Wells Fargo Pipeline, MLP and Utility Symposium

Transcription

1 Wells Fargo Pipeline, MLP and Utility Symposium December 6 & 7, 2016

2 2 Forward Looking Statements and Non-GAAP Measures This presentation contains certain forward-looking statements within the meaning of the federal securities law. Words such as 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, Noble Energy Inc. s ability to meet their 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 that are discussed in its most recent registration statement on Form S-1 and in the Partnership s other reports on file with the Securities and Exchange Commission ( SEC ). These reports are also available from the Partnership s office or website, Forward-looking 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 contains certain non-gaap measures of financial performance that management believes are good tools for internal use and the investment community in evaluating Noble Midstream s overall financial performance. Please see the attached schedules for reconciliations of the non-gaap financial measures used in this presentation to the most directly comparable GAAP financial measures. In this presentation, we refer to certain results as attributable to the Partnership. Unless otherwise noted herein, this reflects the results of the Partnership as if it had been in existence for the entire second and third quarters of 2016 and excludes the non-controlling s in the development companies ( DevCos ) retained by Noble Energy in connection with the closing of our IPO on September 20, We believe the results attributable to the Partnership provide the best representation of the ongoing operations from which our unitholders will benefit. Unless otherwise noted herein, all other results included in this presentation reflect the results of our predecessor for accounting purposes (our Predecessor ), for periods prior to the closing of the IPO, as well as the results of our Partnership, for the 10 day period subsequent to the closing of the IPO.

3 3 Noble Midstream Partners LP Overview Partnership Overview Premier E&P Sponsorship Noble Midstream Partners ( NBLX ) is a midstream MLP formed by sponsor, Noble Energy ( NBL ), to support the development of its leading liquids shale plays NBLX provides a diverse set of midstream services 100% (NYSE: NBL) Crude oil gathering and treating Natural gas gathering Noble Midstream GP LLC ~55% LP Interest / IDRs Produced water and freshwater delivery NBLX s development company ( DevCo ) structure provides multiple avenues for organic and drop down growth NBLX holds significant dedications in two leading U.S. oil shale basins 0-95% Non-Controlling Interests Non-economic GP Interest (NYSE: NBLX) 100% Noble Midstream Services, LLC ~45% LP Interest Public Unitholders DJ Basin 300,000 net acres DevCos 5-100% Controlling Interests Delaware Basin 40,000 net acres NBLX Unit Information NBLX 12/2/2016 Unit Price $32.15 Market Cap ($B) $1.0 Yield 4.7%

4 4 Diverse Midstream Platform in DJ and Delaware Basins Structured for long-term growth; drop-down optionality from ROFRs on NBL retained s Dedicated Service DevCo Colorado River 80% NBLX Controlling Interest IDP Operator Dedicated Acres (~) Wells Ranch NBL 78k East Pony NBL 44k Blanco River 25% Delaware Basin NBL 40k Laramie River 100% Greeley Crescent SYRG Green River 25% Mustang NBL 75k San Juan River 25% East Pony NBL 44k Gunnison River 5% Bronco NBL 36k NBL 33k 32k Crude Oil Gathering Gas Gathering Prod. Water Gathering Fresh Water Delivery

5 About Our Sponsor (1) Leading global exploration and production company with premier U.S. onshore footprint U.S. onshore net unrisked resources of ~7 BBoe 7,000 future drilling locations with avg. lateral length of 8,000 ft. DJ and Delaware combined CAGR of nearly 20% E on base plan Robust preliminary 2017 outlook 2017E total volumes raised nearly 10% from original expectations to MBoe/d Over 70% of 2017E total capital allocation to U.S. onshore DJ Basin, Delaware Basin and Eagle Ford Shale volumes up 25% 2H17E from 2H16 Strong financial position and flexibility Investment grade credit rating at all three rating agencies >$5B of liquidity U.S. Onshore Noble Energy s Core Operating Areas Eastern Mediterranean EMED & Global Offshore Global Offshore 2016E Capital <$1.5B EMED & Global Offshore 2016E MBoe/d 400* USO USO *Adjusted for divestitures Investing in low cost / high value horizontal programs in the DJ Basin, Delaware Basin, Eagle Ford Shale and Marcellus Shale (1) Based on NBL publically available information Delivering natural gas in Israel and positioned to provide regional gas needs via Tamar expansion and Leviathan development Oil-levered assets in the GOM and West Africa providing meaningful cash flow and production 5

