First Quarter 2016 Earnings Presentation May 2, 2016
Forward Looking Statements This presentation includes forward-looking statements, which are statements that frequently use words such as "anticipate," "believe ,“ “consider,” "continue," "could," "estimate ,“ "expect ,“ “explore,” “evaluate,” "forecast," "intend," "may," "plan," "position," "projection," "should," "strategy," “opportunity,” "target," "will" and similar words. Although we believe that such forward-looking statements are reasonable based on currently available information, such statements involve risks, uncertainties and assumptions and are not guarantees of performance. Future actions, conditions or events and future results of operations may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results are beyond the ability of Midcoast Energy Partners, L.P. (the “Partnership”) to control or predict. The Partnership’s forward-looking statements are subject to risks and uncertainties pertaining to operating performance, regulatory parameters, project approval and support, weather, economic conditions, interest rates and commodity prices, including but not limited to the following specific factors that could cause actual results to differ from those in the forward-looking statements: (1) changes in the demand for or the supply of, forecast data for, and price trends related to natural gas, natural gas liquids and crude oil and the response by natural gas and crude oil producers to changes in any of these factors; (2) the Partnership’s ability to successfully complete and finance expansion projects; (3) the effects of competition, in particular, by other pipeline and gathering systems, as well as other processing and treating plants; (4) shut-downs or cutbacks at the Partnership’s facilities or refineries, petrochemical plants, utilities or other businesses for which the Partnership transports products or to whom the Partnership sells products; (5) hazards and operating risks that may not be covered fully by insurance; (6) changes in or challenges to the Partnership’s rates; (7) changes in laws or regulations to which the Partnership is subject, including compliance with environmental and operational safety regulations that may increase costs of system integrity testing and maintenance; and (8) cost overruns and delays on construction projects resulting from numerous factors. Forward-looking statements regarding “drop - down” opportunities are further qualified by the fact that Enbridge Energy Partners, L.P. is under no obligation to offer to sell us additional interests in Midcoast Operating, L.P., and we are under no obligation to buy any such additional interests. As a result, we do not know when or if any such additional interests will be purchased. Except to the extent required by law, we assume no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Reference should also be made to the Partnership’s filings with the U.S. Securities and Exchange Commission (the “SEC”), including its Annual Report on Form 10-K for the year ended December 31, 2015 and any subsequently filed Quarterly Reports on Form 10-Q and current Reports on Form 8-K for additional factors that may affect results. These filings are available to the public over the Internet at the SEC’s web site (www.sec.gov) and at the Partnership’s web site. In this presentation, unless the context otherwise requires, references to “Midcoast,” “the Partnership,” “MEP,” “we,” “our,” “us,” or like terms refer to Midcoast Energy Partners, L.P. We refer to Enbridge Energy Partners, L.P. as “Enbridge Energy Partners ,” “sponsor,” or “EEP . ” References to “Midcoast Operating” or “MOLP” refer to Midcoast Operating, L.P. 2 midcoastpartners.com
Overview First Quarter Financial Performance In Line • First quarter cash distribution maintained at $0.3575/unit ($1.43/unit annualized). • Distribution agreement in place with sponsor to support 1.0x coverage through 2017 (1) • Disciplined hedging and credit risk management program enhance cash flow certainty. • Efficient and sustainable cost structure established. • Continue to optimize existing assets and capture incremental supply. • MEP has begun working with sponsor EEP to explore and evaluate a broad range of strategic alternatives. (1) As previously disclosed, distribution agreement in place with sponsor to support 1.0x coverage each quarter with respect to any declared distribution through 2017, and no requirement for MEP to reimburse EEP for adjusted distributions. 3 midcoastpartners.com
