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MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc.

Oneok Inc. · Mar 16, 2010 · 68 slides

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  1. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 1
    Morgan Stanley MLP and Diversified Natural Gas Corporate Access Day New York City March 16, 2010
  2. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 2
    Overview Page 3
  3. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 3
    Key Investment Considerations A Premier Energy Company Focused on creating value for customers, producers and investors Value Creation Growth at ONEOK Partners benefits ONEOK Generate consistent free cash flow ONEOK Partners assets…
  4. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 4
    ONEOK Today A Premier Energy Company Assets that fit and work together Proven ability to grow profitably Page 5
  5. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 5
    Our Vision A Premier Energy Company Creating exceptional value for all stakeholders by: Rebundling services across the value chain, primarily through vertical integration, to provide customers with premium services at lower costs…
  6. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 6
    Our Key Strategies A Premier Energy Company Generate consistent growth and sustainable earnings Increase distributable cash flow at ONEOK Partners through a combination of strategic acquisitions and growth projects Grow operating…
  7. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 7
    Business Environment 2010-2012 Moderate economic recovery in 2010 Improved credit markets for investment-grade issuers Federal legislative and regulatory environment is uncertain Anticipated consolidation of underperforming assets,…
  8. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 8
    Diversified Assets Page 9
  9. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 9
    Business Segments Diversity Provides Stability and Opportunity Distribution Provides low-risk, stable cash flow Rate strategies have led to an increase in sustainable earnings and an improved return on equity Energy Services…
  10. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 10
    Distribution Page 11
  11. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 11
    Distribution Key Points Eighth largest U.S. natural gas distributor Largest in Oklahoma and Kansas Third largest in Texas More than 2 million customers served Kansas Oklahoma Texas Customer Base Approximately 70% of states…
  12. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 12
    Distribution Successful Execution of Rate Strategy Synchronized rates and regulatory actions Capital and bad-debt recovery in all states Innovative rates (performance-based, decoupling) 2005 2009 Opportunities Solutions Oklahoma…
  13. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 13
    Distribution Earnings Growth to Close the Performance Gap Essentially closed the gap between Increased level of sustainable actual and allowed returns earnings 2010 return on equity Rate mechanisms reduce Allowed: 10.7% regulatory…
  14. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 14
    Distribution On the Horizon - Regulatory Oklahoma Rate case approved for 54.5 million, with new rates effective Dec. Oklahoma - 2009 Texas Filed for rate Performance-based increase in El Paso service rate filing anticipated…
  15. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 15
    Distribution Oklahoma Natural Gas Largest customer base Approximately 85 percent of states natural gas customers 834,500 customers Oklahoma Corporation Commission Three commissioners elected to six- year staggered terms Rate…
  16. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 16
    Distribution Kansas Gas Service Coldest territory Approximately 70 percent of states natural gas customers 633,200 customers Kansas Corporation Commission Three commissioners appointed by the governor to four-year staggered…
  17. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 17
    Distribution Texas Gas Service Third largest natural gas distributor in the state Approximately 14 percent of states natural gas customers 604,800 customers Home Rule with 10 jurisdictions Texas Railroad Commission has…
  18. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 18
    Distribution Oklahoma Natural Gas Performance-based Rates Performance-based rate structure If actual ROE is higher than band: Shift from infrequent, larger 75 bps 75% revenue- sharing requirement rate increases to smaller 25%…
  19. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 19
    Energy Services Page 20
  20. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 20
    Energy Services Contracted Capacity Enable us to Provide Premium Services to Customers Deliver natural gas, together with bundled, reliable, premium products and services Peaking services Primarily to LDCs Access to prolific…
  21. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 21
    Energy Services Current Efforts Continued focus on customer-specific Reduce volatility in earnings premium delivery services Minimizes downside, limits Realign contracted storage and upside transportation capacity with…
  22. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 22
    Energy Services Financial Profile Thousands except /MMBtu Baseline* 2009 Actual 2010 Guidance* Premium service fees 85,000 81,625 68,000 Year-end storage capacity (Bcf) 65.0 82.8 71.3 Assumed winter/summer spread NYMEX (/MMBtu)…
  23. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 23
    Financial Strength Page 24
  24. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 24
    Earnings Growth Delivering Consistent Growth and Stable Earnings Stand-alone Operating Income Distribution segment provides Plus Equity Earnings stable cash flow ( in Millions) Energy Services margin 609 607 hedged in 2010: 591…
  25. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 25
