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 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 production cuts from many oil producing countries, we are still experiencing global and regional economic disruption due primarily to COVID-19, and although crude oil prices have improved, they remain relatively low. Due to the commodity price environment and continued economic disruption, many of our crude oil and natural gas producers curtailed production, which significantly reduced volumes on our system in the second quarter 2020. However, global and regional economies are beginning to reopen, which, combined with improving crude oil prices, have caused July 2020 production volumes to increase, compared with lows experienced during second quarter 2020, across all our supply basins. Although the extent of the impact on future periods depends upon the recovery of commodity prices, the quantity and duration of production curtailments, and the pace and scale of economic recovery, we expect continued improvement in the second half of 2020, compared with the second quarter 2020, as we anticipate global and regional economies will continue to reopen and the demand for crude oil will continue to increase.

We continue to monitor producers' drilling, completion and production plans and are evaluating the impact on our future 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. Each of our three segment's earnings are primarily fee-based, and we expect our consolidated earnings to be more than 90% fee-based in 2020. While our Natural Gas Gathering and Processing segment's earnings are primarily fee-based, we have direct commodity price exposure related primarily to POP with fee 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 production curtailments, 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 of our capacity being subscribed under long-term firm contracts.



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In continued response to COVID-19, we remain committed to managing the impact of the pandemic on our employees and the communities where we operate. 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 meaningfully reduced our operating expenses in the first half of 2020, compared with the same period in 2019, primarily as a result of reduced discretionary expenses. In the first quarter 2020, we 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 federal government issued guidelines and local government mandated stay-at-home or other safety related ordinances. We continue to practice 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, social distancing and sanitation procedures. We continue to apply 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.

In the first quarter 2020, due to the 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 incurred $641.8 million in noncash impairment charges, which had an adverse impact on our financial results for the six months ended June 30, 2020. We expect to maintain sufficient liquidity and financial stability for the remainder of 2020 due to cash on hand from our recent equity issuance, cash flows from operations and full access to our $2.5 Billion Credit Agreement. In the first quarter 2020, the CARES Act was signed into law in response to the COVID-19 pandemic, and we opted into the CARES Act payroll tax deferral program, which will modestly benefit us, and the 401(k) penalty-free hardship withdrawal and loan deferral programs for employees.

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.

Natural Gas - In our Natural Gas Gathering and Processing segment, gathered and processed volumes decreased in the first half of 2020, compared with the same period in 2019, due primarily to production curtailments from many of our crude oil and natural gas producers. The low commodity price environment continues to create challenges for producers, and we expect decreased drilling and completion activities and some sustained production curtailments for the remainder of 2020, compared with 2019. In July 2020, many of our producers have reduced curtailments as prices have strengthened. As prices and volumes continue to strengthen, we have the capacity to benefit from production growth without significant capital investment due to the recent completion of our Demicks Lake I and II natural gas processing plants, which were placed in service in the fourth quarter 2019 and the first quarter 2020, respectively. These plants have increased our total processing capacity to approximately 1.5 Bcf/d in the Williston Basin and will enable us to capture natural gas from producers on our more than 3 million dedicated acres in the Williston Basin.

Production growth may be impacted by the current litigation challenging the continued operation of the Dakota Access Pipeline (DAPL), which transports crude oil from the Williston Basin to markets in the Mid-Continent region and Gulf Coast, which may result in a temporary shut down of the pipeline pending an additional environmental review. If temporarily or permanently shut down, production growth could be limited into 2021 due to increased crude oil transportation costs and capacity constraints in the region. However, we expect limited near-term impact due to alternative available crude pipeline capacity and existing rail infrastructure.

NGLs - In our Natural Gas Liquids segment, we are the largest NGL takeaway provider in the Rocky Mountain region where volumes were relatively unchanged in the second quarter 2020, compared with the same period in 2019, as production curtailments were offset by increased production from third-party processing plants. Volumes decreased in the second quarter 2020, compared with the first quarter 2020, due primarily to production curtailments. While lower than the high volumes reached in March 2020, average volumes in the Permian Basin increased in the first half of 2020, compared with the same period in 2019, due primarily to increased production from new and existing processing plants.

The low commodity price environment continues to create challenges for producers across our system, and production curtailments and decreased drilling and completion activity could continue for the remainder of 2020, compared with 2019. However, production volumes in July 2020 have increased across all our basins, compared with lows experienced during second quarter 2020, as crude oil prices improved. We expect production growth to resume once economic recovery accelerates and to benefit, without significant capital investment, from 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



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second half of 2019. During the first half of 2020, we completed construction of both our Arbuckle II pipeline as well as our MB-4 fractionator, which has a capacity of 125 MBbl/d and is fully contracted. While production growth may be impacted by the current litigation challenging DAPL, we expect limited near-term impact due to alternative available crude pipeline capacity and existing rail infrastructure for our producers out of the Rocky Mountain region.

