Oneok Inc (OKE) — Q2 2025 Earnings Call Transcript

Thank you, Jamie. Welcome to ONEOK's Second Quarter 2025 Earnings Call. We issued our earnings release and presentation after the markets closed yesterday, and those materials are available on our website. After our prepared remarks, management will be available to take your questions. Statements made during this call that might include ONEOK's expectations or predictions should be considered forward-looking statements and are covered under the safe harbor provision of the Securities Act of 1933 and 1934. Actual results could differ materially from those projected in forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer to our SEC filings. Just a reminder for Q&A, we ask that you limit yourself to 1 question and 1 follow-up to fit in as many of you as we can. With that, I'll turn the call over to Pierce Norton, President and Chief Executive Officer. Pierce?

Thanks, Megan. Good morning, and thank you for joining us. On today's call is Walter Hulse, our Chief Financial Officer, Treasurer and Executive Vice President, Investor Relations and Corporate Development; and Sheridan Swords, Executive Vice President and Chief Commercial Officer. Also on the call are Kevin Burdick, Executive Vice President and Chief Enterprise Service Officer; and Randy Lentz, our Executive Vice President and Chief Operating Officer. Yesterday, we announced higher second quarter results and affirmed our 2025 financial guidance ranges, which were originally provided in late February. Our second quarter adjusted EBITDA increased 12% compared with the first quarter, highlighting the continuation of incremental synergy capture, increasing supply and demand strength. As we exited the winter, we saw accelerated volume momentum through the seasonal improvements across our operations, driving sequential quarter growth in NGL and natural gas processing volumes across all regions and increasing refined products demand. The sequential EBITDA growth we experienced this quarter was consistent with our expectations at the beginning of the year and begins to demonstrate the potential earnings power of bringing these assets together. As we continue to navigate an evolving macroeconomic landscape and shifting market dynamics, we believe the energy sector remains resilient with domestic and global demand for U.S. energy continuing to be well supported. Producers across our acreage continue to execute their 2025 drilling plans and drive efficiencies in their drilling and completion techniques. We're monitoring the 2026 market dynamics closely while continuing to execute on our growth strategy and support supply and demand market needs. Our focused investments on high-return organic projects such as the Bakken's Elk Creek Liquids Pipeline, West Texas NGL pipeline and Denver refined products pipeline expansions and the Medford fractionation facility provide significant operating leverage and position us to capture incremental growth across our assets in the Williston Basin, the Powder River, Mid-Continent and Permian Basins. Today, we are announcing a final investment decision on a new natural gas processing plant in the Permian's Delaware Basin, further expanding and enhancing our presence in what is a key strategic area for ONEOK. Sheridan will provide more details on this project and our Permian growth strategy in his remarks. Our acquisitions are delivering tangible benefits as we continue to make meaningful progress on acquisition-related synergies and organic growth. Our contiguously integrated assets, diversified business mix, and strong balance sheet provide flexibility and enable opportunities even during changing market dynamics. As always, we'll remain intentional and disciplined in our approach to capital allocation as we evaluate future opportunities. I'll now turn it over to Walt and Sheridan to provide their financial and commercial updates. Walt?

