Executive Summary / Key Takeaways

• ONEOK has fundamentally transformed into a larger, more diversified, and integrated energy infrastructure leader through strategic acquisitions, positioning it for enhanced resilience and growth across market cycles.
• Recent acquisitions of EnLink (ENLC) and Medallion, building on the Magellan integration, are driving significant synergy capture, with $250 million in incremental synergies expected in 2025, providing an earnings catalyst largely independent of production volume fluctuations.
• The company's strategic organic growth projects, including NGL expansions, fractionator rebuilds, refined products pipeline expansion, and natural gas storage additions, are nearing completion and expected to contribute meaningfully to earnings in the latter half of 2025 and into 2026.
• ONEOK affirmed its 2025 financial guidance and 2026 outlook, projecting greater than 15% EPS growth and adjusted EBITDA growth approaching 10% in 2026, supported by integrated operations, synergy realization, and project contributions.
• Leverage is trending towards the target of 3.5x in 2026, supported by strong operating cash flows and a disciplined capital allocation strategy that includes a growing dividend and a $2 billion share repurchase program.

Setting the Scene: A Transformed Midstream Leader

ONEOK, Inc. stands as a leading energy infrastructure company, operating an extensive network of pipelines and related assets across the United States. Its core business revolves around the gathering, processing, fractionation, transportation, storage, and marketing of natural gas, natural gas liquids (NGLs), refined products, and crude oil. This diversified portfolio positions ONEOK as a critical link in the energy value chain, connecting producers in prolific basins to key demand centers and export markets.

The company has undergone a significant transformation over the past two years, executing a disciplined growth strategy centered on strategic acquisitions and targeted organic investments. This journey included the notable acquisitions of Magellan Midstream Partners, Easton Energy's NGL assets, and most recently, the controlling interests and remaining public units of EnLink Midstream and Medallion Midstream. These transactions have dramatically expanded ONEOK's footprint, particularly in the Permian Basin, Mid-Continent, North Texas, and Louisiana, creating a more integrated and geographically diverse asset base.

Within the competitive landscape, ONEOK operates alongside major players like Williams Companies (WMB), Kinder Morgan (KMI), Enbridge (ENB), and TC Energy (TRP). Competition exists across various segments, driven by factors such as asset scale, operational efficiency, strategic location, and regulatory positioning. While rivals like KMI and ENB boast larger overall pipeline networks, ONEOK's strategic focus has been on building a highly integrated system that offers distinct advantages.

ONEOK's integrated pipeline network, processing plants, storage facilities, and fractionation assets represent its core technological differentiation. This interconnected infrastructure enables efficient and reliable movement of multiple energy products across its system. The company's capabilities in NGL fractionation, storage, and blending, particularly in key hubs like Mont Belvieu and Conway, provide operational flexibility and the ability to capture value across the NGL value chain.

The benefits of this integrated technology are tangible. It allows for optimized logistics, reduced transportation costs, and enhanced reliability compared to less connected systems. Specific advantages include the ability to efficiently blend NGLs into refined products and maximize throughput by leveraging connectivity between different asset types. While specific quantifiable performance metrics for all technological aspects were not detailed, the strategic intent is clear: to drive operational efficiency, enhance service offerings, and create a competitive moat through seamless connectivity and optimized product movement. The company's R&D efforts are focused on identifying and implementing smaller, high-return projects aimed at further optimizing these integrated assets, such as blending automation and system interconnects, with the goal of capturing additional synergies and improving profitability.

This integrated structure and strategic positioning are designed to capitalize on significant industry trends. Growing global demand for U.S. energy exports, particularly LNG and LPGs, is a major driver. The increasing power demand from emerging sectors like AI data centers also presents substantial opportunities for natural gas infrastructure. ONEOK's expanded footprint, especially in Louisiana with its connectivity to LNG export facilities and industrial corridors, and in Oklahoma and Texas with proximity to potential data center sites, positions it well to benefit from these demand-pull trends.

