Beyond the merger, ONEOK's NGL sector provided the largest share of fourth-quarter 2023 earnings at 40%. (Source: Shutterstock/ ONEOK)
With its acquisition of Magellan complete, ONEOK finished 2023 with a $900 million increase in income over 2022 and more than $335 million in cash on hand.
In 2024, the company plans to focus on incorporating its new assets and staying in a firm financial position before looking at other properties for M&A.
“Our primary focus is to continue to be integrating the Magellan acquisition and executing on the synergies and opportunities that we see to create the maximum value for our shareholders,” said Pierce Norton, ONEOK president and CEO. “We’re going to continue to be intentional and disciplined in our approach to M&A.”
Norton, speaking during ONEOK’s fourth-quarter 2023 earnings call, added that the company would consider other mergers that could strengthen the company’s position in the marketplace.
ONEOK’s acquisition of Magellan was announced in May 2023 and completed in September. The $18.8 billion deal created one of the largest midstream companies in the U.S. Executives forecasted continued savings and profit through the integration of the companies for the next three years, with an initial guidance of $175 million in 2024 and a target of $125 million in 2025.
The savings will show in ONEOK’s refined products and crude segment’s earnings, said Sheridan Swords, ONEOK’s executive vice president of commercial liquids and natural gas gathering and processing.
Beyond the merger, the company’s NGL sector provided the largest share of fourth-quarter 2023 earnings at 40%. For all of 2023, ONEOK’s NGL average daily volumes increased to 1.36 Bbbl/d, up about 9% compared to 1.24 Bbbl/d in 2022.
As a result, ONEOK plans to continue expanding its NGL capacity. The company approved an expansion of the Elk Creek Pipeline to a capacity of 435,000 bbl/d. The $355 million project will increase NGL capacity out of the Rocky Mountain region to 575,000 bbl/d and is expected to be completed in the first quarter of 2025.
The company’s 2024 capex guidance of $1.75 billion to $1.95 billion includes an NGL fractionator and a West Texas NGL pipeline expansion project.
“Healthy demand for ethane from the petrochemical industry and wide gas-to-oil ratios are setting up a positive backdrop for NGL markets in 2024,” Swords said. “On our system, we’ve assumed high levels of ethane recovery continue in the Permian Basin in 2024 and partial recovery in the Midcontinent.”
ONEOK did not include one major project, the Saguaro Pipeline, in its capex outlay for the year. Executives said they planned to wait on a final investment decision (FID) before moving forward.
Earlier this month, the Federal Energy Regulatory Commission approved the Saguaro Connector Pipeline permit to cross from West Texas into Mexico. The Saguaro pipeline would provide 2.8 Bcf/d of natural gas from the Permian Basin to the proposed Mexico Pacific Saguaro LNG export terminal on the West Coast of Mexico. ONEOK would be the owner-operator of the line and expects an FID by the middle of 2024.
“If (the Saguaro pipeline) gets FID midyear, the capital associated with that would not be a material change to 2024,” said Walt Hulse, CFO and treasurer for ONEOK. “Projects takes a couple of years to construct, and we’ll fit it right in with our capital program.”
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