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oneok 2008 Wachovia Securities Nantucket Equity Conference

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oneok 2008 Wachovia Securities Nantucket Equity Conference

  1. 1. 18th Annual Wachovia Equity Conference Nantucket, Massachusetts | June 24, 2008
  2. 2. John W Gibson W. ONEOK, Inc. | Chief Executive Officer ONEOK Partners, L.P. | Chairman and Chief Executive Officer Page | 2
  3. 3. Forward- Forward-Looking Statement Statements contained in this presentation that include company expectations or predictions of the future are forward-looking statements intended to be covered by the safe harbor provisions of the S ii f th Securities A t of 1933 and th S iti Act f d the Securities iti Exchange Act of 1934. It is important to note that the actual results of company earnings could differ materially from those projected in any forward-looking statements. For additional information, refer to ONEOK’s and ONEOK Partners’ Securities and Exchange Commission Filings Filings. Page | 3
  4. 4. Agenda • Overview & Vision • Diversified Assets • Financial Highlights Page | 4
  5. 5. Overview & Vision Page | 5
  6. 6. ONEOK Today A Premier Energy Company • Three business segments g – Distribution -- Three distribution companies serving two million customers $521 ONEOK Partners – Energy Services -- A leading marketer of natural gas – ONEOK Partners -- General $180 Distribution partner and 47.7 percent owner • Expanding participation in $180 Energy Services energy value chain l hi Other Oth ($2) Operating Income • $5.2 billion market capitalization 2008 Guidance: $879 million Page | 6
  7. 7. ONEOK Today Assets That Fit and Work Together ONEOK Distribution ONEOK Energy Services Leased Pipeline Capacity Leased Storage Capacity ONEOK Partners Growth Projects Page | 7
  8. 8. Our Vision A Premier Energy Company A premier energy company creating exceptional value for all p gy py g p stakeholders by: • Re-bundling services across the value chain, primarily through verticall integration, t provide customers with premium services at ti i t ti to id t ith i i t lower costs • Applying our capabilities — as a gatherer, processor, transporter, marketer and distributor — to natural gas and natural gas liquids… …and other commodities Page | 8
  9. 9. Our Vision: A Journey by Design Value Creation Through Re-bundling - 1995 Natural Gas Distribution Marketing Power Industrial Exploration & Production Gathering & Processing Pipelines/Storage Markets Natural Gas Liquids Refining Heating Petro- Chemical 1995 Financial Statistics Total revenue: $949.9 million Net income: $42.8 million Gathering & Fractionation Pipelines/Storage Markets Total assets: $1.2 billion Page | 9
  10. 10. Our Vision: A Journey by Design Value Creation Through Re-bundling - Today Natural Gas Distribution Marketing Power Industrial Exploration & Production Gathering & Processing Markets Pipelines/Storage Natural Gas Liquids Refining Heating Petro- Chemical 2007 Financial Statistics Total revenue: $13.5 billion Net income: $304 9 million N ti $304.9 illi Gathering & Fractionation Pipelines/Storage Markets Total assets: $11.1 billion Page | 10
  11. 11. Our Vision: A Journey by Design Applying Our Capabilities to the NGL Business • Established Mid-Continent presence beginning in 2000 • Acquired NGL assets from Koch in 2005 – Gained access to largest NGL g market hubs: Conway, Kansas, and Mont Belvieu,Texas • Extending our reach into the Rockies and Barnett Shale through g internal growth projects – Doubles the business • Acquired NGL and refined petroleum products system to connect to the Midwest markets NGL Storage NGL Pipelines – Provides customers with access to NGL Fractionator NGL Gathering & Fractionation supplies NGL Market Hub NGL Growth Projects Acquired NGL Pipeline System – First entrance into refined petroleum products market Page | 11
