gibson dunn: webcast: current developments in capital ... · 3/4/2020 · negative for stocks ....

Current Developments in Capital Markets Transactions in the Oil and Gas Industry

March 4, 2020

• Most participants should anticipate receiving their certificate of attendance in 4-6 weeks following the webcast

• Virginia Bar Association members should anticipate receiving their certificate of attendance in 6-8 weeks following the webcast

• All questions regarding MCLE Information should be directed to Victoria Chan at (650) 849-5378 or [email protected]

MCLE Information (1.0 Hour Credit)

Gibson Dunn 2

Today’s Panelists

Hillary H. Holmes is a partner in the Houston office of Gibson,Dunn & Crutcher and Co-Chair of the firm’s Capital Marketspractice group. Ms. Holmes advises companies in all sectors ofthe energy industry on long-term and strategic capitalplanning, disclosure and reporting obligations under U.S.federal securities laws, corporate governance and M&Atransactions. She represents issuers, underwriters, MLPs,financial advisors, private investors, management teams andprivate equity firms in all forms of capital marketstransactions. Her experience comprises IPOs, registeredofferings of debt and equity securities, private placements ofdebt and equity securities, structured preferred equity, jointventures and private equity investments. She frequentlyadvises boards of directors, special committees, and financialadvisors in M&A transactions involving conflicts of interest orunique complexities.

Doug Rayburn is a partner in the Dallas and Houstonoffices of Gibson, Dunn & Crutcher. His principal areasof concentration are securities offerings, mergers andacquisitions and general corporate matters. He hasrepresented issuers and underwriters in over 200public offerings and private placements, includinginitial public offerings, high yield offerings, investmentgrade and convertible note offerings, offerings byMLPs, and offerings of preferred and hybridsecurities. Additionally, Mr. Rayburn representspurchasers and sellers in connection with mergersand acquisitions involving both public and privatecompanies, including private equity investments andjoint ventures. His practice also encompassescorporate governance and other general corporateconcerns.

Gerry Spedale is a partner in the Houston office of Gibson,Dunn & Crutcher. He has a broad corporate practice, advisingon mergers and acquisitions, joint ventures, capital marketstransactions and corporate governance. He has extensiveexperience advising public companies, private companies,investment banks and private equity groups actively engagingor investing in the energy industry. His over 20 years ofexperience covers a broad range of the energy industry,including upstream, midstream, downstream, oilfield servicesand utilities.

Michael Casey is a Partner and Managing Director inthe Houston office of Goldman Sachs & Co. He hasover 20 years of energy investment bankingexperience and has advised on a variety of capitalraising and strategic transactions. Michael has broadcapital raising and financing experience across equityand debt markets, both public and private, as well asjoint ventures and private equity investments. Inaddition to his financing transaction experience,Michael has significant experience in M&A, havingadvised on numerous public company mergers, aswell as advising both sellers and buyers on privatecompany and asset transactions.

Gibson Dunn 3

Disclaimer

• PRIVATE AND CONFIDENTIAL. This presentation has been prepared for the purposes of the Gibson Dunn conference and should not be disseminated. This presentation has been prepared by the Investment Banking Division and is not a product of Global Investment Research at Goldman Sachs. This presentation should not be used as a basis for trading in the securities or loans of the companies named herein or for any other investment decision. This presentation does not constitute an offer to sell the securities or loans of the companies named herein or a solicitation of proxies or votes and should not be construed as consisting of investment advice. This presentation has been prepared and is based on information obtained by us from publicly available sources. In preparing this presentation, we have applied certain assumptions, have performed no due diligence, and have relied upon and assumed, without assuming any responsibility for independent verification, the accuracy and completeness of all financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by us. We assume no liability for any such information. This presentation is necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to us as of, the dates indicated herein and we assume no responsibility for updating or revising this presentation. Goldman Sachs does not provide accounting, tax, or legal advice.

1. State of the Oil and Gas Capital Markets

2. Preferred Equity As a Flexible Tool

3. Developments in High Yield Debt Offerings

4. SPACs Continue and Change Course

5. Prospects for Rights Offerings

6. Direct Listings Evolve

Agenda

1. State of the Oil and Gas Capital Markets (Goldman Sachs)

7

VIX Shoots Up

n Last week’s market selloff was largely driven by concerns about the spread of coronavirus outside of China. This weighted on expectations that economic headwinds will be limited to Q1 and put a dent in the earnings recovery theme

Politics continued to receive attention, especially following Sanders’ victory in Nevada. However, Sanders’ momentum has turned from positive to negative for stocks

There has been a shift in monetary policy expectations, with the market now pricing in a 96% probability of a 50bps rate cut in March (vs. 11% for a 25bps cut just a week ago). However, Fed officials argued that it is too soon to gauge the economic impact of coronavirus

Current State of the US Equity MarketUS Equities Sell off Sharply Driven by Coronavirus Concerns

US Equity Market Recap

Source: FactSet, Bloomberg, CapIQ, AMG Data Services and Goldman Sachs Macro Economic Research as of 28-Feb-2020, Morningstar

n Market Snapshot— US equities sold off sharply last week, suffering their biggest weekly decline

since October 2008, with the Dow (12.4)%, S&P 500 (11.5)% and Nasdaq (10.5)%

1Macro Drivers of Equity Markets

2

Key Charts to Watch

3

S&P Sector Performance US Equities Fall Sharply1 Week 2020 YTD

Coronavirus Impact to the US Equity Market: Goldman Sachs Baseline Path Forecasts for the S&P 500

Overview of the Energy Equity Capital Markets

The trajectory of the US and global economy is highly uncertain. A more severe pandemic could lead to a more prolonged business and community disruption and a US recession. GS’ three-month S&P 500

index target remains at 2900, assuming the US avoids a recession

10

15

20

25

30

35

40

45

01-Jan 20-Jan 08-Feb 27-Feb

VIX

40.1

5yr Avg 15.12019 Avg 15.4

(15.4)%(13.5)%(12.7)%(12.2)%(11.8)%(11.5)%(11.2)%(11.1)%(10.6)%(10.5)%(10.4)%

(9.5)%

EnergyFinancialsMaterials

IndustrialsUtilities

S&P 500Cons. Discr.

Info TechHealthcare

RetailCons. StaplesComm. Svcs. (5.7)%

(8.0)%(3.4)%(9.5)%(3.8)%(7.2)%(8.6)%(4.4)%

(10.3)%(14.3)%(13.8)%(24.7)%

(30)%(26)%(22)%(18)%(14)%(10)%(6)%(2)%2%6%

10%

01-Jan 20-Jan 08-Feb 27-Feb

Inde

xed

Pric

e

S&P 500 NasdaqRussell 2000 S&P 500 Energy

(11.5)%

(4.5)%(8.6)%

(24.7)%

8

Energy Weighting in the S&P 500 is at Multi Year Lows

Current S&P 500 Sector Weightings Historical S&P 500 Index Energy Weighting

Source: Bloomberg; market data as of 28-Feb-2020Note: E&P includes: APA, APC, COG, COP, CXO, CVX, DVN, EOG, FANG, HES, MRO, NE, OXY, PXD, XEC and XOM. Midstream includes: HFC, KMI, OKE, PSX, VLO and WMB. OFSE includes: BHGE, HAL, NOV and SLB.

Energy weighting in the S&P 500 is at ~20 year lows, down significantly from its peak in 2008

Avg. Energy

Weighting Since 2000:

8.9%

Peak: 16.3%01-Jul-2008

WTI: $140.97


Information Technology

24%

Health Care14%

Financials12%Communication

Services10%

Industrials9%

Consumer Discretionary

10%

Consumer Staples

7%

Energy 4%

Utilities4%

Real Estate3%

Materials3%

OFSE9%

Midstream22%E&P

70%

0 %

2 %

4 %

6 %

8 %

10 %

12 %

14 %

16 %

18 %

2000 2004 2008 2012 2016 2020

S&P

Ener

gy W

eigh

ting

(%)

S&P Energy Weighting Avg. Energy Weighting

3.6 %

9

22,316

42,945

11,290 6,203

89

17,869

15,908

18,099

4,822

2,450

159

6,572

6,074

7,565

3,322

$ 40,344

$ 65,425

$ 35,463

$ 18,590

$ 7,373

$ 89

2015 2016 2017 2018 2019 2020

OFS Midstream E&P

Energy Equity Market Dynamics: 2019 in Review / 2020 Outlook

Energy Equities Remained Volatile Throughout 2019, Tied Largely to Oil Prices / Geopolitical Headlines

2020 Energy Equity Themes

Issuance Came in Well-Below Previous Years in Light of Broader Volatility

Sources: Dealogic, Bloomberg as of 28-Feb-2020

Expectation for OPEC cuts to turn to increases post-2020, providing a potential tailwind for improved sentiment as conditions around

supply / inventory evolve

$2.8bn of 2019’s total came from GE’s sell-down of BKR, which

represented the largest US registered energy

equity follow-on in the last 5 years


Recent strength in oil and credit expected to put 2020 capital allocation plans in focus; deleveraging and shareholder returns

favored over capex

Competitive FCF profiles compared to the rest of the S&P 500, a trend that is expected to continue as earnings / returns / FCF improve

Focus on profile and sustainability of crude inventories with regards to maturing shale plays

Long-term sector risks, such as focus on ESG / decarbonization, oil demand, post-2020 policy overhang

(50)%

(30)%

(10)%

10 %

30 %

50 %

Dec-18 Feb-19 Apr-19 Jun-19 Aug-19 Oct-19 Dec-19 Feb-20

Inde

xed

Pric

e

AMZ XLE OSX WTI XOP

(22)%

(35)%

(21)%(1)%

(42)%

10

Energy Equity Market Dynamics

…And Majority of Equity Has Been Structured…

Source: Bloomberg, Dealogic¹ Shows U.S. energy equity fund flows excluding ETFs.


