ONEOK's Geographic Diversity Brings Benefits

Researched by Industrial Info Resources (Sugar Land, Texas)--Midstream company ONEOK Incorporated (NYSE:OKE) (Tulsa, Oklahoma) is poised to take advantage of its geographic footprint in the U.S. by having gathering, processing and fractionation assets in the energy hotspots across the country, including the Williston Basin of North Dakota, the Permian Basin and Gulf Coast region of Texas, and the Rocky Mountains region. In the recently passed first quarter of 2022, the company showed increasing year-over-year results in its natural gas liquids (NGLs) and natural gas pipelines segment. ONEOK is capitalizing on its results by constructing both an additional gas processing train in North Dakota and another NGL fractionator in Mont Belvieu, Texas, but may be slowing large growth projects in future years.

In a Wednesday conference call with analysts, ONEOK Chief Commercial Officer Kevin Burdick spoke of the company's first-quarter operational results, noting that it saw double-digit NGL volume growth across all operating regions compared to first-quarter 2021. ONEOK's overall NGL throughput volumes increased 17% year over year on increased producer activity and increased ethane recovery. NGL throughput in the Rockies increased 24% compared with first-quarter 2021. Midcontinent NGL volumes increased 10% year over year, and the company saw a 23% increase from the Permian Basin.

To help process the NGLs, which executives expect to keep trending higher, ONEOK is constructing a fifth fractionator at its complex in Mont Belvieu. Burdick said, "In the Gulf Coast, construction continues on our 125,000-barrel-per-day (BBL/d) MB-5 fractionator in Mont Belvieu, which we now expect to be complete in the second quarter of 2023." Construction began in early 2019 but was delayed at the onset of the COVID-19 pandemic. Burns & McDonnell Incorporated (Kansas City, Missouri) is providing engineering, procurement and construction services on the project, which when completed, will boost ONEOK's system-wide fractionation capacity to more than 1 million BBL/d. Subscribers to Industrial Info's Global Market Intelligence (GMI) Production Project Database can click here for the detailed report.

ONEOK's gas processing volumes in the Rocky Mountains region increased 11% year over year, averaging 1.3 billion cubic feet per day. Burdick said ONEOK saw strong activity from producers in the region and expects these activities to trend higher for the remainder of the year. The company connected 91 wells in the region in the first three months of the year.

Burdick said gas processing volumes in the Williston Basin also are on track to grow. To meet this demand, ONEOK is underway with construction on a third gas-processing train at its Demicks Lake facility in McKenzie County, North Dakota. The train will be capable of processing 200 million cubic feet per day, and will bring the site's total natural gas processing capacity to 600 million cubic feet per day. Like the fractionator in Texas, construction was delayed at the onset of the COVID-19 pandemic but is now on track to be completed in first-quarter 2023. Subscribers can click here for the project report.

As increasing petrochemical plants are brought online in the U.S., so is the demand for ethane feedstock, which is benefitting ONEOK. "As natural gas prices have increased this year, ethane prices have kept pace, providing attractive ethane-recovery economics in certain areas of our system," said Burdick. "While first-quarter ethane recovery is typically lighter due to natural gas heating demand and typical winter-weather impact, we see strong ethane recovery opportunities for the remainder of the year."

In the past few years, ONEOK has completed other major projects, including another fractionator, a gas processing train and the Arbuckle II NGL pipeline from Oklahoma to Mont Belvieu. The fifth fractionator and third processing train in the Williston Basin may spell the end of major projects from the company for a while. Chief Executive Officer Pierce Norton II said, "Our systems have significant capacity to grow alongside the needs of our customers, and because our large infrastructure projects are complete, we now have opportunities for bolt-on expansion projects with quicker in-service dates, attractive returns and minimal capital requirements."

ONEOK reported first-quarter 2022 net income of $391 million, compared with $386 million in the prior-year quarter.

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