CONE Midstream Partners LP Citi 2015 MLP/Midstream Infrastructure Conference August 19-20, 2015
Disclaimer Forward Looking Statements This presentation contains forward-looking statements within the meaning of the federal securities laws. Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include the words "believe," "expect," "anticipate," "intend," "estimate" and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. Forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict, and there can be no assurance that actual outcomes and results will not differ materially from those expected by our management. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include, among others: the effects of changes in market prices of natural gas, NGLs and crude oil on our Sponsors drilling and development plan on our dedicated acreage and the volumes of natural gas and condensate that are produced on our dedicated acreage; changes in our Sponsors drilling and development plan in the Marcellus Shale; our Sponsors ability to meet their drilling and development plan in the Marcellus Shale; the demand for natural gas and condensate gathering services; changes in general economic conditions; competitive conditions in our industry; actions taken by third-party operators, gatherers, processors and transporters; our ability to successfully implement our business plan; and our ability to complete internal growth projects on time and on budget. You should not place undue reliance on our forward-looking statements. Although forward-looking statements reflect our good faith beliefs at the time they are made, forward-looking statements involve known and unknown risks, uncertainties and other factors, including the factors described under Risk Factors and Forward- Looking Statements in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, unless required by law. 2
Key Investment Considerations Strategically Advantaged Marcellus Shale Assets Dedicated 516,000 net acres in premier areas of Marcellus Shale Access to liquids-rich and dry gas areas Close proximity to processing facilities and long-haul transmission pipelines Substantial Sponsor and third-party midstream infrastructure needs Experienced, Large-Cap E&P Sponsorship Combined market capitalization of over $17 billion Executive management w/ an average of 28+ years of energy sector experience Approximately 700,000 jointly-owned net acres in the Marcellus Shale Growth Through Stable, Fixed-Fee Cash Flows Pure-play gathering & processing MLP Long-term (20-year), fixed-fee gathering agreements with Sponsors Throughput growth (consolidated) of 97% in 2014; 40% growth projected in 2015 No direct exposure to commodity price risk Financial Flexibility and Strong Capital Structure No leverage at IPO $227 million of undrawn base borrowing capacity available (at 6/30/2015) with accordion to support borrowings up to $500 million for acquisitions Sponsors will bear approximately 80% of capital expenditures over near term Distribution Growth Expected Sponsors drilling program is expected to drive organic growth Visible drop-down acquisition opportunities of Sponsors retained interests Opportunities to attract third-party volumes 3
CNNX Overview
CONE Midstream Partners LP - Overview CONE Gathering and the Formation of CNNX In 2011, CONSOL Energy ( CNX ) and Noble Energy ( NBL ) (the Sponsors ) formed a 50/50 midstream joint venture, CONE Gathering LLC, to service their rapidly growing production in the Marcellus Shale CONE Midstream Partners ( CNNX ) was formed in 2014 through the initial contribution of ownership interests in CONE Gathering s assets held in three distinct development companies ( DevCos ), including: 75% interest in Anchor Systems 5% interest in Growth Systems 5% interest in Additional Systems Initial Public Offering September 2014 20.125 million LP units (33.8% ownership interest) sold to public at $22.00 Sponsors retain 38.2 million LP units (29.163 million are subordinated) and 2% GP interest Sponsors have dedicated over 516,000 acres to CNNX for an initial term of 20 years Dedication is in one of the most cost-advantaged, core development areas of the Marcellus Shale CNNX has a right of first offer ( ROFO ) on the Sponsors remaining 186,000 net acres 5
Structured for Significant Organic and Drop-down Growth Potential CONE Midstream Partners LP 75% interest 5% interest 5% interest Organic Growth Drop-down Growth Anchor Systems Growth Systems Additional Systems Established systems that comprise a substantial majority of current cash flows Large share of Sponsors PDP volumes Organic growth from rising throughput Profile provides source of expected long term growth 95% of capital expenditure requirements initially absorbed by the Sponsors through their retained interest Located on highly-contiguous West Virginia acreage Predominately dry gas acreage Substantial growth from five systems in near to intermediate term 95% of capital expenditure requirements initially absorbed by the Sponsors through their retained interest Located primarily in the wet gas window of the Marcellus Shale 6
