![]() Preliminary Materials Prepared for the Conflicts Committee of the Board of Directors of Crestwood Gas Services GP LLC Project Intrepid April 24, 2013 EXHIBIT (c)(2) DRAFT Preliminary and Subject to Change |
These materials have been prepared by Evercore Group L.L.C. (“Evercore”) for the Conflicts Committee of the Board of Directors (the “Conflicts Committee”) of Crestwood Gas Services GP LLC (the “Company”), the general partner of Crestwood Midstream Partners LP (the “Partnership”), to whom such materials are directly addressed and delivered and may not be used or relied upon for any purpose other than as specifically contemplated by a written agreement with Evercore. These materials are based on information provided by or on behalf of the Partnership and/or other potential transaction participants, from public sources or otherwise reviewed by Evercore. Evercore assumes no responsibility for independent investigation or verification of such information and has relied on such information being complete and accurate in all material respects. To the extent such information includes estimates and forecasts of future financial performance prepared by or reviewed with the management of the Partnership and/or other potential transaction participants or obtained from public sources, Evercore has assumed that such estimates and forecasts have been reasonably prepared on bases reflecting the best currently available estimates and judgments of such management (or, with respect to estimates and forecasts obtained from public sources, represent reasonable estimates). No representation or warranty, express or implied, is made as to the accuracy or completeness of such information and nothing contained herein is, or shall be relied upon as, a representation, whether as to the past, the present or the future. These materials were designed for use by specific persons familiar with the business and affairs of the Partnership. These materials are not intended to provide the sole basis for evaluating, and should not be considered a recommendation with respect to, any transaction or other matter. These materials have been developed by and are proprietary to Evercore and were prepared for the benefit and internal use of the Conflicts Committee. These materials were compiled on a confidential basis for use by the Conflicts Committee in evaluating the potential transaction described herein and not with a view to public disclosure or filing thereof under state or federal securities laws, and may not be reproduced, disseminated, quoted or referred to, in whole or in part, without the prior written consent of Evercore. These materials do not constitute an offer or solicitation to sell or purchase any securities and are not a commitment by Evercore (or any affiliate) to provide or arrange any financing for any transaction or to purchase any security in connection therewith. Evercore assumes no obligation to update or otherwise revise these materials. These materials may not reflect information known to other professionals in other business areas of Evercore and its affiliates. Evercore and its affiliates do not provide legal, accounting or tax advice. Accordingly, any statements contained herein as to tax matters were neither written nor intended by Evercore or its affiliates to be used and cannot be used by any taxpayer for the purpose of avoiding tax penalties that may be imposed on such taxpayer. Each person should seek legal, accounting and tax advice based on his, her or its particular circumstances from independent advisors regarding the impact of the transactions or matters described herein. DRAFT |
![]() Table of Contents Section I II III IV V VI VII VIII IX Confidential DRAFT A. Weighted Average Cost of Capital Certain Benefits and Issues for Consideration With Respect to the Proposed Transaction Summary Pro Forma Impact Introduction Executive Summary Overview of CMLP Indicative Valuation of CMLP Overview of NRGM Indicative Valuation of NRGM Summary Analysis of the Proposed Consideration Appendix |
![]() I. Introduction DRAFT |
![]() DRAFT Evercore Partners (“Evercore”) is pleased to provide the materials herein to the Conflicts Committee of the Board of Directors (the “Conflicts Committee”) of Crestwood Gas Services GP LLC, the general partner of Crestwood Midstream Partners LP (“Crestwood”, “CMLP” or the “Partnership”), regarding the proposed merger of CMLP with and into Inergy Midstream, L.P. (“NRGM”) (the “Proposed Transaction” or “Project Intrepid”) – As part of the Proposed Transaction, each common unit and Class D Unit (1) of CMLP is to be exchanged for 1.061x NRGM units and $0.41 in cash (the “Proposed Consideration”) based on a proposed 5.0% premium to CMLP’s volume- weighted average unit price over the previous 20 trading days ending April 19, 2013 and an aggregate $25.0 million dollar one-time cash payment to CMLP unitholders – Pro forma for Project Intrepid, CMLP will survive as a wholly-owned subsidiary of NRGM – As part of the Proposed Transaction, NRGM will assume CMLP’s current debt outstanding – As a condition to the Proposed Transaction, Inergy, L.P. (“NRGY”) and Crestwood Holdings, LLC (“Crestwood Holdings”) will enter into a series of transactions to consolidate the general partner of both entities including: (i) NRGY distributing all its existing NRGM units to existing NRGY unitholders; (ii) Crestwood Holdings acquiring Inergy Holdings GP, LLC (“IHGP”) from NRGY principals and (iii) NRGY acquiring CMLP’s general partner and IDR interest from Crestwood Holdings Overview of Materials Introduction 1 (1) Class D Units are similar in certain respects to existing common units, except that CMLP has the option to pay distributions on Class D Units for the period from March 2013 to March 2014 with cash or by issuing additional paid-in-kind Class D Units based upon the volume weighted-average price of CMLP common units for the ten trading days immediately preceding the date the distribution is declared Confidential |
![]() Confidential DRAFT As such, the materials herein review the following: – An executive summary including: (i) an overview of the Proposed Transaction, including summary proposed terms; (ii) a review of Evercore’s evaluation process to-date; (iii) Evercore’s remaining outstanding due diligence and evaluation items and (iv) a summary preliminary analysis of the value of the Proposed Consideration relative to the preliminary value of a CMLP unit and an analysis of the proposed pro forma ownership relative to each of CMLP’s and NRGM’s contribution to the proposed MLP based on various financial metrics – An overview of CMLP, including an overview of CMLP’s assets and operations, a review of CMLP’s market and capitalization data and historical and projected operating and financial results as provided by CMLP management (the “CMLP Management Financial Projections”), a review of the assumptions utilized by CMLP management in deriving such financial projections and a comparison of the CMLP Management Financial Projections to projected financial results per Wall Street Research analysts covering CMLP (the “CMLP Research Financial Projections”) – A preliminary valuation analysis of CMLP – An overview of NRGM, including an overview of NRGM’s assets and operations, a review of NRGM’s market and capitalization data and historical and projected operating and financial results as provided by NRGM management (the “NRGM Management Financial Projections”), a review of the assumptions utilized by NRGM management in deriving such financial projections and a comparison of the NRGM Management Financial Projections to projected financial results per Wall Street Research analysts covering NRGM (the “NRGM Research Financial Projections”) – A preliminary analysis of the Proposed Consideration, including an analysis of the proposed pro forma ownership relative to each of CMLP’s and NRGM’s contribution to the pro forma entity based on various financial metrics – A review of the pro forma financial impact of the Proposed Transaction to CMLP unitholders, including sensitivities assuming various adjustments to the assumptions underlying the CMLP Management Financial Projections and the NRGM Management Financial Projections – A review of certain benefits and issues for consideration with respect to the Proposed Transaction The materials herein are preliminary and are subject to potentially material changes Overview of Materials (cont’d) Introduction 2 |
![]() DRAFT II. Executive Summary |
![]() Overview of Project Intrepid 3 Executive Summary Confidential DRAFT Opinion Requested: Evercore has been asked by the Conflicts Committee, whether, in Evercore’s opinion, the Proposed Consideration to be received in the Proposed Transaction is fair, from a financial point of view, to the holders of the Partnership’s common units other than Crestwood Gas Services GP LLC, Crestwood Gas Services Holdings LLC and their respective affiliates As part of the Proposed Transaction, NRGM has proposed to acquire each CMLP common unit and Class D Unit outstanding in exchange for: (i) 1.061x NRGM common units and (ii) $0.41 cash assuming no more than a [5.0]% premium to CMLP’s volume-weighted average closing unit price over the 20 trading days prior to execution of a definitive agreement (“20- Day VWAP”) as described below and a one-time payment to CMLP unitholders not to exceed $[25.0] million in total – Represents an aggregate CMLP equity value of approximately $1.5 billion based on a 20-Day VWAP as of April 19, 2012 and, including NRGM’s assumption of CMLP’s approximately $787.4 million of net debt projected to be outstanding as of July 1, 2013, a CMLP enterprise value of approximately $2.3 billion – Pro forma for the Proposed Transaction, CMLP unitholders will own 42.7% of the pro forma entity – Expected announcement on May 6, 2013 Prior to the Proposed Transaction, it is anticipated that NRGY and Crestwood Holdings will enter into a series of transactions to consolidate the general partner of both entities (together the “GP Consolidation”), including: – Step 1: NRGY will distribute all of its 56.4 million NRGM units to NRGY unitholders – Step 2: Crestwood Holdings will acquire IHGP for a cash payment of [$70 million -$80 million], with the exact amount of such payment still to be determined based on certain tax and other considerations – Step 3: NRGY will acquire CMLP’s general partner and IDR interest on a debt-free basis from Crestwood Holdings in exchange for $450 million in NRGY units (41.6 million NRGY units based 20-Day VWAP as of April 19, 2012) – Step 4: Crestwood Holdings will contribute a portion of its CMLP units, currently proposed to be 5.5 million CMLP units, for an equivalent value of NRGY units such that Crestwood Holdings owns a 29.0% interest in NRGY on a pro forma basis While Steps 1 through 4 above are conditions precedent to closing of the Proposed Transaction, closing of the Proposed Transaction is not a condition precedent to the GP Consolidation |
![]() Current NRGM Organizational Structure Note: Structure as of 4/1/13 4 Executive Summary NRGP Limited Partner, LLC Inergy Holdings GP , LLC Inergy Holdings, L.P. Inergy GP, LLC (Managing General Partner) IPCH Acquisition Corp. 847,415 Class A Units Inergy Partners, LLC 4,019,837 Class A Units Inergy Services, LLC Tres Palacios Midstream, LLC Inergy Pipeline East, LLC Inergy Gas Marketing, LLC Inergy Storage, Inc. Arlington Storage Company, LLC Finger Lakes LPG Storage, LLC Inergy Crude Logistics, LLC US Salt, LLC Inergy Terminals, LLC Inergy Dakota Pipeline, LLC Central New York Oil And Gas Company, L.L.C. Inergy , L.P. NYSE: NRGY 56,398,707 NRGM Common Units Incentive Distribution Rights Market Capitalization: $2,847 MM Net Debt: $345 MM Inergy Midstream, L.P. NYSE: NRGM Market Capitalization: $1,967 MM Net Debt: $680 MM Inergy Midstream Operations, LLC NRGY Public Unitholders NRGM Public Unitholders 99% L.P. Interest 1% L.P. Interest 100% Member Interest Non-Economic GP Interest 96.7% L.P. Interest 0.6% L.P. Interest 2.7% L.P. Interest 0.5% Class A Member Interest 100% Class A Member Interest 100% Member Interest 100% Member Interest 100% Member Interest 100% Member Interest 100% Member Interest 100% Member Interest 100% Ownership 99.9% Member Interest 0.1% Member Interest 100% Member Interest 100% Member Interest 100% Member Interest 100% Member Interest Non-economic GP interest 100% Member Interest 100% Member Interest Non-economic GP interest 100% Member Interest 100% Member Interest Tres Palacios Gas Storage, LLC 34.3% Ownership 65.7% Ownership Incentive Distribution Rights 100% L.P. Interest 100% Member Interest MGP GP, LLC Inergy Midstream Holdings, L.P. NRGM GP, LLC Inergy Operations, LLC Confidential DRAFT |
![]() Current CMLP Organizational Structure 5 Executive Summary Source: Public partnership filings (1) Class D Units are similar in certain respects to existing common units, except that CMLP has the option to pay distributions to Class D unitholders for a period of one year with cash or by issuing additional paid-in-kind Class D units based upon the volume weighted-average price of CMLP common units for the ten trading days immediately preceding the date the distribution is declared 100% Public Unitholders 34,083,730 Common LP Units Crestwood Holdings Partners LLC Crestwood Gas Services Holdings LLC 17,210,377 Common LP Units 6,190,469 Class D LP Units Crestwood Holdings LLC 2,333,712 Common LP Units 55.8% Operating Subsidiaries Class D LP Units (1) 10.1% 100% GP 1.8% Crestwood Gas Services GP LLC 137,105 Common LP Units 1,112,674 GP Units Common LP Units 28.2% Crestwood Marcellus Midstream LLC Crestwood Midstream Partners LP Market Capitalization: $1,524.9 million Net Debt: $702.5 million B3 / B Crestwood Holdings II LLC Crestwood Marcellus Holdings LLC 3.8% LP 0.2% Confidential DRAFT 100% 100% |
![]() Summary Transaction Structure 6 Executive Summary Summary Structure Step 2: Acquisition of Inergy Holdings GP Step 1: Distribution of NRGY’s NRGM Units to NRGY Unitholders Step 3: NRGY Acquires CMLP’s GP and IDR Interests for NRGY Units Crestwood Holdings acquires IHGP from NRGY principals for a cash payment of [$70 - $80] million NRGY distributes all of its existing NRGM units (56.4 million) to existing NRGY unitholders NRGY Principals Inergy Holdings GP, LLC and associated non-economic GP interest in NRGY [$70- $80] million cash NRGY NRGY Public Unitholders Crestwood Holdings NRGY Principals 56.4 million NRGM Units NRGY acquires CMLP’s general partner and IDR interests from Crestwood Holdings in exchange for $450 million of NRGY units (or 41.6 million NRGY units) NRGY CMLP’s General Partner and IDR Interest 41.6 million NRGY Units Crestwood Holdings Step 4: True-Up Contribution CMLP/NRGM Merger CMLP merges with and into NRGM at (i) an agreed upon premium not to exceed 5% for CMLP units and (ii) a one-time payment to CMLP unitholders not to exceed $25.0 million – As a result, NRGM issues 63.7 million new NRGM units and $25.0 million in cash Crestwood Holdings CMLP Public Unitholders 20.4 million CMLP Units NRGY acquires 5.5 million CMLP units from Crestwood Holdings in exchange for 12.2 million NRGY units NRGY 5.5 million CMLP Units 12.2 million NRGY Units Crestwood Holdings NRGM NRGY 5.5 million CMLP Units 5.8 million NRGM Units & $2.3 million 21.7 million NRGM Units & $8.5 million Confidential DRAFT |
![]() Common LP Units 12.0 million 8.0% Common LP Units 26.7 million 14.4% 100% 100% 100% Common LP Units 105.0 million 56.6% Pro Forma Ownership Structure 7 Executive Summary 100% Crestwood Holdings Partners LLC Inergy Holdings, L.P. Public Unitholders Crestwood Holdings LLC 100% 100% 100% 100% Common LP Units 110.0 million 73.6% Inergy GP, LLC Inergy, L.P. Public Unitholders MGP GP, LLC NRGM GP, LLC Common LP Units 5.8 million 3.9% Non-Economic General Partner Interest Non-Economic General Partner Interest Inergy Midstream Holdings, L.P. Non-Economic General Partner Interest 100% Incentive Distribution Rights Non-Economic General Partner Interest Common LP Units 53.8 million 29.0% Management Management Common LP Units 21.7 million 14.5% Inergy Midstream, L.P. Crestwood Midstream Partners, LP 100% Crestwood Gas Services, LLC 100% Non-Economic General Partner Interest 100% Pro Forma Ownership Units (MM) % NRGY Public - NRGY 105.0 56.6% Crestwood Holdings 53.8 29.0% Management 26.7 14.4% Total NRGY Units 185.6 100.0% NRGM Public - NRGM 17.5 11.7% Public - CMLP 36.2 24.1% Crestwood Holdings 22.0 14.7% NRGY Unitholders 56.4 37.6% NRGY 5.8 3.9% Management 12.0 8.0% Total NRGM Units 149.9 100.0% Confidential DRAFT |
![]() Pro Forma Asset Map 8 Executive Summary Gathering Systems (CMLP) Compression and Treating Facility (CMLP) Processing Facility (CMLP) Legend Gas Storage (NRGM) NGL Storage (NRGM) COLT Hub (NRGM) DRAFT Confidential |
![]() Summary Side by Side Comparison ($ in millions, except per unit amounts) Executive Summary 9 Source: CMLP and NRGM management, respectively and CMLP and NRGM filings Note:: All entities listed on a fiscal year basis; NRGM fiscal year ends September 30 (1) Distribution per LP unit and Distributable Cash Flow per LP Unit for the three months ending September 30, 2013 NRGM CMLP NRGM Pro Forma Unit Price (as of 04/19/2013) $24.97 $22.90 $22.90 Total Equity Value $1,524.9 $1,967.2 $3,450.2 Plus: Net Debt $702.5 $679.8 $1,637.9 Plus: Minority Interest -- -- -- Enterprise Value $2,227.4 $2,647.0 $5,088.1 Adjusted EBITDA 2013E $173.3 $194.3 $377.5 2014E 214.8 228.6 458.4 Enterprise Value / Adjusted EBITDA 2013E 12.9x 13.6x 13.5x 2014E 10.4 11.6 11.1 Distributed Cash Flow Yield Current Annualized 8.2% 6.8% 7.4% 2013E 8.3% 6.9% 7.2% 2014E 8.6% 7.3% 8.1% Distributable Cash Flow Yield Current Annualized 7.8% 6.0% 7.6% 2013E 8.0% 6.7% 7.2% 2014E 8.6% 7.6% 8.3% Credit Rating B3 / B Ba3 / BB NA (1) (1) DRAFT Confidential |
![]() Summary of Merger Agreement 10 Executive Summary Source: Draft of the Agreement and Plan of Merger by and among Inergy Midstream, L.P., NRGM GP, LLC, Intrepid Merger Sub, LLC, Inergy, L.P., Crestwood Midstream Partners LP and Crestwood Gas Services GP LLC dated April 19, 2013 (1) Subject to NRGM’s further confirmation of impact of merger transaction on CMLP equity awards Parties: CMLP Crestwood Gas Services GP, LLC (“CMLP GP”) NRGM; NRGM GP, LLC (“NRGM GP”) NRGY Intrepid Merger Sub, LLC (“Merger Sub”), a wholly-owned subsidiary of NRGM Mechanics: Provides for merger of CMLP with Merger Sub; CMLP remains as surviving entity post-closing, continuing as a wholly-owned subsidiary of NRGM NRGM will be sole limited partner of CMLP, CMLP GP will be sole general partner of CMLP, and NRGM GP will be sole member of CMLP GP Closing occurs within 3 business days of satisfaction or waiver of closing conditions (see page 11) Consideration: The Proposed Consideration (CMLP common units and Class D Units exchanged for NRGM units and cash) Merger Sub LLC interests convert into 100% LP interest in CMLP CMLP GP’s GP interest in CMLP converts into a non-economic GP interest in CMLP Outstanding CMLP Incentive Distribution Rights are cancelled [CMLP Restricted Common Units lapse; CMLP Phantom Units vest and restrictions thereon lapse] (1) Required Approvals After Merger Agreement is Executed: Majority of outstanding CMLP common units FTC/DOJ approval under the HSR Act (antitrust clearance) NYSE approval of listing of additional NRGM common units to be issued in connection with merger As a condition to execution of Merger Agreement, NRGM will require CMLP GP; Crestwood Gas Services Holdings LLC and Crestwood Holdings LLC to enter into a Voting Agreement (agreeing to support the Proposed Transaction) and an Option Agreement (giving NRGY the option to purchase these parties’ CMLP units in the event the Merger Agreement is terminated) – Confidential DRAFT |
![]() Summary of Merger Agreement (cont’d) 11 Executive Summary Covenants: Parties agree to continue to conduct business in the ordinary course through Closing and abide by customary restrictions on issuance of equity, incurrence of debt, entry into material contracts, etc. No-Shop Clause: CMLP agrees not to solicit or otherwise agree to an alternative to the Proposed Transaction; includes fiduciary out allowing CMLP GP’s Board to agree to superior proposal Indemnification: NRGM must indemnify directors and officers of CMLP and related parties for 6 years after closing, including for claims relating to the Proposed Transaction Directors of CMLP Board (and related entities as NRGM may designate) must resign Securities Law Filings: Parties agree to cooperate in filing Joint Proxy Statement/Prospectus, Schedule 13E-3 (if needed), and other filings as required by the SEC Conditions to Closing: Customary closing conditions (including absence of Material Adverse Effect); GP Consolidation has occurred; and Required Approvals obtained (see page 10) Termination: Termination (i) by mutual consent of the parties; (ii) by either CMLP or NRGM if merger is not consummated [within one year of Merger Agreement execution], CMLP unitholder or requisite governmental approval not obtained, or material breach and failure to cure by the other party or (iii) by NRGM if CMLP GP Board changes its recommendation or willfully breaches non-solicitation provision Termination Fee: CMLP must pay termination fee of $[ ] if CMLP willfully breaches non-solicitation provision, CMLP GP Board changes its recommendation or CMLP agrees to a superior proposal Expense Reimbursement: CMLP must pay NRGM $[ ] million as expense reimbursement if CMLP unitholder approval is not obtained Controlling Law: Delaware Source: Draft of the Agreement and Plan of Merger by and among Inergy Midstream, L.P., NRGM GP, LLC, Intrepid Merger Sub, LLC, Inergy, L.P., Crestwood Midstream Partners LP and Crestwood Gas Services GP LLC dated April 19, 2013 DRAFT Confidential |
![]() Confidential DRAFT Evercore Evaluation Process To-Date 12 Executive Summary In connection with its review of the Proposed Transaction as of April 24, 2013, Evercore has, among other things: – Reviewed certain publicly-available financial and operating data relating to CMLP and NRGM that we deemed to be relevant; – Reviewed publicly-available research analyst estimates for CMLP’s and NRGM’s future financial performance on a standalone basis; – Reviewed certain non-public projected financial and operating data relating to CMLP prepared and furnished to us by management of CMLP; – Discussed the past and current operations, financial projections and current financial condition of CMLP with management of CMLP (including management’s views of the risks and uncertainties of achieving such projections); – Reviewed certain non-public projected financial and operating data relating to NRGM prepared and furnished to us by management of NRGM; – Reviewed the past and current operations, financial projections and current financial condition of NRGM with CMLP management; – Reviewed the dynamics of each of the markets in which CMLP and NRGM participates with CMLP management; – Reviewed the Crestwood Management Presentation dated April 11, 2013 prepared for NRGY and NRGM by CMLP management – Reviewed the Inergy Management Presentation dated April 11, 2013 prepared for CMLP by NRGM management – Reviewed the Project Intrepid Due Diligence Presentation dated April 19, 2013 prepared by CMLP management – Reviewed a draft of the Agreement and Plan of Merger by and among Inergy Midstream, L.P., NRGM GP, LLC, Intrepid Merger Sub, LLC, Inergy, L.P., Crestwood Midstream Partners LP and Crestwood Gas Services GP LLC dated April 19, 2013 – Reviewed a draft of the Purchase and Sale Agreement among Crestwood Holdings LLC, Intrepid Holdings GP, LLC and NRGP Limited Partner, LLC dated April 19, 2013 – Reviewed a draft of the Contribution Agreement of Membership Interests of Crestwood Gas Services GP LLC among Crestwood Holdings LLC, Crestwood Gas Services Holdings LLC as Contributing Parties and Intrepid GP, LLC, Intrepid, L.P. as Recipient Parties dated April 19, 2013 |
![]() 13 In connection with its review of the Proposed Transaction, as of April 24, 2013 Evercore has the following remaining items to complete: – Reviewing certain additional sensitivity cases and other financial information as requested by Evercore on April 19, 2013 and not yet provided by CMLP management – Reviewing additional information from ongoing diligence with respect to NRGM as such information continues to be provided to CMLP management and Evercore – Reviewing certain tax information requested on April 21, 2013 Confidential DRAFT Executive Summary Evercore Remaining Due Diligence/Evaluation |
