Barclays Investment Grade Energy & Pipeline Corporate Day ...
Transcript of Barclays Investment Grade Energy & Pipeline Corporate Day ...
1 www.plainsallamerican.com NYSE: PAA & PAGP
Barclays Investment Grade Energy & Pipeline
Corporate Day March 1, 2018
2 www.plainsallamerican.com NYSE: PAA & PAGP
Forward-Looking Statements & Non-GAAP Financial Measures Disclosure
This presentation contains forward-looking statements, including, in particular, statements about the plans, strategies and objectives for future operations of Plains All American Pipeline, L.P. (“PAA”) and Plains GP Holdings, L.P. (“PAGP”). These forward-looking statements are based on PAA’s current views with respect to future events, based on what we believe to be reasonable assumptions.
PAA and PAGP can give no assurance that future results or outcomes will be achieved. Important factors, some of which may be beyond PAA’s and PAGP’s control, that could cause actual results or outcomes to differ materially from the results or outcomes anticipated in the forward-looking statements are disclosed in PAA’s and PAGP’s respective filings with the Securities and Exchange Commission.
This presentation also contains non-GAAP financial measures relating to PAA, such as adjusted EBITDA. A reconciliation of these historical 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.” Furthermore, PAA does not provide a reconciliation of non-GAAP financial measures to the equivalent GAAP financial measures on a forward-looking basis as it is impractical to forecast certain items that it has defined as “Selected Items Impacting Comparability”.
3 www.plainsallamerican.com NYSE: PAA & PAGP
Discussion Outline
Brief Overview of PAA
2017 Highlights & Outlook for 2018++
Permian Basin: Critical Growth Region
PAA’s Positioning for Continued Growth
Key Takeaways
4 www.plainsallamerican.com NYSE: PAA & PAGP
Plains’ Current Profile
PAA Has One of the Largest and Most Integrated Crude Oil Pipeline & Terminal 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).
Volumes Handled: >5 mmb/d Transportation volumes ~1.3 mmb/d Supply & Logistics
Total Enterprise Value: ~$29B PAA Total Assets: ~$25B
PAA’s Crude Oil Value Chain
(2)
(3)
(1)
(1) Average daily Transportation segment and Supply & Logistics segment volumes for the quarter ending 12/31/17. (2) Based on balance sheet data as of 12/31/17 and closing unit prices as of 2/20/18. (3) Asset data as of 12/31/17, adjusted for assets sales closed through 12/31/17.
Key Takeaways: 1. Highly integrated U.S. crude oil pipeline &
terminal system 2. Minimal direct exposure to commodity prices 3. Largest crude oil midstream service provider in
the Permian Basin
Legend Legend
www.plainsallamerican.com NYSE: PAA & PAGP 5
$0.5 $0.6 $0.7 $0.8 $1.0 $1.3 $1.4 $1.6 $1.6
$1.8 $2.0 $2.2
$0.3 $0.3
$0.3 $0.3
$0.6
$0.9 $0.9 $0.7 $0.6
$0.4 $0.1
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018(G)
+/-$0.1
PAA Reported Multiple Positive Achievements In 2017; Well Positioned For Continued Growth in 2018++
2017 Results & 2018 Guidance 4Q & FY 2017 Results – fee-based
performance slightly above guidance 2018(G): +/- $2.3B (~95% fee-based)
DCF/Common Share: $2.03
2017 Highlights Fee-Based Segments: ~12% growth
(2016 – 2017) Executing CAPEX Program, 4Q17 placed
into service: Diamond Pipeline Cactus I Expansion STACK JV Fort Sask (storage caverns)
Progressing Deleveraging Plan – reduced debt in 4Q17 by $1.5 billion
Improving fundamentals as we enter 2018, particularly in the Permian
Estimate ~14-15% growth in 2019 Fee-based Adj. EBITDA over 2018(G) level
--PAA Segment Adj. EBITDA--
Fee-based Segments (blue) Margin-based Segment (green)
($ billions)
(1) 2018(G) issued February 6, 2018 (2) 2018(G) reflects estimated average full-year 2018 Permian tariff volumes
2,197 2,466