CNNX Benefits From its Development Company Structure Provides CNNX with a critical mass of established gathering assets within Anchor Systems Shields CNNX from a substantial portion of the capital requirements, which will be borne by the Sponsors Creates visible organic and drop-down distribution growth platform 7
Gathering Systems Overview Gathering System Information (1) System Pipeline (Miles) Maximum Interconnect Capacity (Bbtu/d) Compression (HP) Anchor 132 1,329 61,380 Growth 27 860 8,040 Additional 21 385 Total 180 2,574 69,420 NBL NBL (1 ) Data as of 12/31/2014 8
Gathering Agreements Support Stable Fixed Fee Cash Flows Gathering Agreement Highlights General Terms 20-year gas gathering agreement 516,000 dedicated acres $0.40/MMBtu dry gas gathering fee $0.55/MMBtu wet gas gathering fee 1 $5.00/Bbl condensate handling fee 2 Annual 2.5% rate escalation starting 1/1/2016 Rate Reset Mechanism Annual redetermination option Opportunity to raise gathering fee to account for cost and volume changes Consideration of CNNX s rate of return and margins 1 Wet gas gathering fees at Airport & Moundsville are adjusted to $0.28 per MMBtu to account for 3 rd party services 2 Condensate handling fees at Airport & Moundsville are adjusted to $0.00 and $2.50 per Bbl, respectively, to account for 3 rd party services 9
Strong Sponsorship in Strategic Gas Play
CNNX Operations are Located in Premier Area of Marcellus Shale Marcellus Shale: Estimated Ultimate Recovery per Foot Data as of September 2014 11
Sponsored by Experienced, Large-Cap E&P Companies Over 6.8 Tcfe of proven reserves at year-end 2014 One of the largest producers in the Appalachian basin 30% annual natural gas production growth rate expected in 2015 Interests in 13,000 net producing wells Leading producer of coalbed methane in the Appalachian Basin Marcellus Shale is CNX s core gas play Owns reserves of 1.4 Bboe and assets over $22 billion at year-end 2014 Worldwide producer of crude oil and natural gas One of the industry leaders in exploration and development capability Five core areas including Marcellus Shale, DJ Basin, Deepwater Gulf of Mexico, West Africa and Eastern Mediterranean CONSOL EBITDA Mix Shifting to E&P Average Annual Net Volume Growth 2013 2014E 2016E E&P 32% Coal 47% Coal 37% 2 3 1 4 5 Coal 68% E&P 53% E&P 63% 1 Marcellus Shale 2 Denver-Julesburg (DJ) Basin 3 Deepwater Gulf of Mexico (GOM) Source: Company Filings, Capital IQ 4 West Africa 5 Eastern Mediterranean 12
Strong Anchor Tenants Developing Premier Marcellus Shale Resource Highlights Two of the leading E&P companies in the Eastern United States Marcellus Shale acreage is the most important asset in CONSOL s upstream portfolio and is one of Noble Energy s five core areas Significantly expanded through acquisitions Projected double digit annual production growth through 2016 Near term production forecast benefitting from improved cycle times, type curve improvements, and service deflation. Integrated Development Plan approach to reduce costs and increase production 2,000 1,600 1,200 800 400 0 Marcellus Shale Acreage Position (Acres in Thousands) Sponsors Position Represents One of Largest Aggregate Acreage Positions in the Marcellus Shale Sponsors 2015E Capex Budget CONSOL Noble Energy Other 31% Marcellus 69% Other 76% 24% Marcellus Combined 2015E Marcellus Shale Capex: Approximately $1.4 billion 1 1 Includes upstream and midstream capital expenditures on dedicated and ROFO acreage Note: Company Filings, Investor Presentations, News Releases 13
Sponsors Hold Strategically Advantaged Position in Marcellus Core Sponsors Hold Approximately 700,000 Net Acres in the Cost-advantaged and Prolific Area of the Marcellus Sponsors 50/50 upstream joint venture in the Marcellus covers an area of mutual interest that is supported by a 25- year joint development agreement 100% operated, high net revenue interest and 78% held by production as of December 31, 2014 Acreage is highly contiguous and located in close proximity to processing facilities and major interstate pipelines CNX develops and operates in the eastern, dry gas portion of the upstream acreage NBL develops and operates in the western, wet gas portion of the upstream acreage JV Relationship Provides Development Synergies NBL Two management teams focusing on best practices Diversified producers create capital investment stability Improved efficiencies through shared resources and purchasing power Multi-basin perspective Long-tenured Appalachian experience NBL 14
