BP Midstream Partners 4Q and full year 2018 Results

Transcription

1 BP Midstream Partners 4Q and full year 2018 Results February 28, 2019 BP MAD DOG 4Q & FULL YEAR 2018 RESULTS Offshore deepwater Gulf of Mexico 1

2 Cautionary statement FORWARDLOOKING STATEMENTS This presentation includes various forward looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, regarding BP Midstream Partners LP s ( BP Midstream, we, us or our ) strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forwardlooking statements. These statements often include the words could, believe, anticipate, intend, estimate, expect, project and similar expressions are intended to identify forwardlooking statements, although not all forwardlooking statements contain such identifying words. These forwardlooking statements are based on BP Midstream's current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. In accordance with safe harbor provisions of the Private Securities Litigation Reform Act of 1995, these statements are accompanied by cautionary language identifying important factors, though not necessarily all such factors, which could cause future outcomes to differ materially from those set forth in forwardlooking statements. In particular, expressed or implied statements concerning future actions, future drop downs, volumes, capital requirements, conditions or events, future impact of prior acquisitions, future operating results or the ability to generate sales, the potential exposure of BP Midstream to market risks, and statements relating to expected Adjusted EBITDA, future growth, income, cash flow and the amount of distributions are forwardlooking statements. Forwardlooking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Future actions, conditions or events and future results of operations may differ materially from those expressed in these forwardlooking statements. Forwardlooking statements speak only as of the date of this presentation, and we disclaim any obligation to update such statements for any reason, except as required by law. All forwardlooking statements contained in this presentation are expressly qualified in their entirety by the cautionary statements contained or referred to in this paragraph. Many of the factors that will determine these results are beyond our ability to control or predict. These factors include the risk factors described in BP Midstream s annual report for the year ended December 31, 2018 as filed with the Securities and Exchange Commission (the SEC ) on February 28, 2019, as updated by our subsequent filings with the SEC. If any of those risks occur, it could cause our actual results to differ materially from those contained in any forwardlooking statement. Because of these risks and uncertainties, you should not place undue reliance on any forwardlooking statement. This presentation has been prepared by BP Midstream and includes market data and other statistical information from sources believed by BP Midstream to be reliable, including independent industry publications, government publications or other published independent sources. Some data are also based on BP Midstream s good faith estimates, which are derived from its review of internal sources as well as the independent sources described above. Although BP Midstream believes these sources are reliable, it has not independently verified the information and cannot guarantee its accuracy and completeness. NONGAAP FINANCIAL MEASURES BP Midstream has included the nongaap financial measures Adjusted EBITDA and cash available for distribution based on information in its financial statements. Adjusted EBITDA and cash available for distribution are supplemental financial measures that management and external users of BP Midstream s financial statements, such as industry analysts, investors, lenders and rating agencies may use, to assess: (i) BP Midstream s operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or, in the case of Adjusted EBITDA, financing methods; (ii) the ability of BP Midstream s business to generate sufficient cash to support its decision to make distributions to its unitholders; (iii) BP Midstream s ability to incur and service debt and fund capital expenditures; and (iv) the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities. BP Midstream believes that the presentation of Adjusted EBITDA and cash available for distribution provides useful information to management and investors in assessing its financial condition and results of operations. The GAAP measures most directly comparable to Adjusted EBITDA and cash available for distribution are net income and net cash provided by operating activities. Adjusted EBITDA and cash available for distribution should not be considered as an alternative to GAAP net income or net cash provided by operating activities, respectively. Adjusted EBITDA and cash available for distribution have important limitations as analytical tools because they exclude some but not all items that affect net income and net cash provided by operating activities. Adjusted EBITDA or cash available for distribution should not be considered in isolation or as a substitute for analysis of results as reported under GAAP. Additionally, because Adjusted EBITDA and cash available for distribution may be defined differently by other companies in the industry, BP Midstream s definition of Adjusted EBITDA and cash available for distribution may not be comparable to similarly titled measures of other companies, thereby diminishing its utility. For reconciliations of Adjusted EBITDA and cash available for distribution to their most directly comparable GAAPmeasures, see Supplementary Information. The Partnership is unable to provide financial guidance for projected net income or net cash provided by operating activities without unreasonable effort, and, therefore, is unable to provide a reconciliation of its Adjusted EBITDA and cash available for distributions projections to net income or net cashprovided by operating activities, the most comparable financial measures calculated in accordance with GAAP. The Partnership has not included a reconciliation of projected cash available for distribution to the nearest GAAP financial measure for 2018 because it cannot do so without unreasonable effort and any attempt to do so would be inherently imprecise. 4Q & FULL YEAR 2018 RESULTS 2

