Hey. Welcome, everyone. My name is Theresa Chen. I am the midstream and Refining Analyst here at Barclays. It is my pleasure to welcome our next company, ONEOK. From ONEOK, we have Pierce Norton, CEO, Walter Hulse, CFO, and Sheridan Swords, SVP Commercial. Welcome, everyone. Thank you. So let's jt dive right into it, and talk about the acquisition first. Can you talk about your strategic rationale for the proposed transaction and how that came about? Well, first of all, Theresa, thank you for having us here today, and welcome, everybody. So I'll break the strategic transaction down into basically four parts. The first part is growth, second part is scope, scale, and basically diversification. And so first part on the growth thing, we believe strongly that these two companies together, we've looked at this for quite some time. Both Magellan has this opinion, and both we have the opinion that these two assets together can do way more than they could individually. So there's a-- we can get into that a little bit more. Sheridan will talk about the different opportunities there that you have. The other thing is on the scope piece. ONEOK is a company that provides energy for utilities, which covers the residential, industrial, commercial, and a little bit of the transportation piece. But what this adds to us is transportation. So you have you have electric generation, you have the traditional natural gas utility piece, and you also have added transportation piece. We believe strongly that there's gonna be a lot of demand for that transportation piece, and even if it wanes off with EVs, in the United States, you're gonna have the opportunities to go basically over the water, with some of the same refined products. And then the scale, we were looking for something that would be meaningful, and, and what I would call quality of scale. I mean, you can, you can do scale for scale's sake, but when you look at the quality of these assets, and you look at the EBITDA that they generate, and the minimum amount of capital it takes to basically produce that EBITDA every, that's what we call quality scale, and so that was what we're looking for. And then the last thing was diversification. T his is a company that has been noted, because of its presence in the Bakken, that it kind of trades for the oil price. And if you look at refined products, when the oil price is down, you usually have more consumption of refined products. It's kind of a little bit of an offset. It's not one for one, but there is an offset there. So it's really those four things. Makes sense. Just thinking in the construct of they are different value chains with overlap in the infrastructure, but how does your expertise in NGLs and natural gas from a commercial perspective translate to expertise or potential expertise and growth in refined products? So I think the first thing is, obviously we're dealing with... On the NGL side, we're dealing with refineries today, as we deliver purity products into the refinery. So we have some of the same—we do have some of the same customers that not everybody realizes. So we can move product, we can market product, we can deliver product into these refineries or into the Gulf Coast, into the export terminals by using the same thing we do today from a commercial standpoint. And then you get on to—on the crude system, we have an extensive network of dealing with producers out there, much more than they do from that standpoint. So we know the producers. We have great relationships with them. Being able to source product onto their pipelines, just from a commercial standpoint, we actually think we're gonna bring a lot to them from that standpoint. Makes sense. So on your second earnings call, you did provide some quantitative details on expected commercial synergies. Can you give some examples of the opportunities related to batching, blending, and bundling? So the first thing, let's talk a little bit about batching. I don't think everybody has, as we've had more conversations, understanding exactly what batching is and how we will do it. This is—we do this today. This is we move refined products on our NGL pipeline today. So the—how you do that is if you have a. We're We're talking about purity NGL pipelines. If you're moving propane and you want to move unleaded on that, what you're gonna do is you're gonna put a buffer of normal butane in there, and it's gonna be 2,000 barrels of normal butane. In terms of a pipeline, that's miles of pipeline that will be under normal butane. So we'll have propane, the buffer of normal butane, and then we'll put unleaded right next to it and doing it. The reason we use the buffer of normal butane is normal butane can be mixed into propane, which is back for that, and as we all know, the normal butane can be mixed into unleaded for blending. So as that moves down the pipeline, we have a system where we can track that buffer as it goes down, and you're talking about miles of pipeline. So when it comes in, we will, what they call cut, we'll cut the batch. We'll work more of the normal butane into the unleaded, and that we get an upgrade on that, or you get some blending on that, and the other ones will stay in the propane. That's how we can batch down the pipeline. So you think about it, that these two systems sit on top of each other. So to the extent that at times as the market changes or you get spikes in the market and there's pinch points along Magellan system, we can move onto the NGL system around those pinch points. Or if there's more long-term constraints on either one of those systems, we can move product back and forth as the pipelines sit on top of each other to get to the location. And one of the examples I used on the earnings call was the Sterling Pipeline system that moves from the Mid-Continent down to the Gulf Coast. And, and we can use that