NYSE: OKE

ONEOK INC
Report created Apr 3, 2020 Page 1 OF 5

ONEOK Inc. is one of the largest energy midstream service providers in the U.S., connecting supply basins Argus Recommendations
with key market centers. It owns and operates one of the nation's premier natural gas liquids systems and
is a leader in the gathering, processing, storage and transportation of natural gas. ONEOK's operations
include a 38,000-mile integrated network of NGL and natural gas pipelines, processing plants, Twelve Month Rating SELL HOLD BUY
fractionators and storage facilities in the Mid-Continent, Williston, Permian and Rocky Mountain regions.
The company operates in three business segments: Natural Gas Gathering and Processing, Natural Gas Five Year Rating SELL HOLD BUY
Liquids, and Natural Gas Pipelines.
Under Market Over
Sector Rating Weight Weight Weight
Analyst's Notes
Argus assigns a 12-month BUY, HOLD, or SELL rating to each
Analysis by Bill Selesky, April 3, 2020 stock under coverage.
ARGUS RATING: BUY • BUY-rated stocks are expected to outperform the market (the
benchmark S&P 500 Index) on a risk-adjusted basis over the
next year.
• ONEOK to cut capex spending by $500 million
• HOLD-rated stocks are expected to perform in line with the
• On March 11, ONEOK lowered its 2020 growth capital spending guidance to reflect the current market.
commodity price environment. It now expects growth capital expenditures of $1.60-$2.40 billion with • SELL-rated stocks are expected to underperform the market
a midpoint of $2.0 billion, down from approximately $2.5 billion in its previous forecast. on a risk-adjusted basis.
The distribution of ratings across Argus' entire company
• At the same time, CEO Terry Spencer said that the company expected its 2020 results to be within universe is: 64% Buy, 35% Hold, 1% Sell.
previously announced guidance ranges: adjusted EBITDA of $3.100-$3.350 billion, net income of
$1.355-$1.605 billion, and diluted EPS of $3.25-$3.85.
• We are lowering our 2020 EPS estimate to $3.62 from $3.81 based on significantly lower oil prices Key Statistics
Key Statistics pricing data reflects previous trading day's closing
and the impact of the pandemic, which has lowered demand from the company's customers. Our price. Other applicable data are trailing 12-months unless
estimate remains within management's guidance range. The consensus is $3.56 per share. otherwise specified
• We are also lowering our 2021 EPS estimate to $3.87 from $4.34 based on our forecast for continued Market Overview
weak oil prices (though we expect pricing to be slightly higher than in 2020) and the fallout from the Price $21.63
coronavirus. The 2021 consensus is $3.95. Target Price $27.00
52 Week Price Range $12.16 to $78.48
INVESTMENT THESIS Shares Outstanding 413.32 Million
We are reaffirming our BUY rating on ONEOK Inc. (NYSE: OKE) but are lowering our Dividend $3.74
price target to $27 from $82 to reflect our lower profit forecasts for 2020 and 2021 and Sector Overview
current challenging energy market conditions. We have a favorable view of OKE's strategy Sector Energy
of restructuring legacy contracts to a newer 'fee-based' system, as we see the company's Sector Rating UNDER WEIGHT
earnings as less vulnerable to changes in volume and pricing. Total % of S&P 500 Market Cap. 3.00%
Our long-term rating also remains BUY, reflecting OKE's strong market position, Financial Strength
greater earnings stability, and record of steady dividend growth. Financial Strength Rating MEDIUM
RECENT DEVELOPMENTS Debt/Capital Ratio 67.2%
Return on Equity 25.3%
On March 11, 2020, ONEOK lowered its 2020 growth capital spending guidance to
Net Margin 12.6%
Payout Ratio 1.03
Market Data Pricing reflects previous trading week's closing price. Current Ratio 0.73
200-Day Moving Average Target Price: $27.00 52 Week High: $71.92 52 Week Low: $12.16 Closed at $20.94 on 3/27 Revenue $10.16 Billion
Price After-Tax Income $1.28 Billion
($)
80
Valuation
Current FY P/E 5.98
60 Prior FY P/E 7.02
40 Price/Sales 0.88
Price/Book 1.44
20
Book Value/Share $15.07
Market Capitalization $8.94 Billion
Rating BUY
HOLD
SELL Forecasted Growth
EPS 1 Year EPS Growth Forecast
($) 17.53%
5 Year EPS Growth Forecast
10.00%
Quarterly 0.64 0.68 0.75 0.70 0.81 0.76 0.74 0.77 0.82 0.90 0.94 0.96 0.92 0.93 0.99 1.03
2.77 3.08 3.62 ( Estimate) 3.87 ( Estimate)
1 Year Dividend Growth Forecast
Annual
4.18%
Revenue
($ in Bil.) Risk
Beta 1.40
Quarterly 3.1 3.0 3.4 3.1 2.8 2.5 2.3 2.7 2.9 3.0 3.1 3.2 2.5 2.6 2.8 2.9 Institutional Ownership 75.07%
Annual 12.6 10.2 12.2 ( Estimate) 10.9 ( Estimate)
FY ends Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Dec 31 2018 2019 2020 2021

