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ONEOK Inc. (NYSE:OKE)

Analyst Day Call

September 27, 2011 9:00 AM ET

Executives

Dan Harrison – VP, Investor Relations and Public Affairs

John Gibson – Chairman, President and CEO

Robert Martinovich – SVP, CFO and Treasurer

Robert Mareburger – SVP, Corporate Planning and Development

Pierce Norton – COO

Caron Lawhorn – President, ONEOK Distribution Companies

Patrick McDonie – President

Terry Spencer – COO, ONEOK Partners

Sheridan Swords – President, Natural Gas Liquids, ONEOK Partners

Curtis Dinan – President, Natural Gas, ONEOK Partners

Dan Harrison

I’m Dan Harrison with ONEOK and ONEOK Partners and if you not met Andrew Ziola and Lindsey Ameen, check in please they have presentations and copies of our news releases on 2010 guidance for OKE and OKS. So, please get those. You want to go through our riveting forwarding-looking statement recognizing that many of the comments we made today are forward looking and from an agenda standpoint, we have a full agenda.

We’ll start with John and then Rob on the financial side and then Pierce will talk about OKE with distribution and Energy Services. We’ll take a break and then Terry and his team will talk about ONEOK Partners followed by wrap up with John and we hope that you’ll join us for lunch next door beginning at 12:00, we’ll have some table setup with individual members of our management team at each table giving opportunity to ask additional questions that you may have.

So, with that I’m going to introduce Mr. Gibson.

John Gibson

Hello everybody. All right, that’s the end of our difficulties for today. Welcome to our Investor Day. It’s good to be back here again. I’d like to at this time to figure out all the important things here is and introduce to you are our participants in today’s discussion starting with Mr. Martinovich. I might add that there is bios in the back so I’m not going to repeat all that. Although there is some interest facts about each that I would like to share I’m not embarrass them because these people are extremely importantly to ONEOK and extremely important to our leadership team.

Rob is an engineer, graduate Notre Dame. His background with Phillips Petroleum, ethylene olefins background, then into gathering and processing with Phillips and then GPM, then DCP and then to ONEOK. So, a very strong background in not only olefins but also in the midstream business.

Bob Mareburger, another engineer petroleum engineer with a MBA started his career with Andersen Consulting, went to CITGO, came there Chief Information Officer. We hired him as our Chief Information Officer. Moved even several years to run our natural gas business in the partnership did an outstanding job and now is our Senior Vice President, Corporate Planning and Development.

Next, Pierce Norton. Pierce, would you stand up, an engineer also. A background in primarily gathering and processing, TXO Delhi and then Bear Paw, which we acquired then to Northern Border and Pierce background with us leading gathering and processing then he ran our distribution businesses and now he is our Chief Operating Officer at ONEOK.

And then, Terry Spencer, another engineer. Background much similar to Pierce. TXO Delhi and then Terry went to Continental and then to ONEOK. He ran our gathering and processing business. He then, when we acquired the Koch assets ran our NGL business and he is now our Chief Operating Officer at ONEOK Partners.

Here today with Pierce, is his team Pat McDonie, standup Pat, another engineer. There is a pattern here. Petroleum and he also worked at Delhi TXO. He has got some gathering and processing background but has spent his entire career with ONEOK inside our Energy Services segment and now is a President of Energy Services segment.

Ms. Caron Lawhorn, who many of you know she has background in business and accounting. Was our Chief Accounting Officer at ONEOK and interim CFO when we sent Curtis to off to school during very tumultuous times, she did a great job. She then became Senior Vice President, Corporate Planning and Development. Led lot of our changes that have occurred to the company and now she is the President of all our distribution companies.

And then, Sheridan Swords. Sheridan would stand up. He is an engineer. His background is with Koch and in the NGL business. He has spent his entire career there all the way through operating engineering and in commercial and now is the president of our NGL business.

And then, last but certainly not least Curtis Dinan, who has a background obviously educational background in accounting business administration and Curtis was our Chief Accounting Officer, then our Chief Financial Officer and now, he is responsible for all the gas activities which are gathering and processing in pipelines in the natural gas side inside the partnership.

I’d also like to introduce Steve Lake who will become our general counsel in December up on John Barker retirement.

And then last but certainly not least I’d like to introduce Derek Reiners, our Chief Accounting Officer who came to us from Arthur Andersen, grab the work but his background in accounting and business as well.

Okay. This is what we talk about today. We’ll obviously shed some light on our 2012 guidance. Give you three year look. We want to touch on the environmental safety and health performance of the company. We’re going to spend some time on each of these segments and then we’re going to end the discussion with some thoughts about natural gas, liquids supply and demand. But, what I like you to take away from our meeting today is that we remain very confident in 2011 guidance.

Our 2012 guidance, which we announced yesterday shows year-over-year improvement. We like you to know that we’re on top of our pipeline safety. I like you also to know that at ONEOK Partners, our projects are on time and on budget and relative to the commercial negotiations, relative to each of those projects we continue to make great progress.

At our distribution segment, we continue to have both regulatory and financial discipline as we grow that business and Energy Services we continue to face a pretty tough business, pretty tough market due to low basis, low price volatility and low seasonal spreads. But, the bottom line is between now and 2014, this management team, our company, our employees intend to deliver 18 to 22% growth and net income at ONEOK and 18 to 22% EBITDA growth at ONEOK Partners. And what we want to show you today is how we’re going to do that.

If you look at ONEOK today, as it has been in the past for us all about supply and demand and connecting supply and demand for a producer or a customer. We do that through our integrated assets that we build and we buy and as a result of that we have produced a track record of growth primarily at ONEOK Partners through acquisition and in this internal growth projects.

These are the three business segments that we’ll take a deeper dive into as we go through the day, our ONEOK Partners, Natural Gas Distribution segment where we have our three utilities and our Energy Services or Gas Marketing business.

Our vision remains unchanged. I mean it’s been this for the last five years and we create value in the marketplace by re-bundling pieces of the value chain back together. Historically, they were broken up and a lot of inefficiencies created in the marketplace and in particular as it relates to supply needing to get to demand or demand requiring supply. As we go through our screen test so to speak, we look for opportunities where supplies trap or demands not being met either by our customer or a producer and we try to figure out how to solve that problem and we do so by applying the capabilities we have at the company obviously through our people as well as our assets.

For example, how we gather process, treat, how we store, how we market, how we account for all those of things we considered to be our capability some of which are a competitive advantage and we are constantly looking at how we can improve in those areas of capabilities as well as identifying those capabilities we don’t have that we think we need and how best to acquire or develop those capabilities. So, I obviously want to emphasis the capabilities are as important to our successful execution of our vision as is looking for the opportunities to re-bundle pieces in the value chain.

Our key strategies likewise remain unchanged. So, you got a vision, strategy over the last five years been relatively unchanged. But, the benefit of that has been and in particular at ONEOK Partners this growth engine has delivered to ONEOK approximately $300 million in 2010 and we expect in 2011, ONEOK Partners deliver around $333 million and as announced yesterday, we expect in 2012 ONEOK Partners to deliver $423 million. It’s a great problem to have. That results in a compound annual growth rate of 20% since 2006 and as we talk today, you’re going to hear comparisons back to 2006, that’s important for us because that’s when we became 100% owners of the general partner at ONEOK Partners.

So, another reason we believe the vision and strategy of working is because relative to the S&P 500 and other relevant indices, ONEOK and ONEOK Partners are exceed those indices creating exceptional value for our shareholders and our unit holders. Some of the achievements that we’ve experienced since the last time we were together. We’ve obviously –we’ve announced more growth projects. So, when you look back over the – if you start back when we acquired the Koch assets. We’ve invested well over $5 billion and just recently had another 2.7 to $3.3 billion.

We’ve increased ONEOK quarterly dividend three times since the last time we were together. We’re now on $0.56 per share for quarter, 22% increase. We completed $300 million accelerated share repurchase at ONEOK. We increase ONEOK Partners this quarterly distribution four times since the last time we were together, now, $0.585 per unit. In July, we completed a split of the ONEOK Partners unit and then our ONEOK standalone capitalization remains below 50.

Now, slide 19 to talk about acquisitions. I’ll step down and we’ll get the show started. You have to talk about transforming transactions because I don’t talk about transforming transactions most of you in this room agrees with me for the balance of the year or the next we’re together we won’t have anything to talk about. I use that phrase last year and it seems like every time I run into you, we want to talk more about transforming transaction. So, here we go again. But seriously, if you look at our history and how we’ve grown we grow initially primarily through acquisition.

If you go back to the 2000 timeframe, we acquired the midstream assets of Kinder Morgan, Dynegy and Koch. We acquired a lot other gathering processing assets in the Mid-Continent. That transformed the company from a natural gas distribution company to a natural distribution company and a midstream player in gathering and processing with interstate pipeline. And we continue to incremental grow that midstream business.

It remains our preference to continue to buy assets to buy earnings. But, with so many attractive internal growth projects at ONEOK Partners relative to the alternative of acquiring businesses, we have continued to invest money in these internal growth projects. But, we are lucky and we continue to look for opportunities to growth through acquisition.

The criteria that we have for those acquisitions are like you got to lever our integrated operations and our capabilities and keep in mind what I said about some capabilities we’d like to have that we don’t have can be developed through acquisitions. We are looking for a platform for future growth. So, what do I mean by that. Well, it’s another way of saying transforming transaction because that new platform will transform the company in another direction. Here is the example. Again, one I will repeat. So, when we started buying the midstream businesses throughout, when we acquired Koch industries natural gas liquids business in 2005, it transformed the company.

For those of you who followed us in 2004, no one in this industry you, our peers, our competitors looked at ONEOK as an NGL company. We are an NGL company. It is a big part of our business and that acquisition transform this company. That’s the kind of transforming new platform of growth transaction that we’re looking forward. Are we going to buy that first thing that comes along, absolutely not.

We spent over two year preparing to acquire Koch NGL business. So, these names one would happen quickly, with Southern Union a transforming transaction, no. If we were to have Southern Union, we would have more pipelines, more gathering and processing, more distribution. We would have some other things but primarily we would have incrementally in the business we already have. That’s not transforming.

We will continue to look for opportunities to grow distribution, gathering and processing natural gas, liquids and pipelines. We will do that. But, that’s not by definition what we consider a transforming transaction. But opportunities like Southern Union and others, those will be some that we’ll look for and what in particularly are we looking for that combinations probably strong for us where we can apply our assets, have distribution and have MLT qualified assets to see level we can drop down to the MLT. And then, I should also add that we’ll continue to look for smaller acquisitions those that enhance our competitive position inside any other segments of ONEOK or ONEOK Partners. And we also feel advantage because of our financial flexibility to transact at either ONEOK or at ONEOK Partners.

