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2014 Investor Day – Southcross Energy Partners, L.P.

Southcross Energy Partners, L.P. · Dec 8, 2014 · 78 slides

Investor presentation from the Shale Experts oil & gas presentation and slide database. Every page is imaged and its text indexed for search across operators, plays, basins and time.

Slides

  1. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 1
    2014 Investor Day December 8, 2014
  2. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 2
    Non-GAAP Financial Measures We believe that Adjusted EBITDA is a widely accepted financial indicator of our operational performance and our ability to incur and service debt, fund capital expenditures and make distributions. We define…
  3. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 3
    Presenters David Biegler Overview Chairman John Bonn Operations and Strategy President and Chief Executive Officer Financial Overview Michael Anderson and Outlook SVP and Chief Financial Officer 2014 Investor Day 3
  4. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 4
    Other Management Team Attendees Need David Ash Picture David Ash David Mueller VP, Corporate Development VP, Commercial & Operations Support David Lawrence Gerardo Rivera VP, Treasury & Investor Relations VP, Natural Gas…
  5. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 5
    President & Chief Executive Officer John E. Bonn 30+ Years Experience President & COO Southcross Energy President NiSource Midstream Services Owner, President Ranger Interests, Inc. VP, Commercial (Western Region) Enterprise Product…
  6. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 6
    Key Executive Management John Bonn David Biegler President & CEO Chairman Phil Gaylon David David Michael Corey Gerardo Mezey Gray Ishmael Ash Anderson Lothamer Rivera EVP VP VP VP Chief Business VP VP Pipeline Plant…
  7. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 7
    Attending Management Team Bios Years of Name / Title Previous Experience Experience Chairman and CEO Estrella Energy Chairman and Co-Founder Regency Gas Services David Biegler 45+ Vice Chairman, President and COO TXU Corp…
  8. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 8
    Overview David Biegler
  9. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 9
    The Southcross Advantage Transportation Lines / Storage Natural Gas End Users NGL End Users Wellhead Gathering and Compression Gas Processing and Y-Grade Fractionation Facilities NGL & Residue Marketing Treating Plants…
  10. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 10
    Premier Strategic Footprint with Scale to Succeed in the Eagle Ford South Texas Assets Conroe Holdings SXE Pipeline (miles) 655 3,030 Gas Processing Capacity (MMcf/d) - 685 Houston Fractionation Capacity (MBbls/d) 63 27 San…
  11. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 11
    History of Growth 2012 Monco Acquisition 20122014 2013 2013 Lancaster System Kenedy Line Lone Star Plant 2012 T2 Pipeline 2014 2013 McMullen Lateral Bee Line 2013 McMullen Gathering 2014 McMullen Lateral Acquisition…
  12. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 12
    Partnership Structure Financial sponsor ownership through various holding companies Southcross Holdings LP (Holdings) 100% Interest Southcross Energy 57% LP Interest Partners GP, LLC Affiliate Assets Southcross…
  13. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 13
    Strong Equity Sponsors with a History of Industry Success Fund Description Request for Proposal Summary Other Proposed Relevant Contract Investments and Deal Terms 15.1 billion assets under management BlackBrush Oil & Gas…
  14. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 14
    U.S. Energy Highlights The U.S. is the largest petroleum and natural gas-producing country in the world The U.S. is expected to produce more than 25 MMBOE in 2014, over 40% growth in 6 years United States Million Barrels per Day…
  15. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 15
    U.S. Energy Highlights U.S. Natural Gas Production Power Generation by Source Natural gas is surpassing coal as the main power generation source Source: EIA 2014 Investor Day 15
  16. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 16
    Eagle Ford Highlights The Eagle Ford is a major driver of U.S. oil and natural gas production growth U.S. Oil Production per Day U.S. Natural Gas Production per Day Source: EIA 2014 Investor Day 16
  17. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 17
    The Eagle Ford is One of the Most Active Plays in the U.S. Eagle Ford rig count is up 15 rigs since November 1, 2013 Active Rigs / Yearly Change Source: Bentek 2014 Investor Day 17
  18. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 18
    U.S. Gas Production Growth Led by the Texas Gulf Coast Region The Texas Gulf Coast Region is projected to account for an additional Request for Proposal Summary 4 Bcf/d U.S. production by 2019 Proposed Contract and Deal Terms Texas…
  19. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 19
    Texas Gulf Coast Production Expected to Exceed Processing Capacity Texas Gulf Coast Region Request is forecasted for Proposal Summary to need an additional 2.0 to 4.5Contract Proposed bcf/d ofand processing Deal Terms capacity by…
  20. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 20
