I'm Jean Ann Salisbury. I cover natural gas and midstream at Bernstein. I'd like to welcome the ONEOK management team here today. We have Pierce Norton, the CEO. We have Walt Hulse, the CFO, and we have Kevin Burdick, the COO. So I'll be asking a bunch of questions, and then if you would like, you can actually input your own questions via the Poll Everywhere link. And yeah, so without further ado, we can get started here. So I think unsurprisingly, the main topic of every meeting in midstream, not just ONEOK meetings, is the ONEOK-Magellan merger. So if it's all right with you, we can kind of get started with just some questions about that.
Sure.
Great. Can we start with your strategic rationale for the Magellan acquisition?
Okay, well, first of all, thanks for inviting us.
Thank you.
Jean Ann, so glad to be here and glad to represent all of our employees for both us and Magellan. So really four things with a strategic rationale. First is to address risk. Second one is scope. The third is scale. And then the fourth one is opportunities. So I'll kind of go through each one of those. As it relates to risk, if you look at the portfolio of what ONEOK had today, it became apparent to us that we would like to diversify our portfolio to get a little bit more balanced approach. So what that did for us is introduce kind of a new platform for us as opposed to buying more of something we already had. This elongates or extends our reach kind of beyond what we would deliver, some of the products that we have today, over to kind of extension to some new customers.
So that's the first thing we did. And as far as scope goes, if you look at our natural gas business, we supply the needs of residential, industrial, commercial, and electric generation customers. But what this does is it introduces the transportation piece. So if you looked at an energy balance and looked at all the supply of energy coming into the system in the United States and the demand that goes out, this completes that picture of the energy needs. And with our NGL business, we're supplying the needs of the petchem industries, which can either go here in the United States or anywhere in the world to basically increase the quality of life. And then scale, we do think that scale does matter.
I think when the rating agencies came out and immediately said, "Okay, we're going to basically give you a stable rating," when you did basically issue $5 billion as far as to pay for the cash portion on this thing, that was meaningful to us, and so that just demonstrated that the size of your company does matter going forward in the resiliency, and these are in no particular order, but the opportunity to be able to basically put two very large liquid systems together, it's going to give us the ability to basically move more volume and meet more of the market demand that we think is going forward, and then you also have some of the same customers where we might have gone in and sold them a service to maybe move their gas or their NGLs. We can now talk to them about refined products.
We can talk to them about crude. And so now you're actually putting more value together with the same customer. And then also some of those same customers are throughout the United States. And so now we have more service offerings. So that was basically the strategic rationale.
Okay. That makes sense. Can you provide any insight to how long you've been considering this transaction?
It's been going on for quite a while. This is not something that we woke up one day and said, "Okay, we're going to go across the street and buy our neighbor." This is something that we've been thinking about for quite some time, and it actually goes back even beyond my tenure as CEO, which is coming up on two years.
Okay. When do you expect the proxy to come out?
I think everything's on track. I mean, typically it's four weeks or so after the announcement. So I think mid-June is a good target.
Great. I think it'd be helpful if you could share any additional details or examples that you see related to the commercial synergies that you see from the deal. I think that that's probably a lot of investors would be interested in that.
Okay. Well, I told you some of them. I'll let Walt kind of go into a few more details. But I do think it's about moving more volume through a combined system. It's about us being able to sell more services than we had before. What would you add to that? Well, I think that, as Pierce mentioned, from a customer standpoint, it gives us the ability to reach new customers that the Magellan system may not have been able to reach or the ONEOK system was not able to reach. But even more importantly, for the customers, we may give our customers of both companies the ability to reach new markets that they haven't been able to reach in the past. And those opportunities will create the situation where we can use capacity on both our systems to move more volume.
Makes sense. I think one thing that's been coming up since the EIC is, is it technically feasible to batch in NGLs with refined products?
The short answer is yes.
