers Primarily fee-based earnings 64% of…
ONEOK Partners Well Positioned Our Fairway Active in and evaluating numerous shale plays Producer supply commitments required Exposure to NGL-rich resource development Provides platform for future growth Western Canadian…
Track Record of Disciplined Growth Page 14
Disciplined Growth Continues 5 Billion in Capital Investments Announced approximately 2.7 to 3.3 billion in growth projects in 2011-2014 Adjacent to existing operating footprint and includes: 1.5 to 1.8 billion related to the Bakken…
ONEOK Partners Growth Projects Timeline Natural Gas Stateline II plant (135-150 million) Stateline II plant well-connects and related infrastructure (125-155 million) Stateline I plant (180-205 million) Woodford G&P Stateline…
ONEOK Partners Growth Projects Timeline Natural Gas Liquids Sterling III Pipeline and Reconfiguring Sterling I and II Pipelines (610 -810 million) MB-2 Fractionator (300 -390 million) Bakken NGL Pipeline (450 -550 million)…
Bakken Shale Strategic Fit Largest independent processor Extensive infrastructure Best positioned to provide critical midstream capability Knowledgeable workforce and contractors in place Strong producer relationships…
Bakken Shale Growth Projects Gathering and Processing Bakken Shale Approximately 1.0 billion Garden Creek 100 MMcf/d Stateline I 100 MMcf/d Stateline II 100 MMcf/d Well-connects, upgrades and expansions to existing…
Sterling NGL Pipelines and Fractionator Investments Natural Gas Liquids Build new Sterling III pipeline Ability to transport purity products and unfractionated NGLs 610 million to 810 million 570-plus-mile, 16-inch diameter…
Cana-Woodford Shale and Granite Wash Investments Natural Gas Liquids Expands partnerships existing Granite Mid-Continent NGL gathering Wash Cana-Woodford Shale Woodford system Shale Connects three new processing plants and…
Acquisitions Point of View Expand current businesses in existing footprint or adjacent areas Natural gas utilities Midstream assets Enter new lines of business within the midstream value chain Must create value for both customers…
Demonstrated Ability to Create Value Page 23
Commitment to Value Creation Expectations for ONEOK Average annual net income growth of 8-10% over the next three years Driven by continued growth at ONEOK Partners Dividend growth of 50-60% over the next three years Long-term…
Commitment to Value Creation Earnings and Distribution Growth Outlook Average annual EBITDA growth of 14-18% between 2011-2013 Driven by earnings from capital projects Sustainable distribution growth Projected 1 cent per unit per…
Value for ONEOK Shareholders Dividend Growth 2011 guidance includes two dividend increases of 4 cents per share semiannually Dividend growth of 50-60% over the next three years Long-term dividend payout target of 60-70% of recurring…
Value Creation for Unitholders Distribution Growth 2011 guidance of 1 cent per unit per quarter increase; 5-10% annual growth in 2012/2013 44 percent increase since ONEOK became the sole general partner in April 2006 Target coverage…
OKS Growth Benefits OKE ONEOKs Growth Engine 2011 guidance includes 1- Distributions paid to ONEOK ( in Millions) cent-per-quarter increase in 18% CAGR ONEOK Partners distributions 328 1-cent-per-quarter distribution 304 increase…
Stable Cash Flows Key Points Business is built to weather economic cycles through: Regulatory-recovery mechanisms Hedging strategies to mitigate risk Predominantly fee-based earnings in ONEOK Partners segment Non-discretionary…
Free Cash Flow at ONEOK Provides Financial Flexibility 235-275 million free cash Stand-alone cash flow, flow in 2011 guidance* before changes in working capital Benefits from bonus depreciation ( in Millions) 150-200 million per…
Share Repurchase Returning Value to Shareholders May 2011: 300 million Average YTD shares outstanding (diluted) accelerated share repurchase 109.2 agreement with Barclays Capital 107.7 Funded by available cash and 107.1…
Key Investment Considerations A Premier Energy Company Strategic assets connecting prolific supply basins and key markets Non-discretionary services to producers, processors and customers Focused on creating value for both customers…
