The operator welcomes participants to the ONEOK First Quarter 2024 Earnings Conference Call and introduces the speakers. The speakers remind listeners of the forward-looking statements and introduce the financial results and increased guidance for the first quarter of 2024. They also mention the support from higher volumes and contributions from the Refined Products and Crude segment.

The company's employees were praised for their efforts in managing through winter weather and volumes have rebounded, leading to an increase in financial guidance for 2024. This is due to favorable industrial fundamentals and confidence in realizing synergies. The company remains focused on integration efforts and sees potential for growth in producer productivity, commodity prices, and demand for their products and services. Additionally, the expected increase in power generation for AI-driven data centers is seen as a potential source of future natural gas demand, in which ONEOK will play a role as a pipeline operator.

The company has had discussions with their customers about the increasing need for natural gas transportation to meet the power demand of future AI data centers. This will lead to an increase in domestic natural gas demand and ONEOK is well-positioned to play a significant role. The company also serves natural gas-fired power plants and sees supportive demand for NGLs and refined products. They have increased their financial guidance for 2024 and remain confident in their synergy expectations.

In the first quarter of 2024, ONEOK's net income was $639 million and adjusted EBITDA was $1.44 billion. The company expects to achieve additional synergies of $125 million by 2025 and has maintained its capital expenditure guidance for 2024. Higher operating costs were driven by planned maintenance turnarounds, insurance premiums, and operational growth. The company has no outstanding borrowings and a net debt-to-EBITDA ratio of 3.8x as of March 31. ONEOK remains focused on delivering long-term value through a balanced approach of high-return capital projects, dividend growth, debt reduction, and share repurchases. The company has significantly reduced its debt while completing growth projects and a major acquisition.

In the fifth paragraph, Sheridan Swords provides a commercial update on the company's Natural Gas Liquids and Refined Products and Crude segments. NGL volumes in the Rocky Mountain region increased 12% year-over-year, with record propane plus volumes in April. The Elk Creek pipeline expansion is on track for completion in early 2025, which will increase NGL capacity. Mid-Continent region NGL volumes were affected by winter weather and contract expirations, but the company expects to replace them with market-based rates. Ethane remains the preferred feedstock for the petrochemical industry and ethane exports are highly utilized. In the Refined Products and Crude segment, business fundamentals and performance remained consistent, with volumes increasing compared to the first quarter of 2023. Liquids blending volumes and margins were in line with expectations.

In the first quarter, demand for gasoline and diesel was low but is expected to increase in the coming months due to agricultural activity and summer driving. The completion of a pipeline expansion to El Paso will also contribute to higher refined product volumes. In the Natural Gas Gathering and Processing segment, volumes have increased due to winter weather and are expected to continue growing with stable rig activity and longer laterals. In the Mid-Continent region, there are currently more than 40 rigs operating, and gas prices are expected to lead to increased activity in oilier and NGL-rich areas. In the Natural Gas Pipelines segment, higher equity natural gas sales and increased transportation have been beneficial, and expansion projects are underway to meet high demand for natural gas storage.

The Texas project will be completed in the third quarter of 2024 and the Oklahoma expansion in the second quarter of 2025, with firm contracts extending beyond 2030. Pierce Norton acknowledges the dedication of employees during the first quarter and highlights the company's focus on reliable and responsible operations and supporting communities. The guidance for 2024 has been increased, with stronger volumes and better-than-expected synergy realization being the main reasons. The Bakken and other parts of the portfolio are seeing strong rebound in volumes.

Sheridan Swords, speaking on behalf of the company, explains that the increase in volume across their system is mainly due to strong production in the Bakken and good volume in the El Paso market. They also expect to see more synergies and growth as they continue to work together as a company. Additionally, they had two large planned turnarounds in the first quarter which increased their operating costs but won't be repeated for the rest of the year. Swords also mentions the potential for data centers to be a positive factor for the business in the future.

Pierce Norton, speaking on behalf of the company, discusses the potential impact of data centers on natural gas demand. He believes that the increasing need for energy in data centers will lead to a rise in natural gas demand, and that data centers could potentially be located near existing electricity sources or near pipelines for natural gas-fired generation. The company is currently in conversations with potential customers in various areas of their system.

The company has received calls from utilities and is still determining the infrastructure needed. The CEO is confident in finding more synergies and is getting closer to the $800 million target. Examples of where they have been surprised include optimizing storage, combining assets, and demand pulling. They are also identifying opportunities for cost reduction in G&A. The company prioritizes these opportunities based on value, timing, and cost.

The speaker discusses the importance of transparency and accountability in improving the company's numbers. They also mention a comment about getting what you measure and how they are measuring their synergies. The speaker then turns to CapEx and mentions that they have three major projects coming online in 2025, which will result in a decrease in CapEx. They also mention that the sustainable CapEx level will likely be lower than in 2024. The next question is about the small Saddlehorn acquisition and how it contributed to the increase in guidance, to which the speaker responds that it was a small portion.

