Energy Quarterly Dialogue...
Transcript of Energy Quarterly Dialogue...
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INVESTMENT BANKING • RESTRUCTURING • VALUATION & F INANCIAL RISK MANAGEMENT
Realizing Value … Delivering Results
www.ncacf.com | 847.583.1618 | Atlanta • Chicago • New York
Investment banking, private placement, merger, acquisition and divestiture services offered through Navigant Capital Advisors, LLC. Member FINRA/SIPC.
August 2013
To The Friends and Clients of Navigant Capital Advisors (“NCA”):
We are pleased to share with you Navigant Capital Advisors’ Energy Quarterly
Dialogue for the second quarter 2013, which provides coverage and analysis of
key news, valuation, M&A, and capital markets activity in the NCA Energy
universe: (i) Energy Assets and Services, (ii) Oil and Gas Refining and
Marketing, (iii) Oil and Gas Transportation and Storage, and (iv) Independent
Power Producers (IPPs)/Merchant Generators.
The energy sector continues to be impacted by the expansion of new drilling
technologies, resulting in discovery of new energy sources, declining commodity
prices, and regulatory uncertainty. The shift of the U.S. becoming energy self-
sufficient is underway, as U.S. gas production continues to increase due to the
discovery of new shale gas reserves and improved drilling technologies. The
following pages offer insight into the current trends in natural gas in the
“Industry Perspectives” section. Expanding upon an emerging theme presented
in our last Quarterly Dialogue, natural gas continues to be at the forefront of the
changing energy market, particularly liquefied natural gas (“LNG”).
Overall, the industry experienced a slight uptick in the second quarter as M&A
transaction volume increased; however, leveraged loan volumes remained
stagnant and loan default rates remain stable at their lowest levels since the first
quarter 2009.
We welcome your comments and hope that you find our Quarterly Dialogue
informative.
Edward R. Casas Laurie Oppel Kim J. Brady
Senior Managing Director Managing Director Managing Director
Head of NCA Energy Practice Navigant Capital Advisors
[email protected] [email protected] [email protected]
847.583.1619 202.481.7534 847.583.1718
Navigant Capital Advisors is the dedicated corporate finance business unit of Navigant (NYSE: NCI). Navigant is a specialized, global expert services firm dedicated to assisting clients in creating and protecting value in the face of critical business risks and opportunities. Through senior level engagement with clients, Navigant professionals combine technical expertise in Disputes, Investigations, Economics, Financial Advisory and Management Consulting, with business pragmatism in highly regulated industries.
Contents
Market Overview 2
Industry Perspectives 5
Notable Industry Developments 10
Selected M&A Transactions 14
Valuation & Performance Metrics 16
EnergyQUARTERLY DIALOGUE | SECOND QUARTER 2013
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Energy: Market Overview
Fig. A – Global M&A Transactions ($ in billions) Fig. B – Monthly Net Power Generation by Source
Fig. C – NCA Energy Indices Annual Returns (2012) Fig. D – NCA Energy Indices Quarterly Returns
Fig. E – New Issue Oil & Gas Loan Volume ($ in billions) Fig. F – Cumulative Institutional Loan Default Rates
* Please see following page for NCA Energy Universe and additional information in the “Notes” section at the end of this report Page 2 of 24
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Energy: Market Overview (cont.)
NCA Energy Universe
NCA Energy Assets & Services NCA Energy Oil & Transportation & Storage
BHI Baker Hughes Incorporated ATLS Atlas Energy, L.P
BAS Basic Energy Services, Inc. BKEP Blueknight Energy Partners, L.P.
DVR Cal Dive International Inc BPL Buckeye Partners, L.P.
CAM Cameron International Corporation LNG Cheniere Energy, Inc.
CRR CARBO Ceramics Inc. CPNO Copano Energy LLC
DWSN Dawson Geophysical Company XTXI Crosstex Energy Inc.
DRC Dresser-Rand Group Inc. DPM DCP Midstream Partners LP
DRQ Dril-Quip, Inc. EPB El Paso Pipeline Partners, L.P.
EXH Exterran Holdings, Inc. EEP Enbridge Energy Partners LP
FTI FMC Technologies, Inc. ETE Energy Transfer Equity, L.P.
GEOK.Q (Invalid Identifier) EPD Enterprise Products Partners L.P.
GIFI Gulf Island Fabrication Inc. GEL Genesis Energy LP
GLF Gulfmark Offshore, Inc. GLP Global Partners LP
HAL Halliburton Company NRGY Inergy, L.P., Prior to Reverse Merger
HLX Helix Energy Solutions Group, Inc. KMP Kinder Morgan Energy Partners, L.P.
HOS Hornbeck Offshore Services, Inc. MMP Magellan Midstream Partners LP
IO ION Geophysical Corporation MWE MarkWest Energy Partners, L.P.
KEG Key Energy Services Inc. MMLP Martin Midstream Partners LP
MTRX Matrix Service Company NS NuStar Energy L.P.
NBR Nabors Industries Ltd. OKS ONEOK Partners, L.P.
NOV National Oilwell Varco, Inc. PAA Plains All American Pipeline, L.P.
NGS Natural Gas Services Group Inc. RGP Regency Energy Partners LP
NR Newpark Resources Inc. SE Spectra Energy Corp.
NOF Northern Offshore Ltd SXL Sunoco Logistics Partners L.P.
OIS Oil States International Inc. TCP TC PipeLines, LP
RES RPC Inc. TLP Transmontaigne Partners L.P.
SLB Schlumberger Limited WMB Williams Companies, Inc.
SPN Superior Energy Services, Inc. WPZ Williams Partners L.P.
TESO Tesco Corporation
TTI TETRA Technologies, Inc. NCA Oil & Gas Marketing & Refining
WG Willbros Group Inc. CLMT Calumet Specialty Products Partners LP
CVI CVR Energy, Inc.
NCA IPP & Merchant Generators HFC HollyFrontier Corporation
ATP Atlantic Power Corporation NS NuStar Energy L.P.
CPN Calpine Corp. TSO Tesoro Corporation
DYN Dynegy Inc. VLO Valero Energy Corporation
NRG NRG Energy, Inc. WNR Western Refining, Inc.
AES The AES Corporation INT World Fuel Services Corp.
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Energy: Market Overview (cont.)
� As presented in Fig. A, global energy M&A picked up slightly in the second quarter of 2013, as
activity increased during the quarter with 415 transactions reported, a 6.7% decrease over the
average of 445 transactions reported for each of the prior three quarters, and down 17.0% from
the second quarter of 2012.
� Unlike M&A deal volume, from an aggregate dollar value perspective, global M&A decreased
nearly 55%, from an average aggregate value of $88.6 billion for the last three quarters, to $39.8
billion, but is down only 14.1% when compared to the same prior year quarter (Fig. A).
� Recently published data by EIA (refer to Fig. B) indicates that, while the net production of
electricity is down 2.7% from the end of the prior quarter to 325.7 million MWH, the portion of
electricity generated from coal fired plants continues to remain dominant. In March 2013, nearly
40% of all electricity generated came from coal fired plants, on par with the end of the prior
quarter. Though natural gas fired plants’ share of generated electricity decreased 4% from the
same quarter prior year, it still accounts for over 26% of total power generation.
� The S&P 500 Energy Sector Index decreased 0.9% over the first quarter as compared to a 2.4%
gain in the broader S&P 500, as shown in Fig. C and D. Losses in the NCA Energy index were
experienced across all sectors, with Oil & Gas Refining and Marketing posting the most
significant losses, down 16.9% over the quarter.
� NCA’s Energy Assets and Services, IPP/Merchant Generators, and Oil and Gas Transportation
and Storage subsectors declined at a rate of 1.4%, 1.7%, and 0.1%, respectively.
� The Oil & Gas sector saw a significant boom in institutional loan volumes, with a 219% increase
from the prior quarter to $15.6 billion, as shown in Fig. E.
� Typical of historical cycles, Fig. F shows a continued downtrend in the number of defaults in the
Oil & Gas and Utilities sectors. This may reflect diminished credit quality over time, portending
a rise in future default rates as the current environment of loose monetary policy results in
inflationary pressures, ultimately impacting lower credit quality borrowers.
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Lessons from the Natural Gas Market
Why a Market Solution to the LNG Export Question Makes Sense
Background
The issue of liquefied natural gas (LNG) exports seems to be front and center of many news programs, policy journals, newspapers, and magazines. Everyone seems to have an opinion about how much natural gas should be exported, or more accu-rately, whether or not the U.S. should even consider exporting natural gas. Opinions range from having the government closely monitor market conditions and attempt to virtually prescribe the trajectory of liquefaction facility development, to allowing the market to determine the ultimate allocation and use of capital resources. The reason there is a controversy at all is the “shale revolution” that fundamentally revised the outlook for the U.S. gas market from one of expected imminent declines in gas pro-duction to one of abundant supply possibly into the next century.1
As U.S. natural gas production has increased to record highs2 (as shown in Figure 1), the market has adjusted to account for the change. Not surprisingly, plans for the de-velopment of LNG import facilities have been abandoned3, while plans for the development of LNG export facili-ties have taken off. In fact, the proposed projects of some LNG export de-velopers are actu-ally located at sites where proposed im-port facility projects have been aban-doned4. As outlined
A publication by Navigant’s Energy Practice » June 2013
Contents1 Lessons from the
Natural Gas Market – Why a Market Solution to the LNG Export Question Makes Sense
6 Natural Gas Market Charts
9 Legislative and Regulatory Highlights
12 About Navigant
1. The “shale revolution” has been caused by technical advances in the combined use of horizontal drilling and hydraulic fracturing that have made
FIGURE 1: U.S. DRY GAS PRODUCTION
14,000
16,000
18,000
20,000
22,000
24,000
26,000
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
Bcf
21.7 Tcf
24.0 Tcf
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in various Navigant studies5, these export projects will be an important element in providing stable, incremental demand to help sustain the development of shale gas re-sources and foster the long-term stability of the U.S. natu-ral gas market. In any event, there are currently applica-tions before the Department of Energy (DOE) seeking LNG export authorization for 17 major projects represent-ing approximately 26 bcfd in LNG exports. The recent ap-proval by the DOE of its second shale-era LNG export li-cense, Order No. 32826, which conditionally grants export authority to Freeport LNG (Freeport Order), provides a good opportunity to review the LNG export question.
