QR Energy LP — Merger or Acquisition (September 2014)
35 slides from QR Energy LP's merger presentation, Sep 18, 2014
Slide 1: Investor Presentation
NASDAQ: BBEP INVESTOR PRESENTATION BREITBURN ENERGY PARTNERS LP JAMES G. JACKSON EXECUTIVE VICE PRESIDENT CHIEF FINANCIAL OFFICER SEPTEMBER 2014
Slide 2: Cautionary Statement Regarding Forward-Looking Information
pg. 2 This presentation contains forward - looking statements relating to Breitburn’s operations that are based on management’s current expectations, estimates and projections about its operations. Words and phrases such as “expected,” “guidance,” “expansion,” “opportunities,” “target,” “estimated,”
Slide 3: Breitburn: Key Investment Considerations
STRONG HEDGE BOOK & FINANCIAL FLEXIBILITY COMMITTED TO DISTRIBUTION GROWTH E&P MLP OVER 25 YEARS OF SUCCESSFUL OPERATORSHIP pg. 3 • Predecessor founded in 1988, 2006 IPO • Focus on acquisition, exploitation, and production of oil and gas properties • Enterprise value: ~$4.7 billion (1) BREITBURN: KE
Slide 4: QR Energy Acquisition
NASDAQ: BBEP QR ENERGY ACQUISITION
Slide 5: Transaction Overview & Rationale
CONSIDERATION pg. 5 • 0.9856 of a BBEP unit for each unit of QRE (includes Common and Class B units) – Subject to maximum of approximately 72mm total BBEP units issued • QRE Class C Convertible Preferred units redeemed for cash at $350 million face value TRANSACTION OVERVIEW & RATIONALE TRANSACTION
Slide 6: Combined Operating Areas
California 2013 Avg. Daily Production 4,645 Boe/d Est. Proved Reserves 23.3 M m b oe Proved Reserve Life ~14 years Texas 2013 Avg. Daily Production 3,899 Boe/d Est. Proved Reserves 40.9 M m b oe Proved Reserve Life ~29 years Oklahoma/New Mexico 2013 Avg. Daily Production 7,204 Boe/d Est. Proved Rese
Slide 7: Combination of Growing Businesses
pg. 7 COMBINATION OF GROWING BUSINESSES Estimated Proved Reserves (2) Average Daily Production (3) Distribution per Unit (1) (1) 2011 through 2013 are based on actual reported distribution per unit. For 2014E, reflects actual 1Q and 2Q distribution per u nit declared and 2Q distribution per unit hel
Slide 8: Significantly Enhances Scale vs. Peers
pg. 8 SIGNIFICANTLY ENHANCES SCALE VS. PEERS $ 22.0 323.4 298.8 262.3 214.3 198.6 180.0 142.6 109.1 57.7 30.1 20.6 15.5 - 50.0 100.0 150.0 200.0 250.0 300.0 350.0 400.0 Peer 1 PF Breitburn Peer 2 Peer 3 Breitburn Peer 4 Peer 5 Peer 6 QR Energy Peer 7 Peer 8 Peer 9 Peer 10 (Mmboe) 1,405.7 Enterprise
Slide 9: Pro Forma Commodity Price Protection Portfolio: FY2015–FY2018
0% 20% 40% 60% 80% 100% FY 2015 FY 2016 FY 2017 FY 2018 69% 57% 35% 1% 67% 57% 35% 1% 73% 58% 35% 2% PRO FORMA COMMODITY PRICE PROTECTION PORTFOLIO: FY 2015 – FY 2018 • The chart assumes FY 2015 – FY 2018 expected production remains constant at the midpoint of BBEP’s recently announced revised guida
Slide 10: Acquisitions Overview
NASDAQ: BBEP ACQUISITIONS OVERVIEW
Slide 11: Disciplined Acquisition Strategy
• Breitburn acquisition strategy unchanged for 25 years since the founding of its original company • 15 person business development and acquisition evaluation team • Acquire mature oil and gas properties with stable, long - life production and low - risk drilling opportunities • 2013 - $1.2 billion
Slide 12: Acquisition Strategy Promotes High Margin, High Growth Reserve Base
