fourth quarter and full year 2017 results · 2017 proforma asset portfolio 1.4 million boed wholly...
TRANSCRIPT
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MARCH 22, 2018
Fourth Quarter and Full Year 2017 Results
Brian SullivanVice President, Investor Relations
4Q & FULL YEAR 2017 RESULTS
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FORWARD‐LOOKING STATEMENTS
This presentation includes various “forward looking statements” within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. All statements,other than statements of historical fact, regarding BP Midstream Partners LP’s (“BP Midstream,” “we,” “us” or “our”) strategy, future operations, financial position, estimated revenues and losses,projected costs, prospects, plans and objectives of management are forward‐looking statements. These statements often include the words “could,” “believe,” “anticipate,” “intend,” “estimate,”“expect,” “project” and similar expressions are intended to identify forward‐looking statements, although not all forward‐looking statements contain such identifying words. These forward‐lookingstatements are based on BP Midstream's current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events.In accordance with “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, these statements are accompanied by cautionary language identifying important factors, thoughnot necessarily all such factors, which could cause future outcomes to differ materially from those set forth in forward‐looking statements. In particular, expressed or implied statements concerningfuture actions, future drop downs, volumes, capital requirements, conditions or events, future impact of prior acquisitions, future operating results or the ability to generate sales, the potentialexposure of BP Midstream to market risks, and statements relating to expected Adjusted EBITDA, future growth, income, cash flow and the amount of distributions are forward‐looking statements.Forward‐looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Future actions, conditions or events and future results of operations may differmaterially from those expressed in these forward‐looking statements. Forward‐looking statements speak only as of the date of this presentation, and we disclaim any obligation to update suchstatements for any reason, except as required by law. All forward‐looking statements contained in this presentation are expressly qualified in their entirety by the cautionary statements containedor referred to in this paragraph. Many of the factors that will determine these results are beyond our ability to control or predict. These factors include the risk factors described in BP Midstream’sannual report for the year ended December 31, 2017 and filed with the Securities and Exchange Commission (the “SEC”) on March 22, 2018, as updated by our subsequent filings with the SEC. If anyof those risks occur, it could cause our actual results to differ materially from those contained in any forward‐looking statement. Because of these risks and uncertainties, you should not place unduereliance on any forward‐looking statement.
This presentation has been prepared by BP Midstream and includes market data and other statistical information from sources believed by BP Midstream to be reliable, including independentindustry publications, government publications or other published independent sources. Some data are also based on BP Midstream’s good faith estimates, which are derived from its review ofinternal sources as well as the independent sources described above. Although BP Midstream believes these sources are reliable, it has not independently verified the information and cannotguarantee its accuracy and completeness.
NON‐GAAP FINANCIAL MEASURES
BP Midstream has included the non‐GAAP financial measures Adjusted EBITDA and cash available for distribution based on information in its financial statements. Adjusted EBITDA and cashavailable for distribution are supplemental financial measures that management and external users of BP Midstream’s financial statements, such as industry analysts, investors, lenders and ratingagencies may use, to assess: (i) BP Midstream’s operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basisor, in the case of Adjusted EBITDA, financing methods; (ii) the ability of BP Midstream’s business to generate sufficient cash to support its decision to make distributions to its unitholders; (iii) BPMidstream’s ability to incur and service debt and fund capital expenditures; and (iv) the viability of acquisitions and other capital expenditure projects and the returns on investment of variousinvestment opportunities.
BP Midstream believes that the presentation of Adjusted EBITDA and cash available for distribution provides useful information to management and investors in assessing its financial condition andresults of operations. The GAAP measures most directly comparable to Adjusted EBITDA and cash available for distribution are net income and net cash provided by operating activities. AdjustedEBITDA and cash available for distribution should not be considered as an alternative to GAAP net income or net cash provided by operating activities, respectively. Adjusted EBITDA and cashavailable for distribution have important limitations as analytical tools because they exclude some but not all items that affect net income and net cash provided by operating activities. AdjustedEBITDA or cash available for distribution should not be considered in isolation or as a substitute for analysis of results as reported under GAAP. Additionally, because Adjusted EBITDA and cashavailable for distribution may be defined differently by other companies in the industry, BP Midstream’s definition of Adjusted EBITDA and cash available for distribution may not be comparable tosimilarly titled measures of other companies, thereby diminishing its utility. For reconciliations of Adjusted EBITDA and cash available for distribution to their most directly comparable GAAPmeasures, see “Supplementary Information”.
