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| 8-K - FORM 8-K - VALERO ENERGY PARTNERS LP | d293973d8k.htm |
 Investor Presentation
November 2016 Exhibit 99.01 |
 2 Safe Harbor Statement This presentation contains forward-looking statements within the meaning of federal securities laws. These statements discuss future expectations, contain projections of results of operations or of financial condition or state other forward-looking information. You can identify forward-looking statements by words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “project,” “could,” “may,” “should,” “would,” “will” or other similar expressions that convey the uncertainty of future events or outcomes. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the Partnership’s control and are difficult to predict. These statements are often based upon various assumptions, many of which are based, in turn, upon further assumptions, including examination of historical operating trends made by the management of the Partnership. Although the Partnership believes that these assumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencies, which are difficult or impossible to predict and are beyond its control, the Partnership cannot give assurance that it will achieve or accomplish these expectations, beliefs or intentions. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements contained in the Partnership’s filings with the SEC, including the Partnership’s annual reports on Form 10-K and quarterly reports on Form 10-Q available on the Partnership’s website at www.valeroenergypartners.com. These risks could cause the Partnership’s actual results to differ materially from those contained in any forward-looking statement. |
 Who We
Are Sponsored by World’s Largest
Independent Refiner, VLO
• VLO is general partner and majority owner of Valero Energy Partners LP (NYSE: VLP) • $28.6 billion market capitalization (1) • VLP’s assets are integrated with VLO’s refining system Fee-Based Master Limited Partnership • Formed in 2013 by Valero Energy Corporation (NYSE: VLO) • Owner and operator of liquids-focused logistics assets • Revenues are 100% fee-based • $2.7 billion market capitalization (1) (1) As of November 10, 2016. VLP at $39.95 per unit and VLO at $62.96 per share. 3 |
 Current
Macro Environment Abundant global supply of crude oil
and natural gas Forecasted world GDP growth Product shortages in Latin America, Africa and Eastern Canada Demand response to lower product prices SUPPLY DEMAND North American logistics build out added efficiency and removed mid-continent bottlenecks 2 Macro environment themes represent industry consultant views. Positive outlook on fundamentals for Valero and refining should drive higher utilization of VLP assets.
1 3 4 5 4 |
 5 Our Strategic Vision Generate Stable, Predictable Cash Flows • Maintain safe and reliable operations • Avoid direct exposure to commodity price risks • Protect revenues with minimum volume commitments (MVCs) and 10 year agreements Maintain Top-Tier Growth Profile and Demonstrate Financial Discipline • Targeting annual distribution growth of 25% through 2017 and at least 20% for 2018 Financial flexibility to fund growth in distribution and distributable cash flow with 2.0x coverage ratio and 3.1x debt/EBITDA ratio (1) Approximately $1 billion of MLP-eligible EBITDA available at VLO for drop down transactions • Targeting organic growth opportunities and logistics deals that support VLO’s core business or that provide third party revenue • Maintain strong balance sheet and healthy distribution coverage • Target investment grade credit rating (1) Coverage and debt/EBITDA ratios as of nine months ended Sep 30, 2016. Debt/EBITDA ratio calculated in accordance with debt covenants.
