JP Energy Partners LP Investor Presentation November 2014 Disclaimers Forward Looking Statements This presentation contains forward-looking statements. These statements discuss future expectations, contain projections of results of operations or of financial condition or state other forward-looking information. These statements are based upon various assumptions, many of which are based, in turn, upon further assumptions, including examination of historical operating trends made by the management of JP Energy Partners LP (the “Partnership” or “JPE”). Although the Partnership believes that these assumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencies, which are difficult or impossible to predict and are beyond its control, the Partnership cannot give assurance that it will achieve or accomplish these expectations, beliefs or intentions. These forward-looking statements involve risks and uncertainties. When considering these forward- looking statements, you should keep in mind the risk factors and other cautionary statements in the filings made by the Partnership with the Securities and Exchange Commission (the “SEC”), copies of which are available to the public. The risk factors and other factors noted in the Partnership’s filings with the SEC could cause the Partnership’s actual results to differ materially from those contained in any forward-looking statement. The Partnership expressly disclaims any intention or obligation to revise or publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. Non-GAAP Measures This document includes certain non-GAAP financial measures as defined under SEC Regulation G. A reconciliation of those measures to most directly comparable GAAP measures is provided at the end of this presentation. Adjusted EBITDA is defined as net income (loss) plus (minus) interest expense (income), income tax expense (benefit), depreciation and amortization expense, asset impairments, (gains) losses on asset sales, certain non-cash charges such as non-cash equity compensation and non-cash vacation expense, non-cash (gains) losses on commodity derivative contracts (total (gain) loss on commodity derivatives less net cash flow associated with commodity derivatives settled during the period) and selected (gains) charges and transaction costs that are unusual or non-recurring and other selected items that impact comparability. We define distributable cash flow as Adjusted EBITDA less net cash interest paid, income taxes paid and maintenance capital expenditures. 2 JP Energy Partners LP JP Energy Partners LP is a Master Limited Partnership founded in May 2010 to own, operate, develop and acquire a strategic portfolio of midstream assets • Midstream MLP focused on infrastructure solutions to users of liquid petroleum products • Integrated and diversified platform with stable cash flows • Fee-based and margin-based business model with low commodity price sensitivity • Proven ability to complete acquisitions and develop organic projects • Significant growth opportunities through JP Energy family of organic projects & drop-downs Strategically Located Assets in High Growth Shale Plays 3 Our Business Strategy Capitalize on Strategically Located Assets Maximize our Experienced & Entrepreneurial Management Team Expand our Platform for Integrated Midstream Solutions Grow Our Business through Organic and Drop Down Opportunities Focus on Stable, FeeBased Cash Flows Service our High Quality Customer Base 4 Significant Platform of Services Crude Oil Producers Refiners Truck Pipeline Injection Station Rail Terminal/Storage/ Exchange Location Pipeline Pipeline Gathering Natural Gas Liquids Refined Products Refineries Producers Gas Stations Barge Retail Distributor Spec Products Storage Refinery Produced LPG OFS and Agriculture Common Carrier Pipelines Storage Tanker Diluent for Heavy Crude Logistics solution from the wellhead to the end-user 5 Growing, Fee-Based Cash Flows with High Quality Customer Base Focused on Growing Fee-based Cash Flows Crude Oil Pipelines & Storage – Fixed storage & throughput or minimum volume requirement fees – Growing volumes in the Southern Wolfcamp from existing contractual producers with long-term fee-based commitments – New customer acreage and MVC within JP Energy’s capture area – Expansion of Silver Dollar Pipeline Refined Products Terminaling & Storage – Fixed fees for throughput & storage, blending services, injection of additives and ancillary services, including product handling and transfer services – Rollup strategy & optimization and diluent logistical solutions drive growth Forecasted Adjusted EBITDA(1): $67 million NGL Distribution & Sales Refined Products Terminals & Storage Crude Oil Pipelines & Storage Crude Oil Supply & Logistics NGL Distribution & Sales – National cylinder exchange platform & accounts – Increasing application with auto gas, mower gas, industrial & oilfield applications – Recent acquisition of NGL truck services from JP Development – Fixed fee based on distance and volume transported ___________________________ 1. Forecasted Adjusted EBITDA for the twelve months ending September 30, 2015. 