Thank you, Pierce. Second quarter 2025 net income attributable to ONEOK totaled $841 million or $1.34 per share, more than a 30% increase compared with the first quarter. Second quarter adjusted EBITDA totaled $1.98 billion or $2 billion when excluding transaction costs of $21 million, which is consistent with the approach used in our guidance. The acquired EnLink and Medallion assets delivered nearly $450 million in adjusted EBITDA during the second quarter, contributing to strong year-over-year earnings growth. We ended the second quarter with $97 million in cash and no borrowings outstanding under our $3.5 billion credit facility. During the quarter, we reduced our senior notes by nearly $600 million, including more than $400 million of notes paid at maturity. Year-to-date, we've extinguished nearly $850 million in senior notes, underscoring our proactive approach to managing debt and clear progress towards achieving our long-term leverage target of 3.5x, which we expect to reach in 2026. With yesterday's earnings announcement, we affirmed our 2025 financial guidance ranges, including net income attributable to ONEOK of $3.1 billion to $3.6 billion and adjusted EBITDA range of $8 billion to $8.45 billion. Our expectation to achieve results within our guidance ranges reflects current market conditions and is supported by producer performance, recently completed projects, increasing seasonal demand for refined products and the timing of acquisition-related synergies. While the market environment and commodity price outlook is different today than when we originally announced financial guidance in February, we continue to see resilience in producer activity across our operations and benefits from our integrated system. We also remain on track to realize approximately $250 million of synergies in 2025, consistent with our guidance with significant additional contributions expected in 2026. Our 2026 outlook also provided in February was based on commodity prices at the time. Given current market conditions, we believe our 2026 outlook for adjusted EBITDA should be adjusted downward by approximately 2% or $200 million to reflect current commodity prices and resulting spread differentials. We continue to expect year-over-year mid- to upper single-digit EBITDA growth in 2026. We are tempering our previous outlook based on a cautious macro environment. In addition to our future earnings growth, we also reviewed our tax position following the recent tax legislation and expected a benefit of more than $1.3 billion in lower cash taxes over the next 5 years due primarily to enhancements related to bonus depreciation and interest expense deductibility. With our commitment to investing in infrastructure that strengthens energy security and resilience, the enhanced tax provisions enable us to immediately expense the full cost of qualifying investments. We now don't expect to pay any meaningful cash taxes until 2028, which is a year later than our previous expectations. Additionally, we expect our cash tax rate in '28 and '29 to be less than the full 15% corporate alternative minimum tax rate, which is lower than our previous expectations. This increase in expected free cash flow will enhance our flexibility as it relates to capital allocation. I'll now turn the call over to Sheridan for a commercial update.

