Q2 2025 Earnings Call Transcript

Good morning, everyone, and welcome to the ONEOK Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Megan Patterson, Vice President, Investor Relations. Ma'am, please go ahead.

Thank you, Jamie. Welcome to ONEOK's Second Quarter 2025 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 be -- that might include ONEOK's expectations or predictions should be considered forward-looking statements and are covered under the safe harbor provision of the Securities Act 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. Just a reminder for Q&A, we ask that you limit yourself to 1 question and 1 follow-up to fit in as many of you as we can. With that, I'll turn the call over to Pierce Norton, President and Chief Executive Officer.

Pierce?

Thanks, Megan. Good morning, and thank you for joining us. On today's call is Walter Hulse, our Chief Financial Officer, Treasurer and Executive Vice President, Investor Relations and Corporate Development; and Sheridan Swords, Executive Vice President and Chief Commercial Officer. Also on the call are Kevin Burdick, Executive Vice President and Chief Enterprise Service Officer; and Randy Lentz, our Executive Vice President and Chief Operating Officer.

Yesterday, we announced higher second quarter results and affirmed our 2025 financial guidance ranges, which were originally provided in late February. Our second quarter adjusted EBITDA increased 12% compared with the first quarter, highlighting the continuation of incremental synergy capture, increasing supply and demand strength. As we exited the winter, we saw accelerated volume momentum through the seasonal improvements across our operations, driving sequential quarter growth in NGL and natural gas processing volumes across all regions and increasing refined products demand. The sequential EBITDA growth we experienced this quarter was consistent with our expectations at the beginning of the year and begins to demonstrate the potential earnings power of bringing these assets together.

As we continue to navigate an evolving macroeconomic landscape, and shifting market dynamics, we believe the energy sector remains resilient with domestic and global demand for U.S. energy continuing to be well supported. Producers across our acreage continue to execute their 2025 drilling plans and drive efficiencies in their drilling and completion techniques. We're monitoring the 2026 market dynamics closely while continuing to execute on our growth strategy and support supply and demand market needs. Our focused investments on high-return organic projects such as the Bakken's Elk Creek Liquids Pipeline, West Texas NGL pipeline and Denver refined products pipeline expansions and the Medford fractionation facility provides significant operating leverage and position us to capture incremental growth across our assets in the Williston Basin, the Powder River, Mid-Continent and Permian Basins.

Today, we are announcing a final investment decision on a new natural gas processing plant in the Permian's Delaware Basin, further expanding and enhancing our presence in what is a key strategic area for ONEOK. Sheridan will provide more details on this project and our Permian growth strategy in his remarks. Our acquisitions are delivering tangible benefits as we continue to make meaningful progress on acquisition-related synergies and organic growth. Our contiguously integrated assets, diversified business mix and strong balance sheet provide flexibility, enable opportunities even during changing market dynamics.

As always, we'll remain intentional and disciplined in our approach to capital allocation as we evaluate future opportunities. I'll now turn it over to Walt and Sheridan to provide their financial and commercial updates. Walt?

Thank you, Pierce. Second quarter 2025 net income attributable to ONEOK totaled $841 million or $1.34 per share, more than 30% increase compared with the first quarter. Second quarter adjusted EBITDA totaled $1.98 billion or $2 billion when excluding transaction costs of $21 million, which is consistent with the approach used in our guidance. The acquired EnLink and Medallion assets delivered nearly $450 million in adjusted EBITDA during the second quarter, contributing to a strong year-over-year earnings growth.

We ended the second quarter with $97 million in cash and no borrowings outstanding under our $3.5 billion credit facility. During the quarter, we reduced our senior notes by nearly $600 million, including more than $400 million of notes paid at maturity. Year-to-date, we've extinguished nearly $850 million in senior notes, underscoring our proactive approach to managing debt and clear progress towards achieving our long-term leverage target of 3.5x, which we expect to reach in 2026. With yesterday's earnings announcement, we affirmed our 2025 financial guidance ranges, including net income attributable to ONEOK of $3.1 billion to $3.6 billion and adjusted EBITDA range of $8 billion to $8.45 billion.