6 6 Investment Thesis Strong Sponsor Commitment Large-Cap, investment grade E&P sponsor Strategic midstream vehicle for NBL Incentivized to support NBLX through significant post-ipo ownership (including the General Partner and Incentive Distribution Rights) Strategically Positioned Assets Significant dedications in DJ Basin and Delaware Basin Aligned with NBL capital allocation priorities Diverse midstream services portfolio Visible, Long-Term Growth Opportunities Targeting long-term 20% distribution per unit growth Significant drop down inventory Contractual ROFR on NBL retained midstream assets (1) and future services Long-Term, Fixed-Fee Contracts 15-year, fixed fee contracts Annual rate escalators Financial Flexibility and Strong Capital Structure Undrawn $350 MM revolving credit facility Conservative distribution coverage and leverage ratio 1. Excluding Marcellus Shale

7 7 3Q Highlights and Takeaways Strong 3Q 2016 Financial and Operational Performance Across All Business Segments Record gathering volumes; oil and gas of 63.0 MBoe/d and produced water of 11.6 MBw/d Connected 45 equivalent wells to gathering system in the quarter (1) Record fresh water delivery volumes of MBw/d Nearly 3.0x more per lateral foot than average of prior six quarters Nearly all of the 42 equivalent wells completed in the quarter were enhanced slickwater completions Net Income and Net Cash Provided by Operating Activities of $22.4 million and $33.6 million, respectively, on a gross basis Gross EBITDA (2) of $38.2 million, with $29.6 million attributable to NBLX, up 63% from prior quarter DCF (2) attributable to NBLX of $27.7 million (2.3x cash coverage), with $3.1 million for 10 day post IPO period Oil and gas gathered volumes up 7% from 2Q 16 on $8.0 million of capital Primarily gathering system extensions in East Pony and Wells Ranch First quarterly distribution will be declared following the conclusion of the fourth quarter (3) 1. Normalized to 4,500 lateral length 2. EBITDA and DCF are not measures calculated and presented in accordance with accounting principles generally accepted in the U.S. ( GAAP ). Definitions and reconciliations of these non-gaap measures to GAAP reporting measures appear in the Appendix. 3. Initial distribution will include adjustment for the 10 day period from the closing of the initial public offering to the start of the fourth quarter

8 Gathering Increasing Share of NBL DJ Horizontal Volumes NBLX Gathered Volumes and NBL DJ Basin Gross Horizontal Production (1) Gross Volumes (MBoe/d) NBLX Gathered Volumes as % of NBL Gross Hz. Production 4Q 13 4Q 14 4Q 15 1Q 16 2Q 16 3Q 16 20% 30% 49% 51% 52% 53% NBLX Gathered Volumes NBL Gross Horizontal Volumes 1. NBL gross volumes assume 78% NBL net revenue 8

