Good day ladies and gentlemen and welcome to the ONEOK First Quarter 2009 Earnings Call. At this time, all participants are in a listen-only mode. (Operator Instructions). As a reminder, today's conference call is being recorded. Now I would like to turn the call over to your host, Mr. Dan Harrison. Sir, you may begin.

Thank you. Good morning and welcome everyone. A reminder that any statements that might include ONEOK or ONEOK Partners expectations or predictions should be considered forward-looking statements and are covered by the Safe Harbor Provision of the Securities Act of 1933 and 1934. Please note that actual results could differ materially from those projected in any forward-looking statements. For discussion of factors that could cause actual results to differ, please refer to Securities and Exchange Commission filings. And now let me turn the call over to John Gibson, ONEOK's CEO and ONEOK Partners Chairman and CEO. John?

Thanks, Dan. Good morning everyone and many thanks for joining us today, and also for your continued interest and investment in ONEOK and ONEOK Partners. Here with us today on the phone call are Jim Kneale, President and Chief Operating Officer for ONEOK and ONEOK Partners; and Curtis Dinan, Chief Financial Officer for both, ONEOK and ONEOK Partners; and Terry Spencer, our Executive Vice President, who is responsible for the partnership's Natural Gas Liquids businesses and ONEOK synergy services segment. He will also be available during the question-and-answer period. Both ONEOK and ONEOK Partners had strong first quarters. Based on this performance and what we currently see and foresee in the marketplace, we are reaffirming our 2009 earnings guidance for both entities and keeping the ranges at their current levels. While expected results from some of the individual business segments may move around a bit, the total expected results have not materially changed. In keeping with our practice as the year progresses and as we develop a clear view of the industry and the economic environment, we will make the necessary adjustments and narrow the ranges. ONEOK Partners had a strong first quarter, particularly given the challenges created by a lower commodity price environment. NGL volume growth and Overland Pass Pipeline being fully operational benefited the natural gas liquids businesses. We also experienced higher volumes processed and sold, and the natural gas gathering and processing segment. As expected however, lower commodity prices affected the natural gas gathering and processing segment. And narrower NGL product price spreads between Conway, Kansas and Mont Belvieu, Texas resulted in lower earnings in the natural gas liquids gathering and fractionation business. The distribution segment had an exceptional quarter benefiting from the implementation of new rates and lower operating cost, primarily from reduced bad debt expenses.…

Thanks, John and good morning everyone. In the first quarter, ONEOK Partners reported net income of $100 million or $0.85 per unit, lower than last years first quarter net income of $145 million or $1.48 per unit. The decline reflects the impact of lower commodity prices and natural gas gathering and processing, and narrower NGL product price differentials and natural gas liquids gathering and fractionation, which more than offset the volume increases experienced by both segments. Distributable cash flow in the first quarter was lower by $24 million but more than adequate to cover a $1.08 per unit first quarter distribution and maintain a 1.14 times coverage ratio which is at the upper end of our target. As John indicated earlier, we expect to maintain our distribution at least at its current level but are closely monitoring the industry and economic environment, and our own performance and could increase it if conditions warrant. As you know, the partnership's natural gas gathering and processing segment has the most sensitivity to commodity prices. To mitigate the sensitivity we increased our hedges on expected production during the quarter to lock-in margins. For the remainder of 2009, we have hedged almost 70% of our expected NGL and condensate production at an average price of $1.29 per gallon and 45% of our expected natural gas production at $4.20 per MMBtu. For 2010, we have 6% of our expected NGL and condensate production hedged at an average price of $1.54 per gallon, and almost 40% of our expected natural gas production hedged at $5.71 per MMBtu. As we have previously indicated, the partnership's planned 2009 capital expenditures are significantly lower than they were last year. They are currently estimated at $439 million which includes $378 million for growth and $61 million for maintenance. Through the first quarter we invested approximately $190 million which includes a little over $180 million for growth and less than $10 million for maintenance leaving approximately $250 million in our capital program for 2009. At the end of the first quarter the partnership had more than $560 million in capacity under its $1 billion revolving credit agreement which does not expire until 2012. As we have termed out, some of our growth capital financing through the completion of a $500 million 10-year debt offering in March. Our credit metrics fall well within the covenants established in our debt agreements. We expect those metrics to continue to improve as earnings from the growth projects ramp up this year into next. The partnership has no long-term debt due this year with $250 million due in June of next year, and another $225 million due in 2011. John, that concludes my remarks.

Okay. Now Jim Kneale, President and Chief Operating Officer will discuss the partnerships operating performance.

