HL Acquisitions Corp .: Change Brings Opportunity Change Brings - - PowerPoint PPT Presentation

HL Acquisitions Corp.:

Change Brings Opportunity Change Brings Opportunity

Investor Presentation July 2018

Disclosures

This presentation (the “Presentation”) has been prepared by HL Acquisitions Corp. (the “Company”). This Presentation has been prepared solely for discussion purposes only. Any reproduction or distribution of this Presentation, in whole or in part, or the disclosure of its contents, without the prior consent of the Company is prohibited. This Presentation does not purport to contain all of the information that may be required to evaluate a possible transaction. This Presentation is not intended to form the basis of any investment decision by the recipient and does not constitute investment , tax or legal

• advice. No representation or warranty, express or implied, is or will be given by the Company or any of its affiliates, directors, officers,

employees or advisers or any other person as to the accuracy or completeness of the information in this presentation or any other writt en,

• ral or other communications transmitted or otherwise made available to any party in the course of its evaluation of a possible tr ansaction,

and no responsibility or liability whatsoever is accepted for the accuracy or sufficiency thereof or for any errors, omissions or misstatements, negligent or otherwise, relating thereto. Accordingly, none of the Company or any of its affiliates, directors, officers, employees or advisers or any other person shall be liable for any direct, indirect or consequential loss or damages suffered by any per son as a result of relying on any statement in or omission from this Presentation and any such liability is expressly disclaimed. This Presentation contains forward-looking statements. Terms such as “anticipates,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,”“potential,” “predicts,” “project,” “should,” “would” as well as similar comments, are forward- looking in nature. The forward-looking statements contained in this discussion are based on the Company’s current expectations and beliefs concerning future developments and their potential effects. There can be no assurance that future developments affecting the Company will be those that it has anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, they could cause our actual results to differ materially from the forward- looking statements. We are not undertaking any obligation to update or revise any forward looking statements whether as a result of new information, future events or otherwise. You should not take any statement regarding past trends, activities or performance as a representation that the trends, activities or performance will continue in the future. Accordingly, you should not put undue reliance on these

• statements. This Presentation is not intended to constitute, and should not be construed as investment advice.

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Contents

• Acquisition Criteria
• Management Team
• Market Landscape
• Shale Revolution
• IMO 2020
• IMO 2020
• Emergent Opportunities
• Appendix
• Vehicle Description

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Our Acquisition Criteria

We intend to seek an initial business combination in the hydrocarbon logistics value chain that offers some combination of the following characteristics:

• Smaller initial capital requirements (i.e., $50 to $200 million)
• Located close to areas of rapid growth in energy demand or industries transitioning to cleaner burning fuels
• Mid-to-late development stage, providing for very high expected returns while mitigating the risk associated with the

initial phases of development

• initial phases of development
• Proven business with attractive bolt-on growth opportunity, but limited access to capital markets
• Upstream production and refining, considered on an opportunistic basis
• Could benefit from the substantial expertise, experience and network of our sponsor and management team
• Squarely positioned to take advantage of growth trends

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Our leadership team has extensive operating and investment experience across petroleum production, services & logistics

Jeffrey Schw arz Chairman and CEO Rune Magnus Lundetrae Independent Director Ajay Khandelw al Independent Director Prim ary providers of risk capital:

• Schwarz Family
• Joel Greenblatt (Founder and Co-CIO of Gotham Capital)
• Karen Finerman (CEO & Co-Founder of Metropolitan Capital Advisors, Panelist on CNBC’s Fast Money)

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Our sponsors have structured their equity in the form of w arrants ( vs. units) as w e strongly believe that this

• pportunity offers significant upside potential over the long term

Jeffrey Schwarz, Chairman & CEO

• Jeffrey is the co-founder of Metropolitan Capital Advisors, Inc., a New York-based money management firm founded in
• 1992. He served as Metropolitan’s Chief Investm ent Officer from the firm’s inception until his retirement in 2012.
• Since 2012, Mr. Schwarz has served as the Managing Member of Metropolitan Capital Partners V LLC, the investment

vehicle of the Schwarz family office.

