ONEOK Reports Q1 2026 Results: Full Earnings Call Transcript

ONEOK (NYSE:OKE) reported first-quarter financial results on Wednesday. The transcript from the company's first-quarter earnings call has been provided below. This content is powered by Benzinga APIs. For comprehensive financial data and transcripts, visit https://www.benzinga.com/apis/. Access the full call at https://event.choruscall.com/mediaframe/webcast.html?webcastid=1bF093VI Summary ONEOK reported strong first-quarter earnings with a 12% year-over-year increase in net income, reaching $776 million, and raised its 2026 financial guidance due to robust performance and favorable market conditions. The company is focusing on strategic initiatives such as the expansion of its natural gas and NGL infrastructure, including projects in the Permian and Powder River Basins, while maintaining a strong balance sheet and financial flexibility. Management emphasized the long-term demand for U.S. energy infrastructure, driven by increasing LNG export capacity and rising natural gas demand, and highlighted ongoing operational excellence and customer relationship management as key to future growth. ONEOK's adjusted EBITDA guidance for 2026 was increased to a midpoint of $8.25 billion, reflecting strong business segment performance and improved market dynamics. Operationally, ONEOK completed the relocation of the Shadowfax natural gas processing plant and is on track with other key projects, while also seeing strong demand for its export infrastructure, particularly for LPG exports. Full Transcript OPERATOR Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press Star zero and a member of our team will be happy to help you. Megan Patterson (Vice President, Investor Relationship) Thank you. everyone welcome to one of the first quarter 2026 earnings call. We issued our earnings release and presentation after the markets closed yesterday and those materials are available on our website. After our prepared remarks, management will be available to take your questions. Statements made during this call that might include oneok's expectations or predictions should be considered forward looking statements and are covered by the Safe harbor provision of the securities Acts of 1933 and 1934. Actual results could differ materially from those projected in forward looking statements. For a discussion of factors that could cause actual results to differ, please refer to our SEC filings. With that, I'll turn the call over to Pierce Norton, President and Chief Executive Officer. Pierce Norton (President and Chief Executive Officer) Thank you Megan and good morning everyone and thank you for joining us today. Joining me on the call are Walt Hulse, Chief Financial Officer, Randy Lentz, Chief Operating Officer and Sheridan Swartz, our Chief Commercial Officer. Yesterday we reported first quarter earnings and raised our 2026 financial guidance, reflecting strong performance and building momentum. Before we get into the quarter, I'd like to take a step back and frame the environment we're operating in and how we think about ONEOK's role within it. Energy markets remain dynamic, but long term fundamentals are strong. It remains clear that the US Energy infrastructure is essential for economic growth, industrial competitiveness, power demand and global energy security. Midstream's role is simple. We connect supply and demand safely and efficiently across cycles, not around them. That's where ONEOK differentiates itself. We built a regionally diversified integrated platform at scale across natural gas liquids, natural gas, crude oil and refined products, anchored by an innovative employee base, the interconnectivity of our assets, customer relationships and a predominantly fee based model. Our systems sit in and around some of the most resilient basins and durable demand centers, including power generation, industrial demand and export markets. As we look to the remainder of 2026, our high level priorities remain consistent operate safely and reliably, execute our capital growth program with discipline, maintain balance sheet strength and financial flexibility and leverage our integrated asset advantage and strong customer relationships to continue driving volume growth across all of our systems. These priorities are grounded in what we see across the US Energy landscape where long term demand remains constructive both domestically and globally. US Natural gas demand is growing across power generation for emerging data center demand, industrial activity and liquefied natural gas exports. LNG export capacity alone is projected to more than double over the next decade, reinforcing the durable global call on U.S. energy and natural gas infrastructure. 65% of U.S. natural gas production contains recoverable natural gas liquids. That means the infrastructure to handle natural gas liquids must be addressed alongside natural gas. This requires full value chain infrastructure and continued investments in natural gas, natural gas liquids, crude oil and refined product assets. Companies like one of at the same time, NGL demand remains strong globally driven by petrochemical and international markets, with US Supply playing an increasingly critical role. And finally, the resilience and innovation of the US Energy industry continues to stand out through consistent efficiency gains and reliable results. Recent global events have only reinforced the importance of secure, resilient energy supply and the critical role U.S. energy plays in providing it. The world has seen that the most expensive energy is the energy that does not show up as global demand continues to grow. Infrastructure, not supply, is the constraint and that is exactly where oneok is positioned providing scalable, strategically located infrastructure with capacity and the ability to respond to evolving demand dynamics. I'll now turn the call over to Walt Hulse (Chief Financial Officer) Walt Hulse for our financial update. Thank you, Pierce. As Pierce mentioned, we are increasing our 2026 financial guidance reflecting the strong performance we delivered in the first quarter across ONEOKs integrated systems and our higher expectations for the remainder of the year. We now expect 2026 net income to increase to a midpoint of approximately $3.5 billion, with diluted earnings per share increasing to a midpoint of $5.53. We are also increasing our adjusted EBITDA guidance to a midpoint of $8.25 billion. These updates reflect strong underlying business segment performance as well as increased opportunities across our system, driven in part by by a more constructive market environment that developed late in the first quarter. As we move into the back half of the year, the combination of higher volumes, completed projects and market tailwinds should be reflected more clearly in our results for the balance of this year and into 2027 our total 2026 capital expenditures guidance remains unchanged and at $2.7 billion to $3.2 billion. Turning to the first quarter performance, ONEOK reported net income of $776 million or $1.23 per diluted share, a 12% increase compared with the first quarter of 2025. Results included a non cash impairment of $60 million or $0.07 