Jefferies 2016 Energy Conference · 2016. 12. 13. · Jefferies 2016 Energy Conference ... 31, 2015...
Transcript of Jefferies 2016 Energy Conference · 2016. 12. 13. · Jefferies 2016 Energy Conference ... 31, 2015...
1www.plainsallamerican.com NYSE: PAA & PAGP
Jefferies 2016 Energy ConferenceHouston, TX November 29, 2016
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Forward-Looking Statements & Non-GAAPFinancial Measures Disclosure
Except for the historical information contained herein, the matters discussed in this presentationconsist of forward-looking statements. These forward-looking statements are based on PAGP’sand PAA’s current views with respect to future events, based on what we believe to bereasonable assumptions. Actual results may differ significantly because of risks anduncertainties that are difficult to predict and that may be beyond the control of PAGP and PAA.You should read PAGP’s and PAA’s Annual Reports on Form 10-K for the year ended December31, 2015 and their most recently filed Quarterly Reports on Form 10-Q for a more extensive listof factors that could cause actual results or outcomes to differ materially from the results oroutcomes anticipated in the forward-looking statements. PAGP and PAA undertake no obligationto revise any forward-looking statements to reflect events or circumstances occurring aftertoday’s date.
This presentation also contains non-GAAP financial measures relating to PAA, such as adjustedEBITDA. A reconciliation of these measures to the most directly comparable GAAP measures isavailable in the Investor Relations section of PAA’s and PAGP’s website atwww.plainsallamerican.com, select “PAA” or “PAGP,” navigate to the “Financial Information”tab, then click on “Non-GAAP Reconciliations.”
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Discussion Outline
PAA Overview
Industry Status
Midstream Environment & PAA Actions
PAA’s Integrated System & Growth Capacity
Closing Thoughts
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Plains All American Profile(NYSE: PAA & PAGP)
Total Enterprise Value $33.1 B
PAA Equity Market Cap(2) $14.5 B
PAGP Equity Market Cap(3) $8.4 B
Total LT Debt(4) $10.2 B
Current PAA Yield ~7.1%
Current PAGP Yield ~6.4%
PAA Total Assets $23.5 B
PAA S&P / Moody’s / Fitch BBB-/Baa3/BBB
Financial Profile(1)
2016 Adjusted EBITDA (5) ~$2.13 B
2016 Adj. Net Income (5) ~$1.09 B
PAA Public Guidance – Mid-point
Pipelines (active miles) 19,200 miles
Liquids Storage 135 mmbls
Natural Gas Storage 97 Bcf
Fractionation Facilities(7) 181,000 b/d
Natural Gas Processing(8) 8.5 Bcf/d
Crude & NGL Rail Facilities 28
Crude & NGL Railcars 10,100
Truck Fleet 1,930 Trailers
990 Trucks
Barge Fleet 142 Barges
64 Tugs
Crude & NGLVolumes(9): >4.6 mmb/d
PAA Assets(6)
(1) As applicable, based on balance sheet data as of 09/30/16, 11/25/16 closing unit prices and distributions paidon 11/14/16 (PAGP’s distribution adjusted for the reverse split on 11/15/16).
(2) $1.6 billion preferred equity included in PAA Equity Market Cap(3) PAGP Equity Market Cap includes AAP Management units as of 11/03/16.(4) Pro-forma for simplification (includes GP debt)(5) Adjusted EBITDA and Adjusted Net Income Attributable to PAA, which has been abbreviated as “Adj. Net
Income,” are the mid-point of PAA’s public guidance furnished via form 8-K on 11/02/16 and exclude selecteditems impacting comparability.
(6) Assets as of 12/31/15.(7) Amount represents net capacity.(8) Amount represents net capacity. Natural gas processing capacity also includes
approximately 2.5 Bcf per day for a long-term liquid supply contract.(9) YTD average daily Transportation segment volumes for period ending
09/30/16.
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PAA Has:1. Highly integrated crude oil pipeline &
terminal system in the U.S.
2. Minimal direct exposure to commodity prices
3. Multiple expansion projects coming on-stream supported by long-term contracts
Note: Map includes only most significant PAA assets (includes assets in which PAA owns a partial non-operating interest). Certain PAA assets reflected above are announced or under construction, but not yet in service.