References to “proforma asset portfolio” mean our asset portfolio immediately following our initial public offering on October 30, 2017, presented if we owned such assets for full years 2016 and2017. BP Midstream presents such data on a proforma basis for illustrative purposes only. The presentation of data on a proforma basis does not purport to project (and should not be read asprojecting) our future performance on a 12‐month basis or in any other future time period.
Cautionary Statement
BPMP 4Q & FULL YEAR 2017 RESULTS
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Rip ZinsmeisterChief Executive Officer
4Q & FULL YEAR 2017 RESULTS
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Agenda
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Overview
Highlights & operational results
Financial results & guidance
Asset dropdowns
Q&A
BPMP 4Q & FULL YEAR 2017 RESULTS
Overview of BP Midstream Partners
Our Key Strengths
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What we do
Asset portfolio
Conservative financial strategy
Deliver consistent, top-tier distribution growth
Strong relationship with BP
Strategically located, highly integrated asset portfolio
Stable cash flows
Financial flexibility
Significant management experience
BPMP 4Q & FULL YEAR 2017 RESULTS
Our sponsor - BP
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Integrated energy business
Extensive portfolio of midstream assets
Well capitalized, investment grade credit rating
Maintains a significant interest in BPMP
Monetize midstream assets while retaining control
Strategic relationship
with BP
BPMP 4Q & FULL YEAR 2017 RESULTS
Differentiated investment proposition
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Stability
Growth
Throughput & deficiency agreements• Minimum volume
commitmentsStrategically located, highly integrated assetsNo material reduction due to FERC order
Organic growth• Without capital spend by
the partnershipInorganic growth –• Significant inventory of
dropdown candidates remaining at sponsor
7 year, Right of First Offer, on BP Pipeline’s asset portfolio1
Deliver unit holders
consistent, top-tier
distribution growth
BPMP 4Q & FULL YEAR 2017 RESULTS
(1) As owned by BP Pipelines at the closing of the initial public offering of BPMP.
2017 Highlights
INITIAL PUBLIC OFFERING
47.8millioncommon units
THROUGHPUT GROWTH
+15%gross throughput annual growth
of proforma asset portfolio
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PRORATED DISTRIBUTION
$0.18cents1
quarterly distribution per common unit
(1) Amount has been rounded. Actual distribution declared was $0.179755 per unit.
BPMP 4Q & FULL YEAR 2017 RESULTS
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500
1,000
1,500
2016 2017
Endymion Proteus Cleopatra Caesar
Mars Diamondback River Rouge BP2
Performance indicators
Gross Throughput1,2
kboepd
(1) Cleopatra gas volumes are converted to kboepd by dividing MMscf/d by 5.8(2) Assumes proforma asset portfolio for full years 2016 and 2017(3) Based on reported revenues from transportation and allowance oil divided by delivered barrels over the same time period
Average Revenue per Barrel1,2,3
$ per boe
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+15%
BPMP 4Q & FULL YEAR 2017 RESULTS
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0.50
1.00
1.50
TotalWholly Owned
Assets
Mars Mardi GrasJoint Ventures
2016 2017
Craig CoburnChief Financial Officer
4Q & FULL YEAR 2017 RESULTS
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Fourth quarter and full year 2017 results
12BPMP 4Q & FULL YEAR 2017 RESULTS
$million 4Q16 3Q17 4Q17 2016 2017
Revenue 21.5 27.0 27.6 103.0 108.2
Costs and expenses 8.4 8.5 10.7 28.2 31.7
Operating income 13.1 18.5 16.9 74.8 76.5
Income from equity method investments - - 17.9 - 17.9
