2014 05-16 update on may 2014 mlp conference v5
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Transcript of 2014 05-16 update on may 2014 mlp conference v5
Peter C. Boylan III – Chairman & CEO
Les Austin – Vice President & CFO
2014 NAPTP MLP Investor Conference | May 21st, 2014
Confidential
2 Confidential
LEGAL INFORMATION
Some of the statements in this presentation concerning future performance are forward-looking within the meaning of U.S. securities
laws. Forward-looking statements discuss the Issuer’s future expectations, contain projections of results of operations or of financial
condition, forecasts of future events or state other forward-looking information. Words such as “may,” “assume,” “forecast,” “position,”
“strategy,” “expect,” “intend,” “plan,” “estimate,” “anticipate,” “believe,” “project,” “budget,” “potential,” or “continue,” and similar
expressions are used to identify forward-looking statements. Forward-looking statements may include statements that relate to,
among other things, availability of cash flow to pay minimum quarterly distributions on the Issuer’s common units; the consummation
of financing, acquisition or disposition transactions and the effect thereof on the Issuer’s business; the Issuer’s existing or future
indebtedness and credit facilities; the Issuer’s liquidity, results of operations and financial condition; future legislation and changes in
regulations or governmental policies or changes in enforcement or interpretations thereof; changes in energy policy; increases in
energy conservation efforts; technological advances; volatility in the capital and credit markets; the impact of worldwide economic and
political conditions; the impact of wars and acts of terrorism; weather conditions or catastrophic weather-related damage;
earthquakes and other natural disasters; unexpected environmental liabilities; the outcome of pending or future litigation; and other
factors, including those discussed in “Risk Factors” section of the S-1 registration statement. Except for historical information
contained in this presentation, the matters discussed in this presentation include forward-looking statements that involve risks and
uncertainties. The Issuer does not undertake and specifically declines any obligation to publicly release the results of any revisions to
these forward-looking statements that may be made to reflect any future events or circumstances after the date of such statements or
to reflect the occurrence of anticipated and unanticipated events. Forward-looking statements are not guarantees of future
performance or an assurance that the Issuer’s current assumptions or projections are valid. Actual results may differ materially from
those projected. You are strongly encouraged to closely consider the additional disclosures and risk factors contained in the
prospectus.
3 Confidential
IPO SUMMARY – JANUARY 21ST, 2014
Issuer: Cypress Energy Partners, L.P. (NYSE: CELP)
Common units sold: 4,312,500 units (~ 4.5X oversubscribed)
Offering size: $86.25 million
IPO Price per unit: $20.00 (Yield of 7.75%); Current Yield ~ 6.9% @ $22.31
(5/16/14)
Minimum quarterly distribution: $0.3875 per unit ($1.55 annualized); Q1 2014 $0.3014 pro-
rated for IPO on 1/21/14
Equity market value: $264 million (11.826MM total units outstanding)
Estimated distribution coverage: 1.15x total unit coverage, 2.30x common unit coverage
Expected tax shield: ≥ 80%
% Owned by Sponsor/MGMT: ~ 64%
NOTE: This presentation is not an offering for securities.
4 Confidential
• Tulsa Inspection Resources, Inc. (TIR) − 50.1% interest in TIR entities held by CELP at IPO
− Remaining 49.9% future drop down opportunity
• Founded in 2003
• Pipeline inspection & integrity services
• Large provider of independent services − Pipelines and related infrastructures
− U.S. and Canada
− Proprietary database of 10,000+ inspectors
− 1,506 average inspectors employed during 1Q14
• Scalable
• Recurring revenue given maintenance,
repair & operations (MRO) activities relating
to existing pipelines
Pipeline Inspection & Integrity Services (PI&IS)Water & Environmental Services (W&ES)
• Founded in 2012
• Saltwater disposal and other water &
environmental services
• Sponsor (Charles Stephenson, Jr.; E&P)
• 9 owned SWD facilities (Bakken-7; Permian-2)− High quality construction & ops.
