Agenda Officer Topic Duration STEVE SPAULDING STRATEGY OVERVIEW 20 25 min PRESIDENT & CHIEF EXECUTIVE OFFICER MICHAEL LINDSAY CORE TERMINALS POSITION 20 25 min SVP, OPERATIONS & ENGINEERING BREAK 15 min STEVE SPAULDING…
STRATEGY OVERVIEW Steve Spaulding President & Chief Executive Officer Strategy Overview Core Terminals Position Complementing the Core Financial Outlook Balance Sheet
Key Takeaways Dramatic Transformation of the Business High-Quality Oil Infrastructure Business Visibility to Growth Near-Term Platform to Target 10% Growth Longer-Term Strong Financial Position 5
Context for Gibsons Strategy Building a business positioned to win in any oil price environment Plan for a Strategy must position the business to succeed at US45/bbl to US55/bbl WTI and Flat Oil Price withstand potential future…
Focused Strategy Premier oil infrastructure assets to underpin DCF per share and dividend growth Leverage Terminals Position Complementary Growth Terminals expected to represent Basin strategy targeting oil sands, 75% of EBITDA by…
Oil Infrastructure Focused On Growth Basins Existing footprint provides exposure to the key North American growth basins Canadian Oil Production by Basin (million barrels per day) OILSANDS 4.5 MONTNEY 3.5 EDMONTON TERMINAL…
Businesses Divested or In Process Actively advancing two asset sale processes currently in the market Second largest industrial propane distribution business in Canada with three-quarters of revenue from oil & gas and commercial…
Businesses to be Divested Committed to divesting non-core businesses in a timely manner Require access to trucks to transport oil to terminals, but ownership deemed not strategic Sulphur, LPG and other hauling represents…
Aligning Moose Jaw Facility to Strategy Seek to improve margins, quality of revenue and reduce cost More of a splitter than refinery; utilizes low-cost heavy oil feedstock to produce specialty market refined products Will initiate a…
Incremental Growth Identified opportunities within existing asset base for additional growth Stronger oil price expected to drive incremental oil sands development and corresponding Sanction demand for operational tankage Additional…
Potential Growth Trajectory Target securing additional growth opportunities to reach 10% annual growth Line of sight to grow continuing business at or above target 10% growth rate through 2019 based on secured growth under…
Complete Transformation of Business Repositioned from diverse mix of business lines to focused energy infrastructure 2014 2017E 2019E PF 25% 60% 75% Segment T&P EBITDA From T&P and Infrastructure 35% 75% 85% Infra. 15% 50%…
Strong Financial Position Line of sight to reaching target leverage with room for future dividend increases Expect to fully fund growth capital program using proceeds from dispositions through the end of 2019, providing the ability to…
Key Takeaways Premier oil infrastructure assets to underpin DCF per share and dividend growth Infrastructure and terminals businesses expected to represent 85% and 75% of EBITDA, Oil respectively, when divestitures are complete…
CORE TERMINALS POSITION Michael Lindsay SVP, Operations & Engineering Strategy Overview Core Terminals Position Complementing the Core Financial Outlook Balance Sheet
Oil Sands Project Economics Significant number of projects economic…
Western Canadian Oil Production Outlook Expect production to increase 1 mmbbl/d over next decade at current prices Oil sands will continue to drive growth in Western Canadian production, with conventional production remaining flat as…
Western Canadian Oil Egress Outlook Egress to remain tight until Line 3 Replacement and TMX or KXL in-service Effectively no spare capacity in Canadian pipeline network until Line 3 Replacement in-service, likely widening heavy oil…
Crude Oil Flows Within Alberta Continue to expect that incremental oil sands production will flow to Hardisty Ample egress from the oil sands following a significant build out of regional pipeline capacity over past few years…
Hardisty Competitive Position Gibson has built 100% of new third-party tankage placed into service this decade Project Tankage In Service Builder Hardisty Top of Hill 3 Tanks Est. Q3 2019 Hardisty West Terminal 2 Tanks 2016…
Offer Producers the Most Flexibility at Hardisty Strategically advantaged due to most inbound and outbound connections Flexibility offered by existing connectivity to both inbound and outbound pipelines a key differentiator in…
