Creating Superior Value Go for Extraordinary

Transcription

1 Creating Superior Value Go for Extraordinary Mizuho Energy Summit April 9-10, 2018

2 Forward Looking Statements This presentation (and oral statements made regarding the subjects of this presentation) includes forward-looking statements within the meaning of the federal securities laws. All statements, other than statements of historical fact, are forward-looking statements, including without limitation statements concerning: our operational, financial and growth strategies, including significant business improvements, sustainable earnings growth, stable, fee-based business focus, existing asset base optimization, pursuit of organic expansion opportunities, strategic acquisitions, growth capital projects, and future dropdowns; our ability to successfully effect those strategies and the expected timing and results thereof; our financial and operational outlook, including targets for EBITDA and capital expenditures, and ability to fulfill that outlook; financial position, liquidity and capital resources; expectations regarding future economic and market conditions and their effects on us; our 2020 journey plan and targets, including targets for EBITDA and the components thereof, investments in organic projects, acquisitions and dropdowns, dropdown portfolio and estimated EBITDA contribution from each project, third party revenue targets, and the expected timing and benefits thereof; plans, goals and targets for growth and execution associated with our Permian, Delaware basin, Bakken and Rockies gas gathering and processing assets; statements regarding the Conan Crude Oil Gathering Pipeline system, North Dakota NGL Logistics Hub and other major projects, including the expected capacity, timing, capital investment, net earnings and EBITDA contribution and other benefits associated with each project; statements regarding the planned acquisition of the Wamsutter Pipeline System, including expected benefits of the acquisition and the projected annual net earnings and annual EBITDA provided thereby; the planned transfer of the Conan System and the Los Angeles Pipeline Interconnect System to ; the benefits to our business and growth prospects of our strategic relationship with Andeavor, and Andeavor s expected EBITDA contributions to us; our financial strategy, including targets for EBITDA, coverage and leverage ratios, liquidity, growth and maintenance capital, distribution capital and public common equity; our capital and funding plan, including the allocation, sources, uses and expected benefits thereof; our continued focus on unitholder value, and the main drivers thereof; and other aspects of future performance. Although we believe the assumptions concerning future events are reasonable, a number of factors could cause results to differ materially from those projected. Our operations involve risks and uncertainties, many of which are outside of our control and could materially affect our results. For more information concerning factors that could affect these statements, see our annual report on Form 10-K, quarterly reports on Form 10-Q, and other SEC filings, available at We undertake no obligation to revise or update any forward-looking statements as a result of new information, future events or otherwise. See the Appendix for reconciliations of the differences between the non-gaap financial measures used in this presentation, including various estimates of EBITDA, and their most directly comparable GAAP financial measures. 1

3 Positioned for Continued Growth Continue to grow customer-focused, full-service, diversified midstream business, strategically integrated into Andeavor s value chain Targets: Execute at least $1 billion of annual high-return growth investments Grow Permian EBITDA * to $200+ million by 2020 Deliver $80+ million of annual EBITDA * from Bakken projects Increase third-party business to 50% of revenues Targeting EBITDA * of $1.6+ billion in 2020 *Represents a non-gaap measure. Please see the Appendix for a definition of this measure and a reconciliation to its most directly comparable GAAP measure 2

4 Growth Since 2010 Expecting to deliver approximately $1.2 $1.3 billion of EBITDA * in 2018 Expanded geography and services Diversified and fee-based cash flow Increased third-party business Anacortes Dickinson Mandan St. Paul Park Driven by: Martinez Salt Lake City Asset optimization and organic investments Strategic acquisitions Los Angeles Gallup Rockies Midstream North Dakota Midstream Western Refining Logistics Dropdowns from Andeavor Kenai ANDV Refinery Gathering Pipelines ANDV Pipelines Gas Processing El Paso Terminalling Rail Trucking Marine San Antonio *Represents a non-gaap measure. Please see the Appendix for a definition of this measure and a reconciliation to its most directly comparable GAAP measure Note: map above depicts Wamsutter Pipeline. Wamsutter is part of the previously announced acquisition from Plains All-American Pipeline L.P., which is anticipated to close in the second quarter of 2018, subject to customary closing conditions including regulatory approval 3

5 Stable, Fee-Based Cash Flow Fee-Based Cash Flow - 95% of cash flow fee based - 60% backed by Minimum Volume Commitments (MVCs) or take-or-pay contracts Strong geographic diversity - PADDs III, IV and V regions in Terminalling and Transportation - Bakken, Permian, and Rockies regions in Gathering and Processing Approximately 75% of revenue from investment grade customers Segment Contribution To EBITDA * Gathering & Processing Other Wholesale Revenues 2017 Pro Forma Terminalling & Transportation Investment Grade Gathering & Processing EBITDA * Permian Rockies Revenues Other Bakken Fee-Based 2017 Pro Forma includes a full year WNRL and represents contributions to EBITDA by segment and region *Represents a non-gaap measure. Please see the Appendix for a definition of this measure 4

