Regency Energy Partners Investor Day Presentation June 2008
Agenda Overview, Strategy and Vision Byron Kelley, CEO Gathering & Processing and Transport Segments Rick Moncrief, COO Overview Randy Dean, President Contract Compression Services Segment Overview CDM Resource Management…
Overview, Strategy and Vision Byron Kelley, CEO
Regency History Capturing growth opportunities from acquisition platforms Acquisitions Bolt-on Acquisitions Organic Growth Total Platform 977 million Initial 405 million 240 million 332 million invested Platforms…
Recent Platform Acquisitions Completed 965 million of step-out acquisitions since 2006 Acquisitions Type Strategic Relevance Growth Opportunities CDM Resource Platform Source of stable, fee-based cash Expand market share in existing…
Recent Bolt-On Acquisitions Completed 386 million of bolt-on acquisitions since 2004 Acquisitions Type Strategic Relevance Growth Opportunity Nexus Gas Bolt-on Provides additional gathering Strategically located to Holdings LLC…
Recent Organic Growth Projects On schedule to complete 584 million of organic growth projects since 2004 Year Amount Key Projects 2008 208 million Construction of a 40 mile, 10 inch diameter pipeline in west Texas Construction and…
Announced Organic Growth Projects 2008 Expected Capital Return Project Description Region Budgeted Status (EBITDA ( Millions) Multiple) Construct 20 miles of 10 inch South Complete Delta to Fashing Pipeline 25 5.0x pipe and…
Attractive Assets Located in productive natural gas producing regions including Louisiana, Texas, Arkansas and the Mid-Continent region of the United States Capitalization Current IPO Market Capitalization (bn) 2.0 0.8 Enterprise…
Attractive Market Dynamics Strong market fundamentals drive increased infrastructure needs Strong Market Strong Commodity Increased Demand Prices Infrastructure Needs X Growing global energy X Thin margin between supply X Pipeline…
New Infrastructure Needed Shift in supply sources and market demands creates additional infrastructure requirements US Natural Gas Supply 2005 - 20201 24.00 22.00 20.00 18.00 TCF 16.00 14.00 12.00 10.00 2005…
Why North American Energy Infrastructure What We Are Seeing X As conventional supply basins have continued to decline, producers have turned to unconventional sources of natural gas such as tight sands, shale plays, and coal bed…
Why North American Energy Infrastructure Widening Gap Between Consumption and Production U.S. Production vs Consumption 70 60 50 40 Bcf/d 30 20 10 0 1980 1981 1982 1983 1984 1985 1986 1987 1988…
Declining Conventional Production Shallow Gulf and Western Canada declining, but Continental US mostly flat Projected Conventional Gas Production Source: ICF International 14
Shale Development Characteristics As time progresses volume predictions continue to become more bullish 2008 Average Daily Production MMcf/d 2007 2006 15 Source: ICF International
Regencys Assets Strategically Located Regency is well positioned to capitalize on the growth of the new shale developments Projected Gas Production 16 Source: ICF International
Production Costs in the Shales 14 X For the Barnett, Woodford, and Fayetteville Shale combined, there Resource Cost at Wellhead in /MMBtu are almost 140 Tcf of reserves 12 available at wellhead prices or 6 per Mmbtu or less.…
What it means for the midstream sector Increased drilling should drive additional growth for our gathering and processing and compression segments 18 Source: ICF International
Attractive Formula for Success Regency GE EFS Partnership Dedicated and GREATER Experienced Strong Sponsor Greater GROWTH Growth Management Team Potential POTENTIAL X Active merger and acquisition X Regency is the principal X…
Attractive Future 20
Our Corporate Mission and Key Objective Mission Key Objective Consistent growth in unit holder value Implications X Obtain scale in our business segments and regions X Manage using a results-oriented organizational philosophy…
Implication: Scale Doubling our assets and EBITDA requires relentless focus on the following strategies Maximize Asset Greenfield Acquisitions Asset Value Expansion Development X Optimize portfolio performance X Rationalize in a…
