Tall Oak Midstream Acquisition December 7, 2015

Transcription

1 Tall Oak Midstream Acquisition December 7, 2015 Strong. Innovative. Growing.

2 Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the federal securities laws. Although these statements reflect the current views, assumptions and expectations of our management, the matters addressed herein involve certain assumptions, risks and uncertainties that could cause actual activities, performance, outcomes and results to differ materially than those indicated herein. Such forward-looking statements include, but are not limited to, statements about future financial and operating results, guidance, projected or forecasted financial results, objectives, project timing, expectations and intentions and other statements that are not historical facts. Factors that could result in such differences or otherwise materially affect our financial condition, results of operations and cash flows include, without limitation, (a) our failure to consummate the transactions, (b) the risk that we do not complete our financing transactions to fund the transactions, (c) the risk that the entities and assets to be acquired will not be successfully integrated or that such integration will take longer than expected, (d) the risk that the entities and assets to be acquired will not perform as expected, (e) the risk that the assets to be acquired fail to generate follow-on investment opportunities, (f) the risk that the transaction does not result in expected synergies, (f) the risk that we fail to enter into an arrangement with Devon regarding minimum volume commitments, (g) the risk that the contemplated construction projects are not completed on time or at all,.(h) the risk that we fail to maintain our investment grade credit rating, (i) changes in the availability and cost of capital, (j) competitive conditions in our industry and their impact on our ability to connect hydrocarbon supplies to our assets, (k) operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control, and (l) the effects of existing and future laws and governmental regulations, including environmental and climate change requirements and other uncertainties. These and other applicable uncertainties, factors and risks are described more fully in EnLink Midstream Partners, LP s and EnLink Midstream, LLC s filings (collectively, EnLink Midstream ) with the Securities and Exchange Commission, including EnLink Midstream Partners, LP s and EnLink Midstream, LLC s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Neither EnLink Midstream Partners, LP nor EnLink Midstream, LLC assumes any obligation to update any forward-looking statements contained herein. The assumptions and estimates underlying the forecasted financial information included in the guidance information in this presentation are inherently uncertain and, though considered reasonable by the EnLink Midstream management team as of the date of its preparation, are subject to a wide variety of significant business, economic, and competitive risks and uncertainties that could cause actual results to differ materially from those contained in the forecasted financial information. Accordingly, there can be no assurance that the forecasted results are indicative of EnLink Midstream s future performance or that actual results will not differ materially from those presented in the forecasted financial information. Inclusion of the forecasted financial information in this presentation should not be regarded as a representation by any person that the results contained in the forecasted financial information will be achieved. 2

3 Non-GAAP Financial Information This presentation contains a non-generally accepted accounting principle financial measure that we refer to as adjusted EBITDA. Adjusted EBITDA is defined as net income from continuing operations plus interest expense, provision for income taxes, depreciation and amortization expense, impairment expense, unit-based compensation, (gain) loss on noncash derivatives, transaction costs, distribution of equity investment and non-controlling interest and income (loss) on equity investment. The amounts included in the calculation of this measure are computed in accordance with generally accepted accounting principles (GAAP). EnLink Midstream believes this measure is useful to investors because it may provide users of this financial information with meaningful comparisons between current results and prior-reported results and a meaningful measure of EnLink Midstream's cash flow after satisfaction of the capital and related requirements of its operations. Adjusted EBITDA, as defined above, is not a measure of financial performance or liquidity under GAAP. It should not be considered in isolation or as an indicator of EnLink Midstream s performance. Furthermore, it should not be seen as measures of liquidity or a substitute for metrics prepared in accordance with GAAP. Investor Notice: The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserves that meet the SEC's definitions for such terms, and price and cost sensitivities for such reserves, and prohibits disclosure of resources that do not constitute such reserves. This presentation may contain certain terms, such as resource potential and exploration target size and risked resource. These estimates are by their nature more speculative than estimates of proved, probable and possible reserves and accordingly are subject to substantially greater risk of being actually realized. The SEC guidelines strictly prohibit us from including these estimates in filings with the SEC. Investors are urged to consider closely the disclosure in Devon Energy Corporation s Form 10-K, available at Devon Energy Corporation, Attn. Investor Relations, 333 West Sheridan, Oklahoma City, OK You can also obtain this form from the SEC by calling SEC-0330 or from the SEC s website at 3

