Crestwood Midstream Partners LP
SM
DUG Conference The Quick and Connected: Midstream Panel Robert G. Phillips Chairman, Pres. & CEO Crestwood Midstream Partners LP
April 19 - 20, 2011
Forward Looking Statements
SM
This presentation contains forward-looking statements and projections, made in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, regarding future events, occurrences, circumstances, activities, performance, outcomes and results of Crestwood Midstream Partners LP (“Crestwood LP”). Although these statements reflect the current views, assumptions and expectations of Crestwood LP’s 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. However, a variety of factors could cause actual results to materially differ from Crestwood LP’s current expectations in financial condition, results of operations and cash flows including, without limitation, changes in general economic conditions; fluctuations in natural gas prices; failure or delays by our customers in achieving expected production natural gas projects; competitive conditions in our industry; actions or inactions taken or non-performance by third parties, including suppliers, contractors, operators, processors, transporters and customers; our ability to consummate acquisitions and successfully integrate the acquired business and ability to realize any cost savings and other synergies from any acquisition; any disruption from the recent acquisition of midstream assets from Frontier Gas Services, LLC making it more difficult to maintain relationships with customers, employees or suppliers; fluctuations in the value of certain of our assets and liabilities; changes in the availability and cost of capital; operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control; construction costs or capital expenditures exceeding estimated or budgeted amounts; the effects of existing and future laws and governmental regulations, including environmental and climate change requirements; and the effects of existing and future litigation; the risk that the businesses will not be integrated successfully with the new management; as well as other factors disclosed in Crestwood LP’s filings with the Securities and Exchange Commission. The forward-looking statements included in this presentation are made only as of the date of this presentation, and we undertake no obligation to update any of these forward-looking statements to reflect new information, future events or circumstances except to the extent required by applicable law.
2
Who We Are
SM
Crestwood Holdings Partners LLC (“Crestwood Holdings”) •
Partnership between First Reserve Corp and Crestwood Management Team –
Strategy to create long term value through acquisition of high quality midstream assets and investment in organic infrastructure projects
–
Focus on shale or unconventional resource plays due to (i) reasonable entry acquisition multiples on a relative value basis, (ii) volume certainty due to low exploratory risk, (iii) ability to match phased timing of HBP and development drilling with phased infrastructure build-out and capital deployment over extended period
–
Acquired control of Crestwood Midstream Partners LP as our platform for growth
Crestwood Midstream Partners LP (“Crestwood” or “CMLP”) •
Formerly Quicksilver Gas Services LP (NYSE:KGS) – early midstream player in the Barnett Shale
•
Changed its name and ticker to Crestwood Midstream Partners LP and (NYSE:CMLP)
•
Current Enterprise Value of approximately $1.9+ Billion
•
Common Unit Price - $31.42 as of (April 7, 2011) –
Distribution Per Unit - $0.43 quarter ($1.72 annualized)
–
Yield – 5.5%
3
Building the Crestwood Platform First Reserve Corporation
Crestwood Management
Crestwood Holdings and other Entities
($ Millions)
51.2% LP
NYSE Ticker
CMLP
Market Capitalization (1)
$
1,475.1
Total Debt (2)
$
483.5
Enterprise Value
$
1,958.6
2.0% GP (IDRs)
Public and Class C Unit holders
SM
May 26, 2010 – First Reserve/Crestwood announced the initial capital commitment to Crestwood Holdings