Okay. Another very common question: Is this announcement a sign that the Bakken was starting to slow down? It sounds like you've been thinking about this for a while. If you can provide any other context about why now?
Absolutely not. We are still extremely positive on the Bakken. This in no way is some sort of a proxy that we think the Bakken is any way in decline. I'm going to ask Kevin to kind of go through some data on the Bakken just to kind of reaffirm our confidence in the Bakken. Yeah. We still see a lot of strength. When you think about runway left, we still believe decades of inventory left at sub $60. That continues to be reinforced as producers drill in different parts of the play and have great results with their new completion and drilling techniques. So that's one aspect. Just more tactically, we saw a very, very strong first quarter from a well-connect perspective as we went through that. Completion crews have remained very steady through the various commodity ups and downs over the last several months.
Rigs on our acreage is maintained at 20 or above through that time period. So as we look forward, we still have a lot of strength, we believe, in both the NGL side and the gathering and processing side as well.
Okay. How important did the tax synergies play into this?
I call that the icing on the cake. That was not the main reason for doing this. The main reason was the diversification. It was to add scope to what we did, add the scale, and add additional opportunities that both of these companies can basically execute on together that we would not have been able to do going forward. But it is meaningful. So Walt, do you want to talk a little bit about the taxes?
Well, sure. I mean, it's an opportunity for us to extend our utilization of the NOL at its full rate as opposed to getting caught in the alternative minimum tax, which we had said previously that we would in 2024. So in this particular situation, because Magellan is an MLP, we'll get the full step up in basis and be able to take a large portion of that as bonus depreciation, which when you put it into the formula, which is quite complex, I won't go into it right here, but it involves a three-year look back on a going forward basis. It'll enable us to not trigger that alternative minimum tax out through around 2027. So if you kind of factor that in and look at the present value of our utilization of the NOL, we've said it's about $1.5 billion.
So we looked at it for all the reasons that we did the transaction that Pierce described, but we kind of looked at that $1.5 billion as a value opportunity so that when we looked at our going in price, we also then looked that we were not only buying the company, but we were getting the value of that tax synergy. To the extent that we grow faster than we have currently projected or we find another asset or investment to make within that earlier period, we have more NOL to utilize. So there's up to $3 billion of NOL utilization. We're only saying that we're going to be able to efficiently use $1.5 billion of it from a net present value standpoint.
Can you just give kind of one more, because I've been interested in this as well, but one more layer of context of what it would take to unlock the remainder?
Can you just give kind of one more, because I've been interested in this as well, but one more layer of context of what it would take to unlock the remainder?
It's just actually getting income equal to that. I mean, it's a function of, so we're using more than $1.5 billion when we're just discounting it back to the current market. To the extent that we could use it all in the first year, we could unlock the full $3 billion. And that just means that we have to have offsetting income against the loss that we are carrying forward.
Okay. How does this augment your plans to get more involved in the export game?
What we think this brings to us is the expertise that they have to actually build docks and to operate docks and to be in the market to move the product across the docks. We don't have any plans to do anything different with the docks that they have today. But that's something that we think they bring that expertise. And until you've actually been in that market, built one, operated one, and are in the market, you're really doing it for the first time. And the first time you do it, there's risk to it. So we feel like they've kind of taken that risk off the table for us in assessing whether or not we would go forward with a dock. And you know, Jean, we've been talking about a dock for several years.
It's just not something that right now that we're necessarily moving forward with because we're not necessarily taking any kind of discounts on our product and our product's still moving. But we feel like that's what we've gained by this acquisition is that expertise.
That makes sense, and I guess, yeah, just as a follow-up, I would say that that's been a question that you've been perpetually asked for the last five years is if you were going to get into exports while you weren't in exports already, and if you can just kind of shine some light on the decisions that you guys were having internally and ultimately not deciding to get into exports in the past.
