Oneok, Inc. 2026 Q3 Earnings Call

Good morning, and welcome to ONEOK's third quarter 2026 earnings call. As a reminder, this call is being recorded. If you would like to participate in the question and answer session following the speaker's opening remarks, simply press star one on your telephone keypad. At this time, I'd like to turn the conference over to Megan Patterson, Vice President, Investor Relations. Megan, please go ahead. Thank you, Anna.

Welcome to ONEOK's third quarter 2026 earnings call. Our earnings release and presentation were issued after market close yesterday and are available on our website. On our call today are Pierce Norton, President and Chief Executive Officer, Walt Hulse, Chief Financial Officer, Randy Lentz, Chief Operating Officer, and Sheridan Swords, Chief Commercial Officer. Following our prepared remarks, management will be available to take your questions. Statements made during this call that might include ONEOK's expectations or predictions should be considered forward-looking statements and are covered by the safe harbor provision of the Securities Acts of 1933 and 1934. Actual results could differ materially from those projected in forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer to our SEC filings. With that, I'll turn the call over to Pierce Norton.

Thank you, Megan, and good morning, everyone, and thank you for joining us today. Yesterday, we reported strong third quarter results, supported by our record Permian Basin volumes and continued growth across our integrated system. We increased our 2026 financial guidance for the third time this year. Also completed several strategic milestones. During the quarter, we closed a $9 billion minority equity investment, extinguished nearly $5.5 billion of debt, and received credit rating upgrades from both S&P and Fitch. Earlier this month, we closed the acquisition of Brazos Midstream's Permian Midland Basin assets. Together, these actions give ONEOK greater scale, greater financial flexibility, and clearer visibility into the future earnings growth. Our confidence in ONEOK's outlook continues to gain momentum, supported by the assets that we own, the customers that we serve, growth projects already underway, and the innovation of our people.

We're not providing 2027 guidance today, but we expect to do so after our fourth quarter results in February. The underlying drivers are increasingly clear. Constructive producer development plans and continued drilling and completion efficiencies, recently completed projects that will contribute to a full year's earnings in 2027, additional projects nearing completion, and a full year of ownership of the Brazos assets. Importantly, that visibility extends across our integrated system and isn't dependent on a single commodity or project or basin. We see opportunities across natural gas, NGLs, refined products in crude, and supported by domestic international demand and the connectivity that we built across our value chain. That diversification gives us a multiple of avenues to grow and capture value as the market conditions evolve. The broader backdrop reinforces the opportunity.

Global energy markets remain dynamic, but growing natural gas demand for power generation, industrial loads, and liquefied natural gas exports to feed the international demand all point to the same need: reliable access to essential energy when and where it is needed. International buyers are increasingly seeking long-term access to U.S. supply for its reliability and resiliency. This trend we're seeing through the strong export demand across our system. These drivers also reinforce our confidence in our mid to high single digit adjusted EBITDA growth target for the next five to seven years from our 2025 base. Brazos adds substantial contracted growth and value chain opportunities across our system, increasing our momentum toward the higher end of that target. ONEOK has the assets, the financial strength, the discipline, and the people to capture the growing energy demand and to deliver sustainable long-term value for our investors.

With that, I'll turn the call over to Walt for a financial update.

Thank you, Pierce. Third quarter net income attributable to ONEOK totaled $1.35 billion, or $2.13 per diluted share. Adjusted EBITDA totaled $2.24 billion, a 6% increase compared with the third quarter of 2025. Net income and EPS included a $336 million one-time non-cash income tax benefit related to the corporate reorganization completed in connection with the minority equity transaction. Adjusted EBITDA included a $53 million net benefit from the transactions, primarily related to gains on the extinguishment of debt. As Pierce mentioned, we increased our 2026 financial guidance again, reflecting strong year-to-date performance, visibility into the remainder of the year, and the addition of the Brazos Midland assets. We now expect a 2026 net income midpoint of $4.18 billion and adjusted EBITDA midpoint of approximately $8.55 billion.

