Crestwood Midstream Partners LP Arrow Acquisition Overview October 10, 2013

Transcription

1 Crestwood Midstream Partners LP Arrow Acquisition Overview October 10, 2013

2 Forward Looking Statements The statements in this communication regarding future events, occurrences, circumstances, activities, performance, outcomes and results are forward-looking statements. Although these statements reflect the current views, assumptions and expectations of Crestwood Midstream and Crestwood Equity management, the matters addressed herein are subject to numerous risks and uncertainties which could cause actual activities, performance, outcomes and results to differ materially from those indicated. Such forward-looking statements include, but are not limited to, statements about the future financial and operating results, objectives, expectations and intentions and other statements that are not historical facts. Factors that could result in such differences or otherwise materially affect Crestwood Midstream s or Crestwood Equity s financial condition, results of operations and cash flows include, without limitation, the risks that the Crestwood Midstream and Crestwood Equity businesses will not be integrated successfully or may take longer than anticipated; the possibility that expected synergies will not be realized, or will not be realized within the expected timeframe; fluctuations in oil, natural gas and NGL prices; the extent and success of drilling efforts, as well as the extent and quality of natural gas volumes produced within proximity of Crestwood Midstream or Crestwood Equity assets; failure or delays by customers in achieving expected production in their natural gas projects; competitive conditions in the industry and their impact on the ability of Crestwood Midstream or Crestwood Equity to connect natural gas supplies to Crestwood Midstream or Crestwood Equity gathering and processing assets or systems; actions or inactions taken or non-performance by third parties, including suppliers, contractors, operators, processors, transporters and customers; the ability of Crestwood Midstream or Crestwood Equity to consummate acquisitions, successfully integrate the acquired businesses, realize any cost savings and other synergies from any acquisition; changes in the availability and cost of capital; operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond Crestwood Midstream or Crestwood Equity s control; timely receipt of necessary government approvals and permits, the ability of Crestwood Midstream or Crestwood Equity to control the costs of construction, including costs of materials, labor and right-of-way and other factors that may impact either company s ability to complete projects within budget and on schedule; the effects of existing and future laws and governmental regulations, including environmental and climate change requirements; the effects of existing and future litigation; and risks related to the substantial indebtedness of either company, as well as other factors disclosed in Crestwood Midstream and Crestwood Equity s filings with the U.S. Securities and Exchange Commission. You should read filings made by Crestwood Midstream and Crestwood Equity with the U.S. Securities and Exchange Commission, including Annual Reports on Form 10-K for the year ended December 31, 2012 and September 30, 2012, respectively, and the most recent Quarterly Reports and Current Reports, for a more extensive list of factors that could affect results. Crestwood Midstream and Crestwood Equity do not assume any obligation to update these forward-looking statements. 2

3 Arrow Midstream Opportunity Overview Crestwood Midstream Partners Expands Bakken Shale Footprint with $750 Million Midstream Acquisition in Core of the Core of the Bakken play Attractive acquisition valuation drives immediate accretion to Crestwood s estimated distributable cash flow per limited partner unit in 2014; committed financing in place to close the transaction Visible growth from substantial producer crude oil development and synergies with Crestwood s existing Bakken assets drives meaningful long-term accretion Highlights the immediate benefits of the merger of Crestwood and Inergy Midstream, which was completed on Monday, October 7, 2013 Natural extension of Crestwood s liquids-focused strategy positioning Crestwood among the largest full-service midstream players in the Bakken Shale Transaction is expected to close in 4Q 2013 This transaction represents the next strategic step in our continued expansion of Crestwood s full suite of midstream services across the value chain in the most prolific crude oil and liquids-rich shale basins in North America 3

