hiland partners, lp (hlnd) hiland holdings gp, lp...

Hiland Partners, LP (HLND)Hiland Holdings GP, LP (HPGP)

Joe GriffinChief Executive Officer

Matt HarrisonChief Financial Officer

Wachovia Pipeline and MLP SymposiumDecember 2008

2

Risks and Forward-Looking Statements

Investment in the common units of Hiland Partners, LP and Hiland Holdings GP, LP (collectively, “Hiland” or the “Partnership”) involves risks associated with the Partnership’s business, the Partnership’s structure and the tax characteristics of the common units. These risks can significantly impact the market value of Hiland’s common units.

The statements made by representatives of Hiland during the course of this presentation that are not historical facts are forward-looking statements. Although Hiland believes that the assumptions underlying these statements are reasonable, investors are cautioned that such forward-looking statements are inherently uncertain and necessarily involve risks that may affect Hiland’s business prospects and performance, causing actual results to differ from those discussed during this presentation. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements included in Hiland’s various filings with the Securities & Exchange Commission (“SEC”).

Any forward-looking statements made are subject to all of the risks and uncertainties, many of which are beyond management’s control, involved in gathering, compressing, dehydrating, treating, processing and marketing natural gas, fractionating NGLs and providing air compression and water injection services for oil and gas secondary recovery operations. These risks include the risks described in the Partnership’s Form 10-K and other documents filed from time to time with the SEC. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, Hiland’s actual results and plans could differ materially from those expressed in any forward-looking statements.

The Partnership undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information or future events.

3

Non-GAAP Measures

This presentation includes the non-generally accepted accounting principles (“non-GAAP”) financial measure of EBITDA. We define EBITDA, a non-GAAP financial measure, as net income plus interest expense, provisions for income taxes and depreciation, amortization and accretion expense. EBITDA is used as a supplemental financial measure by our management and by external users of our financial statements such as investors, commercial banks, research analysts and others to assess: (1) the financial performance of our assets without regard to financial methods, capital structure or historical costs basis; (2) the ability of our assets to generate cash sufficient to pay interest costs and support our indebtedness; (3) our operating performance and return on capital as compared to those of other companies in the midstream energy sector, without regard to financing and structure; and (4) the viability of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities. EBITDA is also a financial measurement that, with certain negotiated adjustments, is reported to our banks and is used as a gauge for compliance with our financial covenants under our credit facility. EBITDA should not be considered as an alternative to net income, operating income, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP. Our EBITDA may not be comparable to EBITDA of similarly titled measures of other entities, as other entities may not calculate EBITDA in the same manner as we do.

4

An Overview of Hiland

• Strong operational and financial attributes

– Modern, strategically located assets in the Rockies and Mid-Continent

– Prudent growth strategy

Over $400 million of acquisitions / organic growth projects / systems expansions / announced and closed since IPO

– Visible inventory of potential unconventional resource organic growth prospects

– Solid distribution track record

– Broad range of midstream services

– Experienced management team

Public(8,362,825 HPGPCommon Units)

Hiland Partners GPHoldings, LLC

Public(3,960,864

Common Units)

Hiland Partners GP, LLC(2% IDR’s)

61.3% LPInterest

2% GPInterest

42.4% LPInterest

Hiland Partners, LP

100%Interest

38.7% LPInterest

0% GPInterest

100%

57.6% LPInterest

Hiland Holdings GP, LP(2,321,471 Common Units

3,060,000 Sub Units)

HPGP Market Capitalization: $72 million*

HLND Market Capitalization: $83 million**As of 12/2/08

Harold Hamm & Affiliates(13,244,675 HPGP

Common Units)

5

Hiland Midstream Natural Gas Services

TransmissionLines

TransmissionLines

Wellhead

Gathering, Dehydrationand Compression

Processing, Treating and Fractionation

NGL ProductsTransportation− Truck− Y-grade line− Rail terminal

Hiland Partners’

Midstream Focus

6

Business Strategy

• Engage in construction of organic growth projects and system expansion opportunities

– Unique relationship with Continental Resources, Inc.

