Adam Bedard, CEO ARB Midstream, LLC Cond ndens nsate from t the - PowerPoint PPT Presentation

Adam Bedard, CEO ARB Midstream, LLC Cond ndens nsate from t the e Rock ckies es Produci cing R Reg egion October 29, 2015

Market Observations • Lease condensate production from the Rockies (Williston, PRB, DJ) projected to grow by 84,000 b/d, from 266,000 b/d to 350,000 b/d, over the next five years • 95% of that growth is from the DJ Basin • Lease condensate production can be blended into the pipelines, but pipelines have specs that limit the % light ends • However, excess takeaway capacity and batching make hitting any sort of “blend wall” difficult • Possibly a problem only in the DJ, depending on how concentrated the barrels area • Rail can access the Canadian diluent market or Gulf Coast market (Splitters/Exports) and provide an uplift to distressed light barrels • However current pipeline capacity is causing previously distressed barrels to receive a higher price, closing the arb. • Rail provides Rockies’ producers with a coastal market, rather than only delivering a Cushing market • Producers can get Brent-based pricing 2

ARB Midstream Overview • Growth oriented, infrastructure development company focused on early stage, organic development projects and acquisitions in gas liquids, condensate, and crude oil • Provide marketing and logistics services to producers and refiners • Quantitative analytics drive development strategy • Current Projects/Marketing • Marketing ~20,000 b/d • DJ Basin Energy Hub: Niobrara Connector (“ NiCon ”) • Midland Basin (Big Spring) Energy Hub: Gateway Project 3

Organic Projects – Energy Rail Hubs Niobrara Connector Permian Gateway Located in the heart of DJ • Located in Howard County • 230 Acres • 350 acres • Under construction • Pipe connection to new • Drilling materials in bound, • gathering system liquids outbound Drilling materials in bound, • liquids outbound 4

Rockies Drilling Update Impact of declining rig count outpaces influence of high grading and efficiencies 5

Rockies Rig Count Down from 265 to 96 (64%) YoY 300 250 200 Hz Rig Count 150 100 50 0 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 6 Bakken PRB DJ-Niobrara

Bakken Rig Count Down By 113 rigs, nearly 2/3 YoY Oct 2014 Oct 2015 -113 175 Rigs 62 Rigs -65% 7

PRB rigs down by 70% YoY Oct 2014 Oct 2015 -23 33 Rigs 10 Rigs -70% 8

DJ Basin Rig Count Holding Up Slightly Stronger, But Still Down 58% Oct 2014 Oct 2015 33 57 Rigs 24 Rigs -58% 9

Rigs Are Drilling 35% More Wells/Month Today Compared to a Year Ago DJ: 24 t 24 today = = 37 a 37 a year ago go Bakke ken: 62 62 today = = 81 81 a year ago go PR PRB: 10 t 10 today = 19 a 19 a year ago go 4.00 Hz Rig Efficiency (wells drilled per month per rig) 3.50 3.00 2.50 2.00 1.50 1.00 0.50 - Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 10 Williston PRB DJ-Niobrara

Lease Condensate Production How much condensate will be produced from the Bakken and Niobrara plays? 11

PRB and Ba PRB Bakken Are N Not a Significant S Source o of Cond ndensa sate. e. DJ, U Utica, S SCOOP and nd EF a are e Major S Sources es API Gravity 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Condensate Natural Gasoline Canadian Condensate PRB DJ Basin Miss Lime Bakken Utica SCOOP Eagle Ford 12 Source: DI Desktop

Lease Condensate Makes up 15% of Rockies Total Production. Projected to Grow by 84,000 b/d over next 5 years (f/ 266 Mb/d up to 350 Mb/d) Rockies (Bakken, PRB, DJ) Crude Oil and Lease Condensate Production vs Time Rockies (Bakken, PRB, DJ) Crude Oil and Lease Condensate Production vs Time 2,500,000 2,500,000 Forecast Crude Oil and Lease Condensate Production Crude Oil and Lease Condensate Production 2,000,000 2,000,000 1,500,000 1,500,000 (b/d) (b/d) 1,000,000 1,000,000 500,000 500,000 - - 13 Heavy (<22°) Heavy (<22°) Intermediate (>22° and <38°) Intermediate (>22° and <38°) Light (>38° and <45°) Light (>38° and <45°) Condensate (>45°) Condensate (>45°)

Condensate is Fastest Growing Quality Segment, Projected to Grow by 31% Over Next Five Years Dec. 2014 to Dec. 2019: Bakken, PRB, DJ 1,600,000 Crude Oil and Lease Condensate Production (b/d) 1,452,937 1,400,000 1,313,333 1,200,000 1,000,000 800,000 Dec-14 Dec-19 600,000 349,828 400,000 266,398 200,000 123,139 102,188 40,625 37,294 - Heavy (<22°) Intermediate (>22° and Light (>38° and <45°) Condensate (>45°) 14 <38°)

