MLPA Investor Conference. June 2016

Transcription

1 MLPA Investor Conference June 2016

2 Disclaimers Forward Looking Statements This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of You typically can identify forward-looking statements by words such as anticipates, believes, could, may, should, estimates, expects, forecasts, targets, projects, will, guidance, assumes and outlook or other similar expressions. These statements discuss future expectations, contain projections of results of operations or of financial condition or state other forward-looking information. These statements are based upon various assumptions, many of which are based, in turn, upon further assumptions, including examination of historical operating trends made by the management of JP Energy Partners LP (the Partnership ). Although the Partnership believes that these assumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencies, which are difficult or impossible to predict and are beyond its control, the Partnership cannot give assurance that it will achieve or accomplish these expectations, beliefs or intentions. These forward-looking statements involve risks and uncertainties. When considering these forward- looking statements, you should keep in mind the risk factors and other cautionary statements in the Partnership s 10-K and other documents on file with the Securities and Exchange Commission. The risk factors and other factors noted in the Partnership s public filings could cause the Partnership s actual results to differ materially from those contained in any forward-looking statement. Given the uncertainties and risk factors that could cause our actual results to differ materially from those contained in any forward-looking statement, we caution investors not to unduly rely on our forward-looking statements. We disclaim any obligations to and do not intend to update or announce publicly the result of any revisions to any of the forward-looking statements in this presentation to reflect future events or developments. This document includes certain non-gaap financial measures as defined under SEC Regulation G. A reconciliation of those measures to most directly comparable GAPP measures is provided in the appendix to this presentation. Non-GAAP Measures We define Adjusted EBITDA as net income (loss) plus (minus) interest expense (income), income tax expense (benefit), depreciation and amortization expense, asset impairments, (gains) losses on asset sales, certain non-cash charges such as non-cash equity compensation and non-cash vacation expense, non-cash (gains) losses on commodity derivative contracts (total (gain) loss on commodity derivatives less net cash flow associated with commodity derivatives settled during the period) and selected (gains) charges and transaction costs that are unusual or non-recurring and other selected items that impact comparability. We define distributable cash flow as Adjusted EBITDA less net cash interest paid, income taxes paid and maintenance capital expenditures. 2

3 Company Overview

4 JP Energy Partners LP (JPEP) Overview JPEP is a publicly traded, diversified MLP We operate in three segments: JPEP Summary Unit Price 1 $7.34 Market Cap ($mm) Crude Oil Pipelines & Storage Refined Products Terminals & Storage Our crude oil assets include crude oil storage, gathering and transportation to ensure reliable services and throughput for producers, marketers and refiners Our refined products assets include transportation, storage, rail and terminalling Equity Yield % Units Outstanding (mm) 36.6 Leverage Ratio 3.1x 2015 Adj. EBITDA ($mm) 46.9 NGL Distribution & Sales Our NGL assets include propane operations that encompass supply and logistics, transportation and storage throughout the U.S. (1) As of May 24, 2016 Close 4

5 Segment Overviews

6 Crude Oil Pipelines and Storage Segment Overview Crude Oil Storage Asset: 3.0 million barrels of shell capacity in Cushing, OK Services Offered: Lease crude storage capacity to a customer Gross Margin: 100% fee based Contracted to a single customer who we charge a fixed monthly fee per barrel of shell capacity (not based on usage) Expenses: Outsourced services for fixed monthly fee Silver Dollar Pipeline System Asset: ~148-mile pipeline system Services Offered: Provide crude oil gathering services for producers targeting the Spraberry and Wolfcamp formations in the Midland Basin Gross Margin: Back-to-back buy-sell agreements where we earn a transportation fee Our pipeline operations are underpinned by longterm, fee-based contracts with three leading producers in the Midland Basin Additionally, our Crude Oil Supply and Logistics assets supply additional volume to the pipeline generally under 30-day evergreen contracts Expenses: Mostly fixed expense business M I D L A N D U P T O N Silver Dollar Pipeline Map G L A S S C O C K J P E P : S i l v e r D o l l a r P i p e l i n e $+ Stations/Interconnects Active Pipeline R E A G A N C R O C K E T T!P Big Lake Radio Tower Station $+ Owens Station $+ (Plains Interconnect to Midland) Rocker B Station $+ I R I O N Oxy Barnhart Station (Oxy Clineshale Interconnect to $+ Colorado City) Iraan!P Future Construction $+ P E C O S Midway!P Nearby Cities Station µ WGS MAY 2016 Sources: Esri, USGS, NOAA Other Silver Dollar Pipeline Details Throughput capacity of ~130,000 barrels per day (bpd) Three interconnections to third-party, long-haul pipelines System includes crude oil shell storage capacity of ~140,000 bbls, offering us operational flexibility and the ability to take advantage of favorable pricing environments!p Barnhart S T E R L I N G T O M G R E E N $+ Magellan Barnhart Station (Longhorn Interconnect to E. Houston) 6 C O K E Mertzon!P S C H L E I C H E R

