ONEOK, Inc. (NYSE:OKE) Q1 2026 Earnings Call Transcript

ONEOK, Inc. (NYSE:OKE) Q1 2026 Earnings Call Transcript April 29, 2026

Operator: Good morning, and welcome to ONEOK’s First Quarter 2026 Earnings Conference Call. As a reminder, this call is being recorded. [Operator Instructions] With that, it is my pleasure to turn the program over to Megan Patterson, Vice President, Investor Relations. You may now begin.

Megan Patterson: Thank you, Angela. Welcome to ONEOK’s First Quarter 2026 Earnings Call. We issued our earnings release and presentation after the markets closed yesterday, and those materials are available on our website. After our prepared remarks, management will be available to take your questions. Statements made during this call that might include ONEOK’s expectations or predictions should be considered forward-looking statements and are covered by the safe harbor provision of the Securities Acts of 1933 and 1934. Actual results could differ materially from those projected in forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer to our SEC filings. With that, I’ll turn the call over to Pierce Norton, President and Chief Executive Officer.

Pierce Norton: Thank you, Megan, and good morning, everyone, and thank you for joining us today. Joining me on the call are Walt Hulse, Chief Financial Officer; Randy Lentz, Chief Operating Officer; and Sheridan Swords, our Chief Commercial Officer. Yesterday, we reported first quarter earnings and raised our 2026 financial guidance, reflecting strong performance and building momentum. Before we get into the quarter, I’d like to take a step back and frame the environment we’re operating in and how we think about ONEOK’s role within it. Energy markets remain dynamic, but long-term fundamentals are strong. It remains clear that the U.S. energy infrastructure is essential for economic growth, industrial competitiveness, power demand and global energy security.

Midstream’s role is similar. We connect supply and demand safely and efficiently across cycles, not around them. That’s where ONEOK differentiates itself. We built a regionally diversified integrated platform at scale across natural gas liquids, natural gas, crude oil and refined products, anchored by an innovative employee base, the interconnectivity of our assets, customer relationships and a predominantly fee-based model. Our systems sit in and around some of the most resilient basins and durable demand centers, including power generation, industrial demand and export markets. As we look to the remainder of 2026, our high-level priorities remain consistent, operate safely and reliably, execute our capital growth program with discipline, maintain balance sheet strength and financial flexibility and leverage our integrated asset advantage and strong customer relationships to continue driving volume growth across all of our systems.

These priorities are grounded in what we see across the U.S. energy landscape where long-term demand remains constructive, both domestically and globally. U.S. natural gas demand is growing, across power generation for emerging data center demand, industrial activity and liquefied natural gas exports. LNG export capacity alone is protected to more than double over the next decade, reinforcing the durable global call on U.S. energy and natural gas infrastructure. 65% of U.S. natural gas production contains recoverable natural gas lipids. That means the infrastructure to handle natural gas liquids must be addressed alongside natural gas. This requires full value chain infrastructure and continued investments in natural gas, natural gas liquids, crude oil and refined product assets by companies like ONEOK.

At the same time, NGL demand remains strong globally, driven by petrochemical and international markets, with U.S. supply playing an increasingly critical role. And finally, the resilience and innovation of the U.S. energy industry continues to stand out. through consistent efficiency gains and reliable results. Recent global events have only reinforced the importance of secure, resilient energy supply. — and the cripple roll U.S. energy plays in providing it. The world has seen that the most expensive energy is the energy that does not show up. As global demand continues to grow, infrastructure not supply is the constraint, and that is exactly where ONEOK is positioned, providing scalable, strategically located infrastructure with capacity and the ability to respond to evolving demand dynamics.

I’ll now turn the call over to Walt Hulse for our financial update.

Walter Hulse: Thank you, Pierce. As Pierce mentioned, we are increasing our 2026 financial guidance, reflecting the strong performance we delivered in the first quarter across ONEOK’s integrated systems and our higher expectations for the remainder of the year. We now expect 2026 net income to increase to a midpoint of approximately $3.5 billion, with diluted earnings per share increasing to a midpoint of $5.53. We are also increasing our adjusted EBITDA guidance to a midpoint of $8.25 billion. These updates reflect strong underlying business segment performance as well as increased opportunities across our system. Driven in part by a more constructive market environment that developed late in the first quarter. As we move into the back half of the year, the combination of higher volumes, completed projects and market tailwinds should be reflected more clearly in our results for the balance of this year and into 2027.

Our total 2026 capital expenditure guidance remains unchanged at $2.7 billion to $3.2 billion. Turning to the first quarter performance. ONEOK reported net income of $776 million or $1.23 per diluted share, a 12% increase compared with the first quarter of 2025. Results included a noncash impairment of $60 million or $0.07 per diluted share after tax related to our Powder Springs logistics joint venture in the refined products and crude segment. Adjusted EBITDA for the quarter totaled approximately $2 billion, a 13% year-over-year increase driven by higher volumes, and strong segment level performance. As market conditions strengthened towards the end of the quarter, we also saw additional opportunities across our system. We continue to expect the first quarter to be our lowest EBITDA quarter of the year, consistent with our typical annual cadence and seasonal dynamics.