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©2020 Argus Research Company Argus Analyst Report

 NYSE: OKE

ONEOK INC
Report created Apr 3, 2020 Page 2 OF 5

Analyst's Notes...Continued
reflect the current commodity price environment. It now expects
growth capital expenditures of $1.60-$2.40 billion with a midpoint
of $2.0 billion, down from approximately $2.5 billion in its
previous forecast. We believe that the reduced spending will give
ONEOK the flexibility to make adjustments based on expected
producer activity.
As discussed in our last note, on February 24, ONEOK reported
adjusted 4Q19 net income of $320.3 million or $0.77 per diluted
share, up from $292.9 million or $0.70 per share in the prior-year
period. Adjusted EPS matched our estimate and the consensus
estimate of $0.77.
The higher earnings were driven by volume growth in natural
gas liquids (NGLs) and natural gas, along with increased
transportation services revenue in the natural gas pipelines
segment.
Adjusted EBITDA was $660.5 million, compared to $625.2
million in the prior-year quarter. Revenue fell 15% to 2.664
billion, mostly due to lower realized natural gas and NGL prices. In
4Q, OKE spent $1.109 billion on capital projects, up from $831.8
million a year earlier due to new project expansions and start-ups.
Fourth-quarter results by business segment are summarized
below.
ONEOK's Natural Gas Liquids segment posted 4Q19 adjusted
EBITDA of $373.9 million, up 8% from the prior year. The
improvement was due primarily to higher volumes in the Permian
Basin and Rocky Mountain region and higher average fee rates in
the Permian Basin.
In the Natural Gas Gathering and Processing segment, adjusted
EBITDA rose 8% to $188.5 million, driven mostly by higher
natural gas volume in the Williston Basin. In addition, the segment
benefited from a $1.2 million decrease in operating costs.
In Natural Gas Pipelines, adjusted EBITDA rose about 1% from
the prior year to $97.8 million, reflecting higher transportation
service revenue, offset in part by higher compensation costs.
As discussed in previous reports, in June 2017, ONEOK
completed its acquisition of all remaining common units of
ONEOK Partners for $9.3 billion in ONEOK common stock. The
merger was intended to lower the company's cost of capital and
improve its financial position.
For 2019, the company reported an adjusted net profit of $3.07
per diluted share compared to $2.77 per share in 2018.
EARNINGS & GROWTH ANALYSIS
Together with the updated 2020 capital expenditure program
announced on March 11, CEO Terry Spencer said that the
company expected its 2020 results to be within previously
announced guidance ranges: adjusted EBITDA of $3.100-$3.350
billion, net income of $1.355-$1.605 billion, and diluted EPS of
$3.25-$3.85. The guidance reflects the 'significant inventory of
flared natural gas in the Williston Basin and fully contracted
growth in the Permian Basin' as well as current depressed
commodity prices and rig count reductions.