per diluted share after tax related to our Powder Springs logistic joint venture in the refined products and crude segment. Adjusted EBITDA for the quarter totaled approximately $2 billion, a 13% year over year increase driven by higher volumes and strong segment level performance. As market conditions strengthened toward the end of the quarter, we also saw additional opportunities across our system. We continue to expect the first quarter to be our lowest EBITDA quarter of the year, consistent with our typical annual cadence and seasonal dynamics. Importantly, our balance sheet and capital framework remains strong. We continue to prioritize financial flexibility while investing in the business and returning capital to shareholders. In April, we redeemed nearly $500 million of outstanding notes due July 2026 and we entered into a $1.2 billion term loan, further enhancing balance sheet flexibility in a rapidly changing market. Our results reflect the same themes that underpin our strategy a high quality, largely fee based earnings mix, strong performance across our integrated systems and disciplined cost and capital management. And our increased financial guidance reflects both this consistent execution year to date and improving market dynamics. I'll turn it over to Randy for an operational and large capital projects update. Randy Lentz (Chief Operating Officer) Thank you Walt. From an operational standpoint, our focus remains on safe and reliable performance across our integrated assets. Our teams continue to execute well across all four business segments managing normal seasonality and weather related impacts. The scale and diversity of our systems allow us to absorb those seasonal dynamics while continuing to provide reliable service to our customers. Winter Storm Fern created temporary wellhead freeze offs that briefly reduced throughput, but as a reminder there were no material downtime on our assets on those related. Those impacts were already reflected in our original 2026 guidance. Turning to capital projects, we made strong progress so far this year. In the first quarter we completed the relocation of our 150 million cubic feet per day Shadowfax natural gas processing plant from North Texas to the Midland Basin. We expect a steady ramp up of volumes as producer activity remains solid in the area. We're also on track to complete expansions of our Delaware Basin processing assets in the third quarter, increasing our capacity in the basin by 110 million cubic feet per day. In addition to our 300 million cubic feet per day Bighorn processing plant that remains on schedule for completion in mid-2027 in the powder River Basin. We're on track to complete construction of our 60 million cubic feet per day cutter plant in the fourth quarter of 2026. This plant will increase our processing capacity in the Powder river to more than 100 million cubic feet per day. We expect capacity to fill quickly from wells already drilled and expected to be drilled by our 15% JV partnering plant. Across other segments, our Denver area refined products pipeline expansion will add 35,000 barrels per day of capacity when it enters service mid year and phase one of our Medford NGL fractionator will add 100,000 barrels per day of mid continent fractionation capacity in the fourth quarter. These projects remain on schedule and are positioned to deliver meaningful near term benefits by improving reliability, expanding connectivity and increasing optionality by also creating long term durable value across our footprint. I'll now turn it over to Sheridan for a commercial update. Sheridan Swartz (Chief Commercial Officer) Thank you Randy Commercially we continue to see active engagement across our asset portfolio. Demand is supported by downstream pull, particularly from power generation, industrial and petrochemical demand and export linked markets. These dynamics reinforce the importance of strategically located infrastructure and long term relationships. Looking at the first quarter, we delivered strong year over year volume performance across our assets despite typically seasonal headwinds starting with the natural gas liquid segment performance was led by broad based volume growth across all three of our core regions. In the Rocky Mountain region, NGL volumes increased 11% year over year driven by higher base volume and increased ethane recovery. In the Mid Continent volumes increased 4% year over year driven entirely by C3 plus volume even as the region experienced some temporary impacts from winter storms earlier in the quarter. In the Gulf Coast Permian region volumes increased more than 30% year over year primarily reflecting base volume growth from newly connected third party plants that were delayed last year as well as higher short term volume opportunity. From a global perspective, NGL demand remains structurally strong and recent geopolitical dynamics have further reinforced the attractiveness of U.S. supply. We pressed request for capacity on our announced LPG export dock were already increasing and have accelerated more recently as customers look to diversify supply toward the US Turning to the refined products and crude segment, year over year refined products volumes increased 12% supported by strong gasoline and diesel demand, refinery maintenance dynamics, favorable regional basis differentials and wide crack spreads that drove strong refinery utilization. Blending volumes were also strong during the quarter we entered the spring blending season significantly hedged which limited our exposure to widening RBOB to butane spreads Historically wide basis differentials between New York harbor where we hedge and the Mid Continent where we sell product also impacted realized margins. Looking ahead, we've secured additional hedges on fall volumes at higher prices and extended new hedges into spring 2027. Importantly, blending volumes continue to be driven primarily by system throughput rather than EPA RVP waivers which typically create only modest incremental opportunities. Increased gasoline throughput and completed synergy projects provide a much greater benefit allowing us to optimize blending activity across our system. More broadly, the reach and flexibility of refined products systems remain a key advantage. We are the only refined products pipeline system with bi directional access between the Mid Continent and the Gulf coast which allows us to attract incremental volume and respond to changing market conditions. Demand fundamentals remain strong. We continue to see very strong diesel demand across our system which we expect to remain as we move into spring agricultural season. We also anticipate a robust summer travel season supported gasoline demand across our footprint. Additionally, if jet fuel supply remains constrained for an extended period, we could see incremental demand for gasoline. Refined products and crude exports have increased in recent months amid global supply tightness particularly related to diesel, and we are well positioned with dock capacity across multiple Gulf coast marine facilities. Crude dock utilization remain robust at our highly contracted seabora joint venture and we are in discussions to extend our