system, especially now that Medford's—we've moved Medford down to the Gulf Coast. We have capacity on Sterling today. We can use that pipeline to move product into the Gulf Coast area. They also have a pipeline that can go that way, but now we'll be able to much better move product back and forth between the two systems more efficiently, where we can move product into and out of the Gulf Coast region as needed. Those are an example of batching. Blending, we start talking about blending. One thing we do with, we obviously have a tremendous amount of normal butane. With our systems, we, one thing we are going to be able to do is cut down on their trucking costs and being able to batch normal butane to their end use markets, where now they're using a lot of trucks to get there. We can load that as well, and also by having the normal butane more readily available, we'll be able to increase the blending a little bit on that side of it. That also goes into some of the other blending that they do as well. The bundling piece is the one piece that we talk about that we will have to have a little bit of a customer interaction with them. We think the blending and the batching, we do not. But on the bundling piece, as I talked about, we have a lot of conversations, a lot of contacts with producers in the field. So you talk about, like, in West Texas or in the Mid-Continent, where we will go out and talk to somebody, a producer, about moving their natural gas and moving their NGLs. Now, it's we're also talking about moving their crude oil. And by that, we can create a portfolio of opportunities for them, contracts, where we can move value to the customer through all different streams, and that way we can incentivize more product to come onto our pipeline. So those are examples of the- Got it. And as you plan to execute these synergies, what is the level of CapEx requirement required here, if any? So we think this is all very. At first, there's some that's gonna have no capital, no capital on it, and then there's gonna be minor capital that we'll need as we can go forward. But I would say there may be opportunities as capital kind of goes up a little bit. They will be low-return projects, and they will be nothing like you. We're not talking about $1 billion here or anything like that, but there'll be some as we grow in the short term. As we get further out, there may be opportunities years down the road to extend both systems into completely new markets. But as we do that, they will be at very high-return type projects we'll be able to do that. That's what we think the benefit of bringing the two systems together. Assets breed opportunities, and so we think there are going to be some opportunities out there for maybe bigger projects. But in the beginning, it is going to be very low capital, some no-capital projects to capture the synergies that we've outlined today. Which equates to the higher return. Understood. So within Batching, Blending, Bundling, these potential projects and, growth in the system are independent, really, of demand and end market growth, right? So if demand is flat and want to commence to take market share from existing Midstream competitors, how do you think you'll be positioned to compete with these companies? Well, the first thing we're gonna be able to do, by being able to bring the two systems together, we're gonna be able to do it more efficiently. We're gonna be able to be a much lower cost to get into new markets or get around constraints. We'll also be able to hit market demand quicker by having, not having the constraints on either one of the systems as well. So it's gonna be a cost system, and there's also the opportunity to open up new markets. So we may have people in the Gulf Coast that can't get product into the Upper Midwest customers, that will allow them to get into new markets that they're not seeing today. But on the other side, I think there's also a growth component to it we as well, because we talked about the growth in the Permian crude oil, and you talked about the bundling piece. We'll see growth coming out of the Permian in terms of crude oil. And we think through what the assets we have in the Permian today and our relationships we have there, we'll be able to capture some of that growth coming out of the Permian. Does this acquisition accelerate your ability to add NGL exports to your asset portfolio, touching on that fourth bucket of potential synergies? I would probably say it helps us advance our NGL export. We wanted to look at NGL exports. We've been studying that for a period of time. But what Magellan brings us is, they operate in export terminals, and they've built export terminals. Those are two things that ONEOK does not do today. So with them coming on, I think that is very much going to enhance our, our ability to get a terminal up and going with those expertise on site. Now, we will, as, as we close this, we will look at their existing terminals to see if there's opportunities to build an NGL terminal. There's synergies there as well, but we need to get kind of close to dive into that much more. We have not put any of those synergies in what we've already shown the marketplace. None of that is in there, but we think there could be an opportunity for that. But definitely on the operation and construction, it is gonna advance our efforts. Okay. Speaking of the numbers that have been put out into the marketplace, can you discuss the pro forma financial and CapEx assumptions included in the proxy? And what is the basis for those assumptions, and are they still valid at this point? Sure. Well, I think it's important to understand the context of when those projections were created and what the purpose of why they were created. They were created in August of 2022, and they were created for the board presentation that would lead to the approval of our 