The conference call begins with the operator introducing the ONEOK Third Quarter 2023 Earnings Conference Call and Webcast and turning it over to Andrew Ziola, Vice President of Investor Relations. Ziola reminds listeners that statements made during the call are considered forward-looking and may differ from actual results. The call features Pierce Norton, President and CEO, Walt Hulse, CFO and EVP of Investor Relations and Corporate Development, and other executives who will be available to answer questions. Norton introduces Sheridan Swords, EVP of Commercial Liquids and Natural Gas Gathering and Processing, Chuck Kelley, SVP of Commercial of Natural Gas Pipelines, and Kevin Burdick, EVP and Chief Enterprise Services Officer.

The company's new position will be crucial for integrating systems and workforces after the acquisition of Magellan. The person chosen for the position, Kevin, has the necessary experience in integration processes, information technology, and corporate operations. The company has been focused on integration activities since the acquisition and has already identified several commercial synergies and opportunities. The collaboration of employees from both companies has also presented additional possibilities. The company's increased scale and diversified operations are expected to create value for stakeholders through fee-based earnings, free cash flow, and tax synergies. The company has also announced increased financial guidance for the third quarter of 2023 and provided new consolidated guidance that includes the impact of the acquisition.

In the third quarter, ONEOK saw strong financial performance with net income of $454 million and adjusted EBITDA of over $1 billion, an 11% increase from the previous year. The Refined Products and Crude segment also contributed $40 million in adjusted EBITDA, including a $9 million gain on commodity derivative positions. The company had no outstanding borrowings and had over $280 million in cash as of September 30. For the fourth quarter, they expect net debt to adjusted EBITDA to be around 3.7x on an annualized basis.

The company has increased its guidance for 2023, with a higher net income and adjusted EBITDA midpoint, driven by volume strength, higher fee rates, and lower NGL fractionation costs. The newly announced 2023 consolidated financial guidance includes impacts from the Magellan acquisition, with a net income midpoint of $2.6 billion and adjusted EBITDA midpoint of $5.1 billion. This includes transaction costs and an unfavorable earnings impact related to commodity inventory balances. The Refined Products and Crude segment is expected to perform well despite these impacts.

The company expects to invest $1.575 billion in capital expenditures in 2023, with a focus on expanding pipelines and supporting producer activity. Their financial outlook remains strong, and they anticipate exceeding expectations. The commercial update highlights a 11% increase in NGL volumes and a 12% increase in processed volumes compared to the same quarter last year. The Rocky Mountain region saw the most significant growth, with volumes averaging over 400,000 barrels per day in September. The company maintains their ethane recovery assumptions and sees potential for further growth in 2024.

In the third quarter, North Dakota gas production reached record levels and the Rocky Mountain region saw a significant increase in well connections. The company has also increased their well connect guidance for 2023. In the Mid-Continent region, process volumes and well connections have also increased. The Refined Products and Crude segment has only been operational for 6 days in the third quarter, but is performing as expected with strong seasonal margins.

The Natural Gas Pipelines segment has seen strong year-to-date results and is expected to continue growing through synergies. There are opportunities for expansion in Oklahoma and Texas, as well as potential for a new LNG export facility. The CEO, Pierce Norton, is pleased with the progress and collaboration between the legacy ONEOK and Magellan employees. He thanks them for their efforts and expresses gratitude to investors for their support.

The speaker discusses the future prospects of the recently merged companies and mentions the immediate synergies that have been realized since the merger. They also mention the ongoing process of identifying and realizing further synergies, with a focus on cost savings and efficiency improvements. The speaker then turns the question over to a colleague to discuss the integration planning and data analysis that has been done to identify potential synergies.

The company has identified around 250 opportunities for growth and is prioritizing them based on value and time to achieve. They have owners assigned to each opportunity and are tracking progress. These opportunities will be factored into the company's guidance for 2024. The company has pulled forward some CapEx related to West Texas LPG and Elk Creek expansion, and Saguaro may be a JV relationship, which could defer capital further. The analyst asks for an update on the forward CapEx outlook for 2024 and beyond.

The speaker is not giving specific guidance for 2024, but mentions that there are opportunities for growth without any major capital projects. They will provide guidance in February. Another speaker asks for clarification on the company's current guidance and the speaker confirms that the run rate for the business is around $1.5 billion, taking into account seasonality and synergies from a recent acquisition.