contract expiring capacity at favorable rates. Finally, higher margin Permian crude oil gathering volumes increased compared with the fourth quarter as activity in the basin remains favorable but discipline moving to the natural gathering and processing segment, we delivered strong year over year volume led by the Mid continent where volumes increased 7%. Mid continent producers continue to focus activity across both gas focused and liquid rich plays and we have 11 rigs currently operating at cost our more than 1 million dedicated acres in this region. In the Rocky Mountain region, process volumes increased year over year even with winter weather and heater treater impacts. As operating conditions normalize, we expect volumes to strengthen in the second and third quarters. There are currently 11 rigs on our dedicated acreage with producers continue to drive efficiency gains through longer lapses. In the Permian basin, process volumes increased 4% year over year and we currently have 11 rigs operating across our footprint. As Randy mentioned earlier, our expanded capacity in the Permian enhances system flexibility and positions us well to support producers development plans across both the Midland and Delaware basins, customer activity remains strong and we are increasingly encouraged by the depth of opportunities the Permian Basin brings to our portfolio. From a financial perspective, realized commodity prices were lower in the first quarter as a result of entering the year fully hedged. Importantly, underlying throughput volumes increased year over year across all regions, reinforcing the long term earning capacity and resilience of our gathering and processing portfolio. Producer behavior remains disciplined and execution focused. We are seeing some acceleration in completion activity which supports our confidence in the 2026 volume outlook. That confidence is driven by direct visibility into producer plans and rather than an expectation of higher commodity prices. This view is consistent with recent earnings commentary for oilfield services companies that noted early signs of increasing activity, particularly among private and single basin operators. DUC inventories can also provide an avenue for this acceleration. Our producer base across ONEOK's approximately 7bcf per day system is well balanced among large public companies, private operators and private equity backed producers. That diversity provides both scale and durability while allowing activity to adjust incrementally. I'll close with our natural gas pipeline segment where strong results continued in the first quarter with all regions outperforming expectations. Results benefited from wider than planned Waha to Katy location price differentials as well as incremental marketing opportunities created by Winter Storm firm across our Louisiana assets. Looking ahead, we expect Waha to Katy differentials to normalize as new pipeline egress comes online in the second half of the year. Firm transportation demand remains strong with high contracted capacity and strong utilization. We also continue to see significant interest from data center related opportunities in Oklahoma and Texas and we remain in advanced discussion with several counterpoints. Additionally, LNG related demand remains strong both near term and long term, reinforcing the durability demand for natural gas pipeline assets. Pierce, that concludes my remarks. Pierce Norton (President and Chief Executive Officer) Thank you Sheridan, Randy and Walt for those comments to close. I'll come back to where I started. The energy landscape will continue to evolve, but the need for reliable, scalable US Energy infrastructure is not cyclical. It is driven by long term demand fundamentals. Oneok is built for this environment. Having an integrated platform with capacity, a strong balance sheet and disciplined execution results durable long term value creation. Most importantly, none of this happens without our people. I want to thank our employees for their continued focus on safety, operational excellence, innovation and service and thank you to our investors for your continued trust and support in one up with that operator. OPERATOR We're now ready to take questions. We will now begin the question and answer session. If you would like to ask a question, press Star one on your telephone keypad to leave the queue at any time, press Star two. We do ask that you limit yourself to one question and a follow up to fit in as many of you as we can. Once Again, that is Star One to ask a question. And our first question will come from Spiro Dunas with Citi. Your line is now open. Please go ahead. Spiro Dunas Thanks operator. Morning team. Maybe just start with the improved outlook. Just looking for a little more granularity on how much that $150 million move is maybe early realized during the first quarter and I guess what level of visibility you have on the remaining forward component. You know Sheridan, you mentioned sort of hedging out butane through 27. Just curious how much of that forward look is locked in. Walt Hulse (Chief Financial Officer) Sparrow, it's Walt. So first of all I just want to clarify make sure that it's clear that Winter Storm Fern was already in our guidance. So we had zero impact from that as it related to the increase. The increase was really a blend of stronger volume expectations driven by higher commodity prices, continued expected differential opportunities and then we of course expect to realize some benefit from the higher commodity prices. Although we are hedged, typically we're hedged about 75% going into a year. But with the higher volume expectations, any volumes we receive going forward will enjoy the full benefit of these higher commodity prices. Understood. Well, second one maybe for you as well, just pivoting to capital allocation. So once again you're trending a little bit stronger than expected. Could you just level set us? I know you're thinking about the timing to sort of reach your leverage targets here and when you do free up that cash flow, just rear your head down buybacks or any other uses of that free catch. Sure. Well nothing's really changed from our capital expenditure planned. As you know and Randy mentioned, our projects are on time and right on budget. So you know we expect to start completing those this year with the Denver project finishing up and Medford first phase finishing up as well as you know, some of the smaller things as those wind down. As we've stated in the plan past, Most of our capex will larger capex will be completed by mid year of 2027 and that's when we'll really see the free cash flow kicking in. You know we're headed towards our leverage targets. Clearly with the increased EBITDA expectations as that denominator rises we'll get there faster. But we continue to pay down debt and we'll be in a position to meet our targets and return capital to shareholders appropriately. But I want to make sure that every understands our first objective is always to get high return capital projects. So you know, as we see those come in, we'll definitely try to prioritize those. But our Expectation is free cash flow and there will be plenty for those. Our dividend, our debt