2,761 2,963 3,219
~3,800
2,0002,2002,4002,6002,8003,0003,2003,4003,6003,8004,000
4Q16 1Q17 2Q17 3Q17 4Q17 2018(G)
--PAA Permian Basin Tariff Volumes--
~12%
+/-9%
(mb/d)
>1mmb/d increase 4Q16 – 4Q17
(1)
(2)
6 www.plainsallamerican.com NYSE: PAA & PAGP
Looking Forward: PAA Focus Areas & Capabilities
Fundamental analysis and commercial intelligence supports strategic planning and identification of new opportunities
Large regional presence in key crude basins with emphasis on Permian Basin
Existing Permian franchise enables PAA to win new projects (e.g. Cactus II Pipeline, Sunrise Pipeline Extension & Loop)
System integration & optimization capabilities
7 www.plainsallamerican.com NYSE: PAA & PAGP
15.6
12.2 11.2
5.4 4.9 4.8 4.6 3.5 3.3 3.4 3.9
- 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. Among World’s Top Liquids Producers 10 Countries Produce Nearly 70% of World Liquids Supply
(1) 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 (incl. condensate, NGLs, biofuels & processing gains)
2017 Avg. World Liquids Production: ~98 mmb/d
US & Canada = >20 mmb/d
Permian Basin = Largest North American producing region
Source: EIA, BTU Analytics & PAA Estimates
70% of World Liquids Supply
(1)
U.S. 22%
Saudi Arabia 18%
Russia 16%
Iraq 8%
Canada 7%
China 7%
Iran 7%
UAE 5%
Kuwait 5%
Brazil 5%
8 www.plainsallamerican.com NYSE: PAA & PAGP
Permian is the Leading Crude Oil Growth Basin Potential 5 Yr. Outlook – Total U.S. & Canada Oil Production to Grow ~3.9 mmb/d, Permian is >50% of Total
~+2mmb/d
-
1,000
2,000
3,000
4,000
5,000
Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22
Central Basin/Other Midland Basin Delaware Basin
Permian Basin Crude Oil Production (exc. NGL)
YE 2017: ~2.8 mmb/d
YE 2022: ~4.8 mmb/d
Permian Trends
+ Rig efficiency improving
+ Longer laterals
+ Bigger fracks
+ Wells more productive
= Positive Outlook
--Ring size illustrates magnitude of production growth --
Source: Drilling Info, PAA estimates
Note: Production data reflected on slide refers to crude oil only (1) Directional commentary based on upstream improvements realized over past several years
(1)
www.plainsallamerican.com NYSE: PAA & PAGP 9
1,200 1,105 1,168 1,213
1,267 1,386
1,433 1,533
1,616 1,753
1,879
2,030
2,231 2,383
2,540 2,631
2,768 2,880
1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,400 2,600 2,800 3,000
Total DUCs
Permian Drove ~12% Fee-Based Growth at PAA in 2017; Significant Momentum Leading into 2018
YE 2016 – YE 2017: ~700mb/d Permian production growth
Overall volumes in-line with / slightly ahead of expectations outlined in May 2017 Investor Day
Intra-basin contributions varied
Represented >50% of U.S. lower 48 onshore production growth
Record level of Permian Drilled Uncompleted Wells (“DUC”)
20-25% of Permian DUCs reside on acreage dedicated to PAA assets
DUCs baseload 2018 completion activity
Expect overall completion rate to increase during 2018 (more frack spreads) & growth in DUC inventory to moderate/halt in 2H18
Reduced threshold breakeven oil price levels drive producer momentum into 2018
Improvements in technology, efficiency gains
Compressed differentials
Unit cost reductions
PAA’s Permian outlook: forecasting production to grow to 3.4 – 3.5mmb/d by YE 2018
# DUCs Total Permian DUCs
Total Permian Crude Oil Production
- 500
1,000 1,500 2,000 2,500 3,000 3,500 4,000
(mb/d)
Crude Oil Production
DUC inventory increased ~1,500 in past 12 months
Sources: Drilling Info; PAA Estimates; EIA data published 2/12/18
Directional impact of weather
10 www.plainsallamerican.com NYSE: PAA & PAGP
$-
$20
$40
$60
$80
$100
$120
0
50
100
150
200
250
300
350
400
450
Feb-11 Feb-12 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17 Feb-18
Permian Hz Rigs WTI ($)
Permian Basin Rig Activity Continues To Drive Majority of U.S. Unconventional Activity