4 Crestwood Strategic Objectives Pursue liquids-driven strategy around existing asset platform and geographic footprint to deliver promised growth objectives; success will be primarily driven by execution Execution & Optimization Integration & Synergies Future Growth & Accretion Financial Flexibility Primary focus on execution of organic growth in hand (Marcellus, Bakken, Niobrara) Delivering current projects on-time and onbudget drives greatest near-term accretion Aggressive commercial development and pursuit of consolidation and bolton opportunities around existing assets Capture $15 to $20 million of annual cost and operational synergies One partnership culture with centralized shared services platform drives economies of scale and standardization Cross-selling services to maximize fee / margin opportunities Leverage customer relationships to link supply with fundamental demand Growth balanced between M&A and organic development; balance of near-term accretion and longterm growth Leverage existing platform for bolt-on acquisitions and expansions with upstream and downstream synergies Capital allocation towards opportunities with greatest visibility to growth; Core of the Core unconventional plays Proactively manage the balance sheet to front-run capital requirements Focused on achieving investment grade credit ratings to lower cost of capital Dual equity currency to facilitate transformational growth Significant track record of raising capital to fund growth opportunities 4

5 Established Platform Where We Want to Be Natural Gas Asset Summary (1) 1.3 Bcf/d natural gas transportation capacity 2.1+ Bcf/d gathering capacity 1,260+ miles of pipeline ~80 Bcf natural gas storage capacity NGL & Crude Oil NGL logistics business including trucks, terminals, fractionation, NGL storage and marketing 8 natural gas processing plants; 600+ MMcf/d processing capacity 110,000 BPD NGL trucking volumes 300 miles of crude and water gathering pipelines; 125,000 Bbl/d crude oil gathering capacity; 40,000 Bbl/d water gathering capacity 160,000 BPD crude oil rail terminal Crude trucks, rail cars and marketing Existing platform in every premier shale play in North America creates significant opportunity for optimization, organic expansion, and strategic M&A Gathering and Processing Greenfield Development Projects Natural Gas Storage Facilities NGL Facilities Crude Oil Rail Facility (1) Includes announced expansion projects. High Growth Core Optimize Core Stable 5

6 Arrow Midstream: A Strategic Fit Highlights the immediate benefits of the merger of Crestwood and Inergy Midstream Liquids-focused strategy Expanding the value chain with fixed-fee service offerings Optimization opportunities around existing footprint Long-term financing for longterm assets Substantial footprint in the core of the core of the prolific Bakken Shale Strong crude oil fundamentals drive robust producer economics translating into accelerated development and significant expected production growth Expanded platform positions Crestwood among the largest full-service Bakken Shale midstream players Service offerings in the Bakken expanded to include crude oil gathering, natural gas gathering and water gathering along with truck, rail and pipeline transport Over 150,000 net acres dedicated to Arrow gathering systems from blue-chip producer customers under primarily fixed-fee contracts (~85% of Arrow gross margin from fixed-fee services) System located approximately 60 miles southeast of Crestwood s existing COLT Hub assets in Williams County, ND Direct connectivity through Hiland and Tesoro crude oil pipeline provides significant opportunity for synergies between COLT and Arrow Exemplifies Crestwood s long-term strategy of connecting supply with demand to increase fee opportunities and optimize customer service solutions Secured fully committed equity and debt financing required to close the transaction >50% of acquisition consideration to come from issuance of long-term equity capital; deleveraging to the Partnership with meaningful expected EBITDA growth in 2014 No financing contingencies to close the transaction 6

7 Arrow Midstream System Overview Arrow Midstream s assets located in some of the most active areas of the Bakken Shale Asset Description Located on the Fort Berthold Reservation in Dunn and McKenzie counties, North Dakota The Arrow system consists of approximately 460 miles of gathering pipeline: 150 miles of crude oil gathering lines (125,000 Bbl/d of throughput capacity by 2015) 160 miles of natural gas gathering lines (100 MMcf/d of throughput capacity by 2015) 150 miles of water gathering lines (40,000 Bbl/d of throughput capacity by 2015) 23-acre CDP that is a central aggregation point for all crude oil, natural gas and production water gathered: Centrally located near multiple product markets in the region providing significant customer optionality Adjacent to Tesoro s Johnson s Corner Injection Point with deliverability to Mandan Refinery, Ramberg to Enbridge or COLT Hub and Stampede Rail Stations Multiple pipeline interconnects, including connections with the Tesoro, Hiland, and BakkenLink pipelines Fully-automated truck loading facilities and crude oil storage capacity Counties of Operations: Approx. Current Throughput: Current Wells Connected: Asset Map Dunn and McKenzie Counties, ND 50,000 MBbls/d crude oil; 15 MMcf/d of gas; 8,500 MBbls/d of water ~235 wells 7

