2018 MLPA Conference - mlpassociation.org · equity, private-equity arrangements 2018(G): Guidance...
Transcript of 2018 MLPA Conference - mlpassociation.org · equity, private-equity arrangements 2018(G): Guidance...
1www.plainsallamerican.com NYSE: PAA & PAGP
2018 MLPA ConferenceOrlando, FL May 23-24, 2018
2www.plainsallamerican.com NYSE: PAA & PAGP
Forward-Looking Statements And Non-GAAP Financial Measures
Except for the historical information contained herein, the matters discussed in this presentation consist of forward-looking statements. These forward-looking statements are based on PAGP’s and PAA’s current views with respect to future events, based on what we believe to be reasonable assumptions. Actual results may differ significantly because of risks and uncertainties 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 December 31, 2017 and their most recently filed Quarterly Report on Form 10-Q for a more extensive list of factors that could cause actual results or outcomes to differ materially from the results or outcomes anticipated in the forward-looking statements. PAGP and PAA undertake no obligation to revise any forward-looking statements to reflect events or circumstances occurring after today’s date.
This presentation also contains non-GAAP financial measures relating to PAA, such as adjusted EBITDA. A reconciliation of these measures to the most directly comparable GAAP measures is available in the Investor Relations section of PAA’s and PAGP’s website at www.plainsallamerican.com, select “PAA” or “PAGP,” navigate to the “Financial Information” tab, then click on “Non-GAAP Reconciliations.”
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Discussion Outline
Overview of Plains All American
Current Industry Dynamics & Permian Update
PAA Positioning and Capital Projects Update
Closing Thoughts & Key Takeaways
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Financial structure provides flexibility & optionality
PAA – MLP security, owns 100% of assets and operations
PAGP – GP security, indirect ownership in PAA common units (economic parity) plus tax attributes
PAGP – do not expect to pay corporate income taxes for 10+ years
Cash distributions treated as a “return of capital” until positive earnings and profits for tax purposes (est. timing 8+ years)
Public Investors
Plains AAP, L.P. (AAP)
PAA GP Holdings, LLC(PAGP GP)
Public Investors (NYSE: PAGP)
Investors Receive 1099
(NYSE: PAA)Investors Receive K-1
Private Owners & Management
Unified Board
Right to Exchange AAP Unit For PAGP
Class A Share
Right to Redeem AAP Unit For PAA
Common Unit
Or, alternatively:
Plains’ Organization Structure (Simplified)
Series A & B Preferred Holders
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Volumes Handled(1):
>5 mmb/d Transportation volumes
~1.3 mmb/d Supply & Logistics
Total Enterprise Value: ~$31B(2)
PAA Total Assets: ~$25B(3)
Plains’ Current Profile
Over Past 20+ Years, PAA Has Developed One of the Largest and Most Integrated Midstream Systems in North America
Note: Map contains only most significant PAA assets, including recent/pending acquisitions, current projects and equity-investments assets (excludes non-core assets where sale is announced/pending).
PAA’s Crude Oil Value Chain
(1) Average daily Transportation segment and Supply & Logistics segment volumes for the year ending 12/31/17. (2) Based on balance sheet data as of 12/31/17 and closing unit prices as of 5/21/18.(3) Asset data as of 12/31/17.