Importantly, our balance sheet and capital framework remains strong. We continue to prioritize financial flexibility while investing in the business and returning capital to shareholders. In April, we redeemed nearly $500 million of outstanding notes due July 2026, and we entered into a $1.2 billion term loan further enhancing balance sheet flexibility in a rapidly changing market. Our results reflect the same themes that underpin our strategy: A high-quality largely fee-based earnings mix, strong performance across our integrated systems and disciplined cost and capital management. And our increased financial guidance reflects both this consistent execution year-to-date and improving market dynamics. I’ll turn it over to Randy for an operational and large capital projects update.

Randy Lentz: Thank you, Walt. From an operational standpoint, our focus remains on safe and reliable performance across our integrated assets. Our teams continue to execute well across all 4 business segments, managing normal seasonality and weather-related impacts. The scale and diversity of our systems allow us to absorb those seasonal dynamics while continuing to provide reliable service to our customers. Winter Storm created temporary wellhead freeze-offs that briefly reduced throughput. But as a reminder, there were no material downtime on our assets on those — related to those impacts were already reflected in our original 2026 guidance. Turning to capital projects, we’ve made strong progress so far this year. In the first quarter, we completed the relocation of our 150 million cubic feet per day shadow fax natural gas processing plant from North Texas to Midland Basin.

We expect a steady ramp-up of volumes as producer activity remains solid in the area. We’re also on track to complete expansions of our Delaware Basin processing assets in the third quarter, increasing our capacity in the basin by 110 million cubic feet per day, in addition to our 300 million cubic feet per day Bighorn processing plant that remains on schedule for completion in mid-2027. In the Powder River Basin, we’re on track to complete construction of our 60 million cubic per day in center plant in the fourth quarter of 2026. This plant will increase our processing capacity in the Powder River to more than 100 million cubic feet per day, we expect capacity to deal quickly from wells already drilled and expected to be drilled by our 15% JV Parker plant.

Across other segments, our Denver area refined products pipeline expansion will add 35,000 barrels per day of capacity when an inter service midyear and Phase 1 of our Medford NGL fractionator will add 100,000 barrels per day of Mid-Continent fractionation capacity in the fourth quarter. These projects remain on schedule and are positioned to deliver meaningful near-term benefits by improving reliability, expanding connectivity and increasing optionality by also creating long-term durable value across our footprint. I’ll now turn it over to Sheridan for a commercial update.

Sheridan Swords: Thank you, Randy. Commercially, we continue to see active engagement across our asset portfolio. Demand is supported by downstream particularly from power generation, industrial and petrochemical demand and export linked markets. These dynamics reinforce the importance of strategically located infrastructure and long-term relationships. Looking at the first quarter, we delivered strong year-over-year volume performance across our assets. despite typically seasonal headwinds. Starting with the Natural Gas Liquids segment. Performance was led by broad-based volume growth across all 3 of our core regions. In the Rocky Mountain region, NGL volumes increased 11% year-over-year, driven by higher base volume and increased ethane recovery.

In the Mid-Continent, volumes increased 4% year-over-year, driven entirely by C3+ volume, even as the region experienced some temporary impacts of winter storage earlier in the quarter. In the Gulf Coast Permian region, volumes increased more than 30% year-over-year, primarily reflecting base volume growth from newly connected third-party plants that were delayed last as well as higher short-term volume opportunity. From a global perspective, NGL demand remained structurally strong, and recent geopolitical dynamics have further reinforced the attractiveness of the U.S. supply. request for capacity on our announced LPG export dock were already increasing and have accelerated more recently as customers look to do supply toward the U.S. Turning to the refined products and crude segment.

Year-over-year refined products volumes increased 12%, supported by strong gasoline and diesel demand, refinery maintenance dynamics, favorable regional basis differentials and wide crack spreads that drove strong refinery utilization. Lending volumes were also strong during the quarter. We entered the spring blending season significantly hedged, which limited our exposure to binding ore — to butane spreads. Historically wide basis differentials between New York Harbor, where we hedge and the Mid-Continent where we sell product, also impacted realized margins. Looking ahead, we’ve secured additional hedges on fall volumes at higher prices and extended new hedges into spring 2027. Importantly, lending volumes continue to be driven primarily by system throughput rather than EPA RVP waivers, which typically create only modest incremental opportunities.

Increased gasoline throughput and completed synergy projects provide a much greater benefit allowing us to optimize blending activity across our system. More broadly, the reach and flexibility of our refined product systems remain a key advantage. We are the only refined products pipeline system with bidirectional access between the Mid-Continent and the Gulf Coast, which allows us to attract incremental volume and respond to changing market conditions. Demand fundamentals remain strong. We continue to see very strong diesel demand across our system, which we expect to remain as we move into spring agricultural season. We also anticipate a robust summer travel season. supported gasoline demand across our footprint. Additionally, jet fuel supply remains constrained for an extended period, we could see incremental demand for gasoline.

Refined products and exports have increased in recent months amid global supply titers, particularly related to diesel, and we are well positioned with dock capacity across multiple Gulf Coast marine facilities, crude dock utilization remained robust at our highly contracted joint venture, and we are in discussions to extend our contract expiring capacity at favorable rates. Finally, higher-margin Permian crude oil gathering volumes increased compared with the fourth quarter as activity in the basin remains favorable of discipline. Moving to the natural Gathering and Processing segment. We delivered strong year-over-year volume growth, led by the Mid-Continent where volumes increased 7%. Mid-Continent producers continue to focus activity across both gas-focused and liquid-rich plays, and we have 11 rigs currently operating at costs more than 1 million dedicated acres in this region.

