HL Acquisitions Corp.: Change Brings Opportunity. Investor Presentation July 2018

Transcription

1 HL Acquisitions Corp.: Change Brings Opportunity Investor Presentation July 2018

2 Disclosures This presentation (the Presentation ) has been prepared by HL Acquisitions Corp. (the Company ). This Presentation has been prepared solely for discussion purposes only. Any reproduction or distribution of this Presentation, in whole or in part, or the disclosure of its contents, without the prior consent of the Company is prohibited. This Presentation does not purport to contain all of the information that may be required to evaluate a possible transaction. This Presentation is not intended to form the basis of any investment decision by the recipient and does not constitute investment, tax or legal advice. No representation or warranty, express or implied, is or will be given by the Company or any of its affiliates, directors, officers, employees or advisers or any other person as to the accuracy or completeness of the information in this presentation or any other written, oral or other communications transmitted or otherwise made available to any party in the course of its evaluation of a possible transaction, and no responsibility or liability whatsoever is accepted for the accuracy or sufficiency thereof or for any errors, omissions or misstatements, negligent or otherwise, relating thereto. Accordingly, none of the Company or any of its affiliates, directors, officers, employees or advisers or any other person shall be liable for any direct, indirect or consequential loss or damages suffered by any person as a result of relying on any statement in or omission from this Presentation and any such liability is expressly disclaimed. This Presentation contains forward-looking statements. Terms such as anticipates, believe, continue, could, estimate, expect, intends, may, might, plan, possible, potential, predicts, project, should, would as well as similar comments, are forwardlooking in nature. The forward-looking statements contained in this discussion are based on the Company s current expectations and beliefs concerning future developments and their potential effects. There can be no assurance that future developments affecting the Company will be those that it has anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, they could cause our actual results to differ materially from the forwardlooking statements. We are not undertaking any obligation to update or revise any forward looking statements whether as a result of new information, future events or otherwise. You should not take any statement regarding past trends, activities or performance as a representation that the trends, activities or performance will continue in the future. Accordingly, you should not put undue reliance on these statements. This Presentation is not intended to constitute, and should not be construed as investment advice. 2

3 Contents Acquisition Criteria Management Team Market Landscape o Shale Revolution o IMO 2020 o Emergent Opportunities Appendix o Vehicle Description 3

4 Our Acquisition Criteria We intend to seek an initial business combination in the hydrocarbon logistics value chain that offers some combination of the following characteristics: Smaller initial capital requirements (i.e., $50 to $200 million) Located close to areas of rapid growth in energy demand or industries transitioning to cleaner burning fuels Mid-to-late development stage, providing for very high expected returns while mitigating the risk associated with the initial phases of development Proven business with attractive bolt-on growth opportunity, but limited access to capital markets Upstream production and refining, considered on an opportunistic basis Could benefit from the substantial expertise, experience and network of our sponsor and management team Squarely positioned to take advantage of growth trends 5

5 Our leadership team has extensive operating and investment experience across petroleum production, services & logistics Jeffrey Schwarz Chairman and CEO Rune Magnus Lundetrae Independent Director Ajay Khandelwal Independent Director Primary providers of risk capital: Schwarz Family Joel Greenblatt (Founder and Co-CIO of Gotham Capital) Karen Finerman (CEO & Co-Founder of Metropolitan Capital Advisors, Panelist on CNBC s Fast Money) Our sponsors have structured their equity in the form of warrants (vs. units) as we strongly believe that this opportunity offers significant upside potential over the long term 6

6 Jeffrey Schwarz, Chairman & CEO Jeffrey is the co-founder of Metropolitan Capital Advisors, Inc., a New York-based money management firm founded in He served as Metropolitan s Chief Investment Officer from the firm s inception until his retirement in Since 2012, Mr. Schwarz has served as the Managing Member of Metropolitan Capital Partners V LLC, the investment vehicle of the Schwarz family office. Previous Board Experience Co-Chairman of the Board, Bogen Corporation Chairman of the Board, Molopo Energy Ltd. Board member, Cyberonics Inc. Relevant Experience With an investment management career that began in 1981, and with a focus on the oil & gas, oil services, refining and marketing, MLP and shipping sectors Jeffrey has deep experience in evaluating the opportunity set to be targeted by HL Acquisitions Inc. Key Executive Relationships Christian Andersen, CEO of Avance Gas Holding Ltd (c.andersen@avancegas.com) Carsten Mortensen, CEO of BW Group Ltd (cmo@bwmaritime.com) Gary Smith, Former CEO of Golar LNG Ltd (gsmith@poten.com) Jens Gruner-Hegge CFO of Stolt-Nielsen Ltd. (j.gruner-hegge@stolt.com) 7

