Attached files
| file | filename |
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| 8-K - FORM 8-K - PVR PARTNERS, L. P. | d331380d8k.htm |
| EX-99.1 - PRESS RELEASE - PVR PARTNERS, L. P. | d331380dex991.htm |
 April 10,
2012 April 10, 2012
Chief Gathering Acquisition
Exhibit 99.2 |
 Forward Looking Statements
2
This
presentation includes "forward-looking statements” within the meaning of
federal securities laws. All statements, other than statements of historical facts,
included in this presentation that address activities, events or developments that the
Partnership expects, believes, anticipates or targets will or may occur in the future
are forward-looking statements. These forward-looking statements rely on a
number of assumptions concerning future events and are subject to a number of
uncertainties, factors and risks, many of which are outside the Partnership's ability
to control or predict, which could cause results to differ materially from those
expected by management. Such risks and uncertainties include, but are not limited to,
regulatory, economic and market conditions, the timing and success of business development
efforts and other uncertainties. Additional information concerning these and
other factors can be found in our press releases and public periodic filings with the
Securities and Exchange Commission, including our Annual Report on Form 10-K for the
year ended December 31, 2011 and most recently filed Quarterly Reports on Form 10-Q.
Readers should not place undue reliance on forward-looking statements, which reflect
management’s views only as of the date hereof. We undertake no obligation to
revise or update any forward-looking statements, or to make any other
forward-looking statements, whether as a result of new information, future events
or otherwise.
Our pending acquisition of natural gas
gathering assets from Chief E&D Holdings LP may not be consummated. The closing of
the acquisition is subject to certain customary closing conditions, and the acquisition
may, in certain circumstances, be terminated.
Pending Chief Acquisition.
Forward Looking Statements. |
 Transforming Our Partnership
3
Stable Cash
Flow and
Conservative
Distribution
Coverage
Midstream
Operations with
Significant
Internal Growth
Opportunities
Strong
Balance
Sheet with
Ample
Liquidity
Critical Mass and
Substantial Strategic
Footprint in Prolific
Marcellus Shale
Transformative
Operational
Focus on
Midstream
Fee-Based
Contracts
Driving
Midstream
Growth
Well-Positioned to Capitalize on Momentum & Favorable Industry Trends
|
 Transaction Overview
PVR has entered into a definitive agreement to acquire 100% of Chief Gathering LLC
(“Chief”) from Chief E&D Holdings LP (“Chief Holdings”) for $1.0
billion Acquisition is anticipated to close during the 2
nd
quarter of 2012
Transaction
multiple,
adjusted
to
include
future
capex,
expected
to
be
approximately
6.0x -
6.5x 2014E EBITDA
Highlights of Chief’s assets include:
Natural gas gathering systems located in Lycoming, Wyoming, Susquehanna, Bradford and
Sullivan
counties
in
the
northeastern
Pennsylvania
region
of
the
prolific
Marcellus
Shale
–
Extremely
complementary
to
PVR’s
existing
Marcellus
footprint
Additional gathering system in Greene County in southwest Pennsylvania
Over 300,000 net acres dedicated to Chief under long-term arrangements with leading
producers
–
Chesapeake, Anadarko, Statoil, Mitsui, EXCO / British Gas, Exxon
/ XTO, Chief Oil & Gas,
Enerplus and Chevron
100% fee-based contracts with top producers in the region
750 MMcfd intrastate transmission pipeline under construction in
Wyoming County
–
275 MMcfd of average firm transportation for 15 years
4 |
 Transaction Financing Structure
Total purchase price of $1.0 billion
Chief Holdings to receive $200 million of equity consideration at closing in the form of
Special Common Units
Special Common Units will not receive distributions for the six quarters post-closing, at
which time they will convert to Common Units on a 1:1 basis
–
Special Common Units will be issued at a discount equal to six times the quarterly
distribution
to
be
declared
in
April
2012
(1)
Chief Holdings to receive $800 million of cash consideration at closing, for which PVR
has 100% committed financing in place
$400 million Class B Unit investment by investment entities affiliated with Riverstone Global
Energy
and
Power
Fund
V,
LP
(“Riverstone”),
representing
approximately
21.2
million
units
(2)
–
Substantially similar to PVR Common Units
–
Class B Units will receive Payment-in-Kind (“PIK”) distributions for the
eight quarters post- closing, at which time they will convert to Common Units on a
1:1 basis $180
million
Common
Unit
private
placement,
representing
approximately
8.8
million
units
(2)
$220 million bridge commitment provided by RBC Capital Markets
–
PVR expects to put permanent debt financing in place prior to closing
No additional equity issuance currently contemplated to fund acquisition
5
(1)
For reference, PVR declared a quarterly distribution of $0.51 per common unit with respect to
the fourth fiscal quarter of 2011.
