All rights reserved.Enterprise Products Partners L.P.OTC Paper 17713 Panel Member PresentationThe Creation of Value throughthe Good Old 80/20 RuleTuesday May 3, 2005Bart H. Heijermans Bart H. HeijermansSenior Vice President Senior Vice President2 2Enterprise Products Partners L.P.One of the largest publicly traded energy partnerships with an enterprise value of more than $14 billionLeading North American provider of midstream energy services to producers and consumers of natural gas, Natural Gas Liquids (NGLs) and crude oilEnterprise owns $11 billion of integrated assets, including 32,500 miles of pipelines, and strong business positions across each link of the value chainEnterprise has developed over $2 billion of offshore organic growth projects over the last ten years3 3Enterprise Gulf of Mexico Assets & ProjectsNew NewOrleans OrleansHouma HoumaFalcon NestSS332VK817EC373TPC TPCMarco PoloTLPGB72VKGSPoseidonIndependenceHubMarco PoloPipelinesAlleghenyOil PipelineTyphoonNautilusSS331TexasTexas City CityPortPort Arthur ArthurHouston HoustonCameron HighwayHIOSEast BreaksIndependenceTrailConstitutionPipelinesRed HawkGas Pipeline4 4The Creation of Value through the Good Old 80/20 RuleIf you do not know where you are going, you might end up somewhere else Casey StengelThe truth is somewhere in the middle (Anonymous) Politician5 5Why Collaboration? Maximizing Share Holder ValueComplex problems and shortage of talent & equipmentCAPEXCAPEX(F&D) (F&D)OPEXOPEX(Quality)FunctionalFunctionalNPVNPVCollaboration does not replace accountabilityCollaboration does not replace accountability6 6Time; the fourth dimension..Getting itGetting it Right RightGetting itGetting it Perfect Perfectvs. vs.StandardizationScalabilityFit for purpose designAvoid right-sizing(monetize excess capacity)Recoverable Reserves Recoverable Reserves250 250 600 600 400 400P95 P95P5 P5P50 P50Whale Curve Whale CurveValue Reduction Value ReductionValue CreationValue CreationTime Time7 7Value of AccelerationProject Cash-FlowMillions US Dollars-$500$0$500$1,000$1,500$2,000$2,5002000200220042006200820102012201420162018Discovery & AppraisalSanctioning EvaluationProduction PeriodProject ExecutionUS$1.3B NPVProject Thom:Project Gerry: Note: The project names were changed to prevent any conflict with Hollywood.8 8Six Primary Causes for Value ReductionEPCI Contract Strategy Strategy is a sense of direction on which to improvise Peter F. DruckerManagement Processes If you want the company to create value you require internal processes that allow you to create value - AnonymousLack of Experience It is simple: Lets get the best people regardless of their affiliation, empower them and await the results. AnonymousValue Creation versus Job Creation What can I contribute instead of How can I achieve? Peter F. DruckerUn-balanced risk/reward culture in many companies Well-led businesses tend to organize and reward people who create value.-AnonymousMisalignment between working interest owners, individually, and contractors or service providers and lack of trust The idea of getting people moving in the same direction appears to be an organizational problem, but what is needed is not to organize people but align them. John P. Kotter9 9Operator Contractor Relationships10 10Negotiations with OperatorsIs the Tide Turning?We are the contractors who say. Yes!!We are the contractors who say. Yes!!11 11What level of Collaboration?Value added relationship from a basis of equality with a shared belief systemUse of Integrated Project Teams Representatives of both operators and contractorsImprove collaboration though teamwork, communication and professionalism12 12Controlled EmpowermentProjectStrategyCore ValuesCriticalPerformanceVariablesRisks toBe AvoidedStrategic UncertaintiesBoundary SystemDiagnostic Control SystemBelief SystemInteractive Control SystemInternalControls13 13Independence Hub and TrailIndependence HubIndependence TrailTGP14 14Independence HubSpidermanDC 620/621San JacintoDC 618/619MerganserAV 36/37VortexAV 217/261LR 177/221JubileeAV 305/349LR 265/309Atlas NWLR 5Anchor FieldMC920Mondo NWLR 1/2Recent POECheyenneLR 39AtlasLR 49/50AdirondackAV 168/169DaredevilLL 94/9515 15Independence Project Structure SubseaWorkDrilling & CompletionProducersProducersOwnersOwnersContractorsContractorsTeamTeamTeamworkTeamworkExpertiseExpertiseCommunicationCommunicationAccountabilityAccountabilityNo Blame CultureNo Blame CultureCommercial AgreementsOwnershipConstructionOperationCommercial AgreementsOwnershipOperationJ OA / shared subseaflowlinesystemPlatformPipelinesBelief System Belief System16 16Independence Hub OrganizationExecutive Advisory Committee Executive Advisory CommitteeExecutive SponsorProducersExecutive SponsorKey ContractorsExecutive SponsorOwnersSteering Committee(Producers / Owners)Subsea TeamIntegrated Project Team(Producers / Owners)Pipeline TeamOwnerContractorsVendorsProducers17 17Independence Project - Timeline2002 20032004 2005Merganser DiscoveryAVPG FormedFEED workEnterprise approached Kerr McGee and BHP withthird party owned hub conceptAVPG and Enterprise sign Notice to ProceedDiscoveriesParallel Negotiations between: AVPG Members Enterprise and AVPG AVPG and El Paso Enterprise and El PasoAwarded Key LOIs andproject execution startsOrdered Line PipeExecuted Commercial Agreements18 18RecommendationsAlign incentives based on value creationHire best integrated project team members and leave them alone!Start making commitments and spending money at an early stage if it appears that there is a high probability of a successful field development a sense of urgencyBetter to miss an aggressive target than to beat a conservative targetDevelop a shared belief systemsDo not right size infrastructure