Walt Hulse and Jeremy Tonet discuss the positive direction of moving parts, with Hulse noting a favorable debt to EBITDA ratio and increased flexibility for capital allocation. Tonet asks about future plans after the Magellan agreement, to which Pierce Norton responds that they continue to look at different options with more flexibility post-Magellan. Michael Blum asks about the West Texas NGL pipeline expansion and Sheridan Swords explains that there is optionality to use the legacy system for NGLs, refined products, or crude, but does not provide a specific breakdown of how it will be split over time.

The company has been working on a legacy system they bought from Chevron, which will allow them to segregate and use it for different products. This will provide opportunities for them to move more products in and out of the Permian Basin. The Bison Express pipeline project will not have a significant impact on their incentivized ethane program, as there is already enough natural gas production in the basin. The project will ensure that there is enough natural gas takeaway for producers in the area.

The speaker discusses the potential for growth in the natural gas market, thanks to the addition of Magellan to their company. They also mention the possibility of expanding into exports, with Magellan's expertise in operating docks and understanding global demand. They plan to continue looking at this as the market dictates and with the help of Magellan's employees.

The speaker is discussing the potential for competition in the LNG market in the region, but they feel secure in their market share and long-term contracts. They also mention the potential for mid to high-single-digit dividend growth and increased flexibility in capital allocation due to improved debt metrics.

The speaker discusses their plans for the future and mentions giving more information in February. They also talk about the growth of GOR in the Bakken and how it will continue to rise. The speaker then answers a question about contracts in the Permian and says that they have long-term contracts in place.

The company has secured long-term contracts for their liquid pipelines, providing a favorable return on their investment. The majority of tariffs for these pipelines are at market rate, with the remaining portion subject to FERC regulations. The company expects to see a 3.7x leverage ratio in the fourth quarter, with the goal of reaching 3.5x by 2024. They are confident in their progress and are open to going below 3.5x if needed.

The speaker discusses the company's debt-to-EBITDA ratio and how it has been improving. They mention that they are generating a lot of cash and have the flexibility to manage their debt portfolio. The speaker also mentions the possibility of going to the credit markets for a reason, but they will maintain their flexibility. A question is asked about the potential for realizing batching upside, but the speaker states that there are a variety of scenarios that could play out.

The company expects to see some projects come to fruition quickly, while others will require more time and resources. They are confident in their ability to achieve these goals and are seeing good activity in the Rockies and Mid-Continent regions. The Bakken area is particularly promising and they are expanding their Elk Creek project. The Mid-Continent has also been performing well, with increased producer activity and high liquid content gas production.

The company is optimistic about growth in the fourth quarter and into 2024. They believe there is opportunity for commercial synergies in the butane blending market, with potential for increased profits in 2024. They also plan to increase capacity for West Texas LPG and may consider building or buying Permian plants for long-term NGL supply.

The company is looking at opportunities for expansion, and they have been able to contract NGLs without a G&P presence. They have a very integrated value chain and can offer an attractive program to producers. They will be disciplined about any future M&A opportunities. They are currently working towards FID for the SWRO project and will provide more details at that point. The questioner asked about the current running capacity of the West Texas LPG system.

The speaker, Sheridan Swords, discusses the current volumes of West Texas LPG throughput, stating that they are currently at 430,000 barrels a day with a capacity for 740,000 barrels a day when completed. The interviewer then asks about the impact of recent E&P deals on the company's dialogue with producer customers. Pierce Norton responds that they view these deals as positive for domestic production in the United States and that they do business with all of the companies involved, including in gathering and processing, natural gas pipelines, NGLs, and crude.

The speaker discusses the potential for bundling deals with larger companies and the potential for shareholder returns after the merger. They also mention plans to potentially build an LPG export terminal on the Gulf Coast, despite potential pricing challenges.

The company is considering various factors in order to prioritize their opportunities, including capital, speed to market, and potential profits. The LPG export dock project is still being considered, but it is a longer term project compared to others. The company is seeing more opportunities for commercial growth since the closing of a recent deal, and they will prioritize these opportunities.

The speaker discusses the company's current resources and priorities, stating that they are focusing on high-impact tasks and will obtain additional resources if needed. The conference call has concluded and the company's quiet period for the fourth quarter will begin in January until the earnings are released in late February.

This summary was generated with AI and may contain some inaccuracies.