Thank you, Walt. During the second quarter, we saw a significant rebound in volumes following normal and expected first quarter seasonality. We experienced strong sequential quarter growth coming out of the first quarter with higher natural gas processing volumes and double-digit NGL growth across all regions. Taking a closer look at the natural gas liquids segment. Total NGL raw feed throughput volumes increased 18% compared with the first quarter. Rocky Mountain region volumes averaged nearly 470,000 barrels per day, a record for the region, driven by increased ethane recovery and higher propane plus volume compared with the first quarter of 2025. Mid-Continent and Permian NGL volumes both increased 20% compared with the first quarter, supported by higher ethane recovery levels, improved seasonality and newly contracted volumes beginning to ramp up in the Permian Basin. During the quarter, we experienced lower fractionation utilization due to maintenance, which resulted in a $13 million impact in the second quarter from unfractionated NGLs and inventory. We expect to fractionate these NGLs and recognize their earnings over the next 2 quarters. We saw minimal impacts from ethane export disruptions during the quarter. The importance of ethane to the global market was evident during this period, and it's clear there is a strong demand for U.S. ethane in the global market. We continue to see opportunities for economic ethane recovery across our system for the balance of the year. The build-out of connectivity between our Mont Belvieu and Conway NGL platforms and our strategic Houston and Mid-Continent refined products assets remains on pace. All 3 critical Houston connections of Galena Park, East Houston and our Pasadena MVP joint venture are expected to come online in the third quarter of this year. We have strong line of sight to these pipelines operating at high utilization and delivering earning contributions in the fourth quarter of this year. With executed synergies related to our liquid blending business, we expect record blending volumes in 2025 and 2026. Our Texas City LPG export joint venture is also progressing as planned, and we continue to have a lot of interest from customers on the strategically positioned wellhead-to-water solution. Moving on to the refined products and crude segment. Second quarter refined product volumes increased sequentially as seasonal demand picked up. We expect continued demand growth in the third quarter as we've entered peak summer travel season. Diesel and aviation fuel volumes have remained strong during the first half of the year, and we expect that to continue for the remainder of the year. Regional supply disruptions in Mid-Continent tempered gasoline volumes during the quarter. However, volumes have recovered following the completion of refinery maintenance in late spring. Following the July tariff rate adjustments, we increased our refined products rate by mid-single digits as expected. Our refined products pipeline to the Denver area is on track for a mid-2026 completion, and we're currently seeing record jet fuel volumes into the Denver International Airport. Turning now to our crude business. Our gathering and long-haul assets continue to perform with wellhead gathering volumes on our Medallion assets up approximately 20% year-over-year. The overall decrease in crude volumes compared with the first quarter of 2025 was due primarily to low-margin exchange volumes. These volumes have significantly lower rates than wellhead gathering or long-haul shipments, so the earning impact was not material. Moving on to the natural gas gathering and processing segment. Volumes increased in all regions compared with the first quarter of 2025, with producers increasing activity coming out of winter. Looking first at the Permian Basin. Following a 4% growth in volumes in the second quarter, we reached 1.6 billion cubic feet per day in July. Currently, we have 12 active rigs on our dedicated acreage, providing line of sight to filling our existing processing capacity in the region and driving the need for additional capacity. In addition to our already announced 150 million cubic feet per day relocation to the Midland and approximately 75 million cubic feet per day of low-cost expansion at existing Delaware facilities, we've also reached FID on the construction of a new plant in the Delaware Basin. The new Big Horn plant will have a capacity of 300 million cubic feet per day with the ability to treat high CO2 gas. The plant and treater are expected to cost approximately $365 million. Big Horn is supported by acreage dedication and is expected to be completed in mid-2027. These growth opportunities will increase ONEOK's processing capacity in the Delaware Basin to 1.1 billion cubic feet per day with a little over 700 million cubic feet per day currently and will position ONEOK for additional growth opportunities in the basin across our value chain. The Permian Basin continues to be a key area of strategic growth for us, and we will continue to be actively engaged and intentional in assessing opportunities to expand and enhance our integrated operations within the basin. In the Mid-Continent, there are 12 rigs running on our dedicated acreage in Oklahoma and a number of projects underway to connect and optimize assets in the region. Second quarter natural gas processing volumes increased 9% compared with the first quarter, in line with our expectations and continue to show resilience. Rocky Mountain region processing volumes averaged more than 1.6 Bcf per day in the second quarter of 2025, a 4% increase compared with the first quarter. We saw a ramp in well completions in the second quarter compared with the first quarter and expect the same level in the third quarter, reflecting the normal seasonality we see in this region. There are currently 15 rigs on our dedicated acreage. As Pierce and Walt noted, producers across our operations remain resilient and the effectiveness they have gained in recent years are being highlighted in this environment. I'll close with our natural gas pipeline segment, which continues to outperform compared with our guidance expectations. Approximately 75% of the outperformance is tied to legacy EnLink assets and our ability to optimize that system. As demand for natural gas continues to rise, particularly related to power generation and industrial demand, our footprint is uniquely positioned to meet that growth, and we're in active conversation with customers to support project developments through direct connections. We are also well positioned to benefit from increased demand tied to LNG exports in Louisiana. Pierce, that concludes my remarks.

Thank you, Sheridan and Walt. I want to begin by thanking all of our employees. Their efforts and commitment to bringing together our assets, teams, and ideas is evident in the strength of our day-to-day operations and the solid results we continue to deliver. ONEOK remains well positioned in today's market environment to continue delivering long-term value to our stakeholders. The strength of our balance sheet, a stable and long-standing customer base, diversified earnings across our integrated value chain and the dedication of our experienced and innovative employees, we're focused on running our business efficiently and providing essential products and services that make a difference. Just as important as what we do is how we do it with a steadfast commitment to safety, integrity, and responsibility. In that spirit, I am pleased to share that our 17th Annual Corporate Sustainability Report will be published on our website this week. I encourage you to take a look and see the measurable progress we've made on our sustainability journey. While our workforce and operations have grown significantly in recent years, our commitment to our core values has never wavered. Together, we're delivering the energy that makes a difference in how we live, how we move, communicate, and learn across the U.S. and around the world, a shared purpose that creates value for all of our stakeholders. Operator, we're now ready for questions.