Performance Management Metrics Illustrative Example Regency Energy Performance Management Tracker Gathering & Processing MidCon Region 2007 A 2008 B 2008 F 2009 P 2010 E 2011 E 2012 E 2013 E Financial Performance: EBITDA…
Implication: Results-Oriented Management Philosophy Build and retain a committed, strong management and employee team that is highly motivated and focused on results By establishing a unified culture of excellence, we will be better…
Implication: Balanced Business Profile Optimize the growth of cash flow while taking into account the stability of the market sector Conceptual Example Current Business Mix Trending Toward Storage Contract Contract Compression…
Implication: Financial Strength Maintain a solid balance sheet that allows for financial flexibility to pursue growth opportunities 26
Key to Success Relentless focus on execution Regency will strive for top quartile total annualized returns to unit holders through our relentless focus on execution 27
Overview, Strategy and Vision Questions & Answers
Segment Detail Gathering & Processing and Transportation Overview Rick Moncrief, COO
Midstream Overview Regencys operations are located in Texas, Louisiana, Kansas and Oklahoma East East Texas Texas Plants 1 Gathering System Length 371 (Miles) Compression (HP) 25,665 Plants1 1 Plant Capacity (MMcf/d) 65…
North Louisiana Key Assets Lisbon Plants Plant Dubach Dubach Processing Plant Plant Lisbon Processing Plant Dubberly Plant Elm Grove Refrigeration Plant Elm Grove Plant Dubberly Refrigeration Plant Gathering Systems…
Increasing Terryville Drilling Activity North Louisiana system is well positioned to capture increasing volumes 2007-2008 Drilling Activity Terryville Field Volumes 2006-20071 Lisbon NGL Line Plant Regency Intrastate Gas System…
Nexus Gathering System Provides Regency with significant gathering footprint in active drilling area that has limited downstream takeaway capacity Nexus Gathering System Gas wells Jan 2007 to Current1 Gas wells prior to 20071 Area…
Purchase of Sonat Assets would connect Nexus to RIGS With the purchase of Nexus, Regency acquired an agreement to purchase certain Sonat assets Acquisition Lisbon X Contract is for 52.5 million, Plant contingent upon FERC approval of…
Haynesville Shale Development Regency is well positioned to exploit opportunities in Haynesville Shale Highlights X 20+ rigs expected to be operating by end of 2008 Expected to be horizontal play Resource potential up to 20…
South Texas Key Assets Plants Tilden (Treating) Fashing (Treating) Gathering Systems Tilden (Lean/Sour) LaSalle (Rich/Sweet) Tilden (Rich/Sour) Fashing (Lean/Sour) Fashing Plant Key Producer Customers X St. Marys X…
South Texas Organic Growth Over 80 million invested in optimizing assets Delta to Fashing Edwards Lime Extension 12 million1 25 million Gold River Compression 7 million Fashing Plant Tilden Plant Area Shown…
South Texas - Edwards Lime Edwards Lime is a joint venture between Regency and Enduring Resources Fashing Plant Pawnee Field Boundaries Edwards Lime Expansion Area of mutual interest Enduring Resources Operated Gas Wells1…
East Texas Key Assets Assets Eustace Processing Plant Eustace Gathering System Key Producer Customers X Valence Myrtle Springs Liquid Treating X Eagle Rock Cedar Creek Facility Lake Primary Producing Formations Area…
Cedar Creek Reservoir Project (BBOG) Gas Gathering Assets Prior Wells Drilled Blackbrush drilling location Regency Processing Plant Reschke No. 1 Area of reservoir X Drilled in 1984 Cedar Creek Lake X Tested at 1,000-1,200 Mcf/d…
West Texas Key Assets Assets Waha Processing Plant Waha Gathering System Key Producer Customers X Exxon Mobil X Chevron X Oxy Permian X Finley X Marathon X BTA Waha Plant Area Shown Primary Producing Formations X…
Contract Compression Services Integration Improving system performance by optimizing compression assets in West Texas Project Description X Shut down 3 existing compressor stations and consolidated to one station with two units X…