3 Agenda 2018 Highlights Results Operational results Financial results Financial frame Organic growth Whiting refinery Gulf of Mexico deepwater Asset dropdowns Q&A 4Q & FULL YEAR 2018 RESULTS 3

4 2018 Highlights BP Midstream Partners 4Q and full year 2018 Results 4Q & FULL YEAR 2018 RESULTS BP WHITING REFINERY 4

5 2018 Highlights 1 Built track record of operational and financial delivery; exceeded IPO forecasts 2 Successfully completed first asset acquisition 3 Delivered unitholders midteens distribution growth 4 Enhanced corporate governance with appointment of independent directors BP ATLANTIS Offshore deepwater Gulf of Mexico 5 Positioned for future delivery 4Q & FULL YEAR 2018 RESULTS 5

6 Established solid track record 2018 Adjusted EBITDA exceeded IPO forecast Adjusted EBITDA attributable to the Partnership ($ million) 1, Cash Available For Distribution exceeded IPO forecast Cash available for distribution to the Partnership ($ million) 1,2 Midteens distribution growth delivered 3 Annualized quarterly distribution ($ per common unit) $ 149 $ 144 $ 1.17 $ 1.21 $ 107 $ 103 $ 1.05 $ 1.07 $ 1.09 $ 69 $ 69 $ 35 $ 37 1Q18 2Q18 3Q18 4Q18 IPO forecast 1Q18 2Q18 3Q18 4Q18 IPO forecast 4Q17 1Q18 2Q18 3Q18 4Q18 MQD 1) 4Q18 includes contribution from assets acquired as part of the 2018 asset dropdown. IPO forecast does not include this contribution. 2) Cumulative amounts. 3) As measured by comparing the quarterly distribution declared in relation to 4Q17 (not prorated) and the quarterly distribution declared in relation to 4Q18. 4Q & FULL YEAR 2018 RESULTS 6

7 Results BP Midstream Partners 4Q and full year 2018 Results 4Q & FULL YEAR 2018 RESULTS BP WHITING REFINERY 7

8 Operational results Pipeline Gross Throughput 1,2 mboed Pipeline Average Revenue per Barrel 1,2,3 $ per boe BP2 River rouge Diamondback Mars Ursa Caesar 2,000 Cleopatra Proteus Endymion Q17 3Q18 4Q18 1, , Q17 3Q18 4Q18 1) Cleopatra gas volumes are converted to mboed by dividing mmscfd by ) 4Q17 based on proforma asset portfolio. 3) Based on reported revenue from transportation and allowance oil divided by delivered barrels over the same time period. Assets Ventures 4Q & FULL YEAR 2018 RESULTS Total Wholly Owned Mars Mardi Gras Joint Ursa

9 Financial results 1 ($ million) 4Q17 2 3Q18 4Q Revenue 4 Costs and expenses Operating income Income from equity method investments Other income Interest expense, net Income tax expense Net income Less: Predecessor net income prior to the IPO on October 30, 2017 Net income subsequent to the IPO Less: Net income attributable to noncontrolling interests Net income attributable to the Partnership Adjusted EBITDA attributable to the Partnership 5 Cash available for distribution attributable to the Partnership ) Rounding convention has been modified to ensure key line items sum correctly. 4) 4Q18 Revenue includes $4.1 million of deficiency revenue recognized under the throughput and 2) Predecessor financials October 1 29, 2017; BPMP financials October 30 December 31, deficiency agreements. 3) Predecessor financials January 1 October 29, 2017; BPMP financials October 30 December 31, ) 4Q17 and 2017 shown subsequent to the IPO. 4Q & FULL YEAR 2018 RESULTS