7 Crude Oil Pipelines and Storage (con t) Segment Overview Crude Oil Supply and Logistics Assets: 74 crude oil gathering trucks in the Midland Basin, Eagleford and Texas Panhandle. 4 crude oil truck injection stations in the Midland Basin Services Offered: Marketing and transportation of crude oil and condensate with particular focus of gathering in the Midland basin for delivery onto our Silver Dollar Pipeline system Gross Margin: Primarily back-to-back buy-sell agreements linked to the same price index; we make a pre-determined marketing or transportation margin on the difference between the buy and sell price Gross margin includes all trucking and pipeline costs Expenses: Lease rep salaries, regional fleet supervisors, fleet dispatch, fleet maintenance and repair, truck yard leases Crude Oil Supply and Logistics 7

8 Refined Products Terminals and Storage Segment Overview Refined Products Terminals and Storage Assets: Two terminals located in North Little Rock, AR and Caddo Mills, TX Services Offered: Transport refined products to or from storage or transportation systems (pipelines, rail, trucks) Example: Receive RBOB from Explorer pipeline, store for a week and deliver to customer truck for transportation to a local gas station Gross Margin: Throughput fees based on the volume of product redelivered, typically evergreen fee-based contracts Storage fees based on barrels stored per month Additive services fees based on additive (ethanol, proprietary additive, biodiesel) injection volume Sale of product primarily from butane blending activities Expenses: Relatively fixed costs to operate the terminals Terminals in Large Metropolitan Areas Other Refined Products Terminals Detail Large, active terminals: North Little Rock: 41,000 bpd / 550,000 bbls 2015 throughput / storage capacity Caddo Mills: 21,000 bpd / 770,000 bbls 2015 throughput / storage capacity 8

9 NGL Distribution & Sales Segment Overview Retail, Commercial and Wholesale Propane Footprint Retail, Commercial and Wholesale Propane Assets: Trucks, tanks and 39 customer service locations; also 28 regulated community central distribution systems Services Offered: Procurement and delivery of propane or refined fuels to one of ~100k commercial or residential locations Gross Margin: Per gallon price charged to customer less our supply, transportation and commodity costs (Laid-in-costs or LIC ) Most contracts allow us to pass on our LIC creating a fixed margin Expenses: Cost to manage and deliver the product NGL Transportation Assets: 43 tank trucks Services Offered: Gathering and transportation of NGL and condensate for producers, gas processing plants, refiners and fractionators Gross Margin: Per gallon transportation fee or marketing spread less cost to transport the product Expenses: Cost to manage the dispatch, marketing and accounting of the transportation 9

10 NGL Distribution & Sales (cont d) Segment Overview Cylinder Exchange Footprint Cylinder Exchange Assets: Cylinders, cages, trucks, 52 depots and 8 production facilities to process and fill empty cylinders Services Offered: Production and delivery of 20- pound propane cylinders to retail locations across the 48 continental United Sates for sale to endusers for use in barbeque grills, patio heaters and other appliances Gross Margin: Per cylinder price charged to retail locations for exchanged tanks; separate price for sold tanks (i.e. no return of an empty tank) Contract length and nature range by retail locations Expenses: Cost to clean, fill and deliver cylinders 10