  12. 12. Our Key Strategies A Premier Energy Company • Generate consistent growth and sustainable earnings g g – Improve profitability of ONEOK Distribution Companies – Continue focus on physical activities at ONEOK Energy Services – D l and execute internally generated growth projects at Develop d t it ll td th j t t ONEOK Partners • 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 Page | 12
  13. 13. Diversified Assets Distribution Energy Services ONEOK Partners Page | 13
  14. 14. Distribution Eighth Largest Natural Gas Distributor in the U.S. • Largest natural g g gas distributor in Oklahoma and Kansas; third largest in Texas • Growth – Efficient investments – Customers, volumes, rate base • Long term focus has led to: Long-term – Unbundling and restructuring in Oklahoma – Weather normalization Kansas Gas Service – Capital recovery Oklahoma Natural Gas Texas Gas Service – Bad-debt recovery Customers 2 million – Margin stability Revenues R $2.1 billi $2 1 billion Asset Base $2.7 billion Rate Base $1.7 billion Page | 14
  15. 15. Distribution Integrated Strategy to Improve Profitability Return on equity Closing the Gap • Si ifi Significant progress since 2005 t i 2005: Oklahoma rate case – 2006: Kansas and Texas rate cases Gap Gap – 10.2 2007: Five rate filings in Texas Allowed – ap ap Ga Ga 2008: First quarter approved rate 8.6 86 – 8.5 85 * Return on Equity (%) increases of $4.2 million in Texas – Capital recovery mechanisms in all three states – Disciplined approach to capital 53 5.3 n 4.9 investment Expense control and recovery • Expense recovery mechanisms p y – Continuous process improvement – Pipeline integrity management recovery – Total Distribution Companies Pension and other post-employment – 2005 2006 2007 2008G 2008 Allowed benefit costs * ROE calculations are consistent with utility ratemaking in each jurisdiction and not consistent with GAAP returns Page | 15
  16. 16. Energy Services Leased Assets Enhance Our Ability to Provide Premium Services to Customers • Access to prolific supply p pp y and high-demand areas • Industry knowledge and customer relationships • Deliver natural gas together with bundled, reliable products and services Leased Pipeline Leased Storage – Premium, no-notice no notice Storage 96 Bcf of capacity services 2.4 Bcf/d of withdrawal rights 1.6 Bcf/d of injection rights Transportation 1.8 Bcf/d of firm capacity – Primarily to LDCs Sales 3.3 Bcf/d in 2007 3.1 Bcf/d in 2006 Margin $0.19/MMBtu $0 19/MMBtu in 2007 $0.22/MMBtu in 2006 Page | 16
  17. 17. Energy Services Sources of Income Storage Transportation Optimization Retail Trading Utilize leased capacity to meet customers’ customers Enhance storage and Sell natural gas supplies Extract trading baseload, swing and peaking requirements transportation margins and provide risk margins around our through application of management services to physical positions Provide marketing and risk management services market knowledge and commercial and through market risk management skills industrial customers and knowledge, volatility or Capture arbitrage opportunities to consumers who inefficiencies participate in LDC customer choice programs Spread- and demand- Spread- and fee-based Spread-, commodity- Commodity-based Spread-, commodity- based and derivative-based and derivative-based 7% 8% 6% 11% 54% 27% 60% 27% 2008 Operating Income Guidance 2007 Operating Income $180 million $205 million Page | 17
  18. 18. ONEOK Partners Overview • Primary growth engine for ONEOK • Aligned interests: ONEOK is general partner and 47.7 percent owner • Value creation through integrated operations • Cash flow is more than 60 percent fee based Natural Gas Natural Gas Liquids Gathering & Fractionation Pipelines Gathering & Processing Pipelines – Connected to over 90 percent of the Mid- – Stable earnings through diversity Continent region’s processing plants – Diversified supply basins, producers and – Allows us to provide full range of services contracts mitigate earnings volatility t t iti t i l tilit to our customers Page | 18