7 Board of Directors Rune Magnus Lundetrae Ajay Khandelwal Mr. Lundetrae joined Borr Drilling Ltd. at the time of its inception in December Since that time he has served in various capacities, currently serving as the Deputy Chief Executive Officer and Chief Financial Officer. He has played an instrumental role in helping build Borr Drilling into the world s largest offshore driller in the premium jack-up space, participating in the structuring and financing of acquisitions approaching $4b. Borr Drilling has effectively consolidated its sector with purchases of the premium jack up assets of Transocean Ltd., Sembcorp Marine Ltd. and Paragon Offshore Ltd., as well as under construction rigs from the Keppel Shipyard in Singapore. Since December 2017, Mr. Khandelwal has served as the Chief Executive Officer of Chi Energie Private Limited, an Indian-based company seeking to broaden the access of Indian energy consumers (including industrial/commercial, city gas distribution and heavy vehicle/buses transportation customers) to LNG. From August 2015 to December 2016, Mr. Lundetrae was a Managing Director and Head of Oil Services of DNB Markets, the investment banking subsidiary of DNB, Norway s largest financial services group. From 2006 to 2009, Mr. Khandelwal served as an investment advisor to the family office of John Fredriksen, one of the world s largest owners of shipping and oilfield services businesses where he guided the investments of nine private equity funds in the U.S., Europe and Asia. From 2012 to June 2015, he served as Chief Financial Officer of Seadrill Ltd, the world s largest offshore driller. From 2013 to September 2017, Mr. Khandelwal served as President (Petroleum and Production) of Reliance Industries Limited, one of India s largest oil companies. From 2010 to 2013, Mr. Khandelwal served as Chief Executive Officer of Jubilant Energy, an E&P company based in India. From 2001 to 2006, Mr. Khandelwal served in several positions with Shell International, most recently as Lead Investment Finance Advisor, focusing on LNG business development and upstream M&A. 8

8 Our Investment Thesis

9 The shale revolution is fundamentally reshaping global energy markets, creating new opportunities for investment across the value chain The shale revolution, driven by innovations in horizontal drilling and hydraulic fracturing, has up-ended global energy markets in both obvious and more nuanced ways: o US crude production has grown from 5.5m barrels per day in 2010 ( b/d ) to an all-time record high of 10m b/d in late 2017 o Domestic dry natural gas production has grown from 56 billion cubic feet per day in 2010 ( Bcf/d ) to 78 Bcf/d, which has enabled the US to become a net exporter of natural gas in 2017, increasingly in the form of LNG o The market for LNG which had historically only been available under very long-term contracts to buyers with the strongest credit profiles is becoming more flexible, opening the market to a much wider universe of buyers The wider availability and flexibility of LNG, coupled with the greater awareness of environmental implications of fossil fuel use, is driving a fundamental change in patterns of energy consumption as both industrial and commercial users increasingly transition to natural gas as a primary source of energy. We believe this change signals the beginning of the second phase of the shale revolution: Phase I Phase II ( ) US centric Large, expensive projects ( ) Primarily producer oriented Developing markets Smaller, scalable projects Primarily consumer oriented This second phase will present new opportunities for innovative, agile organizations to put capital to work creatively, and we seek to be an early player in this emergent market 9

10 Phase I was characterized by large scale investments in domestic, onshore production and infrastructure projects Phase I Primarily producer oriented Focus largely US-centric, as oil majors have shifted their upstream capital budgets away from offshore to concentrate on US land Once the shale revolution proved the ability of producers to access America's enormous reserves of oil and natural gas, major capital commitments were made in the midstream, to support the export of crude oil and LNG This has coincided with significant increases in domestic liquefaction capacity, as well as LNG exports, which have grown to nearly 1.9 Bcf/d Primarily consumer oriented Monthly Domestic Crude & Natural Gas Production, Crude Oil 60 6 Natural Gas Annual Natural Gas Liquefaction and LNG Exports, US Liquefaction Capacity 12 US LNG Exports Monthly Crude Oil and Natural Gas Production, US Energy Information Administration 2. Bloomberg New Energy Finance Liquefaction Capacity (Bcf/d) Since 2010, U.S. crude oil production has grown by 10% annually to all-time record level of 10 mb/d in late Over the same period, dry natural gas production has grown by 5% annually to 78 Bcf/d Smaller, scalable projects Dry Natural Gas Production (Bcf/d) Lumpy investment in onshore production, processing and infrastructure (e.g., pipelines, terminals) Developing markets Crude Oil Production (mb/d) Large, expensive projects LNG Exports (Bcf/d) US centric Phase II 10