Mid-Continent Key Assets Plants Mocane Processing Plant Area Shown Gathering Systems FrontStreet Hugoton Lakin Mocane-Laverne Greenwood Key Producer Customers X BP X Oxy X Cimarex X EXCO Mocane Plant Primary Producing…
FrontStreet Hugoton Acquisition Conceptual Example Gas Gathering Assets FrontStreet Hugoton System Regency Processing Plant X Unique rate structure which limits downside risk X Operated by BP America Production Company X…
Environmental and Safety Committed to the achievement of excellence in the area of environmental, health and safety performance Goal: Goal: Reliable Reliable delivery delivery of of products products to to customers…
Environmental Initiatives Completed Since 2007 Proactively invested capital to reduce emissions while optimizing our assets Capture Gas to Replacement of Old Consolidation Atmosphere Compressors X Retired grand-fathered X…
Synergies and Asset Optimization We have a history of producing operational synergies and expect to aggressively pursue more in the future Synergies Asset Optimization Executed: X Consolidated Como Processing Plant X Tilden…
Gathering & Processing and Transportation Questions & Answers
Contract Compression Services Randy Dean, President, CDM Resource Management
Contract Compression Services Delivering value to our customers through superior run-times X Contract Compression Segment provides our customers with turnkey services while adapting to their changing conditions to maximize their…
Compression Market Overview X The current outsourced compression market is made up primarily of smaller, independent producers X As the majors and larger independents sell off non-core assets, significant amounts of additional…
U.S. Field Compression Historical Growth X Since 2000, nationwide outsourced compression has grown as a percent of total compression every year Historical Compression Growth U.S. Markets 25,000 4.4% GR Overall CA CAGR 20,000…
Drivers of Compression Growth X Driven by the volume of production in a field as well as the fields average wellhead pressure and the average pressure of takeaway pipelines Illustrative Example X Because long-haul line pressures…
Contract Compression Business Model Contract Compression Services versus Unit Rental f Full-service contract includes maintenance and unit operations f 98% runtime guarantee places greatest value on customer cash flow f Focus is on…
Distinctive Asset Base Core compression operations are located in Texas, Louisiana and Arkansas HP by Region1 Total State HP Southwest (Texas) 199,962 Southeast (Louisiana and 106,260 Texas) Northwest (Arkansas, 110,032 Louisiana…
Contract Compression Horsepower Growth Contract Compression has seen impressive year-over-year growth in horsepower 800,000 Operating Horsepower 2008E 743,000 HP 700,000 127,118 600,000 6 .5% G R3 New CA Customer 500,000…
Contract Compression Services Questions & Answers
Financial Overview Stephen Arata, CFO
Disciplined Financial Growth Strategy Regencys key objective is to achieve an investment grade rating within the next 3 years X Credit profile targets: Debt/Adjusted EBITDA: < 4.0x Adjusted EBITDA/Interest: 5.0x X Maintain…
Track Record of Performance 300 Adjusted EBITDA 250 220-240 200 R 47% millions C AG 150 142 in 93 100 50 51 50 0 2004 2005 2006 2007 2008E Recast to reflect the TexStar and FrontStreet acquisitions…
Q1 08 Growth Over Q1 07 Offers Glimpse of Potential Future Growth in Millions, except per unit data 1st Quarter Adjusted Segment Margin: 2008 2007 % Change Gathering & Processing 57.1 30.2 89% Transportation 14.7 14.3 3% Compression…
Changing Business Mix Adjusted Segment Margin 404 5 2% GR CA in millions 229 154 88 76 62
Gathering & Processing Segment Drivers 976 5% R3 C AG 773 219 in M arg m en t Se g ed Volume (thousand MMBtu/d) t Adjusted Segment Margin us Adj 170 ( in millions) 529 345 109 305 72 67 Adjusted…
Transport Segment Drivers R 62% 830 C AG in M arg ent Completion 752 m 62 Seg of Bossier s ted Loop A dju 59 Volume (thousand MMBtu/d) Adjusted Segment Margin 587 ( in millions) Completion 45 of RIGS 258…
Growing Fee-Based Cash Flows With the acquisition of Hugoton, CDM, and Nexus, a significantly larger portion of Regencys total segment margin is derived from fee-based business Total Segment Margin Q4 2007 Q1 2008 58% 42% 37%…
