2014 rbc capital markets’ mlp conference
TRANSCRIPT
JP Energy Partners LPInvestor Presentation
November 2014
Disclaimers
2
This presentation contains forward-looking statements. These statements discuss future expectations, contain projections of results of operations or of financial condition or state other forward-looking information. These statements are 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 JP Energy Partners LP (the “Partnership” or “JPE”). 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. These forward-looking statements involve risks and uncertainties. When considering these forward- looking statements, you should keep in mind the risk factors and other cautionary statements in the filings made by the Partnership with the Securities and Exchange Commission (the “SEC”), copies of which are available to the public. The risk factors and other factors noted in the Partnership’s filings with the SEC could cause the Partnership’s actual results to differ materially from those contained in any forward-looking statement. The Partnership expressly disclaims any intention or obligation to revise or publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
Forward Looking Statements
Non-GAAP Measures
This document includes certain non-GAAP financial measures as defined under SEC Regulation G. A reconciliation of those measures to most directly comparable GAAPmeasures is provided at the end of this presentation.
Adjusted EBITDA is defined as net income (loss) plus (minus) interest expense (income), income tax expense (benefit), depreciation and amortization expense, assetimpairments, (gains) losses on asset sales, certain non-cash charges such as non-cash equity compensation and non-cash vacation expense, non-cash (gains) losses oncommodity derivative contracts (total (gain) loss on commodity derivatives less net cash flow associated with commodity derivatives settled during the period) and selected(gains) charges and transaction costs that are unusual or non-recurring and other selected items that impact comparability.
We define distributable cash flow as Adjusted EBITDA less net cash interest paid, income taxes paid and maintenance capital expenditures.
JP Energy Partners LP
• Midstream MLP focused on infrastructure solutions to users of liquid petroleum products
• Integrated and diversified platform with stable cash flows
• Fee-based and margin-based business model with low commodity price sensitivity
• Proven ability to complete acquisitions and develop organic projects
• Significant growth opportunities through JP Energy family of organic projects & drop-downs
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JP Energy Partners LP is a Master Limited Partnership founded in May 2010 to own, operate, develop and acquire a strategic portfolio of midstream assets
Strategically Located Assets in High Growth Shale Plays
Our Business Strategy
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Maximize our Experienced &
EntrepreneurialManagement Team
Focus on Stable, Fee-Based Cash Flows
Grow Our Business through Organic and
Drop Down Opportunities
Capitalize on Strategically Located
Assets
Service our High Quality Customer Base
Expand our Platform for Integrated
Midstream Solutions
Significant Platform of Services
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Logistics solution from the wellhead to the end-user
Crude Oil
Producers Refiners
Truck
Pipeline Gathering
Injection Station Pipeline Terminal/Storage/Exchange Location
Pipeline
Refined ProductsNatural Gas LiquidsRefineries
OFS and Agriculture
Gas Stations
Barge
Common Carrier Pipelines
Tanker
Storage
Rail
Diluent for Heavy Crude
Producers
Refinery Produced LPG
Spec Products
Retail Distributor
Storage
Forecasted Adjusted EBITDA(1): $67 million
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Growing, Fee-Based Cash Flows with High Quality Customer Base