![]() Summary Preliminary Valuation Analysis 14 Executive Summary Relevant Range of the Proposed Consideration $27.00 $22.00 Indicative Value per CMLP Common Unit Indicative Value of the Proposed Consideration to be Paid per CMLP Common Unit Crestwood Midstream Partners LP Indicative Valuation per LP Unit Indicative Valuation of Proposed Consideration Discounted Cash Flow Analysis Precedent M&A Peer Group Wall Street Discounted Cash Flow Analysis Precedent M&A Peer Group Wall Street Financial Distirbution Transactions Trading Research Price Financial Distirbution Transactions Trading Research Price Projections Per LP Unit Analysis Analysis Targets Projections Per LP Unit Analysis Analysis Targets 7.5% - 8.5% WACC 7.0% - 10.0% 2013E EBITDA 2013E EBITDA: Barclays 6.5% - 7.5% WACC 6.0% - 8.0% 2013E EBITDA: 2013E EBITDA: Barclays 2017E EBITDA Terminal Exit Yield $173.3 MM $173.3 MM Hilliard Lyons 2017E EBITDA Terminal Exit Yield $171.6 MM $171.6 MM Credit Suisse Exit Multiple of 8.5% - 9.5% CAPM 9.0x -12.5x 10.5x -13.5x Simmons Exit Multiple of 7.5% - 9.5% CAPM 11.5x -13.5x 14.0x -17.0x JP Morgan 9.0x -11.0x Equity Discount Rate EBITDA Multiple EBITDA Multiple Ladenburg Thalmann 11.5x -13.5x Equity Discount Rate EBITDA Multiple EBITDA Multiple Morgan Stanley Perpetuity Growth 13.5% -14.5% 2014E EBITDA: 2014E EBITDA: Wells Fargo Perpetuity Growth 9.0% - 11.0% 2014E EBITDA: 2014E EBITDA: Robert W. Baird & Co. Rate of Expected Market Return $214.8 MM $214.8 MM Rate of Expected Market Return $223.5 MM $223.5 MM Stifel Nicolaus 0.5% - 1.5% Equity Discount Rate 9.0x -12.5x 9.0x -12.0x 0.5% - 1.5% Equity Discount Rate 11.5x -13.5x 10.0x -13.0x EBITDA Multiple EBITDA Multiple EBITDA Multiple EBITDA Multiple Growth Capital Expenditures Growth Capital Expenditures Discounted @ 8.0% Discounted @ 7.0% $25.94 $23.70 $10.90 $16.81 $26.00 $19.55 $22.88 $14.77 $18.79 $25.89 $39.91 $37.49 $23.79 $29.16 $32.50 $32.70 $31.77 $24.29 $27.20 $30.13 $-- $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 Confidential DRAFT 1.061x NRGM Units + $0.41 per unit of cash Current CMLP Unit Price: $24.97 |
![]() Summary Contribution Analysis 15 Executive Summary (1) Adjusted for CMLP and NRGM net debt outstanding as of the most recent public disclosure. Equity value as of April 19, 2013 (2) Proposed exchange ratio excludes cash consideration of $0.41 per unit Management Financial Projections Implied Exchange Ratio Pro Forma Ownership Based on Proposed Exchange Ratio 1.061x 2013E Distributable Cash Flow 1.178x 2014E Distributable Cash Flow 1.290x 2015E Distributable Cash Flow 1.546x 2013E EBITDA (1) 1.178x 2014E EBITDA (1) 1.271x 2015E EBITDA (1) 1.585x DCF Equity Value 1.360x Precedent Transactions Equity Value 0.981x Peer Group Trading Equity Value 1.100x Relevant Range - - Implied Exchange Ratio - Proposed Exchange Ratio (2) 40.8% 1.061x 0.981x 1.585x 59.2% 47.3% 51.2% 40.8% 59.2% 52.0% 48.0% 45.2% 54.8% 47.1% 52.7% 52.9% Crestwood Inergy Midstream 45.2% 54.8% 47.5% 52.5% 42.7% 57.3% 43.6% 56.4% 52.7% 47.3% 48.8% DRAFT Confidential |
![]() Confidential DRAFT Summary Pro Forma Accretion/Dilution Results 16 Executive Summary (1) Based on CMLP’s current 8.2% yield Standalone Pro Forma CMLP CMLP CMLP Breakeven Yield (1) CY 2014E CMLP DCF / LP Unit $2.14 $2.02 7.7% Accretion / (Dilution) - $ ($0.12) CY 2015E CMLP DCF / LP Unit $2.51 $2.22 7.7% Accretion / (Dilution) - $ ($0.29) CY 2016E CMLP DCF / LP Unit $2.78 $2.35 7.4% Accretion / (Dilution) - $ ($0.42) CY 2017E CMLP DCF / LP Unit $2.98 $2.48 7.1% Accretion / (Dilution) - $ ($0.50) CY 2014E CMLP Distribution / LP Unit $2.15 $1.96 7.4% Accretion / (Dilution) - $ ($0.19) CY 2015E CMLP Distribution / LP Unit $2.37 $2.16 7.5% Accretion / (Dilution) - $ ($0.20) CY 2016E CMLP Distribution / LP Unit $2.60 $2.31 7.2% Accretion / (Dilution) - $ ($0.29) CY 2017E CMLP Distribution / LP Unit $2.86 $2.39 6.8% Accretion / (Dilution) - $ ($0.47) CY 2014E - 2017E Distribution Growth 10.0% 6.9% Debt Metrics CY 2014E Debt/EBITDA 4.4x 3.8x CY 2015E Debt/EBITDA 3.7x 3.5x CY 2016E Debt/EBITDA 3.4x 3.2x CY 2017E Debt/EBITDA 3.2x 3.0x |
![]() III. Overview of CMLP DRAFT |
![]() CMLP Asset Map ($ in millions) 17 Overview of CMLP Source: Public partnership filings (1) Excludes corporate expenses Acreage Dedication Summary Avalon Shale Barnett Shale Granite Wash Haynesville Shale Legend Fayetteville Shale Marcellus Shale 2012A to 2017E Gathering Volume Compound Annual Growth Rate by Basin (1) 2013E EBITDA by Basin (1) Confidential DRAFT Gathering Systems Compression and Treating Facility Processing Facility 40.0% 30.0% 20.0% 10.0% -- (10.0%) (20.0%) (30.0%) Barnett Shale Marcellus Shale Fayetteville Shale Granite Wash Haynesville Shale Avalon Shale 2.9% 28.1% 22.2% 32.6% (0.6%) (18.9%) Avalon Shale Granite Wash Fayetteville Shale Barnett Shale Haynesville Shale Marcellus Shale Contract Expiration 2017E 2020E 2021E 2022E 2024E 2032E 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 -- $21.2MM $3.7MM $3.0MM $111.2MM 55% 11% 2% 1% Avalon Shale Granite Wash Barnett Shale Fayetteville Shale Haynesville Shale Marcellus Shale $0.1MM 0% 31% $62.1MM |
![]() Confidential DRAFT 1 Pipeline Nominal Capacity (MMcfd) Installed Compression Asset Miles Gathering Processing Treating Dehydration Compression (HP) Units Barnett Shale Owned: Cowtown System 298 425 425 -- 425 103,590 33 Lake Arlington System 10 230 -- -- 235 30,480 7 Alliance System 42 300 -- 340 240 43,680 7 Owned 350 955 425 340 900 177,750 47 Operated Non-Owned: Cowtown System 104 -- -- -- -- -- -- Lake Arlington System 10 -- -- -- -- -- -- Alliance System 35 -- -- -- -- -- -- Operated Non-Owned 149 -- -- -- -- -- -- Total Barnett Shale Assets 499 955 425 340 900 177,750 47 Fayetteville Shale Twin Groves/Prairie Creek/Woolly Hollow System 129 350 -- 185 180 26,635 14 Wilson Creek System 24 100 -- -- 5 425 1 Rose Bud System 15 60 -- -- 5 630 1 Total Fayetteville Shale Assets 168 510 -- 185 190 27,690 16 Granite Wash Total Granite Wash Assets 36 36 36 -- -- 10,890 10 Marcellus Shale Total Marcellus Shale Assets 42 420 -- -- 300 43,100 31 Other Las Animas System 47 50 -- -- 34 -- 1 Sabine System 57 100 -- 74 72 -- -- Total Other Assets 104 150 -- 74 106 -- Total CMLP 849 2,071 461 599 1,496 259,430 105 Asset Overview 18 Overview of CMLP Source: Public partnership filings |
![]() Confidential DRAFT Asset Overview (cont’d) 19 Overview of CMLP Source: Public partnership filings (1) Excludes corporate expenses Located principally in Hood, Somervell and Johnson Counties, Texas in the southern portion of the Fort Worth Basin – The Cowtown Pipeline, which consists of NGL rich natural gas gathering systems, gathers natural gas for processing at the Cowtown Plant or Corvette Plant – The Cowtown Plant, which consists of two natural gas processing units, extracts NGLs from the natural gas stream and delivers residue gas and extracted NGLs to unaffiliated pipelines – The Corvette Plant extracts NGLs from the natural gas stream and delivers residue gas and extracted NGLs to unaffiliated pipelines Residue gas delivered to Atmos Energy Corporation, Enterprise Texas Pipeline LLC and/or Energy Transfer Partners, LP (“Energy Transfer”) Extracted NGLs delivered to West Texas Pipeline, LP and Lone Star NGL LLC for delivery to Mont Belvieu, Texas Acquired on August 24, 2012 from Devon Corporation and ceased operations on December 1, 2012 – CMLP is currently evaluating other potential uses for the 100 MMcfd West Johnson County Plant Located in eastern Tarrant County, Texas, the Lake Arlington System consists of a natural gas gathering system and related compression facility – Gathers natural gas for delivery to Energy Transfer Located in northern Tarrant and southern Denton Counties, Texas, the Alliance System consists of a natural gas gathering system and a related dehydration, compression and amine treating facility – Gathers natural gas for delivery to Energy Transfer and Crosstex Partners, LP (“Crosstex”) Barnett Shale 55.3% of 2013E EBITDA (1) Located in Harrison and Doddridge Counties, West Virginia, the Marcellus Systems consist of low pressure natural gas gathering systems and compression and dehydration facilities The Marcellus Systems interconnect with various interstate pipeline systems including Columbia Gas Transmission, Dominion Resources Inc. (“Dominion”) and Equitrans Pipeline The Marcellus Systems deliver high NGL content natural gas to MarkWest Energy Partners, L.P.’s Sherwood Natural Gas Processing Plant Antero’s assets consist of a 33-mile low pressure gathering system with 59 existing Antero horizontal Marcellus Shale well connections – Area of dedication located within the rich natural gas window of the southwestern core Marcellus Shale play in northern West Virginia Antero committed to deliver minimum annual throughput volumes for a seven-year period from January 1, 2012 to January 1, 2019, ranging from an average of 300 MMcfd in 2012 to an average of 450 MMcfd in 2018 EMAC’s assets consist of four compression and dehydration stations located on the acquired Antero gathering assets – Provide compression and dehydration services to Antero pursuant to a compression services agreement through 2018 Marcellus Shale 30.8% of 2013E EBITDA (1) Cowtown System West Johnson County System Lake Arlington System Alliance System Marcellus Systems Antero Resources Corporation (“Antero”) Acquisition E. Marcellus Asset Company, LLC (“EMAC”) Acquisition |
![]() Confidential DRAFT Asset Overview (cont’d) 20 Overview of CMLP Source: Public partnership filings (1) Excludes corporate expenses Located in Roberts County, Texas, includes – The Indian Creek rich natural gas gathering system and related compression facility – The Indian Creek processing plant Gathers rich natural gas produced by Chesapeake Energy Corporation (“CHK”), Linn Energy, LLC and Sabine Oil and Gas LLC and interconnects with Mid-America Pipeline, a subsidiary of Enterprise Products Partners, L.P., for delivery of NGLs to Mont Belvieu, Texas The residue gas is delivered to ANR Pipeline and Northern Natural Gas Pipeline to provide access to the Mid-Continent natural gas markets Granite Wash 1.8% of 2013E EBITDA (1) Located in Eddy County, New Mexico, the Las Animas assets consist of three natural gas gathering systems located in the Morrow/Atoka reservoir and the Avalon Shale rich gas trend in the Permian Basin The Las Animas Systems include approximately 55,000 acres of dedication from Bass Oil Production Company through 2017 Located in Sabine Parish, Louisiana, the Sabine assets consist of high-pressure natural gas gathering pipelines Provides gathering and treating services for production from CHK, Comstock Resources, Inc., Forest Oil Corporation, Wildcat Sabine Pipeline LLC and Devon Corporation in the Haynesville/Bossier Shale with deliveries to Gulf South Pipeline and Tennessee Gas Pipeline Company, LLC – The Sabine System is supported by fixed-fee contracts with producers and approximately 20,000 dedicated acres Contracts have initial terms through 2019 to 2021 Other 1.6% of 2013E EBITDA (1) Located in Conway and Faulkner Counties, Arkansas, the Twin Groves/Prairie Creek/Woolly Hollow Systems consist of three natural gas gathering, compression, dehydration and treating facilities – Gather natural gas produced by BHP Billiton Petroleum, Plc. (“BHP”), BP and XTO Energy for delivery to Texas Gas Transmission, Ozark Gas Transmission and Fayetteville Express Pipeline Located in Van Buren County, Arkansas, the Wilson Creek System consists of a natural gas gathering system and a related compression facility. This system gathers natural gas produced by independent producers and delivers to Ozark Gas Transmission Located in White County, Arkansas, the Rose Bud System consists of a natural gas gathering system and a related compression facility. This system gathers natural gas produced by XTO Energy and delivers to Ozark Gas Transmission Fayetteville Shale 10.5% of 2013E EBITDA (1) Twin Groves / Prairie Creek / Woolly Hollow Systems Wilson Creek System Rose Bud System Granite Wash System Sabine System Los Animas Systems |
![]() Confidential DRAFT Asset Overview – Barnett Shale (55.3% of 2013E EBITDA Excluding Corporate Expenses) 21 Source: Public partnership filings and CMLP management During the year ended December 31, 2012, CMLP’s Barnett Shale EBITDA declined $8.9 million from 2011 levels – Gathering volumes declined from 473.5 MMfcd in 2011 to 433.1 MMcfd in 2012 given reduced production from existing wells and well shut-ins on the Alliance System and Lake Arlington System – Such volume declines were partially offset by producers connecting 64 new wells during the year ended December 31, 2012 mostly on the Cowtown System – During the year ended December 31, 2011, Quicksilver Resources Inc.’s (“Quicksilver”) joint development agreement with Eni SpA resulted in an increase of approximately 75 MMcfd in gathered volumes and approximately $16.0 million in revenue Given the higher NGL content of the natural gas production in Johnson County, Texas, Devon Energy Corporation maintained an active drilling and development plan in 2012 Map – Barnett Shale Assets CMLP Natural Gas Gathering Pipeline Third-Party Natural Gas Gathering Pipeline Third-Party Natural Gas Takeaway Pipeline CMLP Natural Gas Processing Plants Third-Party Natural Gas Processing Plants CMLP Treating and Compression Facility Competitive Asset Legend Cowtown System Alliance System Lake Arlington System The primary producer on the system, Quicksilver, represented 71.6% of CMLP’s Barnett Shale gathering volumes On March 29, 2013, Quicksilver announced that it had executed an agreement to sell an undivided 25.0% interest in its Barnett Shale oil and gas assets for $485.0 million to TG Barnett Resources LP, a U.S. subsidiary of Tokyo Gas Co., Ltd. – Future development spending will be shared in proportion to each party’s working interest Overview of CMLP |
![]() Asset Overview – Barnett Shale (55.3% of 2013E EBITDA Excluding Corporate Expenses) (cont’d) 22 Overview of CMLP Source: Public partnership filings and HPDI Wells Spud and Permits by Quarter (Denton, Tarrant, Hood, Johnson, Somervell and Bosque Counties, Texas) -- 150 300 450 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Permits Spuds On August 24, 2012, CMLP acquired certain gathering and processing assets from Devon Corporation (“Devon”) in west Johnson County, Texas (the “West Johnson County System”) – The assets acquired consist of a 74-mile low pressure natural gas gathering system, a 100 MMcfd cryogenic processing facility and 23,100 horsepower of compression equipment – Additionally, CMLP entered into a 20-year, fixed-fee gathering, processing and compression agreement with Devon, pursuant to which CMLP will gather and process Devon’s natural gas production from a 20,500 acre dedication • Natural gas production gathered and processed pursuant to the agreement was approximately 96 MMcfd as of December 31, 2012 – The West Johnson County System was operational from August 24, 2012 to December 1, 2012 • On December 1, 2012, CMLP elected to cease operating the 100 MMcfd natural gas processing plant and consolidated natural gas volumes then on the West Johnson County System onto the Cowtown System – CMLP is currently evaluating other potential uses for the 100 MMcfd natural gas processing plant Producing Wells and Production by Quarter (Denton, Tarrant, Hood, Johnson, Somervell and Bosque Counties, Texas) Confidential DRAFT Production (MMcfed) Average Producing Wells 7,500 9,500 10,500 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 3,750 4,250 4,500 4,750 4,000 8,500 |
![]() Asset Overview – Marcellus Shale (30.8% of 2013E EBITDA Excluding Corporate Expenses) 23 Overview of CMLP Antero Resources LLC (“Antero”) is the only producer on CMLP’s Marcellus Shale assets Based upon Antero’s current 2013 drilling plan in the eastern part of CMLP’s dedicated acreage: – CMLP management expects 60 to 70 new well connections in 2013 – CMLP management expects to expand its low pressure gathering systems with an additional 18 miles of pipeline – In addition to the four compressor stations acquired from Enerven in January 2013 for $95.0 million, CMLP also expects to add at least two new compressor stations during 2013 CMLP is in early discussions with Antero regarding the accelerated development of midstream infrastructure in the western part of CMLP’s dedicated acreage including the addition of incremental compressor stations to increase total gathering capacity CMLP’s Marcellus Shale assets gather natural gas production that Evercore believes, given well costs and production profile, generate 20.0% + IRRs for producers down to a $3.50 per MMBtu natural gas price Map – Marcellus Shale Assets Source: Public partnership filings and HPDI Wells Spud and Permits by Quarter (Harrison and Doddridge Counties, West Virginia) CMLP Natural Gas Gathering Pipeline Third-Party Natural Gas Gathering Pipeline Third-Party Natural Gas Takeaway Pipeline Third-Party Natural Gas Processing Plants CMLP Compression Station Antero Acreage Dedication Competitive Asset Legend Producing Wells and Production by Quarter (Harrison and Doddridge Counties, West Virginia) -- 10 20 30 40 50 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Permits Spuds 5,000 5,500 6,000 6,500 -- 100 200 300 400 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Production (MMcfed) Average Producing Wells Confidential DRAFT |
![]() Asset Overview – Fayetteville Shale (10.5% of 2013E EBITDA Excluding Corporate Expenses) 24 Overview of CMLP Fayetteville segment EBITDA increased approximately $7.9 million during the year ended December 31, 2012 compared to 2011 and gathering volume increased by 22.5 MMcfd in 2012 compared to 2011 – During the year ended December 31, 2012, BHP connected six new wells on the Twin Groves System The Fayetteville System’s volumes are supported by long-term fixed-fee contracts with producers with approximately 100,000 acres dedicated to CMLP – These contracts have initial terms that extend through 2020 and include an option, by either party to the contract, to extend the contract through 2025 Primary producer, BHP, acquired CHK’s Fayetteville Shale upstream assets on February 22, 2011 for $4.25 billion On August 3, 2012, BHP took a $2.84 billion writedown on its Fayetteville assets, and BHP’s CEO Marius Kloppers stated, “The Fayetteville charge reflects the fall in United States domestic gas prices and the company’s decision to adjust its development plans by shifting drilling from dry gas to more liquids rich fields” Source: Public partnership filings and HPDI Wells Spud and Permits by Quarter (Van Buren, Conway, Faulkner and White Counties, Arkansas) -- 75 150 225 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Permits Spuds CMLP Natural Gas Gathering Pipeline Third-Party Natural Gas Gathering Pipeline Third-Party Natural Gas Takeaway Pipeline CMLP Treating and Compression Facility Third-Party Natural Gas Processing Plants Prairie Creek Twin Groves Woolly Hollow Producing Wells and Production by Quarter (Van Buren, Conway, Faulkner and White Counties, Arkansas) Confidential DRAFT Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Production (MMcfed) Average Producing Wells 1,500 2,000 2,500 1,750 2,750 3,750 Rose Bud Map – Fayetteville Shale Assets Competitive Asset Legend Wilson Creek |
![]() 25 Overview of CMLP For the year ended December 31, 2012, the Granite Wash segment’s EBITDA was approximately $0.8 million lower than in 2011, primarily due to lower product sales margin and higher operations and maintenance expenses while volumes on the system increased by 5.2 MMcfd, or 41.4%, versus 2011 – Lower margins earned on percent-of- proceeds contracts, which primarily resulted from lower NGL and natural gas prices coupled with relatively consistent costs per volume – Higher gathering revenues from new wells connected by Sabine Oil and Gas LLC (“Sabine”) partially offset the decline in product sales margin in 2012 Source: Public partnership filings and HPDI CMLP Natural Gas Gathering Pipeline Third-Party Natural Gas Gathering Pipeline Third-Party Natural Gas Takeaway Pipeline CMLP Natural Gas Processing Plants Third-Party Natural Gas Processing Plants Indian Creek System Confidential DRAFT Wells Spud and Permits by Quarter (Roberts County, Texas) Producing Wells and Production by Quarter (Roberts County, Texas) Permits Spuds 30 20 10 -- Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Production (Mmcfed) Average Producing Wells 250 200 150 1,200 1,100 1,000 Map – Granite Wash Assets Competitive Asset Legend Asset Overview – Granite Wash (1.8% of 2013E EBITDA Excluding Corporate Expenses) |
![]() Confidential Asset Overview – Haynesville Shale (1.5% of 2013E EBITDA Excluding Corporate Expenses) 26 Overview of CMLP Map – Haynesville Shale Assets Source: Public partnership filings and HPDI Wells Spud and Permits by Quarter (Sabine Parish, Louisiana) -- 25 50 75 100 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Permits Spuds On November 1, 2011, CMLP acquired Tristate Sabine, LLC (“Tristate”) from affiliates of Energy Spectrum Capital, Zwolle Pipeline, LLC and Tristate’s management for approximately $72.0 million in cash consideration comprised of $64.0 million paid at closing plus a deferred payment of approximately $8.0 million, which was paid during the fourth quarter of 2012 The Sabine System is supported by long-term, fixed- fee contracts with approximately 20,000 acres dedicated to CMLP – These contracts have various initial terms that extend through 2019 and 2021 The Sabine System had 50 MMcfd in gathered volumes for the year ended December 31, 2012, which resulted in approximately $10.0 million in revenues for the year ended December 31, 2012 CMLP Natural Gas Gathering Pipeline Third-Party Natural Gas Gathering Pipeline Third-Party Natural Gas Takeaway Pipeline CMLP Treating and Compression Facility Third-Party Natural Gas Processing Plants Competitive Asset Legend Sabine System Producing Wells and Production by Quarter (Sabine Parish, Louisiana) 275 375 475 575 -- 250 500 750 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Production (MMcfed) Average Producing Wells DRAFT |
![]() Asset Overview – Avalon Shale (0.1% of 2013E EBITDA Excluding Corporate Expenses) 27 Overview of CMLP Effective February 1, 2011, CMLP acquired approximately 46 miles of natural gas gathering systems located in the Morrow/Atoka trend and the Avalon Shale for $5.1 million from a group of independent producers – Supported by long term, fixed-fee contracts which include existing Morrow/Atoka production and dedications of approximately 90,000 acres at the time of the acquisition – The Las Animas Systems currently has approximately 55,000 acres of dedication from Bass Oil Production Company through 2017 EBITDA related to the Las Animas System remained relatively unchanged for the year ended December 31, 2012 compared to 2011 as volumes decreased by 5.3% during the year Source: Public partnership filings and HPDI -- 100 200 300 400 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Permits Spuds CMLP Natural Gas Gathering Pipeline Third-Party Natural Gas Gathering Pipeline Third-Party Natural Gas Takeaway Pipeline CMLP Treating and Compression Facility Third-Party Natural Gas Processing Plants Wells Spud and Permits by Quarter (Eddy County, New Mexico) Producing Wells and Production by Quarter (Eddy County, New Mexico) Confidential DRAFT Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 1,500 1,000 500 -- 12,000 11,500 11,000 10,500 10,000 Production (MMcfed) Average Producing Wells Competitive Asset Legend Las Animas Systems Map – Avalon Shale Assets |
