Enable Midstream Partners, LP
Transcription
Enable Midstream Partners, LP
Enable Midstream Partners, LP First Quarter 2015 Conference Call May 6, 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 First Quarter 2015 Highlights ► Started full operations of the Bradley Plant in the SCOOP and the Bear Den Crude Oil and Produced Water Gathering System in the Bakken ► Began commissioning of our second Bakken crude gathering system ► Conducted an open season on EGT ► Completed an organizational restructuring ► Announced a first quarter 2015 distribution of $0.3125/unit ► 1.2% increase over fourth quarter 2014 distribution 8.7% increase over the partnership’s minimum quarter distribution On May 1, 2015, acquired an $80 million gas gathering system in the Texas Panhandle 4 Acquisition is immediately accretive Current Market Update Many plays across Enable’s footprint continue to provide strong returns for producers, including the Bakken, SCOOP and Cana Woodford plays ► ► Production in these plays drives growth across Enable’s value chain – from building more gathering and processing capacity to holding an open season for expansion of interstate transportation ► The Haynesville Shale is starting to see growing natural gas output again1, despite low natural gas prices, as drilling costs decline and new demand develops in Gulf Coast markets 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 ► ► Natural gas consumption in the power sector is projected to grow by 11.5% in 2015 and the industrial sector consumption to increase by 4.9% in 20152 ► Contango in natural gas markets is increasing the value of natural gas storage ► Approximately 227 rigs are currently operating in the counties in which Enable operates or is constructing assets as of April 29, 2015, a decrease of approximately 119 rigs since February 13, 20153 The largest decline is in the Bakken where Enable’s anchor customer, XTO Energy, still remains active ► Enable has seen trends of producers maintaining current drilling schedules in core plays and continuing with drilling after initially reducing plans Enable expects that changing markets and supply dynamics will continue to create opportunities ► 5 ► 1. 2. 3. April 2015 U. S. Energy Information Administration (EIA) Drilling Productivity Report EIA Short-term Energy and Summer Fuels Outlook April 2015 Per Drillinginfo as of April 29, 2015 By-play Return Analysis ► Enable’s growth areas still rank as some of the highest returning plays in the country ► Enable is positioned in the core of the Bakken and SCOOP plays where returns are strongest Internal Rate of Returns for Major Plays Plays with Enable assets 30% 25% 20% 15% 10% 5% 0% -5% Base Case 6 20% Completed Well Costs Reduction Gas Price = 12 month forward average curve for each regional pricing point (range $1.92 - $2.91/Mcf) Oil Price = 12 month forward average WTI +/- differential (range $38.82-$54.24/barrel) NGL Prices = weighted average $/barrel, 12-mo forward average Mt. Belvieu prices (range $19.25-$26.36/barrel) Source: Bentek SCOOP Overview ► SCOOP breakeven prices estimated at $41-$47 per barrel for the SCOOP Core in Grady, Garvin and Stephens Counties of Oklahoma ► Over $63 billion remaining to be spent in the SCOOP, STACK and Cana footprint through 2025 with approximately $19 billion related to investments in the SCOOP Core ► SCOOP production expected to more than double over 10 years ► Enable has significant, long-term contracts and acreage dedications with the largest leaseholders and most active operators in the play ► Currently, 18 rigs in the SCOOP area are drilling wells scheduled to be connected to Enable’s gathering systems Remaining Producer Capex by Sub-play SCOOP Production Outlook $ billions 1,400 $19 $13 $8 $5 Source: Wood Mackenzie 7 Cana WDFD Dry Gas SCOOP WDFD Oil SCOOP WDFD Condensate SCOOP Ardmore WDFD Cana WDFD Core STACK SCOOP Core $3 $3 $1 Cana WDFD Liquids-Rich $6 SCOOP WDFD Gas $7 Production (mboe/d) 1,200 1,000 800 600 400 200 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Gas NGL Crude & Condensate Well-Positioned in the SCOOP Enable is the leading midstream provider in the SCOOP and is well-positioned to continue to capture additional volume growth Enable continues to build out gathering, compression, processing and transportation infrastructure. ► SCOOP Footprint and Activity1 ► Completed the 200 MMcf/d Bradley Plant in the first quarter of 2015 in the heart of the SCOOP ► Over 130,000 total HP of compression installed ► Bradley Lateral estimated to be in service in the fourth quarter of 2015 ► On target to add another 200 MMcf/d natural gas processing plant by the first quarter of 2016 to support volume growth ► Still expect additional transportation takeaway capacity will be needed as volumes grow ► Enable holds the leading position in processing capacity in the SCOOP, STACK and Cana region2 1. 