Performance Reflecting Integration and Growth

ONEOK's recent financial performance demonstrates the early impacts of its expanded operations and integrated strategy. For the three months ended March 31, 2025, the company reported total revenues of $8,043 million, a significant increase from $4,781 million in the same period of 2024. This growth was primarily driven by the inclusion of results from the EnLink and Medallion acquisitions. Operating income also saw a notable increase, rising to $1,220 million in Q1 2025 from $1,064 million in Q1 2024.

Net income attributable to ONEOK was $636 million for the first quarter of 2025, compared to $639 million in the prior-year quarter. While net income remained relatively stable year-over-year, Adjusted EBITDA, a key metric reflecting operational performance, increased substantially to $1,775 million in Q1 2025 from $1,441 million in Q1 2024. This Adjusted EBITDA growth was a direct result of contributions from the acquired EnLink and Medallion assets across all segments, coupled with strong underlying performance in the legacy business, particularly higher volumes in the Rocky Mountain region.

Segment-level performance highlights the impact of the acquisitions and underlying operational strength. The Natural Gas Gathering and Processing segment saw revenues jump from $1,010 million to $2,197 million and Adjusted EBITDA increase from $306 million to $491 million, largely due to the inclusion of EnLink's operations and higher Rocky Mountain volumes. The Natural Gas Liquids segment experienced revenue growth from $3,436 million to $4,268 million and Adjusted EBITDA increased from $588 million to $635 million, benefiting from EnLink's contribution and higher volumes, partially offset by lower blending margins.

The Natural Gas Pipelines segment's revenues surged from $185 million to $464 million, and Adjusted EBITDA grew from $165 million to $212 million, primarily reflecting the addition of EnLink's natural gas assets, partially offset by the impact of prior divestitures. The Refined Products and Crude segment, bolstered by the Medallion and EnLink acquisitions, saw revenues climb from $844 million to $2,468 million and Adjusted EBITDA increase from $381 million to $471 million, driven by the acquired assets and improved operating costs, despite lower blending differentials. These results underscore how the strategic acquisitions are translating into increased scale and earnings power across the portfolio.

Strategic Execution and Future Catalysts

ONEOK's strategic narrative is currently defined by the integration of its recent acquisitions and the execution of a robust organic growth program designed to leverage its expanded footprint. The full integration of Magellan, EnLink, and Medallion is expected to unlock significant value through identified synergies. The company anticipates realizing $250 million in incremental synergies in 2025, building upon those already achieved. These synergies stem from operational efficiencies, commercial optimization through blending and bundling services across the integrated network, and maximizing volumes on acquired systems by directing them to ONEOK's downstream assets.

A number of key synergy-related projects, such as connecting the acquired Easton Energy NGL assets with existing Gulf Coast infrastructure, are nearing completion and are expected to provide an earnings tailwind in the latter half of 2025 and into 2026. Alongside integration, ONEOK is advancing several major organic growth projects. The Elk Creek and West Texas NGL pipeline expansions are approaching full completion, increasing takeaway capacity from the Rocky Mountain and Permian basins. The rebuild of the Medford fractionator, a strategic investment at a low cost per barrel, is underway to enhance fractionation capacity, reliability, and blending opportunities in the Mid-Continent.

In the Refined Products and Crude segment, the Greater Denver pipeline expansion is progressing to meet growing demand in that market. The company is also expanding its natural gas storage capabilities in Oklahoma and Louisiana, with projects like the recently completed Oklahoma expansion and the underway Jefferson Island expansion in Louisiana adding significant, fully contracted capacity. Furthermore, the joint ventures with MPLX (MPLX) to build the Texas City LPG export terminal and connecting pipeline represent a strategic move to offer a fully integrated wellhead-to-water solution, leveraging ONEOK's extensive NGL system and storage capabilities to serve growing global LPG demand.

