Morgan Stanley MLP and Diversified Natural Gas Corporate Access Day New York City March 8, 2012
John W. Gibson Chairman and Chief Executive Officer Page 2
Index Key Points Vision and Strategy 6 Well-positioned assets 9 Track record of disciplined growth 16 Demonstrated ability to create value 25 Appendix ONEOK 36 Financial 37 Natural Gas Distribution 41 Energy Services 48…
Key Points Vision and Strategy A premier energy company Well-positioned assets Connecting prolific supply basins to key markets Track record of disciplined growth Investing in new and existing infrastructure Demonstrated ability…
Vision and Strategy Page 6
Our Vision 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 Applying our…
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 through a…
Well-Positioned Assets Page 9
ONEOK Today A Premier Energy Company Assets that fit and work together Integrated operations Connecting prolific supply basins to key markets Proven ability to grow profitably ONEOK Partners is ONEOKs primary growth vehicle…
Business Segments Provide Stability and Opportunity ONEOK Partners ONEOKs primary growth vehicle Growth at OKS benefits OKE Generates primarily fee-based earnings Provides non-discretionary services to producers, processors and…
ONEOK Partners Asset Overview Owns and operates assets in midstream natural gas and natural gas liquids businesses Provides non-discretionary services to producers, processors and customers Primarily fee-based earnings Aligned…
Well Positioned in Shale Plays Our Fairway Active in and evaluating numerous shale plays Producer supply commitments are key Exposure to NGL-rich resource development Provides platform for future growth Bakken Shale Williston…
Natural Gas Distribution Asset Overview Kansas City Eighth largest U.S. natural gas distributor Wichita Tulsa Largest in Oklahoma and Kansas; Oklahoma City third largest in Texas More than 2 million customers served El…
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…
Track Record of Disciplined Growth Page 16
Disciplined Growth Continues 6 Billion in Capital Investments Announced approximately 2.7 to 3.3 billion in growth projects in 2011-2014 Adjacent to and within our existing operating footprint including: 1.5 to 1.8 billion related…
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 Existing…
Bakken Shale Natural Gas Gathering and Processing Investments Three new plants and related 910 million 1.1 billion infrastructure Garden Creek 100 MMcf/d Bakken Completed December 2011 Shale Stateline I 100 MMcf/d Expected to be…
Bakken Shale Natural Gas Liquids Investments Bakken Pipeline 595 million to 730 million 450-550 million 525-to 615-mile, 12-inch diameter, NGL pipeline from Bakken Shale to Overland Pass Pipeline Bakken Initial capacity to…
Cana-Woodford Shale and Granite Wash Investments 235 million to 295 million Natural Gas Liquids Expands partnerships existing Mid- Continent NGL gathering system Connects three new processing plants and expands capacity at three…
Sterling NGL Pipelines and Fractionator Investments 910 million to 1.2 billion Build new Sterling III pipeline Flexibility to transport purity products and unfractionated NGLs 610 million to 810 million 570-plus-mile, 16-inch…
Future Growth 1 Billion-plus Backlog Lengthy backlog of unannounced growth projects Includes natural gas- and NGL-related infrastructure projects, including: Natural gas processing plants NGL fractionation and storage facilities…
Acquisitions Point of View Expand current businesses in existing footprint or adjacent areas Enter new lines of business within the energy value chain Must create value for both customers and investors Disciplined buyer Corporate…
Demonstrated Ability to Create Value Page 25
OKS Growth Benefits OKE ONEOKs Growth Engine 1-cent-per-quarter Distributions paid to ONEOK ( in Millions) distribution increase 20% CAGR provides 12.5 million in 432 incremental annual distributions to ONEOK 333 Growth projects…
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 155-195 million in 2012 guidance Stand-alone cash flow, before changes in working capital Lower bonus depreciation than in 2011 ( in Millions) 215-260 million in 2013 and…
Three-year Financial Outlook Expectations for ONEOK Average annual net income growth of 18-22% between 2012- 2014* Driven by continued growth at ONEOK Partners Dividend growth of 50% by 2014** Long-term dividend payout target of…
