CONE Midstream Partners LP. Capital Link MLP Investing Forum March 5, 2015

Transcription

1 CONE Midstream Partners LP Capital Link MLP Investing Forum March 5, 2015

2 Disclaimer Forward Looking Statements This presentation contains forward-looking statements within the meaning of the federal securities laws. Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include the words "believe," "expect," "anticipate," "intend," "estimate" and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. Forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict, and there can be no assurance that actual outcomes and results will not differ materially from those expected by our management. These forward-looking statements involve certain risks and uncertainties, including, among others, that our business plans may change as circumstances warrant. For more information concerning factors that could cause actual results to differ materially from those conveyed in the forward-looking statements, please refer to the "Risk Factors" section of the prospectus included in the registration statement on Form S-1, in the form last filed with the SEC as well as as our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, unless required by law. 2

3 Key Investment Considerations Strategically Advantaged Marcellus Assets Dedicated 516,000 net acres in premier areas of Marcellus Shale Access to liquids-rich and dry gas areas Close proximity to processing facilities and long-haul transmission pipelines Substantial Sponsor and third-party midstream infrastructure needs Experienced, Large-Cap E&P Sponsorship Combined market capitalization of approximately $25 billion Executive management w/ an average of 28+ years of energy sector experience Over 690,000 jointly-owned net acres in the Marcellus Shale Growth Through Stable, Fixed-Fee Cash Flows Pure-play gathering & processing MLP Long-term (20-year), fixed-fee gathering agreements with Sponsors Throughput growth (consolidated) of 97% in 2014; 40% growth projected in 2015 No direct exposure to commodity price risk Financial Flexibility and Strong Capital Structure No leverage at IPO $219 million of undrawn borrowing capacity available (at 12/31/2014) Sponsors will bear approximately 80% of capital expenditures over near term Distribution Growth Expected Sponsors drilling program is expected to drive organic growth Visible drop-down acquisition opportunities of Sponsors retained interests Opportunities to attract third-party volumes 3

4 CNNX Overview

5 CONE Midstream Partners LP - Overview CONE Gathering and the Formation of CNNX In 2011, Consol Energy ( CNX ) and Noble Energy ( NBL ) (the Sponsors ) formed a 50/50 midstream joint venture, CONE Gathering LLC, to service their rapidly growing production in the Marcellus Shale CONE Midstream Partners ( CNNX ) was formed in 2014 through the initial contribution of ownership interests in CONE Gathering s assets held in three distinct development companies ( DevCos ), including: 75% interest in Anchor Systems 5% interest in Growth Systems 5% interest in Additional Systems Initial Public Offering September million LP units (33.8% ownership interest) sold to public at $22.00 Sponsors retain 38.2 million LP units ( million are subordinated) and 2% GP interest Sponsors have dedicated over 516,000 acres to CNNX for an initial term of 20 years Dedication is in one of the most cost-advantaged, core development areas of the Marcellus Shale CNNX has a right of first offer ( ROFO ) on the Sponsors remaining 194,000 net acres 5

6 Structured for Significant Organic and Drop-down Growth Potential CONE Midstream Partners LP 75% interest 5% interest 5% interest Organic Growth Drop-down Growth Anchor Systems Growth Systems Additional Systems Established systems that comprise a substantial majority of current cash flows Large share of Sponsors PDP volumes Strong organic growth on rising throughput Cash flow expected to ramp significantly Cash flow expected to ramp significantly Robust growth profile 95% of capital expenditure requirements initially absorbed by the Sponsors through their retained interest Located on highly-contiguous West Virginia acreage Currently producing modest cash flows Substantial growth from five systems 95% of capital expenditure requirements initially absorbed by the Sponsors through their retained interest Located primarily in the wet gas window of the Marcellus 6

7 CNNX Benefits From its Development Company Structure Provides CNNX with a critical mass of established gathering assets within Anchor Systems Shields CNNX from a substantial portion of the capital requirements, which will be borne by the Sponsors Creates visible organic and drop-down distribution growth platform 7

8 Gathering Systems Overview Gathering System Information (1) System Pipeline (Miles) Maximum Interconnect Capacity (Bbtu/d) Compression (HP) Anchor 132 1,329 61,380 Growth ,040 Additional Total 180 2,574 69,420 NBL NBL (1 ) Data as of 12/31/2014 8

9 Gathering Agreements Support Stable Fixed Fee Cash Flows Gathering Agreement Highlights General Terms 20-year gas gathering agreement 516,000 dedicated acres $0.40/MMBtu dry gas gathering fee $0.55/MMBtu wet gas gathering fee 1 $5.00/Bbl condensate handling fee 2 Automatic rate escalation Rate Reset Mechanism Annual redetermination option Opportunity to raise gathering fee to account for cost and volume changes Consideration of CNNX s rate of return and margins 1 Wet gas gathering fees at Airport & Moundsville are adjusted to $0.28 per MMBtu to account for 3 rd party services 2 Condensate handling fees at Airport & Moundsville are adjusted to $0.00 and $2.50 per Bbl, respectively, to account for 3 rd party services 9

