Hiland Partners, LP (HLND) Hiland Holdings GP, LP (HPGP)

Transcription

1 Hiland Partners, LP (HLND) Hiland Holdings GP, LP (HPGP) 2006 RBC Master Limited Partnership Conference Four Seasons Hotel at Las Colinas, Dallas, TX November 16 & 17, 2006 Randy Moeder Chief Executive Officer, President and Director

2 Risks and Forward-Looking Statements Investment in the common units of Hiland Partners, LP and Hiland Holdings GP, LP (collectively Hiland or the Partnership ) involves risks associated with the Partnership s business, the Partnership s structure and the tax characteristics of the common units. These risks can significantly impact the market value of Hiland s common units. The statements made by representatives of Hiland during the course of this presentation that are not historical facts are forward-looking statements. Although Hiland believes that the assumptions underlying these statements are reasonable, investors are cautioned that such forward-looking statements are inherently uncertain and necessarily involve risks that may affect Hiland s business prospects and performance, causing actual results to differ from those discussed during this presentation. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements included in Hiland s various filings with the Securities & Exchange Commission ( SEC ). Any forward-looking statements made are subject to all of the risks and uncertainties, many of which are beyond management s control, involved in gathering, compressing, dehydrating, treating, processing and marketing natural gas, fractionating NGLs and providing air compression and water injection services for oil and gas secondary recovery operations. These risks include the risks described in the Preliminary Prospectus. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, Hiland s actual results and plans could differ materially from those expressed in any forward-looking statements. The Partnership undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information or future events. 2

3 An Overview of Hiland Ownership Structure Hiland Holdings GP, LP (Nasdaq: HPGP) 2.0% G.P. Interest 57% L.P. Interest Hiland Partners, LP (Nasdaq: HLND) All Assets & Operations Public Unitholders 41% L.P. Interest Strong operational and financial attributes Modern, strategically located assets Proven track record of executing growth strategy Over $248 million of acquisitions / internal growth projects announced / closed in the last twelve months Visible inventory of growth prospects Strong distribution coverage Financial flexibility to fund growth Broad range of midstream services Experienced management team HPGP Market Capitalization: HLND Market Capitalization: $525 million $450 million Management s interests are aligned with unitholders 3

4 Business Strategy Engage in construction and expansion opportunities Unique relationship with Continental Resources, Inc. Construct and expand systems to meet growing demand Pursue complementary acquisitions Target opportunities that offer operational efficiencies and increased utilization Increase volumes on existing assets Reduce exposure to commodity price risk Grow distributions to unitholders 4

5 Background & Continental Resources, Inc. Relationship Hiland s predecessor formed in 1990 to support privately-held Continental Resources, Inc. s ( CRI ) E&P activities CRI is a large E&P company with an active drilling program Mid-Continent and Rocky Mountain regions Specializes in horizontal drilling and large exploration activities Focuses on areas without existing gathering infrastructure HLND, HPGP and CRI are separate entities with Harold Hamm as the controlling equity holder of both CRI contributed 31% of HLND s total natural gas revenue for the nine months ended September 30, 2006 Hiland s relationship with CRI has enabled it to significantly expand its asset base Bakken Acquisition Badlands Expansion 5

6 Midstream Natural Gas Industry Transmission Lines Hiland Partners Midstream Focus Transmission Lines End Users Wellhead Gathering, Dehydration and Compression Processing, Treating and Fractionation NGL Products Transportation Marketable NGL Products 6

7 HLND Distribution Growth Since IPO Hiland Partners has increased its cash distribution every quarter since its IPO Annualized Quarterly Distribution $3.20 $2.80 $2.50 $2.60 $2.70 $2.80 $2.40 $2.00 $1.60 $1.20 $1.80 $1.85 $ % growth Q3 '06 vs. Q1 '05 $0.80 $0.40 $0.00 (1) 05Q1 05Q2 05Q3 05Q4 06Q1 06Q2 06Q3 1. Represents the MQD of $0.45 ($1.80 annualized). A pro rata portion of the MQD ($0.225) was paid for the first quarter of