It's a long process, right? So we've actually been planning as if we were going to do one, but then just slowly, methodically moving through that process. But it's like I said, it's a matter of is your product moving? Are you taking some kind of discount on the product? And then ultimately, where does the market really go? And if it's something that we feel like it's necessary to grow the company to have a dock, then that's when we'll make that final investment decision. And we want to do it with creditworthy partners and those kind of things to kind of Kevin, do you have anything to add to that?
No, that's where I was going to go. I mean, we continue to look for opportunities, but we're going to make sure we're going to be intentional and disciplined about that investment as well. So to the extent we find the right counterparties and the right contracts and the right credit and all those things that line up, that's when I think you'd see us do something.
Makes sense. Does this deal provide you more Permian NGL and refined products opportunities? I guess two separate questions.
Kevin, what do you think?
I think you go back to the various locations, the services that we can provide, where the pipes are. Yes, I think there's the opportunity to unlock some of the various things that both Pierce and Walt have talked about before. So as we engage with our customers, as we engage with Magellan's customers, those are some of the we'll be looking at a collection of services now that we weren't able to kind of offer or to talk about before, not just the Permian, but also up and down the two companies' footprints.
I think part of the surprise of this deal too, Jean Ann, is that I think some people thought that diversification meant that we were going to diversify into a different basin, and therefore, kind of the natural one, the Permian is the one that gets a lot of press.
And I think they thought, well, you're going to buy more G&P there. But when you look at this particular acquisition and you look at the free cash flow that comes off of it and the amount of capital being fairly de minimis to stay flat, this, in our opinion, is a way better deal for our shareholders. Not that we would not do anything in the Permian and G&P, but this would be one that would be at a higher value to us and to our shareholders than going out and buying some G&P where you have to spend quite a bit of money just to hold your earnings flat. This one is not that case.
Makes sense. Has there been or can you share what the feedback has been from your large shareholders so far?
No, it's been very, very positive. I think it did take quite a few by surprise. But our core shareholders have been right there with us. We had quite a bit of arbitrage selling that took place immediately. We are a very liquid stock, and we have a lot of borrow given the index holdings that we have. So it was an easy thing for people to do. So the initial volume really wasn't coming from any of our core shareholders. In the long run, we kind of look at that as a positive because it probably got more of the Magellan stock in hands that will be very favorable from a vote standpoint. But I think that it goes even beyond our core shareholders.
We have another set of shareholders that have regularly been in and out of ONEOK stock, depending on where they think midstream is within the cycle. And I would say without a fault, every one of those that wasn't in the stock when we announced the deal that has traditionally looked at our stock is circling around, and we're talking to them right now. They all have an interest, especially with the stock where it is today. They're all looking at this as a very strong entry point.
Makes sense. How does the HSR filing work from a timing standpoint?
We've made the filing because it had to be done within 10 days of the announcement. I will say that we have complied. Now we just, we're in that waiting period to let the process run its course.
Okay. Yeah. Can you give details around just the share that you need of the ONEOK votes and the Magellan votes and kind of the timeline of the voting? I know that there's a lot of, I want to call it confusion, but it seems a little detailed.
Sure. For the ONEOK vote, we need a majority of the quorum, and for the Magellan vote, we need a majority of the outstanding units.
Okay. And what's the timeline for it?
If we file that proxy in mid-June, probably the earliest you're going to get out of the SEC would be mid-July. That's if we get no comments. I mean, typically we're going to get some. We would hope to be in a process where somewhere in that August timeframe we'd be able to mail the proxy, and then it's the normal process that would run forward. On that timeframe, we could still see a September close.
Okay. I would say from my seat, it's always felt like the NGL names, like ONEOK, which is a C Corp, but to some extent, Enterprise and Energy Transfer as well don't get quite as much broad generalist investor interest because people first have to do what's an NGL. Do you agree with that? And do you think that having a broader array of assets in the portfolio will kind of help with generalist interest? Are you seeing any signs of that?