10 Strong Sponsorship in Strategic Gas Play

11 CNNX Operations are Located in Premier Area of Marcellus Shale Marcellus Shale: Estimated Ultimate Recovery per Foot 11

12 Breakeven to Achieve a 15% IRR Marcellus Shale Advantaged Economics Low Breakeven Provides Attractive Returns in Most Commodity Environments Gas Shale Play Breakeven Prices ($/MMBtu) $6.00 Acreage by Window $5.00 Marcellus SWPA (Dry) 9% CPA South (Dry) 29% $4.00 Marcellus (Wet) 34% WV North (Dry) 28% $3.00 $2.00 $1.00 $0.00 Utica (Wet) Marcellus SWPA (Dry) Marcellus (Wet) Granite Wash (Wet) Cana- Woodford Marcellus NE WV North (Dry) CPA South (Dry) Barnett Fayetteville Horn River Piceance Valley Eagle Ford (Dry) Huron Arkoma- Woodford Haynesville Granite Wash (Dry) Note: Assumes $90.00 / Bbl WTI Reflects breakeven to achieve 15% after tax rate-of-return Source: CONSOL and Noble Energy Estimates, Credit Suisse Research Report dated February

13 Sponsored by Experienced, Large-Cap E&P Companies Approximately $7 billion market capitalization Over 6.8 Tcfe of proven reserves at year-end 2014 One of the largest producers in the Appalachian basin 30% annual natural gas production growth rate expected through 2016 Interests in 13,000 net producing wells Leading producer of coalbed methane in the Appalachian Basin Marcellus is CNX s core gas play Approximately $18 billion market capitalization Owns reserves of 1.4 Bboe and assets over $22 billion at year-end 2014 Worldwide producer of crude oil and natural gas One of the industry leaders in exploration and development capability Five core areas including Marcellus Shale, DJ Basin, Deepwater Gulf of Mexico, West Africa and Eastern Mediterranean CONSOL EBITDA Mix Shifting to E&P Average Annual Net Volume Growth E 2016E E&P 32% Coal 47% Coal 37% Coal 68% E&P 53% E&P 63% 1 Marcellus Shale 2 Denver-Julesburg (DJ) Basin 3 Deepwater Gulf of Mexico (GOM) 4 West Africa Note: Market data as of March 1, 2015 Source: Company Filings, Capital IQ 5 Eastern Mediterranean 13

14 Strong Anchor Tenants Developing Premier Marcellus Resource Highlights Two of the leading E&P companies in the Eastern United States Marcellus acreage is the most important asset in CONSOL s upstream portfolio and is one of Noble Energy s five core areas Significantly expanded through acquisitions Projected double digit annual production growth through 2016 Near term production shift towards wet gas drilling areas Integrated Development Plan approach to reduce costs and increase production 2,000 1,600 1, (Acres in Thousands) Marcellus Acreage Position Sponsors Position Represents One of Largest Aggregate Acreage Positions in the Marcellus Sponsors 2015E Capex Budget CONSOL Noble Energy Other 31% Marcellus 69% Other 76% 24% Marcellus Combined 2015E Marcellus Shale Capex: Approximately $1.9 billion 1 1 Includes upstream and midstream capital expenditures on dedicated and ROFO acreage Note: Company Filings, Investor Presentations, News Releases 14

15 Sponsors Hold Strategically Advantaged Position in Marcellus Core Sponsors Hold Over 690,000 Net Acres in the Cost-advantaged and Prolific Area of the Marcellus Sponsors 50/50 upstream joint venture in the Marcellus covers an area of mutual interest that is supported by a 25- year joint development agreement 100% operated, high net revenue interest and 78% held by production as of December 31, 2014 Acreage is highly contiguous and located in close proximity to processing facilities and major interstate pipelines CNX develops and operates in the eastern, dry gas portion of the upstream acreage NBL develops and operates in the western, wet gas portion of the upstream acreage JV Relationship Provides Development Synergies NBL Two management teams focusing on best practices Diversified producers create capital investment stability Improved efficiencies through shared resources and purchasing power Multi-basin perspective Long-tenured Appalachian experience NBL 15

16 Proximity to Major Interstate Pipelines Key Highlights Sponsors have secured sufficient processing and takeaway capacity to handle projected needs thru 2016: Sponsors hold approximately 1.4 Bcf/d of long-term firm transportation with: Dominion Transmission ( DTI ) Spectra Energy ( SE ) NiSource Inc. ( NI ) Columbia Gas Transmission ( TCO ) National Fuel Gas ( NFG ) Region Pipelines Available Pipelines Under Contract Central Pennsy lv ania DTI, EQT, TCO, SE DTI, SE Southwest Pennsy lv ania DTI, EQT, NFG, TCO, SE DTI, TCO, SE West Virginia DTI, EQT, TCO DTI, TCO Sponsors Marcellus Acreage with Interstate Transmission Line Overlay Sponsors sell to numerous customers who hold their own firm transportation agreements Sponsors hold NGL extraction and fractionation agreements with MarkWest, Williams, and Dominion NBL NBL 1 Includes all of CNX s Appalachian Basin firm transportation Source: SNL Financial 16

