The following discussion and analysis should be read in conjunction with our unaudited Consolidated Financial Statements and the Notes to Consolidated Financial Statements in this Quarterly Report, as well as our Annual Report.

RECENT DEVELOPMENTS

Please refer to the "Financial Results and Operating Information" and "Liquidity and Capital Resources" sections of Management's Discussion and Analysis of Financial Condition and Results of Operations in this Quarterly Report for additional information.

Market Conditions - Late in the first quarter 2020, the energy industry experienced historic events that led to a simultaneous demand and supply shock. The World Health Organization declared the novel strain of COVID-19 a global pandemic and recommended containment and mitigation measures worldwide, which contributed to a massive economic slowdown and decreased demand for crude oil. In addition, Saudi Arabia and Russia increased production of crude oil as the two countries competed for market share. As a result, the global supply of crude oil significantly exceeded demand and led to a collapse in crude oil prices. Despite recently announced production cuts from many oil producing countries, supply exceeds demand, crude oil storage is near capacity and prices remain volatile. WTI crude oil dipped below $20.00 per barrel in the month of March and declined to an average of approximately $45.00 per barrel in the first quarter 2020, compared with an average of approximately $55.00 per barrel in the first quarter 2019. The collapse in crude oil prices and demand for energy commodities has also contributed to lower NGL product prices and lower natural gas prices, which is creating challenges for crude oil and natural gas producers as they assess their future drilling and production plans.

In response to these events, we are taking steps to manage potential impacts of the COVID-19 outbreak on our employees, customers and the communities where we operate and do business. As always, we remain focused on operating our assets safely, reliably and in an environmentally responsible manner. We are taking actions to continue safe operations, protect our workforce and implement appropriate cost reduction measures. We have reduced our planned 2020 capital-growth expenditures by approximately $900 million. We continue to monitor the COVID-19 outbreak and have implemented our business continuity plans. ONEOK is a critical infrastructure business as defined by the United States Department of Homeland Security, and, therefore, our workforce remains fully engaged in the midst of government issued stay-at-home orders. We implemented remote work procedures when possible to protect the safety of our employees and their families, and have taken extra precautions for our employees who work in the field or need to report to a ONEOK facility, such as increased facility access restrictions and sanitation procedures. We continue to implement risk-management and cybersecurity measures designed to ensure that our systems remain functional in order to both serve our operational needs and to provide service to our customers. We have reduced work performed by contractors and continue to look for opportunities to reduce expenses.

Due to the current commodity price and market environment, we experienced a significant decline in our share price and market capitalization, and performed a Step 1 analysis to test our goodwill for impairment and evaluated certain long-lived asset groups and equity investments for impairment. As a result, we recorded $641.8 million in noncash impairment charges,



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which had an adverse impact on our first-quarter 2020 financial results. However, we expect to maintain sufficient liquidity and financial stability in 2020 due to cash flows from operations and our $2.5 Billion Credit Agreement. Our credit ratings have not been negatively affected by these events. In March 2020, the CARES Act was signed into law in response to the COVID-19 pandemic, and we opted into the CARES Act 401(k) hardship withdrawal and loan deferral programs for employees. While this legislation includes tax provisions that will modestly benefit us, we do not expect the CARES Act to materially impact us.

Due to the current commodity price environment and expected rig reductions, we expect adverse impact to our volume expectations and cash flows in 2020; however, we expect this impact to be partially mitigated by the significant amount of flared natural gas in the Williston Basin and our fully contracted positions in the Permian Basin. We are monitoring producers' drilling, completion and production plans and are evaluating the impact on our future volume expectations. We are also monitoring regulatory developments in several of the states where we operate, where regulators are considering imposing limits on oil production, which could further impact our volume expectations. The energy industry has historically experienced down cycles from disruptive events, and as a result, we have previously positioned ourselves to minimize exposure to direct commodity price volatility and volumetric risk. Each of our three reportable segment's earnings are primarily fee-based, and we expect our consolidated earnings to be approximately 90% fee-based in 2020. While our Natural Gas Gathering and Processing segment's earnings are primarily fee-based, we have some direct commodity price exposure related primarily to POP contracts. Under certain POP with fee contracts, our contractual fees and POP percentage may increase or decrease if production volumes, delivery pressures or commodity prices change relative to specified thresholds. In addition, although our Natural Gas Gathering and Processing and Natural Gas Liquids segments generate primarily fee-based earnings, those segments' results of operations are exposed to volumetric risk as a result of reduced drilling and completion activity, declining well productivity, severe weather disruptions, operational outages and ethane demand. Our Natural Gas Pipelines segment is not exposed to significant volumetric risk due to nearly all our capacity being subscribed under long-term firm contracts.

See Part I, Item 3, Quantitative and Qualitative Disclosures About Market Risk, in this Quarterly Report for more information on our exposure to market risk.