I do think we'll see a broader array of interest, primarily more from the standpoint that's kind of that Bakken question on the other side. We've had probably more volatility associated with crude prices than we thought the stock should have. If you've looked at our earnings over time, they have consistently grown. 2014 through 2022, we didn't have a year where we didn't grow EBITDA, but even through multiple commodity cycles, through a pandemic, we kept growing. Yet we had a couple of periods of pretty extreme volatility in our stock when it was in and around crude price movements. So we think now with a broader base, a more $1.5 billion of very stable earnings and cash flow into that mix, that we're hoping that some of that volatility that has been there in the past might and we're hearing that.
We're seeing that investors do see that scope, scale, and diversification should mollify some of that concern.
Makes sense. Let me take a quick break to check the pigeonhole here and see if we've gotten any burning questions in here. If not, you still have time. We have not. Not that surprising that the QR code is a step too far for people. Great. Well, that was all super helpful. If we can kind of shift to some business questions, which I think may fall to Kevin to some extent. In the near term, as the Bakken grows, can you just remind us how much capacity is left on Elk Creek and how much can be captured via expansion? It might be helpful just to kind of put that into what that would mean for gas and crude numbers as well if people are not super familiar with NGL.
Okay. Let's just start kind of with the gas production in the basin. From our perspective at ONEOK, we have 1.9 BCF per day of processing capacity with recently bringing on our Demicks Lake III processing plant. We said on the call we had reached 1.5 BCF a day, average in the 1.4 range. So you've got somewhere between 4 and 500 million cubic feet per day of available processing capacity, which sets us up nicely for the next two, three years for sure. So that's great from a processing perspective. From an NGL takeaway perspective, we have 440,000 barrels a day of capacity when you consider both the original Bakken NGL line and the Elk Creek pipeline. I think in the third quarter, we were around 370,000, somewhere in that range average for the first quarter.
And so that gives us 70,000 barrels a day-ish of capacity on the NGL takeaway. We do have the ability to expand Elk Creek by another 100,000 barrels a day by just adding pump stations. We've talked about that for a while. As we start bumping up and hitting some of those higher reach numbers, we're starting to have conversations about, and we've said before, taking steps so that we can shorten the window that we need to actually bring that capacity online once we get kind of line of sight to those volumes.
How long does it take to add the pumps?
We've talked about somewhere 12 to 18 months-ish, maybe a little bit longer than that. But that all depends on when you say go, right? Like I mentioned, we've already started taking steps to shorten that window with some low-dollar type things to go there. So that would be the range probably if we talk if we would come out and announce something, that would be a rough range that you're talking about there. And a lot of that is just kind of power-driven, getting the utilities out to the new pump stations and so forth. Transitioning to the residue gas takeaway side, the majority of the gas goes into residue gas goes into Northern Border, which ultimately makes its way down to the Chicago type market. That's a 2.5 BCF a day pipeline.
Currently, there's about probably 800 million cubic feet per day coming down or available coming from Canada. That's what happens is gas coming in from the Bakken just displaces that gas coming from Canada. We think that can happen, and there's another 3-400 million cubic feet per day of capacity that Bakken gas can displace on Northern Border. That's one aspect, so there is another 100 million cubic feet a day of capacity that we signed up for that goes kind of South on WBI into some other existing pipelines that makes its way down to the Cheyenne market. Northern Border has been talking about and are in the process of evaluating a project to expand their capacity by up to 400 million cubic feet a day that would ultimately reverse Bison and take gas down into a Cheyenne-type market. That project is well underway.
It hasn't reached FID yet, but hopefully something will be coming here pretty quickly.
So is your guess that that's the most likely next gas takeaway solution?