Questions
Index Overview Strategy and Vision 4 Well-positioned assets 7 Track record of disciplined growth 14 Demonstrated ability to create value 23 Appendix ONEOK Financial 35 Natural Gas Distribution 40 Energy Services 50 Appendix…
Appendix ONEOK Financial Page 35
ONEOK 2011 Financial Guidance 2011 guidance released January 2011 Two 4-cent-per-share semiannual dividend increases in 2011 1,083 1,046 967 102 106 72 102 944 977 895 335 343 305 246 230 175 Operating Income and…
Earnings 2011 Financial Guidance ONEOK Partners increases: Higher NGL volumes gathered, Stand-alone Operating Income transported and optimized Plus Equity Earnings* ( in Millions) Higher natural gas volumes processed 625 627 609…
Appendix Appendix Natural Gas Distribution Page 40
Natural Gas Distribution Improved Performance Closed the gap between actual and allowed returns Achieving allowed return on equity: 10.7%* Compared with 5% in 2006 Operating income almost doubled over last five years Operating…
Natural Gas Distribution Current Efforts Investing in projects to benefit customers and shareholders 25 million to continue installation of automated meters in selected residential communities in Oklahoma and Texas in 2011 Quicker,…
Natural Gas Distribution Innovative Rate Strategy Faster capital and cost recovery for shareholders Prevents rate shock and stabilizes rates for customers 2005 2011 Opportunities Solutions Oklahoma Kansas Texas* Oklahoma Kansas…
Natural Gas Distribution Reducing Margin Sensitivity Two-thirds of margin is residential More than 70% of margin from fixed charges Weather normalization stabilizes volumetric charges Oklahoma Kansas Texas Total Residential…
Natural Gas Distribution On the Horizon - Regulatory First Oklahoma performance-based rate filed in February 2011 Next substantial rate case filing in Kansas by December 2013 Oklahoma - Performance-based rate Oklahoma - filing…
Natural Gas Distribution Oklahoma Natural Gas Largest customer base Approximately 82 percent of states natural gas customers 847,000 customers 75% in metropolitan areas Oklahoma Corporation Commission Three commissioners elected…
Natural Gas Distribution Oklahoma Natural Gas Performance-based Rates Performance-based rate structure If actual ROE is higher Shift from infrequent, larger rate than band: increases to smaller annual rate 75 bps 75% revenue-…
Natural Gas Distribution Kansas Gas Service Coldest territory Approximately 67 percent of states natural gas customers 641,000 customers 58% in metropolitan areas Kansas Corporation Commission Three commissioners appointed by…
Natural Gas Distribution Texas Gas Service Third largest natural gas distributor in the state Approximately 14 percent of states natural gas customers 623,000 customers 74% in metropolitan areas Home Rule with 10 jurisdictions…
Appendix Energy Services Page 50
Energy Services What We Do Provide bundled, reliable products and services to natural gas and electric utilities Buy natural gas supply from diverse sources Lease and optimize storage and transportation capacity Effectively use…
Energy Services Current Efforts Continued focus on providing customer-specific premium services Hedging strategy Executed based on point-of-view and market liquidity 2011 hedged margins* 47% of transportation for 2011 54% of…
Energy Services Realignment Efforts Realign contracted capacity Storage Capacity (Bcf) with customer requirements 91 Storage capacity to 65 Bcf by 83 year-end 2012 74 75 Long-term transportation 65 capacity to 1 Bcf/d by…
Energy Services Sources of Margin Premium Services Provide natural gas and a wide Fee -based 2011* 48% Fees range of services (base load, swing 2010 38% and peaking) to various end users 2009 52% by optimizing storage,…
ONEOK Partners Strong Asset Position Strategic assets connecting prolific supply basins to key markets Embedded growth opportunities within existing operating footprint Provides non-discretionary services to producers, processors…
Appendix ONEOK Partners Growth Projects Page 58