6 Multiple Avenues for Growth Platform Provides Enormous Growth Opportunities Organic Growth Opportunities Built-in contracted growth Asset footprint in many of the most attractive liquids basins in North America Near-term crude oil pipeline expansions and organic opportunities in NGL Acreage dedications and minimum volume commitments provide for built-in growth as production increases Recent success in re-contracting large customers in the cylinder exchange business Current MLP Assets & Drop-Downs Cylinder Exchange Mississippian Lime Expansion Cylinder Exchange Footprint NGL CRUDE Granite Wash CRUDE NGL NGL CRUDE Fort Worth Basin / SCOOP Play Permian Basin NGL Acquisitions from our affiliates Acquisitions from 3rd parties CRUDE Potential drop-down of two pipelines currently flowing and a third to be constructed Management team has extensive experience integrating acquisition opportunities Footprint creates synergies for bolt-on acquisitions CRUDE NGL Eagle Ford Shale Legend Shales JPEP Footprint Affiliated Pipelines Silver Dollar Pipeline Crude Storage Refined Product Storage 7 Drop-Down Opportunities Management & ArcLight have created near term drop-down opportunities Potential Drop-Downs Great Salt Plains Pipeline • ~115 mile crude oil pipeline • Transports Mississippian Lime supply to Cushing, Oklahoma • Ability to expand capacity from 27 Mbbls/d to 40 Mbbls/d ArcLight Sponsorship • • – Red River Pipeline • ~75 mile crude oil pipeline that transports oil from N. Texas to Garvin City, Oklahoma • Current capacity of 5 Mbbls/d Republic Midstream • 180-mile crude oil gathering system in Gonzales & Lavaca counties, Texas • Central delivery point (“CDP”) with storage and blending capacity • 30-mile takeaway pipeline ArcLight has demonstrated the ability to invest broadly and profitably across the energy industry ArcLight has a substantial equity commitment to JP Energy Partners / JP Development • ROFO assets could increase JP Energy EBITDA by ~50% Right of First Offer with JP Development & Republic Midstream – JP Development has granted JP Energy Partners a five-year right of first offer on all of its current and future assets – ArcLight granted JP Energy Partners an 18-month right of first offer on its 50% interest in Republic Midstream at the closing of the IPO 8 Experienced and Entrepreneurial Leadership J. Patrick Barley Chairman, President & Chief Executive Officer • • • Founder, President and CEO of Lonestar Midstream Partners, a midstream company focused on natural gas gathering and processing Brings over 15 years of experience managing early-stage investments 10 years in midstream sector Patrick (Pat) Welch Executive Vice President & Chief Financial Officer • • • Senior roles at Opportune, Atlantic Power Corporation, DCP Midstream and Dynegy Senior Audit Manager in energy, utilities and mining practice for PricewaterhouseCoopers Over 24 years of energy industry finance experience Jerry Ashcroft Executive Vice President & Chief Operating Officer • • Senior Vice President of Buckeye Partners LP and President of Buckeye Services Senior roles with Colonial Pipeline Company, Georgia Pacific Company and the U.S. Marine Corps 9 JP Energy Assets JP Energy Family Overview JP Energy Partners has a strategic partnership with JP Development and Republic Midstream JP Development • Founded in July 2012 to support JP Energy’s growth • JP Development projects may be dropped down to us – In February 2014, we completed our first drop down valued at $319 million • JP Development has extended us a right of first offer (ROFO) for the next five years on all of JP Development’s current and future assets JP Energy Partners • Founded in May 2010 to own, operate, develop and acquire a diversified portfolio of midstream energy assets • Operations currently consist of four business segments: – Crude Oil Pipelines & Storage – Crude Oil Supply & Logistics – Refined Products Terminals & Storage Republic Midstream • Formed with $400 million commitment from ArcLight to design, build and operate a crude gathering system for Penn Virginia in the Eagle Ford shale – Managed by JPEP and American Midstream – JPEP has a ROFO for the next seventeen months for a 50% interest in the joint venture – NGL Distribution & Sales 11 Crude Oil Assets Levered to High Growth Areas Operations provide JP Energy with unique insight into customer needs • Asset Overview Crude oil pipelines (current and future potential drop-downs) located within high growth areas and provide for a stable cash flow profile – – Mississippian Lime Current