In the Rocky Mountain region, processed volumes increased year-over-year even with winter weather and heater treater impacts. As operating conditions normalize, we expect volumes to strengthen in the second and third quarters. There are currently 11 rigs on our dedicated acreage with producers continue to drive efficiency gains through longer labs. In the Permian basin process volumes increased 4% year-over-year, and we currently have 11 rigs operating across our footprint. As Randy mentioned earlier, our expanded capacity in the Permian enhances system flexibility and positions us well to support producers’ development plans across both the Midland and Delaware Basins. Customer activity remains strong, and we are increasingly encouraged by the depth of opportunities the Permian Basin brings to our portfolio.

From a financial perspective, realized commodity prices were lower in the first quarter as a result of entering the year fully hedged. Importantly, underlying throughput volumes increased year-over-year across all regions, reinforcing the long-term earning capacity and resilience of our gathering and processing portfolio. Producer behavior remains disciplined and executive focused. We are seeing some acceleration in completion activity, which supports our confidence in the 2026 volume outlook. That confidence is driven by direct visibility into producer plans rather than an expectation of higher commodity prices. This view is consistent with recent earnings commentary for oilfield services companies, the noted early signs of increasing activity.

particularly among private and single basin operators. Doug inventories can also provide an avenue for this acceleration. Our producer base across ONEOK’s approximately 7 Bcf per day system is well balanced among large public companies, private operators and private equity-backed producers. That diversity provides both scale and durability while allowing activity to adjust incrementally. I’ll close with our Natural Gas Pipeline segment, where strong results continued in the first quarter with all regions outperforming expectations. Results benefited from wider than planned Waha to Katy location price differentials as well as incremental marketing opportunities created by winter storm firm across our Louisiana assets. Looking ahead, we expect Waha to Katy differentials to normalize as new pipeline egress comes online in the second half of the year.

Firm transportation demand remains strong, with high contracted capacity and strong utilization of the system. We also continue to see significant interest from added center-related opportunities in Oklahoma and Texas and we remain in advanced discussions with several counterpoints. Additionally, LNG-related demand remains strong, both near term and long term, reinforcing the durability of demand of our natural gas pipeline assets. Pierce, that concludes my remarks.

Pierce Norton: Thank you, Sheridan, Randy and Walt for those comments. To close, I’ll come back to where I started. The energy landscape will continue to evolve, but the need for reliable, scalable U.S. energy infrastructure is not cyclical. It is driven by long-term demand fundamentals. ONEOK is built for this environment, having an integrated platform with capacity, a strong balance sheet and disciplined execution. Results, durable long-term value creation. Most importantly, none of this happens without our people. I want to thank our employees for their continued focus on safety, operational excellence, innovation and service. And thank you to our investors for your continued trust and support in ONEOK. With that, operator, we’re now ready to take questions.

Operator: [Operator Instructions] And our first question will come from Spiro Dounis with Citi.

Q&A Session

Spiro Dounis: Maybe let us start with the improved outlook, just for a little more granularity on how much of that $150 million move is maybe early realized here in the first quarter? I guess, what level of visibility you have on the remaining forward component Sheridan, you mentioned sort of hedging out butane through ’27. Just curious how much of that forward look is locked in?

Walter Hulse: Spiro, it’s Walt. So first of all, I just want to clarify, picture that — it’s clear that winter storm turn was already in our guidance. So we had zero impact from that as it related to the increase. The increase was really a blend of stronger volume expectations driven by higher commodity prices, continued expected differential opportunities, and then we, of course, expect to realize some benefit from the higher commodity prices. So though we are hedged. And typically, we’re hedged about 75% going into a year. But with the higher volume expectations, any volumes we receive going forward will enjoy the full benefit of these higher commodity prices.

Spiro Dounis: Understood. Well, second one maybe for you as well, just pivoting to capital allocation. So once again, you’re trending a little bit stronger than expected. Could you just level set us I know you’re thinking about the timing to sort of reach your leverage targets here. And when you do free up that cash flow, just where your head on buybacks or any other uses of that free cash?

Walter Hulse: Sure. Well, nothing’s really changed from our capital expenditure plan, as you know, and Randy mentioned, our projects are on time and right on budget. So we expect to start completing those this year with the Denver project finishing up and Bedford first phase finishing up, as well as some of the smaller things. As those wind down, as we’ve stated in the past, most of our CapEx — larger CapEx will be completed by midyear of 2027. And that’s when we’ll really see the free cash flow kicking in. We’re headed towards our leverage targets. Clearly, with the increased EBITDA expectations as that denominator rises, we’ll get there faster. But we continue to pay down debt and we’ll be in a position to meet our targets and return capital to shareholders appropriately.

But I want to make sure that everybody stands our first objective is always to get high return capital projects. So as we see those come in, we’ll definitely try to prioritize those. But our expectation is free cash flow, there will be funny for those. Our dividend our debt repayment as well as other forms of returning to shareholders.

Operator: Our next question comes from Theresa Chen with Barclays.

