ONEOK Inc — Earnings Call Q3 2026

Operator: Good morning, and welcome to ONEOK's Third Quarter 26 Earnings Call. As a reminder, this call is being recorded. If you would like to participate in the question-and-answer session following the At this time, I would like to turn the conference over to Megan Patterson, Vice President, Investor Relations. Megan, please go ahead. Megan Patterson: Thank you, Anna. Welcome to ONEOK's third quarter 26 earnings call. Our earnings release and presentation were issued after market closed yesterday and are available on our website. On our call today are Pierce H. Norton, President and Chief Executive Officer Walt Holt, Chief Financial Officer Randy Lentz, Chief Operating Officer and Sheridan C. Swords, Chief Commercial Officer. Following 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 1.93 thousand and 1.93 thousand. 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 will turn the call over to Pierce H. Norton. Pierce H. Norton: Thank you, Megan, and good morning, everyone, and thank you for joining us today. Yesterday, we reported strong third quarter results supported by our record Permian Basin volumes and continued growth across our integrated system. And we increased our 2026 financial guidance for the third time this year. Also completed several strategic milestones During the quarter, we closed a $9 billion minority equity investment extinguished nearly $5.5 billion of debt and received credit rating upgrades from both S and P and Fitch. Earlier this month, we closed the acquisition of Brazos Midstream's Permian Midland Basin assets together these actions give ONEOK greater scale greater financial flexibility and clear visibility into the future earnings growth. Our confidence in ONEOK's outlook continues to gain momentum supported by the assets that we own, the customers that we serve growth projects already underway and the innovation of our people. We are not providing 2027 guidance today. But we expect to do so after our fourth quarter results in February. But the underlying drivers are increasingly clear. Constructive producer development plans and continued drilling and completion efficiencies recently completed projects that will contribute to full year's earnings in 2027 additional projects nearing completion and a full year of ownership of Brazos assets. Importantly, that visibility extends across our integrated system and is not dependent on a single commodity or project or based We see opportunities across natural gas, NGLs, refined products in crude, and supported by domestic and international demand and the connectivity that we built across our value chain. That diversification gives us multiple avenues to grow and capture value as the market conditions evolve. The broader backdrop reinforces the opportunity Global energy markets remain dynamic, but growing natural gas demand for power generation industrial loads, and liquefied natural gas exports to feed the international demand all point to the same need. Reliable access to essential energy when and where it is needed. International buyers are increasingly seeking long term access to US supply. For its reliability and resiliency a trend we are seeing through the strong export demand across our system. These drivers also reinforce our confidence in our mid to high single digit adjusted EBITDA growth target for the next 5 to 7 years. From our 2025 base. Brazos adds substantial contracted growth and value chain opportunities across our system. Increasing our momentum toward the higher end of that target. ONEOK has the assets the financial strength the discipline, and the people to capture the growing energy demand and to deliver sustainable long term value for our investors. With that, I will turn the call over to Walter Hulse for a financial update. Walter S. Hulse: Thank you, Pierce. Third quarter net income attributable to ONEOK totaled $1.35 billion or $2.13 per diluted share. And adjusted EBITDA totaled $2.24 billion a 6% increase compared with the third quarter of 2025. Net income and EPS included a $336 million onetime noncash income tax benefit related to the corporate reorganization completed in connection with a minority equity transaction. Adjusted EBITDA included a $53 million net benefit from the transactions, primarily related to gains on the extinguishment of debt. As Pierce mentioned, we increased our 2026 financial guidance again. Reflecting strong year to date performance visibility into the remainder of the year and the addition of the Brazos Midland assets. We now expect a 2026 net income midpoint of $4.18 billion and adjusted EBITDA midpoint of approximately $8.55 billion This represents a $200 million increase in our adjusted EBITDA midpoint compared with the guidance we provided last quarter, and a $450 million increase compared with our original February guidance. Of this quarter's $200 million increase, approximately $50 million reflects transaction related benefits I just described Approximately $75 million reflects the expected 2026 contribution from the Brazos assets, which is offset then by $25 million of transaction cost and the remaining $100 million reflects stronger performance across our base businesses. This year, we have been somewhat conservative with guidance due to the geopolitical volatility. If commodity conditions remain consistent with where they are today, we will have a very good tailwind in the fourth quarter and into 2027. That takes me to our hedging program. As the back end of the commodity forward curve has risen throughout the year, we have increased our hedging position into 2027 at a greater percentage and at higher prices than 2026. We continue to programmatically hedge commodity exposures. On capital expenditures, we stated on the second quarter earnings call we expected to approach the high end of our guidance range or $3.2 billion We now expect 2026 capital expenditures to total approximately $3.5 billion due primarily to $200 million of capital associated with the Brazos acquisition along with adding growth projects such as the Cutter 2 plants, our Delaware NGL expansion, and compression pulled into 2026 from 2027, due to Bakken and Mid-Continent activity level. From a balance sheet perspective, we extinguished nearly $5.5 billion of debt in September. Following completion of the $9 billion Apollo minority equity investment. Both S and P Global Ratings and Fitch Ratings upgraded our credit ratings to BBB plus with a stable outlook following these transactions. With these actions complete, we are operating with a stronger balance sheet. And now I want to spend a moment on our leverage