First question, maybe to start with the 2026 outlook. I can certainly sympathize with the change in the environment since February. And Walt, I guess I'm curious how lean you would describe this revised outlook. I think you said mid- to high single digits. And if you could maybe just provide a little bit more color on how much of that growth is hardwired by either contractual volumes, synergies, cost savings. In other words, things that don't necessarily rely on volume growth.

So this is Pierce. Let me take a shot at that first, and then I'll pass it to Walt to add some additional color. But I think you hit on it, which is with the volatility in the market, the spread differentials that have tightened in comparison to those that we used as assumptions for that 2026 EBITDA outlook. As we said in the script, we continue to work with our producers and understand their 2026 plans as well in a kind of up and down commodity market, especially related to oil prices. So given both of these factors, we did lower our 2026 outlook by around 2% or that $200 million, as Walt said in his remarks. I'll turn it over to him for a little bit more color on this as well.

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

Great. That's helpful color. Second one, maybe just going to natural gas. Sheridan, like you said, natural gas always seems to be a bright spot, especially now with these EnLink assets in there. And I guess I'm just curious about a two-part question here. One, can you just give us a little bit more color on exactly what's driving that? And if it's become something ratable enough to maybe start including in the forward guidance. And then you also mentioned data centers and AI and power demand on the back of your comments there, still in discussions. Just curious where you are maybe innings-wise in those discussions and when we should expect an announcement on that front.

I'll start with the AI, data centers, and industrial demand. We are currently in discussions with over 30 different parties. While not all of these discussions will lead to outcomes, we are at various stages with each. What we've learned is that nothing is certain until it's finalized, but we are engaged in several discussions. Some seem to be progressing faster than others, but our experience shows that situations can change rapidly. Thus, we remain very open to opportunities. On the industrial front, we've entered contracts with some entities along the Mississippi River corridor, where we see a significant advantage with our final pipeline. This will start contributing over the next few years. While these contracts may not be substantial individually, collectively they can have a significant impact. When examining the EnLink assets, we recognize that as we integrate and adopt a fresh perspective on how to utilize these assets, we are identifying considerable opportunities, as you've begun to see. As we continue to expand, some improvements may be linked to spreads, while others will depend on volume. Our team is working diligently to stabilize this so we can project effectively for the coming years. You can expect to see this reflected in our guidance for 2026. We're very optimistic about the natural gas business. Initially, we didn’t focus heavily on the Louisiana aspect of it after acquiring EnLink, but the numbers are showing promising performance now.

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

Jeremy, this is Sheridan. We acquired the Houston assets in 2024, and we are integrating our NGL assets at Mont Belvieu with the refining products assets we purchased from Magellan. You can see that process starting to unfold, which will be completed by the end of this quarter. This integration will lead to two key outcomes: it will increase our NGL volumes for blending while simultaneously reducing our blending costs, thereby enhancing our overall value, especially when market spreads are favorable. This development is evident in our Eastern assets. Furthermore, as we prepare for MVP and Galena Park, we will be able to offer improved products and services to our customers in that area, resulting in increased volume sales. Therefore, we anticipate growth in both blending and tariff as these assets come back online. Additionally, looking ahead to 2026, we plan to replicate this model in the Mid-Continent region by connecting our Conway assets to our Mid-Continent refining operations. This will ensure that we have sufficient volume available when blending opportunities arise, allowing us to lower our costs for transporting butane to that area and enabling us to extend our reach further in our system. These are essentially the last major blending projects associated with the Magellan acquisition. If you recall, I mentioned that we expect record blending volumes on our system in 2025, and everything indicates that we will exceed that volume in 2026.

