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Drive revenue growth through strategic midstream partnerships by becoming North America's NGL leader

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SWOT Analysis

7/2/25

ONEOK's SWOT reveals a company well-positioned to capitalize on America's energy infrastructure buildout. The massive NGL pipeline network and processing capacity create formidable competitive moats, while the fee-based model provides earnings stability. However, geographic concentration in the Permian Basin presents execution risk. The export opportunity is transformational - LNG demand growth could drive 40% NGL volume increases. Key priorities must focus on diversification beyond Permian dependence while accelerating export infrastructure development. The $3B capital program positions ONEOK perfectly for this energy transition, but execution discipline will determine whether they capture or miss this generational growth opportunity.

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Drive revenue growth through strategic midstream partnerships by becoming North America's NGL leader

Strengths

  • INFRASTRUCTURE: Largest NGL pipeline system with 14,000 miles coverage
  • CAPACITY: 1.2 million barrels per day processing capability advantage
  • DIVERSIFICATION: Fee-based model provides 85% stable revenue streams
  • POSITIONING: Strategic Permian Basin and Bakken exposure dominance
  • EXPANSION: $3B capital program driving 2025-2027 growth trajectory

Weaknesses

  • CONCENTRATION: Heavy Permian Basin dependence creates geographic risk
  • COMMODITY: 15% commodity-exposed earnings create margin volatility
  • CAPITAL: High $3B capex requirements strain cash flow generation
  • COMPLEXITY: Multiple business segments reduce operational focus
  • COMPETITION: Limited differentiation versus enterprise peers

Opportunities

  • EXPORTS: LNG export growth driving 40% NGL demand increase by 2030
  • PERMIAN: Basin production growth requiring additional takeaway capacity
  • CONSOLIDATION: Industry fragmentation creating acquisition targets
  • ENERGY: Security concerns driving domestic infrastructure investment
  • ELECTRIFICATION: Power generation shift increasing gas demand

Threats

  • REGULATION: Environmental policies restricting pipeline development
  • VOLATILITY: Commodity price swings impacting producer drilling activity
  • COMPETITION: New pipeline projects reducing market share potential
  • TRANSITION: Renewable energy adoption threatening long-term demand
  • INTEREST: Rising rates increasing capital project financing costs

Key Priorities

  • EXPAND: Accelerate NGL export infrastructure to capture demand growth
  • DIVERSIFY: Reduce Permian concentration through geographic expansion
  • OPTIMIZE: Increase fee-based earnings mix to minimize volatility
  • CONSOLIDATE: Pursue strategic acquisitions to strengthen market position
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Drive revenue growth through strategic midstream partnerships by becoming North America's NGL leader

DOMINATE EXPORTS

Capture NGL export growth through infrastructure expansion

  • CAPACITY: Complete Elk Creek Phase II adding 200,000 bpd export capacity by Q3 2025
  • CONTRACTS: Sign 5-year fee-based agreements for 60% of new export capacity
  • CONNECTIVITY: Connect 3 new Permian producers to export infrastructure network
  • REVENUE: Generate $150M incremental annual revenue from export operations
DIVERSIFY RISK

Reduce geographic concentration through expansion

  • ACQUISITION: Complete strategic acquisition in Appalachian or Rockies region
  • PERMIAN: Reduce Permian Basin revenue concentration from 65% to 55%
  • BASINS: Establish operations in 2 additional major production basins
  • CONTRACTS: Secure fee-based agreements representing 40% of new basin revenue
OPTIMIZE AI

Deploy AI for operational excellence and cost reduction

  • MAINTENANCE: Implement predictive maintenance AI across 50% of critical assets
  • EFFICIENCY: Achieve 12% operational cost reduction through AI optimization
  • TALENT: Hire 15 AI specialists and train 100 existing employees
  • PLATFORM: Launch integrated data platform connecting all business segments
MAXIMIZE CASH

