 Fourth Quarter
and Year Ended 2012 Earnings Conference Call and Webcast
March 14, 2013 |
 Forward Looking
Statements 1
The
following
information
contains
forward-looking
statements
within
the
meaning
of
the
Private
Securities
Litigation
Reform
Act
of
1995.
These
forward-looking statements are based on management’s current expectations and beliefs,
as well as a number of assumptions concerning future events. You
can
identify
forward-looking
statements
by
words
such
as
“anticipate,”
“believe,”
“estimate,”
“forecast,”
“project,”
“could,”
“may,”
“should,”
“would,”
“will
or
other
similar
expression
that
convey
the
uncertainty
of
future
events
or
outcomes.
These
forward-looking
statements
are
based
on
our
current
expectations
and
beliefs
concerning
future
developments
and
their
potential
effect
on
us.
While
management
believes
that
these
forward-looking
statements
are
reasonable
as
and
when
made,
there
can
be
no
assurance
that
future
developments
affecting
us
will
be
those
that
we
anticipate.
All
comments
concerning
our
expectations
for
future
revenues
and
operating
results
are
based
on
our
forecasts
for
our
existing
operations
and
do
not
include
the
potential
impact
of
any
future
acquisitions.
Our
forward-looking
statements
involve
significant
risks
and
uncertainties
(some
of
which
are
beyond
our
control)
and
assumptions
that
could
cause
actual
results
to
differ
materially
from
our
historical
experience
and
our
present
expectations
or
projections.
Important
factors
that
could
cause
actual
results
to
differ
materially
from
those
in
the
forward-looking
statements
include,
but
are
not
limited
to,
the
overall
demand
for
hydrocarbon
products,
fuels
and
other
refined
products;
our
ability
to
produce
products
and
fuels
that
meet
our
customers’
unique
and
precise
specifications;
the
impact
of
fluctuations
and
rapid
increases
or
decreases
in
crude
oil,
refined
products,
fuel
and
utility
services
prices
and
crack
spreads,
including
the
impact
of
these
factors
on
our
liquidity;
fluctuations
in
refinery
capacity;
accidents
or
other
unscheduled
shutdowns
or
disruptions
affecting
our
refinery,
machinery,
or
equipment,
or
those
of
our
suppliers
or
customers;
changes
in
the
cost
or
availability
of
transportation
for
feedstocks
and
refined
products;
the
results
of
our
hedging
and
other
risk
management
activities;
our
ability
to
comply
with
covenants
contained
in
our
debt
instruments;
labor
relations;
relationships
with
our
partners
and
franchisees;
successful
integration
and
future
performance
of
acquired
assets,
businesses
or
third-party
product
supply
and
processing
relationships;
our
access
to
capital
to
fund
expansions,
acquisitions
and
our
working
capital
needs
and
our
ability
to
obtain
debt
or
equity
financing
on
satisfactory
terms;
currently
unknown
liabilities
in
connection
with
the
Marathon
Acquisition
(as
defined
herein);
environmental
liabilities
or
events
that
are
not
covered
by
an
indemnity,
insurance
or
existing
reserves;
dependence
on
one
principal
supplier
for
merchandise;
maintenance
of
our
credit
ratings
and
ability
to
receive
open
credit
lines
from
our
suppliers;
the
effects
of
competition;
continued
creditworthiness
of,
and
performance
by,
counterparties;
the
impact
of
current
and
future
laws,
rulings
and
governmental
regulations,
including
guidance
related
to
the
Dodd-Frank
Wall
Street
Reform
and
Consumer
Protection
Act;
shortages
or
cost
increases
of
power
supplies,
natural
gas,
materials
or
labor;
weather
interference
with
business
operations;
seasonal
trends
in
the
industries
in
which
we
operate;
fluctuations
in
the
debt
markets;
potential
product
liability
claims
and
other
litigation;
and
changes
in
economic
conditions,
generally,
and
in
the
markets
we
serve,
consumer
behavior,
and
travel
and
tourism
trends.
For
additional
information
regarding
known
material
factors
that
could
cause
our
actual
results
to
differ
from
our
projected
results,
please
see
Part
I,
“Item
1A.
Risk
Factors”
and
elsewhere
in
our
Form
10-K,
dated
March
14,
2013
(File
No.