− Average age of 23 months at 3/31/14
− Avg. disposal volume of ≈52,000 barrels per day (BPD)
during 12 months ended 3/31/14
− ≈80% YTD volume is produced water
− Capacity to grow volumes, ≈38% TTM avg. facility
utilization
− Annual injection capacity of ≈50 million barrels
− 3 facilities currently receive piped water
• Manage 4 additional facilities in Bakken
CYPRESS ENERGY PARTNERS OVERVIEW
(1) Includes 100% of W&ES and 50.1% of PI&IS.
Serves Energy Companies
% of CELP 1Q14 Adj. Gross Margin: 43%(1) % of CELP 1Q14 Adj. Gross Margin: 57%(1)
5 Confidential
Pipeline Inspection & Integrity Services
Water & Environmental Services
INVESTMENT HIGHLIGHTS
Cypress/TIR team
has significant
industry experience
and connections
High quality new
SWD facilities in
active U.S. oil & gas
producing regions
Independent
inspection & integrity
business serving
large pipeline owners
of North America
Provide services
throughout long life
of customers’ assets
Heightened industry
focus on regulatory
compliance and
safety
Increasing U.S.
energy activity –
“U.S. Energy
Independence”
Cypress/TIR team
has significant
industry experience
and connections
Consolidation and
growth opportunities
in highly fragmented
markets
6 Confidential
WATER & ENVIRONMENTAL SERVICES
(1) Source: University of North Dakota Study of Bakken wells, April 2010.
Water Handling And
Disposal Is A Growing,
Multi-Billion Dollar Annual Market
Flowback: up to 47% of
injected water within 10 days(1)
Water
Acquisition
Fracturing
Fluid Mixing
Fracturing
Fluid Injection
Production of
Oil/Gas And
Saltwater
Well Completion
Produced Water
Transportation
Saltwater
Disposal (SWD)
Flowback Water
Transportation
RecyclingSaltwater Injection
Residual
Oil Sales
= Current Cypress Activities
Pipeline
7 Confidential
WASTEWATER (OR SALTWATER)
• Water is a byproduct of oil & gas operations, with virtually all wells producing
wastewater for lifespan of well
− Brinish fluid (saltwater) returns to the surface during well completion
(flowback water) and during production (produced water)
Produced
Water
Flowback
Water
• Naturally occurring water flows to surface with oil and natural gas
• Generated for lifespan of the well (in Bakken and Permian, can
be decades)
• Millions of gallons of water are injected during fracturing of
horizontal wells - 100 – 200,000 barrels not uncommon with
today’s growing multi-stage horizontal fracking completions.
• Portion of this water returns to surface during weeks following
completion
8 Confidential
SWD FACILITY OVERVIEW(1)
• Subsurface injection at an SWD facility is industry
standard method of saltwater disposal
• SWD facility: unload, filtration, separation, treatment,
tanks (water and oil), pumps, disposal well(s) and
associated equipment
• Residual (skim) oil is separated from saltwater and
saltwater is injected deep underground
(1) SWD wells are regulated by U.S. EPA as Class II injection wells. CELP Injection Interval > 4,000’
9 Confidential
TRANSPORTATION, CUSTOMERS, REVENUE
(1) CELP does not own trucks but serves trucking companies.
(2) CELP has 3 facilities that currently receive piped water, and a producer is in the process of building pipelines to CELP facilities. Additional piping
opportunities under discussion.
(3) Source: University of North Dakota Study of Bakken Wells, April 2010.
• 2 methods of saltwater transport
− Trucking is primary method of transporting saltwater today(1)
− Pipeline is alternative method for transporting saltwater from oil & gas well
to SWD facility(2)
• Producers increasingly favor piping, given trucking’s cost, carbon footprint,
road damage, weight limit and liability issues
• Disposal can be transportation-intensive; transportation is 56% to 84% of
Williston producers’ total water handling and disposal costs(3)
− Piping reduces operating costs (and carbon footprint, liability) for producers
Tra
nsp
ort
ation
Custo
me
rs
• Producers that contract directly with SWD facility (typically piping)
• Trucking companies hired by producers to transport saltwater
Reve
nu
e • SWD facility charges a fee per barrel of saltwater disposed
• SWD facility sells residual oil
10 Confidential
SWD DEMAND DRIVERS AND TRENDS
1. Increasing levels of U.S. onshore oil & gas production
− Increasing production equates to increasing saltwater volumes
− EIA forecasts 15+% growth from 2012 to 2014 in Lower 48(1)
(1) Source: U.S. EIA Petroleum Supply Monthly and Natural Gas Monthly, November 2013. Lower 48 States excluding Gulf of Mexico.