Analytical Framework for DOE Export Approvals
As the DOE summarized in the Freeport Order, the cri-teria for export approval set forth in Section 3(a) of the Natural Gas Act create a rebuttable presumption that a proposed export of natural gas is in the public interest and DOE/Fossil Energy (FE) must grant such an appli-cation unless the opponents of the application overcome that presumption by making an affirmative showing of inconsistency with the public interest. In reviewing ex-port applications, the Freeport Order list-ed the following areas of focus by DOE/FE: 1) the domestic need for the natural gas to be exported, 2) whether the pro-posed exports pose a threat to the secu-rity of the domestic natural gas supplies, 3) whether the arrangement is consis-tent with DOE/FE’s policy of promoting market competition7, and 4) any other factors bearing on the public interest as described in the Freeport Order.8
In the only other recent DOE order au-thorizing LNG exports, Order No. 2961 regarding Sabine Pass LNG9 (Sabine Pass Order), DOE stated in its approval that the application contained substantial
evidence of sufficient future supplies of domestic natu-ral gas, as well as modest price increases10 that DOE did not find to be due to “an alleged convergence of domes-tic natural gas prices with prices in certain international markets where the price of natural gas is linked to the price of oil”11. However, as the DOE noted in the Freeport Order, because of the number of LNG export applications that had been filed after the Sabine Pass approval, further study of the economic impacts of LNG exports was war-ranted to better inform its public interest review.12 A map showing the locations of projects is shown in Figure 2. Thus, in late 2011, the DOE commissioned a two-part LNG Export Study to examine 1) potential effects on domes-tic energy markets of LNG exports (the EIA Study), and 2) potential macroeconomic impacts on the U.S. economy (the NERA Study).
The Freeport Order focused extensively on analysis of the LNG Export Study, ultimately finding that “the best available evidence supports the conclusion that [Freeport LNG’s] proposed exports will benefit the U.S. economy overall and are consistent with the public interest.”13
FIGURE 2: MAP OF MAJOR LNG EXPORT PROJECTS, APPROVED (#1-5) AND PENDING (#6-20)14
11.
13
123
46 5 7
8
9
11
12
14
1013 15 16 17
1819 20
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DOE Analysis of Freeport LNG
While the DOE/FE found that Freeport LNG had intro-duced substantial evidence of the sufficiency of domestic natural gas supplies, as well as evidence of a modest price increase and significant local and regional economic bene-fits15, much of Order No. 3282 focused on the LNG Export Study and the various comments filed both supporting and challenging the study. Two main areas of contention centered on 1) sufficiency of supply, especially in relation to natural gas price levels, and 2) distributional aspects of capturing the benefits of natural gas abundance. In both instances, the DOE/FE favored the power of free markets to optimize production and allocation decisions.
With respect to the sufficiency of supply, two areas of concern emerged. First, opponents criticized the use of the EIA’s Annual Energy Outlook (AEO) 2011 data, based on the claim that more recent data would show large increases in natural gas demand that would have led to much higher estimated price impacts of LNG exports.16 The DOE/FE, however, dispensed with these claims by quoting a Navigant analysis, stating that Navigant “cor-rectly notes the increasing gas production projections in later EIA Analyses:
For the period of 2013-2035, there was an average percentage increase in forecast total domestic natural gas consumption between AEO 2011 and AEO 2013 of 5.6 percent, while the increase in forecast total natural gas production was 16 percent. This important context helps explain why the more recent AEO 2013 assumptions actually indicate the beneficial market impacts that come along with LNG exports.”17
The fact that gas production increased dramatically in AEO 2013 (which actually included LNG exports) is consistent with the DOE/FE’s statement that “in light of our findings regarding domestic natural gas reserves explained above, we see no reason why LNG exports would interfere with the market’s supply response to in-creased prices,” which the DOE/FE explains is part of the normal business cycle.18
Second, in rejecting arguments that LNG exports will exacerbate projected price increases, the DOE/FE ac-knowledged the point made in the NERA Study — that in many circumstances, the a priori export levels assumed in the EIA Study that generated some significant project-ed price increases were not even economically feasible in the global market19. Thus, the EIA Study did not (and could not) reflect the reality, as noted in the Freeport Or-der, that LNG exports from the U.S. will be constrained by competitive conditions in the global marketplace.20 We believe this to be a key finding by the DOE that clearly recognizes some of the global developments in the LNG area. For example, roughly 40 percent of new liquefaction capacity needed to meet global LNG demand projections in 2030 is already under construction in Australia alone, as can be seen from reviewing BP’s market projections.21
With respect to the distributional question, some oppos-ing commenters claimed, in essence, that domestic use of natural gas in manufacturing would be more produc-tive or valuable than exporting it.22 The DOE/FE noted, however, that such competition was captured by NERA’s modeling in that no exports occurred in the majority of scenarios, indicating that the gas was of greater value to domestic rather than foreign uses, but where exports were projected to occur, the model “found that greater economic value was being placed on the LNG by for-eign markets and, at the same time, greater economic benefits, both in terms of welfare and GDP accrued to the U.S. economy due to those exports.”23 The Freeport Order goes on to reiterate the “long-standing principle established in our Policy Guidelines that resource alloca-tion decisions of this nature are better left to the market, rather than the Department, to resolve.”24
A second distributional issue raised by opposing com-menters concerned whether or not NERA’s modeling of energy-intensive trade-exposed industries was suffi-ciently disaggregated to fully capture industry-specific impacts. The DOE/FE noted that while it takes these concerns seriously, it is “ultimately guided by the prin-ciple that the public interest requires us to look to the
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impacts to the U.S. economy as a whole, without privileging the com-mercial interests of any industry over another”.25 Thus, not only is resource allocation best left to the market, but so is the distribution of impacts re-sulting from actions approved due to their net overall benefits for the U.S. economy.26 Navigant’s natural gas ex-perts believe that the DOE preference to rely on market forces is a key take-away from the Freeport Order for other projects with pending applica-tions and others that might follow.
Order and Outlook
The DOE/FE found that the LNG Export Study provided substantial additional support (beyond Freeport LNG’s application and studies) for conditionally granting the applica-tion. The DOE/FE cited Navigant’s analyses of the LNG Export Study in noting that the LNG Export Study is fundamentally sound27, and supports the proposition that the proposed au-thorization would not be inconsistent with the public interest. The condi-tions attached by DOE/FE to the authorization include the following: 1) satisfactory completion of the envi-ronmental review of the project under NEPA by FERC; 2) filing of all exe-cuted long-term contracts associated with the long-term export of LNG or supply of natural gas, whether on its own behalf, or as agent or on behalf of others; 3) registration by Freeport
LNG of all parties for which it acts on behalf of or as agent of others; 4) fil-ing of semi-annual progress reports on the development of the project; 5) filing of monthly statements of LNG export quantities; 6) commence-ment of operations within seven years of the Order; 7) prior approval by the Assistant Secretary for Fossil Energy for any change in control of the license holder. Additional terms provide for a 20-year term to start no later than five years from the Order, with an annual authorized volume of 511 Bcf. These terms and conditions, are consistent with (i.e., no more onerous than) those attached to the authorization for Sabine Pass granted in 2011.
With respect to the outlook for fu-ture authorizations for the long-term export of LNG, several points can be made. First, subsequent to the comment period for the LNG Export Study, the Potential Gas Committee (PGC) released its bi-annual update of its estimate of the U.S. technical-ly recoverable natural gas resource. The 2013 update reflects a significant increase in the total estimated U.S. natural gas resource from 2,203 Tcf to 2,689 Tcf, which should only strength-en the findings on the sufficiency of U.S. gas supplies.28 A history of the PGC’s potential resource estimates is shown in Figure 3.29
FIGURE 3: POTENTIAL GAS COMMITTEE NATURAL GAS RESOURCE ESTIMATE
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Second, while any specific conclu-sions about the timing of future export authorizations by the DOE would only be speculative, certain facts seem to indicate that the DOE is at least positioning itself to move forward with reviewing the applica-tions. For example, there is an “order of precedence” established for the processing of the export applications, with applicants that received FERC approval to use its pre-filing process on or before December 5, 2012 being handled in the order their DOE ap-plications were received, followed by applicants without such pre-filing process approval, in chronological DOE order. Further, in his inaugural press conference, Secretary of Energy
Ernest Moniz stated that he “has no plans of commissioning new studies, but everything’s on the table” until he completes his analysis, (i.e., reviews the existing LNG export studies).30
Finally, the continued preference for market solutions to resource alloca-tion decisions shown in the Freeport Order seems to bode well for further authorizations of LNG exports, given that the strength of U.S. natural gas supplies and the natural constraints provided by global competition in LNG markets should allow U.S. LNG exports to create benefits for the U.S. economy without disrupting the stability of the domestic natural gas market or the security of supply. In
fact, for some time Navigant’s natu-ral gas experts have been highlight-ing the benefits of LNG exports, and believe that they will foster contin-ued natural gas supply development despite the existing oversupplied gas market, helping to create long-term supply security, with less price vola-tility, for the North American natural gas market.