  19. 19. ONEOK Partners Delivering Consistent Growth and Stable Earnings Distribution Growth Unitholder Return Nine increases with ONEOK as Unit price increase of 27 percent • • general partner since 2006 Target coverage ratio: 1.05x to Total return of 71 percent since • • 1.15x 2006; 137 percent since 2003 Unit Price Total Return Distributions Per Unit $70 90% $69.26 $1.04 $1.025 $1 025 80% $67.60 $67 60 $60 $1.01 $61.25 $1.00 $57.50 $60.90 70% $0.99 $57.57 $0.98 $0.97 $50 $0.95 60% $48.00 $40 50% $0.88 $0 88 40% $30 30% $20 $0.80 20% $10 10% ONEOK Partners Pt Al i MLP I d Alerian Index $0 0% 1Q06 3Q06 1Q07 3Q07 1Q08 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 *Unit prices are closing prices at last day of quarter; Second quarter 2008 through closing price on 6/16/08 Page | 19
  20. 20. ONEOK Partners - Roadmap to Growth $1.6 Billion of Internal Growth Projects Under Way, 2007-2009 Grasslands plant expansion $30 million Guardian II Expansion Fort Union Gas $277 million Gathering Expansion (37% owner) Bison Pipeline (50% owner) Overland Pass NGL & Refined Product Pipeline System Acquisition $535 million $300 million Piceance Lateral $120 million NGL Upgrade Projects $216 million Woodford Extension 2010 -2015 Internal Growth Projects: $25 million $300-500 million/year y plus acquisitions Natural Gas Gathering & Processing Natural Gas Pipelines Arbuckle Pipeline Natural Gas Liquids Gathering & Fractionation $260 million Natural Gas Liquids Pipelines q p Growth Projects Page | 20
  21. 21. ONEOK Partners – Growth Status Complement Existing Infrastructure and Core Operating Capabilities MAJOR PROJECTS*: Contracts / Volumes Fee Based Expected In Service p Long-term supply agreement Overland Pass Pipeline Third Quarter 2008 with Williams Infrastructure upgrades to Related NGL projects Second Quarter 2008 accommodate growth Arbuckle Pipeline Anchor customers committed Early 2009 Dedicated supplies from two Piceance Lateral Second Quarter 2009 Williams plants Dedicated supplies from Devon Woodford Shale extension Second Quarter 2008 and Antero processing plants Supply growth driven by drilling Grasslands Plant expansion Second Half 2008 and production Phase I – Complete p Fort Union Gas Gathering e pansion (37%) expansion Fully s bscribed F ll subscribed Phase II – 2Q 2008 Anchored by two 15-year Guardian Pipeline extension Fourth Quarter 2008 agreements Bison Pipeline (50%) Anchor customer committed Fourth Quarter 2010 * Additional project details included in the appendix, slides 53 - 69 Page | 21
  22. 22. ONEOK Partners - Growth Contribution Complements Existing Infrastructure and Core Operating Capabilities • $1 6 billion of internal growth $1.6 projects through 2009 EBITDA* Generated – Growth projects generate $300+ significant cash flow $260+ – Growth EBITDA generated is $125- $ In Millions primarily fee based $150 M • $300-$500 million in growth projects for 2010-2015 • Incremental acquisition 2009 2010 2008 opportunities * EBITDA contributions assume projects are completed on schedule * Does not include WMB exercising its 50/50 option in OPPL or Piceance Lateral Page | 22 * Offsets natural declines in natural gas gathering and processing supplies
  23. 23. Growth at OKS benefits OKE How Growth at ONEOK Partners Benefits ONEOK IDR and Capital EBITDA Higher Net Equity Dividends Projects Growth Distributions Income Income Unit Price Appreciation Share Price Appreciation OKS Incremental EBITDA is $1 million Impacts OKE income by $684 thousand (pre-tax) EBITDA • $500 thousand* from incentive distribution rights • Partnership is in “high splits” Growth • $184 thousand* in equity earnings from general • All incremental cash flow is distributed • Annual depreciation is $125 thousand partner interest and limited partner units owned Incentive Distribution Rights* Distribution Every 1 cent quarterly increase Results in $3.5 million annual increase in cash flow Growth and income before taxes Limited Partner Units** Every 1 cent quarterly increase Results in $1.7 million annual increase in cash flow * Assumes “high splits” Page | 23 ** ONEOK owns 42.4 million limited partner units