Thank you, John and good morning. Let's start with our natural gas businesses. The natural gas gathering and processing segment had a good quarter, although it was lower than 2008s record performance. The down turning commodity pricing that began in 2008 has continued into 2009. As a result, our realized prices for NGL, the natural gas in the first quarter were about half of what they were in the same period of 2008. The significantly lower prices were the driver of the decreases in operating income as compared with 2008. However, first quarter results exceeded the results we achieved in the same period in 2007 and operating cost were below last years levels. As Curtis discussed, during the first quarter we placed additional hedges on our expected production for both, 2009 and 2010. And we will continue to seek opportunities to take more price risk off the table as conditions warm. Volumes of natural gas gathered were down slightly from the first quarter of 2008 but were actually up somewhat from the fourth quarter of 2008. Processed volumes increased about 5% from last year and increased slightly over the last quarter. Overall, volumes are holding steady. If you recall, our guidance forecast them to be about 2% lower than last year. Even though we are seeing some impacts of reduced drilling in our areas of operation, our initial production rates on wells that are being completed in certain areas appear to be coming on at higher rate. Last years record drilling pace created a larger than normal backlog of well connects, particularly in the Williston Basin which we have been working off. Through the first quarter, we have connected about 12% fewer wells than we did in the first quarter of last year and our backlog has returned to more…

Thanks, Jim. Now, I'd like to turn the call back over to Curtis to review ONEOK's first quarter financial performance. Curtis?

Thanks, John. ONEOK's net income for the first quarter was $122 million or $1.16 per diluted share, compared with $144 million or $1.36 per diluted share in the same period last year. Lower commodity prices and narrower NGL product price spreads reduced the ONEOK Partners segment earnings. The distribution segment was up slightly, and while energy services results were lower than the first quarter a year ago, its performance was ahead of our expectations for the quarter. ONEOK's first quarter standalone free cash flow before changes at working capital exceeded capital expenditures and dividend payments by almost $100 million. We continue to forecast standalone free cash flow to be in the range of $185 million to $235 million for 2009. This free cash flow continues to provide a significant financial flexibility and liquidity with opportunities to increase future dividends, increase our investment in ONEOK Partners or for acquisitions. By virtue of ONEOK's general partner interest and significant ownership position, ONEOK received $69 million in distributions from the partnership in the first quarter, almost a 27% increase from the same period in 2008. At the partnership's current distribution level, ONEOK will receive approximately $275 million in distributions in 2009, an increase of 9% over 2008. ONEOK's liquidity position is excellent. At the end of the first quarter and on a standalone basis, we have $550 million outstanding on our $1.2 billion revolver that does not expire until 2011, $75 million in cash and cash equivalents, and almost $300 million of natural gas in storage. We did not expect our short-term borrowings to exceed $850 million for the rest of the year. As John mentioned, we reduced our total debt by $950 million during the quarter from cash on-hand, cash from operations and lower working capital levels as we sold natural gas from storage during this past heating season. Included in this reduction is the repayment of the $400 million, 364-day revolving credit agreement we took out last summer. We did not anticipate securing a similar revolver in 2009 given lower anticipated commodity prices, reduced storage capacity in our energy services segment, and more than adequate liquidity to handle our working capital needs. We also repaid $100 million of long-term debt in February. Our next scheduled debt maturity is not until 2011 when $400 million comes due. As a result of these actions during the quarter, our current standalone long-term debt-to-equity is 41% and our standalone total debt-to-equity is reduced to 49% from 59% at the end of 2008. John, that concludes my remarks.

Thanks you, Curtis. Now, Jim Kneale will review ONEOK's operating performance. Jim?

Thanks, John. I've already talked about ONEOK Partners segment, so I'll start with energy services. We had a solid first quarter. Although transportation and storage margins were below 2008 first quarter due to lower Mid-Continent-to-Gulf Coast transportation margins and lower summer to winter storage spreads, the quarter's results did exceed our expectations. We previously indicated that we are adjusting our overall energy services strategy to reduce earnings volatility and increase predictability. As part of that process, we are actively reducing our storage capacity under contract to focus more effectively on storage assets that we believe are core to our demand service business, serving primarily LDC. While we ended the first quarter with storage capacity unchanged at 91 Bcf, some leases rolled off in April leading us with 83 Bcf under lease beginning May 1st. We are targeting to reduce our storage capacity to 65 Bcf during the first half of next year. At that level we can continue to serve our current demand customers and still have capacity to add additional customers. Since we have additional storage capacity under lease until next year, we are filling some of that capacity to take advantage of strong summer to winter spreads putting hedges on that capacity, and we'll use this gas to serve a portion of our base load business during the upcoming winter. These additional margins will primarily be recognized in the first quarter of 2010. Our natural gas and storage at the end of the quarter was about 45 Bcf, up from last year's 15 Bcf. The higher level is partially due to warmer than normal weather that affected demand in the first quarter. We also made the decision to buy flowing gas to serve some of our customers needs. As a result, we were able to sell gas in…