Strong Presence Throughout The Value Chain In All Major U.S. AndCanadian Crude Oil Production Areas And Substantially All Inland AndCoastal Crude Oil Terminal / Interchange Locations
Crude Oil Value Chain
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Industry Status
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PAA’s View
Bullish intermediate to long-term, but remain cautious near-term
(preparing for another 9 months or more of challenging conditions)
Compared to last cycles:
1. Tighter global supply/demand imbalance
2. Facing steeper decline curves
3. Greater magnitude of global capital retrenchment
4. Inventory overhang presents near-term challenges
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Comparison of Current Cycle to Last Four Cycles’U.S. Rig Count
Sources: Baker Hughes Inc., Robert W. Baird, IEA, Simmons & Co.
Unlike The 1984+ Cycle, OPEC’s Excess ProductionCapacity is Greatly Reduced
(1) Rig data as of 11/23/2016
Current Downturn Similar To The Early 1980s Cycle; However,Supply / Demand Imbalance Much Narrower
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Steep Shale Decline Curves Require More ActivityTo Maintain/Increase Production
At year end 2015, more than half of the onshore crude oil production in theLower 48 came from wells completed in the prior 24 months.
1st year declines generally range from 65% to 80% in horizontal / hydraulicfractured oil wells in shale/resource plays (30% to 40% in 2nd year)
~55% from2014 / 2015completions
Lower 48 Onshore Production Declines
To
tal
L48
On
sh
ore
Pro
du
cti
on
(mb/d)
Total L48 onshore ~55%
Permian ~55%
Eagle Ford ~70%
Williston ~60%
DJ ~80%
All other ~30%
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Source: EIA, HPDI
Encouraging Signs That We Are At Or Near TheBottom Of The Current Downturn
Permian & STACK represent over 50% of total working rigs in L48 onshore areas (extensive PAA footprint)
Continuation of upstream progress (e.g. D&C efficiency, well-economics, resource definition, M&A)
OPEC public comments indicating plans to reduce production 0.5mmb/d –1.0mmb/d
However, crude oil inventory levels continue to present near-term challenges
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Midstream Environment& PAA Actions
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The Midstream Sector Has Generally “Over-solved” The
Infrastructure Shortfall Driven By The Shale Renaissance
Midstream Response
From 2010 - 2018, ~50 major crude oil pipeline
projects
~$35 billion capital investment
~12 mmb/d of supply push/demand pull capacity
Many projects supported by volumetric
commitments
Result = Long takeaway capacity, Short
production volumes
Crude oil takeaway capacity exceeds near-termneeds in all major U.S. crude oil producingbasins (Permian Basin likely first to absorb)
Adverse impact to midstream companies andshippers compounded by:
Impact of low prices on production trends
Shipper MVC over-commitments and intensecompetition for the marginal barrel
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
U.S. L48 Onshore Crude Oil Production
Source: EIA Production data as of August 2016
mb/d
L48 onshore oil
production increased
4.5 mmb/d (150%)…
…but has declined
~1mmb/d since mid-2015
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Midstream Response To Current EnvironmentShifting Focus To Optimization & Rationalization
Maximizing Margin
Optimization - increased utilization of existing assets
Reducing costs
Focusing the core business (e.g. non-core asset sales)
Debottlenecking systems
Developing and connecting gathering systems
Increasing Capital Efficiency
Reducing project costs
Executing strategic JV partnerships
Pursuing bolt-on acquisitions
Leveraging system interconnectivity and integration – lease gathering focus
Midstream sector trends and other focus areas
Focus on export capability
Investing in quality segregation
Emphasis on system interconnectivity, flexibility, and optionality
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PAA’s Actions Have Improved Its Ability To Manage ThroughThe Downturn And Be Well Positioned For Recovery
Operating Initiatives
Intensify efforts to capture incremental gathering and
transportation barrels
Focus on system optimization and cost efficiencies
Sale of non-core assets and execute strategic joint ventures
Raised approximately $550mm in cash proceeds (excludes current
disposition efforts)
Reduce and focus capital initiatives and execute capital program
(reduced $600mm)
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Financial Initiatives
Secured $1.6 billion of non-conventional financing
Executed PAA/PAGP simplification transaction
Reduced PAA’s incremental cost of equity by eliminating IDRs
Reset PAA’s annualized distribution from $2.80 to $2.20 per unit
Reiterated distribution coverage target of 115% and commitment to
Investment Grade credit ratings
Prudent equity issuance
(~$440mm raised via COP
from August – October 2016)
PAA’s Actions Have Improved Its Ability To Manage ThroughThe Downturn And Be Well Positioned For Recovery
Summary: significantly improvedPAA’s cost of capital and overall
financial flexibility
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PAA’s Integrated System &Growth Capacity
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Texas City
Wichita Falls
Longview
Houston
Shreveport
Mobile
Patoka
Cushing
PAA Is Completing A Multi-Year Capital Program Focused OnBuilding Out Regional Interconnectivity Across The Value Chain
Nederland
St. James
SCOOP
Cushing toBroom
Delek
Caddo
Scoop InjectionStation
Bakken /CanadianCrude to
St. James
Stack InjectionStation
STACK
Imports / Exports
Note: Map for illustrative purposes and only includes most significant PAA assets. Not all PAA 3rd
party assets are shown. Asset / Activity data as of 12/31/15. (1) All amounts are approximate.