  24. 24. Financial Highlights Page | 24
  25. 25. Investing in ONEOK Partners ONEOK Partners: ONEOK: Raises Redeploys Growth $1 Billion $1 Billion Repurchased 7.5 million shares for $370 To finance $1.6 billion of internal growth projects: • million in June 2007 • Permanent debt financing of $600 million in Paid $402 million of maturing d bt in f t i debt i September 2007 P id illi Stb • February 2008 Common unit offering, generating net • Purchased 5.4 million OKS common units proceeds of $460 million, in March 2008 • for $303 million in March 2008 – 2 5 million units public offering 2.5 – Increased ownership to 47.7 percent – 5.4 million units sold to ONEOK – Contributed $9.6 million to maintain 2 percent general partner Page | 25
  26. 26. Solid Financial Position Strong Balance Sheet Stable Cash Flow • Strong credit rating • Continued strong free cash flow free-cash available for: – S&P: BBB – Moody’s: Baa2 – Acquisitions – Investment in OKS • Capital Structure – Debt repayment – Share repurchase – Dividend increases – Goal: 50/50 Capitalization Capital Expenditures Surplus Total Debt $182 Equity $160 48% 52% Dividends $163 Stand –Alone Cash Flow Stand –Alone Capitalization 2008 Guidance (Millions) March 31, 2008 Page | 26
  27. 27. Shareholder Value Delivering Consistent Growth and Stable Earnings Dividend Growth Shareholder Return 12 dividend increases since Share price increase of 49 • • January 2003 percent since 2006 Target: 50-55 percent of Total Return of 100 percent since • • recurring earnings 2006; 209 percent since 2003 Dividends Per Share Share Price Total Return $0.38 120% $0.36 0.34 $50 $ $51.68 $0.32 2 $ $0 100% $48.53 $0.30 $45.29 $44.63 $49.11 $0.28 $40 $43.12 $0.25 80% $38.25 $0.23 $33.06 $0.21 $30 0.19 60% 18 $0.1 $0.17 7 $0 $0.155 $20 40% $10 20% S&P 500 ONEOK, Inc. $0 0% Q4 2002 Q4 2003 Q4 2004 Q4 2005 Q4 2006 Q4 2007 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 *Share prices are closing prices at last day of quarter; Second quarter 2008 through closing price on 6/16/08 Page | 27
  28. 28. Why Invest in ONEOK? Key Investment Considerations • Strong track record of creating value for both customers and g g investors, through rebundling services across the value chain and applying our capabilities to other commodities • St t i assets connecting prolific supply b i and k markets Strategic t ti lifi l basins d key kt • Significant growth potential through continued strategy execution • Demonstrated financial discipline • Experienced and proven management team • Talented workforce dedicated to providing safe and reliable p g service to all our customers Page | 28
  29. 29. Questions & Answers Page | 29
  30. 30. Page | 30
  31. 31. Appendix Page | 31
  32. 32. Our Vision: A Journey by Design Value Creation Through Re-bundling – How We Got Here Acquired Oklahoma gathering and Oklahoma Natural Gas Acquired Kansas Gas Acquired Texas processing assets and exploration & Service and Kansas Gas Service Acquired NGL and refined from Koch natural gas pipelines, production are primary petroleum product pipeline businesses storage and marketing system from Ki d tf Kinder Oklahoma Unbundling: Acquired Conway Acquired NGL system from Western Morgan Storage & Gathering NGL assets from from Koch Resources deregulated; Distribution & Texaco Transmission assets become Acquired 85% general partner interest separate utilities in Northern Border Partners 1996 1998 2000 2002 2004 2006 1995 2007 1997 1999 2001 2003 2005 Built NGL pipeline Created ONEOK Partners: from Bushton to Dropped down $3 billion of Conway assets to Northern Border Created Acquired NGL storage and fractionation Partners; became sole Energy Services E Si assets from Kinder Morgan general partner Sold and exited Acquired gathering and processing and 2006 — 2007 exploration & natural gas pipeline, storage and production marketing assets in Texas, Oklahoma Announced $1.6 billion of business and Kansas from Dynegy and Kinder internal growth projects at Morgan g ONEOK Partners, , Sold Texas $1.2 billion of which are gathering and NGL related processing assets Page | 32