9 3Q 2016 Results and Coverage MQD Coverage of 2.3x; MQD Coverage of 1.7x with normalized freshwater use Ample 3Q 16 Coverage in Normalized Freshwater Environment 3Q 2016 NBLX Net EBITDA (1,2) 3Q 2016 Net EBITDA of $29.6 million and DCF of $27.7 million, with implied coverage of 2.3x the MQD Driven by strong underlying gathering business performance and significant increases in freshwater delivery volumes $40.0 $ x 2.3x $29.6 Normalizing the 3Q 2016 freshwater delivery volumes to 1H 2016 average volumes / equivalent well results in $22.2 million in Net EBITDA and DCF that covers the MQD by 1.7x $20.0 $17.1 $22.2 Gathering segment alone covers the MQD by greater than 1.2x Expect freshwater delivery segment to continue to exceed historical volume levels per equivalent well $10.0 x Implied DCF Coverage at MQD Actual Freshwater Delivery EBITDA Normalized Freshwater Delivery EBITDA (3) $0.0 Gathering EBITDA Note: MQD refers to Minimum Quarterly Distribution; coverage based on 3Q 2016 unit count 1. Figures are Non-GAAP; see reconciliation to GAAP measures in Appendix 2. G&A allocated to gathering and freshwater delivery based on proportionate share of EBITDA; coverage figures reflect full net G&A and net maintenance capital totals 3. Assumes 1H 2016 average water volumes / equivalent well and 3Q16 wells completed 9

10 Gross Volumes Activity 10 4Q Guidance Continued Outperformance In All Segments as Key 2017 Growth Projects Progress Continued volume outperformance driving projected >2.0x Coverage 3Q 2016 Actuals 4Q 2016 Current Est. Oil Gathered (MBbl/d) Gas Gathered (BBtu/d) Q expected equivalent wells completed in excess of previous guidance Oil and Gas Gathered (MBoe/d) Produced Water Gathered (MBw/d) Fresh Water Delivered (MBw/d) Anticipate 4Q average water per equivalent well of ~250 MBw 150% above 1Q 15 2Q 16 Average Majority of 4Q Completions in East Pony Lower controlling in San Juan River DevCo reduces EBITDA as % attributable to the Partnership Financials ($MM) (1) Gross EBITDA $38.2 $36 $40 Net EBITDA $29.6 $26 $29 Distributable Cash Flow* $27.7 $24 $27 Implied Cash Coverage (at MQD)* 2.3x 2.0x 2.2x Total Capital Spending $8.0 $20 $25 Eq. Wells Connected Eq. Wells Completed Includes Non-GAAP measures; see reconciliation to GAAP measures in Appendix * Assumes no additional common units issued during 4Q 2016

11 Gathering Volumes Ahead of Initial Forecast Equivalent Wells Connected (1) Oil and Gas Gathered (MBoe/d) Average = Q '15 2Q '15 3Q '15 4Q '15 1Q '16 2Q '16 3Q '16 4Q '16 (E) Produced Water Gathered (MBw/d) Q '15 2Q '15 3Q '15 4Q '15 1Q '16 2Q '16 3Q '16 4Q '16 (E) 0 1Q '15 2Q '15 3Q '15 4Q '15 1Q '16 2Q '16 3Q '16 4Q '16 (E) 1. Normalized to 4,500 lateral length 11

12 Fresh Water Delivery Volumes Remain Strong 4Q daily fresh water volumes relatively flat on increased completion activity with lower per well use Recent trending in fresh water per well expected to continue into 4Q as NBL continues to focus on enhanced slickwater completions S-1 forecast assumed water per equivalent well in line with early 2015 use Estimated increased completion activity in 4Q Fresh Water Delivered (MBw/equivalent well) (1) Q 15 2Q 16 Average = ~200% Higher than 1Q15 2Q16 Average Q '15 2Q '15 3Q '15 4Q '15 1Q '16 2Q '16 3Q '16 4Q '16 (E) Equivalent Wells Completed (1) Fresh Water Delivered (Mbw/d) Average = Q '15 2Q '15 3Q '15 4Q '15 1Q '16 2Q '16 3Q '16 4Q '16 (E) 0 1Q '15 2Q '15 3Q '15 4Q '15 1Q '16 2Q '16 3Q '16 4Q '16 (E) 1. Normalized to 4,500 lateral length 12