001-35612).
The presentation also includes non-GAAP measures. We believe that these non-GAAP
financial measures provide useful information about our operating performance and
should not be viewed in isolation or considered as alternatives to comparable GAAP measures. Our non-GAAP financial measures may also differ
from similarly names measures used by other companies. See the disclosures in the
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations”
included in our Form 10-K, dated March 14, 2013, for additional information on the non
–GAAP measures used in this presentation and reconciliations to the most directly
comparable GAAP measures. |
 Q4 and Full Year
2012 Financial Results and Key Refining Performance Metrics
2
Q4 2012
Q4 2011
Full Year 2012
Full Year 2011
Net Income
$84.5
$292.7
$197.6
$28.3
Adjusted EBITDA
162.4
66.5
739.7
430.7
Consolidated Financial Results
Key Refining Performance Metrics
1
See Appendix for reconciliation of Net Income to Adjusted EBITDA.
2
See Appendix for the components used in this calculation (revenue and cost of sales).
Gross margin per barrel is our average margin per barrel across all refined products. Whereas the 3-2-1 crack
spread is specific to light products only (gasoline and distillates).
3
Direct operating expenses per barrel is calculated by dividing direct operating expenses by
the total barrels of throughput for the respective periods presented. ($ in
millions) Gross Margin²
($ per throughput barrel)
Group 3 3-2-1
Benchmark Crack Spread
(per bbl)
Direct Operating Expenses³
($ per throughput barrel)
Throughput
(millions of barrels)
2012
2011
1 |
 Select Balance
Sheet & Cash Flow Data 3
Q4 2012
Cash and Cash Equivalents
$272.9
Total Debt
282.5
Equity
483.8
Full Year Adjusted EBITDA
739.7
Net Debt to Full Year Adjusted EBITDA
0.0x
Cash Flow from Operations
$133.7
Cash Available for Distribution¹
116.7
Distribution per Unit
$1.27
($ in millions)
1
See Appendix for reconciliation of Net Income to Cash Available for Distribution.
|
 Hedge
Positions 4
Volume Hedged
(000 barrels)
NTI Strike Price
Gasoline
Diesel
Gasoline
Distillate
2013
Q1
504
761
$16.08
$21.40
Q2
504
761
16.08
21.40
Q3
504
761
16.08
21.40
Q4
504
761
16.08
21.40
1
30,000 barrels of gasoline per quarter and 15,000 barrels of diesel per quarter are
hedged at cracks against WCS, while the remaining barrels are hedged at cracks against WTI.
1 |
 Expansion
Capital #2
Crude
Unit
Expansion
•Increase
the processing capability of NDL crude via modifications to the #2 Crude unit, Sats
Plant, and LSR Hydrotreater
•Allows for
additional crude rate capability (8,000 bpd) during periods of increased demand for
light products and more flexibility in the winter to optimize crude supply
Other
Refining
Projects
•Start up of
North Dakota trucking operation to purchase crude from well head in order to
improve delivered cost of crude
•Install
dedicated slurry separation column on the fuel oil product stream to capture light
product value uplift
Project
Estimated
2013 Capital
Estimated
Annual
EBITDA
Impact
#2 Crude Unit Expansion
$29
$36
Other Refining Projects
$10
$10
1
Assumes a 10% expansion of throughput at an average gross margin of $13 per barrel.
5
1 |
 Q1 ‘13
Operating and Full Year Capex Guidance 6
Q1 2013
Low
High
Refinery Statistics:
Total throughput (bpd)
80,000
85,000
Refined products sold (bpd)¹
75,000
80,000
Direct opex ex. turnaround ($/throughput bbl)
$4.85
Turnaround reserve ($ in mm)
$10.0
Retail Statistics:
Forecasted gallons (mm)
72.0
Retail fuel margin ($/gallon)
$0.16
Merchandise sales ($ in mm)
$80.0
Merchandise gross margin (%)
25.5%
Direct operating expense ($ in mm)
$29.0
Other Guidance ($ in mm):
SG&A
$22.0
Depreciation & amortization
$10.0
Cash interest expense
$5.1
Taxes
$0.5
Capital Program:
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Maintenance and replacement capital
$7.2
$10.4
$7.4
$6.2
Waste Water Treatment (non recurring regulatory capital)
3.8
1.9
8.7
7.2
Expansion capital
20.5
13.7
2.7
1.7
Total Planned Capital Expenditures ($ in mm) $31.5
$26.0
$18.8
$15.1
1
GAAP Net Income and Adjusted EBITDA are based on volume of refined products sold. For Q1 2013,
products sold are anticipated to be below throughput. Q1 2013 working capital will increase
given the planned inventory build leading into the April 2013 turnaround. Management
anticipates to manage 2013 working capital requirements using available liquidity while not impacting the
Cash
Available
for
Distribution
in
any
given
quarter.