So, with that I’ll turn this over to Rob and here you go buddy.

Robert Martinovich

Good morning. Thanks John very much. I’ll review the financial highlights for 2012 guidance as well as our expectations for 2013 and 2014 beginning first with ONEOK Partners. Our 2012 net income is expected to be in the range of 740 to $800 million compared with our current 2011 guidance range of 630 to $660 million, a 20% increase.

Our distributable cash flow is expected to be in the range of 845 to $915 million, compared with our current 2011 guidance range of 735 to $765 million, a 17%. This growth is driven by new volumes as several projects from 2.7 to $3.3 billion four year growth program come online later this year and in 2012.

The average un-hedged price assumptions are listed on the slide. Of note is our $0.12 per gallon Conway-to-Belvieu ethane spread. The increased net income and distributable cash flow has driven additional distribution growth at the partnership. We anticipate a $0.02 per unit per quarter increase in distributions in 2012. The $1.9 billion of capital expenditures in 2012 are largest year ever is driven by the $3 plus billion capital projects that we previously announced.

Our 2012 distributable cash flow guidance midpoint is $880 million. We’re are on the high end of our target coverage ratio range as we consider potential risk through our earnings forecast due to capital project execution, volume growth, commodity prices and NGL spreads. These risks are certainly not new and we’re confident in our ability to deliver our earnings forecast.

At ONEOK Partners, we projected an 18 to 22% annual EBITDA growth over the next three years from those capital projects that we are currently building providing us the opportunity to continue to increase distributions to our unit holders. Pending board approval, we plan to continue our $0.01 per unit per quarter increase in distribution through 2011. Then, $0.02 per unit per quarter for 2012 and 15 to 20% annual growth rate in 2013 and 2014.

The average un-hedge three year price assumptions are also shown. We do expect the Conway-to-Belvieu ethane spread to tight and as you can see from $0.12 to $0.09 per gallon by 2014. Since ONEOK became general partner in 2006, we created exceptional value for ONEOK Partners and ONEOK through distribution growth. The partnership has increased its distribution 19 times since then, represented an 8% annual growth rate or 46% in total.

ONEOK Partners has ample liquidity with an investment grade credit rating. In January, we issued $1.3 billion of senior notes. The proceeds of which we’re used to repay all amounts outstanding under the partnerships commercial paper program, fund portion of our capital spending and pay off the $225 million of long-term notes due in March. In addition to these proceeds, commercial paper will also be utilized over the coming years to fund our capital projects. We increased our revolving credit facilities to $1.2 billion in August and are in still a cash position. We do not anticipate any additional financing this year but we’ll continue to monitor the capital markets and be prepared to take advantage of any opportunities.

Our long-term goal remains a balanced capital structure of 50-50 and maintaining our investment grade rating. As you can see on the graph, we will able to rebalance our capital structure last year following our 2006 to 2009 capital investment program allowing us to enter this next tranche of capital projects with a healthy balance sheet.

Let’s turn to ONEOK now. 2012 net income is expected to be in the range of 355 to $400 million compared with our current 2011 guidance range of 325 to $345 million, a 13% increase. This growth is driven primarily by ONEOK Partners, including the distribution growth I just reviewed. The 2012 free cash flow of 165 to $205 million after capital expenditure and dividends is slightly lower than 2011 due to the reduced bonus depreciation benefit next year. The average un-hedge price assumptions all the same as previously noted in the ONEOK Partners section.

Our 2012 earnings guidance assumes dividend increases of $0.04 per share semiannually. Increased capital spending is primarily in the distribution segment related to pipeline, integrity management and for projects that also reduce operating and maintenance expenses.

At ONEOK, after capital investments and dividends payments, we expect to generate between 180 and $210 million of free cash flow for 201l, between 165 and $205 million for 212 and between 215 and $260 million in 2013 and 2014. This free cash flow shown in the graph in green provides us with the flexibility to purchase assets, increase our investment in ONEOK Partners, increase the dividend or repurchase shares. Bottom line, our free cash flow provides us with a lot of financial flexibility and options for ONEOK and ONEOK Partners.

We’re projecting an 18 to 22% average annual net income growth over the next three years primarily from the growth at ONEOK Partners, which provides us with the opportunity to continue to increase dividends to our shareholders. Pending board approval, we plan to increase ONEOK’s dividend $0.04 per share semiannual through 2012 and expect it to grow 50% from 2011 through 2014. The distribution segment has worked very hard since 2005 to eliminate the large gap between actual and allowed returns. Their focus going forward is keeping that gap to a minimum.

The successful execution of our vision and strategies has created exceptional value for ONEOK shareholders. As I mentioned, we plan to grow our dividends significantly over the next few years. We target a 60 to 70% long-term dividend payout ratio of recurring earnings and through 2012, our dividend has grown on average 30% per year doubling since 2006, when we became general partner and a significant owner of ONEOK Partners.

ONEOK has a strong balance sheet with proven track record of financial discipline demonstrated by the investment grade credit rating, total debt of 42% and exceptional liquidity. That liquidity position combined with ONEOK significant free cash flow continues to give us tremendous flexibility for dividend increases, purchasing additional ONEOK Partners units, share repurchases and acquisitions. This makes us an attractive investment as we continue to create sustainable value for investors and customers.

Finally, we completed a $300 million accelerated share repurchase agreement in August. This leaves us $450 million through 2013 in the share repurchase program authorized last fall by our board. We received approximately 3.7 million shares on May 17 and an additional 600,000 shares on August 23rd, completing this accelerated share repurchase program which was funded by the company’s available cash and short-term borrowings.

At this time, I’m going to join Bob at the table and we’ll be glad to address any questions that you may have.

Unidentified Company Representative

Thank you, Rob. Any questions that I can deflect to these two.

Unidentified Analyst

I just have a real quick question. I was just curious with the $99 per barrel estimate build into those projected numbers for oil for next year and a coin flip potential for a recession. Just curious, what your sensitivity is if you can give any guidance on that to the price of oil that will be for the MPL.

Robert Mareburger

As it relates to the MLP, the segment is primarily expose to that sort of price risk or price exposure is our gathering and processing segment and in the appendix of the packet, Dan Harrison is quickly going to tell me what page that’s on.

Dan Harrison

147.

Robert Mareburger

We have our sensitivities for that segment. So, you can take that crude dollar relative to today or your view of it and you can see the sensitivity. But, as it stands right now it’s like a million bucks every cents per gallon of NGLs or about a $1 million for every dollar of crude can sense gap can sense, $1 million about $0.10 on gas prices. But, as Terry talked about that is going to – that sensitivity will increase as we grow longer in NGLs primarily out in the Bakken where we’re going to own more and more those NGLS. So, I expect that sensitivity. We’ll become more sensitive with NGL pricing. But, our contract we’ll always be positive.

Unidentified Analyst

Just following up on those questions. Can you hear me? Can you hear up there.

Unidentified Company Representative

Yes, we can hear you.

Unidentified Analyst

Yes. Right now, oil is around 80 or little south of 80 and if it’s there instead of 113 and 119 earlier. How does that change your distribution policy or dividend policy? Can you talk a little bit I know we have the sensitivities in there but if we were to have sustained recession, is $80 have not to change your distribution and your dividend policy.

Unidentified Company Representative

Well, our distribution policy, if you look at that it’s not a policy, first of all. We don’t have distribution or dividend policy. But, if you look at our practice at OKS also take into account our coverage ratio. You’ll see periods of time where we’ve had coverage ratios at as high as like 1.45. But, it’s been in a period of time where we thought commodity prices were not sustainable. So, we as it relates to our plans for distribution, if crude oil was to go $80, obviously the board would look at the long-term effect and determine whether or not we would not to adjust what we’ve talked about here for the next three years and maintain that financial discipline that we have in the past. I don’t anticipate that it will negatively affect our distribution growth. Andrew?

Unidentified Analyst

John, when you think about different platforms that you like – you may like to add to ONEOK, what kind of criteria are you thinking about and are there any secular trends out there that you’d like to capture?

John Gibson

Well, before I answer the question I will answer it with obvious and that I if we were here – this time of the year in 2004, we wouldn’t tell you that we were interested in growing our natural gas, into natural gas liquids for obvious reasons. If you go back and focus on the capabilities that we have and that we’ve demonstrated can create value then. I think they are going to be similar, could apply to crude oil, could apply to natural gas liquids in the form of exportation, could apply to the transportation and storage, other refine products, things of that nature just in general. I do not anticipate, I’ll tell you we are not looking at moving into the olefins business, the cracking business, the refining business.

Unidentified Analyst

And in terms of trends, you mentioned refined products potentially. How do you think about maybe the trend we’re actually seeing consumption flat to down.

John Gibson

Consumption of?

Unidentified Analyst

Gasoline.

John Gibson

Motor gasoline.

Unidentified Analyst

Yeah.

John Gibson

But, one of the nice things about pipelines is that and this would argue against that commodity but one of the nice things about pipelines is that as you look at our NGL business where we can get producer commitments or shipper commitments under shipper pay for extended period of time to then somewhat eliminate your exposure to short term supply and demand disruptions. So again, we focus on and Terry will talk more about that, those types of contractual arrangements. And again, it gets back to steadying supply and demand and where there is a need to put the two together. That’s the best situation.

Unidentified Analyst

John or Rob, is it inevitable that to maintain a 50-50 capital structure at OKS, we’re going to have issue equity or can you stretch that a little bit into 2013.

Unidentified Company Representative

Thank you. If you look at OKS and its history and it’s fair to say that we’ll be engaged in the capital markets for some time in the future. Obviously ‘12 and on into the future that just part of business to continue to support our growth taking one of the important takeaways is the free cash flow at ONEOK, it allows us at ONEOK to be an active participant in any if we go equity, any equity offering which allows us to own more of ONEOK Partners which if you think back to the distributions we received, the more we own the greater those distributions. So, we kind of like that cycle at ONEOK among other things. Obviously, one thing we’ve done is given a lot of money back to our shareholders and our unit holders.

Unidentified Analyst

John, looking at 2012 guidance and it looks like one of the areas where you look conservative in the NGL segment where you have your Conway-to-Mont Belvieu ethane spread differential only $0.l2 per 2012 and when you look it today, it’s about $0.30. It averages about $0.17 year-to-date. Is there a catalyst that you see that coming down in the next year that we should be looking forward specially?

John Gibson

A catalyst, I wouldn’t call it a catalyst I call it experience. It’s one of the things that happen Steve when you get old as you realize the things don’t always stay at $0.30 when spreads been five or six. And there is always particularly in the last quarter there is always a lot of readjusting on inventories at it relates to NGLs and as you go into the year, we don’t see $0.30 being sustainable throughout 2012.