Current and Future Growth Current and Future Investments Announced NGL Projects Potential Projects Bakken NGL pipeline Well-connects Overland Pass Pipeline expansion New plant facilities Bushton fractionator expansion Plant…
ONEOK Partners Growth More than 2 Billion of Growth Projects Completed 2006-2009 2010 was first full year of all projects contributing EBITDA Two-thirds of investments were NGL-related projects fee based Set the stage for next…
Bakken Shale Drilling Economics More than 90% of producer economics from crude-oil Reserve content* production Natural Drilling is economical with NGLs gas 6% 3% crude oil prices as low as 35-50 per barrel Rapid production…
NGL Content Averages from Selected Natural Gas Basins Conventional Non-Associated lean Non-Associated rich Associated South Texas Associated Permian Associated Midwest Shale Lean (e.g. Haynesville) (TX) W. Barnett (TX) Opal…
Bakken Shale Garden Creek Plant Natural Gas Gathering and Processing Investments Garden Creek plant 100 MMcf/d natural gas processing facility 150-210 million In service by end of 2011 Well-connects, upgrades and expansions to…
Bakken Shale Stateline I Plant Natural Gas Gathering and Processing Investments Stateline I plant 100 MMcf/d natural gas processing facility 180-205 million Completed by third-quarter 2012 Well-connects, upgrades and expansions…
Bakken Shale Stateline II Plant Natural Gas Gathering and Processing Investments Stateline II plant 100 MMcf/d natural gas processing facility 135-150 million Completed by first half of 2013 Well-connects, upgrades and expansions…
Bakken Shale Natural Gas Liquids Investments Bakken Pipeline 450-550 million Bakken Shale 525-to 615-mile, 12 diameter, NGL pipeline from Bakken Shale to Overland Pass Pipeline Initial capacity to transport 60,000 bpd of…
Woodford Shale 2010 Investments Natural gas gathering system expansion Connect gathering system to existing processing facility Optimize Oklahoma processing capacity Cana-Woodford to accommodate growing volumes Shale Woodford…
Niobrara Shale Growth Potential Producers accumulating significant acreage Drilling permit activity escalating Bakken Shale Preliminary well results have been positive Driven by crude-oil economics Gathering and processing…
NGL Distribution Pipeline Expansion Sterling I Installing seven additional pump stations along Sterling I pipeline Increasing capacity by 15,000 bpd Transports NGL purity products from Medford, Okla., fractionator to Mont…
Appendix ONEOK Partners Financial Page 70
ONEOK Partners 2011 Financial Guidance 2011 guidance released January 2011 1-cent-per-unit-per-quarter increase in distribution 1,116 656 650 1,011 Growth 586 616 547 550 558 588 434 473 557 353 291 62 105 Maintenance…
Earnings 2011 Financial Guidance Gathering and processing: Higher processed volumes Operating Income and Equity Earnings* ( in Millions) Slightly higher gathered volumes 9% CAGR Higher operating expenses 746 762 Natural gas…
Predominantly Fee-Based Earnings Percent of Margin Capital investments provide earnings growth Sources of Margin 896 MM 1.1 B 1.1 B 1.2 B 1.3 B Commodity price risk 13% 9% 13% Exists in gathering and 20% 18% processing segment…
Debt Offering Liquidity 1.3 billion senior notes offering completed January 2011 650 million of 5-year senior notes at 3.25% 650 million of 30-year senior notes at 6.125% Proceeds used to: Repay amounts outstanding under 1.0…
Distribution Coverage Financial Discipline Target coverage ratio of Distributable Cash Flow (DCF) ( in Millions) 1.05x to 1.15x 650 Considerations 637 588 558 38 Fund growth projects 164 9 47 466 Commodity prices 579 612 74…
Appendix Natural Gas Gathering and Processing Page 77
Natural Gas Gathering and Processing Asset Overview Williston Basin Non-discretionary services to producers Gathering, compression, treating and processing Wind River Powder River Natural gas supplies from six basins Diverse…
Natural Gas Gathering and Processing Contract Portfolio Contract restructuring is a core capability Increases fee-based business and reduces commodity price sensitivity Conditioning language on 85% of keep-whole contracts to reduce…