(2) Source: Texas Water Development Board, Proposed Mining Demands for 2016 Regional Use and 2017 State Water Plan, January 2013.
(3) Source: Spears & Associates, Drilling and Production Outlook, December 2013.
(4) Source: U.S. EIA Short-Term Energy Outlook, February 2013.
2. Increasing volumes of water utilized for completion of U.S.
oil & gas wells
− Total water used for fracturing in Texas more than doubled
from 2008 to 2011(2)
− Average U.S. onshore well length (and number of stages)
is increasing
3. Increasing capital needs and public & regulatory scrutiny
driving outsourcing
− Producers want to drill oil & gas wells, not build waste
infrastructure, with precious capital
4. Current CELP facilities in Williston/Bakken and Permian
− 2 of most active drilling regions
− Currently 181 rigs working in Williston & 498 in Permian
− Estimates call for 2,813 new wells to be completed in
Williston & 13,506 in the Permian during 2014
− EIA forecasts increasing production in both basins
12.35 13.77 15.38 16.67 17.71
0
3
5
8
10
13
15
18
20
23
25
2010 2011 2012 2013P 2014P
Lower 48 Oil & Gas Production (MMBoe/d)(1)
38,000 43,000 46,300 46,600 48,100
6,7537,498
7,862 8,155 8,308
3,000
3,500
4,000
4,500
5,000
5,500
6,000
6,500
7,000
7,500
8,000
8,500
9,000
9,500
10,000
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
2010 2011 2012 2013P 2014P
Wells Drilled Avg. Footage Per Well
All U.S. Onshore (3)
0.720.95
1.131.18 1.29 1.37
0.0
0.3
0.5
0.8
1.0
1.3
1.5
1.8
2.0
2012 2013P 2014P
Williston Basin (ND; SD; eMT) Permian Basin (TX; NM)
Hydrocarbon Liquids Production (4) (MMBbl/d)
11 Confidential
• Regulations require pipeline operators to develop an integrity management
program and conduct inspection, with operators outsourcing elements
PIPELINE INSPECTION & INTEGRITY SERVICES
Pipeline Inspection Is A Growing,
Multi-Billion Dollar Annual Market
End
Users
Wellhead Gathering System Processing/Treating
Facilities
Pipelines/Transportation
Lines/Storage Facilities
Construction and Repair Management
Project supervision and coordination of field activities
Dig site excavation oversight
Defect assessments and mapping/surveying
Documentation
Staking Services
AGM placement
Dig site staking
In-line Inspection
Smart pigs
Pig tracking
Other Non-destructive Examination (NDE) Inspection
Visual/aerial
X-ray
Ultrasonic
Other testing
Data and Integrity Program Management Services
Smart pig and other NDE inspection data
Anomaly and above ground marker (AGM) reports
Automated dig sheet generation
= Current TIR Activities
12 Confidential
INFRASTRUCTURE BY USER/SECTOR
NGL Fractionation
Residential
Electric Generation
Commercial/Industrial
Residential
LNG Export
Chemicals and Plastics
Refinery
DownstreamUsers
MidstreamUpstream
Oil & Gas Wells
Crude Oil Gathering
Gas Gathering
CompressionGas Processing & Treating Plants
Compression
Natural Gas Transmission Pipelines
Natural Gas Local
Distribution Company
Distribution Lines
NGL Transmission
Pipelines
Crude Oil Field Tank Battery
Truck
Rail
Crude StorageCrude Transportation
Pipelines
Natural Gas Liquid (“NGL”) Transmission
Pipelines
Natural Gas
Storage
User/Sector
Currently
Served By
TIR
13 Confidential
CUSTOMERS AND REVENUE
• Midstream pipeline companies are historically the largest consumers of
independent inspection & integrity services
• Oil & gas producers with gathering systems are customers that are subject to
additional scrutiny due to recent regulations
• Local Distribution Companies (“LDCs”) and Public Utility Companies (“PUCs”)
represent small but growing component customer base
− Recent high profile LDC/PUC accidents have increased regulatory oversight
− Like gathering systems, utility pipelines are subject to additional scrutiny due
to recent regulations
• Customers typically pay daily rate per inspector as well as per diems/expenses
Custo
me
rsR
eve
nu
e
14 Confidential
0%
5%
10%
15%
20%
25%
• North American oil & gas wells
can produce for decades,
including U.S. onshore wells
− Wells can produce higher %
water as they age
• North American pipeline
infrastructure also lasts decades
− 60+% of U.S. active pipeline
was installed 40+ years ago(1)
− Older pipeline is more
susceptible to failures
SERVICES FOR LIFESPAN OF ASSETS
(1) Source: INGAA The Role of Pipeline Age in Pipeline Safety, November 2012.