Is it conservative? If you would like to call it conservative, but, we feel as we apply our best local knowledge, we think we’re going to average $0.12. If it’s $0.30, it’s going to be a good year. But, that’s what we think and there is not catalyst, it’s just as we look at the market. We’ve not seen period of where 30 to be sustainable for that long period of time and clearly when our pipelines are built that’s spread is going to come in and that’s why we’re building our pipeline contrary to others, that’s why we’re building our pipeline.

Unidentified Analyst

Just coming back to the balance sheet, you’ve been at 50% equity. Your goal is 50-50. So, you got buyback, they almost should be – that’s kind of that dealer already thinking about the buyback right now.

Unidentified Company Representative

Well, we ensure – make sure understand the question just on future repurchases. Well, I think again as far as our we look at first and foremost investment grade credit rating and then the 50-50 capital structure and then from a dividend standpoint, those are kind of three things we look at, we’d like to be maintaining that 60%, 70% and so that you’re looking at the various alternatives we kind of laid out of which share repurchases is one and investment in partners is another. I think they are all varies, the priorities vary over time, it’s not a static list. But, that’s one of the option that we do have and with the program that’s on the table, we have a couple of years left on that. But, we continue to evaluate that not just say absolutely it’s a slam dunk that we’re going do that come hell high water.

Unidentified Analyst

So, I guess call up on the investment partners meaning you would actually take equity in partners and the thing is you’d actually give source of funds for them.

Unidentified Company Representative

Well, I think as John said, as far as another question with regards to the OKS going out into equity markets that would be one item that we could participate, ONEOK could participate in that and so yes, I guess how we see that.

Unidentified Analyst

And then, if I could check here one quick question on the equity complication for employees. Are you going to continue with pro rata every employee get same amount of shares or we consider changing not at all neighborhood like the contribution that each segment has with the business.

Unidentified Company Representative

I want to make sure I answer your question correctly particularly because a lot of our employees listen to this call. We have an employee stock award program. Whatever time we reach a new $1 increment in share price, we give every employee one share stock, we will continue that, okay. However, we also have short-term incentive and long-term incentive that is adjusted in his relative to the performance of the business unit but it’s also relative to the performance of the company as well.

Unidentified Analyst

Another question and this maybe that’s way forward this segment and guides come up but on the guidance that you have for 2012, higher than expectation, yes we all knew about the project that you have out there. So, can you give us more color on the gathering and processing business if we just put the volume business these numbers aren’t there?

John Gibson

These numbers aren’t there, well then, we’ll just wait till Terry get’s done because it works. We’re not making the stuff up.

Unidentified Analyst

That’s not what I’m saying John, I’m saying that it’s some more color for sides just dividing, there’s got be more –

John Gibson

There got to be color back, that’s what we’re going to do but Terry will get you.

One more question. Okay, let’s see where do we go next? Pierce, I turn it over to Pierce Norton.

Pierce Norton

Thanks, John. I’ll go ahead and get started here while my team is joining here, Pat and Caron. First of all, good morning. Let’s go ahead and get started with ONEOK. At the end of this session, you’re going to be able to referring to this slide for list of key takeaways and points pertaining to environmental safety and health in our two segments within ONEOK there, which is Distribution and the Energy Services business.

First, I’ll cover ESH and there is a reason why we start with environmental safety and health at the very beginning and the reason is because it’s a primary driver behind our thinking and decision making at ONEOK. We refer to that as wanting responsibility. ESH actually starts with culture. We’re seeking a balanced culture between personal safety and system safety and as you can see from this slide we’re taking proactive steps in both categories.

If you look at serious incidences which a lot of times happens on the system safety side, in the majority cases when these type incidents occur, it happens because there is some sort of a high-risk activity and it’s in combination where controls are either absent, ineffective or non compliant. We strive daily for culture where our board executive management, our company leadership and employees assure themselves that the exposures to these events that lead to the serious incidences are being continually identified and effectively managed.

Part of strong safety culture is actually good governance. So, I wanted to spend just a little bit of time telling you how we do this. We achieve this good governance through our ESH leadership committee which is comprised of all of our VPs of operations, environmental heads, corporate compliance, legal and is actually chaired by myself the Chief Operating Office of ONEOK. This committee’s mission is to continuously drive improvement and give organizational gannets in all facets of ES&H.

So, how we’re doing? Since 2008, our total recordable incident rate which we referred to as TRIR and our preventable vehicle incident rate which is called PVIR has actually decreased by 33% and 30% respectively. But more importantly, the day away restricted or transfer rate which is referred to as DART has actually decreased by 48%. DART is the measure of the severity of an incident. So, it’s very important to keep an eye on your DART rating.

Our goal is continuous improvement on these metrics. The ultimate goal being a injury free work environment. Integrity management programs continue to be a focus at ONEOK. We required to make assessments in high consequence areas I want to briefly bring you to-date on where we stand. We’re actually a 100% complete in natural gas liquids, 87% complete in distribution and 76% complete in natural gas transmission. We do not see any issues in completing all three segments to 100% within the specified time period as set out by the regulatory bodies and that time period is actually December of 2012 and there is a reason why liquids is ahead is their timeframe actually has already expired. So, we’ve already taken care of those. The other two are actually in December of 2012.

Unfortunately, there have been several serious events such as those that all you know about and San Bruno and the Allentown, Pennsylvania area that is drawn attention to our industry. The government safety administrator PHMSA published a preliminary report on the state of natural gas pipeline infrastructure. What this report actually said was that there was a 10% decline every three years for pipeline incidents involving a death or major injury. That’s the good news. The bad news is when you look at those incidents that the number of fatalities per occurrence has actually raisin.

Shown on this slide is the ongoing legislative and regulatory activity that’s associated and this been driven by those events and the bottom line is that the proposed safety legislation and regulation will impact operations and pipeline integrity management programs into the future.

My final point on ESH has to do with compliance and due to this advisory from PHMSA that actually stemmed again from San Bruno, we are validating all of our maximum liable operating pressures of all of our pipelines and all our segments. And what this means is as we have to evaluate the completeness of our data, the construction data, the inspection data, the testing and anything that historically has gone in to determining these MAOP. This review is both formal and extensive. We are using both internal and external resources to accomplish this. The progress is reported to the ES&H leadership committee every single month.

So, moving along to the businesses. As mentioned in our 2012 guidance, ONEOK’s operating income and equity earnings growth is up 17% over the 2011 guidance. This is driven as Rob has said and John has indicated driven by the growth and the partnership and increased earnings in the distribution segment. But I think worth noting is that blend that this gives us. ONEOK Partners is actually 63%. Natural Gas Distribution is 32% and Energy Services is 5%.

The first business segment is the Natural Gas Distribution. Our three natural gas utilities have a strong customer base of more than 2 million customers. Our rate base of about 1.9 million and we have approximately 2800 employees in the segment. We serve residential, commercial, industrial and transportation customers through all three of our states and we are the largest natural gas utility in Oklahoma, Kansas and the third largest in Texas where we serve the cities of Austin and El Paso and various other smaller communities.

This is a very important slide to us. We built our culture around focusing on competitive advantage and how to sustain it. As you can see from this chart, 50% of the energy consumption from a residential customer comes actually from four appliances and I would argue that the use of natural gas in these four appliances is paramount to the nation’s energy policy. Also shown in our territories is the theoretical cost per Btu of a kilowatt. You can actually compare that to our all in cost including the amounts that we recover, return on a rate base and then also the commodity cost. It’s actually around 10 to $12 per (inaudible). So, as you can see we have a wide competitive advantage when looking at the consumers and the choices that they have to make on the appliances and how they use their energy in their home. This clearly makes natural gas the most efficient choice for consumer when heating space, water, food and drying their cloths.

If our competitive advantage is our primary focus, it’s worth taking a brief look at whether or not what things widen our competitive advantage and what things narrow our competitive advantage. So, in general we believe or it’s over view that electricity rate increases will likely outpace the natural utility price increases to the customer and the stability to pricing and volatility will be the foundation in the future and we believe through the shale plays and prolific plays that are found all across United States that that gas prices likely to be stable well into the future.

Partially offsetting this could be the electric use of technology such as smart metering. However, we believe that net-net that the current environment sets up more positive than negative for natural gas.

For the past two years in aggregate, we have been achieving in the range of our allowed returns. Our goal in the future is to make sure that we minimize that gap between the actually and the allowed returns as our capital spend increases and our rate base grows. We believe we can achieve this through our regulatory filings and efficient deployment of capital and at the same time focusing on productivity that reduces our operating expenses to lower sustainable levels.

Supporting our goals for return on equity, returning on investing capital and growth, our regulatory strategies which is really threefold. One is reduction of regulatory lag, number one. Number two, more frequent rate cases and number three to maintain our increased volumes across our assets. This was reduction of regulatory lag. We just filed a gas system reliability surcharge filing in Kansas for 2.9 million and we also have our PBRC in Oklahoma and grip in Kansas and Texas that we file frequently.

As far as the rate cases go, we’ve said in past presentations that by the end of 2013, we’d file a rate case in Kansas. We can now announce that we do plan on making a filing in Kansas in 2012 and it will primarily impact 2013 as far it’s earning go because there is a 240 day period that this goes through after you make your filing in Kansas.

We’ve targeted an efficient capital program. We’re focusing a significant amount of expenditure towards assets that will lower operating cost long-term either focusing on our pipe or AMR such event. The strategic benefits are employee and public safety, sustainable cost reductions and increased rate base that is recoverable through regulatory mechanisms and rate case filings.

Natural gas vehicles are getting a lot of attention right now. So, I thought I’d update you on our focus in that area and it’s been in fleet conversions, seeking opportunities to provide natural gas supply to retail CNG outlets and then also supporting efforts to develop more vehicle options for the consumer from the original equipment manufacturer. It actually based on the growth that we’re seeing in our territories. We believe that free market is working in this area and we also believe that at this time this is the widest used of our capital to continue to focus on our assets and things that bring more efficiencies and kind of led the premarket work to put in CNG fill stations.

Our second segment is Energy Services. Our extensive fiscal network of leased storage and transportation assets connects key supply basins with markets enabling us to provide our customers primarily utilities with premium services. We buy natural gas and diverse basins across the United States and we are leased storage and transportation capacities that we use to provide these bundled and reliable services to our electric utilities and an array of industrial customers.

