Please stand-by, we’re about to begin. Good day and welcome to the First Quarter 2015 ONEOK and ONEOK Partners Earnings Call. Today’s call is being recorded. At this time, I would like to turn the conference over to Mr. T.D. Eureste. Please go ahead.

Thank you and welcome to ONEOK and ONEOK Partners’ first quarter 2015 earnings conference call. A reminder that statements made during this call that might include ONEOK or ONEOK Partners’ expectations or predictions should be considered forward-looking statements and are covered by the Safe Harbor provisions of the Securities Acts of 1933 and 1934. Actual results could differ materially from those projected in any forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer to our SEC filings. Our first speaker is Terry Spencer, President and CEO of ONEOK and ONEOK Partners. Terry?

Thank you, T.D. Good morning and many thanks for joining today. As always, we appreciate your continued interest and investment in ONEOK and ONEOK Partners. On this conference call is Derek Reiners, our Chief Financial Officer. Also with us are Walt Hulse, Executive Vice President of Strategic Planning and Corporate Affairs; Wes Christensen, Senior Vice President, Operations; Sheridan Swords, Senior Vice President, Natural Gas Liquids; Kevin Burdick, Vice President, Natural Gas Gathering and Processing; and Phill May, Vice President, Natural Gas Pipelines. As you know, our first quarter financial results were released yesterday afternoon. For all first quarter financial information and year-over-year variants explanations please refer to our ONEOK and ONEOK Partners earnings news releases. In our remarks today, Derek will focus primarily on the sequential quarter variances. I’ll focus my remarks on ONEOK and ONEOK Partners’ expectation to achieve its 2015 financial guidance ranges, which we reaffirmed in last night’s earnings release. And I will give some insight into 2016. Before I hand the call over to Derek, I would like to reiterate that our financial guidance expectations have not changed for 2015. The first quarter was challenging, largely due to the anticipated step change in our realized commodity prices from 2014 into 2015 which significantly impacted our first quarter results. However, we do not expect first quarter results to have a material impact on our year-end projections for ONEOK or ONEOK Partners. There are still challenges and opportunities that will unfold as the year progresses. And one of our goals today is to provide insight into our expected path forward to meet our financial objectives. I will now turn the call over to Derek for a brief discussion of ONEOK Partners’ first quarter results compared with the fourth quarter of 2014. Derek?

Thanks, Terry, and good morning. At ONEOK Partners, the natural gas gathering and processing segment’s first quarter 2015 operating income was down compared to the fourth quarter of 2014 primarily due to a decrease of $46 million in lower net realized NGL prices, and a decrease of $8 million due primarily to lower natural gas volumes in the Mid-Continent. We were predominantly un-hedged in the first quarter 2015, as the majority of our hedges are timed for the remaining three quarters. The natural gas liquids segment’s first quarter 2015 operating income was down compared to the fourth quarter 2014 primarily due to a decrease of $18 million due primarily to narrower realized NGL product price differentials and significantly narrower NGL location price differentials. A decrease of $6 million in exchange services margins, which resulted primarily from lower volumes from customers in the Mid-Continent region, caused primarily by customer freeze-offs and gas plant outages, offset partially by increased volumes from recently connected plants in the Williston Basin and lower cost associated with these services, partially offset by an increase of $7 million in transportation margins primarily from new volumes from the Permian Basin transported on the West Texas LPG pipeline system, which were lower than expected due to the impact of well freeze-offs on the system from severely cold weather in the first quarter of 2015. Operating costs increased $4 million, and depreciation and amortization increased $5 million related to the completion of growth projects and the West Texas LPG pipeline system acquisition. The natural gas pipeline segment’s first quarter 2015 operating income was down compared to the fourth quarter of 2014, primarily due to a decrease of $21 million from lower short-term storage services, due to milder weather-related demand and a $5 million gain on the sale of natural gas and storage in the fourth quarter 2014. In March, ONEOK Partners completed an $800 million public offering of senior notes, generating net proceeds of approximately $792 million. It increased the credit facility and commercial paper program to $2.4 billion each from $1.7 billion, and issued approximately 1.7 million units through our aftermarket equity program, generating net proceeds of $71.6 million. At March 31, we had approximately $443 million of common units available for issuance under the $650 million program. We will continue to take a balanced approach and remain disciplined on how we determine our debt and equity needs. Our investment-grade credit rating at the partnership remains very important to us. At ONEOK, $169 million in distributions were declared by ONEOK Partners in the first quarter of 2015, a 16% increase from the same period last year. Cash flow available for dividends for the first quarter was $152 million, providing 1.2 times coverage of the ONEOK dividend. We will continue to make prudent financial decisions that are in the long-term interest of ONEOK and its shareholders. Terry, that concludes my remarks.