Theresa Chen: Going back to your comments on the upstream outlook, though it’s still early on. Can you elaborate further on recent conversations with your producer customers? What are your near- and medium-term expectations for upstream activity in your areas of service? And where do you think prices will need to stabilize in the outer years to stimulate a material uptick in production? And how long would it take to see these volumes potentially materialize on your system?

Sheridan Swords: Theresa, this is Sheridan. The first thing we’re seeing with producers is what we call kind of leaning in to production. And that starts with the first 1 starts with — if there’s anything that goes down there quickly getting that back up quicker than they do in a much more lower price environment. We also see them bringing on more completion crews. So that’s kind of impacting your DUCs. They go forward or bringing things on quicker than they’ve already drilled. And the other thing, as I said in my remarks, we are starting to see some producers looking for additional rigs to bring online. And as we see the environment we are today, where a lot of people see the back end of the curve coming up, people are getting more excited about what the price environment is going to be going forward.

Obviously, when we bring on rigs that the rig volume is a little more delayed into the back half of ’26 and earlier. But as I said earlier, pretty more completion crews on and when they have any downtime getting that back on will be the more near-term effect on volumes.

Theresa Chen: And the second question is related to your export infrastructure and your outlook there, given the call on U.S. Energy Resources and export infrastructure, in particular, within your existing liquids export docks on the heels of recently building out the connectivity between going to park, East Houston and your Pasadena and VP joint venture, what kind of upside — could you potentially furbish whether it be optimization on utilization or spot cargoes or even additional brownfield investment in Pasadena? And then on the LPG front, can you just talk through the commercialization process at this point? And have those conversations with potential counterparties accelerated?

Sheridan Swords: Yes. Starting with our existing facilities. We have — as you mentioned, we have 2 marine export facilities refined products on the Houston Ship Channel market and MVP. We have seen increased activity across those docks going forward. We still have more room that we could expand for and we are in conversations with customers around that. So there could be a little bit of upside in that area. — on our crude dock, it is highly utilized right now. We have a lot more interest in there. And what we’re seeing is the opportunity to extend contracts or more turn at more favorable rates than we historically have seen. So we see some tailwinds not only in ’26, but beyond in both of our export facilities. Concerns our LPG dock, yes, we are seeing an acceleration of interest.

We are sowing interest before the Middle East conflict, we’re seeing even more of that interest. And right now, we are not concerned at all about finishing the contracting of our targeted utilization of that dock here in the relative near future.

Pierce Norton: Theresa, this is Pierce. I want to add something to what Sheridan said, just to remind everybody on this call and prior to the Iran War, the U.S. and the Middle East were the only ones — only two countries that we’re actually going to expand LNG facilities over the next 5 years. And then if you fast forward to today, you look at the damage that was done to Qatar’s LNG facilities, more than likely the equipment that was ordered to do those expansions, we’ll probably go to rebuilding some of the damage that was done during these war efforts. So that means that the incremental capacity is going to really land back in the United States. And with LNG going from 18 Bcf to 30 Bcf basically by 2030, and I’d like to remind everybody, 65% plus of all the U.S. gas has recoverable NGLs with it.

So that’s really going to drive a lot of the NGL growth here in the United States, and we’re well positioned for that. Think Sheridan did a great job of explaining the LPG exports, but it’s providing a very constructive backdrop for the future volume growth here at ONEOK .

Theresa Chen: And if I could just squeeze in a final one. Your funding say, splitter in the Gulf Coast, what utilization is that seeing currently? And what’s your recontracting time line for that?

Sheridan Swords: It’s highly utilized right now, especially with the spreads that we’re seeing. And we have just recently recontracted that for term. So that will be contracted here for the foreseeable future. And we will be running at high utilization rates.

Operator: Our next question comes from Michael Blum with Wells Fargo.

Michael Blum: I wanted to go back to your comment on hedges. You said you entered the year about 75% hedged. Wondering if you can give us a sense specifically on butane blending, if that’s the case as well, if you’re 75% hedged going into the year? And then is there any kind of seasonality to these hedges? Are they sort of more back-end weighted, front end loaded or how that plays out?

Michael Lapides: Yes, Michael, this is Sheridan. We came in highly hedged for the first quarter on the butane to RBOB hedges. We do have some — had some space to hedge further out into the fourth quarter that we have done that at much higher prices after the Middle East complex going forward. The thing we’re really seeing on butane that’s really exciting for us right now is that we’re seeing, as I mentioned in my remarks, an increased gasoline volume across our system. That gives us even more opportunity to blend. And you couple that with our synergy projects that we brought online that we think we have some really good tailwinds behind our blending operation, both here in the first quarter when you see a lot of blending and in the fourth quarter when we see the fall blending season come about.

Michael Blum: Okay. Great. I appreciate that. And then I just wanted to ask the status of the potential Sunbelt Connector project. As I’m sure you’re aware, Western Gateway appears close to moving forward. So wondering if there’s a possibility that you could somehow join that project in some capacity if it does reach FID or if there’s a path for both projects?

Sheridan Swords: Yes, Michael, this is Sheridan, again. As I’ve said before, there’s — we think there’s only room for one project. And what we’ve said before is if either 1 of these projects go forward, we think it will benefit 1 of from us being able to bring volume out of the Gulf Coast into the Mid-Continent as long leave that to go to Arizona on the P66 project. And we also think that we have the ability to supply it coming out of the Gulf Coast with with us being connected to all the refiners on the Gulf Coast and the ease of getting it into the El Paso area.