10 Financial frame Pipelines Gross throughput 1 Average revenue per barrel 1,2 Terminals Distribution Financing costs Maintenance 6 Total Capex (included in Total) Cash available for distribution Existing portfolio ~1.7mboed Broadly flat with $56m 3 month LIBOR % 5 ~$15m ~$12m $160170m Through Organic and inorganic Sufficient to support 56% organic distribution growth Consistent with 2019 Consistent with 2019 Sufficient for midteens per unit annual distribution growth Debt Gross Debt to Adjusted EBITDA ratio not to exceed 3.5 times; target credit metrics consistent with investment grade 1) Pipeline gross throughput and average revenue/bbl for Mars, Mardi Gras and Ursa joint ventures are presented on a full year, 100% basis. 2) Cleopatra gas volumes are converted to mboed by dividing mmscf/d by ) Portfolio basis. Average revenue/bbl for 2018: Wholly owned: $0.73; Mars $1.25; Mardi Gras JV: $ ) Subject to change with future dropdown activity and capital structure adjustments. 5) Calculated on balances outstanding under the Partnership s revolving credit facility. Excludes customary fees, such as a commitment fee of 0.10% and a utilization fee of 0.20%. 6) Total includes maintenance capital expenditure and revex for wholly owned assets and maintenance capital incurred by joint ventures. Capex is a subset of the Total and includes maintenance capital expenditure for wholly owned assets only. 4Q & FULL YEAR 2018 RESULTS 10

11 Organic growth BP Midstream Partners 4Q and full year 2018 Results 4Q & FULL YEAR 2018 RESULTS BP WHITING REFINERY 11

12 Advantaged feedstock growth at Whiting refinery 1 Largest refinery in US Midwest and in BP s global refining portfolio 2 Geographically advantaged to access Canadian crudes and serve the US Midwest market 3 Refinery configuration provides flexibility to optimize feedstock mix 4 Plans to expand heavy crude processing capacity towards 350,000 barrels per day by 2020; minimal capital spend by the Partnership 5 Pipeline throughput MVCs 1 through 2020 BP WHITING REFINERY 1) Minimum volume commitments. 4Q & FULL YEAR 2018 RESULTS 12

13 Achieving growth in Gulf of Mexico Since our IPO in 2017 Select Gulf of Mexico projects 1 FID has been taken on several new projects BP Atlantis Phase 3 Shell Vito New projects have started up in 2018 BP Thunder Horse North West Expansion Shell Kaikias Chevron Big Foot Hess Stampede Several new discoveries & resource extensions have been announced Power Nap Norphlet Rydberg, Ballymore, Fort Sumter, Dover 1 bn boe around Thunder Horse mn boe around Atlantis 2 1) Not intended to be an exhausted list of future growth projects 2) Hydrocarbons initially in place. Project Operator Production Capacity Estimated Startup Mars Pipeline Vito Shell Kaikias Shell Power Nap Shell 35 TBD Amberjack Deliveries to Mars Pipeline Jack St. Malo Chevron Big Foot Chevron Stampede Hess Proteus / Endymion Appomattox Shell Norphlet Various ~65 TBD Caesar & Cleopatra Heidelberg Anadarko Mad Dog II BP Atlantis III BP Atlantis options BP TBD TBD Mad Dog options BP TBD TBD Thunder Horse options BP TBD TBD 4Q & FULL YEAR 2018 RESULTS 13

14 Gulf of Mexico deepwater 1 High margin, competitive business; resilience to commodity prices 2 Significant near and long term growth potential 3 New technologies and ways of working unlocking additional resources BP THUNDER HORSE Offshore deepwater Gulf of Mexico 4 Uniquely positioned to capture future growth 4Q & FULL YEAR 2018 RESULTS 14

15 Portfolio positioned to capture next wave of growth BPMP Pipelines Mars oil pipeline Proteus oil pipeline Endymion oil pipeline Louisiana Offshore Oil Port (LOOP) Ursa oil pipeline Cleopatra gas pipeline Fourchon Caesar oil pipeline BPoperated platform WD143 SP89E Mississippi Canyon Desoto Canyon Appomattox Norphlet Nonoperated or third party platform Pipeline hub platform Catchment areas Connecting third party pipeline Future connecting third party pipelines Future growth potential Future project not yet sanctioned Future project sanctioned SS332 Olympus Mars A Ursa Thunder Horse 4Q & FULL YEAR 2018 RESULTS 15 Thunder Hawk Big Bend field Dantzler field Green Canyon Shenzi Kaikias Thunder Horse South Holstein Neptune Expansion 2 Vito Thunder Horse Shallow Heidelberg Power Nap Stampede Mad Atlantis Walker Ridge Dog Atlantis Phase 3 Big Foot Atlantis Phase 4&5 Atlantis Water Injection Expansion Mad Dog Phase 2 Mag Dog North West Jack/St Malo Water Injection Mad Dog South West Expansion Map not to scale; for illustrative purposes only

16 Asset dropdowns BP Midstream Partners 4Q and full year 2018 Results 4Q & FULL YEAR 2018 RESULTS BP WHITING REFINERY 16

