ONEOK: Touch as Many Molecules as We Can, as Often as We Can, as Long as We Can

Written by Paul Wiseman for Industrial Info Resources (Sugar Land, Texas)

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Summary

ONEOK decided in 2021 to do mergers and acquisitions (M&A) with planning and intention. Its goal has been to connect the dots in the oil field to bring a variety of pipelined resources all the way from source to destination.

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Leave No Molecule Behind

Midstream giant ONEOK (Tulsa, Oklahoma) has greatly increased its footprint in both geography and product since it made a decision in 2021. At an investor call on Tuesday, company leaders explained their strategy. Leading the discussion was ONEOK Chief Executive Officer Pierce Norton's declaration, "We want to touch as many molecules as we can, basically as often as we can, for as long as we can. That's the premise of our strategy."

In 2021, as the industry and the world were recovering from COVID shutdowns, Norton said the management team decided to "really assess our competitive advantage." The resulting acquisitions were carefully calculated to do several things: connect isolated lines and facilities, expand the company's connections "from well to water" for exports, and to reach beyond just natural gas, to natural gas liquids (NGLs), refined products, crude oil and exports.

Where They Are Now

ONEOK's pipeline network now totals about 60,000 miles due to the following acquisitions:

• Magellan ($18.8 billion, May 2023)
• Easton's Gulf Coast NGL system ($280 million, May 2024)
• Medallion and EnLink ($5.9 billion, August 2024)

Along with pipelines, those acquisitions have added to their facilities, including:

• Gathering, fractionation, transportation and storage of NGLs
• Gathering, processing, transportation and storage of natural gas
• Transportation, storage and distribution of refined products
• Gathering, transportation and storage of crude oil

No Line is an Island

Norton noted that by starting with the acquisition of Magellan, ONEOK set the stage for the next steps and greatly expanded its market. Thereby, "we got much larger in the refined products business with jet fuel, diesel and gasoline distribution." Due to Magellan's existing market strength, it created cash flow for ONEOK to sustain earnings and move to other buys.

EnLink was the next significant one, he said. Its significance was to get the Oklahoma-based company "into the Permian," giving ONEOK a toehold in the most productive oil basin in the world.

He added, almost punning, that Magellan paved the way for Medallion and EnLink because, "All of those assets were pretty much on islands. Our assets connected all those. The whole thing really flowed into our strategy."

Mapping a Strategy

A company map of current assets reveals the M&A strategy, showing the Midwest laced with ONEOK interconnections. Hubs are visible in the Bakken, the Permian, North Central Texas, the Texas-Louisiana Gulf Coast, and blanketing most of its home state of Oklahoma.

Click on the image at right for a ONEOK map of its pipeline network.

This ties in with Norton's "many molecules" plan, with the larger name of "well to water." The latter involves having the contracts, the pipelines and the fractionators and other processing to get production either to refineries or to export on the Gulf Coast, without any outside help. For the latter, the connection between the Permian and the coast's Mont Belvieu, Texas, facilities is key.

From In-the-Ground to LNG

Norton referred to the phrase "30 at 30," which refers to the expectations that Gulf Coast liquefied natural gas (LNG) exporters could reach or at least approach 30 billion cubic feet per day (Bcf/d) of capacity by 2030, which ONEOK could be part of. "It's almost double what we have currently," he observed.

He said most of that gas will come from nearby basins, at least in the near term: the Permian (West Texas) and the Haynesville (east Texas and northeast Louisiana). It would be years before pipelines could connect Appalachian gas to the Gulf, but ONEOK's Bakken connections could connect that area to the coast before Appalachia.

As Permian wells mature and become gassier, Norton sees natural gas production, along with casing head gas and NGLs, increasing there even in a flat oil environment, should those prices remain low. He said he expects ONEOK's new strategy to advantage the company in that realm.

"All of those are going to continue to grow, which means just more liquids for us and filling up our assets because we do have the operating leverage both out of the Bakken, out of the West Texas area and with the fractionation that we're putting back in at Medford (the Oklahoma site of a ONEOK NGL fractionation plant)."

The Mid-Continental area (Mid-Con) of Oklahoma and Kansas could yet contribute to LNG supplies.

ONEOK Chief Commercial Officer Sheridan Swords said Mid-Con "continues to become more and more exciting for us for increased volume growth out of that," with potential higher revenue from rising natural gas prices due to demand from LNG exporters and data centers.

Subscribers to Industrial Info's Global Market Intelligence (GMI) Oil & Gas databases can access detailed profiles of 596 ONEOK plants, 95 projects worth $8.39 billion and more than 1,400 pipelines.

By the Numbers

• 60,000: Miles of pipeline now owned by ONEOK
• Almost $25 billion: Amount spent since 2023 on acquisitions

Key Takeaways

• Now the sixth-largest midstream company, ONEOK has carefully chosen its acquisitions to maximize connections and markets, while streamlining costs and minimizing dependence on competitors.
• It hopes to be a key part of the infrastructure buildout required to meet LNG export goals by 2030.

About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).