Continued Stability of Cash Flows Regency targets 85%, 75%, and 50% hedge ratios at years 1, 2, and 3 for NGLs and a 70% hedged ratio on condensate for all three years NGL Equity Production vs. Hedged 7,000 6,000 5,776 5,626 5,626…
Q1 2008 Impact of Commodity Price Hedges on Results Earnings without hedges and with management fundamental price deck Pricing Benefit Impact of Results Using on Unhedged Hedges Below Q1 Commodity 80 Oil and Fundamental ( millions)…
Locked in Growth in Cash Flows On average, Regencys executed hedge pricing increases over time, which translates into built-in growth in adjusted segment margin Executed Hedges by Product: 4Q 2008 2009 2010 Bbl/d Price Bbl/d Price…
Organic Growth and Bolt-on Acquisitions Organic growth and small bolt-on acquisitions are expected to be at least 300 million per year going forward Pro Forma Historical Organic Growth and Bolt-on Acquisitions 500 448 450 400 118…
2008 Budget Spending Excluding Acquisitions ( millions) 2008E Growth Capital Gathering and Processing Segment 90.5 Transportation Segment - Contract Compression Services Segment 117.5 Total Growth Capital 208.0 Maintenance…
Balance Sheet Strength and Liquidity ( millions) 12/31/2005 12/31/2006 12/31/2007 3/31/2008 Capitalization Summary Total debt 429 665 482 1,091 Partner Capital 231 213 470 785 Total book capitalization 660 878 952 1,876…
Credit and Liquidity Regency has sufficient capacity under its revolver to fund its budgeted organic growth plans through 2008 Senior Notes Revolver Credit Summary X 357.5 million maturing on X Capacity: 900 million X Debt Rating…
Significant Sponsor and Management Ownership X GE EFS owns a 92% economic interest in Regencys General Partner and approximately 32% of Regencys Limited partner units LP holdings include 17.7 million subordinated units and 4.7 million…
Regency Approach to Guidance and Distributions X Annual guidance ranges are developed using current year budget as the starting point. Ranges are developed for: EBITDA Cash available for distribution Cash generated per LP unit X…
12 Month Distribution Growth ase Incre 10.5% 76
2008 Outlook and Goals X Evaluation of existing assets for optimization opportunities X Continued improvement in operating fundamentals X Significant growth in EBITDA and Cash Available for Distribution supported by integration of…
Financial Overview Questions & Answers
Appendices
2008 Guidance Reconciliation of forecasted twelve months ended December 31, 2008 net income to cash available for distribution and cash generated per LP unit ( in thousands) Low Estimate Mid Estimate High Estimate Forecasted net…
Non-GAAP Reconciliation Non-GAAP Adjusted Segment Margin to GAAP Net Income (Loss) Year to Date Dec. 31, ( in thousands) 2004 2005 2006 2007 Net income (loss) 21,490 (10,860) (7,244) (13,836) Add / (deduct): Operation and…
Non-GAAP Reconciliation Non-GAAP Adjusted EBITDA to GAAP Net Income (Loss) Year to Date Dec. 31, ( in thousands) 2004 2005 2006 2007 Net income (loss) 21,490 (10,860) (7,244) (13,836) Income tax expense - - - 931 Interest expense,…
Non-GAAP Reconciliation Non-GAAP Adjusted EBITDA to GAAP Net Income (Loss) Three Months Ended Mar. 31, ( in thousands) 2007 2008 Net income (loss) (1,295) 10,348 Income tax expense - 251 Interest expense, net 14,885 15,406…
Non-GAAP Reconciliation Non-GAAP Adjusted Segment Margin to GAAP Net Income (Loss) Three Months Ended Mar. 31, ( in thousands) 2007 2008 Net income (loss) (1,295) 10,348 Add: Operation and maintenance 10,925 28,845 General and…
Non-GAAP Reconciliation Reconciliation of Non-GAAP CAFD to Net Cash Flows Provided by Operating Activities and to Net Income (Loss) Three Months Ended Mar. 31, ( in thousands) 2007 2008 Net cash flows provided by operating activities…
Non-GAAP Reconciliation Non-GAAP EBITDA to GAAP Net Income (Loss) for Contract Compression Segment Year to Date Dec. 31, ( in thousands) 2005 2006 2007 2008E Net income (loss) 6,082 8,644 2,009 41,141 Add: Interest expense 5,090…
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