002.art cantrell
TRANSCRIPT
DUG EastNovember 3, 2010
2
Caiman Energy: The Foundation
•Skilled Management Team with Significant Shale Experience• Over $2.5 Billion in New Infrastructure Investment in Barnett and Haynesville
• Crosstex and Regency
• Partners have 90+ years of Midstream Experience
• Solid Organization- Execution Culture Being Developed• Attracting Top Talent
• Engineering/Operations
• Flat Structure Enables Effective Decision Making
•Well Funded by Investor Group Led by EnCap and Flatrock• $400 MM Equity Commitment Secured
• Additional Capital Available as Opportunities Develop
• Private Equity Model Provides Financial and Operational Flexibility
• Independent Midstream Provider• Not affiliated with an E&P, Interstate or Utility Company
• Fully Producer Focused: Our Only Customers!
• No Internal Competition for Focus or Capital
•Focused on Marcellus Infrastructure Needs Only• Not Active in Other Plays: Marcellus Focused
• No Legacy Assets to Optimize
• Deals/Infrastructure Structured to Meet Producer Needs
•Full Suite of Classic Midstream Services• Wellhead/Lateral Gathering, Dehydration, Measurement
• Compression Services
• Condensate Gathering
• Processing/Fractionation
Caiman Energy: Producer Focused
3
4
Producers/Capital
Allocators shifting to
liquids-rich plays
Rich Acreage of
Marcellus is 3,000 –
5,000 sq. miles
Size of Barnett
Core
Larger than
Woodford and
Eagle Ford
$ Billions in Midstream
investments required
First Stop: Marcellus Rich Area
Issues:
Take Away Capacity
Processing Capacity
NGL Infrastructure
5
Opportunity: Marshall County, WV
• What we “Found”
• Apparent Sufficiency of Infrastructure
• Appalachian Pipelines Constrained
• Processing, But…
• Not Easily Accessible
• Legacy Assets Capacity Constrained
• Commercial Terms Not Producer-Oriented
• Reality: Dramatic Infrastructure Investment Required
• Rich Area=Capital Intensive
• Take Away Capacity
• Processing/Fractionation Capacity
• Critical for Rich Area Development
• TET: A Different Model for Appalachia • Built as a “Long Line” Transmission Line
• Not a “Traditional” Appalachian Aggregator
• Record of Regional Expansions
• Vibrant Market Area • Northeast US: Growth
• Regional Market: Static, Declining
• Caiman has (2) 300,000 Dth/day taps
• Taps in C2+ Waiver Zone
6
Texas Eastern Transmission (TET)
• Early Marcellus Development
Proximate to Pipeline
• 2010: Volumes Increase 4x
• Caiman View: TET Analogy to
Tennessee Gas Pipeline for
SWPA/NWV
• Timing
• Access
Tennessee Gas: TET Analogy
7
8
Caiman – Rich Gas System
9
Caiman History
Feb. 2009 EEIF commits $50
MM to Caiman
Energy
Feb. 2010 Caiman reaches 85,000
dedicated acres
May 2010 Began Cryo Plant
Construction
Oct. 2010 Caiman reaches 150,000
dedicated acres
May 2009 Initial Survey of
Marcellus
Nov. 2009 Caiman signs first
agreement
(AB/Chief)
Mar. 2010First well connect to
Fort Beeler System
Jul. 2010$400MM equity
commitment secured
Dec. 2010Cryo Plant
operational
2009 2011
10
Caiman Project Milestones
• $300 +MM for Infrastructure in Marshall and Wetzel Counties
• Over 150,000 Acres in Marshall and Wetzel Counties Dedicated to the Project
• 600 Dth/d Tap on Texas Eastern Transmission
• Rapidly Expanding High-Pressure Gathering System• Constructed 30+ miles of pipe and related infrastructure
• 50+ miles of additional high capacity pipe under contract/construction
• Condensate Pipeline System Constructed/Expanding
• 120,000 Mcf/d Cryogenic Processing Facility Being Completed• In Service: December 2010
• 200,000 Mcf/d Expansion Underway: Target 4Q 2011
• 12,500 BBl/d Fractionation Complex On-Track for Summer 2011
• NGL Pipeline to Fractionation Complex Scheduled for Summer 2011
11
12
TAFT
13
PICTURES
14
PICTURES
15
16
PICTURES
17
• Issue #1: Limited Marcellus Fractionation Capacity• Alternatives:
• Construct New Fractionation Capacity
– New Marcellus Capacity Being Added (Caiman, MWE)
• Transport Y-Grade to Markets
– Pipeline Projects Are Proposed (Sarnia)
• Issue #2: No Local Ethane Market • Alternatives
• Fractionate Y-Grade Where Ethane Market Exists
• Fractionate Locally, Sell C3+ Regionally, Transport Ethane to USGC
• Blend Ethane, Fractionate C3+ Locally, Sell C3+ Regionally
• Key Questions:• Will Ethane Demand Keep Up with Supply?