% Of U.S. Pipe Mileage Installed
By Decade(1)
15 Confidential
Arctic, $0.3
Southwest, $56.0
Southeast, $35.6
Central, $48.1
Northeast, $33.6
Canada, $38.7
Midwest, $20.8
Western, $12.4
Offshore, $5.3
INSPECTION DEMAND DRIVERS AND TRENDS
1. Substantial existing infrastructure is aging
− ~ 2.3+ million miles of transmission and
distribution pipelines in U.S. plus
millions of miles of gathering systems(1)
(1) Source: Pipeline and Hazardous Materials Safety Administration (PHMSA), U.S. Department of Transportation main website.
(2) Source: INGAA North American Midstream Infrastructure Through 2035, June 2011.
2. Expanding infrastructures with shifts in
energy production and consumption
− $250+ billion will need to be invested in
North American energy infrastructure
from 2011-2035(2)
3. Operators of pipelines and related infrastructure are facing increasingly stringent
government regulations and safety requirements, are not staffed to address and
are increasingly preferring to outsource for independence and avoidance of
permanent overheads
2011-2035 Infrastructure Investment(2)
(U.S. Dollars in Billions)
16 Confidential
COMPETITIVE LANDSCAPE
• Certain producers with private SWD
facilities serving own production
• Service providers with commercial SWD
facilities serving producers (piping),
vertically integrated trucking companies
and third party trucking companies
• Highly fragmented market of oil & gas
industry(1)
• NGL Energy Partners (NGL) has been
actively acquiring businesses within the
water services sector since June 2012
• Ferrellgas Partners, L.P (FGP) recently
entered sector with Eagleford purchase.
• In-house personnel
• Engineering & construction (E&C)
companies
• Independent inspection & integrity
services companies
• Examples: Wood Group/Mustang (E&C);
Intertek/Moody Int’l, Houston Inspection,
(independent inspection)
• TIR is believed to be one of the leading
providers of independent inspectors to
the North American pipeline industry
(1) For example, data available from the Texas Railroad Commission lists over 900 operators owning approximately 2,500 commercial SWD wells in Texas with
the largest operator having 73 SWD wells and several hundred operators owning only a single SWD well.
Cypress was 1st IPO in W&ES as well as in PI&IS
Pipeline Inspection & Integrity Services (PI&IS)
Water & Environmental Services (W&ES)
17 Confidential
CYPRESS’ OWNED SWD FACILITIES
Mountrail County, ND Facility (2 Wells)
• Opened June 2012 – 10 acres(1)
• 4,000+ feet deep SWD injection zone
• 1st wellbore: est. capacity of 13,500 BPD
• 2nd wellbore: est. capacity of 15,000 BPD
• (3) Piped water lines – Public E&P client
• DVR security systems
• Automation systems (1) Cypress facilities are up to 30 acres.