  33. 33. Distribution Rate Strategy Progress • Synchronized rate filings y g • Maintain positive relationships with regulators Issue Solution Oklahoma Kansas Texas Margin fluctuations Straight-fixed variable rates Revenue decoupling 1/17 Weather normalization 8/17 Earnings lag More frequent filings Cost f C t of service adjustment i dj t t 8/17 Bad debt Commodity recovery in PGA 4/17 Fixed-price plan 1/17 Average payment plan Financial hedging 7/17 Physical hedging Capital recovery Capital recovery mechanisms 6/17 Return on gas in storage 2/17 Incentive rates Revenue sharing 2/17 Page | 33
  34. 34. Energy Services What We Do • Contract with customers to deliver natural gas, together with g,g bundled, reliable products and services • Contract for natural gas supplies • Lease and optimize storage and transportation capacity • Capitalize on market irregularities and inefficiencies ptimization Supply Markets Storage Transportation Trading g Op • Electric • LDC Retail Customers: Generators • Industrial • Trading • Commercial Counterparties • Residential Page | 34
  35. 35. Energy Services Operating Income Sensitivities Utilize storage and transportation assets to enhance our ability to provide • premium services t customers i i to t Utilize hedging related to location and seasonal spreads to capture • incremental margins $5.00 $250 illions) $229 $4.00 $200 $ 05 $205 Operati Income (Mi $180 $166 $3.00 $150 $/MMBtu $139 $2.00 $100 ing $1.00 $50 $- $- 2004 2005 2006 2007 2008 Outlook Apr. - Dec. Storage Spread Rockies to Mid-Continent Basis Spread Operating Income Page | 35
  36. 36. ONEOK Partners Diversified Assets Page | 36
  37. 37. ONEOK Partners Overview • One of the largest publicly gp y traded MLPs Natural Gas • Diversified asset base and Gathering & $217 Processing stable cash fl t bl h flows – More than 60 percent fee based Natural Gas $110 Pipelines • Value creation through NGL Gathering & integrated operations $105 Fractionation • Aligned interests: NGL Pipelines $92 Other ($3) – ONEOK: General Partner Operating Income – ONEOK: 47.7 percent owner 2008 Guidance: $521 million • $5.5 billion market capitalization Page | 37
  38. 38. ONEOK Partners Overview Natural Gas Gathering & Processing Natural Gas Pipelines Natural Gas Liquids Gathering & Fractionation Natural Gas Liquids Pipelines Page | 38
  39. 39. Natural Gas What We Do • Connect raw natural gas production from the wellhead to markets through: k t th h Gathering and compression via extensive pipeline systems – Processing and treating to remove contaminants and extract natural gas liquids – Storage services through underground caverns – Transportation of residue natural gas via extensive pipeline systems, both intra- – and inter-state Storage & Gathering & Supply Markets Transportation Processing Marketing Distribution Power / Industrial Page | 39
  40. 40. Natural Gas Stable Earnings Through Diversity • Two segments Grasslands Plant Expansion E i – Natural Gas Gathering & Guardian II Expansion Processing Bison Pipeline – Natural Gas Pipelines • Diversified supply basins, Fort Union Gas , Gathering Expansion producers and contracts mitigate earnings volatility in gathering and processing • Earnings on pipelines are fee based • More than $400 million of internal growth projects under way through 2009 y g Natural Gas Gathering Pipeline Natural Nat ral Gas Interstate Pipeline Natural Gas Intrastate Pipeline Natural Gas Storage Natural Gas Processing Plant Growth Projects Page | 40