Thank you, Derek. I would now like to take this opportunity to provide visibility into our volume projections, capacity expansions, and operational execution, which we expect to enable ONEOK and ONEOK Partners to achieve its 2015 financial guidance and provide some further insight into our 2016 volume outlook. Starting with our natural gas pipelines business, with primarily fee-based revenue and long-term firm contracts we expect this segment to contribute $225 million in operating income and equity earnings in 2015. In the short-term, we will continue to provide quality transportation services to end-use markets and producers; provide short-term flexible storage and loan services to meet market needs; and grow long-term fee-based storage revenues. This segment’s long-term growth opportunities include continuing the expansion of our natural gas pipelines asset footprint by leveraging the Permian, Mid-Continent, and Upper Midwest platforms. Our recently announced RoadRunner Gas Transmission pipeline joint venture serving growing markets in Mexico is a great example of fee-based growth opportunities we are planning to take advantage of, as this project is expected to result in additional upstream-related capital projects at attractive returns. Additionally, we are expanding our Midwest gas transmission, or MGT, pipelines, bidirectional pipeline to increase deliveries into the Chicago markets from the Marcellus and Utica basins. Demand for capacity on this bidirectional pipeline continues to grow, and the flexibility and connectivity of MGT is key to meeting producer end-market needs. The low natural gas pricing environment and mandates related to air emission standards are providing many opportunities to generate incremental fee-based earnings as we expand our assets to meet the growing electric generation needs as coal-to-gas conversions continue. Phill and his team continue to develop the fee-based projects such as pipeline expansions and compression facilities to support these opportunities. In our natural gas gathering and processing segment, we expect…

Thank you. [Operator Instructions] We’ll take our first question from Matt Niblack with HITE Capital.

Thank you, and congratulations on continuing to maneuver through a tough environment here. Just one thought, given the sharp decline in your equity price here, which might view really as a trough evaluation and one that will hopefully improve over time as you see some of the benefits of capturing some of those flared volumes and some of the completions that require you to some of the mandatory regulations of their North Dakota. Do you have the flexibility to put off equity offerings both overnight and in your ATM until, at least, the second-half of the year in order to hopefully see some of those reflected in your business and then transparently your equity price?

Yes, Matt, I think, that’s a good question, and it’s certainly something we have to balance. We’ve got stakeholders kind of on both sides of this with debt holders. We mentioned that our investment-grade credit rating is very important to us. Obviously that helps us fuel or finance the growth that we’ve got ahead. But we do have to balance the equity, and we have some flexibility, but we have said many times that our targets are to be 50-50. And so we do expect issue equity along the way.

Okay.

Yes, Matt, the only thing I would add to is, and we have said this in the past that it is likely that in 2015, we will be issuing some equity, we just haven’t provided specific timing on that.

Okay. And then turning back to North Dakota, so how impactful is this regulation that they have in the state that you need to complete wells within 12 months of drilling them? Is that really going to create an uptick in the volumes coming out of the Bakken, at least, temporarily and consequently onto your system, or do you see that as less meaningful?

Yes, Matt, I’ll let Kevin Burdick take that.

Yes, Matt, we - the way we view that is we talk our producers. Yes, there is that year requirement where they complete the wells from when they drill it. There is an extension process, though, that is relatively easy to get from the standpoint. So we have had some producers say, yes, they will complete within a year, but then others, if they do need to get an extension, they can do that.

So overall, the magnitude of that phenomenon though, do you see that as significant or not that significant?

No, we - I don’t - we don’t see that as significant when we - as we look at our volume forecast over 2015.

Okay. Thank you very much.

We’ll take our next question from Ross Payne with Wells Fargo.

How are you doing, guys?

Good, Ross. How are you?