![]() CMLP – Summary Market Data ($ in millions, except per unit amounts) Market Capitalization Balance Sheet and Credit Data Unit Price and Distribution Information Overview of CMLP 28 Source: Public partnership filings and Factset (1) Includes 6,190,469 Class D Units (2) Excludes 6,190,469 Class D Units General Partner Incentive Distribution Rights As of April 19, 2013 Total Units Outstanding (1) 61.1 Common Unit Price $24.97 Total Equity Value $1,524.9 Plus: Total Debt 702.7 Less: Cash (0.1) Total Enterprise Value $2,227.4 IBES Yield/ Data Multiple Distribution Yield Current $2.04 8.2% 2013E 2.07 8.3% 2014E 2.15 8.6% 2015E 2.26 9.1% TEV / EBITDA 2013E $179.1 12.4x 2014E 229.5 9.7 2015E 296.3 7.5 As of December 31, 2012 Cash and Marketable Securities $0.1 Short-term Debt 3.9 Long-term Debt 698.8 Total Debt $702.7 Net Debt 702.5 Plus: Partners' Capital 978.6 Net Book Capitalization $1,681.2 Revolver Availability / Revolver Capacity $406 / $750 Net Debt / Net Book Cap 41.8% Net Debt / 2013E EBITDA 3.9x Net Debt / 2014E EBITDA 3.1x Current Ratings: Moody's B3 S&P B $34.00 $30.00 $26.00 $22.00 $18.00 4/19/11 9/12/11 2/5/12 6/30/12 11/23/12 4/19/13 $2.10 $2.00 $1.90 $1.80 $1.70 $1.60 $1.50 DRAFT Confidential Distribution per Unit Unit Price Quarterly Distribution per LP Unit $0.5100 Quarterly Total Total Total Total LP Quarterly Quarterly Distribution Total Quarterly Quarterly Annual Annual Distribution Distribution to GP LP Units (2) Distribution Distribution Distribution Distribution % to LP % to GP Range Within Range per LP Unit Outstanding to LPs to GP to LPs to GP 98.2% 1.8% $0.0000 $0.3450 $0.3450 $0.0064 53.8 $18.5 $0.3 $74.2 $1.4 85.2% 14.8% 0.3450 0.3750 0.0300 0.0052 53.8 1.6 0.3 6.5 1.1 75.2% 24.8% 0.3750 0.4500 0.0750 0.0248 53.8 4.0 1.3 16.1 5.3 50.2% 49.8% 0.4500 0.4500 0.0600 0.0596 53.8 3.2 3.2 12.9 12.8 $27.4 $5.2 $109.7 $20.6 % of Total Distributions to the GP 15.8% % of Total Distributions to the IDRs 14.0% |
![]() Confidential DRAFT Trading Performance 29 Overview of CMLP Source: Public partnership filings and Factset 12/8/2008: Purchased Lake Arlington Dry System for $42.0 million 12/10/2009: Announced purchase of Alliance system midstream gathering and treating assets from Quicksilver Resources Inc for $87.1 million 7/22/2010: Announced sale by Quicksilver Resources Inc of all of its interest in Quicksilver Gas Services to Crestwood Holdings Partners LLC for $701.0 million 10/04/2010: Changed name from Quicksilver Gas Services LP to Crestwood Midstream Partners LP 2/01/2011: Acquired natural gas gathering pipelines located in Avalon Shale for $5.1 million from a group of independent producers 2/18/2011: Announced agreement to acquire midstream assets in Fayetteville Shale and Granite Wash from Frontier Gas Services, LLC for $345.0 million 12/13/2011: Announced signing of memorandum of understanding with Mountaineer Keystone LLC to construct 42- mile, 16-inch natural gas gathering system to serve Marcellus Shale development program 4/01/2011: Issued 6.24 million Class C Units in private placement for $24.50 per unit 10/18/2011: Announced agreement to acquire Tristate Sabine, LLC from affiliates of Energy Spectrum Capital, Zwolle Pipeline LLC and Tristate management for $73.0 million 7/23/2012: Announced agreement to acquire midstream assets in the Barnett Shale from Devon Corporation for $90.0 million 11/26/2012: CMM agrees to acquire natural gas compression and dehydration assets from Enerven Compression, LLC for $95.0 million 2/27/2012: Announced agreement with Crestwood Holdings Partners LLC and Antero Resources Appalachian Corporation through newly-formed JV, Crestwood Marcellus Midstream (“CMM”), to acquire certain of Antero’s Marcellus Shale assets for $375.0 million 1/8/2013: Agrees to acquire remaining 65.0% interest in CMM from Crestwood Holdings Partners LLC for $258.0 million 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 $20.00 $22.50 $25.00 $27.50 $30.00 $32.50 $35.00 $37.50 $40.00 6/20/08 12/13/08 6/7/09 12/1/09 5/26/10 11/19/10 5/14/11 11/6/11 5/1/12 10/24/12 4/19/13 $17.50 $15.00 $12.50 $10.00 $7.50 $5.00 $2.50 $-- |
![]() Confidential DRAFT Overview of CMLP 30 Relevant Relative Trading Metrics ($ in millions, except per unit amounts) Source: Partnership filings, FactSet, IBES Enterprise Value / Price Equity Enterprise EBITDA Distribution Yield Distribution Total Partnership (04/19/2013) Value Value 2013E 2014E Current 2013E 2014E Growth Return Natural Gas Gathering and Processing MLPs American Midstream Partners, LP $17.09 $159.9 $370.1 12.5x 11.6x 10.1% 10.1% 11.0% 2.9% 13.0% Atlas Pipeline Partners, L.P. 35.55 2,341.9 3,585.6 10.3 8.5 6.5% 7.1% 8.0% 9.9% 16.4% Access Midstream Partners, L.P. 40.41 7,814.3 10,360.9 12.8 10.0 4.5% 4.9% 5.6% 10.6% 15.0% Crosstex Energy, L.P. 19.12 1,828.0 2,864.2 12.2 9.3 6.9% 7.3% 7.9% 5.3% 12.2% DCP Midstream Partners, LP 47.62 2,946.1 4,600.5 12.6 9.2 5.8% 6.0% 6.5% 8.4% 14.2% MarkWest Energy Partners, L.P. 60.68 9,046.7 11,550.2 16.6 12.2 5.4% 5.7% 6.2% 9.2% 14.6% Regency Energy Partners LP 26.07 5,360.4 8,213.9 13.1 10.5 7.1% 7.4% 7.9% 5.0% 12.0% Southcross Energy Partners, L.P. 20.86 520.1 962.3 18.2 16.9 7.7% 8.5% 8.9% 5.0% 12.7% Summit Midstream Partners, LP 26.92 1,341.0 1,532.4 13.2 10.8 6.1% 6.4% 7.1% 8.0% 14.1% Targa Resources Partners LP 48.53 5,040.6 7,516.4 11.8 9.2 5.6% 5.9% 6.5% 8.5% 14.1% Western Gas Partners, LP 58.10 6,231.5 8,029.5 18.3 13.4 3.7% 3.9% 4.5% 11.6% 15.3% Mean 13.8x 11.1x 6.3% 6.7% 7.3% 7.7% 14.0% Median 12.8 10.5 6.1% 6.4% 7.1% 8.4% 14.1% Crestwood Midstream Partners LP $24.97 $1,524.9 $2,256.4 12.6x 9.8x 8.2% 8.3% 8.6% 4.1% 12.3% |
![]() Confidential DRAFT Wall Street Research Price Targets ($ in millions, except per unit amounts) Summary Price Targets 31 Analyst Recommendations Source: Bloomberg, IBES Distribution Per Unit Estimates EBITDA Estimates Overview of CMLP Hold (2) 33.3% Buy (4) 66.7% $2.09 $2.17 $2.26 $2.12 $2.24 $2.36 $2.04 $2.14 $2.07 $2.10 $2.20 $2.07 $2.15 $2.26 $1.80 $1.90 $2.00 $2.10 $2.20 $2.30 $2.40 2013E 2014E 2015E $178.0 $258.0 $307.0 $179.1 $209.0 $180.7 $229.0 $178.6 $248.8 $316.4 $179.1 $229.5 $296.3 $-- $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 $350.0 2013E 2014E 2015E Barclays Ladenburg Thalmann RBC Wells Fargo IBES Target Firm Analyst Date Recommendation Price Ladenburg Thalmann Eduardo Seda 02/27/13 Buy $32.50 Hilliard Lyons Joel K. Havard 02/27/13 Long-term Buy 32.00 Simmons Mark L. Reichman 03/21/13 Overweight 30.00 Barclays Richard Gross 02/28/13 Equalweight 27.00 RBC T.J. Schultz 02/27/13 Sector Perform 26.00 Wells Fargo Michael J. Blum 02/28/13 Outperform NA Median: $30.00 Mean: 29.50 Low: 26.00 High: 32.50 |
![]() Research Analyst Commentary Overview of CMLP 32 “In our opinion, given our assumption of an improving sector growth outlook, a weak natural gas but strong crude oil and NGL commodity price environment, additional organic growth projects coming on-line, as well as contributions from the recent acquisitions and CMLP’s increased growth capex budget, we believe CMLP is well positioned to achieve a distribution growth rate of 5.6% CAGR over the 2013-15 period, and thereafter at a higher rate.” – Ladenburg Thalmann, Eduardo Seda; February 27, 2013 ���We expect CMLP's valuation to improve as investors better appreciate the partnership's growing geographic footprint, stable cash flow (98% fee-based), strong sponsor support, and potential upside tied to future acquisitions and organic investments. We forecast CMLP to grow distributions at a 5-year CAGR of approximately 4% supported by volume growth in liquids-rich areas.” – Wells Fargo Securities, Ronald F. Londe; February 28, 2013 “We forecast 5-year distribution CAGR of 3.9%. We believe CMLP will be able to raise distribution at a moderate pace, but expect near-term coverage to be impacted (and light) from Class C and D unit conversions in 2Q13 and 1Q14, respectively. Risks to the upside include potential parent-led drop downs, a recovery in dry gas volumes or new oil / rich gas projects” – Barclays Capital, Richard Gross; February 28, 2013 Price Target: $32.50 Price Target: NA Price Target: $27.00 DRAFT Confidential |
![]() Confidential DRAFT Ratings Agency Commentary 33 Overview of CMLP Standard & Poor’s – B/Stable (Nora Pickens & Michael V. Grande – March 29, 2013) – “CMLP’s aggressive growth strategy, customer concentration to Quicksilver Resources Inc., and potential cash flow volatility due to lower natural gas throughput characterize the partnership's “weak” business profile. High financial leverage and the master limited partnership structure, which gives CMLP much incentive to pay out most of its cash flow after maintenance capital spending to unitholders each quarter, reflect the aggressive financial profile. CMLP’s mostly fee-based contract mix and minimal direct commodity exposure partly offset these risks.” – “We could lower the rating if a debt-financed acquisition or a decrease in volumes causes cash flow to decline and financial ratios to deteriorate, stand-alone and fully consolidated basis, respectively, for an extended period” – “A higher rating is unlikely at this time because of CMLP’s limited scale and high consolidated leverage, but is attainable if we believe it will maintain consolidated leverage at 4x or less.” Moody’s – B2/Stable (Jonathan Kalmanoff & Steven Wood – March 28, 2013) – “Crestwood's B2 corporate family rating is supported by fixed fee contracts that avoid direct commodity price exposure, a moderate degree of basin and customer diversification, exposure to producing basins with liquids production, minimum volume commitments for a portion of throughput, a management team with extensive experience in the midstream sector, and a private equity sponsor with the industry knowledge and financial capacity to support the company's growth ambitions. concentration relative to rated midstream peers, volumes driven by E&P drilling activity which is indirectly tied to commodity prices, and high consolidated leverage.” such that debt to EBITDA remains above 5.5x and 7.0x on a The rating is restrained by business line |
![]() Equity Ownership Summary Overview of CMLP Includes 6,190,469 Class D Units and 1,112,674 GP units Source: NASDAQ National Markets as of March 28, 2013 34 Institutional Top 10: Kayne Anderson Capital Advisors LP 5,807,677 9.5% Tortoise Capital Advisors LLC 2,676,178 4.4% ClearBridge Investments LLC 2,481,349 4.1% Center Coast Capital Advisors LP 2,463,613 4.0% Tiverton Asset Management LLC 600,000 1.0% JPMorgan Securities LLC 512,084 0.8% UBS Global Asset Management 279,425 0.5% Advisors Asset Management, Inc. 159,065 0.3% Wells Fargo Advisors LLC 115,524 0.2% Fidelity Management & Research Co. 95,332 0.2% Other 888,299 1.5% Total Institutional Ownership 16,078,546 26.3% Insiders First Reserve Corp. 27,135,412 44.4% Other 448,596 0.7% Total Insiders 27,584,008 45.2% Retail / Other 17,405,513 28.5% Total Units Outstanding (1) 61,068,067 100.0% Short Interest (2) 639,653 1.0% Current Unitholders Units % of Total (1) Confidential DRAFT Source: FactSet (1) (2) |
![]() Confidential DRAFT Overview of CMLP 35 CMLP Management Financial Projections – Assumptions The CMLP Management Financial Projections as provided by CMLP management and utilized herein by Evercore, incorporate the following assumptions: – Marcellus volumes are expected to increase 101.2% year-over-year from 227.2 MMcfd in 2012A to 457.1 MMcfd in 2013E based on Antero’s volume forecast provided to CMLP management – Barnett rich natural gas volumes are expected to increase 32.2% year-over-year from 163.5 MMcfd in 2012A to 216.1 MMcfd in 2013E based on a full year contribution from Devon and increasing offload point volumes from Empire Pipeline Corporation (“Empire”) Empire is as a natural gas utility serving Parker, western Tarrant, northern Hood and western Johnson Counties, Texas operating over 240 miles of low-pressure gathering and transmission pipeline – Barnett dry natural gas volumes are expected to decline by 12.5% year-over-year from 268.4 MMcfd in 2012A to 234.9 MMcfd in 2013E due to limited anticipated 2013E drilling activity and no well completions by Quicksilver – Fayetteville dry natural gas volumes are expected to increase by 12.9% year-over-year from 86.7 MMcfd in 2012A to 97.9 MMcfd in 2013E due to 23 new BHP wells expected to be connected to the CMLP gathering system – Rich natural gas volumes from the Marcellus, Barnett, Granite Wash and Avalon are expected to grow at a 5-year compound annual growth rate (“CAGR”) of 10.9% based on forecasts provided by producers and management’s estimates of drilling activity corresponding to current 5-year commodity strip pricing – Dry natural gas volumes are expected to grow at a 5-year CAGR of 11.6% based on management’s estimate of two to three rigs working in the Fayetteville Shale for BHP beginning in 2014E, one to two rigs working in the Barnett Shale beginning in 2014E and an average of one half of one rig per year working in the Haynesville beginning in 2014E – Operations and maintenance expenses were derived from a bottom-up forecast provided by CMLP operations managers 2013E includes full-year expenses for CMM, West Johnson County and Enerven assets and a partial year of expenses for new Marcellus compressor stations in addition to the incremental costs of 18 new full time employees Fixed costs assumed to increase at 3% per year after 2013E |
![]() Overview of CMLP 36 – General and administrative expenses were also derived from a bottom-up forecast provided by CMLP operations managers 2013E includes incremental costs for 23 additional full-time employees and additional equity compensation and amortization expenses General and administrative expenses assumed to increase at 4% per annum after 2013E – Similarly, 2013E maintenance and growth capital expenditure estimates were also derived from a bottom-up forecast provided by CMLP operations managers and include: 2013E maintenance capital expenditures are projected to be $9.3 million including compressor overhauls and a new compressor warehouse – Five year maintenance capital expenditures based on 2013E budget and consist primarily of compressor overhauls 2013E growth capital expenditures are projected to be $126.8 million and include $77.1 million of new pipeline and compressor stations in the Marcellus, $22.0 million for the West Union Compressor Station in Doddridge County, West Virginia, $5.1 million for the upgrade of Enerven compressor stations with the remaining $22.7 million primarily related to new well connections – Five year growth capital expenditures based on forecasted well connections and associated pipeline capital projects, as well as additional Marcellus compressor stations and Fayetteville and Granite Wash facility expansions Excludes potential other growth capital expenditure opportunities, including: – The potential acquisition of RKI Exploration & Production, LLC’s (“RKI”) 50.0% non-operating interest in the Jackalope Gas Gathering System (“JGGS”) in the Niobrara Basin, and the further development of that system for $199.1 million in 2013E – The potential acquisition of 41 miles of high-pressure pipeline and two compressor stations in the Marcellus from MarkWest Energy Partners, L.P. (the “MarkWest Marcellus Bolt-On Acquisition”) for $125 million – The potential acquisition of certain pipeline assets pursuant to CMM’s seven-year right of first offer to acquire any midstream assets sold by Antero in an area of approximately 100,000 acres adjacent to Antero’s current area of dedication (“Antero Western AOD Acquisition”) for $250 million CMLP Management Financial Projections – Assumptions (cont’d) DRAFT Confidential |
![]() Confidential DRAFT – Growth capital expenditures to be financed with revolver borrowings at an interest rate of 3.60%, 3.75%, 4.50%, 5.00% and 5.50% in 2013E, 2014E, 2015E, 2016E and 2017E, respectively – Assumes CMLP’s Class D Units distributions are paid in-kind with additional Class D Units until conversion into 6.8 million CMLP common units in March 2014 on a one-for-one basis – $200.0 million senior note offering on June 30, 2014 assumed to be issued at an 8.0% interest rate with proceeds utilized to reduce borrowings from CMLP’s revolving credit facility – Distribution per LP unit of $2.07 and $2.15 in 2013E and 2014E, respectively, and a target 10.0% distribution per LP unit growth rate in 2015E, 2016E and 2017E – No interest income on cash balances Overview of CMLP 37 CMLP Management Financial Projections – Assumptions (cont’d) Assumes CMLP yield of 9.0%, 8.5%, 8.0% and 7.5% in the first, second, third and fourth quarter of 2013E, respectively LP distribution coverage of 1.10x, 1.10x and 1.06x for 2015E, 2016E and 2017E, respectively |
![]() 2013E Growth Capital Expenditures – Summary 38 Overview of CMLP Source: CMLP management ($ in millions) For the Quarter Ending Fiscal Year Budgeted Growth Capital Expenditures 3/31/13E 6/30/13E 9/30/13E 12/31/13E 2013E Marcellus: Zinnia Mainlines $-- $30.1 $7.1 $-- $37.2 Perkins/Morgan Stations 5.0 12.7 6.4 4.9 29.0 Other Marcellus Laterals -- 3.5 6.7 0.7 10.9 Enerven Engine Upgrades 1.3 2.5 1.3 -- 5.1 Mackey Wolfe Lateral 1.8 1.8 -- -- 3.6 West Union Station 14.7 3.8 0.4 3.1 22.0 Total Marcellus $22.8 $54.4 $21.9 $8.7 $107.8 Barnett 1.8 2.4 3.7 2.5 10.4 Fayetteville 0.8 0.2 0.9 -- 1.9 Granite Wash 1.5 -- -- -- 1.5 Haynesville 0.1 0.3 -- -- 0.4 Avalon -- -- -- -- -- Corporate (Oracle/SAP) 0.2 2.2 1.2 1.2 4.8 Total Budgeted Growth Capital Expenditures $27.2 $59.5 $27.7 $12.4 $126.8 Upside Growth Capital Expenditures Q1 2013 Q2 2013 Q3 2013 Q4 2013 2013E RKI Niobrara Development $91.5 $12.0 $47.8 $47.8 $199.1 MarkWest Marcellus Bolt-On Acquisition -- 125.0 -- -- 125.0 Antero Western AOD Acquisition -- -- 250.0 -- 250.0 Identified Incremental Capital Expenditures $91.5 $137.0 $297.8 $47.8 $574.1 Total Potential Capital Expenditures (Budget + Potential) $118.7 $196.5 $325.5 $60.2 $700.9 Confidential DRAFT |
![]() CMLP Management Financial Projections 39 Overview of CMLP The following sets forth selected operating projections provided by CMLP management utilized in deriving the CMLP Management Financial Projections herein: Confidential DRAFT For the Year Ended December 31, For the Years Ending December 31, CAGR 2010A 2011A 2012A 2013E 2014E 2015E 2016E 2017E 2013E - 2017E Gathering Volumes (MMcfd) Barnett Rich 129.5 143.9 163.5 216.1 211.6 210.6 212.9 215.9 (0.0%) Granite Wash -- 16.6 17.6 29.7 46.1 58.4 66.4 72.1 24.8% Avalon -- 11.5 9.0 6.8 5.2 4.3 3.6 3.1 (17.4%) Marcellus -- -- 227.2 457.1 572.5 692.0 740.5 783.3 14.4% Total Rich Gathering Volumes 129.5 172.0 417.2 709.7 835.3 965.3 1,023.4 1,074.4 10.9% Barnett Dry 213.8 329.7 268.4 234.9 256.6 275.7 277.8 283.2 4.8% Fayetteville -- 85.2 86.7 97.9 117.1 160.6 205.7 235.7 24.6% Haynesville -- 60.1 50.5 33.6 32.4 42.4 46.0 48.9 9.8% Total Dry Gathering Volumes 213.8 475.0 405.6 366.4 406.1 478.8 529.5 567.8 11.6% Total Gathering 343.3 647.0 822.8 1,076.1 1,241.5 1,444.0 1,552.9 1,642.2 11.1% Processing Volumes (MMcfd) Barnett 127.8 131.8 155.7 207.0 202.6 201.6 203.8 206.8 (0.0%) Granite Wash -- 12.3 17.5 29.4 45.6 57.8 65.7 71.3 24.8% Total Processing Volumes 127.8 144.1 173.2 236.4 248.2 259.4 269.6 278.1 4.1% Compression Volumes (MMcfd) Marcellus -- -- 6.4 331.8 543.9 702.9 752.0 794.8 24.4% Well Connections Barnett Rich NA NA 43.0 60.0 68.0 68.0 68.0 68.0 Granite Wash NA NA 5.0 10.0 16.0 16.0 15.0 15.0 Avalon NA NA -- -- -- -- -- -- Marcellus NA NA 60.0 65.0 102.0 69.0 73.0 73.0 Total Rich Well Connections NA NA 108.0 135.0 186.0 153.0 156.0 156.0 Barnett Dry NA NA 23.0 8.0 41.0 35.0 32.0 32.0 Fayetteville NA NA 18.0 23.0 35.0 60.0 60.0 60.0 Haynesville NA NA 1.0 -- 5.0 5.0 5.0 5.0 Total Dry Well Connections NA NA 42.0 31.0 81.0 100.0 97.0 97.0 Total Well Connections NA NA 150.0 166.0 267.0 253.0 253.0 253.0 |
![]() CMLP Management Financial Projections (cont’d) ($ in millions) 40 Overview of CMLP The following sets forth the CMLP Management Financial Projections utilized by Evercore in its analysis herein: For the Years Ending December 31, CAGR 2013E 2014E 2015E 2016E 2017E 2013E - 2017E Revenue, Less Purchases: Barnett Rich $90.5 $93.7 $101.5 $108.4 $115.1 Granite Wash 5.9 10.2 14.0 16.5 18.4 Avalon 0.4 0.3 0.3 0.2 0.2 Marcellus 69.9 100.1 127.6 140.4 152.3 Total Rich Natural Gas Revenue $166.7 $204.3 $243.3 $265.6 $285.9 14.4% Barnett Dry 49.5 52.5 59.1 62.4 65.8 Fayetteville 30.6 36.5 49.7 66.1 78.2 Haynesville 5.3 5.6 7.9 8.2 9.0 Total Dry Natural Gas Revenue $85.4 $94.7 $116.7 $136.7 $153.0 15.7% Total Revenue, Less Purchases $252.1 $299.0 $360.0 $402.3 $439.0 14.9% Operating Expense: CMLP Operating Expense $42.9 $44.9 $48.6 $51.7 $54.1 CMM Operating Expense 7.9 9.8 10.6 10.9 11.2 Total Operating Expense $50.8 $54.7 $59.2 $62.6 $65.3 6.5% General and Administrative Expense: CMLP General and Administrative Expense $25.4 $26.4 $27.4 $28.5 $29.7 CMM General and Administrative Expense 2.9 3.0 3.2 3.3 3.4 Total General and Administrative Expense 28.3 29.4 30.6 31.8 33.1 4.0% Plus: Other Corporate Adjustments 0.3 -- -- -- -- Adjusted EBITDA $173.3 $214.8 $270.3 $307.9 $340.6 18.4% Confidential DRAFT |
![]() Confidential DRAFT CMLP Management Financial Projections (cont’d) ($ in millions, except per unit amounts) 41 Overview of CMLP The following sets forth the CMLP Management Financial Projections utilized by Evercore in its analysis herein: For the Years Ending December 31, CAGR 2013E 2014E 2015E 2016E 2017E 2013E - 2017E Distributable Cash Flow Adjusted EBITDA $173.3 $214.8 $270.3 $307.9 $340.6 18.4% Less: Cash Interest Expense, net (43.0) (52.4) (62.8) (67.6) (72.8) Less: Maintenance Capital Expenditures (9.3) (7.2) (7.7) (8.9) (11.8) Plus: Non-Cash Equity Compensation 3.8 4.5 4.7 4.9 5.2 Distributable Cash Flow $124.7 $159.8 $204.5 $236.3 $261.1 20.3% Distributed Cash Flow Common Units (Public) $70.6 $73.3 $80.6 $88.7 $97.6 Common Units (Crestwood Holdings) 40.7 57.0 62.7 69.0 75.9 GP 22.2 30.3 43.3 57.7 73.4 Total $133.5 $160.6 $186.7 $215.4 $246.9 16.6% % to GP 16.6% 18.9% 23.2% 26.8% 29.7% GP IDRs $20.1 $27.6 $40.4 $54.5 $69.9 Weighted Average LP Units Outstanding 60.2 60.6 60.6 60.6 60.6 DCF / LP Unit $1.99 $2.14 $2.51 $2.78 $2.98 10.7% Distribution / LP Unit $2.07 $2.15 $2.37 $2.60 $2.86 8.4% LP Coverage 0.96x 1.00x 1.06x 1.07x 1.04x Total Coverage 0.93x 0.99x 1.10x 1.10x 1.06x Distributable Cash Flow Surplus / (Shortfall) ($8.7) ($0.9) $17.8 $20.9 $14.2 |
![]() CMLP Management Financial Projections (cont’d) ($ in millions) 42 The following sets forth the funding assumptions utilized in the CMLP Management Financial Projections and CMLP’s resulting capital structure and credit statistics Overview of CMLP For the Years Ending December 31, 2013E 2014E 2015E 2016E 2017E Sources: Equity Issued (Public) $119.0 $-- $-- $-- $-- Equity Issued (Crestwood Holdings) -- -- -- -- -- GP Contribution (Crestwood Holdings) -- -- -- -- -- Class D Units Issued for Acquisition of 65.0% of CMM 129.0 -- -- -- -- Revolver Draw for Acquisition of 65.0% of CMM 129.0 -- -- -- -- CMM Debt Issued 32.1 45.0 40.0 40.0 40.0 CMLP Debt Issued/(Repaid), net of Surplus/(Shortfall) 49.8 69.3 14.0 10.7 9.0 DCF Surplus / (Shortfall) (8.7) (0.9) 17.8 20.9 14.2 Contribution from CMLP to CMM 50.0 -- -- -- -- Less: Financing Fees (0.5) -- -- -- -- Total Funding $499.6 $113.4 $71.8 $71.7 $63.3 Debt Issued/(Repaid), net of Surplus/(Shortfall) $92.3 $114.3 $54.0 $50.7 $49.0 Total Equity Issued 248.0 -- -- -- -- Uses: Acquisition of 65.0% of CMM $258.0 $-- $-- $-- $-- Debt Paydown from 5.175 MM Units Issuance 118.5 -- -- -- -- (Increase) / Decrease in Working Capital (3.7) 5.3 -- -- -- Growth Capital Expenditures 126.8 108.1 71.8 71.7 63.3 Total Uses $499.6 $113.4 $71.8 $71.7 $63.3 Credit Statistics Debt / Adjusted EBITDA 4.8x 4.4x 3.7x 3.4x 3.2x Net Debt / Adjusted EBITDA 4.8x 4.4x 3.7x 3.4x 3.2x Capital Structure Cash $0.1 $0.1 $0.1 $0.1 $0.1 Total Debt 826.0 940.3 994.4 1,045.1 1,094.1 Net Debt $825.9 $940.2 $994.3 $1,045.0 $1,094.0 Confidential DRAFT |
![]() Overview of CMLP 43 CMLP Management Financial Projections Comparison to Wall Street Research Estimates The following sets forth a comparison of the CMLP Management Financial Projections and Wall Street Research consensus estimates EBITDA Distribution per LP Unit DCF per LP Unit $2.07 $2.07 $2.15 $2.15 $2.37 $2.60 $2.86 $2.26 $2.35 $2.43 $-- $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 2013E 2014E 2015E 2016E 2017E CMLP Management Financial Projections Wall Street Research Distribution Coverage 0.93x 0.99x 1.10x 1.10x 1.06x 0.98x 1.07x 1.27x 1.38x 1.47x -- 0.20x 0.40x 0.60x 0.80x 1.00x 1.20x 1.40x 1.60x 2013E 2014E 2015E 2016E 2017E CMLP Management Financial Projections Wall Street Research $173.3 $214.8 $270.3 $307.9 $340.6 $179.1 $229.5 $296.3 $370.1 $446.5 $-- $100.0 $200.0 $300.0 $400.0 $500.0 2013E 2014E 2015E 2016E 2017E CMLP Management Financial Projections Wall Street Research $1.99 $2.14 $2.51 $2.78 $2.98 $2.05 $2.24 $2.64 $2.93 $3.19 $-- $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 2013E 2014E 2015E 2016E 2017E CMLP Management Financial Projections Wall Street Research ($ in millions, except per unit amounts) DRAFT Confidential |