Our expectation to achieve results within our guidance ranges reflects current market conditions and is supported by producer performance, recently completed projects, increasing seasonal demand for refined products and the timing of acquisition-related synergies. While the market environment and commodity price outlook is different today than when we originally announced financial guidance in February, we continue to see resilience in producer activity across our operations and benefits from our integrated system. We also remain on track to realize approximately $250 million of synergies in 2025, consistent with our guidance with significant additional contributions expected in 2026. Our 2026 outlook also provided in February was based on commodity prices at the time.

Given current market conditions, we believe our 2026 outlook for adjusted EBITDA should be adjusted downward by approximately 2% or $200 million to reflect current commodity prices and resulting spread differentials. We continue to expect year-over-year mid- to upper single-digit EBITDA growth in 2026. We are tempering our previous outlook based on a cautious macro environment. In addition to our future earnings growth, we also reviewed our tax position following the recent tax legislation and expected a benefit of more than $1.3 billion in lower cash taxes over the next 5 years due primarily to enhancements related to bonus depreciation and interest expense deductibility.

With our commitment to investing in infrastructure that strengthens energy security and resilience, the enhanced tax provisions enable us to immediately expense the full cost of qualifying investments. We now don't expect to pay any meaningful cash taxes until 2028, which is a year later than our previous expectations. Additionally, we expect our cash tax rate in '28 and '29 to be less than the full 15% corporate alternative minimum tax rate, which is lower than our previous expectations. This increase in expected free cash flow will enhance our flexibility as it relates to capital allocation.

I'll now turn the call over to Sheridan for a commercial update.

Thank you, Walt. During the second quarter, we saw a significant rebound in volumes following normal and expected first quarter seasonality. We experienced strong sequential quarter growth coming out of the first quarter with higher natural gas processing volumes and double-digit NGL growth across all regions. Taking a closer look at the natural gas liquids segment.

Total NGL raw feed throughput volumes increased 18% compared with the first quarter. Rocky Mountain region volumes averaged nearly 470,000 barrels per day, a record for the region, driven by increased ethane recovery and higher propane plus volume compared with the first quarter of 2025. Mid-Continent and Permian NGL volumes both increased 20% compared with the first quarter, supported by higher ethane recovery levels, improved seasonality and newly contracted volumes beginning to ramp up in the Permian Basin. During the quarter, we experienced lower fractionation utilization due to maintenance, which resulted in a $13 million impact in the second quarter from unfractionated NGLs and inventory.

We expect to fractionate these NGLs and recognize their earnings over the next 2 quarters. We saw minimal impacts from ethane export disruptions during the quarter. The importance of ethane to the global market was evident during this period, and it's clear there is a strong demand for U.S. ethane in the global market. We continue to see opportunities for economic ethane recovery across our system for the balance of the year.

The build-out of connectivity between our Mont Belvieu and Conway NGL platforms and our strategic Houston and Mid-Continent refined products assets remains on pace. All 3 critical Houston connections of Galena Park, East Houston and our Pasadena MVP joint venture are expected to come online in the third quarter of this year. We have strong line of sight to these pipelines operating at high utilization and delivering earning contributions in the first quarter -- in the fourth quarter of this year. With executed synergies related to our liquid blending business, we expect record blending volumes in 2005 and 2006. Our Texas City LPG export joint venture is also progressing as planned, and we continue to have a lot of interest from customers on the strategically positioned wellhead-to-water solution.

Moving on to the refined products and crude segment. Second quarter refined product volumes increased sequentially as seasonal demand picked up. We expect continued demand growth in the third quarter as we've entered peak summer travel season. Diesel and aviation fuel volumes have remained strong during the first half of the year, and we expect that to continue for the remainder of the year.

Regional supply disruptions in Mid-Continent tempered gasoline volumes during the quarter. However, volumes have recovered following the completion of refinery maintenance in late spring. Following the July tariff rate adjustments, we increased our refined products rate by mid-single digits as expected. Our refined products pipeline to the Denver area is on track for a mid-2026 completion, and we're currently seeing record jet fuel volumes into the Denver International Airport.

Turning now to our crude business. Our gathering and long-haul assets to continue to perform with wellhead gathering volumes on our Medallion assets up approximately 20% year-over-year. The overall decrease in crude volumes compared with the first quarter of 2025 was due primarily to low-margin exchange volumes. These volumes have significantly lower rates than wellhead gathering or long-haul shipments, so the earning impact was not material.

