2. Dan Harrison
Vice President
Investor Relations & Public Affairs
2 | Journey By Design
3. Forward-
Forward-Looking Statement
Statements contained in this presentation that include company
p py
expectations or predictions should be considered forward-looking
statements which are covered by the safe harbor provisions of the
Securities Act of 1933 and the Securities and Exchange Act of 1934
1934.
It is important to note that the actual results of company earnings
could differ materially from those projected in such forward-looking
statements. For additional information, refer to ONEOK’s and
ONEOK Partners’ Securities and Exchange Commission Filings.
3 | Journey By Design
4. John W Gibson
W.
ONEOK, Inc. | Chief Executive Officer
ONEOK Partners, L.P. | Chairman and Chief Executive Officer
4 | Journey By Design
5. Leadership
ONEOK and ONEOK Partners
John W. Gibson
Chief Executive Officer
Curtis Dinan
Jim Kneale
Senior Vice President
President
P id t &
Chief Financial Officer &
Chief Operating Officer
Treasurer
Pierce Norton II Terry Spencer
Caron Lawhorn
Executive Vice President Executive Vice President
Senior Vice President
& Chief Accounting Officer
5 | Journey By Design
6. Leadership
ONEOK and ONEOK Partners
Pierce Norton II Terry Spencer
Executive Vice President Executive Vice President
Rob Martinovich Kent Shortridge Samuel Combs III Sheridan Swords Roger Thorpe Patrick McDonie
President President President President President President
Natural Gas Gathering & Processing Natural Gas Pipelines Distribution NGL Gathering & Fractionation NGL Pipelines Energy Services
6 | Journey By Design
8. Agenda
John W. Gibson Vision, Strategy and Overview 8:30
Jim Kneale, President & Chief
ONEOK P t
Partners OKS Overview
O i 8:45
8 45
Operating Officer
Pierce Norton II, Executive Vice President Natural Gas 8:55
Rob Martinovich, President Gathering & Processing
Kent Shortridge, President Natural Gas Pipelines
Natural Gas Q & A
Terry Spencer, Executive Vice President Natural Gas Liquids 9:30
Sheridan Swords, President Gathering & Fractionation
Roger Thorpe, President Natural Gas Liquids Pipelines
Natural Gas Liquids Q & A
Caron Lawhorn, Senior Vice President &
OKS Financial Review 10:05
Chief Accounting Officer
ONEOK Partners Q & A
BREAK 10:25
8 | Journey By Design
9. Agenda
Jim Kneale, President & Chief
ONEOK, I
ONEOK Inc. OKE Overview
O i 10:45
10 45
Operating Officer
Pierce Norton II, Executive Vice President Distribution 10:50
Sam Combs III, President
Terry Spencer, Executive Vice President Energy Services 11:05
Patrick McDonie, President
ONEOK Q & A
Caron Lawhorn, Senior Vice President &
OKE Financial Review 11:30
Chief Accounting Officer
John W. Gibson Closing Remarks 11:45
Q&A
LUNCHEON 12:00
9 | Journey By Design
11. ONEOK Today
A Premier Energy Company
• Assets that fit and work • Strong balance sheet
g
together • Market capitalization
– Integrated operations – ONEOK: $3.8 billion
– Expanding participation in the – ONEOK Partners: $ billion
$4.9
value chain
• Proven ability to grow
profitably
– Predominately fee-based
income
– Executing $2 billion of growth
projects at ONEOK Partners
11 | Journey By Design
12. Journey By Design
Key Points
• Demonstrated financial flexibility and discipline
– Ability to access capital markets
– No significant exposure to financially challenged firms
– Disciplined acquirer of assets
• Growth at ONEOK Partners will continue to benefit ONEOK
– OKS incremental EBITDA and distributable cash flow increases OKE earnings
and cash flow
– OKE has demonstrated its interest in increasing its ownership in OKS
• Growing NGL business provides non-discretionary, fee-based services
• Distribution segment has increased its sustainable level of earnings
g g
through the execution of key strategies
• Energy Services focuses on physical marketing of natural gas to LDCs
and is positioned to capitalize on market inefficiencies
12 | Journey By Design
13. Our Vision
A Premier Energy Company
A premier energy company creating exceptional value for all
p gy py g p
stakeholders by:
• Rebundling services across the value chain, primarily through
verticall integration, t provide customers with premium services
ti i t ti to id t ith i i
at lower costs
• Applying our capabilities — as a gatherer, processor, transporter,
marketer and distributor — to natural gas and natural gas