…With Few Primary Offerings ($bn)

As Investors Have Exited Energy Equity…

% Secondary

$ 22.5

$ 49.5

$ 17.4 $ 13.8 $ 4.9

$ 9.1

$ 16.1

$ 16.8 $ 8.1

$ 15.4

$ 31.5

$ 65.7

$ 34.2

$ 21.9 $ 20.3

2015 2016 2017 2018 2019

Common Equity Preferred Issuance

…Energy IPOs Have Declined…

Ener

gy F

und

Flow

s¹ ($

mm

)Eq

uity

Offe

rings

($bn

)

$ 17.9

$ 43.1

$ 11.8 $ 3.1 $ 0.7

$ 0.3

$ 0.2

$ 2.9 $ 9.5

$ 4.0

$ 4.3

$ 6.2

$ 2.7 $ 1.2

$ 0.2

$ 22.5

$ 49.5

$ 17.4 $ 13.8

$ 4.9

2015

1 %

2016

0 %

2017

17 %

2018

69 %

2019

81 %

Primary Secondary Mixed Offering

WTI

($/b

bl)$ 11

$ 430

$(741)

$ 45

$(406)$ 49.09

$ 43.82 $ 50.98

$ 64.83

$ 57.09

$ 40

$ 45

$ 50

$ 55

$ 60

$ 65

$ 70

$(1,000)

$(750)

$(500)

$(250)

$ 0

$ 250

$ 500

2015 2016 2017 2018 2019

49

103

3415

3

$ 17.9

$ 43.1

$ 11.8

$ 3.1 $ 0.7

$ 0

$ 10

$ 20

$ 30

$ 40

$ 50

0

20

40

60

80

100

120

140

2015 2016 2017 2018 2019

Tran

sact

ion

Valu

e ($

bn)

Num

ber

of IP

Os

Number of IPOs Transaction Value

11

n 480 miles of crude gathering pipelines and 260 miles of natural gas gathering pipelines

n 125,000 bbls of crude storage

n Fee-based contracts, large acreage dedications and areas of mutual interest from multiple producers

n Natural gas processing plant, Little Missouri (“LM”)

— LM1, LM2, and LM3 with 90 MMcf/d of processing capacity

— 50% interest (JV with HESM) in LM4 expansion with 200 MMcf/d of processing capacity, expected 2Q19

— Transport agreement for LM4 NGLs to Targa Mont Belvieu fractionation complex

Targa Resources Sells 45% Interest in Badlands Bakken Asset to Blackstone GSO for $1.6bn

Source: Company disclosures, Drillinginfo¹ Represents median of selected Wall Street Research estimates.


Transaction Overview

Transaction Rationale

n On 19-Feb-2019, Targa Resources Corp. (NYSE: TRGP) announced a definitive agreement to sell a 45% interest in its Badland assets in North Dakota to funds managed by GSO Capital Partners and Blackstone Tactical Opportunities (collectively, “Blackstone”) for $1.6 billion in cash

— Implied multiple of 14x 2019E EBITDA¹

— Targa will continue to be the operator and hold majority governance rights

— Future growth capital funded on a pro rata basis

P Sale of minority interest in Badlands provides Targa with a meaningful portion of 2019 net growth capex plans

P Improved balance sheet strength

Badlands Bakken Asset Map and Rig Activity

Badlands Asset Highlights

“Selling a minority interest in the Badlands at an attractive valuation allows us to satisfy a substantial portion of our estimated 2019 equity funding needs and provides us with significant flexibility looking forward.”

- Joe Bob Perkins, CEO of Targa Announcement Press Release, 19-Feb-2019

12

Leveraged Finance Market Update(US$ in billions)

Key Takeaways

HY and CLO Fund Flows ($bn)

US Leveraged Loan & High Yield Issuance ($bn)

HY Index and US 10Yr Treasury | 2015-2020

Source: S&P LCD News & Research, Dealogic, Bloomberg; market data as of 28-Feb-2020Note: Leveraged loan primary volume excludes repricings.

Overview of the Energy High Yield Markets

n Leveraged loan new issue volume decreased for 2nd

consecutive year in 2019

n YTD 2020 new issue volumes higher year over year compared to same period in 2019

n Robust CLO formation supports loan market technicals, while HY fund flows fluctuate on evolving market conditions

n CCC spreads have widened significantly more than BB spreads over the past year

0.00 %

5.00 %

10.00 %

15.00 %

20.00 %

2015 2016 2017 2018 2019 2020BB HY Index B HY IndexCCC HY Index 10 Year Treasury

11.42%

4.58%6.20%

1.15%

$258

$337

$503

$437

$309

$44

$104

$270 $261 $266

$162

$263

$37$67

$0 bn

$150 bn

$300 bn

$450 bn

$600 bn

2015 2016 2017 2018 2019 2019 2020

Institutional LoansHigh Yield

Loans: 139.0 %HY: 80.2 %

YoY Change:

Δ From 28-Feb-19

BB (42) bps

B (33) bps

10 Yr Treasury (156) bps

CCC 90 bps

$(7) $ 11 $(15)

$(35)

$ 19

$(2)

$ 83 $ 81

$ 129 $ 118 $ 115

$ 8

2015 2016 2017 2018 2019 2020 YTD

HY Fund FlowsCLO Formation

13

9.8

21.9 18.1

5.9 2.9 3.0 4.6

7.3

4.0 11.5

2.0

2.0 1.8

10.7

14.8 8.6

12.1

8.1

4.0 2.7

2.8

1.0

1.9

1.9 2.0

$30.6

$41.7

$38.2

$21.9

$13.1

$8.8$11.0

2016 2017 2018 2019 1H'19 2H'19 Q1'20

2.9 4.4

0.6 1.5 1.5 0.2

1.1

4.4 0.4

0.4 0.5

0.2

12.4 11.9

11.0

7.6 3.4

0.4

0.5

1.6

2.7

2.1

0.7

0.2

$3.7

$17.9 $18.5

$15.6

$10.0

$5.6

$1.1

2016 2017 2018 2019 1H'19 2H'19 Q1'20

Summary Energy High Yield and Loan Issuance

n There were 36 energy bond issuances in 2019 for ~$21.9bn of volume

n There have been 18 energy bond issuances (across 14 deals) in 2020 for ~$11.0bn of volume

Sources: Advantage Data, LCD News, Bloomberg; as of 28-Feb-2020

(US$ in billions)


Energy HY Issuance by Sub-Sectorn There were 23 energy loan issuances in 2019 for ~$15.6bn of volume

n There have been 3 energy loan issuances in 2020 for ~$1.1bn of volume

Energy Loan Issuance by Sub-Sector

E&P 32.1% 52.2% 47.3% 26.7% 22.2% 33.4% 41.4% 77.8% 24.4% 3.0% 9.6% 0.0% 27.0% 0.0%OFS 23.9 9.6 30.1 9.3 15.5 0.0 15.9 4.5 6.0 23.8 2.4 3.8 0.0 47.6Midstream 34.8 35.4 22.6 55.2 62.3 44.8 24.4 4.1 69.6 64.3 70.5 75.5 61.3 34.2Refining 9.2 2.5 0.0 8.8 0.0 21.8 18.2 13.6 0.0 8.9 17.5 20.7 11.7 18.3

Refining

Midstream

OFS

E&P

14

Energy HY Trading PerformanceSecondary Market Performance by Sub-Sector

Source: Barclays Live, Bloomberg; market data as of 28-Feb-2020Note: On June 5, 2017, $2.38bn across 4 tranches of Tesoro Corporation’s senior notes were removed while 1 tranche of PBF Holding’s 7.25% senior notes due 2025 were added to the Refining Index

constituents (D 134bps to overall index performance).


YE 2019 Last Week CurrentWeek Over

Week ∆ YTD 2020 ∆E&P 9.28 % 11.31 % 14.23 % 292 bps 496 bpsRefining 5.21 % 5.58 % 6.58 % 100 bps 138 bpsOFS 11.86 % 12.97 % 14.98 % 201 bps 312 bpsMidstream 5.45 % 5.67 % 6.76 % 109 bps 131 bps 14.23 %

6.58 %

14.98 %

6.76 %

4.0 %

6.0 %

8.0 %

10.0 %

12.0 %

14.0 %

16.0 %

Jan-17 May-17 Oct-17 Mar-18 Jul-18 Dec-18 May-19 Sep-19 Feb-20

Yiel

d To

Wor

st (%

)

E&P Refining OFS Midstream

15

Source: eReds, OMs, Bloomberg, GS SecDB; market data as of 28-Feb-20201 Based on LTM EBITDA from CapIQ of ~$646mm.