Commodity Price Risk Mitigation Natural Gas Gathering and Processing Contract restructuring reduced keep-whole Commodity Price Sensitivity Before Hedging Margin Impact sensitivity 4.8 4.5 Long NGL, condensate and 3.8 natural gas…
Volume Growth by Basin Natural Gas Gathering and Processing Williston Basin produces high NGL-content gas; produced with crude oil Oklahoma and Kansas regions produce moderately wet gas - requires processing Powder River Basin…
Natural Gas Gathering and Processing Processed Volumes Active drilling in the Bakken Natural Gas Processed (BBtu/d) Shale and Cana-Woodford 749 2011 processed volumes 658 674 621 641 expected to increase 11% from 2010 583 545…
Appendix Natural Gas Pipelines Page 84
Natural Gas Pipelines Asset Overview Predominantly fee-based Northern Border Viking Gas Transmission income Pipeline Approximately 85% of Guardian Pipeline transportation capacity contracted under demand- Midwestern Gas…
Sustainable, Stable Cash Flow Natural Gas Pipelines Interstate Pipelines Wholly owned pipelines are 95% Viking Gas subscribed under firm, demand- Northern Border Transmission Pipeline based rates Guardian Intrastate Pipelines…
Northern Border Pipeline 50-Percent Equity Investment Links natural gas supply from western Canada to Midwest markets Potential new supply from emerging shale development in northeast British Columbia Fully subscribed through…
Appendix Natural Gas Liquids Page 88
Natural Gas Liquids Asset Overview Provides non-discretionary and fee-based services to processors and customers Gathering, fractionation, transportation, marketing and storage Extensive NGL gathering system NGL Gathering…
NGL Supply Decline Rates Substantial new supply U.S. Production by Year needed to just offset U.S. 80,000 base decline 70,000 Hurricanes Ike and Gustav Correlation of U.S. natural gas 2010 production to NGL production 60,000…
Volume Growth Natural Gas Liquids Significant volume growth in the Mid-Continent from 22 new processing plant connections and growth from existing plant connections Currently developing over 15 new supply connections Rockies,…
Margin Profile Natural Gas Liquids 2011* 2011* Exchange & Gather, fractionate, transport and Primarily fee based 2009 71% 2010 68% Storage store NGLs and deliver to market 2008 2009 59% Services hubs 2008 56% 2011* 4%…
Arbuckle Pipeline Delivering Unfractionated NGLs to Gulf Coast Current capacity to transport 180,000 bpd of unfractionated NGLs expanding to 240,000 bpd From southern Oklahoma through Barnett Shale to Mont Belvieu Completed by…
Overland Pass Pipeline 50-Percent Equity Investment Williams increased ownership to 50 percent from 1 percent Presented as equity earnings prospectively from September 2010 ONEOK Partners received approximately 424 million…
Natural Gas Liquids Optimization Opportunities Provides earnings upside to fee-based business How it works: Ability to deliver NGL products at either Conway or Mont Belvieu Utilize assets, contract portfolio and market knowledge…
Natural Gas Liquids ONEOK Partners Fractionation Capacity ONEOK Partners 549,000 bpd, net ownership* Increasing our fractionation capacity 60,000 bpd of fractionation services from Targa begins second quarter Expanding Bushton…
Natural Gas Liquids Fractionation Capacity Agreement with Targa 10-year fractionation services agreement for 60,000 bpd of capacity at Targas Cedar Bayou facility in Mont Belvieu, Texas Operational since April 2011 Services begin…
Natural Gas Liquids U.S. NGL Supply Sources and End Uses Five-year Averages NGL Supply Sources NGL products1 NGL End Uses Ethane - 39% Primary Propane - 29% Petrochemicals 50% of NGLs Supplied Gas Processing Normal Butane - 7%…
Non-GAAP Reconciliations ONEOK Page 99
Non-GAAP Reconciliations ONEOK ONEOK has disclosed in this presentation stand-alone cash flow, before changes in working capital, free cash flow, and stand-alone operating income and equity earnings, amounts that are non-GAAP…
Non-GAAP Reconciliations Stand-Alone Operating Income and Equity Earnings 2006 2007 2008 2009 2010 2011G* Total operating income 862 823 917 895 944 977 Less: ONEOK Partners operating income 511 447 645 547 586 656 Stand-alone…
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