    ONEOK Financial Guidance 2010 2 cents per share dividend increase semi annually 2010 capital expenditures include 31 million to install automated meters in selected Oklahoma residential communities 958 895 306 318 241…
  26. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 26
    ONEOK Earnings Growth 2010 Drivers Operating Income and Equity Earnings Drivers ONEOK Partners Distribution Energy 1,100 13 Services 86 1,038 (28) 1,000 967 * Oklahoma performance- * Higher seasonal storage based rates…
  27. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 27
    Strong Cash Flow Provides Financial Flexibility Free Cash Flow* 135-170 million free cash ( in Millions) flow available for: Acquisitions 152 170 223 Investment in OKS 205 182 Dividend increase 191 Share repurchase 163 150…
  28. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 28
    Strong Balance Sheet Demonstrated Financial Discipline Strong credit rating S&P: BBB Moodys: Baa2 Total Capital structure Debt Goal: 50/50 capitalization 41% Equity Reduced debt by 1.2 billion in 2009 by: 59% Lower working…
  29. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 29
    Dividend Growth Creating Exceptional Value for Shareholders 8 dividend increases since January 2006 Target long-term dividend payout of 60%-70% of recurring earnings 2010 guidance includes dividend increases of 2 cents per share semi…
  30. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 30
    ONEOK Partners Page 31
  31. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 31
    ONEOK Partners Overview Participates in natural gas and natural gas liquids value chains Strategic assets connected to prolific supply basins with access to key markets Provides non-discretionary services to producers and…
  32. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 32
    ONEOK Partners Strong Asset Position Strategic assets connected to prolific supply basins with access to key markets Provides non-discretionary services to natural gas producers and various customers Natural Gas Natural Gas…
  33. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 33
    Natural Gas What We Do Connect raw natural gas production from the wellhead to markets through: Gathering and compression via extensive pipeline systems Processing and treating to remove contaminants and extract natural gas…
  34. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 34
    Natural Gas Diverse Asset Base Two businesses: Gathering & Processing Pipelines Diversified supply basins, producers and contracts mitigate earnings volatility Earnings on pipelines are predominantly fee based Natural Gas…
  35. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 35
    Natural Gas Gathering & Processing Key Points Provides non-discretionary Williston services to producers Gathering, compression, Powder River treating and processing Wind River Natural gas supplies from five basins Wind…
  36. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 36
    Natural Gas Gathering & Processing Volumes by Basin Williston Basin produces high Gathered Volumes by Basin* NGL content gas Central Produced with crude oil Kansas Uplift 12% Powder River Powder River Basin 2-4 GPM 21% produces…
  37. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 37
    Natural Gas Gathering & Processing Gathered Volumes Wells connected Natural Gas Gathered (BBtu/d) 2010: 400 plus 1,171 1,164 1,123 1,131 2009: 304 2008: 476 2007: 352 Approximately 32 million in annual 800 798 782 799 growth…
  38. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 38
    Natural Gas Gathering & Processing Processed Volumes Natural Gas Processed (BBtu/d) Active drilling in the 696 Woodford Shale and 621 641 658 Bakken Shale 2009 processed volumes increased 3% from 2008 545 571 539 2010…
  39. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 39
    Natural Gas Gathering & Processing Contract Portfolio Contract restructuring is a core capability Increases fee-based business and reduces commodity price sensitivity Conditioning language is on 84% of keep-whole contracts and…
  40. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 40
    Natural Gas Gathering & Processing Risk Mitigation Contract restructuring reduced Commodity Price Sensitivity Before Hedging Margin Impact ( Millions) commodity price and keep-whole spread sensitivity 4.8 4.5 3.8 Long NGL,…
  41. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 41
    Natural Gas Pipelines Key Points Connected to diverse supply Viking Gas basins and markets Transmission Predominantly fee-based income Northern Border Pipeline Guardian Approximately 90 percent of Pipeline…
  42. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 42
    Northern Border Pipeline 50 Percent Equity Investment Links natural gas supply from western Canada to Midwest Potential new supply from emerging shale development in northeast British Columbia Bison Pipeline project Connecting…
  43. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 43
    Natural Gas Liquids What We Do Connect raw-blended NGL production from natural gas processing plants to markets through: Gathering via extensive pipeline systems Fractionating to convert raw-blended NGLs to purity products Storage…
  44. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 44
    Natural Gas Liquids Extensive Asset Base Gathering, fractionation & storage Capacity in Mid-Continent and Gulf Coast NGL Pipelines From key supply areas Distribution to key markets Connected to approximately 90% of the…
  45. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 45
    Natural Gas Liquids Key Points Provides non-discretionary and fee-based services to various customers Gathering, fractionation, storage, transportation and marketing Extensive raw NGL gathering system NGL Gathering Pipelines…
  46. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 46
    Natural Gas Liquids NGL Supply Significant volume growth in the Mid-Continent from 21 new processing plant connections and growth from existing plant connections Rockies, Barnett Shale and Woodford Shale provide additional growth…