![]() Wall Street Research vs. CMLP Management Financial Projections 44 Overview of CMLP Barclays - February 28, 2013 (Price Target: $27.00) CMLP Management Financial Projections Difference: Research vs. CMLP For the Years Ending December 31, For the Years Ending December 31, For the Years Ending December 31, 2013E 2014E 2015E 2016E 2017E 2013E 2014E 2015E 2016E 2017E 2013E 2014E 2015E 2016E 2017E Adjusted EBITDA $177.5 $257.7 $306.8 $358.5 NA $173.3 $214.8 $270.3 $307.9 $340.6 $4.2 $42.9 $36.5 $50.6 NA Less: Cash Interest Expense, net (50.7) (68.7) (76.8) (84.9) NA (43.0) (52.4) (62.8) (67.6) (72.8) (7.7) (16.3) (14.0) (17.3) NA Less: Maintenance Capital Expenditures (10.0) (14.0) (16.8) (19.8) NA (9.3) (7.2) (7.7) (8.9) (11.8) (0.7) (6.8) (9.1) (10.9) NA Plus: Other 4.0 4.0 4.0 4.0 NA 3.8 4.5 4.7 4.9 5.2 0.2 (0.5) (0.7) (0.9) NA Distributable Cash Flow $120.8 $179.0 $217.2 $257.8 NA $124.7 $159.8 $204.5 $236.3 $261.1 ($3.9) $19.2 $12.7 $21.5 NA DCF / LP Unit $2.10 $2.21 $2.45 $2.70 NA $1.99 $2.14 $2.51 $2.78 $2.98 $0.11 $0.07 ($0.06) ($0.08) NA Distribution / LP Unit $2.09 $2.17 $2.26 $2.35 NA $2.07 $2.15 $2.37 $2.60 $2.86 $0.02 $0.02 ($0.11) ($0.25) NA Growth Capital Expenditures / Acquisitions $583.0 $300.0 $300.0 $300.0 NA $126.8 $108.1 $71.8 $71.7 $63.3 $456.2 $191.9 $228.2 $228.4 NA Wells Fargo - February 28, 2013 (Price Target: $25.00 - $27.00) CMLP Management Financial Projections Difference: Research vs. CMLP For the Years Ending December 31, For the Years Ending December 31, For the Years Ending December 31, 2013E 2014E 2015E 2016E 2017E 2013E 2014E 2015E 2016E 2017E 2013E 2014E 2015E 2016E 2017E Adjusted EBITDA $178.6 $248.8 $316.4 $381.6 $446.5 $173.3 $214.8 $270.3 $307.9 $340.6 $5.3 $34.0 $46.1 $73.7 $105.9 Less: Cash Interest Expense, net (54.2) (71.5) (85.3) (105.7) (127.2) (43.0) (52.4) (62.8) (67.6) (72.8) (11.2) (19.1) (22.5) (38.1) (54.4) Less: Maintenance Capital Expenditures (9.7) (13.1) (16.6) (20.0) (23.3) (9.3) (7.2) (7.7) (8.9) (11.8) (0.4) (5.9) (8.9) (11.1) (11.5) Plus: Other 8.3 8.3 8.3 8.3 8.3 3.8 4.5 4.7 4.9 5.2 4.5 3.8 3.6 3.4 3.1 Distributable Cash Flow $122.9 $172.5 $222.8 $264.2 $304.3 $124.7 $159.8 $204.5 $236.3 $261.1 ($1.8) $12.7 $18.3 $27.9 $43.2 DCF / LP Unit $1.84 $2.15 $2.50 $2.65 $2.77 $1.99 $2.14 $2.51 $2.78 $2.98 ($0.15) $0.01 ($0.01) ($0.13) ($0.21) Distribution / LP Unit $2.07 $2.10 $2.20 $2.32 $2.43 $2.07 $2.15 $2.37 $2.60 $2.86 ($0.00) ($0.05) ($0.17) ($0.28) ($0.43) Growth Capital Expenditures / Acquisitions $375.0 $375.0 $375.0 $375.0 $375.0 $126.8 $108.1 $71.8 $71.7 $63.3 $248.2 $266.9 $303.2 $303.4 $311.8 RBC - February 27, 2013 (Price Target: $26.00) CMLP Management Financial Projections Difference: Research vs. CMLP For the Years Ending December 31, For the Years Ending December 31, For the Years Ending December 31, 2013E 2014E 2015E 2016E 2017E 2013E 2014E 2015E 2016E 2017E 2013E 2014E 2015E 2016E 2017E Adjusted EBITDA $180.7 $229.0 NA NA NA $173.3 $214.8 $270.3 $307.9 $340.6 $7.4 $14.2 NA NA NA Less: Cash Interest Expense, net (45.4) (55.3) NA NA NA (43.0) (52.4) (62.8) (67.6) (72.8) (2.4) (2.9) NA NA NA Less: Maintenance Capital Expenditures (10.0) (12.6) NA NA NA (9.3) (7.2) (7.7) (8.9) (11.8) (0.7) (5.4) NA NA NA Plus: Other 4.1 4.1 NA NA NA 3.8 4.5 4.7 4.9 5.2 0.3 (0.4) NA NA NA Distributable Cash Flow $129.4 $165.2 NA NA NA $124.7 $159.8 $204.5 $236.3 $261.1 $4.7 $5.4 NA NA NA DCF / LP Unit $2.23 $2.27 NA NA NA $1.99 $2.14 $2.51 $2.78 $2.98 $0.24 $0.13 NA NA NA Distribution / LP Unit $2.04 $2.14 NA NA NA $2.07 $2.15 $2.37 $2.60 $2.86 ($0.03) ($0.01) NA NA NA Growth Capital Expenditures / Acquisitions NA NA NA NA NA $126.8 $108.1 $71.8 $71.7 $63.3 NA NA NA NA NA Wall Street Research Analyst CMLP Management Financial Projections Comparison ($ in millions, except per unit amounts) Confidential DRAFT |
![]() IV. Indicative Valuation of CMLP DRAFT |
![]() Valuation Methodologies Utilizing the following methodologies, Evercore analyzed the value of CMLP common units 45 Indicative Valuation of CMLP Methodology Description Metrics/Assumptions Values CMLP common units based on the concepts of the time value of money Utilizing the CMLP Management Financial Projections as previously reviewed herein, Evercore: – Utilized varying weighted average cost of capital (“WACC”) discount rates and applied various perpetuity growth rates to derive after-tax valuation ranges for CMLP – Calculated terminal values based on a range of multiples of EBITDA derived from precedent transactions as well as assumed perpetuity growth rates Tax depreciation based on schedule provided by CMLP management EBITDA exit multiple of 9.0x to 11.0x and a perpetuity growth rate of 0.5% to 1.5% For the terminal value, tax depreciation assumed to be equal to maintenance capital expenditures Weighted average cost of capital based on mid-point of the Capital Asset Pricing Model (“CAPM”) Tax rate of 35.0% based on unitholders’ tax rates Discounted the projected cash flows to the assumed July 1, 2013 effective date Values the CMLP common units based on the concepts of the time value of money Utilizing projected distributions per unit from the CMLP Management Financial Projections as previously reviewed herein, Evercore: – Utilized varying total expected market return discount rates and calculated a terminal value based on various terminal exit yields Terminal exit yield range of 7.0% to 10.0% Cost of equity of 8.5% to 9.5% based on the Capital Asset Pricing Model utilizing betas from selected publicly-traded peers Cost of equity of 13.5% to 14.5% based on the expected market total return of selected publicly-traded peers Valuation for the CMLP common units based on multiples of transaction value to EBITDA in historical transactions involving other natural gas gathering and processing assets Based on transaction value / EBITDA Enterprise value / EBITDA multiples applied to 2013E and 2014E EBITDA with the resulting value discounted at an 8.0% discount rate, the midpoint of the weighted average cost of capital range based on the assumed July 1, 2013 effective date Growth capital expenditures discounted at an 8.0% discount rate Peer Group Trading Analysis Valuation for the CMLP common units based on current market enterprise value multiples of relevant EBITDA for selected comparable publicly-traded entities Enterprise value / EBITDA multiples applied to 2013E EBITDA and 2014E EBITDA Valuation for the CMLP common units based historical premiums paid in MLP unit-for-unit transactions Median 1-Day, 5-Day, 30-Day and 52-Week high premiums paid applied to relevant CMLP unit prices Valuation for the CMLP common units based on historical exchange ratio between CMLP unit prices and NRGM unit prices 30-Day, 60-Day and 90-Day High exchange ratio applied to NRGM current unit price Valuation for the CMLP common units based on the most recent research analyst price targets of firms covering CMLP Research price targets from: Barlcays, Hilliard Lyons, Ladenburg Thalmann, RBC, Simmons and Wells Fargo Discounted Cash Flow Analysis: Financials Projections Discounted Cash Flow Analysis: Projected Distribution per Unit Precedent M&A Transaction Analysis Premiums Paid Analysis Historical Unit Price Trading Ratio Wall Street Research Price Targets Confidential DRAFT |
![]() Current Price: $24.97 Summary Valuation – CMLP Common Unit 46 Indicative Valuation of CMLP Discounted Cash Flow Analysis Precedent M&A Peer Group Premiums Paid Historical Unit Price Wall Street Reseach Financial Projections Distribution per Unit Transactions Trading Analysis Trading Analysis Price Targets 7.5% - 8.5% WACC 7.0% - 10.0% Terminal Exit Yield 2013E EBITDA: $173.3 MM 2013E EBITDA: $173.3 MM Median 1-Day Premium: 18.0% 30-Day Unit Price Trading Ratio: 1.05x Barclays 2017E EBITDA Perpetuity 8.5% - 9.5% CAPM 9.0x -12.5x EBITDA Multiple 10.5x -13.5x EBITDA Multiple Median 5-Day Premium: 17.4% 60-Day Unit Price Trading Ratio: 1.03x Hilliard Lyons Exit Multiple of Growth Rate of Equity Discount Rate 2014E EBITDA: $214.8 MM 2014E EBITDA: $214.8 MM Median 30-Day Premium: 21.8% 90-Day Unit Price Trading Ratio: 1.05x Simmons 9.0x -11.0x 0.5% - 1.5% 13.5% -14.5% Expected Market Return 9.0x -12.5x EBITDA Multiple 9.0x -12.0x EBITDA Multiple Median 52-Week High Premium: 0.7% Ladenburg Thalmann Equity Discount Rate Growth Capital Expenditures Wells Fargo Discounted @ 8.0% $25.94 $23.70 $10.90 $16.81 $27.98 $23.53 $26.00 $39.91 $37.49 $23.79 $29.16 $30.83 $23.98 $32.50 $-- $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $50.00 $55.00 $60.00 Indicative Value of CMLP Common Unit Assuming the CMLP Management Financial Projections DRAFT Confidential |
![]() 47 Indicative Valuation of CMLP Evercore utilized a DCF Analysis based on the following assumptions: – Effective date of July 1, 2013 – EBITDA and capital expenditures through December 31, 2017E per the CMLP Management Financial Projections as previously reviewed herein – A 35.0% tax rate – Tax depreciation based on schedule provided by CMLP management – Mid-point discount rate of 8.0% utilizing a weighted average cost of capital based on CAPM – Terminal value based on both: (i) a 9.0x to 11.0x EBITDA exit multiple and (ii) a 0.5% to 1.5% perpetuity growth rate Confidential DRAFT Discounted Cash Flow Analysis – Assumptions Tax depreciation is set equal to maintenance capital expenditures in perpetuity |
![]() Confidential DRAFT (1) Assumes tax depreciation equal to maintenance capital expenditures in perpetuity 48 Indicative Valuation of CMLP For the Six Months Ending Terminal Value December 31, For the Years Ending December 31, EBITDA Perpetuity 2013E 2014E 2015E 2016E 2017E Exit Multiple Growth Rate (1) EBITDA $116.4 $214.8 $270.3 $307.9 $340.6 $340.6 $340.6 Less: Tax DD&A (89.2) (164.8) (164.8) (114.3) (103.5) (11.8) EBIT $27.2 $50.0 $105.5 $193.5 $237.1 $328.7 Less: Taxes @ 35.0% (9.5) (17.5) (36.9) (67.7) (83.0) (115.1) EBIAT $17.7 $32.5 $68.6 $125.8 $154.1 $213.7 Plus: Tax DD&A 89.2 164.8 164.8 114.3 103.5 11.8 Less: Maintenance Capital Expenditures (3.6) (7.2) (7.7) (8.9) (11.8) (11.8) Less: Growth Capital Expenditures (44.9) (108.1) (71.8) (71.7) (63.3) -- Unlevered FCF $58.4 $82.0 $153.8 $159.6 $182.5 $213.7 Terminal Value Multiple/Growth Rate 10.0x 1.0% PV of Terminal Value @ 8.0% $2,408.9 $2,180.6 Plus: Present Value of Unlevered FCF Implied Enterprise Value $2,934.9 - $2,706.6 Less: Debt as of July 1, 2013 Plus: Cash as of July 1, 2013 Implied Equity Value $2,147.5 - $1,919.3 Total Units Outstanding as of July 1, 2013 Implied Unit Price $34.98 - $31.26 526.0 (787.4) 0.0 61.4 WACC Perpetuity Growth Rate $31.3 0.0% 0.5% 1.0% 1.5% 2.0% 7.0% $32.61 $35.63 $39.15 $43.31 $48.30 7.5% 29.35 31.93 34.90 38.36 42.46 8.0% 26.51 28.73 31.26 34.18 37.59 8.5% 24.01 25.94 28.12 30.61 33.48 9.0% 21.80 23.48 25.37 27.52 29.97 WACC EBITDA Multiple $35.0 8.0x 9.0x 10.0x 11.0x 12.0x 7.0% $28.67 $32.76 $36.85 $40.94 $45.03 7.5% 27.89 31.90 35.90 39.91 43.92 8.0% 27.13 31.06 34.98 38.90 42.83 8.5% 26.39 30.23 34.08 37.92 41.76 9.0% 25.67 29.43 33.20 36.96 40.73 Discounted Cash Flow Analysis ($ in millions, except per unit amounts) Perpetuity Growth Rate Sensitivities EBITDA Exit Multiple Sensitivities Summary Results |
![]() Indicative Valuation of CMLP 49 (1) CMLP 52-week yield range of 6.89% to 9.74%, with an average yield of 8.32% The analysis below sets forth CMLP’s projected annual distribution per unit based on the CMLP Management Financial Projections for the six months ending December 31, 2013E and for the years ending December 31, 2014E, 2015E, 2016E and 2017E and a terminal value based on an CMLP yield range of 7.0% to 10.0% discounted at a cost of equity for CMLP ranging between 8.5% and 9.5% based on CAPM and 13.5% to 14.5% based on the total expected market return (as detailed in the Appendix) Discounted Cash Flow Analysis – CMLP Common Units Confidential DRAFT For the Six Months Ending December 31, For the Years Ending December 31, Terminal Value 2013E 2014E 2015E 2016E 2017E Low High CMLP Standalone Distribution per LP Unit $1.09 $2.15 $2.37 $2.60 $2.86 $2.86 Terminal Yield (1) 10.00% - 7.00% Terminal Value $28.63 - $40.90 Equity Cost of Capital Based on CAPM PV @ 8.0% of Value per CMLP Common Unit $29.51 - $38.19 PV @ 8.5% of Value per CMLP Common Unit 29.00 - 37.50 PV @ 9.0% of Value per CMLP Common Unit 28.50 - 36.82 PV @ 9.5% of Value per CMLP Common Unit 28.01 - 36.16 PV @ 10.0% of Value per CMLP Common Unit 27.53 - 35.52 Implied CMLP Common Unit Value Range $28.01 - $37.50 Equity Cost of Capital Based on Total Expected Market Return PV @ 13.0% of Value per CMLP Common Unit $24.89 - $31.97 PV @ 13.5% of Value per CMLP Common Unit 24.49 - 31.43 PV @ 14.0% of Value per CMLP Common Unit 24.09 - 30.89 PV @ 14.5% of Value per CMLP Common Unit 23.70 - 30.37 PV @ 15.0% of Value per CMLP Common Unit 23.33 - 29.87 Implied CMLP Common Unit Value Range $23.70 - $31.43 Implied Unit Price $23.70 - $37.50 |
![]() 50 Source: Public filings and Wall Street research Indicative Valuation of CMLP Precedent M&A Transactions ($ in millions) Date Transaction EBITDA Announced Acquiror/Target (Seller) Value ($MM) Multiple 04/13 Atlas Pipeline Partners, L.P. / TEAK Midstream, L.L.C. $1,000.0 17.5x 02/13 Regency Energy Partners LP / Southern Union Gathering Company, LLC (Southern Union Company) 1,429.0 16.1 02/13 Western Gas Partners, LP / 33.75% Interest in Liberty and Rome Gas Gathering Systems (Anadarko Petroleum Corporation) 490.0 7.6 02/13 Western Gas Partners, LP / 33.75% Interest in Larry's Creek, Seely and Warrensville Gas Gathering Systems (Chesapeake Energy Corporation) 133.5 9.7 02/13 DCP Midstream Partners LP / Additional 47.0% Interest in Eagle Ford Joint Venture and Additional Interest in the Goliad Plant (DCP Midstream LLC) 856.0 NA 01/13 Summit Midstream Partners / Bear Tracker Energy, LLC 513.0 9.2 01/13 Crestwood Midstream Partners / 65.0% Interest in Crestwood Marcellus Midstream LLC (Crestwood Holdings Partners LLC) 258.0 8.9 11/12 Targa Resources Partners LP / Saddle Butte Pipeline, LLC 950.0 11.5 11/12 Atlas Pipeline Partners, L.P. / Cardinal Midstream L.L.C. 600.0 10.0 08/12 Eagle Rock Energy Partners/Sunray and Hemphill processing plants and associated 2,500 mile gathering system (BP America Production Co.) 227.5 9.5 07/12 Crestwood Midstream Partners LP / West Johnson County Gathering and Processing Assets in the Barnett Shale (Devon Energy Corporation) 90.0 NA 06/12 CenterPoint Energy, Inc. / 50% Interest in Waskom Gas Processing and Other Gathering and Processing Assets (Martin Midstream Partners L.P.) 275.0 10.9 05/12 MarkWest Energy Partners, L.P. / Keystone Midstream Services, LLC (Stonehenge Energy Resources, L.P., Rex Energy Corporation, Sumitomo Corporation) 512.0 28.4 04/12 PennVirginia Resource Partners, L.P. / Chief Gathering LLC 1,252.5 13.9 03/12 Williams Partners L.P. / Caiman Eastern Midstream LLC 2,500.0 12.5 01/12 Western Gas Partners L.P. / Red Desert Complex (Anadarko Petroleum Corporation) 483.0 7.0 12/11 Crestwood Midstream Partners LP / Antero Resources' Marcellus Shale Gathering Assets 375.0 11.5 12/11 Plains All American Pipelines, LP / Velocity South Texas Gathering LLC 352.0 43.3 10/11 Kinder Morgan Energy Partners, L.P./SouthTex Treaters 155.0 NA 10/11 Crestwood Midstream Partners LP/Tristate Sabine, LLC (Energy Spectrum Capital and Zwolle Pipeline, LLC) 73.0 9.4 07/11 Western Gas Partners, LP/Bison Gas Treating Facility (Anadarko Petroleum Corporation) 130.0 8.8 06/11 Sable NGL LLC / Stanley Condensate Recovery Plant and Prairie Rose Pipeline Inc. (EOG Resources, Inc.) 185.0 NA 05/11 Kinder Morgan Energy Partners, L.P. / 50% Interest in KinderHawk Field Services and 25% of Eagle Ford Midstream (Petrohawk Energy Corporation) 920.0 NA 03/11 Energy Transfer Partners, L.P. and Regency Energy Partners LP / Louis Dreyfus Highbridge Energy LLC 1,925.0 11.6 03/11 Anadarko Petroleum Corp / 93% Interest in Wattenburg Processing Plant (BP plc) 575.5 7.5 02/11 Crestwood Midstream Partners / Gathering and Processing assets in the Fayetteville Shale and Granite Wash (Frontier Gas Services, LLC) 338.0 12.5 01/11 MarkWest Energy Partners L.P. / Kentucky Hydro Natural Gas Processing Complex and NGL Pipeline (EQT Corporation) 230.0 12.7 01/11 Western Gas Partners, LP / Fort Lupton Processing Plant and Related Gathering Systems in the DJ Basin (Encana Oil & Gas (USA) Inc.) 303.3 9.3 12/10 Chesapeake Midstream Partners LP / Springridge Natural Gas Gathering System and Related Facilities in the Haynesville Shale 500.0 11.9 11/10 Williams Partners L.P. / Marcellus Midstream Assets in Susquehanna County, Pennslyvania (Cabot Oil & Gas Corporation) 150.0 NA 11/10 Chevron Corporation / 49% Interest in Laurel Mountain Midstream in Marcellus (Atlas Pipeline Partners, LP) 403.0 NA 11/10 ArcLight Capital Partners LLC / 9.9% Equity Interest in Enogex (OGE Energy) 183.0 9.5 10/10 Williams Partners L.P. / Gathering and Processing Assets in Colorado's Piceance Basin (Williams Companies, Inc.) 782.0 7.4 10/10 Cardinal Midstream, LLC / Gathering and Processing Assets in the Arkoma Woodford Shale in Eastern Oklahoma (Antero Resources, LLC) 268.0 9.8 09/10 Targa Resources Partners LP / Venice Energy Services Company (Targa Resources, Inc.) 167.5 7.2 08/10 Targa Resources Partners LP / Versado Gas Processors, L.L.C. (Targa Resources, Inc.) 230.0 5.7 08/10 Regency Energy Partners, L.P. / Zephyr Gas Services 185.0 9.5 08/10 Western Gas Partners, LP / Wattenberg Gathering System & Fort Lupton Processing Plant (Anadarko Petroleum Corporation) 498.0 8.2 07/10 Enbridge Energy Partners, L.P. / Elk City Gathering and Processing System (Atlas Pipeline Partners, LP) 686.1 16.5 06/10 DCP Midstream, LLC / Liberty Gathering System and South Raywood Processing Plant (Ceritas Energy) 79.0 NA 04/10 Regency Energy Partners LP / 7% Interest in Haynesville Joint Venture Increasing its Total Interest to 49.99% (GE Energy Financial Services) 92.1 NA 04/10 Kinder Morgan Energy Partners, L.P. / 50% interest in Haynesville Gathering & Treating Business (Petrohawk Energy) 875.0 20.5 04/10 Enterprise Products Partners, L.P. / M2 Midsteam LLC (Yorktown Partners) 1,200.0 15.2 03/10 Targa Resources Partners LP / Sand Hills, Coastal Straddles and Targa Gas Marketing (Targa Resources, Inc.) 420.0 6.0 02/10 Western Gas Partners, LP / Southwest Wyoming Gathering and Processing Assets (Anadarko Petroleum Corporation) 254.4 7.2 Mean 12.0x Median 9.8 DRAFT Confidential |
![]() 51 Source: Public filings and Wall Street research Indicative Valuation of CMLP Precedent M&A Transactions (cont’d) ($ in millions, except per unit amounts) 2013E EBITDA $173.3 Relevant EBITDA Multiple 9.0x - 12.5x Implied Enterprise Value Range on December 31, 2013 $1,559.5 - $2,166.0 Implied Enterprise Value Range on July 1, 2013 @ 8.0% Discount Rate $1,500.5 - $2,084.0 Less: Present Value of Q3 2013E and Q4 2013E Growth Capital Expenditures @ 8.0% Discount Rate (44.0) Implied Enterprise Value $1,456.5 - $2,040.0 2014E EBITDA $214.8 Relevant EBITDA Multiple 9.0x - 12.5x Implied Enterprise Value Range on December 31, 2014 $1,933.3 - $2,685.1 Implied Enterprise Value Range on July 1, 2013 @ 8.0% Discount Rate $1,722.3 - $2,392.1 Less: Present Value of Q3 2013E, Q4 2013E and 2014E Growth Capital Expenditures @ 8.0% Discount Rate (144.1) Implied Enterprise Value $1,578.2 - $2,247.9 Relevant Range - Enterprise Value $1,456.5 - $2,247.9 Less: Debt as of July 1, 2013 (787.4) Plus: Cash as of July 1, 2013 0.0 Implied Equity Value $669.1 - $1,460.6 Total Units Outstanding as of July 1, 2013 61.4 Implied Unit Price $10.90 - $23.79 DRAFT Confidential |
![]() ![]() Peer Group Trading Analysis 52 Indicative Valuation of CMLP Source: Public filings Natural Gas Gathering and Processing Enterprise Value / Price Equity Enterprise EBITDA Distribution Yield Distribution Total Partnership (04/19/2013) Value Value 2013E 2014E Current 2013E 2014E Growth Return Natural Gas Gathering and Processing MLPs American Midstream Partners, LP $17.09 $159.9 $370.1 12.5x 11.6x 10.1% 10.1% 11.0% 2.9% 13.0% Atlas Pipeline Partners, L.P. 35.55 2,341.9 3,585.6 10.3 8.5 6.5% 7.1% 8.0% 9.9% 16.4% Access Midstream Partners, L.P. 40.41 7,814.3 10,360.9 12.8 10.0 4.5% 4.9% 5.6% 10.6% 15.0% Crosstex Energy, L.P. 19.12 1,828.0 2,864.2 12.2 9.3 6.9% 7.3% 7.9% 5.3% 12.2% DCP Midstream Partners, LP 47.62 2,946.1 4,600.5 12.6 9.2 5.8% 6.0% 6.5% 8.4% 14.2% MarkWest Energy Partners, L.P. 60.68 9,046.7 11,550.2 16.6 12.2 5.4% 5.7% 6.2% 9.2% 14.6% Regency Energy Partners LP 26.07 5,360.4 8,213.9 13.1 10.5 7.1% 7.4% 7.9% 5.0% 12.0% Southcross Energy Partners, L.P. 20.86 520.1 962.3 18.2 16.9 7.7% 8.5% 8.9% 5.0% 12.7% Summit Midstream Partners, LP 26.92 1,341.0 1,532.4 13.2 10.8 6.1% 6.4% 7.1% 8.0% 14.1% Targa Resources Partners LP 48.53 5,040.6 7,516.4 11.8 9.2 5.6% 5.9% 6.5% 8.5% 14.1% Western Gas Partners, LP 58.10 6,231.5 8,029.5 18.3 13.4 3.7% 3.9% 4.5% 11.6% 15.3% Mean 13.8x 11.1x 6.3% 6.7% 7.3% 7.7% 14.0% Median 12.8 10.5 6.1% 6.4% 7.1% 8.4% 14.1% Crestwood Midstream Partners LP $24.97 $1,524.9 $2,256.4 12.6x 9.8x 8.2% 8.3% 8.6% 4.1% 12.3% ($ in millions, except per unit amounts) Confidential DRAFT |
![]() Confidential DRAFT Peer Group Trading Analysis (cont’d) ($ in millions, except per unit amounts) 53 Indicative Valuation of CMLP Source: Public filings CMLP Management Financial Projections 2013E EBITDA $173.3 Relevant EBITDA Multiple 10.5x - 13.5x Implied Enterprise Value $1,819.4 - $2,339.3 2014E EBITDA $214.8 Relevant EBITDA Multiple 9.0x - 12.0x Implied Enterprise Value $1,933.3 - $2,577.7 Relevant Range - Enterprise Value $1,819.4 - $2,577.7 Less: Debt as of July 1, 2013 (787.4) Plus: Cash as of July 1, 2013 0.0 Implied Equity Value $1,032.1 - $1,790.3 Total Units Outstanding as of July 1, 2013 61.4 Implied Unit Price $16.81 - $29.16 |
![]() Confidential DRAFT MLP Merger Premiums MLP Merger Premiums Paid Analysis ($ in millions, except per unit amounts) 54 Historically, MLP merger premiums have varied widely based on specific considerations with respect to each transaction, with a range of 2.2% to 31.8% premium to one-day trailing trading price and a mean premium of 18.0% 1-Day 5-Day 30-Day 52-Week High Current Trading Price $24.97 $23.83 $25.32 $29.03 Estimated Merger Premium 2.2% - 31.8% 3.7% - 33.2% 2.1% - 40.5% (13.5%) - 9.1% Implied Transaction Price Range $25.51 - $32.91 $24.70 - $31.75 $25.86 - $35.58 $25.12 - $31.68 Mean Merger Premium 18.0% 17.4% 21.8% 0.7% Mean Implied Transaction Price $29.46 $27.98 $30.83 $29.23 Indicative Valuation of CMLP Transaction Premium Date Equity Enterprise 52-Week Announced Target Acquiror(s) Consideration Value Value 1-Day 5-Day 30-Day High 01/29/13 Copano Energy, L.L.C. Kinder Morgan Energy Partners, L.P. Unit-for-Unit $3,884.3 $4,831.0 25.3% 25.2% 40.5% 9.1% 02/23/11 Duncan Energy Partners L.P. Enterprise Products Partners L.P. Unit-for-Unit 2,405.0 3,302.8 27.9% 27.7% 27.4% 2.3% 06/09/09 TEPPCO Partners LP Enterprise Products Partners L.P. Unit-for-Unit 3,290.7 6,024.5 7.1% 4.3% 8.9% (13.5%) 06/12/06 Pacific Energy Partners, L.P. Plains All American Pipeline, L.P. Unit-for-Unit 1,395.4 2,007.9 10.6% 10.2% 14.4% (0.5%) 11/01/04 Kaneb Pipeline Partners, L.P. Valero L.P. Unit-for-Unit 1,741.5 2,371.4 21.2% 17.6% 18.6% 4.2% 12/15/03 GulfTerra Energy Partners, L.P. Enterprise Products Partners L.P. Unit-for-Unit 2,408.4 4,240.3 2.2% 3.7% 2.1% (2.0%) 10/18/97 Santa Fe Pacific Pipeline Partners LP Kinder Morgan Energy Partners, L.P. Unit-for-Unit 1,038.0 1,339.9 31.8% 33.2% 40.3% 5.3% Median 21.2% 17.6% 18.6% 2.3% Mean 18.0% 17.4% 21.8% 0.7% Max 31.8% 33.2% 40.5% 9.1% Min 2.2% 3.7% 2.1% (13.5%) |
![]() ![]() Confidential 55 Implied Period NRGM CMLP Ratio Current as of 04/19/13 $22.90 $24.97 1.090x 30-Day Average 23.72 24.37 1.027x 60-Day Average 23.83 24.96 1.047x 90-Day Average 23.39 24.33 1.040x Over the twelve months ended December 31, 2012, CMLP’s unit price decreased by 32.2%, while NRGM’s unit price increased by 17.4%, resulting in a decrease in the NRGM/CMLP unit price trading ratio from 1.675x to 0.968x Since January 1, 2012, NRGM and CMLP unit prices have increased by 2.9% and 16.0%, respectively, as of April 19, 2013 Current Offer = 1.061x + $0.41 cash per unit 0.800x 0.900x 1.000x 1.100x 1.200x 1.300x 1.400x 1.500x 1.600x 1.700x 1.800x 12/16/2011 3/6/2012 5/27/2012 8/17/2012 11/6/2012 1/27/2013 4/19/2013 Indicative Valuation of CMLP Historical Unit Price Trading Ratio DRAFT |
