ONEOK, Inc. (OKE) Q4 2007 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. And welcome to the ONEOK Fourth Quarter 2007 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later there will be a question-and-answer session, and instruction for follow at that time. [Operator Instructions]. I would now like to introduce your host for today's conference, Mr. Dan Harrison. Sir, you may begin your conference.

Good morning and welcome everyone. As we begin this morning's conference call, I remind you that any statements that might include ONEOK or ONEOK Partners expectations or predictions should be considered forward-looking statements, which are covered by the Safe Harbor provision of the Securities Act of 1933 and 1934. It's important to note that actual results could differ materially from those projected in such forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer ONEOK and ONEOK Partners filings with the Securities and Exchange Commission. And now John Gibson, who serves as CEO of ONEOK, and Chairman and President and CEO of ONEOK Partners, John? John W. Gibson - Chief Executive Officer, ONEOK, Inc.; Chairman, President and Chief Executive Officer, ONEOK Partners, L.P.: Thanks, Dan; and good morning everyone, and many thanks for participating in our call. Joining me today are Jim Kneale, ONEOK's President and Chief Operating Officer; Curtis Dinan, Senior Vice President and Chief Financial Officer for both ONEOK and ONEOK Partners; Pierce Norton ONEOK Partners Executive Vice President of Natural Gas; and Terry Spencer, ONEOK Partners Executive Vice President of Natural Gas Liquids. Here is our agenda this morning. Following a few opening remarks, we will discuss ONEOK Partners first, and then review ONEOK. Curtis will start us off and review ONEOK Partners financial performance followed by Pierce and Terry, who will review the partnerships operating performance. Then Curtis will return to review ONEOK's financial performance and Jim will review ONEOK's operating performance. Then I will make a few closing comments before we take your questions. ONEOK had an exceptional fourth quarter with net income increasing almost 40%. For the year after adjusting for the one-time gain that occurred in ONEOK Partners in 2006 on the sale of 20% interest in Northern Border Pipeline, ONEOK's annual net income increased more than 10%. For both the fourth quarter and the year, all three of ONEOK's segments performed extremely well. In the quarter, ONEOK Partners benefited from higher commodity prices that positively affected the partnerships gathering and process in operations. And the NGL pipeline business had its first quarter of earnings from the North System, the NGL and refined petroleum products pipeline we acquired on October 1. For the year, the ONEOK Partners segment was positively affected by the continued growth of NGL supply in the Mid-Continent region, which resulted in more barrels of NGLs being gathered, fractionated, transported, and sold. It's also worth noting that the partnerships natural gas gathering and processing business turned in solid results for the year, especially since they had to overcome anticipated contract terminations late in 2006, which reduced volumes available for processing. The distribution segment turned in higher results for the fourth quarter and full year primarily as a result of new rates schedules in Kansas and Texas. The new Kansas rate schedule added $13.5 million of margins in the fourth quarter and $51.1 million for the full year. Our energy services segment had a good year and exceptional quarter, fourth quarter results benefited from improved transportation, storage and marketing margins. However, full year results were lower primarily due to reduced transportation margins caused by lower basis differentials and the impact of the third quarter Cheyenne Plains pipeline outage that we discussed at our last conference call. So, now let's take a more detailed look at ONEOK Partners. Curtis Dinan will now review the financial highlights and results. Curtis?