Growth Projects - We operate an integrated, reliable and diversified network of natural gas gathering, processing, fractionation, storage and transportation assets connecting NGL supply in the Rocky Mountain, Mid-Continent and Permian 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. In the first quarter 2020, due to the decline in commodity prices and economic demand disruptions caused by COVID-19, we reduced our planned 2020 capital-growth expenditures by approximately $900 million. These reductions include the suspension of our announced plans to construct the Demicks Lake III natural gas processing plant, the fourth expansion of the West Texas LPG pipeline system, a reduction in the scope of the expansion of our Elk Creek pipeline and various other paused projects, as noted in the table below, which can be restarted quickly when drilling activity resumes. We spent a majority of our planned 2020 capital expenditures in the first half of 2020. Our announced large capital-growth projects that have recently been completed or are in various stages of construction are outlined in the table below:


                                                          Approximate
      Project                      Scope                   Costs (a)     Completion
Natural Gas Gathering and Processing                     (In millions)
Demicks Lake I      200 MMcf/d processing plant and          $400         Completed
plant 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        Paused (b)
expansion and       expansion and related gathering
related             infrastructure in the Williston
infrastructure      Basin
                    Supported by acreage dedications
                    with long-term primarily fee-based
                    contracts

(a) - Excludes capitalized interest/AFUDC. (b) - In the first quarter 2020, 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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                                                         Approximate
      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         530-mile NGL pipeline from the STACK   $1,360        Completed
pipeline and        area to Mont Belvieu, Texas, and                     March 2020
related             related infrastructure
infrastructure
                    Supported by long-term contracts
                    Expansion capability up to 1 MMBbl/d
MB-4 fractionator   125 MBbl/d NGL fractionator in Mont     $575         Completed
and related         Belvieu, Texas, and related                        March 2020 (b)
infrastructure      infrastructure, which includes
                    additional NGL storage in Mont
                    Belvieu
                    Fully contracted with long-term
                    contracts

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

                        June 2020 (c)
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
Bakken NGL pipeline 75-mile NGL pipeline in the             $100       September 2020
extension           Williston Basin connecting to a
                    third-party processing plant
                    Supported by a long-term contract
                    with a minimum volume commitment
Arbuckle II         Provide additional takeaway capacity    $240     First Quarter 2021
extension project   in the STACK area
and additional
gathering           Allow increasing volumes on the Elk
infrastructure      Creek pipeline access to
                    fractionation capacity at Mont
                    Belvieu, Texas

Arbuckle II Increasing mainline capacity with $60 Paused (d) pipeline expansion additional pump facilities


                    Increases capacity to 500 MBbl/d
MB-5 fractionator   125 MBbl/d NGL fractionator in Mont     $750         Paused (d)
and related         Belvieu, Texas, and related
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 Paused (d) pipeline expansion MBbl/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 Paused (d) fractionation Mid-Continent NGL facilities facility expansions




(a) - Excludes capitalized interest/AFUDC.
(b) - We completed 75 MBbl/d in December 2019 and completed the remaining 50
MBbl/d in March 2020.
(c) - We completed expansions to increase mainline capacity by approximately 45
MBbl/d in the first quarter 2020 and completed the remaining portion of this
project in the second quarter 2020, which was delayed due to weather.
(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 in the second quarter 2020 averaged 365 MBbl/d, compared with 400 MBbl/d in the second quarter 2019, due primarily to changes in ethane extraction economics, and we expect to see volatility of ethane production into 2021.

Debt Issuances and Repayments - In May 2020, we completed an underwritten public offering of $1.5 billion senior unsecured notes consisting of $600 million, 5.85% senior notes due 2026; $600 million, 6.35% senior notes due 2031; and $300 million, 7.15% senior notes due 2051. The net proceeds, after deducting underwriting discounts, commissions and offering expenses, were $1.48 billion. A portion of the proceeds were used to repay the remaining $1.25 billion outstanding on our $1.5 Billion Term Loan Agreement. The remainder was used for general corporate purposes.

In 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



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portion of the proceeds were used to pay all outstanding amounts under our commercial paper program. The remainder was used for general corporate purposes, which included repayment of existing indebtedness and funding capital expenditures.

During the three and six months ended June 30, 2020, we repurchased in the open market outstanding principal of certain of our senior notes in the amounts of $107.3 million and $174.3 million, respectively, for an aggregate repurchase price of $101.8 million and $152.3 million, respectively, with cash on hand. In connection with these open market repurchases, we recognized a $4.3 million and $20.0 million gain on extinguishment of debt, which is included in other income in our Consolidated Statement of Income for the three and six months ended June 30, 2020, respectively.

Equity Issuances - In June 2020, we completed an underwritten public offering of 29.9 million shares of our common stock at a public offering price of $32.00 per share, generating net proceeds, after deducting underwriting discounts, commissions and offering expenses, of $937.0 million. We expect to use the net proceeds from this offering for general corporate purposes, which could include the repayment of existing indebtedness and the funding of capital expenditures.

Dividends - In February 2020 and May 2020, we paid quarterly dividends of $0.935 per share ($3.74 per share on an annualized basis), which represented increases of 9% and 8% when compared with the dividends paid in the respective quarters in the prior year. We declared a quarterly dividend of $0.935 per share ($3.74 per share on an annualized basis) in July 2020. The quarterly dividend will be paid August 14, 2020, to shareholders of record at the close of business on August 3, 2020.

Impairments - In the first quarter 2020, we evaluated our goodwill, certain long-lived asset groups and equity investments for impairment. Based on the results, we recorded the following impairment charges:

Natural Gas Gathering and Processing - In the first quarter 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 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 - In the first quarter 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.




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