![]() Wall Street Research Price Targets ($ in millions, except per unit amounts) Summary Price Targets 56 Analyst Recommendations Source: Bloomberg, IBES Distribution Per Unit Estimates EBITDA Estimates Indicative Valuation of CMLP Target Firm Analyst Date Recommendation Price Ladenburg Thalmann Eduardo Seda 02/27/13 Buy $32.50 Hilliard Lyons Joel K. Havard 02/27/13 Long-term Buy 32.00 Simmons Mark L. Reichman 03/21/13 Overweight 30.00 Barclays Richard Gross 02/28/13 Equalweight 27.00 RBC T.J. Schultz 02/27/13 Sector Perform 26.00 Wells Fargo Michael J. Blum 02/28/13 Outperform NA Median: $30.00 Mean: 29.50 Low: 26.00 High: 32.50 Confidential DRAFT $178.0 $258.0 $307.0 $179.1 $209.0 $180.7 $229.0 $178.6 $248.8 $316.4 $179.1 $229.5 $296.3 $173.3 $214.8 $270.3 $-- $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 $350.0 2013E 2014E 2015E Barclays Ladenburg Thalmann RBC Wells Fargo IBES CMLP Management Projections $2.09 $2.17 $2.26 $2.12 $2.24 $2.36 $2.04 $2.14 $2.07 $2.10 $2.20 $2.07 $2.15 $2.26 $2.07 $2.15 $2.37 $1.80 $1.90 $2.00 $2.10 $2.20 $2.30 $2.40 2013E 2014E 2015E Hold (2) 33.3% Buy (4) 66.7% |
![]() V. Overview of NRGM DRAFT |
![]() Confidential DRAFT NRGM Map 57 Overview of NRGM Source: Public partnership filings NRGM Asset Map Gas Storage NGL Storage COLT Hub Legend COLT Hub: – Located in Epping, North Dakota – 120,000 barrels per day rail loading capacity – 720,000 barrel crude oil storage capacity Steuben (Adrian Field): – Located in Steuben County, New York – Working gas of 6.2 Bcf with 30/60 MMcfd injection/withdrawal capability – Owned by ASC, a subsidiary of NRGM U.S. Salt Gas Storage Development: – Located in Watkins Glen, New York – Potential development of up to approximately 10.0 Bcf of natural gas storage capacity ��� Development rights owned by NRGM Stagecoach: – Located 150 miles northwest of New York City – Working gas of 26.3 Bcf with 250/500 MMcfd injection/withdrawal capability Seneca Lake – Located in Schuyler County, New York – Working Gas of 1.5 Bcf with 72.5/145 MMcfd injection/withdrawal capability – Owned by ASC, a subsidiary of NRGM Thomas Corners: – Located in Steuben County, New York – Working gas of 7.0 Bcf with 70/140 MMcf per day (“MMcfd”) injection / withdrawal capability – Owned by Arlington Storage Company (“ASC”), a subsidiary of NRGM Finger Lakes NGL Storage – Two facilities: • Bath Facility: 1.5 million barrels of NGL storage • Watkins Glen Facility: 2.1 million barrels of NGL storage |
![]() Confidential NRGM Asset Overview – Natural Gas Storage and Transportation 58 Overview of NRGM Source: NRGM website and Bloomberg Map of NRGM Natural Gas Storage and Transportation Seasonal April/January Natural Gas Futures – Henry Hub Daily Natural Gas Price Volatility $0.511 $0.477 $0.417 2010 Daily Volatility: $0.11 2011 Daily Volatility: $0.10 2012 Daily Volatility: $0.05 Legend Seneca Lake Stagecoach Steuben (Adrian Field) Thomas Corners East (NRGM) Marc I (NRGM) Dominion Millennium National Fuel Tennessee Gas Transco Commonwealth (NRGM) Seneca Lake (NRGM) North-South (NRGM) Steuben (NRGM) Thomas Corners (NRGM) Stagecoach (NRGM) YTD 2013 Daily Volatility: $0.13 $0.400 $0.450 $0.500 $0.550 $0.600 3/29/2012 6/1/2012 8/4/2012 10/8/2012 12/11/2012 2/13/2013 4/19/2013 April 14/January15 April 15/January16 April 16/January17 $0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 $16.00 $18.00 4/23/2010 10/22/2010 4/23/2011 10/22/2011 4/22/2012 10/21/2012 4/22/2013 TETCO M3 Natural Gas Spot Price DRAFT |
![]() NRGM Asset Overview – Natural Gas Storage Facilities (cont’d) 59 Overview of NRGM Natural gas storage facility located 150 miles northwest of New York City Working gas capacity of 26.25 Bcf 18 horizontal storage wells with 250/500 MMcfd injection/withdrawal capability Connected to Tennessee Gas Pipeline Company, L.L.C’s (“TGP”) 300 Line and Millennium Pipeline Company, L.L.C. (“Millennium”) 24-mile South lateral pipeline connected to TGP's 300 Line and 10-mile North lateral pipeline connected to Millennium Stagecoach Natural gas storage facility located in Steuben County, New York Initial working gas capacity of 5.7 Bcf although certified to 7.0 Bcf 10 high angle vertical storage wells provide two-cycle non-seasonal service with 70/140 MMcfd injection/withdrawal capacity Connections to TGP and Millennium 8-mile lateral pipeline connected to TGP's 400 Line and 7.5-mile lateral pipeline connected to Millennium Thomas Corners Source: Management presentation and NRGM filings -- 3,154.0 3,911.3 6,218.9 3,850.0 4,220.0 -- 1,000.0 2,000.0 3,000.0 4,000.0 5,000.0 6,000.0 7,000.0 8,000.0 2013 2014 2015 2016 2017 2018 Utility (62.2%) Marketer (37.8%) Weighed Average Rate $0.1853 1,254.0 4,446.0 -- 1,000.0 2,000.0 3,000.0 4,000.0 5,000.0 6,000.0 2013 2014 2015 2016 2017 2018 Utility (22.0%) Marketer (78.0%) Weighed Average Rate $0.1800 Confidential DRAFT |
![]() NRGM Asset Overview – Natural Gas Storage Facilities (cont’d) 60 Overview of NRGM Steuben (Adrian Field) Natural gas storage facility located in Steuben County, New York Working gas capacity of 6.2 Bcf 11 vertical wells with 30/60 MMcfd injection/withdrawal capability 12.5-mile lateral pipeline connected to Dominion’s Woodhull line Received FERC approval to charge market based rates under ASC’s tariff effective April 1, 2013 Natural gas storage facility located in Schuyler County, New York – Located on U.S. Salt property Working gas capacity of 1.5 Bcf with 72.5/145 MMcfd injection/withdrawal capability 20-mile, 16-inch lateral pipeline connected to Dominion and Millennium Seneca Lake Source: Management presentation and NRGM filings DRAFT Confidential 500.0 4,405.0 -- 1,000.0 2,000.0 3,000.0 4,000.0 5,000.0 6,000.0 2013 2014 2015 2016 2017 2018 Utility Marketer (8.1%) (91.9%) 1,295.0 300.0 350.0 510.0 290.0 -- 100.0 200.0 300.0 400.0 500.0 600.0 700.0 2013 2014 2015 2016 2017 2018 2019 2020 2021 Utility Marketer (80.0%) (20.0%) Weighed Average Rate $0.2745 Weighed Average Rate $0.0838 |
![]() NRGM Asset Overview – Natural Gas Transportation 61 Overview of NRGM Provides approximately 325 MMcfd of interstate transportation service for shippers seeking to transport natural gas on a firm basis through NRGM’s existing North and/or South Laterals of Stagecoach Includes compression and associated facilities installed to expand transportation capacity on the Stagecoach north and south pipeline laterals Generates fee-based revenue pursuant to a negotiated rate structure authorized by the FERC Placed into service in December 2011 100% contracted with weighted average maturity through 2016 Future connection to Dominion would potentially allow access to Iroquois Pipeline Operating Company (“Iroquois”) via Dominion-Iroquois expansion North-South Pipeline Source: Management presentation and NRGM filings Marc I Pipeline 39-mile, 30-inch bi-directional natural gas pipeline connecting NRGM’s Stagecoach South Lateral pipeline interconnect at TGP’s 300 Line to Transco’s Leidy Line Provides 550 MMcfd of interstate transportation capacity Includes a 16,360 horsepower gas-fired compressor station in the vicinity of the Transco interconnection and a 15,000 horsepower electric-powered compressor station at the proposed interconnection between the Stagecoach south lateral and TGP's 300 Line Generates fee-based revenue pursuant to a negotiated rate structure authorized by the FERC Placed into service in December 2011 82% contracted with 10-year terms Confidential DRAFT |
![]() East Pipeline NRGM Asset Overview – Natural Gas Transportation (cont’d) 62 Overview of NRGM Source: Management presentation and NRGM filings 37.5-mile, 12-inch diameter natural gas intrastate pipeline located in New York Transports 30 MMcfd of natural gas from Dominion to the Binghamton, New York city gate Runs within three miles of the Stagecoach north lateral's point of interconnection with Millennium Generates fee-based revenue pursuant to under a negotiated rate structure authorized by the New York State Public Service Commission NRGM acquired the East Pipeline (formerly known as the Seneca Lake east pipeline) from New York State Electric & Gas Corporation on July 13, 2011 as part of its acquisition of the Seneca Lake natural gas storage facility 100% contracted through 2021 Commonwealth Pipeline Approximately 120-mile, 30-inch natural gas pipeline extending from southern end of Marc I Pipeline to Chester County, Pennsylvania Approximately $750.0 million total capital investment of which NRGM is responsible for $250.0 million Expected to be in-service in the second half of 2016 or the first half of 2017 and to generate $32.5 million of EBITDA annually at full run-rate – 7.7x run-rate EBITDA Confidential DRAFT |
![]() Confidential DRAFT NRGM Asset Overview – NGL Storage and Terminals 63 Overview of NRGM 1.5 million barrels of underground NGL storage in Steuben County, New York Rail and truck terminal facilities capable of loading and unloading 23 railcars per day and 17 truck transports per day Nine separate caverns allow for segregation of multiple streams 100% contracted with Inergy Services, LLC , with maturity to 2016 Expansion potential with U.S. Salt as brine outlet Bath Facility Developing an initial 2.1 million barrels of NGL storage in Schuyler County, New York Connected to TE Products Pipeline ("TEPPCO") pipeline with rail and truck access capable of loading and unloading 32 railcars per day and 45 truck transports per day 95% contracted with BP plc with maturity to 2016 and option to take back capacity Expected in-service calendar 1H 2013, subject to regulatory approval (1) Wholly-owned subsidiary of NRGY Watkins Glen Facility Source: Management presentation and NRGM filings (1) |
![]() Confidential NRGM Asset Overview – U.S. Salt 64 U.S. Salt Operations Acquired from NRGY on May 14, 2012 for a total purchase price of $192.5 million, including $182.5 million in cash and 473,707 common units U.S. Salt Operations Solution mining and salt production company located outside of Watkins Glen, New York Produces and sells approximately 300,000 tons of food, pharmaceutical and chemical feedstock grade salt each year Over 40.0 million barrels of previously solution mined cavern capacity convertible to energy storage U.S. Salt Gas Storage Development NRGM’s Seneca Lake facility is located on U.S. Salt property Potential development of up to approximately 10.0 Bcf of natural gas storage capacity Additional storage capacity available via the solution-mining process at U.S. Salt Name Position Previous Position Mitchell Dascher President President of Southern Lime Barry Wall VP of Finance Midwest Controller at Compass Minerals Don Krider VP of Sales Eastern Regional sales manager at North American Salt Source: NRGM filings, NRGM website and projections provided by NRGM management $22.2 $21.7 $21.7 $19.1 $20.8 $21.5 $21.5 $21.5 $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E DRAFT Historical and Projected U.S. Salt Performance U.S. Salt Management Team Overview of NRGM |
![]() Confidential DRAFT NRGM Asset Overview – U.S. Salt – Market Dynamics 65 Overview of NRGM United States Salt Production by Process Net Selling Value F.O.B. Excluding Container Costs Vacuum and Open Pans Largest Vacuum and Open Pan Producers Based on 2011 Production Volume Source: NRGM filings, NRGM website and projections provided by NRGM management United States Salt Imports and Exports -- 10.0 20.0 30.0 40.0 50.0 60.0 19.7 18.9 17.8 18.5 19.2 16.8 20.9 20.3 17.6 18.4 3.7 4.1 3.9 3.1 3.3 4.4 4.2 4.0 4.1 4.1 -- 500 1,000 1,500 2,000 2,500 Cargill Morton United Salt Corp. North American Salt Co. U.S. Salt L.L.C. The Mosaic Co. E.I. duPont de Nemours 2,025 1,835 600 425 335 300 230 Bulk Compressed Pellets Packaged $109.46 $110.73 $109.05 $110.83 $108.06 $160.74 $166.74 $180.00 $177.44 $173.92 $175.35 $180.03 $206.27 $209.19 $200.74 2007A 2008A 2009A 2010A 2011A 2007A 2008A 2009A 2010A 2011A Imports Exports 8.6 13.8 14.7 12.9 13.8 0.8 1.0 1.5 0.6 0.8 -- 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 Brine Rock Solar Vacuum and Open Pans $0.00 $50.00 $100.00 $150.00 $200.00 $250.00 2007A 2008A 2009A 2010A 2011A |
![]() 66 Overview of NRGM COLT Hub Overview On November 5, 2012, NRGM announced the acquisition of the COLT Hub for $425.0 million Crude oil rail terminal located in Epping, North Dakota – Commenced commercial operation in May 2012 120,000 Bpd rail loading capacity, 720,000 Bbl crude oil storage capacity Ability to handle up to 120-car unit trains Connected to Burlington Northern Santa Fe rail system 21-mile, 10" bi-directional pipeline (“COLT Connector”) connecting the COLT Terminal to the Dry Fork Terminal Dry Fork Terminal located at the Beaver Lodge/Ramberg pipeline hub providing crude oil pipeline access and interconnects – Crude oil metering and pipeline interconnection facilities allow transfer to Tesoro and Enbridge pipelines Product sourcing via truck unloading racks, pipelines and gathering system interconnects 98% of capacity is contracted or committed pursuant to “take-or-pay” contracts with weighted average maturity of 3.6 years COLT Hub Map Source: Management presentation and NRGM filings Contract Summary Rail Pipeline Storage Credit Commencement Maturity Minimum Base Rate Minimum Base Rate Capacity Base Rate Contract Rating Date Date Commitment (Bpd) ($ / Bbl) Commitment (Bpd) ($ / Bbl) (Bbl) ($ / Bbl/Month) Tesoro BB+/Ba1 Take-or-Pay 6/1/12 6/1/16 40,000 $1.15 20,000 $0.46 240,000 $-- Take-or-Pay 7/1/13 6/1/16 20,000 1.15 10,000 0.46 120,000 -- Sunoco Logistics BBB/BBB- Take-or-Pay 6/1/12 6/1/17 10,000 $1.35 $0.66 120,000 $-- Take-or-Pay 6/1/13 6/1/15 10,000 1.35 0.66 Flint Hills NR Take-or-Pay 10/1/12 12/31/13 9,300 $1.50 Take-or-Pay 10/1/12 9/1/15 5,000 $0.46 120,000 $0.55 U.S. Oil / Astra NR Take-or-Pay 4/1/13 11/1/17 18,000 $1.50 120,000 $0.55 Take-or-Pay 4/1/13 11/1/17 9,000 1.50 Statoil AA-/Aa2 Take-or-Pay 10/1/13 10/1/16 10,000 $1.55 $0.66 120,000 $0.60 Legend Dry Fork Terminal Colt Terminal Belle Fourche Enbridge Tesoro Confidential DRAFT NRGM Asset Overview – COLT Hub |
![]() 67 Overview of NRGM Competing Terminals near COLT Hub Source: Management presentation, NRGM filings and Platts Confidential DRAFT Marker Terminal 2013E Exit Capacity (Bbls) Bakken Oil Express Basin Transload Enbridge EOG Resources Great Northern Midstream Global Partners Hess Musket Plains Savage Services COLT Dry Fork Enbridge Belle Fourche Tesoro 100,000 40,000 80,000 65,000 160,000 60,000 60,000 60,000 175,000 90,000 120,000 NA NA NA NA NRGM Asset Overview – COLT Hub (cont’d) |
![]() Overview of NRGM NRGM – Summary Market Data 68 Market Capitalization Balance Sheet and Credit Data Unit Price and Distribution Information General Partner Incentive Distribution Rights (1) Distribution per unit and EBITDA estimates shown on a calendar basis, fiscal year ends September 30 As of December 31, 2012 Cash and Marketable Securities $-- Short-term Debt 1.8 Long-term Debt 678.0 Total Debt $679.8 Net Debt 679.8 Plus: Minority Interest -- Plus: Partners' Capital 759.0 Net Book Capitalization $1,438.8 Revolver Availability / Total Revolver Capacity $418 / $600 Net Debt / Net Book Cap 47.2% Net Debt / 2013E EBTIDA 3.3x Net Debt / 2014E EBTIDA 2.4 Current Ratings Moody's Ba3 S&P BB As of April 19, 2013 Total Units Outstanding 85.9 Common Unit Price $22.90 Total Equity Value $1,967.2 Plus: Preferred Equity -- Plus: Net Debt 679.8 Plus: Minority Interest -- Total Enterprise Value $2,647.0 IBES Data Yield / Multiple Distribution Yield Current $1.56 6.8% Calendar 2013 1.64 7.2% Calendar 2014 1.78 7.8% EV / EBITDA Calendar 2013 $205.7 12.9x Calendar 2014 283.9 9.3 ($ in millions, except per unit amounts) NRGM Distribution per Unit NRGM Price $1.35 $1.43 $1.51 $1.59 $1.67 $1.75 $15.00 $18.00 $21.00 $24.00 $27.00 $30.00 12/16/11 3/23/12 6/29/12 10/5/12 1/11/13 4/19/13 Confidential DRAFT Quarterly Distribution per LP Unit $0.3900 Quarterly Total Total Total Total LP Quarterly Quarterly Distribution Total Quarterly Quarterly Annual Annual Distribution Distribution to GP LP Units Distribution Distribution Distribution Distribution % to LP % to GP Range Within Range per LP Unit Outstanding to LPs to LPs to GP % of Total Distributions to the GP 4.9% % of Total Distributions to the IDRs 4.9% to GP $31.8 $-- $127.1 $-- 1.7 6.9 $33.5 $134.0 $6.9 100.0% 0.0% $0.3700 $0.3700 $0.0000 85.9 50.0% 0.3700 1.7 6.9 $0.0000 50.0% 0.0200 85.9 $1.7 0.3700 0.0200 |
![]() Price Performance 69 (1) IPO volume of 8,000,420 exceeds scale of the volume axis 0 100 200 300 400 500 600 700 800 900 1,000 $-- $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $50.00 4/19/11 8/18/11 12/18/11 4/18/12 8/18/12 12/18/12 4/19/13 NRGM Volume NRGM Unit Price NRGY Unit Price Overview of NRGM 12/16/2011: Completed IPO of NRGM 8/9/2011: NRGY announced restructuring of business units and intention to file for IPO of NRGM 1/27/2012: NRGY announced quarterly cash distribution of $0.705 and potential to reduce distributions largely due to propane operations 5/14/2012: NRGM announced acquisition of US Salt LLC from NRGY for $192.5 million 4/26/2012: NRGY announced contribution of retail propane business to Suburban Propane Partners, L.P. for $1.8 billion 11/5/2012: NRGM announced acquisition of Rangeland Energy, LLC for $425 million DRAFT Confidential |
![]() Relevant Relative Trading Metrics ($ in millions, except per unit amounts) 70 Publicly Traded Natural Gas Pipeline and Storage MLPs Overview of NRGM Publicly Traded Natural Gas Storage MLPs (1) IBES estimates are on a calendar basis, fiscal year ends September 30 Enterprise Value / Equity Enterprise EBITDA Distribution Yield Distribution Total Partnership Price (04/19/2013) Value Value 2013E 2014E Current 2013E 2014E Growth Return Natural Gas Pipelines/Storage Boardwalk Pipeline Partners, LP $30.58 $7,194.8 $10,730.1 13.6x 12.9x 7.0% 7.0% 7.1% 2.4% 9.3% El Paso Pipeline Partners, L.P. 43.17 9,505.7 13,637.7 11.7 11.0 5.7% 6.2% 6.5% 4.2% 9.9% EQT Midstream Partners, LP 37.08 1,312.2 1,290.2 13.6 10.2 3.8% 4.7% 5.5% 16.9% 20.6% Niska Gas Storage Partners LLC 14.26 501.8 893.3 6.5 6.3 9.8% 9.8% 9.9% 3.5% 13.3% PAA Natural Gas Storage, L.P. 22.69 1,646.3 2,227.8 18.5 17.0 6.3% 6.4% 6.6% 2.1% 8.4% Spectra Energy Partners, LP 37.55 4,085.8 5,178.7 20.2 17.0 5.3% 5.7% 6.0% 5.4% 10.7% TC PipeLines, LP 48.29 2,634.9 3,322.9 17.4 16.6 6.5% 6.5% 6.7% 2.3% 8.8% Mean 14.5x 13.0x 6.3% 6.6% 6.9% 5.2% 11.6% Median 13.6 12.9 6.3% 6.4% 6.6% 3.5% 9.9% $22.90 $1,966.5 $2,646.3 12.9x 9.3x 6.8% 7.2% 7.8% 8.7% 15.5% Enterprise Value / Equity Enterprise EBITDA Distribution Yield Distribution Total Partnership Price (04/19/2013) Value Value 2013E 2014E Current 2013E 2014E Growth Return Natural Gas Storage Niska Gas Storage Partners LLC $14.26 $501.8 $893.3 6.5x 6.3x 9.8% 9.8% 9.9% 3.5% 13.3% PAA Natural Gas Storage, L.P. 22.69 1,646.3 2,227.8 18.5 17.0 6.3% 6.4% 6.6% 2.1% 8.4% Mean 12.5x 11.6x 8.1% 8.1% 8.2% 2.8% 10.9% $22.90 $1,966.5 $2,646.3 12.9x 9.3x 6.8% 7.2% 7.8% 8.7% 15.5% Confidential DRAFT Inergy Midstream, L.P. (1) Inergy Midstream, L.P. (1) |
![]() Wall Street Research Price Targets Summary Price Targets 71 Analyst Recommendations Source: Bloomberg, IBES (1) Distribution per unit and EBITDA estimates shown on a fiscal basis Distribution Per Unit Estimates (1) EBITDA Estimates (1) Overview of NRGM Target Firm Analyst Date Recommendation Price Credit Suisse Brett Reilly 01/09/13 Outperform $28.00 JPMorgan Jeremy Tonet 03/21/13 Overweight 26.00 Stifel Nicolaus Selman Akyol 02/06/13 Buy 26.00 Barclays Brian J. Zarahn 02/06/13 Overweight 26.00 Morgan Stanley Stephen J. Maresca 11/5/12 Equal-weight 25.00 Robert W. Baird & Co Ethan H. Bellamy 02/06/13 Neutral 24.00 Median: $26.00 Mean: 25.83 Low: 24.00 High: 28.00 $1.60 $1.73 $1.88 $1.66 $1.92 $2.14 $1.62 $1.73 $1.61 $1.76 $1.96 $-- $0.50 $1.00 $1.50 $2.00 $2.50 2013E 2014E 2015E $182.0 $245.0 $295.0 $250.1 $399.3 $361.3 $177.4 $224.0 $186.4 $263.6 $344.7 $-- $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 $350.0 $400.0 $450.0 2013E 2014E 2015E Barclays Morgan Stanley Stifel Nicolaus IBES Hold (2) 33.3% Buy (4) 66.7% Confidential DRAFT ($ in millions, except per unit amounts) |
![]() Confidential DRAFT “We expect NRGM distribution growth of 6.0% in 2013 and 8.5% in 2014 supported by contributions from COLT acquisition, in-service Marc I pipeline, drop downs and the Finger Lakes expansion. coverage, we forecast no growth at NRGY in 2013 but estimate 10% distribution CAGR 2013-2016 as the Partnership transitions to a pure play GP. On a relative basis, we continue to prefer NRGM over NRGY due to the distribution growth differential in 2013.” – Barclays, Brian J. Zarahn; February 6, 2013 Price Target: $26.00 “Adding a new asset platform (oil) and shale exposure (Bakken) is a plus. Management projects FY2014 EBITDA of $58mm, translating to a 7.6x EV/EBITDA multiple (inclusive of $19mm in capex) and 9% estimated fully distributed accretion at NRGM and 8% at NRGY. The transaction’s ultimate benefit will be measured by new capital opportunities created, while potentially also signaling an ability to source reasonable acquisitions.” – Morgan Stanley, Stephen J. Maresca; November 5, 2012 Price Target: $25.00 “We continue to believe NRGM has a stable platform of businesses which have very little commodity exposure and will produce growing cash flows over time. NRGM by NRGY as well as potential expansion opportunities at the recently acquired COLT hub to potentially further drive growth. As a result we continue to expect NRGM to continue to grow its distribution over time.” – Stifel Nicolaus, Selman Akyol; February 6, 2013 Price Target: $26.00 72 Due to expected tight In addition we expect the partnership to benefit from additional assets dropped into Overview of NRGM Research Analyst Commentary |
![]() Confidential DRAFT Ratings Agency Commentary “NRGM’s storage and transportation businesses offer stable revenues, with contracts usually fee-based, take-or-pay in structure. Excluding the salt business, we expect NRGM’s storage and transportation revenues to continue to comprise over 90% of 2013 revenues. As a whole, fee-based revenues, which will increase with the Rangeland acquisition are expected to comprise the large majority of the company’s revenues. The company takes negligible commodity price risk in the storage and transportation business, providing good visibility into cash flow and debt servicing capability. With such a large base of fee-based revenues, NRGM’s credit risk is lower than that of many other midstream companies.” – Moody’s; November 29, 2012 Credit Rating: Ba3 “If a default occurs, we believe that NRGM would retain the greatest value by reorganizing. To value NRGM, we apply an EBITDA multiple of 7x to our estimated postdefault run-rate EBITDA of $120 million, which assumes a 40% reduction from our 2013 EBITDA estimate. These valuation assumptions are slightly more favorable than those used for peers because a significant portion of the partnership's revenues are derived from fee-based firm contracts. This leads us to a gross enterprise value of $840 million for NRGM.” – Standard & Poor’s Ratings Services; December 13, 2012 Credit Rating: BB Overview of NRGM 73 |
![]() Confidential DRAFT NRGM Equity Ownership Summary Overview of NRGM Note: Shading denotes overlapping ownership (1) Source: NASDAQ National Markets as of March 28, 2013 74 Current Unitholders Units % of Total Institutional Top 10: Kayne Anderson Capital Advisors LP 8,657,629 10.1% Neuberger Berman LLC 3,720,166 4.3% Tortoise Capital Advisors LLC 3,123,176 3.6% Eagle Global Advisors LLC 1,894,945 2.2% OppenheimerFunds, Inc. 1,617,827 1.9% OFI Steelpath, Inc. 1,600,605 1.9% Advisory Research, Inc. 929,260 1.1% Magnetar Financial LLC 833,333 1.0% Mason Street Advisors LLC 629,680 0.7% Fidelity Management & Research Co. 603,900 0.7% Other 1,168,393 1.4% Total Institutional Ownership 24,778,914 28.9% Insiders Inergy LP 56,398,707 65.7% William C. Gautreaux 140,000 0.2% John J. Sherman 100,000 0.1% R. Brooks Sherman Jr. 55,000 0.1% Laura L. Ozenberger 45,000 0.1% Other 88,924 0.1% Total Insiders 56,827,631 66.2% Retail / Other 4,268,170 5.0% Total Common Units Outstanding 85,874,715 100.0% Short Interest (1) 158,467 0.2% NRGM CMLP Current Unitholders (Excluding Broker Holdings in Street Name) Shares Percentage Shares Percentage Kayne Anderson Capital Advisors LP 8,657,629 10.1% 5,807,677 9.5% Neuberger Berman LLC 3,720,166 4.3% -- 0.0% Tortoise Capital Advisors LLC 3,123,176 3.6% 2,676,178 4.4% Eagle Global Advisors LLC 1,894,945 2.2% 10,280 0.0% OppenheimerFunds, Inc. 1,617,827 1.9% -- 0.0% OFI Steelpath, Inc. 1,600,605 1.9% -- 0.0% Advisory Research, Inc. 929,260 1.1% -- 0.0% Magnetar Financial LLC 833,333 1.0% -- 0.0% Mason Street Advisors LLC 629,680 0.7% -- 0.0% Fidelity Management & Research Co. 603,900 0.7% 95,332 0.2% Salient Capital Advisors LLC 277,857 0.3% -- 0.0% Glenmede Investment Management LP 53,150 0.1% -- 0.0% Oxford Asset Management LLP 46,718 0.1% -- 0.0% Morgan Stanley Investment Management, Inc. 30,000 0.0% 55,918 0.1% Cadence Bank, NA (Investment Management) 13,853 0.0% -- 0.0% Salem Investment Counselors, Inc. 12,500 0.0% -- 0.0% UBS Global Asset Management 11,994 0.0% 279,425 0.5% Susquehanna Financial Group LLLP 11,726 0.0% -- 0.0% Westport Resources Management, Inc. 3,847 0.0% 575 0.0% Royal Alliance Associates, Inc. 2,970 0.0% 200 0.0% Deutsche Bank Investment Management, Inc. 2,300 0.0% 23,309 0.0% Group One Trading LP 2,012 0.0% 5,308 0.0% Delta Asset Management LLC (Tennessee) 2,000 0.0% -- 0.0% Creative Planning, Inc. 1,450 0.0% -- 0.0% PNC Bank NA (Trust Department) 1,000 0.0% -- 0.0% Harbor Springs Financial Management LLC 1,000 0.0% -- 0.0% Retirement Planning Group, Inc. 605 0.0% -- 0.0% Union Bank, NA 600 0.0% -- 0.0% C. M. Bidwell & Associates Ltd. 600 0.0% -- 0.0% Central Trust & Investment Co. 300 0.0% -- 0.0% Tower Research Capital LLC 298 0.0% 1,293 0.0% Baystate Wealth Management LLC 200 0.0% -- 0.0% Barclays Capital, Inc. 100 0.0% 1,587 0.0% NRGM Institutional Owners Represent 16.0% Ownership in CMLP |