13 13 NBL Accelerating Activity on NBLX Dedicated Acreage NBL activity plans well ahead of NBLX assumption through (E) Rig Assumptions (3) 2020(E) +25% On NBLX dedicated acreage, NBL Base Case (1) is ~ 2 rigs above prior NBLX estimate in 2017 and Increase of 49% for 2017 vs. prior expectations Upside Case (2) has 3 additional rigs in 2020 on NBLX acreage +49% % of NBL USO Capital focused on NBLX dedicated acreage (DJ and Delaware) and ROFR acreage (Eagle Ford) Formal 2017 Budget and Capital Program is expected to be finalized early in 2017 NBLX Prior Estimate NBL Updated Base Case DJ Basin (3) NBLX Prior Estimate Delaware Basin NBL Updated Base Case 1. Base Case Assumes $50 WTI in Upside Case $60 WTI in Excludes 3 rd party rigs on dedicated acreage

14 DJ Basin DJ Basin: Foundational Asset for NBL USO (1) 2 BBoe with large, high-quality, contiguous acreage position Creating differential value with long laterals, midstream advantage and high liquids content 2016 well performance 15% above rigs delivers same lateral footage as 9 rigs in wells on average per rig year (based on actual lateral lengths) Continued expansion of necessary NBLX infrastructure to support growth IDP 3 Stream EUR (MBoe) Lateral Length (ft.) Commodity Mix % (Oil / NGL / Gas) Gross Locations Equivalent Locations (2) Wells Ranch 1,000 9, / 30 / ,140 East Pony 570 7, / 10 / Mustang 975 9, / 30 / ,921 Bronco 900 7, / 30 / ,067 Greeley Crescent 900 9, / 30 / ,077 NBLX Dedicated 1. Based on NBL publically available information 2. Normalized to 4,500 lateral length 14

15 Delaware Basin Delaware Basin: Long-term Growth Engine for NBL 1 BBoe in the heart of the Delaware WCA Type Curve Up 20% per lateral foot NBL Accelerating into Full Development Mode 0.5 rigs in 2016 to 3 rigs in 2017(E) 15 wells on average per rig year (based on actual lateral lengths) NBLX facility startup 2Q 2017(E) Significant Improvements from Initial NBL Wells Stronger well performance with higher proppant loading and shorter stages Testing higher proppant concentration upside IDP 3 Stream EUR (MBoe) Lateral Length (ft.) Commodity Mix % (Oil / NGL / Gas) Gross Locations Equivalent Locations (1) 3 rd Bone Spring 920 7, / 15 / Wolfcamp A (Lower & Upper) 1,200 7, / 15 / ,158 Wolfcamp B 1,135 7, / 15 / Wolfcamp C 900 7, / 15 / NBLX Dedicated 1. Normalized to 4,500 lateral length 15

16 16 Asset Overview & Projects Update Growth projects remain on schedule for 2017 startups DJ Basin DJ Basin Updates Laramie River 100% Interest GREELEY CRESCENT Weld County, CO WELLS RANCH EAST PONY Colorado River San Juan River 25% Interest Greeley Crescent infrastructure (3Q 17) Wells Ranch Produced Water Expansion (1Q 17) Mustang infrastructure (YE 2017) 80% Interest BRONCO Delaware Basin Gunnison River MUSTANG 5% Interest Green River 25% Interest Delaware Basin Updates Oil and Produced Water Systems & 1 st Central Gathering Facility (2Q 17) Blanco River 25% Interest 2 nd Central Gathering Facility (4Q 17) Reeves County, TX