Previous Board Experience

• Co-Chairman of the Board,

Bogen Corporation

• Relevant Experience

Key Executive Relationships

• With an investment management

career that began in 1981, and with

• Christian Andersen,

CEO of Avance Gas Holding Ltd

• Bogen Corporation
• Chairman of the Board,

Molopo Energy Ltd.

• Board member,

Cyberonics Inc.

• career that began in 1981, and with

a focus on the oil & gas, oil services, refining and marketing, MLP and shipping sectors Jeffrey has deep experience in evaluating the

• pportunity set to be targeted by HL

Acquisitions Inc.

• CEO of Avance Gas Holding Ltd

(c.andersen@avancegas.com )

• Carsten Mortensen,

CEO of BW Group Ltd (cmo@bwmaritime.com )

• Gary Smith,

Former CEO of Golar LNG Ltd (gsmith@poten.com )

• Jens Gruner-Hegge

CFO of Stolt-Nielsen Ltd. (j.gruner-hegge@stolt.com )

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Board of Directors

Rune Magnus Lundetrae

• Mr. Lundetrae joined Borr Drilling Ltd. at the time of its

inception in December 2016. Since that time he has served in various capacities, currently serving as the Deputy Chief Executive Officer and Chief Financial Officer. He has played an instrumental role in helping build Borr Drilling into the world’s largest offshore driller in the premium jack-up space, participating in the structuring and financing of acquisitions approaching $4b. Borr Drilling has effectively consolidated its sector with

• Ajay Khandelw al
• Since December 2017, Mr. Khandelwal has served as the

Chief Executive Officer of Chi Energie Private Limited, an Indian-based company seeking to broaden the access of Indian energy consumers (including industrial/ commercial, city gas distribution and heavy vehicle/ buses transportation customers) to LNG.

• From 2013 to September 2017, Mr. Khandelwal served as

President (Petroleum and Production) of Reliance Industries Limited, one of India’s largest oil companies.

• Drilling has effectively consolidated its sector with

purchases of the premium jack up assets of Transocean Ltd., Sembcorp Marine Ltd. and Paragon Offshore Ltd., as well as under construction rigs from the Keppel Shipyard in Singapore.

• From August 2015 to December 2016, Mr. Lundetrae was

a Managing Director and Head of Oil Services of DNB Markets, the investment banking subsidiary of DNB, Norway’s largest financial services group.

• From 2012 to June 2015, he served as Chief Financial

Officer of Seadrill Ltd, the world’s largest offshore driller.

• Industries Limited, one of India’s largest oil companies.
• From 2010 to 2013, Mr. Khandelwal served as Chief

Executive Officer of Jubilant Energy, an E&P company based in India.

• From 2006 to 2009, Mr. Khandelwal served as an

investment advisor to the family office of John Fredriksen, one of the world’s largest owners of shipping and oilfield services businesses where he guided the investments of nine private equity funds in the U.S., Europe and Asia.

• From 2001 to 2006, Mr. Khandelwal served in several

positions with Shell International, most recently as Lead Investment Finance Advisor, focusing on LNG business development and upstream M&A.

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Our I nvestm ent I nvestm ent Thesis

The shale revolution is fundamentally reshaping global energy markets, creating new opportunities for investment across the value chain

• The shale revolution, driven by innovations in horizontal drilling and hydraulic fracturing, has up -ended global energy

markets in both obvious and more nuanced ways:

• US crude production has grown from 5.5m barrels per day in 2010 (“b/ d”) to an all-time record high of 10m b/ d in

late 2017

• Domestic dry natural gas production has grown from 56 billion cubic feet per day in 2010 (“ Bcf/ d”) to 78 Bcf/ d, which

has enabled the US to becom e a net exporter of natural gas in 2017, increasingly in the form of LNG

• The market for LNG—which had historically only been available under very long-term contracts to buyers with the

strongest credit profiles—is becoming more flexible, opening the market to a much wider universe of buyers

• strongest credit profiles—is becoming more flexible, opening the market to a much wider universe of buyers
• The wider availability and flexibility of LNG, coupled with the greater awareness of environmental implications of fossil

fuel use, is driving a fundamental change in patterns of energy consumption as both industrial and commercial users increasingly transition to natural gas as a primary source of energy. We believe this change signals the beginning of the second phase of the shale revolution:

