Saddle Butte Acquisition Creating the Premier DJ Basin Crude Gathering Portfolio

Transcription

1 Saddle Butte Acquisition Creating the Premier DJ Basin Crude Gathering Portfolio December 12, 2017

2 Disclaimer This presentation contains certain forward-looking statements within the meaning of the federal securities law. Words such as could, anticipates, believes, expects, intends, will, should, may, estimate and similar expressions may be used to identify forward-looking statements. Forward-looking statements are not statements of historical fact and reflect Noble Midstream Partners LP s ( the Partnership or Noble Midstream ) current views about future events. No assurances can be given that the forward-looking statements contained in this presentation will occur as projected, and actual results may differ materially from those projected. Forward-looking statements are based on current expectations, estimates and assumptions that involve a number of risks and uncertainties that could cause actual results to differ materially from those projected. These risks include, without limitation, the Partnership s ability to consummate and successfully integrate the acquisition as described herein and the anticipated financing transactions in connection therewith, the ability of Noble Energy, Inc. ( NBL ) to meet its drilling and development plans, changes in general economic conditions, competitive conditions in the Partnership s industry, actions taken by third-party operators, gatherers, processors and transporters, the demand for crude oil and natural gas gathering and processing services, the Partnership s ability to successfully implement its business plan, the Partnership s ability to complete internal growth projects on time and on budget, the price and availability of debt and equity financing, the availability and price of crude oil and natural gas to the consumer compared to the price of alternative and competing fuels, and other risks inherent in the Partnership s business, including those described under Risk Factors and Forward-Looking Statements in the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and in the other reports the Partnership files with the Securities and Exchange Commission. These reports are available to the public at the SEC s web site at Forwardlooking statements are based on the estimates and opinions of management at the time the statements are made. Noble Midstream does not assume any obligation to update forward-looking statements should circumstances or management's estimates or opinions change. This presentation also discusses certain measures of financial performance that are not calculated in accordance with generally accepted accounting principles in the United States ( GAAP ) that management believes are good tools for internal use and the investment community in evaluating Noble Midstream s overall financial performance. Please see the Appendix for a discussion of the non-gaap financial measures discussed in this presentation. 2

3 Strategic DJ Basin Acquisition and Partnership Tra sactio Overvie Joi t Ve ture Structure 2 Noble Midstream has formed a joint venture with Greenfield Midstream (backed by Encap Flatrock) to acquire Saddle Butte Pipeline (or SBP ) for $625mm 1 NBLX to fund 50% of transaction ($312.5mm) for 54.4% of joint venture economics; NBLX will operate and control the asset NBLX expects to fund the transaction with proceeds from a common unit issuance and borrowings under its revolving credit facility SBP provides crude gatheri g, oi storage, a d termi a b e di g so utio s ith access to a DJ Basi takea ay out ets PDC is key anchor customer PDC is expected to expand acreage dedication and extend contract term upon transaction close Tra sactio is expected to be accretive to Distributab e Cash Flow Per Unit ( DCFPU ) in Year One and maintains NBLX s conservative leverage profile 4.4% promote improves asset returns Enhances NBLX s commercial opportunity set NBLX and Greenfield Midstream to jointly provide commercial efforts to attract further producer dedications (Laramie DevCo) 54.4% economic ownership including promote 50% of purchase price 45.6% economic ownership 50% of purchase price B ack Diamo d Gatheri g, LLC (Ne Co) 100% Sadd e Butte Pipe i e Acquired E tities 1. Subject to closing and post closing adjustments. Transaction expected to close in Q1 2018, subject to regulatory approvals and certain closing conditions 2. Simplified organizational structure. Does not include all intermediary entities and subsidiaries 3

4 Investment Thesis Further Enhancing Financial Outlook and Growth Runway SBP Acquisitio / B ack Diamo d JV Expected to be Accretive to Distributable Cash Flow ( DCF ) 1 per Unit in Year One Attractive Entry Multiple with JV promote in a high-growth asset in premier liquids basin Conservative activity assumptions; base acquisition case does not include contributions from PDC contract amendment or any existing NBLX dedications Expected to compress to organic build-like multiples without incremental contribution from NBLX / PDC Pro-Forma Nob e Midstream Part ers Extended 20% DPU growth runway Strengthens best-in-class distribution coverage Near and long-term financial leverage expected to remain <2.5x Remain focused on 50% / 50% DJ Basin / Delaware Basin EBITDA mix by DCF is not a Generally Accepted Accounting Principles ("GAAP") measure. Definitions of these non-gaap measures appear under Non-GAAP Financial Measures, in the Appendix. 4