Value for ONEOK Shareholders Dividend Growth July 2012 dividend increase Dividends paid per share 13% CAGR** of 5 cents per share* Dividend growth of 50% by 2014* Long-term dividend payout target of 60-70% of recurring 2.54…
Creating Shareholder Value Total Shareholder Return ONEOKs total return exceeds S&P 500 and S&P 500 Utilities Indices ONEOK as of Feb. 29, 2012 700% 600% 553% 500% 400% 315% 300% 200% 139% 96% 98% 100% 50% 58% 11%…
Three-year Financial Outlook Expectations for ONEOK Partners Average annual EBITDA growth of 18-22% (2012-2014)* Driven by earnings from capital projects Sustainable distribution growth Projected 2.5-cent-per-unit per-quarter…
Value Creation for OKS Unitholders Outlook Expects 2.5-cent-per-unit Distributions Paid Per Unit per-quarter increase for (Split Adjusted) 8% CAGR** 0.710 2012* 0.685 0.660 15-20% annual distribution 0.635 0.610…
Creating Unitholder Value Total Unitholder Return ONEOK Partners total return exceeds S&P 500 and Alerian MLP Indices ONEOK Partners as of Feb. 29, 2012 600% 533% 500% 392% 400% 300% 233% 200% 162% 150% 92% 98% 100%…
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…
Appendix ONEOK Page 36
Appendix ONEOK Financial Page 37
Financial Guidance Summary* 2012 Net income: range of 360-410 million Capital expenditures: approximately 302 million on a stand- alone basis Stand-alone cash flow before changes in working capital: midpoint of 740 million 155-195…
Earnings 2012 Financial Guidance Operating income and equity earnings growth: Stand-alone Operating Income Plus Equity Earnings* 8% increase from 2011 ( in Millions) ONEOK Partners 706 655 decreases: 609 625 591 597 ONEOK…
Strong Balance Sheet Investment Grade Commitment to investment- grade credit rating S&P: BBB (stable) ONEOK Stand Alone Moodys: Baa2 (stable) Debt-to-Capitalization Ratio* Capital structure Goal: 50/50 capitalization 46% 40%…
Appendix Natural Gas Distribution Page 41
Financial Performance Natural Gas Distribution Goal: Minimize the gap between actual and allowed returns Allowed return on equity (ROE)*: Range of 10.1-10.7% 2012 estimate: 9.3%* Operating Income** ( In Millions) CAGR = 11%…
Regulatory - On the Horizon Natural Gas Distribution Oklahoma - Oklahoma - Performance-based rate Performance-based rate filing in March 2012 with filing in March 2013 with Oklahoma - A new rates to be effective new rates to be…
Oklahoma Natural Gas Natural Gas Distribution Largest customer base Approximately 82 percent of states natural gas customers 836,000 customers 75% in metropolitan areas Oklahoma Corporation Commission Three commissioners elected…
Oklahoma Natural Gas Performance-based Rates Performance-based rate structure If actual ROE is higher Increase frequency and than band: decrease size of rate case 75 bps 75% revenue- changes sharing requirement 25% earnings Once…
Kansas Gas Service Natural Gas Distribution Coldest territory Approximately 67 percent of states natural gas customers 632,000 customers 60% in metropolitan areas Kansas Corporation Commission Three commissioners appointed by…
Texas Gas Service Natural Gas Distribution Third largest natural gas distributor in the state Approximately 14 percent of states natural gas customers 621,000 customers 75% in metropolitan areas Home Rule with 10 jurisdictions…
Appendix Energy Services Page 48
Meeting Customer Needs Energy Services Utilities need non-uniform natural gas supply as dictated by weather requirements Utilities are willing to pay a premium for callable service Assures physical gas is available when and where…
What We Do Energy Services 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…
Current Efforts Action Plan Maintain existing premium-services customers More than 90% retained annually Premium-services fees lower due to lower natural gas price and volatility Maximize earnings through effective optimization…
Capacity Realignment Efforts Energy Services Realign contracted capacity Storage Capacity (Bcf) with customer requirements 91 Expected storage capacity to 65 83 Bcf by year end 2012 74 76 60 Bcf by year end 2015 65 Expected…
Rebasing Cost Structure Current Plans Re-contract transportation and storage capacity Renewal Estimates Based on Capacity* At competitive rates that are economically attractive Aligned with premium-services 88% customer needs…