(1) As of 2/12/18 (2) Current rig count as a % of 2014 peak rig count
Basin Hz Rigs¹ % Peak2
Delaware 217 Central Basin 18 Midland 148
Total Permian 383 109% Eagle Ford 79 37% Williston 50 28% STACK 65 118% DJ 22 38% Powder River 16 50% MidCon3 79 38% GC/Other 5 8%
Utica
18 43% Total Other 334 51%
U.S. Hz Rig Count 717 67%
~53% of U.S. HZ rigs currently operating in the Permian
*
Source: Drilling Info *Excludes rigs operating in gas basins
Permian Basin Hz Rigs vs WTI Price
383 HZ Rigs 351 HZ Rigs
(3) Excludes STACK
11 www.plainsallamerican.com NYSE: PAA & PAGP
Top 15 Operators
July 2017 Rig Count
Feb. 2018 Rig Count
Pioneer 19 22 3
Exxon 14 22 8
Concho 18 19 1
EOG 16 17 1
Chevron 12 15 3
Apache 16 15 -1
Parsley 14 15 1
Diamondback 10 12 2
Oxy 12 11 -1
Cimarex 8 10 2
Anadarko 16 9 -7
Endeavor 7 9 2
SM Energy 4 9 5
Surge 7 8 1
Devon 6 8 2
Total 179 201 22
2018 Public Commentary (Direct Excerpts)
Exxon Mobil: “We are progressing plans to ramp up to around 36 operated rigs in the Permian and Bakken by year end, of which 30 will be in the Delaware and Midland basins.”
Chevron: “currently operating 16 rigs in the basin and plan to end this year with 20 company operated rigs.”
Source: Drilling Info., Company Presentations
Completions 2017 2018 % Growth
Pioneer 224 265 41 18%
Concho 211 244 33 16%
Diamondback 123 180 57 46%
Anadarko 97 160 63 65%
Parsley 126 160 34 27%
Cimarex 97 139 42 44%
Energen 108 125 17 16%
Devon 50 100 50 100%
Total 1,036 1,374 338 33%
*Does not imply that all rigs are on PAA acreage.
Leading Permian Producers Continue To Ramp Activity Going Into 2018
12 www.plainsallamerican.com NYSE: PAA & PAGP
Wichita Falls
Longview
Shreveport
Nederland
Cushing to Broome
Caddo
Exports
Memphis
Diamond
Colorado City
Corpus Christi
McCamey
Crane
Driver
Jal Midland
Wink
Three Rivers Gardendale
Lyssy
Local Refiners
Cushing Hub
Corpus Christi Refiners
Cushing Supplied Refiners
Constructing Corpus 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
Note: Illustrative map, only includes most significant PAA assets and select third party pipelines for context. Volume and asset data as of 12/31/17.
Permian Basin Assets / Activities
Transportation Volumes >2,800 mb/d
Lease Gathering Volumes >500 mb/d
Active Pipeline Miles >4,700
Crude Storage Capacity ~15 mmbls 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 Pipelines PAA Pipelines Under Construction PAA Potential Projects (identified) 3rd Party Export Pipelines PAA Facility PAA Rail Facility PAA Dock Facility 3rd Party Refinery
Legend
Orla
13 www.plainsallamerican.com NYSE: PAA & PAGP
Note: Operable Capacity assumes average 22 of 24 hour day
Permian Production vs. Operable Pipeline Takeaway Capacity
PAA Projects: ~700 mb/d of incremental takeaway capacity via
Sunrise Extension and Cactus II
Source: Company Filings, PAA estimates, Drilling Info
Permian Growth Expected To Fill Existing Capacity & Drive Demand for New Takeaway Capacity (Permian is PAA’s largest asset concentration)
Pipeline Takeaway Capacity + Local Refining Demand
(red line)
Oil Production (grey area) PAA owns a significant amount of
Permian takeaway capacity
14 www.plainsallamerican.com NYSE: PAA & PAGP
$1.4
$1.1
$0.6
$0.8
$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 Program & Proceeding with Key Permian Growth Opportunities
New Permian takeaway projects drive increased 2018 CAPEX Cactus II - expect investment to be shared in
JV structure, to span +/-18 month timeframe
Sunrise Extension & Loop (Phases I & II)
Funding Plan for 2018 capital program: ~$600mm of retained cash flow
~$700mm of 2018 targeted asset sales*
$200mm of additional Series B preferred equity proceeds from Oct. 2017 issuance
Potential sources of additional funding, if needed: Additional asset sales, non-convertible