    Eagle Ford Has Attractive Producer Economics U.S. Oil PlayRequest Break-Even Assessment at December 1, 2014 Forward for Proposal Summary Strip Prices Proposed Contract and Deal Terms /Bbl (WTI) Marginal Economics 12-Month…
  21. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 21
    Eagle Ford Growth Volumetric Breakeven Price at 10% IRR Most Eagle Ford drilling since 2011 would have been economic under todays lower oil prices Percentage of Wells by Operator with a Greater than 10% IRR Basin Total Note:…
  22. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 22
    Gas Producers More Resistant to Current Change in Commodity Landscape Gas well gas producers account for approximately 75% of Southcross processed volumes and have seen their revenue decline approximately 8% over the last month compared…
  23. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 23
    Operations and Strategy John Bonn
  24. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 24
    The Southcross Advantage Transportation Lines / Storage Natural Gas End Users NGL End Users Wellhead Gathering and Compression Gas Processing and Y-Grade Fractionation Facilities NGL & Residue Marketing Treating Plants…
  25. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 25
    Significant Scale of Pipeline and Processing Assets Woodsboro Processing Plant Conroe Processing Plant Year Built: Year Enhanced: Lone Star Processing Plant 2012 o 2012 Conroe o Capacity: Capacity: Year Built: 200 MMcf/d 50 MMcf/d…
  26. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 26
    Major Eagle Ford Midstream Company Southcross is the 5th largest Eagle Ford midstream company by processing capacity 2,000 1,500 MMcf/d 2,230 1,000 1,575 1,525 1,100 500 685 500 400 340 200 200 200 175 150 135…
  27. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 27
    Operating Stability through Interconnected System Rich Gas Flow Y-Grade Flow Lone Star Lone Star Woodsboro Bonnie View Woodsboro Gregory Gregory Robstown Corpus Christi Corpus Christi Holdings SXE…
  28. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 28
    Well Positioned for Current Eagle Ford Activity Permits 2012-2014 2014 Investor Day 28
  29. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 29
    Attractive Supply Sourcing Southcross footprint is in prolific gas production counties with significant drilling inventory Request for Proposal Summary Proposed Contract and Deal Terms Production (MMcf/d) Inventory Y/Y Eagle Ford…
  30. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 30
    Lengthy Gas Supply Inventory in Eagle Ford The major producing Eagle Ford counties have a weighted average inventory of 13 years Request for Proposal Summary Proposed Contract and Deal Terms 746 1,795 642 639 645 390 171 328 58 29…
  31. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 31
    Blue Chip Customer and Contract Base Minimum volume commitments, acreage dedications and captive volumes should provide a solid and growing base of gas supply(1) Other Captive 3% Volumes 14% Minimum Commodity Volume…
  32. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 32
    Rapid Growth of Southcross Processed Gas Volumes 38% compound annual growth rate in average daily processed gas volumes since 2011 500 450 400 29% Organic CAGR (excluding 350 acquisition) 300 250 200 150 100 Average…
  33. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 33
    Focus on Eagle Ford Region Karnes / De Witt Frio / La Salle Region Region Webb / Dimmit McMullen Region Region Corpus Christi Region 2014 Investor Day 33
  34. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 34
    Frio / La Salle Region Selected Producer Highlights 100 MMcf/d of current production Operating 4 rigs in La Salle Breakeven oil price of 50 per barrel 50% of 3Q14 capex spend in the Eagle Ford 12 MMcf/d of current production…
  35. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 35
    Webb / Dimmit Region Selected Producer Highlights 525 MMcf/d of current production Operating more than 1,400 wells, primarily focused on Eagle Ford 150 MMcf/d of current production More than 2,800 net drilling locations in the…
  36. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 36
    McMullen Region Selected Producer Highlights 51 MMcf/d of current production 82% of 2014 capex has been spent in the Eagle Ford Completed 10 wells in 3Q 14 Operating 1 rig in McMullen 15 MMcf/d of current production Operating 2…
  37. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 37
    Karnes / Dewitt Region Selected Producer Highlights 200 MMcf/d of current production Operating 15 rigs in Karnes 2.3 billion in capex has been spent in the Eagle Ford in 2014 18 MMcf/d of current production 13 active rigs in the…
  38. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 38
    Corpus Christi Region Selected Producer Highlights 33 MMcf/d of current production Operating 3 rigs in the area 27 MMcf/d of current production Operating 1 rig in San Patricio county Holdings SXE Note: Monthly…
  39. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 39
    The Southcross Advantage Transportation Lines / Storage Natural Gas End Users NGL End Users Wellhead Gathering and Compression Gas Processing and Y-Grade Fractionation Facilities NGL & Residue Marketing Treating Plants…
  40. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 40