Other income 0.2 0.4 0.1 0.5 -
Interest expense, net - - 0.1 - 0.1
Income tax expense 5.2 7.4 2.0 29.4 25.3
Net income 8.1 11.5 32.8 45.9 69.0
Less: Predecessor net income prior to the IPO on October 30, 2017 8.1 11.5 2.9 45.9 39.1
Net income subsequent to the IPO - - 29.9 - 29.9
Less: Net income attributable to noncontrollinginterests N/A N/A 8.1 N/A 8.1
Net income attributable to the Partnership subsequent to the IPO
N/A N/A 21.8 N/A 21.8
Adjusted EBITDA attributable to the Partnership subsequent to the IPO N/A N/A 23.5 N/A 23.5
Cash available for distribution attributable to the Partnership N/A N/A 23.3 N/A 23.3
Post-IPO period results
NET INCOME
$22million $23million
ADJUSTED EBITDA
$23million
CASH AVAILABLEFOR DISTRIBUTION
4Q 2017 PRORATEDDISTRIBUTION
$19million
DISTRIBUTION COVERAGE RATIO1
1.2times
$15million
DEBT AVAILABLE CREDIT
$585million 0.6times
DEBT TO ADJUSTEDEBITDA RATIO
$29million
CASH PROVIDED BY OPERATING ACTIVITIES
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at December 31, 2017 at December 31, 2017
(1) Coverage ratio is calculated as cash available for distribution attributable to the Partnership divided by total cash distributions
BPMP 4Q & FULL YEAR 2017 RESULTS
Financial frame
2018Existing asset portfolio
Gross throughput
~1.5 million boed
Average revenue per bbl1
Broadly flat with 20173
MaintenanceEstimated Total
Maintenance Spend ~$6 million
Cash available for distribution
> $126 million
Debt $15 million for aportion of the year
Through 2020Organic and inorganic
Sufficient to support 5 – 6% organic
distribution growth
Consistent with20184
Sufficient for mid-teens, per annum, unit distribution growth
Debt to Adjusted EBITDA ratio not to exceed 3.5
times; target credit metrics consistent with
investment grade
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Sufficient to support 5 – 6% organic
distribution growth
2017Proforma asset portfolio
1.4 million boed
Wholly owned: $0.73Mars: $1.41Mardi Gras JV: $0.67
Total Actual Maintenance Spend
$8 million2
Subsequent to IPO:$23 million
As at Dec 31, 2017:$15 million
BPMP 4Q & FULL YEAR 2017 RESULTS
(1) Cleopatra gas volumes are converted to kboepd by dividing MMscf/d by 5.8(2) Based on financials for our predecessor prior to October 30, and financials for BPMP, including our post-IPO asset portfolio, from October 30 to December 31, 2017(3) On a portfolio basis(4) Subject to future dropdown activity
Asset dropdowns
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Extensive portfolio of dropdown candidates from sponsor• 7 year ROFO on pipeline
business assets1
Downstream pipelines Adjusted EBITDA inventory provides multi-year runway at guided inorganic growth rates
Anticipate dropdowns from other asset categories to extend guided inorganic growth rate
Financing optionality
Subject to market conditions, forecast at least 1 dropdown a year –2018 drop in 2H18
Dropdown candidates from BP
BPMP 4Q & FULL YEAR 2017 RESULTS
(1) As owned by BP Pipelines at the closing of the initial public offering of BPMP
Rip ZinsmeisterChief Executive Officer
4Q & FULL YEAR 2017 RESULTS
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Rip ZinsmeisterChief Executive Officer
4Q & FULL YEAR 2017 RESULTS
Craig CoburnChief Financial Officer
Brian SullivanVice President, Investor Relations
Q&A
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4Q & FULL YEAR 2017 RESULTS
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Supplementary Information
Initial portfolio summary
19BPMP 4Q & FULL YEAR 2017 RESULTS
Initial portfolio summary
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Minimum volume commitments
BPMP 4Q & FULL YEAR 2017 RESULTS
Pipeline Period Minimum Throughput Commitment (kbpd)
Transportation Fee
