Enable Midstream Partners, LP Fourth Quarter 2014 Conference Call February 18, 2015
Forward-looking Statements This presentation and the oral statements made in connection herewith may contain forward-looking statements within the meaning of the securities laws. All statements, other than statements of historical fact, regarding Enable Midstream Partners ( Enable ) strategy, future operations, financial position, estimated revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. These statements often include the words could, believe, anticipate, intend, estimate, expect, project, forecast and similar expressions and are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on Enable s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. Enable assumes no obligation to and does not intend to update any forward-looking statements included herein. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under the heading Risk Factors included in our SEC filings. Enable cautions you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond its control, incident to the ownership, operation and development of natural gas and crude oil infrastructure assets. These risks include, but are not limited to, contract renewal risk, commodity price risk, environmental risks, operating risks, regulatory changes and the other risks described under Risk Factors in our SEC filings. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, Enable s actual results and plans could differ materially from those expressed in any forward-looking statements. 2
Non-GAAP Financial Measures The Partnership has included the non-gaap financial measures gross margin, Adjusted EBITDA and distributable cash flow in this presentation based on information in its condensed combined and consolidated financial statements. Gross margin, Adjusted EBITDA and distributable cash flow are supplemental financial measures that management and external users of the Partnership s financial statements, such as industry analysts, investors, lenders and rating agencies may use, to assess: The Partnership s operating performance as compared to those of other publicly traded partnerships in the midstream energy industry, without regard to capital structure or historical cost basis; The ability of the Partnership s assets to generate sufficient cash flow to make distributions to its partners; The Partnership s 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. The appendix to this presentation includes a reconciliation of gross margin to revenues, Adjusted EBITDA and distributable cash flow to net income attributable to controlling interest, and Adjusted EBITDA to net cash provided by operating activities, the most directly comparable GAAP financial measures, on a historical basis, as applicable, for each of the periods indicated. The Partnership believes that the presentation of gross margin, Adjusted EBITDA and distributable cash flow provides information useful to investors in assessing its financial condition and results of operations. Gross margin, Adjusted EBITDA and distributable cash flow should not be considered as alternatives to net income, operating income, revenue, cash from operations or any other measure of financial performance or liquidity presented in accordance with GAAP. Gross margin, Adjusted EBITDA and distributable cash flow have important limitations as analytical tools because they exclude some but not all items that affect the most directly comparable GAAP measures. Additionally, because gross margin, Adjusted EBITDA and distributable cash flow may be defined differently by other companies in the Partnership s industry, its definitions of gross margin, Adjusted EBITDA and distributable cash flow may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. 3
2014 Financial Highlights Net income 1 of $530 million, an 18% increase over pro forma 2013 Adjusted EBITDA of $868 million, an 11% increase over pro forma 2013 DCF of $622 million, a 14% increase over pro forma 2013 Fourth quarter 2014 distribution of $0.30875/unit, a 7% increase over the partnership s minimum quarter distribution 4 1. Net income attributable to Enable Midstream Partners, LP
Well-Positioned for Today s Environment Investment grade ratings, low leverage and substantial liquidity with a 2.9x debt-to-adjusted EBITDA ratio 1 as of December 31, 2014 and $1.2 billion in revolver capacity 2 as of January 31, 2015 Significant fee-based margin with approximately 79% of 2015 gross margin forecasted to be fee-based and 54% forecasted to be firm or MVC-based Hedging program provides downside protection with 88% of 2015 gross margin projected to be either fee-based or hedged Integrated assets allow us to adjust volume flows and optimize our system in response to changing prices and supply dynamics Seasoned management team and significant experience throughout the organization 5 1. Calculated by dividing $2,544 million of debt (including commercial paper and promissory notes payable to sponsor) by $868 million in Adjusted EBITDA 2. Calculated by reducing $1.4 billion revolver by $2 million of outstanding letters of credit and $224 million of outstanding commercial paper.