11 JP Energy Growth Update

12 Timeline of Achievements Supporting our Growth October 2014 Completed Initial Public Offering January 2015 Announced first quarterly distribution April 2015 Announced Silver Dollar Pipeline interconnection agreement with Magellan Midstream Partners February 2016 Announced ~$5mm ethanol unit train project and interconnection agreement at North Little Rock Refined Products Terminal Oct 2014 Jan Jun Jan Mar 2016 February 2015 Announced strategic extension of Silver Dollar Pipeline in the Midland Basin May 2015 Completed immediately accretive Southern Propane acquisition for $14.9mm February 2016 Completed MidCon marketing business sale for $9.7mm 12

13 2015 Major Accomplishments Growth Balance Sheet Grew Adjusted EBITDA by 31% YoY excluding the impact of corporate overhead support from our general partner Silver Dollar Pipeline volumes grew 35% year-over-year Retail Propane volumes grew 16% year-over-year Maintained under 3.5x leverage ratio for each quarter of 2015 Below our long term target of x Acquisitions Completed the purchase of Southern Propane, a non-heating degree day driven industrial propane distribution business Organic Projects Completed Phase I of our 50+ mile strategic extension of our Silver Dollar Pipeline system north into Reagan County (Phase II completed in 1Q16) Completed inline butane blending upgrade at our North Little Rock refined products terminal Completed the interconnection of our Silver Dollar System to Magellan Longhorn Pipeline, adding additional optionality to our pipeline customers 13

14 Project Completions / Announcements Completed: Phase II of the Regan County Extension In January 2016, we completed Phase II of our Reagan County extension to our Silver Dollar Pipeline Expands our system north through Reagan County and into Glasscock County The project was completed on time and significantly under budget Project is base loaded by a 10-year fee based gathering agreement with Discovery Natural Resources dedicating 53,000 acres in Reagan, Glasscock, Sterling and Irion Counties M I D L A N D G L A S S C O C K JPEP - Silver Dollar Pipeline U P T O N P E C O S $ R E A G A N $+!P Big Lake C R O C K E T T Announced: North Little Rock Ethanol Rail Project / Magellan Pipeline Connection In February 2016, we initiated an expansion of our rail facilities at our North Little Rock terminal materially improving the terminal s ethanol offloading efficiency New system capable of offloading up to 108 train cars per delivery Facility capable of blending and distributing 9 million gallons of ethanol per month Also announced our connection to Magellan s Little Rock Pipeline allowing JP Energy s customers to deliver to the terminal via Gulf Coast and Midcontinent refineries Phase II $+ $+ $+!P $+ $+ $+ S T E R L I N G Barnhart T O M G R E E N I R I O N C O K E $+ Future Truck Station $ EP CPF 8-24 Mertzon!P $+ S Stations/Interconnects C H L E I C H E R Active Pipeline Future Construction Offload equipment similar to the North Little Rock design 14

15 Financial Overview

16 Q1 2016: Segment Performance Segment Q1 Performance Drivers Adjusted EBITDA by Segment ($mm) NGL Distribution & Sales Higher margins from more favorable market conditions, cost control Partially offset by volume declines from unseasonably warm weather NGL Distribution & Sales Crude Oil Pipelines & Storage Refined Products Terminals & Storage Decrease in sales and throughput volumes from reduced customer activity and increased competition Largely offset by an increase in crude oil sales margin from improved cost efficiencies Expense control, capital improvements, butane blending Partially offset by lower throughput due to a non-recurring increase in volumes in the prior year quarter Crude Oil Pipelines & Storage Refined Products Terminals & Storage Q16 1Q15 16

17 Balance Sheet & Liquidity (May 2, 2016) Available debt capacity expected to fully support planned 2016 organic capex Strong Metrics, Access to Capital Available Liquidity ($mm) 1 Exited Q with a leverage ratio of 3.1x; down from 3.4x in the previous quarter Maintained conservative leverage below 3.5x throughout 2015 Leverage ratio remains below peer average and JPEP long-term target of ~ x $106.5 million unused credit facility capacity 1 Strong interest coverage of 7.5x Ample liquidity and balance sheet capacity to support capital needs Credit Facility Borrowings, 154 Unused Credit Facility Capacity, Outstanding Letters of Credit, As of May 2,