See page 19 for non-GAAP disclosures. |
 6 Growth-Oriented Logistics MLP with Diversified Portfolio (2) , Integrated with VLO’s Refining Assets (1) Total consideration value. (2) Portfolio assets as of Sep 30, 2016. Texas Crude Systems McKee, Three Rivers, Wynnewood July 1, 2014 - $154 mm (1) Houston and St. Charles Terminals March 1, 2015 - $671 mm (1) Corpus Christi Terminals October 1, 2015 - $465 mm (1) IPO assets Drop downs McKee Terminal April 1, 2016 - $240 mm (1) 1 2 3 4 Meraux and Three Rivers Terminals September 1, 2016 - $325 mm (1) 5 |
 7 Meraux and Three Rivers Terminals (1) See page 19 for non-GAAP reconciliations. Meraux and Three Rivers Terminals (9-1-16) • 86 tanks with 6.2 million barrels of crude oil, intermediates, and products storage capacity
• Total transaction value of $325 million financed with $210 million revolver borrowings, $66 million cash, and $49 million equity issued to VLO
• Estimated first 12 months EBITDA contribution of $38.6 million (1) • Long term contract with MVC that protects 85% of expected revenues for 2016 |
 8 Long Term Agreements Provide Stable and Predictable Cash Flows • Transportation and terminal services agreements have 10 year initial terms and five year renewal terms (1) Approximately 85% of revenues supported by MVC’s • No direct commodity price exposure (1) Memphis refinery truck rack is exception, without renewal term. Terminals Revenue (Nine months ended September 30, 2016) 78% Pipelines 22% |
 9 Approximately $1 Billion of Estimated MLP Eligible EBITDA (2)(3) Inventory at VLO Racks, Terminals, and Storage (1) • Over 70 million barrels of active shell capacity for crude oil and products • 139 truck rack bays Rail • 5,250 purchased railcars, expected to serve long-term needs of ethanol, asphalt, aromatics, and other products Pipelines (1) • Over 1,200 miles of active pipelines • 440-mile Diamond Pipeline from Cushing to Memphis expected to start up in 4Q17 Marine (1) • 51 docks • Two Panamax class vessels (joint venture) Wholesale Fuels Marketing • Approximately 800 MBPD fuels distribution volume (1) Includes assets that have other joint venture or minority interests. (2) We are unable to provide a reconciliation of the above forward-looking estimate of non-GAAP EBITDA because certain information needed to
make a reasonable forward-looking estimate is
difficult to estimate and dependent on future events which may be uncertain or outside of our control, including with respect to unknown financing terms, acquisition timing, unanticipated acquisition costs, negotiation of acquisition terms, and other potential variables. Accordingly, a reconciliation is not available without unreasonable effort. (3) Estimated MLP eligible EBITDA inventory as of September 30, 2016. |
 10 • Grow VLP primarily through drop downs from VLO • Target organic growth opportunities and logistics deals strategic to VLO’s core business or that provide third party revenue • Grow annual distributions at target rates of 25% through 2017 and at least 20% for 2018 • Target investment grade credit rating Executing from a Position of Fundamental Strength Strategy * This is the minimum quarterly distribution (MQD). The actual distribution was smaller as it was prorated for the period of December 16 – 31. (1) As of September 30, 2016. • 81% increase in quarterly cash distribution over MQD • $1.9 billion of drop down transactions completed • Grew annualized EBITDA attributable to Partnership by more than 2,500% to $265 million (1) • 4.25 million common unit follow-on equity offering completed in November 2015 • ATM program established in September 2016 Accomplishments since IPO Distributable Cash Flow (millions) Distribution per LP Unit |
 11 Appendix Contents Topic Pages Organizational Structure 12 VLP’s Acquisitions 13 – 15 VLP’s Financial Flexibility for Funding Growth 16 Valero’s Refining and Ethanol Assets 17 Valero’s Investment in Diamond Pipeline 18 Non-GAAP Reconciliations 19 – 22 IR Contacts 23 |
 12 Organizational Structure (1) Valero Energy Corporation (NYSE: VLO) A wholly owned subsidiary of Valero Energy Corporation Common Units Valero Energy Partners GP LLC (our General Partner) General Partner Units Incentive Distribution Rights Valero Energy Partners LP (NYSE: VLP) (the Partnership) Valero Partners Operating Co. LLC Operating Subsidiaries 66.6% limited partner interest 100.0% ownership interest 100.0% ownership interest 2.0% general partner interest Public Unitholders Common Units 100.0% ownership
interest 31.4% public interest 100.0% ownership
interest (1) As of November 3, 2016. |
 13 IPO Assets and Texas Crude Systems Business Texas Crude Systems Business (7-1-14) • Pipelines, truck unloading sites, and storage supporting VLO’s McKee, Three Rivers, and Ardmore refineries McKee system includes 72 MBPD of throughput capacity and 240,000 barrels of storage for crude oil Three Rivers system includes 11 truck unloading sites and three 110 MBPD crude oil pipelines Wynnewood system includes 90 MBPD of throughput capacity and 180,000 barrels of storage for products • Assets contributing as expected IPO Assets (12-16-13) • Port Arthur systems Lucas crude with 1.9 million barrels of storage and two crude oil pipelines Port Arthur products with 2.0 million barrels of storage and three products pipelines • McKee products 33 % undivided interest in El Paso pipeline and terminal Allocable capacities of 21 MBPD for pipeline and 169,000 barrels for storage • Memphis systems Collierville crude with 1.3 million barrels storage and 210 MBPD pipeline Memphis products with two pipelines, refinery truck rack, and West Memphis terminal (1.1 million barrels storage) • Assets contributing as expected |