Financial Profile 2012 Guidance 2010 2011 2012 (Thousands of dollars, except Bcf and MMBtu/d) Actual Actual Guidance (Feb. 20, 2012) Premium services fees 60,348 53,003 59,500 Average storage capacity* (Bcf) 73.6 74.1 74.1 Assumed…
Appendix ONEOK Partners Page 55
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…
Predominantly Fee-Based Earnings Percent of Margin Fee-based margins increase in 2012 Sources of Margin Capital investments provide 0.9 B 1.1 B 1.1 B 1.2 B 1.6 B 1.6 B predominantly fee-based earnings 9% 13% 18% growth 20% 20%…
Appendix ONEOK Partners Financial Page 58
Financial Guidance Summary* 2012 Net income: range of 810-870 million Distributable cash flow: range of 925-985 million Capital expenditures: approximately 2.0 billion 1.9 billion in growth capital 109 million in maintenance…
Earnings 2012 Financial Guidance Gathering and processing: Higher gathered and processed Operating Income and Equity Earnings* ( in Millions) volumes 14% CAGR Garden Creek natural gas 1,067 1,037 processing plant in service late…
Distribution Coverage Financial Discipline Target coverage ratio of Distributable Cash Flow (DCF) 1.05x to 1.15x ( in Millions) Considerations 946 955 140 Capital project execution 320 815 Volume growth 637 558 588 626…
Bakken Shale Drilling Economics More than 90% of producer economics from crude-oil Producer Economics* production Natural Drilling is economical with NGLs gas 6% 3% crude oil prices as low as 50-60 per barrel* Increased…
Bakken Shale Current Environment Backlog of wells waiting to be fractured Shortage of crews Competing with other shales Increases well-completion costs Crude takeaway capacity with pipeline, rail and truck Existing OKS…
Bakken-related Project Status 2011-2014 % Contract In-service Major Project Contracting Status Committed Type Date Garden Creek plant and related Backed by volume commitments 100% committed POP with fee Dec. 2011 infrastructure and…
Supply Commitments Bakken Growth Projects Majority of Bakken-related projects are backed by volume commitments for 5+ years New processing plants are primarily percent-of-proceeds contracts, aligned with producers Percentage of…
Mid-Continent-Gulf Coast NGL Project Status 2011-2014 Contracting % Contract In-service Major Project Status Committed Type Date Sterling I expansion Capacity available 100% committed Differential November for optimization or fee…
Supply Commitments Mid-Continent and Gulf-Coast Growth Projects Substantially committed by in-service dates Percentage of Available Capacity Committed* 100% 90% 25% 80% 70% 60% 50% 100% 100% 100% 100% 40% 30% 75% 20% 10%…
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 Well-connects, upgrades and expansions to existing Garden…
Bakken Shale Stateline I Plant Natural Gas Gathering and Processing Investments Stateline I plant 100 MMcf/d natural gas processing facility 180-205 million In service third quarter 2012 Well-connects, upgrades and expansions to…
Bakken Shale Stateline II Plant Natural Gas Gathering and Processing Investments Stateline II plant 100 MMcf/d natural gas processing facility 135-150 million In service first half of 2013 Well-connects, upgrades and expansions…
NGL Distribution Pipeline Expansion Sterling I Installed seven additional pump stations along Sterling I pipeline Increased capacity by 15,000 bpd Transports NGL purity products from Medford, Okla., fractionator to Mont Belvieu,…
Niobrara Shale Growth Potential Producers accumulating significant acreage Bakken Driven by crude-oil Shale economics Gathering and processing infrastructure required Bakken NGL pipeline designed to expand in order Niobrara…
Mississippian Lime New Play with Great Potential Existing natural gas gathering and processing and NGL assets are well positioned Exceptional potential Mississippian Lime Eastern section contains higher amount of NGLs Western…
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…
Appendix Natural Gas Gathering and Processing Page 77
Asset Overview Natural Gas Gathering and Processing Non-discretionary services Williston Basin to producers Gathering, compression, treating and processing Wind River Powder River Natural gas supplies from six basins Diverse…
Contract Portfolio Natural Gas Gathering and Processing Contract restructuring is a core capability Increases fee-based business and reduces commodity price sensitivity Conditioning language on 75% of keep-whole contracts to reduce…