![]() Confidential DRAFT The NRGM Management Financial Projections utilized herein by Evercore incorporate the following assumptions: – Growth in EBITDA from $171.6 million in 2013E to $223.5 million in 2014E primarily attributed to full-year COLT Hub performance and the Phase I expansion project providing an additional 20,000 Bpd of rail loading capacity (“COLT Hub Phase I”), additional Watkins Glen NGL storage of 2.1 million barrels on US Salt property and full year performance of the Marc I pipeline – Growth in EBITDA from $223.5 million in 2014E to $242.7 million in 2015E primarily attributed to full year COLT Hub Phase I performance, the COLT Hub Phase II expansion project providing an additional 20,000 Bpd of rail loading capacity (“COLT Hub Phase II”) and expansion of natural gas storage capacity at Seneca Lake (“Seneca Lake Gas Storage Expansion”) – Maintenance capital expenditures of $4.5 million to $8.6 million annually in 2013E through 2017E – Growth capital expenditures of $126.7 million in 2013E and $66.5 million in 2014E, primarily attributable to the Marc I pipeline that was placed into service on December 1, 2012, the Seneca Lake Gas Storage Expansion and COLT Hub Phase I – Growth capital expenditures in 2015E of $137.5 million are primarily attributable to the Commonwealth Pipeline, Seneca Lake Gas Storage Expansion and COLT Hub Phase II project Growth capital expenditures in 2016E of $189.5 million are primarily attributable to the Commonwealth Pipeline – Issuance of $200.0 million of 6.0% Senior Notes in fiscal 2015E – Issuance of $150.0 million of common equity in the fourth quarter of fiscal 2016E at an assumed net common unit price of $26.57 – No minimum cash balance Overview of NRGM 75 NRGM Management Financial Projections – Assumptions • |
![]() Growth Capital Expenditures – Summary ($ in millions) 76 Overview of NRGM Source: Public partnership filings For the Fiscal Years Ending September 30, 2013E 2014E 2015E 2016E 2017E Growth Capital Expenditures Commonwealth Pipeline -- (62.5) (187.5) -- Seneca Lake Gas Storage Expansion (21.3) (28.8) -- -- COLT Hub Expansion I (28.5) -- -- -- COLT Hub Expansion II (14.8) (44.3) -- -- Other NRGM Growth (2.0) (2.0) (2.0) (2.0) Total ($126.7) ($66.5) ($137.5) ($189.5) ($2.0) Projected EBITDA Stagecoach $51.2 $55.6 $55.6 $55.6 $55.6 North-South 14.7 14.7 14.7 14.7 14.7 Marc I 27.7 33.5 33.5 33.5 33.5 Commonwealth Pipeline -- -- -- 8.1 32.5 Steuben Gas 4.8 4.7 4.7 4.7 4.7 Thomas Corners 11.5 12.5 11.9 11.9 11.9 Seneca Lake 6.9 7.6 7.6 8.1 8.1 Seneca Lake Gas Storage Expansion -- -- 3.8 7.5 7.5 FL NGL - Bath 11.5 11.7 11.7 11.7 11.7 FL NGL - Watkins Glen 1.8 7.4 9.2 9.2 9.2 US Salt 17.2 18.7 19.4 19.4 19.4 COLT Hub 33.3 57.6 58.3 59.6 61.7 COLT Expansion I -- 8.4 12.8 13.0 13.0 COLT Expansion II -- -- 8.5 13.0 13.0 NRGM Corporate (9.2) (9.1) (9.1) (9.1) (9.1) Total $171.6 $223.5 $242.7 $260.9 $287.5 Confidential DRAFT |
![]() NRGM Management Financial Projections ($ in millions) 77 Overview of NRGM The following sets forth selected operating and financial projections utilized by NRGM management to derive the NRGM Management Financial Projections herein: For the Fiscal Years Ending September 30, CAGR 2013E 2014E 2015E 2016E 2017E 2013E - 2017E Working Gas Capacity (Bcf) 41.2 41.4 43.9 46.4 46.4 Natural Gas Transportation (MMcfd) 813.3 905.0 905.0 1,105.0 1,705.0 20.3% NGL Storage Capacity (MMBbls) 2.0 3.6 3.6 3.6 3.6 Salt Tons Sold 362,423.3 378,013.8 388,013.8 388,013.8 388,013.8 1.7% Revenue Firm Storage $103.2 $106.8 $113.1 $117.6 $117.6 3.3% Transportation 48.5 60.2 60.2 69.8 98.6 19.4% Hub Services 11.0 14.3 13.9 15.1 16.2 10.0% Salt 48.1 50.3 51.4 51.4 51.4 1.7% Crude and Other 41.5 78.7 93.4 99.8 102.3 25.3% Total Revenue $252.3 $310.3 $332.0 $353.6 $386.1 11.2% Cost of Sales/Service Storage ($7.4) ($4.7) ($4.9) ($5.1) ($5.1) (9.0%) Transportation (7.7) (10.5) (10.5) (11.9) (16.1) 20.3% Salt (29.0) (29.5) (30.0) (30.0) (30.0) 0.8% Crude and Other (5.6) (8.4) (9.1) (9.4) (9.6) 14.4% Total Cost of Sales/Service ($49.7) ($53.0) ($54.5) ($56.4) ($60.7) 5.1% Gross Profit Storage & Transportation $147.6 $166.2 $171.8 $185.4 $211.2 9.4% Salt 19.1 20.8 21.5 21.5 21.5 2.9% Crude and Other 35.9 70.3 84.3 90.3 92.7 26.7% Total Gross Profit $202.6 $257.3 $277.6 $297.2 $325.3 12.6% Less: Total Operating Expenses (31.1) (33.8) (34.9) (36.3) (37.8) Plus: Minority Interest and Other Expense 0.0 -- -- -- -- Adjusted EBITDA $171.6 $223.5 $242.7 $260.9 $287.5 13.8% Confidential DRAFT |
![]() NRGM Management Financial Projections (cont’d) ($ in millions, except per unit amounts) 78 Overview of NRGM The following sets forth the NRGM Management Financial Projections utilized by Evercore in its analysis herein: For the Fiscal Years Ending September 30, CAGR 2013E 2014E 2015E 2016E 2017E 2014E - 2017E Adjusted EBITDA $171.6 $223.5 $242.7 $260.9 $287.5 8.8% Less: Maintenance Capital Expenditures (4.5) (7.0) (7.8) (8.2) (8.6) Less: Interest Expense (34.8) (42.7) (52.1) (56.5) (57.2) Other 4.6 (0.3) 2.7 1.3 (1.3) Distributable Cash Flow $136.9 $173.5 $185.4 $197.5 $220.4 8.3% Distributed Cash Flow Common Units - Public $46.9 $49.7 $52.2 $57.2 $66.1 Common Units - NRGY 89.7 94.9 99.8 104.3 106.0 General Partner 9.4 17.4 24.9 32.3 36.6 Distributed Cash Flow $146.0 $161.9 $177.0 $193.8 $208.7 8.8% % to GP 6.5% 10.7% 14.1% 16.7% 17.5% GP IDRs $9.4 $17.4 $24.9 $32.3 $36.6 28.2% Weighted Average LP Units Outstanding 85.9 85.9 85.9 87.3 91.5 DCF / LP Unit $1.52 $1.75 $1.82 $1.87 $1.94 3.6% Distribution / LP Unit 1.59 1.68 1.77 1.85 1.88 3.8% LP Coverage 0.96x 1.04x 1.03x 1.01x 1.03x Total Coverage 0.94 1.07 1.05 1.02 1.06 Distributable Cash Flow Surplus / (Shortfall) ($9.2) $11.6 $8.4 $3.6 $11.6 DRAFT Confidential |
![]() NRGM Management Financial Projections (cont’d) ($ in millions) 79 The following sets forth the funding assumptions utilized in the NRGM Management Financial Projections and NRGM’s resulting capital structure and credit statistics Overview of NRGM Confidential DRAFT For the Fiscal Years Ending September 30, 2013E 2014E 2015E 2016E 2017E Sources: Equity Issued for Growth Capital Expenditures $-- $-- $-- $-- $-- Equity Issued for Rangeland Acquisition 225.0 -- -- -- -- Equity Issuance in Q4 2016E -- -- -- 150.0 -- Debt Issued / (Repaid) 361.5 46.5 130.7 37.4 (9.2) DCF Surplus / (Shortfall) (9.2) 11.6 8.4 3.6 11.6 Total Sources $577.4 $58.0 $139.1 $191.0 $2.4 Debt Issued / (Repaid), net of Surplus / (Shortfall) $361.5 $46.5 $130.7 $37.4 ($9.2) Total Equity Issued 225.0 -- -- -- -- Uses: Growth Capital Expenditures $126.7 $66.5 $137.5 $189.5 $2.0 Rangeland Acquisition 425.0 -- -- -- -- Rangeland Transaction Fees and Expenses 6.0 -- -- -- -- Other 19.7 (8.5) 1.6 1.5 0.4 Total Uses $577.4 $58.0 $139.1 $191.0 $2.4 Credit Statistics Debt / Adjusted EBITDA 4.5x 3.7x 3.9x 3.8x 3.4x Net Debt / Adjusted EBITDA 4.5 3.7 3.9 3.8 3.4 Capital Structure Cash $-- $-- $-- $-- $-- Total Debt 778.0 824.5 955.2 992.5 983.3 Net Debt $778.0 $824.5 $955.2 $992.5 $983.3 |
![]() Overview of NRGM 80 NRGM Management Financial Projections Comparison to Wall Street Research Estimates The following sets forth a comparison of the NRGM Management Financial Projections and Wall Street Research consensus estimates ($ in millions, except per unit amounts) Confidential DRAFT EBITDA DCF per LP Unit Distribution per LP Unit Distribution Coverage NRGM Management Financial Projections Wall Street Research $500.0 $400.0 $300.0 $200.0 $100.0 $-- 2013E 2014E 2015E 2016E 2017E $2.50 $2.00 $1.50 $1.00 $0.50 $-- NRGM Management Financial Projections Wall Street Research NRGM Management Financial Projections Wall Street Research NRGM Management Financial Projections Wall Street Research 2013E 2014E 2015E 2016E 2017E 2013E 2014E 2015E 2016E 2017E 2013E 2014E 2015E 2016E 2017E $2.50 $2.00 $1.50 $1.00 $0.50 $-- $3.00 $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $-- $171.6 $195.9 $223.5 $299.6 $242.7 $388.2 $260.9 $287.5 $1.59 $1.66 $1.68 $1.92 $1.77 $2.14 $1.85 $1.88 $1.52 $1.64 $1.75 $2.14 $1.82 $2.53 $1.87 $1.94 0.94x 0.97x 1.07x 1.19x 1.05x 1.28x 1.02x 1.06x |
![]() Confidential DRAFT NRGM Research Financial Projections ($ in millions, except per unit amounts) 81 Overview of NRGM The following sets forth a comparison of the NRGM Management Financial Projections and the NRGM Research Financial Projections utilized by Evercore in its analysis herein Source: NRGM management; Wall Street Research NRGM Management Financial Projections NRGM Research Financial Projections For the Fiscal Years Ending September 30, CAGR 2013E 2014E 2015E 2016E 2017E 2013E - 2015E Adjusted EBITDA $171.6 $223.5 $242.7 $260.9 $287.5 18.9% Less: Maintenance Capital Expenditures (4.5) (7.0) (7.8) (8.2) (8.6) Less: Interest Expense (34.8) (42.7) (52.1) (56.5) (57.2) Other 4.6 (0.3) 2.7 1.3 (1.3) Distributable Cash Flow $136.9 $173.5 $185.4 $197.5 $220.4 16.4% DCF / LP Unit $1.52 $1.75 $1.82 $1.87 $1.94 9.3% Distribution / LP Unit 1.59 1.68 1.77 1.85 1.88 5.5% LP Coverage 0.96x 1.04x 1.03x 1.01x 1.03x Total Coverage 0.94 1.07 1.05 1.02 1.06 Distributable Cash Flow Surplus / (Shortfall) ($9.2) $11.6 $8.4 $3.6 $11.6 Difference versus NRGM For the Fiscal Years Ending September 30, CAGR Management Financial Projections 2013E 2014E 2015E 2013E - 2015E 2013E 2014E 2015E Adjusted EBITDA $195.9 $299.6 $388.2 40.8% ($24.4) ($76.0) ($145.5) Less: Maintenance Capital Expenditures (10.0) (10.0) (20.2) 5.5 3.0 12.4 Less: Interest Expense (33.3) (38.6) (41.7) (1.5) (4.2) (10.4) Other 4.6 (0.3) 2.7 -- -- -- Distributable Cash Flow $157.2 $250.7 $329.0 44.6% ($20.4) ($77.2) ($143.6) DCF / LP Unit $1.64 $2.14 $2.53 24.4% ($0.11) ($0.39) ($0.71) Distribution / LP Unit 1.66 1.92 2.14 13.5% (0.07) (0.24) (0.37) LP Coverage 0.99x 1.11x 1.18x Total Coverage 0.97 1.19 1.28 Distributable Cash Flow Surplus / (Shortfall) ($4.3) $39.4 $72.1 |
![]() DRAFT VI. Indicative Value of NRGM |
![]() Valuation Methodologies Utilizing the following methodologies, Evercore analyzed the value of NRGM common units 82 Indicative Value of NRGM Methodology Description Metrics/Assumptions Discounted Cash Flow Analysis: Financials Projections Discounted Cash Flow Analysis: Projected Distribution per Unit Precedent M&A Transaction Analysis Peer Group Trading Analysis Wall Street Research Price Targets Values NRGM based on the concepts of the time value of money Utilizing the NRGM Management Financial Projections as previously reviewed herein, Evercore: – Utilized varying weighted average cost of capital (“WACC”) discount rates and applied various perpetuity growth rates to derive after-tax valuation ranges for NRGM – Calculated terminal values based on a range of multiples of EBITDA derived from precedent transactions as well as assumed perpetuity growth rates Values the NRGM common units based on the concepts of the time value of money – Utilized varying total expected market return discount rates and calculated a terminal value based on a various terminal exit yields Valuation for the NRGM common units based on current market enterprise value multiples of relevant EBITDA for selected comparable publicly-traded entities Valuation for the NRGM common units based on the most recent research analyst price targets of firms covering NRGM Tax depreciation based on a 15-year MACRS schedule and a full step-up in tax basis Terminal exit yield range of 6.0% to 8.0% Cost of equity of 7.5% to 9.5% based on the Capital Asset Pricing Model utilizing betas from selected publicly-traded peers Cost of equity of 9.0% to 11.0% based on the expected market total return of selected publicly-traded peers Based on transaction value / EBITDA Enterprise value / EBITDA multiples applied to 2013E EBITDA and 2014E EBITDA Confidential DRAFT Growth capital expenditures discounted at a 7.0% discount rate EBITDA exit multiple of 11.5x to 13.5x and a perpetuity growth rate of 0.5% to 1.5% For the terminal value, tax depreciation assumed to be equal to maintenance capital expenditures Weighted average cost of capital based on mid-point of the Capital Asset Pricing Model (“CAPM”) and distribution yields and expected growth in distributions for entities with comparable assets Discounted the projected cash flows to the assumed July 1, 2013 effective date Utilizing projected distributions per unit from the NRGM Management Financial Projections as previously reviewed herein, Evercore: Valuation for the NRGM common units based on multiples of transaction value to EBITDA in historical transactions involving other natural gas storage and pipeline assets Tax rate of 35.0% based on unitholders’ tax rates Enterprise value / EBITDA multiples applied to 2013E and 2014E EBITDA with the resulting value discounted at a 7.0% discount rate, the midpoint of the weighted average cost of capital range based on the assumed July 1, 2013 effective date Research price targets from: Barclays, Credit Suisse, JP Morgan, Morgan Stanley, Robert W. Baird & Co. and Stifel Nicolaus |
![]() Confidential DRAFT Current Price: $22.90 Summary Preliminary Valuation – NRGM Common Unit 83 Discounted Cash Flow Analysis Precedent M&A Transactions Peer Group Trading Wall Street Research Financial Projections Distribution per Unit Analysis Analysis Price Target 6.5% - 7.5% WACC 6.0% - 8.0% Terminal Exit Yield 2013E EBITDA: $171.6 MM 2013E EBITDA: $171.6 MM Barclays 2017E EBITDA Exit Multiple of 7.5% - 9.5% CAPM 11.5x - 13.5x EBITDA Multiple 14.0x - 17.0x EBITDA Multiple Credit Suisse 11.5x - 13.5x Equity Discount Rate 2014E EBITDA: $223.5 MM 2014E EBITDA: $223.5 MM JP Morgan Perpetuity Growth Rates of 9.0% - 11.0% Expected Market Return 11.5x - 13.5x EBITDA Multiple 10.0x - 13.0x EBITDA Multiple Morgan Stanley 0.50% - 1.50% Equity Discount Rate Growth Capital Expenditures Robert W. Baird & Co. Discounted @ 7.0% Stifel Nicolaus $18.03 $21.17 $13.53 $17.31 $24.00 $30.42 $29.54 $22.49 $25.24 $28.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 Preliminary Value of NRGM Common Units Indicative Value of NRGM |
![]() Confidential DRAFT 84 Indicative Value of NRGM $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 Discounted Cash Flow Analysis Precedent M&A Transactions Peer Group Trading Wall Street Research Financial Projections Distribution per Unit Analysis Analysis Price Target $19.55 $22.88 $14.77 $18.79 $25.89 $32.70 $31.77 $24.29 $27.20 $30.13 $22.00 $27.00 6.5% - 7.5% WACC 2017E EBITDA Exit Multiple of 11.5x - 13.5x Perpetuity Growth Rates of 0.50% - 1.50% 6.0% - 8.0% Terminal Exit Yield 7.5% - 9.5% CAPM Equity Discount Rate 9.0% - 11.0% Expected Market Return Equity Discount Rate 2013E EBITDA: $171.6 MM 11.5x - 13.5x EBITDA Multiple 2014E EBITDA: $223.5 MM 11.5x - 13.5x EBITDA Multiple Growth Capital Expenditures Discounted @ 7.0% 2013E EBITDA: $171.6 MM 14.0x - 17.0x EBITDA Multiple 2014E EBITDA: $223.5 MM 10.0x - 13.0x EBITDA Multiple Barclays Credit Suisse JP Morgan Morgan Stanley Robert W. Baird & Co. Stifel Nicolaus Preliminary Value of 1.061 NRGM Common Units and $0.41 of cash Summary Preliminary Valuation – Valuation of Proposed Consideration Preliminary Value of the Proposed Consideration to be Paid per CMLP Common Unit |
![]() 85 Indicative Value of NRGM Evercore utilized a DCF Analysis based on the following assumptions: – Effective date on July 1, 2013 – EBITDA and capital expenditures through December 31, 2017E per the NRGM Management Financial Projections as previously reviewed herein – A 35.0% tax rate – Tax depreciation forecast based on a full tax-basis step-up and a 15-year MACRS depreciation schedule – Mid-point discount rate of 7.0% utilizing a weighted average cost of capital based on CAPM – Terminal value based on both: (i) a 11.5x to 13.5x EBITDA exit multiple and (ii) a 0.50% to 1.50% perpetuity growth rate Tax depreciation is set equal to maintenance capital expenditures in perpetuity Confidential DRAFT Discounted Cash Flow Analysis – Assumptions |
![]() Confidential DRAFT Discounted Cash Flow Analysis ($ in millions, except per unit amounts) EBITDA Exit Multiple Sensitivities Perpetuity Growth Rate Sensitivities (1) Assumes tax depreciation equal to maintenance capital expenditures in perpetuity Summary Results 86 Indicative Value of NRGM For the Three Months Ending Terminal Value September 30, For the Fiscal Years Ending September 30, EBITDA Perpetuity 2013E 2014E 2015E 2016E 2017E Exit Multiple / Growth Rate (1) EBITDA $50.6 $223.5 $242.7 $260.9 $287.5 $287.5 $287.5 Less: Depreciation and Amortization (39.0) (154.9) (151.9) (153.1) (130.0) (8.6) EBIT $11.6 $68.7 $90.8 $107.8 $157.5 $278.9 Less: Taxes (4.1) (24.0) (31.8) (37.7) (55.1) (97.6) Plus: NOL -- -- -- -- -- -- EBIAT $7.6 $44.6 $59.0 $70.1 $102.4 $181.3 Less: Maintenance Capital Expenditures (1.0) (7.0) (7.8) (8.2) (8.6) (8.6) Less: Growth Capital Expenditures (29.7) (66.5) (137.5) (189.5) (2.0) -- Plus: Depreciation and Amortization 39.0 154.9 151.9 153.1 130.0 8.6 Unlevered Free Cash Flow $15.9 $126.0 $65.5 $25.5 $221.8 $181.3 Exit multiple / Perpetuity Growth Rate 12.5x / 1.0% Terminal Value $3,593.9 / $3,051.8 PV of Unlevered Free Cash Flow @ 7.0% $387.0 Plus: PV of Terminal Value @ 7.0% $2,695.8 / $2,289.1 Plus: PV of 0.5x 2017E NOL $-- Implied Enterprise Value $3,082.8 / $2,676.1 Less: Net Debt ($748.1) ($748.1) Implied Equity Value $2,334.7 / $1,928.0 Total Units Outstanding 85.9 Implied Unit Price $27.18 / $22.44 WACC EBITDA Multiple $27.18 10.5x 11.5x 12.5x 13.5x 14.5x 6.0% $23.33 $25.94 $28.56 $31.17 $33.78 6.5% 22.74 25.30 27.86 30.42 32.98 7.0% 22.16 24.67 27.18 29.69 32.20 7.5% 21.59 24.05 26.51 28.98 31.44 8.0% 21.04 23.45 25.87 28.28 30.69 WACC Perpetuity Growth Rate $22.44 0.00% 0.50% 1.00% 1.50% 2.00% 6.0% $23.35 $26.00 $29.18 $33.06 $37.91 6.5% 20.69 22.89 25.50 28.63 32.45 7.0% 18.41 20.27 22.44 25.01 28.09 7.5% 16.44 18.03 19.86 22.00 24.53 8.0% 14.72 16.09 17.66 19.46 21.57 |
![]() Indicative Value of NRGM 87 (1) NRGM 52-week yield range of 6.2% to 8.0%, with an average yield of 6.8% The analysis below sets forth NRGM’s projected annual distribution per unit based on the NRGM Management Financial Projections for the three months ending September 30, 2013E and for the years ending September 30, 2014E, 2015E, 2016E and 2017E and a terminal value based on an NRGM yield range of 6.0% to 8.0% discounted at a cost of equity for NRGM ranging between 7.5% and 9.5% based on CAPM and 9.0% to 11.0% based on the total expected market return (as detailed in the Appendix) Discounted Cash Flow Analysis – NRGM Common Units For the Three Months Ending September 30, For the Fiscal Years Ending September 30, Terminal Value 2013E 2014E 2015E 2016E 2017E Low - High NRGM Standalone Distribution per Unit $0.40 $1.68 $1.77 $1.85 $1.88 $1.88 Terminal Yield (1) 8.0% - 6.0% Terminal Value $23.50 - $31.33 Equity Cost of Capital Based on CAPM PV @ 6.5% of Value per NRGM Common Unit $24.61 - $30.60 PV @ 7.5% of Value per NRGM Common Unit 23.78 - 29.54 PV @ 8.5% of Value per NRGM Common Unit 22.99 - 28.53 PV @ 9.5% of Value per NRGM Common Unit 22.24 - 27.56 PV @ 10.5% of Value per NRGM Common Unit 21.51 - 26.64 Implied NRGM Common Unit Value Range Equity Cost of Capital Based on Total Expected Market Return PV @ 8.0% of Value per NRGM Common Unit $23.38 - $29.03 PV @ 9.0% of Value per NRGM Common Unit 22.61 - 28.04 PV @ 10.0% of Value per NRGM Common Unit 21.87 - 27.10 PV @ 11.0% of Value per NRGM Common Unit 21.17 - 26.19 PV @ 12.0% of Value per NRGM Common Unit 20.49 - 25.33 Implied NRGM Common Unit Value Range $21.17 - $29.54 ($ in millions, except per unit amounts) Confidential DRAFT |
![]() 88 Source: Public filings and Wall Street research Indicative Value of NRGM Precedent M&A Transactions ($ in millions) Confidential DRAFT Facility Type Date Salt Depleted Transaction EBITDA Bcf of $MM/Bcf Announced Acquiror/Seller Cavern Reservior Value ($MM) Multiple Storage of Storage 08/12 Boardwalk Pipeline Partners, LP/PL Midstream LLC (PL Logistics LLC) $625.0 NA 11.2 $55.8 10/11 Boardwalk Pipeline Partners, LP/ Petal Gas Storage, L.L.C. and Hattiesburg Gas Storage Company (Enterprise Products Partners L.P.) 550.0 12.2x 29.0 $19.0 07/11 Inergy, L.P. / Seneca Lake storage facility (New York State Electric & Gas Corp.) 65.0 NA 2.0 32.5 06/11 Cardinal Gas Storage Partners LLC / 70% Interest in Monroe Gas Storage Co. LLC (High Sierra Energy LP) 148.0 NA 12.0 12.3 01/11 DCP Midstream Partners LP / Propane and Butane Storage Facility (Marysville Hydrocarbon Holdings LLC) 101.0 NA 6.8 14.9 12/10 PAA Natural Gas Storage, L.P. / Southern Pines Energy Center (SGR Holdings, L.L.C.) 750.0 17.0 40.0 18.8 09/10 Inergy, L.P. / Tres Palacios Gas Storage LLC (NGS Energy LP) 725.0 NA 38.4 18.9 07/10 Spectra Energy Corp. / Bobcat Gas Storage (Haddington Energy Partners, GE Energy Financial Services) 965.0 NA 46.0 21.0 07/10 Buckeye Partners / Lodi Gas Storage (ArcLight Capital Partners) 484.0 NA 34.0 14.2 08/09 Plains All American Pipeline, L.P./Remaining 50% Interest in PAA Natural Gas Storage, LLC (Vulcan Capital) 220.0 11.5 35.0 6.3 03/06 Riverstone (Niska) / Majority of Encana's Gas Storage assets (EnCana Corp.) 1,515.0 NA 191.0 7.9 08/05 Plains All American Pipeline, L.P. and Vulcan Capital / Energy Center Investments Corporation (Sempra Energy) 510.0 7.0 48.5 10.5 07/05 Inergy, L.P. / Stagecoach natural gas storage facility (eCORP, L.L.C.) 230.0 NA 13.6 16.9 08/04 AGL Resources / Jefferson Island Storage (AEP) 86.0 6.5 9.2 9.3 08/02 Scottish Power PLC (PacifiCorp Power Marketing) / Katy Storage Assets (Aquila, Inc.) 180.0 NA 32.0 5.6 08/00 Duke Energy Gas Transmission Corp. / Market Hub Partners (NiSource) 400.0 15.3 23.1 17.3 07/00 El Paso Energy Partners / Gas Crystal Storage (El Paso Corp.) 170.0 16.6 6.7 25.4 All Transactions Mean 12.3x 34.0 $18.0 Median 12.2 29.0 16.9 |
![]() 89 Indicative Value of NRGM Precedent M&A Transactions (cont’d) ($ in millions, except per unit amounts) 2013E EBITDA $171.6 Relevant EBITDA Multiple 11.5x - 13.5x Implied Enterprise Value Range on September 30, 2013 $1,972.9 - $2,316.0 Implied Enterprise Value Range on July 1, 2013 @ 7.0% Discount Rate $1,939.8 - $2,277.2 Less: Present Value of FQ4 2013E Growth Capital Expenditures @ 7.0% Discount Rate (29.4) Implied Enterprise Value $1,910.4 - $2,247.8 2014E EBITDA $223.5 Relevant EBITDA Multiple 11.5x - 13.5x Implied Enterprise Value Range on September 30, 2014 $2,570.6 - $3,017.7 Implied Enterprise Value Range on July 1, 2013 @ 7.0% Discount Rate $2,362.2 - $2,773.0 Less: Present Value of FQ4 2013E and FY 2014E Growth Capital Expenditures @ 7.0% Discount Rate (92.7) Implied Enterprise Value $2,269.5 - $2,680.3 Relevant Range - Enterprise Value $1,910.4 - $2,680.3 Less: Net Debt (748.1) Implied Equity Value $1,162.3 - $1,932.2 Total Units Outstanding 85.9 Implied Unit Price - Confidential DRAFT $13.53 $22.49 |
![]() Confidential DRAFT 90 Source: Public filings (1) IBES estimates are on a calendar basis, fiscal year ends September 30 Enterprise Value / Price Equity Enterprise EBITDA Distribution Yield Distribution Total Partnership (04/19/2013) Value Value 2013E 2014E Current 2013E 2014E Growth Return Natural Gas Pipelines/Storage Boardwalk Pipeline Partners, LP $30.58 $7,194.8 $10,730.1 13.6x 12.9x 7.0% 7.0% 7.1% 2.4% 9.3% El Paso Pipeline Partners, L.P. 43.17 9,505.7 13,637.7 11.7 11.0 5.7% 6.2% 6.5% 4.2% 9.9% EQT Midstream Partners, LP 37.08 1,312.2 1,290.2 13.6 10.2 3.8% 4.7% 5.5% 16.9% 20.6% Niska Gas Storage Partners LLC 14.26 501.8 893.3 6.5 6.3 9.8% 9.8% 9.9% 3.5% 13.3% PAA Natural Gas Storage, L.P. 22.69 1,646.3 2,227.8 18.5 17.0 6.3% 6.4% 6.6% 2.1% 8.4% Spectra Energy Partners, LP 37.55 4,085.8 5,178.7 20.2 17.0 5.3% 5.7% 6.0% 5.4% 10.7% TC PipeLines, LP 48.29 2,634.9 3,322.9 17.4 16.6 6.5% 6.5% 6.7% 2.3% 8.8% Mean 14.5x 13.0x 6.3% 6.6% 6.9% 5.2% 11.6% Median 13.6 12.9 6.3% 6.4% 6.6% 3.5% 9.9% Inergy Midstream, L.P. (1) $22.90 $1,966.5 $2,646.3 12.9x 9.3x 6.8% 7.2% 7.8% 8.7% 15.5% Enterprise Value / Price Equity Enterprise EBITDA Distribution Yield Distribution Total Partnership (04/19/2013) Value Value 2013E 2014E Current 2013E 2014E Growth Return Natural Gas Storage Niska Gas Storage Partners LLC $14.26 $501.8 $893.3 6.5x 6.3x 9.8% 9.8% 9.9% 3.5% 13.3% PAA Natural Gas Storage, L.P. 22.69 1,646.3 2,227.8 18.5 17.0 6.3% 6.4% 6.6% 2.1% 8.4% Mean 12.5x 11.6x 8.1% 8.1% 8.2% 2.8% 10.9% Inergy Midstream, L.P. (1) $22.90 $1,966.5 $2,646.3 12.9x 9.3x 6.8% 7.2% 7.8% 8.7% 15.5% Indicative Value of NRGM Peer Group Trading Analysis ($ in millions, except per unit amounts) Publicly Traded Natural Gas Storage MLPs Publicly Traded Natural Gas Pipeline and Storage MLPs |