Growth & Valuation Analysis Financial & Risk Analysis

GROWTH ANALYSIS
($ in Millions, except per share data) 2015 2016 2017 2018 2019
FINANCIAL STRENGTH 2017 2018 2019
Revenue 7,763 8,921 12,174 12,593 10,164
Cash ($ in Millions) 37 12 21
COGS 5,996 6,888 9,944 9,851 7,265
Working Capital ($ in Millions) -903 -710 -550
Gross Profit 1,768 2,033 2,230 2,742 2,900
Current Ratio 0.66 0.66 0.73
SG&A — — — — —
LT Debt/Equity Ratio (%) 146.4 135.3 200.8
R&D — — — — —
Total Debt/Equity Ratio (%) 165.3 143.0 204.5
Operating Income 1,074 1,276 1,396 1,835 1,917
Interest Expense 417 470 486 470 492 RATIOS (%)
Pretax Income 522 958 1,041 1,518 1,651 Gross Profit Margin 18.3 21.8 28.5
Income Taxes 137 212 447 363 372 Operating Margin 11.6 14.6 18.9
Tax Rate (%) 26 22 43 24 23 Net Margin 3.2 9.1 12.6
Net Income 245 352 388 1,152 1,279 Return On Assets 2.3 6.6 6.4
Diluted Shares Outstanding 211 212 300 414 415 Return On Equity 13.5 19.0 20.0
EPS 1.16 1.66 1.29 2.78 3.07
RISK ANALYSIS
Dividend 2.43 2.46 2.72 3.25 3.53
Cash Cycle (days) 5.8 3.6 -5.0
GROWTH RATES (%) Cash Flow/Cap Ex 2.6 1.0 0.5
Revenue -36.3 14.9 36.5 3.4 -19.3 Oper. Income/Int. Exp. (ratio) 3.1 4.2 4.4
Operating Income -5.5 19.7 9.4 30.4 4.5 Payout Ratio 179.6 158.9 145.1
Net Income -22.0 43.7 10.2 197.0 11.0
EPS -21.7 40.3 -22.8 115.5 10.4 The data contained on this page of this report has been
Dividend 14.4 1.2 10.6 19.3 8.8 provided by Morningstar, Inc. (© 2020 Morningstar, Inc.
Sustainable Growth Rate -35.9 -72.6 -8.8 -6.9 -2.9 All Rights Reserved). This data (1) is proprietary to
VALUATION ANALYSIS Morningstar and/or its content providers; (2) may not be
Price: High $51.53 $59.47 $59.30 $71.99 $77.21 copied or distributed; and (3) is not warranted to be
Price: Low $18.84 $18.88 $47.14 $50.26 $52.72 accurate, complete or timely. Neither Morningstar nor its
content providers are responsible for any damages or
Price/Sales: High-Low 1.4 - 0.5 1.4 - 0.4 1.5 - 1.2 2.4 - 1.7 3.2 - 2.2
losses arising from any use of this information. Past
P/E: High-Low 44.4 - 16.2 35.8 - 11.4 46.0 - 36.5 25.9 - 18.1 25.1 - 17.2
performance is no guarantee of future results. This data
Price/Cash Flow: High-Low 9.8 - 3.6 10.2 - 3.2 11.1 - 8.8 15.5 - 10.8 16.0 - 11.0 is set forth herein for historical reference only and is not
necessarily used in Argus’ analysis of the stock set forth
on this page of this report or any other stock or other
security. All earnings figures are in GAAP.