As indicated, our primary customer base is the utility companies and which is both electric utilities and natural gas utilities. We have just under 30 customers that have contracted for premium services. These 30 customers represent approximately 100 contracts in our premium service portfolio. As a result of our industry knowledge and relationships and the track record of meeting our customers’ needs, we actually have a 95% customer retention rate in this segment of our business.

This next slide actually shows what we do. But, I think most of the people in this room are familiar with this so I’m going on to the challenges in the business environment and our plans to address them. This is a very important slide in this presentation and businesses like energy services, volatility creates opportunity through capacity management and optimization. Without this volatility, it’s more difficult to lock in earnings related to located and the seasonal spreads.

You can see from the chart that we’ve been fairly tight bend when it’s concerning the actual gas price itself for the last three years but the volatility has been the most non-existent since February of this year and it’s not until you go back until 2008 in the first quarter that we ever have seen this type of levels of volatility. But, if you really look at that close you realize the volatility did not sustain itself at that time. It is important to understand the drives behind the stable gas prices and the lack of volatility. In short, it’s the share plays and ample transportation has virtually removed this volatility from the market and stabilized gas prices. Not to mention the fact that sluggish economy has actually not helped this as well.

We are attacking our issues and energy services from all directions both by trying to increase revenue but just as importantly reducing costs. We see our competitive advantage is twofold. First is our financial strengthen scale, second is our proven capabilities. Again, this is an important slide because it deals with our cost. Since 2009, we have targeted to reduce energy services storage and transportation capacities. In a four year period we’ve reduced the storage capacity by 30% and the transport capacity by 33%. This is proven to be a very wild strategy given today’s narrow season and location differentials. We’ll be continuing to look at the needs of our capacity as it relates to our premium service customers or even more reductions if necessary.

I want to spend probably the majority of my time here on rebasing the cost structure. This is actually a new slide that I want bring your attention to and this is extremely important as you look at Energy Services between now and 2015. In our last quarterly call, I had mentioned that we have an opportunity to rebase cost structure between now and 2015. I also mentioned about 2015 that we would have the opportunity to look at 85% of our contracts and the way you get to the 85% it’s the average between the 92 and the 75%, the 92% being in the storage side and the 75% being on the transportation side.

We decided to put this new slide and to give you the break down on this cumulative percentages and what’s important about this is whether or not the market moves in your favor so that it increases the revenues or you can actually fiscally do something about this for reconstructing. It actually does has the same net effect because if you move these markets on the cost side or the revenue side, it supplies earnings to the segment of the business. So, I want to kind of disclose our sensitivities in this area. For every penny of movement on the transportation book, our operating income is affected by $4 million. For every $0.10 movement in the seasonal spread, our operating income is affected by $7.5 million.

On the next slide you can actually see how this map goes into practice and this is my final slide for Energy Services, I call it my transparency slide. It clearly spells out the options that allows you to tweak models either up or down based on your point of view of the market. I’d also like to point out that the seasonal spread that we show is more than just a strip between the summer and the winter because if you look at this for instance in the seasonal spread, it says around $1.22. Well, if you look out our market right now you don’t see that $1.22. Well, embedded in that number is more than just that seasonal spread. It’s our ability to hedge. It’s our ability to manage the capacity of our storage. It’s our ability to optimize around that storage capacity and actually lastly, it’s actually flowing more gas than maybe you have contracted for. So, you can actually take more out through this fast cycle turns of the storage capacity that we have.

So, that actually concludes my remarks on ONEOK and I’d like to invite any questions that you guys might have at this time.

Unidentified Analyst

Hi, I like to rollback couple of pages to where you talked about the distribution segment and focusing on the transportation, it really caught my eye that 28% is the transportation. But, when you get to the page where you have some of the numbers it seems that 27 or 28 stations and it equates to each vehicle equates to one household and just trying to do some top side math, I’m trying to get sense of how many vehicles you guys might be servicing right now on that 28% because it seems like it awful lot. I’m trying to get a sense of the size of the market, what kind of penetration you’ve made into the market so far, see what you’ve enumerated as what you try to achieve, curious is to what kind of method you might be having if you seen anything from the government side kind of like Ohio. You mentioned this morning which binding together with other states to try to get a pool of vehicles to be purchased to create some more manufacturing opportunities in the space to ramp it up.

Pierce Norton

Right. I’m actually going let Caron to answer that question. But, I want to make some comments before she talks about some of our CNG and how many stations we have in vehicles and those kinds of things. I think what’s important to focus on in this is that’s an incremental opportunity that we have for revenue and if you look at where you are right now, which is pretty much your allowed returns. Anything incremental that you bring in allows you go get some relief potentially to some other customer classes and what’s important about that is I mentioned we really focus on heavily on competitive advantage. So, if you bring in some incremental revenue streams and can then pass some of those that revenue relief over to a commercial customer, industrial customer or a residential customer then it just further widens your competitive advantage. So, I let Caron kind of answer that question about CNG.

Caron Lawhorn

The majority of our transportation revenues are really not found in CNG directly. They are just customers to allow the transport on our system, we don’t split the commodity, we just provide the transportation services. So, from a load perspective directly related to CNG, it’s not that significant at the moment. There is a lot going on in all three of our service territories in terms of private industries and developing CNG infrastructure. There is a lot of fleet that are looking at implementing CNG. We have school buses in Kansas City. We’ve had trucking companies in other states that are looking to use CNG primarily creating their own fill stations for their own use rather than in a public infrastructure.

On a public side though, there are some stations particularly we’re active in Oklahoma creating a lot more public infrastructure for CNG vehicles. And then, as Pierce said, we are trying to let the free market work. We are creating our own internal CNG stations that are accessible to the public and that are not interested in trying to create that infrastructure where we kind of serve that load. I hope I answered the question fully.

Unidentified Analyst

Thank you.

Unidentified Analyst

Couple of questions. Three quarters of the transport cost, 90% storage you reprised by 15. Can you characterize how much above today’s market pricing that currently is?

Pierce Norton

Pat, I’m going to let you answer that question.

Patrick McDonie

I want to make sure I understand before I answer. You’re saying how much above current value that we’re paying is the fees or make sure I understand before I answer.

Unidentified Analyst

Well, for example at subsidiary of another peer company they had said that they have total overhead costs for all their contracted position and described costs and they said a certain percentage was available will be reprised by certain periods as you just said. But then, they said it was priced 50% above market allowing us to do some math. So, that’s what I was hoping for.

Patrick McDonie

I don’t know we’ve looked at in that particular line obviously. We’ve looked at the dollar savings throughout that period of time. But, I will say that it is going to be between that 40 and 55 percentage probably, a reasonable range of value.

Unidentified Analyst

And what is the aggregate overhead that on your contract in dollars on your contracted position.

Pierce Norton

It’s on that slide.

Unidentified Analyst

Okay.

Pierce Norton

That we have it. It lists out the transport cost which I think is one of them is like $90 something million, the other one is $70 million and then actually our operating expenses associated with our people administrative services is like 26 million. The only thing that I would add to what Pat said was that we typically haven’t got very specific about numbers or percentages because we view this as a negotiation. So, we don’t want kind of bar out there for it is that either we’re looking for or expect.

Unidentified Analyst

Understood. And Pierce, how should we differentiate your description, I’ll describe it broader inclusion winner summer spread versus the optimization line that in the little spread sheet there and on that note kind of follow up. For optimization you are assuming lofty 2011 performance continuing into 2012, that’s kind of out of line but those numbers if I’m not mistaken are more than two times the results of ‘09 and 2010. What confidence do you have in that?

Pierce Norton

Well the confidence we have is in my opinion more or less around the team of people and the experience we have to deliver those numbers. There is not at large amount of optimization actually in that spread number. Most of that is in the way you manage the capacity, your hedging those kind of things and kind of more importantly the last bullet that I described just a few minutes ago which is the ability. Lewis say, PBR 74 bcf of storage contracted, if you can actually cycle that quick enough to get 83 bcf or 85 bcf, then that starts to weigh into those numbers as well. So, that’s in there also.

Unidentified Analyst

And the confidence of maintaining what was that 27 million on the optimization line that so much higher than 2009 point of time.

Pierce Norton

Well, that’s our point of view. Pat, do you have anything to add to that.

Patrick McDonie

I would just say that we are more aggressive in the monthly option market because physical option market because of the lack of forward spreads and the value deteriorate and we want to extract from the market is better on monthly basis which falls into that optimization bucket then it is necessarily forward hedging quote spread. You end up doing a combination of both but you end up driving or generating money into this optimization bucked because the actual tightness of the spread.

Unidentified Analyst

Question on Energy Services. As capacity rolls off and you can renew, do you think assuming the gas markets kind of stay the way they are into the foreseeable future. Would you expect that you’ll be able to resign that capacity at rates that allow you to make an accessible return or do you think it’s more likely that you’ll just let more of that capacity go so effectively that business will shrink overtime.

Pierce Norton

Well, it’s probably a combination of both Michael. We’re going to be looking continuously at matching up our premium service customers and to the extent that we can turn back even more transport capacity or more storage capacity. We’ll do that but we think if the current market environment stays the same, then we think that it is likely that we’re going to be able to re-contract at lower numbers and like I said we’re not putting marker out there as to what we’re looking like but I can tell you it’s material numbers.

Patrick McDonie

And I would add to that one thing. We were here at 1999 and 2000. You are the same location differentials and you are at these basic storage or seasonal differentials. You seen this in the past and I can tell you that the rates that we pay during that timeframe were materially different than what we paid through the last three to four years. So, let’s just take past Katrina timeframe. So, we’ve been here before, rates close to the 50% or less that he was talking about earlier. It takes time because as pipelines have contracts that roll off every time the customer base is a combination of marketing companies, producers and utilities. So, as that roll off occurs those costs will get rebase and those rates will come down barring the changes the marketplace.

Unidentified Analyst

Yeah, good morning. Just I’m kind of curious back on the compressed natural gas. What kind of capital you have deployed there and then I think Caron mentioned revenue pretty minimum is kind of worrying about the numbers are and then I’m just curious in terms of vehicles how many are being served and kind of what the – and there is lot of interest in more numbers on I guess.

Pierce Norton

I give you some kind of some general numbers of something that John and I just did a couple of years ago and it’s pretty specific to Oklahoma. But, I think there is approximately three million or so vehicles on the road in Oklahoma and we determined at that time that probably to make this a viable business for ONEOK, you’d probably had to have in the neighborhood of well over 200,000 to 250,000 vehicles that are actually convert to CNG. It’s clearly advantages for fleets to do that. We don’t quite have enough choice for Americans to really storm this market right now and as far as cost goes we don’t have a significant amount of cost in this segment and I’ll let Caron tell you how many stations we have. It’s just a good rule of thumb right now to put in a CNG station say a convenient store just to standalone. It’s somewhere in the neighborhood of 1 million to $1.5 million per station. Caron?