— Gordon Pickering and Jeff Van Horne
The opinions expressed in this article are those of the authors and do not necessarily represent the views of Navigant Consulting, Inc.
About the Author »
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Energy: Notable Industry Developments
Date Industry Development
6/26/13 Crosstex Energy, L.P. and Crosstex Energy Inc. announced that the Partnership has completed the Phase II
expansion of its Riverside facility located on the Mississippi River in southern Louisiana. The Riverside facility's
capacity to transload crude oil from railcars to the Partnership's barge facility has increased to approximately
15,000 barrels of crude oil per day. Phase II additions to the Riverside facility include a 100,000 barrel-per day
above-ground crude oil storage tank, a rail spur with a 26-spot crude railcar unloading rack, and a crude
offloading facility with pumps and metering, as well as a truck unloading bay.
6/25/13 Williams Companies, Inc. board of directors has voted to approve the company's Bluegrass Pipeline project. The
company is engaged in development work on the proposed natural-gas-liquids pipeline, which has a targeted in-
service date of late 2015. The Bluegrass Pipeline will connect supply from the Marcellus and Utica shale-gas areas
in the U.S. Northeast to growing petrochemical and export markets in the U.S. Gulf Coast. The pipeline also will
connect NGL supply with the developing petrochemical market in the U.S. Northeast.
6/25/13 FMC Technologies, Inc. announced that it has received an order from Total Upstream Nigeria Ltd. for subsea
equipment for the Egina field. The award has an estimated value of $1.2 billion. The Egina field is located in Block
OML 130 offshore Nigeria. FMC Technologies' scope of supply includes subsea trees and wellheads, manifolds,
installation tooling, flowline connection systems, and associated control systems. The equipment is scheduled for
delivery commencing in 2015.
6/24/13 Cameron and Schlumberger announced that OneSubsea, a joint venture to manufacture and develop products,
systems and services for the subsea oil and gas market, has received all required regulatory approvals. The parties
will close the transaction making OneSubsea operational on June 30, 2013. Cameron and Schlumberger have 60/40
ownership of the joint venture, respectively. Cameron, with its long history of innovation and firsts in the subsea
market, is a leader in design capability, manufacturing excellence and successful installations. Schlumberger
brings a deep understanding of the reservoir, and well completions, subsea processing and an integration
platform. Through the integration of these strengths, OneSubsea will offer best-in-class subsea solutions for its
customers.
6/24/13 NRG Energy, Inc. is offering to exchange up to $990 million of its new 6.625% senior notes due 2023 for a like
amount of its outstanding 6.625% senior notes due 2023, subject to certain customary conditions. The terms of the
exchange notes to be issued in the exchange offer are substantially identical to the old 6.625% notes, except that the
transfer restrictions and registration rights relating to the old notes will not apply to the exchange notes, according
to a prospectus filed June 20.
6/21/13 A purported shareholder of Lufkin Industries Inc. filed a lawsuit in the District Court of Angelina County, Texas
challenging the previously disclosed Agreement and Plan of Merger, dated as of April 5, 2013, among General
Electric company (GE), Red Acquisition, Inc. (Merger Sub) and the company. The Action sought to enjoin the
merger and alleged, among other things, that the members of the company's board of directors breached their
fiduciary duties by agreeing to sell the company for insufficient consideration, reaching that decision through an
inadequate process and filing a proxy containing insufficient disclosures and that GE and Merger Sub aided and
abetted the Board in breaching its fiduciary duties. In response to the Plaintiff's petition, the company, GE, Merger
Sub, and the company's directors not serving on the Special Committee jointly filed pleadings opposing injunctive
relief and seeking dismissal of the Action on jurisdictional grounds. On June 20, 2013, the Court denied the
Plaintiff's request for injunctive relief and granted the motions to dismiss the Action. The Special Committee will
continue to investigate, review and evaluate the allegations.
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Date Industry Development
6/19/13 Helix Energy Solutions Group, Inc. announced that it has entered into a credit agreement with a syndicated bank
lending group in the amount of $900 million, consisting of a $600 million revolving credit facility and a $300
million term loan. The term loan will be funded in conjunction with the early redemption of the company's
remaining $275 million Senior Unsecured Notes. The key features of the new secured credit facility include: initial
pricing at Libor plus 275 basis points, with an undrawn fee of 50 basis points; annual amortization payments on
the term loan of 5% in years 1 and 2, and 10% per annum in years 3 through 5 with a balloon payment at maturity;
and, $200 million accordion feature and 5 year term. The company will pay a call premium of $6.5 million for
early redemption of its $275 million 9.5% Senior Unsecured Notes and will incur a noncash charge of $8.7 million
to expense the deferred charges associated with the existing credit facility and Senior Unsecured Notes.
6/17/13 Spectra Energy Corp. (NYSE:SE) may evaluate strategic alternatives. In a letter to Spectra Chief Executive Greg
Ebel, Sandell Chief Executive Officer, Thomas Sandell said it has formed a group of shareholders, making it one of
Spectra Energy's largest holders. The activist investor urged Spectra Energy to review strategic options for its
Canadian operations, including a possible initial public offering, as well as its stake in DCP Midstream Partners LP
(NYSE:DPM), including a possible dropdown or sale.
6/14/13 Western Refining, Inc. has announced a Fixed-Income Offering in the amount of $350.0 million with a 6.25%
coupon rate maturing April 1, 2021.
6/14/13 Williams Cos. and WPX Energy Inc., are being sued by six Fayette County families who filed a civil lawsuit in
Allegheny County claiming nearby natural gas wells are a nuisance that have diminished their ability to use their
property. The families, who reside in Springhill and Nicholson townships, claim in the 63-page lawsuit that
Chevron Corp., Williams Cos. and WPX Energy Inc., which own, operate and maintain several gas wells in the
area, "adversely impacted" their "quality of life and enjoyment of property." They are seeking unspecified damages
for the effects of toxic chemicals, noise, odor and damage to their properties from a dozen gas wells and a
compressor station near their property.
6/11/13 Halliburton Company announced the opening of its new Technology Center at the Federal University of Rio de
Janeiro (UFRJ) Technology Park, located at Ilha do Fundão, Rio de Janeiro, Brazil. The center provides the setting
for collaboration as the company works with the country's universities and customer research groups to establish a
global center of expertise for deepwater and mature fields. The 7,062-square-meter technology center is located on
three floors and includes specialized laboratories, a collaboration room, a testing area, and conference and training
rooms.
6/10/13 NRG Energy, Inc. completed a refinancing, on June 4, 2013 of its senior secured credit facility comprised of a
senior secured term loan facility in an aggregate principal amount of $2.022 billion and a senior secured revolving
credit facility in an aggregate principal amount not to exceed $2.511 billion. The principal amount of the term
facility amortizes in quarterly installments equal to 0.25% of the original principal amount of the term facility, with
the balance payable at maturity. Borrowings under the term facility shall bear variable rates of interest, as
determined at company’s election, at LIBOR or at base rate, in each case, plus an applicable margin equal to
(a) 2.00% per annum for LIBOR loans and (b) 1.00% per annum for base rate loans. The Lenders under the
revolving facility will be paid a per annum commitment fee of 0.50% on the average daily amount of the unused
portion of the revolving commitments. In an event of default, the amended credit agreement requires the company
to pay incremental interest at the rate of 2.0%.
6/10/13 Williams Partners L.P. announced a major expansion of its Transco natural gas pipeline which was completed
and brought into service, providing an additional 225,000 dekatherms of incremental firm natural gas
transportation capacity to growing markets in the Southeast United States. The Mid-South Expansion project
provides service to power generators in North Carolina and Alabama, as well as a local distribution company in
Georgia. The Mid-South Expansion project consists of approximately 23 miles of new pipeline, a new compressor
facility in Dallas County, Alabama, and upgrades to existing compressor facilities in Alabama, Georgia, South
Carolina and North Carolina.
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Date Industry Development
6/9/13 Atlas Resource Partners, L.P. (NYSE:ARP) announced a private placement of 5,411,255 class C convertible
preferred units at a price of $23.10 per unit for gross proceeds of $125,000,000. The transaction will include
participation from existing investor, Atlas Energy, L.P. The class C preferred units will be convertible into the
company’s common stock at a conversion price of $23.10 per share. The class C preferred units will pay cash
distributions in an amount of $0.51 for the quarter ending September 30, 2013. The company will issue 811,688
warrants to purchase common units of the company at an exercise price equal to 15% of the number of class C
preferred units in the transaction. The warrants will be exercisable after 90 days from the date of issuance.
6/4/13 The Communications, Energy and Paperworkers Union and Suncor Energy Inc. have ratified an agreement that
will see wages for workers in the oil, natural gas and petrochemical sectors rise 10.5% over three years. Delegates
from 48 bargaining units that take part in the union's National and Energy and Chemical Bargaining Program
ratified the tentative agreement. The 2013-2016 deal will see wage increases of 3.25%, 3.5% and 3.75%.