Proximity to Major Interstate Pipelines Key Highlights Sponsors have secured sufficient processing and takeaway capacity to handle projected needs thru 2016: Sponsors hold approximately 1.8 Bcf/d of long-term firm transportation with: Dominion Transmission ( DTI ) Spectra Energy ( SE ) NiSource Inc. ( NI ) Columbia Gas Transmission ( TCO ) National Fuel Gas ( NFG ) Region Pipelines Available Pipelines Under Contract Central Pennsy lv ania DTI, EQT, TCO, SE DTI, SE Southwest Pennsy lv ania DTI, EQT, NFG, TCO, SE DTI, TCO, SE West Virginia DTI, EQT, TCO DTI, TCO Sponsors Marcellus Acreage with Interstate Transmission Line Overlay Sponsors sell to numerous customers who hold their own firm transportation agreements Sponsors hold NGL extraction and fractionation agreements with MarkWest, Williams, and Dominion NBL NBL 1 Includes all of CNX s Appalachian Basin firm transportation Source: SNL Financial 15
Growth Profile
System Benchmarks Milestones 2015 Forecast CNNX s Throughput Growth Has Just Begun CNNX Consolidated Throughput Growth 1,200 1,000 800 Total CONE Gathering Attributable to CNNX (Amounts prior to 4Q2014 are proforma) 768 883 2015 YoY Growth: 40% - 50% 600 400 200 130 161 155 172 233 277 249 251 370 453 490 552 0 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 2015 October 2008: First flow of horizontal Marcellus well September 2011: CONSOL and Noble Energy form CONE January 2012: Majorsville Construction Start July 2014: CONE systems reach 700 MMcfe/d Q3 2015: Projected 1.0 Bcf/d throughput 2008 2010 2012 2014 2015E September 2011: CONE systems initial volumes of 130 MMcfe/d September 2011: Mamont first flow July 2012: Majorsville first flow May 2014: McQuay reaches 250 MMcfe/d June 2014: Mamont reaches 100 MMcfe/d June 2014: Majorsville reaches 250 MMcfe/d June 2015: Average Q2 throughput exceeds 1 Bcfe/d 17
Improved Completion Techniques Enhance Well Recovery and Pipeline Volumes Reduced Cluster Spacing & Shorter Stage Lengths Overview of Sponsors Activity Advanced completion techniques, such as Reduced Cluster Spacing ( RCS ) and Shorter Stage Lengths ( SSL ), improve well economics and gas recovery RCS & SSL wells showing increases in IP rates by approximately 40% and EURs by 15% - 20% over much of the acreage Results in higher CONE Gathering throughput per well connected and lower breakeven price for Sponsors Approximately 120 wells have been completed using RCS/SSL technology. (As of May 2015) Note: Townships are shown in yellow where the Sponsors hold 3,000 or more acres as of 12/31/2014 18
Stacked Pay Potential Gas Factory Development Stacked Laterals Provide Economies of Scale to Access up to 4 Pays From 1 Pad 19
Recent Utica Well Results Have Been Outstanding This past Friday, we began flow back on the Gaut 4IH, a deep dry Utica well located in Westmoreland County, Pennsylvania. The Gaut stands out over and above any other Utica wells drilled to date because of its location and results. This is a true step out well, which adds substantial breadth to the entire Utica play. Based on flow rate, the Gaut is the second best dry Utica well drilled to-date with maximum flowing pressures exceeding 9,000 pounds and a 24-hour flow rate in excess of 61 million cubic feet a day. During the 24-hour flow test, the pressures never dropped below 7,500 pounds. Tim Dugan CONSOL Chief Operating Officer Gas Operations Source: Quote and graphic from CONSOL Energy s 2Q 2015 Earnings Call and Presentation Materials 7/28/15 20
Third-party Acreage Opportunity Wells Permitted & Drilled per County High Concentration of Third-Party Wells in Close Proximity 21
CNNX : Engineered for Long-term Growth CONE Midstream Has Ample Business Growth Drivers Even in Lower Commodity Price Environment Co-ownership of Development Companies Provides Opportunities for Drop-downs of Sponsors Retained Interests: Anchor Systems (25%) Growth Systems (95%) Additional Systems (95%) Additional Drivers of MLP Upside Potential Improved Completions Technology Rig Cycle Time Well Recompletes Stacked Pay Third-Party Volumes 22
Financial Overview
Key Financial Statistics (Amounts attributable to CONE Midstream) Daily Throughput (1) Total Capex Bbtu/d 700 600 500 400 300 200 100 0 158 257 452 564-614 2012 2013 2014 2015F $ Millions 140 120 100 80 60 40 20 0 66 76.9 96.9 95-115 2012 2013 2014 2015F CNNX Distributable Cash Flow (2) EBITDA (2) $ Millions 70 60 50 40 30 20 10 0 Assuming a full year of: public company expenses allocations to non-controlling interest maintenance capital 2014 DCF would have been approximately $39.1 million 20.8 30.5 57.5 55-62 2012 2013 2014 2015F $ Millions 80 70 60 50 40 30 20 10 0 Assuming a full year of: public company expenses allocations to noncontrolling interest 2014 EBITDA would have been approximately $45.1 million 23.4 33.9 63.5 66-72 2012 2013 2014 2015F Notes: 1 2012 and 2013 throughput reflects the Sponsors gross wellhead production. 2 2012-2014 EBITDA and DCF reflect unaudited pro forma amounts and are not comparable to 2015 forecast as they do not adjust for full or partial year incremental G&A expenses as a result of being a publicly traded partnership, allocations to non-controlling interests or (for DCF) maintenance capital. EBITDA and Distributable Cash Flow are non-gaap measures. Reconciliations to GAAP measures are available in the appendix of this presentation. 24