2. Per Drillinginfo as of April 29, 2015 Source: Wood Mackenzie 8 Texas Panhandle Acquisition On May 1, 2015, Enable purchased a natural gas gathering system in the Texas Panhandle from Monarch Natural Gas for $80 million ► Acquisition is immediately accretive ► A strategic extension of Enable’s assets into the Anadarko Cleveland play; an active, top-tier return play located in Hemphill and Lipscomb counties in the Texas Panhandle ► Provides the ability to tie into Enable’s existing “super-header” system ► Underpinned with a long-term dedication from an anchor producer of approximately 35,000 net acres and allows Enable to target additional third party producers ► System includes approximately 88 miles of recently built gathering pipeline and more than 5,000 horsepower of compression 9 Acquisition Extends Texas Panhandle Footprint Anadarko Basin Activity Producers remain active across Enable’s footprint in the Anadarko Basin ► Significant drilling activity continues in the SCOOP but producers also remain active throughout Enable’s Anadarko footprint ► Customers remain active in the Northwest Cana area in Blaine, Custer and Dewey counties of Oklahoma, including one customer that recently moved four rigs into the area supported by a drilling carry ► Customers also remain active in the Granite Wash, including one customer currently running two rigs in the play with plans to expand up to eight rigs 1. Per Drillinginfo as of April 29, 2015 10 Anadarko Footprint and Activity1 Monarch Transportation and Storage Update Open Season Update ► In the first quarter, Enable announced an open season on EGT for additional transportation options from receipt points in Oklahoma to Bennington, Oklahoma, and Perryville, Louisiana ► Received a positive response and currently evaluating bids received ► This additional capacity would enhance Enable’s leading position to provide transport services from the Anadarko basin to key downstream markets Market Update ► Power plant and LDC loads account for over 5.0 Bcf/d on our systems ► Enable is well-positioned to capture additional demand with over 45 coal-fired plants located within a 50-mile radius of our pipelines ► Within a 50 mile radius are another 60+ units totaling 6+ Bcf/d of gas fired capacity that is not connected to Enable 1. Power Plant locations per the EIA 11 Power Plants Near Enable’s Footprint1 Bakken Update Asset Update Enable recently announced that its Bear Den Crude Oil and Produced Water Gathering System in North Dakota is fully operational ► ► System began construction in August 2013 with initial segments of the system starting service in November 2013 ► Provides services to producer XTO Energy Inc. in its Little Missouri Field and will have a maximum throughput of 19,500 Bbl/d In February of 2015, Enable began commissioning of its second crude oil and produced water gathering system, the Nesson System, and anticipates the system’s full capacity of 30,000 Bbl/d will be available by the end of 2015 ► Bakken Footprint and Activity2 Enable continues to add origin points and is looking to bring non-system barrels onto existing systems ► Market Update ► 93% of the active rigs in North Dakota are active in counties in which the partnership operates or is constructing assets1 ► XTO, Enable’s top customer in the Bakken, is the most active producer in North Dakota with 12 rigs running in the state1 1. 2. Per North Dakota’s Department of Mineral Resources website as of April 28, 2015 Per Drillinginfo as of April 29, 2015 12 Growth Strategy ► 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 high-growth 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 13 First Quarter Operating Statistics Q1 2015 Q1 2014 Gathered volumes (TBtu/d) 3.18 3.31 Natural gas processed volumes (TBtu/d) 1.68 1.44 NGLs produced (MBbls/d)1 65.00 65.28 Condensate sold (MBbls/d) 5.96 5.15 Crude Oil – Gathered Volumes (MBbl/d) 6.72 1.00 Transportation volumes (TBtu/d) 5.72 5.55 Interstate firm contracted capacity (Bcf/d) 7.82 7.93 Intrastate transported volumes (TBtu/d) 1.84 1.57 1. 