There have been 18 high yield energy bond issuances (across 14 deals) in 2020 for ~$11.0bn of volume YTD (vs. ~$3.8bn of volume for the 2019 YTD period)


Date Priced 2/18/2020 2/11/2020 2/6/2020 1/22/2020 1/21/2020 1/16/2020 1/16/2020 1/10/2020 1/10/2020 1/9/2020 1/9/2020 1/8/2020 1/7/2020 1/7/2020

GS Role - Joint Bookrunner - - - Joint Bookrunner - Joint Bookrunner - - - Left Lead Bookrunner Joint Bookrunner Co-Manager

Sub-Sector Midstream Midstream E&P E&P Midstream Refining E&P E&P Refining E&P Midstream OFS OFS E&P

7 years 5 years 8 years 7.25 years 8 years 8 years 7 years 5 years 5 years 6 years 8 years 7 years 6 years 8 years

8 years 8 years 8 years 8 years 10 years

Size At Launch $500mm $1000mm, split

equally $400mm $500mm $500mm $1,000mm $800mm $900mm, split equally $1,100mm in total $500mm $750mm $750mm $800mm in total $900mm in total

Security Unsecured Unsecured Senior Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Gtd. Unsecured Gtd. Unsecured Unsecured

Use of Proceeds Refinance Refinance Refinance Debt Refinance Debt Refinance Debt Refinance Debt,

Acquisition Refinance Debt Refinance Refinance, GCP Refinance Refinance Refinance, GCP Refinance Acquisition

Tranche Ratings B1 / BB- B1 / BB Ba3 / BB / BBB- B2 / BB / BB- B1 / BB B1 / BB / BB B3 / BB- / B+ B3 / B+ B1 / BB- B1 / BB B1 / B+ Caa1 / B- Ba2 / BB- B1 / BB-

PF Net Leverage 3.5 x 7.1x 1.5 x 2.1x 4.0x 1.2x ~ 3.5x1 2.1x 0.5x ~ 3.2x 4.9x 7.5x 3.9x 1.9x

Mid-High 5s - 5yr: Low-Mid 4s Mid-4s Mid-High 8s Low 5s Low 6s Mid-High 7s - 5yr: Mid 9s - 5yr: 5.25% area Low 9s Mid 7s Low 8s - 6yr: Mid 7s - 8yr: Mid-High 4s

- 8yr: Mid-High 4s - 8yr: 10% - 8yr: 5.75% area - 8yr: High 7s - 10yr: High 4s–5%

5.75 - 6.00% - 5yr: 4.25% area 4.125% 8.50 - 8.75% 5.00 - 5.125% 6.00% area 7.25% area - 5yr: 9.00 - 9.25% - 5yr: 5.25% area 9.00 - 9.25% 7.50 - 7.75% 7.75 - 8.00% - 6yr: 7.25 - 7.50% 10yr: 4.63 - 4.75 %

- 8yr: 4.50-4.75% - 8yr: 10% area - 8yr: 5.75% area - 8yr: 7.50 - 7.75%

Size At Pricing $430mm $1,000mm in total $400mm $500mm $500mm $1,000mm $1,200mm $1,000mm in total $1,000mm in total $550mm $750mm $750mm $1,000mm in total $900mm

98.591 // 6.00% (to yield 6.25%)

- $500mm 5yr: 4.125% 4.13% 100.00 // 8.75% 100.00 // 5.00% 100.00 // 6.00% 100.00 // 7.125% - $600mm 5yr:

9.50%- $600mm 5yr:

5.25% 100.00 // 9.25% 100.00 // 7.75% 100.00 // 8.00% - $600mm 6yr:7.25% 100.00 // 4.50%

- $500mm 8yr: 4.500%

- $400mm 8yr: 10.125%

- $400mm 8yr: 5.75%

- $400mm 8yr: 7.5%

95.75 // 6.77% - 5yr: 99.75 // 4.18% 93.75 // 5.09% 92.00 // 10.37% 100.50 // 4.90% 99.50 // 6.08% 94.00 // 8.28% - 5yr: 72.00 //

18.44%- 5yr: 93.75 //

6.75% 67.50 // 18.50% 86.75 // 10.23% 82.50 // 11.76% - 6yr: 91.00 // 9.27% 95.50 // 5.08%

- 8yr: 96.63 // 5.02%

- 8yr: 71.00 // 16.92%

- 8yr: 95.50 // 6.48%

- 8yr: 92.00 // 8.93%

Additional Notes

Downsized by $70mm N/A N/A

Call schedule revised to first call

at par + 75% of coupon (from par

+ 50%)

N/A N/A Upsized by $400mm

Upsized by $100mm

Downsized by $100mm

Upsized by $50mm N/A N/A Upsized by

$200mm

8yr tranche pulled due to strong

demand for 10yr

Tenor

Whisper

Price Talk

Pricing

Current Trading

Busy Start to 2020 for HY Energy Issuance(US$ in millions)

Sources: Advantage Data, LCD News, Bloomberg

Summary Energy High Yield and Loan Issuance(US$ in billions)

Energy HY Issuance by Sub-Sector ($bn)n There were 36 energy bond issuances in 2019 for ~$21.9bn of volume

n There have been 18 energy bond issuances (across 14 deals) in2020for ~$11.0bn of volume

Energy Loan Issuance by Sub-Sector ($bn)n There were 23 energy loan issuances in 2019 for ~$15.6bn of volume

n There have been 3 energy loan issuance in 2020 for $1.1bn ofvolume

E&P 32.1% 52.2% 47.3% 26.7% 22.2% 33.4% 41.4% 77.8% 24.4% 3.0% 9.6% 0.0% 27.0% 0.0%

OFS 23.9 9.6 30.1 9.3 15.5 0.0 15.9 4.5 6.0 23.8 2.4 3.8 0.0 47.6

Midstream 34.8 35.4 22.6 55.2 62.3 44.8 24.4 4.1 69.6 64.3 70.5 75.5 61.3 34.2

Refining 9.2 2.5 0.0 8.8 0.0 21.8 18.2 13.6 0.0 8.9 17.5 20.7 11.7 18.3

Refining

Midstream

OFS

E&P

2.94.4

0.6 1.5 1.50.2

1.1

4.40.4

0.4 0.5

0.2

12.4 11.9

11.0

7.63.4

0.4

0.5

1.6

2.7

2.1

0.7$3.7

$17.9 $18.5

$15.6

$10.0

$5.6

$1.1

2016 2017 2018 2019 1H'19 2H'19 Q1'20

21.9


18.1

9.85.9

2.9 3.0 4.6

7.3

4.0 11.5

2.0

2.01.8

10.7

14.8 8.6

12.1

8.1

4.02.7

2.8

1.0

1.9

1.92.0

$30.6

$41.7

$38.2

$21.9

$13.1

$8.8$11.0

2016 2017 2018 2019 1H'19 2H'19 Q1'20

10.51 %

5.42 %5.31 %

4.0 %

6.0 %

8.0 %

10.0 %

12.45 %12.0 %

14.0 %

16.0 %

Jan-17 May-17 Jan-18 Sep-18 May-19 Jan-20

Yiel

dTo

Wor

st(%

)

Sep-17

E&P

May-18

Refining

Jan-19

OFS

Sep-19

Midstream


Energy HY Trading PerformanceSecondary Market Performance by Sub-Sector

Source: Barclays Live, Bloomberg; market data as of 14-Feb-2020Note: On June 5, 2017, $2.38bn across 4 tranches of Tesoro Corporation’s senior notes were removed while 1 tranche of PBF Holding’s 7.25% senior notes due 2025 were added to

the Refining Index constituents (D 134bps to overall index performance).

Week OverYE 2019 Last Week Current Week ∆ YTD 2020 ∆ 10 Year Tight ∆

E&P 9.28 % 10.08 % 10.51 % 43 bps 123 bps 589 bpsRefining 5.21 % 5.39 % 5.31 % (8) bps 11 bps 106 bpsOFS 11.86 % 12.36 % 12.45 % 9 bps 60 bps 726 bpsMidstream 5.45 % 5.55 % 5.42 % (12) bps (3) bps 86 bps

18

Broader IG Market Dynamics:Year-In-Review and Looking Ahead

IG Volumes Declined for the 2nd Time in the last 5y, 2020 Gross Supply Expected to be Down ~5-10% YoY

n 2019 was a robust year for markets with equities hitting record highs (S&P rose 29%, best annual return since 2013) and IG US corporates returning 14.6% (best since 2009)

n GS forecasts IG gross supply to be down ~5-10% in 2020; net supply to be down ~40%, implying the lowest net IG supply in a decade

— M&A related volume expected to slow ~20% YoY given weak backlog (5+ year low) and low CEO confidence (lowest since 2008)

n 2019 experienced the largest total ESG bond issuance volume with $27bn on record. ESG financing volumes are expected to continue acceleration into 2020

n LIBOR is predicted to go away at YE 2021 and the Secured Overnight Finance Rate (SOFR) was chosen as the USD LIBOR replacement1

— In the hybrid space, this has resulted in investor preference for securities that reference UST vs. LIBOR

2020 Supply Drivers

Sources: Goldman Sachs Investment Research / IBD Internal Estimates, Bloomberg, AMG Data Services, Dealogic, YieldBook1 https://www.newyorkfed.org/medialibrary/microsites/arrc/files/2017/ARRC-Minutes-August-1-2017.pdf. 2 Excludes callable securities. 3 TLAC: Total loss absorbing capacity.