8 Bakken Shale a Core Area for Future Growth Rate of Return - % 1/1/2010 4/1/2010 7/1/ /1/2010 1/1/2011 4/1/2011 7/1/ /1/2011 1/1/2012 4/1/2012 7/1/ /1/2012 1/1/2013 4/1/2013 7/1/2013 Capital allocation to the core of the core of the most prolific liquids-rich and crude oil plays Over 150,000 acres dedicated to Arrow systems including more than 1,000 total potential drilling locations on the acreage Dramatic production growth resulting from increased drilling activity, improved completion techniques and highly prolific wells 8 rigs currently operating in the dedicated acreage; expecting 2 to 3 incremental rigs to be added by Q Original Oil in Place Expanding footprint in the core of the Bakken Attractive Producer Economics Drive (1) Continued Production Growth (Bbls/d) (2) 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% $20.00 $40.00 $60.00 $80.00 $ $ $ Oil Price ($/Bbl) ROR 900, , , , , , , , ,000 0 Crestwood s Bakken platform to service ~18% of current Bakken production (1) Source: Cawley, Gillespie & Associates. (2) Source: North Dakota Department of Mineral Resources 8

9 Liquids-Driven Value Chain Strategy Crestwood expands liquids-focused value chain services around Bakken Shale footprint for blue-chip producer customers Full Suite of Value Chain Services Expanding Bakken service offerings up the value chain to include crude oil gathering, natural gas gathering and water gathering Ability to source crude oil, natural gas and NGLs at the wellhead and gather to central liquidity point under primarily fixed-fee contracts Provide central aggregation point for gathered volumes and bulk sales connection to oil and natural gas end-use markets Full suite of take-away solutions in the region: Pipeline interconnects Rail terminal operations Truck loading capacity 1.2 MMBbl of crude oil storage 2014E Margin Mix by Commodity (1) NGL / Crude Oil Margin, 69% Dry Gas Margin, 31% Nationwide, Crestwood will be handling over 470,000 Bbls/d of crude oil and NGLs in addition to over 2 Bcf/d of natural gas through our gathering systems and transportation assets (1) Represents Crestwood consolidated gross margin. Dry gas margin includes 2014E gross margin contribution from dry gas gathering and natural gas transportation and storage assets. NGL and crude oil margin includes 2014E gross margin contribution from rich-gas gathering and processing, NGL logistics, NGL trucking, NGL terminals, NGL fractionation, storage and marketing, crude oil gathering, crude oil rail terminals, and crude oil trucking assets. 9

10 Integrating the Bakken Footprint Arrow s CDP is a strategic liquidity hub south of the Missouri river, which complements CMLP s existing COLT Hub Synergy Potential Arrow system is located approximately 60 miles southeast of CMLP s COLT Hub crude rail and pipeline terminal, located in Williams County, North Dakota Provides regional operating scale and synergies Direct connectivity through Hiland and Tesoro Logistics High Plains Pipeline provides access to COLT Hub s 1.2MM Bbl crude oil storage and +140,000 Bbl/d (expanding to 160,000 Bbl/d) crude oil by rail take-away capacity Enbridge Pipeline COLT Terminal Tesoro Pipeline BNSF Mainline COLT Connector Dry Fork Terminal Beaver Lodge Improves pricing and sales optionality for Arrow producers Largest customers at COLT Hub are also major purchasers of crude oil at the Arrow CDP Improves access to supply for COLT customers Belle Fourche Arrow System Arrow system completes well-head to refinery value chain link for customers, thus enhancing value for both producers and refiners alike Crude Pipelines Tesoro Corporation Belle Fourche Pipeline Co. Enbridge Pipelines North Dakota Inc. BNSF Railroad 10