  41. 41. Natural Gas Gathering & Processing Key Points Stable earnings through diversity g g y Williston • Multiple producing basins effectively offset natural volume Powder River declines Wind River • Supply mix between small and large producers spreads drilling and volume exposure Kansas Uplift • Makeup of contract portfolio: Hugoton Natural Gas Gathering Pipeline – Eliminates material exposure to Natural Gas Processing Plant Anadarko naturall gas price fl t ti t i fluctuations Gathering 14,300 miles of pipe – Spreads NGL exposure among Processing 13 active plants 0.7 Bcf/d capacity six products and revenue streams Production 1,192 BBtu/d gathered At first quarter 2008 624 BBtu/d processed 38 MBpd NGL produced MB d NGLs d d Page | 41
  42. 42. Natural Gas Gathering & Processing Supply Gas Gathered * • Strong supply focus g pp y BBtu/d 1,190 1,171 1,182 1,168 1,192 • New well connects and growth in the Rockies offset naturall d li t declines 803 800 852 910 908 389 371 316 280 274 2004 2005 2006 2007 1Q08 Rocky Mountain Mid-Continent g * Volumes based on existing asset base Page | 42
  43. 43. Natural Gas Gathering & Processing Risk Mitigation Contract restructuring has reduced commodity price sensitivity and increased fee-based business • Hedging strategy focuses on long NGL and natural gas positions • – 2008: 72 percent hedged on NGLs and condensate at $1.39/ gallon and 78 percent on natural gas at $9.23/MMBtu Contract Mix by Volume Commodity Price Sensitivity Co t act ou e Co od ty ce Se s t ty Margin Impact ($ Millions) 3% 3% $4.8 3% 6% 7% 8% $4.5 1% 10% 1% 6% $3.8 15% 19% $2.1 31% 30% 27% $1.6 $1.3 $1 3 $1.7 $1 7 $1.1 $1 1 $1 0 $1.0 34% 31% $0.4 $0.7 25% $0.5 $0.3 $0.3 -$0.1 -$1.6 -$2.7 61% 61% 61% -$3.5 53% 52% 51% 2006 2007 2008 2003 2004 2005 Commodity Sensitivity Natural Gas Liquids Nt l G Li id 1 cent/gallon increase t/ ll i 2003 2004 2005 2006 2007 2008 Natural Gas 10 cent/MMBtu increase Fee Based Percent of Proceeds Crude Oil $1/barrel increase Keep Whole Keep Whole w/conditioning Page | 43
  44. 44. Natural Gas Pipelines Key Points Provides fee-based income • Viking Gas Transmission – Over 75 percent is demand/firm Pipelines connect to key supply • Northern Border Pipeline aggregation points: Guardian – G ardian Viking and Northern Guardian, Pipeline Border Midwestern Gas Midwestern Gas acts as a • Transmission hub, offering numerous , g interconnects for receipts and deliveries Storage provides premium “swing” • services f iintrastate pipelines i for t t t i li Intrastate pipelines are diversified Natural Gas Interstate Pipeline • Natural Gas Intrastate Pipeline through connections to numerous Natural Gas Storage supply and market points Pipelines 6,920 miles, 5.3 6 920 miles 5 3 Bcf/d peak capacity Storage 51.6 Bcf active working capacity Equity Investment 50% Northern Border Pipeline Page | 44
  45. 45. Natural Gas Liquids What We Do Connect raw-blended NGL production from gas processing plants to markets • through: Gathering via extensive pipeline systems – Fractionating to convert raw-blended NGLs to purity products – Storage services through underground caverns – Marketing NGL products to end-users – Distributing purity product to markets – Gathering & Markets Storage Distribution Optimization Fractionation imization Opti Purity Products Ethane Normal Butane Heating NGLs Petrochemical Refining Propane Natural Gasoline Isobutane Page | 45
  46. 46. Natural Gas Liquids Largest Gatherer and Fractionator of NGLs in the Mid-Continent • Two segments – NGL Gathering & Fractionation Overland Pass – NGL Pipelines Pipeline • Connected to over 90 percent p of the Mid-Continent region’s Piceance Lateral processing plants • Allows us to provide a full range p g NGL Upgrade of services to our customers Projects Woodford Extension • Integrated asset base creates opportunities for growth through major expansions into new Arbuckle Pipeline supply areas – More than $1.2 billion of internal NGL Storage NGL Pipelines NGL Fractionator NGL Gathering & Fractionation g growth projects under way th j t d NGL Market Hub NGL Growth Projects through 2009 Page | 46