Thanks Jim. As you've heard, we're performing well in a very challenging industry and an economic environment with excellent liquidity and financial flexibility. ONEOK as a significant owner and general partner remains very supportive of ONEOK Partners, not only because it's a significant contributor to ONEOK's cash flow but also because we continue to believe, it is a very attractive long-term investment. Finally, I would like to take this opportunity to welcome Geoff Sands to the ONEOK team. Geoff's appointment as Vice President, Environmental Safety and Health reflects our commitment to our employees and communities in further improving our environmental safety and health program and performance. Geoff has been on the job for almost a month, and his leadership is already making a difference. I'd also like to thank our employees for their commitment and their contributions which are enabling us to create value for our customers and investors by completing the remaining growth projects and indentifying new ones, growing volumes, satisfying customers, managing risk and reducing expenses. My thanks to all of them for the contributions. At this time, we are happy to try to answer your questions.

(Operator Instructions). Our first question comes from Michael Blum of Wachovia. Your line is open sir.

Couple of quick questions, one, Jim I appreciated your commentary on the petrochem market. I guess I was looking for the conclusion meaning, what does that mean for your NGL pipeline volumes for the rest of '09? How do you see that being impacted?

Michael, I had a comment in there, maybe I wasn't real clear. We have actually seen our volumes in our sales to petrochemical company's increase, partially because some have come back online but also the customers we were selling to were actually selling them a larger portion of their supply right now. So for our system and our pipelines, we're fairly positive on that flow of ethane to those petrochemical companies.

The other thing I would add is that Terry and his people have been very successful in building direct sales to the petrochems which has also contributed to our increased volumes. So, perhaps the main balance hasn't changed but our share of the market has. Anything you'd like to add Terry?

Yeah. Mike, this is Terry. If you look at [peak doc] numbers, and you compare March actuals to February, that's up actually 20% which is kind of surprising when you consider the economic environment that we're in. As we've communicated with the petchems directly, we continue to get strong orders and so the view from the petchems going forward and on into the summer is their continued strong orders. You're looking at 765,000 barrels a day of ethane feed being consumed in April which is really surprising considering the environment. So the economic fundamentals are week, the actual performance of the petchems has being relatively strong which has been surprising.

You don't see your projection of perhaps lower demand for propane? I guess that will not offset the increasing demand for ethane, net-net it will be up.

Yes, net-net it will be up.

The second question was just on the hedges for 2010. I just wanted to clarify, are those new hedges you've put in place since your last report?

Short answer is yes.

So then that backs the question. It's a small number but on the NGL hedges, that would appear to be at above market price based on the strips. So I'm just curious, what's going on there? Did you pay upfront something to get those or am I missing something?

Again, using John's word the shorter answer is no. We don't pay anything upfront, we just have a group that watches those prices and it's in market daily. And as you see crude oil spike at different points in times, sometimes those prices run up with it and we're able to take advantage of those moves in the market.

What's the plan in terms of increasing your hedges for 2010?

I think we are going to continue to be opportunistic as we have been in this year for 2009, as well as 2010. So we'll stay after that which has worked well for us.

Our next question comes from [Helen Riel] from Barclays Capital.

Going back to the hedge table, if I do the calculation it seems like your 2010 equity NGL volume appears to be down about 13% versus 2009 and condensate volume up 5%. So I'm just wondering what's driving that. Is it if you have lower volume projection for 2010 versus 2009, then that could drive down your NGL equity volume assumption? Just wanted to understand the condensate side as well, if you could explain that?

I guess I haven't done that calculation. I know we are projecting that type of scenario. At this moment I don't have an answer.

So you are not projecting your equity NGL volumes to be down 2010 versus 2009?

No.

I was just playing with the numbers and coming with that conclusion.

We'd be happy too if you would point us to the numbers. We'd happy just try to explain that a bit further and with more clarity.

We could take it offline, but I was just closing up your NGL volume hedged versus what percentage volume that is and what's the gross number implies. Basically, I'm getting 8,600 of barrels per day on NGL in 2009, and getting 7,500 in 2010, so that implies a bit of drop there.

We got it. We have a guest. We'll be glad to take it offline and provide more detail to you or anyone else that we have confused. Jim you want to?

Helen, what I think it maybe is, we hedged specific products and sometimes not all the products because the market isn't there. So, it could be just mathematically how we're, as what portion of what product is hedged for next year, and its making it look like there's a volume drop.

For example, we have more barrels of ethane in our barrel, our composite barrel and that may be part of it.

You mentioned that your volume guidance for 2009 was 2% down. Is that still a good assumption that you're using, given there is some announcement of Chesapeake's volume shut in and overall Mid-Continent seen some drilling activity slow down.

