crestwood midstream partners · china national offshore oil corporation • 311,000 acre dedication...

Connections for America’s Energy ™

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™ Connections for America’s Energy ™

™ Connections for America’s Energy

Sept 18, 2014

Crestwood Midstream Partners

Crude Oil Midstream Infrastructure...Trucks, Pipelines and Rail

WY Oil and Gas Fair

Brian Freed – Vice President Crude Logistics – [email protected]

mailto:[email protected]


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The statements in this communication regarding future events, occurrences, circumstances, activities, performance, outcomes

and results are forward-looking statements. Although these statements reflect the current views, assumptions and expectations

of Crestwood Midstream and Crestwood Equity management, the matters addressed herein are subject to numerous risks and

uncertainties which could cause actual activities, performance, outcomes and results to differ materially from those indicated.

Such forward-looking statements include, but are not limited to, statements about the future financial and operating results,

objectives, expectations and intentions and other statements that are not historical facts. Factors that could result in such

differences or otherwise materially affect Crestwood Midstream’s or Crestwood Equity’s financial condition, results of operations

and cash flows include, without limitation, the risks that the Crestwood Midstream and Crestwood Equity businesses will not be

integrated successfully or may take longer than anticipated; the possibility that expected synergies will not be realized, or will not

be realized within the expected timeframe; fluctuations in oil, natural gas and NGL prices; the extent and success of drilling

efforts, as well as the extent and quality of natural gas volumes produced within proximity of Crestwood Midstream or Crestwood

Equity assets; failure or delays by customers in achieving expected production in their natural gas projects; competitive

conditions in the industry and their impact on the ability of Crestwood Midstream or Crestwood Equity to connect natural gas

supplies to Crestwood Midstream or Crestwood Equity gathering and processing assets or systems; actions or inactions taken or

non-performance by third parties, including suppliers, contractors, operators, processors, transporters and customers; the ability

of Crestwood Midstream or Crestwood Equity to consummate acquisitions, successfully integrate the acquired businesses,

realize any cost savings and other synergies from any acquisition; changes in the availability and cost of capital; operating

hazards, natural disasters, weather-related delays, casualty losses and other matters beyond Crestwood Midstream or

Crestwood Equity’s control; timely receipt of necessary government approvals and permits, the ability of Crestwood Midstream

or Crestwood Equity to control the costs of construction, including costs of materials, labor and right-of-way and other factors that

may impact either company’s ability to complete projects within budget and on schedule; the effects of existing and future laws

and governmental regulations, including environmental and climate change requirements; the effects of existing and future

litigation; and risks related to the substantial indebtedness of either company, as well as other factors disclosed in Crestwood

Midstream and Crestwood Equity’s filings with the U.S. Securities and Exchange Commission. You should read filings made by

Crestwood Midstream and Crestwood Equity with the U.S. Securities and Exchange Commission, including Annual Reports on

Form 10-K for the year ended December 31, 2013, and the most recent Quarterly Reports and Current Reports, for a more

extensive list of factors that could affect results.

Forward Looking Statements


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Crude Oil Midstream Infrastructure...Trucks, Pipelines and Rail

• Introduction to Crestwood Midstream

– Overview of rocky mountain assets

• Overview of our Gas Gathering And Processing In WY

• Overview Of the WY Crude Oil Midstream Market

– Crude oil marketing

– Crude oil trucking

– Crude gathering pipelines

– Crude take‐away pipelines

– Crude rail facilities (focus on Douglas)

Agenda


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Growing Operations in Key US Shale Plays

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Crestwood’s assets and operations are divided into 4 operating regions to gain scale,

reduce costs, and generate commercial synergies across the platform


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Rockies Region: Bakken / PRB Niobrara

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• Bakken Shale the premier crude oil shale play in North America

– ~1.5 MMBbls/d by 2020

– 194 active rigs running in the Bakken

– 60-70% all crude Bbls currently exit basin via rail

• PRB Niobrara emerging crude oil play

– Stacked pay zones provides attractive inventory of highly economic development locations

Regional Commentary (1)

Gathering & Processing Storage & Terminalling Crude Logistics

Bakken Arrow gathering systems

125 MBbl/d crude oil, 100 MMcf/d natural gas, 40 MBbl/d water

Key customers: WPX, Kodiak, Halcon, XTO, QEP and Enerplus

• PRB Niobrara gas gathering and processing system

>180 MMcf/d in 2015

Key Customers: Chesapeake and RKI Exploration

• Bakken: 1.1 MMBbl crude oil storage capacity at COLT Hub; 120 MBbl storage at Dry Fork Terminal; 200 MBbl tank capacity at Arrow CDP

• 160 MBbl/d crude-by-rail terminal facility at COLT Hub

• Niobrara: 10-20 Mbbl/d rail Douglas terminal and 100 Mbbl storage in Converse County, WY

• Key customers: Tesoro, Sunoco, Flint Hills, US Oil, Statoil, BP, CHK

COLT Connector pipeline links COLT Hub and Dry Fork Terminal

>40 MBbl/d truck capacity for crude oil and produced water

Commenced crude supply and logistics marketing in 2Q 2014 to optimize Crestwood’s Bakken assets

Key customers: Arrow producers, EOG, Sinclair, WY Refining Co

2 unit trains (220 rail cars) on order, to be received 1Q 2015

Value chain strategy at work in Bakken and PRB Niobrara

(1) Based on industry forecast data.