5 Transaction Rationale Strategic Asset A premier oil gathering system located in the core of the DJ Basin Complementary to existing infrastructure Connectivity to every downstream takeaway option in DJ Basin 1 Attractive Metrics Expected to be accretive to DCFPU in Year One NBLX received a 4.4% ownership promote Significant multiple compression through time as asset matures NBLX retains conservative leverage profile Focused Partners Combined Business Development effort from NBLX and Greenfield Greenfield brings experienced team with focus on commercial success of asset Synergies Existing SBP pipeline network footprint provides NBLX meaningful capital avoidance opportunities Significant operational synergies expected to be realized in Year One Scale Total dedicated acres of ~141K from existing customers 2 Significant undedicated acreage in catchment area NBLX has significant existing dedicated / ROFR acreage within and around the pipeline system Blue Chip Customers Six existing customers, including two of the larger acreage holders in the basin PDC anchors existing acreage dedication and is expected to expand and extend dedication upon closing 1. Subject to completion of Tallgrass s Platteville extension 2. Includes PDC s amended contract terms expected to be effective upon closing of the acquisition 5

6 Saddle Butte is an Integrated Crude Oil Gathering System Sadd e Butte Pipe i e Overvie Sadd e Butte System Map Large-scale integrated gathering system located in the core of the DJ Basin with ~160 miles of pipeline in operation and delivery capacity of >300 MBbl/d Early mover advantage long term contracts supported by top-tier producers System was constructed in 2015 Large acreage dedications and footprint provide a high degree of visibility into expected volume growth Contracted under fixed fee, long-term agreements Strategic footprint and system design that provides maximum flexibility Terminal blending solutions; opportunity for varying crude gravities Two terminal sites with current storage tank capacity of 210 MBbl (~300 MBbl by Q and permitted for 990 MBbl) Downstream connectivity with every major crude outlet Only DJ Basin midstream service provider with ability to deliver simultaneously to all major long-haul crude outlets in the region Grand Mesa, Saddlehorn, White Cliffs and Pony Express (under construction) NBLX Existing Oil Infrastructure SBP System SBP Storage and Terminals Current throughput of ~55 MBbl/d 6

7 Strategic Expansion of NBLX s Existing Asset Footprint Curre t NBLX System Pro Forma System NBLX Existing Infrastructure NBLX Planned Infrastructure z NBLX Dedicated / ROFR Acreage NBLX Existing Infrastructure NBLX Planned Infrastructure NBLX Dedicated / ROFR Acreage SBP System z SBP Dedicated Acreage Incremental PDC Dedication SBP system provides NBLX flexibility to enhance economic benefit from existing dedications Existing SBP footprint provides NBLX >$70mm in capital savings opportunities SBP overlaps much of NBLX planned infrastructure Adds storage and terminal blending solution to NBLX portfolio Improves NBLX third-party acreage mix from ~20% to ~45% of DJ Basin dedicated acres 7

8 Driving Incremental Value The acquisition further enhances a high-growth asset with a history of commercial success + Standalone Track Record of Success 1 1 Contract Footprint Assets In Our Hands: Incremental Value Drivers Noble Midstream 2 115K dedicated acres u der o g-term co tracts a d fixed fee arra geme ts (before PDC ame dme t) Footpri t covers 23 to ships a d over 500K acres 6 co tracted customers Average of 7 dedicated rigs o system i 2017 Key Metrics Curre t throughput of ~55 MBb /d ~150%+ growth from Q $625mm valuation attractive and is based on standalone asset forecast Conservative activity growth from existing customers Conservative additional commercial success No PDC contract amendment or NBL uplift 2 C ose proximity to ~300K NBLX dedicated acres Abi ity to strategica y co tribute vo umes/acreage through time Greenfield Midstream Dedicated team to co ti ue commercia izatio mome tum Impressive track record of va ue creatio ith deep DJ Basi experie ce PDC Energy Contract Amendment Effective Upon Close Expa sio of PDC dedicatio footpri t to ~96K acres (+24K acres versus sta da o e) Brings total SBP dedications to ~141K acres across all six customers Exte sio of co tract duratio 8