Overview of the Energy Investment Grade Markets

0 0 0 0

$542 $539 $568 $622 $492 $433

$647 $778 $773 $822 $771 $829

$1,190 $1,318 $1,342

$1,445 $1,263 $1,262

$1,167

8 %20 % 20 % 13 %

20 % 15 %

0 %

10 %

20 %

30 %

40 %

50 %

$0

$250

$500

$750

$1,000

$1,250

$1,500

$1,750

$2,000

2014 2015 2016 2017 2018 2019 2020

Financials Corporates M&A as a % of Total

M&A Refinancing Interest Rates FIG Supply

20% 5% 5% 5%§ GS expects 2020 M&A supply to be

~$150bn, or down ~20% YoY§ The ~$39bn M&A backlog to enter

the year was at a 5+ year low vs. $64bn in YE 2018 and $120bn in YE 2017

§ Record low CEO confidence may limit additional announced M&A activity in Q1 2020

• Annual redemptions continue to increase, with ~$942bn expected in 2020, +7% vs. 2019

• Over 40% increase in IG liability management activity in 2019 vs. 2018; pick-up likely to continue in 2020

• Upside case: pre-funding of 2021 maturities

• Downside case: levered balance sheet companies (due to M&A funding) continue to refi with cash

• Outlook for interest rates to remain low will continue to support opportunistic funding

• Economic uncertainty related to coronavirus and slow European economic growth continue to provide downward pressure on U.S. rates

• Potentially offset by continued reverse Yankee issuance

• USD FIG redemptions expected to be up 12% in 2020

• Supply decreased by ~13% in 2019, largely due to TLAC funding in 2017 and 2018

• We continue to see some headwinds to Yankee bank supply as funding levels in EUR continue to look attractive and basis swap rises

0 0 0 0

19

USD Investment Grade Bond Market Update

Source: Advantage Data, Informa, Dealogic, Reuters; Data as of 28-Feb-2020.

Volatility Caused by Developments Around the Coronavirus Halt New Issue Activity


Issuance: Total 2020YTD Supply Up 11% vs. 2019YTD

Top Ten US Corporate Return Since 1990: 2020 YTD Return Up 12% vs. 2019 YTD

IG Corporate Index: Spreads Widen as Rates Reach Record Lows on back of Coronavirus Concerns

Investment Grade Fund Flows: Investors Continue to Have a Significant Amount of Cash to Put to Work

-48

107

229

86

176

71

-50

0

50

100

150

200

250

1 5 9 13 17 21 25 29 33 37 41 45 49

Cum

ulat

ive

Fund

Flo

ws

($bn

)

Week

2015 Flows 2016 Flows2017 Flows 2018 Flows2019 Flows 2020 Flows

$539 $568 $622 $492 $433 $120

$778 $773 $822 $771 $829

$135

$1,317 $1,341 $1,444

$1,263 $1,262

$254

20 % 20 %

13 %20 % 15 %

5 %0 %

10 %

20 %

30 %

40 %

50 %

$0

$250

$500

$750

$1,000

$1,250

$1,500

$1,750

$2,000

2015 2016 2017 2018 2019 2020

Financials Corporates M&A as a % of Total

75

95

115

135

155

175

195

215

235

2012 2013 2014 2015 2016 2017 2018 2019 2020

Inve

stm

ent G

rade

Cor

p Sp

read

(b

ps)

Avg. Since 2012 Avg. Since 2017

Min 96Max 118YTD ∆ 17

Current 118

IG Index 2020 YTD

22.2%

18.7% 18.5%

14.5%

12.2%10.3% 10.2% 10.1% 9.8% 9.1%

0 %

5 %

10 %

15 %

20 %

25 %

1995 2009 1991 2019 1993 2001 1997 2002 2012 2000

% C

hang

e in

Tot

al R

etur

n(v

s. P

rior Y

ear)

20

IG Midstream Markets Strong First Quarter

Increasing Use of Long End vs. 20192020YTD Volume already >50% of 2019

Strong Orderbook Subscription Due to Favorable Supply/Demand Technicals

Source: GS Internal, Bloomberg; market data as of Feb-2020

$17.8

$30.0

$36.9

$25.3

$13.5

0

10

20

30

40

'16 '17 '18 '19 '20 YTD

2% 3%

63%

20%

11%

11% 8%

36%

21% 25%

4% 6%

32%

49%

9%10% 12%

44%

26%

7%7%

16%

33% 33%

11%

0%

25%

50%

75%

≤ 3-Year 5 & 7-Year 10-Year 20 & 30-Year ≥ 60-Year

2016 2017 2018 2019 2020YTD

# of Tranches:Volume ($bn):


3.3x

5.5x6.2x

4.9x 4.9x

3.6x2.9x 3.2x

3.6x 3.2x 2.8x3.5x 3.4x 3.8x

3.2x 2.7x3.8x

01234567

Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20

4 4 7 12 10 7 11 13 21 18 4 7 9 6 11 6 16

$ 2.9 $ 2.2 $ 5.9 $ 6.8 $ 8.5 $ 4.8 $ 8.1 $ 7.7 $ 16.2 $ 12.6 $ 1.4 $ 6.7 $ 8.3 $ 4.5 $ 8.1 $ 4.0 $ 15.1

Ord

erbo

ok O

vers

ubsc

riptio

n (x

)

Avg. Oversubscription: 3.8x 2020: 3.8x

21

4.0x

2.2x2.9x 2.6x 2.4x

4.6x

3.4x 3.1x

4.3x4.7x

3.0x2.3x

3.1x

2.3x

4.2x

2.5x 2.7x

0

1

2

3

4

5

6

Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20

19 12 10 5 10 7 13 7 3 2 6 7 7 3 23 11 6

$ 21.8 $ 16.1 $ 8.3 $ 4.1 $ 6.6 $ 6.7 $ 9.9 $ 6.6 $ 1.8 $ 1.6 $ 6.0 $ 7.0 $ 6.1 $ 2.4 $ 25.0 $ 9.4 $ 5.5

Ord

erbo

ok O

vers

ubsc

riptio

n (x

)

+10.4Avg. Oversubscription: 3.2x 2020: 2.7x

Orderbook Demand Remains in Line with Historical Average

Annual IG Energy Issuance More than Doubled in 2019 Issuers Utilizing Balance of Tenors Across Curve

Strong 2019 for IG Upstream / Integrated with Lower Volumes in Q1

Note: Excludes issuance from national oil companies (NOCs)Source: Bloomberg, GS Internal; market data as of Feb-2020

# of Tranches:Volume ($bn):

20% 22% 21%29%

34%28% 28% 27%

45%

20%

62%

32%

50%

6%

25%

10%

19% 23%

0%

10%

20%

30%

40%

50%

60%

70%

'16 '17 '18 '19 '20 YTD

<3 5 & 7 10 20 & 30


$54.1

$24.8$16.1

$30.7(Other)

$5.5

$13.0 (OXY/APC)

0

10

20

30

40

50

60

'16 '17 '18 '19 '20 YTD

Issu

ance

($ b

n)

168%

$43.7

22

Energy IG Trading PerformanceAll-in Yields are at Historic Lows

Source: Advantage Data Inc as of 28-Feb-2020. Indices have a weighted average duration of ~8 years

2

3

4

5

6

7

Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20

Yiel

d to

Wor

st (%

)

IG OFS IG Midstream IG E&PCurrent 2.80 % 3.07 % 2.78 %Min over Last 5 years 2.74 % 3.03 % 2.72 %Date of Min over Last 5 years 2/25/2020 2/25/2020 2/25/2020


IG Midstream | 3.07 %

IG OFS | 2.80 %IG E&P | 2.78 %

23

Issuer

Sub-Sector Midstream Midstream Upstream Midstream Midstream Midstream Integrated Oil Field Services Midstream

Ratings (M / S) Baa1 / BBB+ Baa3 / BBB- Ba1 / BBB- Ba1 / BBB- Ba1 / BBB- Baa2 / BBB+ A1 / A- Baa1 / A- Baa2 / BBB

Pricing Date 1/6/2020 1/7/2020 1/8/2020 1/9/2020 1/16/2020 2/18/2020 2/19/2020 2/19/2020 2/19/2020