liquids…
…and other commodities
13 | Journey By Design
14. A Journey By Design
Rebundling the Value Chain and Applying Our Capabilities
Markets
Midstream
Exploration & Distribution Marketing
Midstream
Natural Gas
Production NGLs
• Serve 2 million
• Gathering
• Gathering • Leading
customers in
• Fractionation
• Processing marketer of
Oklahoma,
• Pipelines
• Pipelines natural gas
Kansas & Texas
• Storage
• Storage
14 | Journey By Design
15. Our Key Strategies
A Premier Energy Company
• Generate consistent growth and sustainable earnings
g g
– Develop and execute internally generated growth projects at
ONEOK Partners
– Improve profitability of ONEOK Distribution Companies
– Continue focus on physical activities at ONEOK Energy Services
• Execute strategic acquisitions that p
g q provide long-term value
g
• Manage our balance sheet and maintain strong credit ratings
at or above current level
• Operate in a safe and environmentally responsible manner
• Attract, develop and retain employees to support strategy
p py pp gy
execution
15 | Journey By Design
16. Strategy Execution
Since We Last Met…
• Increased dividends and distributions
– ONEOK: Indicated annual rate from $1.44 to $1.60 per share
– ONEOK Partners: Indicated annual rate from $4.00 to $4.24 per unit
• Growth in ONEOK Partners segment
– O erland Pass Pipeline—start-up has begun on the largest pipeline project in
Overland Pipeline start p beg n
our history
– Expanded the Bushton fractionator, storage and other related infrastructure
projects
– Constructing three other NGL pipeline projects
– Acquisition of NGL and refined petroleum products pipeline system
• ONEOK increased its investment in ONEOK Partners
• Di t ib ti segment iimplemented additionall profitability enhancement
Distribution t l t d dditi fit bilit h t
mechanisms
• Operational excellence and reliability
16 | Journey By Design
17. Jim Kneale
President & Chief Operating Officer
17 | Journey By Design
18. ONEOK Partners
Assets That Fit and Work Together
• Strategic assets connected to
g
prolific supply basins with
access to key markets
• Provide non discretionary
non-discretionary
services to producers
• Predominantly fee-based
income generates stable cash
flows
• $2 billion of internally
generated growth projects
under way
18 | Journey By Design
19. Roadmap to Growth
$2 Billion of Internal Growth Projects Under Way, 2007-2009
Grasslands
plant expansion
$40-$45 million
Guardian II
Expansion
Fort Union Gas $277-$305 million
Gathering
Expansion
(
(37% owner)
NGL & Refined Product
D-J Lateral
System Acquisition
$70-$80 million
Overland Pass
$300 million
Pipeline
$575-$590 million
Piceance
Lateral
$110-$140 million NGL Upgrade
Projects Midwestern
$230-$240 million Extension
$69 million
Woodford
Extension
$30-$35 million
Natural Gas Gathering & Processing
2010 -2015 Internal Growth Projects:
Arbuckle
Natural Gas Pipelines
$300-500 million/year
Pipeline
Natural Gas Liquids Gathering & Fractionation
$340-$360 million
Natural Gas Liquids Pipelines
plus acquisitions
l i iti
Growth Projects
19 | Journey By Design
20. Pierce Norton II
Executive Vice President
Natural Gas
20 | Journey By Design
21. Natural Gas
Diverse Asset Base
Grasslands Plant
• Two segments Expansion
Guardian II
Expansion
– Natural Gas Gathering &
Processing
– Natural Gas Pipelines
Fort Union Gas
• Diverse supply basins, Gathering Expansion
producers and contracts
mitigate earnings volatility in
gathering and processing
Midwestern
• Earnings on pipelines are Extension
predominantly fee based
• More than $600 million of
internal growth projects under
way through 2009
y g Natural Gas Gathering Pipeline Natural Gas Processing Plant
Natural G Interstate Pipeline
Gas Natural G S
Gas Storage
Natural Gas Intrastate Pipeline Growth Projects
Northern Border Pipeline (50% interest)
21 | Journey By Design
23. Current Environment
Natural Gas Gathering and Processing
• Commodity py prices affect drilling activity
g y
• High level of infrastructure build-outs has significantly increased
material and construction labor costs
• Higher margins have led to increased competition for new
supplies, primarily from producers
• Internally generated growth projects continue to offer the greatest
return on investment
23 | Journey By Design
24. Natural Gas Gathering and Processing