17 Growth Profile

18 System Benchmarks Milestones 2015 Forecast CNNX s Throughput Growth Has Just Begun 1,200 CNNX Consolidated Throughput Growth 1, Anchor Systems Growth Systems Additional Systems Q Q Q Q Q Q Q Q Q Q Q Q Q Q October 2008: First flow of horizontal Marcellus well September 2011: CONSOL and Noble Energy form CONE January 2012: Majorsville Construction Start July 2014: CONE systems reach 700 MMcfe/d Q3 2015: Projected 1.0 Bcf/d throughput E September 2011: CONE systems initial volumes of 130 MMcfe/d September 2011: Mamont first flow July 2012: Majorsville first flow May 2014: McQuay reaches 250 MMcfe/d June 2014: Mamont reaches 100 MMcfe/d June 2014: Majorsville reaches 250 MMcfe/d January 2015: Total throughput touches 1 Bcfe/d 18

19 Improved Completion Techniques Enhance Well Recovery and Pipeline Volumes Reduced Cluster Spacing & Shorter Stage Lengths Overview of Sponsors Activity Advanced completion techniques, such as Reduced Cluster Spacing ( RCS ) and Shorter Stage Lengths ( SSL ), improve well economics and gas recovery RCS & SSL wells showing increases in IP rates by approximately 40% and EURs by 15% - 20% over much of the acreage Results in higher CONE Gathering throughput per well connected and lower breakeven price for Sponsors Note: Townships are shown in yellow where the Sponsors hold 3,000 or more acres as of May 1,

20 Stacked Pay Potential Gas Factory Development Stacked Laterals Provide Economies of Scale to Access up to 4 Pays From 1 Pad 20

21 Third-party Acreage Opportunity Wells Permitted & Drilled per County High Concentration of Third-Party Wells in Close Proximity 21

22 CNNX : Engineered for Long-term Growth CONE Midstream Has Ample Business Growth Opportunities Even in Lower Commodity Price Environment Co-ownership of Development Companies Provides Opportunities for Drop-downs of Sponsors Retained Interests: Anchor Systems (25%) Growth Systems (95%) Additional Systems (95%) Additional Drivers of MLP Upside Potential Improved Completions Technology Rig Cycle Time Well Recompletes Stacked Pay Third-Party Volumes 22

23 Financial Overview

24 Key Financial Statistics (Amounts attributable to CONE Midstream) Bbtu/d $ Millions Daily Throughput F CNNX Distributable Cash Flow F $ Millions 140 Total Capex Note: and 2013 throughput reflects the Sponsors gross wellhead production EBITDA and DCF reflect unaudited pro forma amounts and do not include approximately $5 million of estimated annual incremental G&A expenses as a result of being a publicly traded partnership. EBITDA and Distributable Cash Flow are non-gaap measures. Reconciliations to GAPP measures are available in our K and IPO Prospectus as filed with the SEC $ Millions F 23.4 EBITDA

25 Balance Sheet Well Positioned for Growth CNNX Has a Balance Sheet and Liquidity Profile that Facilitates its Growth Strategy ($ in Millions) Capitalization 1 December 31, 2014 Cash and Cash Equivalents $ 3.3 Revolving Credit Facility Balance Outstanding 31.3 Partners Capital Common Units Subordinated Units (92.3) General Partnership Interest (3.8) Capital attributable to CONE Midstream Partners LP/Parent $ Noncontrolling interest Total Partners' Capital $ Total Capitalization $ Revolving Credit Facility Available Balance $ Note: Totals may not foot due to rounding. 25

26 Attractive Financial Profile Visible Growth Upstream development plan drives organic growth on existing system Large drop-down inventory from Sponsors retained ownership interest Stable Revenue Business Model Long-term (20-year), fixed-fee gathering agreements with Sponsors No direct exposure to commodity price risk Prudent Distribution Strategy 1.15x total unit targeted coverage 2.35x common unit coverage during forecast period Underpinned by dedicated acreage Sponsor-held subordinated unit structure mirrors industry standard Collaborative Capex Strategy CNNX is responsible for only its pro-rata share of capex in each system Significant portion of development capex retained by Sponsors Balance Sheet Poised For Growth Only $31.3 million drawn on credit facility at EOY 2014 $218.7 million of undrawn borrowing capacity available Plan to prudently utilize leverage to execute on growth strategy 26

27 Investment Highlights Recap Strategically Advantaged Marcellus Assets Experienced, Large-Cap E&P Sponsorship Growth Through Stable, Fixed-Fee Cash Flows Financial Flexibility and Strong Capital Structure Robust Distribution Growth Expected 27

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