• Will Mt. Belvieu (less T&F) > Gas Equivalence?
NGL/Ethane Issues and Options
18
• Supply Will Increase Much Faster Than Demand
• Added Fractionation Capacity, Rich Gas Focus Will Increase Supply
• Demand Increasing Much Slower Than Supply (Wells Fargo 10/5/10)
• Past, Present, Future Look at Ethane Economics
• 1995-2010 : Approx. 80% of the time, Blending would be Better Option
• October 22, 2010: 20% Premium to Blending (2011)
• Forward Curve: Frac Spread Below $2.00/Mmbtu ($0.15 or less/gal) in 2012-13
• OPIS study: “[O]ver the next five years, the difference between the Marcellus Shale gas
price and the Mt. Belvieu ethane price could average just 1-20cts/gal.”
Ethane Economics
19
$/gal $/MMBTU
Mt. Belvieu Ethane (1) $0.46 $6.93
Fractionation and Gulf Transport $0.22 $3.32
Realized Ethane Price $0.24 $3.62
Natural Gas (2) $4.34
Blending Advantage $0.72
1. Calendar 2011 swap pricing as of 10/22/10.
2. NYMEX CY 2011 as of 10/22/10 plus $0.20 per MMBTU Appalachia basis.
2011 Blending Economics
Source: Wells Fargo
• Rich Gas Area: 15% of Marcellus Area
• Really Lean Gas! 2-3% Ethane
• Most Marcellus Mileage in Lean Area
• Substantial Capacity to Blend Ethane
Blending Rich Gas on TET
20
Recent Lean Gas Datapoints in SW PA
• CNX (October 2010 Investor Presentation)
• Greene County EURs range from 5.5
to 9.9 BCF
• EQT (9/29/10 press release)
• Reported an average 30-day IP rate of 22
Mmcf/d and a preliminary EUR of 18 Bcf in
Greene County.
• ATLS (10/13/10 press release)
• Completed a well in Westmoreland County that
reached a Company-record IP rate of 21
Mmcf/d.
21
Caiman NGL Strategy
• Continued Expansion of Processing Capacity
• Blend Ethane with Lean Gas
– Lean Gas Opportunities
– Ample Ethane Capacity in TET
– Gas Equivalency Pricing
• Complete Y-Grade/Fractionation Projects
– Focus on C3+ Fractionation /Sell Regionally
– Remain Flexible with Fractionation Investments
• Active Dialogue with Proposed NGL Pipelines
• Finalizing NGL Marketing Alliance
• Caiman: Well Funded, Experienced Midstream Team
• Solely Focused on Producers
• Successful First Year Execution in Rich Gas Area
• TET Take Away Strategy
• High Pressure Gathering System Build out (80+) Miles by 2011
• Ft. Beeler Processing Plant (2010) and Expansion (2011)• 320,000 Mcf/d Capacity
• NGL Infrastructure in Place for 2011
• 150,000 Dedicated Acres
• Ethane Blending Strategy with Flexibility: Provide Options
to Producers
Summary: Caiman Energy
22
• Jack Lafield, President and CEO
• 214-580-3704
• Rick Moncrief, EVP, Business Development
• 214-580-3703
• Art Cantrell, VP, Business Development
• 724-754-9369
• Ryan Strawn, Business Development Manager
• 724-754-9370
Caiman Energy Contacts
23