  47. 47. NGL Gathering & Fractionation Key Points • Extensive raw NGL gathering system with access t 78 gas t ith to processing plants • Mid-Continent supply growth since July 2005: – Gathering volume up 30 percent – Fractionation volume up 27 percent – Fifteen new gas processing plant g g connections completed • New supply commitments drive infrastructure upgrades and expansions NGL Gathering Pipeline NGL St Storage – Rockies NGL Fractionator NGL Market Hub – Barnett Shale Gathering 2,570 miles of pipe – Woodford Shale Fractionation 399,000 Bpd capacity Isomerization 9,000 Bpd capacity Storage 24.6 MMBbls capacity Page | 47
  48. 48. NGL Gathering & Fractionation Supply • Volume growth since acquisition of Koch’s NGL system in July 2005 g q y y – New processing plant connections – Growth from existing connections Gathering Volume Fractionation Volume MBpd MBpd 251 385 391 246 370 349 232 Up 27% Up 30% 333 326 224 312 319 309 213 208 210 210 275 281 p p 193 193 189 3Q05 Q 1Q06 Q 3Q06 Q 1Q07 Q 3Q07 Q 1Q08 Q 3Q05 Q 1Q06 Q 3Q06 Q 1Q07 Q 3Q07 Q 1Q08 Q Page | 48
  49. 49. NGL Gathering & Fractionation Sources of Margin Exchange and Optimization Isomerization Marketing Storage Services Gather, fractionate, transport Obtain highest product price Convert normal butane to Purchase approximately one- and store NGLs and deliver to by directing product isobutane half of exchange volumes in market hubs movement between Conway the Mid-Continent for resale and Mont Belvieu on an index-related basis index related Fee-based Spread-based Spread-based Fee- and Commodity-based 8% 2% 11% 13% 6% 8% 73% 79% 2008 Gross Margin Guidance 2007 Gross Margin Contribution $214 million $206 million Page | 49
  50. 50. NGL Pipelines Key Points • Links key NGL market centers at Conway, Kansas, and Mont Belvieu, Texas • Connects Mid-Continent to upper Midwest • Significant supply sources in Mid-Continent – Connected to 23 gas processing plants with access to another 55 – Connected to seven fractionators • Regulation NGL Pipeline NGL Market Hub – FERC-approved tariffs Distribution 3,350 3 350 miles of pipe with 434,000 Bpd capacity Gathering 720 miles of pipe with 93,000 Bpd capacity Page | 50
  51. 51. Strong Balance Sheet Disciplined Approach to Raising Capital for Growth • $1 billion revolver • Capital structure – Funds 2008 capital expenditures – Goal: 50/50 capitalization – Strong credit rating • Permanent debt financing g of $600 million in September 2007 Debt Equity y 49% 51% • Common unit offering in March 2008, generating net proceeds of $460 million df illi Capitalization: March 31, 2008 Page | 51
  52. 52. Stable Cash Flow Cash Flow Stability Managed Within Each Segment • Predominantly fee based – Large growth projects under way increase fee-based income • Commodity and spread risk is measured and managed – 2008: 72 percent hedged on NGLs and condensate at $1.39/gallon and 78 percent on natural gas at $9.23/MMBtu Fee Fee 63% 60% Commodity Commodity 27% 26% Spread Spread 13% 11% 2007 Gross Margin: $896 million 2008 Gross Margin: $1.0 billion Page | 52
  53. 53. ONEOK Partners Growth Projects Page | 53
  54. 54. ONEOK Partners - Growth Contribution Complements Existing Infrastructure and Core Operating Capabilities • Growth projects g pj generate significant cash flow g • Growth EBITDA generated is primarily fee based • Incremental acquisition opportunities …………….EBITDA* Generated…...………… …………….Capital Expenditures…...………… $1,088 $300+ $91 $ $260+ $710 $60 $125- $ In Millions $ In Millions $150 $300-$500/year $997 $650 I I $165 $60 $105 2007 2008 2009 2010-2015 2008 2009 2010 Maintenance Mit Growth G th * EBITDA contributions assume projects are completed on schedule * Does not include WMB exercising its 50/50 option in OPPL or Piceance Lateral Page | 54 * Offsets natural declines in natural gas gathering and processing supplies
