NGL Energy Partners LP

Transcription

1 NGL Energy Partners LP August 2013

2 Presenters H. Michael Krimbill Chief Executive Officer NGL James J. Burke Chief Executive Officer High Sierra 2

3 NGL Energy Partners Overview NGL is a diversified midstream MLP that provides multiple services to producers and end-users Transportation and marketing of crude oil Transportation and marketing of NGLs Water treatment and processing Vertical integration allows NGL to capture margins across the entire value chain From crude oil wellhead to refinery From fractionator/refinery to propane and commercial end-users From wellhead to disposal, recycle or discharge water facility Geographic diversification Most prolific producing regions/shale plays in the U.S. Coast-to-coast Rail, Terminal and Retail operations Focused on generating stable and repeatable cash flows Growth centered on Crude Oil Logistics and Water Treatment and Processing segments Four business segments Water Treatment and Processing Crude Oil Logistics NGL Logistics Retail Propane 3

4 $mm Distribution per LP Unit $mm Substantial Growth Since IPO in May 2011 NGL has increased distribution every quarter since IPO October 2010 NGL Supply and Hicks Gas combine to form NGL May 2011 Completes $84mm IPO October 2011 Acquires Osterman Propane, one of the largest U.S. independents November 2011 Acquires SemStream LP January 2012 Acquires Pacer Propane, one of the largest West Coast independents February 2012 Acquires North American Propane; folds into Osterman Propane June 2012 Merger with High Sierra Energy, diversified crude oil & water services assets May 2012 Acquires Downeast Energy propane October 2012 Acquires Eagle Ford water assets November 2012 Acquires Pecos Gathering & Marketing, crude oil assets Successfully executing strategy to build a leading vertically integrated midstream company - Uses proceeds to repay debt - 12 terminals railcars - 3 million barrels of leased. underground storage December 2012 Acquires crude oil barge business July Completes $300mm equity offering - Acquires Crescent Terminals and High Roller Wells Big Lake SWD in Permian August 2013 Acquires OWL SWD wells in Eagle Ford 24 Acquisitions Completed in 2 years for $1.8Bn Adjusted EBITDA Distribution / Unit Market Cap $184 $260 $255 $0.60 $0.50 $0.40 $0.34 $0.34 $0.34 $0.35 $0.36 $0.41 $0.45 $0.46 $0.48 $0.49 2,000 1,750 1,500 1, $0.30 1, $0.20 $ $24 $ IPO NTM $0.00 IPO Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun /11 09/11 02/12 06/12 11/12 03/13 08/13 4

5 NGL Energy Partners Overview - Growth Since IPO Operating Segments Segment Contribution 2013 (1) NGL Retail Propane 29% Crude Oil Logistics 33% Water Treatment and Processing Crude Oil Logistics NGL Logistics Retail Propane Water Treatment and Processing NGL Logistics 18% 20% Financial Comparison (IPO vs. Pro-Forma Fiscal Year-End 2013 and 2014) ($ in millions) Market Capitalization EBITDA Distributable Cash Total Distributions $260 (3) $2, % 983% 895% $ % $184 (2) $1,442 $141 $72 $134 $303 $24 $20 $20 IPO (May 2011) 3/31/13 FY2014E IPO (May 2011) 2013 FY2014E IPO (May 2011) 2013 FY2014E IPO (May 2011) 2013 FY2014E (1) Represents pre-g&a pro-forma segment EBITDA for the fiscal year ending 3/31/2013. (2) Assumes unit price of $26.90 (3) Market Capitalization calculated based on assumed yield of 6.2%and projected distribution per unit of $

6 NGL Operational Assumptions Key Investment Highlights Successful Track Record of Growth 983% EBITDA growth from NTM EBITDA of $23.6mm at IPO to $ mm Fiscal % distribution per unit increase since IPO Growth has been combination of organic and acquisitions (24 completed since IPO) for aggregate value of $1.8 billion Diversified and Attractive Asset Base Diverse asset base reduces cash flow volatility and provides significant opportunities for growth in multiple regions and segments Presence in many of the most prolific, highest return crude oil producing regions in North America Vertical Integration Vertical integration allows for capture of margin across the value chain from wellhead to end-user Emphasis on asset ownership drives ability to capitalize on multiple revenue/bolt-on opportunities Stable Cash Flows Focus is on repeatable fee-based cash flows Combination of fee-based, take-or-pay, acreage dedication, margin-based and cost-plus revenue contracts Geographic diversity Strong Credit Profile and Liquidity Conservative capital structure with low leverage (targeted leverage of 2.75X 3.25X) Revolver sized at $1,050mm, with $300mm available Excess cash earned is reinvested in growth Experienced & Incentivized Management Team Extensive industry and MLP experience with proven record of acquiring, integrating, operating and growing successful businesses (completed and integrated over 200 acquisitions in the past 20 years) Senior management holds significant limited partner interests and GP stake, which strengthens alignment of incentives with lenders and public unitholders 6

