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, COVID-19 and Business Update - Despite the COVID-19 pandemic,
we expect earnings growth in 2021 due primarily to increasing volumes, available
capacity and efficiency gains from recently completed capital-growth projects,
continued flared natural gas capture and rising gas-to-oil ratios in the
Williston Basin. Although the energy industry has experienced many up and down
cycles, we have positioned ourselves to reduce exposure to direct commodity
price volatility. Each of our three reportable segments are primarily fee-based,
and we expect our consolidated earnings to be approximately 90% fee-based in
2021. While our Natural Gas Gathering and Processing segment's earnings are
primarily fee-based, we have direct commodity price exposure related primarily
to fee with POP contracts. In addition, our Natural Gas Gathering and Processing
and Natural Gas Liquids segments are exposed to volumetric risk as a result of
reduced drilling and completion activity, declining well productivity, severe
weather disruption, operational outages and crude oil, NGL and natural gas
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 fee-based contracts.

In continued response to COVID-19, we remain committed to managing the impact of
the pandemic on our employees. We continue to protect our workforce and, as
always, we remain focused on operating our assets safely, reliably and in an
environmentally responsible manner. We continue to monitor the COVID-19 outbreak
and have previously 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 has remained fully engaged
within federal, state and local government issued guidelines and safety-related
ordinances. We continue to practice remote work procedures when possible to
protect the safety of our employees and their families and continue to take
precautions for our employees who work in the field or need to report to a ONEOK
facility, such as facility access restrictions, workspace modifications, social
distancing, face covering protocols and sanitation procedures. As COVID-19
vaccinations are becoming more readily available, we anticipate implementing a
return to office plan later this year. We continue to apply risk-management and
cybersecurity measures designed so that our systems remain functional in order
to both serve our operational needs and to provide service to our customers.

In February 2021, Winter Storm Uri brought significant challenges to the energy
industry and our operating areas. Our employees were proactive in preparing for
the severe winter weather, made the necessary operational adjustments to keep
our assets running and provided exceptional service to meet the needs of our
customers during the difficult weather conditions as demand for natural gas,
propane and electricity soared. This increased demand, coupled with supply
reductions from wellhead freeze-offs and power outages to processing plants in
the Mid-Continent and Rocky Mountain regions and the Permian Basin
                                       26
--------------------------------------------------------------------------------
  Table of Contents
and fractionators in the Mid-Continent region, resulted in record high commodity
prices at certain market hubs, particularly in the Mid-Continent region and in
Texas. Commodity prices quickly returned to previous levels as the weather
improved and natural gas supply returned.

Winter Storm Uri impacted all three of our operating segments, resulting in a
net positive impact to our financial results, as our ability to meet increased
demand for natural gas and NGLs during the period more than offset the
unfavorable volume impacts. Our well-positioned natural gas storage assets and
market connected pipelines in our Natural Gas Pipelines segment were able to
meet critical needs during this period of severe winter weather. The reliability
of our interstate and intrastate assets enabled us to continue to provide our
customers access to transportation services, park-and-loan services and
additional natural gas supply if available, which improved our financial
results. However, wellhead freeze-offs reduced February volumes in our Natural
Gas Gathering and Processing and Natural Gas Liquids segments, which negatively
impacted our financial results.

We expect to maintain sufficient liquidity and financial stability in 2021 due
to cash flows from operations, our undrawn $2.5 Billion Credit Agreement, $402.4
million in cash and cash equivalents and no debt maturities until 2022.

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.



Sustainability - We continue to look for ways to reduce our environmental impact
and utilize more efficient technologies. In 2021, we qualified for inclusion in
the S&P Global Sustainability Yearbook and received Industry Mover status, which
is awarded to a company that recorded the strongest year-over-year improvement
in its industry. In addition, we received a perfect score of 100 in the Human
Rights Campaign 2021 Corporate Equality Index. We have a stand-alone
environmental sustainability team, formed in 2017, that accelerated our ongoing
environmental stewardship efforts and is exploring ways to lower our greenhouse
gas emissions. We are actively researching opportunities that will complement
our extensive midstream assets and help enhance the vital role we expect to play
in a future transition to a low-carbon economy.