Providing Non-discretionary Services to Producers
Gathering
g
– More than 14,500 miles of pipeline
– Approximately 9,000 meters
– 1,100 MMcf/d* gathered Williston
Compression
– More than 625,000 Bhp Powder River
Wind River
Treating
– Removal of water and other
contaminants Kansas Uplift
Hugoton
Processing Anadarko
– 13 plants with 725 MMcf/d capacity
– 560 MMcf/d* processed
MMcf/d
*At second quarter 2008
24 | Journey By Design
25. Contract Portfolio
Successful Execution of Strategy
• Diverse portfolio
Contract Mix by Volume
– More than 2,000 contracts
3% 3%
3% 6% 7%
8%
1%
10% 1%
– No one contract accounts for more
6%
15%
19%
than 10 percent of volume
30% 32%
27%
34%
– Average term slightly more than
31%
25%
two years
• Contract restructuring has
61% 61% 60%
reduced commodity price
53%
52% 51%
sensitivity and increased fee
revenues
2003 2004 2005 2006 2007 2008G
• Conditioning language on 85
Fee Based Percent of Proceeds
percent of keep-whole contracts
Keep Whole Keep Whole w/ Conditioning
reduces spread risk
25 | Journey By Design
26. Risk Mitigation
Through Contract Portfolio and Hedging
• Contract portfolio Commodity Price Sensitivity*
y y
Margin Impact ($ Millions)
– Minimizes exposure to keep-whole
spread $4.8
$4.5
– NGL exposure diversified among $3.8
five individual products $2.1
• Hedging strategy focuses on $1.6
$1.7
$1.3
$1.1 $1.0
long NGL, condensate and
$0.4 $0.7
$0.5
natural gas positions $0.3 $0.2
-$0.1
-$0 1
– Target 75 percent of expected -$1.6
production -$2.7
• Hedged p
g position:
-$3.5
2006 2007 2008
2003 2004 2005
Second Half 2008:
Commodity Sensitivity
NGLs & Condensate 74% $1.38 / gallon
Natural Gas Liquids 1 cent/gallon increase
Natural Gas 54% $9.35 / MMBtu Natural Gas 10 cent/MMBtu increase
Crude Oil $1/barrel increase
Full Year 2009
2009:
*Excludes effects of hedging
NGLs & Condensate 30% $2.22 / gallon
26 | Journey By Design
27. Supply
Strong Focus on Natural Gas Supply
Natural Gas Gathered *
• Natural gas supplies from six Bbtu/d
basins 1,188
1,182 1,168 1,171
• Significant drilling activity under
way in the Powder River, Williston
and Anadarko basins 805
800
• Well connects outpacing prior 852
908
years, January – August:
– 2008: 295
– 2007: 240
– 2006: 282 383
371
316
274
• Approximately $30 million annual
growth capital for new well 2005 2006 2007 2008
Jun YTD
connections
Rocky Mountain Mid-Continent
* Volumes based on existing asset base
27 | Journey By Design
28. Moving Forward
Key Growth Strategies
• Disciplined g
p growth through well connects and contract
g
renegotiations
• Expand and extend existing systems and plants
– Bakken and Woodford Shale
• Extending our footprint to other basins
– Partner with producers to build infrastructure
– Acquisition and consolidation opportunities
28 | Journey By Design
30. Current Environment
Natural Gas Pipelines
• Increased supply driving current p p
pp y g pipeline infrastructure build-outs
• High level of infrastructure build-outs has significantly increased
material and construction labor costs
• Regulatory environment continues to change
• Energy demand from natural gas-fired electric generation is
increasing
30 | Journey By Design
31. Natural Gas Pipelines
Key Points
• Stable markets and diverse Viking Gas
Transmission
supply basins Northern Border
• Predominately fee-based
Pipeline
Guardian
Pipeline
iincome
• Storage provides valuable Midwestern Gas
services
Transmission
• Regulation at the state and
federal level
Pipelines 6,900 miles, 5.3 Bcf/d peak capacity
Natural Gas Interstate Pipeline
Storage 51.6 Bcf active working capacity Natural Gas Intrastate Pipeline
50% Northern Border Pipeline
Equity Natural Gas Storage
Investment Northern Border Pipeline (50% interest)
31 | Journey By Design
32. Contract Portfolio
Provides Sustainable, Stable Cash Flow
• Interstate Pipelines
p Viking Gas
Transmission
– Wholly owned pipelines are fully
subscribed under demand-based Northern Border
Pipeline
rates Guardian
Pipeline
– N th Border Pi li (50 percent
Northern B d Pipeline t
interest) is 80 percent subscribed
under demand-based rates Midwestern Gas
Transmission
• Intrastate Pipelines
– 60-70 percent subscribed under
demand-based rates
• Storage
– 100 percent subscribed under
market-based rates Natural Gas Interstate Pipeline
• Key Customers
y Natural Gas Intrastate Pipeline
Natural Gas Storage