Major Project Updates Bradley Plant scheduled for a first quarter 2015 start-up Additional SCOOP-area 200 MMcf/d plant now scheduled for a first quarter 2016 start-up SCOOP gathering and compression build-out continues with 47,000 HP of compression added during the fourth quarter of 2014 Bradley Lateral now estimated to be in service in either the third quarter or the fourth quarter of 2015, depending on regulatory approvals Dunn and McKenzie County crude oil gathering system most of the 19,500 Bbl/d system was placed into service in 2014 with the remaining portions of the system expected to be placed into service during the first quarter of 2015 Williams and Mountrail County crude oil gathering system expected to commence initial operations in the first quarter of 2015 with construction of the 30,000 Bbl/d system anticipated to be completed by the end of 2015 Bradley Plant Construction 2014 6
Current Market Update Approximately 350 rigs are currently operating in the counties in which Enable Midstream operates or is constructing assets as of February 13, 2015, a decrease of approximately 70 rigs since October 21, 2014 1 The largest rig count decreases have come from the Bakken, Greater Granite Wash and SCOOP plays offset by increases in the Cana Woodford play Despite an overall rig reduction, producers remain active in Enable Midstream s growth areas Currently, 27 rigs in the SCOOP are drilling wells scheduled to be connected to Enable s gathering systems Returns remain strong in the SCOOP with Continental Resources indicating SCOOP rates of return at ~50% assuming a $60/barrel oil price and $3.00/Mcf natural gas price 2 93% of the active rigs in North Dakota are active in counties in which the partnership operates or is constructing assets 3 Based on current and forecasted SCOOP drilling activity, we still expect additional transportation takeaway capacity out of the area will be needed End-user opportunities continue to develop on and around our transportation systems driven by lower gas prices, including recent announcements of new natural gas-fired power generation We expect that volatile markets and changing supply dynamics will continue to create opportunities 7 1. Per Drillinginfo 2. Per Continental Resources February 2015 Investor Presentation. Returns assume a 15% reduction in completed well costs. 3. Per North Dakota s Department of Mineral Resources website as of February 14, 2015
Growth Strategy Remains Unchanged Capture organic growth opportunities in our core basins Extend the value chain from wellhead to end users in our core commodities of gas, NGLs and crude Establish a presence in highgrowth basins Develop a meaningful and competitive position in any basin where we participate Capture additional market demand on and around our system Maximize earnings stability by increasing fee-based margin 8
Fourth Quarter Operating Statistics Q4 2014 Q4 2013 Gathered volumes (TBtu/d) 3.36 3.43 Natural gas processed volumes (TBtu/d) 1.64 1.44 NGLs produced (MBbls/d) 1 64.06 61.13 Condensate sold (MBbls/d) 4.60 3.11 Crude Oil Gathered Volumes (MBbl/d) 2 7.46 - Transportation volumes (TBtu/d) 4.76 4.65 Interstate firm contracted capacity (Bcf/d) 7.77 7.86 Intrastate transported volumes (TBtu/d) 1.60 1.59 9 1. Excludes condensate 2. Initial operation of our crude oil gathering system began on November 1, 2013
Fourth Quarter Results $ in millions Q4 2014 Q4 2013 Gross Margin 1 $371 $338 Gathering and Processing $207 $203 Transportation and Storage $165 $135 Operation and Maintenance Expense $144 $127 Net Income 2 $122 $115 Adjusted EBITDA $198 $200 Adjusted Interest Expense, net $22 $18 Maintenance Capital $57 $47 Distributable Cash Flow $119 $135 Expansion Capital $196 $160 10 1. Gross margin includes a ($1) million elimination in Q4 2014 2. Net income attributable to Enable Midstream Partners, LP
2015 Outlook 2014 Prior Updated $ in millions, except volume numbers Actuals 2015 Outlook 2015 Outlook Natural Gas Gathered Volumes (TBtu/d) 3.34 3.5 3.7 3.1 3.3 Natural Gas Processed Volumes (TBtu/d) 1.56 1.9 2.2 1.6 1.8 Crude Oil Gathered Volumes (MBbl/d) 3.64 22.0 28.0 20.0 22.0 Adjusted EBITDA $868 $915 $985 $800 $860 Adjusted Interest Expense, net $82 $100 $110 $95 $105 Maintenance Capital $164 $175 $190 $140 $160 Distributable Cash Flow $622 $630 $690 $540 $590 Per-unit Distribution Growth 1 3% 7% Per-unit Distribution Growth from MQD 2 10% 12% (2014 & 2015) 6% 8% Coverage Ratio 1.10x 1.20x 1.0x 1.08x 2015 guidance centered around the following price assumptions: Natural Gas (Henry Hub) at $2.85/MMBtu Natural Gas Liquids Composite 3 : Mont Belvieu, Texas at $.47/gal; Conway, Kansas at $.46/gal Crude Oil (WTI) at $52.50/Bbl 11 1. Distribution growth calculated as the growth rate from Enable Midstream s $0.30875 fourth quarter 2014 distribution to Enable Midstream's projected fourth quarter 2015 distribution 2. Distribution growth calculated as the compound annual growth rate from Enable Midstream s minimum quarterly distribution of $0.2875 per unit through the fourth quarter of 2015 (7 quarterly compounding periods) 3. Natural gas liquids composite based on an assumed composition of 45%, 30%, 10%, 5%, and 10% for ethane, propane, normal butane, isobutane and natural gasoline, respectively.