Thank you, John and good morning. ONEOK Partners continued its outstanding performance in 2007 with a really strong fourth quarter. Net income in the fourth quarter of 2007 was $122 million or $1.27 per unit compared with $80 million or $0.82 per unit in the fourth quarter of 2006. During the fourth quarter of 2007, our gathering and processing segment benefited from strong commodity prices. Our natural gas liquids pipeline segment benefited from the North System acquisition that was completed during the quarter and increased throughput related to new NGL supply connections. Full year 2007 net income was $408 million or $4.21 per unit, excluding a gain from the sale of a 20% interest in Northern Border Pipeline during 2006, net income for 2007 increased $76 million or 23% over 2006. For the year, distributable cash flow increased 27% to $466 million or $4.92 per unit. During 2007, our natural gas liquids businesses grew from the connection of new NGL supplies and our gathering and processing business delivered higher results despite lower processed volumes due to contract terminations in late 2006. During 2007, the partnership completed the $300 million North System acquisition and spent $650 million on capital expenditures for its growth projects including the Overland Pass pipeline and related NGL infrastructure upgrades. The Guardian II expansion and the Midwestern extension; these expenditures have been financed with available cash, our revolving credit agreement and the issuance of $600 million of 30 year notes. ONEOK Partners ended 2007 with 900 million available under our $1 billion revolving credit agreement. The partnership remains well positioned to execute its growth capital program that is expected to contribute incremental EBITDA during the second quarter of this year as Overland Pass pipeline and related infrastructure, upgrades, and expansions come online. Recently, ONEOK Partners increased its quarterly distribution to an annualized rate of $4.10 per unit. This is the eighth consecutive distribution increase since the dropdown of the ONEOK assets in April of 2006. During this period, the partnership has increased distributions by 28%, demonstrating our commitment to growing unit holder distributions. At the new annualized distribution rate of $4.10, our distribution coverage ratio for 2007 was 1.2 times providing the opportunity to consider additional distribution increases in future. John, that concludes my remarks regarding the partnerships financials. John W. Gibson - Chief Executive Officer, ONEOK, Inc.; Chairman, President and Chief Executive Officer, ONEOK Partners, L.P.: Thanks, Curtis. Now let's review the operating results of ONEOK Partners, which as you recall now consisted of four segments, two in natural gas and two in natural gas liquids. First, Pierce Norton will discuss the two natural gas segments, gathering and processing and natural gas pipelines. Pierce?

Thanks John. and good morning. The natural gas gathering and processing segment had an exceptional quarter and a very solid year. This segment is based on diversity contributed to volume stability with growth in the Rockies continuing to offset decline in the mid-continent region. In the fourth quarter of 2007, the segment's operating income increased by more than $35 million primarily from high-realized commodity prices, which added $19.8 million. The quarter also benefited from an $8.6 million contract settlement that results several outstanding issues that had occurred over a number of years. This settlement was tied to a contract renegotiation with one of our producers. These events happen frequently in this business that are not usually this large. The important takeaway in this instance is that the new contract is in place on the same volume and no future earnings were affected by this settlement. When looking at the full year 2007, the gathering and processing segment contributed slightly more income than in 2006. A notable feed considering the decline in process volumes from the anticipated contract terminations in late 2006. Through a combination of our employees' commercial efforts and a strong focus on controlling operating cost, we were able to exceed the prior year's record performance. Recently processing spreads have tightened, giving us a good reason to talk about its impact on this segment. Our contract mix by volume currently stands at 61% fee, 30% is percent of proceeds and only 9% is keep hold, which are the contracts that are affected by processing spreads. As a result, the processing spread has less impact on our earnings in this segment. In addition to having less than 10% of our volume susceptible to the processing spread, we ended the year with more than 84% of our keep hold contracts containing conditioning language, allowing them to convert to a fee when processing spreads are negative well above of our stated goal to incorporate conditioning language on 75% of the keep hold volumes. When you combine all of our commodity affected contracts, percent of proceeds and keep hold, the greatest sensitivities are to natural gas liquids and crude oil prices. We have taken steps to secure the revenue affected by price movement on these two commodities by locking in 2008 prices on 70% of our expected NGL production at an average price of $1.28 per gallon and a 74% of our expected condensate production at $2.15 per gallon or $90.30 per barrel. Now taking a look at our growth activity in the natural gas gathering and processing segment, the first phase of Ford Union Gas Gathering system expansion in the Powder River Basin was completed in November. The final phase is expected to go into service by mid-year. As a 37% owner of Fort Union, our equity earnings will continue to increase in the future with a completion of this project. Upon completion of the final phase of the Grasslands processing plant expansion expected later this year we are poised to capture the growth in and around this Williston Basin asset. For the third consecutive year, we have experienced a record number of new well connects in this region. There are currently 50 plus rigs operating in North Dakota indicating a start to yet another record year for drilling. The natural gas pipeline segment earnings were down slightly in the fourth quarter primarily due to higher employee related costs. Excluding the gain of the sale of 20% of Northern Border Pipeline in the second quarter of 2006, earnings were also down for the full year primarily as a result of decreased transportation revenues from slightly lower throughput and higher fuel costs. This was partially offset by higher storage revenues from both new contracts and renegotiated rates on existing contracts. Equity earnings, which consist primarily of our Northern Border Pipeline are relatively flat in the fourth quarter, but were down for the year due primarily to reduced ownership in the Northern Border Pipeline. Looking at our growth projects for the Natural Gas Pipeline Segment, in December, we received and accepted the certificate of public convenience and necessity issued by the Federal Energy Regulatory Commission for the Guardian Pipeline expansion and extension. The certificate authorizes us to construct, install and operate the 119 mile extension into the Green Bay area. Currently this project is on schedule as reported, and is estimated to be completed in the fourth quarter of 2008. The Midwestern Gas Transmission extension project was completed and put into service in early January and would deliver the first full year of earnings in 2008. John, that concludes my remarks. John W. Gibson - Chief Executive Officer, ONEOK, Inc.; Chairman, President and Chief Executive Officer, ONEOK Partners, L.P.: Thanks Pierce. Now Terry Spencer will review the two natural gas liquid segment, gathering and fractionation in NGL pipelines. Terry?