That one, again, from my perspective, my opinion seems to make a lot of sense. Again, anytime you can utilize existing pipelines that are already in the ground and you can just do some piping at compressor stations and turn things around and flow a different direction, that's low capital type, high return type projects. So that one seems to make sense. And then relatively recently, there's been a couple of new gas to power plants announced that reached FID up in North Dakota, which somewhere between 100 and 200 million cubic feet a day of new demand. It's not pipeline demand, but it's new local demand that would be residue where residue would go. So all in all, I think the industry is doing a really nice job of staying ahead of where the capacity needs are given the growth that we see coming out of the Bakken.
Jean, I think it's important to note those volumes of capacity are interesting, but you need to know the context of what they can deliver from a value standpoint. We've got 500 million a day of processing. Each 200 million a day plant generates between $100 million and $125 million of EBITDA. And each 200 million a day plant produces 25,000 barrels of C3+ on the NGL line. So each 25,000 barrels of C3 Plus is an additional $100 million. So we've got 170,000 of capacity once we expand it. That's close to $700 million of potential growth on the system before we fully utilize that, plus the 250 on the processing. And you got to remember that we get all the NGLs, incremental NGLs in the whole basin. We only have about 50% of the GMP ourselves.
So there are other plants that are growing in the basin, and we'll get those NGLs to use on that capacity.
Makes sense. So just sort of high level directionally of how much runway we have left for different takeaways, you would say probably we would hit the ONEOK gas takeaway first with what's on the table now, and then probably processing, and then probably NGL, and then probably crude if ever.
That would be a good handicap. That's the way we think about it. Residue takeaway has been the first one that the industry has really jumped on hard. They know we've got. There's been some responses with processing capacity. There's third-party processing capacity available as well. That's probably similar to ours. And then, yeah, NGL and then crude's in great shape.
I think the most important thing too, Jean, is that the producing community supports these types of expansions because you're taking away the gas, which keeps the processing plants going, which keeps the liquids going, which keeps the well producing, which keeps the oil producing. And really, it's oil play. So the producers up there have been very, very supportive of these expansions and behind those.
Makes sense. Switching gears a bit. Everyone in midstream right now is very excited about gas storage recontracting. Rates are apparently going up a lot. Everyone's talking about it. Can you remind us how much gas storage you have and whether you are also seeing upward movement in rates? I don't usually think of it being a large part of your portfolio, but I think you do have some.
We absolutely do. We've got around a little over 50 BCF of storage split mainly in Oklahoma, but we also have some in Texas as well around our intrastate assets in those states. Our financials, you've seen in our financials, we've done some recontracting. We've done some expansions at both of those facilities. In fact, the one in Oklahoma is right near to the point of coming online. We've been saying second quarter, we're in second quarter, and so we're just about there. But you've seen some of the recontracting already reflected in our strong results on the gas pipeline segment. So yes, we've seen that. We are also looking at additional expansion opportunities in both Oklahoma and Texas as well and evaluating different ways to both expand storage and are there some opportunities to bring other storage fields back in service.
So it's definitely been a tailwind since Uri as we've worked with our customers to ensure that we've got the gas in the ground to meet some pretty crazy weather that can happen.
That was actually my follow-up question is from your discussions with customers, do you feel like this step up in how people think about gas storage is a true difference and it's like we need to make sure we have backup capacity? How much do you think is that and how much is sort of this forward contango in the curve that will be maybe a one-off of how much people are willing to pay over the next year for storage?
I think from my experience and our discussions with our customers and our footprint, it has been a fundamental shift in the storage needed, and both from a gas utility perspective, but also from an electric utility perspective as well, from a gas-fired generation and seeing them step up for more firm service or more storage or things like that. Again, it was another impact that we saw. It wasn't just the gas demand, not just from the gas utilities, but also from the power gen facilities as well. We've seen a shift in how they think about their supply, so I definitely think it's Uri related because the performance, especially of the ONEOK assets as related to storage, really saved Oklahoma from any of the outages and those kind of things that were happening.