• Focus on expanding oil / liquids opportunities • Acquisitions were key drivers of increased oil exposure • 60% of estimated proved reserves are oil / NGLs as of YE 2013; 66% including QR Energy • Long - term option on natural gas INCREASED FOCUS ON OIL pg. 12 • Provides multi - year organic growth
Slide 13: Financial Overview
NASDAQ: BBEP FINANCIAL OVERVIEW
Slide 14: Successful Operating Plan That Pays
SEQUENTIAL DISTRIBUTION GROWTH • Consistent distribution growth for the past 4 years • 2013 distribution growth of ~4.8% (1) ACCRETIVE ACQUISITIONS • Acquire assets that complement existing portfolio and are accretive to DCF and NAV per unit EFFECTIVE HEDGING STRATEGY • Mitigate commodity price vola
Slide 15: BBEP: Last Five Years Operating and Financial Performance
pg. 15 BBEP: LAST FIVE YEARS OPERATING AND FINANCIAL PERFORMANCE ADJUSTED EBITDA (1) ($MM) 17% CAGR PRODUCTION (MBOE) 14% CAGR (1) Adjusted EBITDA conformed to exclude net operating cash flow from acquisitions from the effective date through the closing date. Strong Operating and Financial Performan
Slide 16: 2014 Capital Program Summary
• 2014 capital program between $325 million and $345 million ▪ Significant amount of total capital planned for oil projects in Texas, California, Oklahoma and CO 2 supply / infrastructure ▪ Significant amount of total capital planned for drilling, rate - generating, and facilities projects designed
Slide 17: Significant Financial Flexibility
pg. 17 SIGNIFICANT FINANCIAL FLEXIBILITY Recent Financing Activities Credit Facility Existing Senior Notes ATM PROGRAM ▪ Launched ATM program offering common units for aggregate proceeds of up to $200 million in March 2014 COMMON AND PREFERRED ▪ Issued 8 million 8.25% Series A Cumulative Redeemable
Slide 18: Distributions
pg. 18 • Tax advantaged income • Converted to monthly distribution payment policy in January 2014 • Breitburn has made cumulative distributions of $12.26 per unit since IPO • Future distribution growth supported by: – Ongoing acquisitions – Organic growth – Hedge portfolio DISTRIBUTIONS CONSISTENT D
Slide 19: Mitigating Commodity Price Volatility
• Breitburn’s hedge portfolio has mitigated crude oil and natural gas price fluctuations as evidenced by our quarterly Adjusted EBITDA (1) pg. 19 MITIGATING COMMODITY PRICE VOLATILITY (1) Adjusted EBITDA conformed to exclude net operating cash flow from acquisitions from the effective date through t
Slide 20: Peer Yield Comparison
• Breitburn has delivered steady yield and price improvement during the past year • Since August 2013, Breitburn’s current yield has declined from 10.7% to 9.2% (1) pg. 20 PEER YIELD COMPARISON (1) As measured from average closing prices from August 2013 and August 2014. (2) Based on unit price as o
Slide 21: Breitburn: Key Investment Considerations
STRONG HEDGE BOOK & FINANCIAL FLEXIBILITY COMMITTED TO DISTRIBUTION GROWTH E&P MLP OVER 25 YEARS OF SUCCESSFUL OPERATORSHIP pg. 21 • Predecessor founded in 1988, 2006 IPO • Focus on acquisition, exploitation, and production of oil and gas properties • Enterprise value: ~$4.7 billion (1) BREITBURN: K
Slide 22: Appendix: Operations & Financial Information
NASDAQ: BBEP APPENDIX OPERATIONS & FINANCIAL INFORMATION 1 (1) Financial statements included in the Appendix are from the 2Q14 10 - Q.