17 17 Appendix

18 Strong 3Q Results and Exceptional Future Growth Runway NBLX s development company ( DevCo ) structure provides multiple avenues for organic and drop down growth Anchor Business Organic Growth Opportunities Colorado River (Wells Ranch and East Pony) Green River (Mustang) San Juan River (East Pony) Laramie River (Greeley Crescent) Blanco River (Delaware Basin) Gunnison River (Bronco) White Cliffs Crude oil and natural gas gathering Water services (WR) Crude oil and natural gas gathering Water services Water Services Crude oil gathering Water services Crude oil gathering Produced water services Crude oil gathering Water services ~3.3% Equity Interest 63.0 MBoe/d oil and gas gathered 11.6 MBw/d produced water gathered MBw/d FW Delivered $4.7mm Capex 3.3 MBw/d FW Delivered $0.4mm Capex 19.2 MBw/d FW Delivered $0.2mm Capex $2.1mm Capex Service begins 3Q 17 $0.6mm Capex Service beings 2Q 17 Future development No development assumed in 5 years ~$1.1mm income from equity investment NBLX Ownership % 80% 25% 25% 100% 25% 5% $ in million (1) Dedicated Service Gross EBITDA (Pre-G&A) G&A Expense Gross EBITDA Net EBITDA Maintenance Capex Distributable Cash Flow Implied Cash Coverage (at MQD) $40.8 ($2.6) $38.2 $29.6 ($1.9) $ x Net Capex 3Q 2016 Cash Balance RCF Balance Outstanding RCF Capacity Total Liquidity $6.2 $ $350.0 $397.5 Drop down flexibility through NBL s retained DevCo s and other midstream assets Note: MQD refers to Minimum Quarterly Distribution; coverage based on 3Q 2016 unit count 1. Figures are Non-GAAP; see reconciliation to GAAP measures in Appendix 18

19 19 EBITDA Reconciliation Non-GAAP Financial Measures This presentation includes EBITDA and Distributable Cash Flow, both of which are non- GAAP measures which may be used periodically by management when discussing our financial results with investors and analysts. The following presents a reconciliation of each of these non-gaap financial measures to their nearest comparable GAAP measure. $ in millions 4Q '16 Current Est. 3Q '16 Actual We define EBITDA as net income before income taxes, net 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. 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 (the Board ) 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 measure most directly comparable to EBITDA and Distributable Cash Flow is net income. 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. Net Income $34 - $37 $22.4 Add: Depreciation and Amortization Add: Interest Expense, Net of Amount Capitalized Add: Income Tax Provision EBITDA $36 - $40 $38.2 Less: EBITDA Attributable to Noncontrolling Interests EBITDA Attributable to NBLX $26 - $29 $29.6 Less: Maintenance Capital Expenditures Distributable Cash Flow of NBLX $24 - $27 $27.7 EBITDA and Distributable Cash Flow exclude some, but not all, items that affect net income, and these measures may vary from those of other companies. As a result, EBITDA and Distributable Cash Flow as presented herein may not be comparable to similarly titled measures of other companies. EBITDA and Distributable Cash Flow should not be considered as alternatives to GAAP measures, such as net income, operating income, cash flow from operating activities, or any other GAAP measure of financial performance.