6/3/13 Buckeye Partners, L.P. has completed a non-convertible Fixed-Income Offering in the amount of $499.05 million
with a 4.150% coupon rate maturing June 1, 2023.
6/1/13 More than 200 Washington County families had their first day in court on June 4 in a lawsuit against the owner
and operator of a fuel pipeline that spilled gasoline in July 2012 in a Town of Jackson farm field. Gasoline has
contaminated groundwater in roughly a one-square-mile area of the town, tainting 37 private wells with benzene
and other chemicals and forcing rural residents to consider other options for their permanent drinking water
supply. Plaintiffs are seeking compensation for the following: costs of a new safe water supply; reduced property
values; lost profits and interference with family-run businesses; loss of use and loss of enjoyment of properties;
reduced quality of life; and emotional distress. The lawsuit also asks the court to order the companies to pay for
restoring their properties and groundwater and to award punitive damages against the companies for failing to
prevent the spill and to act as a deterrent against similar conduct in the future.
5/30/13 AES Corp. announced that it purchased a total of about $927.6 million of securities in connection with its tender
offers to purchase for cash its outstanding 2014 notes, 2015 notes, 2016 notes and 2017 notes.
5/29/13 Plains All American Pipeline, L.P. (NYSE:PAA) is seeking acquisitions. PAA has filed an offering in the amount
of $750 million. PAA intends to use net proceeds from the offering for general partnership purposes, which may
include, among other things, repayment of indebtedness, acquisitions, capital expenditures and additions to
working capital.
5/21/13 The AES Corporation announced the introduction of a technology-aware control platform for the commercial
operation of energy storage. This patented operating system, called sOS(TM), is a fast-response architecture that
applies patented performance algorithms to automate the operation of AES-delivered battery-based energy
storage arrays, optimizing performance and efficiency for customers, and extending the life of the battery. To date,
AES has developed and is offering customized modules for the PJM, NYISO, ERCOT and Puerto Rico markets.
AES is developing additional modules for key markets in the U.S. and around the world. The sOS(TM) platform
enables the system to automatically make trade-off decisions during operation, matching the system performance
specifically to the market need at that time. This function reduces ramping, improves efficiency, and enables
battery longevity and increased performance while also allowing AES to right-size projects, ensuring that facilities
are built to match the needs of the customer.
5/20/13 Dynegy Inc. closed its Rule 144A private placement of $500 million in aggregate principal amount of 5.875%
Senior Notes due 2023. Dynegy used the proceeds of the offering to repay its recently issued $500 million, seven-
year Term Loan B.
5/20/13 Genesis Energy LP has announced a Fixed-Income Offering in the amount of $350.00 million with a 5.75% coupon
rate maturing February 15, 2021.
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QUARTERLY D I ALOGUE
Distressed Real Estate
TH I RD QUARTER 2 0 1 0 EnergyQUARTERLY D I ALOGUE | S E COND QUARTER 2 0 1 3
Date Industry Development
5/20/13 Plains All American Pipeline, L.P. announced the construction of a 95-mile extension of its existing Oklahoma
crude oil pipeline system to service increasing production from the Granite Wash, Hogshooter and Cleveland
Sands producing areas in western Oklahoma and the Texas panhandle. The new Western Oklahoma pipeline will
provide up to 75,000 barrels per day of new takeaway capacity. The pipeline is supported by long-term producer
commitments and is expected to be in service by the end of the first quarter of 2014.
5/20/13 Starwood Hotels & Resorts Worldwide Inc. and NRG Energy, Inc. announced a new global alliance to expand
the use of renewable energy systems at Starwood properties. The alliance will begin with three properties,
including the installation of a 1.3 megawatt (MW) solar array at the Westin St. John in the U.S. Virgin Islands
where NRG will build, own and operate the project.
5/15/13 NRG Energy, Inc. announced that it has agreed with the States of New Jersey and Connecticut to settle a lawsuit
concerning the operation of two coal-fueled electric generating units at the company's Portland Generating Station
in Mt. Bethel, Pennsylvania. The settlement, via a federal Consent Decree, allows the parties to avoid further
litigation of a lawsuit that began in 2007.
5/14/13 The AES Corporation has completed a Fixed-Income Offering in the amount of $253.13 million with a 4.875%
coupon rate maturing May 15, 2023.
5/8/13 ION Geophysical Corporation has completed a non-convertible fixed-income offering in the amount of $175.00
million with an 8.125% coupon maturing May 15, 2018.
Page 13 of 24
QUARTERLY D I ALOGUE
Distressed Real Estate
TH I RD QUARTER 2 0 1 0 EnergyQUARTERLY D I ALOGUE | S E COND QUARTER 2 0 1 3
Energy: Selected M&A Transactions
Announced
Date Target Buyer
Enterprise
Value
($USD in millions)
Enterprise
Value /
Revenue
Enterprise
Value /
EBITDA
06/27/2013 Enbridge Energy Limited Partnership
Enbridge Energy Company, Inc. $681.5 - -
Enbridge Energy Company, Inc. (EEC) agreed to acquire 15% stake in Enbridge Energy Limited Partnership from Enbridge Energy Partners, LP (NYSE:EEP) (EEP) for approximately $100 million. EEP shall pay $90.2 million for Series EA Limited Partner Interests and $12 million for Series ME Limited Partner Interests.
06/20/2013 TerraVest Capital Inc. (TSX:TVK)
Geosime Capital Inc. $68.6 0.99x 4.93x
Geosime Capital Inc. acquired 15.89% stake in TerraVest Capital Inc. (TSX:TVK) for CAD 7.9 million in cash. As per the deal, Geosime Capital acquired 1.98 million shares at CAD 4 per share.
06/05/2013 Canadian Solar Solutions Inc. - Four Utility-Scale Solar Power Plants
BluEarth Renewables Inc. $225.0 - -
BluEarth Renewables Inc. entered into a sales agreement to acquire four utility-scale solar power plants totaling 38.5MWac from Canadian Solar Solutions Inc. for approximately CAD 230 million. The projects are in Kawartha Lakes, Belleville, Beaverton and Napanee, Ontario, Canada.
06/05/2013 MarkWest Liberty Midstream & Resources, LLC, Certain Assets
Summit Midstream Partners, LP (NYSE:SMLP)
$210.0 - -
Summit Midstream Partners, LP (NYSE:SMLP) entered into an agreement to acquire certain assets from MarkWest Liberty Midstream & Resources, LLC for $210 million. Summit Midstream Partners expects to fund the transaction with borrowings of $110 million under the revolving credit facility and $98 million in proceeds from 3.1 million common units that will be sold to Summit Midstream Partners Holdings, LLC and $2 million in proceeds from another sale.
06/05/2013 Bison Midstream, LLC Summit Midstream Partners, LP (NYSE:SMLP)
$248.1 6.60x -
Summit Midstream Partners, LP (NYSE:SMLP) acquired Bison Midstream, LLC, a natural gas pipeline owner and operator, from Summit Midstream Partners Holdings, LLC for approximately $250 million.
06/03/2013 Pipeline Management Inc.
Inter Pipeline Fund (TSX:IPL.UN) $340.0 - -
Inter Pipeline Fund (TSX:IPL.UN) entered into a share purchase agreement to acquire Pipeline Management Inc. from certain individual investors and Petro Assets Inc. for approximately CAD 340 million in preferred stock (7.4 million Class A preferred shares and 7.1 million Class B preferred shares).
05/22/2013 IronGate Energy Services, LLC (formerly North American Rental and Tubular Services)
Clearlake Capital Group, LLC $244.0 2.44x 5.42x
Clearlake Capital Group, LLC agreed to acquire North American Rental and Tubular Services division from Archer Limited (OB:ARCHER) for approximately $240 million in cash. North American Rental and Tubular Services generated $100 million in revenue, $45 million in earnings before income taxes, depreciation and amortization and $244 million in net assets for the year 2012.
05/15/2013 45% of Gas Transmission Northwest LLC and 45% of Bison Pipeline LLC
TC PipeLines, LP (NYSE:TCP) $1,050.0 - -
TC PipeLines, LP (NYSE:TCP) entered into an agreement to acquire 45% of Gas Transmission Northwest LLC (GTN) and 45% of Bison Pipeline LLC from TransCanada Corp. (TSX:TRP) for $1.1 billion. The deal value includes $146 million for 45% of GTN’s debt. The purchase price for the GTN interest is $750 million in cash, and the Bison interest is $300 million in cash. TransCanada, through its subsidiaries, will continue to hold an approximately 30% direct ownership interest in both pipelines.
05/13/2013 Wenzel Downhole Tools Ltd. (TSX:WZL)
Basin Tools, LP $87.6 1.05x 4.68x
Basin Tools, LP entered into an arrangement agreement to acquire 72.25% stake in Wenzel Downhole Tools Ltd. (TSX:WZL) from Perlus Investment Management LLP and other shareholders for CAD 50.3 million. Basin Tools will acquire shares at an offer per share of CAD 2.25.