Moving on to the natural gas gathering and processing segment. Volumes increased all regions compared with the first quarter of 2025, with producers increasing activity coming out of winter. Looking first at the Permian Basin. Following 4% growth in volumes in the second quarter, we reached 1.6 billion cubic feet per day in July.

Currently, we have 12 active rigs on our dedicated acreage, providing line of sight to filling our existing processing capacity in the region and driving the need for additional capacity. In addition to our already announced 150 million cubic feet per day relocation to the Midland and approximately 75 million cubic feet per day of low-cost expansion at existing Delaware facilities, we've also reached FAD on the construction of a new plant in the Delaware Basin. The new Big Horn plant will have a capacity of 300 million cubic feet per day with the ability to treat high CO2 gas. The plant and treater are expected to cost approximately $365 million.

Big Horn is supported by acreage dedication and is expected to be completed in mid-2027. These growth opportunities will increase ONEOK's processing capacity in the Delaware Basin to 1.1 billion cubic feet per day with a little over 700 million cubic feet per day currently and will position ONEOK for additional growth opportunities in the basin across our value chain. The Permian Basin continues to be a key area of strategic growth for us, and we will continue to be actively engaged and intentional in assessing opportunities to expand and enhance our integrated operations within the basin. In the Mid-Continent, there are 12 rigs running on our dedicated acreage in Oklahoma and a number of projects underway to connect and optimize assets in the region.

Second quarter natural gas processing volumes increased 9% compared with the first quarter, in line with our expectations and continue to show resilience. Rocky Mountain region processing volumes averaged more than 1.6 Bcf per day in the second quarter of 2025, a 4% increase compared with the first quarter. We saw a ramp in well completions in the second quarter compared with the first quarter and expect the same level in the third quarter, reflecting the normal seasonality we see in this region. There are currently 15 rigs on our dedicated acreage.

As Pierce and Walt noted, producers across our operations remain resilient and the effectiveness they have gained in recent years are being highlighted in this environment. I'll close with our natural gas pipeline segment, which continues to outperform compared with our guidance expectations. Approximately 75% of the outperformance is tied to legacy EnLink assets and our ability to optimize that system. As demand for natural gas continue to rise, particularly related to power generation and industrial demand, our footprint is uniquely positioned to meet that growth, and we're in active conversation with customers to support project developments through direct connections.

We are also well positioned to benefit from increased demand tied to LNG exports in Louisiana. Pierce, that concludes my remarks.

Thank you, Sheridan and Walt. I want to begin by thanking all of our employees. Their efforts and commitment to bringing together our assets, teams and ideas is evident in the strength of our day-to-day operations and the solid results we continue to deliver. ONEOK remains well positioned in today's market environment to continue delivering long-term value to our stakeholders.

The strength of our balance sheet, a stable and long-standing customer base, diversified earnings across our integrated value chain and the dedication of our experienced and innovation employees, we're focused on running our business efficiently and providing essential products and services that make a difference. Just as important as what we do is how we do it with a steadfast commitment to safety, integrity and responsibility. In that spirit, I am pleased to share that our 17th Annual Corporate Sustainability Report will be published on our website this week. I encourage you to take a look and see the measurable progress we've made on our sustainability journey.

While our workforce and operations have grown significantly in recent years, our commitment to our core values has never wavered. Together, we're delivering the energy that makes a difference in how we live, how we move, communicate and learn across the U.S. and around the world, a shared purpose that creates value for all of our stakeholders. Operator, we're now ready for questions.

[Operator Instructions] Our first question today comes from Spiro Dounis from Citi.

First question, maybe to start with the 2026 outlook. Can certainly sympathize with the change in the environment since February. And Walt, I guess I'm curious how lean you describe this revised outlook. I think you said mid- to high single digits.

And if you could maybe just provide a little bit more color on how much of that growth is hardwired by either contractual volumes, synergies, cost savings. In other words, things that don't necessarily rely on volume growth.

So this is Pierce. Let me take a shot at that first, and then I'll pass it to Walt to add some additional color. But I think you hit on it, which is with the volatility in the market, the spread differentials that have tightened in comparison to those that we used as assumptions that we use for that 2026 EBITDA outlook. As we said in the script, we continue to work with our producers and understand their '26 plans as well in a kind of up and down commodity market, especially related to oil prices.