Operator: Our next question comes from Jean Ann Salisbury with Bank of America.

Indraneel Mitra: You touched on [Technical Difficulty] Can you give a little bit more color about how 1 possible in your systems in 2025 and just fit with your portion and something that you would consider to increase that volume…

Walter Hulse: Jean, you were breaking up quite badly there. It’s very difficult to understand what you’re saying. Could you try that again, maybe pick up your handset?

Jean Ann Salisbury: Yes, sorry about that. I was asking about U.K. volumes and what it would take for to increase on your system?

Sheridan Swords: I mean the butane or volumes is related to blending. We’ve been increasing that for the last 3 years. I think every season, we’ve been able to blend more and more on our system as we continue to go forward, especially as we brought these synergy projects online. So to see a meaningful uptick in our system. What we need is more volume across our system on gasoline. And we are seeing that right now. And we can even see that grow. As I mentioned in there, the rest of the year into the fourth quarter, if you see jet fuel continue to be tightening — prices continue to rise people to be able to travel by airplane and move more to traveling by vehicle…

Jean Ann Salisbury: Okay. [Technical Difficulty] Hopefully is it more clear. Sorry about that. And my other was that aspire 1 than expected this year. Can you remind us if you use that exposure over the course of the year or if it’s all in 2027…

Sheridan Swords: Breaking up a little bit, Jean, but I think you said is that the Waha to Katy spread was wider this year in the first quarter than we anticipated, and we were able to capture that. We see that continue through the second quarter into the third quarter when additional pipeline capacity will come online and then it will go back to be more normalized at that time.

Operator: And our next question comes from Jeremy Tonet with JPMorgan.

Jeremy Tonet: Just wanted to touch on, I guess, the guidance thoughts on EBITDA for the year. If I look at 1Q results and granted there were items that might not repeat. But if I annualize that, that would pretty much get you to the bottom end of the guide. And if I look at last year, I look at the difference between 1Q and 4Q, it’s a pretty big step up and you talk about seasonality over the course of the year. I was wondering, if you could just help us think about shaping of the year, EBITDA by quarter, if that’s going to vary from your pattern before? Or is there kind of conservatism built into your guidance expectations at this point?

Walter Hulse: Jeremy, I’ll just point you back to the earnings presentation, I think it’s Page 5 in there where we’ve try to reflect the shape of that as well as demonstrate how the first quarter was the lowest. So we expect the shape of that curve to continue — the only thing that might change a little bit might be upward slope if we see some enhanced volume in the later part of the year. So no change on the front end and hopefully a big change on the back end.

Jeremy Tonet: Got it. So annualized in the first quarter would and does that slope will put you over the top end, it seems like. So it seems like a good year shaping up there. I was wondering, as we think about the uplift in the ’26 guide, how much of that do you see recurring in ’27?

Walter Hulse: I think we’re positioned very well to go into ’27 with a great tailwind behind us and really have some nice volume growth and strength. And I’d remind you that we have a significant amount of operating leverage on our Bakken pipeline on the West Texas LPG pipeline out of the Mid-Continent. So as volumes pick up in the basins we serve, we don’t have any incremental CapEx that needs to be spent. All that’s going to drop to the bottom line. So we’re looking pretty positively as we go into ’27. Clearly, we’ve had some benefit from the differential on the — well ahead that may not be there next year. But our system is diverse, and we find differentials all the time. As we bring on Medford, we might see a pickup in the north-south differentials as well. So were they positioned to capture those across our integrated system whenever they present themselves.

Operator: Our next question comes from Manav Gupta with UBS.

Manav Gupta: [Technical Difficulty] A little bit wet spread in terms of a thereof pipelines coming on. with involvement also, which obviously drives higher prices, which for your volumes, but if this gas gets to [Technical Difficulty] possibility you could see somewhat of a gas not over there. And I’m trying to understand if that does happen in that South Texas part, it starts to dislocate from Are there ways to capitalize on that opportunity?

Sheridan Swords: I think it’s more volume. I think what you’re asking about is could there be a cut in natural gas as we see more volume come on, especially as we see more pipelines down into the Gulf Coast area. Obviously, we’re seeing more LNG assets being brought online that will take that volume up. So we don’t think we’re going to see an overall in the Katy area as these LNG projects come on and also as we see more AI projects coming online as well.

Operator: And our next question comes from Julien Dumoulin-Smith with Jefferies.

Robert Mosca: This is Rob Mosca on for Julien. Most like the final FERC oil pipeline index came in better than expected. Can you help contextualize maybe what this means for your RPC segment and a refresh on how much of that segment is actually exposed to those FERC index interstate oil pipeline rates? And does this outcome meaningfully change your earnings outlook for RPC over the next 5 years?

Sheridan Swords: This is Sheridan, a little bit. Yes. Remember that the spread did come in better than expected, which is beneficial to us. I’ll remind you that 70% of our volume on the RPC system is market-based rates, not FERC index. So the impact in 2026 is going to be very marginal, as we go in there. But there’s a compounding effect as we continue to go forward that, that will build out every year in a little bit more as we go forward. But it’s a nice little tailwind, but it’s not substantially change our outlook for the RPC segment.