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• $750 MM November 2013 acquisition

• ~150,000 acreage dedication on Fort Berthold Indian Reservation (FBIR)

• Long-term crude oil, rich natural gas and produced water gathering contracts with WPX, Kodiak, Halcon, XTO, QEP and Enerplus

• Recent Arrow producer developments

– WPX:

2Q 2014 oil production results up 21% over 1Q 2014

Down-spacing creating 10-year drilling inventory at 2014 rate

– Kodiak:

Whiting announced acquisition of Kodiak in July 2014; expected to ramp development activities

– Halcon:

Down-spacing tests indicate potential for up to 16 wells per DSU

– QEP:

Strong 2Q 2014 well results and lower LOE on FBIR

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Crestwood’s Bakken crude oil value chain strategy begins with Arrow Gathering

Rockies Region – Arrow Gathering

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Rockies Region - COLT Hub and Connector

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Sourcing Capacity Storage Capacity Takeaway Capacity

COLT Hub links Bakken crude supply to prime markets; currently the leading rail terminal in North Dakota by volume

• >290,000 Bbls/d

− COLT Connector

− Tesoro pipeline

− Banner pipeline

− Meadowlark pipeline

− Truck deliveries

• 1.2 MM Bbls (working cap)

− Largest storage position in the basin

− Tradable market

− Buyers and sellers

− Point of liquidity

− Creditworthy counterparties

• >350,000 Bbls/d

− Rail loading to West/East Coast

− COLT Connector

− Tesoro pipeline

− Enbridge pipeline

− ETP Bakken project


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• Increased Q2 2014 volumes following severe winter weather in 1Q 2014

• 36 wells connected 2Q 2014 compared to 9 in Q1 2014; expect 43 additional wells to be connected 2H 2014

• Forecasted Q4 2014 performance of ~$20 MM is on-target with original acquisition expectation

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CMLP handled 200 MBbls/d in 2Q via gathering, trucking, rail loading and pipe

Arrow Gathering Update

Rockies Region – Arrow/COLT 2Q 2014 Update

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Arrow Gathering

COLT Hub & Connector COLT Hub & Connector Update

• Completion of additional R&D track in Q4 2014 expected to increase COLT CBR loadings to ~160 MBbls/d

• COLT Connector 3Q QTD at 35 MBbls/d vs 25 MBbls/d in 2Q 2014

• Contracted for 10 MBbls/d capacity on Tesoro Logistics High Plains expansion to directly connect Arrow and COLT


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PRB Niobrara: Developing Growth Area

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Superior producer economics drive continued drilling activity and sustained future production growth

• High-growth crude oil and rich gas plays emerging in legacy Powder River Basin

– 250 MBoe/d current production with substantial expected growth by 2020

– Stacked oil pay creates attractive long-term inventory of drilling locations

– Limited infrastructure to support prolific oil and gas production growth

– Minimal gas processing, NGL and crude oil takeaway capacity in place

Superior Producer Economics… …and Continued Production Growth

Sources: NDIC, TPH Equity Research

$4.5MM D&C

$6.0MM D&C

$6.0MM D&C


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Expanding gathering and processing system in the Powder River Basin (PRB) to serve increasing production

• 50/50 JV with Access Midstream

• 20-year cost-of-service agreement with Chesapeake, RKI Exploration and Production and China National Offshore Oil Corporation

• 311,000 acre dedication

• Current Q3 2014 volumes ~ 55 MMcf/d

• 115 wells currently connected to system and ~145 miles of pipeline / 15,600 HP of compression

• 120 MMcf/d Bucking Horse processing plant to be completed in 4Q 2014; will alleviate capacity constraints

Rockies Region – Crestwood Gas in PRB Niobrara

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Jackalope Gas Gathering

Recent Jackalope Developments

• CHK and RKI announced agreement to exchange acreage and interests in Jackalope dedication

• Increases CHK interest by 66,000 acres and net WI to 79%

• >2 Billion BOE potential recoverable gross resource

• Announced increase in operated rigs to 7-9 in 2015

Jackalope Volumes


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Strategy in Motion: PRB Niobrara Shale

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Linking supply with demand through integrated asset footprint

Jackalope Gas Gathering System

20-year GGA/GPA with Chesapeake and RKI

Gathering ~55 MMcf/d of rich natural gas

Trucking crude from wellhead

Constructing 120 MMcf/d Buckinghorse processing plant on Jackalope system; operational in Q4 2014

Douglas Rail Terminal

10-15 Mbbl/d rail terminal and 100 Mbbls storage to serve growing crude oil production