October 1, 2010 - Crestwood Holdings acquired 100% of the GP and 60+% of the LP units of Quicksilver Gas Services (NYSE:KGS) from Quicksilver Resources (NYSE:KWK) for $701 MM
January 18, 2011 - Crestwood increased its quarterly distribution to $0.43 per common unit ($1.72 per year) a 9.9% year over year increase
February 18, 2011 - Crestwood signed agreements to acquire the midstream assets of Frontier Gas Services in the Fayetteville Shale play of NW Arkansas and the Granite Wash play of the Texas Panhandle for $338 MM
February 22, 2011 - Crestwood announced record 4th Quarter and FYE 2010 earnings and the purchase of assets in the Avalon/Bone Spring play of SE New Mexico for $5.1 MM from independent producers
April 1, 2011 – Crestwood closed on the acquisition of midstream assets from Frontier Gas Services
46.8% LP
Crestwood Midstream Partners LP (NYSE: CMLP)
Existing Barnett/Avalon Shale Assets
Fayetteville Shale Assets
Granite Wash Assets
___________________________ (1) Includes 37.4 MM LP units at $31.42 plus $300 MM GP valuation (2) Total Pro Forma Debt as of 12/31/10 including $200MM Senior Notes
4
Crestwood’s Shale Play Strategy
(Tcfe)
500
Assets located in some of the most prolific oil and natural gas basins and active shale plays in the US
Our long term acreage dedication’s are largely located in the core areas with solid drilling economics even at today’s low gas prices
Diversified producer portfolio represents some of the largest, most technically competent and financially sound oil and gas shale developers
Expanded midstream operations are relatively new, efficient and easy to operate with low maintenance costs
1,400
Fayetteville & Barnett are two of the largest gas fields in the world
490
2013 Strip: $5.45 (1)
400 300 200
Basin Breakeven NYMEX (10% IRR)
World Class Natural Gas Resource 600
SM
222 235
110 123 68 70 73 81 95 100 42 42 44 45 46 47 48
2012 Strip: $5.04 (1) NTM Strip: $4.69 (1)
138
F Kh aye a r tte sa vi ve ll e D au Ka y Sh ( l e ra ta ch Or Ba Ru al e ba a en rn ss d- ga b ett ia) D na urg S on k h m (K (R al e e z a us (T zak si a u h ) M Nor rkm sta ed th e n) ve P ni s G Bon zh ars tan ro a ye (I ) n i ve ( ra ng n Ru n) en ko ss (N (R i a) Za et us he sia po rl a ) ly am n Sh o Hu ds) ye go t o H k ( to as m R n si an uss Ya R'M (Ru ia ) m el ss i b ( U ur Al g a) re g ng (R eria N H o u ) or ay y ss th ne (R ia) Fi el s u d- Ma vil l ssi S. rc e a) Pa e S h rs ll us ale (Q S at ha ar le -Ir an )
0
Source: Chesapeake October 2010 Investor Presentation *US Dept of Energy (April 2009): Modern Shale Gas Development in the US ** Dr. Terry Engelder, Penn State University.
___________________________
Source: Morgan Stanley research estimates as of November 7, 2010. 1. As of 4/5/11. 5
Crestwood – A Diversified Midstream Shale Play
SM
Shale gas plays have substantial gas-in-place meaning it is more of a “gas manufacturing” operation for producers; stable long-term growth
Crestwood has over 320,000 acres dedicated under contracts through 2020 – 2025 with in excess of 5 Tcfe of reserve potential
Diversified portfolio of low-development cost, dry gas basins and liquids-rich basins with compelling economics even at current gas prices
Geographical Footprint Fayetteville Shale
Granite Wash • Granite Wash Horizontal Play benefits from superior drilling economics due to improved oil and NGL prices
Avalon Shale
1
Fayetteville Shale
2
Granite Wash
6
3 4
Barnett Shale
• Fayetteville Shale Core is an attractive dry-gas basin for HBP drilling and later infill development
5
7
• BHP announced that it will spend approximately $800 MM to $1 billion per year to triple Fayetteville production
10 8 9
System Locations
Avalon Shale
Barnett Shale
• Avalon Shale wells provide the opportunity to convert the Las Animas pipelines to rich gas service with processing
• Quicksilver plans to continue developing Core/Tier 1 Barnett Shale acreage with 20% YOY volume growth target in 2011
1. 2.
Indian Creek Wilson Creek
3. 4.
Prairie Creek Twin Groves
5. 6.
Woolly Hollow Rose Bud
7. 8.