18 2016 Adjusted EBITDA Guidance 2016 JP Energy Guidance 2016 Adjusted EBITDA of $50 - $56 million before considering any corporate overhead support (1) or any acquisitions we may undertake during the year Expected 2016 Adjusted EBITDA growth is largely attributed to items within our control, including expense reductions and efficiency improvements Targeting 1x 2016 distribution coverage, which could include some level of corporate overhead support from our general partner $25 - $35 million of 2016 growth capital expenditures including an estimated $15 million on our Silver Dollar Pipeline Continue to maintain a strong balance sheet and adequate liquidity on our revolving credit facility 1. Corporate overhead support is at the discretion of our general partner 18

19 2016 Adjusted EBITDA Guidance by Segment 2016 Adjusted EBITDA and DCF Guidance ($mm) (1)(2)(3) 1Q16 2Q16 3Q16 4Q Growth Adjusted EBITDA Guidance Range YoY Crude Oil Pipelines and Storage Refined Products Terminals (1) - 1 NGL Distribution and Sales Corporate (7) - (6) (6) - (5) (6) - (5) (6) - (5) (24) - (23) (19) (5) - (4) Total Adjusted EBITDA Distributable Cash Flow Common Units Coverage 1.5x - 2.4x 1.2x - 1.9x 1.0x - 1.8x 1.7x - 2.6x 1.6x - 1.8x 1.6x Total Units Coverage 0.8x - 1.2x 0.6x - 1.0x 0.5x - 0.9x 0.9x - 1.3x 0.8x - 0.9x 0.8x We consolidated the Crude Oil Supply and Logistics segment into the Crude Oil Pipelines and Storage segment in Q to better align with the operations and management of this business Included in 2015 results are $5.5 million of corporate overhead support from our sponsor. There is no corporate overhead support included in the 2016 guidance excludes the potential benefit of any corporate overhead support that could be received from our general partner 2. Quarterly low / high guidance range will not sum to 2016 totals 3. Crude Oil Pipelines and Storage includes Adjusted EBITDA previously attributable to the Crude Oil Supply and Logistics segment 19

20 Expense Reductions Driving Controllable Growth Adjusted EBITDA Walk-Forward ($mm) (1) $60 $58 $55 Absolute Control Some Control Less Control / Market Sensitive $53 $50 $48 $45 $43 $ Forecast Corporate 2015 Forecast Reductions Expense Reductions NGL Reductions NGL Expense Reductions Trucking Effeciency Efficiency Improvement PPE Full Year Annualizing NGL Margin Current Margin Other EBITDA Other EBITDA Changes Changes 2016 Budget 2016 Guidance Range Lower professional fees Reduced engineering needs Elimination of COO Position Improved technology Lower T&E Lower advertising Lower fleet costs Other efficiency initiatives Improvement in logistics and efficiency Full year benefit of lower propane prices Partially subject to market conditions Net unallocated impact of other factors 1. Excludes any potential benefit from general partner corporate overhead support in

21 Strong Common Unit Distribution Coverage Discussion Approximately half of the units outstanding are subordinated to the common unit holders, including public unit holders Expect considerable coverage for common unit distributions Achieved over 1x distribution coverage in 1Q15, 4Q15 and 1Q16 $ 16 $ 14 $ 12 $ 10 $ 8 $ 6 $ 4 Quarterly Distributable Cash Flow ($mm) (1)(2) Total Unit Distribution Common Unit Distribution 2016 Quarterly Average DCF $ 2 $ 0 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 Low High Common Units Coverage 1.6x 2.2x 0.7x 1.4x 2.0x 2.1x 1.6x 1.8x Total Units Coverage 0.8x 1.1x 0.4x 0.7x 1.0x 1.0x 0.8x 0.9x 1. 4Q14 is adjusted for certain previously disclosed one time items 2. Excludes any potential future corporate overhead support 21