Phase I

( 2 0 0 3 – 2 0 1 7 )

Phase I I

( 2 0 1 8 – 2 0 2 5 )

US centric Large, expensive projects Prim arily producer oriented Developing m arkets Sm aller, scalable projects Prim arily consum er oriented

This second phase w ill present new opportunities for innovative, agile organizations to put capital to w ork creatively, and w e seek to be an early player in this em ergent m arket

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Phase I was characterized by large scale investments in domestic,

• nshore production and infrastructure projects

Phase I Phase I I

• “Lumpy” investment in onshore production, processing and

infrastructure (e.g., pipelines, terminals)

• Focus largely US-centric, as oil majors have shifted their

upstream capital budgets away from offshore to concentrate

• n US land
• Monthly Dom estic Crude & Natural Gas Production, 2 0 1 0 -1 7 1

US centric Large, expensive projects Prim arily producer

• riented

Developing m arkets Sm aller, scalable projects Prim arily consum er oriented

65 70 75 80 8 9 10 11 Dry Natural Production ( B Oil Production ( m b/ d)

• n US land
• Once the shale revolution proved the ability of producers to

access America’s enormous reserves of oil and natural gas, major capital commitments were made in the midstream, to support the export of crude oil and LNG

• Since 2010, U.S. crude oil production has grown by 10%

annually to all-time record level of 10 mb/ d in late 2017. Over the same period, dry natural gas production has grown by 5% annually to 78 Bcf/ d

• This has coincided with significant increases in domestic

liquefaction capacity, as well as LNG exports, which have grown to nearly 1.9 Bcf/ d

50 55 60 5 6 7 Crude Oil Natural Gas al Gas ( Bcf/ d) Crude Oil ( m 2 4 6 8 10 12 14 0.0 0.5 1.0 1.5 2.0 2.5 2013 2014 2015 2016 2017 US Liquefaction Capacity US LNG Exports LNG Exports ( Bcf/ d) Liquefaction Capacity ( Bcf/ d)

Annual Natural Gas Liquefaction and LNG Exports, 2 0 1 3 -1 7 2

• 1. Monthly Crude Oil and Natural Gas Production, US Energy Information Administration
• 2. Bloomberg New Energy Finance

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Phase II will be characterized by growing demand from the developing world for cheaper, cleaner energy

• The developing world will account for much of the increase in

global energy demand, particularly in Asia, where energy consumption is expected to grow by 51% between 2015-40

• Asia is already the biggest importer of LNG, and greater

environmental awareness and favorable economics will

• Phase I

Phase I I

US centric Large, expensive projects Prim arily producer

• riented

Developing m arkets Sm aller, scalable projects Prim arily consum er oriented Projected Energy Dem and Grow th by Region, 2 0 1 5 -4 0 1

400 600 800 Asia Middle East & Africa rillion Btu

• environmental awareness and favorable economics will

accelerate demand for LNG

• Shell projects that Asia will account for more than half
• f incremental LNG imports between 2017-35
• While capital investment will continue to be made in

upstream and midstream segments domestically, returns will be modest as the space is now dominated by large public companies with low cost of capital

• Higher returns will draw capital to projects closer to fast

growing demand centers aiming to capitalize on the emergence of a more flexible market for LNG

• Indeed, spot deliveries accounted for nearly 30% of the

global LNG market in 2017

LNG I m ports ( bcm ) 200 400 2015 2020 2030 2040 Americas Europe OECD

Projected LNG I m ports by Region, 2 0 1 7 -3 5 2

Quadril

• 1. International Energy Outlook 2017, US Energy Information Administration
• 2. Shell LNG Outlook 2018

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In parallel, a greater focus on environmental protection in the marine shipping space will create unique, intermediate-term opportunities

• Fuel used in the shipping industry currently represents ~ 6% of

global consumption of refined oil products

• New fuel regulations aimed at reducing sulfur emissions are

slated to begin in 2020, which will require shippers to either employ scrubbers or switch to compliant marine fuels with a sulfur content of no more than 0.5% (vs. current limit of 3.5% )

• Most analysts predict shipowners will opt for compliant fuel, due

to the stressed state of shipowner balance sheets, concerns around their ability to pass on the capital expense of scrubbers to

