ONEOK (NYSE:OKE) recently reported strong second-quarter results fueled by surging volumes on most of its systems thanks in part to higher oil prices. That strong showing, when combined with its equally impressive first-quarter results and optimistic outlook, has the company on track to grow earnings and cash flow at an even faster pace than it initially expected. However, as good as 2018 has been, it's even more excited about what lies ahead. That was evident from the comments of management on the accompanying conference call, where they provided a glimpse of what they're working on to drive future growth.

1. We're making excellent progress on our current slate of expansions

ONEOK has secured more than $4 billion of expansion projects over the past 18 months to grow cash flow and its dividend in the coming years. COO Kevin Burdick provided a quick update on its progress with these projects during the call. As he walked through each one, there were two recurring themes. First, all were on track to enter service on schedule. That's noteworthy given the delays other pipeline companies have had finishing projects in recent years.

Pipelines laid out for construction at sunset.

Image source: Getty Images.

The other thing Burdick mentioned was that the company secured additional volume contracts for many of these projects, which increases the visibility of future cash flows as well as its returns. For example, when the company announced the development of its Elk Creek pipeline, a 900-mile line that will move natural gas liquids (NGLs) out of the Rockies, it had secured contracts to transport 100,000 barrels per day (BPD), which was less than half of its 240,000 BPD capacity. Those agreements were still enough to make this a very lucrative investment since ONEOK anticipated it could generate an adjusted EBITDA multiple of four to six times its $1.4 billion investment or between $233 million to $350 million in annual earnings. However, Burdick stated on the call that it had "contracted an additional 20,000 barrels per day (BPD) on Elk Creek since our last call bringing the total contracted volume to approximately 140,000 BPD" as well as contracting additional volumes for its Arbuckle Pipeline. Those new agreements will enhance what are already excellent investments.

2. We took a key step toward our Permian Basin growth strategy

Most of ONEOK's assets and expansion projects run through the central part of the country, serving the Bakken shale, Powder River Basin, and STACK shale play. While those regions are all growing, none are expanding quite as fast as the Permian Basin, which is why the company is looking for ways to bolster its position in that region. As part of that effort, CEO Terry Spencer noted that the company: "completed the acquisition of Martin Midstream's (NASDAQ:MMLP) 20% interest in the West Texas LPG Pipeline. With that acquisition, ONEOK became the sole owner of West Texas LPG, a strategic step in our broader Permian Basin strategy and further positioning us for expansion opportunities, some of which are in the late stages of negotiations."

This transaction was a win-win for both companies. The cash-strapped Martin Midstream received money that it used to pay down debt, giving it some more breathing room. Meanwhile, ONEOK now has full control over an asset that it can expand without needing to get approval from Martin Midstream. As Spencer notes, the company already has opportunities lined up, which will enable it to increase its footprint in this fast-growing region.

A stack of pipelines with a blue sky in the background.

Image source: Getty Images.

3. We see two long-term growth drivers

Spencer laid out his growth vision for the company by stating that "our long-term strategy remains focused on expanding our integrated assets through capital growth projects and strategic acquisitions that fit within our footprint and provide sustainable long-term fee-based earnings."

On the organic side, the company's focus is on the Permian, as Spencer already pointed out. However, in addition to that, COO Kevin Burdick noted that the company "continue[s] to look at additional plant and compression expansion opportunities in the Bakken," where it currently has one new processing plant under construction that should start up by the end of next year.

Meanwhile, on the mergers and acquisition side, Spencer stated that the deal with Martin Midstream was "a perfect example of what we're really interested in." He went on to say:

As we think about acquisitions from a more strategic standpoint... broadly speaking in terms of the types of assets, again that we're interested in, certainly downstream assets, particularly as it relates to terminalling, storage, transportation of liquid products, they don't have to be NGLs, it could be crude oil, it could be refined products, it could be petrochemical products. That infrastructure as well as long-haul crude oil transportation further upstream could certainly make a lot of sense and we've been very vocal about that over the past couple of years.

One thing that's worth noting about Spencer's comments is that the company remains interested in diversifying into oil-related products. Other than acquiring these assets, Burdick stated on the call that the company has thought about the potential of repurposing existing pipelines for oil. That's one of the things it's exploring in the Permian, which desperately needs new crude oil pipeline capacity.

A full tank of gas

The main theme on ONEOK's second-quarter conference call is that the company has ample growth coming down the pipeline. Not only is it making excellent progress on the $4 billion of expansions it has underway, but it has more projects in development in places like the Permian. In addition, it's on the lookout for acquisitions that would enhance its portfolio. These factors make it increasingly likely that not only will ONEOK be able to increase its 4.8% yielding dividend at a 9% to 11% annual rate through 2021, but that it should be able to extend that fast-paced growth well into the future.

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.