Optimize cash generation and capital allocation

  • CASH: Generate $1.1B operating cash flow exceeding capex requirements
  • FEES: Increase fee-based earnings mix from 85% to 90% of total EBITDA
  • DIVIDEND: Grow dividend per share by 3% while maintaining coverage ratio
  • RETURNS: Achieve 12% return on invested capital from growth projects
METRICS
  • Fee-based earnings: $2.8B
  • Operating cash flow: $1.1B
  • NGL volumes: 1.4M bpd
VALUES
  • Safety
  • Integrity
  • Reliability
  • Growth
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Align the learnings

ONEOK Sales Retrospective

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Drive revenue growth through strategic midstream partnerships by becoming North America's NGL leader

What Went Well

  • EARNINGS: Beat Q3 expectations with $0.95 per share vs $0.88 estimate
  • VOLUMES: NGL volumes increased 8% year-over-year driving revenue growth
  • PROJECTS: Completed Elk Creek pipeline expansion ahead of schedule
  • CASH: Generated $800M operating cash flow supporting dividend growth

Not So Well

  • MARGINS: Commodity price volatility reduced processing margins by 12%
  • COSTS: Higher labor and material costs increased operating expenses
  • OUTAGES: Unplanned maintenance impacted Q3 throughput capacity
  • GUIDANCE: Narrowed 2024 guidance range citing market uncertainty

Learnings

  • HEDGING: Need better commodity price hedging strategies for stability
  • MAINTENANCE: Predictive maintenance could prevent unplanned outages
  • CONTRACTS: Long-term fee-based contracts provide better visibility
  • FLEXIBILITY: Operational flexibility key during volatile periods

Action Items

  • IMPLEMENT: Deploy predictive maintenance AI by Q2 2025
  • NEGOTIATE: Secure additional long-term fee-based contracts
  • HEDGE: Develop comprehensive commodity hedging strategy
  • AUTOMATE: Increase operational automation to reduce labor costs
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AI Strategy Analysis

7/2/25

ONEOK's AI strategy SWOT reveals tremendous potential to revolutionize midstream operations. The extensive sensor network across 14,000 miles of pipeline creates a data goldmine for AI optimization. Predictive maintenance alone could save millions in prevented failures. However, traditional energy culture and legacy systems present adoption barriers. The talent gap is critical - ONEOK must aggressively recruit AI expertise while retraining existing workforce. Early movers in energy AI will capture sustainable competitive advantages through operational excellence and cost reduction.

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Drive revenue growth through strategic midstream partnerships by becoming North America's NGL leader

Strengths

  • DATA: Extensive pipeline sensors generating real-time operational data
  • INFRASTRUCTURE: Digital backbone supporting predictive maintenance AI
  • SCALE: Large asset base providing training data for AI algorithms
  • PARTNERSHIPS: Technology vendors enabling rapid AI implementation
  • INVESTMENT: Capital program includes digital transformation initiatives

Weaknesses

  • TALENT: Limited AI expertise within traditional energy workforce
  • LEGACY: Older systems requiring significant modernization investment
  • CULTURE: Conservative industry approach slowing AI adoption pace
  • INTEGRATION: Siloed data systems preventing holistic AI deployment
  • SECURITY: Cybersecurity concerns limiting cloud-based AI solutions

Opportunities

  • OPTIMIZATION: AI-driven operational efficiency reducing costs by 15%
  • PREDICTIVE: Maintenance algorithms preventing costly pipeline failures
  • AUTOMATION: Autonomous operations reducing labor costs and risks
  • ANALYTICS: Advanced forecasting improving capacity planning accuracy
  • COMPETITIVE: Early AI adoption creating sustainable advantage

Threats

  • DISRUPTION: Tech companies entering energy infrastructure space
  • CYBERSECURITY: AI systems creating new attack vectors for hackers
  • REGULATION: Data privacy laws restricting AI implementation scope
  • OBSOLESCENCE: Rapid AI evolution making investments quickly outdated
  • DEPENDENCE: Over-reliance on AI systems creating operational risks

Key Priorities

  • INVEST: Deploy AI for predictive maintenance across pipeline network
  • TALENT: Build internal AI capabilities through hiring and training
  • INTEGRATE: Unify data systems to enable comprehensive AI deployment
  • PARTNER: Collaborate with tech companies for rapid AI scaling