Thanks John, and good morning everyone. The natural gas liquids businesses had another outstanding quarter topping up a great year. We continue to see NGL volume growth positively affecting both segments and as drilling and exploration activity drive new natural gas process and plan developments particularly in Oklahoma, and Texas Panhandle. Now let's take a look at each natural gas liquid segment. The natural gas liquid gathering and fractionation segments, fourth quarter results benefited from higher volumes, driven by both new NGL supplies connected to our system, and growth from existing plant connections, and higher product price spreads. Gathered volumes were up 17% and fractionated volumes were up 23% over the same period last year. During the fourth quarter, we connected one new processing plant to our Mid-Continent System, bringing the total to four new plants connected in 2007, adding approximately 16,000 barrels per day new NGL supplies, and 15 new connections adding over 60,000 barrels per day, since we acquire these assets back in July 2005. For the year the gathering and fractionation segments EBITDA increased 22%, again primarily driven by increased NGL volumes from new supply connections as well as higher throughput at our Mont Belvieu fractionator. In 2007, we also saw higher spreads between products and locations. In 2008, we will continue to stay focussed on adding new NGL supplies to our Mid-Continent gathering and fractionation systems. And in fact work is under way to connect as many as seven new gas processing plants during the year, adding approximately 36,000 barrels per day. To accommodate some of this growth, we recently announced a $25 million expansion over Oklahoma NGL gathering system to connect two new gas processing plants, operated by Devon Energy and Antero Resources in the Woodford Shale Play in southeast Oklahoma. These two plants will have the ability to produce approximately 25,000 barrels per day with NGLs adding new supplies to our Mid-Continent system as well as our previously announced Arbuckle Pipeline once it is completed. Our natural gas liquids pipeline segment also had an exceptional fourth quarter. NGL lines transported were up more than 50% compared with the fourth quarter last year driven by NGL supply growth from new plant connections and the addition of the North System and interstate NGL and refine petroleum products pipeline system and related assets we acquired in October of 2007. During our first quarter operations of the North System, we have already started pursuing opportunities to enhance the system to meet growing customer needs and to position the assets for future growth. Also during the fourth quarter 2007, we began construction on the Overland Pass pipeline. As you may recall, we received approval last October from various local states and federal agencies to begin construction on the pipeline. Recent heavy snowfall and high winds in Wyoming have presented some construction challenges. Winter conditions this year have been far worse than any winter in recent history and many locals suggest that conditions this severe have not been seen or experienced in Southern Wyoming since the early 1980. We have also been requested by the Wyoming office of the Federal Bureau of Land Management to temporarily idle pipeline construction in certain areas to accommodate the seasonal migration patterns of big game animals and the nesting activities of birds of prey. We are working diligently in cooperation with the BLM to develop timely plans for the completion of construction within those areas. BLM lands account to less than 10% of the entire project route. Our construction periods continue to make good progress on the projects in other parts of Wyoming, Colorado, and Kansas. As with any pipeline construction project of this magnitude completion and cost of the project can be impacted by risk factors beyond our control, such as the weather and the surrounding natural environment. Overland Pass is currently expected to begin operating during the second quarter. At present, more than 50% of the pipeline construction has been completed. Contracting with NGL supplies relating to Overland Pass continue to move forward as we are nearing final agreements with several suppliers to commit as much as 50,000 barrels per day of NGLs to our the new pipeline, for which when combined with the Williams dedication of 60,000 barrels per day from two plants in Wyoming and 30,000 barrels per day from two plants in the Piceance basin in Colorado, bringing the total commitments to Overland Pass to approximately 140,000 barrels per day. We will announce more details when definitive agreements with the new suppliers are finalized assuming the suppliers agreed to such announcement. We also continued to make good progress on permitting and right of way acquisitions relating to two of our previously announced projects, the Arbuckle pipeline in the Piceance Lateral. To-date nearly 70% of the total 440 mile Arbuckle route has been surveyed. Pipe at the steel mill continues to be rolled with over 300 miles completed and early 250 miles of pipe has been delivered. Regarding the Piceance Lateral, we continue to work closely with BLM to complete the required construction permitting process in the timely manner. Our supply activities for Arbuckle are making favorable progress as new natural gas processing plant projects continue to be proposed along the planned pipeline route. We are in discussions with those parties for NGL supply commitments to our pipeline. Drilling success in Barnett Shale and Woodford Shale and other areas along the proposed route particularly in Southern Okalahoma and North Texas continue to drive new processing plant projects. The Arbuckle pipeline is well positioned to serve those new plants and the associated incremental NGL production. At the time of start up in early 2009, we currently expect Arbuckle to be shipping approximately 65,000 barrels per day of NGLs to our Mont Belvieu fractionator and other facilities in the Texas Golf Coast. These volumes are consistent with our initial business plan and economic analysis for the project. In addition to the 65,000 barrels per day, we have committed by start up, we also currently are in negotiations with the owners pending new plant projects that could add another 20,000 barrels per day to Arbuckle. As you begin to link together, the pieces of the growing supplied picture in the Rockies and Mid-Continent and Central Texas, the lead and purpose for Arbuckle becomes very evident. The completion will link the United States major production growth periods to the Texas Golf Coast markets. In the Piceance Basin, the supplier outlook for NGLs remains robust. New natural gas process and capacity in the field has come online producing large volumes of NGLs tightening the capacity of the existing NGL infrastructure. In addition to already committed production from two Williams processing plant from the Piceance Basin, which are capable of producing up to $30,000 barrels per of NGLs. We will be well positioned to serve other gas processing plants as well as existing NGL infrastructure to move NGL as this rapidly growing region. With more than $1.1 billion in growth activities underway in our NGL businesses, we remain very focused on the successful execution of this project. We also continue to assess new expansion opportunities within our core footprint and those regions to be accessed by the large pipeline project that we currently have under way. John, that concludes my remarks. John W. Gibson - Chief Executive Officer, ONEOK, Inc.; Chairman, President and Chief Executive Officer, ONEOK Partners, L.P.: Thank you, Terry. Now, let's turn our focus ONEOK, where Curtis Dinan will now review ONEOK's fourth quarter and full year 2007 financial highlights. Curtis?

