Executive Summary / Key Takeaways

• Strategic Transformation Driving Growth: ONEOK has undergone a significant transformation through strategic acquisitions (Magellan, EnLink, Medallion) and organic growth, creating a vast, integrated midstream network of approximately 60,000 miles that balances demand-pull and supply-push dynamics across diverse energy products and geographies.
• Robust Financial Performance & Outlook: The company reported strong Q3 2025 results, affirming its 2025 adjusted EBITDA guidance of $8.0 billion to $8.45 billion, driven by acquisition synergies and volume growth. A 2026 outlook projects mid- to upper single-digit EBITDA growth, underpinned by hardwired project completions and further synergy capture.
• Synergy Realization Exceeding Expectations: ONEOK is on track to achieve approximately $250 million in incremental synergies in 2025, bringing the total to nearly $500 million since the Magellan acquisition, with many of these benefits being volume-independent and within the company's direct control.
• Leveraging Emerging Demand Drivers: The company is strategically positioned to capitalize on surging natural gas demand from LNG exports and the rapidly expanding AI-driven data center market, with extensive pipeline networks and new infrastructure projects designed for speed-to-market and direct connections.
• Disciplined Capital Allocation & Financial Strength: With a long-term leverage target of 3.5x by Q4 2026 and expected lower cash taxes of over $1.5 billion due to the One Big Beautiful Bill Act, ONEOK maintains significant financial flexibility to fund high-return projects, manage debt, and execute its $2 billion share repurchase program.

A Midstream Powerhouse Forged by Integration

ONEOK, Inc. (NYSE:OKE), founded in 1906, has evolved into a formidable midstream energy infrastructure company, strategically expanding its footprint to become a leading provider of gathering, processing, fractionation, transportation, storage, and marine export services across the United States. The company's core business revolves around connecting vital energy supply basins with key demand centers, leveraging an extensive network that now spans approximately 60,000 miles. This integrated approach, characterized by a balanced mix of demand-pull and supply-push drivers, underpins ONEOK's resilience across various market cycles.

The company's strategic narrative is defined by a series of transformative acquisitions between 2023 and 2025. The acquisition of Magellan Midstream Partners in September 2023 significantly diversified ONEOK's portfolio by adding refined products and crude oil transportation, alongside crude oil gathering. This was swiftly followed by the controlling interest acquisition of EnLink Midstream and the Medallion Acquisition in late 2024, further enhancing its crude oil gathering infrastructure. These moves were not merely about scale; they were about creating a contiguous, integrated system designed to unlock substantial commercial and operational synergies.

ONEOK's strategic vision extends to capturing emerging market opportunities. The company is actively positioning itself to meet the escalating demand for natural gas driven by both burgeoning LNG exports and the rapid expansion of AI-driven data centers. Management has indicated that its intrastate assets are strategically located in premier natural gas supply and demand centers, making them well-suited to support the timing needs of numerous potential AI-driven data center projects. This proactive engagement with new demand sources highlights ONEOK's adaptability and forward-thinking approach in a dynamic energy landscape.

Technological Edge and Operational Excellence

ONEOK's competitive advantage is deeply rooted in its integrated asset base and operational flexibility, which function as a differentiated "technology" in the midstream sector. The company's ability to seamlessly connect natural gas gathering and processing with NGL fractionation, transportation, and refined products distribution creates a powerful value chain. This integration allows for optimized product flow, reduced logistical costs, and enhanced market access, providing tangible benefits over less integrated competitors. For instance, the connectivity between ONEOK's Mont Belvieu NGL assets and key Houston area refined product terminals, facilitated by the Easton asset connections, is expected to increase transportation fees in the natural gas liquids segment and boost blending uplift in the refined product and crude segment. These connections are on track for completion by early 2026.