So given both of these factors, we did lower our '26 outlook by around 2% or that $200 million, as Walt said in his remarks. I'll turn it over to him for a little bit more color on this as well.

Yes, Spiro, the strength here in our 2026 outlook really comes from the fact that we have a number of projects that come on in 2026, including the refined products expansion. We'll start to see the ramp on West Texas LPG. But more importantly, the connections of East and some of the other connections between our refined products and NGL business. Those connections are expected to provide more of the incremental increase over 2025 than producer activity.

So it's really a benefit from these ongoing synergies layering in and then producer activity on top of that.

Great. That's helpful color. Second one, maybe just going to natural gas. Sheridan, like you said, always seems to be a bright spot, especially now with these EnLink assets in there.

And I guess I'm just curious, 2-part question here. One, can you just give us a little bit more color on exactly what's driving that? And if it's become something ratable enough to maybe start including in the forward guidance. And then you also mentioned data centers and AI and power demand on the back of your comments there, still in discussions.

Just curious where you are maybe innings-wise in those discussions and when we should expect an announcement on that front?

Well, I'll start with the AI on that and the data centers and the industrial demand. Obviously, I think we're in discussions with over 30 different people. Obviously, not all of those are going to come to fruition, and we're at different levels. But what we've learned through that, it's not done until it's done, but we are actively participating in some.

Some we think are further along than others, but we've been in this business long enough that they can change on a dime. So we're still very opportunistic about that. On the industrial side, we have actually contracted some people over on the Mississippi River corridor, where we think we have a big advantage having that last pipe in there, and that will start coming on over the next couple of years. None of them are huge, but you do enough with these little ones, they can make a pretty big difference.

Then when we look at the EnLink assets, we just know as we continue to integrate and look at how by bringing a different mindset to their assets and looking at it differently and how we utilize those assets, we are starting to see some pretty big opportunities as you're seeing coming out. As we continue to grow that -- some of that can be a little bit related to spread. Other ones are going to be volume, and we continue to -- the team continues to work on that and to bring more of it to a steady state that we can continue to project out over the next couple of years. So I think you'll see that in our guidance when we come out in '26. But that's -- we've been very excited about the natural gas business.

I think I said early on that we didn't put a whole lot of weight on the Louisiana side of the natural gas business. We bought EnLink. And as you can see from the numbers, it's really starting to perform.

Our next question comes from Jeremy Tonet from JPMorgan.

I know in the commentary, you described synergy capture picking up in the back half of '25. I was wondering if you could provide a bit more color on specific opportunities and how that, I guess, feeds into confidence in the guidance range, but any kind of concrete examples there and what's coming together would be helpful.

Jeremy, this is Sheridan. So we bought the Houston assets in '24, and we came out that we were going to be connecting our NGL assets at Mont Belvieu into the refining products assets that we bought from Magellan. And you're seeing that starting to come through. That's going to be done here at the end of this quarter.

And that's going to do 2 things for us. That's going to create more volume for us to be more NGL volumes to blend and also be able to reduce our cost to be able to blend, which even creates more value when you -- to be able to blend if the spreads are there. So that's what you're seeing in the Eastern assets. Also the Eastern assets, as you think about going into MVP and Galena Park, we'll be able to actually sell that product to some of our customers at that location, giving them a better product at that location, a better service offering.

And obviously, they will move a lot more volume in there. So we're going to see some pickup in both blending and tariff as those assets come back on. Then as we look into 2026, we're also doing the same thing up in the Mid-Continent, where we're connecting our Conway assets into our Mid-Continent refining assets. So once again, we make sure we have the right amount of volume there when the blend opportunity is there, we can reduce the cost of getting that butane to that location, which allows us even to push it out further on our system.

And these are kind of the last big projects that we have of the blending aspect of the Magellan acquisition. We've done [indiscernible] service. And if you remember in my comments, I said right now in 2025, we're expecting record blend volume on our system and 2026 will -- everything looks like we will beat that volume as well, the '25 volume in '26.

Got it. That's helpful. And then just want to pivot towards BridgeTex here. I was wondering if you could provide a bit more color on economics there and synergies as well. And will you be consolidating BridgeTex?