4 Tall Oak Midstream Transaction EnLink and Devon are executing on two highly strategic acquisitions that strengthen their relationship, diversify their underlying businesses and further align growth plans Transaction Summary EnLink Midstream and Devon Energy Corporation plan to acquire two separate private companies in related transactions Tall Oak Midstream a gathering and processing midstream company with assets that support Felix Energy and other producers; being purchased by EnLink for $1.55 B Felix Energy an E&P company with operations in the STACK play and an anchor producer to Tall Oak Midstream; being purchased by Devon for $1.9 B Strategic Benefits Growth Alignment with Devon: sponsor to be largest customer on the system; supporting with minimum volume commitments Top-Tier Assets in Cores of STACK & CNOW 1 : new assets in plays offering among the best drilling economics in North America Focused Producer Customers: currently serving 15 customers; majority of top customers focused on STACK Long-Term, Fee-Based Contracts: ~500,000 net acres dedicated; weighted average remaining contract term of ~15 years Expanded Growth Platform: complements Cana gas system; longer-term potential for crude, condensate & NGL development Financial Benefits Flexible financing structure $1.05 B to be paid at closing: $750 MM of convertible preferred equity; $250 MM of ENLC equity; $50 MM of debt Remaining $500 MM installment to be paid within 12 months of closing EnLink has the option to defer $250 MM of the installment payment to 24 months Expect financing structure to enable EnLink to maintain its investment grade credit profile Line-of-sight to significant growth; expect ~7.5-8x consolidated adjusted EBITDA multiple of Tall Oak assets by 2018 Accretive acquisition and financing structure designed to support EnLink s ability to grow distributions at ENLK and ENLC 1. STACK: Sooner Trend (oil field), Anadarko (Basin), Canadian and Kingfisher (counties) ; CNOW: Central North Oklahoma (location), and Woodford (resource) 4

5 Strategic Benefits

6 Growth Alignment With Devon Aligns Devon s & EnLink s Growth Plans Devon to Acquire Felix Energy for $1.9 B Acreage in economic core with highest returns in STACK ~ 80,000 net surface acres Devon expects to spend ~$500MM in 2016 to drive STACK growth of >30% year-over-year Accelerating activity to ~10 rigs (includes partner activity) Best in Class STACK Position Largest and best position in the play ~ 430,000 net surface acres (Devon and Felix included) ~ 5,300 risked locations (Devon and Felix included) Alignment with EnLink 100% of Felix acreage dedicated to Tall Oak Largest customer on Tall Oak system 15-year acreage dedication 5-year minimum volume commitments that cover gathering and processing for dedicated Felix acreage 6

7 Top-Tier Assets in Core of STACK & CNOW Creates Franchise Position in Central Oklahoma Tall Oak Assets Central Oklahoma System Map Post-Closing 1 Chisholm Plant: 100 MMcf/d cryogenic processing plant Additional 200 MMcf/d cryogenic plant to be in-service by third quarter 2016 Chisholm site expandable up to 700 MMcf/d Battle Ridge Plant: 75 MMcf/d cryogenic processing Over 500 miles of pipeline in service or under construction Currently constructing 42-mile, 16 pipeline that will connect Battle Ridge and Chisholm plant systems Expected to be completed by year-end 2015 Allows gas to be processed at either processing plant Allows movement of gas from STACK to eastern residue markets, which trade at a premium STACK Play Chisolm CNOW Play Battle Ridge EnLink s Central Oklahoma System Post-Closing 1 3 processing plants with 525 MMcf/d of capacity Expanding to 725 MMcf/d upon completion of Chisolm Plant expansion in Q ~715 miles of pipeline in-service with additional pipelines under construction (1) Includes EnLink s Cana processing plant and gathering pipelines and assumes completion of the Tall Oak Midstream acquisition. 7

8 # of Rigs WTI Spot Price Top-Tier Assets in Core of STACK & CNOW Early-Stage, Rapidly Developing Growth Plays Oklahoma s STACK and CNOW are early-stage growth plays with strong well results STACK Overview Two main stacked producing formations Meramec Woodford Shale Well performance has improved rapidly as large independents have applied learnings from other basins Meramec and Woodford shales range in depth from 6,500 to 11,000 Low economic break-evens supporting recent movement of rigs to the area 27 rigs active in the STACK play as of November 2015 (1) CNOW Overview Two main stacked producing formations Mississippi Lime Woodford Shale Shallow zones at 4,000 to 5,000 cost at less than ~$2MM per well to drill and complete 3 rigs active in the CNOW play as of November 2015 (1) (1) Source: RigData as of ; active rigs during month of November in counties where Tall Oak has acreage dedications Oct- 14 Tall Oak Core Counties Rig Count 35 Nov Dec Jan Feb Mar Apr- 15 Blaine County Kingfisher County Payne County May- Jun- Jul Aug- 15 Sep Oct- Nov Canadian County Lincoln County WTI Price $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 8