14 Excludes condensate First Quarter Results Q1 2015 Q1 2014 $324 $369 Gathering and Processing $179 $207 Transportation and Storage $145 $162 $130 $126 $91 $149 $204 $228 Adjusted Interest Expense, net $22 $15 Maintenance Capital $39 $30 Distributable Cash Flow $143 $183 Expansion Capital $200 $119 $ in millions Gross Margin Operation and Maintenance Expense Net Income 1 Adjusted EBITDA 1. 15 Net income attributable to Enable Midstream Partners, LP 2015 Outlook Feb 18, 2015 2015 Outlook May 6, 2015 2015 Outlook Natural Gas Gathered Volumes (TBtu/d) 3.1 – 3.3 3.1 – 3.3 Natural Gas Processed Volumes (TBtu/d) 1.6 – 1.8 1.7 – 1.9 20.0 – 22.0 13.0 – 15.0 Adjusted EBITDA $800 – $860 $800 – $840 Adjusted Interest Expense, net $95 – $105 $100 – $110 Maintenance Capital $140 – $160 $140 – $160 Distributable Cash Flow $540 – $590 $540 – $590 3% – 7% 3% – 7% 6% – 8% 6% – 8% 1.0x – 1.08x 1.0x – 1.08x $ in millions, except volume numbers Crude Oil – Gathered Volumes (MBbl/d) Per-unit Distribution Growth 1 Per-unit Distribution Growth from MQD 2 Coverage Ratio 2015 guidance centered around the following price assumptions: • Natural Gas (Henry Hub) at $2.80/MMBtu (compared to $2.85/MMBtu on February 18, 2015) • Natural Gas Liquids Composite3: Mont Belvieu, Texas at $.48/gal; Conway, Kansas at $.45/gal (compared to $.47/gal and $.46/gal , respectively, on February 18, 2015) • Crude Oil (WTI) at $56.00/Bbl (compared to $52.50 on February 18, 2015) 1. 16 2. 3. Distribution growth calculated as the growth rate from Enable’s $0.30875 fourth quarter 2014 distribution to Enable's projected fourth quarter 2015 distribution Distribution growth calculated as the compound annual growth rate from Enable’s minimum quarterly distribution of $0.2875 per unit through the fourth quarter of 2015 (7 quarterly compounding periods) 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 Contracted Expansion Acquisitions Identified Opportunities Total ► 17 May 6, 2015 2015 Outlook $600 – $800 $600 – $800 – $80 $0 – $300 $0 – $300 $600 – $1,100 $680 – $1,180 Contracted Expansion includes: ► ► Feb 18, 2015 2015 Outlook 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 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 for second quarter 2015 through fourth quarter 2015, 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 $6 million in gross margin ► A 10% increase or decrease in the price of NGLs and condensate from forecasted levels would result in an increase or decrease of approximately $1 million in gross margin Q1 2015 – Q4 2015 Fee-Based Margin Profile1 Commodity 6% Q2 – Q4 2015 Natural Gas2 11% ~94% feebased or hedged Q2 2015 – Q4 2015 Commodity Hedging Summary 53% 30% Exposure Hedged (%) 66% Average Hedge Price ($/MMBtu) $3.23 Crude3 Exposure Hedged (%) Average Hedge Price ($/Bbl) 79% $59.16 Propane 18 Firm/MVC Fee-based Other Fee-based Commodity-based Hedged Commodity-based Unhedged 1. 2. 3. Exposure Hedged (%) 81% Average Hedge Price ($/gal) $0.58 Percentages in pie charts based on Gross Margin contribution Excludes basis not matched with NYMEX and natural gas shrink associated with ethane spread positions Enable hedges condensate exposure with crude Enable is Well-positioned for the Future ► Investment grade ratings, low leverage and substantial liquidity ► Significant fee-based margin ► Hedging program provides downside protection ► Integrated and scalable assets in top-tier basins ► High-quality customers ► Seasoned management team ► Solid growth strategy driven by organic opportunities and capacity for asset acquisitions 19 Question and Answer Question & Answer 20 Appendix 21 Appendix Non-GAAP Reconciliations 3 Months Ended March 31, 2015 2014 Revenues 616 1,002 Cost of goods sold, excluding depreciation and amortization 292 633 Gross Margin 324 369 91 149 Depreciation and amortization expense 73 67 Interest expense, net of interest income 20 14 1 1 185 231 Distributions from equity method affiliates 12 3 Other non-cash losses 14 — Other non-cash gains — (3) Equity in earnings of equity method affiliates (7) (3) 204 228 (22) (15) Maintenance capital expenditures (39) (30) Distributable cash flow 143 183 Net income attributable to Enable Midstream Partners, LP Add: Income tax expense EBITDA Add: Less: Adjusted EBITDA Less: Adjusted interest expense, net 22 1