![]() Peer Group Trading Analysis (cont’d) ($ in millions, except per unit amounts) 91 Indicative Value of NRGM Source: Public filings Confidential DRAFT Fiscal 2013E EBITDA $171.6 Relevant EBITDA Multiple 14.0x - 17.0x Implied Enterprise Value $2,401.8 - $2,916.5 Fiscal 2014E EBITDA $223.5 Relevant EBITDA Multiple 10.0x - 13.0x Implied Enterprise Value $2,235.3 - $2,905.9 Relevant Enterprise Value Range $2,235.3 - $2,916.5 Less: Net Debt (748.1) - (748.1) Implied Equity Value $1,487.2 - $2,168.4 Total Units Outstanding 85.9 Implied Unit Price $17.31 - $25.24 |
![]() Confidential DRAFT Wall Street Research Price Targets ($ in millions, except per unit amounts) Summary Price Targets 92 Analyst Recommendations EBITDA Estimates (1) Indicative Value of NRGM Hold (2) 33.3% Buy (4) 66.7% $182.0 $245.0 $295.0 $250.1 $399.3 $361.3 $177.4 $224.0 $186.4 $263.6 $344.7 $171.6 $223.5 $242.7 $-- $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 $350.0 $400.0 $450.0 2013E 2014E 2015E $1.60 $1.73 $1.88 $1.66 $1.92 $2.14 $1.62 $1.73 $1.61 $1.76 $1.96 $1.59 $1.68 $1.77 $-- $0.50 $1.00 $1.50 $2.00 $2.50 2013E 2014E 2015E Stifel Nicolaus IBES Barclays Morgan Stanley NRGM Management Financial Projections Target Firm Analyst Date Recommendation Price Credit Suisse Brett Reilly 01/09/13 Outperform $28.00 JPMorgan Jeremy Tonet 03/21/13 Overweight 26.00 Stifel Nicolaus Selman Akyol 02/06/13 Buy 26.00 Barclays Brian J. Zarahn 02/06/13 Overweight 26.00 Morgan Stanley Stephen J. Maresca 11/5/12 Equal-weight 25.00 Robert W. Baird & Co Ethan H. Bellamy 02/06/13 Neutral 24.00 Median: $26.00 Mean: 25.83 Low: 24.00 High: 28.00 Source: Bloomberg, IBES (1) Distribution per unit and EBITDA estimates shown on a fiscal basis Distribution Per Unit Estimates (1) |
![]() VII. Summary Analysis of the Proposed Exchange Ratio DRAFT |
![]() Confidential DRAFT Summary Analysis of the Proposed Exchange Ratio 93 Set forth below is a summary of the relevant contribution percentages to the pro forma entity from CMLP and NRGM Contribution Summary Contribution Analysis – Management Projections ($ in millions) (1) Adjusted for CMLP and NRGM net debt outstanding as of the most recent public disclosure. Equity value as of April 19, 2013 Metrics Implied Crestwood Inergy Midstream Pro Forma Exchange Ratio Pro Forma Ownership Based on Proposed Exchange Ratio $42.7 $57.3 $100.0 42.7% 57.3% 1.061x 2013E Distributable Cash Flow $124.7 $150.9 $275.7 45.2% 54.8% 1.178x 2014E Distributable Cash Flow $159.6 $176.3 $335.9 47.5% 52.5% 1.290x 2015E Distributable Cash Flow $204.4 $188.4 $392.9 52.0% 48.0% 1.546x 2013E EBITDA (1) $173.3 $194.3 $367.5 45.2% 54.8% 1.178x 2014E EBITDA (1) $214.8 $228.6 $443.4 47.1% 52.9% 1.271x 2015E EBITDA (1) $270.3 $247.2 $517.5 52.7% 47.3% 1.585x DCF Equity Value $2,033.4 $2,131.4 $4,164.8 48.8% 51.2% 1.360x Precedent Transactions Equity Value $1,064.8 $1,547.3 $2,612.1 40.8% 59.2% 0.981x Peer Group Trading Equity Value $1,411.2 $1,827.8 $3,239.0 43.6% 56.4% 1.100x Relevant Range Proposed Exchange Ratio (2) 1.061x - - Crestwood Inergy Midstream 45.2% 54.8% 47.5% 52.5% 42.7% 57.3% 52.0% 48.0% 45.2% 54.8% 47.1% 52.9% 43.6% 56.4% 52.7% 47.3% 48.8% 51.2% 40.8% 59.2% 52.7% 59.2% 47.3% 40.8% (2) Proposed exchange ratio excludes cash consideration of $0.41 per unit |
![]() VIII. Summary Pro Forma Impact DRAFT |
![]() Confidential DRAFT Evercore analyzed the pro forma impact to NRGM unitholders and CMLP unitholders from the Proposed Transaction, utilizing the CMLP Management Financial Projections and the NRGM Management Financial Projections previously reviewed herein – NRGM acquires CMLP assuming a 5.0% premium to CMLP’s 20-Day VWAP of $24.11 as of April 19, 2013, or $25.31 per unit, plus $0.41 in cash for a total value of $25.73 per CMLP unit, representing a total enterprise value of $2.3 billion or 10.9x 2014E EBITDA – CMLP’s projected total debt outstanding of $787.4 million as of July 1, 2013 assumed by NRGM, without triggering change of control provisions – Assumes one-time change of control payments to NRGM management of $10.0 million and one-time integration expenses of $150.0 million are funded with borrowings from NRGM’s existing revolver – Assumes a total distribution coverage equal to NRGM’s standalone distribution coverage pro forma for the Proposed Transaction – Assumes NRGM and CMLP (excluding CMM) growth capital expenditures are funded 50.0% with equity issued to the public at an all-in discount of 8.0% to the then-current projected unit price assuming NRGM’s current yield of 6.81% – Transaction fees and expenses of $20.0 million are funded with borrowings on NRGM’s existing revolver – Assumes $10.0 million and $15.0 million of annual synergies in 2013E and 2014E, respectively, and $20.0 million of annual synergies in each of 2015E, 2016E and 2017E – Evercore analyzed the pro forma impact to distributable cash flow per current CMLP unit and distribution per current CMLP unit utilizing sensitivities related to: (i) incremental EBITDA at NRGM pro forma for the Proposed Transaction (in excess of the annual synergies previously reviewed herein) ranging from ($15.0) to $15.0 million and (ii) an offer price premium to CMLP’s 20-Day VWAP ranging between 0.0% and 25.0% – Evercore also analyzed the pro forma NRGM yield necessary for the CMLP implied pro forma projected price to equal the CMLP standalone projected price based on CMLP’s current yield utilizing sensitivities related to an offer price premium to CMLP’s 20-Day VWAP ranging between 0.0% and 25.0% per unit Assumptions 94 Summary Pro Forma Impact Transaction assumed to be financed with NRGM common equity issued directly to CMLP common unitholders and the $25.0 million of cash consideration financed with borrowings from NRGM’s existing revolver Implies a 1.061x NRGM/CMLP exchange ratio, assuming NRGM’s 20-Day VWAP of $23.55 CMM growth capital expenditures are funded 100.0% with borrowings on CMM’s revolving credit facility |
![]() Transaction Economics ($ in millions, except per unit amounts) 95 Summary Pro Forma Impact Sources and Uses Transaction Economics Net NRGM Equity Issued $1,525.9 Cash Consideration 25.0 Equity Value $1,550.9 CMLP Net Debt Assumed as of July 1, 2013 787.4 Transaction Enterprise Value $2,338.3 Assumed Annual Synergies: 2013E Annual Synergies $10.0 2014E Annual Synergies 15.0 2015E Annual Synergies 20.0 CMLP Enterprise Value as a Multiple of: Data Multiple 2013E EBITDA $173.3 13.5x 2014E EBITDA 214.8 10.9 2015E EBITDA 270.3 8.7 2013E EBITDA + Synergies $183.3 12.8x 2014E EBITDA + Synergies 229.8 10.2 2015E EBITDA + Synergies 290.3 8.1 CMLP Equity Value as a Multiple of: Data Multiple 2013E DCF $124.7 12.4x 2014E DCF 159.8 9.7 2015E DCF 204.5 7.6 2013E DCF + Synergies $134.7 11.5x 2014E DCF + Synergies 174.8 8.9 2015E DCF + Synergies 224.5 6.9 Consideration per CMLP Unit (1) Includes 6,516,776 common units from the conversion of the Class D Units outstanding as of July 1, 2013 Confidential DRAFT CMLP LP Units Outstanding (1) 60.3 Assumed LP Unit Price @ 5.0% Premium to $24.11 $25.31 Acquired LP Equity Value $1,525.9 Plus: Transaction Fees 20.0 Plus: One-Time Integration Expenses 15.0 Plus: Management Change of Control Payments 10.0 Plus: Cash Consideration 25.0 Less: Funding on NRGM Revolver (70.0) Net NRGM Equity Issued $1,525.9 Net NRGM LP Equity Issued $1,525.9 NRGM 20-Day VWAP $23.85 New NRGM LP Units Issued 64.0 CMLP Pro Forma Ownership of NRGM 42.7% CMLP 20-Day VWAP $24.11 Offer Premium to CMLP's 20-Day VWAP 5.0% Offer Price $25.31 NRGM 20-Day VWAP 23.85 CMLP / NRGM Exchange Ratio 1.06x Value of Equity Consideration $25.31 Value of Cash Consideration 0.41 Total Consideration per CMLP Unit $25.73 |
![]() Proposed Transaction ($ in millions, except per unit amounts) 96 Summary Pro Forma Impact Pro Forma Impact Confidential DRAFT For the Quarter Ending For the Years Ending December 31, CAGR 3/31/13E 6/30/13E 9/30/13E 12/31/13E 2013E 2014E 2015E 2016E 2017E 2014E - 2017E NRGM Adjusted EBITDA $42.4 $45.6 $50.6 $55.6 $194.3 $228.6 $247.2 $267.6 $294.8 CMLP Adjusted EBITDA -- -- 45.2 45.9 91.1 214.8 270.3 307.9 340.6 Synergies -- -- 5.0 5.0 10.0 15.0 20.0 20.0 20.0 Adjusted EBITDA $42.4 $45.6 $100.8 $106.5 $295.4 $458.4 $537.5 $595.4 $655.4 12.7% Less: NRGM Maintenance Capital Expenditures (1.3) (1.6) (1.0) (1.6) (5.5) (7.3) (7.9) (8.3) (8.8) Less: CMLP Maintenance Capital Expenditures -- -- (3.6) (2.5) (6.1) (7.2) (7.7) (8.9) (11.8) Less: NRGM Interest Expense (9.0) (9.6) (9.8) (10.3) (38.7) (45.4) (53.2) (56.7) (57.2) Less: CMLP Interest Expense -- -- (11.0) (11.3) (22.3) (52.4) (62.8) (67.6) (72.8) Less: Incremental Interest (Expense) / Savings -- -- (0.5) (0.4) (0.8) 5.3 6.2 10.5 12.2 NRGM - Other Income 0.4 0.5 0.0 (0.1) 0.9 0.4 2.3 0.6 (1.3) CMLP - Other Income -- -- 0.9 1.0 1.9 4.5 4.7 4.9 5.2 Distributable Cash Flow $32.6 $35.0 $75.9 $81.3 $224.8 $356.4 $419.1 $470.0 $520.8 13.5% Distributable Cash Flow Common Units - Public $11.1 $11.5 $13.2 $14.0 $49.8 $62.2 $72.4 $86.4 $99.7 Common Units - NRGY 21.1 21.9 24.6 25.6 93.3 107.4 118.0 124.9 131.8 Common Units - CMLP -- -- 28.0 29.0 57.0 121.8 133.8 141.7 149.5 General Partner 0.4 1.6 10.1 12.7 24.8 64.9 94.9 117.1 139.8 Distributable Cash Flow $32.6 $35.0 $75.9 $81.3 $224.8 $356.4 $419.1 $470.0 $520.8 Distributed Cash Flow Common Units - Public $11.7 $11.8 $12.9 $13.0 $49.4 $60.4 $70.6 $84.8 $96.1 Common Units - NRGY 22.3 22.6 23.9 23.9 92.6 104.1 115.0 122.6 127.0 Common Units - CMLP -- -- 27.1 27.1 54.2 118.1 130.5 139.1 144.1 General Partner 2.1 2.6 8.2 8.1 21.0 56.2 86.7 110.7 126.0 Distributed Cash Flow $36.1 $36.9 $72.1 $72.1 $217.2 $338.8 $402.8 $457.3 $493.3 13.3% |
![]() Proposed Transaction (cont’d) ($ in millions, except per unit amounts) 97 Summary Pro Forma Impact Pro Forma Impact Confidential DRAFT For the Quarter Ending For the Years Ending December 31, CAGR 3/31/13E 6/30/13E 9/30/13E 12/31/13E 2013E 2014E 2015E 2016E 2017E 2014E - 2017E Distributed Cash Flow $36.1 $36.9 $72.1 $72.1 $217.2 $338.8 $402.8 $457.3 $493.3 % to GP 6.0% 7.0% 11.3% 11.2% 9.7% 16.6% 21.5% 24.2% 25.5% GP IDRs $2.1 $2.6 $8.2 $8.1 $21.0 $56.2 $86.7 $110.7 $126.0 30.9% Distributed Cash Flow to Common and GP Units 33.9 34.4 63.9 64.0 196.2 282.6 316.1 346.6 367.3 Weighted Average LP Units Outstanding 85.9 85.9 150.7 151.2 118.4 153.0 155.0 159.4 163.0 NRGM Summary: DCF / LP Unit - Pro Forma $0.37 $0.39 $0.44 $0.45 $1.65 $1.90 $2.09 $2.21 $2.34 7.1% Distribution / LP Unit - Pro Forma 0.40 0.40 0.42 0.42 $1.64 $1.85 2.04 2.17 2.25 6.9% CMLP Summary: DCF / LP Unit - Pro Forma $0.48 $0.49 $0.46 $0.48 $1.92 $2.02 $2.22 $2.35 $2.48 7.1% Distribution / LP Unit - Pro Forma $0.51 $0.51 $0.45 $0.45 $1.92 $1.96 $2.16 $2.31 $2.39 6.9% LP Coverage 0.95x 0.97x 1.03x 1.07x 1.01x 1.03x 1.03x 1.02x 1.04x Total Coverage 0.90 0.95 1.05 1.13 1.03 1.05 1.04 1.03 1.06 Distributable Cash Flow Surplus / (Shortfall) ($3.5) ($1.9) $3.9 $9.2 $7.6 $17.6 $16.3 $12.8 $27.5 |
![]() Proposed Transaction (cont’d) ($ in millions) 98 Summary Pro Forma Impact For the Quarter Ending For the Years Ending December 31, 3/31/13E 6/30/13E 9/30/13E 12/31/13E 2013E 2014E 2015E 2016E 2017E Sources: Equity Issued for CMLP Acquisition $-- $-- $1,525.9 $-- $1,525.9 $-- $-- $-- $-- Revolver Draw for Cash Consideration -- -- 25.0 -- 25.0 -- -- -- -- CMLP Net Debt Assumed -- -- 787.4 -- 787.4 -- -- -- -- Revolver Draw for Transaction Fees and Expenses -- -- 70.0 -- 70.0 -- -- -- -- Equity Issued for Growth Capital Expenditures -- -- 18.0 11.5 29.5 73.9 45.6 43.6 6.3 Equity Issuance in Q4 2016E -- -- -- -- -- -- -- 150.0 -- Debt Issued / (Repaid) 42.0 38.1 35.8 3.3 119.2 97.8 162.0 9.1 31.8 DCF Surplus / (Shortfall) (3.5) (1.9) 3.9 9.2 7.6 17.6 16.3 12.8 27.5 Total Sources $38.5 $36.2 $2,465.9 $24.0 $2,564.6 $189.2 $223.9 $215.5 $65.6 Debt Issued / (Repaid), net of Surplus / (Shortfall) $42.0 $38.1 $60.8 $3.3 $144.2 $97.8 $162.0 $9.1 $31.8 Total Equity Issued -- -- 1,543.9 11.5 1,555.5 73.9 45.6 43.6 6.3 Uses: CMLP Merger $-- $-- $2,338.3 $-- $2,338.3 $-- $-- $-- $-- CMLP Transaction Fees and Expenses -- -- 70.0 -- 70.0 -- -- -- -- NRGM Growth Capital Expenditures 28.8 26.6 29.7 16.3 101.4 84.6 150.5 142.6 2.0 CMLP Growth Capital Expenditures -- -- 6.3 6.8 13.1 63.1 31.8 31.7 23.3 CMM Growth Capital Expenditures -- -- 21.5 5.5 27.0 45.0 40.0 40.0 40.0 Other 9.7 9.6 0.2 (4.6) 14.8 (3.5) 1.5 1.2 0.3 Total Uses $38.5 $36.2 $2,465.9 $24.0 $2,564.6 $189.2 $223.9 $215.5 $65.6 Pro Forma Credit Statistics Debt / Adjusted EBITDA 4.3x 3.8x 3.5x 3.2x 3.0x Net Debt / Adjusted EBITDA 4.3 3.8 3.5 3.2 3.0 Standalone NRGM Credit Statistics Debt / Adjusted EBITDA 4.0x 3.6x 3.9x 3.7x 3.3x Net Debt / Adjusted EBITDA 4.0 3.6 3.9 3.7 3.3 Standalone CMLP Credit Statistics Debt / Adjusted EBITDA 4.8x 4.4x 3.7x 3.4x 3.2x Net Debt / Adjusted EBITDA 4.8 4.4 3.7 3.4 3.2 Capital Structure Cash $-- $-- $-- $-- $-- $-- $-- $-- $-- Total Debt 712.1 750.2 1,637.9 1,641.2 1,641.2 1,738.9 1,901.0 1,910.1 1,941.8 Net Debt $712.1 $750.2 $1,637.9 $1,641.2 $1,641.2 $1,738.9 $1,901.0 $1,910.1 $1,941.8 Confidential DRAFT |
![]() Confidential DRAFT Pro Forma Impact – CMLP Unitholder 99 Summary Pro Forma Impact CMLP Accretion / (Dilution) For the Quarter Ending For the Years Ending December 31, CAGR 9/30/13E 12/31/13E 2013E 2014E 2015E 2016E 2017E 2014E - 2017E CMLP Accretion / (Dilution): DCF / LP Unit - Standalone $0.50 $0.51 $1.99 $2.14 $2.51 $2.78 $2.98 11.6% DCF / LP Unit - Pro Forma $0.46 $0.48 $1.92 $2.02 $2.22 $2.35 $2.48 7.1% Accretion / (Dilution) - $ ($0.04) ($0.03) ($0.07) ($0.12) ($0.29) ($0.42) ($0.50) Accretion / (Dilution) - % (7.4%) (6.4%) (3.5%) (5.7%) (11.6%) (15.3%) (16.8%) Distribution / LP Unit - Standalone $0.52 $0.53 $2.07 $2.15 $2.37 $2.60 $2.86 10.0% Distribution / LP Unit - Pro Forma $0.45 $0.45 $1.92 $1.96 $2.16 $2.31 $2.39 6.9% Accretion / (Dilution) - $ ($0.07) ($0.08) ($0.15) ($0.19) ($0.20) ($0.29) ($0.47) Accretion / (Dilution) - % (13.4%) (15.2%) (7.3%) (8.9%) (8.5%) (11.3%) (16.5%) Standalone Distribution Coverage 0.94x 0.95x 0.93x 0.99x 1.10x 1.10x 1.06x Pro Forma Distribution Coverage 1.05 1.13 1.03 1.05 1.04 1.03 1.06 Standalone Debt/EBITDA 4.8x 4.4x 3.7x 3.4x 3.2x Pro Forma Debt/EBITDA 4.3 3.8 3.5 3.2 3.0 |
![]() Confidential DRAFT Pro Forma Impact – NRGM Unitholder 100 Summary Pro Forma Impact NRGM Accretion / (Dilution) For the Quarter Ending For the Years Ending December 31, CAGR 9/30/13E 12/31/13E 2013E 2014E 2015E 2016E 2017E 2014E - 2017E NRGM Accretion / (Dilution): DCF / LP Unit - Standalone $0.42 $0.44 $1.62 $1.77 $1.83 $1.89 $1.96 3.6% DCF / LP Unit - Pro Forma $0.44 $0.45 $1.65 $1.90 $2.09 $2.21 $2.34 7.1% Accretion / (Dilution) - $ $0.02 $0.02 $0.04 $0.14 $0.26 $0.33 $0.37 Accretion / (Dilution) - % 4.8% 3.5% 2.2% 7.8% 14.2% 17.3% 19.1% Distribution / LP Unit - Standalone $0.41 $0.41 $1.61 $1.72 $1.79 $1.86 $1.89 3.2% Distribution / LP Unit - Pro Forma 0.42 0.42 1.64 1.85 2.04 2.17 2.25 6.9% Accretion / (Dilution) - $ $0.02 $0.01 $0.03 $0.13 $0.25 $0.32 $0.37 Accretion / (Dilution) - % 4.7% 3.3% 2.0% 7.7% 13.9% 17.1% 19.4% Standalone Distribution Coverage 1.05x 1.13x 1.01x 1.07x 1.04x 1.03x 1.06x Pro Forma Distribution Coverage 1.05 1.13 1.03 1.05 1.04 1.03 1.06 Standalone Debt/EBITDA 4.0x 3.6x 3.9x 3.7x 3.3x Pro Forma Debt/EBITDA 4.3 3.8 3.5 3.2 3.0 |
![]() CMLP Sensitivity Analysis ($ in millions, except per unit amounts) 101 Summary Pro Forma Impact (1) Based on CMLP’s current yield of 8.2%. Assumes $0.0 million of incremental EBITDA 1.01x 1.06x 1.11x 1.16x 1.21x 1.26x $24.11 $25.31 $26.52 $27.72 $28.93 $30.14 ($0.15) -- 5.0% 10.0% 15.0% 20.0% 25.0% ($15.0) ($0.23) ($0.20) ($0.17) ($0.14) ($0.11) ($0.08) (10.0) (0.21) (0.18) (0.15) (0.12) (0.09) (0.06) (5.0) (0.20) (0.17) (0.13) (0.10) (0.07) (0.04) -- (0.18) (0.15) (0.12) (0.09) (0.05) (0.02) 5.0 (0.17) (0.13) (0.10) (0.07) (0.04) (0.01) 10.0 (0.15) (0.12) (0.08) (0.05) (0.02) 0.01 15.0 (0.14) (0.10) (0.07) (0.04) (0.00) 0.03 7.4% 7.6% 7.7% 7.8% 8.0% 8.1% CMLP 2014E Distribution/LP Unit Accretion/(Dilution) - $ Implied Exchange Ratio/ Offer Price per CMLP Unit/Premium to 20-Day VWAP/ 1.01x 1.06x 1.11x 1.16x 1.21x 1.26x $24.11 $25.31 $26.52 $27.72 $28.93 $30.14 ($0.19) -- 5.0% 10.0% 15.0% 20.0% 25.0% ($15.0) ($0.31) ($0.24) ($0.17) ($0.11) ($0.04) $0.02 (10.0) (0.29) (0.22) (0.16) (0.09) (0.02) 0.04 (5.0) (0.28) (0.21) (0.14) (0.07) (0.01) 0.06 -- (0.26) (0.19) (0.12) (0.05) 0.01 0.08 5.0 (0.25) (0.17) (0.11) (0.04) 0.03 0.10 10.0 (0.23) (0.16) (0.09) (0.02) 0.05 0.11 15.0 (0.21) (0.14) (0.07) (0.00) 0.07 0.13 Breakeven Yield (1) 7.2% 7.4% 7.7% 8.0% 8.2% 8.5% CMLP 2015E Distribution/LP Unit Accretion/(Dilution) - $ Implied Exchange Ratio/ Offer Price per CMLP Unit/Premium to 20-Day VWAP/ 1.01x 1.06x 1.11x 1.16x 1.21x 1.26x $24.11 $25.31 $26.52 $27.72 $28.93 $30.14 ($0.20) -- 5.0% 10.0% 15.0% 20.0% 25.0% ($15.0) ($0.33) ($0.25) ($0.18) ($0.11) ($0.03) $0.03 (10.0) (0.31) (0.23) (0.16) (0.09) (0.02) 0.05 (5.0) (0.29) (0.22) (0.14) (0.07) 0.00 0.07 -- (0.28) (0.20) (0.13) (0.05) 0.02 0.09 5.0 (0.26) (0.18) (0.11) (0.04) 0.04 0.11 10.0 (0.25) (0.17) (0.09) (0.02) 0.05 0.13 15.0 (0.23) (0.15) (0.08) (0.00) 0.07 0.14 7.2% 7.5% 7.7% 8.0% 8.2% 8.5% CMLP 2016E Distribution/LP Unit Accretion/(Dilution) - $ Implied Exchange Ratio/ Offer Price per CMLP Unit/Premium to 20-Day VWAP/ 1.01x 1.06x 1.11x 1.16x 1.21x 1.26x $24.11 $25.31 $26.52 $27.72 $28.93 $30.14 ($0.29) -- 5.0% 10.0% 15.0% 20.0% 25.0% ($15.0) ($0.42) ($0.34) ($0.27) ($0.19) ($0.11) ($0.04) (10.0) (0.41) (0.33) (0.25) (0.17) (0.10) (0.02) (5.0) (0.39) (0.31) (0.23) (0.15) (0.08) (0.00) -- (0.38) (0.29) (0.22) (0.14) (0.06) 0.01 5.0 (0.36) (0.28) (0.20) (0.12) (0.04) 0.03 10.0 (0.34) (0.26) (0.18) (0.10) (0.03) 0.05 15.0 (0.33) (0.25) (0.17) (0.09) (0.01) 0.07 7.0% 7.2% 7.5% 7.7% 8.0% 8.2% CMLP 2017E Distribution/LP Unit Accretion/(Dilution) - $ Implied Exchange Ratio/ Offer Price per CMLP Unit/Premium to 20-Day VWAP/ 1.01x 1.06x 1.11x 1.16x 1.21x 1.26x $24.11 $25.31 $26.52 $27.72 $28.93 $30.14 ($0.47) -- 5.0% 10.0% 15.0% 20.0% 25.0% ($15.0) ($0.60) ($0.52) ($0.44) ($0.36) ($0.28) ($0.20) (10.0) (0.59) (0.50) (0.42) (0.34) (0.26) (0.19) (5.0) (0.57) (0.49) (0.41) (0.33) (0.25) (0.17) -- (0.56) (0.47) (0.39) (0.31) (0.23) (0.15) 5.0 (0.54) (0.46) (0.37) (0.29) (0.21) (0.14) 10.0 (0.53) (0.44) (0.36) (0.28) (0.20) (0.12) 15.0 (0.51) (0.43) (0.34) (0.26) (0.18) (0.10) 6.6% 6.8% 7.1% 7.3% 7.5% 7.7% Confidential DRAFT Breakeven Yield (1) Breakeven Yield (1) Breakeven Yield (1) Breakeven Yield (1) Implied Exchange Ratio/ Offer Price per CMLP Unit/Premium to 20-Day VWAP/ CMLP 2013E Distribution/LP Unit Accretion/(Dilution) - $ |
![]() Confidential DRAFT Pro Forma Impact to CMLP Unitholder 102 Summary Pro Forma Impact Potential CMLP Unit Price Impact For the Quarter Ending For the Years Ending December 31, 9/30/13E 12/31/13E 2013E 2014E 2015E 2016E 2017E Potential CMLP Unit Price Impact: Distribution / LP Unit - Standalone $0.52 $0.53 $2.07 $2.15 $2.37 $2.60 $2.86 CMLP Current Yield 8.2% 8.2% 8.2% 8.2% 8.2% 8.2% 8.2% CMLP Standalone Projected Unit Price - Current Yield $25.46 $25.95 $25.34 $26.33 $28.96 $31.86 $35.04 Standalone Projected Yield - CMLP Management Financial Projections 8.0% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% CMLP Standalone Unit Price - CMLP Management Financial Projections $26.00 $28.27 $27.60 $28.68 $31.55 $34.70 $38.17 Distribution / LP Unit - Pro Forma $0.45 $0.45 $1.92 $1.96 $2.16 $2.31 $2.39 NRGM Current Yield 6.8% 6.8% 6.8% 6.8% 6.8% 6.8% 6.8% CMLP Implied Pro Forma Unit Price $26.43 $26.40 $28.18 $28.77 $31.78 $33.88 $35.10 CMLP Standalone Unit Price - Current Yield $25.46 $25.95 $25.34 $26.33 $28.96 $31.86 $35.04 CMLP Implied Pro Forma Unit Price $26.43 $26.40 $28.18 $28.77 $31.78 $33.88 $35.10 Per Unit Value Accretion / (Dilution) - $ $0.97 $0.45 $2.84 $2.44 $2.82 $2.03 $0.06 Per Unit Value Accretion / (Dilution) - % 3.8% 1.7% 11.2% 9.3% 9.7% 6.4% 0.2% NRGM Yield Necessary to Achieve CMLP Standalone Projected Unit Price (Breakeven Yield) 7.1% 6.9% 7.6% 7.4% 7.5% 7.2% 6.8% CMLP Standalone Unit Price - CMLP Management Financial Projections $26.00 $28.27 $27.60 $28.68 $31.55 $34.70 $38.17 CMLP Implied Pro Forma Unit Price $26.43 $26.40 $28.18 $28.77 $31.78 $33.88 $35.10 Per Unit Value Accretion / (Dilution) - $ $0.43 ($1.87) $0.58 $0.09 $0.23 ($0.82) ($3.07) Per Unit Value Accretion / (Dilution) - % 1.7% (6.6%) 2.1% 0.3% 0.7% (2.4%) (8.0%) NRGM Yield Necessary to Achieve CMLP Standalone Projected Unit Price (Breakeven Yield) 6.9% 6.4% 7.0% 6.8% 6.9% 6.7% 6.3% |
![]() Summary Pro Forma Impact 103 MLP Yield Determinants The following charts set forth the yield for all MLPs excluding variable rate and upstream MLPs relative to: (i) near-term distribution growth; (ii) long-term distribution growth; (iii) size, as reflected by equity market capitalization; (iv) distribution coverage and diversification as measured by the number of business lines in which each MLP participates Long-Term Distribution Growth Size Near-Term Distribution Growth Diversification Distribution Coverage CMLP NRGM CMLP NRGM CMLP NRGM CMLP NRGM CMLP NRGM R² = 0.5182 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 2013E-2014E IBES Consensus Distribution Growth Rate R² = 0.4852 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 0.0% 5.0% 10.0% 15.0% 20.0% 3-Year IBES Consensus Distribution Growth Rate R² = 0.0771 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% $0.0 $10,000.0 $20,000.0 $30,000.0 $40,000.0 $50,000.0 $60,000.0 Equity Value R² = 0.0039 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 0.50 x 0.75 x 1.00 x 1.25 x 1.50 x 1.75 x Distribution Coverage R² = 0.1121 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% -- 5.0 10.0 15.0 Diversification Confidential DRAFT |