framework. Because it is an area where we have received a number of questions. Our debt-to-EBITDA target going forward is approximately 3.25x or lower and the overall lower matters. This is not guidance It reflects a change in philosophy. We intend to operate the company with lower leverage than our previous target of approximately 3.5x. As modeled today, we would expect to go below 3x within the next few years. However, our commercial team continues to find highly attractive projects which we expect will increase our capital expenditures over the next few years. We now have the financial flexibility to execute on those capital expenditures and still maintain a strong balance sheet. We now view 3.5x as the upper end of our targeted leverage range. The gap between where we expect to operate and that ceiling is intentional. It gives us meaningful flexibility through business and commodity cycles and the capacity to act if a compelling opportunity comes along that clearly meets our return thresholds. that is optionality, not a plan. Our base case remains disciplined deleveraging while we continue to fund attractive growth and return capital projects and capital return to shareholders. That includes our dividend, and the capacity for share repurchases. From a cash tax perspective, the Brazos Midland acquisition is expected to extend our runway by another year deferring meaningful cash tax payments until 2032 from previously 2031. I will now turn it over to Randy for an operational and project update. Randy N. Lentz: Thank you, Walter. Our teams continue to execute safely and reliably during the third quarter while advancing growth projects across the system. During the quarter, we completed our Denver area refined product pipeline expansion adding 35 thousand barrels per day of capacity Demand has been encouraging, and we are beginning to evaluate further expansion opportunities. We also completed 110 million cubic feet per day of processing expansions in the Delaware Basin and are already seeing incremental volume, with a continued ramp up to capacity in early 27. In the fourth quarter, Medford Phase 1 Cutter 1, and Cassidy 1 are all expected to enter service providing additional fractionation and processing capacity across the Mid-Continent, Powder River and Permian. Then in 2027, Bighorn adds 400 million cubic feet per day of processing capacity in the Delaware, Cassidy 2 adds another approximately 33 million cubic feet per day of capacity in the Midland. And our Delaware NGL expansion adds 245 thousand barrels per day of takeaway capacity. That expansion, added this year, supports growing Delaware volumes and connectivity with our West Texas NGL pipe pipeline. The acquisition of Brazos Midland assets also expands our opportunity set considerably. We are already advancing connections between Brazos and our legacy OneOak system which we expect will improve capital efficiency in commercial flexibility as we continue Midland Basin growth. Beyond what we have announced, we continue to see a growing set of opportunities across multiple products and regions, providing several pathways for continued organic growth. With that, I will turn the call over to Sheridan for a commercial update. Sheridan C. Swords: Thank you, Randy. Third quarter commercial activity was strong. Driven by customer demand and volume growth across key portions of our system. Starting with the Natural Gas Liquids segment. Total raw feed throughput increased 6% year over year to nearly 1.7 million barrels per day. Our largest volume growth was in the Gulf Coast Permian region. Where volumes increased 16% year over year and 9% compared with the second quarter. With nearly all of the increase from West Texas. Volumes continue to benefit from increasing producer activity recently connected third party plants, and additional natural gas egress out of the basin. Propane Plus volumes increased both year over year and sequentially across all of our operating regions. Driven by continued producer activity. Ethane recovery remained attractive across most of our system. Supported by strong domestic and international petrochemical demand. We saw modestly higher rejection in the Rockies and Mid-Continent following strong recovery levels in the second quarter. While Permian economics continue to favor full recovery. Our fractionators are highly utilized as we work toward the completion of Medford Phase 1. Which we expect in mid December. Until then, we are continuing to build the inventory of NGLs, which defers the timing of the associated earnings from these NGLs. As Medford comes online, we will begin working through that inventory and recognize the associated earnings, primarily in the first quarter of 27. We expect this to give us a built in earnings benefit early next year. Turning to the Refined Products and Crude segment. Refined Products volumes increased 6% year over year. Including 10% growth in gasoline and 2% in distillates. Supported by solid demand and high refined utilization across our footprint. Based on our year to date performance, we expect refined products volumes to finish the year near the top end of our original guidance range. Our connectivity and marketing capabilities also let us capture regional opportunities as wide Mid-Continent to Gulf Coast basis differentials and low inventories created price volatility. Mid year tariff adjustments added a further benefit. Liquid blending also performed well. Increased gasoline throughput and the completion of synergy projects contribute to higher blending volumes during the quarter. We entered the fall season approximately 75% hedged and unhedged September spot margins provided additional upside. Historically, widespreads have allowed us to lock in favorable blending margins throughout 2027, Further out, than we typically would. Export demand has also remained strong. With refined products volumes at Galena Park, up approximately 15% year over year. Crude oil exports at Seabrook remain fully contracted with third quarter throughput approximately doubling the prior year period. In our higher margin crude gathering business, we expect full year volumes to increase approximately 7% supported by Midland producer activity averaging nearly 40 rigs on our dedicated acre. Moving to the natural gas gathering and processing Volumes increased across all 3 regions compared with the second quarter. Led by record volumes in the Permian Basin. Volumes are higher across both the Midland and Delaware Basins in the Permian led by growth in the Delaware following completions of our processing expansions. Across our dedicated Permian acreage, we have