7 Strategy for Future Growth Target distribution growth of 13% -15% over next four quarters and 10% - 12% thereafter Growth at attractive multiples through: Organic projects Accretive negotiated acquisitions Selective participation in limited auctions Future growth focused primarily in Crude Oil Logistics and Water Treatment and Processing NGL logistics and Retail Propane strategy primarily focused on maximizing/harvesting cash flow and bolt-on growth opportunities Target ownership of hard assets / infrastructure with stable and repeatable cash flows We believe we are well positioned to execute $1.05 billion bank facility Prefund equity for acquisitions Organic projects financed internally 7

8 Diversified Across Multiple Businesses and Producing Basins NGL s operations are geographically and operationally diversified across four attractive sub segments Significant presence in the most economic oil and natural gas shale plays in the country Coast-to-coast terminals and Retail Propane locations Bakken Shale Marcellus Shale Crude Oil Logistics Green River Basin NGL Pinedale Anticline Jonah Field Assets and marketing presence Refinery terminal NGL leased storage NGL proprietary terminal Natural gas liquids segment Railcar NGL terminal Common Carrier Pipeline Crude oil and NGLs operational area Crude oil segment Crude barge terminal Crude Barges Water Treatment and Processing Retail Propane > 10 mm gallons Niobrara Shale Wattenberg Field Mississippi Lime Granite Wash DJ Basin Permian Basin Eagle Ford Water Treatment and Processing NGL Logistics Retail Propane 8

9 Significant Operational Diversity Our Core Business Lines Water Services Crude Oil NGL Logistics Retail Description Treatment of oil and gas wastewater Water disposal, recycling and discharge Innovative (patented technology) Purchase and transport crude oil to pipelines and own terminal, barge, rail and truck logistics assets Transport, handle, store NGLs Own assets across value chain Marketing / supply business allows NGL to capture opportunities with approximately 1,000 customers in 47 states Distribute propane / distillates to residential, industrial, and commercial customers Own assets 90% tank ownership Region Anticline (WY) DJ Basin (CO) Eagle Ford Permian Mid-continent Eagle Ford / Permian Rockies Gulf Coast Coast to Coast Midwest New England Pacific Northwest Cash Flow Characteristics Fee-based Take-or-pay / acreage dedication contracts Strong customer base Margin-based Back-to-back contracts Fee-based / Cost Plus Back-to-back contracts Margin-based Utility residential model Weather-sensitive Strategic Focus Grow organically Pursue strategic acquisitions Expand operations in existing areas Grow through acquisitions Integrate operations and capture full value chain opportunities Grow / expand terminals segment Focus on West Coast expansion Blend-ins in current footprint 9

10 Focus on Stable and Consistently Growing Cash Flows Cash Flow Characteristics Historical Annualized Distributions Continue to grow fee-based businesses Water Segment: fee charged on every bbl handled Terminals: fee charged on each gallon of throughput Other assets generate EBITDA from margin-based and/or cost plus arrangements Crude Oil / NGLs: purchase / sale transactions are back-to-backed Retail Propane: margin-based Wholesale Supply and Marketing: cost plus margin; physical assets are key and add incremental revenue opportunities We will continue to focus on a solid distribution coverage and ample liquidity Coverage target is 1.3x - 1.4x on LP unit distributions and > 1.5x total coverage (1) Excluding one-time acquisition costs of $5.6mm (2) Based on Full FY2014 EBITDA run rate Distributable Cash Flow Actual Guidance FY 2013 FY 2014 EBITDA (1) $183.5 $260 Maintenance Capital Expenditures (13.8) (25) Interest Expense (28.9) (36) Total DCF $140.8 $199 Distributions $71.7 $134 Distribution Coverage Ratio 2x 1.7x (2) 10

