Martin Midstream Partners L.p. · NASDAQ:MMLP
Martin Midstream Partners L.p — Investor Day (March 2014)
79 slides from Martin Midstream Partners L.p's investor day presentation, Mar 25, 2014
Slide 1: 2014 Analyst and Investor Day
2014 Analyst and Investor Day March 25th NASDAQ: MMLP www.martinmidstream.com
Slide 2: Welcome & Partnership Overview
MARTIN MIDSTREAM PARTNERS L.P. ANALYST & INVESTOR DAY 2014 Welcome & Partnership Overview Joe McCreery, Vice President - Finance & Head of Investor Relations Operational Excellence Terminalling & Storage Doug Towns, Vice President – Martin Lubricants Bob Bondurant, Chief Financial Officer Natural Ga
Slide 3: Use of Non-GAAP Financial Measures
USE OF NON-GAAP FINANCIAL MEASURES This presentation includes certain non-GAAP financial measures such as EBITDA and Adjusted EBITDA. These non- GAAP financial measures are not meant to be considered in isolation or as a substitute for results prepared in accordance with accounting principles genera
Slide 4: Forward Looking Statements
FORWARD LOOKING STATEMENTS Statements included that are not historical facts (including any statements concerning plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto), are forward-looking statements. These statements can be id
Slide 5: Partnership Overview
Partnership Overview Joe McCreery, Vice President – Finance & Head of Investor Relations
Slide 6: Martin Midstream Partners L.P. (MMLP) Overview
MARTIN MIDSTREAM PARTNERS L.P. (MMLP) OVERVIEW • NASDAQ Listed: MMLP • Formed October 31, 2002 • MMLP is a publically traded, diversified master limited partnership with operations including: • Terminalling & Storage • Natural Gas Services • Sulfur Services • Marine Transportation • MMLP Trading Sum
Slide 7: Martin Resource Management (MRMC) Overview
MARTIN RESOURCE MANAGEMENT (MRMC) OVERVIEW • Based in Kilgore, TX, MRMC is a leading independent provider of integrated logistics solutions, storage, manufacturing, marketing, and distribution services to energy, petrochemical and other industrial concerns • MRMC and its legacy companies have been o
Slide 8: Strong General Partner Support
STRONG GENERAL PARTNER SUPPORT • Ongoing MRMC businesses help support the Partnership • Maintains distinct set of assets and business units that Martin Resource are complementary to MMLP Management Corporation • Approximately 22% of MMLP EBITDA derived from 50% Economic contracts with MRMC 51% Votin
Slide 9: Key Investment Highlights
KEY INVESTMENT HIGHLIGHTS • Majority of cash flows generated from fee-based or ‘fee-like’ contracts Fee-Based Contracts • Significant portions consist of reservation charges or minimum fee arrangements Fully Integrated, • Diversified asset base with 4 complementary business units that create a custo
Slide 10: Significant Events Since 2011
SIGNIFICANT EVENTS SINCE 2011 $51MM acquisition of 6 LPG pressure barges MRMC sold 49% non-controlling $60MM Monroe Gas $273MM divestiture $47MM marine and two inland push voting interest (50% economic) Storage acquisition of Prism Gas Systems terminal acquisition boats in MMLP's GP to Alinda May 20
Slide 11: MMLP Unit Performance
MMLP UNIT PERFORMANCE 12.4% CAGR Total Return to Unit holders (including cash distributions) Since IPO (11/2002) 278.4% CAGR 12.4% Total Distribution Payout (since 2002) $30.05 Current Yield 7.5% As of March 21st, 2014 close 11
Slide 12: Our Diversified Operating Mix
OUR DIVERSIFIED OPERATING MIX Terminalling & Storage 2013 EBITDA By Segment Sulfur Services ($ in millions) $67.1 $34.0 21.9% 43.2% 12.4% 22.5% $155.2 Million Natural Gas Services Marine Transportation $34.9 (all $ values before unallocated SG&A) $19.2 12
Slide 13: MMLP Asset Locations – All Segments
MMLP ASSET LOCATIONS – ALL SEGMENTS 13
Slide 14: Stable Businesses/No Direct Commodity Exposure