2023 plan. It had nothing to do with an M&A transaction, and was very focused on 2023. Our board has a process where they only approve the coming year and set the metrics on which they evaluate our performance. As we give them a quality opinion, it's primarily on 2023, and that's when all of the capital that we might be bringing to market. And in this particular incident, we put in the full boat of Saguaro pipeline. Because if you think about it from our board's perspective, they don't want us to get to July of the next year and say: "Oh, by the way, we've got this $1 billion-plus asset that we want to build. We didn't tell you about it when you approved our plan." So we're a little bit conservative on that side. So that is a fully loaded CapEx, and in the outer years, a pretty conservative look at what our forecast would be. Dial forward, when we get into, we started this discussion in September of 2020. We didn't expect it to take nine months, but we did that. And those numbers then continued to live through the process as we were moving forward. We didn't go out and create a new set of numbers for an M&A transaction. We used what the board had planned, approved for our plan. Magellan did similarly the same thing. They were using their planned numbers as well. So those are the-- that's the way they were put together. We have obviously found many new opportunities since August 2022 in our base business, and then Sheridan, as I've talked about, some of the synergies that we see here going forward. So I would say that in February, when we put out fresh guidance, you will see the benefits of the transaction, the benefits of the growth in our base business. And obviously in 2023, we had put out our forecast. We've already raised that by $100 million in our expectations after the Q2. The base business is very robust, and that will carry to the forward view. With the backdrop of elevated capital needs for growth in your business, both organically and inorganically, and a number of standalone projects still under development, looking forward, what is your, prioritization in the use of free cash flow? And are stock buybacks still in the mix? Yeah. Well, first of all, I mentioned that we fully loaded the CapEx going forward, so I think the Saguaro pipeline will be coming in at a very, a significantly lower capital amount, than we had in that forecast before. So I think on a going-forward basis, we will have, kind of a consistent capital over the next several years. But you're right. That's going to create a situation where we have a significant amount of excess free cash flow above and beyond our CapEx and our dividend. O bviously, we're looking for opportunities for high-return growth projects, but to the extent that, we have, additional free cash flow, I'm sure the stock buybacks would be something that we will consider and the board will take into account. Much more so than we have in the past, primarily because in the past we had, we were either in a build mode or we were in a debt reduction mode. In this instance, we're going to be a balancing shape very quickly, and be in a position to, to look at all, all forms of capital return. One of our priorities over the last couple of years has been to reduce our payout ratio. So that's come down nicely. And so we're in a better position now, especially in a post-Magellan transaction, because of the free cash flow and the actual limited amount of capital that it takes from that business to sustain that amount of cash flow. So, the company is going to be really, really well positioned in the future for all forms of capital allocation. As you've been on the road post the announcement of the transaction and spoken to, I imagine, many of your holders, what has the feedback been from investors on this acquisition, and has it changed over time from the original announcement? Yeah. Well, I think it's definitely changed. I think that, when we originally announced the transaction, I don't think the marketplace clearly understood the interchangeability of these business lines and that purity NGL pipes could be used for refined products. Clearly, as we've been able to get out and talk about the possibilities with these pipes, as opposed to even just the specific opportunities, the marketplace has embraced that, and we've seen investors coming around to where they understand batching, they understand blending, and the opportunities that's give us, and I think we've seen that reflected in the performance of our stock. But initially, at announcement, I think that we had some explaining to do, and we've done our best to try to get that clear to the market. From here until February 21st, the vote date, later this month, are there any remaining key milestones that we should be aware of? No, we're in a position today where the votes are really the gating item at this point. We've gotten all of our federal approvals. Of course, there's always, minor consents that happen, from a legal standpoint when you're bringing together two companies. But the only gating real approvals that we need that are conditions for closing are the unit holder vote and the shareholder vote. I want to give, my kudos to the Magellan executive team. They have taken the attitude from the very day one of this announcement, basically on Mother's Day of May 15, that they will not look back and say: "We should have done this," or, "We should have done that." They've well thought through all that. They've got backup plans to everything. They've executed everything, in my opinion, just flawlessly, to date. And so, they have done a really great job and made a lot, a lot of headway there. Turning to the base business, with Q2 earnings, you increased annual guidance for the year. What is driving your higher expectations? Well, it's actually the performance of all the assets. We've got higher volumes