Page 14 of 24
QUARTERLY D I ALOGUE
Distressed Real Estate
TH I RD QUARTER 2 0 1 0 EnergyQUARTERLY D I ALOGUE | S E COND QUARTER 2 0 1 3
Announced
Date Target Buyer
Enterprise
Value
($USD in millions)
Enterprise
Value /
Revenue
Enterprise
Value /
EBITDA
05/08/2013 Chesapeake Energy Corporation., Certain Midstream Assets in the Anadarko Basin
MarkWest Energy Partners, LP (NYSE:MWE)
$245.0 - -
MarkWest Energy Partners, LP (NYSE:MWE) acquired certain Midstream Assets in the Anadarko Basin from Chesapeake Energy Corporation (NYSE:CHK) for $245 million in cash. The acquired assets consist of a cryogenic gas processing plant and gas gathering pipeline in Texas and approximately 30 miles of rights-of-way associated with the future construction of a high-pressure trunk line.
05/06/2013 Crestwood Midstream Partners LP (NYSE:CMLP)
Inergy Midstream, LP (NYSE:NRGM)
$1,877.0 8.07x 14.80x
Inergy Midstream, LP (NYSE:NRGM) signed a definitive agreement to acquire Crestwood Midstream Partners LP (NYSE:CMLP) for $1.9 billion. Under the terms of the agreement, Crestwood Midstream unitholders will receive 1.070 units of Inergy Midstream for each unit of Crestwood Midstream they own. Additionally, all Crestwood Midstream public unitholders other than Crestwood Holdings will receive a one-time cash payment at closing of approximately $35 million in the aggregate.
05/02/2013 Express Holdings (USA), LLC
Spectra Energy Partners, LP (NYSE:SEP)
$1,365.6 - -
Spectra Energy Partners, LP (NYSE:SEP) entered into an agreement to acquire 40% interest in Express Holdings (USA), LLC from Spectra Energy Partners (DE) GP, LP for approximately $580 million in cash, units and assumed debt. Under the terms of the deal, Spectra Energy Partners will pay approximately $379 million in cash, approximately 98% of $138.82 million in newly issued partnership units, and the rest in the form of its general partner units (which is Spectra Energy Partners (DE) GP, LP) and approximately $69 million of assumed debt.
05/01/2013 Mid-America Midstream Gas Services, LLC
SemGas, LP $300.0 - -
SemGas, LP entered into a definitive agreement to acquire assets of Mid-America Midstream Gas Services, LLC from Chesapeake Midstream Development, LP for approximately $300 million in cash. The purchase includes two natural gas processing plants in the Rose Valley area, 200 miles of gathering pipeline and a 20-year commitment from Chesapeake to gather and process natural gas on 540,000 acres of natural gas rights.
04/16/2013 TEAK Midstream, LLC Atlas Pipeline Mid-Continent Holdings, LLC
$1,000.0 - -
Atlas Pipeline Mid-Continent Holdings, LLC entered into a definitive agreement to acquire membership interests of TEAK Midstream, LLC from NGP Energy Capital Management for $1 billion. Atlas Pipeline has secured financing for the acquisition through a $400 million Series D Convertible Preferred issuance, as well as through committed bank financing from Citigroup and Wells Fargo.
04/12/2013 Overseas Shipholding Group Inc. (OTCPK:OSGI.Q)
- $2,160.7 1.97x 47.29x
Oslo Asset Management Asa sold 4.66% stake in Overseas Shipholding Group Inc. (OTCPK:OSGI.Q) for $6.5 million. Oslo sold 1.44 million shares of Overseas at the price of $4.49 per share.
04/08/2013 Lufkin Industries Inc. GE Oil & Gas SpA $3,323.4 2.52x -
GE Oil & Gas SpA entered into joint agreement to acquire Lufkin Industries Inc. (NasdaqGS:LUFK) from Kornitzer Capital Management, Inc., Eagle Asset Management, Inc. and other shareholders for $3.3 billion in cash. Lufkin shareholders will receive $88.5 per share in cash for each of their Lufkin shares.
04/08/2013 Greengate Power Corporation, 300 Megawatt Blackspring Ridge Wind Project
Enbridge Inc. (TSX:ENB); EDF EN Canada Inc.
$600.0 - -
Enbridge Inc. (TSX:ENB) and EDF EN Canada Inc. signed a purchase agreement to acquire 300 Megawatt Blackspring Ridge Wind Project from Greengate Power Corporation for CAD 600 million. EDF EN Canada and Enbridge will each own 50% of the project. Greengate will provide development services to Enbridge and EDF EN Canada during the construction of Blackspring Ridge.
Note: All enterprise value amounts are in $USD; however transaction synopses reference local currencies.
Page 15 of 24
QUARTERLY D I ALOGUE
Distressed Real Estate
TH I RD QUARTER 2 0 1 0 EnergyQUARTERLY D I ALOGUE | S E COND QUARTER 2 0 1 3
Energy Assets & Services
Valuation Overview
Notes:
(1) Outliers have been excluded from high, low, mean and median calculations
(2) Enterprise Value (EV) = Common equity value + preferred equity + debt – cash & short-term investments.
(3) EV multiples are based on the book value of the companies’ debt and not current trading volume. The numbers presented in this report have been adjusted to exclude non-recurring and extraordinary items, net of taxes (NM = No Multiple)
Stock Change Market Enterprise
Ticker Company Name Price High Low YTD (%) Cap Value (2) Revenue EBIT EBITDA
Energy Assets & Services
BHI Baker Hughes Incorporated $46.13 $50.97 $38.14 12.2% $20,381.5 $24,566.5 1.2x 11.8x 6.6x
BAS Basic Energy Services, Inc. $12.09 $16.60 $8.81 17.2% $483.2 $1,287.7 1.0x 19.8x 5.0x
DVR Cal Dive International Inc (1) $1.88 $3.08 $1.00 (35.2%) $184.1 $307.3 NM NM 49.9x
CAM Cameron International Corporation $61.16 $67.42 $41.26 43.2% $15,170.5 $15,674.3 1.8x 14.1x 11.4x
CRR CARBO Ceramics Inc. $67.43 $97.86 $60.33 (12.1%) $1,560.1 $1,476.3 2.3x 10.7x 8.0x
DWSN Dawson Geophysical Company $36.86 $39.36 $20.20 54.7% $289.2 $276.7 0.9x 14.0x 5.0x
DRC Dresser-Rand Group Inc. $59.98 $66.30 $42.82 34.7% $4,568.5 $5,563.8 2.0x 15.7x 12.5x
DRQ Dril-Quip, Inc. $90.29 $95.44 $64.01 37.7% $3,664.7 $3,345.7 4.5x 19.2x 16.6x
EXH Exterran Holdings, Inc. $28.12 $30.26 $12.57 120.5% $1,792.0 $3,565.9 1.2x 20.5x 6.8x
FTI FMC Technologies, Inc. $55.68 $59.27 $38.74 41.9% $13,206.7 $14,668.4 2.3x 22.3x 17.8x
GIFI Westinghouse Solar, Inc. (1) $19.15 $31.69 $18.76 (32.1%) $276.9 $274.6 0.5x NM 22.5x
GLF Gulfmark Offshore, Inc. (1) $45.09 $47.49 $27.17 32.5% $1,203.9 $1,585.7 4.0x 33.6x 14.8x
HAL Halliburton Company $41.72 $45.75 $27.62 47.0% $38,884.7 $41,408.7 1.4x 10.3x 7.2x
HLX Helix Energy Solutions Group, Inc. $23.04 $25.99 $15.54 40.4% $2,440.8 $2,538.6 3.1x 25.1x 13.6x
HOS Hornbeck Offshore Services, Inc. $53.50 $56.13 $31.96 38.0% $1,914.8 $2,515.1 4.7x 18.0x 11.0x
IO ION Geophysical Corporation $6.02 $7.87 $5.52 (8.6%) $944.2 $1,011.8 1.9x 14.5x 5.9x
KEG Key Energy Services Inc. $5.95 $9.57 $5.61 (21.7%) $906.2 $1,777.4 0.9x 11.3x 4.7x
MTRX Matrix Service Company $15.58 $17.93 $9.92 37.5% $406.2 $355.5 0.4x 11.3x 8.2x
NBR Nabors Industries Ltd. $15.31 $18.24 $12.75 6.3% $4,510.6 $8,280.4 1.2x 16.1x 5.2x
NOV National Oilwell Varco, Inc. $68.90 $89.95 $63.08 6.9% $29,439.7 $31,477.7 1.5x 9.0x 7.6x
NGS Natural Gas Services Group Inc. $23.49 $24.00 $13.27 58.5% $290.5 $260.1 2.8x 12.5x 7.1x
NR Newpark Resources Inc. $10.99 $11.78 $5.70 86.3% $946.9 $1,156.9 1.1x 10.7x 8.0x