6 Significant Organic Project Portfolio (Capex $ in millions) Anacortes North Dakota NGL Logistics Hub Bakken Gathering Projects Dickinson Mandan St. Paul Park Martinez Salt Lake City LA Refinery Interconnect Pipeline 150 Carson Crude Terminal Expansion Renewable Fuels Unit Train Los Angeles Gallup El Paso Conan Crude Oil Gathering System 225 San Antonio Permian Growth Investments Organic project portfolio supports growth plan Conan Crude Gathering System and LA Refinery Interconnect Pipeline projects expected to be funded by Andeavor and transferred to at cost plus capitalized interest 5

7 Robust Potential Dropdown Portfolio Estimated EBITDA * ($ in millions) Refinery Infrastructure 115+ Refinery tanks Truck racks Logistics Assets 185+ Product terminals Transportation pipelines Assets Under Development 65+ Asphalt Terminals Mixed Xylenes Project Rail loading/unloading Refinery gate pipelines Marine facilities Terminal storage Rio Pipeline Wholesale Fuel 250+ Fixed-fee per gallon service contracts with no commodity exposure Martinez Anacortes Long Beach Demonstrated History of Accretive Dropdowns West Coast & Alaska Carson Storage Alaska & Northern California Anacortes BP Carson 1 & 2 Initial Contribution Dropdown portfolio of at least $615 million of estimated EBITDA * Contributions from the dropdown portfolio of assets is a target established by management. We believe this target best approximates EBITDA. We are unable to provide a reconciliation of this forward-looking estimate to net earnings without unreasonable effort. The information needed to make a reasonable reconciliation of this EBITDA estimate is highly dependent upon future events, which may be uncertain or outside our control, and information that cannot be estimated with reasonable accuracy at this time, including exact composition of assets subject to dropdown assets, timing of the transactions and unknown financing terms *Represents a non-gaap measure. Please see the Appendix for a definition of this measure Note: Asphalt Terminals refer to the announced Delek US Holdings Asphalt Terminals acquisition, which is anticipated to close in the second quarter of 2018, subject to customary closing conditions including regulatory approval 6

8 Target EBITDA * of $1.6+ Billion in 2020 ($ in millions, unless noted) B + 1.0B Full Year Benefit: WNRL Anacortes Drop Synergies Terminalling & Transportation: 2018 Dropdown Organic Growth & Optimization Gathering & Processing: Permian & Bakken Development Conan Rangeland Wamsutter NGL Hub 2018 Permian Dropdown B Identified Growth: Permian Growth, including Conan LA Refinery Interconnect Pipeline Full Year Benefit: Dropdowns Rangeland Wamsutter NGL Hub Asphalt Terminals E 2020E Clearly defined plan to deliver 60% growth by 2020 *Represents a non-gaap measure. Please see the Appendix for a definition of this measure and a reconciliation to its most directly comparable GAAP measure Asphalt Terminals refer to the announced Andeavor acquisition of Delek US Holdings Asphalt Terminals and Wamsutter refers to the previously announced acquisition of the Wamsutter pipeline system from Plains All-American Pipeline L.P. Both transactions are anticipated to close in the second quarter of 2018, subject to customary closing conditions including regulatory approval 7

9 Differentiated Permian Position Cost and capability advantages in the Northern Delaware Basin Inter-basin pipeline transportation for major gathering systems Andeavor s ability to offer first purchase or other commercial arrangements Leverages existing commercial relationships and refining capabilities Physical integration with El Paso and Gallup refineries provides attractive optionality to Andeavor customers Existing connectivity to multiple takeaway pipelines with Midland origin Wink Station strategically positioned to provide key connectivity to future long-haul pipelines Gallup El Paso Refinery ANDX Pipeline Andeavor Pipeline Third-Party Pipeline Receipt Point / Station Four Corners Gathering New Mexico Texas TexNew Mex System Conan Gathering Project Bobcat Pipeline Rio Pipeline Midland Wink Station 8