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

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

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

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

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

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

Sure, Theresa. In the Bakken right now, our volumes remain within our guidance range. Rig counts have remained stable this past year, and producers are continuing to drill longer laterals, which reduces the number of wells we need to connect to maintain or grow our volumes. Year-to-date, approximately 30% of our well connects are 3-mile laterals. We are still having active discussions with producers about their plans and where they expect to be in 2026. There has been a significant ramp-up from the first quarter to the second quarter. In Oklahoma, strong activity continues across our footprint, particularly in the Cherokee formation, where we have seen a 9% increase from the first quarter to the second quarter. We are benefiting from the integration of the EnLink and legacy ONEOK systems, driving synergies that allow us to expand our footprint and access all our system capacity, prioritizing our higher efficiency capacity. In the Permian, we are seeing volumes increase into the second quarter. We experienced a slow start initially, but we've quickly caught up, and the 1.6 Bcf is in line with our expectations at this time. There are currently fewer rigs in the Midland, but the Delaware seems to be ramping up significantly. This is why we made the final investment decision on a new plant and some low-cost expansions in the Delaware, as we see a long runway for growth there. Soon, we will see the new expansions in the Midland with the new plant supported by acreage dedication and volumes from existing producers. By 2027, we expect the new Delaware plant to come online. Despite the market's volatility, producers currently appear to be stable and resilient.

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

We are observing an increase in volume as we move forward. This pipeline connects directly to our East Houston facility, which also supplies our downstream assets. We continue to see growth in crude oil volume from the Permian, which we believe will lead to increased volume through our system. With our larger share, it becomes more beneficial for us to direct the volume from our field gathering to this system, as opposed to sending it through other pipelines. We decided to increase our stake because we are optimistic about the future. The integration of our assets with the Magellan and EnLink crude systems allows us to utilize our preferred pipelines, enhancing our value capture. This not only helps us transport more oil through our pipeline but also supports our East Houston distribution center, providing us with additional downstream value.

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

Michael, if you remember on that West Texas LPG, we contracted that with a base set of volumes that did not fill up the pipeline that gave us a nice rate of return. And we're continuing to hook up plants as they are coming online and delivering it as well. Obviously, as we bring on the shadow plant that's moved out of the Barnett into the Midland, that will add more volume onto our NGL pipeline. The $70 million to $75 million a day of low-cost expansions in the Delaware will add more NGLs to the pipeline, and this new plant will also add more NGLs to the pipeline. But we're also still in discussions with a lot of third-party plants to continue to contract them up as well. As we've said before, we think we have a pretty long runway with this very cheap capacity coming out of the Permian. And then you add on that when we get the Medford fractionator up, which is very low-cost NGL fractionation capacity expansion. We continue to be able to not only maintain our market share out there, but grow it not only on the G&P side but on the NGL side.

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

I believe we will continue to see gas-to-oil ratios increase naturally across all the basins. With some consolidations happening, companies are becoming more strategic about their drilling locations and future plans. We are engaged in discussions regarding these developments, and the drilling choices being made now will have a significant impact next year. While some operations may decline and others may rise as we move forward, this basin remains crucial for many producers, and they will remain actively involved in that area.

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

In 2025, we are not experiencing the same level of spread as we did in 2024, and this is having an impact. However, we have managed to mitigate some of that by increasing our volume significantly due to the synergy projects coming online. As we have mentioned previously, we can transport product through our pipelines instead of relying solely on trucking. This will be evident with the NGL connectivity between Conway and the RBC Mid-Continent assets. Our Eastern assets are also contributing to this effort, with some of these changes already underway and others starting today. Most of the spread compression we have observed has been offset by increased volume, which provides a favorable opportunity for earnings to rise as spreads widen in the future.

I wanted to check on the Delaware Basin joint venture. Did you complete the purchase of the remaining 49.9% for $940 million? Can you discuss the benefits of this transaction at this time?

Sure. Well, we clearly have a strong interest in growing our Delaware position. We've made a move there announced on this call, so adding another plant in the Delaware. So it made a lot of sense to go ahead and buy in that joint venture partner's piece. I think clearly, we didn't expect to do it quite as quickly as we did, but the joint venture partner was ready to move on, being private equity. They've been in it for quite some time. So we went ahead and did that at an attractive multiple. And it now gives us the flexibility to grow that business, making our own decisions, allocating capital where we want to, when we want to, how we want to. So it's really enhanced our flexibility, built the business, and set the platform for growth going forward.

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

The Elk Creek pipeline expansion is fully completed. We have reached over 400,000 barrels a day, with a capacity of 435,000 barrels a day for the Elk Creek pipeline. When combined with the Bakken pipeline, we're operating at 575,000 barrels a day. So that project is finished, and we are fully done.