11 Experienced Management Team Experienced Management Team Michael Krimbill Chief Executive Officer NGL President and Chief Financial Officer of Energy Transfer Partners LP (NYSE: ETP) ( ); former Director of Energy Transfer Equity, the General Partner of ETP Served as the Chief Executive Officer and Chief Financial Officer of Heritage Propane Partners LP (NYSE: HPG) ( ) Former Corporate Treasurer of Total Group Former member of Williams Partners LP (NYSE: WPZ) board and served as Conflicts Committee Chairman Over 30 years of experience in executive roles in the midstream, refinery and marketing and propane industries Has taken three entities public as MLPs and achieved investment grade ratings at HPG and ETP Jim Burke Chief Executive Officer High Sierra Co-founded High Sierra Energy, LP in 2004 Previously co-founded Petro Source Partners, where he ran six business units throughout the U.S. and Canada over a 17 year span Served as Manager of Crude Oil Acquisitions at Asamera Oil (U.S.) Inc. ( ) Began career at Permian Corporation David Kehoe Executive Vice President and Chief Operating Officer Joined High Sierra in 2007 when High Sierra acquired Petro Source Partners, LP Brings extensive operating and business startup experience Began career in the oil and gas industry as the owner of a production company, as well as two service businesses Held several leadership positions for Petro Source Corporation from 1989 to 2007, including General Manager, until it was acquired Atanas H. Atanasov Chief Financial Officer Spent 9 years at GE Capital, most recently as Finance Leader for the U.S. Regions Lending business ( ) where he was responsible for a $14 billion portfolio Finance Manager for GE Capital Leveraged Equity Business ( ) Prior to GE Capital, worked for The Williams Companies and held positions of increasing responsibility in Finance ( ) Extensive experience in structured finance both debt and equity Began career in Public Accounting Certified Public Accountant James Winter Senior Vice President Water Treatment and Processing Joined High Sierra Energy, LP in January of 2007, as Vice President of High Sierra Crude Oil & Marketing Has over 30 years of experience in the energy industry Began career as an independent petroleum landman in 1979 with Joseph S. Rose & Company Co-founded High Plains Energy Company in 1986, an oil and gas land services firm that served a variety of E&P companies throughout the Rockies and Northeastern U.S. Joined Petro Source Partners, Ltd. in 1992 where he managed the company s Permian Basin crude oil purchasing and transportation program 11

12 NGL Organizational Chart Members NGL Energy Holdings LLC (DE LLC) 0.1% GP Interest 99.9% LP Interest Limited Partners NGL Energy Partners LP (NYSE: NGL) (DE LP) 58,509,216 Common / Restricted 5,919,346 Subordinated Units High Sierra Energy, LP (DE LP) NGL Energy Operating LLC (DE LLC) High Sierra Operating Subsidiaries (1) NGL Operating Subsidiaries (2) (1) Includes the operating subsidiaries of the crude oil logistics and water treatment and processing segments and certain of the operating subsidiaries of the natural gas liquids logistics segment. (2) Includes the operating subsidiaries of the retail propane segment and certain of the operating subsidiaries of the natural gas liquids logistics segment.

13 Business Segment Overview 13

14 Water Treatment and Processing Industry Overview Oil and natural gas producers preserve cash for drilling by outsourcing the disposal and treatment of oilfield produced and flowback water ( waste water ) Water quality is measured by amount of TDS (Total Dissolved Solids) which can include salts, boron, iron, calcium, strontium, magnesium, and barium (higher TDS equals harder to treat or dirtier water) The water quality and the geology vary by region / area and dictate the feasibility, cost of disposal and treatment systems Distance to disposal and treatment facilities, as well as the ability to handle large volumes of water, are key concerns for E&P companies Produced water from the well that occurs over the life of the well, and water recovered from hydraulic fracturing activities (flowback water) requires different levels of water treatment Waste water disposal and treatment provides fee-based revenue, with additional revenue generated from hydro-carbon recovery and recycled water sales 14

15 Water Treatment and Processing Business Strategy Asset Strategy Focus on asset ownership Emphasize organic growth utilizing current assets and customer base Expand into additional shale plays and other water producing basins Target highest ROR oil and liquids-rich basins Centered on producers with technology needs Profitability Model Long-term contracts structured as take-or-pay or acreage dedications Eliminate water trucks, replace with pipe under contractual arrangements Target recycled water to producers at or below source water alternatives Treat sludge remaining after process, recover additional hydrocarbons and reduce landfill costs Technology Focus Continue to pursue technological enhancements by investing $2 - $3 million annually in the proprietary R&D facility Pursue issuance of additional process patents 15