Crude Oil Pipelines & Storage
– Fixed storage & throughput or minimum volume requirement fees
– Growing volumes in the Southern Wolfcamp from existing
contractual producers with long-term fee-based commitments
– New customer acreage and MVC within JP Energy’s capture area
– Expansion of Silver Dollar Pipeline
Refined Products Terminaling & Storage
– Fixed fees for throughput & storage, blending services, injection of
additives and ancillary services, including product handling and
transfer services
– Rollup strategy & optimization and diluent logistical solutions drive
growth
NGL Distribution & Sales
– National cylinder exchange platform & accounts
– Increasing application with auto gas, mower gas, industrial &
oilfield applications
– Recent acquisition of NGL truck services from JP Development
– Fixed fee based on distance and volume transported
Focu
sed
on
Gro
win
g Fe
e-b
ased
Cas
h F
low
s NGL Distribution
& Sales
Refined Products
Terminals & Storage Crude Oil
Supply & Logistics
Crude Oil Pipelines &
Storage
___________________________1. Forecasted Adjusted EBITDA for the twelve months ending September 30, 2015.
Asset footprint in many of the most attractive liquids basins in North America
Near-term crude oil pipeline expansions and organic opportunities in NGL
Acreage dedications and minimum volume commitments provide for built-in growth as production increases
Recent success in re-contracting large customers in the cylinder exchange business
Potential drop-down of two pipelines currently flowing and a third to be constructed
Management team has extensive experience integrating acquisition opportunities
Footprint creates synergies for bolt-on acquisitions
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Built-in
contracted
growth
Acquisitions
from our
affiliates
Organic
Growth
Opportunities
Multiple Avenues for Growth
Acquisitions
from 3rd
parties
Platform Provides Enormous Growth OpportunitiesCurrent MLP Assets & Drop-Downs
Eagle Ford Shale
Mississippian Lime
Granite Wash
Permian Basin
Fort Worth Basin / SCOOP Play
CRUDE
CRUDE
CRUDE
CRUDE
CRUDE
Shales
JPEP Footprint
Affiliated Pipelines
Silver Dollar Pipeline
Crude Storage
Refined Product Storage
Legend
NGL
NGL
NGL
NGL
NGL
Cylinder Exchange
Cylinder Exchange Footprint
Expansion
Management & ArcLight have created near term drop-down opportunities
Drop-Down Opportunities
• ArcLight has demonstrated the ability to invest broadly and profitably across the energy industry
• ArcLight has a substantial equity commitment
to JP Energy Partners / JP Development
– ROFO assets could increase JP Energy
EBITDA by ~50%
• Right of First Offer with JP Development &
Republic Midstream
– JP Development has granted JP Energy Partners a five-year right of first offer on all of its current and future assets
– ArcLight granted JP Energy Partners an 18-month right of first offer on its 50% interest in Republic Midstream at the closing of the IPO
ArcLight Sponsorship
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Great Salt Plains Pipeline• ~115 mile crude oil pipeline• Transports Mississippian Lime
supply to Cushing, Oklahoma• Ability to expand capacity from
27 Mbbls/d to 40 Mbbls/d
Red River Pipeline• ~75 mile crude oil pipeline that
transports oil from N. Texas to Garvin City, Oklahoma
• Current capacity of 5 Mbbls/d
Republic Midstream• 180-mile crude oil gathering
system in Gonzales & Lavaca
counties, Texas
• Central delivery point (“CDP”)
with storage and blending
capacity
• 30-mile takeaway pipeline
Potential Drop-Downs
Experienced and Entrepreneurial Leadership
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J. Patrick BarleyChairman, President & Chief Executive Officer
Patrick (Pat) WelchExecutive Vice President & Chief Financial Officer
Jerry AshcroftExecutive Vice President & Chief Operating Officer
• Founder, President and CEO of Lonestar Midstream Partners, a midstream company focused on natural gas gathering and processing
• Brings over 15 years of experience managing early-stage investments
• 10 years in midstream sector
• Senior roles at Opportune, Atlantic Power Corporation, DCP Midstream and Dynegy
• Senior Audit Manager in energy, utilities and mining practice for PricewaterhouseCoopers
• Over 24 years of energy industry finance experience
• Senior Vice President of Buckeye Partners LP and President of Buckeye Services
• Senior roles with Colonial Pipeline Company, Georgia Pacific Company and the U.S. Marine Corps
JP Energy Assets
JP Energy Family Overview
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JP Energy Partners has a strategic partnership with JP Development and Republic Midstream
JP Development
• Founded in July 2012 to support JP
Energy’s growth
• JP Development projects may be
dropped down to us
– In February 2014, we completed
our first drop down valued at
$319 million
• JP Development has extended us a
right of first offer (ROFO) for the
next five years on all of JP
Development’s current and future
assets
JP Energy Partners
• Founded in May 2010 to own,
operate, develop and acquire a
diversified portfolio of midstream
energy assets
• Operations currently consist of four
business segments:
– Crude Oil Pipelines & Storage
– Crude Oil Supply & Logistics
– Refined Products Terminals &
Storage
– NGL Distribution & Sales
Republic Midstream
• Formed with $400 million
commitment from ArcLight to
design, build and operate a crude
gathering system for Penn Virginia in
the Eagle Ford shale
– Managed by JPEP and American
Midstream
– JPEP has a ROFO for the next
seventeen months for a 50%
interest in the joint venture
• Crude oil pipelines (current and future potential drop-downs) located within high growth areas and provide for a stable cash flow profile