Opportunity to gain insight regarding production growth and reserve potential in emerging unconventional resource plays

– Expand systems to meet growing demand

• Increase volumes on existing assets while controlling costs

• Pursue complementary acquisitions

– Target opportunities that expand our presence in existing service territories, offer operational efficiencies and increase utilization

• Reduce exposure to commodity price risk

• Grow distributions to unitholders

7

Distribution Growth Since IPO

HLND - 96% Growth Since IPO HPGP - 72% Growth Since IPO

$1.80 $1.85

$2.05

$2.50 $2.60 $2.70 $2.80 $2.85 $2.85 $2.93

$3.02 $3.18

$3.31 $3.45 $3.52

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

IPO 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 2Q08

$0.74

$0.81 $0.83 $0.83 $0.88 $0.92

$1.02 $1.12

$1.22 $1.27

$0.00

$0.25

$0.50

$0.75

$1.00

$1.25

$1.50

IPO 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08

8

Unique Relationship with Continental Resources, Inc.

• Hiland’s predecessor formed in 1990 to support Continental Resources, Inc.’s (“CLR”) E&P activities

• CLR is a publicly-traded E&P company with an active drilling program– $3.0 billion equity market capitalization (IPO – May 2007)– $663 million drilling capex budget for 2008, $541 million drilling capex budget for 2009 (recently

announced)– EBITDAX of $665 million for the nine months ended 9/30/08– Significant reserve and production growth potential– Organic growth strategy focused on unconventional resource plays

− Approximately 1.1 million net undeveloped acres in unconventional plays and growing− Define new shale plays− Take large acreage positions in new and defined shale plays− Embrace and execute horizontal drilling, high psi fracturing and complex drilling and completion of high organic content shale wells− React to and perfect drilling and completion techniques to make each shale well commercial

• HLND, HPGP and CLR are separate entities with Harold Hamm as the controlling equity holder.

• Hiland’s relationship with CLR has enabled it to significantly expand its asset base– Recently announced North Dakota Bakken organic growth project– Montana Bakken acquisition– Badlands system expansion– Woodford Shale organic growth project

Overview of Continental Resources, Inc.

Source: Continental Resources, Inc. – Company Presentations 10/14/2008 and 11/13/2008 and CLR 3Q 2008 earnings press release.

EBITDAX ($MM)

Production (boepd)

27% CAGR

Announced 2009E Drilling Capex - $541 MM

9

59% CAGR

2008E Drilling Capex - $663 MM

$101

$281

$34

$99

$14 $12

Red River Units

Bakken

Other Areas

Arkoma Woodford

Anadarko Woodford

Atoka

$184

$245

$30

$130

$53$21

Red River Units

Bakken

Other Rockies

Woodford

Other Mid-Con

Gulf Coast

10

CLR’s Key Drilling Projects

• Development (36% 2008 D&C capex)− Red River Units: 50% proved reserves and

43% production

− Montana Bakken Shale: 20% proved reserves and 20% production

• Impact plays (48% 2008 D&C capex)− North Dakota Bakken Shale: 421,000 net

acres

− Oklahoma Woodford Shale: 46,000 net acres

• Continental expects strong growth in production and reserves in the fourth quarter of 2008 and in 2009

Red River Units

MT Bakken

ND Bakken

Arkoma Woodford

Counties with acreage holdings are highlighted

Regional office

Headquarters

Development

Impact Plays

Source: Continental Resources, Inc. – Company Presentation 11/13/2008 and CLR 3Q 2008 earnings press release.

CLR Unconventional Resource Plays

~1.1 million net acres in unconventional plays and growing

Shale Basin

Overthrust Belt

Haynesville – 26,000

Marcellus, Rhinestreet, Huron –91,000

New Albany – 46,000

ArkomaWoodford – 46,000

Anadarko Woodford – 111,000Atoka – 34,000

Marfa Woodford/Barnett – 67,000

Lewis – 27,000

Bakken – 604,000Red River – 77,000

Source: Continental Resources, Inc. – Company Presentation 11/13/2008.11

12

CLR’s Rocky Mountain Operations

MT Bakken

Red River Units

ND Bakken

Source: Continental Resources, Inc. – Company Presentation 11/13/2008.