– Natural gas and electric utilities
Northern Border Pipeline (50% interest)
32 | Journey By Design
33. Guardian Pipeline
Expansion and Extension
• Construction is approximately
70 percent complete
Existing Pipeline
• Fourth-quarter 2008 in-service
q Extension
date
• Fully subscribed with two
15-year
15 year agreements
• New interconnect opportunities
Guardian Extension: $277-$305 million
Capacity Incremental of 537 MMcf/d, bringing
total capacity to 1,287 MMcf/d
1 287
Extension 119 miles from Ixonia to Green Bay
33 | Journey By Design
34. Northern Border Pipeline
50 Percent Equity Investment
• Sold Bison Pipeline p j
p project
to TransCanada
– Bison Pipeline to be built or
combined with Pathfinder
Pipeline project
– Diversifies supplies to Northern
Border Pipeline
Northern Border Pipeline
Proposed Bison Pipeline
Proposed Pathfinder Pipeline
Northern Border Pipeline
Pipeline 1,249 miles
Capacity 2.4 Bcf/d
34 | Journey By Design
35. Moving Forward
Key Growth Strategies
• Expand and extend existing pipeline systems ($ million)
p g pp y ($15 )
– Midwestern southbound expansion
– Viking Fargo lateral
• N and expanded interconnects provide optionality ($10 million)
New d d di t t id ti lit illi )
– Midwestern interconnect to Rockies Express
– Guardian interconnects to Alliance and Vector
• Storage expansion and development
35 | Journey By Design
37. Terry Spencer
Executive Vice President
Natural Gas Liquids
37 | Journey By Design
38. Natural Gas Liquids
Largest Gatherer and Fractionator of NGLs in the Mid-Continent
• Two segments
g
– NGL Gathering & Fractionation
– NGL Pipelines Overland Pass
Pipeline
• Connect large supply
position to major market Piceance Lateral
centers and end-use demand D-J Lateral
• Provide a full range of non
non- NGL Upgrade
Projects
discretionary services to our Woodford
Extension
customers
•OOpportunities f growth
t iti for th Arbuckle Pipeline
through major expansions
into new supply areas NGL Storage
g
NGL Pipelines
NGL Fractionator
NGL Gathering & Fractionation
NGL Market Hub
NGL Growth Projects
38 | Journey By Design
39. Journey by Design
Applying Our Capabilities to Natural Gas Liquids
Strategic Assets Pave the Way for
Future Growth
• Established presence in 2000
• Acquired Koch NGL assets in 2005
• Doubled the size of the business
through internally generated projects
– Extending our reach into the Rockies,
Barnett Shale and Woodford Shale
• Acquired North System in 2007
• Continued infrastructure expansions
needed to serve production growth in
our core areas, plus new regions
areas
– Appalachia
– West Texas NGL Storage
NGL Pipelines
– Williston Basin NGL Fractionator
NGL Gathering & Fractionation
NGL Market Hub
NGL Growth Projects
NGL Pipeline System Acquired 2007
39 | Journey By Design
40. Current Environment
Natural Gas Liquids
• NGL supply affected by drilling activity
pp y y g y
• U.S. NGL supply and demand
– Supply declines to be offset by regional growth
– 2008 petrochemical demand has been strong, driven by international growth
– Ethane demand may increase due to its cost advantage
• Fractionation and pipeline capacity is tightening due to regional
production growth
• Conway-to-Mont Belvieu regional basis differentials remain wide
• High level of infrastructure build-outs has significantly increased
material and construction labor costs
40 | Journey By Design
42. NGL Gathering and Fractionation
Providing Non-discretionary Services to Customers
Gatheringg
– More than 2,500 miles of pipeline
– Access to 82 natural gas processing
plants, more than 90 percent of the
Mid-Continent region’s plants
region s
Fractionation
– Approximately 550,000 Bpd (net)
capacity
– Isomerization 9,000 Bpd capacity
Storage
– Underground caverns with capacity
of 24.6 million barrels NGL Market Hub
NGL Fractionator
Marketing NGL Storage
– NGL products to end-users
NGL Gathering Pipeline
G th i Pi li
NGL Growth Projects
42 | Journey By Design
43. Sources of Margin
Fee-based Earnings with Optimization Opportunities
Fee-based
Gather, fractionate, transport and
Exchange & 2008G 70%
store NGLs and deliver to market
Storage Services 73%
2007
hubs 2006 78%
Differential-based
Purchase for resale
2008G 8%
approximately one-half of system
Marketing 2007 13%
supply in the Mid-Continent on
8%
2006
an index-related basis
Differential-based
Obtain highest product price by 2008G 18%