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©2020 Argus Research Company Argus Analyst Report

 NYSE: OKE

ONEOK INC
Report created Apr 3, 2020 Page 3 OF 5

Analyst's Notes...Continued
We are lowering our 2020 EPS estimate to $3.62 from $3.81
based on significantly lower oil prices and the impact of the
pandemic, which has lowered demand from the company's
customers. Our estimate remains within management's guidance
range. The consensus is $3.56 per share.
We are also lowering our 2021 EPS estimate to $3.87 from
$4.34 based on our forecast for continued weak oil prices (though
we expect pricing to be slightly higher than in 2020) and the fallout
from the coronavirus. The 2021 consensus is $3.95.
FINANCIAL STRENGTH & DIVIDEND
We rate OKE's financial strength as Medium, the midpoint on
our five-point scale. The company's debt is rated Baa3/positive by
Moody's and BBB/stable by S&P. Both ratings are investment
grade.
At the end of 4Q19, the total debt/total capitalization ratio was
67.2%, up from 58.8% at the end of 4Q18. The ratio is above the
peer average and has averaged 65.7% over the past five years.
Total debt was $12.749 billion at the end of the quarter, up
from $9.381 billion a year earlier. Cash from operating activities
decreased to $620 million from $670 million.
OKE had cash and equivalents of $21 million at the end of
4Q19, up from $12 million at the end of 4Q18. In April 2017, the
company said that a new $2.5 billion revolving credit facility
would replace its existing facilities following the completion of the
ONEOK Partners merger. This facility currently has $2.3 billion of
available borrowing capacity.
The company recently raised its quarterly dividend by 2% to
$0.935 or $3.74 annually. The current yield is about 17.3%, an
extraordinarily high yield that we believe is unsustainable.
Management projects annual dividend increases of 9%-11%
through 2021, but under the current market conditions, may
change that forecast. We believe that the company will continue to
pay an 'industry-leading' dividend. Our dividend estimates are
$3.74 for 2020 and $3.74 for 2021.
MANAGEMENT & RISKS
Terry Spencer became CEO of both OKE and OKS in 2014
after previously serving as president. Former CEO John Gibson
now serves as chairman.
OKE's risks involve liquidity, credit and regulatory issues, bad
weather, and changes in demand for natural gas, NGLs, and crude
oil. In addition, rising interest rates may increase the company's
capital costs. The tax treatment of MLPs may also make investors
hesitant to own the stock.
COMPANY DESCRIPTION
ONEOK Inc. is one of the largest energy midstream service
providers in the U.S., connecting supply basins with key market
centers. It owns and operates one of the nation's premier natural
gas liquids systems and is a leader in the gathering, processing,
storage and transportation of natural gas. ONEOK's operations
include a 38,000-mile integrated network of NGL and natural gas

Peer & Industry Analysis

The graphics in this section are designed to
P/E
allow investors to compare OKE versus its Growth
industry peers, the broader sector, and the OKE vs.
market as a whole, as defined by the Argus Market
Universe of Coverage. OKE vs.
15 Sector
• The scatterplot shows how OKE stacks WMB More Value More Growth
up versus its peers on two key ENB
characteristics: long-term growth and
KMI Price/Sales
value. In general, companies in the lower OKE vs.
left-hand corner are more value-oriented, Market
while those in the upper right-hand corner 10 OKE vs.
are more growth-oriented. Sector
More Value More Growth
• The table builds on the scatterplot by
displaying more financial information. EPD Price/Book
• The bar charts on the right take the OKE
5 PSX OKE vs.
analysis two steps further, by broadening Market
the comparison groups into the sector OKE vs.
level and the market as a whole. This tool Sector
is designed to help investors understand More Value More Growth