repayment, as well as other forms of return to shareholders. Great. Spiro Dunas I'll leave it there for today. Thank you guys. OPERATOR Thank you. Our next question comes from Theresa Chin with Barclays. Your line is now open. Theresa Chin Good morning. Going back to ONEOK's comments on the upstream outlook, though it's still early on. Can you elaborate further on recent conversations with ONEOK's producer customers? What are ONEOK's near and medium term expectations for upstream activities in ONEOK's areas of service? And where do you think prices will need to stabilize in the outer years to stimulate a material uptick in production? And how long would it take to see these volumes potentially materialize on ONEOK's system? Sheridan Swartz (Chief Commercial Officer) Teresa, this is Sheridan. The first thing we're seeing with producers is what we call kind of leaning in to production. And that starts with the first one starts with is if there's anything that goes down, they are quickly getting that back up quicker than they do in a much more lower price environment. We also see them bringing on more completion crews. So that's kind of impacting your ducks. They go forward or bringing things on quicker that they've already drilled. And the other thing, as I said in my remarks, we are starting to see some producers looking for additional rigs to bring online. And as we see the environment that we are today, where a lot of people see the back end of the curve coming up, people are getting more excited about what the price environment is going to be going forward. Obviously when we bring on rigs that the rig volume is a little more delayed into the back half of 26 than earlier. But as I said earlier, bringing more completion crews on and when they have any downtime, getting that back on will be the more near term effect on Williams. Theresa Chin Thank you. And the second question is related to your export infrastructure and your outlook there. Given the call on U.S. energy resources and export infrastructure in particular within your existing liquids export docs, on the heels of recently building out the connectivity between Galena Park East Houston and your Pasadena MVP joint venture joint venture, what kind of upside could you potentially harvest? Whether it be optimization on utilization or commercial spot cargoes or even additional brownfield investment in Pasadena. And then on the LPG front, can you just talk through the commercialization process at this point and have those conversations with potential counterparties accelerated? Sheridan Swartz (Chief Commercial Officer) Starting with our existing facilities, we have, as you mentioned, we have two marine export facilities, refined products on the Houston Ship Channel, Galena park and ndp. We have seen increased activity across those docks. Going forward, we still have more room that we could expand forward. And we are in conversations with customers around that. So there could be a little bit of upside in that area. On our crude dock, it is highly utilized right now. We have a lot more interest in there. What we're seeing is the opportunity to extend contracts or more turn at more favorable rates than we historically have seen. So we see some tailwinds not only in 26, but beyond in both of our export facilities concerns. Our LPG dock, yeah, we are seeing an acceleration of interest. We are selling interest before the Middle east contract conflict. We're seeing even more of that interest. And right now we are not concerned at all about finishing the contracting of our targeted utilization of that document here in the relative near future. Pierce Norton (President and Chief Executive Officer) Teresa, this is Pierce. I want to add something to what Sheridan said, just to remind everybody on this call. Prior to the Middle East conflict, the US and the Middle east were the only ones, only two countries that are actually going to expand LNG facilities over the next five years. And then if you fast forward to today and you look at the damage that was done to Qatar's LNG facilities facilities, more than likely the equipment that was ordered to do those expansions will probably go to rebuilding some of the damage that was done during this, these war efforts. So that means that the incremental capacity is going to really land back in the United states. And with LNG going from 18 BCF to 30 BCF basically by 2030. And I'd like to remind everybody, 65% plus of all the US gas has recoverable NGOs with it. So that's really going to drive a lot of the NGO growth here in the United States. And we're well positioned for that. They did a great job explaining the LPG exports, but it's providing a very constructive backdrop for the future volume growth here at one up. Theresa Chin Thank you. And if I could just squeeze in a final one, your Bond, and say splitter in the Gulf coast, what utilization is that seeing currently? And what's your recontracting timeline for that? Sheridan Swartz (Chief Commercial Officer) It's highly utilized right now, especially the spreads that we're seeing. And we have just recently recontracted that for term. So that will be contracted here for the foreseeable future and at and won't be running at high utilization rates. Theresa Chin Thank you. OPERATOR Thank you. Our next question comes from Michael Bloom with Wells Fargo. Your line is now open. Michael Bloom Thanks. Good morning, everyone. Wanted to go back to your comment on hedges. You said you entered the year about 75% hedged. Wonder if you can give us a sense specifically on butane Blending if that's the case as well, if you're 75% hedge going into the year. And then is there any kind of seasonality to those hedges? Are they sort of more back end weighted, front end loaded, or how that plays out? Sheridan Swartz (Chief Commercial Officer) Yeah. Michael, this is Sheridan. We came in highly hedged in for the first quarter on the butane to RBOB hedges. We do have some. Had some space to hedge further out into the fourth quarter that we have. We have done that at much higher prices after the Middle east conflict. Going forward, the thing we're really seeing on butane that's really exciting for us right now is that we're seeing, as I mentioned in my remarks, an increased gasoline volume across our system that gives us even more opportunity to blend. And you couple that with the synergy projects that we brought online that we think we have some really good tailwinds behind our blending operation, both here in the first quarter and when you see a lot of blending and in the fourth quarter, when we see the fall blending season come about. Michael Bloom Okay, great. Appreciate that. And then just wanted to ask the status of the potential Sunbelt Connector project. As I'm sure you're aware, Western Gateway appears close to moving forward. So wondering if there's a possibility that you could somehow join that project in some capacity if it does reach FID or if there's a path for both projects. Sheridan Swartz (Chief Commercial Officer) Yeah, Michael, this is Sheridan again. As I said before, there's. We think there's only room for one project. And what we've said before is if either one of these projects go forward, we think