NOF Northern Offshore Ltd (1) $1.40 $1.92 $1.33 (8.0%) $219.1 $219.1 1.2x 5.8x 3.2x
OIS Oil States International Inc. $92.64 $103.50 $63.42 39.9% $5,091.8 $6,039.0 1.4x 9.5x 6.8x
RES RPC Inc. $13.81 $17.40 $10.45 16.1% $3,045.9 $3,123.2 1.7x 8.3x 5.3x
SLB Schlumberger Limited $71.66 $82.00 $64.02 10.4% $95,268.4 $100,928.4 2.4x 13.0x 8.9x
SPN Superior Energy Services, Inc. $25.94 $29.22 $18.00 28.2% $4,139.6 $5,948.0 1.3x 8.6x 4.8x
TESO Tesco Corporation $13.25 $14.00 $8.70 10.4% $516.1 $486.1 0.9x 8.7x 4.9x
TTI TETRA Technologies, Inc. $10.26 $11.48 $5.35 43.9% $803.1 $1,148.9 1.3x 32.6x 10.1x
WG Willbros Group Inc. $6.14 $10.45 $4.07 (5.0%) $304.7 $546.5 0.3x 14.6x 6.5x
High 4.7x 32.6x 17.8x
Low 0.3x 8.3x 4.7x
Mean 1.7x 14.7x 8.3x
Median 1.4x 13.5x 7.1x
52 - Week Enterprise Value to (3):
Page 16 of 24
QUARTERLY D I ALOGUE
Distressed Real Estate
TH I RD QUARTER 2 0 1 0 EnergyQUARTERLY D I ALOGUE | S E COND QUARTER 2 0 1 3
Energy Assets & Services
Performance Overview
Notes:
(1) Outliers have been excluded from high, low, mean and median calculations
TTM Revenue TTM Financials Margins
Ticker Company Name as of: Growth Revenue EBIT EBITDA Profit (%) EBIT EBITDA
Energy Assets & Services
BHI Baker Hughes Incorporated 03/31/13 2.8% $21,236.0 $2,083.0 $3,703.0 18.1% 9.8% 17.4%
BAS Basic Energy Services, Inc. 03/31/13 -4.4% $1,308.3 $65.1 $258.1 33.0% 5.0% 19.7%
DVR Cal Dive International Inc (1) 03/31/13 9.3% $485.7 -$46.9 $6.2 0.5% -9.6% 1.3%
CAM Cameron International Corporation 03/31/13 21.4% $8,815.5 $1,108.4 $1,373.6 29.2% 12.6% 15.6%
CRR CARBO Ceramics Inc. 03/31/13 -1.3% $630.0 $138.1 $184.2 32.1% 21.9% 29.2%
DWSN Dawson Geophysical Company 03/31/13 -16.3% $301.3 $19.7 $55.1 22.6% 6.5% 18.3%
DRC Dresser-Rand Group Inc. 03/31/13 8.5% $2,841.0 $354.8 $443.9 26.7% 12.5% 15.6%
DRQ Dril-Quip, Inc. 03/31/13 16.9% $749.1 $173.8 $201.0 38.5% 23.2% 26.8%
EXH Exterran Holdings, Inc. 03/31/13 13.7% $2,999.7 $154.8 $503.2 29.0% 5.2% 16.8%
FTI FMC Technologies, Inc. 03/31/13 18.2% $6,400.8 $657.6 $822.7 22.0% 10.3% 12.9%
GIFI Westinghouse Solar, Inc. (1) 03/31/13 49.2% $558.7 -$11.7 $12.2 2.2% -2.1% 2.2%
GLF Gulfmark Offshore, Inc. 03/31/13 2.7% $398.7 $47.2 $107.1 40.3% 11.8% 26.9%
HAL Halliburton Company 03/31/13 8.3% $28,609.0 $4,038.0 $5,729.0 15.1% 14.1% 20.0%
HLX Helix Energy Solutions Group, Inc. 03/31/13 27.1% $813.7 $92.4 $178.1 25.5% 11.4% 21.9%
HOS Hornbeck Offshore Services, Inc. (1) 03/31/13 25.8% $540.3 $139.8 $229.5 52.0% 25.9% 42.5%
IO ION Geophysical Corporation 03/31/13 14.4% $544.3 $70.7 $173.1 38.5% 13.0% 31.8%
KEG Key Energy Services Inc. 03/31/13 2.7% $1,901.8 $157.8 $375.0 31.8% 8.3% 19.7%
MTRX Matrix Service Company 03/31/13 17.3% $841.9 $31.5 $43.6 10.3% 3.7% 5.2%
NBR Nabors Industries Ltd. 03/31/13 1.5% $6,677.8 $743.2 $1,827.3 35.2% 11.1% 27.4%
NOV National Oilwell Varco, Inc. 03/31/13 33.1% $21,045.0 $3,431.0 $4,085.0 25.4% 16.3% 19.4%
NGS Natural Gas Services Group Inc. (1) 03/31/13 19.4% $91.3 $20.7 $36.9 49.1% 22.7% 40.4%
NR Newpark Resources Inc. 03/31/13 4.0% $1,058.2 $108.1 $143.9 18.5% 10.2% 13.6%
NOF Northern Offshore Ltd 03/31/13 31.6% $196.0 $39.0 $72.0 40.1% 19.9% 36.8%
OIS Oil States International Inc. 03/31/13 14.8% $4,383.5 $637.2 $883.6 25.0% 14.5% 20.2%
RES RPC Inc. 03/31/13 -3.2% $1,868.3 $376.1 $592.2 41.1% 20.1% 31.7%
SLB Schlumberger Limited 03/30/13 11.0% $42,910.0 $7,621.0 $11,166.0 21.5% 17.8% 26.0%
SPN Superior Energy Services, Inc. 03/31/13 86.0% $4,736.7 $693.4 $1,249.7 39.8% 14.6% 26.4%
TESO Tesco Corporation 03/31/13 -5.7% $527.8 $55.7 $99.4 21.2% 10.5% 18.8%
TTI TETRA Technologies, Inc. 03/31/13 13.1% $908.6 $35.3 $113.3 28.8% 3.9% 12.5%
WG Willbros Group Inc. (1) 03/31/13 41.2% $2,117.9 $37.4 $83.6 9.7% 1.8% 3.9%
High 41.1% 23.2% 36.8%
Low 10.3% 3.7% 5.2%
Mean 28.4% 12.3% 21.2%
Median 28.8% 11.8% 19.7%
Page 17 of 24
QUARTERLY D I ALOGUE
Distressed Real Estate
TH I RD QUARTER 2 0 1 0 EnergyQUARTERLY D I ALOGUE | S E COND QUARTER 2 0 1 3
Oil and Gas Refining and Marketing
Valuation Overview
Notes:
(1) Due to small sample size, outliers have not been removed for this population
(2) Enterprise Value (EV) = Common equity value + preferred equity + debt – cash & short-term investments.
(3) EV multiples are based on the book value of the companies’ debt and not current trading volume. The numbers presented in this report have been adjusted to exclude non-recurring and extraordinary items, net of taxes (NM = No Multiple)
Performance Overview
Notes:
(1) Due to small sample size, outliers have not been removed for this population
Stock Change Market Enterprise
Ticker Company Name Price High Low YTD (%) Cap Value (2) Revenue EBIT EBITDA
Oil & Gas Marketing & Refining (1)
CLMT Calumet Specialty Products Partners LP $36.38 $40.25 $23.39 53.0% $2,521.8 $3,437.0 0.7x 13.1x 9.5x
CVI CVR Energy, Inc. $47.40 $72.32 $26.31 78.3% $4,115.8 $4,210.3 0.5x 3.8x 3.4x
HFC HollyFrontier Corporation $42.78 $59.20 $33.92 20.7% $8,665.5 $8,053.8 0.4x 2.7x 2.5x
NS NuStar Energy L.P. $45.65 $54.95 $38.43 (15.3%) $3,555.5 $5,945.7 1.1x 31.2x 16.5x
TSO Tesoro Corporation $52.32 $65.75 $24.52 109.6% $7,210.3 $7,712.3 0.2x 4.4x 3.7x
VLO Valero Energy Corporation $34.77 $48.97 $23.47 44.0% $18,962.4 $24,049.4 0.2x 4.2x 3.5x
WNR Western Refining, Inc. $28.07 $39.42 $21.97 26.0% $2,325.7 $2,801.1 0.3x 3.0x 2.7x
CLMT Calumet Specialty Products Partners LP $36.38 $40.25 $23.39 53.0% $2,521.8 $3,437.0 0.7x 13.1x 9.5x
High 0.7x 13.1x 9.5x
Low 0.2x 2.7x 2.5x
Mean 0.4x 6.3x 5.0x
Median 0.4x 4.2x 3.5x
52 - Week Enterprise Value to (3):
TTM Revenue TTM Financials Margins
Ticker Company Name as of: Growth Revenue EBIT EBITDA Profit (%) EBIT EBITDA
Oil & Gas Marketing & Refining (1)
CLMT Calumet Specialty Products Partners LP 03/31/13 29.9% $4,806.3 $262.2 $363.5 11.7% 5.5% 7.6%
CVI CVR Energy, Inc. 03/31/13 53.5% $8,951.1 $1,110.0 $1,242.1 17.4% 12.4% 13.9%
HFC HollyFrontier Corporation 03/30/13 10.1% $19,866.8 $3,013.8 $3,272.3 17.1% 15.2% 16.5%
NS NuStar Energy L.P. 03/31/13 -19.6% $5,346.0 $213.4 $382.3 9.0% 4.0% 7.2%
TSO Tesoro Corporation 03/30/13 7.8% $32,788.0 $1,738.0 $2,048.0 7.7% 5.3% 6.2%
VLO Valero Energy Corporation 03/30/13 1.8% $136,593.0 $5,759.0 $6,920.0 5.9% 4.2% 5.1%
WNR Western Refining, Inc. 03/31/13 -2.3% $9,350.1 $945.0 $1,040.5 12.4% 10.1% 11.1%
CLMT Calumet Specialty Products Partners LP 03/31/13 29.9% $4,806.3 $262.2 $363.5 11.7% 5.5% 7.6%
High 17.4% 15.2% 16.5%
Low 5.9% 4.0% 5.1%
Mean 11.6% 7.8% 9.4%
Median 11.7% 5.5% 7.6%
Page 18 of 24
QUARTERLY D I ALOGUE
Distressed Real Estate
TH I RD QUARTER 2 0 1 0 EnergyQUARTERLY D I ALOGUE | S E COND QUARTER 2 0 1 3
Oil and Gas Transportation and Storage
Valuation Overview
Notes:
(1) Outliers have been excluded from high, low, mean and median calculations
(2) Enterprise Value (EV) = Common equity value + preferred equity + debt – cash & short-term investments.
