ONEOK (OKE) Offers FY18 Guidance

ONEOK, Inc. (NYSE: OKE) today announced 2018 financial and volume guidance. Earnings and volume growth expectations for the year are driven primarily by anticipated natural gas and natural gas liquids (NGL) volume increases in the STACK and SCOOP areas and Williston and Permian basins, and increased ethane recovery.

"We expect to grow volumes and earnings in 2018 by continuing to provide needed services to our customers as they increase production in the basins where we operate," said Terry K. Spencer, ONEOK president and chief executive officer. "Sustained producer drilling activity and increased drilling efficiencies, combined with increased demand for ethane from petrochemical facilities and exports, are expected to drive volume growth across our systems in 2018.

"As we continue to bring new volumes onto our systems, we also expect to announce additional capital investments to address the current and future needs of our customers by continuing to expand our extensive 38,000-mile integrated network of natural gas and NGL pipelines," said Spencer.

FINANCIAL GUIDANCE:

ONEOK's full-year 2018 net income is expected to be in the range of $955 million to $1.155 billion. Adjusted EBITDA for 2018 is expected to be in the range of $2.215 billion to $2.415 billion, a nearly 20 percent increase compared with its previously announced 2017 guidance that was affirmed on Oct. 31, 2017.

ONEOK continues to expect average annual dividend growth of 9 to 11 percent through 2021 and annual dividend coverage greater than 1.2 times. ONEOK expects approximately 85 to 95 percent of its 2018 dividend payments to investors to be a return of capital.

Approximately $2 billion of potential capital-growth projects are in the late stages of development and are expected to be announced when sufficient supply commitments are secured. ONEOK previously announced the successful completion of approximately $1.6 billion of total equity issued in 2017 and early 2018, which was used to retire indebtedness and to pre-fund capital-growth expenditures. ONEOK does not expect to issue additional equity in 2018 and well into 2019. Additional capital-growth projects are expected to be funded with cash generated from operations and short- and long-term borrowings.

BUSINESS-SEGMENT GUIDANCE:

Natural Gas Liquids Segment

The natural gas liquids segment expects full-year 2018 adjusted EBITDA between $1.30 billion to $1.43 billion, an approximately 15 percent increase compared with 2017 guidance.

NGLs gathered are expected to average 850,000 to 1 million barrels per day (bpd) and NGLs fractionated are expected to average 650,000 to 725,000 bpd in 2018, representing increases of approximately 10 percent and 15 percent, respectively, compared with 2017 guidance.

Volume growth in 2018 is expected to be driven primarily by increased producer activity in the STACK and SCOOP areas and increased ethane recovery in the Mid-Continent. Ethane rejection on ONEOK's system is expected to decrease to approximately 70,000 bpd by the end of 2018, resulting in approximately $100 million of incremental adjusted EBITDA during the year compared with 2017.

In 2018, the segment expects to connect between six and nine new third-party natural gas processing plants to its NGL system.

The extension of ONEOK's West Texas LPG Pipeline into the Delaware Basin and the expansion of its Sterling III Pipeline from the Mid-Continent to the Gulf Coast are currently under construction and are expected to be complete in the third and fourth quarters of 2018, respectively. Additionally, construction is expected to begin on the recently announced Elk Creek Pipeline project out of the Williston Basin in the second half of 2018 and is expected to be complete by year-end 2019.

The natural gas liquids segment's earnings are expected to be approximately 90 percent fee based in 2018.

Natural Gas Gathering and Processing Segment

The natural gas gathering and processing segment expects full-year 2018 adjusted EBITDA between $575 million to $625 million, a 25 percent increase compared with 2017 guidance.

Natural gas processed is expected to average 1,750 to 1,900 million cubic feet per day (MMcf/d), and natural gas gathered is expected to average 1,840 to 2,050 MMcf/d in 2018, representing increases of approximately 20 percent compared with 2017 guidance.

The segment's fee rate is expected to average approximately 80 cents per Million British thermal units (MMBtu) in 2018 compared with approximately 85 cents per MMBtu in 2017, due primarily to increased Mid-Continent volumes.

Increased natural gas volumes from the STACK and SCOOP plays in Oklahoma are expected to be the largest driver of the segment's 2018 volume growth. ONEOK added an additional 200 MMcf/d of natural gas processing capacity in the area at the end of 2017 through a long-term third-party processing services agreement and expects to add an additional 200 MMcf/d of capacity by the end of 2018 with the expansion of its Canadian Valley natural gas processing plant.