20 20 IDP/DevCo/Dedication Table NBLX Asset Overview DevCo Areas Served NBLX Dedicated Service Current Status of Asset Colorado River Wells Ranch IDP Crude Oil Gathering Natural Gas Gathering Water Services Dedicated Net Acreage Existing / Planned System Capacity Operational 79,000 (4) Oil: 50 MBbl/d Gas: 165 MMcf/d Saltwater: 30 MBw/d East Pony IDP Crude Oil Gathering Operational 44, MBbl/d NBLX Ownership 80% Gross Capital Spent to Date $249mm All Noble DJ Basin Acreage Crude Oil Treating Operational N/A (1) ~4,600 MBbl per year Green River Mustang IDP (2) Natural Gas Gathering Crude Oil Gathering Water Services Under Construction Under Construction Partially Operational 75,000 Oil: 50 MBbl/d Gas: 275 MMcf/d Saltwater: 20 MBw/d 25% $16mm Blanco River Delaware Basin Crude Oil Gathering Produced Water Services Under Construction 40,000 (5) Oil: 60 MBbl/d Saltwater: 75 MBw/d 25% $0mm Laramie River Greeley Crescent IDP (3) Crude Oil Gathering Water Services Under Construction 65,000 (3) Oil: 60 MBbl/d Saltwater: 20 MBw/d 100% $0mm San Juan River East Pony IDP (6) Water Services Freshwater Operational Produced Water Planned 44,000 ~10 mi. of FW delivery pipe 25% $15mm Gunnison River Bronco IDP (2) Crude Oil Gathering Water Services Future Development 36,000 (4) TBD 5% $0mm Total ~340,000 $292mm $ 1. Crude oil treating fee is not acreage based. NBLX receives monthly fee for each Noble operated well producing in paying quantities in Weld County not connected to NBLX crude oil gathering systems during each month, which was 4,480 wells as of June 30, NBLX currently has limited midstream infrastructure assets in the Mustang IDP and no midstream infrastructure assets in the Bronco IDP. The assets in these IDP areas currently consist primarily of dedications to us from Noble for future production in these IDP areas. In the Mustang IDP, NBLX also owns one fresh water storage pond and certain rights-of-way and surface rights. NBLX anticipates the first centralized facility servicing the Mustang IDP and related gathering infrastructure to be in service by the end of NBLX assets in Greeley Crescent IDP currently consist of dedications from Noble and an unaffiliated third party. On May 3, 2016, Noble announced a sale of approximately 33,000 net acres to such third party. All acreage in the Greeley Crescent IDP remains subject to the dedication in favor of NBLX for crude oil gathering, produced water services and fresh water services. 4. On June 15, 2016, Noble entered into an acreage swap pursuant to which Noble will increase its holdings in the Wells Ranch IDP by approximately 11,700 net acres in exchange for reducing its in the Bronco IDP by approximately 13,500 net acres. Upon completion, all of the outbound acreage in the Bronco IDP will be released from the prior dedications to NBLX, and the inbound acreage in the Wells Ranch IDP will become dedicated to NBLX. After giving effect to this acreage swap, the dedication in the Wells Ranch IDP is approximately 79,000 net acres and the dedication in the Bronco IDP is approximately 36,000 net acres. 5. Includes acreage currently dedicated to other providers for produced water services and committed to NBLX upon expiration of existing dedications. The majority of these dedications will expire or are expected to be terminated by Noble by the time NBLX s planned infrastructure is operational in NBLX currently provides produced water services through third party transportation providers and saltwater disposal facilities, and may provide additional produced water services in the future.

21 21 NBLX Structure Noble Energy, Inc. NYSE: NBL ROFR Assets: East Pony Gas Gathering East Pony Gas Processing Eagle Ford Shale Midstream Additional DJ Acreage Additional Delaware Basin Services [TBD]% 54.8% limited partner Noble Midstream Partners LP NYSE: NBLX 100% 100% Noble Midstream GP LLC Noneconomic general partner 45.2% [TBD]% limited limited partner partner Public Unitholders (LP) Noble Midstream Services, LLC 3.33% nonoperating membership White Cliffs Pipeline, L.L.C. 80% controlling 100% controlling 25% controlling 25% controlling 25% controlling 5% controlling Colorado River Laramie River Blanco River Green River San Juan River Gunnison River 20% noncontrolling 75% noncontrolling 75% noncontrolling 75% noncontrolling 95% noncontrolling Wells Ranch IDP Crude Oil Gathering Natural Gas Gathering Water Services East Pony IDP Crude Oil Gathering Other DJ Basin Facilities Crude Oil Treating Facilities Greeley Crescent IDP Crude Oil Gathering Water Services Delaware Basin Crude Oil Gathering Produced Water Services Mustang IDP Future Development Crude Oil Gathering Natural Gas Gathering Water Services East Pony IDP Water Services Bronco IDP Future Development Crude Oil Gathering Water Services

22 John Bookout Chief Financial Officer Contact Information Chris Hickman VP, Investor Relations Noble Energy Way Houston, TX 77070