Caron Lawhorn

Just in terms of our own stations, we operate 29 stations I believe, 25 of those in Oklahoma are public. There are two more stations that are public and in Texas we have a total of 42 stations in Oklahoma so that (inaudible) ones that just service our own need. We’ve not put a lot of capital into CNG infrastructure. We do have capital in our plan coming up to upgrade our CNG stations but it’s not significant.

Pierce Norton

I might add one thing about CNG and its gets back to something. We looked at a couple of years ago as well in our CNG was an emerging opportunity for the company. At that time, well over 50% of our own fleet secured by CNG. So, we’ve been CNG consumer for many, many years. These stations were refrained to have been then a long time and they are available to the public as well. But, there is not a lot of demand. So, it’s primarily our own usage. As this particular opportunity gain momentum, we did look at these numbers and ask ourselves the question which for us is always how does it fit our vision. Well, I think can obvious how investing in CNG does fit our business because we’re creating value for somebody who is using the CNG and so we clearly understood what debt we are making by investing in CNG. But the other question we always ask ourselves is, what’s our competitive advantage? And if you stop and put this in your personal perspective, when you go to the service station to fill up your car with motor gasoline, where do you go and where we live and go places like car to fills up or we had a big chain called QuikTrip and there is convenient stores, sea stores. And for those of us that had some exposure to that end of the business, the competitive advantage is not in the fuel. It’s in the ability to buy cigarette, beer and bread. And we as a company don’t have a competitive advantage to build convenient stores. Our role in CNG, if we ever as a country get to the point where we’re going to consume CNG where we as a group are going to buy CNG vehicle and we’re going to be a supplier of natural gas to the QuikTrip, Exxon Mobile and Chevron of the world. So, we’ve kind of guess the process, we went through and then make the decision that we made at this point.

Unidentified Analyst

(Inaudible).

Pierce Norton

The question was how many employees do we have in Energy Services and I think that question should be answered by Pat.

Patrick McDonie

Including county, that’s 81.

Pierce Norton

81 people including the county and working capital depends upon the value of natural gas storage.

Patrick McDonie

It obviously varies. On an average annual it’s somewhere between 185 and $235 million.

Pierce Norton

And that’s currently at kind of today’s prices and it’s not loaded all equally. It kind of cash comes in kind of during the first part of the year kind of cycle through the rest of the year.

Unidentified Company Representative

We got time for one more question. Okay.

We’re going to break until 10:35.

(Break)

Terry Spencer

All right. Welcome everybody and good morning. Thanks for taking the time to be with us today. We’re going to cover a number of topics and keys points about ONEOK Partners. I’m going to discuss some of the key drivers behind our 2012 earnings guidance and as you will notice, 10% higher than our current guidance for 2011. An overview of the business activities and the assets, and partnership, where we continue to provide, non-discretionary fee based services to our customers. We’ll cover the shale plays in and around our integrated asset footprint. And I’ll discuss our $3 billion growth program currently underway as well as more opportunities to come. We’ll also abate the current NGL supply and demand environment and our view going forward.

Here at ONEOK Partners, we have two business units engaged in Natural Gas and Natural Gas Liquids. In the Natural Gas business, we operate Gathering & Processing facilities in 6 major producing basins. And we operate fee-based natural gas pipelines and storage assets extending across the Mid-Continent and Midwestern US.

In our Natural Gas Liquids business, we have a fully integrated operation, complete with gathering and fractionation storage and treating and pipelines. This NGL network is one of the largest of its kind in the US and is connected to approximately 90% of the gas processing plants in the Mid-Continent and the US major market hubs.

At ONEOK Partners, we have integrated operations in the Midstream natural gas and Natural Gas Liquids value chains with assets connecting to prolific supply basins to key markets, again, as I mentioned earlier, providing non-discretionary fee-based services to our customers. Over our history, we have demonstrated an ability to grow through acquisitions and internal projects while maintaining a solid financial position which was made possible through our relationship with ONEOK, a strong and supporting general partner.

As we look forward to 2012, our business continues to benefit from the internal growth we’re experiencing particularly from the Gathering & Processing and natural gas liquid segments. Volume growth driven by the connection of new natural gas and NGL supplies in a number of rapidly growing shale plays continues to impact our bottom line favorably.

If you look at the bar graph over on the right, you’ll note that our earnings growth in the partnership in 2012 reflects the start up of new processing plants in our Gathering & Processing segment and lower optimization margins in our Natural Gas Liquids business.

Earnings growth within our Gathering & Processing segment is due primarily to the drilling and resulting new well connections that we’re experiencing in the Bakken Shale of the Williston Basin and in the Cana-Woodford and Granite Wash developments in Oklahoma. And the Texas Panhandle, this chart shows the ramp up in gathered volumes projected in 2012 and the corresponding well-connect account. You’ll note that drilling activity in the Powder River Basin however remains inactive due to the lack of NGL or crude oil value upgrades in the predominantly dry gas production which is typical of the Coal-bed methane wells that are producing in the Powder River.

As our gathered volumes across our systems increased so to volumes that will get delivered into our processing plants. Producers continue to focus on unconventional resource plays rich in crude oil and Natural Gas Liquids, which require liquids extraction in order for the natural gas stream, in order to meet pipeline quality specifications. As you can see from the chart, on the right, Processing volumes are up 28% in 2012 from 2011 due primarily to the partnerships new processing plants in the Williston Basin.

Looking to our Natural Gas Liquids business, this segment has experienced tremendous growth since we acquired the assets in 2005, primarily because of our continued focus on supply. Since 2006, we’ve more than doubled NGL gathering volumes and NGL. And fractionation volumes have increased by more than 90%. NGL volume growth in the Mid-Continent has come from connections to new processing plants and some growing volumes on our existing plant connections.

With the Arbuckle and Overland Pass pipelines in 2008 and 2009, we’ve been able to capitalize on the prolific NGL volume growth coming from the Barnett Shale in Texas, the Rockies, the Cana-Woodford and Granite Wash Development in the Texas Panhandle.

If you look at our business, it’s really designed and built to weather economic cycles. The partnership’s cash flows are predominantly fee-based and as I said before, non-discretionary, meaning that producers and customers must have these services in order to monetize their production, our basin diversity and demand based natural gas pipelines mitigate our volume risk. And if you look at the bar graph to the right, in 2012 we expect 60% of ONEOK Partners margin to be fee-based, with our commodity price risk residing primarily in our Gathering & Processing segment, where we use hedging to mitigate our risk.

Moving on to growth projects, well, as many of you know, we’re involved in a number of prolific shale plays and what we call our Natural Gas Liquids Fairway. And in our Gathering & Processing business in the Bakken Shale, the Williston Basin in North Dakota and Montana, we had experienced significant increases in process volumes. We expect this growth to continue presenting us with additional opportunities to develop natural gas and NGL infrastructure which I’m going to discuss in a bit more detail here as we go forward.

The Cana-Woodford Shale and Granite Wash Developments in Oklahoma and the Texas Panhandle continue to grow. And with their significant NGL content in our current infrastructure is very well positioned. We also see additional growth opportunities there as well on both the Natural Gas and Natural Gas Liquids side of the business.

At ONEOK Partners, the disciplined growth continues in our natural gas and Natural Gas Liquids infrastructure. You know, the project was completed in 2009, are contributing to volume and earnings growth, with 2010 being the first full year that all of those projects contributed to earnings with volume growth continuing to ramp upward. And we’ve announced another $2.7 billion to $3.3 billion on internal growth projects in the Rockies, Mid-Continent and Gulf Coast in the Natural Gas Liquids and Natural Gas Gathering & Processing segments. A few months ago, we announced a new NGL pipeline and fractionator. Then I’m going to discuss in a bit more detail here in just a few moments.

As we look in the Bakken Shale region, ONEOK Partners is the largest independent operator of Gathering & Processing and NGL infrastructure providing natural gas and NGL producers with a full range of midstream capability, necessary to get their production to market. In the Bakken, crude oil production is the primary driver of developing in the area. And you can see at ONEOK that favorable drilling economics continue to work even at a $50 crude oil price environment. We have in the Bakken, in and around our pipeline systems about 1.8 million acres of dedicated acreage, which positions us to continue to benefit from the continued drilling in the region.

As we look to the current environment in the Bakken, the strong economic incentive drill has, as expected placed high demand on supporting services with the area. This creates a backlog of wells that are needing to be completed. This is actually somewhat of a benefit as these shut-in wells wait for services and connections to our gathering systems, otherwise they have to sit there and flare. And we’ll talk more about this flaring phenomenon here in just a minute.

Well, this pie chart shows us the breakdown of the production that’s typical in the Bakken, and the producers have indicated it over 90% of their sales revenues come from the oil production. This is the reason why Bakken producers view NGLs and Natural Gas’ is primarily a byproduct that just simply must be taken away to the market.

As I mentioned earlier, many producers are flaring their associated natural gas and NGLs to the atmosphere in order to produce the oil. And of course that’s where we come in, you know, this flaring is occurring because there is not enough infrastructure to meet their needs. To eliminate this flaring, we of course are building Midstream Nat infrastructure to keep this gas bottled up if you will and get it moved to market.

Well, this is a pretty telling curve here. When we look at the rig counts, I mean, as you can see, the rig counts continue to rise in the Bakken, the favorable drilling economics and high success rates are really driving this. You know, with each rig being capable to drill as many as 10 to 12 wells. The industry is going to add about 2,000 wells to the Bakken over the course of the calendar year. You know, what’s essentially happened in the Bakken is it’s become a mining or manufacturing operation where the boundaries of the Bakken are clearly defined with little to know dry hole risk.

In Gathering & Processing, we’re investing about $1 billion to construct 3 new processing plants in North Dakota, the Garden Creek, the Stateline I, and Stateline II processing plant will quadruple our current processing capacity in the Bakken. We’re also investing in infrastructure around these processing plants through well connections, expansions and upgrades backed primarily by percent of proceeds contract with a fee-based component.

In the Natural Gas Liquids segment, we’re also making major infrastructure investments in the Bakken which are backed primarily by NGL production from the partnerships existing and new natural gas processing plants. The 500 plus mile Bakken NGL pipeline to be in service during the first half of 2013 marks the region’s first major NGL infrastructure development to transport and fractionated NGLs to the Conway and Mont Bellevue market hubs.

In addition to the takeaway capacities, the new pipeline will out processing plants to recover and transport ethane which is not possible economically without it. This expansion in the Bakken allows our NGL segments once again capitalize and build off our existing infrastructure particularly at Overland Pass and our Bushton Fractionation and storage complex located near Conway Kansas.