Williston Basin Natural Gas Capture - In our Natural Gas Gathering and Processing segment, gathered and processed volumes increased in the first quarter 2020, compared with the same period in 2019, due primarily to increased processing capacity from completed capital-growth projects, the capture of natural gas previously flared by producers and new well connections. Our Demicks Lake I natural gas processing plant was placed in service in October 2019, and our Demicks Lake II natural gas processing plant was placed in service in the first quarter 2020, increasing our total processing capacity to approximately 1.5 Bcf/d in the Williston Basin. These plants enable us to capture natural gas previously flared by producers on our more than 3 million dedicated acres in the Williston Basin. The current weakened commodity price environment is creating challenges for producers, and we expect decreased drilling and completion activity for the remainder of 2020.

Northern Border Pipeline, which provides key natural gas takeaway capacity out of the Williston Basin, recently notified shippers that it plans to place limits on the Btu content of the residue natural gas it receives in order to meet downstream pipeline specifications. When these limits take effect, natural gas processors in the Williston Basin may recover incremental ethane into the NGL stream in order to lower the Btu content of the residue natural gas delivered to Northern Border Pipeline. As a result, ethane deliveries to our NGL system may increase.

Mid-Continent Region - Due to the current commodity price environment, we expect a decline in demand for our services in all of our segments in the Mid-Continent as producers decrease drilling and completion activities in this region.

NGLs - In our Natural Gas Liquids segment, we are the largest NGL takeaway provider in the Rocky Mountain region where volumes continued to increase in the first quarter 2020, compared with the same period in 2019, from our new and existing processing plants, third-party processing plants and volumes previously flared by producers. As a result, we have reached approximately 240 MBbl/d of NGLs transported out of this region to downstream market centers through our integrated value chain, which was strengthened through our recently completed capital-growth projects. Our Elk Creek pipeline was completed in two phases during the second half of 2019, and we have completed construction of our Arbuckle II pipeline. During the first quarter 2020, we completed construction of our MB-4 fractionator, with a capacity of 125 MBbl/d, which is fully contracted. These additions were needed to accommodate the Rocky Mountain and Permian region volume growth we have experienced. However, due to recent events, the current weakened commodity price environment is creating challenges for producers across our system, and we expect decreased drilling and completion activity in the remainder of 2020.




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Growth Projects - We operate an integrated, reliable and diversified network of natural gas gathering, processing, storage and transportation assets connecting NGL supply in the Rocky Mountain, Permian and Mid-Continent regions with key market centers. Since the beginning of 2018, we have completed several capital-growth projects that include NGL pipelines, NGL fractionators, natural gas processing plants and related natural gas and NGL infrastructure. Due to the collapse in crude oil prices and massive decline in demand for energy commodities, we reduced our planned 2020 capital-growth expenditures by approximately $900 million, including the suspension of our recently announced plans to construct the Demicks Lake III natural gas processing plant, a fourth expansion of the West Texas LPG pipeline system and reduction in the scope of the expansion of our Elk Creek pipeline. We have also paused various other projects as noted in the table below, which can be restarted quickly when drilling activity resumes. We expect capital expenditures to continue to decrease for the remainder of 2020 and into 2021. Our announced large capital-growth projects that have recently been completed or are in various stages of construction are outlined in the table below:


                                                                           Original
                                                           Approximate      Target
      Project                       Scope                   Costs (a)     Completion
Natural Gas Gathering and Processing                      (In millions)
Demicks Lake I plant 200 MMcf/d processing plant and          $400        Completed
and related          related gathering infrastructure in                 October 2019
infrastructure       the core of the Williston Basin
                     Supported by acreage dedications
                     with long-term primarily fee-based
                     contracts
Demicks Lake II      200 MMcf/d processing plant and          $410        Completed
plant and related    related gathering infrastructure in                 January 2020
infrastructure       the core of the Williston Basin
                     Supported by acreage dedications
                     with long-term primarily fee-based
                     contracts
Bear Creek plant     200 MMcf/d processing plant              $405      First Quarter
expansion and        expansion and related gathering                       2021(b)
related              infrastructure in the Williston
infrastructure       Basin
                     Supported by acreage dedications
                     with long-term primarily fee-based
                     contracts

(a) - Excludes capitalized interest/AFUDC. (b) - Given the current environment, we paused the majority of construction activities on this project and do not expect to complete construction by the original target completion date.






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                                                                         Original
                                                          Approximate     Target
      Project                       Scope                  Costs (a)    Completion
Natural Gas Liquids
Elk Creek pipeline   900-mile NGL pipeline from the         $1,400      Completed
and related          Williston Basin to the Mid-Continent             December 2019
infrastructure       region, with capacity of up to
                     240 MBbl/d, and related
                     infrastructure
                     Anchored by long-term contracts
                     Expansion capability up to 400
                     MBbl/d with additional pump
                     facilities
Arbuckle II pipeline 530-mile NGL pipeline from the STACK   $1,360      Completed
and related          area to Mont Belvieu, Texas, and                   March 2020
infrastructure       related infrastructure
                     Supported by long-term contracts
                     Expansion capability up to 1 MMBbl/d

West Texas LPG Increasing mainline capacity by 80 $295 First Quarter pipeline expansion MBbl/d with additional pump