11 Phase II will be characterized by growing demand from the developing world for cheaper, cleaner energy Phase I Large, expensive projects Primarily producer oriented The developing world will account for much of the increase in global energy demand, particularly in Asia, where energy consumption is expected to grow by 51% between Asia is already the biggest importer of LNG, and greater environmental awareness and favorable economics will accelerate demand for LNG o Shell projects that Asia will account for more than half Developing markets o Indeed, spot deliveries accounted for nearly 30% of the 600 Asia Middle East & Africa 400 Americas 200 Europe OECD Projected LNG Imports by Region, LNG Imports (bcm) Higher returns will draw capital to projects closer to fast growing demand centers aiming to capitalize on the emergence of a more flexible market for LNG Primarily consumer oriented 800 of incremental LNG imports between While capital investment will continue to be made in upstream and midstream segments domestically, returns will be modest as the space is now dominated by large public companies with low cost of capital Smaller, scalable projects Projected Energy Demand Growth by Region, Quadrillion Btu US centric Phase II global LNG market in International Energy Outlook 2017, US Energy Information Administration 2. Shell LNG Outlook

12 In parallel, a greater focus on environmental protection in the marine shipping space will create unique, intermediate-term opportunities Marine Fuel Demand 2017 vs. Projected 2020 (normalized to 5.5m b/d)1 New fuel regulations aimed at reducing sulfur emissions are slated to begin in 2020, which will require shippers to either employ scrubbers or switch to compliant marine fuels with a sulfur content of no more than 0.5% (vs. current limit of 3.5%) Most analysts predict shipowners will opt for compliant fuel, due to the stressed state of shipowner balance sheets, concerns around their ability to pass on the capital expense of scrubbers to charterers, and uncertainty about the performance implications of scrubbers on vessel operating efficiency Marine Fuel Consumption (mb/d) Fuel used in the shipping industry currently represents ~6% of global consumption of refined oil products o Development of LNG as a marine fuel, stimulating early investment in logistical / distribution infrastructure to support LNG bunker facilities o Investment in refinery upgrades to extract more high-value Gasoil ULSD HFO 3.5% Premium of 1% SFO over 3.5% SFO2 HiLo Spread ($/MT) fuels (e.g., marine gasoil and ULSD vs. HFO) Global refining systems will be very challenged to meet new demand for low-sulfur products. Ripple effects will likely be felt across the refined product sector: o Significant expansion in price spread between compliant 6 products from HFO, which will be undesirable after IMO2020 Report, SEB 2. Countdown to IMO 2020, Morgan Stanley 12

13 Greater flexibility and availability in natural gas markets, along with new regulatory efforts, will create ample investment opportunities across the value chain We expect that outside the US these market shifts will require significant investment across the hydrocarbon ecosystem, with new commitments needed in three primary opportunity areas: Supporting the transition of existing industry to new feedstocks and sources of energy (e.g., petrochemical plants that will use NGLs in lieu of crude oil derivatives; natural gas to replace diesel in heavy industry, commercial transportation, and power generation) Facilitating consumer adoption on attractive pricing spreads vs. traditional fuel sources (e.g., natural gas and LPG to replace petroleum products for heating / cooking) Building incremental refining and processing capacity to meet incremental demand for cleaner sources of energy Illustrative investment opportunity set Downstream / end-user centric Upstream / producer centric Large, discrete projects / significant capital costs Refinery capacity expansion Refinery upgrader units Small, scalable projects / lower capital costs LNG bunkering and distribution Industrial and consumer hydrocarbon logistics 13

14 We believe the best opportunities for superior risk-adjusted returns are in hydrocarbon logistics projects that focus on enabling end-user adoption There will continue to be investment needed domestically in upstream and midstream projects, but we believe the excess returns associated with the early phase of the shale revolution have been competed away The more interesting, higher return investment opportunities will be found in businesses closer to the centers of demand growth primarily in the developing world with a greater focus on the logistics of distribution to the end-user We seek to be an early player in this space, taking advantage of the excess returns associated with emergent downstream opportunities that are beginning to ramp up around the globe as part of the second phase of this transformation While we will evaluate upstream and midstream projects on an opportunistic basis, our scope will primarily be downstream investment opportunities, with a focus on smaller-scale logistics projects in developing markets Illustrative investment opportunity set Downstream / end-user centric Upstream / producer centric Large, discrete projects / significant capital costs Refinery capacity expansion Refinery upgrader units Small, scalable projects / lower capital costs LNG bunkering and distribution Projects we will target and evaluate on an opportunistic basis Industrial and consumer hydrocarbon logistics Our primary acquisition focus 14

15 Appendix

16 Why is a SPAC the ideal investment vehicle? The Special Purpose Acquisition Company offers a unique set of advantages vs. more traditional vehicles: Only transactions with strong shareholder support will be approved, otherwise, SPAC is liquidated in 18 months Publicly traded units provide investors with flexible trading strategy Access to public markets for growth capital, including using public currency for bolt-on acquisitions Sponsor funds IPO expenses and working capital, which are not refunded in the event the SPAC is liquidated SPAC provides target owners a longer term exit that is aligned with shareholders Valuation of sponsor Founder s Shares and warrants aligned with shareholders Facilitates Deal Flow Management access to proprietary deal flow Public company provides negotiating leverage with target companies as alternatives are limited 15