Charting Your Course for Midstream Solutions Bernie Thomas Co-Founder and Vice President, Commercial Permian Congress Houston, Texas July 29 & 30, 2015
AGENDA Who is Navigator? Why the Permian Basin? Where are the opportunities? What is the role of trucking? How does the current price environment affect project economics? What are the affects of low vs. high oil prices on gathering capacity? 2
UNLOCKING THE SECRET 3
WHO IS NAVIGATOR? Independent midstream infrastructure company headquartered in Dallas Backed by $250M equity commitment from First Reserve Infrastructure Fund II Approximately 60 full-time employees and consultants Owner of the Big Spring Gateway (BSG) Crude Oil pipeline project North Midland Basin Crude Oil Gathering Transport System ~250,000,000 BO in volume commitments ~145,000 acres dedicated 4
WHAT NAVIGATOR IS ALL ABOUT It s a customer service business, we just happen to lay pipe and build tanks. We identify value gaps where midstream infrastructure can act as a bridge. We are currently building in the Permian, but are geographically nimble. It is about our people. We work to hire the best talent in the industry, to continue setting ourselves apart from the rest. 5
NAVIGATOR TEAM JOHN O SHEA Chief Executive Officer MATT VINING Chief Commercial Officer, Co-Founder RANDY MARGO SVP Business Engineering & Operations BERNIE THOMAS Co-Founder and Vice President, Commercial Experience: 30 years Experience: 12 years Experience: 22 years Experience: 33 years Recent Experience: Tenaska Capital Management, Denham Capital, Tradition Midstream Dynegy Recent Experience: TPF Gas Services, Tenaska Capital Management Recent Experience: PVR Midstream, Lonestar Midstream, Crosstex Energy Recent Experience: TPF Gas Services, Crosstex Energy, Dynegy, Hunt Oil Education: B.S in Petroleum Engineering, Louisiana Tech University MBA, Finance and Entrepreneurship, University of Texas Education: B.S. of Business Administration and Finance, University of Arizona Education: B.S. in Mechanical Engineering, Texas A&M University M.S., Mechanical Engineering, Texas A&M University Education: B.A. in Economics, DePauw University 6
WHY THE PERMIAN? Known Resource The Permian Basin has been producing crude oil since the 1920s. Top Tier Production Economics Advancements in drilling techniques combined with multiple pay zones have enhanced producer drilling economics. Limited Gathering Infrastructure Over 700,000 bopd is transported by truck from the production lease to bulk markets. Broad Geographic Footprint Covering an area approximately 250 miles wide and 300 miles long - greater in size than the Eagle Ford and Bakken combined. 7
WHY THE PERMIAN? Source: Pioneer Resources 8
WHY THE PERMIAN? Source: Pioneer Resources 9
PERMIAN BASIN WHAT A MONSTER! Source: Tudor, Pickering and Holt 10
PERMIAN BASIN OPPORTUNITIES SO MANY WAYS TO PLAY Source: Tudor, Pickering and Holt 11
PERMIAN BASIN HORIZONTAL DRILLING GROWTH 50% oil growth in three years Source: ITG IR 12
ITG PERMIAN OIL GROWTH FORECAST Source: ITG IR 13
PERMIAN BASIN COUNTY INDEX / 242 Rigs Running / 259 Permits Source: PLS Permian Scout 14
WHERE NAVIGATOR FOUND OPPORTUNITY BIG SPRING GATEWAY SYSTEM 15
BIG SPRING GATEWAY SYSTEM Crude oil gathering and transmission line located in Midland Basin Serving Martin, Glasscock, Howard and Midland counties ~160,000 bopd throughput capacity ~200 miles of high pressure common-carrier mainline ~250 miles of low pressure dedicated gathering 450,000 BO of operational and third-party leased crude oil storage 16
BIG SPRING GATEWAY DISTRIBUTION OVERVIEW 17
THE ROLE OF TRUCKING BSG SYSTEM MAP 18
PROJECT DEVELOPMENT WHAT TO CONSIDER Isolated lease vs. large, consolidated acreage position Future drilling plans Proximity to existing infrastructure Options for moving crude Truck Pipeline Rail Options for moving gas Pipeline Options for moving NGL s Truck Pipeline Rail 19
MANAGING PERMIAN CRUDE OIL LOGISTICS Step change in well productivity More production than trucks and drivers Non-uniform quality 90% of storage and pipeline capacity owned by fewer than six (6) companies Inter-basin supply/demand dynamics impact on Permian infrastructure 20
WHY BSG PIPELINE MAKES SENSE Need For Regional Takeaway Capacity 160,000 bopd of new takeaway for a market prominently served by truck; the large scale also reduces costs Creating Multi-Market Access Only local pipeline gathering system with connection into Alon Refinery Only direct path to Colorado City within Howard and Martin Counties Eliminates Regional Truck Reliance Eliminates 30-100 mile roundtrip, reduced logistical oversight, improved field inventory management Well Productivity Requires Pipeline Horizontal well production profiles and multi-well pad development are not efficiently moved by truck 21
NAVIGATOR S COST ADVANTAGE Crude Marketer $/bbl Purchaser #1 Fixed Cost Adder $0.90 Flat Variable (per mile) $0.06 Purchaser #2 Miles (1-15) $0.11 Miles (16-30) $0.09 Miles (31-50) $0.05 Miles 50+ $0.03 Hand Gauge Measurement Fee $0.25 $0.15 Transport Cost Example Martin County (Option 1) Martin County (Option 2) Martin County (NES Injection) Destination Midland Midland Colorado City $/bbl Martin County (NES Injection) Alon Martin County (NES Gathered) Colorado City Truck Haul Rate $2.95 $2.95 $2.95 $2.95 -- Pipeline Gathering Rate -- -- -- -- $1.00 Tariff (Delivered to Market) $0.73 $1.25 $0.73 $0.60 $0.73 Pipeline Loss Allowance $0.18 $0.18 $0.18 $0.09 $0.18 30 mile round trip example $2.95 $3.15 100 mile round trip example $6.90 $5.65 Truck Injection, Mainline, and Pumping Fees Gross Delivered Cost to WTI Market $0.24 $0.06 $0.14 $0.06 $0.14 $4.10 $4.44 $4.00 $3.70 $2.05 22
SCALABILITY OF INFRASTRUCTURE Scale Scale Scale 23
Bernie Thomas Co-Founder & Vice President, Commercial bthomas@nesmidstream.com 2626 Cole Ave. Suite 850 Dallas, TX 75204 24