Thanks, John. ONEOK's net income in the fourth quarter of 2007 was $103 million or $0.98 per share compared with net income of $75 million or $0.66 per share in 2006. All of ONEOK's segments performed very well during the quarter. In addition to the results for ONEOK Partners that were previously discussed, our distribution segment benefited from rate increases. Our energy services segment benefited from improved transportation margins and higher storage and marketing margins resulting from higher seasonal storage spreads. Full year 2007 net income was $305 million or $2.79 per share. Excluding ONEOK share of ONEOK Partners gain from the sale of a 20% interest in Northern Border Pipeline during 2006, net income for 2007 increased $31 million or 11% over 2006. As previously described, our ONEOK Partners segment performed very well during the year. The partnerships for distribution increases for 2007 have increased with annualized distribution by $0.18. These distribution increases create an additional 6.7 million of annual cash flow from the limited partner unit that ONEOK owns. It also increases the incentive distributions to ONEOK's general partner interest by $15 million annually. With the growth forecast by ONEOK Partners from its 1.6 billion of internal growth projects and the recently completed North System acquisition, we expect future distribution increases will continue to create earnings and cash flow growth for ONEOK. On a standalone basis, ONEOK ended 2007 with a debt-to-capital ratio of 51%. Last week, ONEOK retired 402 million of maturing long-term debt primarily with available cash that reduced our debt-to-capital ratio to approximately 47%. During 2007, standalone cash flows from operations excluding the effects of working capital exceeded capital expenditures and dividends by $182. Looking forward to 2008, we anticipate that free cash flows will continue to be in $160 million to $200 million range. John, that concludes my remarks. John W. Gibson - Chief Executive Officer, ONEOK, Inc.; Chairman, President and Chief Executive Officer, ONEOK Partners, L.P.: Thanks, Curtis. Now Jim Kneale will review ONEOK's operating performance. Jim?