Expansion Capital Outlook $ in millions 2015 Contracted Expansion $600 $800 Identified Opportunities $0 $300 Total $600 $1,100 Contracted Expansion includes: Gathering, compression and processing infrastructure to support projected volume growth from current contracts and acreage dedications, including infrastructure in the SCOOP, Bakken and Greater Granite Wash plays Identified Opportunities include transportation and G&P projects in late-stage negotiation, such as: Additional Bakken crude gathering expansions Anadarko gas gathering and processing expansions New end-user transportation service and market access pipeline opportunities NGL transportation infrastructure 12
Commodity Exposure Enable targets fee-based contracts on a firm basis, when possible Some gathering and processing contracts have provisions to protect against low commodity price environments and volume decreases Commodity sensitivities, including the impact of hedges: A 10% increase or decrease in the price of natural gas from forecasted levels would result in an increase or decrease of approximately $9 million in gross margin in 2015 A 10% increase or decrease in the price of NGLs and condensate from forecasted levels would result in an increase or decrease of approximately $5 million in gross margin in 2015 Fee-Based Margin Profile 1 2014 Actual 2015 Forecast ~72% Fee-based ~88% Fee-based or Hedged 9% 28% 12% 22% 50% 25% 54% Firm/MVC Fee-based Other Fee-based Commodity-based Unhedged Commodity-based Hedged 13 1. Percentages in pie charts based on Gross Margin contribution.
2014: A Track Record of Delivery Successful $575 million IPO and $1.65 billion debt offering Multiple commercial accomplishments: contracted a new 30,000 Bbl/d Bakken crude gathering system, added 600,000 gross acres of new SCOOP-area dedication and extended several major transportation and storage contracts Executed on almost $700 million of growth capital and announced a new 200 MMcf/d SCOOP-area plant Exceeded the top end of distributable cash flow guidance and grew distributions by 7% over the minimum quarterly distribution 14
Focus for 2015 2015: A Year for Operational, Commercial and Financial Excellence Partner in our customers success Maintain a strong balance sheet and investment grade credit ratings Manage costs Disciplined growth Safety and environment 15
16 Question and Answer Question & Answer
Appendix Appendix 17
Non-GAAP Reconciliations Historical Pro Forma Year Ended December 31, 2014 2013 2014 2013 2013 Revenues 735 824 3,367 2,489 3,120 Cost of goods sold, excluding depreciation and amortization 364 486 1,914 1,313 1,798 Gross Margin 371 338 1,453 1,176 1,322 Net income attributable to Enable Midstream Partners, LP 122 115 530 1,615 451 Add: Depreciation and amortization expense 71 64 276 212 269 Interest expense, net of interest income 20 14 70 58 49 Income tax expense (benefit) 3 2 (1,192) 4 EBITDA 213 196 878 693 773 Add: Loss on extinguishment of debt 4 Distributions from equity method affiliates 1 10 4 23 24 16 Other non-recurring losses 14 3 22 15 Impairment 7 8 12 12 Less: Other non-cash items (38) (47) Equity in earnings of equity method affiliates (8) (3) (20) (15) (12) Gain on disposition (10) Adjusted EBITDA 198 200 868 729 779 Less: 3 Months Ended December 31, Year Ended December 31, Adjusted interest expense, net 2 (22) (18) (82) (69) (61) Maintenance capital expenditures (57) (47) (164) (164) (174) Distributable cash flow 119 135 622 496 544 18