MLP assets include ~94 miles of high pressure pipeline within the Southern Wolfcamp area of the Permian Basin Granite Wash Long-term, fee-based contracts with leading producers in the play • Supply & Logistics business utilizes customer relationships along with pipeline and trucking assets to serve customers looking for the most advantageous end-market • Cushing storage facility located on the Enterprise terminal with access to Seaway pipeline – Map of JPEP’s Crude Oil Operations and Drop-Downs Five 600,000-barrel tanks connected to Seaway Pipeline system Fort Worth Basin / SCOOP Play Permian Basin Legend Shales JPEP Footprint Affiliated Pipelines Silver Dollar Pipeline Storage Eagle Ford Shale 12 Integrated Midstream Solution From Wellhead to Downstream JP Energy offers producers a full logistical solution to integrate assets from the wellhead to downstream • Manage the physical movement of crude oil from origination to final destination largely through our network of owned and leased assets • JP Energy utilizes its pipelines, LACTS and terminals, fleet of 135 crude oil gathering trucks and 700 MBbls of leased storage capacity at Cushing, Oklahoma to service customers – Majority of revenue is “fee equivalent” • Business provides access to additional producers, market intelligence and increased utilization of our pipelines – Catalyst for organic projects within our pipeline and storage business Integrated Service Solution from Wellhead to Downstream Process Wellhead Production JPEP Trucking Service Offered Barrel acquired at the wellhead and simultaneously sold at liquid exchange JPE utilizes its trucks and 3rd parties to transport crude oil JPE utilizes its pipelines and 3rd parties to transport crude oil Pipeline Market Hub/ Terminal JPE delivers barrels to market hub and offers storage and terminal options 13 Silver Dollar Anchored by Active Producers and Provides Access to Multiple End-Markets JP Energy Partners’ crude oil pipeline system is base loaded by two significant customers with over 300,000 contiguous acres Significant Contract A REAGAN To Midland (Plains Interconnect to Midland) ~8 years remaining with 110,000 acre dedication Owens Station To Colorado City Oxy Barnhart Station (Oxy Cline Shale Interconnect) IRION SCHLEICHER Significant Contract B ~5 years remaining on minimum volume commitment JPEP Line 3rd Party Central Production Facility Station Magellan Longhorn Plains Pipeline – 8” Significant contract A acreage Significant contract B acreage To Houston Midway Station CROCKETT SUTTON 14 Lease Gathering Is a “Fee-Equivalent” Activity Essential Service Provides Durable Baseline Cash Flow in a Variety of Markets JPEP Pipeline Production Area Market Hub Wellhead Price Price $72.30 G&A Cost + Trucking Costs + Pipeline Tariff + $1.00 $0.50 $0.20 = Terminal Total Cost(1) Sales Price Margin $74.00 $75.00 $1.00 Margin is protected against downside, but JPEP still has upside through market optimization activities (exchanges, etc.) Index-Based Cost Known Margin Locked? NYMEX less location/ quality differential Projected from historical costs Tariff is posted Projected from historical costs NYMEX price ___________________________ Note: Values provided for illustration purposes only. Source: Plains All American Pipeline L.P. Investor Presentation. 15 Crude Oil Storage JP Energy Partners’ crude oil storage facility is located in Cushing, Oklahoma, a key crossroad connecting production to the Gulf Coast Asset Highlights • Cushing’s Integral Location to Producers & Refiners Focused on operational storage with largest tanks for logistics solutions on large crude movements Legend Upcoming Pipelines – Current Pipelines Five 600,000 barrel tanks connected to Seaway Pipeline system • Aggregate shell capacity of 3 MMBbls and is situated for increasing crude oil supply from Canada and the Mid-Continent • Inbound connections with multiple pipelines and two-way interconnections with all the other major storage facilities in Cushing • 100% of the shell capacity is dedicated to one customer under a long-term contract (~3 years remaining) • Fixed monthly fee contract based on barrel of shell capacity, whether used or not Cushing, OK • Located in south Cushing with increased connectivity for structural players – 36” manifold JPE 3MMbbls tankage 16 Refined Products Terminals & Storage Growth Provides steady, predictable cash flow with minimal maintenance capital expenditures and fee-based revenues Potential Growth Opportunities Caddo Mills, Texas (Dallas) • Storage capacity of approximately 770,000 barrels from 10 tanks • Primarily supplied by the Explorer Pipeline • We own approximately six acres which can be used for future expansion (~200,000 barrels additional storage capacity) • • Butane blending Vapor Recovery Unit Ethanol side stream blending Flexible tankage for quick turnover of products New unbranded customers Shale play logistical solution for diluent to Canada (Caddo Mills) In tank blending (North Little Rock) Average throughput of 18,224 barrels per day (1) North Little Rock, Arkansas • Storage capacity of approximately 550,000 barrels from 11 tanks Supplied by the pipeline operated by Enterprise TE Products Pipeline Company • Eight loading lanes with automated truck loading equipment to minimize wait time • Average throughput of approximately 45,000 barrels per day (1) ___________________________ 1. For six months ended June 30, 2014. 