Williston Basin volumes also are expected to increase in 2018 from continued strong producer results in the core of the basin where ONEOK has more than 1 million acres dedicated. Approximately 350 to 400 drilled but uncompleted wells remain on ONEOK's acreage dedications, providing a backlog of high-return well connection inventory.

The segment's earnings are expected to be approximately 80 percent fee based in 2018.

Natural Gas Pipelines Segment

The natural gas pipelines segment expects full-year 2018 adjusted EBITDA of $335 million to $355 million.

Earnings in the segment are expected to remain more than 95 percent fee-based in 2018, with approximately 95 percent of its transportation capacity and 65 percent of its natural gas storage capacity contracted under firm fee-based (take-or-pay) commitments.

The 100 MMcf/d westbound expansion of the ONEOK Gas Transmission Pipeline out of the STACK play in Oklahoma is on schedule for an expected completion in the second quarter of 2018.

FEDERAL INCOME TAXES:

The recent Tax Cuts and Jobs Act includes provisions that, beginning in 2018, reduce the U.S. corporate tax rate to 21 percent from 35 percent and introduce a capital investment deduction. ONEOK views the aggregate of these changes as positive to its businesses and continues to expect it will not pay federal cash income taxes through at least 2021. The reduction in the federal corporate tax rate is expected to result in one-time noncash charges to net income in the fourth quarter 2017 to revalue ONEOK's deferred tax assets, but future income tax expense is expected to be lower as reflected in 2018 guidance.

2018 COMMODITY PRICE ASSUMPTIONS:

The average unhedged prices assumed in ONEOK's 2018 guidance are 47 cents per gallon for composite natural gas liquids (32 cents per gallon for ethane and 64 cents per gallon for propane at Mont Belvieu); $2.90 per million British thermal units (MMBtu) for NYMEX natural gas; and $52 per barrel for WTI-NYMEX crude oil.

LINK TO FINANCIAL TABLES:

http://ir.oneok.com/~/media/Files/O/OneOK-IR/financial-reports/2018/oneok-2018-earnings-guidance.pdf

NON-GAAP (GENERALLY ACCEPTED ACCOUNTING PRINCIPLES) FINANCIAL MEASURES:

ONEOK has disclosed in this news release adjusted EBITDA, distributable cash flow and dividend coverage ratio, which are non-GAAP financial metrics, used to measure the company's financial performance and are defined as follows:

• Adjusted EBITDA is defined as net income adjusted for interest expense, depreciation and amortization, noncash impairment charges, income taxes, noncash compensation expense, allowance for equity funds used during construction (equity AFUDC), and other noncash items;
• Distributable cash flow is defined as adjusted EBITDA, computed as described above, less interest expense, maintenance capital expenditures and equity earnings from investments, excluding noncash impairment charges, adjusted for cash distributions received from unconsolidated affiliates and certain other items; and
• Dividend coverage ratio is defined as ONEOK's distributable cash flow to ONEOK shareholders divided by the dividends paid for the period.

These non-GAAP financial measures described above are useful to investors because they, and similar measures, are used by many companies in the industry as a measure of financial performance and are commonly employed by financial analysts and others to evaluate our financial performance and to compare our financial performance with the performance of other companies within our industry. Adjusted EBITDA, ONEOK distributable cash flow and coverage ratio should not be considered in isolation or as a substitute for net income or any other measure of financial performance presented in accordance with GAAP.

These non-GAAP financial measures exclude some, but not all, items that affect net income. Additionally, these calculations may not be comparable with similarly titled measures of other companies. Reconciliations of net income to adjusted EBITDA, distributable cash flow and coverage ratio are included in the tables.

ONEOK, Inc. (pronounced ONE-OAK) (NYSE: OKE) is one of the largest energy midstream service providers in the U.S., connecting prolific supply basins with key market centers. It owns and operates one of the nation's premier natural gas liquids (NGL) systems and is a leader in the gathering, processing, storage and transportation of natural gas. ONEOK's operations include a 38,000-mile integrated network of NGL and natural gas pipelines, processing plants, fractionators and storage facilities in the Mid-Continent, Williston, Permian and Rocky Mountain regions.

ONEOK is a FORTUNE 500 company and is included in Standard & Poor's (S&P) 500 index.

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