Natural Gas - In our Natural Gas Gathering and Processing segment, gathered and
processed volumes in the Rocky Mountain region increased in the three months
ended March 31, 2021, compared with the same period in 2020, due primarily to
the completion of capital-growth projects and the capture of natural gas
previously flared. In February 2021, we experienced severe winter weather as a
result of Winter Storm Uri that reduced volumes across our operating system.
However, volume levels quickly returned and exceeded 1.2 Bcf/d in the Rocky
Mountain region in March 2021. We expect these Rocky Mountain region volumes to
be sustainable for the remainder of 2021, even with no increase in producer
activity, due to the completion of previously drilled but uncompleted wells, the
capture of natural gas previously flared and rising gas-to-oil ratios in the
Williston Basin. In addition, as prices and volumes continue to strengthen, we
currently have the processing capacity to benefit from production growth. Our
Bear Creek plant expansion, which was previously paused, is expected to be
completed later this year, which will increase our total processing capacity to
approximately 1.7 Bcf/d in the Williston Basin.

In our Natural Gas Pipelines segment, our assets are connected to key supply
areas and demand centers, including export markets in Mexico via our Roadrunner
joint venture and supply areas in Canada and the United States via our
interstate and intrastate natural gas pipelines and our Northern Border Pipeline
joint venture, which enable us to provide essential natural gas transportation
and storage services. Continued demand from local distribution companies,
electric-generation facilities and large industrial companies resulted in
low-cost expansions in 2019 and 2020 that position us well to provide additional
expansions for our customers when needed. In February 2021, severe winter
weather impacted our operations. Due to the reliability of our pipeline and
storage assets, we were able to continue to provide services to customers
serving critical needs during the winter storm. Our natural gas transportation
capacity contracted is not significantly impacted by market conditions, as our
end users rely on natural gas to support their business regardless of commodity
price fluctuations. We continue to experience stable fee-based earnings with
transportation capacity more than 95% contracted with firm commitments, and we
expect these stable fee-based earnings to continue throughout 2021 at similarly
contracted levels. In addition, during the first quarter 2021, we sold natural
gas that we owned and held in storage, which benefited our segment's financial
results. During the extreme winter weather periods, we maximized natural gas
storage withdrawals for firm service customers serving critical needs.

NGLs - In our Natural Gas Liquids segment, NGL volumes decreased for the three
months ended March 31, 2021, compared with the same period in 2020, due
primarily to the unfavorable impact of Winter Storm Uri in February 2021 across
our operations, offset partially by increased volumes in the Rocky Mountain
region. Volumes quickly returned, and our average daily raw feed throughput
volumes in March 2021 increased, compared with both the first and fourth
quarters 2020, and we expect these improved NGL volumes to continue. We expect
to benefit from increasing volumes, without significant capital investment, on
our integrated assets, which were strengthened through our recently completed
capital-growth projects.

                                       27
--------------------------------------------------------------------------------
  Table of Contents
Growth Projects - We operate an integrated, reliable and diversified network of
NGL and natural gas gathering, processing, fractionation, storage and
transportation assets connecting supply in the Rocky Mountain, Mid-Continent and
Permian regions with key market centers. We have completed significant
capital-growth projects that include NGL pipelines, NGL fractionators, natural
gas processing plants and related natural gas and NGL infrastructure. These
projects provide us the capacity to benefit from future supply growth without
significant capital investment. In the first quarter 2020, due to the decline in
commodity prices and economic demand disruption caused by COVID-19, we paused
various projects, which can be restarted quickly when producer activity warrants
additional infrastructure. Our announced capital-growth projects are outlined in
the table below:
                                                                                  Approximate
           Project                                 Scope                           Costs (a)           Expected Completion
Natural Gas Gathering and Processing

(In millions)

Bear Creek plant expansion and 200 MMcf/d processing plant expansion and 

$405                    Q4 2021
related infrastructure         related gathering infrastructure in the
                               Williston Basin
                               Supported by acreage dedications with
                               long-term primarily fee-based contracts
Natural Gas Liquids

Arbuckle II pipeline expansion Increasing mainline capacity with additional

$60                    Q2 2021
                               pump facilities
                               Increases capacity to 500 MBbl/d

