Eagle Ford and South Texas NGL Infrastructure September 30, 2014
Today s Agenda HEP Update Company Update Production, Processing, & Liquids Handling in the Eagle Ford Observed Themes HEP s Processing & Liquids Handling Solutions Reveille Gas Plant, Live Oak Stabilizer, & Brownsville Terminal 2
Where We Started June 2011 Founded in June 2011 ~280 miles of gathering pipelines acquired from Clear Springs Energy Acquired Bottom Line Services (Pipeline Construction) Non-Traditional Equity Sponsors Rich Gas Gathering Initial Strategy Vertically integrated Eagle Ford rich gas gathering Eagle Ford Pipeline Construction 3
Where We Are Today September 2014 1 1) MD System 7 2 2) EFG System 1 3 3) CCG / Reveille Gas Plant 4 4 4) Live Oak Rail & Stabilizer 6 2 3 Rich Gathering & Processing 5 5) Brownsville Terminal / Fuel Oil Station Lean Gathering Liquids Projects Mexico Projects 6 6) Mexico Exports 7 7) GT Logistics 5 4
HEP Update Company Update Production, Processing, & Liquids Handling in the Eagle Ford Observed Themes HEP s Processing & Liquids Handling Solutions Reveille Gas Plant, Live Oak Stabilizer, & Brownsville Terminal 5
Observed Themes in Today s Market South Texas Focus 1) Liquids & Liquids Rich Drilling 1,500,000 South Texas Hz. Liquids Production (1) 1,250,000 2) Application of New Drilling & Completion Technology to Old Zones (Olmos, Escondido, Pearsall, Buda) South Texas Hz. Production (Boe/d; 6:1) 1,000,000 750,000 500,000 250,000 0 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 South Texas Hz. Liquids Production Nat. Gas Exports to Mexico (2) 3) Renewed Interest in Lean Gas Drilling 4) Mexico Exports Note: (1) HPDI (2) Tudor Pickering Research Exports (Bcf/d) 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Mexico Mexico Forecast Current Natural Gas Exports to Mexico total 2.3 Bcf/d 6
South Texas Processing Capacity NGL Infrastructure Expansion Facilitates Growth South Texas processing capacity has grown by ~4 Bcf/d since 2010 Producers continue to fill subscribed capacity Increased producer activity and niche markets present further opportunities Y-grade expansions facilitate processing growth and market liquidity Source: Hart Energy 7
HEP Update Company Update Production, Processing, & Liquids Handling in the Eagle Ford Observed Themes HEP s Processing & Liquids Handling Solutions Reveille Gas Plant, Live Oak Stabilizer, & Brownsville Terminal 8
Reveille Gas Plant / Falcon NGL Line 200 MMcfd Cryogenic Processing Plant in Webb County, Texas Project Theme: Listened to customer needs and engineered a solution Designed to process lower GPM gas (relative to Eagle Ford production) from Olmos and Escondido formations Plant location feasibility Falcon NGL Line NGL access to Mt. Belvieu 58 mile y-grade line to Enterprise at Cotulla 18,000 BBL/D initial capacity Residue gas access to Mexican markets NGLS (Access to Mt. Belvieu) Residue Gas to Mexico 9
Live Oak Rail Facility Strategic Rationale Overview Attractive fee based rail business Strategic Eagle Ford location with rail, pipeline, trucking and refinery access Increases exposure to crude, condensate and NGLs Significant organic growth potential from midstream operations Ability to handle both manifest and unit trains Attractive bolt-on midstream opportunities Liquids stabilization Blending & treating facilities Crude, condensate, NGL & nat. gas pipeline injection points in area Operations commenced in January 2014 The Live Oak location is desirable due to multiple pipeline and rail options for liquids products Rail optionality to transport liquid products to premium markets Close proximity to Harvest, NuStar, Kinder Morgan/Magellan for crude and condensate transport Close proximity to DCP, Enterprise, Energy Transfer for y-grade transport 10
Live Oak Stabilizer Off-Spec Condensate Stabilization Strategic Rationale No firm downstream market for high pressure off-spec condensate Truck Routes to Off-Spec Condensate Markets Illustrative Example: - A large Eagle Ford producer was currently trucking the Product to the Ft. Worth basin and East Texas on an interruptible basis - Incurring significant trucking / demurrage fees The Live Oak Stabilizer provides a firm field-level sales point and processing outlet for the product 11
Live Oak Stabilizer Operational Characteristics In-service as of August 2014 Total facility capacity of 15,000 bbl/d 6 truck loading and unloading racks 10,000 bbl/d of off-spec stabilization and treating Capable of handling product up to 205 psig vapor pressure with color and/or corrosive characteristics Pipeline connections for lean fuel gas, rich gas overhead, and y- grade Close proximity to crude and condensate terminals and pipeline markets 12
Live Oak Stabilizer Process Overview Product Sources: Field Stabilizer Overhead Rich Gas Pipeline Pipeline Drip Refrigeration / JT Plants Light Condensate Wells On-Spec Storage Tanks NGL Pipeline On-Spec Volumes Pressurized Condensate Truck Rich Gas Rich Gas / NGLs Off-Spec Volumes Off-Spec Storage Tanks Conditioned Condensate 9# Stabilized Condensate Condensate Storage Tanks Atmospheric Truck 1 st Stabilizer Tower ( Stripper ) 2nd Stabilizer Tower ( De-Butanizer ) 13
Brownsville Terminal Overview Strategic Rationale Current market warrants additional services Total current capacity of 3.6 MMBbl Merchant capacity is fully subscribed Attractive terminal location Overview Access to Gulf of Mexico via 17-mile ship channel Located in the Foreign Trade Zone Dedicated rail facilities Access to oil dock Initial capacity of 225,000 Bbls Operations commenced for anchor customers in March 2014 Fully operational in September 2014 Phase 1 Site 14
Brownsville Terminal Existing Operations and Services Up to 225,000 Bbls of multi-purpose storage Storage Dedicated pipelines on both receipt and delivery systems Heating, Blending and Mixing systems Radar Gauging Panamax class dock with capacity for 4 barges, one oceangoing barge, or one Panamax class marine vessel Marine Existing public dock with low utilization currently Maintained depth of 34 ft. at low water levels Provides us to service our clients immediately 10 car capacity Rail Additional land provides expansion capabilities for up to 100 cars Potential for Unit-Train movements Polymer blending for saturated waxes and viscosity improvement of lubricants Balance of Plant Automated truck rack with on-scale loading Medium pressure steam for heating of wax, lubes or fuel oil Radar gauging for close inventory management Mechanical mixers and Jet Nozzle for blending 15
Key Takeaways 1) Producer focus on liquids and liquids rich drilling has resulted in a shift in midstream strategy for many 2) The rapid growth in Eagle Ford NGL and condensate production will continue to create unique opportunities 3) Increases in terminal and storage capacity will allow the industry to take advantage of export opportunities brought on by increasing domestic supply 16
Questions September 30, 2014