Financial Results Financial Summary (1) Volumes Anadarko East Texas North Texas Midcoast Operating, LP (MOLP) 1Q 2016 1Q 2015 2,500 (mmbtu/d in thousands) Adjusted EBITDA, inclusive of other 2,000 287 $57.2 $59.8 274 Volume by System 262 cash items (2) 239 216 1,500 1,007 Midcoast Energy Partners (MEP) 1Q 2016 1Q 2015 968 966 915 948 1,000 Adjusted EBITDA (1) $23.6 $24.4 500 Distributable Cash Flow (3) $16.5 $18.6 831 794 760 707 652 - Coverage (3) 1.0x 1.16x 1Q15 2Q15 3Q15 4Q15 1Q16 Debt / EBITDA 3.6x 3.3x 90,000 Highlights: NGL Production (bpd) 80,000 Natural gas and NGL system volumes in line with expectations 70,000 60,000 Certain items benefited 1Q financial results 50,000 40,000 1Q15 2Q15 3Q15 4Q15 1Q16 (1) $ Millions, unless otherwise noted. Unaudited; adjusted results exclude the effect of: non-cash, mark-to-market net gains and losses; among other adjustments. Refer to the Non-GAAP Reconciliation tables presented in the supplemental slides. Adjusted EBITDA includes equity earnings from JV investment in Texas Express NGL system. (2) “MOLP Adjusted EBITDA, inclusive of other cash items” includes equity earnings and cash distributions in excess of equity earnings from joint venture investment in Texas Express NGL system and $25 million annual G&A abatement. (3) Distribution agreement in place with sponsor to support 1.0x coverage each quarter with respect to any declared distribution through 2017, and no requirement for MEP to reimburse EEP for adjusted distributions. 4 midcoastpartners.com
Effective Risk Management Hedging program strengthens Strong counterparty credit risk cash flow outlook profile ~$76/Bbl 2016 weighted average • ~90% of exposure with investment crude oil hedge price grade counterparties ~$0.64/gal 2016 weighted average • Credit requirements and security composite NGL barrel hedge price (1) received mitigate credit exposure > 90% forecasted commodity based Counterparty Exposure (2) gross margin hedged in 2016 ~$174 million of 2016 commodity A- or Above (~20 Counterparties) based cash flows hedged BBB (~25 Counterparties) > 40% forecasted commodity based 55% BB+ or Below (3) gross margin hedged in 2017 (~140 Counterparties) 38% 7% Disciplined risk management program enhances cash flow certainty (1) NGL Composite Barrel average hedge price assumes ethane hedged at $0.17/gal. (2) Counterparty credit exposures as of February 29, 2016. (3) Non-investment grade exposure spread across ~140 counterparties; collateral received partially mitigates credit exposure. 5 midcoastpartners.com
Capital Expenditures Forecast 2016 Capital Expenditures Available Under Credit Facility $ millions Midcoast Operating, L.P. 2016e ($ millions) $400 Compression Capital 5 $300 Well Connect Expansion Capital 20 Expansion Capital 15 $200 $370.0 $320.0 Maintenance Capital 35 $100 Total Midcoast Operating Capital (1) $75 $0 Less: Joint funding from EEP (2) $35 3/31/2016 12/31/2015 Total MEP Capital Expenditure Forecast $40 Prudently managing capital expenditures: Capital forecast aligned with producer activity levels Preserve financial flexibility Sufficient liquidity to fund base capital expenditures (1) Represents capital expenditure forecast at Midcoast Operating level. Capex to be proportionally funded by EEP and MEP based on ownership interest in Midcoast Operating. (2) Joint funding based on current EEP ownership at 48.4% of Midcoast Operating. 6 midcoastpartners.com
Strategically Positioned Asset Base Midcoast assets well situated to capture demand growth • Natural gas demand in the US Southwest expected to increase ~9-13 Bcf/d by 2025 Anadarko primarily driven by power generation and industrial growth. (1) • US Gulf Coast LNG export capacity expected to increase by ~8 Bcf/d by 2020. (2) US Gulf Coast LNG Demand 10.0 8.0 North Texas Bcf/d East Texas 6.0 4.0 2.0 - 2016 2017 2018 2019 2020 • New crackers expected to increase ethane demand by ~500 kBpd by 2019. (2) US Gulf Coast New Ethane Crackers 800 600 kBpd 400 200 0 2016 2017 2018 2019 2020 Under Construction Planned • ~550 kBpd of Gulf Coast LPG and ethane export expansions expected to enter service in 2016. (2) (1) Source: INGAA, April 2016 (2) Source Enbridge calculations and company filings. 7 midcoastpartners.com
Recommend
More recommend