16 Water Treatment and Processing Operational Model Treatment and Disposal Company-owned disposal facilities provide producers affordable well-disposal of wastewater generated from oil and natural gas production and drilling activities Water treatment process separates solids and hydrocarbons from water prior to disposal 24 x 7 operations, truck bay loading/unloading Certain facilities are pipeline connected, providing stronger customer relationship with the producers Proprietary well maintenance programs enhance injection-rates and service lives of the wells Recycle Operations Provides higher quality of water treatment services where the clean water can be re-used by producers for fracking, well drilling, and completion projects Offers producers an alternative to fresh water that minimizes the impact on aquifers, particularly in arid regions of the U.S. Recycled ~33 million barrels (1.4 billion gallons) of water since 2008 Discharge Water Multi-patented 14-step water treatment process Cleans water to a better than drinking water quality Returned over five million barrels (210 million gallons) back to New Fork River, Wyoming, a tributary of the Colorado River Continued R&D investments to employ latest technologies in various basins Areas of Operations Contract Types Revenue Profile Pinedale, Anticline Field, Wyoming DJ Basin (Niobrara), Colorado Eagle Ford and Permian Basins, Texas Take-or-Pay minimums Acreage dedication contracts Water hauler Pursuing producer direct contracts Fee basis Hydrocarbon recovery sale Fee basis Recycled water sales Hydrocarbon recovery sale Fee basis Hydrocarbon recovery sale 16

17 Water Treatment and Processing Area of Operations Bakken Shale Pinedale Anticline Green River Basin Jonah Field DJ Basin Uintah Basin Niobrara Shale Wattenberg Field Mississippi Lime Permian Basin Water Solutions Formation area Water Services Expansion projects and opportunities Eagle Ford 17

18 Water Treatment and Processing Basin Characteristics Water Quality Geology Regulatory Environment Anticline TDS 12,000 mg/l Low permeability for disposal wells, bpd Limited private land Centralized plant model State of Wyoming regulates air, water quality and pressure Regulated capacity of discharged water into New Fork River DJ Basin TDS 15,000 mg/l Medium permeability 5,000-20,000 bpd Disposal wells in close proximity to drilling/production State of Colorado permits air emissions, volumes and pressure County permits land usage, operating hours and truck trips Permian Basin TDS 140,000 mg/l High permeability >20,000 bpd Disposal wells in close proximity to drilling/production State of Texas regulates air quality, injection volumes and pressure High permeability >20,000 bpd Eagle Ford TDS 85,000 mg/l Complicated geology Disposal wells in close proximity to drilling/production State of Texas regulates air quality, injection volumes and pressure 18

19 Crude Oil Logistics Business Strategy Grow operations in highest return basins / shale plays (e.g. Eagle Ford, Permian, Niobrara, Bakken) Reduces exposure to commodity prices Focus on owning assets that enable the business to capture margins from wellhead to refinery Expand rail and barge fleets Own, build and operate terminals, rail and pipelines Storage capacity at major trading hubs Increase fee based cash flows Storage and throughput fees at terminals and pipelines Fee-based barge revenue Grow Canadian presence to take advantage of heavier crudes Expand crude oil blending activity Back-to-back contracts on gathered barrels to lock in margins 19

20 Crude Oil Logistics Overview Segment Operations Area of Operation Purchases and transports crude oil for resale to a pipeline injection point, storage terminal, barge loading facility, rail facility, refinery or trade hub Strategically deployed railcar fleet, tows, barges and trucks provide access to multiple customers and markets, allowing NGL to bring the right crude oil to the right market Maximizes value of crude oil gathered through proprietary linear programming model Reduces exposure to price fluctuations by using back-to-back contractual agreements Purchase from ~4,000 active lease locations representing ~500 producers Current volumes of ~140,000 bbls/day Crude Oil Logistics Operational area Crude oil segment Crude barge terminal Crude Barges Bakken Shale DJ Basin Niobrara Shale Wattenberg Field Mississippi Lime Granite Wash Permian Basin Eagle Ford 20

21 Crude Oil Logistics Business Model P S Purchase Point Sales Point Utilize historical shipper space and company owned pipelines and LACT units S Refinery Common Carrier Pipelines S S 42 owned pipeline injection facilities P Owned Truck or Common Carrier Truck Leased / Owned Railcars Cushing, OK or other trade hub S 12 leased rail transload facilities Leased / owned Barge Terminal & Tows/Barges S 2 owned barge loading terminals 8 tows & 17 barges Storage Terminal S ~400K bbls storage in multiple basins 21