Bakken Production Drops By 180,000 b/d by Mid 2016, Rebounds Early 2018. Growth in Lease Condensate is Small at (8,000 b/d). Williston Basin Production Forecast 1,400,000 Forecast Crude Oil and Lease Condensate Production 1,200,000 1,000,000 800,000 (b/d) 600,000 400,000 200,000 - 15 Source: ARB Heavy (<22°) Intermediate (>22° and <38°) Light (>38° and <45°) Condensate (>45°) Source: DI Desktop Analytics

PRB: Only 6,000 b/d condensate. Overall Production Shrinks Over Next five Years, Doesn’t Achieve 2014 levels PRB Production Forecast 140,000 Forecast Crude Oil and Lease Condensate Production 120,000 100,000 80,000 (b/d) 60,000 40,000 20,000 - 16 Source: ARB Heavy (<22°) Intermediate (>22° and <38°) Light (>38° and <45°) Condensate (>45°) Analytics

DJ: Condensate projected to grow by 78,000 b/d DJ Basin Production Forecast 450,000 Crude Oil and Lease Condensate Production Forecast 400,000 350,000 300,000 250,000 (b/d) 200,000 150,000 100,000 50,000 0 17 Source: ARB Heavy (<22°) Intermediate (>22° and <38°) Light (>38° and <45°) Condensate (>45°) Analytics

End Market for DJ Light Barrel? Cushing by pipe, Rail (to splitter), Rail for Export, Rail to Canada DJ Production by API 40,000 Splitter Stabilizer/ Refining/ 35,000 Blending Diluent/Exports 30,000 Production (bpd) 25,000 25% of DJ 20,000 Production: API > 50 15,000 10,000 5,000 - Unknown <30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 65+ 18 API Gravity Source: DI Desktop, ARB Analytics

Takeaway Capacity, Blending, and Deducts 19

Take-or-Pay Commitments May Override Potential Uplift from Other End Markets DJ Supply/Demand By Type 1,100,000 1,000,000 Production & Takeaway Capacity (b/d) Rail 900,000 800,000 700,000 Pipeline 600,000 500,000 400,000 300,000 200,000 100,000 Refinery - 20

Lights and Meet Pipe Specs Likely to Be Enough Heavier DJ Barrels to Blend Off Production (b/d) 10,000 15,000 20,000 25,000 30,000 35,000 5,000 0 API-31 Source: HPDI, FERC API-32 API-33 API-34 API-35 API-36 PXP “NIO” Specs API-37 API-38 API-39 API-40 API-41 API-42 DJ Basin: Production By API API-43 API-44 API-45 White Cliffs Specs API-46 API-47 API-48 API-49 API-50 API-51 API-52 API-53 API-54 API-55 API-56 API-57 API-58 API-59 API-60 API-61 API-62 21 API-63 API-64 API-65

End Markets 22

Where Should DJ Condensate Go? • Utilized Condensate Pricing Model Developed by Univ. Bauer College of Business • Provides Sum of Whole Value ex- Splitter 23 Source: Bauer College of Business, Argus

Uplift from Splitting $3.57/bbl Today, Compared to $4.88 Two Years Ago WTI, Brent, and “Split Products” – October 2013, 2014, 2015 – DJ 46API $120 $100 $80 $60 $40 $20 $4.88 $3.57 $2.72 $- Oct - 14 Jan-13 Jan-14 Jan-15 Oct - 13 Oct - 15 24 WTI Brent Split Products Split Products - WTI Source: Bauer College of Business

Options for a DJ Barrel (60 API) • Pipeline to Cushing • DJ Lease Barrel: WTI-$5 • Quality Deduct: -$6 (60 API) • Value at Lease: WTI-$11 • Rail to Canada as Diluent • Canadian condensate: WTI-$2 • Implies: If rail is less than $9/bbl, this works • Rail to Gulf Coast for Splitting • Splitter Uplift: +$3/bbl • Implies if rail + splitter fee is < $14/bbl, this works 25

Market Observations • Lease condensate production from the Rockies (Williston, PRB, DJ) projected to grow by 84,000 b/d, from 266,000 b/d to 350,000 b/d, over the next five years • 95% of that growth is from the DJ Basin • Lease condensate production can be blended into the pipelines, but pipelines have specs that limit the % light ends • However, excess takeaway capacity and batching make hitting any sort of “blend wall” difficult • Possibly a problem only in the DJ, depending on how concentrated the barrels area • Rail can access the Canadian diluent market or Gulf Coast market (Splitters/Exports) and provide an uplift to distressed light barrels • However current pipeline capacity is causing previously distressed barrels to receive a higher price, closing the arb. • Rail provides Rockies’ producers with a coastal market, rather than only delivering a Cushing market • Producers can get Brent-based pricing 26

End Adam Bedard, CEO ARB Midstream adam.bedard@arbmidstream.com 27