preferred equity, private-equity arrangements
2018 (G): Guidance as of February 6, 2018 2019 Carryover: Preliminary Forecast as of Feb 6, 2018; currently sanctioned and carried over into 2019 *Recently executed definitive agreements on three transactions representing a little over half of the targeted amount
($ billions)
~$1.4
+/-$0.55
2018 (G) Expansion Capital ($ millions)
2018(G) 2019
Carryover In-Service
Timing
Permian Takeaway $765 $370 1Q19 – 3Q19
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
15 www.plainsallamerican.com NYSE: PAA & PAGP
Permian is Key Focus Area for Incremental CAPEX Long-Haul Expansions Drive Volume Pull-through on Gathering & Intra-Basin Systems
Permian to Cushing Phase I (Sunrise Extension) – Colorado City to Wichita Falls Phase II (Sunrise Loop) – Midland to Colorado City segment
Permian to Corpus Cactus II Project – detailed on next slide
Other Complementary Projects Terminalling and Storage expansions (Wink & Midland) Well connection projects (Gathering & Intra-basin)
Phase I Colorado City to
Wichita Falls
Phase II Midland to
Colorado City
Source Hub Long-Haul Hub
Legacy PAA Pipelines
*Represents 2018(G) as of February 6, 2018 and estimated carryover CAPEX in 2019.
Cactus II Permian to
Corpus Christi
Permian Related
~80%
Other ~20%
2018/2019 Capital Program*
Primarily driven by 2 Projects:
Permian to Corpus (Cactus II)
Permian to Cushing (Sunrise)
ORLA
16 www.plainsallamerican.com NYSE: PAA & PAGP
Announced 1/22/18: PAA Proceeding With Construction of Cactus II Pipeline System
Legacy PAA Pipelines Cactus II Project Cactus II Origination Point
Orla
Wink Midland
Crane
McCamey
Corpus Christi
Announcement Highlights: Sufficient third-party support received in initial open
season Project sanctioned and proceeding with construction
Overview: Plains to construct two new pipelines: Wink to McCamey
& McCamey to Corpus & interconnect with existing PAA infrastructure Origination: Orla, Wink, Midland, Crane & McCamey Destination flexibility via multiple docks in the Corpus
Christi / Ingleside area Permitting, ROW, & Procurement activities underway Incremental Pipeline Capacity: 585mb/d In-Service Target: 3Q19
Ingleside Cactus II Delivery Point
17 www.plainsallamerican.com NYSE: PAA & PAGP
New Projects Underpinned by Recent MVCs Also Provide Incremental Capacity & Revenue Optimization Opportunities
Source Hub Long-Haul Hub
Capacity View in Late 2017
Today: Long-haul pipelines & certain intra-basin lines
are currently the near-term constraint within PAA’s Permian system
Existing system positions PAA to win new project opportunities and deploy capital efficiently
Future: Expanding PAA’s long-haul pipelines adds
significant capability & debottlenecks entire PAA Permian system Adding ~700mb/d of long-haul capability Enables volume pull-through on gathering
and intra-basin systems
+700mb/d long-haul
2019*: Targeted in-service timing as follows – Sunrise Extension/Loop: 1Q19; Cactus II: 3Q19 Note: Map color coding is for illustrative purposes and incorporates PAA estimates for MVC commitments on PAA assets and PAA estimates for Permian production growth
Expected Capacity View in Late 2019*
ORLA ORLA
18 www.plainsallamerican.com NYSE: PAA & PAGP
Key Takeaways
Long-term view for the crude oil sector is strong World needs US production; Permian Basin will be a key driver
Infrastructure is critical to domestic & international value chain
PAA’s system is well positioned to serve the industry’s needs: Operational reliability / Flow assurance Access to multiple markets Quality management
PAA intensely focused on execution initiatives: Deleveraging plan Asset optimization and operational excellence System capabilities and new growth opportunities
PAA is well positioned for growth
19 www.plainsallamerican.com NYSE: PAA & PAGP
Q&A