Our capital investments within the partnership are supported by long term and in many cases firm demand based commitments for Gathering & Processing NGL transportation and fractionation. Today, most of the available capacity in our growth projects is committed. As you can see, from this chart, we expect our new processing plants in the Bakken to be full or nearly full following startup as the Gathering infrastructure upstream of our processing plants continues to come together.

At the moment, along with the growth projects with the Bakken remain on schedule and on budget. Construction and cost overrun risk is mitigated to the use of turnkey fixed price bid construction contracts. And the current market for construction labor is stable and readily available. Several months ago, we placed a large order for steel pipe and locked in an attractive price. And as of this month pipe deliveries has begun.

As we’ve indicated in the past, most of our plant and pipeline projects lay outside of federal wins which reduces the exposure to more costly time consuming and administratively challenging permitting processes.

Okay, let’s talk about, some more about growth in the Mid-Continent. In addition to the Williston Basin, much of the growth in the partnership is occurring in our core Mid-Continent Gathering & Processing and Natural Gas Liquids infrastructure. Several active prolific NGL rich unconventional plays are rapidly being developed by producers, the Cana-Woodford to Granite Wash, the Arkoma-Woodford and the Mississippian Lime plays, have shown remarkable growth. And continue to produce high volume wells, capable of producing crude oil and high NGL content natural gas. This active development has led to considerable volume and the demand for capacity particularly in our NGL segment, is leading to more NGL segment infrastructure growth.

With limited incremental NGL markets in the Conway market hub, producers are demanding more capacity all the way to Mont Bellevue. And our integrated infrastructure is well positioned to serve that need and we’ll talk more about projects to meet that need in just a moment.

Well, this slide gives you an excellent picture of how these rapidly growing shale plays stood within our core footprint. The revenue uplift from NGLs and crude oil production combined with the high success rates keep the drill bits turning. And which in turn keeps producing for the partnerships a steady stream of well-connects, new processing plant projects, plant connections and system expansions.

To accommodate the growth in the Cana-Woodford and the Granite Wash region, a major 200-mile pipeline, or 200 plus mile pipeline expansion of our NGL gathering system located in Western Oklahoma and the Texas Panhandle is currently underway. And we’ll connect several new processing plants and create more needed capacity adding 75,000 to 80,000 barrels per day out of NGLs to our system.

Construction of these new NGL pipelines, are underway and expected to be operational by early 2012. And if you look at this map, you can see that red pie there in Western Oklahoma, that’s kind of an upside down L-shaped, you can see that pipeline there and how well it sits with our existing infrastructure. We’re also expanding downstream. Our Arbuckle pipeline to its maximum capacity of 240,000 barrels per day to be completed in the first half of 2012.

In the natural gas Gathering & Processing segment, like last year, we’ve completed the completed the expansion of our gathering system to connect our existing Western Oklahoma system to our Menzel processing plant down in Central Oklahoma. This allows us to optimize our Oklahoma processing capacity as well as put us in a position to accommodate new production growth happening down in that part of the state.

Earlier this year, ONEOK Partners announced over a $1 billion of additional NGL growth projects to accommodate the growth NGL suppliers in the Mid-Continent and to help alleviate the transportation constraints between Conway and Mont Bellevue. That includes the building of a new 570 plus miles, 16 inch Sterling III pipeline that will be able to transport either on fractionated or purity NGL products from Medford Oklahoma to the Texas Gulf Coast. Along with the reconfiguration of our existing Sterling I and Sterling II distribution pipelines to transport either on fractionated or purity NGL products.

And we’ll build a new 75,000 barrel per day NGL fractionator at Mont Bellevue which we refer to as MB2. As we sit today, approximately two thirds of available capacity of these projects, are committed with construction to be completed by late 2013.

The partnerships NGL segment has a unique collection of transportation pipelines capable of transporting NGLs from the Mid-Continent to the Mont Bellevue market center. And arguably we are the largest operator of capacity between Conway and Mont Bellevue. Currently the industry faces a significant capacity constraint between the two market centers and accordingly the demand for south band capacity is at an all time high. The partnership has worked diligently to expand its Mid-Continent to Mont Bellevue capacity, to meet this demand primarily through the construction.

If you remember our Arbuckle pipeline, 160,000 barrels per day. And the soon to be completed 15,000 barrels per day expansion of Sterling I. Despite this added infrastructure, the demand for capacity remains high and price differentials between the market centers remain at historically wide levels. Accordingly more capacity is needed and to meet that, we’ll construct as I mentioned earlier, the Sterling III and MB2 fractionator. Upon completion of the projects, the partnership will now have four pipelines capable of fractionating either raw – capable of transporting either raw or purity NGL products between the market centers, providing more capacity, operational flexibility and redundancy for our customers.

As I indicated previously much of the capacity of our NGL growth projects are committed under long term firm demand based arrangements. And we expect even more commitments between now and the time of these projects become operational. Recently there had been some announcements of lookalike projects following the announcements of the partnerships Sterling III pipeline earlier this year.

While these projects or these other projects have merit and will among other things serve the specific needs of their owners, we believe our Sterling III and MB2 projects combined with our existing infrastructure have some advantages such as operating flexibility and redundancy which results in great risk for mechanical downtime for our customers. And other advantage is our long history of operating NGL facilities reliably and efficiently. And finally these projects offer to our customers a full service integrated solution capable of providing, gathering, transportation, storage and fractionation.

Okay, now, here is an update of some of our NGL projects which are currently on schedule and on budget. Many of these projects will be constructed under the contracts of highly experienced construction contractors, primarily utilizing fixed per foot or per unit contracts to mitigate cost overrun risk as I indicated earlier, much of the steel pipes in order with deliveries of some of the pipes currently underway. To further mitigate risk, we have routed the pipelines to avoid federal lands switched in the past had presented numerous challenges for us.

On our other projects, our major NGL system expansions in Oklahoma and the Texas Panhandle are currently under construction. As well as our Arbuckle pipeline capacity expansion. Permitting work and rights away acquisition are well underway on Sterling III. And our environmental permit for MB2 was received a few months ago and construction work is well underway.

Well, so far, we’ve talked about major growth currently underway. And we see more growth opportunities on the horizon. The timing of these projects of course will be driven by the market and the willingness for producers to commit to the capacity. On the Natural Gas side, potential projects include constructing new Natural Gas processing plants, expansions, upgrades and pipelines to new electric generation loads.

On the NGL side, potential projects exist for more NGL fractionation and storage facilities along with enhanced market connectivity at Mont Bellevue as well as more pipeline expansions both for raw NGLs and purity products.

As we look to the future in our Natural Gas Gathering & Processing business, our strategies won’t change much, with most of our focus remaining on the internal growth projects within our footprint. Some new emerging areas showing substantial promise that we’re really excited are the Niobrara Shale and the D-J Basin of Colorado and the Mississippian Lime in North Central Oklahoma and South Central Kansas. The rapidly emerging Mississippian Lime is particularly interesting as both producers large and small are accumulating considerable acreage positions and are showing considerable success with wells producing crude oil and associated ridge NGLs. As always, we’ll remain very active on the hunt for acquisitions particularly – particularly for opportunities that fits with our asset position.

Well, we’ve talked a number of times about the Niobrara Shale, and in particular, we’re highly interested in it because of its proximity to our NGL infrastructure. Opportunities exist in the play from both in Natural Gas Gathering & Processing and Natural Gas Liquids perspective. While the Niobrara itself is not as contiguous as the Bakken, it’s a bit more modular or spotty. We believe there is significant potential for us to build processing plants in the region as well as NGL related expansions. And as you can see Overland Pass and our pending Bakken NGL pipeline, well, traverses through much of the Niobrara.

Well, the Mississippian Lime is a conventional resource play that’s really starting to hit its stride. The partnership remains very well positioned to participate for the play. A number of people I think have said already that they kind of like the Mississippian Lime Play to the Eagle Ford. And which I think is really exciting for us. The drilling economics are very attractive even at much lower commodity prices. And the dry hole risk is very low. We’re evaluating a number of new Natural Gas and NGL supply opportunities within the play as we speak.

In our Natural Gas Gathering & Processing segment and Natural Gas Liquids business, they’re garnering all the attention right now. But, you know, when I look at our Natural Gas pipelines segment, its regulated business. It produces primarily fee-based income. It continues to produce favorable and consistently profitable results. And we do see considerable growth opportunity in the segment over the next several years in the way of expanding demand, from new natural gas fire to electric generation doing large part due to the stable natural gas environment, for pricing as well as reliable supply growth.

And we see a number of electric companies increasing their incentive, they haven’t increased incentive of course to switch from coal to the cleaner burning natural gas. Our Natural Gas pipeline segments, also, very well positioned to capitalize on some of the shale opportunities we’re seeing in Oklahoma as well. And so, we are increasing the – we’re meeting the producers needs with more and more firm contracts to get their gas to market. Now, you’ve heard the discussion about the narrow location price difference to environment, and our view that it’s going to persist into the future for some time.

Our Natural Gas pipeline segment though remains highly contracted today. It is also predominantly end user connected. Over 80%, nearly 90% of the capacity on our pipelines is connected directly to industrial and electrical and local distribution companies. So, regardless of the basis differential, those end users have to have the natural gas to run their businesses regardless of the spread. So, our pipelines are very well positioned to meet that need.

As we look to the future, for US Natural Gas demand, hot growth there is going to be in natural gas demand. It’s going to come primarily come from electric generation as companies look to switch, electric companies that will look to switch from coal to natural gas. Our Natural Gas pipelines and storage assets as I said earlier are very well positioned to serve that growth with customized delivery services, made possible through our connectivity to suppliers and markets and our storage capability as well.

In Oklahoma and Texas and Kansas, we read some reports where the potential for new electric generation load from coal side plants converting to natural gas exceeds 3 billion cubic feet per day.

Looking to the Natural Gas Liquid segment, we remain poised for continued internal growth, primarily by supply growth in the Shale plays, in and around our footprint. We’re currently evaluating new opportunities, not yet announced in a way of new fractionation capacity, major supply expansions, increased storage and marketing capability. We’re on the lookout for the opportunity to further expand our footprint to serve growth in West Texas via our existing Gulf Coast position. Included in the mix is an array of further de-bottlenecking and upgrade projects across our infrastructure. And we will be continuing our efforts to be a key supplier of products to serve the Denature (ph) and Canadian diluents markets via our North System pipeline serving the Midwest.