Well, Jeremy, we were opportunistic here. We had the opportunity to increase our holdings from 30% up to 60% at very attractive multiples compared to recent transactions in the marketplace. Given the connectivity to our Medallion assets, we really thought that, that made a lot of sense to continue to get more of that business. No, we will not be consolidating it going forward because we still have a governance structure with our other partner there that keeps it more of a 50-50 type of governance.

And ladies and gentlemen, our next question comes from Theresa Chen from Barclays.

Looking at the downstream side of things on NGLs, your largest competitor in Permian NGL infrastructure has publicly disparaged the economics of new LPG export facilities. Do you care to respond to this? And how has the commercialization progress been for your JV Texas City terminal?

What I'd say is what we said earlier, we're not going to talk about infill contracts or whatever, but we have had a lot of interest in our dock going forward, and this is out in 2028. And the big reason for this interest is really our by far premium location outside of the Houston Ship Channel right next to an hour away, hour or 2 hours away from Bayou Zero. It's a much better logistic location. So right now, we are seeing rates in line with what our estimated economics are. So we are still very excited about this project going forward.

Theresa, this is Pierce. The only thing I would add to that is if you look at the LNG exports, you look at the AI demand, that additional volume, whatever that number is going to be, whether or not that's 14 Bcf a day or higher, a significant amount of that is actually going to come with liquids, and you can actually calculate how much liquids is going to come with that additional volume. And we do think there's going to be plenty of propane and butane out there to ship globally.

Very helpful. And looking at the volatility that we've seen year-to-date in commodity prices, would you expand a bit more on the activity and expectations you have on G&P volume by basin and what those conversations with your producers look like at this point?

Sure, Theresa. What I'd say is in the Bakken right now, our volumes are still looking to be in our guidance range. But overall, rig counts have stayed steady this past year and producers are continuing to drill the longer laterals, reducing -- which reduces the number of wells we need to connect to hold or grow our volumes. And year-to-date, we are in line with about 30% of well connects being 3- mile laterals.

And we still continue to have very active discussions with producers of where they are and trying to wait and see where they come out, where they're going to be in 2026. But obviously, we've seen some pretty good ramp-up from first quarter to second quarter. If we go down and look into Oklahoma, we're still seeing strong activity across our footprint, especially in the Cherokee formation, and you saw that we were up 9% from first quarter to second quarter. And we continue to benefit from bringing the EnLink and legacy ONEOK systems together and the synergies we're driving through there that helps us expand not only our footprint out there, but be able to access some of our -- all of our capacity in our system and especially be able to prioritize our higher efficiency capacity.

And as you move to the Permian, we're seeing volumes ramp to the second quarter. Obviously, we kind of -- as we said last time, we were a little slow kind of coming out of the gate, but we've caught up pretty quickly. And that 1.6 Bcf, we're in line where we thought we'd be at this time and continue to move forward. There are a couple of less rigs in the Midland right now, but the Delaware seems to really be ramping up.

And obviously, we're moving in. That's why we FID-ed this new plant as well as some new expansions, low-cost expansions out in the Delaware. So out there, we see a very long runway for growth. And so here coming up pretty soon.

We'll have all of the new expansions in the Midland with that new plant coming down that's backed by acreage dedication and volumes from existing producers. And then here in 2027, we'll see the new Delaware plant coming online. So even though we're seeing a lot of volatility in the market, the producers right now seem to be fairly steady or fairly resilient.

And our next question comes from Michael Blum from Wells Fargo.

Just wanted to ask another question on BridgeTex. Just wondering if you can discuss the performance of BridgeTex this quarter. And then obviously, you've increased your position there. So I want to get your view of the outlook for that pipeline over the next couple of years.

Michael, we continue to see the volume on that increase as we continue to go forward. Obviously, it heads -- that pipeline heads right into our East Houston facility. So it also feeds our downstream assets as well. We continue to see growth in crude oil volume out of the Permian, so we think they'll continue to lead to more volume on the system.