STABLE BUSINESSES/NO DIRECT COMMODITY EXPOSURE Terminalling & Storage • Multi-year, fee-based contracts • Specialty products and shore-based terminals have guaranteed throughput minimums • Margin-based lubricant packaging Natural Gas Services • Stable, margin-based wholesale NGLs • Multi-year, fee-b
Slide 15: High Quality Long Term Customer Base
HIGH QUALITY LONG TERM CUSTOMER BASE • Integrated and complementary business segments uniquely position MMLP • Long-term customer relationships are a key driver of our success • Breadth, scale and brand recognition make MMLP a premier supplier of products and services • Customers include some of the
Slide 16: Business Segment Overview
(A) MARTIN MIDSTREAM PARTNERS BUSINESS SEGMENT OVERVIEW
Slide 17: Terminalling & Storage – Smackover & Martin Lubricants
Terminalling & Storage – Smackover & Martin Lubricants Doug Towns, Vice President – Martin Lubricants
Slide 18: Segment Overview – Terminalling & Storage
SEGMENT OVERVIEW – TERMINALLING & STORAGE • MMLP owns or operates 47 terminal facilities with 3.9 million barrels of aggregate storage capacity across the U.S. Gulf Coast region that provide storage, processing and handling services for producers and suppliers of petroleum products and by-products •
Slide 19: Terminalling & Storage - Smackover Refinery
TERMINALLING & STORAGE - SMACKOVER REFINERY • November 2009 drop-down from MRMC for $45 million in MMLP units • 7,500 bpd nameplate capacity naphthenic lube refinery in Smackover, AR • Approximately 10% of total US naphthenic lube market share • Specialized facility converts crude oil into naphtheni
Slide 20: Terminalling & Storage - Packaging Assets
TERMINALLING & STORAGE - PACKAGING ASSETS • October 2012 drop-down of specialty lubricant product blending and packaging assets in Smackover, AR for $122.7 million; entire platform rebranded as Martin Lubricants • 235,000 sq. ft. warehouse • 5.3 million gallons bulk storage • Central hub for branded
Slide 21: Terminalling & Storage - Packaging Assets
TERMINALLING & STORAGE - PACKAGING ASSETS • We believe the U.S. lubricants business is growing at approximately 2-5% per year while the U.S. grease business is growing at approximately 1-3% per year Expected Growth for Martin Lubricants Lubricants • Continued expansion into national automotive and a
Slide 22: Terminalling & Storage - Asset Description
TERMINALLING & STORAGE - ASSET DESCRIPTION Subsegment Asset(s) Description Services Size (Total Capacity) Location Products Profitability Drivers Smackover Refinery Naphthenic lube refinery Converts naphthenic crude • 7,500 Bpd Smackover, AR • Processes • Guaranteed throughput into refined products
Slide 23: Terminalling & Storage – Specialty & Shore-Based
Terminalling & Storage – Specialty & Shore-Based Bob Bondurant, Chief Financial Officer
Slide 24: Terminalling & Storage – Shore-Based Terminals
TERMINALLING & STORAGE – SHORE-BASED TERMINALS • Strategically-located asset base well-positioned to benefit from the growing exploration and production activity in the Gulf of Mexico • Fee-based contract structure provides stable cash flow • Long-term throughput contract with guaranteed minimums (M
Slide 25: Terminalling & Storage – Specialty Terminals
TERMINALLING & STORAGE – SPECIALITY TERMINALS • 17 specialty terminal facilities with aggregate storage capacity of 3.2 million barrels • Provide storage and handling services for a broad range of products including ammonia, asphalt, sulfur, sulfuric acid, fuel oil, crude oil and other petroleum pro
Slide 26: Terminalling & Storage - Asset Description
TERMINALLING & STORAGE - ASSET DESCRIPTION Subsegment Asset(s) Description Services Size (Total Capacity) Location Products Profitability Drivers Shore-Based Terminals 10 full service terminals • Product storage and 224K Bbls storage TX, LA and AL • Fuel oil • GOM oil and gas activity handling • Lub