Because typically in February, Oklahoma is even a net exporter of natural gas to the tune of about 3 BCF a day. During Winter Storm Uri, that went back to basically zero. And so you had all that went away. So now you really have lost your supply. It was the storage fields in Oklahoma that basically kept all the homes warm and the reason that you didn't have some of the same issues that were happening down in Texas. So I think people really woke up to the fact this has a lot of value. And I think Kevin's right. I think the electric companies who really didn't have that storage before actually see that as an insurance policy to add that to their portfolio going forward.
Good. As someone who had two pretty cold parents in Houston during Uri, a lot of people have responded to that. The Permian is short gas takeaway, which is causing ethane to be recovered there at very low prices. Once more gas takeaway starts there at the end of this year, do you forecast ethane recovery becoming economic in basins outside the Permian again?
We've been very consistent with kind of our assumptions that went into our guidance, and that's really played out because we saw some of those things coming. Short answer is yes, we continue to believe. We do believe Permian will remain in near full recovery even as it moves through the opportunities or the projects coming forth where you get more residue takeaway, but that doesn't change. We still believe we have seen and we continue to believe that the Mid-Continent will be in partial recovery, and with what's going up in the Bakken and Canada with gas prices there, that we will continue to have discretionary opportunities to incentivize ethane out of the Bakken. That's played out so far this year.
The Mid-Continent may have been a little more in injection than we maybe originally thought, but that it continues to ebb and flow just depending on what's going on with your local gas price or your regional gas price and what's going on with ethane price in Belgium.
Makes sense. So Northern Border is the gas pipeline coming out of the Bakken. When does Northern Border BTUs become an issue as the gas stream gets heavier?
It's one of those things that I've said for a while, it's just math. As that Bakken gas continues to displace the drier, the lower BTU content gas coming out of Canada, that's going to raise the BTU level of the blended stream that ultimately gets to downstream markets. A marker to use is if you rewind to pre-COVID, gas production or gas captured was about the same level then as it is today in the basin. And all that gas was flowing in, and complete ethane rejection was flowing into Northern Border. And the BTU level was 1120-ish, right? And that's when it became there was concerns and Northern Border proposed a tariff to put a spec in place at around 1100.
FERC rejected that tariff and asked Northern Border to go back and work with shippers, work with the markets, work with supply sources to try to come up with a more economic solution than had been proposed, well about the same time, COVID hit, volumes dropped off, and so the problem went away for a period of time. As gas production has grown back, we've been incentivized to recover ethane, so we've been making money by recovering ethane from the stream, which has kept the BTU level lower. If those economics change and we all of a sudden started rejecting all that ethane, the BTU content will go right back to the 1,120.
There are some downstream consequences when you think about the utilities, the gas utilities are the primary demand source that the gas gets to a certain BTU level, you start having issues inside the utility, and so they'll start pushing back. Northern Border continues to work it. I think it's just a matter of time before there is something like that. At the end of the day, the tariff will have to get put in place with a spec that will have to be approved by FERC before that happens. Now, in the meantime, if you do have some spots where the gas gets too high and downstream markets refuse to buy the gas, we can always recover ethane as a means to lower the BTU content.
If it's a physical limitation that we have to do that, then we would charge full rates rather than incentivized rates to recover that ethane.
Makes sense, and these ethane decisions, is this something that ONEOK is making day by day? My first job out of college was as a gas scheduler, a lowly gas scheduler for ExxonMobil, so I'm picturing some soon-to-be thriving current gas scheduler at ONEOK that's kind of deciding the ethane amount to take out every day, or is it more of a month-to-month decision?
That depends. We evaluate it every day. We're looking at it. We've got people looking at what's going on in the gas markets and the ethane markets every day. Does that mean we're moving it up and down and turning levers every day? Probably not. But we've done it on a weekly basis, monthly, and to some extent longer term. It all just depends on what the forward curve or the current price and the forward curve looks like for gas in the region and ethane in Belgium.