7 Owned ND Facilities
2 Owned TX Facilities
SWD facility with piped water
SWD facility
18 Confidential
462 530
727 716
689
799
1,035
1,153 1,180
1,303
1,667 1,745
1506
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Q1 Q2 Q3 Q4
2011 2012 2013 2014Number of
Inspectors
LEADER IN INDEPENDENT INSPECTION
• Strong long-term relationships with
customers and inspectors
− Proprietary database of
10,000+ inspectors
• Serves 58+ customers across
North America in >45 states +
Canada(1)
• Growing revenue & new customers
(1) For the three months ended March 31, 2014.
Revenue (U.S.
dollars in millions)2012 2013 1Q13 1Q14
TIR (100%) $234 $380 $74 $92
1,506 average for 1Q14
(up 28+% from year ago)
Average TIR Inspector Headcount Per Quarter
TIR’s Top Customers By Revenue – 12 Months 12/31/13 (In Alpha Order)
19 Confidential
HEIGHTENED REGULATORY LANDSCAPE
• Evolving environmental and safety regulations for both business segments
• High profile spills and incidents with pipelines in California, NYC, and Michigan
have lead to heightened government and media scrutiny and aggressive
prosecution of PG&E by the government including record fines and penalties.
• Increased outsourcing by oil & gas customers in both business segments
− Seeking independent or third party service provider such as Cypress/TIR
− Cypress/TIR advantage: history in oil & gas industry; positive reputation
− Significantly limits applicability of grandfather clause for pre-1970
(or 50+% of) pipelines as pertains to testing/inspection
− Expansion into gathering systems and LDC/PUC pipelines
− Critical elements positively impacting TIR business take effect in the near term
Example: Pipeline Transportation Safety Improvement Act of 2011
20 Confidential
CFO of RAM Energy Resources*
CFO of Matrix Service Company*
Positions at Flint Energy Construction and Ernst & Young
G. Les Austin
VP and CFO
EXPERIENCED MANAGEMENT TEAM
* denotes public company
Peter C. Boylan, III
Chairman, CEO and
President
Co-Founder of Cypress Energy Partners
Director of MRC Global* and BOK Financial*
Former Director and Officer of Liberty Media* companies
CFO of Cherokee Nation Businesses
Positions with BOK Financial*, Gemstar TV Guide
International* and KPMG
Don LaBass
VP and Chief
Accounting Officer
VP of Operations of Bosque Systems
Positions at Vartec Telecom and Ernst & YoungJeff English
VP of Operations
Shareholder & Attorney at GableGotwals Counsel
Senior Counsel at The Williams Companies*
20+ years of legal experience
Richard Carson
VP and General
Counsel
Randall Lorett
TIR President & CEO
Co-Founder of TIR (2003)
25 years of experience in pipeline inspection & integrity services
21 Confidential
VERY EXPERIENCED BOARD OF DIRECTORS
* denotes public company
Co-Founder of Cypress Energy Partners
Founded Vintage Petroleum* (sold to Oxy in 2006)
Co-Founder and Chairman of Premier Natural Resources
Charles C.
Stephenson, Jr.
Director & “Sponsor”
Vice Chairman of Investment Banking at Duff & Phelps
Director of Continental Resources* and Willbros*
John T. McNabb, II
Director
Co-Founder of Cypress Predecessor
Has other SBG entities
CEO and President of Edgewood Vista Senior Living
Phil Gisi
Director
And “ND Partner”
Retired President & CEO of BOK Financial Corporation*
$27 billion public bank holding company with over thirty years of
banking experience with energy companies
Stan Lybarger
Director
Henry L. Cornell
Director
Former Vice Chairman of Goldman Sachs Merchant Banking
Previously practiced law at Davis, Polk & Wardwell
Director of MRC Global*
22 Confidential
CELP GROWTH OPPORTUNITIES
Organic Growth And Existing Opportunities
• Multiple SWD facilities in U.S. (e.g., TX/NM Permian, Bakken, Eagle Ford,
OK Panhandle), including piped facilities
• Associated W&ES services (e.g., oil reclamation, landfills, etc.)