Hardisty Operational Track Record Gibson has a track record of building tankage on time and budget Project Tankage In Service Cost On or ahead Expect on or Hardisty Top of Hill 3 Tanks of schedule below budget Hardisty West…
Additional Competitive Advantages at Hardisty Land position, cost competitiveness and rail access provide moat at Hardisty Located at the heart of the Hardisty footprint Room to build up to 5 million barrels of additional tankage…
Hardisty Position Irreplaceable Replicating Gibsons competitive position not possible and cost prohibitive ATHABASCA COLD LAKE KEYSTONE TERMINAL HARDISTY WEST HARDISTY EAST Gibson connection to 120 kbbl/d rail facility HARDISTY…
Edmonton Terminal Recently expanded to 1.7 mm barrels, with footprint to triple capacity Edmonton Terminal benefits from advantageous positioning located next to both the CN and CP railway lines and near both major egress pipelines…
Recent Tankage Case Study Recent announcements highlight ability to secure growth and execute Edmonton Contract Tankage 2 x 400 kbbl tanks and associated Asset infrastructure Integrated oil sands producer Customer & Need Enhance…
Recent Tankage Case Study Recent announcements highlight ability to secure growth and execute Hardisty Top of the Hill 2 x 300, 1 x 500 kbbl tanks and Asset associated infrastructure Oil sands-focused producer Customer & Need…
Future Tankage Demand Expect to sanction at least 1 to 2 tanks per year with potential upside Expect majority of new tankage in Western Canada will be built at Hardisty Base growth to be driven by oil sands, with existing egress…
Cash Flow Quality Comparison Terminals cash flow quality among the best in the energy infrastructure sector Long-Haul P/L Terminals Comparison Growth Potential Both required to support future WCSB growth Terminals feature 10 20…
Key Takeaways Dominant terminals position offers long-term growth and quality cash flows Oil Sands Expect continued sanction of incremental oil sands projects as improved capital efficiency Production to coupled with a rebound in oil…
COMPLEMENTING THE CORE Steve Spaulding President & Chief Executive Officer Strategy Overview Core Terminals Position Complementing the Core Financial Outlook Balance Sheet
Defining Complementary to the Core Will retain and grow the businesses that augment or leverage the core Drives activity and / or sources volumes for terminals or gathering systems Connected to Core Provides service to terminals or…
Canadian Strategy Overview Business to complement or leverage the terminals position PIPELINES HARDISTY & EDMONTON TERMINALS (CORE BUSINESS) (CORE BUSINESS) PRODUCER PRODUCER SERVICES STORAGE OPTIMIZATION & BLENDING…
Terminal Growth Beyond Tanks Ancillary terminal infrastructure remains a meaningful growth opportunity Pipeline Connections Facility Optimization Add inbound/outbound connections Working with customers to develop to provide…
Canadian Pipelines Existing infrastructure footprint outside of terminals R10 R5 R1W4 Pipeline Overview T45 HARDISTY TERMINAL 400 km of 100% owned and operated pipelines drive volume to the Hardisty Terminal Decades of experience…
Opportunities at Moose Jaw Facility Identified several value-enhancing opportunities to pursue near term Drive Further Visibility to additional opportunities to reduce both operating and capital costs Cost Reductions Require no…
Refocusing U.S. Truck Transportation Maintain modest trucking capability to drive infrastructure growth Current service areas a reflection of supporting the expansion of a previous customer into various basins Expect to have…
Permian Positioning Injection stations and gathering pipeline located at the heart of the Permian play Permian Injection Station Position Pipeline Network Connectivity Plains All American Sunoco / ETP Centurion PYOTE OIL…
SCOOP / STACK Positioning Injection stations within 50 miles of all SCOOP / STACK acreage Oklahoma Injection Station Position U.S. INJECTION STATIONS STACK Breakeven at Pipeline Network Connectivity WTI 35-50/bbl Plains All…
U.S. Growth Near Term Plan Focused on restoring business to 10 15 million EBITDA Viewed as critical component to success in U.S. U.S. experience and relationships, not Canadian relocation or Targeting 1 Hire U.S. Team coverage Q2…
Creating a U.S. Platform Translate platform into smaller-scale infrastructure opportunities Restore Business to 2015 Levels of 10mm - 15mm EBITDA Evaluating opportunity to re-activate 40 mile pipeline in heart Restart of Delaware…
Key Takeaways Targeting 50 to 100 million of annual capital investment beyond tankage Key criteria is that the opportunity complements or leverages core infrastructure assets and Disciplined in increases our presence in our focus…