Thank you John, and good morning. Pierce, Terry, and Curtis have already discussed ONEOK Partners 2007 results and the partnerships expected earnings growth, so I won't spend any time on those issues. However, I will remind you that growth and earnings at ONEOK Partners has and will continue to resolve in significant additional earnings growth at ONEOK because of our 45% ownership position in the partnership and our role as general partner. Looking at our distribution segment, we had solid performance in the fourth quarter and the full year. In the fourth quarter, operating income increased to $61 million, which is 24% over last year. The increase was due to implementation of new rates scheduled in Kansas and Texas and lower operating costs partially offset by reduced volumes in Oklahoma as a result of the December ice storm when many of our customers were without electricity. For the year, the story is similar. Operating income improved to $174 million compared with $118 million in 2006. New rates are returned to more normal weather and a continued emphasis on cost control were the primary drivers. The significant improvement in margins over last year was primarily the result of the implementation of new rate schedules in Kansas and Texas as well as higher residential and commercial sales volumes. Operating cost for the year increased slightly affected by higher bad debt expense in Oklahoma. However, our bad debt expense still remains below industry averages. Although property taxes were higher in Kansas, there is an offset in margins as they are recovered to a surcharge mechanism. Our efforts to control expenses through process improvement and other initiatives continued to show results across all three distribution companies. Our efficiency in metrics such as the number customers per employee increased in both the quarter and the year. We continue to make progress on the regulatory front. This month, we received approval to implement $3.1 million in new rates in El Paso effective February 15, 2008. In August, we filed for a capital recovery mechanism in Oklahoma that would allow us to recover and earn a return on capital investments made for expanding and maintaining our distribution systems. We have similar capital recovery mechanism in Texas and Kansas. On February 15, 2008, the administrative law judge recommend approval for us to recover $7.6 million to a customer surcharge billing in 2008, we believe the commission will sign the order in the next few weeks. Looking forward, we will continue our focus on improving profitability and returns through execution of our integrated strategy. Now, turning to energy services segment; the fourth quarter was strong and the highest ever. Operating income was $76 million, up almost $15 million from the same period in 2006. Improved transportation, storage and marketing margins were the big drivers as higher seasonal storage spreads and withdrawals occured partially offset by lower financial trading margins. Operating income for 2007 of $205 million was below last years results, primarily due to reduced transportation margin and the third quarter 2000 an impact of the Cheyenne Plains gas pipe line outage that John already mentioned. We also saw higher lease storage fees and lower natural gas price volatility then in 2006. Offsetting these declines were improved storage margins due to higher realized seasonal storage spreads increased revenues from premium services sold and optimization activities. The volume of natural gas marketed increased in 2007 and the margin for unit remains strong at $0.19 per Mcf, which is down slightly from last year. In 2006, we benefited from usually high natural gas price volatility as a result of supply disruptions created by the 2005 hurricanes. Our 2007 earnings reflect a summer-winter pattern of high first and fourth quarter earnings driven by sales of natural gas related to winter weather. This logically follows the profile of our large demand base customers local distribution companies. Unless we see extreme weather event this summer and fall, which impacts natural gas pricing, we would expect the 2008 earnings pattern to follow the same trend. John, that concludes my remarks. John W. Gibson - Chief Executive Officer, ONEOK, Inc.; Chairman, President and Chief Executive Officer, ONEOK Partners, L.P.: Thanks Jim, before we open it up to questions, let me make a few additional comments. While the partnership's primary focus last year, and again this year is on the safe timely execution of our large growth projects, we are continuing in our efforts to find additional opportunities to grow. It's worth noting that in 2007 alone, we identified, developed and announced more than $500 million in large growth projects, primarily the Piceance NGL Pipeline Lateral that will connect to the Overland Pass pipeline and the Arbuckle NGL Pipeline that will transport volumes from the Woodford Shale in Oklahoma and the Barnett Shale in Texas to the Texas Gulf Coast. These two projects along with a few smaller ones are in addition to the more than $1 billion in growth projects we announced in 2006. Going forward, we are confident in our ability to develop additional large growth projects and acquisitions, reaffirming our belief that we have the right assets in the right places with a significant amount of embedded growth potential. And because of the efforts of our employees, we are constantly in the market place talking to producers and customers to identify new opportunities to grow. In closing, I would like to thank all of our employees, who make ONEOK a great place to work, to do business with, to invest in. Without their contribution and hard work, we could not deliver these results. Operator, we are now ready for questions. Question And Answer