• Marine Fuel Dem and 2 0 1 7 vs. Projected 2 0 2 0

( norm alized to 5 .5 m b/ d) 1

4.0 0.3 3.0 1.2 1.7 2 4 6 Gasoil ULSD HFO 3.5% Marine Fuel Consum ption ( m b/ d)

• around their ability to pass on the capital expense of scrubbers to

charterers, and uncertainty about the performance implications of scrubbers on vessel operating efficiency

• Global refining systems will be very challenged to meet new

demand for low-sulfur products. Ripple effects will likely be felt across the refined product sector:

• Significant expansion in price spread between compliant

fuels (e.g., marine gasoil and ULSD vs. HFO)

• Development of LNG as a marine fuel, stimulating early

investment in logistical / distribution infrastructure to support LNG bunker facilities

• Investment in refinery upgrades to extract more high-value

products from HFO, which will be undesirable after 2020

Prem ium of 1 % SFO over 3 .5 % SFO2

0.8 2017 2020 Ma HiLo Spread ( $/ MT)

• 1. IMO2020 Report, SEB
• 2. Countdown to IMO 2020, Morgan Stanley

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Greater flexibility and availability in natural gas markets, along with new regulatory efforts, will create ample investment opportunities across the value chain

We expect that outside the US these market shifts will require significant investment across the hydrocarbon ecosystem, with new commitments needed in three primary opportunity areas:

• Supporting the transition of existing industry to new feedstocks and sources of energy (e.g., petrochemical plants that

will use NGLs in lieu of crude oil derivatives; natural gas to replace diesel in heavy industry, commercial transportation, and power generation)

• Facilitating consumer adoption on attractive pricing spreads vs. traditional fuel sources (e.g., natural gas and LPG to

replace petroleum products for heating / cooking)

• Building incremental refining and processing capacity to meet incremental demand for cleaner sources of energy

Upstream / producer centric Dow nstream / end-user centric Large, discrete projects / significant capital costs Sm all, scalable projects / low er capital costs Refinery capacity expansion LNG bunkering and distribution I ndustrial and consum er hydrocarbon logistics Refinery upgrader units

I llustrative investm ent opportunity set

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We believe the best opportunities for superior risk-adjusted returns are in hydrocarbon logistics projects that focus on enabling end-user adoption

• There will continue to be investment needed domestically in upstream and midstream projects, but we believe the excess

returns associated with the early phase of the shale revolution have been competed away

• The more interesting, higher return investment opportunities will be found in businesses closer to the centers of demand

growth—primarily in the developing world—with a greater focus on the logistics of distribution to the end-user

• We seek to be an early player in this space, taking advantage of the excess returns associated with emergent downstream
• pportunities that are beginning to ramp up around the globe as part of the second phase of this transformation
• While we will evaluate upstream and midstream projects on an opportunistic basis, our scope will primarily be downstream

investment opportunities, with a focus on smaller-scale logistics projects in developing markets

• investment opportunities, with a focus on smaller-scale logistics projects in developing markets

Our prim ary acquisition focus Projects w e w ill target and evaluate on an opportunistic basis

I llustrative investm ent opportunity set

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Upstream / producer centric Dow nstream / end-user centric Large, discrete projects / significant capital costs Sm all, scalable projects / low er capital costs Refinery capacity expansion LNG bunkering and distribution I ndustrial and consum er hydrocarbon logistics Refinery upgrader units

Appendix Appendix

Why is a SPAC the ideal investment vehicle?

The Special Purpose Acquisition Company offers a unique set of advantages vs. more traditional vehicles:

• Only transactions with strong shareholder

support will be approved, otherwise, SPAC is liquidated in 18 months

• Sponsor funds IPO expenses and working

capital, which are not refunded in the event the SPAC is liquidated

• Publicly traded units provide investors with

flexible trading strategy

• Access to public markets for growth

capital, including using public currency for bolt-on acquisitions

• SPAC provides target owners a longer term

exit that is aligned with shareholders

• Management access to proprietary deal flow
• Public company provides negotiating leverage with target

companies as alternatives are limited

Facilitates Deal Flow

• Valuation of sponsor Founder’s Shares

and warrants aligned with shareholders

• exit that is aligned with shareholders

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