 14 Houston, St. Charles, and Corpus Christi Terminals Corpus Christi (10-1-15) • Crude oil, intermediates, and refined products terminaling services supporting VLO’s Corpus Christi East and West refineries 10.1 million barrels of storage on Corpus Christi ship channel • Assets contributing as expected Houston and St. Charles (3-1-15) • Crude oil, intermediates, and refined products terminaling services supporting VLO’s Houston and St. Charles refineries 3.6 million barrels of storage on Houston ship channel 10 million barrels of storage on Mississippi River • Assets contributing as expected |
 15 McKee Terminal McKee Terminal (4-1-16) • 75 tanks with 4.4 million barrels of crude oil, intermediates, and products storage capacity
• Total transaction value of $240 million financed with $139 million revolver borrowings, $65 million cash, and $36 million equity issued to VLO
• Assets contributing as expected |
 16 • Retained distributable cash flow (DCF) Strong coverage allows for distribution growth without acquisitions through 2017
Acquisitions to-date funded with approximately $135 MM of internally generated
cash •
Sponsor support $555 MM of subordinated loans $255 MM of equity issued • Debt and equity markets ATM program, $343 MM of capacity remains Private placement, as well as public offerings, could be considered VLP’s Strong Financial Position Provides Flexibility for Growth Flexible Funding Options for Growth |
 17 Valero’s Refining and Ethanol Assets |
 18 Valero’s Investment in Diamond Pipeline Diamond Pipeline • 440 miles of 20-inch pipe (200 MBPD capacity) connecting Memphis to Cushing
• Received permits required to begin construction; project is on track for completion in 4Q17
• Provides supply flexibility and ability to improve crude oil blend quality • Approximately $925 MM total project cost VLO exercised option in Dec 2015 to acquire 50% interest; over $200 MM spent through Sep 30, 2016
VLP expected to generate 12% pre-tax IRR if VLO’s interest in pipeline is
acquired |
 19 Non-GAAP Disclosures: EBITDA, Distributable Cash Flow, Distribution Coverage, and Debt-to-EBITDA VLP defines EBITDA as net income before income tax expense, interest expense, and depreciation expense. VLP
defines distributable cash flow as EBITDA less (i) EBITDA attributable to its
Predecessor and cash payments during the period for interest, income
taxes, and maintenance capital expenditures; plus (ii) adjustments related to minimum throughput commitments, capital projects prefunded by Valero, and certain other items. VLP defines coverage ratio as
the ratio of distributable cash flow to the total distribution declared.
EBITDA, distributable cash flow, and coverage ratio are supplemental financial measures
that are not defined under GAAP. They may be used by management and
external users of our financial statements, such as industry analysts,
investors, lenders, and rating agencies, to:
• describe VLP’s expectation of forecasted earnings; • assess VLP’s operating performance as compared to other publicly traded limited partnerships in the transportation
and logistics industry, without regard to historical cost basis or, in the case of
EBITDA, financing methods; •
assess the ability of VLP’s business to generate sufficient cash to support its
decision to make distributions to its unitholders;
• assess VLP’s ability to incur and service debt and fund capital expenditures; and
• assess the viability of acquisitions and other capital expenditure projects and the returns on investment of various
investment opportunities.
VLP believes that the presentation of EBITDA provides useful information to investors
in assessing its financial condition and results of operations. The GAAP
measures most directly comparable to EBITDA are net income and net cash
provided by operating activities. EBITDA should not be considered an alternative to net
income or net cash provided by operating activities presented in
accordance with GAAP. EBITDA has important limitations as an analytical tool because it excludes some, but not all, items that affect net income or net cash provided by operating activities. EBITDA should not
be considered in isolation or as a substitute for analysis of our results as reported
under GAAP. Additionally, because EBITDA may be defined differently by
other companies in our industry, VLP’s definition of EBITDA may not be
comparable to similarly titled measures of other companies, thereby diminishing its
utility. |
 20 Non-GAAP Disclosures: EBITDA, Distributable Cash Flow, Distribution Coverage, and Debt-to-EBITDA VALERO ENERGY PARTNERS LP RECONCILIATION OF FORECASTED NET INCOME UNDER GAAP TO EBITDA (Unaudited, in Thousands) Full Year Beginning April 1, 2016 McKee Terminal Services Business Full Year Beginning September 1, 2016 Meraux and Three Rivers Terminal Services Business Forecasted net income $ 20,300 $ 27,200 Add: Forecasted depreciation expense 3,400 2,600 Add: Forecasted interest expense 4,500 8,600 Add: Forecasted income tax expense 100 200 Forecasted EBITDA $ 28,300 $ 38,600 VLP uses distributable cash flow to measure whether it has generated from its operations, or “earned,” an amount of
cash sufficient to support the payment of the minimum quarterly distributions.