(3) EV multiples are based on the book value of the companies’ debt and not current trading volume. The numbers presented in this report have been adjusted to exclude non-recurring and extraordinary items, net of taxes (NM = No Multiple)
Stock Change Market Enterprise
Ticker Company Name Price High Low YTD (%) Cap Value (2) Revenue EBIT EBITDA
Energy Oil & Transportation & Storage
ATLS Atlas Energy, L.P (1) $48.99 $53.60 $29.31 60.6% $2,516.8 $6,197.5 3.8x 123.1x 27.6x
BKEP Blueknight Energy Partners, L.P. $8.77 $9.50 $6.08 31.7% $198.9 $32.2 0.2x 0.9x 0.5x
BPL Buckeye Partners, L.P. (1) $70.16 $70.50 $44.37 34.5% $7,407.6 $10,121.9 2.3x 22.8x 17.4x
LNG Cheniere Energy, Inc. (1) $27.76 $31.52 $12.19 88.3% $5,985.1 $11,594.2 42.7x NM NM
XTXI Crosstex Energy Inc. $19.76 $21.59 $11.32 41.1% $940.6 $2,898.7 1.7x 53.0x 15.0x
DPM DCP Midstream Partners LP $54.10 $54.38 $37.78 28.4% $4,154.5 $6,066.5 3.9x 25.7x 21.2x
EPB El Paso Pipeline Partners, L.P. $43.67 $44.99 $33.26 29.2% $9,446.5 $11,304.5 7.5x 12.4x 10.3x
EEP Enbridge Energy Partners LP $30.49 $31.17 $26.88 (0.9%) $9,583.5 $16,919.9 2.6x 31.6x 19.0x
ETE Energy Transfer Equity, L.P. $59.82 $62.50 $39.91 45.8% $16,792.2 $53,891.2 2.0x 27.9x 18.2x
EPD Enterprise Products Partners L.P. $62.15 $63.56 $48.52 21.3% $56,319.5 $72,689.2 1.7x 21.5x 16.1x
GEL Genesis Energy LP $51.83 $54.91 $28.79 78.3% $4,208.7 $5,164.6 1.2x 39.2x 27.3x
GLP Global Partners LP $39.90 $40.00 $21.93 75.3% $1,093.0 $1,915.4 0.1x 19.6x 12.7x
NRGY Inergy, L.P., Prior to Reverse Merger (1) $0.00 $0.00 $0.00 (100.0%) $0.0 $0.0 0.0x 0.0x 0.0x
KMP Kinder Morgan Energy Partners, L.P. $85.40 $92.99 $74.76 8.7% $36,230.3 $58,361.3 6.2x 20.0x 14.2x
MMP Magellan Midstream Partners LP $54.50 $56.29 $35.02 54.3% $12,354.0 $14,524.7 8.5x 25.4x 20.6x
MWE MarkWest Energy Partners, L.P. $66.85 $71.20 $46.03 35.6% $8,714.7 $11,790.5 8.6x 30.6x 17.8x
MMLP Martin Midstream Partners LP $44.09 $46.37 $30.03 34.7% $1,173.9 $1,705.4 1.1x 21.6x 13.8x
NS NuStar Energy L.P. $45.65 $54.95 $38.43 (15.3%) $3,555.5 $5,945.7 1.1x 31.2x 16.5x
OKS ONEOK Partners, L.P. $49.52 $61.34 $45.40 (7.9%) $10,900.1 $15,798.2 1.6x 15.9x 13.2x
PAA Plains All American Pipeline, L.P. $55.81 $59.52 $40.00 38.1% $18,998.3 $26,815.3 0.7x 13.5x 11.5x
RGP Regency Energy Partners LP (1) $26.97 $27.15 $20.58 13.5% $5,457.3 $8,241.3 6.2x 49.3x 23.9x
SE Spectra Energy Corp. $34.46 $34.83 $26.55 18.6% $23,060.5 $38,426.5 7.5x 19.8x 14.3x
SXL Sunoco Logistics Partners L.P. $63.95 $68.44 $35.89 76.3% $6,638.0 $9,979.0 0.8x 15.0x 11.8x
TCP TC PipeLines, LP $48.28 $50.27 $38.74 12.0% $2,953.4 $3,663.4 20.0x 24.6x 22.9x
TLP Transmontaigne Partners L.P. $41.91 $50.77 $31.51 26.0% $605.9 $900.1 5.7x 20.6x 12.4x
WMB Williams Companies, Inc. $32.47 $38.57 $28.25 12.7% $22,167.0 $35,659.0 4.9x 21.7x 14.6x
WPZ Williams Partners L.P. $51.60 $55.90 $45.01 (1.2%) $21,357.3 $29,606.3 4.2x 18.8x 12.7x
High 20.0x 53.0x 27.3x
Low 0.1x 0.9x 0.5x
Mean 4.2x 23.2x 15.3x
Median 2.3x 21.5x 14.5x
52 - Week Enterprise Value to (3):
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QUARTERLY D I ALOGUE
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TH I RD QUARTER 2 0 1 0 EnergyQUARTERLY D I ALOGUE | S E COND QUARTER 2 0 1 3
Oil and Gas Transportation and Storage
Performance Overview
Notes:
(1) Outliers have been excluded from high, low, mean and median calculations
TTM Revenue TTM Financials Margins
Ticker Company Name as of: Growth Revenue EBIT EBITDA Profit (%) EBIT EBITDA
Energy Oil & Transportation & Storage
ATLS Atlas Energy, L.P 03/31/13 1.2% $1,630.7 $43.2 $217.0 21.4% 2.6% 13.3%
BKEP Blueknight Energy Partners, L.P. 03/31/13 2.0% $183.4 $37.2 $60.5 30.8% 20.3% 33.0%
BPL Buckeye Partners, L.P. 03/31/13 -6.8% $4,442.8 $437.6 $577.6 23.8% 9.8% 13.0%
LNG Cheniere Energy, Inc. (1) 03/31/13 -6.4% $266.0 -$142.6 -$77.4 51.0% -52.5% -28.5%
XTXI Crosstex Energy Inc. 03/31/13 -8.8% $1,729.8 $51.6 $190.5 23.0% 3.0% 11.0%
DPM DCP Midstream Partners LP 03/31/13 -38.9% $1,539.9 $205.3 $254.7 15.3% 13.3% 16.5%
EPB El Paso Pipeline Partners, L.P. (1) 03/31/13 -1.0% $1,511.0 $901.0 $1,081.0 77.3% 59.6% 71.5%
EEP Enbridge Energy Partners LP 03/31/13 -23.9% $6,579.6 $534.9 $888.3 30.0% 8.1% 13.5%
ETE Energy Transfer Equity, L.P. 03/31/13 236.3% $24,284.0 $1,707.0 $2,736.0 13.0% 6.4% 10.3%
EPD Enterprise Products Partners L.P. 03/31/13 -5.9% $42,713.7 $3,288.1 $4,418.9 8.1% 7.7% 10.3%
GEL Genesis Energy LP 03/31/13 26.7% $4,256.6 $117.1 $174.5 5.2% 2.8% 4.1%
GLP Global Partners LP 03/31/13 26.1% $19,239.7 $97.6 $150.5 1.9% 0.5% 0.8%
NRGY Inergy, L.P., Prior to Reverse Merger 06/30/13 -2.9% $1,371.3 $138.1 $264.7 29.8% 6.6% 12.7%
KMP Kinder Morgan Energy Partners, L.P. 03/31/13 20.9% $9,455.0 $2,558.0 $3,747.0 47.4% 27.1% 39.6%
MMP Magellan Midstream Partners LP 03/31/13 -4.9% $1,711.0 $568.4 $701.2 47.7% 33.2% 41.0%
MWE MarkWest Energy Partners, L.P. (1) 03/30/13 -13.2% $1,372.7 $385.2 $661.2 61.5% 28.1% 48.2%
MMLP Martin Midstream Partners LP 03/31/13 17.8% $1,575.7 $80.9 $124.9 9.6% 5.1% 7.9%
NS NuStar Energy L.P. 03/31/13 -19.6% $5,346.0 $213.4 $382.3 9.0% 4.0% 7.2%
OKS ONEOK Partners, L.P. 03/31/13 -11.5% $10,105.5 $877.9 $1,086.4 15.7% 8.7% 10.8%
PAA Plains All American Pipeline, L.P. 03/30/13 9.5% $39,199.0 $1,947.0 $2,289.0 6.7% 5.0% 5.8%
RGP Regency Energy Partners LP 03/30/13 -1.1% $1,441.0 $59.0 $237.0 19.8% 3.9% 15.9%
SE Spectra Energy Corp. 03/31/13 -3.1% $4,981.0 $1,562.0 $2,310.0 52.7% 30.5% 45.1%
SXL Sunoco Logistics Partners L.P. 03/30/13 9.7% $13,221.0 $647.0 $825.0 7.2% 4.9% 6.2%
TCP TC PipeLines, LP (1) 03/31/13 -17.6% $66.0 $149.0 $160.0 90.7% 81.4% 87.4%
TLP Transmontaigne Partners L.P. (1) 03/31/13 4.6% $159.0 $43.2 $71.8 57.9% 27.1% 45.2%
WMB Williams Companies, Inc. 03/31/13 -9.9% $7,277.0 $1,547.0 $2,345.0 39.7% 21.3% 32.2%
WPZ Williams Partners L.P. 03/31/13 -12.3% $7,108.0 $1,472.0 $2,226.0 38.6% 20.7% 31.3%
High 52.7% 33.2% 45.1%
Low 1.9% 0.5% 0.8%
Mean 22.6% 11.2% 17.3%
Median 20.6% 7.2% 12.8%
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TH I RD QUARTER 2 0 1 0 EnergyQUARTERLY D I ALOGUE | S E COND QUARTER 2 0 1 3
Independent Power Producers (IPPs)/Merchant Generators
Valuation Overview
Notes:
(1) Due to small sample size, outliers have not been removed for this population
(2) Enterprise Value (EV) = Common equity value + preferred equity + debt – cash & short-term investments.
