Attached files
| file | filename |
|---|---|
| EX-2.1 - AGREEMENT AND PLAN OF MERGER - ANDEAVOR LOGISTICS LP | ex21-agreementandplanofmer.htm |
| EX-99.1 - PRESS RELEASE - ANDEAVOR LOGISTICS LP | ex991-pressrelease.htm |
| 8-K - 8-K - ANDEAVOR LOGISTICS LP | form8-kandxmergerandx.htm |
| EX-10.2 - SPONSOR EQUITY RESTRUCTURING AGREEMENT - ANDEAVOR LOGISTICS LP | ex102-sponsorequityrestruc.htm |
| EX-10.1 - SUPPORT AGREEMENT - ANDEAVOR LOGISTICS LP | ex101-supportagreement.htm |
MLP Merger and
Financial
Repositioning of
Andeavor Logistics
August 14, 2017
Forward Looking Statements
This communication contains certain statements that are “forward-looking” statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act of 1934. Words such as “may,” “will,” “could,” “anticipate,” “estimate,”
“expect,” “predict,” “project,” “future,” “potential,” “intend,” “plan,” “assume,” “believe,” “forecast,” “look,” “build,” “focus,” “create,” “work”
“continue” or the negative of such terms or other variations thereof and words and terms of similar substance used in connection with any
discussion of future plans, actions, or events identify forward-looking statements. These forward-looking statements include, but are not
limited to, statements regarding the proposed acquisition by Andeavor Logistics of WNRL, synergies and the shareholder value to result
from the combined company, and the proposed buy-in of Andeavor Logistics’ incentive distribution rights by Andeavor in exchange for
common units of Andeavor. There are a number of risks and uncertainties that could cause actual results to differ materially from the
forward-looking statements included in this communication. For example, the risk that the proposed transactions do not occur, expected
timing and likelihood of completion of the proposed transactions, including the timing, receipt and terms and conditions of any required
governmental and regulatory approvals of the proposed acquisition that could reduce anticipated benefits or cause the parties to
abandon the transactions, the ability to successfully integrate the businesses, the occurrence of any event, change or other
circumstances that could cause the parties to abandon the transactions, risks related to disruption of management time from ongoing
business operations due to the proposed transactions, the risk that any announcements relating to the proposed transaction could have
adverse effects on the market price of Andeavor Logistics’ common units, WNRL’s common units or Andeavor’s common stock, the risk
that the proposed transaction and its announcement could have an adverse effect on the ability of Andeavor Logistics, WNRL and
Andeavor to retain customers and retain and hire key personnel and maintain relationships with their suppliers and customers and on
their operating results and businesses generally, the risk that problems may arise in successfully integrating the businesses of the
companies, which may result in the combined company not operating as effectively and efficiently as expected, the risk that the
combined company may be unable to achieve cost-cutting synergies or it may take longer than expected to achieve those synergies, the
risk of the amount of any future distribution Andeavor Logistics may pay, and other factors. All such factors are difficult to predict and are
beyond Andeavor Logistics’ or Andeavor’s control, including those detailed in Andeavor Logistics’ annual reports on Form 10-K, quarterly
reports on Form 10-Q and current reports on Form 8-K that are available on its website at http://andeavorlogistics.com/ and on the SEC’s
website at http://www.sec.gov, those detailed in WNRL’s annual reports on Form 10-K, quarterly reports on Form 10-Q and current
reports on Form 8-K that are available on WNRL’s website at http://www.wnrl.com and on the SEC website at http://www.sec.gov and
those detailed in Andeavor’s website at http://andeavor.com and on the SEC’s website at http://www.sec.gov. Andeavor Logistics’,
WNRL’s and Andeavor’s forward-looking statements are based on assumptions that Andeavor Logistics, WNRL and Andeavor believe to
be reasonable but that may not prove to be accurate. Andeavor Logistics, WNRL and Andeavor undertake no obligation to publicly
release the result of any revisions to any such forward-looking statements that may be made to reflect events or circumstances that
occur, or which we become aware of, except as required by applicable law or regulation. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date hereof.