13

Mon

tana

North

Dakota

Williston Basin

Mon

tana

North

Dakota

CLR acreage Horizontal Bakken producer

Williston Basin

Outline of potential Bakken production

• Largest unconventional oil resource play in the lower 48− ~4B boe technologically recoverable

reserves (USGS)

− Play is being developed through horizontal drilling and advanced fracture stimulation

• CLR is the largest leaseholder with 604,000 net acres− 9,631 net boepd in 3Q 2008

− 70+ rigs operating− ConocoPhillips

− EOG Resources

− Hess

− Marathon

• CLR has allocated $281 million of its 2009 capex budget for the Bakken shale

• 52% of drilling capex budget

• Drill 131 gross (44.1 net) wells

Bakken Shale


14

CLR - ND Bakken - Recent Activity

THREE FORKS HORIZONTAL

CLR OPERATED

CLR NON-OPERATED

NO CLR INTEREST

• 9 Three Forks/Sanish wells completed with stronger average production than Middle Bakken wells in the play

• Completion process improving overall

• Drilling program now primarily targeting TFS

CLR-operated wells Gross wells completedNet wells completed

Gross 7-day avg. IP rate

3Q0816

5.3602 boepd

1H0846

12.4493 boepd

New acreage


15

Three Forks/Sanish Wells

• 2/3 of ND Bakken acreage has 50’ or more separation

• Given the low porosity/perm of the rock, CLR’s theory is that the TFS is a separate reservoir from the Middle Bakken

– Exception: Areas where the interval thins

– Exception: Areas where there is significant vertical fracturing due to tectonics

Ronholdt 1-16H –196 boepd

Arvid 1-34H – 340 boepdOmar 1-1H – 1,126 boepd

Maryann 1-15H – 1,216 boepdKirkland 1-33H – 733 boepd

Mathistad 1-35H – 1,260 boepdCroff 1-2H – 1,001 boepd

Morris 1-23H – 1,027 boepdBice 1-29H – 693 boepd

CLR-operated Three Forks/Sanish wells being drilled ( being completed).

CLR-operated Three Forks/Sanish wells in production.


CLR’s Montana Bakken Shale

• Significant unconventional oil resource play

– Represents ½ of Montana’s oil production – ~50,000 boepd

– 6,187 net boepd in 3Q 2008– Developed through horizontal drilling

and advanced fracture stimulation

• CLR’s 3Q08 infield wells averaged 391 boepd in their 7-day production test (33% higher than 2Q08)

• CLR recently began drilling its first Three Forks/Sanish test well in MT

• CLR and other producers are initiating a C02 injection pilot program in Richland County

– Start by end of 2008

Mon

tana

North

Dakota

CLR acreage Horizontal Bakken producer

Williston Basin

Richland Co., MT Bakken

Outline of potential Bakken production

Vertical Bakken producer

16Source: Continental Resources, Inc. – Company Presentation dated 4/10/2008 and 3Q 08 earnings press release.

17

CLR’s - Red River Enhanced Recovery Units

• CLR: 67.9 MMBoe proved reserves• 13,375 net boepd in 3Q 2008• Cedar Hills discovered in 1995, developed