Good. Good. Currently, you guys are mid-triple by Moody’s or on negative outlook. But given your CT paper program and what have you, do you - is it your objective to keep that particular rating? S&P has you at BBB-, but is it important for you to keep the mid-triple by Moody’s?

Yes, Ross, this is Derek. And I think both Moody’s and S&P have us at a stable outlook at the moment. Mid-BBB is where we would like to stay. We’ve done some things - obviously, we scaled back capital spending and reduced our distribution growth rate in February, we announced that. So we’ve clearly indicated that we expect to continue to issue some equity along the way to support these investments. So we think all those things are supportive of the credit rating and hopeful that that will allow us to build through this. We see significant volume increase in the back-half of 2015, which we expect will drive our earnings higher and help reduce that leverage as well. So from our point of view, it’s a relatively short-term stretch here, and we think that we get back on top of it later this year.

Okay. Thank you. And yes, it is stable, my apologies on the mistake in that. And then finally, kind of follow-up to the earlier question, given the extension capabilities by producers, how are they thinking about doing extensions? What pushes them to do that in a low price environment, and how do you gain comfort that they won’t overuse that extension to potentially hurt you meeting your volume objectives? Thanks.

Well, Ross, again, that’s just the capability they have. In our discussions with producers, there’s not a lot of them that are delaying completions due to price. The primary reason that we believe that the backlog is growing as it is like Terry referenced the multi-well pads and waiting until the summer as costs go down as they can drive costs out in their completion process. So, again, we don’t necessarily see that that extension process or that year-long timeframe where they can drill the - or complete the wells is material as we look at our volumes.

Okay, great. That’s very helpful, guys. Thank you.

Thanks, Ross.

We’ll take our next question from Christine Cho with Barclays.

Hi, everyone. Thanks for all the color.

Hi, Christine.

You guys gave a lot of numbers and I tried to jot everything down. But when we think about the sequential volume decline in the NGL segment, can you give us an idea of how much came from your equity volumes versus third parties and how much came from Voss Bakken versus Mid-Con? Then going forward between now and the 4Q 2015 number exit rate that you gave us, when we think about the growth of the volumes in the second-half of this year for the NGL segment, whether it’s through well connect or just capturing the gas that’s being flared, can you break down maybe percentagewise how much of it’s coming from the Bakken versus Mid-Continent/Rockies?

Christine, I’m going to let Sheridan take a crack at that.

Your first question on equity volumes that we have is actually from fourth quarter to first quarter, the volumes that we received from our affiliate GMP processing plants was flat. We were up in the Bakken quarter-over-quarter, but we were down in the Mid-Continent. A lot of in the first quarter, the sub-sequential change in the first quarter on our legacy volumes - on gathering, our legacy volumes were down quarter-over-quarter. But that was mostly in the Mid-Continent and mostly due to freeze-offs and we had some plants that went into some deeper ethane rejection. As we said and as Terry said earlier, as we look forward, going from now into the fourth quarter, today the Bakken pipeline is moving over 70,000 barrels a day and we expect that to ramp up through the rest of the year to get to 85,000 barrels a day coming out of that. The Mid-Continent is averaging - which is I would take - that’s everything besides the Bakken and the West Texas pipeline. The Mid-Continent is averaging about 457,000 barrels a day, and it will go up to 482,000 barrels a day by the end of the year. And in the West Texas pipeline, we think we’ll be around 260,000 barrels a day by the end of the year, and we were at - in April, we reached over 240,000 barrels a day on that pipeline.

I see. So when I look at kind of I guess like percentage increases in each of the three areas, the biggest year-over-year or - I’m sorry, the biggest increases - percentage increases are coming from the Bakken, which is where you are collecting more feed?

That’s correct.

Okay. And then I guess last quarter, Terry, you had told us, you were still assuming 15% of your NGL margins to come from optimization, isomerization, and marketing. Those margins were down big over the prior-year period, which was to be expected. However, I remember in the middle of 2013, you guys telling me that you were expecting propane supplies to be tight and speculating propane with our premium and Conway relative to Bellevue months before it happened. And so it seems like you guys had great line of sight into that. Is there anything you are seeing for the rest of this year to make you feel good about your expectations for guidance on spread-based margins this year, or am I pressing my luck, because disclosing it would give away your competitive advantage?