The company's strategic investments in infrastructure, such as the Bighorn natural gas processing plant in the Permian Basin, demonstrate its commitment to technological advancement. This plant, expected to cost approximately $365 million and be completed by mid-2027, will feature 300 MMcfd processing capacity and the ability to treat natural gas containing high levels of CO2. This high-CO2 treating capability is a critical differentiator, enabling ONEOK to process a broader range of natural gas streams from the Permian, a region increasingly characterized by higher CO2 content. This directly enhances the marketability and value of the processed gas, contributing to a stronger competitive moat.

Furthermore, ONEOK's operational efficiency is bolstered by its continuous focus on optimizing existing assets and leveraging its scale. The Elk Creek pipeline expansion, now completed, has increased NGL pipeline capacity out of the Rocky Mountain region to 435,000 barrels per day, contributing to record volumes in the region. This expansion, combined with the Bakken pipeline, brings total capacity to 575,000 barrels per day. Such expansions, alongside the ongoing Medford fractionator rebuild and the Greater Denver pipeline expansion, provide significant operating leverage, allowing ONEOK to capture substantial earnings uplift with limited incremental investments.

Financial Trajectory and Strategic Deleveraging

ONEOK's financial performance in 2025 reflects the early benefits of its transformative strategy. For the three months ended September 30, 2025, the company reported total revenues of $8.63 billion and net income attributable to ONEOK of $939 million. Diluted EPS for the quarter stood at $1.49. Adjusted EBITDA reached $2.12 billion, marking a 7% sequential increase from the second quarter and a 37% increase year-over-year. The acquired EnLink and Medallion assets were significant contributors, delivering nearly $470 million in adjusted EBITDA during Q3 2025.

The nine months ended September 30, 2025, saw total revenues of $24.56 billion, net income attributable to ONEOK of $2.42 billion, and diluted EPS of $3.87. Operating income for the nine months increased by $788 million compared to the same period in 2024, primarily due to the operating income from EnLink and Medallion across segments, coupled with higher volumes.

ONEOK's liquidity remains robust, supported by operating cash flows, its commercial paper program, and a $3.50 billion revolving credit agreement expiring in February 2030. The company completed a $3 billion senior unsecured notes offering in August 2025, with net proceeds used to repay outstanding commercial paper and maturing senior notes. As of September 30, 2025, ONEOK had $1.20 billion in cash and cash equivalents and no outstanding borrowings under its credit agreement.

The company is committed to a balanced capital allocation strategy, including debt reduction and shareholder returns. ONEOK repurchased $45 million of common stock in Q3 2025 and $62 million year-to-date under its $2 billion share repurchase program. The long-term leverage target is 3.5x, which management expects to approach by the fourth quarter of 2026 on a run-rate basis. This deleveraging is significantly aided by the One Big Beautiful Bill Act (OBBBA), signed in July 2025, which is expected to reduce cash taxes by over $1.5 billion over the next five years, pushing meaningful cash tax payments to 2029 and enhancing free cash flow.

Competitive Positioning and Market Dynamics

ONEOK operates in a highly competitive midstream sector, vying with major players like Kinder Morgan, Inc. , The Williams Companies, Inc. , and Enbridge Inc. . While precise market share figures for all niche competitors are not publicly detailed, ONEOK's strategic acquisitions have significantly bolstered its competitive standing, particularly in its core operating regions.

ONEOK's strength lies in its integrated asset base, which offers a "wellhead-to-water" solution for customers, particularly with its new LPG export terminal joint venture with MPLX (MPLX) in Texas City. This facility, expected to be completed in early 2028, boasts a premier open-water location and brownfield economics, providing a competitive edge over existing docks. Management does not anticipate an overbuilt market for LPG docks by 2028, noting that ONEOK already produces enough propane to fill its dock capacity, which is currently sold into the open market via other providers.

Compared to Kinder Morgan (KMI), ONEOK's focused regional expertise and integrated operations in natural gas gathering, processing, and NGL transportation offer greater efficiency in specific regional markets. While KMI may possess a larger overall network scale, ONEOK's ability to bundle services and optimize product flow within its contiguous system provides a distinct value proposition. For instance, the company is actively competing for existing gas volumes as third-party contracts roll off, leveraging its operating leverage to connect to new supply with minimal capital.