Size ($mm) 3,000 6,100 1,500 3,500 750 750 1,250 1,000 1,000

Use of Proceeds Repay debt and GCP Repay debt and GCP Repay debt and GCP Repay debt and GCP Repay debt Repay debt Repay debt Repay debt and GCP Repay debt and GCP

Tenorsn 10yn 30yn 40y

n 5yn 10yn 30yn PerpNC5n PerpNC10

n 5yn 10y

n 3y FRNn 5yn 10yn 30y

n 5yn 10y

n 2y FRN n 30y n 10y n 10y

Pricing

n 10yr: T+100 (2.800%)

n 31yr: T+145 (3.700%)

n 40yr: T+170 (3.950%)

n 5yr: T+130 (2.900%)

n 10yr: T+195 (3.750%)

n 30yr: T+270 (5.000%)

n PerpNC5 Pfd: 6.750%

n PerpNC10 Pfd: 7.125%

n 5yr: T+140 (3.000%)

n 10yr: T+190 (3.750%)

n 3y FRN: 3mL+85bps

n 5yr: T+145 (3.100%)

n 10yr: T+220 (4.050%)

n 30yr: T+295 (5.250%)

n 5yr: T+200 (3.600%)

n 10yr: T+300 (4.800%)

n 3mL+50bps n 30yr: T+107 (3.000%)

n 10yr: T+135 (2.920%)

n 10yr: T+135 (2.900%)

Avg. Spread Compressionfrom IPT

22 bps 18 bps 30 bps 47 bps 38 bps N/A 18 bps 15 bps 20 bps

Avg. OrderbookSubscription 3.5x 3.1x 3.8x 5.9x 3.4x N/A 2.6x 1.8x 1.9x

Additional Commentary -

Largest IG midstream offering

ever- - - -

Lowest 30yr coupon among the majors

ever- -

Busy Start to 2020 for IG Energy Issuance across Sub-Sectors and Ratings Spectrum

Source: Bloomberg, Informa.


24

n On 10-May-2019, Buckeye Partners LP (“Buckeye”) announced that IFMGlobal Infrastructure (“IFM”) will acquire the outstanding public common unitsof Buckeye for $41.50 per common unit (the “Acquisition”). The transaction isvalued at $10.3 billion enterprise value and $6.5 billion equity value

n On 16-October-2019, Buckeye successfully priced a $2,250 million covenant-lite first-lien secured term loan due 2026 at L+275 bps / 99.5 OID, proceedswill be used to partially fund the Acquisitionü Deal upsized by $500 million on the back of strong demandü Deal priced tight of talk at L+300-325 bpsü Multiple times oversubscribed, syndicated to a wide range of investorsü Structure allowed extant Unsecured and Jr. Subordinated Notes to stay

in place post-transactionn Goldman Sachs served as Joint Lead Arranger and M&A Advisor to IFM,

highlighting our leadership position across products in the Midstreamuniverse

Buckeye Partners $2,850mm Credit Facilities$600mm Revolving Credit Facility & $2.25bn Term Loan B

Transaction Overview

Summary Terms

Company Overview

PRIVATE AND CONFIDENTIAL. This document is being sent to you for your information only as an investment banking client of Goldman Sachs and should not be forwarded outside of your organization. This document has been prepared by the Investment Banking Division and is not a product of Goldman Sachs Global Investment Research. This document should not be used as a basis for trading in the securities or loans of the companies named herein or for any other investment decision. This document does not constitute an offer to sell the securities or loans of the companies named herein or a solicitation of proxies or votes and should not be construed as consisting of investment advice. Goldman Sachs does not provide accounting, tax, or legal advice.

Goldman Sachs Acted as Joint Lead Arranger and M&A Advisor to IFM

Sources: Company disclosures, press release, LCD news, market data as of 17-October-2019. 1 Equal to total partner’s capital per Q2 2019 financials.2 PF LTM 6/30/19 EBITDA excludes contributions from the divested DPTS asset package and VTTI of $13.7MM and $32.3MM, respectively.

Pro Forma Capitalization

n Buckeye owns and operates a network of integrated assets primarily involved inthe transportation, storage, processing and marketing of liquid petroleum productsacross the East Coast, Midwest and Gulf Coast regions of the United States, aswell as in the Caribbean. Primarily operates through two main business segments:

— Domestic Pipelines & Terminals (“DP&T”): ~6,000 miles of pipeline with over100 delivery locations and 110 active liquid petroleum product terminals with~56 MMbbls of liquid petroleum product storage capacity

— Global Marine Terminals (“GMT”): 7 liquid petroleum product terminals locatedin key global energy hubs with ~62 MMbbls of liquid petroleum product tankcapacity

n IFM is an infrastructure fund investing on behalf of institutional investors globally,with $90 billion of assets under management

Borrower n Buckeye PartnersRanking n Senior Secured

Corporate Ratings n Ba3 / BB / BB (Moody’s / S&P / Fitch)Tranche Ratings n Ba1 / BBB- / BB+ (Moody’s / S&P / Fitch)

Maturity n 7 yearsAmount n $2,250 millionMargin n L + 275 bps; 0.0% LIBOR floor

Issue Price n 99.50Yield to Maturity n ~5.0 %

Amortization n 1.0 % per annumCall Protection n 101 soft call for 6 months

NegativeCovenants

n Customary for facilities of this type and including limitations on indebtedness, liens, asset sales, mergers and acquisitions, transactions with affiliates, investments, and restricted payments

Financial Covenant n Covenant-lite

US$ millions 6/30/2019 Adj. PFxLTM

EBITDACash on balance sheet $ 6 $(6) $ 0

New $600mm Revolving Credit Facility 100 100 0.1 xNew Senior Secured Term Loan B 2,250 2,250 2.7 xTotal Secured Debt $ 2,350 $ 2,350 2.7 xExisting $1.5bn Revolving Credit Facility 170 (170) 0 2.7 xUnsecured Notes due 2021-2044 3,300 3,300 6.5 x6.375% Jr. Sub Notes due 2078 400 400 6.9 xTotal Unsecured Debt $ 3,870 $ 3,700 4.2 xTotal Debt $ 3,870 $ 6,050 6.9 xEquity Value1 4,085 411 4,496 12.1 xTotal capitalization $ 7,955 $ 10,546 12.1 x

PF LTM 6/30/19 Adj. EBITDA2 $ 872

25

Saudi Arabian Oil Company (“Saudi Aramco”)$12bn Debut Senior Unsecured Notes OfferingGoldman Sachs International acted as Joint Lead Manager

1 Based on KSA trading levels at time IPTs were announcedSource: Bloomberg, Dealogic, GS Syndicate as of 10-Apr-2019, Pricing Term Sheet dated 9-Apr-2019

Summary Term SheetTransaction Overview, Highlights, and Key Takeaways

n On April 9th, 2019, Saudi Aramco (A1 / A+), the world’s largest integrated oil and gas company, priced its $12bn debut notes offering across 3-year, 5-year, 10-year, 20-year and 30-year tenors

— Marketing was announced on April 1st, consisting of a week-long roadshow covering Asia, London and the US

— Capitalizing on the strong momentum built from engagement with 350+ investors, Saudi Aramco announced the transaction on April 8th at 8:30am ET

n Transaction Highlights:

ü 2nd largest Natural Resources bond financing; matched the largest Oil & Gas bond financing ever

ü Orderbook peaked at near triple-digit billions; final orderbook ranked top 5 largest of all time

— Orderbook was dominated by US investors (50% of final allocations distributed to North America, 24% Europe, 19% APAC and 7% MEA)

ü Priced ~20bps through the Kingdom of Saudi Arabia’s (“KSA”) secondary levels, despite being 100% owned by the KSA1

ü KSA bonds tightened ~15bps on average from marketing announcement to pricing, materially outperforming the broader market

ü As its first step towards building a long-term relationship with the capital markets, the Company publicly disclosed many details of its business for the first time including financials

n Key Takeaways:— Depth of Demand in USD IG: US fundamental-focused IG investors drove pricing

leverage across an orderbook that was top 5 largest of all time

— Strategic Positioning of the Unique Credit Story was Key: Despite A1/A+ credit ratings (constrained by the KSA’s ratings), Saudi Aramco priced closer to the higher-rated integrated oil majors by emphasizing its unique standalone credit attributes and addressing key areas of focus for IG investors

— Effective Marketing Pays Off: The Company met with 350+ investors across a mix of in-person meetings and telephonics, of which a majority placed orders comprising more than 75% of final allocation

Overview of the Energy Investment Grade MarketsPRIVATE AND CONFIDENTIAL. This document is being sent to you for your information only as an Investment Banking client of Goldman Sachs and should not be forwarded outside of your firm. This document has been prepared by the Investment Banking Division and is not a product of the research department of Goldman Sachs. This document should not be used as a basis for trading in the securities or loans of the companies named herein or for any other investment decision. This document does not constitute an offer to sell the securities or loans of the companies named herein or a solicitation of proxies or votes and should not be construed as consisting of investment advice.