Memphis
Diamond
ColoradoCity
Corpus Christi
Yellow highlightsrepresent significant
recent / ongoingcapital investments
McCamey
CraneDriver
JalMidland
Wink
Permian
ThreeRiversGardendale
Lyssy
Tuscaloosa
Haynesville
--Supply Push &Demand Pull--
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2016(G) based on guidance furnished via Form 8-K on 11/02/16.
Regional illustration of2016 capital program
PAA’s Capital Program Focused On Key Growth Regions-- Both Supply Push & Demand Pull
2016(G) based on guidance furnished via Form 8-K on 11/02/16.2017 (PE) represents a preliminary estimate range for capital expenditures and includes incrementalcapex associated with the Empress Acquisition and certain timing adjustments from 2016.
Regional Area
MVC /
Contractual
Support
Strategy CAPEX In-Service Timing
Permian Basin
Permian Basin Area Projects Yes Supply Push $185 Present – 4Q16
Cactus Pipeline Yes Supply Push $20 Present – 2Q17
Central
Red River Pipeline (Cushing to Longview) Yes Demand Pull $310 4Q16
Diamond Pipeline Yes Demand Pull $105 4Q17
Cushing Terminal Expansions Yes - $70 Present – 2Q17
Caddo Pipeline Yes Demand Pull $35 4Q16
Rocky Mountains
Saddlehorn Pipeline Yes Supply Push $125 3Q16
Canada
Ft. Sask Facility Projects / NGL Line Yes - $205 2016 & 2018
Gulf Coast
St. James Terminal Expansions Yes - $50 Present – 1Q17
South Texas / Eagle Ford
Eagle Ford JV Project Yes Supply Push $25 Present – 4Q18
Other Projects (Various Areas) $295 FY 2016 – 2017
Total 2016 CAPEX $1,425
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$0
$300
$600
$900
$1,200
$1,500
$1,800
$2,100
2009 2010 2011 2012 2013 2014 2015 2016 (G)
Transportation Facilities Supply & Logistics
PAA’s Investments Have Continued To Drive Growth InFee-Based Transportation & Facilities Segments
(G) Midpoint of guidance furnished via form 8-K on November 2, 2016.
Continued Growth In PAA’s Fee-BasedAdjusted EBITDA
Continue to Anticipate Fee-basedAdj. EBITDA to be >80% of Total
($ millions)
Revenue Growth From Select CapitalProjects Supported by MVCs
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Texas City
Wichita Falls
Longview
Houston
Shreveport
Cushing
Nederland
St. James
SCOOP
Cushing toBroom
Delek
Caddo
Scoop InjectionStation
Stack InjectionStation
STACK
Imports /Exports
Note: Map for illustrative purposes and only includes most significantPAA assets. Not all PAA 3rd party assets are shown. Asset data as of12/31/15. Gathering data as of 9/30/16.