• PI&IS services (e.g., aerial inspection, additional NDE, right-of-way, hydro testing,
pigging services, etc.)
• Increased utilization of existing assets (W&ES) and personnel (PI&IS)
• Sponsor owns additional 49% interests in TIR entities (U.S.; Canada; NDE)
• Partnering opportunities with producers (e.g., piping water to CELP SWD facilities)
• Another SWD facility at Sponsor
• Additional SWD facility management opportunities
• Expanded PI&IS services (e.g., additional NDE services and users for PI&IS)
• First right to negotiate with ND Partner on other SBG entities (e.g., pipeline
construction opportunities, gas & diesel wholesale venture, rail spur, etc.)
Additional Acquisition Opportunities
23 Confidential
$248.4
$402.3
$13.0
$21.2
$0
$10
$20
$30
$40
$0
$100
$200
$300
$400
$500
12/31/12PF 12/31/13PF
Ad
j. E
BIT
DA
(D
ollars
in
Millio
ns)
Rev
en
ue (
Do
llars
in
Millio
ns)
12 Months Ended
919
1,474
$233.8
$379.9
$0
$100
$200
$300
$400
0
500
1,000
1,500
2,000
12/31/12PF 12/31/13PF
Re
ve
nu
e (
Do
llars
in
Mil
lio
ns
)
Av
era
ge
Nu
mb
er
of
Ins
pe
cto
rs
12 Months Ended
11.0
19.7
$14.6
$22.4
$0
$5
$10
$15
$20
$25
0
5
10
15
20
25
30
35
12/31/12PF 12/31/13PF
Rev
en
ue (
Do
llars
in
Millio
ns)
Dis
po
sed
Salt
wate
r (M
MB
bl)
12 Months Ended
PI&IS Summary(1)
CONSOLIDATED CELP FINANCIAL PERFORMANCE
Revenue(2) And Adjusted EBITDA(3)
W&ES Summary
Revenue
Adj. EBITDA
(1) Includes 100% of PI&IS.
(2) Includes 100% of W&ES and 100% of PI&IS.
(3) Includes 100% of W&ES and 50.1% of PI&IS.
(4) Does not reflect incremental G&A Expense for being a publicly traded partnership.
Disposal Volume
Revenue
Avg. # of Inspectors
Revenue
(4)
(4)
24 Confidential
First Quarter 2014 Highlights
• Declared cash distribution of $3.6 million
• Distributable cash flow of $3.1 million
• Adjusted EBITDA was $6.5 million for the quarter:
• Prior to the IPO - $1.6 million
• Attributable to non-controlling interests - $1.6 million
• Attributable to CELP - $3.3 million
• Net income was $3.5 million for the quarter:
• Prior to the IPO - $0.6 million
• Attributable to non-controlling interests - $0.8 million
• Attributable to CELP - $2.1 million
• Net income for the quarter includes the impact of non-
recurring charges related to the IPO of $0.4 million
$79.5
$97.5
$4.8 $5.0
$0
$2
$4
$6
$8
$10
$0
$20
$40
$60
$80
$100
3/31/13PF 3/31/14
Ad
j. E
BIT
DA
(D
ollars
in
Millio
ns)
Re
ve
nu
e (
Do
llars
in
Mil
lio
ns
)
3 Months Ended
1,180
1,506
$74.2
$92.3
$0
$20
$40
$60
$80
$100
0
500
1,000
1,500
2,000
3/31/13PF 3/31/14
Re
ve
nu
e (
Do
llars
in
Mil
lio
ns
)
Av
era
ge
Nu
mb
er
of
Ins
pe
cto
rs
3 Months Ended
4.6 4.0
$5.3 $5.3
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
$10
0
1
2
3
4
5
6
7
8
9
10
3/31/13PF 3/31/14
Re
ve
nu
e (
Do
llars
in
Mil
lio
ns
)
Dis
po
sed
Sa
ltw
ate
r (M
MB
bl)
3 Months Ended
PI&IS Summary(1)
CONSOLIDATED CELP FINANCIAL PERFORMANCE
Revenue(2) And Adjusted EBITDA(3)
W&ES Summary
Revenue
Adj. EBITDA
(1) Includes 100% of PI&IS.