directing product movement 2007
Optimization 8%
between market hubs 5%
2006
2008G 4%
Differential- and
Convert normal butane to
Isomerization
2007
fee-based 6%
isobutane
9%
2006
43 | Journey By Design
44. Supply
Strong Focus on NGL Supply
• Significant volume g
g growth in the Mid-Continent from 19 new processing
p g
plant connections and growth from existing connections
• Rockies, Barnett Shale and Woodford Shale provide additional growth
Gathering Volume Fractionation Volume
MBpd MBpd
251 253
385 391
246
371
370
232 349
333 326
224
312 319
309
213
208 210 210
275 281
193 193
189 31% Growth 20% Growth
3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08
44 | Journey By Design
46. NGL Pipelines
Key Points
• Links key NGL market
y
centers at Conway, Kansas,
and Mont Belvieu, Texas
• N th System connects Mid
North S t t Mid-
Continent to upper Midwest
refiners
• Developing links to the NGL Distribution Pipeline
NGL Gathering Pipeline
Rockies and Barnett Shale Growth Projects
NGL Market Hub
NGL Fractionator
NGL Storage
Distribution 3,350 miles of pipe with 434,000
Bpd capacity
Gathering 720 miles of pipe with 93,000 Bpd
capacity
46 | Journey By Design
47. NGL Pipelines
Key Points
• Delivers to the petrochemical
• Primary supply sources in Mid-
and refining ind stries
industries
Continent, and soon-to-be Rockies and
– Texas Gulf Coast
north Texas, with connections to:
– Mid-Continent
– 23 natural gas processing plants, with
– Midwest
access to another 59
Regulation
•
– 8 fractionators
– FERC-approved tariffs
– 8 storage facilities
– 4 refineries
Markets
Supply
Fractionators
Processing Plants Storage Petrochemical Refining Heating
47 | Journey By Design
48. North System
Strategic Acquisition Creating Value
• Extends distribution network
into upper Midwest
• Connects to Mid-Continent
supply and Bushton storage
– Seasonal refinery-grade
butane and propane
• Opportunities for growth North System
– Diluent and denaturant NGL Distribution Pipeline
NGL Gathering Pipeline
– Propylene Growth Projects
NGL Market Hub
• Adds refined petroleum NGL Fractionator
NGL Storage
products to value chain
Distribution 1,630 miles of pipe
Capacity for Purity & 134,000 Bpd of transport
Refined Products 978,000 Bbl of storage
48 | Journey By Design
50. Growth in the Rockies
Overland Pass Pipeline, Piceance Lateral and D-J Basin Lateral
• Supply
– 140,000 Bpd committed
– 60,000 Bpd over the next 3-5
years in various stages of
negotiation
• Overland Pass
– Start up in 2008 at 110,000 Bpd
initial capacity
– Expandable to 255,000 Bpd,
expected by 2010
5-7 additional pump stations
pp
needed at cost of
approximately $5 million each
• Piceance and D-J Laterals start
up in 2009
50 | Journey By Design
51. Moving Forward
Key Growth Strategies
• Continued focus on adding new supply connections
• Optimize existing assets
Enhance margins
–
Improve contract terms
–
Manage operating costs
–
Improve fuel efficiency
–
• New or expanded asset positions to increase capability and services
New supply regions
–
Pipeline and fractionation capacity
–
Storage capacity
–
Rail and truck racks
–
Treating services
–
• New markets
– Expand market share using our reliability and supply infrastructure
• Complete $ billion of growth projects currently under way
$1.4
51 | Journey By Design
53. Caron Lawhorn
Senior Vice President & Chief Accounting Officer
53 | Journey By Design
54. Earnings Growth
Delivering Consistent Growth and Stable Earnings
• Diverse asset base
O
Operating I
ti Income*
* $624
provides significant $269
fee-based income and
$445 Natural Gas
stable earnings Gathering &
$396 Processing
• Strategy execution $142 Natural Gas
results in significant $253 Pipelines
$257
earnings growth $153 NGL Gathering &
20% CAGR Fractionation
– Particularly in NGL
Pipelines beg
pe es beginning g $68
NGL Pipelines
in 2009
2004 2005 2006 2007 2008G
*Millions of dollars, excluding gain/loss on sale of assets
54 | Journey By Design
55. Stable Cash Flow
Financial Strength
• Predominantly fee based
y
Sources of Margin
– Large growth projects increase
fee-based income $896 Million $1.1 Billion
$844 Million
12% 13%
• Commodity and spread risk 16%
is measured and managed 28% 27%
29%
within each segment
• Equity earnings are also
primarily fee based 60% 60% 55%
– 2008 Guidance: $81 million
2006 2007 2008 Guidance