Diamond
ColoradoCity
Corpus Christi
McCamey
CraneDriver
JalMidland
Wink
Permian
ThreeRiversGardendale
Lyssy
Tuscaloosa
Haynesville
Permian Basin Assets / Activities (1)
Transportation Volumes ~1,850 mb/d
1st Purchaser Gathered Barrels 470 mb/d
Active Pipeline Miles 4,189
Crude Storage Capacity 14 mmbbls
Crude Rail Loading Capacity 25 mb/d
Truck Injection Stations 120
PAA’s Permian Basin Crude Oil System: UnmatchedInterconnectivity Providing Access To Multiple Markets
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PAA Has An Extended Reach and IncrementalCapacity Within The Permian Basin
C. City
*Capacity data includes quality assumptions and incremental investment required toincrease pumping capacity within PAA’s existing Permian Basin asset footprint.
Midland
Crane
McCamey
Delaware
Basin
MidlandBasin
CentralBasin
Wink
PAA’s Available Permian Pipeline Capacity*
Delaware Trunk lines > Wink: ~750
Permian Trunk lines > Hubs: ~750
Permian Takeaway Capacity: ~400
PAA Total Available Capacity: ~1,900
Source: Drilling Info; PAA estimates,Note: Quality estimates based on the following API gravities: Condensate: >45.0, Light: 35.1-45.0, Medium: 25.1-35.0, Heavy: <25.1
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PAA’s Views On Permian Basin Takeaway Capacity
Currently ~2.5mmb/d of takeaway capacity in the Permian Basin (including400mb/d of regional refining capacity)
Expect there will be an additional 700 – 800mb/d of nameplate capacity available,which consists of the following:
300mb/d (ini� al capacity) from EPD’s Midland → Houston pipeline
400 – 500mb/d of expandable capacity of existing pipelines (BridgeTex, Cactus, PE II, and EPD)
Expansions can be achieved relatively quickly and at relatively low cost by adding additionalpump stations
Identified projects would increase total Permian takeaway capacity to~3.1 – 3.3mmb/d vs. current production of ~2mmb/d in the Permian
Timing for additional pipeline demand dependent upon:
1. Pace of Permian production growth
2. Crude quality segregation needs
3. Market availability (global demand growth)
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Cashion Terminal
BlaineCounty
KingfisherCounty
CanadianCounty
PAACushing
HubSTACK corecrude oil region
STACK & SCOOP – Growth Opportunities
Note: Not all PAA assets are labeled on the above map.STACK/SCOOP shading is illustrative.
STACK
SCOOP
Lindsay Terminal
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PAA Handles > 4.6 mmb/dof Crude Oil & NGLs
Note: Map includes only most significant PAA assets (includes assets inwhich PAA owns a partial non-operating interest). Certain PAA assetsreflected above are announced or under construction, but not yet in service.Color shading is applied to selected assets in major producing regions.
Available Capacity
>100 mb/d
0-100 mb/d
Substantially Full
PAA’s Substantial Capacity Across The Asset SystemLeverages PAA To An Industry Recovery
- With Low to No Capex -
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(1) Represents PAA’s estimates of cash flow increases over 2016 associated withpotential production growth in the U.S. onshore lower 48 and similar assumptionsfor selected assets in Canada.
Transportation & Facilities (1) (~$600mm)
Supply & Logistics (~$400mm)
Increased Utilization Of PAA’s Asset Base Can Result InSignificant EBITDA Growth With Low-to-No Incremental Capex
Production volume growth in each of the basinscan potentially fill a large portion of currentlyavailable pipeline capacity
PAA captures reasonable share of productiongrowth in each respective basin
Supply and Logistics segment has potential foradditional margin as a result of a return to amore balanced market Primarily
PermianRelated
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PAA Key Takeaways
PAA has one of the largest and most integrated midstream systems in North America
Growth profile driven by 2016/2017 capital program underpinned by MVCs
Significant liquidity and competitive cost of capital – financial flexibility
Committed to IG credit ratings and achieving/maintaining 115% distribution coverage
PAA’s system provides significant leverage to market recovery with low-to-noincremental capital requirements
Located in all major crude oil resource plays and substantially all crude demand centers
Extensive crude oil footprint in the Permian Basin leverages PAA to the most prolific andactive producing basin in North America
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Q&A