9 Top-Tier Assets in Core of STACK & CNOW Robust Drilling Economics Tall Oak footprint encompasses an area containing some of the most economic upstream assets in North America Breakeven prices compare favorably with Permian Basin and Eagle Ford STACK play represents multiple pay zones with significant inventory of drilling locations Historical vertical development provides insight into the entire stratigraphic column and de-risks the play significantly 40% 20% 0% -20% -40% -60% -80% Rig Count % Decline Across US Oil Plays 1 Tall Oak Core Counties WTI Price Total US Permian Basin Bakken Eagle Ford The STACK Is One of the Most Economic Resource Plays in North America $50 $45 $40 $35 $30 $25 $20 $15 $10 $5 $0 Lower Spraberry Dewitt Super Rich Condensate Meramec Vol. Oil Core Wolfcamp A - Howard Co. Oil-Weighted Breakeven Summary 2 2nd Bone Dewitt Rich Spring - East Condensate Meramec Black Oil Woodford South Canadian (1) Source: RigData as of (2) Source: Jefferies research. Uses NYMEX strip oil pricing as of November 13, 2015 and assumes constant natural gas pricing of $3.00 / MMBtu Dewitt Vol. Oil Meramec Vol. Oil Woodford Black Oil CNOW 9

10 Superior Contracts, Focused Producers Providing Long-Term, Stable Cash Flows 15 customers Tall Oak s Customers Acreage map Largest customers include Devon (subject to its acquisition of Felix Energy), PayRock Energy, American Energy-Woodford and other major producers in the area STACK Play CNOW Play Contract Terms Fee-based contract structure Weighted-average remaining contract term of ~15 years ~220,000 net acres dedicated in the STACK ~280,000 net acres dedicated in the CNOW Minimum volume commitments from Devon (through acquisition of Felix Energy) and American Energy - Woodford 10

11 Expanded Growth Platform Long-Term Growth Opportunities Crude/condensate opportunities Holds crude dedications from select producers including Felix Energy Close proximity to Cushing and local refineries Devon and EnLink exploring crude development opportunities in the STACK NGL development opportunities Liquids rich plays create significant NGL production at processing facilities NGL pipeline and fractionation opportunities with expanded processing footprint Oklahoma Express Project Potential to link Oklahoma and North Texas assets Will de-bottleneck production growth from the Midcontinent and utilize capacity and market access in North Texas Goal to interconnect with demand-driven markets on Gulf Coast Access EnLink s Louisiana system 11

12 Financial Benefits

13 Tall Oak Acquisition Structure Focus on Financial Flexibility & Strong Balance Sheet EnLink developed a flexible financing plan to manage the near-term impact of a large acquisition Tall Oak Acquisition ($1.55 billion) $750 million funded by newly issued ENLK convertible preferred equity - Annual coupon of 8.5% PIK for the first six quarters - Coupon thereafter set to the greater of (a) 7.5% cash + 1.0% PIK or (b) 7.5% cash + PIK amount above the cash payment that achieves in total the same distribution as the underlying common units $250 million funded by issuing ENLC common equity to sellers - ~16% interest in Tall Oak owned by ENLC $50 million funded with ENLK Revolving Credit Facility $500 million installment payment not due at time of acquisition - Cash payment due to sellers not later than 12 months from close EnLink has the option to defer $250 MM to 24 months Financing Plan Goals Sources of Funds Illustration ($MM) 1 ENLK Revolving Credit Facility $50 2 ENLC Common Equity $250 3 Convertible Preferred Equity $750 4 Cash & Units to Seller at Closing $1,050 5 Cash Due Within 1 Year 1 $500 6 Total Consideration to Seller $1,550 Manage leverage by minimizing debt Limit near-term execution risk of financing plan Create flexibility through installment sale by providing EnLink with options to fund remaining purchase price including: - Equity issuance - Additional ENLK convertible preferred equity - Potential non-core asset sales (1) EnLink has the option to defer $250 MM to 24 months from close. 13

14 Tall Oak Acquisition Structure Flexibility with Financing Structure Pro Forma Organizational Chart (1) TPG/Goldman (2) ~$750MM Convertible Preferred Devon Energy ~28.4% LP ~63.0% ~37.0% EnLink Midstream, LLC ~0.5% GP ~26.5% LP EnLink Midstream Partners, LP Public Unitholders ~44.6% LP ~16% TPG/Goldman (2) is investing in EnLink via convertible preferred equity With the opportunity to expand preferred investment by $500 million to fund Tall Oak capital expenditures or to fund installment purchase EnLink expects to maintain its investment grade credit rating at Moody s and S&P Devon continues to hold majority ownership at ENLC ~84% Tall Oak (1) Devon and Public ownership in ENLC is pro forma (2) Represents TPG Capital and funds managed by the Merchant Banking Division of Goldman Sachs 14