    Full Spectrum of Services Creates Competitive and Economic Advantages Transportation Lines / Storage Natural Gas End Users NGL End Users Wellhead Gathering and Compression Gas Processing Plants Y-Grade Fractionation Facilities…
  41. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 41
    Fractionation Assets Create a Significant Service and Margin Advantage Fractionation increases the full value service offering enabling Southcross to achieve higher margins and be more competitive winning new gas supply Wellhead to…
  42. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 42
    The Gulf Coast is the Hub for NGL Production and End-Use The increasing shift Request forto the Gulf Proposal Coast for both production and Summary end-use Proposed markets Contract is fueling and Deal Terms a heavy demand for…
  43. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 43
    Growing LPG Export Market U.S. LPG Supply, Demand and Exports (MMBbls/d) Propane export terminal capacity is expected to 1.8 double in 2015 to nearly 840 MBbls/d 1.6 1.4 The anticipated 2015 propane export terminal 1.2 capacity…
  44. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 44
    Growing Exports of U.S. Natural Gas Overview Request for Proposal Summary Proposed U.S. Contract Natural Gas NetandExport Deal Terms Projection The United States is transitioning from being a net importer of 1.5 Tcf of natural…
  45. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 45
    Lower Gulf Coast Projects Fuel Growth Lyondell / Equistar Ethylene Capacity Expansion Lyondell to add 800 million lbs/year of ethylene capacity at Corpus Christi plant by 2016 20,000 Bbl/d of estimated increase in ethane demand by…
  46. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 46
    Southcross Delivers Gas to Attractive End-use Markets System provides interconnects to every interstate pipeline in the region and diverse market outlets; both are an advantage in attracting producer contracts Local markets provide…
  47. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 47
    Multiple NGL Markets in Corpus Christi Area Advantaged Southcross footprint in expanding Gulf Coast Fractionator petrochemical infrastructure and NGL markets Markets End-use NGL markets provide attractive pricing and Export…
  48. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 48
    Strategic End-use Market Position in Mississippi and Alabama Overview of Mississippi and Alabama Largest intrastate pipeline in each state MISSISSIPPI ALABAMA Provides consistent cash flow Fayette Periodic growth opportunities to…
  49. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 49
    The Southcross Advantage Transportation Lines / Storage Natural Gas End Users NGL End Users Wellhead Gathering and Compression Gas Processing and Y-Grade Fractionation Facilities NGL & Residue Marketing Treating Plants…
  50. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 50
    Significant Growth Achievable From Existing Capacity Significant available processing capacity presents cash flow growth opportunity 650 600 Adding 200 MMcf/d of 685 gas represents 36 MMcf/d 550 million to 55 million of 500…
  51. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 51
    Fully Utilize Existing Capacity Significant available fractionation capacity to accommodate a new processing plant 90 90 MBbls/d 80 Fractionation Capacity Available for Future Processing Plant 63 MBbls/d 70 60 Fractionation…
  52. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 52
    Develop Organic Growth Projects The Southcross business development team has been enhanced through the TexStar combination and possesses experienced and talented professionals Business Development team is focused on: o Full…
  53. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 53
    Updates on Recent Key Projects Valley Wells System 100 MMcf/d sour gas treating facility; treated gas Conroe flows into SXE rich gas system Webb Pipeline Dedicated acreage in Dimmit and La Salle counties producing sour gas Houston…
  54. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 54
    Growth Through Acquisitions Near-Term Near-term focus is on opportunities to enhance our position in the Eagle Ford Primarily targeting bolt-on acquisitions and other opportunities to enhance our capacity and volumes in South Texas…
  55. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 55
    Drop-Down Opportunities Overview Well in excess of 1 billion of asset value expected to be dropped down to SXE over time Timing and size of each drop-down based upon maturity of asset and capital market conditions Expect to drop…
  56. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 56
    Drop-Down Inventory Lancaster System 600 miles of sweet and sour gas gathering lines 28,000 hp of compression 100 MMcf/d sour gas treating facility; expandable to 300 MMcf/d 300,000 acres dedicated from 18 producers Valley…
  57. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 57
    Robstown Fractionator Overview Holdings is completing construction of the 63,000 Bbl/d Robstown Fractionator with an expected in-service date during Q1 2015 The fractionator will be connected via pipeline to over 1 Bcf/d of…
  58. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 58