with horizontal drilling, began enhanced recovery operations in 2003

• 2009 Plans– $101MM 2009E capex– Infield horizontal drilling and re-entry

drilling program to accelerate production and enhance sweep efficiency

– Develop Cedar Hills on 320 acre / producer

• Badlands Plant began in August 2007• Forecast peak at ~19 net Mboe/d in late

2009

Cedar Hills North Unit

Cedar Hills West Unit

Buffalo Units

Medicine Pole Hills West Unit

Medicine Pole Hills South Unit

Medicine Pole Hills Unit

25 Miles25 Miles

Haley


18

Arkoma Woodford Shale

12 miles

SALT CREEK exploratory

EAST MCALESTER exploratory

ASHLANDdevelopment

Harden-Wolohon 4-well Simul-frac

Avg. 3.5 MMcfd/well

Arlan 2-well Simul-frac

Avg. 6.8 MMcfd/well

Shaklee 2-well Simul-frac

Avg. 1.6 MMcfd/well

Blevins 1-1H – 8,114 Mcfd

Luna-Pratt (2)2-well Simul-

fracs Scheduled 3Q08

CLR Operated WOC CLR Operated Producer CLR 2008 Wells to be drilledWoodford Producer

CLR Acreage

Inset: CLR 2008 Wells WOC/TD

Inset: CLR 2008 Wells to be drilled

Inset: CLR 2008 Completed Wells

• Unconventional gas resource play − 40+ industry-operated rigs

(Newfield, Antero, Devon) in the Arkoma Woodford

• CLR: 46,000 net acres − Significant reserve and production

growth potential

− $99 MM in 2009 capex

− Acquired 26 square miles of 3D in Salt Creek and acquiring 55 square miles in E. McAlester

• CLR continues to develop its simul-fracture technology in the play


19

Anadarko Woodford, Western Oklahoma

• Unconventional natural gas resource play− 10 total rigs active (industry)

− Cimarex, Devon, Chesapeake, Marathon and Western in the play

− Limited but encouraging results reported

• CLR: 111,000 net acres and growing − Significant reserve and

production growth potential

− One well completing and another planned by end of 2008

12 miles

Oakwood Prospect

Redwood Prospect

Driftwood Prospect

Wichita Mtn. Front -15,000 ft

leasing limit

50 ft75 ft

Marathon

Western

Drilling or rig on location

Producing well

Prospective WDFD

CLR Acreage

CLR

Chesapeake

Cimarex

Devon

CLR Bart Woods 1-2H (100% WI)

200’ hz lateral; 150 MCFD

Brown 1-2H (100% WI)

Chesapeake3 active rigs drilling, 13

wells drilled

Cimarex2 completions

2.3MMCFD & 80 bopd

2.9MMCFD & 8 bopd

Devon3 Completions; 3.6 MMCFD

6.6 MMCFD & 105BOPD

CLR McCalla 1-11H ( 90%

WI)


20

Atoka Shale (Western OK, TX Panhandle)

20 miles

• Emerging unconventional natural gas resource play − EOG announced 400BCF of reserve potential from Atoka on their 60,000 net acres − EOG has completed 26 horizontal wells in the play, with rates to ~ 7 MMCFD

• CLR: 34,000 net acres− Significant reserve and production growth potential; one operated rig in the play

− Initial well was the Shrewder 1-22H (100% WI); additional 2008 wells planned

Prospect outline

CLR Wells

CLR Acreage Non-operated wells drilling or WOC

Non-operated permitted wells

Non-operated activity

Non-operated completed wells

Non-Op Wells/Permits:35 wells drilled or

drilling;26 wells completed with rates up to 7.0 MMCFD

Peek Field(2002 Atoka Discovery)

Cum 13.4 BCF & 122 MBODaily Rate: 7 MMCF160 Acre Spacing

CLRShrewder 1-22H (100% WI)

CLRJones Trust 1-168H

(100% WI)

Texa

s

20 miles


21

Hiland Cash Flow Growth Supported by High Quality Asset Base

• Hiland Partners is a growth-oriented midstream MLP– 2,087 miles of pipelines

– 14 gathering systems

– 5 processing plants

– 7 treating facilities

– 3 fractionation facilities

– 2 air compression facilities

– Water injection plant

• Three months ended Sept. 30, 2008:– 261,345 Mcf/d of inlet natural gas

– 95,889 MMBtu/d of natural gas sales

– 6,036 Bbls/d of NGL sales

Driscoll

Stovall

Enid Pipeline

CorporateHeadquarters

Enid, OK

Bakken Gathering System

Matli Gathering System

Cedar Hills Compression Facility

Kinta Gathering System

Woodford Shale Gathering System

Badlands Gathering System

Eagle Chief Gathering System

Worland Gathering System

ND Bakken Gathering System

(Construction Phase)