Balance Sheet Well Positioned for Growth CNNX Has a Balance Sheet and Liquidity Profile that Facilitates its Growth Strategy ($ in Millions) Capitalization 1 June 30, 2015 Cash and Cash Equivalents $ 0.2 Revolving Credit Facility Balance Outstanding 23.0 Partners Capital Common Units 391.6 Subordinated Units (90.5) General Partnership Interest (3.7) Capital attributable to CONE Midstream Partners LP/Parent $ 297.4 Noncontrolling interest 391.7 Total Partners' Capital $ 689.1 Total Capitalization $ 689.3 Revolving Credit Facility Available Balance $ 227.0 Note: Totals may not foot due to rounding. 25
Attractive Financial Profile Visible Growth Upstream development plan drives organic growth on existing system Large drop-down inventory from Sponsors retained ownership interest Stable Revenue Business Model Long-term (20-year), fixed-fee gathering agreements with Sponsors No direct exposure to commodity price risk Prudent Distribution Strategy 1.15x total unit targeted coverage Underpinned by dedicated acreage Sponsor-held subordinated unit structure mirrors industry standard Collaborative Capex Strategy CNNX is responsible for only its pro-rata share of capex in each system Significant portion of development capex retained by Sponsors Balance Sheet Poised For Growth Only $23 million drawn on credit facility at 6/30/15 $227 million of undrawn borrowing capacity available Plan to prudently utilize leverage to execute on growth strategy Opportunity to accelerate distributable cash flows through drop downs 26
Investment Highlights Recap Strategically Advantaged Marcellus Shale Assets Experienced, Large-Cap E&P Sponsorship Growth Through Stable, Fixed-Fee Cash Flows Financial Flexibility and Strong Capital Structure Robust Distribution Growth Expected 27
Appendix
Non-GAAP Financial Measures EBITDA We define EBITDA as net income before income taxes, net interest 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 believe that the presentation of EBITDA provides information useful to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to EBITDA are net income and net cash provided by operating activities. EBITDA should not be considered an alternative to net income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA excludes some, but not all, items that affect net income or net cash, and these measures may vary from those of other companies. As a result, EBITDA as presented below may not be comparable to similarly titled measures of other companies. Distributable Cash Flow We define distributable cash flow as EBITDA less net cash interest paid and maintenance capital expenditures. Distributable cash flow does not reflect changes in working capital balances. Distributable cash flow 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: the ability of our assets to generate cash sufficient to support our indebtedness and make future cash distributions to our unitholders; and the attractiveness of capital projects and acquisitions and the overall rates of return on alternative investment opportunities. We believe that the presentation of distributable cash flow in this report provides information useful to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to distributable cash flow are net income and net cash provided by operating activities. Distributable cash flow should not be considered an alternative to net income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Distributable cash flow excludes some, but not all, items that affect net income or net cash, and these measures may vary from those of other companies. As a result, our distributable cash flow may not be comparable to similarly titled measures of other companies. The partnership does not provide financial guidance for projected net income or changes in working capital, and, therefore, is unable to provide a reconciliation of its adjusted EBITDA and distributable cash flow projections to net income, operating income, or net cash flow provided by operating activities, the most comparable financial measures calculated in accordance with GAAP. Reconciliation to GAAP Measures (Amounts in $ Millions) Y ear Ended December 31, 2012 2013 2014 Net Income $ 19.9 $ 28.1 $ 64.8 Add: Interest Expense, net - - 0.0 Add: Depreciation Expense 3.4 5.8 7.3 EBITDA 23.4 33.9 72.2 Less: Net Income Attributable to Noncontrolling Interest - - 7.9 Less: Depreciation Expense Attributable to Noncontrolling Interest - - 0.9 EBITDA Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP $ 23.4 $ 33.9 $ 63.5 Less: Interest expense, excluding capital lease interest - - - Less: Ongoing Maintenance Capital Expenditures, Net of Expected Reimbursements 2.6 3.4 6.0 Distributable Cash Flow $ 20.8 $ 30.5 $ 57.5 Note: Totals may not foot due to rounding. 29