in our gathering and processing business. We've got higher volumes in our NGL business. At the end of the day, we are a volume-based business. The commodity prices go up and down, but the product has to move in this country, whether or not it's coming from the supply side or the demand side. You add a little bit of storage, if for some reason on the demand side, that gets a little bit out of balance, then it, it's either on the gas side or even on the liquid side. But at the end of the day, we're about moving volume. That's exactly what we do. So the volume is really what's driving the outperformance. We've had upticks in our gas storage business, because with the winter storms that we've had recently, and in particular, Uri, the value of storage is definitely being realized. It's always been strong in the natural gas distribution side, but you also are seeing that strengthening also on the electric side, where they might not have typically taken out storage during the winter. There's this extra demand, so there's competition from the electric side and the gas side that's pushing those prices up on the value of storage. You also increased capital expenditures guidance for the year. Can you discuss the projects included in that and timelines for completion? Yeah. So two of the big projects we have in there is obviously the Elk Creek expansion that we have coming on, and we've talked about that for a period of time, that we're not going to get caught short capacity coming out of the Bakken. We continue to watch that and continue to monitor long lead time items. And when we think we'll need it, we've come to a point that it's now time to start buying those long lead time items, get them in position, make sure that we have the capacity coming out of that. At this time, we haven't either discussed timeline or cost on that, but you can be fair to say that it's going to be a very high return project for us at Magellan. The other big one we have is the West Texas pipeline expansion. When we bought the, the pipeline, the West Texas pipeline from Chevron in 2014, we put in a strategy that we would just start incrementally looping that pipeline with a 24-inch pipeline, so, so we could put a little bit of loop in if we needed an extra 20,000 barrels a day, put a little bit more loop in if we needed 30,000 barrels a day. So we kept doing that as we went along, and we've come to a portion now that we really have to completely do the hydraulic. So we have less than. We have about 100 miles of pipeline left to put in the ground to complete that. Once we complete that, then overall, we'll more than double our capacity coming out of the Permian Basin at this time, where we've already secured contracts to give us a favorable return on that. And it leaves us with tremendous amount of capacity still left as leverage, or that we could go out there at very low prices if needed, to be able to secure more volume on the system. So we think that gives us a very good competitive advantage out of the Permian at this time. And, well, it also gives us, we talk about Magellan, gives us the opportunity, we may be able to take the legacy system and move it into something else if we so desire. So it gives us a lot of optionality around that in a very low hurdle rate to get more volume on the system. So those are the two main projects that increase that capital. Yeah, and you had asked me earlier about the CapEx that was in the projections in the proxy. The West Texas expansion was actually in that capital that was in the proxy. So the only incremental capital that was adjusted from the proxy data was the expansion of Elk Creek. Both of those were new because from our guidance in February, because we hadn't had them approved by the board yet. But those are... And we talk about large capital in the context of our usual build or, when we're doing long-haul pipes, these are very small projects, but they're the most meaningful that we've taken on here. Understood. Related to the West Texas NGL pipeline project, first, you can quantify how much that was either baked into the proxy or how much you expect at this point. That would be great. And also, if you can discuss the progress in or potential, hurdles in contracting NGL volumes without that upstream piece, the gathering and assets. Well, I'd say on the, the last question about being able to contract without gathering and processing, when we first bought that pipeline, we had about 110,000 barrels a day coming out of the, out of the Permian. Today, we are close to 300,000 barrels a day. So without any gathering and processing, we've tripled the capacity coming in over there. And part of the reasons that we can do that is, one, we think we're the lower-- a lower-cost provider out of that, as I explained earlier, but also because we look at customers-- We have a lot of customers in the Permian that are also our customers in Mid-Continent, customers in the Powder River, customers in the Bakken. So when we look at and propose a contract with them, we're looking at them in total, and we will be able to sometimes offer value in different areas that our competitors can't, maybe in the Bakken, maybe in the Powder, to help us be competitive in the Permian. So that's how we've been able to grow up to this period of time, and that's how we've been able to secure the contracts that are going to support this expansion, continuing to go forward on that. So when you talk about the dollars, we haven't been specific about the dollars, but I would frame it up like this: It's only 100 miles of pipe. And as Sheridan just— And we're now moving about 300,000 barrels, pretty much at capacity. When we add this small loop, we'll be able to pick up the volume that he's contracted for that. But we will expand. When we come off with that loop, we will have 700— over 700,000 barrels a day of capacity