Utica Midstream Conference June 7, Blue Racer Midstream

Transcription

1 Utica Midstream Conference June 7, 2017 Blue Racer Midstream

2 Blue Racer Midstream, LLC. Nature of Information Presented: The following information has been prepared by Blue Racer Midstream, LLC to provide current and forward-looking information on our business and operations to members of our commercial banking syndicate. This information is derived from a variety of sources, many of which have not been independently verified by Blue Racer Midstream, LLC. This information also contains financial projections, which may vary materially from actual results in the future. Blue Racer Midstream, LLC believes such projections have been prepared based on reasonable assumptions, but makes no representation or warranty as to the accuracy or completeness of such projections, other forward looking information and information of a general economic or industry specific nature. This presentation does not constitute an offer or solicitation to sell or purchase any securities. This presentation has not been prepared with a view toward public disclosure under state or federal securities laws or otherwise and may not be reproduced, disseminated, quoted or referred to, in whole or in part, without the prior written consent of Blue Racer Midstream, LLC. Forward-Looking Statements: This presentation contains forward looking statements based on the beliefs of the company, as well as assumptions made by, and information currently available to our management team. When used in this presentation, words such as anticipate, project, expect, plan, seek, goal, estimate, forecast, intend, could, should, will, believe, may, potential and similar expressions and statements regarding our plans and objectives for future operations, are intended to identify forward looking statements. Although management believes that the expectations reflected in such forward looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. You should not put undue reliance on any forward looking statements, which speak only as of their dates. Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those expected, including insufficient cash from operations, adverse market conditions, governmental regulations, the possibility that tax or other costs or difficulties related thereto will be greater than expected, the impact of competition and other factors. All forward looking statements attributable to Caiman Energy II, LLC, Blue Racer Midstream, LLC or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained herein. Except as required by law, we do not intend to update or revise our forward looking statements, whether as a result of new information, future events or otherwise. 1

3 Blue Racer Midstream Overview (1) Expansive footprint throughout Utica and Marcellus Headquarters Dallas, TX Founded 2012 Employees 164 Total Assets Senior Secured Credit Facility Senior Unsecured Notes Senior Unsecured Notes Rating ~$2.3B $1.0B $850MM B3/B- Senior Unsecured Notes Price/Yield (2) $101.8 / 5.75% Strong and Supportive Sponsors Caiman Energy II, LLC. (3) 50% 50% Dominion Energy, Inc. Senior Secured Credit Facility Blue Racer Midstream, LLC. Blue Racer Finance Corp. Senior Unsecured Notes 1. As of December 31, 2016, unless otherwise noted 2. As of April 12, Owned by Williams Partners, EnCap Flatrock Midstream, Oaktree Capital Management, L.P., management and certain non-insjtujonal investors 2

4 Blue Racer Midstream Volume Growth Ability to grow through a challenging environment 800 $ $100 Processed Volumes [MMcf/d] $80 $60 WTI [$/Bbl] 300 $ $ $0 Processed Volumes WTI 3

5 Safety and Operational Focus Safety Focused Culture n Safety-first culture Consistent safety training Perform safety reviews and employee performance monitoring Monitor KPIs Operational Results n Operational excellence Maintain focus on operational efficiencies Monitor KPIs TRIR Run-time (1) 105% 100% 95% 90% 85% 80% 2015: 99% 2016: 99% OSHA TRIR (YTD) Target Goal = Mo Rolling TRIR 30-Day Run-time Adjusted 1. Excludes planned outages 4

6 Pipeline System Overview Extensive pipeline network allows efficient and economically advantaged connectivity across rich and lean acreage n Upstream System currently serves 20 customers Pipelines serve lean gathering, rich gathering and condensate gathering n Midstream Full value chain service Super-system - largest network of gathering pipeline spanning throughout the wet gas and lean Utica ~400 miles of pipeline from Dominion ~316 miles of pipeline constructed from formation through 2016 n Downstream Connectivity to multiple markets and end users maximizes producer netbacks Residue pipelines NGL pipelines Rail Barge Truck 5

7 Facilities Overview Natrium n Located along the Ohio River in West Virginia 450 MMcf/d of processing capacity Two cryogenic processing plants 123,000 Bbl/d fractionation plant (C2+) Site can accommodate up to four processing plants Condensate: 2,500 Bbl/d of onsite stabilization Product takeaway facilities include pipeline, rail, truck and barge Berne n Located in Northwest Monroe County, Ohio 420 MMcf/d of processing capacity Two 210 MMcf/d cryogenic processing plants Site can accommodate one additional processing facility Condensate: 10,000 Bbl/d of onsite stabilization capacity 6