10 Conan Crude Oil Gathering System Expected online 3Q 2018 Expected annual EBITDA * $30 $40 million TexNew Mex System Conan Gathering System NM TX Connectivity with multiple long-haul pipelines from new terminal in Loving County, Texas Project to integrate with Rio Pipeline to provide direct access to Midland, Texas Initial capacity 250 MBD expandable to 500 MBD To El Paso Refinery To Midland Rio Pipeline Conan ANDX Pipeline Andeavor Pipeline Third Party Pipeline Receipt Point / Station Three new crude truck crude oil receipt points Storage capacity 720,000 barrels New Assets Existing Assets Wink Terminal Capex $225 million Crude Gathering New Truck Offloading Gathering Pipelines Conan Terminal Existing Pipelines CR-1 Station Plains Pipeline Enterprise Pipeline Midland market hub *Represents a non-gaap measure. Please see the Appendix for a definition of this measure and a reconciliation to its most directly comparable GAAP measure 9

11 Positioned to Capture Expected Production Growth in Delaware Basin Delaware Basin Conan Gathering System Midland Basin 9 Rio Pipeline Midland Significant production growth expected in Delaware basin Potential opportunities: Crude oil focused gathering projects Long haul pipelines to market hubs (MBD) Strategic partnerships / joint ventures Bolt-on acquisitions at accretive multiples Permian EBITDA * ($ in millions) 200+ Least Active Most Active April 2018 Permian basin 180 day permit activity, current rigs Identified Additional Near-Term Permian Opportunities Awarded/Executed Permian Opportunities Permian EBITDA represents all Gathering & Processing EBITDA in Texas and New Mexico; 2017P Permian EBITDA is pro forma for full year WNRL Permian 180 day heat map and production data from DrillingInfo, historical rig counts from Marketview, forecast from Andeavor analysis *Represents a non-gaap measure. Please see the Appendix for a definition of this measure and a reconciliation to its most directly comparable GAAP measure P 2020E 10

12 Physically Integrated Bakken System Andeavor Refinery ANDX Gas Processing ANDX Crude Oil Pipelines ANDX Gas Pipelines ANDX Crude, Gas & Water Pipelines Andeavor Pipeline DAPL ANDX Bakken Storage Hub & Enbridge Connections Robinson Lake Gathering & Processing ND SD MN Premier aggregator with wide geographic footprint and interconnectivity Highly integrated system supplying four Andeavor refineries To Guernsey, WY DAPL Connection Providing crude oil, natural gas, NGL and water services Strong customer value due to multiple takeaway connections Fryburg Rail Terminal Belfield Gathering & Processing Dickinson Refinery To Mandan Refinery Well positioned to capture upside as production increases 11

13 North Dakota NGL Logistics Hub ANDX Gas Processing Facility ANDX Crude Oil Pipelines ANDV Bakkenlink Crude Oil Pipeline Bakkenlink Converted to NGL Service New NGL Pipeline Third Party Gas Processing Facility ND SD MN Provides alternative takeaway optionality for growing natural gas liquids production Converts Bakkenlink segment to NGL service lowers capital outlay and increases utilization Bakkenlink Conversion to NGL Service Expands Belfield Processing facility fractionation capacity Partial operations to commence in 4Q 2018 with full operations in early 2019 New THPP-Fryburg Crude Oil Connection Capex $ million; 6 7 times multiple expected New NGL Loading Fryburg Rail Terminal Expanding Belfield Fractionator 12

14 Wamsutter Pipeline Acquisition February 15, 2018 announced an agreement to acquire the Wamsutter Pipeline System from Plains All American Pipeline, L.P. for $180 million 575 miles of crude oil transportation pipelines supplying Salt Lake City Refineries Green River Basin UT WY CO Ft. Laramie / Guernsey Volumes historically stable between MBD, with high pipeline utilization Reversal project from Ft. Laramie to Wamsutter to enable more advantaged crude oil to Salt Lake City refineries Significant Andeavor commercial and refining synergies Expected annual EBITDA * $20 $24 million Salt Lake City Wamsutter Segment To Flow To Salt Lake City Piceance Basin ANDX Gas Processing ANDX Gas Gathering Wamsutter System Wamsutter Reversal Third Party Pipelines *Represents a non-gaap measure. Please see the Appendix for a definition of this measure and a reconciliation to its most directly comparable GAAP measure Note: Wamsutter is part of the previously announced acquisition from Plains All-American Pipeline L.P., which is anticipated to close in the second quarter of 2018, subject to customary closing conditions including regulatory approval 13