Financial Strength, Outlook, and Risk Considerations

ONEOK maintains a focus on financial discipline and a strong balance sheet to support its growth and return capital to shareholders. As of March 31, 2025, the company had $141 million in cash and cash equivalents and no outstanding borrowings under its $3.5 billion revolving credit facility, which was recently amended and extended to February 2030. The company's ratio of consolidated indebtedness to adjusted EBITDA stood at 4.10 to 1.00, with a leverage ratio covenant of 5.50 to 1.00 extended through the third quarter of 2025 before decreasing.

The company's primary sources of liquidity include operating cash flows, its credit facility, and access to capital markets. While a working capital deficit of $2.10 billion at March 31, 2025, primarily due to current debt maturities, is noted, management does not expect this to materially impact cash flows or operations. ONEOK successfully repaid $250 million of senior notes in March 2025 with cash on hand, demonstrating its ability to manage debt maturities.

ONEOK affirmed its 2025 financial guidance and 2026 outlook, signaling confidence in its trajectory. The 2025 outlook anticipates approximately 90% fee-based earnings, underpinned by long-term contracts with investment-grade counterparties, providing a degree of insulation from direct commodity price volatility. The 2026 outlook projects greater than 15% EPS growth and adjusted EBITDA growth approaching 10% compared to the 2025 guidance midpoint, driven by the full realization of 2025 synergies, contributions from completed organic projects, and expected volume growth. Leverage is expected to trend towards the target of 3.5x in 2026 as the integrated systems generate increased earnings.

The company's capital allocation strategy balances investments in high-return growth projects (with expected total capital expenditures of $2.80 - $3.20 billion in 2025) with returning value to shareholders. ONEOK increased its quarterly common stock dividend by 4% in February 2025 and is executing on its $2 billion share repurchase program, having repurchased $17 million in Q1 2025. Operating cash flows exceeded dividends paid in Q1 2025, and the company expects this trend to continue, with flexibility to use other liquidity sources if needed.

While the outlook is positive, investors should consider potential risks. Sensitivity to commodity price fluctuations, particularly NGLs and natural gas, remains, although mitigated by fee-based contracts and hedging activities. Integration risk associated with the recent large acquisitions is present, though management has a track record of successful integration and synergy capture. Operational hazards, regulatory and environmental compliance costs, and counterparty credit risk are inherent to the industry. Macroeconomic factors, including inflationary pressures and potential impacts from tariffs on materials and equipment, are also being monitored, although the company does not currently anticipate a material impact on 2025 capital expenditures.

Competitively, ONEOK's integrated model and scale post-acquisitions provide advantages over some rivals, particularly in offering bundled services and optimizing logistics. Its strategic locations in key basins and connectivity to demand centers are strengths. However, competition for new volumes and projects remains intense, and the ability to continue identifying and executing high-return opportunities is crucial. Compared to peers like WMB and KMI, ONEOK's recent acquisitions have rapidly increased its scale, potentially allowing it to compete more effectively on larger projects and capture market share in new areas like the Permian and Louisiana. Its focus on regulated assets and fee-based contracts provides a different risk profile compared to competitors with more exposure to volatile markets.

Conclusion

ONEOK has successfully executed a transformative strategy, evolving into a highly integrated and diversified energy infrastructure company. The acquisitions of Magellan, EnLink, and Medallion have fundamentally reshaped its scale and capabilities, creating a platform for significant synergy realization and organic growth. The company's core technological strength lies in its interconnected network, enabling operational efficiencies and commercial optimization across multiple product streams.

With a clear path to capturing substantial incremental synergies in 2025 and bringing key growth projects online, ONEOK is well-positioned to deliver on its affirmed financial guidance and robust 2026 outlook. The focus on fee-based earnings and a disciplined capital allocation strategy, including a growing dividend and share repurchases, underscores a commitment to shareholder value. While industry risks persist, ONEOK's expanded footprint, integrated operations, and strategic positioning in high-demand areas provide a compelling investment thesis centered on resilient earnings growth and increasing free cash flow generation in the years ahead.