(2)
Excludes potential impact of the distribution to be declared in April 2012. |
 Transaction Investment Highlights
The Chief acquisition transforms PVR from a historically coal-weighted Partnership
to a primarily midstream Partnership
Midstream operations anticipated to contribute ~75% of PVR’s cash flows by 2013E
Chief’s assets serve a diverse group of leading producers including:
Chesapeake, Anadarko, Statoil, Mitsui, EXCO / British Gas, Exxon
/ XTO, Chief Oil & Gas,
Enerplus and Chevron
Provides significant growth opportunities in counties that have some of the most
active development in North America
PVR will have over 372,000 acres under dedication in the Marcellus Shale
Chief provides substantial takeaway capacity to attractive markets via Transco and
Tennessee interstate pipelines connections
Growth of
Fee-Based Volumes
Expands PVR’s
Leading Position
in the Marcellus Shale
Total expected capital savings of $25+ million
Anticipated annual revenue enhancements of $25+ million
Defining PVR’s
Midstream Focus
Attractive Synergies
Acquisition increases fee-based contract volume mix for Midstream segment
Chief has 100% fee-based contracts
PVR Marcellus Shale volumes expected to be greater than 1.5 Bcfd
by the end of 2013E
Both
Chief
Holdings
and
Riverstone,
which
will
become
substantial
unitholders
of
PVR,
are
experienced
investors
with
deep
knowledge
of
the
energy
sector
Long-Term Gathering
Agreements with
Active Producers
Partnership with
Premier Energy Investors
6 |
 A
Transformational Acquisition The Chief acquisition converts PVR into an entity that is
primarily focused on midstream operations
Further strengthens PVR’s strategic position in the most prolific counties in the eastern
Marcellus
Diversifies PVR’s Marcellus customer base with producers who are expected to remain
active in the current price environment
PVR’s Granite Wash system has a significant backlog of growth opportunities and is
well- positioned to capture additional natural gas liquids (“NGL”)
production 7
Contribution by Segment
(1)
2013E
(2)
2011
Midstream
37%
Midstream
~75%
Coal
63%
Coal
~25%
The Growth of the Midstream Segment will Result in the Coal Segment
Comprising a Smaller Percentage of Total Cash Flow Over Time
(1)
Operating income plus depreciation, depletion and amortization by segment.
(2)
2013 estimate is the expected pro forma for the Chief acquisition and anticipated development.
|
 Transforming Our Midstream Business
Volumes by Contract
Throughput Volumes
0
200
400
600
800
1,000
1,200
1,400
1,600
2008
2009
2010
2011
2013E
>1,500
2011
~30%
Fee-based
2013E
(1)
~80%
Fee-based
Growing level of fee-based cash
flows help mitigate overall
commodity exposure as
Marcellus assets come on-line
Contract arrangements provide
further cash flow stability and
reduce risk profile
Chief has 100% fee-based
contracts
8
(1)
2013 estimate is the expected pro forma for the Chief acquisition and anticipated
development. (1) |
 NE
Marcellus Area Producer Activity 9
Pennsylvania
3 operated rigs
NE EURS: 4 –
11 Bcfe
Susquehanna: 125 Hz,
37 V wells producing
5 Hz rigs running
605 MMcf/d production
26,500 acres (majority in Wyoming County)
20total
wells
in
2011
-
2012
4 rigs running, 3 in NE PA (Lycoming
and Sullivan Counties)
Expect 200 MMcf/d by mid-2012
(100 MMcf/d gross in early 2012)
$86 million net budgeted for PA,
primarily NE
~$370 million budgeted to NE Marcellus
~180,000 net acres in NE PA, 21 gross
wells drilled in 4Q2011 (5 in Lycoming)
3 wells in Lycoming with IP rate of
10 MMcf/d / 23 MMcf/d / 8 MMcf/d
2012: ~13 rigs (5 operated), 200+ wells
260,000 net acres with 5,000+ locations
Focused on expanding infrastructure
8 Bcf EUR, $7 million well cost
186,893 net acres in NE PA
~$525 million budgeted for 2012
3
operated
rigs
(80
–
85
wells)
in
2012
45 gross wells in 2011 (18 in Bradford
County / 27 Susquehanna County)
~700,000 acres
12 rigs in NE PA
Top acreage holder
in Marcellus
Note: Map provided by Chief highlighting gathering systems and areas of dedication in the NE
Marcellus Area. Producer activity based on recent company filings and investor presentations. |
 Chief
Total Volume Summary System Volume by Receipt Point