VLP’s partnership agreement contains the concept of “operating
surplus” to determine whether VLP’s operations are generating sufficient cash to support the distributions that it is paying, as opposed to returning capital to VLP’s partners. Because operating surplus is a
cumulative concept (measured from VLP’s IPO date and compared to cumulative
distributions from the IPO date), VLP uses the term distributable cash
flow to approximate operating surplus on a quarterly or annual, rather than a cumulative, basis. As a result, distributable cash flow is not necessarily indicative of the actual cash VLP has on hand to distribute or
that it is required to distribute.
VLP uses the distribution coverage ratio to reflect the relationship between its
distributable cash flow and the total distribution declared.
The debt-to-EBITDA ratio as defined in accordance with VLP’s
debt covenants is the total debt and capital lease obligations divided by
adjusted pro forma EBITDA for the trailing 12 month period. VLP believes that the presentation of net debt-to-EBITDA provides useful information to investors to assess its ability to incur and service debt.
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 21 Non-GAAP Disclosures: EBITDA, Distributable Cash Flow, Distribution Coverage, and Debt-to-EBITDA VALERO ENERGY PARTNERS LP RECONCILIATION OF NON-GAAP MEASURES TO MOST COMPARABLE AMOUNTS REPORTED UNDER U.S. GAAP
(Unaudited, in Thousands, Except Ratio Amount) Reconciliation of net income to EBITDA and distributable cash flow: Nine Months Ended September 30, 2016 Net income $ 129,032 Plus: Depreciation expense 34,652 Plus: Interest and debt expense, net of capitalized interest 9,582 Plus: Income tax expense 780 EBITDA 174,046 Less: EBITDA attributable to Predecessor (11,492) EBITDA attributable to Partnership 185,538 Plus: Adjustments related to minimum throughput commitments 1,100 Less: Cash interest paid 8,688 Less: Income taxes paid 496 Less: Maintenance capital expenditures 5,759 Distributable cash flow $ 171,695 Total distribution declared $ 86,695 Distribution coverage ratio: distributable cash flow divided by total distribution declared 2.0x |
 22 Non-GAAP Disclosures: EBITDA, Distributable Cash Flow, Distribution Coverage, and Debt-to-EBITDA VALERO ENERGY PARTNERS LP RECONCILIATION OF NON-GAAP MEASURES TO MOST COMPARABLE AMOUNTS REPORTED UNDER U.S. GAAP
(Unaudited, in Thousands, Except Ratio Amount) September 30, 2016 Numerator: Total debt and capital lease obligations $ 894,057 Nine Months Ended September 30, 2015 Year Ended December 31, 2015 Nine Months Ended September 30, 2016 Denominator: Net income $ 34,517 $ 71,312 $ 129,032 Plus: Depreciation expense 34,702 45,678 34,652 Plus: Interest and debt expense, net of capitalized interest 3,365 6,113 9,582 Plus: Income tax expense (benefit) (62) 251 780 EBITDA 72,522 123,354 174,046 Less: EBITDA attributable to Predecessor (41,605) (47,652) (11,492) EBITDA attributable to Partnership $ 114,127 $ 171,006 $ 185,538 12 Months Ended September 30, 2016 EBITDA attributable to Partnership for 12 months ended Sep 30, 2016: Sum of EBITDA for nine months ended Sep 30, 2016 and year ended December 31, 2015 less EBITDA for nine months ended Sep 30, 2015 $ 242,417 Pro forma EBITDA adjustments: Plus: Apr 1, 2015 – McKee Terminal Services ($28,300 x 6/12 months) 14,150 Plus: Sep 1, 2015 – Meraux and Three Rivers Terminal Services ($38,600 x 11/12 months) 35,383 Adjusted pro forma EBITDA $ 291,950 Debt-to-EBITDA ratio ($894,057/ $291,950): 3.1 |
 23 IR Contacts For more information, please contact: John Locke Vice President, Investor Relations 210.345.3077 john.locke@valero.com Karen Ngo Manager, Investor Relations 210.345.4574 karen.ngo@valero.com |