Okay, let’s talk a little bit about the NGL industry environment. As we assess the current NGL environment, there are a number of key points to consider. NGL supply growth remains robust to the NGL Rich shale plays. But we expect some of this growth to be offset by the steep natural production declines typical of shale wells and the decline that currently persists in the Gulf of Mexico.

NGL demand continues to absorb NGL supply growth driven primarily by strong demand by US and Canadian petrochemicals. New world scale petrochemical plants and expansions are in the works. And we’re going to talk more about that here in just a minute. Capacity across the NGL space will remain tight. And Conway to Mont Bellevue differentials or price differentials that is, will remain relatively wide until the effects of the announced capacity build-outs begin taking effect in 2014. All of these considerations equate to more opportunity for our NGL business to serve its customers on both the supply and market and of the pipeline.

Well, you heard us say this, a number of times. And fractionation capacity in the United States remains very tight. But release is on the way over the next couple of years as more than 700,000 barrels per day of new frac capacity will be built. Much of this capacity will be back by firm, frac or pay contract commitments by NGL producers. And currently ONEOK Partners has plans to construct a total of 135,000 barrels per day at Bushton, Kansas and Mont Bellevue, Texas combined. Much of this new capacity is being built to serve the NGL supply growth underway and the Williston and the Mid-Continent.

With the strong economic incentive continuing for the drilling and production of NGL rich shale wells and new infrastructure to gather and process the associated natural gas, to transport, fractionate the NGLs we’ll continue to be needed. Most of the shale plays wax decision infrastructure coverage within the plays themselves creating opportunity for midstream growth. Older conventional production will continue to decline as will the high volume plus production from new shale wells. With this natural decline, our new NGLs must feel a considerable hole each and every year. So, you may see in and will see regional supply growth, you’ll see strong regional supply growth. But overall, perhaps you won’t see quite as much.

Favorable ethane extraction margins may pass a little by the soft natural gas prices and strong petrochemical demand have incentivized producers to maximize ethane recovery through improved processing plant designs. While ethane suppliers are growing so is the demand, due to the favorable ethane prices relative to the more expensive oil based seed stocks. We’ll talk more about that here in just a minute.

Again, the strong petrochemical demand that we’re seeing today is driven by the wide natural gas to crude oil price ratio which helps to keep ethane prices low relative to the heavy oil bases seed stocks. And this chart, over on the right hand side shows the natural gas to crude oil ratio currently in the range of about 26% and is expected to remain below 30% over the next couple of years. Historically, that relationship has been around 50%, so you get a sense of how low that ratio is. Low ethane prices typically in attractive margins for the petrochemical customers and that’s a good thing for our business.

The economic advantages of ethane demand, we’ve been discussing a driving tangible growth within the petrochemical sector as a number of new world-class petrochemical plants have recently been announced. Incremental ethane demand is expected to grow by 400,000 barrels per day by 2017 as a result of these new expansions. Stable prices, adequate supply and infrastructure along with growing world demand for petrochemical derivatives are the primary drivers for the expansion. And the help of the US continue to be one of the top competitors for petrochemicals in the world marketplace. You know, attractive prices, ample supplies, US propane are also driving increased export demand from international markets, which has periodically turned the US into a net exporter of propane creating even more market potential for US NGL supplies.

Well, on the next couple of slides, what you’re going to see is a bit more detail on the petrochemical companies and the announced expansions they have in works. I’m not going to go into much detail on these two slides. But this info does give you a sense of the petrochemical industries favorable long-term outlook and their confidence in US supply and infrastructure.

As you can see a number of the players here, we’ve had discussions with all of these folks. And they appear highly committed to execute their expansion plans. The shale revolution has changed their views and has given them the confidence to pursue these investments. And we’re glad to be there to serve them.

That pretty well wraps me up. I appreciate you all being here today. And very much appreciate your interest in ONEOK and ONEOK Partners. Thank you very much.

Sheridan Swords

If you don’t mind, Sheridan here. We’ll open it up for questions.

Question-and-Answer Session

Unidentified Analyst

Hi Terry.

Terry Spencer

Hi.

Unidentified Analyst

Great presentation. When you were talking about potential future growth, two areas on the NGL supply side that you mentioned were West Texas and then the Northeast in terms of Utica and Marcellus. Could you talk a little bit about potential strategies to how ONEOK would get, I guess more involved in West Texas and to get about in the first place in the Northeast. You know, how do you build a platform there kind of what we have?

Terry Spencer

It’s a good question. I think, you know, we really already view our business as a platform to get into those areas. So, when we look specifically at West Texas, you know, it’s important that you have a position in the Gulf Coast and Mont Bellevue, we have that. We’ve got a pipeline system already that traverses through. The dense and crowded Mont Bellevue area, we have looked at potentially expanding off of that infrastructure into West Texas. We’ve had a number of producers approach us over the years, trying to get us to expand into that area. And we continue to look at that and wait for our opportunity, okay.

As far as the Utica, if you see the Utica on a map, you’ll see that it’s actually closer to our existing infrastructure, NGL infrastructure in Chicago then was the Marcellus, okay. So, you know, that’s really perked up our attention. As I’ve said before, the Marcellus was an area we were very interested in. But as we said today, you know, our focus continues to be in the Bakken and in the Mid-Continent with less emphasis on the Marcellus. But with this Utica play and the success that’s happening there, we’re very much interested in it. And we think that we can be a part of that solution. So, it’s not a stretch for us to step into that area with our current platform. Sheridan, you want to add anything?

Unidentified Analyst

Terry, with liquids growth coming out in the Mid-Continent and the Rockies, limited takeaway capacity connecting Mont Bellevue and Conway markets. You know how do you view incremental ethane supplies getting down to Mont Bellevue over the next year and half before you really see a lot of the pipeline connectivity between Conway and Bellevue open up? You know, are you seeing a crowding out effect of ethane in the Mid-Con where producers are choosing to send their heavier barrels down to Conway versus Ethane or are there options for those heavier barrels other than pipeline and so you’re still not seeing too much ethane rejection in Mid-Continent?

Terry Spencer

Well, I mean, it’s a great question. And Sheridan probably can give you a much higher quality answers. And but what I can tell you is that we have seen some crowding in the ethane space. We do intend to try to utilize the capacity in the existing assets. We mentioned the expansion that’s happening with Arbuckle. And we mentioned the Sterling I expansion, we’ll utilize that capacity, the capacity that we have available there to move the ethane. It’s going to be crowded and it’s going to be tight. We have seen in the Mid-Continent, some producers are not maximizing ethane production because capacity is so tight. There is really nothing that’s going to change significantly from today until the time Sterling III comes online.

Okay. So, to kind of address the conversation that happened earlier, as it relates to optimization differentials or Conway to Bellevue differentials. Well, our view is that that spreads, for ethane it’s going to be about $0.12 in the same breadth. There is not a whole lot that’s going to change between now and then in the way of capacity additions until Sterling III is built, okay. So, you can take that for what it’s worth. With this widespread environment continues, we don’t see anything in the marketplace to change it.

But as John, indicated, nothing stays exactly the same right forever. Things change, we have other participants, not just with pipeline assets but you have other large marketing players that play the Conway to Bellevue game. And so, they may have strategies that might potentially impact the spread, okay. Sheridan, do you have anything to add.

Sheridan Swords

One thing I had about on the ethane get down on mobility is that with our pipeline systems. If the ethane spread is wide enough related to other spreads, we’ll open up more pipeline capacity. For ethane as opposed to natural gas plant or propone or something like that, so there is a bouncing affect on that side of that who gets from up the space on our batch of pipeline systems.

Unidentified Analyst

And piggybacking on these answers, what has your capacity for optimization changed going into 2012?

Terry Spencer

It will change. It will change, it actually will be lower. We’re going to disclose it to you for competitive reasons the exact numbers. But what we can tell you is they’re going to be lower as we place that capacity with fee-based firm arrangements.

Unidentified Analyst

And can you give any, are they long term or can you give any duration of the contracts, any color on that?

Terry Spencer

Well, most of these contracts are going to be 10 years plus.

Unidentified Analyst

In terms of electric utilities that you currently supply, how many have older coal plants or less efficient they could be retiring specifically electric generation?

Terry Spencer

You know, I don’t have a count for that exact percentage. Curtis might have that number. But we do have a number of plans that are currently coal fired. If you look, just to give you a perspective, about 20% of our demands or our capacity is utilized to serve electric generation plants, okay. We have seen that demand periodically grow to as much as 50% periodically throughout the year. You know, we’ve had a lot of discussions with companies, within Oklahoma and Texas about new electric generation plants. And they are very large coal fired plants in this region that have great potential for conversion, okay.

I hope that kind of gives you a perspective of how we’re levered to the electric generation sector.

Unidentified Analyst

Thanks. On Bakken, you guys are putting a lot of money there. And your assets seem to be very interrelated in that, you’re taking the capacity on the NGL lines and are processing. In the event that we have a sustained environment of low oil prices and guys aren’t processing. What’s your downside protection in that since things are so interrelated?

Terry Spencer

Well, with some of our contracts we have minimum volume agreements, okay. We also have with the NGL transportation we’ll have firm demand based contracts. But I think the thing that you really have to understand about the Bakken. And this gets to the question you were asking earlier, is that the spreads that we’re generate in this business because of the richness of the natural gas and the current market. The margins we generate are significantly higher than our typical core Mid-Continent business. So, when you kind of do the math on this and you look at, okay, well, how does this volume growth getting into this point. You have to consider the fact that the margins we’re going to generate are significantly above, by multiples above, what we’re going to realize in a typical Mid-Continent.

Well, now, so, when you look at the economics, it takes more capital than a typical Mid-Continent well. It takes more capital in the Bakken to connect and process and gather a well, in the Mid-Continent, it takes less. So, we have to generate a higher margin in the Bakken, and we’re doing that. And of course the market is bearing it. Because they are obviously incented to produce the crude oil, that’s a good place to be.

So, when you look at and we’ve tested this. We run cases when we do these economics, okay. Our economics are still very attractive even at these lower price environments.

Unidentified Analyst

So, just to push a little bit further. Of the 300 million a day of processing capacity that you have, what percent of that will have minimum volume commitments?

Terry Spencer

We’ve actually not, I don’t think we’ve disclosed that but what I’ll tell you is that what we have said publicly is that, of that margins, about 75% of it will be commodity based and about 25% is going to be fee-based, okay. I’m not trying to be evasive but I’m trying to disclose to you what I can.

Unidentified Analyst

You made a comment that you think NGL prices will be more sensitive than Brent sensitive?

Terry Spencer

Well, I’m going to let, probably some of these guys talk more about that.

Sheridan Swords

What was the question, I didn’t hear the question.