Alliance Lake Arlington
9. Cowtown & Corvette 10. Las Animas 6
The Importance of Shale Plays
SM
Primary future supply base to drive increased natural gas consumption Abundance of unconventional gas will enable stable natural gas pricing and drive demand growth
With virtually unlimited long term supplies and stable pricing, natural gas is poised to capture increased market share Resource play development fits the long term production growth profile of majors, IOC and NOC Lower risk resource development and midstream infrastructure build out of shale play’s is very attractive to the capital markets
7
Shale Play Life Cycle
SM
Crestwood Portfolio Barnett Shale – Mid/Late Stage Fayetteville Shale – Mid Stage Granite Wash – Early/Mid Stage Avalon Shale – Early Stage
Early Stage Lease Accumulation Exploration Drilling Define Infrastructure Plan Build System Backbone
Mid Stage HBP Drilling Phase Expand System Infrastructure through Laterals & Central Facilities 8
Late Stage Infill Drilling Phase Infrastructure largely complete Modify Central Facilities based upon volume outlook
Haynesville Shale Overview
SM
9 Source: Wood Mackenzie & Bank of America Merrill Lynch & EIA
Location: East Texas Basin in NW LA/ETX
Life Cycle: Mid Stage
Current Production: approximately 5.5 Bcf/d (#1 producing gas field in US)
Major Producers: Chesapeake; 530,000 net acres EnCana; 429,000 net acres Petrohawk; 368,000 net acres EXCO Resources; 188,000 net acres
Key Statistics: Average well depth 10,400’ – 12,200’ Average well cost $7 - $10 MM IP Rates 10 – 20+ MMcf/d Expected EUR per well 5 – 10 Bcf
Key Midstream Players/Outlook Regency, CHKM, ETC, KMP, EPD Takeaway pipeline capacity adequate due to RIGS, Tiger, Centerpoint and EPD Acadian expansions Gathering backbone largely complete Expansion of gathering systems underway but many wells still WOPL Slow down in drilling due to lower gas prices may delay buildout
Barnett Shale Overview
SM
10 Source: Wood Mackenzie & Bank of America Merrill Lynch
Location: Fort Worth Basin in North Texas
Life Cycle: Mid/Late Stage
Current Production: 5.2 Bcf/d (2nd largest US natural gas field) Core acreage accounts for 80% of Barnett production
Major Producers: Devon; 589,000 Net Acres Exxon; 280,000 Net Acres Chesapeake; 220,000 Net Acres Quicksilver; 163,000 Net Acres
Key Statistics: Average well depth 6,500 – 9,000 (ft) Average well cost $2 - $3 ($MM) Core IP Rates 3 – 6 (MMcf/d) Expected EUR per well 3 – 5 (Bcf)
Key Midstream Players/Outlook: Devon, CHKM, ETC, XTEX, CMLP Takeaway pipelines, gathering & processing infrastructure largely complete Export pipelines built in 2005-9 Processing installed in 2006-9 due to drilling in Tier 1&2 (rich gas window)
Fayetteville Shale Overview
SM
11 Source: Wood Mackenzie & Bank of America Merrill Lynch
Location: Arkoma Basin in NW Arkansas
Life Cycle: Mid Stage Second most developed shale play in North America behind Barnett Currently companies are still in the HBP phase of the drilling program
Current Production: Approximately 3.1 Bcf/d
Major Producers: Southwestern Energy; 915,890 net acres ExxonMobil (XTO); 550,000 net acres BHP Billiton; 487,000 net acres BHP purchased CHK’s Fayetteville acreage for $4.75 billion in 1Q 2011
Key Statistics: Average well depth: 1,500 – 6,500 (ft) Average well cost: $2.5 - $3.25 ($MM) IP Rates: 3 – 4 (MMcf/d) Expected EUR per well: 3 – 4 (Bcf)
Key Midstream Players/Outlook: SWN (Desoto), XTO, BHP, CMLP Substantial new export capacity added by Ozark, Centerpoint, Boardwalk and Fayetteville Express Additions to expand gathering infrastructure ongoing based upon phase of producer drilling plans
Granite Wash Shale Overview
SM
12 Source: Wood Mackenzie & Bank of America Merrill Lynch
Location: Anadarko Basin in the Texas Panhandle extending into Western Oklahoma High IP’s and liquids rich gas make it economical in low gas price environments
Current production: Between 900 and 1,100 Mmcf/d
Life Cycle: Early/Mid Currently the Granite Wash is still in the early stages of lease accumulation and exploration with most companies
Major Producers: Apache; 200,000 net acres Chesapeake; 200,000 net acres Forest Oil; 102,000 net acres LINN; 73,000 net acres
Key Statistics: Average well depth 1,800 – 5,200 (ft) Average well cost $6.6 ($MM) IP Rates 10 – 20 and up (MMcf/d) Expected EUR per well 4 – 5 (Bcf)