Buckinghorse NGL’s get transloaded to Douglas Rail Terminal until OneOk NGL export line complete

Douglas unit train service to begin May 2014

Douglas expandable to 50-60 Mbbl/d loading cap & 120 Mbbl/d storage

Interstate natural gas (WIC) and NGL takeaway (OneOK) pipelines

West coast crude-by-rail markets

Marketing crude oil to local refineries and market hubs

Supply Aggregation Connectivity &

Optionality Integration & Optimization

Market Access


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™ Wyoming Crude Services Opportunities 12

Illustrative Wyoming Crude Marketing Example

• Truck loads at the lease – leaves ticket

– Includes crude specs and volume

– Ticket acts as contract – pay on this volume

– Title of crude is taken at lease

– Dependent on LACT for proper volume data

• Crestwood has crude trucking fleet as well as other trucking companies

• Injection fees are typically charged at pipeline injection stations with potential for 3rd party station or owned stations

• Published tariff paid to transport oil

• Line loss (PLA) charged in addition to tariff

• Crude can be transported by unit train (think 70,000 bbl batch) to destination

• Pump over to pipeline terminal at a market center (Guernsey, Cushing, etc.)

Moving barrels from the lease to the end-user

• Transactions settled on the 20th day of the following month of delivery/sale


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PADD IV Crude Pipelines & Refineries

Source: Canadian Association of Petroleum Producers (CAPP) as of June 2014


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• Crestwood crude trucking provides 3rd party trucking services for picking up crude oil at the lease

• Services are provided on a fee for service basis on a per barrel based on distance and terrain from pick-up to drop-off locations

• Typical truck load is 200-220 bbls per haul

• Drivers and mechanics are based out of centralized WY shop

• Back office and billing support provided out of Watford City, ND office

• Utilize QV21 ticketing and dispatch for automated dispatching and automated run ticket

Crestwood Crude Trucking


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• Limited Crude gathering projects are in place in WY. Crestwood is working to develop a crude oil gathering system from the lease to the PRBIC terminal in Douglas. The advantages of this include:

– Safety

o Reduce over the road truck mileage

o Avoid major highway and congested areas during the transportation process

– Flow assurance

o Avoid harsh winter conditions

o Eliminate shut-ins during peak production times by having a dedicated market

o Douglas Rail Facility will function to provide storage as needed

– Market Diversification - allow for delivery to multiple markets from the same location

• Douglas – rail markets

• Guernsey – pipe market accessible via pipeline

• Casper – pipe market accessible via pipeline

– Cost Savings

Reduce trucking costs based on shorter hauls

Fixed transportation rates based on negotiated tariffs

Incremental costs savings as volumes grow

– Gathering system options and assumptions

Connect to high producing well pads

Construct stations in the field to reduce trucking distance for smaller volume wells

Crude Gathering - Advantages


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Powder River Basin Crude Midstream Overview

PRB Crude Take-Away Map

Capacity

Operator Initial Planned Location In-Service

PRBIC 10,000 60,000 Douglas, WY In-service

Eighty-Eight Oil (True) 80,000 80,000 Guernsey, WY In-service

Black Thunder (Meritage) 10,000 120,000 Wright, WY In-service

Pronghorn (Genesis) 60,000 60,000 Casper, WY 1Q 2014

Granite Peak/Cogent 140,000 140,000 Casper, WY 3Q 2014

Granite Peak/Cogent 5,000 35,000 Cheyenne, WY In-service

Tiger Transfer 40,000 40,000 Upton, WY In-service

PRB Crude by Rail Facilities


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• Located 5 miles south of the town of Douglas, WY

• Dual 8,700 foot loops currently serving manifest and unit train business in the area

• 100,000 bbl tank in service and additional 140,000 bbl tank in service Nov 14

• Ability to provide both manifest and unit train operations to multiple customers simultaneously

• Located within 5-60 miles of wellhead production in Converse county

• Available capacity to design additional unloading and storage at customer request

Douglas Terminal Overview

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Provides entry point to provide additional services to existing customers in PRB

Douglas Aerial Overview Douglas Overview


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Summary

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• Rockies shale plays focused on crude oil and rich natural gas production offer substantial midstream infrastructure growth opportunities due to strong producer development activity supported by impressive drilling economics and substantial volume growth forecasts

• Crestwood has made major investments (~$1.5 BB) in the region

– Bakken: Colt Hub, Arrow Midstream, Red Rock Trucking, LT Trucking

– WY: Jackalope Gathering, BuckingHorse plant, Douglas CBR facility

– Denver office to provide crude marketing services, better producer services and support capital project execution

• Crestwood is employing a total value chain strategy to provide competitive services from the wellhead to the burnertip

– Optimizing assets and providing better flow assurance for our customers

• We believe in the long term growth of this region, we are committed and we are here to stay!

crestwood midstream partners · china national offshore oil corporation • 311,000 acre dedication...

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