– Current MLP assets include ~94 miles of high pressure pipeline within the Southern Wolfcamp area of the Permian Basin
– Long-term, fee-based contracts with leading producers in the play
• Supply & Logistics business utilizes customer relationships along with pipeline and trucking assets to serve customers looking for the most advantageous end-market
• Cushing storage facility located on the Enterprise terminal with access to Seaway pipeline
– Five 600,000-barrel tanks connected to Seaway Pipeline system
Crude Oil Assets Levered to High Growth Areas
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Asset Overview
Operations provide JP Energy with unique insight into customer needsMap of JPEP’s Crude Oil Operations and Drop-Downs
Eagle Ford Shale
Mississippian Lime
Granite Wash
Permian Basin
Fort Worth Basin /
SCOOP Play
Shales
JPEP Footprint
Affiliated Pipelines
Silver Dollar Pipeline
Storage
Legend
Integrated Midstream Solution From Wellhead to DownstreamJP Energy offers producers a full logistical solution to integrate assets from the wellhead to downstream
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Integrated Service Solution from Wellhead to Downstream
WellheadProduction
Process Service Offered
Barrel acquired at the wellhead and
simultaneously sold at liquid exchange
JPEP JPE utilizes its trucks and 3rd parties to
transport crude oil
JPE utilizes its pipelines and 3rd parties to
transport crude oil
• Manage the physical movement of
crude oil from origination to final
destination largely through our
network of owned and leased assets
• JP Energy utilizes its pipelines, LACTS
and terminals, fleet of 135 crude oil
gathering trucks and 700 MBbls of
leased storage capacity at Cushing,
Oklahoma to service customers
– Majority of revenue is “fee
equivalent”
• Business provides access to additional
producers, market intelligence and
increased utilization of our pipelines
– Catalyst for organic projects
within our pipeline and storage
business
JPE delivers barrels to market hub and
offers storage and terminal options
Trucking
Pipeline
Market Hub/Terminal
Silver Dollar Anchored by Active Producers and Provides Access to Multiple End-Markets
JP Energy Partners’ crude oil pipeline system is base loaded by two significant customers with over 300,000 contiguous acres
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SUTTON
REAGAN
IRION
CROCKETT
Owens Station
Midway Station
SCHLEICHER
JPEP Line
3rd Party
Central Production Facility
Station
Magellan Longhorn
Plains Pipeline – 8”
Significant contract A acreage
Significant contract B acreage
Oxy BarnhartStation (Oxy Cline Shale Interconnect)
(Plains Interconnect to Midland)
To Houston
To Colorado City To Midland
~5 years remaining on
minimum volume commitment
~8 years remaining with 110,000 acre
dedication
Significant Contract A
Significant Contract B
Lease Gathering Is a “Fee-Equivalent” Activity
Essential Service Provides Durable Baseline Cash Flow in a Variety of Markets
Wellhead Price
Trucking Costs Pipeline TariffG&A Cost
Total Cost(1) Sales Price Margin
Price $72.30 $1.00 $0.50 $0.20 $74.00 $75.00 $1.00
Cost Known
Margin Locked?
NYMEX less location/ quality
differential
Projected from
historical costs
Tariff is posted
Projected from
historical costs
NYMEX price
Production Area
JPEP
Market Hub
Pipeline
Terminal
Index-Based
Margin is
protected
against
downside, but
JPEP still has
upside through
market
optimization
activities
(exchanges,
etc.)
+ + =+
15___________________________Note: Values provided for illustration purposes only.Source: Plains All American Pipeline L.P. Investor Presentation.
Crude Oil Storage
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JP Energy Partners’ crude oil storage facility is located in Cushing, Oklahoma, a key crossroad connecting production to the Gulf Coast
Asset Highlights• Focused on operational storage with largest
tanks for logistics solutions on large crude movements
– Five 600,000 barrel tanks connected to Seaway Pipeline system
• Aggregate shell capacity of 3 MMBbls and is situated for increasing crude oil supply from Canada and the Mid-Continent
• Inbound connections with multiple pipelines and two-way interconnections with all the other major storage facilities in Cushing
• 100% of the shell capacity is dedicated to one customer under a long-term contract (~3 years remaining)
• Fixed monthly fee contract based on barrel of shell capacity, whether used or not
Cushing’s Integral Location to Producers & Refiners
Upcoming Pipelines
Current Pipelines
Cushing, OK
Legend
JPE 3MMbbls tankage
• Located in south Cushing with increased connectivity for structural players
– 36” manifold
Refined Products Terminals & Storage Growth
• Storage capacity of approximately 770,000 barrels from 10 tanks
• Primarily supplied by the Explorer Pipeline
• We own approximately six acres which can be used for future expansion (~200,000 barrels additional storage capacity)
• Average throughput of 18,224 barrels per day (1)
Caddo Mills, Texas (Dallas) Potential Growth Opportunities
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• Storage capacity of approximately 550,000 barrels from 11 tanks
• Supplied by the pipeline operated by Enterprise TE Products Pipeline Company
• Eight loading lanes with automated truck loading equipment to minimize wait time
• Average throughput of approximately 45,000 barrels per day(1)
North Little Rock, Arkansas
Provides steady, predictable cash flow with minimal maintenance capital expenditures and fee-based revenues
Butane blending
Vapor Recovery Unit
Ethanol side stream blending
Flexible tankage for quick turnover of products
New unbranded customers
Shale play logistical solution for diluent to Canada (Caddo Mills)
In tank blending (North Little Rock)