[Operator Instructions]. The first question is from Ted Chung [ph] from Bear Stearns.

Hi. Good morning, thanks for your earnings call and congratulations. I had two questions; one is regarding the comments you just made at the end about the growth initiatives and acquisition strategy. Where would you see within the context of those comments, your... where would you see your ratings or where would you be willing to let your credit ratings go or not go. And then the second question is if you could address whether or not you have any debt issuance plans or the probability of capital markets transactions this year of both the partnership and the parent? John W. Gibson - Chief Executive Officer, ONEOK, Inc.; Chairman, President and Chief Executive Officer, ONEOK Partners, L.P.: Ted, this is John Gibson. I will answer you this way and then turn it to Curtis for more detail. But as far as our credit ratings, we have stated many times, we have an investment grade rating and we intend to keep that it's very important to us as we manage and grow this portfolio of assets. Curtis, is there anything you like to add to that point?

Ted, this is Curtis. Just to echo what John said, and as I mentioned in my remarks, we have finished 2007 with capacity of about 900 million on our revolving credit agreement. We just completed the $600 million offering last fall, which was used to finance the North System acquisition and to at that completely pay down the revolver. We are now into the revolver at about a $200 million level. So it's going up a little bit since year-end, but that leaves, $800 billion available to finance projects that we have coming through the balance of 2008. Ted, did that answer for your question?

Yes, yes. John W. Gibson - Chief Executive Officer, ONEOK, Inc.; Chairman, President and Chief Executive Officer, ONEOK Partners, L.P.: More questions?

No that's great. Thank you. John W. Gibson - Chief Executive Officer, ONEOK, Inc.; Chairman, President and Chief Executive Officer, ONEOK Partners, L.P.: You are welcome.