1
• Growth-oriented, full-service and diversified midstream
company
• Targets at least $1 billion of annual growth investments, with
exposure to the highly attractive Permian Basin
• Enhances capital structure and improves cost of capital to
support sustainable, long-term growth
– Targets metrics of:
Annual distribution growth rate of 6% or greater
Distribution coverage of approximately 1.1x
Debt-to-EBITDA at or below 4.0x by end of 2017
– Significantly reduces need for new public equity issuances
– Expected to be accretive to distributable cash flow by
second half 2019
• Transparent value for Andeavor, who will own approximately
59% of Andeavor Logistics valued at $6.1 billion1
2
Andeavor Logistics Repositioned for
Long-Term, Sustainable Growth
1. Assumes 34 million current ANDX common units owned by Andeavor, 78 million newly issued units from IDR
Buy-In and approximately 15 million newly issued units from the Merger for a total ownership of approximately
127 million ANDX common units. Based on Andeavor Logistics closing price on August 11, 2017
3
Transaction Overview
ANDX / WNRL
Merger
• Andeavor Logistics to acquire WNRL in a unit-for-unit transaction for a total
enterprise value of $1.8 billion, including net debt of approximately $310 million,
representing 8.6x estimated 2018 EBITDA1
− 0.5233x exchange ratio for WNRL public unitholders, representing a 6.4%
premium to WNRL’s previous closing price
− 0.4639x effective exchange ratio2 for Andeavor representing no premium to the
exchange ratio on April 13, 2017, one trading day prior to ANDX’s initial 13D filing
− 0.4921x effective blended exchange ratio
IDR Buy-In
• Andeavor Logistics to issue 78.0 million ANDX common units to Andeavor in
exchange for the cancellation of Andeavor Logistics’ IDRs
− Total equity value of $3.8 billion, representing 13.1x 2018 GP/IDR multiple3
based on previous closing day price
− Total equity value of $4.0 billion, representing 14.0x 2018 GP/IDR multiple3
based on 30 day VWAP
• Pro forma Andeavor ownership of approximately 59% of ANDX’s common units;
retains non-economic general partner interest post-transaction
Distribution Waiver
• Andeavor also agreed to increase existing distribution waivers in 2017-2019 by $60
million to $160 million, consisting of:
− $50 million in 2017 (no change)
− $60 million in 2018 ($10 million increase)
− $50 million in 2019 ($50 million increase)
Timing/Closing
Conditions
• Both transactions expected to close in fourth quarter 2017
• Merger is subject to customary closing conditions, including regulatory and approval
from holders of majority of the WNRL units
1. 2018 estimated net earnings of $96 million and EBITDA of $226 million for WNRL less $22 million of 2018 WNRL GP/IDR distributions
2. Effective exchange ratio achieved through Andeavor agreeing to cancel 3.6 million of its WNRL units
3. 2018 estimated GP/IDR distributions of $287 million for ANDX and WNRL, combined, and excludes distribution waivers
4
Increased Scale and Geographic
Diversity
Martinez
Kenai
Anacortes Dickinson
Mandan
St. Paul
Park
Los
Angeles
Salt Lake
City
Gallup
El Paso
San
Antonio
Kenai
ANDX WNRL Pro Forma
Pipeline Miles 5,800+ 705 6,500+
Storage (MMBLS) 26 12 38
Terminals 32 10 42
Processing Capacity (MMcf/d) 1,600+ - 1,600+
5
Near-Term Organic Growth CAPEX
Opportunities
Current two-year organic growth backlog of $800 to $900 million2
Martinez
Kenai
Anacortes
Dickinson Mandan
St. Paul Park
Los Angeles
Salt
Lake
City
Gallup
El Paso
San
Antonio
Kenai
4
Vermillion Compression
$15 - $20 Million 7
Conan Crude Oil Pipeline1
$225 Million
1
North Dakota Gathering
$25 - $45 Million 6
LA Refinery Interconnect Pipeline System1
$150 Million
2
1
2
Carson Crude Terminal
$140 - $160 Million
3
3
6
Natural Gas and NGLs Optimization
$140 - $150 Million
5
5
7
Stockton Rail Offloading
$15 - $20 Million
4
1. Expected to be funded and/or acquired at cost
2. Includes other discrete projects of $100 to $125 million
Strategic Position in the Permian Basin
6
• Attractive entry by Andeavor
Logistics into Permian Basin
• Capture organic growth with full-
service offering
• Optimize refinery supply with new
pipeline opportunities
• Enhance logistics system value
with Andeavor supply and trading
opportunities
• Pursue select acquisitions that
enhance existing pipeline and
storage system
• Execute drop downs of existing
assets
• Andeavor’s recently announced
Conan Crude Oil Pipeline indicative
of growth opportunities
Four Corners
System
TexNew Mex
System
Delaware Basin
System
West Texas
System
Refinery
Pipeline
ANDV Bobcat Pipeline
Third Party Pipeline
Permian
Basin
Delaware
Basin
Gallup
El Paso
NM
AZ
TX
Midland
McCarney
Wink
San Juan
Basin
Select Assets Capacity
Refining Capacity (MBD) 160