8 Strong Price Performance Since IPO Consistent track record of organic and acquisition-oriented growth and increased distributions Indexed Price Performance (%) /26/05: HLND announces distribution increase to $1.85 per unit (annualized). 2/10/05: HLND prices IPO at $22.50 per unit with MQD of $1.80 per unit. 9/12/05: HLND announces Bakken acquisition ($95 million). 10/25/05: HLND announces distribution increase to $2.05 per unit (annualized). 11/10/05: HLND announces Badlands expansion ($40 million). 1/24/06: HLND announces distribution increase to $2.50 per unit (annualized). 3/30/06: HLND announces acquisition of Enogex gathering assets ($93 million). 4/26/06: HLND announces distribution increase to $2.60 per unit (annualized). 8/23/06: HLND announces planned expansion projects ($15 million). 7/25/06: HLND announces distribution increase to $2.70 per unit (annualized) % 10/24/06: HLND announces distribution increase to $2.80 per unit (annualized) % +15.1% 100 9/19/06: HPGP prices IPO at $18.50 per unit with MQD of 10/24/06: HPGP announces $0.74. initial distribution increase to $0.81 per unit (annualized). 75 2/10/05 5/11/05 8/9/05 11/4/05 2/6/06 5/5/06 8/3/06 10/31/06 Hiland Partners, LP Hiland Holdings GP, LP S&P 500 8

9 Asset Overview

10 Hiland Cash Flow Growth Supported by High Quality Asset Base Badlands Gathering System Bakken Gathering System Worland Gathering System Matli Gathering System Enid, OK Corporate Headquarters Enid Pipeline Cedar Hills Compression Facility Eagle Chief Gathering System Stovall Kinta Gathering System Hiland Partners is a growth-oriented midstream MLP 1,800 miles of pipelines 13 gathering systems 5 processing plants 3 treating facilities 3 fractionation facilities 2 air compression facilities Water injection plant Nine months ended September 30, 2006: 64.8 MMBtu/d of natural gas sales 72.7 MMBtu/d of natural gas gathered 3,256 Bbls/d of NGL sales HLND EBITDA for the LTM ended 9/30/06 of ~ $40.5 million (1) Driscoll 1. EBITDA is defined as net income (loss) plus interest expense, provision for income taxes and depreciation, amortization and accretion expense.. 10

11 Execution of Business Strategy Bakken Gathering System Operating Highlights 302 miles of pipelines 207 wells connected 25,000 Mcf/d processing plant capacity Fractionation facility 34.8% of total segment margin for the nine months ended September 30, 2006 Acquired in Sept for $95 million from an affiliate of Hiland s G.P. Expansion of gathering and compression infrastructure to improve efficiency Expected to be completed in 4Q 2006 Expansion of NGL fractionation facilities Increased volumes from Bakken and Badlands Plants Expected to be completed in 2Q 2007 Major Gas Suppliers: Enerplus CRI Burlington 11

12 Execution of Business Strategy Badlands Gathering System Operating Highlights 141 miles of pipeline 105 wells connected 5,000 Mcf/d processing plant capacity Treating facility Fractionation facility 7.6% of total segment margin for the nine months ended September 30, 2006 Announced significant expansion of system in Nov $40 million capex in 2006; $9.5 million in 2007 Constructing a 40 MMcf/d nitrogen rejection plant Expanding gathering infrastructure 15 year agreement with CRI 50% / 50% POP (with fees) $3 million project to expand into South Dakota Completed on October 10, 2006 Major Gas Suppliers: CRI Luff Burlington 12

13 Execution of Business Strategy Badlands Air Compression and Water Injection Facilities CRI secondary recovery operations 8 compression units 29,300 of horsepower in aggregate Compress air to 4,000 psig Inject water at 2,000 psig Fixed-fee take-or-pay type contracts 8.0% of total segment margin for the nine months ended September 30,

14 Execution of Business Strategy Worland Gathering System Operating Highlights 151 miles of pipeline 94 wells connected 8,000 Mcf/d processing plant capacity Treating facility Fractionation facility 7.8% of total segment margin for the nine months ended September 30, 2006 Natural gas supplied under long-term POI contracts Residue gas sold to intrastate markets Major Gas Suppliers: CRI KCS 14

15 Execution of Business Strategy Matli Gathering System Operating Highlights 49 miles of pipelines 44 wells connected Currently, 10,000 Mcf/d processing plant capacity Treating facility 6.6% of total segment margin for the nine months ended September 30, 2006 Announced construction of a new natural gas plant 25 MMcf/d of capacity Additional capacity for increased system volumes $2.8 million capex Expected to be operational 4Q 2006 Major Gas Suppliers: CRI Range 15