[Operator Instructions]. The next question is from Louis Shimmy [ph] from Zimmer Lucas.

Hi, good afternoon everybody; congratulation on strong year. My question was regarding your expected NGL volumes for the next year. What was implied by the hedging guidance that you gave was something like a 177 million gallons expected productions for 2008. I am just wondering how that compares to your 2007 numbers? John W. Gibson - Chief Executive Officer, ONEOK, Inc.; Chairman, President and Chief Executive Officer, ONEOK Partners, L.P.: Louis, it's John. I am not sure that I've got those numbers in gallons, but I will refer this to Terry, and I am not even sure what we put in the guidance. But I am not sure that we put an expected volume.

I am just using the amount of NGLs that you hedged in the 70% numbers that? John W. Gibson - Chief Executive Officer, ONEOK, Inc.; Chairman, President and Chief Executive Officer, ONEOK Partners, L.P.: You've got two different issues here. So, let me try it up.

Sure. John W. Gibson - Chief Executive Officer, ONEOK, Inc.; Chairman, President and Chief Executive Officer, ONEOK Partners, L.P.: Separate those and clarify. The first is the liquids that were hedged are in the... are the equity NGL barrels or gallons that are produced and owned by the gathering and processing segment. So, those are different from all of the barrels that we gather and fractionate and market inside of our gathering and fractionation segment in our NGL business.

I understand that, I guess what I am asking is of those equity volumes, how does your expectation for 2008 compared to the equity volumes that you took on in 2007? John W. Gibson - Chief Executive Officer, ONEOK, Inc.; Chairman, President and Chief Executive Officer, ONEOK Partners, L.P.: I am sorry; Louis, you are talking about the price expectations. Is that correct?

No, the volume expectations. John W. Gibson - Chief Executive Officer, ONEOK, Inc.; Chairman, President and Chief Executive Officer, ONEOK Partners, L.P.: Volume expectations; well, I will get the question right here in a minute.

Okay. John W. Gibson - Chief Executive Officer, ONEOK, Inc.; Chairman, President and Chief Executive Officer, ONEOK Partners, L.P.: Let me... since I am not doing a very good job, this I will flip it to Pierce.

Well, Louis, the way I would answer that is that the volume expectations that we used in the guidance is the same ones that we go back to look at for what the amount that we hedged. So those volumes actually are in support of what were in the guidance and what we hedged.

Okay, and historically for the year that has just ended, what would the comparable numbers be? Would it be higher or lower than what you are expecting?

The hedges that are in place are inline and supportive of their guidance.

Okay, thanks a lot. John W. Gibson - Chief Executive Officer, ONEOK, Inc.; Chairman, President and Chief Executive Officer, ONEOK Partners, L.P.: Thank you, Louis.

The next question is from Faisel Khan from Citigroup.

Good morning. John W. Gibson - Chief Executive Officer, ONEOK, Inc.; Chairman, President and Chief Executive Officer, ONEOK Partners, L.P.: Good morning, Faisel, how are you?

All right. How are you doing? John W. Gibson - Chief Executive Officer, ONEOK, Inc.; Chairman, President and Chief Executive Officer, ONEOK Partners, L.P.: Fine, thank you.

Okay. Wondering if you could talk a little bit about NGL demand, kind of higher level in terms of what you are seeing your customers? Is there any softness in demand, given the supposed slowdown in the economy that we are seeing or how your customers reacting to current price? John W. Gibson - Chief Executive Officer, ONEOK, Inc.; Chairman, President and Chief Executive Officer, ONEOK Partners, L.P.: Faisel, it's John. The short answer is we've not seen any degradation in our... in the demand whether that be in the refining business or petrochemical business, but perhaps Terry could share a bit more detail on that.