Well, okay, Christine. We are seeing spreads widen as we speak, so we are seeing a pretty good trend here getting established over the last couple of months. We are watching the supply inventory in Conway, particularly for propane. And propane is building quickly there, and obviously, we are at historically high levels. And we are seeing demand for propane continued to be robust down on the export side down on the Gulf Coast. So that’s all contributing to wider spreads. So I don’t know how magical that visibility is, but a lot of that information is readily available. But it’s telling us that spreads are going to go wider. So we do have a view for the balance of the year that we could see propane spreads in that $0.07 to $0.10 of gallon range, which is significantly wider than what we’ve seen in the last couple of quarters.

Okay.

Sheridan, do you have anything to add to that?

No, that’s exactly right. I mean, as you can see, Conway is - it’s not only we are increasing inventory up there, but you see our numbers, our production and propane in the Mid-Continent will also increase, as we go forward throughout the year.

Okay. I guess also lastly, can you give us an estimate of what the impact of well freeze-offs were from the Permian Basin as well as your other service territories during the quarter?

Yes, in the Permian Basin there was quite a bit of time that we had 40,000 to 60,000 barrels a day off our system. In the Mid-Continent, we probably had 20,000 to 30,000 barrels a day for extended periods of time throughout the first quarter due to the well freeze-offs.

I’m sorry, one more question. Can you give some more color on these changes in your contract mix in the G&P segment? And should we expect to see more that going forward?

Yes, we’ve been - Christine, this is Kevin. We have been pretty open about trying to shift over time some of our commodity exposure to fee-based. In our conversations with our producers, we’ve been working that hard as contracts come up for renewal. And, yes, I would expect to see that trend continue.

Okay. Thank you.

Christine, the only thing I would add to that is that we’ve had some considerable success in restructuring these contracts to more of a fee-based component that is reducing the commodity-sensitive sharing part of the contract and expanding on the fee-based. But we’re also providing added services and flexibility and additional features to those contracts to benefit the customer. So they have been pretty well received. It’s probably not going to be a one size fits all. They all have little - each contract has little nuances and differences depending upon the specific needs of the producer. So we’ve had some good success and expect to continue to have success as we go forward.

Great. Thank you so much for the color.

You bet. Thank you.

[Operator Instructions] We’ll take our next question from Craig Shere with Tuohy.

Good morning. Thank you, Terry, so much for that incredibly detailed guidance.

Glad, you appreciate it, Craig. We did it just for you.

Well, apparently, the markets don’t appreciate it enough, you rallied off the low today on ONEOK even now you are back down 6.5% I guess people just don’t get it.

Yes, hopefully they’ll digest it and feel better, actually digest it.

Well, on that note picking up a little on Matt’s question about the equity performance, given the well-supported outlook. I believe in the last quarterly call you expressed, Terry, that you were keeping minds open about the use of excess cash at the C Corp. level for M&A, future dividends, and share repurchases, and possible OKS support. In light of the equity performance, in light of the need to issue some more equity down the road this year at OKS, are you leaning at all towards OKE share buybacks or just directly supporting OKS from the parent?

Well, certainly, Craig, we look at all those things. And what you just mentioned are a number of great levers that we can pull if we feel like we need to. The fact of the matter is this low-coverage environment is not an environment that we expect to persist long-term. So as we have provided plenty of color on this call and how we expect our volumes to increase and our margins to improve and coverages to get better, we expect to grow out of this weak coverage environment. So we are able to do what we need to do at OKS in the immediate future. So really no need for OKE to step in and provide some support at this point in time, although we look at it. Our individual boards - our boards at OKS and our boards at OKE look at their needs separately and make their determinations. And right now, what we’re doing at OKE with our cash, retaining excess cash in this very uncertain environment, we think is prudent and it makes good sense.

You know, often when people talk about parent support, they are talking about IDR forgiveness. I was thinking more along the lines of using your cash to buy the equity rather than selling it to the market.

Yes, and we do look at that, and have, and continue to.

Okay. And one more question. Look if any of us knew where commodity prices would be in six months, none of us would have to work for a living. So obviously hedging is a problematic effort at best and just a method of smoothing things out. Can you kind of update around your targets and the drivers behind hedging, given the fact you kind of entered this year a little bit under-hedged and we’ve already started hedging out into 2016?