it will benefit one of from us being able to bring volume out of the Gulf coast into the mid Continent, as long as leaves that to go to Arizona on the P66 project. And we also think that we have the ability to. To supply it coming out of the Gulf coast. With us being connected to all the refineries on the Gulf coast and the ease of getting it into the El Paso area. Michael Bloom Thank you. OPERATOR Thank you. Our next question comes from Jean Ann Salisbury with Bank of America. Your line is now open. Jean Ann Salisbury Hi, good morning. You touched on driven by ONEOK's at the system. Can you give a little bit more color? How much more detailed blending volume could be physically possible on your system 2025 and just would require cap. And is that something that you would consider to increase that volume potential? Jeanne, you are breaking up quite, quite badly there. It's very difficult to understand what you're saying. Could you try that again? Maybe pick up your handset? Yeah. Sorry about That I was asking about butane volumes and what it would take for one to increase butane volume on your system. Sheridan Swartz (Chief Commercial Officer) I mean, the butane on our volumes is related to blending. We've been increasing that for the last three years. I think every season we've been able to blend more and more on our system as we continue to go forward, especially as we brought these synergy projects online. So to see a meaningful uptick in our system, what we need is more volume across our system on gasoline. And we are seeing that right now. And we can even see that grow, as I mentioned in there, the rest of the year into the fourth quarter. If you see jet fuel continue to be tightening, prices continue to rise for people to be able to travel by airplane and move more to traveling by. Jean Ann Salisbury Okay, that makes sense. Hopefully this is a little more clear now. Sorry about that. And my other question was that Waha spreads are wider than expected this year. Can you remind us if you lose that exposure over the course of the year or if it's all in 2027, if that goes away? Sheridan Swartz (Chief Commercial Officer) Break it up a little bit, Jean. But I think you said it's the Waha to Katie spread was wider this year in the first quarter than we anticipated. And we were able to capture that. We see that continue through the second quarter into the third quarter when additional pipeline capacity will come online and then it will go back to be more normalized at that time. Jean Ann Salisbury Okay, thank you. OPERATOR Thank you. And our next question comes from Jeremy Tonette with J.P. morgan. Your line is now open. Jeremy Tonette Hi, good morning. Just wanted to touch on, I guess, the guide and thoughts on EBITDA for the year. If I look at 1Q results and granted there were items that might not repeat, but if I annualize that, that would pretty much get you to the bottom end of the guide. And if I look at last year, look at the difference between 1Q and 4Q, it's a pretty big step up. And talk about seasonality over the course of the year. I was wondering if you could just help us think about shaping of the year, EBITDA by quarter, if that's going to vary from your pattern before. Or is there kind of conservatism built into your guidance expectations at this point? Walt Hulse (Chief Financial Officer) Well, Jeremy, I just point you back to the earnings presentation. I think it's page five in there, you know, where we've tried to reflect the shape of that as well as demonstrate, you know, how the first quarter was the lowest. So we expect the shape of that curve to continue. You know, the only thing that Might change a little bit. Might be an upward slope if we see some enhanced volume in the later part of the year. So no change to the front end and hopefully a big change to the back end. Jeremy Tonette Got it. So annualizing the first quarter would, you know, and there's that slope will put you over the top end. It seems like. So it seems like a good year shaping up there. I was wondering, as we think about the uplift in the 26 guide, how much of that do you see recurring in 27? Walt Hulse (Chief Financial Officer) I think we're positioned very well to go into 27 with a great tailwind behind us and really have some nice volume growth and strength. And I'd remind you that we have a significant amount of operating leverage on our Bakken pipeline, on the West Texas LPG pipeline out of the Mid Continent. So as volumes pick up in the basins we serve, we don't have any incremental capex that needs to be spent. All that's going to drop to the bottom line. So we're, you know, we're looking pretty positively as we go into 27. Clearly, you know, we've had some benefit from the differential on the Katy, on the Waha to Katy that may not be there next year. But, you know, our system is diverse and we, you know, we find differentials all the time. You know, as we bring on Medford, we might see a pickup in the north south differentials as well. So we're there positioned to capture those across our integrated system whenever they present themselves. Jeremy Tonette Understood. I'll leave it there. Thank you. Thank you. OPERATOR Our next question comes from Manav Gupta with ubs. Your line is now open. Manav Gupta Good morning. A little bit wanted to dwell into spreads in terms of gas. There are a couple of pipelines coming on with your involvement also which obviously drive higher prices, which good for your perm volumes. But as this gas gets to KT and there's a possibility you could see somewhat of a gas flood over there. And I'm trying to understand if that does happen and that South Texas part starts to dislocate from Henry Hub, are there ways one Oak can capitalize on that opportunity? Sheridan Swartz (Chief Commercial Officer) I think it's more volume. I think what you're asking about is could there be a glut in natural gas as we see more volume. Come on. Especially as we see more pipelines down into the Gulf coast area. Obviously we're seeing more LNG assets being brought online that will take that volume up. So we, we don't think we're going to see an overall clutch in the Katy area as these LNG projects come on and also as we see more AI projects coming online as well. Manav Gupta Thank you. I'll turn it over. OPERATOR Thank you. And our next question comes from Julian Dumoulin Smith with Jefferies. Your line is now open. Rob Moska Hi, good morning everyone. This is Rob Moska on for Julian. Looks like the final FERC oil pipeline index came in better than expected. Can you help contextualize maybe what this means for your RPG segment and a refresher on how much of that segment is actually exposed to those FERC indexed interstate oil pipeline rates? And does this outcome meaningfully change your earnings outlook for RPG over the next five years? Sheridan Swartz (Chief Commercial Officer) This is Sheridan a little bit. Yeah. Remember that the spread did come in better than expected, which is beneficial to us. I'll remind you that 70% of our volume on the RPC system is market base rates, not FERC index. So the impact in 2026 is going to be very marginal as we go in there. But there's a compounding effect as we continue to go forward that