Issuer Saudi Arabian Oil Company (“Saudi Aramco”)Issuer Ratings A1 (Moody’s) (stable) / A+ (Fitch) (stable)Use of Proceeds General Corporate PurposesFormat 144A / Reg SStatus Senior UnsecuredPricing Date 09-April-2019

Maturity 16-Apr-2022 16-Apr-2024 16-Apr-2029 16-Apr-2039 16-Apr-2049

Size US$1bn US$2bn US$3bn US$3bn US$3bnCoupon (S.A 30/360) 2.750% 2.875% 3.500% 4.250% 4.375%

Final Spread T+55 T+75 T+105 T+140 T+155Listing Regulated Market of the London Stock Exchange plc.Joint Lead Managers JP Morgan | Morgan Stanley | Citi | Goldman Sachs | HSBC | NCB

Investor Allocations

By Investor TypeBy Geography

North America

50%

Europe24%

APAC19%

MEA7%

Asset Manager

59%Banks/Private Banks

15%

Insurance/Pension Funds14%

Hedge Funds9%

Other3%

91% Buy-and-Hold Accounts

26

Cheniere Corpus Christi Holdings LLC (“CCH”)$1.5bn Debut IG Senior Secured Notes OfferingGoldman Sachs & Co. LLC acted as Joint Active Bookrunner

1Excludes Cheniere Energy, Inc.’s 2.25% Convertible Senior Notes issued in 2005Source: Bloomberg, GS Internal as of 11-Nov-2019, Pricing Term Sheet dated 6-Nov-2019

Summary Term SheetTransaction Overview, Highlights, and Key Takeaways

n On November 6th, 2019, CCH (Ba1 / BBB- / BBB-), a subsidiary of Cheniere Energy, Inc. (NYSE: LNG), priced its $1.5bn debut 10-year secured notes offering

— Marketing was announced on November 5th, consisting of both a national investor call and small group investor calls

— Capitalizing on the strong momentum built from engagement with 100+ investors, CCH announced the transaction on November 6th at 8:00am ET

n Transaction Highlights:

ü Credit Story Resonates: CCH effectively communicated its credit story through a robust marketing effort to achieve the most deeply negative new issue concession in the past 5 years while still upsizing the transaction by $500mm

ü Repriced CCH’s Credit Curve: The migration of IG investors into the broader CCH debt complex drove CCH’s existing 2027s ~20bps tighter on the day

ü Lowest Coupon in the Cheniere Family Ever: The 3.70% 10-year coupon that CCH achieved was the lowest coupon issued among all Cheniere entities ever, regardless of tenor1

n Key Takeaways:— Strategic Positioning of CCH’s Unique Credit Story was Key: Despite

entering the day with CCH’s existing notes trading at a ~40bps spread to Sabine Pass Liquefaction (“SPL”) (Cheniere’s other IG entity), a carefully crafted credit story that highlighted many shared credit attributes between CCH and SPL allowed CCH to achieve only a 10-15bps spread to SPL’s secondaries at final pricing

— Importance of Conservative Price Talk: Conservative IPTs to begin the price discovery process allowed CCH to build momentum and drive pricing leverage resulting in 35bps of spread compression from IPTs, while still maintaining orderbook integrity with 94% of allocations to buy-and-hold accounts

— Effective Marketing Pays Off: The Company met with 100+ investors across a mix of in-person meetings, a national investor call, and small group calls, of which a majority placed orders comprising ~74% of final allocations

Overview of the Energy Investment Grade MarketsPRIVATE AND CONFIDENTIAL. This document is being sent to you for your information only as an Investment Banking client of Goldman Sachs and should not be forwarded outside of your firm. This document has been prepared by the Investment Banking Division and is not a product of the research department of Goldman Sachs. This document should not be used as a basis for trading in the securities or loans of the companies named herein or for any other investment decision. This document does not constitute an offer to sell the securities or loans of the companies named herein or a solicitation of proxies or votes and should not be construed as consisting of investment advice.

Issuer Cheniere Corpus Christi Holdings LLC (“CCH”)Issuer Ratings Ba1 (P) / BBB- (S) / BBB- (S) by Moody’s / S&P / FitchUse of Proceeds To prepay a portion of the Term Loan FacilityFormat 144A / Reg S (with Registration Rights)Status Senior SecuredPricing Date 06-November-2019Maturity 15-Nov-2029Size US$1.5bnCoupon (S.A 30/360) 3.700%Final Spread T+190Reoffer Yield 3.709%

Denoms $2,000 x $1,000

Joint Active Bookrunners BAML | Goldman Sachs | ING | Scotiabank

Investor Allocations

Investor Mix (by # of investors)Investor Mix (by $ amount)

Asset Manager69%

Insurance16%

Bank4%

Hedge Fund6%

Pension Fund5%

Asset Manager43%

Insurance17%Bank

2%

Hedge Fund31%

Pension Fund7%

94% “Buy and Hold” Investors

2. Preferred Equity As a Flexible Tool

• Preferred equity is an attractive source of capital to the energy industry when:o Private equity is not available or attractiveo There is no market for common equityo Debt financing is less attractive or not availableo There are institutional or affiliated sources of capital

• Provides flexibilityØTermsØPartial equity treatment for issuer (see S&P guidance in July 2019)ØDebt-like features for investorsØMay limit dilution

• In energy industry, privately placed bespoke preferred equity has been a useful toolo Registered offerings of retail marketed preferred stock/units are no longer in use

Preferred Equity: Overview

Gibson Dunn 28

• Main features of preferred stock:o Dividend paymentsØRate, Form, Non/Cumulative, Restrictions, PIK

o Liquidation preferencesØLiquidation value, any adjustments to value, accrued and unpaid dividends

o Redemption rightsØMandatory/optional, triggers, price

o Voting powerso Conversion rightso Pre-emptive rightso Ranking within capital structure

• Primary objectives for the investment: o Fixed income returns; less volatility than common equityo Capital appreciation with down-side protection superior to common stock

Preferred Equity: Overview (Cont’d)

Gibson Dunn 29

• Potentially raise more capital than in PIPE of common equityo Lack of market for public equity or extreme dilution at low stock price

• Customize terms to meet the needs of the issuer and investor• Potentially issued at cheaper cost of capital than private equity or common equity• Current management can maintain control while raising large amount of capital

o Investor can protect investment with targeted governance rightso Particularly relevant for asset development financing

• If public issuer, shareholder consent is required if voting power of preferred stock sold at a below market price is greater than 20% of voting shares outstanding or if purchasers include officers or directors o Enter the “Bridge To Common” - If structured correctly, may allow for capital

raise above these limitationso Shareholder approval may also be required if insufficient authorized and

unissued shares available

Preferred Equity: Considerations

Gibson Dunn 30

• Coupon payments likely higher than debto PIK option may be important

• Cross-default provisions may cause issues

• Approval rights or other terms can limit flexibility when addressing balance sheet issues (eg, refinancing debt or selling assets)

• Dilution of current investors if convertible• Could have ratings implications on the capital structure if treated as a debt security• Does not improve liquidity long-term• Process is longer than a public offering

o Negotiating terms can be lengthyo Obtaining consents may increase costo May involve registration of underlying common or stockholder vote (after receive

the capital)

Preferred Equity: Considerations (Cont’d)

Gibson Dunn 31

• Convertible Preferred Stock (or Units for MLPs)o Perpetualo Dividend (quarterly)ØSome have PIK option; limited examples of common stock option

o Convertible into common equity at valuation based on common equity (upside)ØRecently, 12-25% premium to current common price; may be time limited

o Issuer may force conversion at pricing threshold based on common equityo Typically no call for some period of time (eg, five years for equity treatment)ØRecently, add optionality for call with proceeds from certain equity offerings

o Typically no put (other than change of control) for equity treatmentØ If put, often at par plus any accrued PIK amounts

o Recently, investors require ability to put and opt for cash instead of conversiono Limited governance rights focused on adverse impact on preferred stocko Transfer restrictions; issuer may require standstillo Placement agent fee or commitment fee; reimburse investor’s expenses

Preferred Equity: Forms

Gibson Dunn 32

• Fixed Return Preferred Stocko Typically 5-10 year term o Might be issued at subsidiary level if tied to financing a specific projecto Provides fixed returnØ If dividends limited by debt agreements, ratchet up liquidation preference

o Typically includes put after period of timeo Typically includes call right above minimum return level (upside)o May be coupled with equity kicker, such as warrantso Governance requirements are stronger and may be tied to use of proceedsØDistributions on common equity may be permitted subject to conditions (eg,

satisfaction of leverage ratio test and current payment of dividends)o Transaction or commitment fee; reimburse investor’s expenses

Preferred Equity: Forms (Cont’d)

Gibson Dunn 33

3. Developments in High Yield Debt Offerings

• Overviewo High Yield bonds rated below investment grade (rating is below BBB-/Baa3)o High Yield bonds and Investment Grade bondsØDifferent investors/buyersØBonds have vastly different covenants

o Both High Yield and Investment Grade bonds are a significant source of capital to the energy industry