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

Well, Keith, this is Pierce. We still see the path to our midpoint. There are kind of two keys to that. We've talked a lot today about spreads. So one of those keys for us to kind of get to that midpoint or maybe even exceed it is to have some widening of those spreads, especially in our refined products business. And as you know, I mean, when crude oil is down, it also affects the RBOB pricing. So it kind of squeezes that spread between the butane and RBOB. And then also just making sure that our producers continue to execute on their 2025 drilling plans. We think that's in line. We think that's going to continue to happen. Walt, do you have anything to add to that?

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

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

Yes, as I mentioned earlier, we are not discussing contracts or our activities in that regard for competitive reasons. However, I can say that due to our prime location and other factors, we are still seeing rates consistent with our economic expectations when we made the final investment decision on this project. I understand there are many uncertainties, but we believe that our location is a significant advantage for us.

I wanted to ask about capital expenditures in relation to the final investment decision of the processing plant. How much of that is expected to impact 2025? Additionally, how should we consider the growth spending for 2026 compared to 2025?

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

Okay. That's helpful. And then maybe kind of a roundabout way of looking at synergies. You've discussed some of the bigger things as far as the Eastern system and the integration plays there. But just kind of curious if there's any maybe more singles, doubles, things that aren't being highlighted that you're seeing could kind of stack up and really drive some of that significant capture that you're discussing year-over-year?

We are experiencing significant benefits from all three acquisitions. For instance, with Magellan, we made strategic investments in smaller projects that, while they had high returns, were not guaranteed. These initiatives are now yielding positive results. We have identified synergies between EnLink and Magellan, particularly by streamlining operations in Midland, where our trucks no longer have to bypass one station to reach another. This efficiency has reduced costs. Our approach has shifted; we are acquiring more product through the Medallion system to supply our long-haul pipelines. The Magellan acquisition has also allowed us to enhance our distribution system in East Houston, including our export dock. In the Mid-Con region, our assets are closely aligned, enabling us to capitalize on contracts without significant capital investment, making us more competitive. There are numerous smaller gains contributing to our overall success, and while they may not be as prominent, they collectively represent substantial synergies that we are effectively capturing.

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

We typically don't disclose specific details about our hedging activities for competitive reasons. However, I can say that our hedging approach is consistent with where we were at this time last year. We are very opportunistic in our strategy. One of the advantages we have with Magellan is our access to normal butane, which allows us to be flexible about when we secure the price spread. We wait for favorable conditions in the normal to RBOB spreads before locking in prices. With our NGL assets, we have butane available on demand, enabling our blenders to call for it as needed to sell against RBOB and keep progressing. This year, the spreads have been narrower compared to last year, but we still have the chance to store products without the need to sell immediately after blending. We can look ahead and determine the best time to sell. Overall, we have the same opportunities moving forward as we did last year, and our hedging remains in line with previous practices.

One thing I would add is that we've spent a lot of time talking about spreads here on this call. I think it's important to put them in context. I mean we're talking about maybe $100 million or $200 million on $8-plus billion. So we're talking about 2% variability. It's just when you get to a midpoint, that's putting a pin in the number, a very large number. So variability on our overall earnings of any of these spread relationships is really immaterial. It's just kind of the noise at the end of the spear.

Okay. And then on the new processing plant that you sanctioned in Permian, I think you mentioned $365 million or so of CapEx related to that. So that's on building the plant and the related infrastructure also to fill up that plant? And then how should we be thinking about economics on that? Obviously, with your integrated footprint, the economics improve. But if you think about on a stand-alone basis, how should we be thinking about economics on that investment?

The $365 million is allocated for the cryo plant, which includes residue compression and related components, as well as a significant CO2 treater. We are observing an increasing amount of CO2 in the Delaware that requires treatment, making this investment crucial. Therefore, we are incorporating not only the cryo and compression at the plant but also the CO2 treater. Additionally, there will be further capital expenditures for routine growth activities such as connecting wells, which is part of our ongoing operational process and investment strategy.

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

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

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

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

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