8 Residue Markets Increased takeaway projects reduce basis differentials and increase producer netbacks n Natrium Dominion Energy Transmission, Inc. ( DTI ) Texas Eastern Transmission Company ( TETCO ) Rockies Express Pipeline ( REX ) n Berne TETCO n Future Pipelines to provide ~6.2 Bcf/d of new capacity by the end of 2017 Q317: Rover (Natrium and Berne) Q417: Leach Xpress / Rayne Xpress (Natrium) Q417: NEXUS (Natrium and Berne) 1. Includes Western System sold to DEO on December 1, 2016 Source: Northeast Takeaway Projects from BTU Analy;cs 1Q17 Northeast Gas Outlook; 7

9 NGL Markets Increased takeaway projects help flatten seasonal differentials and increase producer netbacks n Ethane Connection to ATEX, Mariner East I and Mariner West via G-151 and WPZ/OVM n Propane Connection to TEPPCO via G-150 Connection to Mariner East II via G-150 (on ME IIs completion) On-site rail/truck loading On-site barge loading n Butanes Connection to Mariner East II via G-150 (on ME IIs completion) On-site rail loading n NGLs/Condensate On-site rail loading On-site barge loading On-site truck loading 8

10 Business Outlook Improving Economics Healthy Half Cycle Well Returns (1) Half Cycle Well Returns 70% 60% 50% [IRR] 40% 30% 20% 10% 15% 37% 28% 32% 50% 59% 0% Condensate Western Central Eastern Core Utica Lean Condensate Western Central Eastern Core Utica Lean Commentary n At assumed pricing, producers margins are attractive Continue to see an increase in permit and rig activity within our footprint n Basis differentials continue to improve as access to demand centers increases 1. Half cycle well analysis with assumed F&D, midstream, operajng, and royalty expenses. Strip pricing as of 02/09/17 WTI: 2017: $54.95, 2018: $55.82, 2019: $55.33, 2020: $55.27, 2021+: $55.49 // HHUB 2017: $3.32, 2018: $3.09, 2019: $2.89, 2020: $2.88, $2.87. Future price differenjals applied Source: NYMEX Dom. South as of 02/09/2017; BTU Analy;cs Dom. South from BTU Analy;cs 4Q16 Northeast Gas Outlook 9

11 Financial Summary Increasing Processed Volumes Growing EBITDA $300, % CAGR 386% CAGR (1) $250,000 [MMcf/d] [$000] $200,000 $150, $100, $50, $ Scalable Capital Expenditures Focused on Leverage Reduction $800, x $700,000 $600,000 $500,000 ~$1.6B spent to date 5.00x 4.00x 3.00x 20% Reduction [$000] $400, x $300,000 $200, x 0.00x (1.00)x $100,000 $ Compliance Leverage Total Maximum Leverage Ratio 1. Volumetric Commitments represent deficient volumes that are not processed 10

12 U.S. Northeast Natural Gas Production Scenarios Northeast Production (Bcf/d) Advance Growth Cutback Contraction 11

13 Net Northeast Gas Inflows (+) / Outflows (-) RBN Source: PointLogic Energy 12

14 Northeast Gas Inflows/Outflows by Target Region RBN Source: PointLogic Energy 13

15 Northeast Gas Project Timing & State/Federal Progress Projects TGT - Northern Supply Access Capacity (MMcf/d) Current Official ISD BTU AnalyAcs ISD FERC Final EIS/ EA FERC CerAficate Appoval 384 Mar-17 Mar-17 1/2016 3/2016 Notes Requested a two year extension to bring online the last 100 MMcf/d of capacity; Having difficulty markejng the capacity afer the previous holder, Triad Hunter, went bankrupt. TCO - Leach Xpress 1,500 Nov-17 Nov-17 9/2016 1/2017 Tree clearing extension requested and subsequently received by FERC. ConstrucJon acjvijes underway CGT - Rayne Express 1,000 Nov-17 Nov-17 9/2017 1/2017 ConstrucJon started 2/8/17 Jul-17 (Ph 1) Jul-17 (Ph 1) Tree felling completed prior to 3/31/2017 deadline. ET Rover 3,250 Dec-17 (Ph 2) Dec-17 (Ph 2) 7/2016 2/2017 ConstrucJon on track Nexus 1,500 Mar-17 Nov-17 11/2015 (2/2017) NFG -- Northern Access 497 Nov-17-3/2015 2/2017 FERC quorum required before CerJficaJon. DTE stands by Q in-service date Denied required water permit by NYDEC; Project Jmeline highly uncertain AtlanJc Sunrise 1,700 Mid-18 Nov-18 3/2015 2/2017 PennEast 1,000 Nov-18 Nov-20 9/2015 (7/2017) Phase 1 compressor stajons under construcjon. Phased-in official ISD; parjal in-service 2H 2017 full in-service 11/1/18 NJDEP and Army Corps of Engineers returned applicajon as incomplete, July CerJficate decision requires FERC quorum AtlanJc Coast Official ISD delayed form Q to Q due to Pipeline 1,500 Nov-19 Nov-20 9/2015 (9/2017) prolonged FERC review process; received DEIS on 12/30/16 Mountain Valley Pipeline 2,000 Nov-18 Nov-20 10/2015 (9/2017) Release of FEIS delayed by three months Note: Total is 14.3 Bcfd. Dates within parentheses are scheduled dates published by FERC. These dates are subject to revision as project Amelines change. 14