Robert Mosca: Yes, understood. And then maybe just turning back to the guide. I guess wondering if the current commodity — environment simply holds and — should we think about there being upside or something additive to guidance for the remainder of the year? I’m just trying to think through how much of that impact you’re already factoring into your rest of your outlook?

Walter Hulse: Well, I think that one of the things that you hear quite a few of — especially the larger producers talk about is that the back end of the curve right now probably isn’t really reflecting the actual physical damage that’s been done over in the Middle East. So our expectations would be today that that curve should strengthen throughout the year. We have not factored any of that into our thinking when it comes to guidance. So should that happen, we’ll enjoy that benefit going forward. Clearly, if that results in more volume, that’s a positive for us. It takes time to bring on rigs. So maybe we get a little impact in the fourth quarter, but that’s going to send us into ’27 with a lot of momentum going forward.

Operator: Our next question comes from Jackie Koletas with Goldman Sachs.

Jacqueline Koletas: Just going back to the guide, one more really quickly. How would you frame up kind of the magnitude of the optimization upside that’s now expected relative to that $150 million of year-over-year headwinds that was previously assumed.

Walter Hulse: Well, clearly, we knew going into our guidance that these pipes were going to be constrained throughout — at least the first 2 quarters and into the third, so that was factored into our guidance. So as it relates to the win spread, a good portion of that. It’s been a little stronger than we had expected. So we’ve gotten some incremental benefit. But a good portion of that was already there. When you look at the the bridge last year from ’25 into ’26, there was — a portion of that was really the the hedging that was done in ’25 or ’26 as it compared to ’25 was at some lower pricing. So that was factored into our guidance as well. So really, the potential changes to the upside if we get more volume and enjoy these higher rates on all of that. And then there’s still 25% that is unhedged that we will enjoy the higher benefits.

Jacqueline Koletas: That’s clear. And then just another — can you touch on the incremental opportunities within the natural gas segment maybe longer term? I benefiting from price differentials today, how are you thinking about your exposure to power demand and how those commercial discussions trended recently?

Sheridan Swords: This is Sheridan. We have been — we are in advanced discussions with both AI and power demand right now. We have some very nice projects that are in the queue, and then we actually have projects behind that, that we’re even working on as well as they continue to move forward. So we are very excited about what we see in the natural gas demand sector and where our assets sit, especially in the Oklahoma, Texas region for the power and AI demand going forward, and we’ll have these projects in the 2026 and ’27. So it is a good time to be in the natural gas segment for sure.

Pierce Norton: So what I would add, I know set the same thing is — when we first started talking about AI opportunities as related to power generation. We originally saw those. It’s kind of short lays smaller volumes, so not necessarily that much of a material impact. As we’ve now gone through time and we’re talking to more and more of these hyperscalers, the volumes that they’re requiring that it’s going to require us to reach back further into our systems and lay larger pipelines. So I think that’s the big change that I see from where I sit versus where we were maybe 1.5 years, 2 years ago.

Operator: Our next question comes from Keith Stanley with Wolfe Research.

Keith Stanley: Wanted to follow up on Western Gateway. As you assess what that project could do to the market, do you see it mainly as an opportunity for longer haul volumes on your system out of the Gulf Coast? Or do you think this could create constraints and meaningful new growth investments like the Denver project to expand pipeline capacity?

Sheridan Swords: Yes. I think it’s a little bit of both. Obviously, if we if we start shipping volume out of the Gulf Coast up into the Mid-Continent to fulfill volume that’s leaving the Mid-Continent to go on that Western Gateway project. That’s going to mean we’re going to get a longer tariff because we’re moving the volume from a much longer distance away. Also is our — the tariff from Gulf Coast out to El Paso. It’s a very long term, one of our higher tariffs. If we increase that volume as well, that’s going to have a very nice impact on when it can continue to go forward. And obviously, as we get more demand, will we see more expansion of product on our system? Yes, we will, as people are going to shift out the Gulf Coast more over to our system to be able to get it out to the — out to El Paso and to meet the access into the Phoenix and California markets.

Keith Stanley: Second question, the Bakken volumes were only down 2% to 3% versus Q4, that seemed a lot better than the seasonal guidance that you had pointed to last quarter on what’s typical in Q1. So would you say volumes in the Bakken surprised to the upside in Q1 versus what you were expecting?

Sheridan Swords: Yes, a little bit. I mean, the winter is always a little bit. We try to average it out over the 4 months and everything else. So it can be a little bit surprising to us where where the winter actually hits and when we see the volume come online. So I would say outside of winter storm and firm, we have seen — we’ve been surprised with our volumes in the Bakken.

Operator: Our next question comes from Brandon Bingham with Scotiabank.

Brandon Bingham: I wanted to maybe talk about your Permian processing capacity portfolio and how you see that sort of evolving in light of all this resilient gas production? And just seeing some other operators in the basin discuss a more optimistic outlook for run rate capacity additions on an annual basis? How do you that being incorporated into your portfolio moving forward?