Yes. Sure, Craig. We have some guidelines that we go by, obviously. We’d like to be at least 75% hedged for a particular year. And in the past, the strategy that we’ve employed was pretty much holding off doing that hedging until we got into the winter season where we could typically find higher prices to hedge. And clearly, that strategy this past year didn’t work very well. And so as we go forward, we think it’s prudent - regardless of what our point of view on pricing may be, it’s prudent to take some of this risk off the table. In particular for 2016, we are already pretty well hedged for 2015. But in particular for 2016, we think it’s prudent to systematically take some off as we go forward. Did that help you?

That certainly does. I mean, it’s worked in prior years, as you say, but no strategy works forever. So I appreciate the feedback.

Candidly, there’s still downside in commodity prices.

You think from this point with prompt oil at $60 and oil next year like $65-ish that we could take another dive?

Craig, nothing surprises me in terms of what commodity prices could or couldn’t do.

All right. Well, it’s a good thing you have a lot of organic known growth with flared gas backing out.

You bet. We’ve got a unique situation up there in the Williston, and we are working hard to take care of our customers.

Thank you.

You bet. Thank you.

We’ll take our next question from Chris Sighinolfi with Jefferies.

Hey, Terry. How are you?

Hey, Chris. How are you?

I’m well. I just wanted to follow up - maybe this is a question for Sheridan but I really appreciate you sort of detailing the NGL barrel composition the way you did. I was just curious to know if I look at that relative to what the EIA might have reported let’s say year-to-date for pad 2, for example, where a lot of your assets are located. It’s quite a bit different, particularly as I think about ethane and then C5+. And so I’m just wondering, ethane rejection aside, if your barrel would have always reflected this type of composition, or has something changed? And then, as it relates to that, is there anything that you guys see on a go forward outside of ethane rejection that would materially change the composition as you described it?

I will make a couple comments, and then Kevin can chime in here. Obviously with a 50% plus propane percentage, that barrel excludes a lot of ethane. The C5 component down to about 1% by inspection would seem very low. And that’s driven in part by the fact that we’ve got a lot of condensate that falls out in our system. So a lot of that C5 winds up falling out of the NGL barrel we recovered in our pipeline system, recovered in our atmosphere tankage across our entire gathering systems, and sell those barrels primarily by truck sales. So that’s why you get that strange looking breakdown and why in the past it’s probably been challenging for you and others to calculate that composite because it doesn’t look exactly the same as what the EIA puts out. Kevin, do you have anything else to add to that? Yes. That help Chris?

Yes - no, it does. So we are seeing when you report the separate condensate figure, that’s effectively capturing the heavy end of your barrel in part.

Exactly. And I don’t think we’ve had a single contributor to a change in any past molecular breakdown. I think it stayed fairly consistent. If you normalize for the condensate, you normalize for the ethane rejection, I think our core volumes have stayed fairly constant. And you guys, correct me if I’m wrong.

No, I think that’s right.

Okay.

Okay. That’s really helpful, Terry. And then I guess as it relates to the barrel and pricing expectations, as we think about your hedge profile for the balance of the year, can we think about that as being somewhat equally distributed over the three remaining quarters, or is there something from a mix shift that would weight it more heavily towards the back end - realizing that your volumetric projection is a contangoed ramp into the end of the year?

Actually, I think, Chris, it actually ramps up as you move through the last three quarters. Okay, so you will have increasing hedged positions as move throughout the balance of the year.

Okay, great. Thanks for the added color. Appreciate it.

You bet. Thank you, Chris.

We’ll take our next question from Michael Blum with Wells Fargo.

Hi, good morning, guys.

Good morning, Michael.

Just a couple of quick questions. One, where are you seeing ethane rejection these days? I guess both - either your number, or if you have a stab at what industry looks like. Has that changed at all?

It has, actually. We’ve seen ethane rejection volumes in the first quarter. We were about 160,000, 165,000 barrels a day. And today, as we speak in April, if we took a snapshot, we’d see about 190,000 barrels per day. So we have seen it increase though.

And is that in any particular region?

Primarily, it would be Mid-Continent and West Texas. I mean - Sheridan, you got anything? Go ahead and add something.