W. Oklahoma Growth Project

(Planning Phase)

22

Execution of Business Strategy

• 129,000 gross acres dedicated

• $10 million capex in 2008; additional $17 million over next three years

• 10 year agreement with Continental Resources

• Install field gathering, compression, treating and processing facilities

• “NGL Only” sales via JT processing expected to commence early 1Q09

ND Bakken Gathering System – Organic Growth Project

23


• Operating Highlights– 365 miles of pipelines

– 273 wells connected

– 25,000 Mcf/d processing plant capacity

– 6,500 Bbl/d Fractionation facility

• Expansion of NGL fractionation facilities

– Increased volumes from Bakken and Badlands Plants

– Potential 3rd party volume

• Major Gas Suppliers:– Enerplus– Continental Resources– ConocoPhillips

MT Bakken Gathering System - Acquisition

24


• Start up of 40,000 Mcf/d nitrogen rejection plant and treating facilities in August 2007

• Recently announced plans to expand gathering system

– Continental Resources –Cedar Hills Looping and Compression Project

• Operating highlights:– 214 miles of pipeline– 163 wells connected

• Major Gas Suppliers:– Continental Resources– Luff

Badlands Gathering System – Significant System Expansion

Solid Volume Growth

Inlet System Mcf/d

September ‘07 13,219

December ’07 17,727

March ’08 21,979

June ’08 26,315

September ’08 26,582

25

Execution of Business StrategyWoodford Shale Gathering System – Organic Growth Project

• 35,000 gross acres dedicated from Continental Resources

• Start up of Phase I in April 2007

• 25,000 Mcf/d capacity as of March 2008

• Recently completed expansion to over 65,000 Mcf/d

Mid-May 2008 – 35,000 Mcf/d

June 2008 – 48,000 Mcf/d

Early August 2008 –65,000 Mcf/d

Solid Volume Growth

Inlet System Mcf/d

June ’07 2,304


December ’07 12,358

March ’08 18,371

June ’08 24,078


26

HLND Operational and Financial Highlights

Note: Historical 2003-2004 data reflects the combined results of Hiland’s predecessor and Hiland Partners, LLC.1. EBITDA is defined as a net income (loss) plus interest expense, provision for income taxes and depreciation, amortization and accretion expense.2. Adjusted for SemGroup bad debt recovery of $7.8 million, non-cash compensation expense of $0.4 million and non-cash gain on derivative transactions of $5.6

million.

__________________

CAGR=41%

CAGR=48%

CAGR=19%

Hiland’s Contract Mix

27

3Q 08 Midstream Margin by Contract Type

59%7%

22%

13%

POP w/ Incremental FeesPOI - Keep Whole

Index Minus Fees - Keep WholeFixed Fee - Gathering

Hiland’s Current Hedges

28

Natural Gas Hedges- % of Estimated Equity GasNGL Hedges - % of Estimated C3+ Equity Gallons

• Avg. Price: $1.36 / Gallon

• Direct product hedges ONLY

• NO CRUDE OIL HEDGES

• No hedges beyond 2008

• 2008: CIG - $7.84; PEPL - $8.43

• 2009: CIG - $7.30

• 2010 NYMEX Hedge - $10.50

• 2010 hedge volume: 178,000 MMBtu/month

• Will opportunistically lock-in 2010 CIG basis

(1) Represents estimated equity gas for Williston Basin Systems (CIG). There are no Mid-Continent hedges in 2009.

29

Financial Resources

• HLND had $37.9 million of available capacity under its existing $300 million credit facility at September 30, 2008

• $50 million accordion feature

• Hiland currently has adequate capital resources to fund its announced expansion projects and ongoing system expansions without having to access the debt or equity markets

Questions and Answers

hiland partners, lp (hlnd) hiland holdings gp, lp...

Documents