11 Significant Visibility to Long-term Growth Core Arrow system poised for growth with system designed to get ahead of future expected system throughput demand Arrow s oil, gas and water gathering systems have been engineered around modularly expandable stations strategically located along its footprint; allows for highly capital-efficient capacity increases to match future throughput requirements Arrow undertook a significant 2013 capital investment program intended to provide core system capacity to get ahead of future expected throughput system demand Station build-outs Line looping projects Pump and compressor projects System enhancements during 2013 will increase throughput capacity from 60,000 Bbl/d to over 100,000 Bbl/d in Q The majority of Arrow s large core system enhancement projects are either online currently or expected to be online during 4Q-2013 Expansion projects to accelerate gathering of flared natural gas volumes; improves producer economics Multiple identified growth opportunities Immediately accretive to Crestwood s estimated distributable cash flow per limited partner unit in 2014, with growing accretion thereafter based upon projected production growth from customers currently dedicated to Arrow 11

12 Commitment to Operational Excellence Because of the early integration efforts surrounding the Crestwood and Inergy merger, Crestwood is well positioned to successfully integrate the Arrow system Crestwood is an experienced gatherer across the US and a current operator in North Dakota Bakken Shale COLT Hub and significant gathering expertise provides a base of operations to quickly integrate Arrow into the Crestwood operating model Arrow has established a great local operating relationship with the Mandan, Hidatsa & Arikara Nation (MHA) and Crestwood is committed to maintaining and nurturing this relationship Intend to work jointly with the MHA to expand the systems, benefitting both producers and royalty owners Existing relationships with Arrow s customers should provide for a seamless transition Like Crestwood, Arrow is committed to safe and reliable operations, first-class customer service, and active involvement and support for the local communities and environments Transition Services Agreement further allows for a smooth integration of the Arrow system into the Crestwood operating platform 12

13 Financing Overview Crestwood has arranged fully-committed debt financing from Citigroup Global Markets Inc.; No financing contingencies to close the transaction Fully-committed equity financing in the form of equity consideration paid directly to the seller as well as additional equity financing from undisclosed accredited investors Significant equity consideration demonstrates Seller s strong support for Crestwood s long-term growth objectives with the acquired Arrow assets >50% of acquisition consideration to come from issuance of long-term equity capital Transaction is deleveraging to the Partnership with meaningful expected EBITDA growth in 2014 Pro Forma Capitalization Pro Forma As Adjusted Arrow Transaction Adjusted ($ millions) 6/30/2013 (1) Adjustments (2) 6/30/2013 CMLP Cash & Cash Equivalents CMLP Debt: Revolving Credit Facility % Senior Notes Due % Senior Notes Due Arrow Committed Acquisition Debt Other debt Total CMLP Debt $1,335.4 $362.5 $1,697.9 Partners' capital 3, ,889.7 Total capitalization $4,825.1 $5,587.6 Total Liquidity (3) $520.9 $508.4 (1) Reflects capitalization as of 6/30/2013 adjusted for the NRGM 11.0mm unit offering and further adjusted for the closing of the Crestwood / Inergy merger as detailed in the pro forma capitalization table included in the NRGM prospectus supplement dated September 10, (2) Adjustments related to Arrow Midstream transaction close. Includes $12.5 million in estimated transaction fees and expenses and fully-committed debt and equity financing arrangements. (3) Represents total capacity under the revolving credit facility less the outstanding balance. 13

14 Key Investor Highlights Positioning Crestwood for long-term visibility to growth to create unitholder value Liquids-focused strategy benefits from robust longterm macro fundamentals High quality asset base sufficient to drive long-term growth objectives Optimization opportunities around existing footprint drive $15 to $20 million in annual synergies $1.1 billion in contracted and identified organic growth opportunities around existing asset base ~85% margin from fixed-fee contracts 6 to 10% targeted long-term distribution growth Management team with significant experience in building world-class midstream organizations and delivering significant unitholder value Substantial GP sponsor commitment creates strong alignment of interest with our limited partners 14