That's actually one of my favorite jobs to date. It really, there's no better way to learn. So that makes sense. Can you remind us of how FERC PPI indexation works on your assets?
On the liquid side, on an annual basis, FERC puts out an adjustment factor that is based on a couple of things. One, it's based on an adjustment that FERC approves, which the current level, I believe, is negative 0.21 cents or percent or something like that. The bigger one then is the PPI adjustment. I think when you do the math on that, it's around 13% this year. That goes into effect on July 1. To the extent you have a cost of service rate on your NGL or your liquids pipelines, that you have the ability to apply that index, if you will, to your rates from that standpoint. Again, it's the pipelines' decision. They don't have to, but they absolutely have the right from a FERC perspective.
I'll take another quick break to look at the PowerPoint again. There we go. Okay. All right. This is a good one. Has the market reaction to the deal been a surprise to you, and what do investors not appreciate about the deal?
I think that we clearly didn't expect as much arbitrage activity as we got in the first two days. The stock traded 20 million shares the first day and 10 million shares the second day. Magellan traded 17 million shares, which is about 45 days of volume. So there clearly was more activity there than we thought. Stocks have settled down now. The market itself for the space has been under some pressure as we look at what's going to go on with OPEC this weekend and other things. So clearly, we had hoped for better. We expected it to trade down. We didn't expect that initial pressure.
And what we're seeing from the investors and really those investors that I mentioned that have been pretty active in our stock over time that are increasingly, and we've been meeting with a couple of them here at this conference, that are coming back and getting back up to speed on the space is definitely showing us that the activity level is going to come back. So we're pretty confident that it's just a short term. I think once people really have thought through the quality of their earnings and how little capital it takes to maintain those and really thinks through, you're combining a company that has a tremendous amount of free cash flow that kind of run up against their potential growth opportunities, but actually combining them with our assets actually gives them growth opportunities in the future as well as us as well.
So you combine the free cash flow with the growth opportunities, and you quickly start to see that you don't necessarily have to go out and borrow more debt and issue equity. And so that earnings per share is going to really start to take off in the future. So I think once people really think through that, like I said, I think people thought we were going to do something differently, although in my opinion, we've kind of left some breadcrumbs along the way that kind of told what we might do. But I think it all goes back to us being really intentional and disciplined in what we do and the fact that capital allocation is very important to us. And so first priority is to reinvest.
I will say in our economics, we have not taken any benefit from reinvesting that cash flow into really high return projects. That really juices this deal in the long run. But we haven't done that yet. So we'll get to that as we go through our planning process, both in the current annual process for 2024 and looking at our five-year plan as well. But I think once people really grasp the benefits of these two companies together, our board saw it, their board saw it because there was a unanimous consent on voting for this deal. Our employees are very excited about this. Their employees are very excited about it. So when you get your employee base excited about it, that they're in the business every single day and they see the benefits, you get something pretty special there.
Makes sense. Can you give us the latest on the Saguaro Connector?
Sure. We keep working the process. The presidential permit process is well underway, and we'll keep working that. We're working with the LNG facility as they continue to contract and work towards their FID. There's been some discussion in the marketplace about nice PSAs they've put in place with really strong, nice, creditworthy counterparties. That's obviously a positive for us. But we continue to work and do those things to get to that FID. We continue to talk about midsummer, probably on the other side of mid. But again, still love the project. We think it makes perfect industrial logic sense by going west versus east. The shipping cost and the other logistical benefits you have by going from the Mexico coast to markets primarily in Asia makes a lot of sense. And so we feel good about it, and we'll keep working it.
Do you all have a house view on LPG prices? I've noticed over the last month, people have gotten, I'd call it over the short or medium term, but nervous about LPG prices over the next couple of quarters, given where storage is at and the fact that perhaps Asia can't take more. I'm not sure if for the year or for the next 12-18 months. Do you have a view?