will build on it every year get a little bit more as we go forward, but it's a nice little tailwind. But it's not as substantially change our outlook for the RPC segment. Understood. Thanks for that charity. And then maybe just turning back to the guide, I'm just wondering if the current commodity spread environment simply holds and should we think about there being upside or something additive to guidance for the remainder of the year? I'm just trying to think through how much of that impact you're already factoring into your rest of your outlook. Pierce Norton (President and Chief Executive Officer) Well, you know, I think that one of the things that you hear quite a few, especially the larger producers talk about is that the back end of the curve right now probably isn't really reflecting the actual physical damage that's been done over in the Middle East. So our expectations, you know, would be today that that curve we should strengthen throughout the year. We have not factored any of that into our thinking when it comes to guidance. So should that happen, we'll enjoy that benefit going forward. Clearly, if that results in more volume, that's a positive for us. You know, it takes time to bring on rigs, so maybe we get a little impact in the fourth quarter, but that's going to send us into 27, you know, with a lot of momentum going forward. Rob Moska Understood. Appreciate that. Thanks for the time everyone. OPERATOR Thank you. Our next question comes from Jackie Colettes with Goldman Sachs. Your line is now open. Jackie Colettes Hi, thank you so much for the time today. Just going Back to the guide one more really quickly, you know, how would you frame up kind of the magnitude of the optimization upside that's now expected relative to that 150 million of year Walt Hulse (Chief Financial Officer) over year headwinds that was previously assumed? Well, you know, clearly we knew going into our guidance that these pipes were going to be constrained throughout at least the first two quarters and into the third. So that was factored into our guidance. So you know, as it relates to the Waha to Katy spread, a good portion of that, it's been a little stronger than we had expected. So we've gotten some incremental benefit. But you know, a good portion of that was already there. You know, when you looked at the bridge last year from 25 into 26, you know, there was a portion of that was really the hedging that was done in 25 for 26 as it compared to 25 was at, you know, at some lower pricing. So that was factored into our guidance as well. So really the potential changes to the upside if we get more volume and enjoy these higher rates on all of that and then, you know, there's still 25% that is unhedged that will enjoy the higher benefits. Jackie Colettes That's clear. Sheridan Swartz (Chief Commercial Officer) Thank you. And then just another, you know, can you touch on the incremental opportunities within the natural gas segment, maybe longer term? I mean, while benefiting from price differentials today, how are you thinking about your exposure to power demand and how have those commercial discussions trended recently? Jackie Colettes This is Sheridan. We have been in advance, we are in advanced discussions with both AI and power demand right now. We have some very nice projects that are in the queue and then we actually have projects behind that that we're even working on as, as they continue to move forward. So we are very excited about what we see in the natural gas demand sector and where our assets sit, especially in the Oklahoma, Texas region for the power and AI demand going forward. And we'll have these projects in 20, 26 and 27. So it is a good time to be in the natural gas segment for sure. Pierce Norton (President and Chief Executive Officer) What I would have had, I know folks, but say the same thing is when we first started talking about AI opportunities as related to power generation, you know, we originally saw those as kind of short lays, smaller volumes. So not necessarily that much of a material impact. As we've now gone through time and we're talking to more and more of these hyperscalers, the volumes that they're requiring is going to require us to reach back further into our systems and lay larger pipelines. So I think that's the big change that I see from where I sit versus where we were maybe a year and a half, two years ago. Jackie Colettes Appreciate the color. Thanks. OPERATOR Thank you. Our next question comes from Keith Stanley with Wolff Research. Your line is now open. Keith Stanley Good morning. Wanted to follow up on Western Gateway. As you assess what that project could do to the market, do you see it mainly as an opportunity for longer haul volumes on your system out of the Gulf coast, or do you think this could create constraints and meaningful new growth investments like the Denver project to expand pipeline capacity? Sheridan Swartz (Chief Commercial Officer) Yeah, I think it's a little bit of both. Obviously, if we, if we start shipping volume out of the Gulf coast up into the mid continent to fulfill volume, that's leaving the mid continent to go on that Western Gateway project. That's going to mean we're going to get a longer tariff because we're moving the volume from a much longer distance away. Also is our, the tariff from Gulf coast out to El Paso is a very long tariff. One of our higher terrorists. If we increase that volume as well, that's going to have a very nice impact on want to continue to go forward. And obviously as we get more demand, will we see more expansion of product on our system? Yeah, we will. As people are going to shift out of the Gulf coast more over to our system to be able to get it out to El Paso and to meet this access into the Phoenix and California markets. Keith Stanley Thanks for that. Second question. Sheridan Swartz (Chief Commercial Officer) The Bakken volumes were only down 2 to 3% versus Q4. That seemed a lot better than the seasonal guidance that you had pointed to last quarter on what's typical in Q1. So would you say volumes in the Bakken surprise to the upside in Q1 versus what you were expecting? Yeah, a little bit. I mean, you know, the winner's always a little bit and we try to try to average it out over the four months and everything else. So it can be a little bit surprising to us where, you know, where the winter actually hits and when we see the volume come online. So I would say outside of, you know, Winter Storm firm, we have seen we've been pleasantly surprised with our volumes in the market. Keith Stanley Thank you. OPERATOR Thank you. Our next question comes from Brandon Bingham with Scotiabank. Your line is now open. Brandon Bingham Hey, good morning. Thanks for taking the questions here. I wanted to maybe talk about your Permian processing capacity portfolio and how you see that sort of evolving in light of all this resilient gas production and just seeing some other operators in the basin discuss more optimistic outlook for run Rate capacity additions on an annual basis. How do you see that being incorporated into your portfolio moving forward? Sheridan Swartz (Chief Commercial Officer) Well, I know, I think Randy had mentioned, you know, already right now we just put in 150 million a day. The Shadowfax plant that we moved out of the Barnett into the Midland Basin. So we brought another 150 million a day on there that we see that ramping at over time. Then right behind that we have some low cost capacity expansions in the Delaware. 