Yes. We still think that's a good number. Our first quarter, our volumes as we talked about the process volumes were actually up and our gathered volumes were down a little bit but they were our lower margin gallons. We still have a backlog of well connect. The comment I made about wells being completed are coming in at higher rates. It appears producers are high-grading the wells they drilling. In some of our areas, we are getting feedback from producers that they are restarting drilling efforts. So with all of those factors we think our 2% projection is still pretty much in the ballpark as we get through the end of this year, but time will tell.

Finally, just to clarify, there was no ethane rejection throughout the quarter and up to now?

If I remember correctly, there was a little bit in January. Early January, but that’s all we saw in the areas where we operate.

Thank you. Our next question comes from Carl Kirst of BMO Capital.

Just a couple of OKE questions if I could, on the LDC side. Curtis, can you say, I know we're potentially looking at the pension tracker. I mean, if that would happen, what have we seen perhaps in the first quarter as far as incremental pension expense. Just trying to get a sense of what that could mean magnitude-wise?

If we were to have to that for all of this year, it would be about $2 million in Kansas.

With respect to the Oklahoma, when you guys are looking at potentially filing in June, this is basically just a rate structure change, correct? So it’s not necessarily changing, you're not necessarily asking for incremental revenue, it's just more having the ability to actually have the sharing. Is that correct?

I guess the way I would characterize that is that basically correct. Because we'll be using a test year, there's probably potentially some small slight improvement in the margin, but it’s not very large and I mean that’s on purpose because of all these trackers we've put in place and weather normalization and capital recovery. Our goal is to avoid large rate cases. So, I wouldn’t expect much of a margin increase off the bat in this year, but in 2010 there could be some uplift.

That’s helpful. While we are looking at changing the regulatory structure, is it potentially something to ask for as far as decoupled rates, or is that something that would just be clouding the sharing mechanism at this point?

At this point, we think it would cloud it, but we'll see how it develops, because this is designed, like I said, to create a band. So as we invest more capital, but yet are efficient in our cost structure, we can keep earnings in a band and avoid large rate cases and things like that.

Fair enough. Lastly on the energy services side, and understanding there is a lot of moving parts here and not to parse the words too much. I think Jim, your comments were perhaps now over 80% of the gross margin was locked down. If I recall correctly, did you guys, say for instance, when you issued the 115 million of guidance, did that include a financial trading aspect to it?

No, it didn't.

Okay. So between the financial trading benefit that we got in the first quarter or maybe just generally thinking that things came in a little bit better in the first quarter, it is something where the overall confidence in the $115 million, certainly over the last three months has done nothing but go up. Correct?

That's correct. The $115 million guidance that we have this high level of confidence in excludes any financial trading.

I just wanted to make sure I wasn't missing anything.

I'm glad you raised that issue because that's the point.

Our next question comes from Rebecca Followill of Tudor, Pickering, Holt. Your line is open.

Question for you Jim on the LDC and I apologize I came in late just as you were talking about the rate case. So, you're looking at filing a rate case in Oklahoma with a 75 basis point band on either side, so if you under earn you can recover. Can you walk us through what you're earning right now? And if you were to earn at the bottom-end of the theoretical band, what the delta would mean to you? Do you understand what I'm asking?

I understand what you're asking and I'm thinking of this. I know that for all three LDC's we're under earning about $15 million compared to our lab returns. And in Oklahoma the real answer is I haven't seen, I know what you're asking but I haven't seen that calculation. I think I don't know.

I'll just follow-up with you guys afterwards if you would mind trying to figure out how much of that is due to Oklahoma? That would be great.

Okay.

That's all I need, thank you.

Our next question comes from Ross Payne of Wachovia.

My questions have been answered, but very nice quarter, thanks.

Thank you.

(Operator Instructions). Our next question is from [Lewis Shammy] of Zimmer Lucas.

Just had a quick question on your gas and storage, so 45 Bcf is in storage that's attributable to energy services and then you have another portion, may be like half of that attributable to the LDCs?

That's correct. There is about 10 Bcf that the utilities have in the storage.

Okay. And 45 is energy services?

Yes.

Okay. In terms of the [TMP] side, what's the contract breakout for this past quarter in terms of keep-whole, POP fee?

Meaning, in terms of margin or volume?

In terms of volume.

It's just about the first quarter, it's about 30% POP, 5% keep-whole, and 65% fee.

At the moment I have no other questions in queue. (Operator Instructions). I'm showing no further questions from the phone lines.

Okay. Thank you. This concludes the ONEOK and ONEOK Partners conference call. As a reminder our quite period for the second quarter will start when we close our books in early July, and will extend until our earnings are released. We'll provide a reporting date and conference call information for the second quarter at a later date. Christy Williamson and I will be available throughout the day for follow-up questions. Thanks for joining us and have a good day.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. And you may now disconnect.