System Volume by Producer
0
50,000
100,000
150,000
200,000
250,000
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Northern System
Southern System
0
50,000
100,000
150,000
200,000
250,000
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Chief Oil & Gas / Enerplus
EXCO / British Gas
XTO / ExxonMobil
Anadarko
Chesapeake
Chevron
All Gathering Areas: 2010 -
2012
(1) Wells drilled as of January 2012. Well locations based on well spacing (in acres) of
72 to 109 in Chief’s areas of operations. Within Chief’s Area of Dedication,
Producers have Over 2,300 Well Locations with only 56 Wells Drilled
(1)
10 |
 Pro
Forma Marcellus Footprint 11
PVR East Lycoming System
-
26.5 miles of additional pipe (less mileage than connecting
to
Chief’s
System,
and
anchored
by
Inflection
Energy)
and
one compressor station
Chief
Lycoming East
Chief
Lycoming West
Chief
Bradford System
PVR Citrus
System
Chief
Wyoming
Pipeline
(to Transco)
Chief Gathering
Susquehanna/Wyoming System
Tennessee
PVR Existing & Proposed Lycoming System
-
Saves 21 miles of pipe using PVR Lycoming System
Transco |
 Potential Commercial Synergies/Enhancements
12
Chief’s Lycoming system overlays PVR’s existing system
Saves over 21 miles of pipe in the West Lycoming area
Lycoming Phase III construction expected to begin in 2012
PVR East Lycoming –
Inflection system build out will provide
synergies
to
Chief’s
Lycoming
system;
the
majority
of
EXCO’s
volumes will now flow through PVR’s East Lycoming system
Area of Mutual Interest (“AMI”) for EXCO / XTO
Wyoming County Pipeline –
overlay with Citrus Energy
~100 MMcfd of shut-in gas that can be transported via Wyoming
Pipeline
Bradford County
Extension of PVR’s Lycoming system brings Tennessee line into play
PVR’s system may also provide Chief and Chesapeake access to
additional markets through access to the Transco line
Total Expected
Capital Savings
of $25+ million
and Anticipated
Annual Revenue
Enhancements
of $25+ million |
 Fiscal Year 2012 & 2013 Guidance
13
(1)
Reflects full year results from Chief in 2012. EBITDA and Capex between January 1, 2012 to the
closing date will be on the account of Chief Holdings, which will be subject to
transaction closing adjustments for PVR.
Chief Gathering Contribution
Pro Forma PVR
2012
(1)
2013
2014
2012
(1)
2013
($ millions)
Low
High
Low
High
Low
High
Low
High
Low
High
Segment EBITDA
Midstream EBITDA
70
$
70
$
180
$
200
$
220
$
240
$
200
$
210
$
350
$
390
$
Coal EBITDA
-
-
-
-
-
-
130
140
130
150
Total EBITDA
70
$
70
$
180
$
200
$
220
$
240
$
330
$
350
$
480
$
540
$
Midstream (% of Total EBITDA)
~ 60%
~ 73%
Coal (% of Total EBITDA)
~ 40%
~ 27%
Capital Expenditures
Growth Capex
280
$
310
$
90
$
120
$
140
$
170
$
480
$
560
$
200
$
230
$ |
 Reconciliation of EBITDA
14
(1)
EBITDA, or earnings before interest, tax and depreciation, depletion and amortization
("DD&A”) represents operating income plus DD&A, plus impairments. We believe this
presentation is commonly used by investors and professional research analysts in the
valuation, comparison, rating and investment recommendations of companies in the coal
and natural gas midstream industries. We use this information for comparative purposes within
the industry. EBITDA is not a measure of financial performance under GAAP and should
not be considered as a measure of liquidity or as an alternative to net income. Year
Ended Pro Forma Guidance Range
($ millions)
2011
2012
2013
Actual
Low
High
Low
High
Reconciliation of GAAP "Operating Income" to Non-GAAP "EBITDA"
Natural Gas Midstream Segment
Segment Operating Income (Loss)
38
$
(40)
$
(25)
$
210
$
235
$
Segment Depreciation, Depletion & Amortization
52
110
120
140
155
Segment Impairments
-
130
115
-
-
Segment EBITDA
(1)
90
$
200
$
210
$
350
$
390
$
Coal and Natural Resource Management Segment
Segment Operating Income
116
$
98
$
103
$
96
$
111
$
Segment Depreciation, Depletion & Amortization
37
32
37
34
39
Segment Impairments
-
-
-
-
-
Segment EBITDA
(1)
153
$
130
$
140
$
130
$
150
$
Consolidated
Operating Income
154
$
58
$
78
$
306
$
346
$
Depreciation, Depletion & Amortization
89
142
157
174
194
Impairments
-
130
115
-
-
EBITDA
(1)
243
$
330
$
350
$
480
$
540
$
|