And also with having a larger share, we also makes it more advantageous to us to direct our volume coming off of our field gathering to that system as well, where some of that volume was going down some other pipelines. So obviously, we wouldn't have increased our stake in there unless we were very excited about what we see going forward. And I think you're seeing the benefit of our integrated assets with the Magellan and EnLink crude systems together being able to feed the pipelines of the choice and not just go to other third-party pipelines, we capture more value, not only get it on our pipeline, as I said, but it also feeds into our East Houston and big crude oil distribution center where we get additional value downstream.

Got it. And then wondering if you can give us an update on West Texas LPG, kind of where does volume or utilization stand today? And how do you see the path filling that up? And is this latest processing plant you announced part of that?

Michael, if you remember on that West Texas LPG, we contracted that with a base set of volumes that did not fill up the pipeline that gave us a nice rate of return. And we're continuing to hook up plants as coming online and delivering it as well. Obviously, as we bring on the shadow plant that's moved out of the Barnett into the Midland, that will add more volume onto our NGL pipeline. The $70 million a day, $70 million, $75 million a day of low-cost expansions in the Delaware will add more NGLs to the pipeline, and this new plant will also add more NGLs to the pipeline.

But we're also still in discussions with a lot of third-party plants to continue to contract them up as well. As we've said before, we think we have a pretty long runway with this very cheap capacity coming out of the Permian. And then you add on that when we get the Medford fractionator up, which is very low-cost NGL fractionation capacity expansion. We continue to be able to not only maintain our market share out there, but grow it not only on the G&P side, but on the NGL side.

And our next question comes from Jean Ann Salisbury from Bank of America.

Rigs have come down a bit in the Bakken. I was just wondering if you have a sense of whether producers are high grading to oilier acreage in the current environment or if you would actually kind of expect gas-to-oil ratio to increase over the next year and kind of offset perhaps some of the lower growth?

Well, I think we'll -- as we said, I think we'll always continue to see gas oil ratios continue to tick up. It's just naturally of all the basins that will continue to happen. We are -- with some consolidations up there, we are seeing some people making sure where they're going to drill and what they're going to go forward and where they're looking at it. And obviously, we're in conversations with that.

But what really they drilling now takes more of a bigger impact into next year. So we're in the conversation with those continue to look forward, but some go down, some go up as we continue to go forward. But it's still very much a basin that a lot of the producers up there. It's a very key basin for them, and they're going to continue to want to play an active part in that area.

That makes sense. And then obviously, one of the major synergies from the Magellan acquisition has been butane blending. I know this comes up on every call, but could you just give a little bit more detail on kind of broadly how much of it is just recurring almost midstream revenue that wasn't there before? And how much of it is a more volatile marketing spread that's based on the spread of pricing?

Well, what I would tell you is in 2025, we're -- you can see that we're not seeing the same level of spread that we saw in 2024. And so that's having an impact. But what we have done is we've been able to make up quite a bit of that by blending a lot more volume. And that's because the synergy projects are coming online. And as we've talked before, we can ship product up our pipelines.

We can -- instead of trucking it, we can move it on pipelines. That's what you're seeing -- going to see with the NGL connectivity between Conway and the RBC Mid-Continent assets. The Eastern assets, all that's bringing that in. Some of that already started earlier, some started today.

So I would say most of the spread compression we've seen, we've been a makeup of volume, which gives you a great option as spreads continue to widen, you'll see an upside in earnings when those spreads are more at a wider level.

Our next question comes from Manav Gupta from UBS.

I just wanted to go back and check on the Delaware Basin JV. I think you closed -- bought the remaining 49.9% for $940 million. Can you talk about the benefits of this transaction at this point of time?

Sure. Well, we clearly have a strong interest in growing our Delaware position. We've made a move there announced on this call, so adding another plant in the Delaware. So it made a lot of sense to go ahead and buy in that joint venture partners piece.

I think clearly, we didn't expect to do it quite as quickly as we did, but the joint venture partner was ready to move on, being private equity. They've been in it for quite some time. So we went ahead and did that [ part ] at an attractive multiple. And it now gives us the flexibility to grow that business, making our own decisions, allocating capital where we want to, when we want to, how we want to.

So it's really enhanced our flexibility, built the business and set the platform for growth going forward.

And I'm sorry for asking this, there was a minute of silence on my phone for some reason, I'm having technical difficulties, if somebody's already asked this. Can you talk about the Elk Creek pipeline expansion? Is it still scheduled? And when should we expect that to hit full capacity?