22 Asymmetric Crude Price / Volume Exposure Limited Further Crude Related Downside: 2016 Total Segment Adjusted EBITDA Crude Sensitive, 21% Non-Crude Sensitive, 79% Approximately 20% of 2016 Adjusted EBITDA guidance for all operational segments is sensitive to crude volumes or margins Of this amount ~66% is contracted, fee based pipeline tariff with limited volume growth expectations A majority of 2016 forecasted volumes are related to current pipeconnected wells, requiring no additional drilling or growth capex A 20% change in our 2016 pipeline throughput expectation impacts Adjusted EBITDA by approximately $2 million, or less than 4% of our total estimated 2016 Adjusted EBITDA Considerable Upside from Crude Market Recovery: EBITDA Growth Potential Potential Incremental EBITDA The Silver Dollar Pipeline throughput capacity is 130 mbpd; approximately 25% utilized at current volumes Lower capex required for incremental volumes We expect Permian Basin volumes to increase considerably when oil prices begin to recover Long-term fully utilized pipeline income could increase JP Energy Adjusted EBITDA by 60%+ over 2016 guidance 2016 Crude Guidance Midpoint SDP Fully Utilized Crude Recovery Potential EBITDA 22

23 Selected Examples of Cost and Operating Expense Reductions ~$2.0 million in net 2016 savings from our crude trucking operations from: Positioning fleet closer to customers, reducing trucking miles Reducing fuel, repair and maintenance costs Improving truck utilization across fleet >$2.5 million in net 2016 reductions in our NGL segment due to: Streamlining workforce Optimizing fleet Increasing operational efficiencies $2.0 million of 2016 reduction in corporate overhead from: Capturing efficiencies across our business Investing in in new technology Reduced headcount 23

24 Appendix

25 Non-GAAP Reconciliation Adjusted EBITDA Year ended December31, Three months ended March 31, (in Thousands) (in Thousands) Segment Adjusted EBITDA Crude oil pipelines and storage $ 23,119 $ 4,813 $ 4,881 Refined products terminals and storage 10,867 2,858 2,822 NGL distribution and sales 30,896 12,289 12,025 Discontinued operations 1,209 (371) 2,650 Corporate and other (19,226) (5,408) (7,189) Total Adjusted EBITDA 46,865 14,181 15,189 Depreciation and amortization (46,852) (11,536) (10,763) Goodwill impairment (29,896) - - Interest expense (5,375) (2,430) (1,116) Income tax expense (754) (416) (22) Loss on disposal of assets, net (909) (1,132) (113) Unit-based compensation (1,217) (559) (406) Total (loss) gain on commodity derivatives (3,057) (135) 135 Net cash payments for commodity derivatives settled during the period 14, ,192 Early settlement of commodity derivatives (8,745) - - Non-cash inventory costing adjustment Corporate overhead support from general partner (5,500) (1,500) - Transaction costs and other (1,877) (74) (2,374) Discontinued operations (16,160) (168) (3,057) Net (loss) income $ (58,656) $ (3,228) $

26 Non-GAAP Reconciliation Distributable Cash Flow Year ended December 31, 2015 (in Thousands) Net cash provided by operating activities $ 46,041 Depreciation and amortization (49,133) Goodwill impairment (37,835) Asset impairment (4,970) Derivative valuation changes 11,340 Amortization of deferred financing costs (909) Unit-based compensation (1,309) Loss on disposal of assets (1,028) Bad debt expense (1,212) Other non-cash items (1,744) Changes in assets and liabilities (17,897) Net loss $ (58,656) Depreciation and amortization 46,852 Goodwill impairment 29,896 Interest expense 5,375 Income tax expense 754 (Gain) loss on disposal of assets, net 909 Unit-based compensation 1,217 Total gain (loss) on commodity derivatives 3,057 Net cash payments for commodity derivatives settled during the period (14,821) Early settlement of commodity derivatives 8,745 Corporate overhead support from general partner 5,500 Transaction costs and other 1,877 Discontinued operations 16,160 Adjusted EBITDA $ 46,865 Less: Cash interest paid, net of interest income 4,527 Cash taxes paid 450 Maintenance capital expenditures, net 3,109 Distributable cash flow $ 38,779 Less: Distributions 48,063 Amount in excess of (less than) distributions $ (9,284) Distribution coverage 0.81x 26