15 MMcf/d Financial Benefits Strong Sponsor Support Acquisition Considerations Devon Minimum Volume Commitments Tall Oak expected to add ~ $75-85 MM incremental consolidated adjusted EBITDA 1 in 2016 (assuming a 1/1/2016 transaction close) with expected 2016 system volumes of ~ 130 MMcf/d Pro-forma transaction multiple of ~ x consolidated adjusted EBITDA 1 of Tall Oak expected by 2018, which represents expected 2018 adjusted EBITDA 1 of ~$300 MM Devon minimum average volume commitments for 5 years 3 year expected Tall Oak capital expenditures of ~$650 MM, including: capital expenditures of ~$350 MM First quarter 2016 capital expenditures of ~$150 MM to be funded with revolving credit facility - Capability to use convertible preferred equity to fund additional Tall Oak capital as needed Minimal maintenance capital expected given Tall Oak system is newly built Devon Daily Minimum Average Volume Commitments Impact to EnLink For 2016, the transaction is expected to provide low single digit accretion to distributions at ENLK and mid-single accretion to distributions at ENLC on a percentage basis Positive 2016 accretion on fully diluted basis also Results based upon current commodity price environment Ownership at ENLC provides tax benefits as well as dropdown opportunities (1) Adjusted EBITDA is a non-gaap financial measure and is explained on page 3. 15

16 Closing Remarks

17 Acquisition of Tall Oak Midstream Strategic Benefits Sponsor Driven Growth Transaction highlights strong sponsorship, alignment and synergistic relationship with Devon Devon s proposed acquisition of Felix acreage will make it an anchor customer on the Tall Oak system Enhanced Financial Strength Prudent financing is consistent with goal to maintain ENLK s investment grade credit rating and strong balance sheet Transaction accretive to distributable cash flow with expected ~7.5-8x adjusted EBITDA multiple by 2018 Top-Tier Assets in Core of STACK and CNOW The STACK is a premier resource play with drilling economics that are among the most favorable in U.S. The CNOW is an emerging play with two stacked producing formations and low-cost wells Expanded Growth Platform Tall Oak s assets complement to EnLink s Cana assets; allows EnLink to create super-system in Central Oklahoma Longer-term plans include crude, condensate & NGL development and interconnecting to North Texas or Gulf Coast Focused Producer Customers Acquisition will diversify EnLink s customer base with 15 active customers on dedicated acreage Majority of top producers are focused on acreage underlying Tall Oak system Long-Term, Fee-Based Contracts Tall Oak s customer contracts are fee-based with weighted average contract term of ~15 years Devon to support the STACK system with 5-year minimum volume commitments 17

18 EnLink s Focused Areas for Growth Strategically Positioned MLP The Tall Oak acquisition is the next step in positioning EnLink as a midstream leader in North America s best resource plays Midland Permian Leading midstream position in Midland Basin Coronado and LPC acquisitions expanded developing platforms Riptide plant under construction Delaware Permian Matador acquisition established platform for growth Lobo II opportunity Mid-Continent Tall Oak acquisition creates a strong position in STACK and Cana-Woodford Years of organic follow-on investment given early stage of development of the play Louisiana Demand-driven market Franchise NGL position supported by Cajun-Sibon Franchise natural gas position Opportunities to interconnect with other growth areas 18

19 Appendix

20 Devon s Results Validate Core Position Woodford Well Results Woodford Attributes According to Devon Discovered Cana field in 2007 Best position in play >800 producing wells Significant inventory: 3,700 risked locations Results recently boosted with larger completion design Achieving significant efficiencies Source: Devon Energy Corp. presentation on December 7,

21 Devon s Results Validate Core Position Upper Meramec Well Results Upper Meramec Attributes According to Devon Tremendous reservoir qualities Up to 500 of pay 3 landing zones Matrix porosity/over-pressured Very low water cuts Consistent results Extended lateral potential Applying Woodford learnings to drive productivity gains Source: Devon Energy Corp. presentation on December 7,

22 Devon s Results Validate Core Position Lower Meramec Well Results Lower Meramec Attributes According to Devon Formation thickens to northwest Attractive reservoir qualities Up to 250 of pay High reservoir pressure Potential for multiple zones Very low water cuts Production levered towards oil Extended-reach lateral potential Source: Devon Energy Corp. presentation on December 7,

23 Rate (BOED) Devon s STACK Productivity Improving 1,200 1, Initial 90-day production rates up 40% since (56 wells) 2014 (20 wells) 2013 (3 wells) Days Produced Driven by improved completion design Average lateral length is increasing More than double frac stages (>30 stages) Conversion to slick water with diversion Higher proppant volumes Further visible improvements ahead Lateral placement Stimulation design Lateral length optimization Flow-back procedures Source: Devon Energy Corp. presentation on December 7,