Value
P/E

how OKE might fit into or modify a PEG

4 6 8 10
diversified portfolio.
5-yr Growth Rate(%) OKE vs.
Market
5-yr Net 1-yr EPS OKE vs.
Market Cap Growth Current Margin Growth Argus Sector
More Value More Growth
Ticker Company ($ in Millions) Rate (%) FY P/E (%) (%) Rating
ENB Enbridge Inc 55,670 4.0 13.5 11.4 4.9 BUY 5 Year Growth
EPD Enterprise Prods Pntr L 31,547 8.0 6.5 14.0 3.2 BUY OKE vs.
KMI Kinder Morgan Inc 30,465 10.0 13.3 16.6 3.0 HOLD Market
OKE vs.
PSX Phillips 66 22,645 5.0 5.4 2.9 10.2 BUY Sector
WMB Williams Cos Inc 17,445 10.0 14.4 10.4 8.0 HOLD More Value More Growth
OKE Oneok Inc. 8,940 10.0 6.0 12.6 6.9 BUY Debt/Capital
Peer Average 27,785 7.8 9.8 11.3 6.0
OKE vs.
Market
OKE vs.
Sector
More Value More Growth

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©2020 Argus Research Company Argus Analyst Report

 NYSE: OKE

ONEOK INC
Report created Apr 3, 2020 Page 4 OF 5

Analyst's Notes...Continued
pipelines, processing plants, fractionators and storage facilities in
the Mid-Continent, Williston, Permian and Rocky Mountain
regions. The company operates in three business segments: Natural
Gas Gathering and Processing, Natural Gas Liquids, and Natural
Gas Pipelines.
VALUATION
OKE shares have traded between $12.16 and $78.48 over the
past 52 weeks and are currently toward the low end of this range.
The shares trade at 6.4-times our 2020 EPS estimate, below the
peer average of 11.5, and at 6.0-times our 2021 estimate, below the
peer average of 12.3. The five-year average range is 21-34.
The price/book ratio is 3.2, below the low end of the eight-year
average historical range of 5.1-23.1, while the price/cash flow ratio
is 12.0, above the high end of the historical range of 7.3-11.9. We
are reiterating our BUY rating with a revised target price of $27.
On April 3 at midday, BUY-rated OKE traded at $20.59, down
$1.04.

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©2020 Argus Research Company Argus Analyst Report

 NYSE: OKE

METHODOLOGY & DISCLAIMERS Report created Apr 3, 2020 Page 5 OF 5

About Argus
Argus Research, founded by Economist Harold Dorsey in 1934,
has built a top-down, fundamental system that is used by Argus
analysts. This six-point system includes Industry Analysis, Growth
Analysis, Financial Strength Analysis, Management Assessment,
Risk Analysis and Valuation Analysis.
Utilizing forecasts from Argus’ Economist, the Industry Analysis
identifies industries expected to perform well over the next
one-to-two years.
The Growth Analysis generates proprietary estimates for
companies under coverage.
In the Financial Strength Analysis, analysts study ratios to
understand profitability, liquidity and capital structure.
During the Management Assessment, analysts meet with and
familiarize themselves with the processes of corporate management
teams.
Quantitative trends and qualitative threats are assessed under
the Risk Analysis.
And finally, Argus’ Valuation Analysis model integrates a
historical ratio matrix, discounted cash flow modeling, and peer
comparison.
THE ARGUS RESEARCH RATING SYSTEM
Argus uses three ratings for stocks: BUY, HOLD, and SELL.
Stocks are rated relative to a benchmark, the S&P 500.
• A BUY-rated stock is expected to outperform the S&P 500 on
a risk-adjusted basis over a 12-month period. To make this
determination, Argus Analysts set target prices, use beta as the
measure of risk, and compare expected risk-adjusted stock
returns to the S&P 500 forecasts set by the Argus Market
Strategist.
• A HOLD-rated stock is expected to perform in line with the
S&P 500.
• A SELL-rated stock is expected to underperform the S&P 500.

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Morningstar Disclaimer
© 2020 Morningstar, Inc. All Rights Reserved. Certain financial information included in this report: (1) is proprietary to Morningstar and/or its content providers; (2) may not be
copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising
from any use of this information. Past performance is no guarantee of future results.

©2020 Argus Research Company Argus Analyst Report