This represents a $200 million increase in our adjusted EBITDA midpoint compared with the guidance we provided last quarter, and a $450 million increase compared with our original February guidance. Of this quarter's $200 million increase, approximately $50 million reflects transaction-related benefits I just described. Approximately $75 million reflects the expected 2026 contribution from the Brazos assets, which is offset by $25 million of transaction costs. The remaining $100 million reflects stronger performance across our base businesses. This year, we've been somewhat conservative with guidance due to the geopolitical volatility. If commodity conditions remain consistent with where they are today, we will have a very good tailwind in the fourth quarter and into 2027. That takes me to our hedging program.

As the back end of the commodity forward curve has risen throughout the year, we've increased our hedging position into 2027 at a greater percentage and at higher prices than 2026. We continue to programmatically hedge commodity exposures. On capital expenditures, we stated on the second quarter earnings call we expected to approach the high end of our guidance range or $3.2 billion. We now expect 2026 capital expenditures to total approximately $3.5 billion, due primarily to $200 million of capital associated with the Brazos acquisition, along with added growth projects such as the Cutter two plant, our Delaware NGL expansion, and compression pulled into 2026 from 2027 due to Bakken and Mid-Continent activity levels. From a balance sheet perspective, we extinguished nearly $5.5 billion of debt in September, following completion of the $9 billion Apollo minority equity investment.

Both S&P Global Ratings and Fitch Ratings upgraded our credit ratings to BBB+ with a stable outlook following these transactions. With these actions complete, we are operating with a stronger balance sheet. I now want to spend a moment on our leverage framework because it's an area we've received a number of questions. Our debt-to-EBITDA target going forward is approximately 3.25 times or lower, and the lower matters. This is not guidance. It reflects a change in philosophy. We intend to operate the company with lower leverage than our previous target of approximately 3.5 times. As modeled today, we would expect to go below 3 times within the next few years. However, our commercial team continues to find highly attractive projects which we expect will increase our capital expenditures over the next few years.

We now have the financial flexibility to execute on those capital expenditures and still maintain a strong balance sheet. We now view 3.5 times as the upper end of our targeted leverage range. The gap between where we expect to operate and that ceiling is intentional. It gives us meaningful flexibility through business and commodity cycles and the capacity to act if a compelling opportunity comes along that clearly meets our return thresholds. That's optionality, not a plan. Our base case remains disciplined deleveraging while we continue to fund attractive growth and return capital projects and capital return to shareholders. That includes our dividend and the capacity for share repurchases. From a cash tax perspective, the Brazos Midland acquisition is expected to extend our runway by another year, deferring meaningful cash tax payments until 2032 from previously 2031.

I'll now turn it over to Randy for an operational and project update.

Thank you, Walt. Our teams continued to execute safely and reliably during the third quarter while advancing growth projects across the system. During the quarter, we completed our Denver area refined products pipeline expansion, adding 35,000 barrels per day of capacity. Demand has been encouraging, and we are beginning to evaluate further expansion opportunities. We also completed 110 million cubic feet per day of processing expansions in the Delaware Basin and are already seeing incremental volume with a continued ramp up to capacity in early 2027. In the fourth quarter, Medford phase one, Cutter one, and Cassidy One are all expected to enter service, providing additional fractionation and processing capacity across the Mid-Continent, Powder River, and Permian. In 2027, Bighorn adds 400 million cubic feet per day of processing capacity in the Delaware.

Cassidy Two adds another approximately 330 million cubic feet per day of capacity in the Midland. Our Delaware NGL expansion adds 245,000 barrels per day of takeaway capacity. That expansion, added this year, supports growing Delaware volumes and connectivity with our West Texas NGL Pipeline. The acquisition of Brazos Midland assets also expands our opportunity set considerably. We are already advancing connections between Brazos and our legacy ONEOK system, which we expect will improve capital efficiency and commercial flexibility as we continue Midland Basin growth. Beyond what we have announced, we continue to see a growing set of opportunities across multiple products and regions, providing several pathways for continued organic growth. With that, I will turn the call over to Sheridan for a commercial update.