Against The Williams Companies (WMB), which primarily focuses on natural gas transmission, ONEOK's diversified NGL infrastructure and storage capabilities provide a more comprehensive service offering. ONEOK's strategic positioning in the Permian Basin and Mid-Continent, with ongoing expansions like the Bighorn plant, directly addresses growing production, whereas WMB's strengths lie in large-scale interstate transmission.

Enbridge (ENB), a diversified energy company with a broader international scope, presents a different competitive dynamic. ONEOK's U.S.-centric, NGL-focused integration allows for potentially greater efficiency in domestic markets and stronger customer loyalty in refining and marketing segments. While Enbridge's scale might offer advantages in innovation speed, ONEOK's disciplined capital allocation and high-return organic projects, such as the Denver refined products pipeline expansion, demonstrate its ability to drive growth effectively within its strategic areas.

The broader industry is experiencing significant tailwinds from LNG exports and the burgeoning demand for natural gas from AI-driven data centers. Management reports being in active discussions for over 30 data center projects, noting that ONEOK's intrastate assets are ideally located for speed-to-market and direct connections. This emerging demand, coupled with rising gas-to-oil ratios in basins like the Bakken, is expected to fuel modest growth in natural gas and NGL volumes across ONEOK's systems, even in a flat crude oil production environment.

Outlook and Risks

ONEOK's outlook remains positive, with management affirming its 2025 net income guidance of $3.17 billion to $3.65 billion and adjusted EBITDA guidance of $8.0 billion to $8.45 billion. Total capital expenditures for 2025 are projected between $2.8 billion and $3.2 billion. The 2026 outlook, while adjusted downward by approximately 2% or $200 million to reflect commodity price and spread differentials, still anticipates mid- to upper single-digit adjusted EBITDA growth. This growth is largely "hardwired" by the completion of synergy projects and organic growth initiatives, rather than solely relying on producer activity.

Key tailwinds for 2026 include the full-year benefits from the Easton asset connections and the Conway NGL to Mid-Continent refined products connectivity, along with partial year contributions from the Denver refined products expansion and over 550 MMcfd of new Permian Basin natural gas processing capacity coming online through 2027. Management is confident in its ability to realize additional synergies, with nearly $500 million expected by the end of 2025 since the Magellan acquisition, far exceeding original expectations.

Despite the optimistic outlook, ONEOK faces several risks. Commodity price volatility, particularly in NGLs and refined products, can impact earnings, though the company's 90% fee-based earnings model for 2025 provides significant insulation. Volumetric risk from drilling activity, severe weather, and operational outages also remains, especially in the Natural Gas Gathering and Processing and Natural Gas Liquids segments. Regulatory changes, including potential tariffs, are monitored, though no material impact on 2025 capital expenditures is currently expected. Credit ratings, while investment grade, could be affected by leverage or market conditions, potentially increasing borrowing costs.

Conclusion

ONEOK, Inc. stands as a compelling investment in the evolving energy landscape, having successfully transformed into a highly integrated midstream powerhouse. Its strategic acquisitions of Magellan (MMLP), EnLink (ENLC), and Medallion have not only expanded its geographic reach and diversified its product mix but have also unlocked substantial, controllable synergies that are driving robust financial performance. The company's commitment to operational excellence, coupled with its technological edge in integrated asset management and specialized processing capabilities like high-CO2 gas treatment, provides a strong competitive moat.

With a clear path to deleveraging, significant financial flexibility enhanced by tax benefits, and a disciplined approach to capital allocation, ONEOK is well-positioned to capitalize on the secular growth trends of LNG exports and the burgeoning demand from AI-driven data centers. While commodity price fluctuations and operational risks are inherent to the sector, ONEOK's predominantly fee-based earnings and strategic positioning mitigate these challenges, making it an attractive long-term investment for discerning investors seeking resilient growth and a strong dividend yield.