16 Northeast Natural Gas Pipeline Projects ( ) 15

17 Natural Gas Summary n Production growth from this world class resource is astonishing 5 Bcfd in Bcfd in Bcfd to 40 Bcfd projected 2022 n The northeast became a net exporter year round in 2015 n n Pipeline infrastructure is crucial to further improvement in basis 2017: 6.1 Bcfd 2018: 3.2 Bcfd 2020: 3.5 Bcfd Current and future markets are diverse Southeast: 4.0 Bcfd Midwest and Canada: 4.9 Bcfd Gulf Coast: 4.0 Bcfd East: 2.8 Bcfd Waterborne: 0.7 Bcfd 16

18 Natural Gas Pricing for BRM Outlets: Historical and Futures Pricing 1 [$/MMBtu] Jan-15 [Permits] Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Permits Henry Hub Henry Hub Futures TCO TCO Futures DSP DSP Futures CCG (REX) CCG (REX) Futures n Marcellus/Utica producers have experienced wide basis differentials for natural gas due to limited takeaway Additional takeaway pipelines are expected to be in-service and should improve basis differentials over the period Source: FactSet, futures pricing as of 6/7/

19 Ethane Outlook [Mbl/d] Ethane Supply & Demand (1) 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1, Total Potential Ethane Supply Total Potential Ethane Demand Ethane Historical & Future Pricing (2) NYMEX [$/gal] Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18 Sep-18 Jan-19 May-19 Sep-19 Jan-20 May-20 Sep-20 Settlment Price Futures Price Commentary n Staggering growth of up to 930,000 bbls/d Gulf Coast crackers account for 630,000 bbls/d Export adds another 300,000 bbls/d n There is another 245,000 bbls/d of recoverable ethane in current Utica/ Marcellus production, but. Due to high cost to access Gulf Coast (~23 cpg), before discretionary ethane moves to Gulf Coast, it must be at least $3.50 per MMbtu above gas value Even then, local ethane pipes are nearly full with limited expansion capability Opens door for local crackers 1. Source: Wells Fargo NGL Snapshot May Source: FactSet, futures pricing as of 6/7/ Need $0.10/gallon for gas, $0.04/gallon for frac, $0.21/gallon transportajon based on $1.50/Mmbtu natural gas price 18

20 Propane Outlook U.S. Propane Supply & Demand (1) 2,500 2,000 1,500 1,000 NYMEX [$/gal] Refining Imports Total Propane Demand Historical & Future Pricing (2) Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Commentary n Prices continue to improve n Plus, correlation to WTI has risen from ~30% to >60% n Strong seasonal differentials (basis) still hinder netbacks n Export demand has been 900 1,100 kbpd n Despite extraordinarily high levels in October, inventories are almost back to 5-year average Settlment Price Futures Price 1. Source: Wells Fargo NGL Snapshot May Source: FactSet, futures pricing as of 6/7/

21 Butane Outlook NYMEX [$/gal] NYMEX [$/gal] Jan-15 Normal Butane Pricing (1) Jun-15 Nov-15 Apr-16 Sep-16 Feb-17 Jul-17 Settlment Price Jan-15 Iso Butane Pricing (1) Jul-15 Jan-16 Jul-16 Jan-17 Settlment Price Jul-17 Dec-17 Jan-18 May-18 Jul-18 Oct-18 Mar-19 Aug-19 Jan-20 Jun-20 Futures Price Jan-19 Jul-19 Jan-20 Jul-20 Futures Price Nov-20 Normal Butane Commentary n Wide seasonal differentials Regional demand is strong during blending season, but weak outside of that Export demand out of Marcus Hook will increase regional competition for butane, and with it, price Iso Butane n Steady, year round negative basis n Demand is stable n Can be exported with normal as a mixed butane 1. Source: FactSet, futures pricing as of 6/7/

22 NGL Price Summary Mt. Belv History $3.00 $2.50 $2.00 % of WTI Year C3 nc4 ic4 C % 74% 80% 96% % 60% 61% 92% % 55% 56% 89% % 53% 53% 93% % 63% 66% 92% 16-Dec 51% 76% 81% 89% $1.50 $1.00 $0.50 $- Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-1 Mt Belv Ethane Mt Belv TET Propane Mt Belv TET Normal Mt Belv TET Iso Mt Belv TET Gasoline Source: Dominion Transmission 21

23 Improving C3+ Netbacks for Marcellus/Utica Estimated Weighted Average Price (OPIS +/- Basis) $40.00 $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $- Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Source: Dominion Transmission 22

24 Blue Racer Midstream Full-Value Midstream Provider Strategic Assets Located in Top Shale Plays Experienced Management Team with Strong Equity Ownership Base Large Growth Potential 23

25 Blue Racer Customers 24