    NGL Pipeline System Overview NGL Pipeline System Map 56 mile 70,000 Bbls/d 12 Y-grade pipeline extending from the Lone Star Plant to the Robstown Fractionator in Corpus Christi Lone Star 49 mile 12 pipeline extending from Pettus to…
  59. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 59
    Sour Gas Gathering and Treating Overview Gathering and Treating Systems Holdings currently owns two sour gas gathering systems and two sour gas treating plants Lancaster System Valley Wells System At Lancaster, Holdings owns and…
  60. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 60
    Lancaster Treating Facility and Pipelines Overview Lancaster Gathering and Treating System Holdings operates approximately 600 miles of sweet and sour gas gathering lines located in Frio, La Salle, Zavala, Dimmit, Atascosa and…
  61. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 61
    Valley Wells Treating Facility and Pipelines Valley Wells Treating Facility Asset Map Built to serve acreage located between Lancaster System and the rich gas system in Dimmit and La Salle Counties 25,000 horsepower of compression…
  62. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 62
    Employee and Customer Focus Southcross employees and customers are at the Our commercial success is centered around our heart of our operational success customers Creativity Safety Customer Reliability Integrity…
  63. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 63
    Growth Strategy SXE Holdings Fill Capacity Fully utilize processing capacity Fill fractionator with system in 12 to 18 months volumes and potential third party volumes; add sour gas to treating and gathering system Organic…
  64. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 64
    Financial Overview & Outlook Michael Anderson
  65. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 65
    Financial Strategy Generate Provide solid predictable financial foundation and growing cash flow Ensure strong Enable base of capital consistent for growth distribution through growth market cycles 2014…
  66. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 66
    Provide Solid Financial Foundation Attractive credit facilities with long-dated maturities Corporate family credit rating of B1 / B 450 million term loan B facility August 2021 maturity; borrowing rate of LIBOR plus 4.25% (1.00%…
  67. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 67
    Generate Predictable and Growing Cash Flow Attractive contract mix with large base of minimum volume commitment contracts and producer customers driven by attractive Eagle Ford economics Gross operating margin1 is becoming…
  68. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 68
    Low Commodity Price Sensitivity Largely fixed fee contracts with producers provide attractive mix of fixed fee margins with some commodity sensitive upside Commodity price exposure primarily from NGL equity barrels created through…
  69. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 69
    Enable Consistent Distribution Growth Expected near-term path to 1.0x distribution coverage Recent new minimum volume commitment contracts are expected to add 7 million to 8 million in full quarter Adjusted EBITDA Existing base of…
  70. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 70
    Expected Path to Distribution Coverage Quarterly Adjusted EBITDA Distributions Covered 19.0 Million 10.0 million in quarterly distributions 25.0 million common units / GP units 23.9 Million 14.9 million in quarterly distributions…
  71. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 71
    Holdings Profile Holdings Asset Composition 29.2 million SXE common / Class B Convertible PIK units Market value of approximately 440 million at 15 per unit 100% of SXE General Partner units Operating assets with estimated value…
  72. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 72
    Compelling Valuation Attractive Yield vs. Gathering / Processing Peers Potential Large Base of Distribution Potential Drop Growth Heavily Down Assets vs. Discounted in Current Adjusted Current Market EBITDA…
  73. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 73
    Attractive Yield Versus Drop-Down Peers Drop Down Drop Down Opportunities EBITDA / 2014E Company EBITDA 2014E EBITDA EBITDA LQA Yield Southcross (1) (2) SXE 150.0 + 56.0 2.7x 11.4% Valero 850.0 69.0 12.4x 2.0% Phillips 66…
  74. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 74
    Opportunity for Unit Price Appreciation Note: As of market close December 4, 2014; gold shading denotes peers with significant assets at GP level 2014 Investor Day 74
  75. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 75
    Summary David Biegler
  76. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 76
    The Southcross Advantage Transportation Lines / Storage Natural Gas End Users NGL End Users Wellhead Gathering and Compression Gas Processing and Y-Grade Fractionation Facilities NGL & Residue Marketing Treating Plants…
  77. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 77
    Appendix
  78. 2014 Investor Day – Southcross Energy Partners, L.P. – slide 78
    Reconciliation to Adjusted EBITDA (Dollars in Thousands) Three Months Ended, 9/30/2013 12/31/2013 3/31/2014 6/30/2014 9/30/2014 Reconciliation of net loss to Adjusted EBITDA: Net (loss) income (4,069) 674 (1,289) (2,961) (24,778)…

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