Slide 27: Terminalling & Storage – Corpus Christi Crude Terminal (CCCT)
TERMINALLING & STORAGE – CORPUS CHRISTI CRUDE TERMINAL (CCCT) • Strategically located at the primary downstream delivery point for growing Eagle Ford Shale production (Terminal point of the Harvest Pipeline) • Initial operations began in 2012. This terminal has contributed the majority of segment gr
Slide 28: Terminalling & Storage - Financials
TERMINALLING & STORAGE - FINANCIALS Historical Segment Operating Results Terminalling & Storage ($ in thousands) 2011 2012 2013 Revenues: Services $ 81,697 $ 94,895 $ 120,717 Products 201,478 227,280 221,249 Total revenues 283,175 322,175 341,966 Cost of products sold 182,928 202,966 197,974 Operati
Slide 29: Terminalling & Storage - Historical Financials
TERMINALLING & STORAGE - HISTORICAL FINANCIALS Terminalling & Storage EBITDA ($ in millions) $80 $67 $60 $51 $41 $40 $20 $0 2011 2012 2013 29
Slide 30: Terminalling & Storage - Profitability Drivers & Outlook
TERMINALLING & STORAGE - PROFITABILITY DRIVERS & OUTLOOK Shore-Based Terminals • Gulf of Mexico exploration and production activity – additional rigs anticipated in the region Specialty Terminals • Unique collection of assets capable of handling a large assortment of products (crude, condensate, asp
Slide 31: Natural Gas Services
Natural Gas Services Ruben Martin, Chief Executive Officer
Slide 32: Segment Overview – Natural Gas Services
SEGMENT OVERVIEW – NATURAL GAS SERVICES • MMLP’s Natural Gas Services segment has significantly changed since 2012 • April 2012 start-up of refinery grade butane logistics business • July 2012 divestiture of East Texas and North Louisiana gas gathering and processing assets for $273 million • Octobe
Slide 33: Segment Overview – Natural Gas Services
SEGMENT OVERVIEW – NATURAL GAS SERVICES Business Overview • MMLP’s Natural Gas Services segment primarily consists of NGL transportation, logistics and marketing. The segment utilizes MRMC’s land transportation fleet and underground storage facilities as well as third party transportation and storag
Slide 34: Segment Overview – Natural Gas Services (Redbird Joint Venture)
SEGMENT OVERVIEW – NATURAL GAS SERVICES (Redbird Joint Venture) Redbird Gas Storage • Through its ownership interest in Redbird, MMLP invests in Cardinal Gas Storage Partners LLC, a joint venture with Energy Capital Partners, focused on the development, construction, operation and management of natu
Slide 35: Segment Overview – Natural Gas Services (Redbird Joint Venture)
SEGMENT OVERVIEW – NATURAL GAS SERVICES (Redbird Joint Venture) Projects are strategically located in high volume physical flow areas across North Louisiana to the Perryville Hub Monroe asset value was written down to salvage value on December 31, 2013 35
Slide 36: Natural Gas Services – NGL Floating Storage
NATURAL GAS SERVICES – NGL FLOATING STORAGE LPG Pressure Barge Acquisition – February 2013 • Operated by the Marine Transportation segment • Facilitates storage and transloading of Eagle Ford Shale NGL volumes • Integral part of Harbor Island LPG export terminal on Gulf Coast, which supports offshor
Slide 37: Natural Gas Services – Butane Optimization
NATURAL GAS SERVICES – BUTANE OPTIMIZATION Butane Optimization • MMLP utilizes a network of underground storage and transportation equipment owned by MRMC affiliates to facilitate butane optimization • The EPA regulates the Reid Vapor Pressure (RVP) of gasoline sold during the summer season to reduc
Slide 38: Natural Gas Services – Martin Energy Trading (MET)
NATURAL GAS SERVICES – MARTIN ENERGY TRADING (MET) • Martin Energy Trading LLC, formed in 2012, continues to build a natural gas trading business that is focused on optimizing third-party and Martin-affiliated gas storage and transportation assets as well as providing service and knowledge to other