approximately 21 rigs, including 17 in the Midland Basin and 4 in the Delaware. The addition of the Brazos assets substantially expands our Midland opportunity with a long runway of high quality drilling inventory and greater connectivity across the combined system. Importantly, what we have seen since announcing the transaction continue to support our acquisition assumptions. Based on current producer plans, we expect an average of approximately 14 rigs on the Brazos Midland dedicated acreage during 2027. Producers are also encouraged by early Barnett results. Including well performance and drilling and completion efficiencies which are supporting increased development activity and a higher volume outlook. As we sit today, the current Brazos Sundance plants are full and volumes on the Brazos assets are above our expectations for this point in the year. We expect the continued volume will be enough to fill Cassidy 1, which comes online at year end. The larger combined system gives us flexibility to optimize the timing and location of that next expansion. Outside the Permian, Rockies processing volumes increased 3% from the second quarter and we are encouraged by activity in the area. Since March, Williston Basin rigs are up approximately 50% and rigs on our dedicated acreage have doubled to 60 approaching 2025 and early 2020 levels. The higher activity reinforces a stable durable volume base And with our infrastructure already in place, incremental volumes translate directly into very attractive cash flow. In the Powder River Basin, initial well performance around the Cutter plant have exceeded producer expectations and we expect volume to ramp with planned completions in the fourth quarter and throughout 2027. In the Mid-Continent growth continues across our Oklahoma system, driven by activity in both the Cherokee and STACK formations. And several gathering expansions are underway to support further growth into 2027. There are currently 17 rigs on our dedicated acreage. Overall producers remain disciplined by current 2027 plans reflect increased activity and our conversations remain constructive. I will close with the natural gas pipelines. Where third quarter adjusted EBITDA of $231 million up from $200 million a year ago, benefiting from higher optimization and marketing activity and higher firm transportation revenues. As expected, the Waha to Katy opportunity moderated sequentially as additional Permian egress entered service and price differentials narrowed. We expect a further reduction in the fourth quarter which is already reflected in our guidance. Longer term natural gas demand continues to provide significant opportunities. Last quarter, we announced we had been awarded a supply agreement for a 1 gigawatt of power plant demand. This project includes a 10-year firm transportation agreement for 250 million cubic feet per day of natural gas and is expected to be in service in late 2030. Additionally, we have been awarded another agreement to supply a 110 million cubic feet per day for a 500-megawatt power plant expansion which will go into effect in May 2028. These attractive return projects are good examples of the opportunities we are pursuing across our pipeline network. And we expect to announce additional projects as a discussions advance. Pierce, that concludes my remarks. Pierce H. Norton: Thank you, Walter and Randy and Sheridan for those updates. As I look back, at the first 9 months of this year, the progress that we have made is significant. significantly strengthened the balance sheet, expanded our position in scale in the Permian Basin, completed significant organic projects with additional projects approaching start up and we are seeing constructive volume trends and producer activity across our footprint. Most importantly though, those accomplishments along with constructive producer plans and our hedging program give us momentum and visibility as we enter 2027. At the same time, the broader need for reliable US energy infrastructure continues to grow. The energy landscape will remain dynamic, Our goal is not to predict every geopolitical event, or commodity price movement but is to position ONEOK to perform through them. And we believe our scale, asset connectivity financial flexibility, and customer relationships give us the ability to do just that. We believe ONEOK will enter 2027 from a position of strength, with a clear inventory of growth opportunities and the infrastructure required to help connect essential U. S. Energy resources with the growing demand. And as always, none of this happens without our employees. I want to thank them for their continued commitment to safety, reliability innovation and to our customers. Operator, we are now ready to take questions. Operator: Thank you. We do ask that you limit yourself to 1 and a follow-up to fit in as many of you as possible. Again, press star 1 to ask a question. We will pause for just a moment to allow everyone an opportunity to signal for questions. And we will now take our first question from Spiro Dounis with Citi. Spiro Dounis: Operator, good morning team. I want to start off with new projects. Walter, you mentioned commercial teams working on some new opportunities here. Curious if you can expand and maybe give us a sense of what regions or commodities you are seeing the most activity and where that capital is likely to get allocated? And just to add on Pierce, I noticed you added some commentary on the natural gas side. Sheridan seemed to support that with some of these data center projects. So curious if we can expect gas to maybe get a higher allocation than historically been the case and if $3 billion plus is a good run rate to use from here? On CapEx? Sheridan C. Swords: Yeah. This Sheridan. I would say as we start thinking about where we are going to see growth in CapEx or growth across our system is obviously we will start in the Permian where volumes are strong, growing strong. We already have quite a bit of processing capacity come online. We see the runway that we will be adding more processing capacity in future. So that is going to create more opportunity for the NGL business as well. So we think we will see a lot in the NGL. In the gathering and processing segment in the Permian. We are also seeing some opportunities in the Mid Continent. We continue to see that grow. Volumes are up strong. Could have some allocation of capital into the Mid-Continent area. As you start thinking about refined products, we have seen a big pull of volume come export volume that is changing the dynamics on our system. We could see some optimization opportunities or being able to increase our capacity between the Gulf Coast and the Mid-Continent be an opportunity. We are also, looking to expand the Denver pipeline that came up this year completely fully contracted, commercially teams are working with other people to see about the opportunity. To expand that system as we continue to go forward. And then obviously, the data centers, we continue to be in discussions with a large number of data centers A lot of them will continue to advance Last quarter we announced 1, this quarter we announced another 1. The teams are on the edge on a couple of other really nice projects as well. So we will see some area from power demand going forward on the natural gas pipe. So really when we think about capital and the capital we are looking about across our footprint, it is in all the segments as we as we go forward. it is not really a concentrated in 1 area or the other. Pierce H. Norton: Spiro, this is Pierce. 