My point is across our system. I mean obviously, the Bakken has been up forever, and the Mid-Continent, we still - we’ve seen a little bit more plants going to ethane rejection there that weren’t in last year. And also another increase - the reason that we are increasing from the 165,000, you said this first quarter to 190,000, it’s also because we have more volume on as well. More volume coming on, and that volume is coming on - it doesn’t have any ethane in it.

Got it. That makes sense. And then just on your earlier comments on the MGT pipeline and the bidirectional service you’re offering, can you just talk a little bit about that in terms of what type of capacity you have to offer. Is that signed up? And what sort of capital is associated with that?

Sure, I would go let Phill May take that question.

Sure, Michael. Yes, MGT is in the upper Midwest, and the facility connects with the Chicago hub, and it is bidirectional. You have 600 million a day going south and then 500 million a day going north. The facility has been very strategic for some of the Utica and Marcellus producers to access movement of their molecules into Chicago via some of the other pipelines that interconnect with MGT. We are looking at a couple of expansions. One is announced that will move 125 million a day into Chicago from the Rockies express interconnect, and that is under construction currently. And we are also evaluating additional expansions and visiting with the same producer community in the Utica and Marcellus to access more capacity on that facility.

Got it. Thank you very much, guys.

You bet. Thanks, Michael.

We’ll take our next question from Eric Genco with Citi.

Good morning.

Good morning.

Just a quick I guess clarification question. I appreciate all the help you’ve kind of given us on the NGL barrel and trying to get to the realize prices. I was curious as to what assumptions we should make in terms of transportation or basis on top of sort of whatever we have for the barrel components. Because it looked to me - and maybe I need to go back and look at the numbers as you kind of given some new numbers on NGL barrel composition that the unhedged barrel should have been around $0.60 last quarter assuming no basis. And I’m trying to figure out maybe there’s about $0.20 of basis in there. Is that correct? Because I guess the Bakken NGL pipeline has gone from being maybe about $0.21 to $0.13 depending on how you look at it per gallon. And then I guess you would add Oberland Pass in there, about $0.05 per gallon, for the Bakken NGL - I guess the Bakken volumes. Is that a fair way to look at it? And what kind of help could you give us there?

Eric, I’m not sure that it is. I’m not sure that I followed all of those - you put all those pieces together. Kevin, you got a comment?

Well, I mean, the concept of getting to the TNF is correct. But, again, I’m like Terry, I’m not sure I’m following your tracking the individual components you’re looking at there.

Well, maybe if we step back, is there a way to give us a sense based on the way you think the volumes come in to certain percent from the Bakken, a certain percent from the Mid-Con, what type of basis would you take out of there?

Well, actually, I think - from a NGL perspective, Eric, we provided some transparency in my remarks, and that will help you a lot in terms of that basis. And we provided specific transportation and fractionation rates from the Bakken, from the Mid-Continent, and West Texas. That can help you allocate that basis, if you will, back to the NGL barrel.

Okay, I’ll take a look at that and come back to you if I have questions. Thank you.

You bet.

We’ll take our next question from Ross Payne with Wells Fargo.

Yes, just a quick follow-up question. Propane prices obviously have been fairly depressed in here. I just wanted to know if you guys had any thoughts on what might drive that north alongside with what we’re seeing with the crude. Thanks.

I think, obviously, we need some more increased demand, and we see that coming on later this year as more export capacity is brought online. That will help lift that up. Also if it goes too much deeper, we think there’s probably some more that the crackers could consume if propane prices go a little bit lower than they are today. So they’re consuming a lot today, but they consume a little bit more. So that’s why we think that it will ramp up. We will see a little bit of strength in propane, but it will be later this year.

Okay, and finally on your hedges, you are obviously doing a decent amount given a substantial portion of the barrel is propane for you guys. Is that fair to say?

Yes.

Great. Okay, thank you.

Thanks Ross.

With no further questions in the queue at this time, I would like to turn the conference back over to our speakers for any additional or closing remarks.

Thank you for joining us. Our quiet period for the second quarter starts when we close our books in early July and extends into earnings are released after the market closes on August 4, followed by our conference call on August 5. We will provide details on the conference call at a later date. Thank you for joining us.