Sheridan Swords: Well, I think Randy had mentioned already right now, we just put in 150 million a day, the Shaderfax plant that we moved out of the Barnett into the Midland Basin. So we brought another 150 million a day on there that we see that ramping up over time. And right behind that, we have some low-cost capacity expansions in the Delaware, 110 million a day that will come up later this year. And then we’ve already announced the 300 million a day plant that we’ll be putting in the Delaware beyond that. Those are what we have announced. We continue to look forward. We see a lot of opportunity in the Permian Basin. We’re in a lot of discussions on RFPs, especially in the Delaware that we would have the potential to even expand that capacity even more.

beyond what we see today. I think we see that and also expect that to happen as we get into the — as we get further into 2017, we hope there’s opportunities as well. So we are, as like everybody else, very optimistic on the growth out of the…

Brandon Bingham: Okay. Great. And then I just wanted to go back to some comments made earlier about better volume expectations this year as part of the guidance increase. Could you help frame up how the new volumes expectations compared to maybe the various midpoints within the businesses? I noticed the ranges didn’t necessarily change, but it sounds like within those ranges, the expectation is definitely better now.

Walter Hulse: As I said, our increase in guidance was balanced across what we’ve seen in volumes. And Sheridan just mentioned that we did have a little bit stronger first quarter volumes in some areas than we might have historically expected given what the or treater impact and that sort of thing would have been — so as we go forward, we hope that builds, and we’ve taken that kind of projected it forward. Clearly, I think it still has to be seen what these higher commodity prices are going to do from producer activity. Some of our smaller producers, private equity or smaller independents seem to be a little bit quicker to think about rigs, and getting them fired up. So we could see some of that impact a little quicker. But I think the larger exploration companies are waiting for that curve to reflect what they think the fundamentals are and then they’ll make their decisions.

So — we’re not trying to get too far ahead of our volume expectations. We’ll let that play out. But we do think in this commodity environment and how it’s going to look into ’27 that we would expect to go into ’27 with a really nice tailwind behind us.

Operator: And our next question comes from Sunil Sibal with Seaport Global Securities.

Sunil Sibal: And hopefully, you can hear me all right. So my first question was related to the hedging. I think you mentioned on the call that you put in some hedges for ’27 also. Could you indicate how much of your total 2027 commodity price exposure is hedged now?

Walter Hulse: No, we’re not going to get into specifics, but we’ve taken opportunities to make sure that we’ve captured at least a portion of what we see in ’27. We clearly have been focused on the tail end of ’26. So across our various businesses, we cleared in some portion of ’27 at this point. In the markets that we can, it’s probably important to know that in many of the markets that we are serving, there’s just not a lot of liquidity in ’27 or the backwardation is just so significant that we wouldn’t want to do that. So we’ve been opportunistic, but where we think it makes sense. We’ve looked at it, and we’re going to continue to look at it throughout the year.

Pierce Norton: Sunil, this is Pierce. The only thing I’d add to that is that we have a what we call a programmatic hedging program where we just automatically hedge a certain percentage as the year goes back out. So it’s not until we see some of these opportunistic opportunities that we go out and do anything like an just described. But there is a — we don’t try to time the market is sitting here, wait knowing something that happened that didn’t move. We just methodically go through the year. And we do that because we’re 90% volume times rate anyway, and so we just want to make sure we’re not speculating too much on the hedging.

Sunil Sibal: Understood. And then one clarification on the potential projects that you’re looking on. I think you mentioned in Texas and Oklahoma with the data center clients. Should we think about those as significant CapEx opportunities with some midstream people — midstream players undertaking? Or is it — should we think about more like incremental CapEx or small incremental CapEx for those opportunities?

Walter Hulse: Yes. I think as we’ve gone through and given you some thoughts about ’27 and beyond ’27 into ’28, ’29 and a run rate. We’ve looked at kind of a run rate of around $600 million of maintenance, about $1 billion, give or take, of what we call routine growth and a portion of this would be in that routine growth. And then we left kind of another $500 million to $600 million to get you around that 2 — a little bit over $2 billion kind of run rate going forward. basically unallocated. So these types of projects, while they’re bigger than our expectation, we originally thought they’d be $50 million projects are turning out to be $400 million to $700 million project. So they’ll fit right in that window that we had left open, and they’re coming in at really nice returns.

Operator: Our next question comes from Gabe Moreen with Mizuho.

Gabriel Moreen: If I could just ask about head chem economics, having improved quite a great deal here over the last month or 2, are you seeing any change in behavior on ethane extraction as it relates to either the Bakken or cadence going into Louisiana? I’m just curious if things have changed on that end at all?

Sheridan Swords: Well, Gabe, you’re right. I mean, obviously, what’s going on in the world right now, the ethane economics in the United States are very strong, and we’re seeing our petrochemical customers operating at very high utilization rates. But it has had due is we are seeing the ability for discretionary ethane out of the Bakken and at times out of Oklahoma to be good, be strong, and that’s driving some of — we see in volumes, so we mentioned. Going into — that’s coming off of coming out of the Mid-Continent and out of the Bakken as we draw feet over into our Louisiana crackers or Louisiana fractionators that hasn’t really changed that amount on that piece. But as I said before, I think we will see some pretty good tailwinds on ethane coming out of the Bakken and then coming out through the rest of the year with the demand we’re seeing from the petrochemical facilities.