1 thing I would add to that is much of the gas that we move is going to be feeding LNG facilities as well as the electric generation either for utilities or for AI data centers. It comes with liquids. And so the gas demand that we see also will increase the gathering and the processing opportunities that we have along with moving the liquids associated with those gathering and processing plants and the fractionation facilities and it gives us more blending opportunities with those products into our RPC business. So it is it touches all phases of our business. Spiro Dounis: Got it. that is helpful color. Second question, moving to NGL volumes, tracking to be above the high end of your guidance this year, but you did see some volumes come in quarter over quarter in the Rockies and Mid-Continent Sheridan, I suspect that was really a function of ethane rejection, but maybe would appreciate more color there and how you are seeing the rest of the year shape up. And if you could maybe just talk through what changes when Medford comes online? Is there an easy way to sort of quantify impact of storing all these NGLs and how quickly you would expect Medford to fill up? Sheridan C. Swords: Yeah. I think Spiro, you are exactly right. The little bit of fall off we saw in the Rocky Mountains and Mid Continent for the NGLs was all ethane. As I said in my remarks, the C3 plus volume is actually up. So that the underlying growth is strong there. Just a little bit more ethane rejection. Some of that is on our. Of our own toast coming out of that Bakken that we dialed back our incentivized ethane a little bit. Just due to the market conditions we are seeing right now. As we continue to move forward on NGLs, we continue to see growth and that. A lot of that growth is going to come out of come out of the Permian, where we will see significant amount of that growth going forward as we continue to ramp up our natural gas gathering and processing assets out there in the area. So we see that go forth. Now when Medford comes up, the impact of Medford is because we do have raw feed that is in storage today, obviously, we have more raw feed coming to our system than our current fractionators can handle. Medford will come up completely full for a period of time as we work off that raw feed and inventory. So both phase 1 and phase 2 will be full for a period of time going forward. But then we will be able to leverage that into growth after that support down, that growth coming out of Permian that we see as we bring on the Brazos plants continue to fill our legacy ONEOK plants out there as going forward. As Randy said, We are in the process of tying both those and the legacy ONEOK Midland systems together, which we will be able to remove volume that we are doing on third parties today. Have offloads in the G&P Midland system today. Third parties will be able to bring that into our own plants create more NGLs, which we will be able to fractionate through Medford. Going forward. When we put Medford. When we actually came out with Medford, we had said that we had not subscribed a 100% of that capacity because it was a lower cost fractionator. It was a brownfield fractionator, we did not need to subscribe all the capacity. So that we had we had additional, you know, operating leverage so we could continue to contract The commercial team has continued to contract as we have gone through this build phase. We still have capacity that is uncontracted today, but that is a lot less than we had before. And we think that gives us a lot of leverage to be able to contract even more third party volumes as we have done with our Delaware expansion. Spiro Dounis: Brent. I will leave it there. Thank you, gentlemen. Operator: We will now take our next question from Jeremy Tonet with JPMorgan. Jeremy Tonet: Hi, good morning. Pierce H. Norton: Good morning, Jeremy. Jeremy Tonet: Just want to touch on the guide for 2026 if I could a bit. And if we are looking at it right, it seems like it implies 4Q is. It does not really move up, versus 3Q in any meaningful fashion. And, that would even be with, the Brazos' contribution. So just wondering if you could talk a bit more gives and takes in the fourth quarter. Think of it as maybe seasonally a bit stronger as well. Is that conservatism? Or are there other elements of play here? Walter S. Hulse: Jerry, this is Walter. As I said in our remarks, you know, we have remained cautious throughout the year just given the whole geopolitical situation. If everything stays like we are today, we are probably on the conservative side. And you could expect a nice tailwind that will be in the fourth quarter and with the reactivity that we are seeing now really continue into 2027 pretty strong. Jeremy Tonet: Got it. Thank you for that. And then maybe just moving over towards, the fractionation side, picking up a bit more on the comments you said, Seems like Medford would bring, you know, a lot of optimization opportunities or flexibility to the system. Then even if I look at the NGL raw supply that you guys have versus fractionation capacity, it still seems maybe the system is a little bit short and could need some more fractionation build out. Particularly when you are thinking about all the processing plant additions. And, you know, the dock and export coming up here. Just wondering, how you think about that, growth opportunity. Sheridan C. Swords: Yeah. We watch that very closely. Jeremy. To understand where it is. Now remember, not all the volume you see that we report, we fractionate some of that we just transport. On that. but what I would say, we do have a little bit extra capacity in Medford and we do have NBC that is already permitted and then we are just