Midstream Infrastructure: Many old Morrow/Atoka gathering systems and processing plants in place to handle current production New gathering and processing investment needed to handle larger volumes & higher pressures Investments to increase processing capacity underway CMLP, Enbridge, Eagle Rock, BP, Penn Virginia, Atlas
Summary
SM
Shale play infrastructure development represents a unique opportunity for midstream companies to plan for long term capital investment to drive growth Entry valuations, risk profile and return potential depend upon shale play life cycle
Old, existing assets provide an early-mover, competitive advantage but must be modified, expanded quickly to capture market share Matching producer development plans with midstream infrastructure build-out is the key to success 13
DUG Conference The Quick and Connected: Midstream Panel Robert G. Phillips Chairman, Pres. & CEO Crestwood Midstream Partners LP
April 19 - 20, 2011
Forward Looking Statements
SM
This presentation contains forward-looking statements and projections, made in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, regarding future events, occurrences, circumstances, activities, performance, outcomes and results of Crestwood Midstream Partners LP (“Crestwood LP”). Although these statements reflect the current views, assumptions and expectations of Crestwood LP’s 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. However, a variety of factors could cause actual results to materially differ from Crestwood LP’s current expectations in financial condition, results of operations and cash flows including, without limitation, changes in general economic conditions; fluctuations in natural gas prices; failure or delays by our customers in achieving expected production natural gas projects; competitive conditions in our industry; actions or inactions taken or non-performance by third parties, including suppliers, contractors, operators, processors, transporters and customers; our ability to consummate acquisitions and successfully integrate the acquired business and ability to realize any cost savings and other synergies from any acquisition; any disruption from the recent acquisition of midstream assets from Frontier Gas Services, LLC making it more difficult to maintain relationships with customers, employees or suppliers; fluctuations in the value of certain of our assets and liabilities; changes in the availability and cost of capital; operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control; construction costs or capital expenditures exceeding estimated or budgeted amounts; the effects of existing and future laws and governmental regulations, including environmental and climate change requirements; and the effects of existing and future litigation; the risk that the businesses will not be integrated successfully with the new management; as well as other factors disclosed in Crestwood LP’s filings with the Securities and Exchange Commission. The forward-looking statements included in this presentation are made only as of the date of this presentation, and we undertake no obligation to update any of these forward-looking statements to reflect new information, future events or circumstances except to the extent required by applicable law.
2
Who We Are
SM
Crestwood Holdings Partners LLC (“Crestwood Holdings”) •
Partnership between First Reserve Corp and Crestwood Management Team –
Strategy to create long term value through acquisition of high quality midstream assets and investment in organic infrastructure projects
–
Focus on shale or unconventional resource plays due to (i) reasonable entry acquisition multiples on a relative value basis, (ii) volume certainty due to low exploratory risk, (iii) ability to match phased timing of HBP and development drilling with phased infrastructure build-out and capital deployment over extended period
–
Acquired control of Crestwood Midstream Partners LP as our platform for growth
Crestwood Midstream Partners LP (“Crestwood” or “CMLP”) •
Formerly Quicksilver Gas Services LP (NYSE:KGS) – early midstream player in the Barnett Shale
•
Changed its name and ticker to Crestwood Midstream Partners LP and (NYSE:CMLP)
•
Current Enterprise Value of approximately $1.9+ Billion
•
Common Unit Price - $31.42 as of (April 7, 2011) –
Distribution Per Unit - $0.43 quarter ($1.72 annualized)
–
Yield – 5.5%
3
Building the Crestwood Platform First Reserve Corporation