17 Asset dropdowns Deliver unit holders consistent, toptier distribution growth Organic Growth 5 6% per annum per unit + Inorganic Growth Pipeline throughput increases (i.e. new production from sanctioned projects in GoM 2 ) Business development opportunities 2018 dropdown provides embedded organic distribution growth of midteens through 2019 Minimal or no capital ROFO 1 assets Bottom two layers of dropdown inventory pyramid (i.e. Downstream pipelines & Midstream assets in US fuels & trading business) Assets BP may acquire Strong Sponsor Strategic, highly integrated assets to BP Preinvestment by BP Capital recycling alignment Midteens per unit annual distribution growth through ) Right of first offer. 2) Gulf of Mexico offshore. 4Q & FULL YEAR 2018 RESULTS 17

18 Q&A Rip Zinsmeister Craig Coburn Brian Sullivan Chief Executive Officer Chief Financial Officer Vice President, Investor Relations 4Q & FULL YEAR 2018 RESULTS 18

19 Supplementary information BP Midstream Partners 4Q and full year 2018 Results 4Q & FULL YEAR 2018 RESULTS 19

20 Reconciliation of Adjusted EBITDA and CAFD to Net Income 1 ($ million) 4Q17 2 3Q18 4Q Net income Add: Depreciation Income tax expense Interest expense, net Cash distributions received from equity method investments Less: Income from equity method investments Adjusted EBITDA Less: Distributions of prorated fourth quarter joint venture dividends to prior owners Adjusted EBITDA attributable to Predecessor prior to IPO on October 30, 2017 Adjusted EBITDA attributable to noncontrolling interests Adjusted EBITDA attributable to the Partnership 5 1) Rounding convention has been modified to ensure key line items sum correctly. 4) These amounts represent 100% of the cash distributions from Mars, Ursa, KM Phoenix and Mardi Gras 2) Predecessor financials October 1 29, 2017; BPMP financials October 30 December 31, joint ventures prior to distribution to noncontrolling interests. 3) Predecessor financials January 1 October 29, 2017; BPMP financials October 30 December 31, ) 4Q17 and 2017 shown subsequent to the IPO. 4Q & FULL YEAR 2018 RESULTS

21 Reconciliation of Adjusted EBITDA and CAFD to Net Income 1 Continues from previous slide ($ million) 4Q17 2 3Q18 4Q Adjusted EBITDA attributable to the Partnership Add: Net adjustments from volume deficiency agreements (0.2) (2.7) 1.8 (0.2) Less: Net interest paid/(received) (0.1) (0.1) (0.1) Maintenance capital expenditures Cash reserves Cash available for distribution attributable to the Partnership ) Rounding convention has been modified to ensure key line items sum correctly. 2) 4Q17 and 2017 shown subsequent to the IPO. 3) Acquisition financing expenses. 4Q & FULL YEAR 2018 RESULTS 21

22 Reconciliation of Adjusted EBITDA and CAFD to Net Cash Provided by Operating Activities 1 ($ million) Net cash provided by operating activities Add: Income tax expense Interest expense, net Distributions in excess of earnings from equity method investments Less: Noncash adjustments Change in operating assets and liabilities Adjusted EBITDA Less: Distributions of prorated fourth quarter joint venture dividends to prior owners Adjusted EBITDA attributable to Predecessor prior to the IPO on October 30, 2017 Adjusted EBITDA attributable to noncontrolling interests Adjusted EBITDA attributable to the Partnership 4 1) Rounding convention has been modified to ensure key line items sum correctly. 2) Predecessor financials October 1 29, 2017; BPMP financials October 30 December 31, ) Predecessor financials January 1 October 29, 2017; BPMP financials October 30 December 31, Q & FULL YEAR 2018 RESULTS 22 4) 4Q17 and 2017 shown subsequent to the IPO. 4Q (3.3) Q Q (0.4) (8.0)

23 Reconciliation of Adjusted EBITDA and CAFD to Net Cash Provided by Operating Activities 1 Continues from previous slide ($ million) 4Q17 2 3Q18 4Q Adjusted EBITDA attributable to the Partnership Add: Net adjustments from volume deficiency agreements (0.2) (2.7) 1.8 (0.2) Less: Net interest paid/(received) (0.1) (0.1) Maintenance capital expenditures Cash reserves Cash available for distribution attributable to the Partnership (0.1) ) Rounding convention has been modified to ensure key line items sum correctly. 2) 4Q17 and 2017 shown subsequent to the IPO. 3) Acquisition financing expenses. 4Q & FULL YEAR 2018 RESULTS 23