trying to understand when the right time is that we FID that to be able to make sure we have fractionation capacity. For our growing gas processing plants. Jeremy Tonet: Got it. Understood. I will leave it there. Thank you. Operator: Our next question will come from Manav Gupta with UBS. Manav Gupta: Good morning. I actually just wanted to go back to Brazos and ask you about now that you have had some look at these assets, are they actually meeting your expectations? Where are the areas where you think actually there could be some upside here? If you could give us an update on how you are thinking about the synergies, now that you have had some chance to look at these assets at a closer look? that is my first question. Sheridan C. Swords: Yes. What I would say is that we are very, very satisfied with what we have seen with. As I made. I mentioned in my remarks, that volumes are above our expectations at this time of the year. At this time in the process. And we nothing tells us that they are not going to continue to be above our but. Expectations as we move into 2027. The assets in general, we have found them we have been very pleased with the assets in general. They put some very big pipelines in their area. They did not just build it enough what they had. They do a lot of things like we did. They upsized their pipe and that is given us a lot of capital synergies immediately. We actually were going to have to expand 1 of our main lines on our system. On our legacy ONEOK gathering and processing system. But because Brazos overbuilt its system we are immediately able to access that capacity and save that capital. And that continues to happen going forward so we could look at it As we get these plants up, we are very pleased at how well they built the plant. The redundancy they put in there. They built them like we would. They built them to last. As we continue, as I talked about on the volumes, we continue to talk to producers. Producers get more and more excited about Barnett and what it means, efficiencies and as they get better at it, volumes exceeding their expectations per well. So right now Brazos is probably hitting on all cylinders of what we expected to. We are very pleased with what we have seen so far. Pierce H. Norton: And this is Pierce. I cannot emphasize enough Sheridan's last comments about the quality of the way these assets have been built You know, Randy and I both background is in the construction of these kind of things. And I can walk around that plant and tell that they have addressed a lot of the things that I have seen as problems in the past. You know, with other companies and other assets and I think they have built them for reliability and resiliency. So I am very, very pleased with the quality of the assets that we picked up Perfect. Manav Gupta: My very quick follow-up here is we noticed in the slide deck, the Delaware NGL expansion of 245 thousand. And we also know you have the processing plant at Big Horn coming around 400 million somewhere in 2Q. And this new expansion is 3Q. So can you talk a little bit about how these 2 projects are in some form complementary to each other? Thank you. Sheridan C. Swords: They are a little bit, but really this expansion that we are doing, we are really laying a pipeline from our Texas Delaware up to the Northern Delaware and New Mexico. So we are opening new area. We did upsize this expansion more than we needed like we have done other ones. We have a lot of growth there. it is backed by third party processors and producers that have contracted for this space. And with that extra capacity, we really are excited about being able to access a different part of the Delaware Basin, that Northern New Mexico Delaware, where there is a lot of opportunity for us compete for third party processing plants and that third party NGL volume. Thank you so much. Operator: We will now take our next question from Jean Ann Salisbury with Bank of America. Jean Ann Salisbury: Good morning. Bakken rigs have gone up markedly in the last month or 2. Have you heard from producers that they are adding activity in the Bakken at these oil prices. Yes, we have. Sheridan C. Swords: They are. Obviously, they are adding activity. We have more rigs coming online. And what is interesting about that is we are seeing more rigs come in or rigs come back from producers that are multi basin producers that have other Opportunities Across The Whole North America and they are bringing rigs back. So we are very we are excited about what we are seeing. And in some of these areas, they are drilling in the core of the core. Which is great for us. And that volume was all coming to us as well. So, yeah, we are seeing more activity in the Bakken with this rig count and from a different type of producers that we have not seen before, which is very encouraging. Jean Ann Salisbury: Thank you. And there is obviously been a lot of Permian M&A in recent months, specifically of G&P M&A. Do you attribute this uptick in activity to? A lot of these G&Ps kind of been out there for a long time? And then I guess relatedly, what are the key criteria when ONEOK assesses these for fit within your portfolio? Is the ability to direct NGLs a must have component when you are screening these things? Walter S. Hulse: Jean Ann, this is Walter. You know, I think that you asked why there are so many of these transactions. Clearly with commodity prices where they are, the private equity backers are looking at this as a window and opportunity to sell when the market's as strong as it has been. So they are all testing the market. Many of these assets have tested the market before. But at these levels, you know, you are you are seeing some activity. And the other thing is that there are fewer and fewer of those opportunities out there. So you know, as people look at trying to round out, they have decided to act. And many of them have derisked quite a bit. You know, in previous years when they have tried to come to market, they had a lot of space, but maybe not a lot of volume. Many of them have been able to do a good job filling those up. it is just the maturity of the basin with the backdrop of a great commodity price that is bringing people to the market. Jean Ann Salisbury: Thanks. Walter S. Hulse: And I guess so, what are the key criteria for ONEOK when you are screening them? Oh, I mean, NGLs apologize. I forgot that part of the question. that is NGLs is clearly something that would be important to us. And something that we look at. Is 1 piece to the-- you know, the overall picture. But to the extent that we can use our integrated system and continue to touch