Commodity Price Risk Mitigation Natural Gas Gathering and Processing Contract restructuring reduced keep-whole sensitivity Commodity Price Sensitivity Before Hedging Margin Impact 2012 hedged positions* 4.8 4.5 NGLs: 72% at…
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…
Gathered Volumes Natural Gas Gathering and Processing 2012 volumes gathered Natural Gas Gathered (BBtu/d) increase by 15% Wells connected 1,171 1,164 1,188 2012: 800+ (estimate) 1,123 1,067 1,030 2011: 583 2010: 316 754 2009:…
Processed Volumes Natural Gas Gathering and Processing 2012 processed volumes Natural Gas Processed (BBtu/d) expected to increase 24% from 2011 886 Higher volumes in Williston Basin 674 713 Garden Creek in service 658 621 641…
Future Growth Opportunities Natural Gas Gathering & Processing Continue growing our Bakken Shale/Williston Basin super- system New processing plants, additional infrastructure in Williston Basin region Western Oklahoma and Texas…
Appendix Natural Gas Pipelines Page 85
Asset Overview Natural Gas Pipelines Predominantly fee-based Northern Border Viking Gas Transmission income Pipeline Approximately 82% of Guardian Pipeline transportation capacity contracted under demand- Midwestern Gas…
Sustainable, Stable Cash Flow Natural Gas Pipelines Interstate Pipelines Wholly owned pipelines are 87% Viking Gas Transmission subscribed under firm, demand- Northern Border Pipeline based rates in 2012 Guardian Intrastate…
Northern Border Pipeline 50-Percent Equity Investment Links natural gas supply from western Canada to Midwest markets Bakken Shale Bison Pipeline interconnection Supply diversity accessing Powder River Rockies natural gas with…
Future Growth Opportunities Natural Gas Pipelines Connections to new natural gas-fired electric-generation plants Providing pipeline takeaway capacity for growing natural gas shale plays Pipeline expansions and extensions into new…
Appendix Natural Gas Liquids Page 90
Asset Overview Natural Gas Liquids Provides non-discretionary and fee-based services to processors and customers Gathering, fractionation, transportation, marketing and storage Extensive NGL gathering system NGL Gathering…
Volume Growth Natural Gas Liquids 2012 gathering volumes increase by 25%; fractionation volumes increase by 13% Significant volume growth in the Mid-Continent from 30 new processing plants and growth from existing plants Currently…
Margin Profile Natural Gas Liquids Exchange & Storage Services Gather, fractionate, transport and store Exchange & NGLs and deliver to market hubs; primarily Storage Services fee based 68% 62% Transportation Transportation 59%…
NGL Transportation Capacity Four Straws Sterling I and II distribution pipelines are at capacity Sterling I expansion complete Arbuckle NGL gathering pipeline can be used to capture market differentials The Four Straws will…
NGL Industry Environment Key Points NGL supply growing from liquids-rich regions Petrochemical demand growth in Gulf Coast NGLs enjoy significant price advantage vs. crude-oil based feedstock Fractionation capacity is tight with new…
Arbuckle Pipeline Delivering Unfractionated NGLs to Gulf Coast Expanding to 240,000 bpd From southern Oklahoma through Barnett Shale to Mont Belvieu Expected to be in service early second quarter 2012 Another option to deliver…
Overland Pass Pipeline 50-Percent Equity Investment Links NGL supply from Bakken Shale Rockies to Mid-Continent and Gulf-Coast markets Williams is 50% owner and became operator in April 2011 Williams is anchor shipper Strong…
Optimization Opportunities Natural Gas Liquids 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…
Fractionation Capacity Natural Gas Liquids 549,000 bpd, net ownership 60,000 bpd agreement for fractionation services with Targa began in second quarter 2011 Increasing our fractionation capacity Expanding Bushton by 60,000 bpd…
U.S. NGL Supply Sources and End Uses 2011 Averages NGL Supply Sources NGL products1 NGL End Uses Ethane - 42% Primary Propane - 28% Petrochemicals 54% of NGLs Supplied Gas Processing Normal Butane - 7% 80% of U.S Supply…
Future Growth Opportunities Natural Gas Liquids Gathering, Fractionation & Storage NGL Pipelines Increase fractionation capacity Overland Pass and Arbuckle Expand existing Mid-Continent Expansions and laterals to new NGL facilities…
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