Mainline Movements (MBD) 229
Gathering and Truck Offloading (MBD) 149
Pipeline Tank Storage (MMBLS) 1.0
7
Robust Drop Down Portfolio of Qualified
Assets
Drop down portfolio of at least $750 million of estimated annual earnings
Refinery tankage, rail loading and
unloading, truck racks, refinery gate
pipelines and petroleum coke
handling
Assets Under
Development
Wholesale Fuels
Business
Refinery
Infrastructure
Logistics
Assets
Product terminals, transportation
pipelines, marine facilities and
terminal storage
Vancouver Energy and Mixed
Xylenes Project
Fixed-fee per gallon service contracts
with no commodity exposure
Description
At Least $150 Million
Estimated Annual Earnings
At Least $200 Million
At Least $150 Million
At Least $250 Million
901
1,353
2,970
1,227
1,742
2012 2013 2014 2015 2016
($ in millions)
5 year average of $1.6 billion
8
Strong Track Record of Over $1.0
Billion in Annual Investments
Acquisitions
Drop Downs
Organic
Continue to efficiently grow logistics business and
reduce MLP cost of capital
• 6% or greater
starting in third
quarter 2017
Create a sustainable, long-term structure for logistics
business
Annual
Distribution
Growth
Efficient access to capital
Enhance MLP positioning and trading
Preserve distribution coverage
Achieve investment grade credit rating
Distribution
Coverage
External
Capital
• Distribution coverage
of approximately 1.1x
Leverage
• Debt-to-EBITDA at or
below 4.0x by end of
2017
• Reduces need for
public equity
issuances
Strategic Principles Financial Objectives
9
Financial Principles Support Growth
and Value Creation
Accretion
• Expect to achieve
DCF accretion by
second half 2019
• Enhances competitiveness through lower cost
of equity
• Reduces reliance on public equity issuances
• Establishes better credit metrics to support a
continued commitment to achieve investment
grade
– Lowers potential debt financing costs
– Longer maturity
– Greater liquidity and access
• Maintains strong alignment between
Andeavor and Andeavor Logistics
12.2%
8.0%
Current Pro Forma
Andeavor Logistics Cost of Equity1
1. Assumes equity cost of capital is equal to current annualized distribution yield grossed up by current percentage of cash flow to GP based on latest annualized quarterly distribution.
Unit price and distribution information as of August 11, 2017
Potential 420 bps
Improvement
10
Enhanced Capital Structure and
Improved Cost of Capital
Current Potential IG
Andeavor Logistics Cost of Debt
Potential 75 – 125
bps Improvement
11
• Simplified corporate structure and
alignment of ownership interests
• More transparent value
• Supports Andeavor’s overall strategy
– Furthers ability to grow logistics business
– Greater opportunity to increase capture
of third-party revenue
– Lowers cost of capital to support
Andeavor’s growth and value creation
Andeavor Ownership1
($ in billions)
More Alignment and Transparent Value
for Andeavor
1. Assumes 34 million current ANDX common units owned by Andeavor, 78 million newly issued units from IDR Buy-In and approximately 15 million newly issued units from the Merger
for a total ownership of approximately 127 million ANDX common units
2. ANDX consensus price target of $60.68 per unit as of August 11, 2017
$6.1
$6.6
$7.4
Pre- Deal
Previous
Close Price
Pro Forma
Previous
Close Price
Pro Forma 30-
Day VWAP
Pro Forma
Consensus
Price Target
ANDX WNRL IDRs
2
Andeavor Logistics Pro Forma
Guidance and Key Metrics
12
Target Metrics
Annual Distribution Growth • 6% or greater
Distribution Coverage Ratio • Approximately 1.1x
Debt-to-EBITDA • At or below 4.0x by the end of 2017
Pro Forma 2018 Outlook¹
Net Earnings • $625 million – $725 million
EBITDA • $1.2 billion – $1.3 billion
1. Assumes closing in fourth quarter 2017. Assumes $10mm in pre-tax synergies
Growth
Annual Investments • At least $1 billion
Organic Growth and Acquisitions – At least $500 to $600 million
Drop Downs – Potential $400 to $500 million
13
Delivering Significant Value
• Significant value proposition for all stakeholders
• Greater organic growth opportunities across the
combined geographic footprint
• Robust drop down portfolio of qualified assets
• Enhanced distribution growth, distribution
coverage and credit metrics
• Simplified capital structure and improved cost of
capital
• Better alignment and more transparent value of
all ownership interests
Andeavor
Appendix
14
Non-GAAP Financial Measures
15
Expected 2018
Combined
Pro Forma WNRL
Projected Net Earnings $ 675 $ 96
Add: Projected Depreciation and Amortization
325
90
Add: Projected Interest Expense
250
40
Projected EBITDA1 $ 1,250 $ 226
1 When a range of estimated EBITDA has been disclosed, we have included the EBITDA reconciliation for the mid-point range.