that molecule throughout the chain, that is what our strategy is. So if we can capture those NGLs that definitely would screen better on our radar for sure. Jean Ann Salisbury: Brent. Thank you all. Pierce H. Norton: Walter mentioned that this was, you know, a part of the criteria, but the areas of dedication, the low of those areas of dedication in and around the existing assets, both from a legacy standpoint and the new assets that you would picked up. The quality of the producer that is drilling those areas. there is a multitude of things that we look at all to basically derisk what it is that we are looking at and where we spend our capital. Jean Ann Salisbury: Brent. I will leave it there. Thank you for the answers. Operator: We will now take a question from John Mackay with Goldman Sachs. John Mackay: Hey, team. Thank you for the time. You touched on this a couple of times I think, in the context of the incremental balance sheet capacity. But just as you guys are out there looking to add new organic growth projects, could you touch a little bit about where you think kind of run rate annual growth CapEx could get to and maybe any sort of range you want to put around that keeping the leverage target in mind? Thank you. Walter S. Hulse: Sure. Well, as we have said, 2027 will look somewhat like 2026. We expect a lower level than 2026, but we still have some reasonably big projects finishing up with Medford wrapping up in 2027. You know, large process. Large processing plant. Several plants actually, and then the dock. So, you know, you should think around that $33 billion ish give or take for 2027. And then we would expect it to range between that 2.5 to 3 billion going forward, which will still leave us with quite a bit of free cash flow to return capital to shareholders. John Mackay: I appreciate that. Thank you. And just second 1 for me. On the Northern Delaware NGL expansion, anything you can comment in terms of mix of third party counterparties there? Either producers or is it all midstream? And then is that a would you expect that to be kind of like full chain margin, including frac all the way to Bellevue from the Northern Delaware? Or is it just a portion? Thanks. Sheridan C. Swords: Yeah. So the first thing, it is both. We have both We have multiple third party processors. That have signed up for this capacity and producers. On that. So it is a very nice mix between there. The it will be almost entirely a full value chain transportation and fractionation There is a little bit that will be just transport only, but it is highly all transportation down to the fractionation in. And we think that ramping will be. What we. The volume that has underwrote this will be coming up fairly quickly once it is put into service, and that will be in the third quarter of 27 when it comes up in service. John Mackay: Interesting. Thanks for the color. Appreciate it. Operator: We will now take our next question from Theresa Chen with Barclays. Theresa Chen: Good morning. Walter, would you further elucidate the shift in your leverage philosophy operating with lower leverage on a run rate basis. Is this rating agency led? Is it that you are seeing more commodity across your base business versus previously? Or is it more driven, towards showing up dry powder in the event of attractive inorganic opportunities complementing the organic ones? Walter S. Hulse: I would say that it is no 1 particular thing. You know, as we have gone through these transactions and lived through commodity cycles, We think maintaining the flexibility to look at opportunities and not stress the balance sheet is important. Have seen a lot of interest from large shareholders and seen a lower leverage in the business. So we are in the view that we did not do it just to get a triple plus, that is for sure. But we are very pleased that the rating agencies have recognized that we intend to operate the business with a lower level of leverage. So it is a little bit more conservative We have seen some pretty significant commodity cycles over the last 10 years. There will be another 1 at some point. Theresa Chen: Thank you. And as you evaluate further expansion of your Denver pipeline, how could the next phase differ from the project now that is online, both in terms of scale and product capabilities. Would it be fair to assume that the next phase would handle products beyond jet fuel? What would you need to see to move forward, towards an FID? And what are you seeing in terms of demand in that market as well? Sheridan C. Swords: Yeah. I mean, really, we set this up very nicely that the next expansion of Denver is not going to be a huge capital expansion. And so really what we are looking for is talking to customers and then wanting to sign up for that capacity. And they are looking at not only what is going on in the front but overall what is going on in path work, what they are looking at. And how they continue to move that out or other inter-movements within PADD or how that would affect the front range. So really to FID that project, we just need to get to the customers and have them ready to sign up for space. it is really where we are at. And we are having those conversations today, but obviously, that plant just. That pipeline just came online. We are moving more volume. Wanna see how the markets react to this additional volume. We are seeing increased jet fuel demand across our whole system. And Denver is no exception. But, obviously, this new capacity is meeting that demand today. But I will say we are having quite a few conversations with customers about the next expansion of Denver and we. The thing is unique about it is if they come in and want a little bit, we can give it or they want a lot, we can we can scale our expansion to what the customers want to sign up for. that is the beauty of us putting this operating leverage. In the pipeline related to the first time. Theresa Chen: Thank you. Operator: We will now take our next question from Praneeth Satish with Wells Fargo. Praneeth Satish: Thanks. Good morning. Just on Brazos, was wondering if you could help bridge the so in Q4, looking at contribution, I think if you annualize it, it is about $315 million of EBITDA. The 2027 target that you provided when you made the acquisition was $5.90 I know you have Cassidy 1 and 2, so that is probably part of it. But maybe, like, what are the other key drivers? And then how much visibility is there into filling up those 2 plants and getting to that $5.90 target for 2027? Sheridan C. Swords: Well, this is Sheridan. What I would say is that is you know, obviously Cassidy 1, as I said, is coming up here