The Elk Creek pipeline expansion is fully -- it's done. It's completed, and we were at over 400,000 barrels a day, I think 435,000 barrels a day is the capacity on the Elk Creek pipeline and you combine that with the Bakken pipeline, we're at 575,000 barrels a day. So that project is completed. We're completely done.

Our next question comes from Keith Stanley from Wolfe Research.

I want to start with a clarification question. So Walt, you said Q2 sequential growth was in line with your expectations. I think you said Q1 was in line as well. So would you say the midpoint of 2025 EBITDA guidance range is still the base case? And what needs to happen to get there?

Well, Keith, this is Pierce. We still see the path to our midpoint. There's kind of 2 keys to that. We've talked a lot today about spreads.

So one of those keys for us to kind of get to that midpoint or maybe even exceed it is to have some widening of those spreads, especially in our refined products business. And as you know, I mean, when crude oil is down, it also affects the RBOB pricing. So it kind of squeezes that spread between the butane and RBOB. And then also just making sure that our producers continue to execute on their 2025 drilling plans.

We think that's in line. We think that's going to continue to happen. Walt, do you have anything to add to that?

No, I think that's absolutely right. We see a clear path that we could get there, but there's also obviously, some volatility in the marketplace with crude prices bouncing around. So we need a couple of things to follow the right direction, but we're cautiously optimistic.

Okay. My second question, I wanted to ask on the LPG export facility. Can you give a sense of how contracted that capacity is at this point and what you're seeing as far as market pricing for LPG exports right now? One of your competitors had a somewhat bearish tone the other day.

Yes. As I said earlier today, we haven't and won't talk about contracts or what we're doing on that side of it for those competitive reasons. What I would say is due to our premier location and everything else, we're still seeing rates in line with our economics of why we -- when we FID-ed this project. So I know there's a lot of [indiscernible] ground there, but we definitely think our locations why we went down there has really given us an advantage.

Our next question comes from Brandon Bingham from Scotiabank.

I just wanted to ask on CapEx -- on the CapEx front in light of the FID of the processing plant, how much of that, if any, is going to be hitting 2025? And then just kind of how we should think about '26 versus '25 growth spend?

Yes. Very little of it is going to really be hitting '25. I mean we'll start construction. But given where we are in the year, you'll definitely see a bigger spend in '26 than you would in '25. CapEx, we'll give our guidance as we come out in February. But I think consistent with what we've said in the past, we've got a bunch of larger projects kind of rolling off here in '26. The Medford project spend will start winding down.

Our Colorado refined products project will come to completion. So we'll see CapEx starting to trail downward a little bit in that '26 period and forward.

Okay. That's helpful. And then maybe kind of a roundabout way of looking at synergies. You've discussed some of the bigger things as far as the Eastern system and the integration plays there.

But just kind of curious if there's any maybe more singles, doubles, things that aren't being highlighted that you're seeing could kind of stack up and really drive some of that significant capture that you're discussing year-over-year?

Absolutely. We're seeing a lot of that from all 3 of the acquisitions. We've talked about some of those publicly about how even with Magellan, we were willing to spend a little more capital on some smaller projects that had high return, but not guaranteed returns on that. The very high.

Those have been in place and are doing quite well. A lot of those little ones you get to Magellan and EnLink, we've had synergies between the 2, EnLink and Magellan by disconnecting those 2 systems out in the Midland, where we now have trucks -- crude trucks that were driving past an EnLink station to get to a Medallion station or driving past the Medallion station to get to an EnLink station. So we've reduced those costs being able to come down. We've been -- some of the things we do, just different mindset.

We're buying more of the product on the Medallion system to be able to feed and fill our other pipelines, our long-haul pipelines. We were part of the Magellan acquisition to get out into our East Houston terminal where we have a big distribution system going out and also have an export dock down that area, continue to grow that in the EnLink legacy and the G&P. We're up in the Mid-Con. Those assets are sitting a lot on top of each other.

We've already had a lot of success where EnLink may have a contract that a well comes up that's a long ways away from them. That would take a lot of extra capital to get there if it even can be economical and the legacy ONEOK system was close by that they could hook that system in there and get very attractive rates. We've been able to tie the systems together to open up more capacity that we don't have to spend any additional capital, and that makes you more competitive in the marketplace to be able to access more of it going forward. So yes, there's a long list.