FINANCIAL OUTLOOK Sean Brown Chief Financial Officer Strategy Overview Core Terminals Position Complementing the Core Financial Outlook Balance Sheet
Segment EBITDA Overview EBITDA growth to be driven by high quality infrastructure cash flows Segment EBITDA at 10% Target Growth Rate (C millions) 400 300 Target 10% distributable cash flow per share growth would require…
Historical Growth Capital Allocation Shifted to allocating nearly all capital towards infrastructure projects Since 2011, have continued to allocate a greater proportion of capital to infrastructure each year Going forward, expect…
Summary of Planned Divestitures Disciplined process targeting 275 375 million in proceeds by mid 2019 2018 2019 Segment Q1 Q2 Q3 Q4 Q1 Q2 Transaction Closed Q1 2017 Industrial Propane U.S. Environmental Services NGL…
Business Composition Significant transformation towards infrastructure Infrastructure expected to generate 255 - 275 million in Segment Profit in 2018E, with terminals representing approximately 80% - 85% of infrastructure In H2…
Contract Structure Composition Approaching 90% of cash flows from high quality contract structures Significant shift in quality of cash flow in last 3 5 years, with high-quality contract structures currently representing about…
Contract Quality Attractive contract quality relative to peer group Estimated Peer Group Proportion Take-or-Pay & Fee-for-Service Peer A Peer B Peer C GEI Peer D Peer E Peer F 52 Peer numbers per BMO Capital Markets and include…
Quality of Counterparties Investment Grade counterparties comprise 90% of terminals revenues 2017E Terminals Counterparty Credit Profile (IG Terminal Revenues % of Total) AA- to AA+ 5% Approximately 90% of current revenues…
Key Takeaways Repositioned as growth-focused oil infrastructure business Significant Infrastructure expected to generate 255 - 275 million in Segment Profit in 2018E, with Transformation terminals representing approximately 80% - 85%…
BALANCE SHEET Sean Brown Chief Financial Officer Strategy Overview Core Terminals Position Complementing the Core Financial Outlook Balance Sheet
Governing Principles Committed to maintaining a strong financial position by managing to key targets Long-Term Governing Financial Principles High Quality 80% segment profit from take-or-pay and high-quality fee-for-service Cash…
Capital Funding Approach Sale proceeds to fully fund growth through 2019; balanced funding thereafter Strategic direction to sell non-core business provides sufficient proceeds to fund Disposition infrastructure growth capital…
Sources and Uses Sale proceeds to fully fund growth through 2019; balanced funding thereafter Anticipate being fully funded through 2019, with growth capital funded by sale proceeds and dividend funded from cash flow from the…
Balance Sheet Outlook Strong balance sheet with line of sight to reaching leverage targets Disposition proceeds anticipated to fully fund growth through 2019, with balanced growth funding thereafter expected to result in absolute debt…
Peer Leverage Comparison Leverage currently at the lower end of Canadian energy infrastructure peers Currently employ one of the lowest leverage levels amongst Canadian energy infrastructure peers while maintaining some of the highest…
Payout Ratio and Fixed Charge Coverage Achieved goal of covering fixed charges with infrastructure cash flows Infrastructure cash flows already covering fixed charge and underpin current payout levels Expect payout ratio to fall below…
Key Takeaways Committed to maintaining a strong financial position by managing to key targets Quality cash flows by targeting over 80% segment profit from high-quality contract Approach structures and over 80% from Investment Grade…
CONCLUDING COMMENTS Steve Spaulding President & Chief Executive Officer
Key Takeaways Dramatic Transformation of the Business High-Quality Oil Infrastructure Business Visibility to Growth Near-Term Platform to Target 10% Growth Longer-Term Strong Financial Position 64
Q&A
GIBSON ENERGY 2018 INVESTOR DAY APPENDIX
Board of Directors Complementary, deep and specialized experience Director Description JAMES ESTEY Chairman of the Board and Chair of the Corporate Governance, Compensation and Nomination 7 YEARS Committee Mr. Estey has more than…
Potential Gibson Growth Opportunity Expect to sanction 1 to 2 tanks per year on run rate basis, with potential upside Potential Gibson Investment Opportunity At US55/bbl 10 Days Storage 8 Days Storage 6 Days Storage Total…
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