at the end of this year. It will fill relatively quickly on that going to get another 330 million cubic feet a day of processing capacity. We are processing right now we have 550 million. So we are increasing by over 50%. Then also as we tie that system into our system, we will be able to access our processing capacity as well. And then you get the downstream effect of the NGLs that are coming off this increased processing capacity to us. As well. So it is kind of a twofold that we are getting on as it is continuing to go forward. So. And then Cassidy 2, when it comes up, we will have to have used our legacy system when Cassidy 2 comes up. So everything is pointing to that Cassidy 2 will ramp up fairly quickly. As I said in my in my remarks that we are actually ahead volume is ahead of where we thought we would be at this time. And projections are showing that is gonna continue well into 2027, especially with our conversations with the producers out there that are getting excited about this Barnett and what they are saying. They are seeing better results than they had anticipated. Anticipated. From a volume standpoint on the gas. So we think it will. It that is how we are gonna get to that higher number. Walter S. Hulse: And, Praneeth, this is Walter. You know, I think the important part today is that the 550 million that is there is full. And we are doing offloads at this point. So, you if we had the capacity, we would be at a higher number. But until we bring in that Cassidy 1 plant, know, we will take a stair step up as we go into 2020. Praneeth Satish: Got it. Got it. that is helpful. And maybe just staying on Brazos. So, Sheridan, I think you noted that you expect 14 rigs on the Brazos acreage in 2027. I guess with commodity prices moving higher and some of these results here, that the producers are seeing from the Barnett, like is there any interest from producers on the Brazos system to add rigs? Do you think there is a possibility that, that rig count moves above 14 rigs in 2027 based on the discussions you are having with your customers? Sheridan C. Swords: Yeah. Yeah. I do think there is an opportunity for it to move up. We do have some customers that are continuing to look at that, continue to see where they want to deploy those rigs as they get more and more comfortable with the 27. Praneeth Satish: Got it. Thank you. Operator: Our next question will come from Brandon Bingham with I am sorry, Brandon Bingham with Scotiabank. Brandon Bingham: Walter to maybe get a little more clarity around the crude volumes during the quarter. It looked a little bit light. it is just what can you say about some of the dynamics around the crude piece? And then maybe how should we think about the forward trajectory of Permian crude, especially in light of all of the gas that is forecasted to come online through the end of the decade? Sheridan C. Swords: So this is Sheridan. What I would tell you is, is that the crude number we give you is a total system number. That includes both the gathering volumes, volumes that travel down our long haul pipelines and also volumes that we move through our Houston distribution system. Each 1 of those have very different rates on there. And Houston distribution system, which is where a lot of the volume moves, is at the lowest rate. that is why in our remarks, talked about the high-margin volumes are gathering out there in the Permian, and that is up 7%. that is why we are trying to give you that number because we know there is other pieces, of course, that move around in there because we have only given you 1 number. And there is another effect of how we kind of account for numbers depending on where they go and what systems they go through, how many times they get counted. So overall, are we like where our volumes are. They are growing. They are growing where they need to grow. That means they are growing in the in the gathering system. We continue to see that grow as we have 40 rigs on our acreage right now drilling. We continue to expand our acreage dedication we are getting from people, continue to grow that volumes, continue to make connectivity between our systems. Continue to make connectivity between our gathering systems and our long haul pipelines. Our long haul pipelines are predominantly full right now at this time. They are moving at rates. So I know it is a little bit hard because we show a little bit of drop in volumes, That is around our Houston distribution system. Where that is, which is by far the lowest margin, but our gathering volumes are up. Nicely at 7%. Pierce H. Norton: And Brandon, if you are going to continue to see the LNG growth in the Gulf Coast there another 12 Bcf a day. You know, it is our belief that a lot of that gas is gonna come out of the Permian Basin. So there is 2 things that is gotta move there. Either the volume of crude has to go up therefore lifting the gas or the GOR has to go up if the volume of crude stays flat. Our opinion is they probably both will move up. So there is gonna be more crude, I think, to move out there in the future. Brandon Bingham: I agree. Very helpful. Helpful. And then maybe 1 quick follow-up I know you said you were going to wait for 4Q to kind of get into specifics but is there anything maybe more qualitative or high level you could discuss Maybe for the non Brazos piece of the business as Brazos feels kind of pretty well understood at this point? Pierce H. Norton: For. I think you are getting on what. what is the guidance for 2027? I do want to reemphasize that you know, we are not gonna give guidance today for 2027, but I can tell you from where I sit, I really like where 2027 is setting up for us. I do think that is Add to that is you really have to we have talked a lot about the Permian today. Probably, I have not given the Midcontinent. it is due because the Mid Continent activity has picked up significantly And we are not only seeing that on the western side of the state, we are now starting to see the stack come back a little bit too. So we are excited about the Midcontinent. The powder has been doing great. So across each of the basins, we have talked about the rigs in the Bakken. So we are seeing that across all the basins. Brandon Bingham: Very helpful. Appreciate it. Operator: Our next question will come from Julien Dumoulin-Smith with Jefferies. Analyst: JULIEN SMITH: Yes. You have actually got Patrick this morning, but thank you for taking our questions. On the first 1, I was wondering if you add a bit more color around the hedging. I know you said you do not want to do 27 guidance, but how does this fit into your mid- to high- single digits