There's actually probably more little singles and doubles than the big ones. It's just that they're kind of the same thing and they're kind of down in the minutiae. But I think you can see by our -- what we've been able to do with these assets and our results that we are getting a large share of the synergies.

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

So a couple of clarifications. Starting off on the blending side of things. I know you talked about good visibility to the volumes in Q4 and 2026. Could you talk a little bit about your hedging strategy or how much of those margins in those blending operations are hedged as of now? And how does that compare with, say, previous years?

Typically, we don't talk about for competitive reasons how much we have hedged. I would say we're in line where we were last year at this time on the hedging activity. We're very opportunistic on that. One of the -- from the last question, one of the synergies that we have with Magellan is that because of our access to normal butane, we don't have to lock it in when we buy the normal butane to lock the spread in.

We can be more opportunistic and see when the normal to RBOB spreads at a level that we like, then we can lock it in because with our NGL assets, we kind of have butane on demand that whenever our blenders see the time to build, they can just call our NGL and they'll get the butane form and they'll sell the RBOB against and continue to go forward. So we can be very opportunistic on that. Just overall, the spreads have been a lot narrower where they were last year. We still have the opportunity this year to be able to store product and go from to -- we don't have to sell it right when we blend it, right, when we actually make the blend, we can look out forward and see if there's another time to sell at that time to continue to go forward.

So we still have all those opportunities as we can go forward that we've had last year. And like I said, we're in line with where we were last year on hedging that.

One thing I would add is that we've spent a lot of time talking about spreads here on this call. I think it's important to put them in context. I mean we're talking about maybe $100 million or $200 million on $8-plus billion. So we're talking about 2% variability.

It's just when you get to a midpoint, that's putting a pin in the number, a very large number. So variability on our overall earnings of any of these spread relationships is really immaterial. It's just kind of the noise at the end of the spear.

Okay. And then on the new processing plant that you sanctioned in Permian, I think you mentioned $365 million or so of CapEx related to that. So that's on building the plant and the related infrastructure also to fill up that plant? And then how should we be thinking about economics on that?

Obviously, with your integrated footprint, the economics improve. But if you think about on a stand-alone basis, how should we be thinking about economics on that investment?

The $365 million is for the cryo plant and which includes residue compression and things at the plant as well as a large CO2 treater because that area, we're seeing more and more CO2 in the Delaware coming out that needs to be treated. That's an important part. So we are putting in not just the cryo and the compression there at the plant, but also the -- also CO2 as well, CO2 [ treater ]. There will be obviously -- there will be additional capital that would be spent in routine growth for hooking up wells and stuff like that, but we have that throughout our system.

But that's our continual process we go through, continual capital we go through.

Okay. And then returns wise, anything to highlight there?

Could you repeat that, sorry?

Yes. So I was wondering when you think about return on that investment in that processing plant, obviously, you've got integrated economics, but I was curious just on the processing side, how the returns on these kind of investments stack up?

We don't ever get into the specific returns on that particular asset. But I think you touched on the key point there is that the benefit of having the EnLink business as part of the ONEOK overall business is that we get the integrated value all the way from the field throughout our value chain. So incrementally is quite profitable for us.

And we have a follow-up question from Jeremy Tonet from JPMorgan.

Just a quick one, if I could. As it relates to the 2026 outlook, would you be able to share any color on commodity price expectations that underpin that backdrop there? And is it kind of on the strip in current spreads? Or any other color you could provide?

Yes. Sure, Jeremy. We don't want to set a precedent of you double dipping here, but we'll let this time. Basically, the update we gave you adjusting that down 2% of the $200 million was bringing it to current market. So that's kind of as we look through that in that $65, $66 crude range.

And with that, ladies and gentlemen, we'll be concluding today's question-and-answer session. I'd like to turn the floor back over to Megan Patterson for closing remarks.

Thank you, Jamie. Our quiet period for the third quarter starts when we close our books in October and extends until we release earnings in late October. We'll provide details for that conference call at a later date. As always, our IR team will be available throughout the day for any follow-ups. Thank you, everyone, for joining, and have a good day.

And ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.