15 Capital Plan and Financial Targets Capital Plan ($ in millions) 3,300 3,300 Maintenance Hybrid/ANDV Equity Available Liquidity Targets $1.0 $2.0 Billion Potential Dropdowns Including Rangeland & Asphalt Terminals ANDV Equity Retained Cash Debt To EBITDA Ratio Annual Growth Investments Approximately 4x At least $1.0 Billion Wamsutter Asset Transfers Growth Capital Uses Debt Sources Annual Maintenance Capital $75 Million (Net) Distribution Growth 6% or greater Distribution Coverage Ratio Approximately 1.1x No public common equity expected through 2020 Asset Transfers are Conan Crude Oil Gathering System and Los Angeles Refinery Interconnect Pipeline, which are expected to be transferred at cost plus accrued interest Asphalt Terminals refer to the announced Andeavor acquisition of Delek US Holdings Asphalt Terminals and Wamsutter refers to the previously announced acquisition from Plains All-American Pipeline L.P. Both transactions are anticipated to close in the second quarter of 2018, subject to customary closing conditions including regulatory approval 14

16 Strategic Relationship With Andeavor Andeavor Premier refiner in western U.S. $16.5 billion market capitalization Investment Grade No IDRs 59% ANDX common LP unit ownership Operations Dropdowns Strategic ANDX assets physically integrated within Andeavor s refining footprint Experienced, proven management team Equity support with dropdowns Robust portfolio of refining and logistics assets Executed ten accretive dropdowns since 2011 Logistics growth key to Andeavor s strategy Major project development support Largest unitholder of ANDX Andeavor growth creates opportunities for ANDV market capitalization as reported by Nasdaq on 4/5/18 15

17 Journey to 2020 Growth Investments Execute at least $1 billion of annual high-return growth investments Permian Grow Permian EBITDA * to $200+ million Bakken Deliver $80+ million of annual EBITDA * from projects Third Party Increase third-party business to 50% of revenues Well-positioned to achieve EBITDA growth, coverage, leverage and distribution growth targets in 2018 and beyond *Represents a non-gaap measure. Please see the Appendix for a definition of this measure and a reconciliation to its most directly comparable GAAP measure 16

18 Appendix 17

19 Non-GAAP Financial Measures Our management uses certain non-gaap operational measures to analyze operating segment performance and non-gaap financial measures to evaluate past performance and prospects for the future to supplement our financial information presented in accordance with accounting principles generally accepted in the United States of America ( GAAP ). These financial and operational non-gaap measures are important factors in assessing our operating results and profitability and include: EBITDA GAAP-based net earnings before interest, income taxes, and depreciation and amortization expenses; Segment EBITDA a segment s GAAP-based operating income before depreciation and amortization expenses plus equity in earnings (loss) of equity method investments and other income (expense), net; We present these measures because we believe they may help investors, analysts, lenders and ratings agencies analyze our results of operations and liquidity in conjunction with our GAAP results, including but not limited to: our operating performance as compared to other publicly traded companies in the marketing, logistics and refining industries, without regard to historical cost basis or financing methods; our ability to incur and service debt and fund capital expenditures; and the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities. Non-GAAP measures have important limitations as analytical tools, because they exclude some, but not all, items that affect net earnings and operating income. These measures should not be considered substitutes for their most directly comparable GAAP financial measures. See Non-GAAP Reconciliations below for reconciliations between non-gaap measures and their most directly comparable GAAP measures. 18

20 Non-GAAP Reconciliations Permian Pro Forma (in millions) Unaudited EBITDA 2017 Pro Forma Net Earnings $ 33 Add: Depreciation and amortization expense 15 Add: Interest and financing costs, net 10 Pro Forma EBITDA $ 58 (in millions) Unaudited 2017 EBITDA Net Earnings $ 373 Add: Depreciation and amortization expense 282 Add: Interest and financing costs, net 322 EBITDA $ 977 (in millions) Unaudited Projected EBITDA WNRL and Synergies from Acquisitions Terminalling and Transportation Growth Permian and Bakken Development 2018E Projected EBITDA Additional Opportunities 2020E Projected EBITDA Projected Net Earnings $ $ $ $ $ 230 $ 965 Add: Depreciation and amortization expense Add: Interest and financing costs, net Projected EBITDA $ $ $ $ 1,200-1,300 $ 350 $ 1,600 Projected Annual (in millions) Unaudited EBITDA 2018E Wamsutter PipelineSystem Acquisition Projected Net Earnings $ Add: Depreciation and amortization expense 6 Add: Interest and financing costs, net 6 Projected EBITDA $ (in millions) Unaudited Projected Annual EBITDA 2020E Conan Crude Oil Gathering System Permian Systems Bakken Systems Projected Net Earnings $ $ 110 $ 65 Add: Depreciation and amortization expense Add: Interest and financing costs, net Projected EBITDA $ $ 200 $ 80 19