![]() Summary Pro Forma Impact 104 R 2 = 0.5182 Confidential DRAFT MLPs by Near-Term Distribution Growth (2013E – 2014E IBES Consensus) ($ in millions) Current Near Term Long Term 2013E Equity Distribution Distribution Distribution Distribution Partnership Value Yield Growth Growth Coverage MPLX LP $2,696.0 2.9% 19.7% 16.5% 1.14x Tesoro Logistics LP 2,460.8 3.7% 19.5% 15.7% 1.10x Seadrill Partners LLC 1,291.9 5.5% 18.2% 0.0% 1.10x Blueknight Energy Partners, L.P. 457.7 5.4% 16.2% 15.4% 1.06x Sunoco Logistics Partners, L.P. 6,719.2 3.4% 15.3% 10.1% 1.45x Rose Rock Midstream, L.P. 846.7 4.2% 14.8% 0.0% 1.10x Access Midstream Partners, L.P. 7,814.3 4.5% 14.7% 11.5% 1.23x Western Gas Partners, LP 6,231.5 3.7% 14.7% 12.4% 1.10x Oiltanking Partners, L.P. 1,969.8 3.1% 13.7% 0.0% 1.15x Susser Petroleum Partners LP 695.1 5.5% 13.7% 10.9% 1.45x EQT Midstream Partners, LP 1,312.2 3.8% 13.1% 17.3% 1.29x Atlas Pipeline Partners, L.P. 2,341.9 6.5% 12.9% 9.1% 1.15x Pro Forma NRGM 3,450.2 TBD 12.3% 9.8% 1.03x NGL Energy Partners LP 1,567.9 6.5% 12.3% 10.1% 1.50x Inergy, L.P. 2,846.9 5.4% 12.2% 0.0% 1.34x Magellan Midstream Partners, L.P. 11,837.2 3.8% 11.1% 11.4% 1.20x Genesis Energy, L.P. 3,971.4 4.2% 10.6% 9.0% 1.20x MarkWest Energy Partners, L.P. 9,046.7 5.4% 10.5% 9.7% 1.23x Targa Resources Partners LP 5,040.6 5.6% 10.4% 8.7% 1.25x Hi-Crush Partners LP 542.9 9.5% 10.4% 0.0% 0.82x Calumet Specialty Products Partners, L.P. 2,584.6 7.0% 9.9% 6.0% 1.43x Delek Logistics Partners, LP 696.4 5.3% 8.7% 12.1% 1.24x Plains All American Pipeline, L.P. 19,490.0 4.0% 8.7% 8.4% 1.03x Inergy Midstream, L.P. 1,967.2 6.8% 8.7% 0.0% 1.10x Crosstex Energy, L.P. 1,828.0 6.9% 8.6% 6.2% 1.30x Summit Midstream Partners, LP 1,341.0 6.1% 8.0% 8.0% 1.20x ONEOK Partners, L.P. 12,498.1 5.1% 8.0% 11.1% 1.12x Copano Energy, L.L.C. 3,207.3 5.7% 7.9% 6.1% 1.19x DCP Midstream Partners, LP 2,946.1 5.8% 7.9% 7.7% 1.19x TransMontaigne Partners L.P. 711.8 5.3% 7.5% 0.0% 1.30x Global Partners LP 975.9 6.5% 7.5% 0.0% 1.32x Williams Partners L.P. 22,133.3 6.3% 7.3% 5.9% 1.00x Alliance Resource Partners, L.P. 2,483.8 6.7% 7.3% 5.4% 1.30x Lehigh Gas Partners LP 356.9 7.5% 6.8% 0.0% 1.20x USA Compression Partners, LP 587.9 8.6% 6.5% 7.0% 1.15x Current Near Term Long Term 2013E Equity Distribution Distribution Distribution Distribution Partnership Value Yield Growth Growth Coverage Holly Energy Partners, L.P. $1,158.3 4.7% 6.4% 0.0% 1.03x Enterprise Products Partners L.P. 54,895.2 4.3% 6.2% 6.7% 1.18x Compressco Partners LP 361.4 7.4% 5.9% 0.0% 1.29x Kinder Morgan Energy Partners, L.P. 35,228.5 5.7% 5.9% 4.4% 1.01x Energy Transfer Partners, L.P. 14,768.9 7.4% 5.6% 0.0% 1.04x El Paso Pipeline Partners, L.P. 9,505.7 5.7% 5.1% 4.4% 1.06x SunCoke Energy Partners, L.P. 658.8 8.0% 4.8% 10.1% 1.15x Spectra Energy Partners, LP 4,085.8 5.3% 4.7% 5.6% 1.16x Teekay Offshore Partners 2,292.2 6.7% 4.7% 6.3% 1.14x Eagle Rock Energy Partners, L.P. 1,497.9 8.7% 4.5% 3.3% 1.38x Amerigas Partners, L.P. 4,231.7 7.2% 4.4% 4.2% 1.41x Teekay LNG Partners L.P. 2,897.6 6.6% 4.0% 4.1% 1.20x Crestwood Midstream Partners LP 1,524.9 8.2% 3.9% 4.3% 1.02x Exterran Partners, L.P. 1,201.8 7.4% 3.8% 2.9% 1.29x Regency Energy Partners LP 5,360.4 7.1% 3.7% 4.7% 1.06x Buckeye Partners, L.P. 6,408.4 6.8% 2.9% 2.7% 1.03x Suburban Propane Partners, L.P. 2,706.7 7.4% 2.8% 2.8% 1.06x PVR Partners, L.P. 3,213.6 8.8% 2.7% 0.9% 1.10x Enbridge Energy Partners, L.P. 9,519.5 7.3% 2.3% 3.1% 1.00x Southcross Energy Partners, L.P. 520.1 7.7% 2.2% 6.3% 1.15x TC PipeLines, LP 2,634.9 6.5% 2.1% 2.2% 1.25x Boardwalk Pipeline Partners, LP 7,194.8 7.0% 1.4% 2.4% 1.04x PAA Natural Gas Storage, L.P. 1,646.3 6.3% 1.0% 1.5% 1.08x Golar LNG Partners LP 1,777.3 6.5% 1.0% 0.0% 1.10x Martin Midstream Partners L.P. 1,092.4 7.7% 0.6% 2.3% 1.01x Niska Gas Storage Partners LLC 501.8 9.8% 0.3% 3.8% 1.36x NuStar Energy LP 4,319.5 8.1% 0.2% 1.1% 0.79x Cheniere Energy Partners, L.P. 7,318.3 6.4% 0.0% 0.0% 1.04x Natural Resource Partners L.P. 2,447.1 9.5% 0.0% 2.9% 0.97x Rhino Resource Partners LP 398.2 12.7% 0.0% 0.0% 1.40x Ferrellgas Partners, L.P. 1,567.2 10.3% 0.0% 0.0% 1.02x Capital Products Partners L.P. 740.1 10.9% 0.0% 0.0% 1.20x Navios Maritime Partners 948.7 12.3% 0.0% 0.0% 1.25x American Midstream Partners, LP 159.9 10.1% 0.0% 3.8% 1.05x Stonemor Partners L.P. 565.0 9.0% 0.0% 0.0% 1.07x |
![]() Summary Pro Forma Impact 105 Current Near Term Long Term 2013E Equity Distribution Distribution Distribution Distribution Partnership Value Yield Growth Growth Coverage EQT Midstream Partners, LP $1,312.2 3.8% 13.1% 17.3% 1.29x MPLX LP 2,696.0 2.9% 19.7% 16.5% 1.14x Tesoro Logistics LP 2,460.8 3.7% 19.5% 15.7% 1.10x Blueknight Energy Partners, L.P. 457.7 5.4% 16.2% 15.4% 1.06x Western Gas Partners, LP 6,231.5 3.7% 14.7% 12.4% 1.10x Delek Logistics Partners, LP 696.4 5.3% 8.7% 12.1% 1.24x Access Midstream Partners, L.P. 7,814.3 4.5% 14.7% 11.5% 1.23x Magellan Midstream Partners, L.P. 11,837.2 3.8% 11.1% 11.4% 1.20x ONEOK Partners, L.P. 12,498.1 5.1% 8.0% 11.1% 1.12x Susser Petroleum Partners LP 695.1 5.5% 13.7% 10.9% 1.45x Sunoco Logistics Partners, L.P. 6,719.2 3.4% 15.3% 10.1% 1.45x NGL Energy Partners LP 1,567.9 6.5% 12.3% 10.1% 1.50x SunCoke Energy Partners, L.P. 658.8 8.0% 4.8% 10.1% 1.15x Pro Forma NRGM 3,450.2 TBD 12.3% 9.8% 1.03x MarkWest Energy Partners, L.P. 9,046.7 5.4% 10.5% 9.7% 1.23x Atlas Pipeline Partners, L.P. 2,341.9 6.5% 12.9% 9.1% 1.15x Genesis Energy, L.P. 3,971.4 4.2% 10.6% 9.0% 1.20x Targa Resources Partners LP 5,040.6 5.6% 10.4% 8.7% 1.25x Plains All American Pipeline, L.P. 19,490.0 4.0% 8.7% 8.4% 1.03x Summit Midstream Partners, LP 1,341.0 6.1% 8.0% 8.0% 1.20x DCP Midstream Partners, LP 2,946.1 5.8% 7.9% 7.7% 1.19x USA Compression Partners, LP 587.9 8.6% 6.5% 7.0% 1.15x Enterprise Products Partners L.P. 54,895.2 4.3% 6.2% 6.7% 1.18x Southcross Energy Partners, L.P. 520.1 7.7% 2.2% 6.3% 1.15x Teekay Offshore Partners 2,292.2 6.7% 4.7% 6.3% 1.14x Crosstex Energy, L.P. 1,828.0 6.9% 8.6% 6.2% 1.30x Copano Energy, L.L.C. 3,207.3 5.7% 7.9% 6.1% 1.19x Calumet Specialty Products Partners, L.P. 2,584.6 7.0% 9.9% 6.0% 1.43x Williams Partners L.P. 22,133.3 6.3% 7.3% 5.9% 1.00x Spectra Energy Partners, LP 4,085.8 5.3% 4.7% 5.6% 1.16x Alliance Resource Partners, L.P. 2,483.8 6.7% 7.3% 5.4% 1.30x Regency Energy Partners LP 5,360.4 7.1% 3.7% 4.7% 1.06x Kinder Morgan Energy Partners, L.P. 35,228.5 5.7% 5.9% 4.4% 1.01x El Paso Pipeline Partners, L.P. 9,505.7 5.7% 5.1% 4.4% 1.06x Crestwood Midstream Partners LP 1,524.9 8.2% 3.9% 4.3% 1.02x Current Near Term Long Term 2013E Equity Distribution Distribution Distribution Distribution Partnership Value Yield Growth Growth Coverage Amerigas Partners, L.P. $4,231.7 7.2% 4.4% 4.2% 1.41x Teekay LNG Partners L.P. 2,897.6 6.6% 4.0% 4.1% 1.20x Niska Gas Storage Partners LLC 501.8 9.8% 0.3% 3.8% 1.36x American Midstream Partners, LP 159.9 10.1% 0.0% 3.8% 1.05x Eagle Rock Energy Partners, L.P. 1,497.9 8.7% 4.5% 3.3% 1.38x Enbridge Energy Partners, L.P. 9,519.5 7.3% 2.3% 3.1% 1.00x Natural Resource Partners L.P. 2,447.1 9.5% 0.0% 2.9% 0.97x Exterran Partners, L.P. 1,201.8 7.4% 3.8% 2.9% 1.29x Suburban Propane Partners, L.P. 2,706.7 7.4% 2.8% 2.8% 1.06x Buckeye Partners, L.P. 6,408.4 6.8% 2.9% 2.7% 1.03x Boardwalk Pipeline Partners, LP 7,194.8 7.0% 1.4% 2.4% 1.04x Martin Midstream Partners L.P. 1,092.4 7.7% 0.6% 2.3% 1.01x TC PipeLines, LP 2,634.9 6.5% 2.1% 2.2% 1.25x PAA Natural Gas Storage, L.P. 1,646.3 6.3% 1.0% 1.5% 1.08x NuStar Energy LP 4,319.5 8.1% 0.2% 1.1% 0.79x PVR Partners, L.P. 3,213.6 8.8% 2.7% 0.9% 1.10x Cheniere Energy Partners, L.P. 7,318.3 6.4% 0.0% 0.0% 1.04x Compressco Partners LP 361.4 7.4% 5.9% 0.0% 1.29x Energy Transfer Partners, L.P. 14,768.9 7.4% 5.6% 0.0% 1.04x Global Partners LP 975.9 6.5% 7.5% 0.0% 1.32x Holly Energy Partners, L.P. 1,158.3 4.7% 6.4% 0.0% 1.03x Inergy Midstream, L.P. 1,967.2 6.8% 8.7% 0.0% 1.10x Lehigh Gas Partners LP 356.9 7.5% 6.8% 0.0% 1.20x Rose Rock Midstream, L.P. 846.7 4.2% 14.8% 0.0% 1.10x TransMontaigne Partners L.P. 711.8 5.3% 7.5% 0.0% 1.30x Rhino Resource Partners LP 398.2 12.7% 0.0% 0.0% 1.40x Ferrellgas Partners, L.P. 1,567.2 10.3% 0.0% 0.0% 1.02x Hi-Crush Partners LP 542.9 9.5% 10.4% 0.0% 0.82x Inergy, L.P. 2,846.9 5.4% 12.2% 0.0% 1.34x Seadrill Partners LLC 1,291.9 5.5% 18.2% 0.0% 1.10x Capital Products Partners L.P. 740.1 10.9% 0.0% 0.0% 1.20x Golar LNG Partners LP 1,777.3 6.5% 1.0% 0.0% 1.10x Navios Maritime Partners 948.7 12.3% 0.0% 0.0% 1.25x Oiltanking Partners, L.P. 1,969.8 3.1% 13.7% 0.0% 1.15x Stonemor Partners L.P. 565.0 9.0% 0.0% 0.0% 1.07x R 2 = 0.4852 MLPs by Long-Term Distribution Growth (3-Year IBES Consensus) ($ in millions) Confidential DRAFT |
![]() Confidential DRAFT Summary Pro Forma Impact 106 MLPs by Equity Value – As of April 19, 2013 ($ in millions) Current Near Term Long Term 2013E Equity Distribution Distribution Distribution Distribution Partnership Value Yield Growth Growth Coverage Enterprise Products Partners L.P. $54,895.2 4.3% 6.2% 6.7% 1.18x Kinder Morgan Energy Partners, L.P. 35,228.5 5.7% 5.9% 4.4% 1.01x Williams Partners L.P. 22,133.3 6.3% 7.3% 5.9% 1.00x Plains All American Pipeline, L.P. 19,490.0 4.0% 8.7% 8.4% 1.03x Energy Transfer Partners, L.P. 14,768.9 7.4% 5.6% 0.0% 1.04x ONEOK Partners, L.P. 12,498.1 5.1% 8.0% 11.1% 1.12x Magellan Midstream Partners, L.P. 11,837.2 3.8% 11.1% 11.4% 1.20x Enbridge Energy Partners, L.P. 9,519.5 7.3% 2.3% 3.1% 1.00x El Paso Pipeline Partners, L.P. 9,505.7 5.7% 5.1% 4.4% 1.06x MarkWest Energy Partners, L.P. 9,046.7 5.4% 10.5% 9.7% 1.23x Access Midstream Partners, L.P. 7,814.3 4.5% 14.7% 11.5% 1.23x Cheniere Energy Partners, L.P. 7,318.3 6.4% 0.0% 0.0% 1.04x Boardwalk Pipeline Partners, LP 7,194.8 7.0% 1.4% 2.4% 1.04x Sunoco Logistics Partners, L.P. 6,719.2 3.4% 15.3% 10.1% 1.45x Buckeye Partners, L.P. 6,408.4 6.8% 2.9% 2.7% 1.03x Western Gas Partners, LP 6,231.5 3.7% 14.7% 12.4% 1.10x Regency Energy Partners LP 5,360.4 7.1% 3.7% 4.7% 1.06x Targa Resources Partners LP 5,040.6 5.6% 10.4% 8.7% 1.25x NuStar Energy LP 4,319.5 8.1% 0.2% 1.1% 0.79x Amerigas Partners, L.P. 4,231.7 7.2% 4.4% 4.2% 1.41x Spectra Energy Partners, LP 4,085.8 5.3% 4.7% 5.6% 1.16x Genesis Energy, L.P. 3,971.4 4.2% 10.6% 9.0% 1.20x Pro Forma NRGM 3,450.2 TBD 12.3% 9.8% 1.03x PVR Partners, L.P. 3,213.6 8.8% 2.7% 0.9% 1.10x Copano Energy, L.L.C. 3,207.3 5.7% 7.9% 6.1% 1.19x DCP Midstream Partners, LP 2,946.1 5.8% 7.9% 7.7% 1.19x Teekay LNG Partners L.P. 2,897.6 6.6% 4.0% 4.1% 1.20x Inergy, L.P. 2,846.9 5.4% 12.2% 0.0% 1.34x Suburban Propane Partners, L.P. 2,706.7 7.4% 2.8% 2.8% 1.06x MPLX LP 2,696.0 2.9% 19.7% 16.5% 1.14x TC PipeLines, LP 2,634.9 6.5% 2.1% 2.2% 1.25x Calumet Specialty Products Partners, L.P. 2,584.6 7.0% 9.9% 6.0% 1.43x Alliance Resource Partners, L.P. 2,483.8 6.7% 7.3% 5.4% 1.30x Tesoro Logistics LP 2,460.8 3.7% 19.5% 15.7% 1.10x Natural Resource Partners L.P. 2,447.1 9.5% 0.0% 2.9% 0.97x Current Near Term Long Term 2013E Equity Distribution Distribution Distribution Distribution Partnership Value Yield Growth Growth Coverage Atlas Pipeline Partners, L.P. $2,341.9 6.5% 12.9% 9.1% 1.15x Teekay Offshore Partners 2,292.2 6.7% 4.7% 6.3% 1.14x Oiltanking Partners, L.P. 1,969.8 3.1% 13.7% 0.0% 1.15x Inergy Midstream, L.P. 1,967.2 6.8% 8.7% 0.0% 1.10x Crosstex Energy, L.P. 1,828.0 6.9% 8.6% 6.2% 1.30x Golar LNG Partners LP 1,777.3 6.5% 1.0% 0.0% 1.10x PAA Natural Gas Storage, L.P. 1,646.3 6.3% 1.0% 1.5% 1.08x NGL Energy Partners LP 1,567.9 6.5% 12.3% 10.1% 1.50x Ferrellgas Partners, L.P. 1,567.2 10.3% 0.0% 0.0% 1.02x Crestwood Midstream Partners LP 1,524.9 8.2% 3.9% 4.3% 1.02x Eagle Rock Energy Partners, L.P. 1,497.9 8.7% 4.5% 3.3% 1.38x Summit Midstream Partners, LP 1,341.0 6.1% 8.0% 8.0% 1.20x EQT Midstream Partners, LP 1,312.2 3.8% 13.1% 17.3% 1.29x Seadrill Partners LLC 1,291.9 5.5% 18.2% 0.0% 1.10x Exterran Partners, L.P. 1,201.8 7.4% 3.8% 2.9% 1.29x Holly Energy Partners, L.P. 1,158.3 4.7% 6.4% 0.0% 1.03x Martin Midstream Partners L.P. 1,092.4 7.7% 0.6% 2.3% 1.01x Global Partners LP 975.9 6.5% 7.5% 0.0% 1.32x Navios Maritime Partners 948.7 12.3% 0.0% 0.0% 1.25x Rose Rock Midstream, L.P. 846.7 4.2% 14.8% 0.0% 1.10x Capital Products Partners L.P. 740.1 10.9% 0.0% 0.0% 1.20x TransMontaigne Partners L.P. 711.8 5.3% 7.5% 0.0% 1.30x Delek Logistics Partners, LP 696.4 5.3% 8.7% 12.1% 1.24x Susser Petroleum Partners LP 695.1 5.5% 13.7% 10.9% 1.45x SunCoke Energy Partners, L.P. 658.8 8.0% 4.8% 10.1% 1.15x USA Compression Partners, LP 587.9 8.6% 6.5% 7.0% 1.15x Stonemor Partners L.P. 565.0 9.0% 0.0% 0.0% 1.07x Hi-Crush Partners LP 542.9 9.5% 10.4% 0.0% 0.82x Southcross Energy Partners, L.P. 520.1 7.7% 2.2% 6.3% 1.15x Niska Gas Storage Partners LLC 501.8 9.8% 0.3% 3.8% 1.36x Blueknight Energy Partners, L.P. 457.7 5.4% 16.2% 15.4% 1.06x Rhino Resource Partners LP 398.2 12.7% 0.0% 0.0% 1.40x Compressco Partners LP 361.4 7.4% 5.9% 0.0% 1.29x Lehigh Gas Partners LP 356.9 7.5% 6.8% 0.0% 1.20x American Midstream Partners, LP 159.9 10.1% 0.0% 3.8% 1.05x R = 0.0771 2 |
![]() Confidential DRAFT Summary Pro Forma Impact 107 MLPs by 2013E Distribution Coverage ($ in millions) R = 0.0039 Current Near Term Long Term 2013E Equity Distribution Distribution Distribution Distribution Partnership Value Yield Growth Growth Coverage NGL Energy Partners LP $1,567.9 6.5% 12.3% 10.1% 1.50x Sunoco Logistics Partners, L.P. 6,719.2 3.4% 15.3% 10.1% 1.45x Susser Petroleum Partners LP 695.1 5.5% 13.7% 10.9% 1.45x Calumet Specialty Products Partners, L.P. 2,584.6 7.0% 9.9% 6.0% 1.43x Amerigas Partners, L.P. 4,231.7 7.2% 4.4% 4.2% 1.41x Rhino Resource Partners LP 398.2 12.7% 0.0% 0.0% 1.40x Eagle Rock Energy Partners, L.P. 1,497.9 8.7% 4.5% 3.3% 1.38x Niska Gas Storage Partners LLC 501.8 9.8% 0.3% 3.8% 1.36x Inergy, L.P. 2,846.9 5.4% 12.2% 0.0% 1.34x Global Partners LP 975.9 6.5% 7.5% 0.0% 1.32x Crosstex Energy, L.P. 1,828.0 6.9% 8.6% 6.2% 1.30x TransMontaigne Partners L.P. 711.8 5.3% 7.5% 0.0% 1.30x Alliance Resource Partners, L.P. 2,483.8 6.7% 7.3% 5.4% 1.30x Exterran Partners, L.P. 1,201.8 7.4% 3.8% 2.9% 1.29x Compressco Partners LP 361.4 7.4% 5.9% 0.0% 1.29x EQT Midstream Partners, LP 1,312.2 3.8% 13.1% 17.3% 1.29x Targa Resources Partners LP 5,040.6 5.6% 10.4% 8.7% 1.25x TC PipeLines, LP 2,634.9 6.5% 2.1% 2.2% 1.25x Navios Maritime Partners 948.7 12.3% 0.0% 0.0% 1.25x Delek Logistics Partners, LP 696.4 5.3% 8.7% 12.1% 1.24x Access Midstream Partners, L.P. 7,814.3 4.5% 14.7% 11.5% 1.23x MarkWest Energy Partners, L.P. 9,046.7 5.4% 10.5% 9.7% 1.23x Genesis Energy, L.P. 3,971.4 4.2% 10.6% 9.0% 1.20x Lehigh Gas Partners LP 356.9 7.5% 6.8% 0.0% 1.20x Magellan Midstream Partners, L.P. 11,837.2 3.8% 11.1% 11.4% 1.20x Summit Midstream Partners, LP 1,341.0 6.1% 8.0% 8.0% 1.20x Capital Products Partners L.P. 740.1 10.9% 0.0% 0.0% 1.20x Teekay LNG Partners L.P. 2,897.6 6.6% 4.0% 4.1% 1.20x Copano Energy, L.L.C. 3,207.3 5.7% 7.9% 6.1% 1.19x DCP Midstream Partners, LP 2,946.1 5.8% 7.9% 7.7% 1.19x Enterprise Products Partners L.P. 54,895.2 4.3% 6.2% 6.7% 1.18x Spectra Energy Partners, LP 4,085.8 5.3% 4.7% 5.6% 1.16x Atlas Pipeline Partners, L.P. 2,341.9 6.5% 12.9% 9.1% 1.15x Southcross Energy Partners, L.P. 520.1 7.7% 2.2% 6.3% 1.15x SunCoke Energy Partners, L.P. 658.8 8.0% 4.8% 10.1% 1.15x Current Near Term Long Term 2013E Equity Distribution Distribution Distribution Distribution Partnership Value Yield Growth Growth Coverage Oiltanking Partners, L.P. $1,969.8 3.1% 13.7% 0.0% 1.15x USA Compression Partners, LP 587.9 8.6% 6.5% 7.0% 1.15x MPLX LP 2,696.0 2.9% 19.7% 16.5% 1.14x Teekay Offshore Partners 2,292.2 6.7% 4.7% 6.3% 1.14x ONEOK Partners, L.P. 12,498.1 5.1% 8.0% 11.1% 1.12x Inergy Midstream, L.P. 1,967.2 6.8% 8.7% 0.0% 1.10x Rose Rock Midstream, L.P. 846.7 4.2% 14.8% 0.0% 1.10x Tesoro Logistics LP 2,460.8 3.7% 19.5% 15.7% 1.10x Western Gas Partners, LP 6,231.5 3.7% 14.7% 12.4% 1.10x PVR Partners, L.P. 3,213.6 8.8% 2.7% 0.9% 1.10x Seadrill Partners LLC 1,291.9 5.5% 18.2% 0.0% 1.10x Golar LNG Partners LP 1,777.3 6.5% 1.0% 0.0% 1.10x PAA Natural Gas Storage, L.P. 1,646.3 6.3% 1.0% 1.5% 1.08x Stonemor Partners L.P. 565.0 9.0% 0.0% 0.0% 1.07x Blueknight Energy Partners, L.P. 457.7 5.4% 16.2% 15.4% 1.06x El Paso Pipeline Partners, L.P. 9,505.7 5.7% 5.1% 4.4% 1.06x Regency Energy Partners LP 5,360.4 7.1% 3.7% 4.7% 1.06x Suburban Propane Partners, L.P. 2,706.7 7.4% 2.8% 2.8% 1.06x American Midstream Partners, LP 159.9 10.1% 0.0% 3.8% 1.05x Energy Transfer Partners, L.P. 14,768.9 7.4% 5.6% 0.0% 1.04x Boardwalk Pipeline Partners, LP 7,194.8 7.0% 1.4% 2.4% 1.04x Cheniere Energy Partners, L.P. 7,318.3 6.4% 0.0% 0.0% 1.04x Pro Forma NRGM 3,450.2 TBD 12.3% 9.8% 1.03x Buckeye Partners, L.P. 6,408.4 6.8% 2.9% 2.7% 1.03x Holly Energy Partners, L.P. 1,158.3 4.7% 6.4% 0.0% 1.03x Plains All American Pipeline, L.P. 19,490.0 4.0% 8.7% 8.4% 1.03x Crestwood Midstream Partners LP 1,524.9 8.2% 3.9% 4.3% 1.02x Ferrellgas Partners, L.P. 1,567.2 10.3% 0.0% 0.0% 1.02x Kinder Morgan Energy Partners, L.P. 35,228.5 5.7% 5.9% 4.4% 1.01x Martin Midstream Partners L.P. 1,092.4 7.7% 0.6% 2.3% 1.01x Enbridge Energy Partners, L.P. 9,519.5 7.3% 2.3% 3.1% 1.00x Williams Partners L.P. 22,133.3 6.3% 7.3% 5.9% 1.00x Natural Resource Partners L.P. 2,447.1 9.5% 0.0% 2.9% 0.97x Hi-Crush Partners LP 542.9 9.5% 10.4% 0.0% 0.82x NuStar Energy LP 4,319.5 8.1% 0.2% 1.1% 0.79x 2 |
![]() Summary Pro Forma Impact MLPs by Diversification (Number of Business Lines) R = 0.1121 Enterprise Products Partners L.P. Plains All American Pipeline, L.P. Kinder Morgan Energy Partners, L.P. Martin Midstream Partners L.P. NuStar Energy LP Targa Resources Partners LP MarkWest Energy Partners, L.P. DCP Midstream Partners, LP Oiltanking Partners, L.P. Pro Forma NRGM Regency Energy Partners LP Magellan Midstream Partners, L.P. NGL Energy Partners LP Rose Rock Midstream, L.P. Spectra Energy Partners, LP Natural Resource Partners L.P. Rhino Resource Partners LP Amerigas Partners, L.P. Atlas Pipeline Partners, L.P. EQT Midstream Partners, LP Exterran Partners, L.P. Global Partners LP Hi-Crush Partners LP PAA Natural Gas Storage, L.P. Suburban Propane Partners, L.P. TC PipeLines, LP Oxford Resource Partners, LP Alliance Resource Partners, L.P. Compressco Partners LP Ferrellgas Partners, L.P. Golar LNG Partners LP Summit Midstream Partners, LP ONEOK Partners, L.P. Williams Partners L.P. Buckeye Partners, L.P. Crosstex Energy, L.P. Energy Transfer Partners, L.P. Genesis Energy, L.P. Southcross Energy Partners, L.P. American Midstream Partners, LP Penn Virginia Resource Partners, L.P. Western Gas Partners, LP Copano Energy, L.L.C. TransMontaigne Partners L.P. Access Midstream Partners, L.P. Calumet Specialty Products Partners, L.P. Crestwood Midstream Partners LP Enbridge Energy Partners, L.P. Holly Energy Partners, L.P. Sunoco Logistics Partners, L.P. Inergy Midstream, L.P. Blueknight Energy Partners, L.P. El Paso Pipeline Partners, L.P. Boardwalk Pipeline Partners, LP Cheniere Energy Partners, L.P. Tesoro Logistics LP Eagle Rock Energy Partners, L.P. 13 10 7 6 6 5 5 5 4 3 3 3 2 2 2 1 1 1 1 1 1 11 8 7 6 5 5 5 5 4 4 3 3 2 2 1 1 1 1 1 7 6 6 5 5 5 4 4 3 3 2 2 1 1 1 1 5.7% 6.3% 3.1% 7.4% 4.7% 3.7% 4 5.4% 8.7% 4 3.7% 5.7% 6.5% 4.5% 12.7% 3.8% 6.5% 6.3% 6.1% 4.0% 7.7% 5.1% 5.8% 8.1% TBD 6.8% 7.3% 4.2% 3.4% 6.8% 8.8% 3.8% 4.2% 7.0% 9.5% 7.2% 7.4% 6.5% 9.8% 7.4% 6.5% 4.3% 5.4% 5.6% 6.9% 7.7% 10.1% 7.1% 5.7% 5.3% 6.4% NA 6.7% 7.4% 10.3% 9.5% 5.3% 7.0% 8.2% 6.5% LNG Total Yield MLP Petrochemicals Other Qualifying Natural Gas Natural Gas Liquids Refined Products Crude Oil Coal Business Lines Current Yield # of 108 2 Niska Gas Storage Partners LLC DRAFT Confidential |
![]() IX. Certain Benefits and Issues for Consideration With Respect to the Proposed Transaction DRAFT |
![]() Confidential DRAFT Benefits Certain Benefits and Issues for Consideration With Respect to the Proposed Transaction 109 Overview Proposed Transaction provides larger scale and more diversified business mix – Combined entity would be 48.4% gathering & processing, 28.4% storage and transportation, 19.1% NGL and crude supply logistics and 4.1% other – Expanded footprint to all the major U.S. shale plays, excluding the Eagle Ford Shale – Reduces Quicksilver and Antero to 28.1% and 29.1%, respectively, of pro forma 2013E EBITDA Potentially improved cost of capital – NRGM is currently rated ‘BB’ with a “fair” business risk profile and “significant” financial risk profile as compared to CMLP’s ‘B’ credit rating and “Weak/Aggressive” profiles – NRGM currently has a 6.8% common unit yield versus CMLP’s current 8.2% common unit yield Creates a platform that may be better positioned to compete for new projects – Vertically integrated across the natural gas and NGL value chain – Potentially improved cost of capital Considerations Ability of CMLP to execute on CMLP Management Financial Projections and risk of not executing on that set of projections Distribution of pro forma distributable cash flow per unit and distribution per unit for CMLP units Likely pro forma yield and ability to provide incremental value for CMLP unitholders despite dilution Benefits of potential asset transfers from NRGY Future accretion in distributable cash flow per unit Ability to support pro forma distribution and credit ratios |
![]() DRAFT Appendix |
![]() DRAFT A. Weighted Average Cost of Capital DRAFT |
![]() CAPM WACC Analysis – CMLP ($ in millions, except per unit amounts) Weighted Average Cost of Capital (1) Source: Predicted raw betas from FactSet; Adjusted Equity Beta calculated as: (0.67) × Raw Beta + (0.33) × 1.0 (2) Unlevered Beta calculated as: Adjusted Equity Beta × (E/(E + D × (1-T)); Assumes corporate tax rate of 35.0% (3) Excludes American Midstream Partners, LP and Southcross Energy Partners, L.P. due to relatively new partnerships with a non-comparable size (4) 10-year Treasury as of April 19, 2013 (5) Source: Ibbotson Associates (6) Equity Cost of Capital calculated as: Risk-free rate + (Levered Equity Beta × Market Risk Premium) + Small Company Risk Premium 110 (3) (3) Unit Price Market Equity Total Debt and Total Debt / Adjusted Unlevered Partnership 4/19/2013 Value Preferred Stock Total Capitalization Beta (1) Beta (2) American Midstream Partners, LP $17.09 $160 $119 42.6% 0.57 0.38 Atlas Pipeline Partners, L.P. 35.55 2,342 1,180 33.5% 1.05 0.79 Access Midstream Partners, L.P. 40.41 7,814 2,500 24.2% 0.66 0.54 Crosstex Energy, L.P. 19.12 1,828 1,036 36.2% 0.91 0.66 DCP Midstream Partners, LP 47.62 2,946 1,620 35.5% 0.70 0.51 MarkWest Energy Partners, L.P. 60.68 9,047 2,523 21.8% 0.75 0.64 Regency Energy Partners LP 26.07 5,360 2,830 34.5% 0.71 0.53 Equity Cost Southcross Energy Partners, L.P. 20.86 520 450 46.4% 0.62 0.40 of Capital Summit Midstream Partners, LP 26.92 1,341 199 12.9% 1.08 0.98 Targa Resources Partners LP 48.53 5,041 2,393 32.2% 0.73 0.56 Western Gas Partners, LP 58.10 6,232 1,927 23.6% 0.73 0.61 Mean 28.3% 0.81 0.65 Median 32.2% 0.73 0.61 WACC Risk-free Rate (4) 1.7% Unlevered Beta 0.65 Debt and Preferred / Total Capitalization 28.3% Adjusted Levered Equity Beta 0.81 Market Risk Premium (5) 6.6% Small Company Risk Premium (5) 1.8% Equity Cost of Capital (6) 8.9% Pre-Tax Cost of Debt 8.0% After-Tax Cost of Debt 5.2% WACC 7.9% WACC DRAFT Confidential |
![]() Confidential DRAFT Total Expected Market Return WACC Analysis – CMLP Weighted Average Cost of Capital (1) Excludes American Midstream Partners, LP and Southcross Energy Partners, L.P. due to relatively new partnerships with a non-comparable size 111 (1) (1) Current Distribution Total Partnership Yield Growth Return American Midstream Partners, LP 10.1% 2.9% 13.0% Atlas Pipeline Partners, L.P. 6.5% 9.9% 16.4% Access Midstream Partners, L.P. 4.5% 10.6% 15.0% Crosstex Energy, L.P. 6.9% 5.3% 12.2% DCP Midstream Partners, LP 5.8% 8.4% 14.2% MarkWest Energy Partners, L.P. 5.4% 9.2% 14.6% Regency Energy Partners LP 7.1% 5.0% 12.0% Total Return Southcross Energy Partners, L.P. 7.7% 5.0% 12.7% Summit Midstream Partners, LP 6.1% 8.0% 14.1% Targa Resources Partners LP 5.6% 8.5% 14.1% Western Gas Partners, LP 3.7% 11.6% 15.3% Mean 14.2% Median 14.2% WACC Debt and Preferred / Total Capitalization 28.3% WACC Market Required Equity Return 14.2% Pre-Tax Cost of Debt 8.0% After-Tax Cost of Debt 5.2% WACC 11.7% |
![]() CAPM WACC Analysis – NRGM ($ in millions, except per unit amounts) Weighted Average Cost of Capital (1) Source: Predicted raw betas from FactSet; Adjusted Equity Beta calculated as: (0.67) × Raw Beta +(0.33) × 1.0 (2) Unlevered Beta calculated as: Adjusted Equity Beta × (E/(E + D × (1-T)); Assumes corporate tax rate of 35.0% (3) Excludes EQT Midstream, LP due to non-comparable capitalization (4) 10-year Treasury as of April 19, 2013 (5) Source: Ibbotson Associates (6) Equity Cost of Capital calculated as: Risk-free rate + (Levered Equity Beta × Market Risk Premium) + Small Company Risk Premium 112 (3) (3) Confidential DRAFT Unit Price Market Equity Total Debt and Total Debt / Adjusted Unlevered Partnership 4/19/2013 Value Preferred Stock Total Capitalization Beta (1) Beta (2) Boardwalk Pipeline Partners, LP $30.58 $7,194.8 $3,539.2 33.0% 0.73 0.55 El Paso Pipeline Partners, L.P. 43.17 9,505.7 4,246.0 30.9% 0.62 0.48 EQT Midstream Partners, LP 37.08 1,312.2 0.0 0.0% 1.02 1.02 Niska Gas Storage Partners LLC 14.26 993.8 400.0 28.7% 0.80 0.63 Equity Cost PAA Natural Gas Storage, L.P. 22.69 1,959.7 582.1 22.9% 0.79 0.66 of Capital Spectra Energy Partners, LP 37.55 4,085.8 1,149.3 22.0% 0.74 0.63 TC PipeLines, LP 48.29 2,634.9 691.0 20.8% 0.57 0.48 Mean 26.4% 0.71 0.57 Median 25.8% 0.73 0.59 WACC Risk-free Rate (4) 1.7% Unlevered Beta 0.57 Debt and Preferred / Total Capitalization 26.4% WACC Adjusted Levered Equity Beta 0.71 Market Risk Premium (5) 6.6% Small Company Risk Premium (5) 1.8% Equity Cost of Capital (6) 8.2% Pre-Tax Cost of Debt 6.0% After-Tax Cost of Debt 3.9% WACC 7.0% |
![]() Confidential DRAFT (1) Excludes EQT Midstream, LP due to non-comparable capitalization 113 (1) (1) Unit Price Market Equity Current Distribution Total Partnership 4/19/2013 Value Yield Growth Return Boardwalk Pipeline Partners, LP $30.58 $7,194.8 7.0% 2.4% 9.3% El Paso Pipeline Partners, L.P. 43.17 9,505.7 5.7% 4.2% 9.9% EQT Midstream Partners, LP 37.08 1,312.2 3.8% 16.9% 20.6% Niska Gas Storage Partners LLC 14.26 993.8 9.8% 3.5% 13.3% Total Return PAA Natural Gas Storage, L.P. 22.69 1,959.7 6.3% 2.1% 8.4% Spectra Energy Partners, LP 37.55 4,085.8 5.3% 5.4% 10.7% TC PipeLines, LP 48.29 2,634.9 6.5% 2.3% 8.8% Mean 10.1% Median 9.6% WACC Debt and Preferred / Total Capitalization 26.4% WACC Market Required Equity Return 10.1% Pre-Tax Cost of Debt 6.0% After-Tax Cost of Debt 3.9% WACC 8.4% Weighted Average Cost of Capital Total Expected Market Return WACC Analysis – NRGM |