Key Takeaways:
1. Highly integrated U.S. crude oil pipeline & terminal system
2. Minimal direct exposure to commodity prices
3. Leading crude oil midstream service provider in the Permian Basin
Legend
Strategic value across multiple regions, but today’s remarks focus on Permian Basin due to time constraints
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Current Industry Dynamics and Permian Update
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Last 5 years – big change for U.S. crude oil industry US crude imports substantially reduced, displaced by significant domestic production growth
US crude exports emerging (>2mmb/d* increase from Dec ‘15 to May ‘18)
30+ Year Trend of Declining US Oil Production / Growing Foreign Imports, Turned on its Head by U.S. Shale
U.S. Crude Oil Production (blue)
U.S. Crude Oil Net Imports (green)
U.S. crude oil infrastructure overhauled (focus on flowing out vs. flowing in)
Source: EIA
*EIA weekly U.S. exports of crude oil as of May 11, 2018
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Today: Transitioning Out of Downcycle Constructive Fundamentals Drive Positive Outlook for Industry & PAA
Global Inventories Declining – past 12 months, significant acceleration of inventory draws
Geopolitical Factors – disciplined OPEC compliance, intent to “overbalance” the market
Robust Global Demand – long-term, driven by developing nations, China and India
Visibility to Market Balancing
U.S. Today – World’s #1 Liquids Producer
2017 Avg. World Liquids Production: ~98 mmb/d
U.S. & Canada = >20 mmb/d; Saudi Arabia = 12.2 mmb/d
Permian Basin = Largest U.S. producing region
U.S. Future – Stable Production Growth
U.S. emerging from cycle with stable production growth trajectory
Incremental barrel positioned for export, driven by light crude & condensate
Source: EIA, PAA Estimates
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15.6 12.2
11.2
5.4 4.9 4.8 4.6 3.5 3.3 3.4
4.3
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
U.S. SaudiArabia
Russia Iraq Canada China Iran UAE Kuwait Brazil Permian
2012 2017
U.S. is World’s #1 Liquid Hydrocarbon ProducerPermian Basin: Largest U.S producing region
Source: EIA, BTU Analytics & PAA EstimatesNote: Liquids includes production of crude oil (including lease condensates),
natural gas plant liquids, biofuels, other liquids, and refinery processing gains.
mmb/d
Top 10 Liquids Producing Nations(bars reflect full-year average production level)
2017 Avg. World Liquids Production: ~98 mmb/d
U.S. & Canada = >20 mmb/d
Permian Basin would rank #8 liquids producer as a standalone country
2017
Crude Oil 9.3
L48 7.2
Alaska 0.5
Fed GOM 1.7
NGLs 3.7
Renew./other 1.4
Refinery gains 1.1
15.6
~16.5 mmb/d as of Dec ‘17
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1,220 1,119 1,212
1,263 1,374
1,417 1,513
1,583 1,707
1,814 1,953
2,114 2,254
2,411 2,497
2,594 2,723
2,853 2,975
3,086
1,000
1,500
2,000
2,500
3,000
3,500
Total DUCs
2,4662,761
2,9633,219 3,240
~3,800
2,000
2,200
2,400
2,600
2,800
3,000
3,200
3,400
3,600
3,800
4,000
1Q17 2Q17 3Q17 4Q17 1Q18 2018(G)
PAA Permian Tariff Volumes(2)
Permian DUCs Building# DUCs
DUC inventory increased >490 from Dec ’17 to Apr ‘18
L48 Hz Rig Activity Ramp
mb/d
Positive Permian Fundamentals Reinforce PAA’s Outlook for Continued Fee-based Growth
Sources: Drilling Info, EIA & Company Presentations
(1) Reflects 2017 actuals & publicly announced 2018 completion plan by operator.(2) 2018(G) reflects estimated average full-year 2018 Permian tariff volumes.
333 362
386416
0
200
400
600
800
2/5/2018 5/21/2018
# HZ Rigs
Onshore Rig Count Increasing, Permian Leading
Permian (>50% of rig
increase)
Other L48 Onshore
Permian Completion Activity Accelerating(1)
Completions 2017 2018 Delta % Growth
Anadarko 97 160 63 65%
Diamondback 123 180 57 46%
Devon 50 100 50 100%Cimarex 97 139 42 44%Pioneer 224 265 41 18%
Parsley 126 160 34 27%Concho 211 244 33 16%Energen 108 125 17 16%Total 1,036 1,374 338 33%
Quarterly Actuals
Annual Guidance
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Crude Oil Production Growth Will Impact Flows & Will Require Export, Particularly for Light Crudes
Permian
Cushing
+2,800 to 3,600 mb/d
Source: Company Filings, PAA estimates
(1) Does not include a potential Capline reversal
Incremental Volumes to USGC (Q4'16 vs. 2021)
Permian +1,700 to +1,900 mb/d
DAPL +350 to +450 mb/d
Eagle Ford +400 to +500 mb/d
Potential Capline Shut Down +350 mb/d
Canada/Other (Seaway/Seaway Twin/Marketlink) 75 to +375 mb/d
Gulf of Mexico Flat
Total +2,800 to +3,600 mb/d
YE 2021 crude growth impact
(illustrative)
(1)
--Excerpt from prior PAA presentations--
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Wichita Falls
Longview
Shreveport
Nederland
Cushing to
Broome
Caddo
Exports
Memphis
Diamond
Colorado
City
Corpus Christi
McCamey
Crane
Driver
Jal
Midland
Wink
Three
RiversGardendale
Lyssy
Local Refiners
Cushing Hub
Corpus Christi Refiners
Cushing Supplied Refiners
Constructing Corpus JV dock for broader access to
domestic and global markets
Houston
Corsicana
Lake
Charle
s
Anchorage
St.