Gabriel Moreen: Great. And then if I could ask a quick follow-up. The PRB new plant there sounds like it’s still pretty quickly any visibility to more capacity there. And then I think there was also a call out for Northern Border performance during the quarter. Was that onetime in nature or kind of there’s a step-up on ratable earnings there?

Sheridan Swords: We’ll see on the Powder River, we’ve been working on that plant for a period of time. It’s a 60 million a day plant. So we mentioned we have a JV partner that’s a producer up in that area, coming along with us. We are getting more and more excited what we’re seeing there. That’s going to feel fairly quickly. Do we see there’s opportunity for more volume? Yes, we hope so. And discussions with them. We’ll continue to evaluate that, but we do think there’s possibility to put some more capacity up there as we look forward. Northern Border, Northern Border is pretty steady. Outperformance is a little bit. Frankly, we see that kind of every year a little bit that they come in a little bit higher than what they had predicted. We continue to see this year, and we continue — we expect to continue to see that throughout the year.

Pierce Norton: [indiscernible] In the volumes is the amount of area and dedication. So there’s plenty of running room up there to continue to drill there in the powder.

Operator: Our next question comes from Jason Gabelman with TD Cowen.

Jason Gabelman: I wanted to go back to full year guidance. And I guess when I look at your slide deck from 4Q from last quarter, you showed that at the time of your initial, I guess, ’26 outlook, was predicated at $75 oil. That was, call it, $8.7 billion-ish, maybe a little higher of EBITDA for ’26. Oil moved down, so your ’26 EBITDA outlook move lower, but we’ve seen oil now move higher, and I understand the hedging dynamics mean maybe you don’t capture all of the upside this year. But would you expect to kind of get back to capturing that upside next year based on where the commodity curves are right now?

Walter Hulse: So what I would say there is you’re absolutely right that clearly, we’ve got a different realized price environment, so that is going to take some time to work its way through and also takes some time for rigs to get up and moving. So when you didn’t have quite as much rig activity as we had expected, that has an impact that you’re starting from a different point as you exit ’26. But we think we are going to see that type of strength. I’m not going to give you an actual guide to a number. But we’re going to see that type of strength that we expected as volumes pick up if these prices stay or go higher, especially in the back end of the curve, there’s a pretty big difference between the prompt month and as you go out towards ’27. So that’s going to be the story to tell as that plays out coming forward.

Jason Gabelman: Great. And just a quick follow-up on a comment you just made. Did I hear you right that the — some of the data center-related projects you’re pursuing you thought they were going to be in the $50 million range and they’re coming in more like $400 million to $700 million, those are the right figures?

Walter Hulse: Yes. The thing is, originally, when we go back to that $50 million, that was couple of years ago when we first started seeing opportunities and people talked about citing these facilities, they were dropping them right next to pipelines, thinking that they could take the gas off of those pipelines. Well, when they were doing that, there were a lot of them were in the development stage. You didn’t have a lot of hyperscalers involved. So some of the specs might not have been quite as realistic. On the hyperscalers talk about 5 gigawatt facilities, you can’t just take that kind of gas off of a fully contracted pipe. So what it’s caused is pure sites for us to need to look at reaching back into our system where the gas is available and building bigger pipe, and that’s why the size of the projects have gone up.

But at the end of the day, the value of getting these projects down to the hyperscalers is still well above their concern about price. So they’re very pleased to provide good economics to make sure that speed and reliability are there.

Operator: And our final question comes from Gabe Dowd with Truist.

Unknown Analyst: Just quickly back to the upstream conversations. Just curious if there’s any notable difference in behavior or price that operators need to see on the screen as you talk to public versus private. Just curious, especially as it looks like current rig activity is largely dominated by private in the Bakken for your footprint?

Sheridan Swords: Yes, Gabe, this is Sheridan. We’re definitely seeing more on the private sector more activity or talking about more activity that we’re seeing on the public sector. especially with the large integrated large integrators are still being very disciplined. And looking at the price environment in front of what we are seeing, especially on the private equity side, starting to look more at rigs, more completion, trying to move production up that’s where the majority of the activities happen. I think as we’ve stated here, as we continue to go throughout the year and everybody expects the the back end of this curve to move up as the paper is not reflecting what we’re seeing in the physical world, when that happens, I think you could see — start seeing some of more of the integrated and larger companies lean in more at that time.

We’ll start bringing rigs on that time. We still are seeing even with the larger, we are seeing them, making sure they get anytime they’re down, they get things back up and looking to complete wells quicker than they had been in the past, but really concerning rig deployment that is more into the private sector.

Pierce Norton: And there’s one other element, I think is worth mentioning here is that they are really leaning into the efficiency of their drilling and how they’re completing at the length of these laterals. So I don’t think we need to get too hung up on like the numbers of rigs because the ones that are running, they’re really putting a lot of emphasis on how efficient those rigs are to make them more profitable per well.

Operator: That concludes our question-and-answer session. I would now like to turn the call back over to Megan Patterson for closing remarks.

Megan Patterson: Our current period for the second quarter starts when we close our books in early July and extends until we release earnings in early August. We’ll provide details for that conference call at a later date. Our IR team will be available throughout the day for any follow-up. Thank you for joining us, and have a great day.

Operator: Thank you. That concludes today’s call. You may now disconnect your lines at this time, and have a wonderful day.