y p
Fee Commodity Spread
55 | Journey By Design
56. Capital Expenditures
Complements Existing Infrastructure and Core Operating Capabilities
Current Growth Program, 2007-2009
g ,
Growth Capital Expenditures
• $2 billion of internally generated
projects and routine growth $1,230
• EBITDA* generated
EBITDA
– Primarily fee based
$ In Millions
$878 $670 spent through
– 2009: $260 million $650 Aug-08
$300-$500
– 2010 $360 million
2010: illi
n
per year
$365
$462
Looking Forward, 2010-2015 $233
$352
• $300 - $500 million of growth $188 $132
projects per year 2007 2008 2009 2010-2015
– Two-thirds in Natural Gas Liquids Natural Gas Liquids Natural Gas
* EBITDA contributions assume projects are completed on schedule
* Does not include WMB exercising its 50/50 option in OPPL, Piceance Lateral or D-J Lateral
56 | Journey By Design
57. Strong Balance Sheet
Financial Discipline
• Disciplined approach to raising
p pp g • Capital structure
p
capital for growth – Goal: 50/50 capitalization
• Common unit offering in March – Strong credit rating
2008 generating net proceeds
2008,
of $460 million
• $1 billion revolver, $720 million Total
Equity
Debt
available S t b 30
il bl September 50%
50%
• Overland Pass joint-venture
option
• ONEOK interested in increasing
ownership of ONEOK Partners Capitalization: June 30, 2008
57 | Journey By Design
58. Distribution Coverage
Financial Discipline
Distributions Declared Per Unit
• Target coverage ratio of
g g Distributable Cash Flow Per Unit $5.80
Coverage Ratio
1.05x to 1.15x $4.92
• Some distributable cash $4.48
$4.22
$4.15 $4.025
flow t i d to fund
fl retained t f d $3.78
$3 78
$3.71
$3.20 $3.20
growth
• Other considerations
– Commodity prices
– Overland Pass option 1.37
1.30 1.22
1.16 1.19
– Capital market conditions
2004 2005 2006 2007 2008
Guidance*
* Assumes q
quarterly p y
y payments for Q3 and Q4 at indicated amount
58 | Journey By Design
59. Distribution Growth
Creating Exceptional Value for Unitholders
• ONEOK as sole general
g
partner Distributions Paid Per Unit
– 10 consecutive distribution $1.06
$1.04
increases $1.025
$1.01
$1 01
$1.00
$0.99
$0.98
– 11 percent compound annual $0.97
$0.95
growth rate
• C ti d opportunities for
Continued t iti f
$0.88
$0 88
distribution growth 11% CAGR
$0.80
1Q06 3Q06 1Q07 3Q07 1Q08 3Q08
59 | Journey By Design
60. Value Creation
Delivering Consistent Growth and Stable Earnings
• General partner with
p T t l U ith ld R t
Total Unitholder Return
aligned interests Unit Price Total Return
$70 140%
• Demonstrated financial $67.50
$60 120%
discipline
di i li $59.46
$57.50
$50 100%
$54.03
$56.25
• Visible growth profile 91%
$48.24
$47.92
$47.85
$45.75
$40 80%
– $2 billion under way $42.10
$30 60%
– 2010–2015: $300 - $500
$20 40%
million per year
$10 20%
ONEOK Partners Alerian MLP Index
$0 0%
1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08
*Unit prices are closing prices at last day of quarter; Third quarter 2008 through closing prices on 9/25/08.
60 | Journey By Design
63. Jim Kneale
President & Chief Operating Officer
63 | Journey By Design
64. Business Segments
Diversity Provides Stability & Opportunity
• ONEOK Partners
– ONEOK’s primary growth engine
• Distribution
– Provides low-risk, stable cash flow
– Rate strategies have led to an increase in
sustainable earnings and an improved return
on equity
• Energy Services
– Combined supply, transportation and storage
contracts provide premium service to customers
– Positions us to capture upside in the market
64 | Journey By Design
65. Distribution
Pierce Norton II
Executive Vice President
65 | Journey By Design
66. Current Environment
Distribution
• Higher commodity p
g y prices and technological advancements in
g
energy efficiency result in residential conservation
• Economic downturn in housing market results in fewer new
connections
ti
• Regulators are challenged to balance consumer and business
interests, creating opportunity for innovative rate design
• Consumer awareness of “carbon footprint” stimulates interest in
higher natural gas consumption
66 | Journey By Design
67. Distribution
Focused Strategy
Growth
•
Earnings stability
•
Margin protection
•
Operational efficiency
•
Revenues $2.1 billion
Asset Base $2.7 billion
Rate Base $1.7 billion
67 | Journey By Design
68. Distribution
Sixth Largest Natural Gas Distributor in U.S.