Slide 39: Natural Gas Services - Financials
NATURAL GAS SERVICES - FINANCIALS Historical Segment Operating Results Natural Gas Services ($ in thousands) 2011 2012 2013 Revenues: Marine transportation $ - $ - $ 3,028 NGLs 611,749 825,506 984,653 Total revenues 611,749 825,506 987,681 Cost of products sold 600,034 803,195 946,551 Operating expe
Slide 40: Natural Gas Services - Breakdown
NATURAL GAS SERVICES - BREAKDOWN 40
Slide 41: Natural Gas Services – Profitability Drivers
NATURAL GAS SERVICES - PROFITABILITY DRIVERS Legacy NGL Businesses (including propane) • Drilling/Production activity • Seasonal Demand/Storage capabilities • Access to pipelines, processing and fractionation • Volatility in commodity prices Butane • Refinery utilization • Seasonal differentials • E
Slide 42: Sulfur Services – Legacy Sulfur
Sulfur Services – Legacy Sulfur Mike Lawrence, Senior Vice President – Sulfur Services
Slide 43: Segment Overview – Legacy Sulfur
SEGMENT OVERVIEW – LEGACY SULFUR Sulfur Marketing, Forming, and Transportation Marketing • Markets molten sulfur using its highly-specialized distribution assets to phosphate fertilizer producers and other industrial costumers Forming • Provides “forming” services whereby molten sulfur is processed
Slide 44: Sulfur Services – Legacy Sulfur Integrated Value Chain
SULFUR SERVICES – LEGACY SULFUR INTEGRATED VALUE CHAIN • Provides transportation, processing and marketing services necessary to move product from producer to consumer • Intermodal transportation offers multiple fee opportunities for the Partnership 44
Slide 45: Sulfur Services – Legacy Sulfur Growth Outlook
SULFUR SERVICES – LEGACY SULFUR GROWTH OUTLOOK Growth & Optimization Strategies Stanolind Terminal • Potential expansion of throughput agreement for 2014 and beyond with key customer Neches Terminal • Execute 15,000 LT Molten Storage Tank project during 2014 • Provides on-site storage redundancy for
Slide 46: Sulfur Services – Legacy Sulfur Contracts and Drivers
SULFUR SERVICES – LEGACY SULFUR CONTRACTS AND DRIVERS Contracts / Margin / Customers Sulfur Services Business Segment Marketing Forming Transportation Contracts: Typically 1-3 years in duration Typically 3-5 year service Typically 1 year agreements agreements Suppliers / Customers: Oil refiners & na
Slide 47: Sulfur Services - Fertilizer
Sulfur Services - Fertilizer Bob Bondurant, Chief Financial Officer
Slide 48: Sulfur Services - Fertilizer
SULFUR SERVICES - FERTILIZER Fertilizer • MMLP manufactures and markets sulfur-based fertilizers and related sulfur products to wholesale fertilizer distributors and industrial users • Natural extension of the legacy sulfur business • The close proximity of our manufacturing plants to our customer b
Slide 49: Sulfur Services – Fertilizer Profitability Drivers
SULFUR SERVICES – FERTILIZER PROFITABILITY DRIVERS U.S. Agricultural Prices • Impacted by weather and seasonality • Recent years have seen an increase in corn acres planted in the U.S., largely driven by biofuel Corn Acres Planted and Harvested (million acres) demand growth • Forecast calls for a sl
Slide 50: Sulfur Services - Financials
SULFUR SERVICES - FINANCIALS Historical Segment Operating Results Sulfur Services ($ in thousands) 2011 2012 2013 Revenues: $ 275,044 $ 261,584 $ 213,124 Cost of products sold 220,059 195,314 158,085 Operating expenses 19,328 17,404 16,975 SG&A 3,361 3,975 4,083 Depreciation and amortization 6,725 7
Slide 51: Sulfur Services – Historical Financials
SULFUR SERVICES – HISTORICAL FINANCIALS 51
Slide 52: Marine Transportation
Marine Transportation Ed Grimm III, Senior Vice President - Marine
Slide 53: Segment Overview – Marine Transportation
