ONEOK's double raise: cash-tax runway and data-center gas demand power the next leg

A second guidance bump for 2026, a $1.1B increase in expected cash tax benefits, and a 1-GW power supply win — the connective tissue is free cash flow inflection.

OKE · Earnings Call · 2026-08-04

A second raise, driven by volume

ONEOK reported a second-quarter print strong enough to lift full-year guidance for the second time this year. Adjusted EBITDA midpoint now sits at $8.35B, up $250M from the original February guidance (net income midpoint $3.6B, diluted EPS $5.68). The driver is straightforward volume growth rather than a single silver bullet: record NGL raw feed throughput, 8% year-over-year refined-products volumes shipped, Midland crude gathering up 10% quarter-over-quarter, and continued fill-up across gathering and processing. CEO Pierce Norton framed it as converting a constructive macro backdrop into visible growth: “The broader energy backdrop remains constructive, but the more important point for ONEOK is that we are converting that backdrop into visible growth.” — Pierce Norton, Chief Executive Officer · 2026-08-04 That growth is also a mix story. Commercial chief Sheridan Swords noted margins were slightly softer because incremental volumes skewed toward ethane recovery at tiered rates below C3+ rates — discretionary ethane out of the Bakken and a large Mid-Continent uptick diluted the blended rate by about a penny. But the volume surge is the bigger signal, including up to ~100,000 barrels a day of incremental Permian NGLs from third-party plants, with July and August tracking ahead. On the fee side, the LPG export dock reached its 80% contracting threshold: “We're pleased to announce that we've reached our targeted contracting threshold of 80% for our 200,000 barrels per day of LPG export capacity.” — Sheridan Swords, Chief Commercial Officer · 2026-08-04 The LPG export franchise is now largely secured into the next decade, reinforcing the company's EBITDA growth target of mid- to high single digits over five to seven years.

The quiet engine: cash taxes

The most consequential number on the call was arguably not in the income statement. CFO Walt Hulse raised the expected cumulative cash tax benefit from the One Big Beautiful Bill and the Inflation Reduction Act to roughly $2.6B from the $1.5B previously discussed, extending ONEOK's cash tax runway by about two years to 2031. He spelled out the impact:

These additional benefits, combined with our existing tax attributes are expected to defer meaningful cash tax payments until 2031, extending our cash tax runway by approximately 2 years and further enhancing future free cash flow generation.
Walter Hulse, Chief Financial Officer · 2026-08-04

That has real implications for the balance-sheet story. ONEOK carries roughly $33.5B of net debt with interest coverage around 3.3x; the tax deferral buys time and pushes the free-cash-flow inflection closer. It dovetails with the fundamentals, where top-line momentum is genuine. Q1 revenue of $9.6B is +20% year over year, and 2025's fourth-quarter print was the strongest in a decade. But free cash flow is at a cyclical trough as CapEx peaks: FCF margin fell to just 0.7% in the latest quarter, down 2.7 points year over year, as capital spending (+37% yoy) outpaces operating cash generation — a trough management argues will flip as projects complete.

Data centers, power gen, and the CapEx run rate

The other substantive new piece was power generation. ONEOK secured a 1 GW natural-gas supply agreement for a power plant and says it is in late-stage discussions on several AI data-center supply deals. The projects have scaled from the $50M range to $400–700M as hyperscaler load requirements grew, and Walt Hulse framed the capital math cleanly: “with that $2.5 billion run rate, call it, you're going to see some very significant free cash flow still coming to the bottom line.” — Walter Hulse, Chief Financial Officer · 2026-08-04 With CapEx moderating toward that run rate (down from the guided $2.7–3.2B for 2026) and no $1B-plus projects on the horizon, management expects EPS growth to exceed EBITDA growth as buybacks re-enter the equation — consistent with prior quarters' emphasis on clearing a path to the 3.5x leverage target. Data centers is not a new theme for ONEOK — it was the company's top keyword in the 20242 call — but commercialization is finally converting into contracted capacity. The contrast with the tape is notable: over the past 90 days, power and data-center themes globally have been among the losing baskets (megawatt of power and related momentum keywords showing negative price returns), even as ONEOK leans into power demand as a core growth driver. That divergence — sector tape fading while the company's own contracted backlog builds — is exactly the kind of setup worth watching. This is a show-me quarter that backs prior guidance with detail. The April call promised CapEx wind-down and FCF inflection, and flagged hyperscaler-driven project scaling; both are now being realized in the 1 GW award and the lowered run rate. “larger CapEx will be completed by midyear of 2027... that's when we'll really see the free cash flow kicking in” — Walter Hulse, Chief Financial Officer · 2026-04-29 — that was the April framing, and this quarter's numbers make it concrete. Similarly, “hyperscalers talk about 5 gigawatt facilities... the size of the projects have gone up” — Walter Hulse, Chief Financial Officer · 2026-04-29 foreshadowed the larger-scale AI deals now in late-stage discussion. The stock trades around $97, up about 8% over the last 90 days, recovering from a ~20% drawdown off its November 2024 peak. If the extended cash-tax runway plus contracted volume growth deliver the promised free-cash-flow inflection into 2027, ONEOK's mid-single-digit EBITDA growth may well prove conservative — and the tape's skepticism about power-infrastructure names could be the setup for a positive surprise.