James
PAA’s Permian System: Unmatched Capacity & Interconnectivity Providing Flow Assurance & Access To Multiple Markets
Permian
STACK JV
Gathering: ~2 mmb/d
Intra-basin: ~2 mmb/d
Long-Haul: ~1 mmb/d
PAA’s Capacity To Market
PAA Large-diameter PipelinesPAA Pipelines Under ConstructionPAA Potential Projects (identified)3rd Party Export PipelinesPAA FacilityPAA Rail FacilityPAA Dock Facility3rd Party Refinery
Legend
Orla
Note: Illustrative map, only includes most significant PAA assets and select third party pipelines for context.(1) Asset data as of 12/31/17 & volume data as of 3/31/18; Storage includes linefill
Permian Basin Assets / Activities(1)
Transportation Volumes >3,200 mb/d
Lease Gathering Volumes >600 mb/d
Active Pipeline Miles >4,700
Crude Storage Capacity ~18 mmbls
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PAA Positioning & Capital Projects Update
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$1.4
$1.1
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
2016 2017 2018(G) 2019 Carryover
Executing Capital ProgramPermian represents ~80% of PAA’s 2018/2019 Capital Program
2018 CAPEX includes:
Cactus II - investment expected to be shared in JV structure, to span +/-18 month timeframe
Sunrise Extension & Loop (Phases I & II)
Complementary Permian growth projects
Strong demand for Permian infrastructure
Driven by elevated producer activity levels & additional demand for gathering & intra-basin capacity
No change to total 2018/2019 Capital Program
Working to accelerate certain 2019 projects into 2018
Evaluating additional projects
Potential sources of additional funding, if needed:
Additional asset sales, non-convertible preferred equity, private-equity arrangements
2018(G): Guidance as of May 8, 2018. 2019 Carryover: Preliminary Forecast as of May 8, 2018; currently sanctioned and carried over into 2019.
*Recently executed definitive agreements on three transactions representing a little over half of the targeted amount.
($ billions)
~$1.4
+/-$0.55
2018 (G) Expansion Capital
($ millions)
2018(G)2019
CarryoverIn-Service
Timing
Permian Takeaway $765 $370 1Q19 – 4Q19
Complementary Permian 375 100 1Q18 – 4Q19
Facilities (e.g. St. James, Ft. Sask) 50 0 2Q18 – 4Q18
Other Projects 210 80 1Q18 – 2019+
$1,400 $550
Note: Several 2016 projects carried over into 2017 (e.g. Diamond)
PAA Expansion Capital Summary
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Executing Permian Capital Projects
Long-Haul Takeaway
Complementary Projects
Additional Opportunities
Terminalling & storage expansions(Wink & Midland)
Gathering & intra-basin capacity
Sunrise I & II (+500mb/d Midland to CC & WF; +120 mb/d to Cushing)
Cactus II (+670 mb/d to Corpus Christi)
MCCAMEY
MIDLAND
WINK
Terminalling & Storage
Expansions
CORPUS CHRISTI
INGLESIDE
Continued demand for additional gathering & intra-basin capacity
HOUSTON
Permian BasinCUSHING
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New Projects Underpinned by Recent MVCs Provide
Incremental Capacity & Revenue Optimization Opportunities
Source Hub
Long-Haul Hub
Capacity View (Late 2017)
Long-haul pipes & certain intra-basin lines are the near-term constraint
Existing system positions PAA to win new project opportunities and deploy capital efficiently
--Map color coding is illustrative; incorporates PAA estimates for MVC commitments & Permian production growth--
ORLA
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New Projects Underpinned by Recent MVCs Provide
Incremental Capacity & Revenue Optimization Opportunities
Source Hub
Long-Haul Hub
2019*: Reflects targeted in-service timings for Sunrise Expansion (1Q19) & Cactus II (4Q19)
ORLA
Capacity View (Late 2019*)
Expanding long-haul pipes: debottlenecks entire system & adds significant capability
Adds ~800mb/d of long-haul takeaway capacity
Enables volume pull-through on / expansion of gathering & intra-basin systems
--Map color coding is illustrative; incorporates PAA estimates for MVC commitments & Permian production growth--
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-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
$0.8 $0.9 $1.0 $1.1