If
availableliquidity
is
not
sufficient
to
mitigate
working
capital
requirements,
the
board
of
directors
of
NTE
GP
LLC
may
determine
that incremental cash reserves are required. |
 APPENDIX
|
 Adjusted EBITDA
Reconciliation 8
2011
2012
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
Net Income (Loss)
$(224.5)
$(42.1)
$2.2
$292.7
$(193.6)
$246.6
$61.1
$84.5
Adjustments:
Interest Expense
10.0
10.2
10.4
11.5
10.4
10.7
15.6
5.5
Income Tax Provision
0.1
(0.1)
-
-
-
0.1
7.7
2.0
Depreciation and Amortization
7.3
7.6
7.4
7.2
8.5
7.8
8.3
8.6
EBITDA Subtotal
$(207.1)
$(24.4)
$20.0
$311.4
(174.7)
$265.2
$92.7
$100.6
Minnesota Pipe Line Proportionate EBITDA
0.9
0.9
0.9
0.1
0.7
0.7
0.7
0.7
Turnaround and Related Expenses
3.3
19.2
-
0.1
3.5
11.5
2.1
9.0
Equity-based Compensation Impacts
0.3
0.4
0.4
0.5
0.4
0.5
0.5
(0.5)
Unrealized (Gains) / Losses on Derivative Activities
262.9
31.0
40.6
(292.6)
88.4
(191.3)
70.3
(35.4)
Contingent Consideration (Income) / Loss
(31.8)
(9.2)
3.4
(18.2)
65.7
0.1
38.5
-
Formation and Offering Costs
2.5
1.9
1.7
1.3
-
-
-
0.4
Loss on Early Extinguishment of Derivatives/Debt
-
-
-
-
44.6
92.2
-
50.0
Realized losses on derivative activities
52.2
81.7
112.5
63.9
52.9
67.4
44.7
37.6
Adjusted EBITDA
$83.2
$101.5
$179.5
$66.5
$81.5
$246.3
$249.5
$162.4
($ in millions) |
 Refining Gross
Product Margin Per Barrel of Throughput Reconciliation
9
Q4 2012
Full Year
2012
Q4 2011
Full Year
2011
Refinery Revenue
$1,127.8
$4,212.6
$946.4
$3,804.1
Refinery Costs of Sales
924.4
3,303.7
837.8
3,208.5
Refinery Gross Product Margin
$203.4
$908.9
$108.6
$595.6
Total Refinery Throughput (bpd)
90,265
83,851
83,335
81,150
Refinery Gross Product Margin Per
Barrel of Throughput
$24.49
$29.62
$14.16
$20.11
($ in millions, unless otherwise indicated) |
 Cash Available
for Distribution Reconciliation For the 3 months ending
12/31/12
Net income
$84.5
Adjustments:
Interest expense
5.5
Income tax provision
2.0
Depreciation and amortization
8.6
EBITDA subtotal
100.6
Minnesota Pipe Line proportionate EBITDA
0.7
Turnaround and related expenses
9.0
Equity-based compensation impacts
(0.5)
Unrealized gains on derivative activities
(35.4)
Formation and offering Costs
0.4
Loss on early extinguishment of debt
50.0
Realized losses on derivative activities
37.6
Adjusted EBITDA
162.4
Cash interest expense
(6.4)
Current tax provision
0.0
Minnesota Pipe Line proportionate EBITDA
(0.7)
Realized losses on derivative activities
(37.6)
Capital expenditures
(17.6)
Reserve for turnaround and related expenses
(10.0)
Working capital impacts
26.6
Cash Available for Distribution
$116.7
($ in millions)
10 |