16 Execution of Business Strategy Eagle Chief Gathering System Operating Highlights 569 miles of pipelines 404 wells connected 35,000 Mcf/d processing plant capacity 20.1% of total segment margin for the nine months ended September 30, 2006 Announced expansion of pipeline and compression facilities in Aug Increase system capacity to ~35,500 Mcf/d Expected to be completed by 4Q 2006 Major Gas Suppliers: Chesapeake CRI 16

17 Execution of Business Strategy Kinta Gathering System Operating Highlights Five gathering systems 572 miles of pipeline 691 wells connected Gathering approximately 137,000 Mcf/d (avg. May September 2006) 14.1% of total segment margin for the nine months ended September 30, 2006 Acquired for $93 million effective May 1, 2006 Fixed fee contracts Installation of four aminetreating facilities Removes excess CO 2 from gas Expected to be completed in 1Q 2007 Additional compression facilities to increase capacity by 11,000 Mcf/d Expected to be completed in 1Q 2007 Major Gas Suppliers: BP America Chesapeake Chevron 17

18 Project Summary Time Line November 16, 2006 Matli Processing Plant Bakken Rail Spur (Fully Operational) Badlands Gathering Expansion Bakken Compression Project Badlands Processing Plant Bakken Frac Train Expansion 10/1/06 11/1/06 12/1/06 1/1/07 2/1/07 3/1/07 4/1/07 5/1/07 Kinta Compressor Project Panther Mountain Treating Facility (Kinta) Harthshorne Treating Facility (Kinta) Eagle Chief Expansion Project NE Wildlife Treating Facility (Kinta) Dow Treating Facility (Kinta) 18

19 Midstream Segment Contract Mix Total Inlet Volumes (MMBtu/d) (1) Total System Margin (1) Percent of Index 8.4% Fixed-Fee 65.8% (2) Eagle Chief % POP % POI - 3.4% Fixed Fee Badlands Worland % POI - 4.3% Fixed Fee Matli % Fixed Fee Percent of Proceeds 25.8% - 100% POP Kinta - 100% Fixed Fee Bakken %POP For 2006, 50% of HLND s gross margin is either hedged or subject to fixedfee arrangements For 2007 and 2008, 75% of HLND s gross margin is either hedged or subject to fixed-fee arrangements 1. Represents data for the nine months ended September 30, Includes both fixed-fee purchase arrangements and fixed-fee gathering arrangements. 19

20 Financial Overview

21 HLND Operational and Financial Highlights Natural Gas Sales (MMBtu/d) NGL Sales (Bbls/d) 80,000 60,000 40,000 31,148 CAGR=20% 41,457 44,063 47,096 64,796 4,000 3,000 2,000 1,232 1,177 CAGR=28% 1,437 1,965 3,256 20,000 1, /30/ /30/06 Revenues EBITDA (1) 200, , ,000 $86,580 CAGR=60% $112,631 $166,601 $163,415 40,000 30,000 20,000 CAGR=64% $17,402 $23,875 $30,879 50,000 $40,952 10,000 $5,383 $10, months ended 9/30/2006 Note: Historical data reflects the combined results of Hiland s predecessor and Hiland Partners, LLC. 1. EBITDA is defined as a net income (loss) plus interest expense, provision for income taxes and depreciation, amortization and accretion expense months ended 9/30/

22 Strong Balance Sheet HLND has $65.9 million of available capacity under its existing $200 million credit facility September 30, 2006 Book Value Capitalization Ratio (unaudited - $ s in 000 s) Capitalization: Total debt $134, % Total partners capital 171, % Total capitalization $305, % 22

23 Comparable MLPs HLND has demonstrated strong distribution growth in the past and has significant potential to grow in the future relative to peers Relative Market Capitalization (1) MLP Distribution Growth LTM (2) 12,000 60% Equity Market Cap ($ millions) 10,000 8,000 6,000 4,000 2,000 % Increase in Distribution 50% 40% 30% 20% 10% 50% 37% 23% 21% 12% 11% 7% 7% 7% 7% 5% 0 EPD ETP VLI MMP BPL XTEX NRGY ARLP PVR APL HLND 0% ETP HLND PVR ARLP XTEX MMP VLI EPD BPL NRGY APL 1. Market capitalization based on closing unit prices as of November 6, LTM as of 9/30/06. 23

24 Questions and Answers