  55. 55. Growth Projects: Status Coming Online During Second-quarter 2008 Natural Gas Natural Gas Liquids q • $110 million Fort Union Gas • $216 million Infrastructure upgrades Gathering expansion – Accommodates Overland Pass Pipeline supply – 37 percent owner – Bushton fractionator expansion – Fee-based earnings – Pipeline capacity expansion between – Doubles capacity, fully subscribed Conway, Medford and Mont Belvieu y • $25 million Woodford Shale extension – 78-mile extension of Oklahoma g gathering system gy – Connects two processing plants capable of producing 25,000 Bpd of NGLs Page | 55
  56. 56. Natural Gas Gathering & Processing Growth Projects Grasslands Processing Plant Expansion Project Status Costs $30 Million Completion On line in phases by second half 2008 Dates Phase 1 Phase 2 Processing plant Permits tie-ins completed approved Construction Equipment completed ordered Grasslands Expansion Phase 1: Processing Increased from 63 to 100 MMcf/d capacity Phase 2: Fractionation Increased from 8 to 12 MBpd capacity Page | 56
  57. 57. Natural Gas Gathering & Processing Growth Projects Fort Union Gas Gathering Project Status P j t St t Costs $110 Million (Project Financed) Completion • Phase 1 – In service • Phase 2 –Second Quarter 2008 Second Dates Phase 1 Phase 2 Customers Customers committed * committed * Right of way Right of way cleared acquired ONEOK Partners Gathering Pipe delivered Pipe delivered Fort Union (37%) Lost Creek (35%) Construction Big Horn (49%) Bi H Started St t d up 11/07 contracts let Fort Union Gas Gathering • Backed by volume commitments * Phase 1: Adds 44 miles of pipe and 200 MMcf/d capacity • Doubles capacity Phase 2: Adds 104 miles of pipe and 450 MMcf/d capacity Page | 57
  58. 58. Natural Gas Pipelines Growth Projects Guardian Pipeline Project Status Costs $277 Million Completion • Notice to Proceed received May 1, 2008 Date • In service during fourth quarter 2008 Customers Pipe ordered committed * Right of way In Progress Pipe delivered acquired Construction Permits contracts let Existing Pipeline • Fully subscribed * Proposed Extension • Anchored by two 15-year agreements * Guardian Pipeline Capacity Incremental of 537 MMcf/d to eastern Wisconsin Extension 119 miles from Ixonia to Green Bay Page | 58
  59. 59. Natural Gas Pipelines Growth Projects Bison Pipeline Project Status Costs $498 Million Proposed interstate pipeline that would extend from natural gas gathering facilities located in Project the Powder River Basin to a point of interconnection with Northern Border Pipeline. Completion Projected in service November 2010 Date Bison Pipeline Customers Letter agreement reached for 250 MMcf/d foundation shipper Committed Bison Pipeline Bi Pi li Pipeline 289 miles, 24” Equity Capacity • Initial 400 MMcf/d 50% Northern Border Pipeline • Maximum of 660 MMcf/d Investment Page | 59
  60. 60. NGL Pipelines Growth Projects Overland Pass Pipeline Project Status Cost $535 Million Opal Echo Springs Completion Third Quarter 2008 Date Anchor customers Pipe ordered committed * Public right of Construction way acquired id contracts l t t t let Permit 700 approved and Construction Overland Pass Pipeline federal right of complete miles way acquired Overland Pass Pipeline • 99/1% joint venture with 50/50 option within two years of Pipeline 760 miles, 14-16” first flow Capacity • 110,000 Bpd of raw NGLs with two pump • Long-term supply agreement with Williams (~60,000 bpd) * stations • Additional commitments of 50,000 Bpd in various stages of • Expandable to 220,000 Bpd with additional negotiation pump stations Page | 60
  61. 61. Overland Pass Pipeline 760-Mile Natural Gas Liquids Pipeline from Opal, Wyoming, to Conway, Kansas Page | 61
  62. 62. Overland Pass Pipeline 760-Mile Natural Gas Liquids Pipeline from Opal, Wyoming, to Conway, Kansas Page | 62

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