SEGMENT OVERVIEW – MARINE TRANSPORTATION Business overview • Marine Transportation owns and/or operates a fleet of inland and offshore tows that provide marine transportation of bulk liquids Diverse geographic operations • Segment operates along major inland and seaborne petroleum product transporta
Slide 54: Marine Transportation: Assets/Contract Structure
MARINE TRANSPORTATION: ASSETS/CONTRACT STRUCTURE Asset(s) Description Services Size (Total Capacity) Location Products Profitability Drivers • 56 inland marine tank barges Marine transportation of • Inland barges - from under • Inland - GICW and • Asphalt • Growing North American • 26 inland push-bo
Slide 55: Marine Transportation - Financials
MARINE TRANSPORTATION - FINANCIALS Historical Segment Operating Results Marine Transportation ($ in thousands) 2011 2012 2013 Revenues: $ 83,971 $ 88,815 $ 99,510 Operating expenses 66,771 70,342 79,306 SG&A 3,087 566 1,347 Depreciation and amortization 13,159 11,115 10,198 Operating income $954 $6,
Slide 56: Marine Transportation - Historical Financials
MARINE TRANSPORTATION - HISTORICAL FINANCIALS 2013 Marine Top 5 Customer Concentration Customer 1 13% Customer 2 7% Customer 3 7% Customer 4 61% 7% Customer 5 5% Other 56
Slide 57: Marine Transportation - Profitability Drivers & Growth Outlook
MARINE TRANSPORTATION - PROFITABILITY DRIVERS & GROWTH OUTLOOK Profitability Drivers • North American shale plays • Distillate aggregation to export • Stack emissions reductions – potential distillate spike • Asphalt, HSFO and cutters Growth Outlook • Growing transportation needs for crude, NGL, LNG
Slide 58: Financial Foundation
Financial Foundation Joe McCreery, Vice President - Finance & Head of Investor Relations
Slide 59: Balance Sheet Management
BALANCE SHEET MANAGEMENT Recent Financing Activities Pro Forma Debt Portfolio • MMLP amended and upsized its revolver in 7.00 8.00% 2013 and upsized again in 2014. Current 6.00 6.86% 7.00% 6.36% commitments of $637.5 million - maturing 5.00 5.76% 6.00% 5.52% 5.53% March 2018 4.00 5.00% W/A Maturity
Slide 60: Cost of Capital Improvement
COST OF CAPITAL IMPROVEMENT Cost of Equity Current Annualized Distribution / LP Unit $3.14 Unit Price $41.86 Distribution Yield 7.50% Total Cost of Equity including GP 8.47% Existing Cost of Debt Pro Forma Cost of Debt Debt Outstanding Int Rate W/A Int Rate Debt Outstanding Int Rate W/A Int Rate 235
Slide 61: Pro Forma Capitalization
PRO FORMA CAPITALIZATION Capitalization ($ in millions) 12/31/2013 Adjustments Pro Forma 12/31/13(3) Cash $17 $17 Debt $600MM RCF due 2018 235 35 270 Total Senior Secured Debt $235 $35 $270 $200MM Senior Notes due 2018 175 (175) 0 $250MM Senior Notes due 2021 250 150 400 Total Debt $660 $10 $670 Par
Slide 62: Historical Liquidity & Capital Expenditures
HISTORICAL LIQUIDITY & CAPITAL EXPENDITURES MMLP has conservatively and opportunistically utilized debt and equity capital markets in the past to finance growth capital expenditures and manage its balance sheet/liquidity as needed 62
Slide 63: Liquidity and 2014 Capital Spending
LIQUIDITY AND 2014 CAPITAL SPENDING Liquidity & Capital Resources • MMLP is well-positioned to capitalize on accretive investment opportunities with approximately $384 million available under its revolver pro forma its impending bond redemption/issuance • The Partnership recently commenced a $300 mi
Slide 64: Capital Markets Access
(A) PIARTIN CAPITAL MARKETS ACCESS Issuance Timeline ($ in millions) Net Proceeds Equity Follow-ons $34.8 $97.4 $57.1 $79.8 $71.8 $198.4 ATM Offering $4.7 $544.0 ‘04 ‘0S ‘06 ‘07 ‘08 ‘09 ‘10 ‘1 ‘12 '13 ‘4 Debt Offerings $200.0 $250.0 $150.0 (Redemptions) ($25.0) ($175.0) $400.0 Revolver Capacity ($ i
Slide 65: Yield Analysis
YIELD ANALYSIS An MMLP investment offers an above-average distribution yield relative to comparable midstream MLPs • Yield based on 1Q’14 annualized distribution and unit price as of 3/21/14 • S&P/Moody’s reflects corporate or family rating 65