High Yield and Investment Grade Offerings: Overview

Gibson Dunn 35

• Senior to equity but typically junior to bank debt (bank debt is typically secured for high yield issuers)

• Significantly less restrictive than bank debt• Generally not sold in issues of less than $300 million• Typically bears interest at a fixed rate (unlike bank debt which bears interest at a

floating rate)• Interest payments typically made semi-annually (bank debt interest payments are

made at least quarterly)• Interest may be payable in cash or in PIK notes (“payment in kind”)• “Discount notes” accrete principal, which is essentially PIK interest• Payment of principal on the notes is typically required to be made, in full, at final

maturity• Term is generally longer than bank debt's (e.g., 7-10 years versus 4-6 years)

High Yield Offerings: Overview

Gibson Dunn 36

• Unlike traditional credit facilities, high yield bonds contain call protection

• Optional prepayment: normally subject to a “no-call” period (5 years for 10-year notes, 3 to 4 years for 7-year notes)o Bank debt is usually optionally prepayable at any time without premiumo During the no-call period, either prohibited from prepaying the notes or must

pay a “make-whole” premium (i.e. present value of all remaining payments during the no call period discounted by the treasury rate plus a small margin)

o After the no-call period, the premium may be a set percentage of the principal amount (half the coupon in a 10 year deal with a 5 year no-call), where the percentage declines over time

• Prepayment upon a Change of Control: the issuer must offer to repurchase the notes at 101% of the principal amounto Unlike a bank deal, a Change of Control does not trigger an Event of Default

High Yield Offerings: Overview (Cont'd)

Gibson Dunn 37

Covenants: Affirmative and negative covenants are designed to ensure that the issuer will stay financially healthy and will use money wisely, and that the noteholders will stay informed on the status of the issuer.

• Since the directors of the issuer generally have no fiduciary duty to the debtholders, the debtholders use contractual obligations to protect their interests.

• The terms will be quite issuer-specific, since the risks of the issuer (which the noteholders will want to limit) and the needs of the issuer (for which the issuer will want to maintain flexibility) will vary.

• Terms of high-yield deals need to be more permissive than terms of bank deals because of the difficulty of obtaining consents from a widely dispersed group of high-yield note holders.o When negotiating high yield covenants, need to think about issuer’s plans over

the next several years to build in appropriate flexibility


Gibson Dunn 38

• Negative covenants restrict, among other things:o Asset Saleso Restricted payments (dividends to equity, payments of more junior debt and

certain investments)o Incurrence of debto “Dividend blockers” (restrictions on dividends, loans and asset transfers from

subsidiaries of the issuer to the issuer)o Transactions with affiliateso Engaging in unrelated businesseso Mergers and sales of all or substantially all assets

• Affirmative covenants require, among other things:o Guarantees from new domestic subsidiarieso Delivery of financial statements

• Do not contain maintenance covenants


Gibson Dunn 39

• Guarantees:o Prevent structural subordinationo Typically are required if subsidiary guarantees other indebtedness (and

correspondingly release if other indebtedness released)

• Security:o Typically, high yield bonds are unsecuredo Secured bonds usually issued by distressed issuers

• Events of Default:o Non-payment of principal, premium or interesto Non-performance of covenantso Acceleration of other debto Assessment of certain judgmentso Bankruptcy


Gibson Dunn 40

• If an event of default exists, a set minimum percentage of the holders (typically 25%) may elect to accelerate the debt and all outstanding amounts immediately are due

• High-yield events of default are usually more permissive than covenants in a bank deal, including “covenant lite” deals


Gibson Dunn 41

• Offering memorandum or prospectus, including a Description of Notes section (the “OM”)o Typically look to disclosure requirements for registered deals even if not

registered

• Indenture

• Notes

• Purchase Agreement

• Registration Rights Agreement (except in “144A for life” or registered deals)

Gibson Dunn 42


• Ability to Issue Secured Debt – the “Hookie Duke”

• The liens covenant and the debt covenant worked together to limit the amount of secured debt

• Traditionally, liens are limited to the specified credit facility basket

• Many energy companies have a more aggressive provision which allows any “Credit Facility” to be securedo Allows ratio debt and refinancing debt to be secured

• During the downturns in 2014 / 2015 and 2016 issuers used these provisions to raise secured debt and exchange unsecured debt for secured debt (“priming”)

• New issuers should expect some resistance to including this exception

High Yield Offerings: Selected Issues

Gibson Dunn 43

• Redemption Provisions• The general construct of having an equity clawback, a T+50 make-whole and a fixed

redemption based on the coupon hasn’t changed• Two changes in the redemption mechanics:

o Shortening the notice period on a redemptiono Conditional redemption

High Yield Offerings: Selected Issues (Cont'd)

Gibson Dunn 44

• Change of Control covenant requires the issuer to make an offer to purchase the bonds in the event the issuer undergoes a change of control (so the bondholders have a put right)

• Two trends in the Change of Control Covenanto “Two-Trigger” Change of Control – a change of control following by a ratings

decline within a certain periodØMore for seasoned issuers

o No Change of Control is no person owns more than 50% of the voting stock of a resulting holding companyØViewed as pretty aggressive


Gibson Dunn 45

• Unrestricted Subsidiarieso Not subject to the covenants, but limitations on counting financial results for

meeting covenants• Customary requirements:

o Able to make an investment equal to the FMV of the subsidiaryo All contracts between the issuer/restricted subsidiaries and the unrestricted

subsidiary must be arms lengtho Issuer does not have an obligation to subscribe for additional equity interests or

preserve financial condition• If creating a Joint Venture, the JV partner typically does not want the subsidiary

subject to the covenantso The last requirement can be problematic


Gibson Dunn 46

4. SPACs Continue and Change Course

48

General15%

TMT10%

NR15%

FIG15%

CRG21%

IND18%

RE3%

HC3%

SPAC Market Remains Active

While The Number of SPAC IPOs Has Steadily Grown… …SPAC IPO Size Is Declining…

…As A Number of SPACs Continue to Search for Deals SPAC Searching by Sector

Source: Dealogic


$469

$336

$264 $265

2016 2017 2018 2019

Aver

age

IPO

Siz

e ($

mm

)

8

2637

48

$ 3.8

$ 8.7 $ 9.8

$ 12.7

$ 0.0

$ 2.0

$ 4.0

$ 6.0

$ 8.0

$ 10.0

$ 12.0

$ 14.0

0

10

20

30

40

50

60

2016 2017 2018 2019

Tran

sact

ion

Valu

e ($

bn)

Num

ber o

f Tra

nsac

tions

Number of Transactions Transaction Value

Capital Searching for Acquisition ($bn)Number of SPACs

21

38

16

1037

48

2018 2019

Announced DeSPACsSearching for Acquisition

$ 5.4

$ 9.5

2018 2019IPO Year IPO Year

RE 3%

HE 3%

49

Tortoise Acquisition Corp. $225 Million Initial Public OfferingGoldman Sachs Served as Active Bookrunner

Transaction Details

Pricing Date: February 27th, 2019

Ticker / Exchange: SHLL.U / NYSE

Size: Base: $225mm / 22.5mm unitsw/ Shoe: $259mm / 25.9mm units

Fixed Price: $10.00 per unit

Unit Structure: Each unit consists of (i) 1 share of Class A common stock and (ii) 1 / 2 of a warrant

Sponsor: Tortoise Sponsor LLC

Forward PurchaseAgreement

$150 of committed capital from CIBC Atlantic Trust at the closing of the initial business combination

Amount Held in Trust: Equal to 100% of the offering proceeds

Target Industry: Energy

Acquisition Period: 24 months

Sponsor Promote: 20% of common stock

Bookrunners: Barclays, Goldman Sachs, UBS

Marketing: 4 day roadshow, touching approximately 25 investors

Key Offering Highlights n Premier Sponsor in Tortoise with long track record in the Energy sector

— Tortoise currently manages ~$18bn of AUM and is a market leader in publicly traded energy investments

— Tortoise is the largest institutional investor in the midstream space—its holdings are more than 60% greater than the second largest investor in the AMZ

— Tortoise’s core Midstream strategy has delivered investors a 10 year annualized return of 13.6% vs. the Alerian of 9.6% (400bps of outperformance)

— Experienced direct and PIPE investor, participating in over 85 financings of more than $2.7bn of capital¹

n Attractive entry point with respect to market and valuation dislocation, depressed commodity prices and capital starved assets— Injecting growth capital and providing public market sponsorship for energy

asset class with huge capital needsn Comprehensive marketing campaign led to high quality placement and an

oversubscribed book— Deliberate and tailored investor outreach aimed at sophisticated, energy-

dedicated hedge funds, long-only mutual funds active in the SPAC space and dedicated SPAC investors led to a 70% 1x1 hit rate

n Up to $150mm committed from CIBC Atlantic Trust in the form of a forward purchase agreement provided third party validation and alignment from a natural investor in the sector

Source: Dealogic, Offering Prospectus, BloombergNote: SPAC investors categorized by common SPAC IPO participants. ¹ Source: PrivateRaise as of 27-Feb-2019

Company Overviewn Tortoise Acquisition Corp. has an experienced team led by Vince Cubbage,

the Founder and CEO of Lightfoot Capital and former Chairman and CEO of Arc Logistics (NYSE:ARCX)— At Lightfoot, Vince delivered investors an 11-year CAGR of 20% and MOIC of

2.8x— Dedicated and experienced team with deep industry and financial expertise,

focused on evaluating and prioritizing assets with potential to generate highest risk-adjusted returns for shareholders

n Board of Directors composed of CEO & Director of GasLog Partners (Andrew Orekar), Founder and President of Carta Energy (Sidney Tassin) and Director of Andeavor Logistics and MPLX (Frank Semple)

Institutional vs.Retail

GeographicBreakdown

Fundamental vs. Technical

Distribution Overview

Institution99%

Retail1%

US82%

CAN16%

Other2%

Fundamental72%


· Four oil and gas SPAC IPOs in 2019:

· None in 2020 to date

Current Oil and Gas SPAC Activity

Gibson Dunn 50

Name Date SponsorTortoise Acquisition Corp. March 2019 Tortoise

RMG Acquisition Corp. February 2019 Riverside Management Group

Switchback Energy Acquisition Corp.