24 Gross Debt to annualized Adjusted EBITDA attributable to the Partnership 1 ($ million) 4Q17 3Q18 4Q18 Gross debt Annualized Adjusted EBITDA attributable to the Partnership 2 Gross Debt to annualized Adjusted EBITDA attributable to the partnership ratio 2 N/A N/A ) Rounding convention has been modified to ensure key line items sum correctly. 2) Calculated by multiplying Adjusted EBITDA for the quarter by 4. 4Q & FULL YEAR 2018 RESULTS 24

25 BPMP asset portfolio Entity/ Asset Product Type BPMP Ownership Interest BP USPL Retained Ownership Interest Pipeline Length (miles) Mainline Capacity (kbpd) (1) Contract Structure % of Estimated 2019 CAFD (2) BP2 Crude 100.0% FERC tariff (3) Onshore Offshore River Rouge Diamondback KM Phoenix Mars Ursa Mardi Gras Caesar (5) Cleopatra Proteus Refined Products 100.0% % FERC tariff Diluent 100.0% % FERC tariff/ Long term contract 4550% Refined 25% % NA NA Terminalling < 5% Crude 28.5% % Crude 22.69% % (6) 65.0% 35.0% FERC and state tariffs/ Lease dedication; Portion with guaranteed return FERC and state tariffs/ Lease dedication Crude 36.4% 19.6% Lease dedication Natural Gas 34.5% 18.5% Lease dedication Crude 42.3% 22.8% Lease dedication (4) (3) 4550% Endymion Notes continue on next slide Crude 42.3% 22.8% Lease dedication 4Q & FULL YEAR 2018 RESULTS 25

26 BPMP asset portfolio Continues from previous slide (1) The approximate capacity information presented is in thousand barrels per day ( kbpd ) with the exception of the approximate capacity related to Cleopatra gas gathering system, which is presented in million standard cubic feet per day ( MMscf/d ). Pipeline capacities are based on current operations and vary dependingon the specific productsbeing transported and delivery point, among other factors. (2) Total cash available for distribution used in calculating percentages shown does not give effect to incremental general and administrative expense related to being a publicly traded partnership and other expenses to be incurred at the partnership level, including certain insurance expenses related to Mars and each of the Mardi Gras Joint Ventures and the initial $13.3 million annual administrative fee paid to BP Pipelines for reimbursement to BP Pipelines and its affiliates for the provision of certain general and administrative services to us under the omnibus agreement. Please read Certain Relationships and Related Party Transactions Agreements Governing the Formation Transactions Omnibus Agreement. Please read Cash Distribution Policy and Restrictions on Distributions for important information as to the assumptions we have made for our financial forecast and for a reconciliation of cash available for distribution to net income for Mars and each of the Mardi Gras Joint Ventures. Our forecast is a forwardlooking statement and should be read together with our historical financial statements and accompanying notes included elsewhere in this prospectus, our unaudited pro forma condensed combined financial statements and accompanying notes included elsewhere in this prospectus and Management s Discussion and Analysis of Financial Condition and Results of Operations. (3) BP has historically been the sole shipper on BP2 and River Rouge. (4) Represents Mars mainline capacity of the approximately 54 mile segment from the connections to Ursa, Medusa and Olympus pipelines at the West Delta 143 platform complex to Fourchon, Louisiana where Mars has a connection with Amberjack pipeline for ultimate delivery to Clovelly, Louisiana. The capacity of the Mars pipeline system ranges from 100kbpdto 600kbpddependingon the pipeline segment and the type of crude oil transported. (5) Our ownership interest and BP Pipelines and its affiliates retained ownership interest in each of Caesar, Cleopatra, Proteus and Endymion represents 20.0% and 80.0%, respectively, of the 56.0%, 53.0%, 65.0% and 65.0% ownership interests in such Mardi Gras Joint Ventures, respectively, held by Mardi Gras. (6) Our 20.0% interest in Mardi Gras will bea managing member interest that providesus withthe right to votebp Pipelines and its affiliates retained ownership interest in the Mardi Gras Joint Ventures. 4Q & FULL YEAR 2018 RESULTS 26

27 Dropdown inventory pyramid (e.g. 35% of Mardi Gras) 4Q & FULL YEAR 2018 RESULTS 27