(2) Includes 100% of W&ES and 100% of PI&IS.
(3) Includes 100% of W&ES and 50.1% of PI&IS.
(4) Includes 100% of PI&IS for 20 days and 50.1% of PI&IS for 70 days.
Disposal Volume
Revenue
(4)(4)
Avg. # of Inspectors
RevenueWinter weather
impact
25 Confidential
(U.S. Dollars In Thousands)
March 31, 2014
Cash and Cash Equivalents 24,032$
Long-Term Debt:
New Credit Facility 70,000$
Total Long-Term Debt 70,000$
Owners' Equity:
Partners' Capital:
Common Units (5,913,000 units outstanding) 23,645$
Subordinated Units (5,913,000 units outstanding) 83,708
General Partner 1,999
Accumulated Other Comprehensive Loss (286)
Total Partners' Capital 109,066
Non-controlling interests 27,294
Total Owners' Equity 136,360$
Total Capitalization 206,360$
FINANCIAL FLEXIBILITY – CREDIT FACILITY
• Credit Facility of $120 MM
− Arrangers: Deutsche Bank, BMO
− $65 MM Borrowing Base Facility &
$55 MM Acquisition Facility
− Also provides for $100 MM Accordion(1)
• Current leverage ratio of .8X pursuant to
facility terms
• Average cost of debt in Q1 2014 = 3.36%
• Leverage covenant excludes Borrowing Base
Facility outstanding
• All covenants based on 100% Adj. EBITDA
rather than Adj. EBITDA Attributable To
Controlling Interests
• Credit facility supports 100% of TIR
• IPO provided access to capital markets
CELP Capitalization
(1) Accordion subject to additional commitments from lenders and satisfaction of certain other conditions.
26 Confidential
(U.S. Dollars In Thousands) Actual
Period From
Year Ended Year Ended 1/21/14 to
12/31/12 12/31/13 3/31/14
Reconciliation of Adjusted EBITDA(1)
to Net Income (Controlling Interests)
Net Income (Controlling Interests) 9,727$ 5,657$ 2,098$
Add:
D&A Expense(1)2,541 5,434 983
Impairment Loss(1)- 8,156 -
Income Tax Expense(1)179 8,197 63
Interest Expense(2)586 2,456 178
Credit Facility/IPO Fees & Expenses(1)- 2,550 -
Less:
Gain on Reversal of Contingent Consideration(1)- 11,250 -
Adjusted EBITDA(1)13,033$ 21,200$ 3,322$
Pro Forma
EBITDA RECONCILIATION
Adjusted EBITDA as presented below may not be comparable to similarly titled measures of other companies. The following
table presents a reconciliation of Adjusted EBITDA to net income attributable to CELP, on a pro forma basis, as applicable
for each of the periods indicated.
(1) 100% attributable to W&ES and 50.1% attributable to PI&IS.
(2) Interest expense reflected as if CELP had entered into its New Credit Facility on January 1, 2012, plus applicable commitment and loan origination fees. The non-
controlling interest holders in the TIR entities will be charged a fee that will equal the interest expense the non-controlling interest holders would have paid to incur
$10.0 million in incremental borrowings under CELP’s New Credit Facility to purchase the non-controlling interest holders’ interests in the TIR entities plus the full amount
of loan origination fees.
27 Confidential
Pipeline Inspection & Integrity Services
Water & Environmental Services
THANK YOU
Cypress/TIR team
has significant
industry experience
and connections
High quality new
SWD facilities in
active U.S. oil & gas
producing regions
Independent
inspection & integrity
business serving
large pipeline owners
of North America
Provide services
throughout long life
of customers’ assets
Heightened industry
focus on regulatory
compliance and
safety
Increasing U.S.
energy activity –
“U.S. Energy
Independence”
Cypress/TIR team
has significant
industry experience
and connections
Consolidation and
growth opportunities
in highly fragmented
markets