long term growth trajectory. I mean, if you have. I think you said 75% hedged into 2027 at these prices. Can you just add some color about how that relates to your longer term earnings guidance, if you expect that to be kind of sustained or if that would drop off pretty sharply, assuming geopolitical normalization? Sheridan C. Swords: Yes, this is Sheridan. First thing is, yes, we did not say we are 75% through 2027. We are we were 75% coming into the fourth quarter of or into the third quarter of 26, and that other 25% gave us quite a bit of uplift. But as we talked about as hedging going into 2027, with these wide margins, we are seeing opportunity to hedge more than we typically We have a very programmatic hedging that we, are on a cadence when we hedge. Not really trying to call the market. When we see times like this, we do have the ability to accelerate that hedging, and we have done that into 2027. More so in the first part of the year because of the degradation in the market. And obviously, that backwardation is a sign of strength. So we really think the market will kind of come up as we get out in 2027. But we are more hedged now than we typically are at this time of the year. These wide margins. Obviously, that has just come of late. When I really think about this you know, medium to high single digit growth rate, that is really going off the base business and more of what we typically see in our margins. Going forward. So commodity price could be a nice little tailwind. Okay. Thanks for that. And I think a second bit, maybe a minor question was, do you tell us how much inventory is building for NGLs that Medford would need to process? Could you say that again? Do you tell us how much inventory is building up for Medford to process? Sorry. Apologize. It we have not come out and said exactly how much inventory we have, but we have quite a bit of inventory right now that we have been building since the second quarter. Anticipating Medford coming on as we have been successful in being able to contract more volume and growth across our system. So Medford is going to run full for definitely the first quarter and probably into part of the second quarter when it comes up. And that will earn it product prices at that point in time where you have hedged the prices that it will get as it all that inventory back? So there is 2 things that happened is because the way of accounting, we cannot account for our fee based earnings that we received from those that volume that we put into the well. So when we fractionate that volume, we will get the fee based earnings associated with those volumes in the well. Our marketing team has already hedged those out into the future to take out the commodity price on it. So the earnings you will see next year coming from this will be from the fee based portion that is we cannot. We cannot record until we fractionate the barrel. Operator: We will now take a question from Keith Stanley with Wolfe Research. Keith Stanley: Hi, good morning. Walter to follow-up on the Delaware NGL expansion pipe. Should we think of the 245 thousand barrels a day as mostly spoken for with new long term contracts? Or is this creating a lot of white space for you in New Mexico And then related to that, any update on how full you are now on the, I think it is, 750 thousand thousand barrels a day of West Texas LPG capacity all the way to the Gulf Coast. Sheridan C. Swords: Yeah. So on the Delaware expansion, we did think it is a very strategic pipeline. We think it goes to an area that has a lot of opportunity to pick up. Third party NGL volume And so we did go in there and upsize that pipeline. For that. So there is quite a bit of white space that we have there to be able to leverage and to be able to increase the volume on that system. And then in overall, we still have around you know, a little over between 200 thousand and 300 thousand barrels a day of space. On the West Texas NGL pipeline. Going forward. Obviously, whether our expectation was Brazos, Brazos is going to fill up quite a bit of that. And then our growth across our other base business will help us get a substantial amount of that pull. Keith Stanley: Great. Thanks for that. Quick 1. Second question on the refined products optimization. So you were up Q over Q in the third quarter on higher blending results. The slides often talk about Q2 and Q4 as the big blending quarters. Should we assume some of the blending sales were pulled forward from Q4 into Q3? Or is there anything else you would point to on Q3 being very strong? Sheridan C. Swords: Yes. Q2 was strong. Obviously, we had some very wide margins in there that made it really good. Volumes were good, which was kind of a culmination of a lot of our synergy projects that we have been being able to put into place. We have we have actually we talked about this Magellan, when we bought it, they were spending around about 20¢ per gallon. For their normal butane to get to the right place and to be able to blend. So they are moving a good portion on trucks The synergy projects that we have been able to put together have moved almost all that onto pipeline and we have been able to cut $0.01 out of that. So what we are blending now even though we had wide marks and then we had lower logistic cost to get there. And those logistic costs cost will be there every year. I mean, that is that is permanent, continue to go forward. So that. And then and then a little. You know, we had some. There was a little bit of waiver health They. In September, they moved the. From the first September 15 to October 15 since you can the RVP change. That gave us some more volume to be able to blend into And frankly, we are just getting better and better at it. Yeah. And you are right. The other thing was good is we are seeing increased gasoline volume across our system. So the more gasoline volume across our systems, the more opportunity we have to blend. So there is 3 or 4 things that have really attributed to that. And as we go into the fourth quarter, we are still seeing good margins. Obviously, costs are still there. And volumes across our system are strong compared to the. Where they are short. Keith Stanley: Thank you. Operator: That concludes our question-and-answer session for today. I would now like turn the call back over to Megan Patterson for closing remarks. Megan Patterson: Thanks, Anna. Our quiet period for the fourth quarter begins when we close our books. Early next year and extends until we release earnings in late February. Our IR team is available throughout the day for any follow ups. 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.