22 Crude Oil Logistics Asset Overview Terminals Rail Port of Catoosa, Oklahoma - storage services; truck and rail trans-loading to barges with access to Gulf Coast; 140Mbbls storage capacity Dwyer Terminal, Wyoming - leased to third party on take or pay basis; pipeline expansion opportunities in the future; 80Mbbls storage capacity Rio Hondo Terminal, Texas - barge and truck terminal; 80Mbbls storage Sunray Terminal, Oklahoma - pipeline served condensate truck terminal, 10Mbbls storage Crescent Terminal Facility 130Mbbls of storage capacity and ability to throughput up to 20 Mbbls per day ~1,400 GP railcars leased or owned Railcars provide optionality to markets via company and third-party facilities ~15K bbls/day moved through manifest shipping and unit-train facilities Barges Own 8 tows, 17 barges, 20-25Mbbls per barge capacity Fee-based, day rate business Operations primarily around the intercoastal waterways of the Gulf Coast, and along the Mississippi and Arkansas river systems Pipelines Ship on 18 common carrier pipelines in three basins Utilize historical shipper space on 11 prorated pipelines Two organic projects to build and operate tariff-based pipeline gathering systems will provide increased gathering volumes at reduced transportation costs Trucks 300 owned trucks and 270 trailers Moving Company first-purchased barrels and fee-based hauling for third parties ~140Mbbls/day hauled/transported (110Mbbls hauled for Company, 30Mbbls for third parties) 22

23 NGL Logistics Overview Area of Operation 23

24 NGL Logistics Terminals and Wholesale Supply & Marketing Terminals and Wholesale Supply & Marketing Sub Segment 18 terminals serving over 300 customers 11 terminals with rail loading capability 11 multi-product terminals 12 pipe-connected terminals 16.5 million gallons of above ground storage Approximately 163 million gallons of leased underground storage Automated truck loading and unloading facilities operating 24 hours a day Approximately 1,000 wholesale customers in 47 states In excess of 1.1 billion gallons of propane sold ~50% of which goes through proprietary terminals Includes 150 million of pre-sold propane gallons at a fixed price with a locked-in margin Rack sales through common carrier pipeline terminals Railcar Sub Segment Transports and markets NGLs to and from refiners, gas processors, propane wholesalers, proprietary terminals, petrochemical plants, diluent markets and other merchant users of NGLs Service offered in each of the lower 48 states and Canada Utilizes terminal storage to take advantage of seasonal demand Purchase-and-sale transactions are entered primarily on a back-to-back basis Average volumes of ~45,000 Bbls/d from more than 100 customers Majority of liquids sold are propane and butane ~ 2,500 leased high pressure railcars 24

25 Retail Propane Overview Segment Operations Area of Operation Sell propane and petroleum distillates to end-users consisting of residential, agricultural, commercial and industrial customers Geographic diversity mitigates weather risk Less volatility from warm weather as margins increase when demand falls and vice versa Retail Propane Operational area NGL Logistics segment provides 75% of Retail Propane segment demand Cost plus margins allow immediate passthrough of wholesale price increases The Retail Propane business is seasonal ~70% of retail propane volume is sold during the peak heating season from October through March Focus on residential customers, high tank ownership and customer retention 25

26 Retail Propane What Sets Us Apart Geographic Focus Operational focus on regions with the highest number of degree days North East, Upper Midwest and Pacific NW In warmer weather, gross margins temporarily expand to recoup a portion of revenues lost to volume declines Customer Base Retention Retain and grow customer base by pricing product below other propane MLPs Acquisition model assumes independent / mom-and-pop margins continue Leverage Acquisition Brand Names Empower Local Management Employee Retention Retain local brand - no change to uniforms, invoices, signs or trucks Ownership change is seamless to customers while simultaneously saving on capital expenditures and expenses Decisions regarding pricing, advertising, vehicles and other expenses are made at the regional and district levels Fosters swift decision making by leadership attuned to the local or regional market Daily price changes at supply points are communicated to local management Efforts are made to retain employees of acquired businesses Aides in preservation of customer relationships, safeguarding knowledge of local market dynamics, and prevents the creation of ex-employees investing in competitive propane assets Quickly Implement Operational Improvements History of successful acquisitions with demonstrated track record of improving profitability through operational efficiencies, not margin enhancement Improved vehicle routing, consolidated back office functions, less expensive insurance, etc. 26

27 Key Takeaways Compelling investment opportunity with attractive combination of yield and growth Distribution growth of 13% - 15% annually 46% distribution per unit increase since IPO NGL total return 68% since IPO vs. 25% for Alerian index over the same period Target strategic acquisitions that are accretive Focus on Crude Oil Logistics and Water Treatment Services Completed $1.8 billion of acquisitions in last 26 months Multiple growth platforms that provide substantial acquisitions and organic growth projects Diverse geographic and operational footprint reduces risk Strong credit profile and ample liquidity to run business and execute growth objectives Experienced, highly regarded management team with substantial equity ownership 27

28 Q&A 28