9 Third Party M&A: NBLX Playbook M&A Strategy Focused on acquiring assets that NBLX can bring more to than the competition Differe tiated Va ue Creatio Attractive Tra sactio Metrics NBLX ownership promote of 4.4% ~300K existing dedicated acres to NBLX in SBP catchment area Expansion of existing SBP dedication (PDC) Capital avoidance opportunities Attractive entry multiple for high-growth asset in premier oil basin; expected to compress to organic build-like multiples without incremental contribution from NBLX / PDC Expected to be accretive to DCFPU in Year One Post-c ose co tract executio : NBL Rosetta acreage dedication Plains Transportation Agreement Acquired at near new build cost Immediately accretive to DCFPU E ha ci g Third- Party Customer P atform Core DJ Basin asset adjacent to substantially all major operating areas Six third-party contracted customers with 141K dedicated acres Core Delaware Basin asset positioned for thirdparty success Blue chip midstream partner in Plains All American Preservatio of Orga ic Story Maintains NBLX s differentiated status on coverage, leverage and growth Resu ts December 2017 nominations of ~60 MBbl/d Greater than 100% above April 2017 volumes (initial month following transaction close) Greater than 33% above acquisition case 9

10 Appendix 10

11 Non-GAAP Financial Measures This presentation references EBITDA and Distributable Cash Flow, both of which are non-gaap measures that may be used periodically by management when discussing our financial results with investors and analysts. We define EBITDA as net income before income taxes, net interest expense, depreciation and amortization. EBITDA is used as a supplemental financial measure by management and by external users of our financial statements, such as investors, industry analysts, lenders and ratings agencies to assess: our operating performance as compared to those of other companies in the midstream energy industry, without regard to financing methods, historical cost basis or capital structure; the ability of our assets to generate sufficient cash flow to make distributions to our partners; 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. We define Distributable Cash Flow as EBITDA less estimated maintenance capital expenditures and cash interest paid. Distributable Cash Flow is used by management to evaluate our overall performance. Our partnership agreement requires us to distribute all available cash on a quarterly basis, and Distributable Cash Flow is one of the factors used by the board of directors of our general partner to help determine the amount of available cash that is available to our unitholders for a given period. We believe that the presentation of EBITDA and Distributable Cash Flow provide information useful to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to EBITDA and Distributable Cash Flow are net income and net cash provided by operating activities. EBITDA and Distributable Cash Flow should not be considered alternatives to net income, net cash provided by (used in) operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA and Distributable Cash Flow exclude some, but not all, items that affect net income or net cash, and these measures may vary from those of other companies. As a result, EBITDA and Distributable Cash Flow may not be comparable to similarly titled measures of other companies. 11

12 NBLX Structure Nob e E ergy NYSE: NBL 100% ROFR Assets: East Pony Gas Gathering East Pony Gas Processing Eagle Ford Shale Midstream Additional DJ Acreage Additional Delaware Basin Services 50.1% Limited Part er I terest 1 Nob e Midstream Part ers LP NYSE: NBLX 100% Nob e Midstream GP LLC No -Eco omic Ge era Part er I terest Pub ic U itho ders (LP) 49.9% Limited Part er I terest 1 Nob e Midstream Services, LLC 3.33% No -Operati g Membership I terest White C iffs Pipe i e L.L.C. Co tro i g I terest 40% 25% 25% 5% 100% 100% 100% B a co Gree Sa Jua Gu iso Co orado Laramie Tri ity 1. As of 12/1/2017 No -Co tro i g I terest 60% 75% 75% 95% 54.4% B ack Diamo d JV 50% Adva tage JV 12

13 Co tact I formatio Chris Hickman VP, Investor Relations chris.hickman@nblmidstream.com Noble Energy Way Houston, TX 77070