Crestwood Management
Crestwood Holdings and other Entities
($ Millions)
51.2% LP
NYSE Ticker
CMLP
Market Capitalization (1)
$
1,475.1
Total Debt (2)
$
483.5
Enterprise Value
$
1,958.6
2.0% GP (IDRs)
Public and Class C Unit holders
SM
May 26, 2010 – First Reserve/Crestwood announced the initial capital commitment to Crestwood Holdings
October 1, 2010 - Crestwood Holdings acquired 100% of the GP and 60+% of the LP units of Quicksilver Gas Services (NYSE:KGS) from Quicksilver Resources (NYSE:KWK) for $701 MM
January 18, 2011 - Crestwood increased its quarterly distribution to $0.43 per common unit ($1.72 per year) a 9.9% year over year increase
February 18, 2011 - Crestwood signed agreements to acquire the midstream assets of Frontier Gas Services in the Fayetteville Shale play of NW Arkansas and the Granite Wash play of the Texas Panhandle for $338 MM
February 22, 2011 - Crestwood announced record 4th Quarter and FYE 2010 earnings and the purchase of assets in the Avalon/Bone Spring play of SE New Mexico for $5.1 MM from independent producers
April 1, 2011 – Crestwood closed on the acquisition of midstream assets from Frontier Gas Services
46.8% LP
Crestwood Midstream Partners LP (NYSE: CMLP)
Existing Barnett/Avalon Shale Assets
Fayetteville Shale Assets
Granite Wash Assets
___________________________ (1) Includes 37.4 MM LP units at $31.42 plus $300 MM GP valuation (2) Total Pro Forma Debt as of 12/31/10 including $200MM Senior Notes
4
Crestwood’s Shale Play Strategy
(Tcfe)
500
Assets located in some of the most prolific oil and natural gas basins and active shale plays in the US
Our long term acreage dedication’s are largely located in the core areas with solid drilling economics even at today’s low gas prices
Diversified producer portfolio represents some of the largest, most technically competent and financially sound oil and gas shale developers
Expanded midstream operations are relatively new, efficient and easy to operate with low maintenance costs
1,400
Fayetteville & Barnett are two of the largest gas fields in the world
490
2013 Strip: $5.45 (1)
400 300 200
Basin Breakeven NYMEX (10% IRR)
World Class Natural Gas Resource 600
SM
222 235
110 123 68 70 73 81 95 100 42 42 44 45 46 47 48
2012 Strip: $5.04 (1) NTM Strip: $4.69 (1)
138
F Kh aye a r tte sa vi ve ll e D au Ka y Sh ( l e ra ta ch Or Ba Ru al e ba a en rn ss d- ga b ett ia) D na urg S on k h m (K (R al e e z a us (T zak si a u h ) M Nor rkm sta ed th e n) ve P ni s G Bon zh ars tan ro a ye (I ) n i ve ( ra ng n Ru n) en ko ss (N (R i a) Za et us he sia po rl a ) ly am n Sh o Hu ds) ye go t o H k ( to as m R n si an uss Ya R'M (Ru ia ) m el ss i b ( U ur Al g a) re g ng (R eria N H o u ) or ay y ss th ne (R ia) Fi el s u d- Ma vil l ssi S. rc e a) Pa e S h rs ll us ale (Q S at ha ar le -Ir an )
0
Source: Chesapeake October 2010 Investor Presentation *US Dept of Energy (April 2009): Modern Shale Gas Development in the US ** Dr. Terry Engelder, Penn State University.
___________________________
Source: Morgan Stanley research estimates as of November 7, 2010. 1. As of 4/5/11. 5
Crestwood – A Diversified Midstream Shale Play
SM
Shale gas plays have substantial gas-in-place meaning it is more of a “gas manufacturing” operation for producers; stable long-term growth
Crestwood has over 320,000 acres dedicated under contracts through 2020 – 2025 with in excess of 5 Tcfe of reserve potential
Diversified portfolio of low-development cost, dry gas basins and liquids-rich basins with compelling economics even at current gas prices
Geographical Footprint Fayetteville Shale
Granite Wash • Granite Wash Horizontal Play benefits from superior drilling economics due to improved oil and NGL prices
Avalon Shale
1
Fayetteville Shale
2
Granite Wash
6
3 4
Barnett Shale
• Fayetteville Shale Core is an attractive dry-gas basin for HBP drilling and later infill development
5
7
• BHP announced that it will spend approximately $800 MM to $1 billion per year to triple Fayetteville production
10 8 9
System Locations
Avalon Shale
Barnett Shale
• Avalon Shale wells provide the opportunity to convert the Las Animas pipelines to rich gas service with processing
• Quicksilver plans to continue developing Core/Tier 1 Barnett Shale acreage with 20% YOY volume growth target in 2011
1. 2.
Indian Creek Wilson Creek
3. 4.
Prairie Creek Twin Groves
5. 6.
Woolly Hollow Rose Bud
7. 8.