John, what I can add to that is that the outlook... you read the reports and studies on the petrochemical side, particularly which is a bulk of the demand. And you do see some outlook for some degradation driven by the economy. But we are... right now, the signals are mixed, I mean we are seeing still... continue to see strong demand and consumption. The utilization rates at crackers are as high as they have ever been; international demand is still very strong. So you are getting kind of mixed signals. Where that lead us, we don't know? John W. Gibson - Chief Executive Officer, ONEOK, Inc.; Chairman, President and Chief Executive Officer, ONEOK Partners, L.P.: Faisel,the other thing I would add is the component of the barrel that is on the margin from the demand standpoint is as it has been in the past, ethane. But I think it goes without saying that all components other than ethane remain very strong. Ethane for... in general is about a third of anybody's barrel.

Right. John W. Gibson - Chief Executive Officer, ONEOK, Inc.; Chairman, President and Chief Executive Officer, ONEOK Partners, L.P.: And so we keep a very watchful eye on ethane.

Okay.

Faisel,on the heavy side, we are seeing very strong demand across the board on heavy products.

Right. Mostly from your refining customers, I would take it. John W. Gibson - Chief Executive Officer, ONEOK, Inc.; Chairman, President and Chief Executive Officer, ONEOK Partners, L.P.: Would you mind repeating that?

Mostly from your refining customers?

Right. John W. Gibson - Chief Executive Officer, ONEOK, Inc.; Chairman, President and Chief Executive Officer, ONEOK Partners, L.P.: Yes, right, correct.

And then in terms of the Overland Pass pipeline, everything is... is everything on time in our budget compared to your last estimates?

So far, everything is looking good. I did indicate in my statement this issue with the Bureau Land Management and we are working with them very closely to get back into some of these sensitive areas, but right now the project is making very good headway, particularly in Colorado and Kansas; and right now our expectation still for the pipeline to be operational in second quarter.

And then in terms of the $1.6 billion of growth projects you have underway, is there any... is that a firm number or is there any room for inflation in those numbers or costs? John W. Gibson - Chief Executive Officer, ONEOK, Inc.; Chairman, President and Chief Executive Officer, ONEOK Partners, L.P.: Overall, those $1.6 billion represents the dollars we anticipate spending in total for all of those. So, if you would... any contingency that we expect or have planned are in those numbers as I think Terry or may be Pierce pointed out in their remarks, anytime you are in aggressive building campaign with particularly large projects. You always stay on the opportunity, unfortunately or the risk for unforeseen things to happen. But we don't have any of those dollars in there, because quite candidly, I don't know exactly how you would deal with that uncertainty.

Okay. How does your procurement for those materials work? Have you ordered close to the pipe and compression and pumping equipment or -- John W. Gibson - Chief Executive Officer, ONEOK, Inc.; Chairman, President and Chief Executive Officer, ONEOK Partners, L.P.: Yes,what you are dealing with right now is just like to for example what Terry is pointing out is lot of snow, particularly on Overland Pass. But all the materials have been acquired, the long lead items... in many cases we are already on ground, we've got pipe for Arbuckle, which is already sitting on the ground. We are in the process of acquiring right of way for all the pipelines that we have announced. And again, as it stands right now, we are... we feel very confident in our numbers and in our schedule.

Great, thanks for the time. I appreciate it. John W. Gibson - Chief Executive Officer, ONEOK, Inc.; Chairman, President and Chief Executive Officer, ONEOK Partners, L.P.: You bet, Faisel.

[Operator Instructions]. There are no further questions. John W. Gibson - Chief Executive Officer, ONEOK, Inc.; Chairman, President and Chief Executive Officer, ONEOK Partners, L.P.: Okay. Well, thank you all very much. This concludes the ONEOK and ONEOK Partners call. As a reminder, our quiet period for the first quarter will start when we close our books in early April and will extend until the earnings are released. We will provide a reporting date and conference call information for the first quarter at a later date. Christy Williamson and I will be available throughout the day for any follow-up questions. Thanks for joining us and have a good day.

Ladies and gentlemen, thank you participating in today's conference. This concludes the program; you may now disconnect.