BP2 Q4 2017 – 2018 303 Posted Tariff
BP2 2019 310 Posted Tariff
BP2 2020 320 Posted Tariff
River Rouge Q4 2017 – 2020 60 Posted Tariff
Diamondback Q3 2017 – Q2 2020 23 Posted Tariff
Diamondback Q4 2017 – 2020 20 Posted Tariff
Reconciliation of Adjusted EBITDA and CAFD to Net Income
21BPMP 4Q & FULL YEAR 2017 RESULTS
$million 4Q16 3Q17 4Q17 2016 2017
Net income 8.1 11.5 32.8 45.9 69.0
Add:
Depreciation 0.7 0.7 0.7 2.6 2.7
Gain from disposition of property, plant and equipment - - - - -
Income tax expense 5.2 7.4 2.0 29.4 25.3
Interest expense, net - - 0.1 - 0.1
Cash distributions received from equity method investments - - 29.9 - 29.9
Less:
Income from equity method investments - - 17.9 - 17.9
Adjusted EBITDA 14.0 19.6 47.6 77.9 109.1
Less:
Distributions of prorated fourth quarter joint venture dividends to prior owners N/A N/A 9.4 N/A 9.4
Adjusted EBITDA attributable to Predecessor prior to the IPO on October 30, 2017 N/A N/A 5.2 N/A 66.7
Adjusted EBITDA attributable to noncontrolling interests N/A N/A 9.5 N/A 9.5
Adjusted EBITDA attributable to the Partnership subsequent to the IPO N/A N/A 23.5 N/A 23.5
Continues on next slide
Reconciliation of Adjusted EBITDA and CAFD to Net Income
22BPMP 4Q & FULL YEAR 2017 RESULTS
$million 4Q16 3Q17 4Q17 2016 2017
Adjusted EBITDA attributable to the Partnership subsequent to the IPO N/A N/A 23.5 N/A 23.5
Less:
Maintenance capital expenditure attributable to the Partnership subsequent to the IPO N/A N/A 0.1 N/A 0.1
Net adjustments from volume deficiency payments attributable to the Partnership subsequent to the IPO N/A N/A 0.2 N/A 0.2
Add:
Net interest received by the Partnership subsequent to the IPO N/A N/A 0.1 N/A 0.1
Cash available for distribution attributable to the Partnership N/A N/A 23.3 N/A 23.3
Continues from previous slide
Reconciliation of Adjusted EBITDA and CAFDto Net Cash Provided by Operating Activities
23BPMP 4Q & FULL YEAR 2017 RESULTS
$million 4Q16 3Q17 4Q17 2016 2017
Net cash provided by operating activities 8.2 13.8 35.0 49.8 69.2
Add:
Income tax expense 5.2 7.4 2.0 29.4 25.3
Interest expense, net - - 0.1 - 0.1
Distributions in excess of earnings from equity method investments - - 7.2 - 7.2
Less:
Non-cash adjustments (0.3) (0.5) - 0.4 0.7
Total change in operating assets and liabilities (0.3) 2.1 (3.3) 0.9 (8.0)
Adjusted EBITDA 14.0 19.6 47.6 77.9 109.1
Less:
Distributions of prorated fourth quarter joint venture dividends to prior owners N/A N/A 9.4 N/A 9.4
Adjusted EBITDA attributable to Predecessor prior to the IPO on October 30, 2017 N/A N/A 5.2 N/A 66.7
Adjusted EBITDA attributable to noncontrollinginterests N/A N/A 9.5 N/A 9.5
Adjusted EBITDA attributable to the Partnership subsequent to the IPO N/A N/A 23.5 N/A 23.5
Continues on next slide
24BPMP 4Q & FULL YEAR 2017 RESULTS
$million 4Q16 3Q17 4Q17 2016 2017
Adjusted EBITDA attributable to the Partnership subsequent to the IPO N/A N/A 23.5 N/A 23.5
Less:
Maintenance capital expenditure attributable to the Partnership subsequent to the IPO N/A N/A 0.1 N/A 0.1
Net adjustments from volume deficiency payments attributable to the Partnership subsequent to the IPO N/A N/A 0.2 N/A 0.2
Add:
Net interest received by the Partnership subsequent to the IPO N/A N/A 0.1 N/A 0.1
Cash available for distribution attributable to the Partnership N/A N/A 23.3 N/A 23.3
Continues from previous slide
Reconciliation of Adjusted EBITDA and CAFDto Net Cash Provided by Operating Activities
Debt to Adjusted EBITDA attributable to the Partnership
25BPMP 4Q & FULL YEAR 2017 RESULTS
$million 4Q16 3Q17 4Q17
Gross debt - - 15.0
Adjusted EBITDA attributable to the Partnership subsequent to the IPO - - 23.5
Debt to adjusted EBITDA attributable to the partnership subsequentto the IPO ratio (times) - - 0.6