• Largest natural g distributor in
g gas
Oklahoma and Kansas; third largest in
Texas
•SServe more th t million customers
than two illi t
Oklahoma Natural Gas Kansas Gas Service Texas Gas Service
Coldest territory with weather Highest potential growth
Largest customer base
normalization & bad debt recovery
$ 98
$19.8 million
o
2008 Rate
008 ate $5
$5.2 million
o
2008 Rate
$2.9 illi
$2 9 million
2008 R t
Rate
Filings Filings
Filings
Customer Base Approximately
Customer Base Approximately 85% Customer Base Approximately 70%
600,000 customers
residential load residential load
$675 million
Rate Base $710 million
Rate Base $302 million
Rate Base
68 | Journey By Design
69. Rate Strategy Progress
Successful Execution of Strategy
2005 2008
Opportunities Rate Mechanism Solution Oklahoma Kansas Texas * Oklahoma Kansas Texas *
36% 50%
Earnings Lag Capital Recovery
Bad Debt Recovery 46%
FILED
Margin Increased Increased Increased
Customer Charge
Protection
Weather Normalization 46% 61%
Incentive Rates Revenue Sharing FUTURE
* Percent of customers within the 17 Texas jurisdictions
69 | Journey By Design
70. Strategy Execution
Established a New Level of Performance
• Closing the gap between actual
• Increased level of sustainable
and allowed returns
earnings
– $70 million operating income gap
• Rate mechanisms reduce in 2005
regulatory lag – Reduced to $20 million in 2008
Return on Equity*
Operating Income 10.2%
$186
$174
$ in Millions
8.8%
8 8%
8.5%
$117
$114
5.3%
4.9%
13% CAGR 80% Increase
2005 2006 2008
2007 2005 2006 2007 2008 2008
Guidance Guidance Allowed
* ROE calculations are consistent with utility ratemaking in
70 | Journey By Design each jurisdiction and not consistent with GAAP returns
71. Moving Forward
Key Strategies
• Grow asset base
– Efficient capital investment
– Infrastructure and technology
•E i
Earnings stabilization
t bili ti
– Ruling on Oklahoma bad-debt filing expected by end of 2008
– Anticipate filing rate cases in Oklahoma and Austin in 2009
– Capital and pipeline integrity management recovery
• Cost Control
– Standardi ation
Standardization
– Continuous process improvement
– Utilize technology
71 | Journey By Design
72. Energy Services
Terry Spencer
Executive Vice President
72 | Journey By Design
73. Energy Services
Strategic Leased Assets Enhance Our Ability to Provide Premium
Services to Customers
• Deliver natural gas,
together with bundled,
reliable, premium p
p products
and services
• Access to prolific supply
and high-demand areas
high demand
• Industry knowledge and
customer relationships
Storage 91 Bcf of capacity
2.2 Bcf/d of withdrawal rights Leased Pipeline
Leased Storage
1.4 Bcf/d of injection rights
Transportation 1.5 Bcf/d of long-term firm capacity
Sales 3.3 Bcf/d in 2007
3.1 Bcf/d in 2006
73 | Journey By Design
74. Energy Services
What We Do
• Contract for natural gas supply from diverse sources
• Lease and optimize storage and transportation capacity
• Provide bundled, reliable products and services to natural gas
and electric utilities
d l t i tiliti
• During periods of market inefficiencies, effectively use storage
and transportation assets to capture incremental margins
a d t a spo tat o captu e c e e ta a g s
Supply Markets
Storage Transportation
• Electric
• LDCs Retail Customers:
Generators • Industrial
• Trading • Commercial
Counterparties • Residential
74 | Journey By Design
75. Current Environment
Energy Services
• Rapidly changing supply sources and infrastructure build-outs
affecting llocation diff
ff ti ti differentials
ti l
– Widening location differentials in areas where pipeline capacity remains
insufficient
–IIncrease iin U S naturall gas production, primarily from shale b i
U.S. di i il f h l basins
– Softening regional wellhead netbacks could impact drilling and supply
growth
• Fi
Financial-institution activity into commodity markets creates
i l i tit ti ti it i t dit kt t
greater pricing uncertainty
• Competitive environment
p
– Providing premium products and services
– Obtaining and retaining leased assets
• Working capital requirements fluctuate with commodity prices
75 | Journey By Design
76. Sources of Margin
More Than 75 Percent From Storage and Transportation
2008G
Differential- and
Baseload, swing and peaking 53%
Storage
demand-based 2007 60%
services
48%
2006
Marketing & risk management
2008G
Differential- and fee- 26%
Transportation services to producers and markets
based 2007 27%
32%
Maximize delivered value 2006
Differential-, commodity-
Enhance margins through application
Optimization 2008G 11%
and derivative-based
of market knowledge and risk-
risk 2007 0%
management skills 5%
2006
Commodity- and fee-
Provide supply and risk-management
Retail 2008G 10%
based
services to industrial, commercial and 2007 6%
residential customers 7%
2006
Differential-, commodity-
Extract margins using primarily
Trading 2008G 0%
and derivative-based
derivatives, leveraging our physical 2007 7%
positions through market knowledge, 8%
2006