Alliance Lake Arlington
9. Cowtown & Corvette 10. Las Animas 6
The Importance of Shale Plays
SM
Primary future supply base to drive increased natural gas consumption Abundance of unconventional gas will enable stable natural gas pricing and drive demand growth
With virtually unlimited long term supplies and stable pricing, natural gas is poised to capture increased market share Resource play development fits the long term production growth profile of majors, IOC and NOC Lower risk resource development and midstream infrastructure build out of shale play’s is very attractive to the capital markets
7
Shale Play Life Cycle
SM
Crestwood Portfolio Barnett Shale – Mid/Late Stage Fayetteville Shale – Mid Stage Granite Wash – Early/Mid Stage Avalon Shale – Early Stage
Early Stage Lease Accumulation Exploration Drilling Define Infrastructure Plan Build System Backbone
Mid Stage HBP Drilling Phase Expand System Infrastructure through Laterals & Central Facilities 8
Late Stage Infill Drilling Phase Infrastructure largely complete Modify Central Facilities based upon volume outlook
Haynesville Shale Overview
SM
9 Source: Wood Mackenzie & Bank of America Merrill Lynch & EIA
Location: East Texas Basin in NW LA/ETX
Life Cycle: Mid Stage
Current Production: approximately 5.5 Bcf/d (#1 producing gas field in US)
Major Producers: Chesapeake; 530,000 net acres EnCana; 429,000 net acres Petrohawk; 368,000 net acres EXCO Resources; 188,000 net acres
Key Statistics: Average well depth 10,400’ – 12,200’ Average well cost $7 - $10 MM IP Rates 10 – 20+ MMcf/d Expected EUR per well 5 – 10 Bcf
Key Midstream Players/Outlook Regency, CHKM, ETC, KMP, EPD Takeaway pipeline capacity adequate due to RIGS, Tiger, Centerpoint and EPD Acadian expansions Gathering backbone largely complete Expansion of gathering systems underway but many wells still WOPL Slow down in drilling due to lower gas prices may delay buildout
Barnett Shale Overview
SM
10 Source: Wood Mackenzie & Bank of America Merrill Lynch
Location: Fort Worth Basin in North Texas
Life Cycle: Mid/Late Stage
Current Production: 5.2 Bcf/d (2nd largest US natural gas field) Core acreage accounts for 80% of Barnett production
Major Producers: Devon; 589,000 Net Acres Exxon; 280,000 Net Acres Chesapeake; 220,000 Net Acres Quicksilver; 163,000 Net Acres
Key Statistics: Average well depth 6,500 – 9,000 (ft) Average well cost $2 - $3 ($MM) Core IP Rates 3 – 6 (MMcf/d) Expected EUR per well 3 – 5 (Bcf)
Key Midstream Players/Outlook: Devon, CHKM, ETC, XTEX, CMLP Takeaway pipelines, gathering & processing infrastructure largely complete Export pipelines built in 2005-9 Processing installed in 2006-9 due to drilling in Tier 1&2 (rich gas window)
Fayetteville Shale Overview
SM
11 Source: Wood Mackenzie & Bank of America Merrill Lynch
Location: Arkoma Basin in NW Arkansas
Life Cycle: Mid Stage Second most developed shale play in North America behind Barnett Currently companies are still in the HBP phase of the drilling program
Current Production: Approximately 3.1 Bcf/d
Major Producers: Southwestern Energy; 915,890 net acres ExxonMobil (XTO); 550,000 net acres BHP Billiton; 487,000 net acres BHP purchased CHK’s Fayetteville acreage for $4.75 billion in 1Q 2011
Key Statistics: Average well depth: 1,500 – 6,500 (ft) Average well cost: $2.5 - $3.25 ($MM) IP Rates: 3 – 4 (MMcf/d) Expected EUR per well: 3 – 4 (Bcf)
Key Midstream Players/Outlook: SWN (Desoto), XTO, BHP, CMLP Substantial new export capacity added by Ozark, Centerpoint, Boardwalk and Fayetteville Express Additions to expand gathering infrastructure ongoing based upon phase of producer drilling plans
Granite Wash Shale Overview
SM
12 Source: Wood Mackenzie & Bank of America Merrill Lynch
Location: Anadarko Basin in the Texas Panhandle extending into Western Oklahoma High IP’s and liquids rich gas make it economical in low gas price environments
Current production: Between 900 and 1,100 Mmcf/d
Life Cycle: Early/Mid Currently the Granite Wash is still in the early stages of lease accumulation and exploration with most companies
Major Producers: Apache; 200,000 net acres Chesapeake; 200,000 net acres Forest Oil; 102,000 net acres LINN; 73,000 net acres
Key Statistics: Average well depth 1,800 – 5,200 (ft) Average well cost $6.6 ($MM) IP Rates 10 – 20 and up (MMcf/d) Expected EUR per well 4 – 5 (Bcf)
Midstream Infrastructure: Many old Morrow/Atoka gathering systems and processing plants in place to handle current production New gathering and processing investment needed to handle larger volumes & higher pressures Investments to increase processing capacity underway CMLP, Enbridge, Eagle Rock, BP, Penn Virginia, Atlas
Summary
SM
Shale play infrastructure development represents a unique opportunity for midstream companies to plan for long term capital investment to drive growth Entry valuations, risk profile and return potential depend upon shale play life cycle
Old, existing assets provide an early-mover, competitive advantage but must be modified, expanded quickly to capture market share Matching producer development plans with midstream infrastructure build-out is the key to success 13