  47. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 47
    Natural Gas Liquids Fractionation Capacity ONEOK Partners: 549,000 Bbl/d, net ownership Increasing our fractionation capacity 60,000 Bbl/d of fractionation services from Targa in early 2011 Conway Hutchinson Continuing to…
  48. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 48
    Natural Gas Liquids Fractionation Capacity Agreement with Targa Signed a definitive 10-year fractionation services agreement for additional capacity at Targas Cedar Bayou facility in Mont Belvieu, Texas Expected to be operational…
  49. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 49
    Natural Gas Liquids Margins Fee-based Earnings with Optimization Opportunities Exchange & Gather, fractionate, transport and Primarily fee based 2010* 65% Storage store NGLs and deliver to market 59% 2009 Services hubs 2008 56%…
  50. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 50
    Natural Gas Liquids Supply Growth - Rocky Mountains Overland Pass and Laterals Supply commitments secured to reach Supply throughput of more than 200,000 Bbl/d over the next three to five years Expandable to 255 Capacity…
  51. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 51
    Natural Gas Liquids Arbuckle Pipeline Arbuckle Pipeline Cost 490 Million NGL Gathering Pipeline NGL Distribution Pipeline Length 440 miles NGL Arbuckle Pipeline Completion NGL Storage In service August 2009 NGL Fractionator…
  52. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 52
    Natural Gas Liquids U.S. NGL Supply Sources and End Uses Five-year Averages NGL Supply Sources NGLs Supplied 1 NGL End Uses Ethane - 39% Primary Propane - 29% Petrochemicals 50% of NGLs Supplied Gas Processing Normal Butane - 7%…
  53. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 53
    ONEOK Partners Growth More than 2 Billion of Growth Projects Completed 2010 is first full year of all projects contributing EBITDA Grasslands plant expansion Guardian II Expansion Fort Union Gas Gathering Expansion Overland…
  54. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 54
    Future Growth Projects 2010-2015 Potential Capital Investments Natural Gas Natural Gas Liquids Segment Category Cost Ranges Segment Category Cost Ranges (millions) (millions) Gathering & Well-connects and routine 60-90 / year…
  55. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 55
    Growth Capital Future Investments Potential Natural Gas Liquids Projects - Fractionator expansions - New fractionator - Rail / truck racks - Storage - New pipelines Potential Natural Gas - New market connections Pipelines…
  56. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 56
    ONEOK Partners Shale Play Opportunities Active in numerous shale plays Evaluating new shale plays Producer supply commitments required Western Canadian Sedimentary Basin Montana Thrust Belt Williston Basin Bakken Shale Big Horn…
  57. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 57
    Financial Strength Financial Strength Page 58
  58. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 58
    Strong Balance Sheet Liquidity Strong credit rating S&P: BBB Moodys: Baa2 Capital structure Goal: 50/50 capitalization Total Equity Debt 50% Reflects Feb. 2010 equity offering of 323 50% million, 5.5 million units 1 billion…
  59. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 59
    Earnings Growth Investments Provide Earnings Growth Diverse asset base Operating Income 16% CAGR provides significant fee- 645 625 based income through 172 non-discretionary 547 Gathering and Processing services 447 396 156…
  60. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 60
    ONEOK Partners Financial Guidance 2010 75% of equity volumes hedged 1 cent per unit per quarter increase in distribution Average units outstanding 101.4 million units 625 600 616 547 558 470 434 557 362 278 Growth 59 84…
  61. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 61
    ONEOK Partners Earnings Growth 2010 Drivers Operating Income and Equity Earnings Drivers 2009 Guidance vs. 2010 Guidance NGL 725 65 Other 705 NGP (1) G&P 17 619 5 625 * Full-year impact of Millions 2009 completed growth…
  62. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 62
    Distribution Coverage Financial Discipline Target coverage ratio of 6.17 1.05x to 1.15x 4.92 4.91 Considerations 4.48 4.26 4.35 4.50 4.025 Fund growth projects 3.71 3.78 3.20 Commodity prices Capital market conditions…
  63. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 63
    Value Creation Delivering Consistent Growth and Stable Earnings Distribution growth: 13 increases with ONEOK as sole general partner Total return exceeds S&P 500 Index Distributions Per Unit Total Return at Feb. 26, 2010 8% CAGR…
  64. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 64
    ONEOK Partners Growth at ONEOK Partners benefits ONEOK Distributions to ONEOK have Distributions to ONEOK* increased significantly in the 18% CAGR past three years: 300 282 267 General partner distributions 250 have more than…
  65. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 65
    Aligned Interests Growth at ONEOK Partners Benefits ONEOK As ONEOK Partners grows, ONEOK grows Two-thirds of every incremental EBITDA dollar flows to ONEOK Distribution growth: Penny a quarter increase adds 5.8 million to ONEOKs…
  66. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 66
    ONEOK Partners Managing Risk Capital projects provide Sources of Margin earnings growth 844 Million 896 Million 1.1 Billion 1.1 Billion 1.2 Billion 12% 13% 12% Predominantly fee-based 20% 18% 21% Natural gas gathering and 28% 27%…
  67. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 67
    Capital Expenditures Capital Expenditures 2007-2015 2010 capital expenditure guidance 278 million in growth 84 million in maintenance Identified 300 - 500 million per year in growth projects between 2010-2015 Growth Capital…
  68. MORGAN STANLEY MLP AND DIVERSIFIED NATURAL GAS CORPORATE ACCESS DAY – Oneok Inc. – slide 68

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