MB-5 fractionator and related 125 MBbl/d NGL fractionator in Mont Belvieu,

$750                  Paused (c)
infrastructure                 Texas, and related infrastructure, which
                               includes additional NGL storage in Mont
                               Belvieu
                               Fully contracted with long-term contracts
West Texas LPG pipeline        Increasing mainline capacity by 40 MBbl/d             $145                  Paused (b)
expansion                      Supported by long-term dedicated production
                               from third-party processing plants expected to
                               produce up to 45 MBbl/d
Mid-Continent fractionation    65 MBbl/d of expansions at our Mid-Continent          $150                  Paused (c)
facility expansions            NGL facilities


(a) - Excludes capitalized interest/AFUDC.
(b) - We do not expect to complete construction by the original target
completion date.
(c) - While many of the construction activities on these projects were paused in
2020, some activity continued in order to complete the infrastructure necessary
to support volumes until market conditions warrant full project completion.

Ethane Production - Price differentials between ethane and natural gas can cause
natural gas processors to process ethane as an NGL or leave some of the ethane
component in the natural gas stream. As a result of these ethane economics,
ethane volumes on our system can also fluctuate period to period. Ethane volumes
under long-term contracts delivered to our NGL system averaged 355 MBbl/d in the
first quarter 2021, compared with 370 MBbl/d in the first quarter 2020, due
primarily to decreased volumes related to Winter Storm Uri in February 2021
across our operations. We expect ethane production to increase from the first
quarter 2021 volumes and continue to fluctuate throughout 2021. We estimate that
there are ethane volumes of approximately 100 MBbl/d in both the Rocky Mountain
and Mid-Continent regions that represent potential ethane opportunity for our
Natural Gas Liquids segment.

Debt Repurchases - During the three months ended March 31, 2021, we repurchased
in the open market outstanding principal of certain of our senior notes in the
amount of $55.2 million for an aggregate repurchase price of $54.6 million with
cash on hand.

Dividends - In February 2021, we maintained and paid a quarterly dividend of
$0.935 per share ($3.74 per share on an annualized basis), which is consistent
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 2021. The
quarterly dividend will be paid May 14, 2021, to shareholders of record at the
close of business on April 26, 2021.

FINANCIAL RESULTS AND OPERATING INFORMATION

How We Evaluate Our Operations



Management uses a variety of financial and operating metrics to analyze our
performance. Our consolidated financial metrics include: (1) operating income
(loss); (2) net income (loss); (3) diluted EPS; and (4) the following non-GAAP
financial measures: adjusted EBITDA and distributable cash flow. We evaluate
segment operating results using adjusted EBITDA and our operating metrics, which
include various volume and rate statistics that are relevant for the respective
segment. These operating metrics allow investors to analyze the various
components of segment financial results in terms of volumes and rate/
                                       28

--------------------------------------------------------------------------------


  Table of Contents
price. Management uses these metrics to analyze historical segment financial
results and as the key inputs for forecasting and budgeting segment financial
results. For additional information on our operating metrics, see the respective
segment subsections of this "Financial Results and Operating Information"
section.

Non-GAAP Financial Measures - Adjusted EBITDA, distributable cash flow and
dividend coverage ratio are non-GAAP measures of our financial performance.
Adjusted EBITDA is defined as net income adjusted for interest expense,
depreciation and amortization, noncash impairment charges, income taxes,
allowance for equity funds used during construction, noncash compensation
expense and certain other noncash items. Distributable cash flow is defined as
adjusted EBITDA, computed as described above, less interest expense, maintenance
capital expenditures and equity earnings from investments, excluding noncash
impairment charges, adjusted for net cash distributions received from
unconsolidated affiliates and certain other items. Dividend coverage ratio is
defined as distributable cash flow to common shareholders divided by the
dividends paid in the period. We believe these non-GAAP financial measures are
useful to investors because they and similar measures are used by many companies
in our industry as a measurement of financial performance and are commonly
employed by financial analysts and others to evaluate our financial performance
and to compare financial performance among companies in our industry. Adjusted
EBITDA, distributable cash flow and dividend coverage ratio should not be
considered alternatives to net income, EPS or any other measure of financial
performance presented in accordance with GAAP. Additionally, these calculations
may not be comparable with similarly titled measures of other companies.

© Edgar Online, source Glimpses