Important Information
No Offer or Solicitation:
This communication relates to a proposed business combination between WNRL and Andeavor Logistics and a proposed transaction between
Andeavor Logistics and Andeavor. This communication is for informational purposes only and is neither an offer to purchase, nor a solicitation
of an offer to sell, any securities in any jurisdiction pursuant to the proposed transactions or otherwise, nor shall there be any sale, issuance or
transfer or securities in any jurisdiction in contravention of applicable law. No offer of securities shall be made except by means of a prospectus
meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
Additional Information and Where to Find It:
Andeavor Logistics and WNRL intend to file a registration statement on Form S-4, containing a consent statement/prospectus (the “S-4”) with
the SEC. This communication is not a substitute for the registration statement, definitive consent statement/prospectus or any other documents
that Andeavor Logistics, WNRL or Andeavor may file with the SEC or send to unitholders in connection with the proposed transaction.
UNITHOLDERS OF ANDEAVOR LOGISTICS AND WNRL AND SHAREHOLDERS OF ANDEAVOR ARE URGED TO READ ALL RELEVANT
DOCUMENTS FILED WITH THE SEC, INCLUDING THE FORM S-4 AND THE DEFINITIVE CONSENT STATEMENT/PROSPECTUS
INCLUDED THEREIN IF AND WHEN FILED, AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. When available, investors and security holders will be
able to obtain copies of these documents, including the consent statement/prospectus, and any other documents that may be filed with the
SEC with respect to the proposed transactions free of charge at the SEC’s website, http://www.sec.gov. Copies of documents filed with the
SEC by Andeavor Logistics will be made available free of charge on Andeavor Logistics’ website at http://andeavorlogistics.com/ or by
contacting Andeavor Logistics’ Investor Relations Department by phone at (210) 626-7202. Copies of documents filed with the SEC by WNRL
will be made available free of charge on WNRL’s website at http://www.wnrl.com or by contacting WNRL’s Investor Relations Department by
phone at (602) 286-1533. Copies of documents filed with the SEC by ANDV will be made available free of charge on ANDV’s website at
http://www.andeavor.com or by contacting ANDV’s Investor Relations Department by phone at (210) 626-4757.
Participants in the Solicitation Relating to the Merger
Andeavor Logistics, WNRL, Andeavor and certain of their respective directors and executive officers may be deemed to be participants in the
solicitation of consent from the unitholders of WNRL in connection with the proposed transaction. Information about the directors and executive
officers of the general partner of Andeavor Logistics is set forth in Andeavor Logistics’ Annual Report on Form 10-K for the year ended
December 31, 2016, which was filed with the SEC on February 21, 2017. Information about the directors and executive officers of the general
partner of WNRL is set forth in WNRL’s Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC on
March 1, 2017. Information about the executive officers of Andeavor is set forth in Andeavor’s Annual Report on Form 10-K for the year ended
December 31, 2016, which was filed with the SEC on February 21, 2017. Information about the directors of Andeavor is set forth in Andeavor’s
Definitive Proxy Statement on Schedule 14A for its 2017 Annual Meeting of Stockholders, which was filed with the SEC on March 22, 2017.
These documents can be obtained free of charge from the sources indicated above. Other information regarding the participants in the consent
solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the consent
statement/prospectus and other relevant materials to be filed with the SEC when they become available. 16