August 2019 NGP Energy CaopitalManagement, LLC

Alussa Energy Acquisition Corp. November 2019 Alussa Energy (Daniel Barcelo)

· There are currently seven oil and gas SPACs looking for IBC targets:

· The four oil and gas SPACs that just completed IPOs in 2019 and have IBC deadlines in 2021

· Trident Acquisitions Corp. - extended IBC deadline twice; current IBC deadline June 2020

· AMCI Acquisition Corp. - IBC deadline August 2020· Spartan Energy Acquisition Corp. - IBC deadline August 2020

• HL Acquisitions Corp. has a pending IBC - In Dec 2019, announced acquisition of 100% equity interest of Chi Energie (Singapore) PTE Ltd. from Sila Energy Holding to develop a modular LNG business to supply the remote power, oilfield service and transportation sectors in Oman

Current Oil and Gas SPAC Activity

Gibson Dunn 51

• No requirement a SPAC acquire 100% of its target

• Under stock exchange rules, the De-SPAC transaction must be with one or more target businesses or assets that together have an aggregate fair market value of at least 80% of the assets held in the trust account (excluding the deferred underwriting discount and taxes payable on the interest earned on the trust account) at the time of signing a definitive agreement for the De-SPAC transaction.

• Altus Midstream

Gibson Dunn 52

SPACs as Minority Investors

Stellar Acquisition IIIIPO Prospectus –

• “While our efforts in identifying a prospective target business for our initial business combination will not be limited to a particular industry or geographic region, we will initially focus our search on identifying a prospective target business in the international energy logistics industry”

• “We believe that the international oil and gas logistics, land and maritime oil and gas transportation, terminal and energy storage industries, which we refer to in this prospectus as the “energy logistics industry,” presents attractive opportunities for consolidation and growth and a favorable area in which to attempt to consummate a business combination. Our executive officers and directors have an aggregate of over 80 years of experience in the energy logistics industry, as managers, principals or directors of major worldwide maritime companies, where they have sourced, negotiated and structured transactions in these industries.”

Gibson Dunn 53

Oil and Gas SPAC Change of Direction

Initial Business Combination -

In December 2018, acquired Phunware, Inc. - a provider of Multiscreen-as-a-Service (“MaaS”) solutions, an integrated customer engagement platform that enables organizations to develop customized, immersive, branded mobile applications.

Gibson Dunn 54

Oil and Gas SPAC Change of Direction – Cont.

Black Ridge Acquisition Corp.IPO Prospectus • “We intend to focus our search on businesses in the energy or energy-related

industries with an emphasis on opportunities in the upstream oil and gas industry in North America where our management team’s networks and experience are suited although our efforts to identify a prospective target business will not be limited to a particular industry or geographic region.”

• “We will seek to capitalize on the significant operating and investing experience and contacts of our officers and directors in consummating an initial business combination. Kenneth DeCubellis, our chairman of the board and chief executive officer, has over 30 years of experience, primarily in the oil and gas and other energy-related industries, including 10 years at Exxon Mobil Corp. Mr. DeCubellis has served as chief executive officer of our sponsor, Black Ridge Oil & Gas, Inc., since November 2011. Black Ridge Oil & Gas, Inc. is an oil and gas company that pursues distressed asset acquisitions in all unconventional, onshore U.S. oil and gas basins, including over $100 million previously invested in the Williston Basin in North Dakota and Montana.”

Gibson Dunn 55


Initial Business Combination -• In August 2019, acquired several sports entertainment companies, including the

creator of the World Poker Tour® and arenas and online card and board games operations in China, the United States and Europe.

Gibson Dunn 56


5. Prospects for Rights Offerings

• Simply a dividend to all shareholder pro rata of a right to acquire equity for a set cash price

• Prospective option for raising capitalo Concern over dilution in low equity price environmentØGives all shareholders opportunity to participate

o Need for capital but limited interest from new investorso Relative ease of executiono No traditional public offering expenseso Risk of funds shorting stock during public announcemento Longer process than some primary issuances (2 months)o Uncertainty as to amount of proceeds, unless employ backstop commitment

• Board of directors must act in accordance with duties for declaring a dividend and manage any conflicts of interests

Gibson Dunn 58

Rights Offerings - Considerations

• Declare dividend of subscription rights for common stock on pro rata basiso Price will be discount to market

• Registered and transferable rights can be issued using registration statement that registers the rights before declaration o Unregistered and nontransferable rights can be issued as a dividend without

registration under “no sale” theory• Rights offering is open 16-40 days (NYSE requires 16-day minimum)• No special offering documents; SEC reports can satisfy information requirement• Committed backstop can provide certainty of some amount of proceeds

o Can offer “overallotment” option to all shareholders on pro rata basis• No shareholder approval required unless issuer pays compensation for backstop • Under SEC Staff guidance, must register shares of common stock underlying rights

only after rights are outstanding (cannot use existing shelf)• Can involve concurrent PIPE to raise additional capital or receive unused backstop

commitment capital

Gibson Dunn 59

Rights Offerings - Process

6. Direct Listings Evolve

• Direct Listing:o listing of a privately held company’s stock for trading o on a national stock exchange (NYSE or Nasdaq)o without conducting an underwritten offering, spin-off or transfer quotation from another

regulated stock exchange

• Advantage of a Direct Listing as Compared to an IPO

o No Underwriting Fees or Roadshows

o No Lock-up Agreements - shareholders can immediately sell

• Currently no ability for the issuer to raise capital through a primary offering in a direct listing but the NYSE has proposed amendments to its listing standards to permit such a primary offering

• A privately-held company seeking to conduct a primary offering in connection with a direct listing under the NYSE’s revised proposal would qualify for such a transaction if:

o the company issues and sells at least $100 million in market value in the opening auction on the first day of listing; or

o the market value of shares sold in the opening auction by such company and the market value of publicly held shares immediately prior to listing, together, exceed $250 million

Gibson Dunn 61

Direct Listing

Current NYSE Direct Listing Rules Proposed NYSE Rule Change (Pending SEC approval by March 29, 2020)

only allows secondary direct listing, i.e., registered sale by selling shareholders

allows “Primary Direct Floor Listing,” which permits a company to sell shares on its own behalf in connection with its initial listing upon effectiveness of a registration statement, without a traditional underwritten public offering

requires the Company to demonstrate “it has $250 million in market value of publicly-held shares at the time of listing.”

dispenses with such requirement for primary direct listing, as long as (i) the company sold at least $100 million in shares in the opening auction on the first day of listing, or (ii) the market value of shares sold in the opening auction by such company and the market value of publicly held shares immediately prior to listing, together, exceed $250 million

company is required to have at least 400 round lot holders and 1.1 million publicly held shares at the time of listing

90-trading-day grace period to demonstrate compliance with the distribution requirements, so long as the company conducts (i) a primary offering of at least $250 million in market value of shares in the opening auction on the initial listing date, (ii) a secondary direct listing that demonstrates $350 million in market value of publicly held shares or (iii) a primary offering in which the aggregate of the market value of publicly held shares immediately prior to listing and the market value of shares sold by the company in the opening auction is at least $350 million.

Gibson Dunn 62

NYSE Proposed Rule Change Regarding Direct Listing

A Current Guide to Direct Listings (https://www.gibsondunn.com/a-current-guide-to-direct-listings/)

An Interim Update on Direct Listing Rules (https://www.securitiesregulationmonitor.com/Lists/Posts/Post.aspx?ID=386)

Direct Listing Update: Revised Proposal for Primary Offerings (https://www.securitiesregulationmonitor.com/Lists/Posts/Post.aspx?List=f3551fe8%2D411e%2D4ea4%2D830c%2Dd680a8c0da43&ID=387&Web=97364e78%2Dc7b4%2D4464%2Da28c%2Dfd4eea1956ac)

Gibson Dunn 63

NYSE Proposed Rule Change Regarding Direct Listing

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