I think obviously, two things are going on. LPGs are following crude. And so as crude has seen some weakness, you've seen some more weakness on the LPG side. Yes, there's been some discussions as supply grows. It's going to have to clear over the water because U.S. demand isn't growing to the extent. As we look internationally, exports have been very strong over the last several months, and I think that continues as you look forward. Longer term, cure for low prices is low prices. LPGs tend to find a way. If it gets to a certain low level, you'll see some switching happen in the U.S. that could chew off some inventory. So I think it just remains to be seen.
We didn't have a lot of weather this year in some of the markets, and I think that caused a little bit of a shift in the inventory position, but it can change in a hurry.
Yeah. On GOR in the Bakken, I know it often fluctuates a bit, but it hasn't risen as much the last 6 to 12 months as kind of in the trend before that. Do you see any reasons for that, or do you think it's just kind of part of the noise still?
I think it's part of the noise, and then part of its math is activity came back. The IPs you're getting depending on where the drilling occurs. There's been some movement of rigs. There's been some phenomenal wells drilled in Dunn County, which is a positive for us because that's why a lot of the rigs are remaining on our acreage. The GORs are slightly lower down there. But regardless, over time, the GORs still will trend up. It's just a matter of kind of where that initial starting point is that could pull a basin average down. That's why it could decrease month over month. But the general trend, we believe, will continue as it has over the last several years.
Okay. Let me check one more time here. Make sure people are able to ask their questions. Oh. Let's see. How do you prioritize mid- BBB rating at all three agencies versus shareholder returns?
I think that the rating agencies have been incredibly supportive of this transaction. Moody's went as far to come out and actually say that they were moving the benchmarks that we had to achieve to maintain our rating. In the past, they had said to get looked at as an upgrade to a Baa1, we'd have to be at three times or lower. They moved that to three and a half times. And they said that for us to maintain our Baa2, that we would historically have been at four times, and they moved that to four and a half. So they've clearly seen the size of the company, the stability of the company, giving us more flexibility. So I don't think that you're going to see a situation where the Baa2 rating is going to play into any kind of constraint on our return on capital.
I think that our overlying thing is that we're going to continue to return capital along the lines of our earnings growth going forward so that we can maintain a sustainable growth profile for that capital return. And I don't think credit rating is going to play into that at all.
Okay. Magellan has historically had modest maintenance CapEx spend, as you mentioned. Are there growth opportunities on legacy Magellan refined products footprint?
So I guess the way to answer that is yes, but it took the combination of the two to unlock those. You're going to be looking at maybe some different interconnects and some other things, that it goes back to that first opportunity that we talked about is combining these two companies together. We do think that more volume is going to be moving, that's going to be meeting market demands and what the customers are really wanting out of both systems.
Makes sense. ONEOK aggressively defended bondholders in 2020 to defend IG. Now ONEOK is buying Magellan. Are there any opportunities that you see to sell assets from the current portfolio?
Right now, the answer would probably be no, at least nothing that would be meaningful.
Okay. Makes sense. Great. Well, I think we're coming up at the end of time. If there's any closing remarks that you want to make about ONEOK or about the deal, feel free to use them.
Number one, I just appreciate the chance and the opportunity to come up here and our management team to present at the conference. We are really strongly behind this particular acquisition. We said all along that if we're going to do M&A, it's going to be intentional and disciplined. I think we've shown the intentionality because we did something probably a little bit different than what people thought. But I can tell you that there was a lot of thought went into this. A lot of things that we looked at as far as the key drivers to something that we would look at and what are the questions you'd ask around those, putting different companies together through those filters, Magellan kept rising to the top.
We're extremely excited to move toward getting this thing closed and to bringing the value and the benefits to all of our stakeholders, our customers, and our shareholders and our employees.
Great. Well, thank you all so much for joining our conference, and I know a lot of investors are really excited for their meetings with you.
All right. Thank you. Thank you, Jean.