Slide 66: Disciplined Distribution Growth
DISCIPLINED DISTRIBUTION GROWTH $3.14 current annualized rate 66
Slide 67: MMLP Historical Financial Performance – Credit Metrics
MMLP HISTORICAL FINANCIAL PERFORMANCE – CREDIT METRICS Interest Coverage 5.00x 4.44x 3.76x 4.00x 3.51x 3.00x 2.00x 1.00x 0.00x 2011 2012 2013 Senior Leverage Leverage 4.66x 3.00x 5.00x 4.34x 2.47x 2.45x 3.84x 2.50x 4.00x 2.00x 1.66x 3.00x 1.50x 2.00x 1.00x 1.00x 0.50x 0.00x 0.00x 2011 2012 2013 2011
Slide 68: MMLP Adjusted EBITDA Reconciliation
MMLP ADJUSTED EBITDA RECONCILIATION Total MMLP 2011 2012 2013 Income from continued operations $ 13,367 $ 37,122 $ (13,354) Adjustments Interest Expense 26,781 30,665 42,495 Income tax expense 2,872 3,557 753 DD&A 40,276 42,063 52,240 EBITDA $ 83,296 $ 113,407 $ 82,134 Adjustments Equity in (earning
Slide 69: Growth Opportunities
Growth Opportunities Bob Bondurant, Chief Financial Officer
Slide 70: Growth Outlook
GROWTH OUTLOOK Primary Growth Areas :Terminalling & Storage, Natural Gas Services, Martin Lubricants • Terminalling & Storage: Opportunities to leverage MMLP’s strategic asset footprint on the Gulf Coast, driven by robust drilling activity in the Gulf of Mexico and onshore North American shale plays
Slide 71: Arcadia Rail Terminal
ARCADIA RAIL TERMINAL • Drop-down of Martin Underground Storage (MUS) assets to the Partnership • The Arcadia rail project involves the installation of a rail siding, multiple rail spurs, rail car unloading and loading facilities at Martin Underground Storage facility near Arcadia, Louisiana. The ad
Slide 72: Condensate Splitter – Investment Rationale
CONDENSATE SPLITTER – INVESTMENT RATIONALE • Eagle Ford Shale production has increased greatly and is projected to continue growing over the next 5 years • This production has flooded the Gulf Coast with light hydrocarbons (condensate), and is anticipated to eventually overwhelm Gulf Coast refinerie
Slide 73: Alinda Capital Partners Overview
ALINDA CAPITAL PARTNERS OVERVIEW • Alinda is one of the world’s largest independently-owned infrastructure investment firms • Approximately $7.8 billion in equity commitments for infrastructure investments • Investors are primarily pension funds for public and private sector workers • Longer-term in
Slide 74: Alinda's Strategic Importance to MMLP
ALINDA’S STRATEGIC IMPORTANCE TO MMLP • MRMC partnered with Alinda to take advantage of unprecedented midstream infrastructure needs in North America • The partnership with Alinda has opened new doors for MMLP with respect to deal flow and other strategic investment opportunities previously unavaila
Slide 75: MMGP/MMGP Holdings Governance
MMGP/MMGP HOLDINGS GOVERNANCE MMGP Board Structure • MMGP’s previous board of directors consisted of 5 directors • Upon closing the transaction, the board of MMGP increased to 7 directors • For a period of one year following closing of the transaction • MRMC has the right to appoint 5 directors; Ali
Slide 76: MMLP Summary
MMLP SUMMARY Ruben Martin, Chief Executive Officer
Slide 77: Separate but Complementary Segments
SEPARATE BUT COMPLEMENTARY SEGMENTS TERMINALLING & STORAGE Shore based terminals • Serviced by Marine Transportation segment assets Specialty terminals • Serviced by Marine Transportation segment assets • Handles and processes product on behalf of MRMC for the Smackover Refinery • Handles sulfur and
Slide 78: Key Investment Highlights
KEY INVESTMENT HIGHLIGHTS • Majority of cash flows generated from fee-based or ‘fee-like’ contracts Fee-Based Contracts • Significant portion consists of reservation charges or minimum fee arrangements Fully Integrated, • Diversified asset base with 4 complementary business units that create a custo
Slide 79: Martin
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