Slide 23: Oklahoma/New Mexico Operating Area
• Key Assets: Postle and Northeast Hardesty Fields in Oklahoma Panhandle and associated midstream assets in Oklahoma, New Mexico and Texas • 100% owned Transpetco, Libby Lateral, and Hardesty Lateral CO 2 pipelines, Hough Oil Pipeline, and Dry Trails Gas Plant • Postle field discovered in 1958, wate
Slide 24: Texas Operating Area
• Key Basin: Permian • Total acreage: 18,013 gross, 14,865 net • Gross producing wells: 230 • 40 API oil • Large inventory of proved undeveloped drilling locations and 20 acre downspacing opportunities • Slight discount to WTI for oil • Premium to Henry Hub for high BTU gas ASSET OVERVIEW pg. 24 • E
Slide 25: California Operating Area
• Key Fields: Santa Fe Springs, Belridge, East Coyote, Sawtelle • Concentrated in large, complex oil fields within the Los Angeles and San Joaquin Basins • Certain fields producing over 100 years • Total acreage: 3,984 gross, 3,154 net • Gross producing wells: 441 • Medium gravity crude • High net r
Slide 26: Wyoming Operating Area
• Key Basins : Wind River, Big Horn, Green River, Powder River • F irst wells drilled in 1884; long, active production history • Total acreage: 198,122 gross, 101,665 net • Gross producing wells: 982 • Medium and heavy gravity crude; Gas is high BTU (~1,150) • High net revenue interest • Low risk in
Slide 27: Florida Operating Area
• Key fields: Raccoon Point, Bear Island, West Felda, Lehigh Park • Production is from the Cretaceous Sunniland Trend of South Florida • Operate 5 fields (100% oil) • Total acreage: 42,422 gross, 36,590 net • Gross producing wells: 27 active wells • 24 API oil • High net revenue interests • Traded a
Slide 28: Michigan Operating Area
• Key fields: Antrim Shale; Prairie du Chien, Richfield, Detroit River Zone III, and Niagaran Pinnacle Reefs • BBEP is the largest gas producer in MI; one of the top producers in Antrim Shale • Total acreage: 503,507 gross, 255,350 net • Includes integrated midstream assets • Interests in 3,396 gros
Slide 29: Public Guidance & Non-GAAP Financial Measures
pg. 29 PUBLIC GUIDANCE & NON - GAAP FINANCIAL MEASURES Excluding the effect of any acquisitions, Breitburn is forecasting total production for the second half of 2014 to be between 6 . 8 million and 7 . 2 million Boe , with oil production now expected to be between 3 . 8 million and 4 . 2 million ba
Slide 30: Adjusted EBITDA
pg. 30 ADJUSTED EBITDA HISTORICAL FINANCIAL STATEMENTS Note: Footnotes on next slide. June 30, March 31, June 30, Thousands of dollars 2014 2014 2013 Reconciliation of net loss to Adjusted EBITDA: Net income (loss) (104,725)$ (9,758)$ 76,432$ Loss (gain) on commodity derivative instruments 127,000 4
Slide 31: Adjusted EBITDA (Continued)
pg. 31 ADJUSTED EBITDA (CONTINUED) HISTORICAL FINANCIAL STATEMENTS June 30, March 31, June 30, Thousands of dollars 2014 2014 2013 Reconciliation of net loss to Adjusted EBITDA: Net cash provided by operating activities 74,798$ 116,311$ 38,570$ Increase (decrease) in assets net of liabilities relati
Slide 32: Consolidated Balance Sheets
pg. 32 CONSOLIDATED BALANCE SHEETS HISTORICAL FINANCIAL STATEMENTS June 30, December 31, Thousands 2014 2013 ASSETS Current assets Cash 9,015$ 2,458$ Accounts and other receivables, net 97,630 96,862 Derivative instruments 2,240 7,914 Related party receivables 1,282 2,604 Inventory 9,237 3,890 Prepa
Slide 33: Consolidated Statements of Operations
pg. 33 CONSOLIDATED STATEMENTS OF OPERATIONS HISTORICAL FINANCIAL STATEMENTS Thousands of dollars, except per unit amounts 2014 2013 Revenues and other income items Oil, natural gas and natural gas liquid sales 219,051$ 149,286$ Gain (loss) on commodity derivative instruments, net (127,000) 66,993 O
Slide 34: Consolidated Statements of Cash Flows
pg. 34 CONSOLIDATED STATEMENTS OF CASH FLOWS HISTORICAL FINANCIAL STATEMENTS Thousands of dollars 2014 2013 Cash flows from operating activities Net income (loss) (114,483)$ 40,132$ Adjustments to reconcile net loss to cash flow from operating activities: Depletion, depreciation and amortization 131
Slide 35: Breitburn Energy Partners LP
NASDAQ: BBEP INVESTOR PRESENTATION BREITBURN ENERGY PARTNERS LP