out of the Permian. So we'll have effectively several hundred thousand barrels a day of capacity for free from this final looping. So it's going to put us in a fantastic competitive position. It gives you the most efficient route out of the basin. Understood. Going back to Saguaro, for that pipeline project, can you talk about the next steps to FID? Yeah, I think that at this point we're to some extent waiting on a couple of things. One, our presidential permit is still outstanding. Everything's going right in line with plan, and we expect that to hear sometime this fall. But probably more importantly, we're not gonna go FID on a project until the overall project, the LNG facility itself, is FID. They have done a fantastic job commercially. They've got three majors that have contracted the capacity. Commercially, I think you can look at it as that that project is pretty much done. So now they're out proceeding to do their financing, and as that financing comes together, they'll be in position to go to FID and we'll see the project moving forward. Great. And going to the gathering processing side of things, can you talk about your outlook on Bakken producer activity and, what the recent conversations have been like with your customers? Right now, what we're seeing in the Bakken, there's enough rigs up in the Bakken and completion crews to grow crude oil production. When we kind of look at it, we kind of base everything off on flat crude oil production. In a flat crude oil production environment, we're still gonna see growing natural gas due to the rising NGL. But with this rig count we have today, we'll see growing crude oil, so we'll see growing NGL, growing gas as well. So we're very constructive about the volume up in the Bakken and the last gas plant we put in there, we have some operational leverage up there to be able to grow without having to spend a significant amount of capital. And with the Elk Creek expansion, we're gonna be able to handle that as well. So, the Bakken looks to be very strong going forward, especially in the environment that we're in today, with enough rigs to grow production. And we get this, also this growing production as we talk to the producers up there. They, the ones that are there, are a lot of the who's who on the E&P side, and they're committed to maintaining or growing their production up there at a very steady rate. Great. And what are you seeing in terms of ethane recovery across your operations, and what are your expectations for the remainder of the year? We're still in the same environment that we have been in for a period of time, is that, ethane is in full recovery coming out of the Permian. The Mid-Continent is gonna kind of go in and out. Right now, we're in Mid-Continent in recovery for the most part, but that will come in and out. And then the Bakken is gonna be in rejection unless we incentivize ethane coming out. So that's really how we see it going forward. We probably do see for the rest of the year, we'll probably see the Mid-Continent in recovery. Not if we get a little bit of spike in gasoline, in gas, not gasoline, gas as we get into November, December timeframe. Not much has changed on our outlook on ethane recovery across our system. Okay. Further downstream, what is your view on domestic petrochemical demand and also NGL export demand? So on the petrochemical demand, we, They did have a period of time, they had a lot of product on hand, and they've been able to work that off, and so now we're seeing the domestic petrochemicals at a high utilization rate. You're seeing ethane prices kind of rise up a little bit for that, because ethane is still the most favorite feedstock as we go forward. We think that will continue, continue as we grow. We're actually seeing some of that exports come around on the petrochemical side as well. So we're very constructive of that, that they'll stay at a high operating rate as we go through this year into the next year. We do have one unit coming on next year. We'll give it a little bit of added capacity to that, with the ethane demand. From an export standpoint, we are at record exports right now. All the time, we're continuing to export more NGLs out of the country, and I think that's going to continue to happen as we continue to go forward. There are a couple expansion projects that are gonna come on, and they're going to be needed up here in the next few years. That's gonna be needed, and we will have the NGLs to continue to feed that. So that's where we think all the incremental NGLs are gonna go, is gonna be exported. We're still very constructive of them staying full for an extended period of time. Finally, on the fractionation piece. Since the loss of Medford, you have been utilizing third-party fractionation. What's your outlook for continued third-party fractionation costs and for next year? I think we said in the earnings call that right now, about $30 million a quarter is roughly where we're gonna be at going forward. T hat a little bit could be driven up just a little bit if we have continued to see growth in NGLs as we continue, which would be a good thing because the fees we're collecting are higher than our third-party fractionation costs. But there's more fracs coming on here later this year and into Q2 of 2023 and Q1 of 2024, there's more fracs coming online. So we think that external frac market will be, we'll be able to favorably contract what we need to have contracted in 2024. Where we are right now with 2024 third-party frac cost, we are at a comfortable level of what we have contracted, so we feel we could be in a good spot, but that's already been put to bed. There's still a little bit left that we could contract. We just want to see how things are gonna go for the rest of the year. So that's where we see the frac market. Great. Thank you all very much. Thank you, Theresa.