110 million a day that will come up later this year. And then we've already announced the 300 million a day plant that we'll be putting in the Delaware. Beyond that, those are what we have announced. We continue to look forward. We see a lot of opportunity in the Permian Basin. We're in a lot of discussions on RFPs, especially in the Delaware, that we would have the potential even expand that capacity even more beyond what we see today. I think we see that and also expect that to happen as we get into the, as we get further into 27. We hope there's opportunities as well. So we are like everybody else, very optimistic on the growth out of the permit. Brandon Bingham Okay, great, thank you. And then just wanted to go back to some comments made earlier about better volumes expectations this year as part of the guidance increase. Could you help frame up how the new volumes expectations compare to maybe the various midpoints within the businesses? I noticed the ranges didn't necessarily change, but it sounds like within those ranges the expectation is definitely better now. Walt Hulse (Chief Financial Officer) You know, as I said, our increase in guidance was balanced across, you know, what we've seen in volumes. And Sheridan just mentioned, you know, that we did have a little bit stronger first quarter volumes in some areas than we might have historically expected given what the heater treater impact and that sort of thing would have been. So as we go forward, we hope that builds and you know, we've taken that kind of projected it forward clearly. I think it still is to be seen, you know, what these higher commodity prices are going to do from producer activity. Some of our smaller producers, private equity or smaller independents seem to be a little bit quicker to think about rigs and getting them fired up. So we could see some of that impact a little quicker. Where I think the larger, the larger exploration companies are waiting for that curve to reflect what they think the fundamentals are and then they'll make their decision. So you know, we're not trying to get too far ahead of our volume expectations. We'll let that layout. But we do think in this commodity environment and how it's going to look into 27 that we would expect to go into 27 with a really nice tailwind behind us. Brandon Bingham Okay, great. Thank you. OPERATOR Thank you. And our next question comes from Sunil Sabal with Seaport Global Securities. Your line is now open. Sunil Sabal Yeah. Hi, good morning. And hopefully you can hear me. All right, so my first question was related to the hedging. I think you mentioned on the call that, you know, you put in some hedges for 27. Also, could you indicate, you know, how much of your total 2027 commodity price exposure is hedged now? Walt Hulse (Chief Financial Officer) Well, we're not going to get into specifics, but we've taken opportunities to make sure that we've captured at least a portion of what we see in 27. We clearly have been focused on the tail end of 26. So across our various businesses, we've layered in Some portion of 27 at this point in the markets that we can. It's probably important to know that in many of the markets that we are serving, there's just not a lot of liquidity. Liquidity in 27 or the backwardation is just so significant that we wouldn't want to do that. So we've been opportunistic, but where we think it made sense, we've looked at it and we're going to continue to look at it throughout the year. Pierce Norton (President and Chief Executive Officer) Sunil, this is Pierce. The only thing I'd add to that is that we have a, what we call a programmatic hedging program where we just automatically hedge a certain percentage as the, as the year goes by out. So it's not until we see some of these opportunistic opportunities that we go out and do anything like Walt just described. But there is a pro. We don't try to time the market or sitting here waiting on, you know, something to happen and then move. We just methodically go through the year. And we do that because we're 90% volume times rate anyway. And so we just want to make sure we're not speculating, you know, too much on that, on the hedging curve. Walt Hulse (Chief Financial Officer) Understood. And then one clarification on the potential projects that you're looking on, I think you mentioned in Texas and Oklahoma with the data center clients, should we think about those as significant CapEx opportunities, which, you know, some midstream people, midstream players are undertaking, or is it. Should we think about, you know, more like incremental capex or small incremental capex for those opportunities? Yeah, I think as we've gone through and Given you, you know, some thoughts about 27 and you know, beyond 27 into 28, 29. And a run rate, you know, we've looked at kind of a run rate of around $600 million of maintenance, about a billion dollars, give or take of what we call routine growth. And a portion of this would be in that routine growth. And then we left, you know, kind of another 5 to 600 million to get you around that 2, a little bit over $2 billion kind of run rate going forward, basically unallocated. So these types of projects, while they're bigger than our expectation, you know, we originally thought they'd be $50 million projects, are turning out to be four to $700 million projects. So they'll fit right in that window that we had left open and they're coming in at really nice returns. Sunil Sabal Got it. Thank you so much. OPERATOR Thank you. Our next question comes from Gabe Marine with Mizuho. Your line is now open. Gabe Marine Hey, good morning everyone. If I could just ask about pet chem economics having improved quite a great deal here over the last month or two. Are you seeing any change in behavior on ethane extraction as it relates to either the Bakken or Cajun Sabon going into Louisiana? I'm just curious if things have changed on that end at all. Sheridan Swartz (Chief Commercial Officer) Well, Gabe, you're right. I mean obviously what's going on in the world right now, the ethane economics in the United States are very strong and we're seeing, you know, our petrochemical customers operating at very high utilization rate. What it has had doing is we are seeing the ability for our discretionary ethane out of the Bakken and at times out of Oklahoma to be good, be strong. And that's, that's driving some of our, we see in volume. So we mentioned going into Cajun Savon, you know, that's coming off of coming out of the Mid continent and out of the Bakken as we divert raw feed over into our Louisiana crackers or Louisiana fractionators. It hasn't really changed that, that, that amount on that piece. But as I said before, I think we will see some pretty good tailwinds on ethane coming out of the Bakken and ethane coming out through the rest of the year with the demand. We're seeing petrochemical facilities great. Gabe Marine And then