(3) EV multiples are based on the book value of the companies’ debt and not current trading volume. The numbers presented in this report have been adjusted to exclude non-recurring and extraordinary items, net of taxes (NM = No Multiple)
Performance Overview
Notes:
(1) Outliers have been excluded from high, low, mean and median calculations
Stock Change Market Enterprise
Ticker Company Name Price High Low YTD (%) Cap Value (2) Revenue EBIT EBITDA
IPP & Merchant Generators (1)
ATP Atlantic Power Corporation $3.91 $14.35 $3.83 (69.4%) $468.4 $2,867.4 6.8x 48.3x 15.5x
CPN Calpine Corp. $21.23 $22.16 $16.42 28.6% $9,665.1 $19,729.1 3.6x 33.5x 16.4x
DYN Dynegy Inc. $22.55 $25.18 $17.00 NM $2,255.0 $3,333.0 2.5x NM 24.2x
NRG NRG Energy, Inc. $26.70 $28.67 $16.66 53.8% $8,610.4 $24,295.4 2.8x 53.8x 14.8x
AES The AES Corporation $11.99 $14.00 $9.52 (6.5%) $8,951.0 $30,869.0 1.7x 9.5x 6.7x
High 6.8x 53.8x 24.2x
Low 1.7x 9.5x 6.7x
Mean 3.5x 36.3x 15.5x
Median 2.8x 40.9x 15.5x
52 - Week Enterprise Value to (3):
TTM Revenue TTM Financials Margins
Ticker Company Name as of: Growth Revenue EBIT EBITDA Profit (%) EBIT EBITDA
IPP & Merchant Generators
ATP Atlantic Power Corporation 03/31/13 176.1% $388.7 $41.9 $172.6 31.1% 9.6% 39.3%
CPN Calpine Corp. 03/31/13 -14.7% $5,513.0 $562.0 $1,174.0 25.1% 10.2% 21.2%
DYN Dynegy Inc. (1) 03/31/13 22.5% $1,343.0 -$225.0 $136.0 5.5% -16.8% 10.1%
NRG NRG Energy, Inc. 03/31/13 -3.4% $8,641.0 $420.0 $1,612.0 27.5% 4.9% 18.7%
AES The AES Corporation 03/31/13 2.7% $17,820.0 $3,217.0 $4,577.0 19.6% 18.1% 25.7%
High 31.1% 18.1% 39.3%
Low 19.6% 4.9% 18.7%
Mean 25.8% 10.7% 26.2%
Median 26.3% 9.9% 23.5%
Page 21 of 24
QUARTERLY D I ALOGUE
Distressed Real Estate
TH I RD QUARTER 2 0 1 0 EnergyQUARTERLY D I ALOGUE | S E COND QUARTER 2 0 1 3
Offices
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registered with FINRA.
Notes
� Sources: Capital IQ, Bloomberg, company 10-K, 10-Q and 8-K SEC filings, annual reports, press
releases, and others as indicated.
� Any public companies chosen for the “NCA Energy Universe” are companies commonly used
for industry information to show performance within a sector. They do not include all public
companies that could be categorized within the sector and were not created as benchmarks; they
do not imply benchmarking and do not constitute recommendations for a particular security
and/or sector. The charts and graphs used in this report have been compiled by Navigant
Capital Advisors solely for purposes of illustration.
For further information regarding our Energy Services, please contact:
Edward R. Casas, Senior Managing Director, Head of Navigant Capital Advisors
847.583.1619
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847.583.1718
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202.481.7534
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www.ncacf.com/dialogues.
About Navigant Capital Advisors
Navigant Capital Advisors is the dedicated corporate finance business unit of Navigant (NYSE: NCI). Navigant
Capital Advisors serves the investment banking and private equity, restructuring and valuation needs of
companies, private equity groups, lenders and other creditor constituencies. The firm arranges private placements
of debt and equity, advises on mergers and acquisitions, as well as initiates divestitures for the owners of
businesses across a broad range of industries. The firm also represents borrowers, secured lenders and other
creditor constituencies in connection with financial and operating restructurings. Finally, we provide
transactional valuations, fairness opinions and other financial reporting and compliance services to companies and
their boards.
NCA gathers its data from sources it considers reliable. However, it does not guarantee the accuracy or completeness of the information provided within this publication. Any opinions presented reflect the current judgment of the authors and are subject to change. NCA makes no warranties, expressed or implied, regarding the accuracy of this information or any opinions expressed by the authors. (Officers, directors and employees of Navigant Consulting, Inc. and its subsidiaries may have positions in the securities of the companies discussed.) This publication does not constitute a recommendation with respect to the securities of any company discussed herein, and it should not be construed as such. NCA or its affiliates may from time to time provide investment banking or related services to these companies. Like all NCA employees, the authors of this publication receive compensation that is affected by overall firm profitability.
©2013 Navigant Capital Advisors, LLC. All rights reserved. Navigant Capital Advisors, LLC (Member FINRA, SIPC) is a wholly owned broker/dealer of Navigant Consulting, Inc. Navigant Consulting is not a certified public accounting firm and does not provide audit, attest, or public accounting services. See www.navigant.com/licensing for a complete listing of
private investigator licenses. Page 22 of 24
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Navigant: Representative Engagements
Page 23 of 24
QUARTERLY D I ALOGUE
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TH I RD QUARTER 2 0 1 0 EnergyQUARTERLY D I ALOGUE | S E COND QUARTER 2 0 1 3
Navigant Wins Consultancy of the Year Award - Gulf Coast Region
Navigant was named Consultancy of the Year – Gulf Coast Region
by Oil and Gas Awards based on an entry submitted on its recent
work for the Gulf LNG Liquefaction Company, LLC (GLNG) which
submitted its application for LNG export on August 31, 2012.
Successes
Navigant’s work for the American Clean Skies Foundation in 2008,
established Navigant as a reputable leader in the area of natural gas
shale and unconventional gas in North America. By mid-2010,
Cheniere Energy engaged by Navigant to provide an analysis that
would be used by Cheniere for its ground-breaking application to
the DOE for approval to export of LNG from Cheniere’s Sabine Pass
LNG export project in Texas. Despite several other DOE
applications that have been submitted since, including the current
GLNG application this year, the Cheniere Sabine Pass LNG export
project remains the only LNG export project to have received DOE
approval to export to non-Free Trade countries.
Navigant’s successful analysis played an instrumental part of the favorable DOE Cheniere decision and the
“lessons learned” from Cheniere will hopefully carry forward as part of the GLNG project application, as well as
several other LNG export projects, that are currently before the DOE pending a decision.
Expertise
In addition to the successful Cheniere Sabine Pass application, Navigant has supported seven other U.S. LNG
export projects, including the GLNG project, to provide similar in-depth analyses on the construction of LNG
export facilities. As such, Navigant has become a recognized leader in the area of providing independent third
party market impact studies for LNG project developers planning on filing applications for the export of LNG to
the DOE. Navigant has assisted these large infrastructure projects that range in size from capital costs of $3 billion
to $10 billion by using its proprietary natural gas market modeling and forecasting tools. These tools allow
Navigant to perform a detailed market analysis that is unique to each project and allows the client to better make
informed decisions on specific LNG export projects. In addition, the analysis serves as an independent third
party analysis for the DOE review and application process. In fact, the methodology and analysis first developed
by Navigant, has proven to be key in the approach taken by other projects and towards answering questions of
interest to the DOE and others, including matters as important as national security, energy independence, and
resource sustainability.
Relevance
In an era of expected ongoing gas production successes, particularly in the development of North American
natural gas shale, LNG exports hold promise as an important emerging new market to assure the ongoing
development of natural gas as a clean and abundant energy source for the future. Navigant’s understanding and
early work done in the natural gas and shale area has proven invaluable for GLNG and for other LNG projects.
Navigant’s work in assessing the impact of LNG exports should over the next few years provide new global
market opportunities for natural gas as North America becomes more connected to the global market. As this
occurs, LNG exports will become an important piece of a new natural gas market structure in North America that
will, in turn, help assure a healthy upstream natural gas producing sector. This will be for the benefit of the
natural gas industry, the economy, and for the country as a whole over the long-term.
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