17 NGL Distribution & Sales Limited Seasonality (1) Overview • • NGL Distribution & Sales / NGL Transportation – Target growing demand for power generation and oilfield service application, reducing exposure to heating degree days – Fixed fee business primarily in the Eagle Ford and Permian Cylinder Exchange – 3rd largest propane cylinder exchange business in the U.S. – Established footprint in 48 states with a network of over 17,700 customer locations – National footprint gives us capability to compete for large volume national accounts and provide us with economies of scale and significant cost savings Summer, 47% NGL Operations Growth Opportunities • • • • • Maintain flexible market pricing to allow for margin optimization Improve logistics and create synergies Leverage scale by using freight and supply point optimization Achieve organic growth by entering new major market, and expanding customer and other strategic relationships Evaluation of new services / geographies – Oilfield & refinery services – Continue to expand westward Winter, 53% Recent Expansion Cylinder Exchange Footprint Pinnacle Location PPE Central Ops PPE Depots PPE Production ___________________________ 1. Based on forecasted revenue for the twelve months ending September 30, 2015. Winter includes three months ending December 31, 2014 and March 31, 2015, and summer includes three months ending June 30, 2015 and September 30, 2015. 18 Financial Overview Financial Strategy Maintain Stable Cash Flows Deliver Consistent Distribution Growth Commitment to Financial Flexibility Targeted Risk Management Large acreage dedications and minimum volume commitments for our crude oil pipelines Refined products and NGL segments offer a healthy mix of assets in mature markets but with considerable growth opportunities Conservative distribution coverage targeting 1.20x Near-term organic growth projects already being pursued in existing businesses Strategic drop-downs from JP Development & Republic Midstream could further bolster growth ~1.1x Debt / NTM Adjusted EBITDA creates borrowing capacity for future growth Revolver has ~$150 million in excess capacity Target 3.5x leverage over the long-term Established risk management policies and procedures to monitor and manage the market risks associated with commodity prices, counterparty credit and interest rates Seek to minimize commodity price exposure through fixed-fee contracts or marginbased arrangements 20 Non-GAAP Reconciliation – Adjusted EBITDA Three months ended September 30, 2013 2014 (in thousands) Segment Adjusted EBITDA Crude oil pipelines and storage Crude oil supply and logistics Refined products terminals and storage NGLs distribution and sales Discontinued operations (1) Corporate and other Total Adjusted EBITDA Depreciation and amortization Interest expense Income tax benefit (expense), net Loss on disposal of assets Unit-based compensation Total gain (loss) on commodity derivatives Net cash payments for commodity derivatives settled during the period Discontinued operations (1) Transaction costs and other non-cash items Net loss $ $ 5,301 5,477 2,525 2,256 (5,966) 9,593 (10,395) (2,406) 158 (533) (578) (762) 105 (792) (5,610) $ $ 2,931 3,175 3,899 386 672 (6,036) 5,027 (7,790) (2,279) (42) (478) (302) 1,022 8 (736) (67) (5,637) 21 ___________________________ 1. In June 2014, we completed the sale of our crude oil logistics operations in the Bakken region of North Dakota, Montana and Wyoming. Non-GAAP Reconciliation – Gross Margin to Operating Loss Three Months Ended September 30, 2014 2013 (in thousands) Reconciliation of adjusted gross margin to operating loss Adjusted gross margin Crude oil pipelines and storage Crude oil supply and logistics Refined products terminals and storage NGL distribution and sales Total Adjusted gross margin Operating expenses General and administrative Depreciation and amortization Loss on disposal of assets Total gain (loss) on commodity derivatives Net cash (receipts) payments for commodity Other non-cash items Operating loss $ $ 6,501 8,234 3,573 18,635 36,943 (17,048) (11,315) (10,395) (533) (762) 105 (357) (3,362) $ $ 3,600 6,382 4,664 16,424 31,070 (16,510) (10,656) (7,790) (478) 1,022 8 (3,334) 22
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