The speaker discusses the increase in business and the addition of Saddlehorn to their operations. They also mention the allocation of corporate costs and the potential for future expansion in their gas pipeline network to serve higher power load growth.

The company is currently in talks with existing customers about adding capacity along their footprint, including 40 gas-fired generation facilities and 15 potential projects. Some of these projects are driven by demand from data centers. The company is considering various options for capacity additions, including looping and compression projects. In terms of upstream benefits, the company could potentially reduce future expansion needs in North Dakota by connecting a data center to a plant in the area.

Sheridan Swords from the company is answering a question about the strategic rationale for acquiring the Salon asset. He explains that they see growth potential in the crude oil market and that the asset is well-connected to other areas, giving them confidence in owning more of it. He also mentions the possibility for additional synergies from marketing crude oil and bringing more volume to their system.

The company is seeing increased volume on the BridgeTex system due to the MEH to mid differential, giving them confidence in increasing their guidance. They are also looking into the potential growth opportunities in natural gas transmission and storage assets, but it is too early to determine the exact size of the EBITDA opportunity. When considering growth beyond current projects, the company is still evaluating opportunities in their four business buckets and their hurdle rates have not changed significantly in the current environment.

The company is seeing low capital high multiple growth projects that are factored into their overall capital plan. They are excited about these projects and are constantly receiving more. They do not rely heavily on short-term debt and do not expect interest rate increases to have a significant impact. In the Permian region, NGL volumes were lower due to weather issues. The company is continuing to contract more volume for their West Texas pipeline expansion.

The company is satisfied with their current progress and plans to continue expanding and connecting plants to their transportation and fractionation business. They have already contracted two plants and have more volume coming onto the system. The expansion is on track for the first quarter of 2025. In the Q&A session, it was mentioned that the GMP rate was higher than expected due to inflationary escalators and volume from certain customers. The company expects a linear increase in volumes in the Bakken, but also budgets for potential weather downturns in the fourth quarter and first quarter.

The company experienced weather-related challenges in the fourth quarter, which were spread out over the first and fourth quarters in their budget. They believe that the AI theme is still in its early stages and are exploring opportunities in North Dakota and other basins, but it is not expected to have a significant impact in the short-term.

During a conference call, Keith Stanley from Wolfe Research asks a question about the Rockies NGL bundled rate, which was up in Q1. Sheridan Swords from ONEOK responds, explaining that the rate was driven by less incentivized ethane and will depend on how much of that is brought out. They anticipate it will stay in the range of $0.28 to $0.30, possibly higher if volume continues to ramp up. Stanley then asks about the potential for other opportunities like the recent Saddlehorn acquisition, and Pierce Norton from ONEOK responds that they are always looking to expand their footprint but are currently focused on integrating Magellan, their recent acquisition. They will continue to be disciplined about future M&A opportunities. The call then moves on to a question from Neal Dingmann with Truist Securities.

The speaker is responding to a question about the wide range in NGL raw throughput volumes. They explain that the main driver behind this is ethane recovery, with opportunities to incentivize it in the Rockies and manage capacity in the Elk Creek pipeline. They also mention that the Mid-Continent will be in and out of ethane recovery, and the Permian will be in full ethane recovery. The speaker is cautiously optimistic about seeing good growth in the Bakken and the Mid-Continent due to high GPM areas and plentiful rigs.

The speaker discusses potential factors that could drive ethane recovery rates to the high end in 2024. They also address a question about the increase in natural gas pipeline earnings and mention their strategy for optimizing value in different months. Another question is asked about the impact of ethane discounts on incented ethane recovery, to which the speaker responds that it may have less of an impact compared to historical rates.

Sheridan Swords, from the company Craig, explains that the incentivized ethane they have done so far this year has been at or slightly above their usual rate. The price of ethane and natural gas in the Bakken affect this, but they have been pleased with the results. Craig asks if ethane will continue to be a positive factor in the future, and Sheridan responds that they have been able to take advantage of good spreads between Conway and Mont Belvieu, and while they may not reach the high levels of the past, they will still meet or exceed expectations. Sheridan did not mention any specific thoughts about ethane in the future.

Sheridan Swords, a company representative, discusses the production of ethane and its impact on the petrochemical industry. They expect to see an increase in ethane exports in the coming years and anticipate petrochemical plants to run at high utilization rates due to the advantage of the United States' ethane prices. The company also plans to incentivize ethane production in the Bakken region, even with increased production in the Permian and Mid-Continent. The conference call concludes with a reminder of the company's quiet period until the release of their second quarter earnings in August.

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