Terry Spencer

The NGL prices are going to be more sensitive to Brent. Before I hand that off, what I will say is that Brent is actually probably the price that more closely reflects sweet crude, I mean that’s the crude that everybody wants, okay. And that’s one of the reasons, why Brent is so high. And that’s probably the answer to your question. But unless Sheridan or Curtis talk about that, or even Mareburger, he’s our pricing expert.

Curtis Dinan

Well, I think Brent is more of the global crude right now. And we’re seeing across that. And the NGL sectors, you go into these petrochemicals, they are competing on a global marketplace. So, as they compete against other petrochemical facilities across the globe, that’s how they get their price advantages from the NGL compared to what their crude alternatives are in Europe or in Southeast Asia. So, as those go up they can explore more and puts them in a more advantage position as it relates to Brent. So I think that’s where your relationship comes together between NGLs and Brent.

Unidentified Analyst

Thank you. In terms of the Bakken realizations and we had similar get Bellevue realizations as well. I’m trying to sort of figure out, so far from Bakken up there, are you actually going to get that or are you going to have a discount?

Curtis Dinan

Your question is, the Bakken barrels, can they get built?

Unidentified Analyst

Yeah, hot contracts in the Bakken.

Curtis Dinan

Yeah, they will get it.

Terry Spencer

You got it.

Unidentified Analyst

Okay.

Curtis Dinan

Yes, the Bakken will be based of Bellevue price.

Unidentified Analyst

I’m kind of maybe holistically on the Bakken. When I look at this producer economics chart that you guys put up here is around 91% of production is crude oil. Competitive midstream business obviously, but can you give us some sense on volumes that we’re really expecting for the NGLs and Natural Gas when it’s only 9% or reduce in production. You know, what are the real volume expectations?

Terry Spencer

I think probably to answer your question, when you look at, what you have to look at to really get a sense of the economic impact to our business, you have to look at the equity. Equity production, I think we have publicly disclosed our equity NGL volumes and our equity Natural Gas. If you look at our equity NGL volumes in 2011, we’re about 9,000 barrels per day. And with the new plants that are coming on in 2012 that will increase to about 12,000 barrels per day. So, pretty significant increase there.

And look at natural gas, we’re about 30, we got about 38,000 to 39,000 MMBtu’s of equity natural gas production that’s coming from the Bakken. It’s going to increase well over 60,000 MMBtu’s per day. So, pretty significant increases and that’s going to continue on that track as we move into 2013 and 2014. So, those numbers are going to have, they mean everything to us.

Unidentified Analyst

The Bakken?

Terry Spencer

The Bakken, sure. You know, today, as you look at the crude oil production in the Bakken we’re running about 350,000 barrels per day, pushing up against 400,000 barrels, I think over the course of last couple of months. Longer-term that number could be as high as 750,000 barrels per day over the course of the next couple of years. So, a significant growth, you can equate that directly to NGLs and to Natural Gas.

All right, well, thank you all very much. I appreciate your interest.

Curtis Dinan

Okay, thank you.

John Gibson

Well, give us just a second we’ll get everybody at the table. And then, we’ll include and open it up for Q&A again for those questions that you might have. Bobby, you got every possible notes that you need? It looks like you’re looking for more. Okay, just a few closing comments. And then, we’ll open it up for Q&A.

For those of you who like dividend and distribution growth. You know, we’ve grown the dividend at ONEOK by an annual compounded growth rate of 13% since 2006 and 8% at ONEOK Partners over the same timeframe. We expect to grow the net income of ONEOK and ONEOK Partners by 13% and 20% respectively in 2012 over 2011. We remain focused on growth.

But the means to that end is the execution of our projects, continuing to provide the marketplace with reliable assets and services and continuing to maintain the financial flexibility. And discipline that we’ve demonstrated over the past many years. And no one knows that more than we do.

We have described our efforts as we have worked together over these last many years as a journey with many twists and turns and surprises and we expect that to continue. But throughout this journey, this team and those employees back home will continue to remain financially disciplined in the things that we do. We will always remain focused on creating value for our customer. And we will continue to find ways to create long-term value and growth for our shareholders and our unit holders.

With that, I’d like to conclude and open it up to any questions which you might have for us that we haven’t already addressed.

Question-and-Answer Session

John Gibson

One question was asked during the break. About a comment I made about our preference to buy, you know, acquisitions, do acquisitions over continuing our growth projects. Just to clarify that, when you acquire assets, given immediate benefit and you get immediate earnings. And then you can set up the course of integrating those assets into your business and then finding those embedded options and growing. That’s what I meant there was an advantage to that from a timing perspective.

But clearly when you look at recent history, in particular sense, I think the last acquisition, I know the large acquisition we made was only about the Kinder Morgan North system, which was what, Terry, 2007?

Terry Spencer

Right.

John Gibson

What we’re facing is a market where we can go out and buy assets probably 10, 11, 12 times but we can build them from 5 to 7. And our history on the 2 billion that we’ve completed and we have in place is more 4 to 5. And so we will continue to use our capital wisely. But we’ll continue to look for opportunities in the acquisition marketplace. But clearly that’s the decision for us. And we’re smart enough to figure out the 5 to 7 is better than 11 to 12. Beyond that we make no disclaimers. I think that’s somewhere in our forward-looking statements as a matter of fact.

Any questions for anybody on the table?

Unidentified Analyst

Hi, Terry. Earlier this winter, we were talking about the flaring of gas in the Bakken. And considering it’s on the cover of the New York Times, and we just received an e-mail from a prominent environmentalist. Is there any chance that you see any regulatory issues up there, I don’t think there were?

Terry Spencer

You know, really no. You know, the regulators, the air quality folks, I mean, clearly want to flaring to reduce. But they also recognize the practical and economic reality and the impact that that production has on the local economy, okay. So, in fact they’re late into the equation, they see the processing infrastructure being built by companies like ONEOK. They see the NGL infrastructure being built. So, they know that the time is coming where all this gas is going to get bottled up, okay. So, they see the progress and they’re happy with the progress.

So, I really don’t see anything changing in the political climate. The political climate in North Dakota and Montana is fantastic for this development. So, you know, as you know, today it’s about jobs. And they’re not going to do things that reduce jobs in my opinion.

Sheridan Swords

Although, I’m sure the federal government will do everything they can to help us. Every time Terry mentioned these, we’re trying to stay away from federal lands. You would think they would make it easier.

Unidentified Analyst

I’m just trying to reconcile a couple of statements that been made throughout the day. Martin, you just said it clearly you’re smart enough to realize it’s better to build it 5 to 7 than by 10 to 12. But I’m trying to reconcile that and figure out how I bridge that with the interest in going into a new area that will be able to have drop down capabilities into the MLP at the parent level? And I’m trying to figure out you know, it’s really tough to do a big transforming of acquisition at 5 to 7.

And then make it accretive or beneficial to the general partners, the parent by dropping it down and still be a little multiple enough for the MLP where you’re in that 5 to 7 category. So, I’m just, you know, trying to think of what areas you’re not in now, there will be MLP. And you know, no, you don’t want to disclose it. But I’m just trying to have an tough time bridging that. Can you talk a little bit more about that?

Robert Martinovich

Yeah, let me try to bridge that in this way. And Southern Union is the best evidence. That is not, as I pointed out earlier, that’s not a transforming transaction for us but that’s market. If you would accept that as a fact then clearly we are going to continue to develop our internal growth projects because that’s the market. And only until or if we find what we consider to be an opportunity that takes us to a different area of the business, which we think we can not only succeed that we can create as much value as we have for producers and customers in the NGL business, where we’ll venture into that.

So, to go and incrementally grow our business and pay some say, maybe 14 times forecasted earnings, we’re not going to do that. That does not take us where we need to go, particularly when we have the advantage of assets that have been remaining embedded options that we can capitalize on in the 5 to 7 times.

So, one could argue that my statement was purely political, in covering all basis, because we’re going to continue down the path of growing our company with these internal growth projects. But at the same time, I clearly want to leave the message to all investors that we look we haven’t turned our heads to acquisitions. But they’re not in the money for us right now. Did that help?

Unidentified Analyst

Yes, sir. Sorry, about leaving a dead horse.

Robert Martinovich

I don’t, who are you calling a dead horse?

Terry Spencer

Not me.

Unidentified Analyst

So, as long as the MLP market is out there. And people can drop assets down at will. You’re going to have these classy multiples and you want to be a buyer. When the market shuts and MLPs can’t issue equity. And, you know, 2 to 4 year GP IVR interest value no longer is in the bidding contest. There may be an opportunity closer to what you view as appropriate pricing. But at the other side of the equation, you know, you said you want something with MLP assets but you can’t drop it down at least in that environment.

So, I guess my question is in market turmoil, are you of a mind to carpet them today, you know, where others are bringing and be patient about when you drop down or how do you think about that?

John Gibson

When I was describing our, let me try to answer his question in such a way that I think the question becomes clear. When I was describing the criteria for an acquisition, the perfect world is to acquire a business that has a distribution business and at the same time has MLP qualified assets that we can drop down into the OKS level i.e., I was using Southern Union as the example. The point I would like to make is, and I didn’t make it very clear.

We also at the same time, we’re going to look at just buying distribution. We’re also at the same time we’re going to look at just buying Gathering & Processing assets at the OKS level, or at the OKE level. So, we’re not looking for, I mean, our target list obviously includes the whole inch a lot a bit. Also then we have other lists that are broken down and more defined by segments. Is that what you were asking us?

Unidentified Analyst

No. That’s fine I think you’ve spent a lot of time.

John Gibson

The horse is dead?

Unidentified Analyst

The horse is dead, I guess.

John Gibson

Any other questions. I thought, is Gates still here? Where are you? Are you not going to ask the question about our investor relations, how are effective investor relations group failed to keep their leering story off the front page of New York Times.

Unidentified Analyst

I feel like, (inaudible) ask a question altogether. But I will ask, you know, about disposition, you’re going to tell 12 to 13, somewhere if you want to put the price?

John Gibson

You know, like everybody, we look at our assets and the assets that we would sell to pay 12 to 13 times for good reason. But, and in particular I’m speaking, you know, Powder River and things of that nature. But, no, as we look through the toolkit, we’re happy with what we have and want to continue to grow. But it is a discipline that we’d built through.

Okay. Then Dan, do you have?

Dan Harrison

Go to the next slide.

Terry Spencer

Speaking of enchiladas?

John Gibson

We’re having enchiladas. We are, my goodness, we’re on time. And we love to have you all join us. I believe what they’ll have is a setup where we’ll different tables for one odd people to sit. You can have further discussion. Thank you all very much for your continued interest in both ONEOK and ONEOK Partners.

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