___________________________1. For six months ended June 30, 2014.
NGL Distribution & Sales
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Limited Seasonality (1)Overview
• NGL Distribution & Sales / NGL Transportation
– Target growing demand for power generation and oilfield service application, reducing exposure to heating degree days
– Fixed fee business primarily in the Eagle Ford and Permian
• Cylinder Exchange
– 3rd largest propane cylinder exchange business in the U.S.
– Established footprint in 48 states with a network of over 17,700 customer locations
– National footprint gives us capability to compete for large volume national accounts and provide us with economies of scale and significant cost savings
• Maintain flexible market pricing to allow for margin optimization
• Improve logistics and create synergies
• Leverage scale by using freight and supply point optimization
• Achieve organic growth by entering new major market, and expanding customer and other strategic relationships
• Evaluation of new services / geographies
– Oilfield & refinery services
– Continue to expand westward
Growth Opportunities NGL Operations
Cylinder Exchange Footprint
Recent Expansion
Pinnacle Location
PPE Central Ops
PPE Depots
PPE Production
Winter, 53%Summer,
47%
___________________________1. Based on forecasted revenue for the twelve months ending September 30, 2015. Winter includes three months ending December 31, 2014 and March 31, 2015, and summer
includes three months ending June 30, 2015 and September 30, 2015.
Financial Overview
Financial Strategy
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Large acreage dedications and minimum volume commitments for our crude oil
pipelines
Refined products and NGL segments offer a healthy mix of assets in mature markets but
with considerable growth opportunities
Conservative distribution coverage targeting 1.20x
Near-term organic growth projects already being pursued in existing businesses
Strategic drop-downs from JP Development & Republic Midstream could further bolster
growth
~1.1x Debt / NTM Adjusted EBITDA creates borrowing capacity for future growth
Revolver has ~$150 million in excess capacity
Target 3.5x leverage over the long-term
Established risk management policies and procedures to monitor and manage the
market risks associated with commodity prices, counterparty credit and interest rates
Seek to minimize commodity price exposure through fixed-fee contracts or margin-
based arrangements
Maintain Stable Cash Flows
Targeted Risk Management
Commitment to Financial Flexibility
Deliver Consistent Distribution
Growth
Non-GAAP Reconciliation – Adjusted EBITDA
21
2014 2013
Segment Adjusted EBITDA
Crude oil pipelines and storage 5,301$ 2,931$
Crude oil supply and logistics 5,477 3,175
Refined products terminals and storage 2,525 3,899
NGLs distribution and sales 2,256 386
Discontinued operations (1) - 672
Corporate and other (5,966) (6,036)
Total Adjusted EBITDA 9,593 5,027
Depreciation and amortization (10,395) (7,790)
Interest expense (2,406) (2,279)
Income tax benefit (expense), net 158 (42)
Loss on disposal of assets (533) (478)
Unit-based compensation (578) (302)
Total gain (loss) on commodity derivatives (762) 1,022
Net cash payments for commodity derivatives settled during the period 105 8
Discontinued operations (1) - (736)
Transaction costs and other non-cash items (792) (67)
Net loss (5,610)$ (5,637)$
Three months ended September 30,
(in thousands)
___________________________1. In June 2014, we completed the sale of our crude oil logistics operations in the Bakken region of North Dakota, Montana and Wyoming.
Non-GAAP Reconciliation – Gross Margin to Operating Loss
22
2014 2013
Reconciliation of adjusted gross margin to operating loss
Adjusted gross margin
Crude oil pipelines and storage 6,501$ 3,600$
Crude oil supply and logistics 8,234 6,382
Refined products terminals and storage 3,573 4,664
NGL distribution and sales 18,635 16,424
Total Adjusted gross margin 36,943 31,070
Operating expenses (17,048) (16,510)
General and administrative (11,315) (10,656)
Depreciation and amortization (10,395) (7,790)
Loss on disposal of assets (533) (478)
Total gain (loss) on commodity derivatives (762) 1,022
105 8
Other non-cash items (357) -
Operating loss (3,362)$ (3,334)$
Three Months Ended September 30,
(in thousands)
Net cash (receipts) payments for commodity