$1.6
$2.1 $2.3 $2.2 $2.2 $2.2 $2.1
+/-$2.3
Expect14-15% growth
Y/Y
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018(G) 2019(PF)
PAA Has Transitioned Through the Cycle Integrated Model Drives Continued Fee-Based Growth
($ billions)
Margin-based Adj. EBITDAFee-based Adj. EBITDA
(mb/d )
(G) Guidance furnished May 8 , 2018(PF) Preliminary Forecast of fee-based growth as described on May 8, 2018
1. Captured S&L margins from infrastructure constraints
2. Provided visibility for growth CAPEX / increased operating leverage
3. Operating leverage & additional fee-based growth capacity
L48 Onshore Production Growth
$0.5 $0.6 $0.7 $0.8
$1.0 $1.3
$1.4 $1.6 $1.6
$1.8
$2.0
+/-$2.2
Expect14-15% growth
Y/Y
$0.3 $0.3
$0.3 $0.3
$0.6
$0.9
$0.9 $0.7 $0.6 $0.4 $0.1
+/-$0.1
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018(G) 2019(PF)
Directional illustration
Total Adj. EBITDA
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3.0x 2.9x
3.9x
4.7x 4.7x4.4x
2.0x
2.5x
3.0x
3.5x
4.0x
4.5x
5.0x
$-
$2
$4
$6
$8
$10
$12
$14
$16
$18
2012 2013 2014 2015 2016 2017 2018(G)Organic Growth Acquisition LT Debt/Adj. EBITDA
(Lev.)PAA Cumulative CAPEX vs. Leverage Ratio
Positioning For Long-term Growth Executing deleveraging plan
Downturn has challenged PAA’s credit metrics, driven by:
~$14 billion of CAPEX (primarily focused in Permian)
Increased competition and delayed fee-based EBITDA growth
With a long-term focus, PAA executed multiple financial actions to fund CAPEX, reduce cost of equity and manage balance sheet
2018 (G): Guidance as of May 8, 2018
(Lev): Represents PAA’s year-end LT Debt to Adj. EBITDA ratio
Raised ~$4B of equity (preferred & common)
Simplified & aligned GP/LP Structure
Completed ~$2 billion in non-core asset sales
In 3Q17, announced plan to reduce leverage by +/-$1.4B
PAA Target
Leverage
($ billions)
On track to return to targeted credit metrics by 1H19 & maintain substantial distribution coverage
Executing ~$2 billion capital program (2018 & 2019) drives continued growth in 2019++
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Plains has an operational vision to be a recognized leader within the industry
through safe, reliable & responsible operations
Continued Growth is Key, but Preserving Base is Crucial Complementing growth through system optimization
3 goals outline the path to this operational vision:
1. Reduce Risk – people & environment
2. Beyond Compliance – exceeding requirements
3. Operational Excellence – leadership
OMS: a framework to reduce risk, promote safety, and continuously improve
Critical to achieving zero incidents
Consistent application across operations, safety, integrity management, engineering, stakeholder engagement, and corporate social responsibility
Key focus areas to preserve the base business & drive continued growth:
System optimization Cost management Operational reliability
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Closing Thoughts & Key Takeaways
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PAA On Track to Executing 2018 Goals
1. Run a safe, reliable, and responsible operation
2. Meet or exceed 2018 operating and financial guidance
3. Progress deleveraging plan for return to targeted credit metrics by early 2019
4. Capture Permian growth opportunities, further enhancing PAA’s positioning for 2019 and beyond
On Track
On Track
On Track
On Track
PAA’s 2018 Goals: Status
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Suggested Takeaways from TodayPAA executing operating and financial initiatives; Positioned for growth
Robust global demand growth (demand for U.S. crude)
Permian Basin key U.S. supply engine
Midstream infrastructure – critical link between supply and demand / export
Focused on Execution
Strong Asset Positioning
Solid Industry Fundamentals
Premier Permian franchise; PAA’s core growth asset
Significant scale, regional interconnectivity & capabilities
Well positioned for continued growth
Deleveraging plan
Capital program & commercial opportunities
Operational excellence, reliability, system optimization, cost management
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Q&A