if I could just quick follow ups, the PRB new plant there sounds filled pretty quickly. Any visibility to more capacity there. And then I think there was also a call out for Northern Border performance during the quarter. Was that one timing in nature or kind of this step up on ratable earnings there. Sheridan Swartz (Chief Commercial Officer) Let's see on the Powder river, you know, we've been working on that plant for a period of time. It's a 60 million a day plant. So we mentioned we have a JV partner that's a producer up in that area coming along with us. We are getting more and more excited. What we're seeing there, that's going to feel fairly quickly. Do we see there's opportunity, more volume? Yeah, we hope so. And discussions with them, we'll continue to evaluate that. But we do think there's possibility to put some more capacity up there. So you look forward Northern border. Northern border is pretty steady. Outperformance is a little bit, frankly we see that kind of every year a little bit that they come in a little bit higher than what they had predicted. We continue to see this year and we continue, we expect to continue to see that throughout the year. Gabe Marine Thank you. Pierce Norton (President and Chief Executive Officer) Jaywalk is in the volumes is the amount of area and dedication. So there's plenty of, plenty of running room up there to continue to drill there at the Powder. Gabe Marine Thanks Pierce. OPERATOR Thank you. Our next question comes from Jason Gableman with TD Calendar. Your line is now open. Jason Gableman Hey, thanks for taking my question. I wanted to go back to full year guidance and I guess when I look at your slide deck from 4Q from last quarter, you show that at the time of or your initial, I guess 26 outlook was predicated at $75 oil that was, you know, call it 8.7 billion ish, maybe a little higher of EBITDA for 26 oil moved down. So your 26 EBITDA outlook move lower. But we've seen oil now move higher. And I understand the hedging dynamics mean maybe you don't capture all of the upside this year, but would you expect to kind of get back to capturing that upside next year based on where the commodity curves are right. Right now? Walt Hulse (Chief Financial Officer) So what I would say there is you're absolutely right that you know, clearly we've got a different realized price environment. So that is going to take some time to work its way through. It also takes some time for rigs to get up and moving. So when you didn't have quite as much rig activity as we expected, you know, that has a impact that you're starting from a different point as you exit 26. But we think we, you know, we are going to see that type of strength. I'm not going to give you an actual guide to a number, but we're going to see that type of strength that we expected as volumes pick up if these prices stay or go higher, especially in the back end of the curve, there's a pretty big difference between the prompt month and as you go out towards 27. So you know that that's going to be the story to tell as that plays out coming forward. Jason Gableman Great, thanks. And just a quick follow up on a comment you just made. Did I hear you right that these some of the data center related projects you're pursuing, you thought they were going to be in the $50 million range and they're coming in more like 400 to 700 million? Those are the right figures, yeah. Pierce Norton (President and Chief Executive Officer) The thing is originally when we go back to that 50, that was, you know, a couple years ago when we first started seeing opportunities and people talked about siting these facilities, they were dropping them right next to pipelines thinking that they could take the gas off those pipelines. Well when they were doing that, you know they were a lot of them were in the development stage. You didn't have a lot of hyperscalers involved. So some of the specs might not have been quite as realistic. When the Hyperscalers talk about 5 gigawatt facilities, you can't just take that kind of gas off of a fully contracted pipe. So what it's caused is puricet is for us to need to look at reaching back into our system where the gas is available and building bigger pipe and that's why the size of the projects have gone up. But at the end of the day the value of getting these projects done to the hyperscalers is still well above their concern about price. So they're very pleased to provide good economics to make sure that speed and reliability are there. OPERATOR Thank you. And our final question comes from Gabe Daoud with Truist. Your line is now open. Gabe Daoud Thanks operator and morning everyone. Thanks for the time. Just quickly back to the upstream conversations. Just curious if there's any notable difference in behavior or price that operators need to see on the screen as you talk to public versus private. Curious especially as looks like current rig activity is largely dominated by private in the Bakken for your footprint. Sheridan Swartz (Chief Commercial Officer) Yeah, Gabe, this is Sheridan. We're definitely seeing more on the private sector more activity or talking about more activity than we're seeing on the public sector, especially with the large integrated. Large integrated are still being very disciplined and looking at the pricing environment we are seeing especially on the private equity side, starting to look more at rigs, more completion, trying to move production up. That's where the majority of the activities happen. I think as we've stated here, as we continue to go throughout the year and everybody expects the back end of this curve to move up as the paper's not reflecting what we're seeing in the physical world. When that happens, I think you could start seeing some more of the integrated and larger companies lean in more at that time or start bringing rigs on that time. We still are seeing even with the larger. We are seeing them, you know, making sure they get anytime they're down, they get things back up and looking to complete wells quicker than they had been in the had been in the past. But really concerning rig deployment, that is more into the private, private sector and Pierce Norton (President and Chief Executive Officer) there's one other element I think is worth mentioning here is that they are really leaning into the efficiency of their drilling and how they're completing and the length of these laterals. So I don't think we need to get too hung up on like numbers of rigs because the ones that are running, they're really putting a lot of emphasis on how efficient those rigs are to make them more profitable, you know, per. Well, OPERATOR Thank you. That concludes our question and answer session. I would now like to turn the call back over to Megan Patterson for closing remarks. Megan Patterson (Vice President, Investor Relationship) Our quiet period for the second quarter starts when we close our books in early July and extends until we release earnings in early August. We'll provide details for that conference call at a later date. Our IR team will be available throughout the day for any follow ups. Thank you for joining us and have a great day. Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.