                         2020 (b)
and Arbuckle II      facilities and pipeline looping
connection           Connecting West Texas LPG pipeline
                     system to the Arbuckle II pipeline
                     Supported by long-term dedicated
                     production from six third-party
                     processing plants expected to
                     produce up to 60 MBbl/d
MB-4 fractionator    125 MBbl/d NGL fractionator in Mont     $575       Completed
and related          Belvieu, Texas, and related                      March 2020 (c)
infrastructure       infrastructure, which includes
                     additional NGL storage in Mont
                     Belvieu
                     Fully contracted with long-term
                     contracts
Bakken NGL pipeline  75-mile NGL pipeline in the             $100     Fourth Quarter
extension            Williston Basin connecting to a                       2020
                     third-party processing plant
                     Supported by a long-term contract
                     with a minimum volume commitment
Arbuckle II          Provide additional takeaway capacity    $240     First Quarter
extension project    in the STACK area                                     2021
and additional
gathering            Allow increasing volumes on the Elk
infrastructure       Creek pipeline access to
                     fractionation capacity at Mont
                     Belvieu, Texas

Arbuckle II pipeline Increasing mainline capacity with $60 First Quarter expansion

            additional pump facilities                            2021
                     Increases capacity to 500 MBbl/d
MB-5 fractionator    125 MBbl/d NGL fractionator in Mont     $750     First Quarter
and related          Belvieu, Texas, and related                         2021 (d)
infrastructure       infrastructure, which includes
                     additional NGL storage in Mont
                     Belvieu
                     Fully contracted with long-term
                     contracts

West Texas LPG Increasing mainline capacity by 40 $145 First Quarter pipeline expansion MBbl/d

                                              2021 (d)
                     Supported by long-term dedicated
                     production from third-party
                     processing plants expected to
                     produce up to 45 MBbl/d
Mid-Continent        65 MBbl/d of expansions at our          $150     First Quarter
fractionation        Mid-Continent NGL facilities                        2021 (d)

facility expansions




(a) - Excludes capitalized interest/AFUDC.
(b) - We completed expansions to increase mainline capacity by approximately 45
MBbl/d and expect to complete the remaining portion of this project, which was
delayed due to weather, in May 2020.
(c) - We completed 75 MBbl/d in December 2019 and completed the remaining 50
MBbl/d in March 2020.
(d) - Given the current environment, we paused the majority of construction
activities on these projects and do not expect to complete construction by the
original target completion dates.

Ethane Production - Ethane volumes under long-term contracts delivered to our NGL system have generally been increasing since 2017, primarily as a result of NGL demand increasing from exports and petrochemical companies completing ethylene production projects and plant expansions. Our completed NGL capital-growth projects have helped alleviate system constraints, enabling additional NGLs, including ethane, to reach the Mont Belvieu, Texas, market center. However, ethane volumes delivered to our NGL system averaged 385 MBbl/d in the first quarter 2020, compared with 411 MBbl/d in the first quarter 2019, with the decrease primarily due to ethane rejection. Due to the collapse of energy prices in March 2020 and continuing volatility, we expect that higher ethane rejection is likely to continue through the remainder of 2020.

Impairments - Based on the results of our goodwill impairment test and evaluation of certain long-lived asset groups and equity investments for impairment, we recorded the following impairment charges:

Natural Gas Gathering and Processing - For the three months ended March 31, 2020, we recorded $380.5 million of noncash impairment charges related primarily to certain long-lived asset groups that were not recoverable, $153.4 million of noncash



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impairment charges related to goodwill and $30.5 million of noncash impairment charges related to our 10.2% investment in Venice Energy Services Company.

Natural Gas Liquids - For the three months ended March 31, 2020, we recorded $70.2 million of noncash impairment charges related to certain inactive assets and $7.2 million of noncash impairment charges related to our 50% investment in Chisholm Pipeline Company.

For additional information on our impairment charges, see Note A of the Notes to Consolidated Financial Statements in this Quarterly Report.

Debt Issuances and Repurchases - In early March 2020, we completed an underwritten public offering of $1.75 billion senior unsecured notes consisting of $400 million, 2.2% senior notes due 2025; $850 million, 3.1% senior notes due 2030; and $500 million, 4.5% senior notes due 2050. The net proceeds, after deducting underwriting discounts, commissions and offering expenses, were $1.73 billion. A portion of the proceeds were used to pay all outstanding amounts under our commercial paper program. The remainder was, and will be, used for general corporate purposes, which may include repayment of existing indebtedness and funding capital expenditures. In March 2020, we repurchased in the open market $67.0 million outstanding principal of certain of our senior notes for an aggregate repurchase price of $50.5 million with cash on hand. In connection with these open market repurchases, we recognized a $15.8 million gain on extinguishment of debt, which is included in other income in our Consolidated Statement of Income for the three months ended March 31, 2020.

Dividends - In February 2020, we paid a quarterly dividend of $0.935 per share ($3.74 per share on an annualized basis), an increase of 9% compared with the same quarter in the prior year. We declared a quarterly dividend of $0.935 per share ($3.74 per share on an annualized basis) in April 2020. The quarterly dividend will be paid May 14, 2020, to shareholders of record at the close of business on April 27, 2020.

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