volatility or inefficiencies
76 | Journey By Design
77. Operating Income History
Key Drivers
• $880 million of operating income in five years
• Seasonal storage and transportation differentials have the
greatest impact
$5.00 $250
$229
$205
Operating Income (Millions)
$4.00 $200
$
$166
$142
$139
$3.00 $150
$/MMBtu
$2.00 $100
$1.00 $50
$- $0
2004 2005 2006 2007 2008 Guidance
Realized Storage Differential Rockies to Mid-Continent Differential Operating Income
77 | Journey By Design
78. Moving Forward
Key Strategies
• Manage current p
g portfolio of supply and leased assets to continue
pp y
to grow premium products and services
• Grow asset management arrangements with LDCs
• Draw on the competitive position of our assets to extract
incremental value through daily optimization of our storage and
transportation assets
– Physical delivery of natural gas
• Use hedging to establish base margins and capture incremental
margins related t llocation and seasonall diff
i l t d to ti d differentials
ti l
• Continue to achieve high customer satisfaction
78 | Journey By Design
80. Financial Highlights
Caron Lawhorn
Senior Vice President & Chief Accounting Officer
80 | Journey By Design
81. Earnings Growth
Delivering Consistent Growth and Stable Earnings
• Di
Diverse asset b base
Stand-alone Operating Income
provides significant fee- Plus Equity Earnings
based income and $638
$
$591
stable earnings $313
$535 $524
$444
• Strategy execution ONEOK
Partners
results
res lts in significant $186 Distribution
earnings growth 7.5% CAGR
$142 Energy
Services
2004 2005 2006 2007 2008G
*Millions of dollars, excluding gain/loss on sale of assets
81 | Journey By Design
82. Aligned Interests
Increasing Our Investment in ONEOK Partners
• Purchased 5.4 million OKS • As ONEOK Partners grows,
g
common units in March 2008 for ONEOK grows
$303 million – EBITDA growth: Two-thirds of
every incremental dollar flows to
– Contributed $9.6 million to maintain
$
ONEOK
2 percent general partner interest
– Distribution growth: Penny a
– Increased ownership to 47.7 percent
quarter adds $5.2 million to
ONEOK’s annual cash flow
ONEOK s
IDR and
Capital EBITDA Higher Net
Equity Dividends
Projects Growth Distributions Income
Income
Unit Price Appreciation Share Price Appreciation
82 | Journey By Design
83. Aligned Interests
Growth at ONEOK Partners Benefits ONEOK
General Partner Distributions
• Quarterly distributions to
Q y $20.9
$19.1
ONEOK have increased in $16.2
$14.9
$13.3 $14.1
$11.6 $12.4
$ in Millions
the past two years: $10.0
– General partner interest has 39% CAGR
more than doubled
– Limited partner interest has 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08
increased almost $10 million
Limited Partner Distributions $44.1 $44.9
• Internally generated growth
projects will result in $36.6 $37.0 $37.4 $37.9
$35.1 $35.9 $36.3
ns
$ in Million
additional growth
12% CAGR
2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08
83 | Journey By Design
84. Strong Balance Sheet
Demonstrated Financial Discipline
• Strong credit rating
g g Stand–alone Capitalization
– S&P: BBB
– Moody’s: Baa2
46% 46%
• C it l structure
Capital t t 47% 49%
52%
– Goal: 50/50 capitalization
• Short-term liquidity
Short term
– $480 million available under 54% 54%
53% 51%
48%
existing $1.6 billion facilities
– Storage 80 percent full at
September 30, 2008 2004 2005 2006 2007 2008*
Total Debt Equity
*At June 30, 2008
84 | Journey By Design
85. Financial Risk Management
Enterprise View
• Diversified asset base and cash-flow stream
– Contract structure, terms, customers
– Across the value chain
– Numerous supply and market centers
• Investment-grade credit rating
• 80 percent of long-term debt at fixed rate
• Diversified counterparty risk
– Numerous banks participate in revolving credit facilities
– Hedging primarily through NYMEX and Intercontinental Exchange contracts
– Secured credit
• Commodity exposure
– Risk managed within each segment
– Corporatewide risk oversight committee
85 | Journey By Design
86. Stable Cash Flow
Financial Flexibility
Free Cash Flow
• Continued strong free-cash flow
g $ i Milli
in Millions
available for:
Acquisitions
– $183 $159 $180
$182
$205
Investment in OKS
–
Share repurchase
–
$89 $110
Dividend increases
–
$163
$150
$135
Debt repayment
–
• Repurchased $884 million of $264 $250
shares since 2005 $182
$175 $174
• Paid $402 million of maturing
long-term debt in February 2008 2004 2005 2006 2007 2008
Guidance
• Invested $313 million in ONEOK
Capital Expenditures Dividends Surplus
Partners in March 2008
*Stand-alone cash flow, excluding acquisitions
86 | Journey By Design
87. Dividend Growth
Creating Exceptional Value for Shareholders
• Target: 50-55 percent of
g p Dividends Per Share
recurring earnings
$0.40
$0.38
$0.36
• 10 dividend increases
$0.34
0.32
30
since January 2004
i J
$0
$0.3
$0.28
$0.25
• 17 percent compound
$0.23
$0.21
$0.19
annual growth rate
$
17% CAGR
Q1 2004 Q1 2005 Q1 2006 Q1 2007 Q1 2008
87 | Journey By Design
